46566 Federal Register / Vol. 82, No. 192 / Thursday, October 5, 2017 / Notices 

18 15 U.S.C. 78s(b)(3)(A)(iii). 

19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

the proposed rule change at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Exchange has satisfied this 

requirement. 

20 17 CFR 240.19b–4(f)(6). 

21 17 CFR 240.19b–4(f)(6)(iii). 

22For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

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

23 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

of the purposes of the Act. The 

proposed rule change is designed to 

correct the Exchange’s rules to more 

accurately reflect the handling of 

auctions in the Block Order Mechanism. 

No changes are proposed to the 

operation of the Exchange’s trading 

system, and no members will be 

impacted by the proposed rule, which 

merely reflects current functionality 

offered to members that trade in the 

Block Order Mechanism. The proposed 

rule change is therefore not designed to 

impose any significant burden on 

competition. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A)(iii) of the Act 18 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.19

A proposed rule change filed under 

Rule 19b–4(f)(6) 20 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),21 the 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. The Exchange requests that the 

Commission waive the 30-day operative 

delay. The Exchange notes that a waiver 

is consistent with the protection of 

investors and the public interest 

because it will allow the Exchange to 

correct its Block Order Mechanism rules 

to reflect the current functionality of the 

system without undue delay. The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest. Accordingly, the 

Commission hereby waives the 30-day 

operative delay and designates the 

proposed rule change operative upon 

filing.22

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) otherwise in 

furtherance of the purposes of the Act. 

If the Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the 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– 

GEMX–2017–43 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–GEMX–2017–43. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–GEMX– 

2017–43 and should be submitted on or 

before October 26, 2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.23

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–21406 Filed 10–4–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81766; File No. SR– 

NYSEArca–2017–86] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change To List and Trade Shares 

of the JPMorgan Managed Futures ETF 

Under NYSE Arca Rule 8.600–E 

September 29, 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 14, 2017, NYSE Arca, Inc. 

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

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade shares of the following under 

NYSE Arca Rule 8.600–E (‘‘Managed 

Fund Shares’’): JPMorgan Managed 

Futures ETF. 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. 


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3A 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 Rule 5.2–E(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. 

4The Commission has previously approved 

listing and trading on the Exchange of other series 

of the Trust that are actively managed funds under 

Rule 8.600–E. See, e.g., Securities Exchange Act 

Release Nos. 79683 (December 23, 2016) (SR– 

NYSEArca–2016–82) (order approving a proposed 

rule change to list and trade shares of the JPMorgan 

Diversified Event Driven ETF under NYSE Arca 

Equities Rule 8.600); 77904 (May 25, 2016) (SR– 

NYSEArca–2016–17) (order approving a proposed 

rule change to list and trade of shares of the 

JPMorgan Diversified Alternative ETF under NYSE 

Arca Equities Rule 8.600). 

5The Trust is registered under the 1940 Act. On 

July 18, 2017, the Trust filed with the Commission 

an amendment to its registration statement on Form 

N–1A under the Securities Act of 1933 (15 U.S.C. 

77a) (‘‘Securities Act’’) and the 1940 Act relating to 

the Fund (File Nos. 333–191837 and 811–22903) 

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

the operation of the Trust and the Fund herein is 

based, in part, on the Registration Statement. In 

addition, the Commission has issued an order 

granting certain exemptive relief to the Trust under 

the 1940 Act. See Investment Company Act Release 

No. 31990 (February 9, 2016) (‘‘Exemptive Order’’). 

Investments made by the Fund will comply with 

the conditions set forth in the Exemptive Order. 

6An 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. 

7The term ‘‘normal market conditions’’ is defined 

in NYSE Arca Rule 8.600–E(c)(5). 

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 8.600–E, which 

governs the listing and trading of 

Managed Fund Shares 3 on the 

Exchange: 4 JPMorgan Managed Futures 

ETF (the ‘‘Fund’’).5

The Fund is a series of J.P. Morgan 

Exchange-Traded Fund Trust (‘‘Trust’’), 

a Delaware statutory trust. J.P. Morgan 

Investment Management Inc. (‘‘Adviser’’ 

or ‘‘Administrator’’) will be the 

investment adviser to the Fund and also 

provide administrative services for and 

oversee the other service providers for 

the Fund. The Adviser is a whollyowned subsidiary of JPMorgan Asset 

Management Holdings Inc., which is an 

indirect, wholly-owned subsidiary of 

JPMorgan Chase & Co. (‘‘JPMorgan 

Chase’’), a bank holding company. 

JPMorgan Distribution Services, Inc. 

(‘‘Distributor’’) will be the distributor of 

the Fund’s Shares. 

Commentary .06 to Rule 8.600–E 

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.6 In addition, 

Commentary .06 further requires that 

personnel who make decisions on the 

open-end fund’s portfolio composition 

must be subject to procedures designed 

to prevent the use and dissemination of 

material nonpublic information 

regarding the open-end fund’s portfolio. 

The Adviser is not registered as a 

broker-dealer but is affiliated with a 

broker-dealer and has implemented and 

will maintain a fire wall with respect to 

such broker-dealer affiliate regarding 

access to information concerning the 

composition and/or changes to the 

portfolio. In the event (a) the Adviser 

becomes registered as a broker-dealer or 

newly affiliated with one or more 

broker-dealers, or (b) any new adviser or 

sub-adviser is a registered broker-dealer 

or becomes affiliated with a brokerdealer, it will implement and maintain 

a fire wall with respect to its relevant 

personnel or its broker-dealer affiliate 

regarding access to information 

concerning the composition and/or 

changes to the portfolio, and will be 

subject to procedures designed to 

prevent the use and dissemination of 

material non-public information 

regarding such portfolio. 

JPMorgan Managed Futures ETF 

According to the Registration 

Statement, the Fund will seek to 

provide long-term total return. Through 

the Adviser’s systematic investment 

process, the Fund seeks to achieve its 

investment objective by investing 

globally to exploit opportunities across 

a broad range of asset classes including, 

but not limited to, equities, fixed 

income, currency and commodities 

based on the adviser’s assessment of 

their relative attractiveness. Within 

these strategies, the Adviser believes it 

has identified (and will continue to 

identify) a set of investment return 

sources that have a low correlation to 

each other and to traditional markets 

and have distinct risk and return 

profiles (each a ‘‘return factor’’). 

Under normal market conditions,7 the 

Fund will implement its ‘‘Managed 

Futures’’ strategy to access certain 

return factors. Each return factor 

represents a potential source of 

investment return that results from, 

among other things, assuming a 

particular risk or taking advantage of a 

behavioral bias. The Adviser believes 

that, in general, the Fund’s investment 

returns are attributable to the individual 

contributions of the various return 

factors. By employing this return factor 

based approach, the Fund seeks to 

provide positive total returns over time 

while maintaining a relatively low 

correlation with traditional markets. 

The exposure to individual return 

factors may vary based on the market 

opportunity of the individual return 

factors. Additional return factors may be 

identified over time. For example, the 

return factors that the Adviser may 

utilize include, but are not limited to, 

the following: 

• Carry—In the carry strategies, the 

Fund seeks to take a short position in a 

low yielding instrument while also 

taking a long position in another 

instrument that is higher yielding. The 

strategies seek to capture the tendency 

for higher yielding assets to provide 

higher returns than lower-yielding 

assets. The Fund implements these 


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8According to the Registration Statement, the 

Fund will use the following asset classes in 

implementing this strategy: Fixed Income—the 

Fund will seek to benefit from differences in the 

yield of interest rates, caused by uncertainty in 

interest rates. The Fund will invest in instruments 

with higher interest rate yields and short those with 

lower yields; Currency—the Fund will seek to 

benefit from differences in the relative yields of 

various currencies. The Fund will invest in higher 

yielding currencies and short those with lower 

yields. Commodities—the Fund will seek to benefit 

from differences in the price of commodities futures 

contracts trading below the expected market price 

at contract maturity and those trading above the 

expected market price at contract maturity. 

9According to the Registration Statement, the 

Fund will implement the momentum return factor 

in the following ways: Looking at the relative value 

of prices of commodities and developed market 

currencies over time. The Fund intends to invest in 

futures or forward contracts to hold the best 

opportunities long while also shorting the worst 

opportunities within these asset classes. Looking 

across developed market fixed income, developed 

market equity indices and international (including 

emerging market) commodities, the Fund will seek 

to utilize futures contracts to exploit price 

momentum trends across the asset classes. At any 

particular time, the Fund may hold only long or 

only short futures in a particular asset class as part 

of this strategy. 

10The Fund’s investments would be subject to 

any applicable percentage limitations in 

Commentary .01 to NYSE Arca Rule 8.600–E. 

11A foreign currency forward contract is a 

negotiated agreement between the contracting 

parties to exchange a specified amount of currency 

at a specified future time at a specified rate. The 

rate can be higher or lower than the spot rate 

between the currencies that are the subject of the 

contract. 

12Bank obligations include the following: 

Bankers’ acceptances, certificates of deposit and 

time deposits. Bankers’ acceptances are bills of 

exchange or time drafts drawn on and accepted by 

a commercial bank. Maturities are generally six 

months or less. Certificates of deposit are negotiable 

certificates issued by a bank for a specified period 

of time and earning a specified return. Time 

deposits are non-negotiable receipts issued by a 

bank in exchange for the deposit of funds. 

13Commercial paper consists of secured and 

unsecured short-term promissory notes issued by 

corporations and other entities. Maturities generally 

vary from a few days to nine months. 

strategies through derivatives instead of 

holding long and shorting securities 

physically; 8

• Momentum—These strategies seek 

to capture the tendency that an asset’s 

recent performance based on its price 

will continue in the near future. The 

Fund will seek to choose investments 

that have performed relatively well over 

those that have underperformed over 

the medium-term.9

The Fund will invest its assets 

globally to gain exposure, either directly 

or through the use of derivatives, to 

equity securities (across market 

capitalizations) in developed markets, 

debt securities (including below 

investment grade or high yield debt 

securities), commodities (through its 

subsidiary as described below) and 

currencies (including in emerging 

markets). The Fund may use both long 

and short positions (achieved primarily 

through the use of financial derivative 

instruments). The Fund may maintain a 

total net long market exposure, meaning 

that the Fund’s long exposure will be 

greater than its short exposure, neutral 

aggregate exposure, where the long and 

short exposure will be equal, or total net 

short exposure, meaning that the Fund’s 

short exposure will be greater than its 

long exposure. In addition, the Fund 

may have net long or net short exposure 

to one or more industry sectors, 

individual markets and/or currencies 

based on the Adviser’s view of whether 

a particular sector, market or currency is 

expected to outperform or 

underperform. 

The Adviser will make use of 

derivatives including swaps, futures, 

options and forward contracts, in 

implementing its strategies. Under 

normal market conditions, the Adviser 

currently expects that a significant 

portion of the Fund’s exposure will be 

attained through the use of derivatives 

in addition to its exposure through 

direct investments. Derivatives, which 

are instruments that have a value based 

on another instrument, exchange rate or 

index, will primarily be used as an 

efficient means of implementing a 

particular strategy in order to gain 

exposure to a desired return factor. 

Derivatives may also be used to 

increase gain, to effectively gain targeted 

exposure from its cash positions, to 

hedge various investments and/or for 

risk management. As a result of the 

Fund’s use of derivatives and to serve as 

collateral, the Fund may hold 

significant amounts of U.S. Treasury 

obligations, including Treasury bills, 

bonds and notes and other obligations 

issued or guaranteed by the U.S. 

Treasury, obligations of other sovereign 

governments or supranational entities, 

other short-term investments, including 

money market funds and foreign 

currencies in which certain derivatives 

are denominated. 

The amount that may be invested in 

any one instrument will vary and 

generally depend on the return factors 

employed by the Adviser at that time. 

However, there are no stated percentage 

limitations on the amount that can be 

invested in any one type of instrument, 

and the Adviser may, at times, focus on 

a smaller number of instruments.10

Moreover, the Fund is generally 

unconstrained by any particular 

capitalization, style or sector and may 

invest in any region or country. The 

Fund may have both long and short 

exposure to these instruments. Given 

the complexity of the investments and 

strategies of the Fund, the Adviser will 

make use of quantitative models and 

information and data supplied by third 

parties to, among other things, help 

determine the portfolio’s weightings 

among various investments and 

construct sets of transactions and 

investments. 

The Fund will purchase a particular 

instrument when the Adviser believes 

that such instrument will allow the 

Fund to gain the desired exposure to a 

return factor. Conversely, the Fund will 

consider selling a particular instrument 

when it no longer provides the desired 

exposure to a return factor. In addition, 

investment decisions will take into 

account a return factor’s contribution to 

the Fund’s overall volatility. In 

allocating assets, the Adviser seeks to 

approximately balance risk to the 

individual return factors over the long 

term, although the exposure to 

individual return factors will vary based 

on, among other things, the opportunity 

the Adviser sees in each individual 

return factor. 

Principal Investments 

According to the Registration 

Statement, under normal market 

conditions, the Fund will invest 

principally (i.e., at least 50% of the 

Fund’s assets) in the securities and 

financial instruments described below, 

which may be represented by 

derivatives relating to such securities 

and financial instruments, as discussed 

below. 

The Fund may purchase and sell U.S. 

and foreign exchange-traded commodity 

futures, equity futures, options on 

equity futures, bond futures, index 

futures, currency futures, and options 

on currency futures. 

The Fund may invest in over-thecounter (‘‘OTC’’) total return swaps on 

equities, fixed income, commodities, 

and foreign currencies; currency swaps; 

interest rate swaps; credit default swaps 

(‘‘CDS’’); CDS index swaps (‘‘CDX’’) and 

loan credit default index swaps 

(‘‘LCDX’’). 

The Fund may invest in forward and 

spot currency transactions. Such 

investments consist of non-deliverable 

forwards (‘‘NDFs’’), foreign forward 

currency contracts,11 spot currency 

transactions, caps and floors. 

The Fund may invest in cash and cash 

equivalents which are investments in 

money market funds (including funds 

for which the Adviser and/or its 

affiliates may serve as investment 

adviser or administrator), bank 

obligations,12 and commercial paper.13

The Fund may invest in U.S. 

Government obligations, which may 

include direct obligations of the U.S. 


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14 15 U.S.C. 80a–12(d)(1). 

15The Fund’s broad-based securities benchmark 

index will be identified in a future amendment to 

the Registration Statement following the Fund’s 

first full calendar year of performance. 

16To mitigate leveraging risk, the Adviser will 

segregate or ‘‘earmark’’ liquid assets or otherwise 

cover the transactions that may give rise to such 

risk. 

Treasury, including Treasury bills, notes 

and bonds, all of which are backed as 

to principal and interest payments by 

the full faith and credit of the United 

States, and separately traded principal 

and interest component parts of such 

obligations that are transferable through 

the Federal book-entry system known as 

Separate Trading of Registered Interest 

and Principal of Securities (‘‘STRIPS’’) 

and Coupons Under Book Entry 

Safekeeping (‘‘CUBES’’). 

The Fund may invest in U.S. and 

foreign corporate debt. 

Other Investments 

While the Fund, under normal market 

conditions, will invest at least fifty 

percent (50%) of its assets in the 

securities and financial instruments 

described above, the Fund may invest 

its remaining assets in other assets and 

financial instruments, as described 

below. 

The Fund may invest in U.S. and 

foreign exchange-traded call and put 

options on equities, equity indexes and 

equity futures. 

The Fund will gain exposure to 

commodity markets by investing 

directly in commodity related 

instruments or indirectly by investing 

up to 20% of its total assets in the 

Managed Futures Fund CS Ltd., a 

wholly owned subsidiary of the Fund 

organized under the laws of the Cayman 

Islands (the Subsidiary). The Subsidiary 

is also advised by the Adviser. The 

Subsidiary will only invest in 

commodity or cash management related 

investments described above in the 

Principal Investments section. However, 

the Subsidiary (unlike the Fund) may 

invest without limitation in commodity 

related investments, including 

derivative instruments linked to the 

value of a particular commodity, 

commodity index or commodity futures 

contract described above. The 

Subsidiary will otherwise be subject to 

the same fundamental, non-fundamental 

and certain other investment restrictions 

as the Fund. 

The Fund may invest in U.S. 

exchange-listed preferred stock. 

The Fund may invest in exchangelisted-and-traded real estate investment 

trusts (‘‘REITs’’). Exchange-listed REITs 

will be traded on U.S. national 

securities exchanges. 

The Fund may invest in repurchase 

agreements and reverse repurchase 

agreements. 

The Fund may invest in sovereign 

obligations, which are investments in 

debt obligations issued or guaranteed by 

a foreign sovereign government or its 

agencies, authorities or political 

subdivisions. The Fund may also invest 

in obligations of supranational entities 

including securities designated or 

supported by governmental entities to 

promote economic reconstruction or 

development of international banking 

institutions and related government 

agencies. 

In addition to money market funds 

referenced above, the Fund may invest 

in shares of non-exchange-traded 

investment company securities 

including investment company 

securities for which the Adviser and/or 

its affiliates may serve as investment 

adviser or administrator, to the extent 

permitted by Section 12(d)(1) 14 of the 

1940 Act and the rules thereunder and/ 

or any applicable exemption or 

exemptive order under the 1940 Act 

with respect to such investments. 

Other Restrictions 

The Fund’s investments, including 

derivatives, will be consistent with the 

Fund’s investment objective and will 

not be used to enhance leverage 

(although certain derivatives and other 

investments may result in leverage). 

That is, while the Fund will be 

permitted to borrow as permitted under 

the 1940 Act, the Fund’s (and the 

Subsidiary’s) investments will not be 

used to seek performance that is the 

multiple or inverse multiple (e.g., 2Xs 

and 3Xs) of the Fund’s primary broadbased securities benchmark index (as 

defined in Form N–1A).15

The Fund’s and the Subsidiary’s Use of 

Derivatives 

The Fund proposes to seek certain 

exposures through transactions in the 

specific derivative instruments 

described above. The derivatives usage 

may occur in the Fund or the Subsidiary 

(provided that the Subsidiary will invest 

only in commodity or cash management 

related investments, as described 

above). The derivatives to be used are 

futures, swaps, forwards, and call and 

put options. Derivatives, which are 

instruments that have a value based on 

another instrument, exchange rate or 

index, may also be used as substitutes 

for securities in which the Fund can 

invest. The Fund may use these 

derivative instruments to increase gain, 

to effectively gain targeted exposure 

from its cash positions, to hedge various 

investments and/or for risk 

management. 

Investments in derivative instruments 

will be made in accordance with the 

1940 Act and consistent with the Fund’s 

investment objective and policies. To 

limit the potential risk associated with 

such transactions, the Fund will 

segregate or ‘‘earmark’’ assets 

determined to be liquid by the Adviser 

in accordance with procedures 

established by the Trust’s Board of 

Trustees (the ‘‘Board’’) and in 

accordance with the 1940 Act (or, as 

permitted by applicable regulation, 

enter into certain offsetting positions) to 

cover its obligations under derivative 

instruments. These procedures have 

been adopted consistent with Section 18 

of the 1940 Act and related Commission 

guidance. In addition, the Fund will 

include appropriate risk disclosure in 

its offering documents, including 

leveraging risk. Leveraging risk is the 

risk that certain transactions of the 

Fund, including the Fund’s use of 

derivatives, may give rise to leverage, 

causing the Fund to be more volatile 

than if it had not been leveraged.16

Because the markets for certain assets, 

or the assets themselves, may be 

unavailable or cost prohibitive as 

compared to derivative instruments, 

suitable derivative transactions may be 

an efficient alternative for the Fund to 

obtain the desired asset exposure. 

Creation and Redemption of Shares 

The consideration for a purchase of 

Creation Units will generally be cash, 

but may consist of an in-kind deposit of 

a designated portfolio of equity 

securities and other investments (the 

‘‘Deposit Instruments’’) and an amount 

of cash computed as described below 

(the ‘‘Cash Amount’’) under some 

circumstances. The Cash Amount 

together with the Deposit Instruments, 

as applicable, are referred to as the 

‘‘Portfolio Deposit,’’ which represents 

the minimum initial and subsequent 

investment amount for a Creation Unit 

of the Fund. The size of a Creation Units 

is 50,000 Shares and is subject to 

change. 

In the event the Fund requires Deposit 

Instruments and a Cash Amount in 

consideration for purchasing a Creation 

Unit, the function of the Cash Amount 

is to compensate for any differences 

between the net asset value (‘‘NAV’’) per 

Creation Unit and the Deposit Amount 

(as defined below). The Cash Amount 

would 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 aggregate market value of 

the Deposit Instruments. If the Cash 


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46570 Federal Register / Vol. 82, No. 192 / Thursday, October 5, 2017 / Notices 

17The Adviser represents that, to the extent the 

Trust effects the creation or redemption of Shares 

in cash, such transactions will be effected in the 

same manner for all Authorized Participants. 

Amount is a positive number (the NAV 

per Creation Unit exceeds the Deposit 

Amount), the Authorized Participant 

will deliver the Cash Amount. If the 

Cash Amount is a negative number (the 

NAV per Creation Unit is less than the 

Deposit Amount), the Authorized 

Participant will receive the Cash 

Amount. The Administrator, through 

the National Securities Clearing 

Corporation (‘‘NSCC’’), will make 

available on each business day, 

immediately prior to the opening of 

business on the Exchange (currently 

9:30 a.m. Eastern time (‘‘E.T.’’)), the list 

of the names and the required number 

of shares of each Deposit Instrument to 

be included in the current Portfolio 

Deposit (based on information at the 

end of the previous business day), as 

well as information regarding the Cash 

Amount for the Fund. Such Portfolio 

Deposit is applicable, subject to any 

adjustments as described below, in 

order to effect creations of Creation 

Units of the Fund until such time as the 

next-announced Portfolio Deposit 

composition is made available. 

The identity and number of the 

Deposit Instruments and Cash Amount 

required for the Portfolio Deposit for the 

Fund changes as rebalancing 

adjustments and corporate action events 

are reflected from time to time by the 

Adviser with a view to the investment 

objective of the Fund. In addition, the 

Trust reserves the right to accept a 

basket of securities or cash that differs 

from Deposit Instruments or to permit 

the substitution of an amount of cash 

(i.e., a ‘‘cash in lieu’’ amount) to be 

added to the Cash Amount to replace 

any Deposit Instrument which may, 

among other reasons, not be available in 

sufficient quantity for delivery, not be 

permitted to be re-registered in the 

name of the Trust as a result of an inkind creation order pursuant to local 

law or market convention or for other 

reasons as described in the Registration 

Statement, or which may not be eligible 

for trading by a Participating Party 

(defined below). In light of the 

foregoing, in order to seek to replicate 

the in-kind creation order process, the 

Trust expects to purchase the Deposit 

Instruments represented by the cash in 

lieu amount in the secondary market. 

Procedures for Creation of Creation 

Units 

To be eligible to place orders with the 

Distributor to create Creation Units of 

the Fund, an entity or person either 

must be (1) a ‘‘Participating Party,’’ i.e., 

a broker-dealer or other participant in 

the clearing process through the 

Continuous Net Settlement System of 

the NSCC; or (2) a Depositary Trust 

Company (‘‘DTC’’) Participant, which, 

in either case, must have executed an 

agreement with the Distributor (as it 

may be amended from time to time in 

accordance with its terms) (‘‘Participant 

Agreement’’). A Participating Party and 

DTC Participant are collectively referred 

to as an ‘‘Authorized Participant.’’ All 

orders to create Creation Units must be 

received by the Distributor no later than 

the closing time of the regular trading 

session on the Exchange (‘‘Closing 

Time’’) (ordinarily 4:00 p.m. E.T.), 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 the Fund as determined on such date. 

Redemption of Creation Units 

Shares may be redeemed only in 

Creation Units at their NAV next 

determined after receipt of a redemption 

request in proper form by the 

Distributor, only on a business day and 

only through a Participating Party or 

DTC Participant who has executed a 

Participant Agreement. The Trust will 

not redeem Shares in amounts less than 

Creation Units. All orders to redeem 

Creation Units must be received by the 

Distributor no later than the Exchange 

Closing Time (ordinarily 4:00 p.m. E.T.). 

Although the Fund will generally pay 

redemption proceeds in cash, there may 

be instances when it will make 

redemptions in-kind. In these instances, 

the Administrator, through NSCC, 

makes available immediately prior to 

the opening of business on the Exchange 

(currently 9:30 a.m. E.T.) on each day 

that the Exchange is open for business, 

the identity of the Fund’s assets and/or 

an amount of cash that will be 

applicable (subject to possible 

amendment or correction) to 

redemption requests received in proper 

form on that day. With respect to 

redemptions in-kind, the redemption 

proceeds for a Creation Unit generally 

consist of Redemption Instruments 

(which are securities received on 

redemption) as announced by the 

Administrator on the business day of 

the request for redemption, plus cash in 

an amount equal to the difference 

between the NAV of the Shares being 

redeemed, as next determined after a 

receipt of a request in proper form, and 

the value of the Redemption 

Instruments, less the redemption 

transaction fee and variable fees 

described below. 

Should the Redemption Instruments 

have a value greater than the NAV of the 

Shares being redeemed, a compensating 

cash payment to the Trust equal to the 

differential plus the applicable 

redemption transaction fee will be 

required to be arranged for by or on 

behalf of the redeeming shareholder. 

The Fund reserves the right to honor a 

redemption request by delivering a 

basket of securities or cash that differs 

from the Redemption Instruments if, 

among other reasons, not permitted to 

be re-registered in the name of the 

customer as a result of an in-kind 

redemption order pursuant to local law 

or market convention or which may not 

be eligible for trading by a Participating 

Party.17

Derivatives Valuation Methodology for 

Purposes of Determining Intra-Day 

Indicative Value 

On each business day, before 

commencement of trading in Fund 

Shares on NYSE Arca, the Fund will 

disclose on its Web site the identities 

and quantities of the portfolio 

instruments and other assets held by the 

Fund that will form the basis for the 

Fund’s calculation of NAV at the end of 

the business day. 

In order to provide additional 

information regarding the intra-day 

value of Shares of the Fund, one or more 

major market data vendors will 

disseminate every 15 seconds during the 

Exchange’s Core Trading Session, 

through the facilities of the 

Consolidated Tape Association (‘‘CTA’’) 

or other widely disseminated means, an 

updated Portfolio Indicative Value 

(‘‘PIV’’) for the Fund as calculated by a 

third party market data provider. 

A third party market data provider 

will calculate the PIV for the Fund. The 

third party market data provider may 

use market quotes if available or may 

fair value securities against proxies 

(such as swap or yield curves). 

With respect to specific derivatives: 

• NDFs and foreign forward currency 

contracts may be valued intraday using 

market quotes, or another proxy as 

determined to be appropriate by the 

third party market data provider. 

• Futures may be valued intraday 

using the relevant futures exchange 

data, or another proxy as determined to 

be appropriate by the third party market 

data provider. 

• Interest rate swaps and currency 

swaps may be mapped to a swap curve 

and valued intraday based on changes of 

the swap curve, or another proxy as 

determined to be appropriate by the 

third party market data provider. 

• CDS, CDX and LCDX may be valued 

using intraday data from market 

vendors, or based on underlying asset 

price, or another proxy as determined to 


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Federal Register / Vol. 82, No. 192 / Thursday, October 5, 2017 / Notices 46571 

18Commentary .01(e) to NYSE Arca Rule 8.600– 

E provides that a portfolio may hold OTC 

derivatives, including forwards, options and swaps 

on commodities, currencies and financial 

instruments (e.g., stocks, fixed income, interest 

rates, and volatility) or a basket or index of any of 

the foregoing; however, on both an initial and 

continuing basis, no more than 20% of the assets 

in the portfolio may be invested in OTC derivatives. 

For purposes of calculating this limitation, a 

portfolio’s investment in OTC derivatives will be 

calculated as the aggregate gross notional value of 

the OTC derivatives. 

19See Securities Exchange Act Release No. 77904 

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

NYSEArca–2016–17) (order approving listing and 

trading of shares of the JPMorgan Diversified 

Alternative ETF under NYSE Arca Equities Rule 

8.600). 

20The Bid/Ask Price of the Fund’s Shares will be 

determined using the mid-point of the highest bid 

and the lowest offer on the Exchange as of the time 

of calculation of the Fund’s NAV. The records 

relating to Bid/Ask Prices will be retained by the 

Fund and its service providers. 

21Under accounting procedures to be followed by 

the Fund, trades made on the prior business day 

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

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

Fund will be able to disclose at the beginning of the 

business day the portfolio that will form the basis 

for the NAV calculation at the end of the business 

day. 

be appropriate by the third party market 

data provider. 

• Total return swaps may be valued 

intraday using the underlying asset 

price, or another proxy as determined to 

be appropriate by the third party market 

data provider. 

• Exchange listed options may be 

valued intraday using the relevant 

exchange data, or another proxy as 

determined to be appropriate by the 

third party market data provider. 

Disclosed Portfolio 

The Fund’s disclosure of derivative 

positions in the applicable Disclosed 

Portfolio includes information that 

market participants can use to value 

these positions intraday. On a daily 

basis, the Fund will disclose the 

information regarding the Disclosed 

Portfolio required under NYSE Arca 

Rule 8.600–E (c)(2) to the extent 

applicable. The Fund’s Web site 

information will be publicly available at 

no charge. 

Impact on Arbitrage Mechanism 

The Adviser believes there will be 

minimal impact to the arbitrage 

mechanism as a result of the use of 

derivatives. Market makers and 

participants should be able to value 

derivatives as long as the positions are 

disclosed with relevant information. 

The Adviser believes that the price at 

which Shares trade will continue to be 

disciplined by arbitrage opportunities 

created by the ability to purchase or 

redeem creation Shares at their NAV, 

which should ensure that Shares will 

not trade at a material discount or 

premium in relation to their NAV. 

The Adviser does not believe there 

will be any significant impacts to the 

settlement or operational aspects of the 

Fund’s arbitrage mechanism due to the 

use of derivatives. Because derivatives 

generally are not eligible for in-kind 

transfer, they will typically be 

substituted with a ‘‘cash in lieu’’ 

amount when the Fund processes 

purchases or redemptions of creation 

units in-kind. 

Application of Generic Listing 

Requirements 

The Exchange is submitting this 

proposed rule change because the 

portfolio for the Fund will not meet all 

of the ‘‘generic’’ listing requirements of 

Commentary .01 to NYSE Arca Rule 

8.600–E applicable to the listing of 

Managed Fund Shares. The Fund’s 

portfolio would meet all such 

requirements except for those set forth 

in Commentary .01(e) of Rule 8.600–E.18

Specifically, the aggregate gross notional 

value of the Fund’s investments in OTC 

derivatives may exceed 20% of Fund 

assets, calculated based on the aggregate 

gross notional value of such OTC 

derivatives. 

The Adviser represents that it intends 

to engage in strategies that utilize 

foreign currency forward transactions 

and swaps (which may be traded OTC), 

as described above, based on its 

investment strategies. Depending on 

market conditions, the exposure due to 

these strategies may exceed 20% of the 

Fund’s assets. The Adviser represents 

further that the foreign exchange 

forward market is OTC and swaps may 

be traded OTC, and, as such, it is not 

possible to implement these strategies 

efficiently using listed derivatives. If the 

Fund were limited to investing up to 

20% of assets in OTC derivatives, the 

Fund would have to exclude or 

underweight these strategies and would 

be less diversified, concentrating risk in 

the other strategies it will utilize. 

The Adviser represents that the Fund 

will follow an investment strategy 

utilized within the JP Morgan 

Diversified Alternative ETF, shares of 

which have previously been approved 

by the Commission for Exchange listing 

and trading.19 As noted above, the Fund 

may use the derivative instruments 

described above to increase gain, to 

effectively gain targeted exposure from 

its cash positions, to hedge various 

investments and/or for risk 

management. 

The Exchange notes that, other than 

Commentary.01(e) to Rule 8.600–E, the 

Fund will meet all other requirements of 

Rule 8.600–E. 

Availability of Information 

The Fund’s Web site 

(www.jpmorganfunds.com), which will 

be publicly available prior to the public 

offering of Shares, will include a form 

of the prospectus for the Fund that may 

be downloaded. The Fund’s Web site 

will include additional quantitative 

information updated on a daily basis, 

including, for the Fund, (1) daily trading 

volume, the prior business day’s 

reported closing price, NAV and midpoint of the bid/ask spread at the time 

of calculation of such NAV (the ‘‘Bid/ 

Ask Price’’),20 and a calculation of the 

premium and discount of the Bid/Ask 

Price against the NAV, and (2) data in 

chart format displaying the frequency 

distribution of discounts and premiums 

of the daily Bid/Ask Price against the 

NAV, within appropriate ranges, for 

each of the four previous calendar 

quarters. On each business day, before 

commencement of trading in Shares in 

the Core Trading Session on the 

Exchange, the Adviser will disclose on 

the Fund’s Web site the Disclosed 

Portfolio for the Fund as defined in 

NYSE Arca Rule 8.600–E(c)(2) that will 

form the basis for the Fund’s calculation 

of NAV at the end of the business day.21

Investors can also obtain the Trust’s 

Statement of Additional Information 

(‘‘SAI’’), the Fund’s Shareholder 

Reports, and its Form N–CSR and Form 

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

SAI and Shareholder Reports are 

available free upon request from the 

Trust, and those documents and the 

Form N–CSR and Form N–SAR may be 

viewed on-screen or downloaded from 

the Commission’s Web site at 

www.sec.gov. 

Quotation and last sale information 

for the Shares and for portfolio holdings 

of the Fund that are U.S. exchangelisted, including U.S. and foreign 

exchange-traded options, preferred 

stocks, and REITs will be available via 

the CTA high speed line. Quotation and 

last sale information for such U.S. 

exchange-listed securities, as well as 

U.S. and foreign exchange-traded 

futures will be available from the 

exchange on which they are listed. 

Quotation and last sale information for 

exchange-listed options cleared via the 

Options Clearing Corporation will be 

available via the Options Price 

Reporting Authority. Price information 

for preferred stocks will also be 

available from one or more major market 

data vendors or from broker-dealers. 


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46572 Federal Register / Vol. 82, No. 192 / Thursday, October 5, 2017 / Notices 

22Currently, it is the Exchange’s understanding 

that several major market data vendors display and/ 

or make widely available PIVs taken from the CTA 

or other data feeds. 

23See NYSE Arca Rule 7.12–E. 

24 17 CFR 240 10A–3. 

25FINRA conducts cross-market surveillances on 

behalf of the Exchange pursuant to a regulatory 

services agreement. The Exchange is responsible for 

FINRA’s performance under this regulatory services 

agreement. 

26For a list of the current members of ISG, see 

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

components of the Disclosed Portfolio for the Fund 

may trade on markets that are members of ISG or 

with which the Exchange has in place a 

comprehensive surveillance sharing agreement. 

Quotation information for cash 

equivalents, swaps, obligations of 

supranational agencies, money market 

funds, non-exchange-listed investment 

company securities (other than money 

market funds), U.S. Government 

obligations, U.S. Government agency 

obligations, sovereign obligations, 

repurchase agreements, reverse 

repurchase agreements, and U.S. and 

foreign corporate debt may be obtained 

from brokers and dealers who make 

markets in such securities or through 

nationally recognized pricing services 

through subscription agreements. The 

U.S. dollar value of foreign securities, 

instruments and currencies can be 

derived by using foreign currency 

exchange rate quotations obtained from 

nationally recognized pricing services. 

Forwards and spot currency price 

information will be available from major 

market data vendors. 

In addition, the PIV, as defined in 

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

widely disseminated by one or more 

major market data vendors at least every 

15 seconds during the Core Trading 

Session.22 The dissemination of the PIV, 

together with the Disclosed Portfolio, 

will allow investors to determine the 

approximate value of the underlying 

portfolio of the Fund on a daily basis 

and will provide a close estimate of that 

value throughout the trading day. 

Trading Halts 

With respect to trading halts, the 

Exchange may consider all relevant 

factors in exercising its discretion to 

halt or suspend trading in the Shares of 

the Fund.23 Trading in Shares of the 

Fund will be halted if the circuit breaker 

parameters in NYSE Arca Rule 7.12–E 

have been reached. Trading also may be 

halted because of market conditions or 

for reasons that, in the view of the 

Exchange, make trading in the Shares of 

the Fund inadvisable. 

Trading in the Shares will be subject 

to NYSE Arca Rule 8.600–E(d)(2)(D), 

which sets forth circumstances under 

which Shares of the Fund may be 

halted. 

Trading Rules 

The Exchange deems the Shares to be 

equity securities, thus rendering trading 

in the Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. Shares will trade on 

the NYSE Arca Marketplace from 4:00 

a.m. to 8:00 p.m. E.T. in accordance 

with NYSE Arca Rule 7.34–E (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 Rule 7.6–E, the minimum 

price variation (‘‘MPV’’) for quoting and 

entry of orders in equity securities 

traded on the NYSE Arca Marketplace is 

$0.01, with the exception of securities 

that are priced less than $1.00 for which 

the MPV for order entry is $0.0001. 

The Shares of the Fund will conform 

to the initial and continued listing 

criteria under NYSE Arca Rule 8.600–E. 

The Exchange represents that, for initial 

and/or continued listing, the Fund will 

be in compliance with Rule 10A–3 24

under the Act, as provided by NYSE 

Arca Rule 5.3–E. A minimum of 100,000 

Shares of the Fund will be outstanding 

at the commencement of trading on the 

Exchange. The Exchange will obtain a 

representation from the issuer of the 

Shares of the Fund that the NAV and 

the Disclosed Portfolio will be made 

available to all market participants at 

the same time. 

Surveillance 

The Exchange represents that trading 

in the Shares will be subject to the 

existing trading surveillances 

administered by the Exchange, as well 

as cross-market surveillances 

administered by the Financial Industry 

Regulatory Authority (‘‘FINRA’’) on 

behalf of the Exchange, which are 

designed to detect violations of 

Exchange rules and applicable federal 

securities laws.25 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 

applicable federal securities laws. 

The surveillances referred to above 

generally focus on detecting securities 

trading outside their normal patterns, 

which could be indicative of 

manipulative or other violative activity. 

When such situations are detected, 

surveillance analysis follows and 

investigations are opened, where 

appropriate, to review the behavior of 

all relevant parties for all relevant 

trading violations. 

The Exchange or FINRA, on behalf of 

the Exchange, or both, will 

communicate as needed regarding 

trading in the Shares, exchange-listed 

equity securities, certain futures, and 

certain exchange-traded options with 

other markets and other entities that are 

members of the Intermarket 

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

Exchange or FINRA, on behalf of the 

Exchange, or both, may obtain trading 

information regarding trading such 

securities and financial instruments 

from such markets and other entities. In 

addition, the Exchange may obtain 

information regarding trading in such 

securities and financial instruments 

from markets and other entities that are 

members of ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement.26

FINRA, on behalf of the Exchange, is 

able to access, as needed, trade 

information for certain fixed income 

securities held by the Fund reported to 

FINRA’s Trade Reporting and 

Compliance Engine (‘‘TRACE’’). 

In addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

All statements and representations 

made in this filing regarding (a) the 

description of the portfolio, (b) 

limitations on portfolio holdings or 

reference assets, or (c) the applicability 

of Exchange listing rules specified in 

this rule filing shall constitute 

continued listing requirements for 

listing the Shares on the Exchange. 

The issuer has represented to the 

Exchange that it will advise the 

Exchange of any failure by the Fund to 

comply with the continued listing 

requirements, and, pursuant to its 

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

Act, the Exchange will monitor for 

compliance with the continued listing 

requirements. If the Fund is not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures under 

NYSE Arca Rule 5.5–E(m). 

Information Bulletin 

Prior to the commencement of 

trading, the Exchange will inform its 

Equity Trading Permit (‘‘ETP’’) Holders 

in an Information Bulletin (‘‘Bulletin’’) 

of the special characteristics and risks 

associated with trading the Shares of the 

Fund. Specifically, the Bulletin will 

discuss the following: (1) The 

procedures for purchases and 

redemptions of Shares in Creation Units 

(and that Shares are not individually 

redeemable); (2) NYSE Arca Rule 9.2– 

E(a), which imposes a duty of due 

diligence on its ETP Holders to learn the 


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Federal Register / Vol. 82, No. 192 / Thursday, October 5, 2017 / Notices 46573 

27 15 U.S.C. 78f(b)(5). 28See note 18, supra. 

essential facts relating to every customer 

prior to trading the Shares; (3) the risks 

involved in trading the Shares during 

the Early and Late Trading Sessions 

when an updated PIV will not be 

calculated or publicly disseminated; (4) 

how information regarding the PIV and 

the Disclosed Portfolio is disseminated; 

(5) the requirement that ETP Holders 

deliver a prospectus to investors 

purchasing newly issued Shares prior to 

or concurrently with the confirmation of 

a transaction; and (6) trading 

information. 

In addition, the Bulletin will 

reference that the Fund is subject to 

various fees and expenses described in 

the Registration Statement. The Bulletin 

will discuss any exemptive, no-action, 

and interpretive relief granted by the 

Commission from any rules under the 

Act. The Bulletin will also disclose that 

the NAV for the Shares of the Fund will 

be calculated after 4:00 p.m. E.T. each 

trading day. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) 27 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 Rule 

8.600–E. The Adviser is not registered 

as a broker-dealer but is affiliated with 

a broker-dealer and has implemented 

and will maintain a fire wall with 

respect to such broker-dealer affiliate 

regarding access to information 

concerning the composition and/or 

changes to the portfolio. The Exchange 

represents that trading in the Shares 

will be subject to the existing trading 

surveillances administered by the 

Exchange, as well as cross-market 

surveillances administered by FINRA on 

behalf of the Exchange, which are 

designed to detect violations of 

Exchange rules and applicable federal 

securities laws. 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 

applicable federal securities laws. The 

Exchange or FINRA, on behalf of the 

Exchange, or both, will communicate as 

needed regarding trading in the Shares, 

exchange-listed equity securities, 

certain futures, and certain exchangetraded options with other markets and 

other entities that are members of the 

ISG, and the Exchange or FINRA, on 

behalf of the Exchange, or both, may 

obtain trading information regarding 

trading such securities and financial 

instruments from such markets and 

other entities. In addition, the Exchange 

may obtain information regarding 

trading in such securities and financial 

instruments from markets and other 

entities that are members of ISG or with 

which the Exchange has in place a 

comprehensive surveillance sharing 

agreement. FINRA, on behalf of the 

Exchange, is able to access, as needed, 

trade information for certain fixed 

income securities held by the Fund 

reported to FINRA’s TRACE. 

The PIV, as defined in NYSE Arca 

Rule 8.600–E(c)(3), will be widely 

disseminated by one or more major 

market data vendors at least every 15 

seconds during the Core Trading 

Session. The Fund may hold up to an 

aggregate amount of 15% of its net 

assets in illiquid assets (calculated at 

the time of investment), deemed illiquid 

by the Adviser, consistent with 

Commission guidance. 

The Shares of the Fund will conform 

to the initial and continued listing 

criteria under NYSE Arca Rule 8.600–E. 

The Exchange represents that, for initial 

and/or continued listing, the Fund will 

be in compliance with Rule 10A–3 

under the Act, as provided by NYSE 

Arca Rule 5.3–E. A minimum of 100,000 

Shares of the Fund will be outstanding 

at the commencement of trading on the 

Exchange. The Exchange will obtain a 

representation from the issuer of the 

Shares of the Fund that the NAV per 

Share will be calculated daily and that 

the NAV and the Disclosed Portfolio 

will be made available to all market 

participants at the same time. In 

addition, a large amount of information 

is publicly available regarding the Fund 

and the Shares, thereby promoting 

market transparency. The Fund’s 

portfolio holdings (including those of 

the Subsidiary) will be disclosed on its 

Web site daily after the close of trading 

on the Exchange and prior to the 

opening of trading on the Exchange the 

following day. On a daily basis, the 

Fund will disclose the information 

regarding the Disclosed Portfolio 

required under NYSE Arca Rule 8.600– 

E (c)(2) to the extent applicable. The 

Fund’s Web site information will be 

publicly available at no charge. 

The Fund’s portfolio would meet all 

requirements of Rule 8.600–E except for 

those set forth in Commentary .01(e) of 

Rule 8.600.28 Specifically, the aggregate 

gross notional value of the Fund’s 

investments in OTC derivatives may 

exceed 20% of Fund assets, calculated 

based on the aggregate gross notional 

value of such OTC derivatives. 

The Exchange believes that it is 

appropriate and in the public interest to 

allow the Fund to exceed the 20% limit 

in Commentary .01(e) to Rule 8.600 of 

portfolio assets that may be invested in 

OTC derivatives. Because the Fund, in 

furtherance of its investment objective, 

may seek to gain market exposure using 

OTC traded foreign currency forwards 

and swaps, the 20% limit in 

Commentary .01(e) to Rule 8.600 could 

result in the Fund being unable to fully 

pursue its investment objective while 

attempting to sufficiently mitigate 

investment risks. As noted above, the 

Fund’s investments in derivative 

instruments will be made in accordance 

with the 1940 Act and consistent with 

the Fund’s investment objective and 

policies. To limit the potential risk 

associated with such transactions, the 

Fund will segregate or ‘‘earmark’’ assets 

determined to be liquid by the Adviser 

in accordance with procedures 

established by the Trust’s Board and in 

accordance with the 1940 Act (or, as 

permitted by applicable regulation, 

enter into certain offsetting positions) to 

cover its obligations under derivative 

instruments. These procedures have 

been adopted consistent with Section 18 

of the 1940 Act and related Commission 

guidance. In addition, the Fund will 

include appropriate risk disclosure in 

its offering documents, including 

leveraging risk. To mitigate leveraging 

risk, the Adviser will segregate or 

‘‘earmark’’ liquid assets or otherwise 

cover the transactions that may give rise 

to such risk. Because the markets for 

certain assets, or the assets themselves, 

may be unavailable or cost prohibitive 

as compared to derivative instruments, 

suitable derivative transactions may be 

an efficient alternative for the Fund to 

obtain the desired asset exposure. In 

addition, OTC derivatives may be 

tailored more specifically to the assets 

held by the Fund than available listed 

derivatives. The Adviser also represents 

that the Fund will follow an investment 

strategy utilized within the JP Morgan 

Diversified Alternatives ETF, shares of 

which have previously been approved 

by the Commission for Exchange listing 

and trading pursuant to Section 19(b)(2) 


ethrower on DSK3G9T082PROD with NOTICES
46574 Federal Register / Vol. 82, No. 192 / Thursday, October 5, 2017 / Notices 

29See Securities Exchange Act Release No. 77904 

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

NYSEArca–2016–17) (order approving listing and 

trading of shares of the JPMorgan Diversified 

Alternative ETF under NYSE Arca Equities Rule 

8.600). 30 17 CFR 200.30–3(a)(12). 

of the Act.29 The Exchange further 

believes that the Fund would be placed 

at a competitive disadvantage to the JP 

Morgan Diversified Alternatives ETF, if 

the Fund’s portfolio could not exceed 

the 20% limit in Commentary .01(e) to 

Rule 8.600 of portfolio assets that may 

be invested in OTC derivatives, as 

described above. 

The Exchange notes that, other than 

Commentary .01(e) to Rule 8.600–E, the 

Fund’s portfolio will meet all other 

requirements of Rule 8.600–E. 

The Web site for the Fund will 

include a form of the prospectus for the 

Fund and additional data relating to 

NAV and other applicable quantitative 

information. Moreover, prior to the 

commencement of trading, the Exchange 

will inform its ETP Holders in an 

Information Bulletin of the special 

characteristics and risks associated with 

trading the Shares of the Fund. Trading 

in Shares of the Fund will be halted if 

the circuit breaker parameters in NYSE 

Arca Rule 7.12–E 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 Rule 

8.600–E(d)(2)(D), which sets forth 

circumstances under which Shares of 

the Fund may be halted. In addition, as 

noted above, investors will have ready 

access to information regarding the 

Fund’s holdings, the PIV, the Disclosed 

Portfolio, and quotation and last sale 

information for the Shares. The Fund’s 

investments, including derivatives, will 

be consistent with the Fund’s 

investment objective and will not be 

used to enhance leverage (although 

certain derivatives and other 

investments may result in leverage). 

That is, while the Fund will be 

permitted to borrow as permitted under 

the 1940 Act, the Fund’s investments 

will not be used to seek performance 

that is the multiple or inverse multiple 

(e.g., 2Xs and 3Xs) of the Fund’s 

primary broad-based securities 

benchmark index (as defined in Form 

N–1A). 

The proposed rule change is designed 

to perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest in that 

it will facilitate the listing and trading 

of an additional type of activelymanaged exchange-traded product that 

will enhance competition among market 

participants, to the benefit of investors 

and the marketplace. As noted above, 

the Exchange has in place surveillance 

procedures relating to trading in the 

Shares of the Fund and may obtain 

information via ISG from other 

exchanges that are members of ISG or 

with which the Exchange has entered 

into a comprehensive surveillance 

sharing agreement. In addition, as noted 

above, investors will have ready access 

to information regarding the Fund’s 

holdings, the PIV, the Disclosed 

Portfolio for the Fund, and quotation 

and last sale information for the Shares 

of the Fund. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purpose of the Act. The Exchange 

notes that the proposed rule change will 

facilitate the listing and trading of an 

additional type of actively-managed 

exchange-traded product that holds 

fixed income securities, equity 

securities, commodities, currencies and 

derivatives and that will enhance 

competition among market participants, 

to the benefit of investors and the 

marketplace. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

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–2017–86 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–2017–86. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEArca–2017–86, and should be 

submitted on or before October 26, 

2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–21403 Filed 10–4–17; 8:45 am] 

BILLING CODE 8011–01–P 


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