Federal Register / Vol. 82, No. 198 / Monday, October 16, 2017 / Notices 48127 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4A Managed Fund Share is a security that 

represents an interest in an investment company 

registered under the Investment Company Act of 

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

an open-end investment company or similar entity 

that invests in a portfolio of securities selected by 

its investment adviser consistent with its 

investment objectives and policies. In contrast, an 

open-end investment company that issues 

Investment Company Units, listed and traded on 

the Exchange under NYSE Arca 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. 

5The 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 Alternatives ETF under NYSE 

Arca Equities Rule 8.600). 

6The 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. 

7An investment adviser to an open-end fund is 

required to be registered under the Investment 

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

result, the Adviser and its related personnel are 

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

Advisers Act relating to codes of ethics. This Rule 

requires investment advisers to adopt a code of 

ethics that reflects the fiduciary nature of the 

relationship to clients as well as compliance with 

other applicable securities laws. Accordingly, 

procedures designed to prevent the communication 

and misuse of non-public information by an 

investment adviser must be consistent with Rule 

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

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

for an investment adviser to provide investment 

advice to clients unless such investment adviser has 

(i) adopted and implemented written policies and 

procedures reasonably designed to prevent 

violation, by the investment adviser and its 

supervised persons, of the Advisers Act and the 

Commission rules adopted thereunder; (ii) 

implemented, at a minimum, an annual review 

regarding the adequacy of the policies and 

procedures established pursuant to subparagraph (i) 

above and the effectiveness of their 

implementation; and (iii) designated an individual 

(who is a supervised person) responsible for 

administering the policies and procedures adopted 

under subparagraph (i) above. 

The following individuals will serve 

as members of the NRC PRB Panel that 

was established to review appraisals 

and make recommendations to the 

appointing and awarding authorities for 

NRC PRB members: 

Brooke P. Clark, Director, Office of 

Commission Appellate Adjudication 

Daniel H. Dorman, Regional 

Administrator, Region I 

Andrea D. Veil, Executive Director, 

Advisory Committee on Reactor 

Safeguards 

All appointments are made pursuant 

to Section 4314 of Chapter 43 of Title 

5 of the United States Code. 

Dated at Rockville, Maryland, this 5th day 

of October 2017. 

For the Nuclear Regulatory Commission. 

Miriam L. Cohen, 

Secretary, Executive Resources Board. 

[FR Doc. 2017–22273 Filed 10–13–17; 8:45 am] 

BILLING CODE 7590–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81842; File No. SR– 

NYSEArca–2017–87 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change To List and Trade Shares 

of the JPMorgan Equity Long/Short 

ETF Under NYSE Arca Rule 8.600–E 

October 10, 2017. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that, on 

September 26, 2017, NYSE Arca, Inc. 

(the ‘‘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 Equities 8.600–E (‘‘Managed 

Fund Shares’’): JPMorgan Equity Long/ 

Short 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. 

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 4 on the 

Exchange: 5 JPMorgan Equity Long/ 

Short ETF (the ‘‘Fund’’).6

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.7 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 


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8The term ‘‘normal market conditions’’ is defined 

in NYSE Arca Rule 8.600–E(c)(5). 

9The Fund’s investments would be subject to any 

applicable percentage limitations in Commentary 

.01 to NYSE Arca Rule 8.600–E. 

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 Equity Long/Short ETF 

According to the Registration 

Statement, the Fund will seek to 

provide long-term total return. The 

Fund will seek to profit by exploiting 

pricing inefficiencies between equity 

securities by maintaining long and short 

positions. It will do so based on a 

systematic investment process. 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,8 the 

Fund will employ the ‘‘Equity Long/ 

Short’’ strategy to access certain return 

factors. The strategy will involve 

simultaneously investing in equities 

(i.e., investing long) that the Adviser 

believes are attractive based on relevant 

return factors and selling equities 

(selling short) that the Adviser believes 

are unattractive based on the relevant 

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. 

According to the Registration Statement, 

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. For example, the return factors 

that the Adviser may utilize include, but 

are not limited to, the following: 

• Value—seek to purchase ‘‘cheap’’ 

stocks and sell short ‘‘expensive’’ 

stocks 

• Momentum—seek to purchase 

companies with positive earnings 

revisions and strong price momentum 

and sell short stocks with negative 

earnings revisions and weak price 

momentum 

• Size—seek to purchase small cap 

stocks and sell short large cap stocks 

• Quality—seek to buy high quality 

stocks and sell short lower ranked 

stocks 

Additional return factors may be 

identified over time. 

The Fund will generally invest its 

assets globally to gain exposure, either 

directly or through the use of 

derivatives, to equity securities (across 

market capitalizations) in developed 

markets. The Fund may use both long 

positions (held directly or through the 

use of derivative instruments) and short 

positions (achieved primarily through 

the use of derivative instruments). The 

Fund generally will maintain a total net 

long market exposure under normal 

market conditions, meaning that the 

Fund’s aggregate exposure will be 

greater to instruments that the Adviser 

expects to outperform. However, the 

Fund may have net long or net short 

exposure to one or more industry 

sectors, individual markets and/or 

currencies. To the extent that the Fund 

hedges its currency exposure into the 

U.S. dollar, it may reduce the effects of 

currency fluctuations. 

The Adviser will make use of 

derivatives, including swaps, futures, 

options and forward contracts, in 

implementing its strategy (see ‘‘The 

Fund’s Use of Derivatives’’, below). 

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 investment. 

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. For example, the Fund 

may use a total return swap to establish 

both long and short positions in order 

to gain the desired exposure rather than 

physically purchasing and selling short 

each instrument. 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. 

Under normal market conditions, at 

least 80% of the Fund’s assets will be 

invested in equity securities and in 

derivative instruments that provide 

exposure to equity securities. ‘‘Assets’’ 

means net assets, plus the amount of 

borrowings for investment purposes. 

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. As long as 

the Fund meets its 80% requirement, 

there are no other 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.9 The 

Fund is generally unconstrained by any 

particular capitalization, style or sector 

and may invest in any developed 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 

For purposes of calculating the 

percentage of principal investments 

under this proposed rule change, under 

normal market conditions, at least 80% 

of the Fund’s assets will be invested in 

U.S. and foreign exchange-traded equity 


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10A 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. 

11 Depositary Receipts include American 

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

Receipts (‘‘GDRs’’) and European Depositary 

Receipts (‘‘EDRs’’). ADRs are receipts typically 

issued by an American bank or trust company that 

evidence ownership of underlying securities issued 

by a foreign corporation. EDRs are receipts issued 

by a European bank or trust company evidencing 

ownership of securities issued by a foreign 

corporation. GDRs are receipts issued throughout 

the world that evidence a similar arrangement. 

ADRs, EDRs and GDRs may trade in foreign 

currencies that differ from the currency the 

underlying security for each ADR, EDR or GDR 

principally trades in. Generally, ADRs, in registered 

form, are designed for use in the U.S. securities 

markets. EDRs, in registered form, are used to 

access European markets. GDRs, in registered form, 

are tradable both in the United States and in Europe 

and are designed for use throughout the world. No 

more than 10% of the net assets of the Fund will 

be invested in ADRs that are not exchange-listed. 

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. 

14The 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. 

securities, derivatives instruments that 

provide exposure to such equity 

securities, and currency forward 

transactions. 

The Fund may invest in the following 

exchange-listed equity securities: U.S. 

and foreign exchange-listed common 

stocks of U.S. and foreign corporations, 

U.S. and foreign exchange-listed 

preferred stocks of U.S. and foreign 

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

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

corporations, and U.S. and foreign 

exchange-listed master limited 

partnerships (‘‘MLPs’’). 

The Fund may purchase and sell U.S. 

exchange-traded futures on U.S. and 

foreign equities, U.S. exchange-traded 

options on U.S. and foreign equity 

futures, and U.S. exchange-traded 

futures on U.S. and foreign stock 

indexes. 

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

securities and equity securities indexes. 

The Fund may invest in OTC total 

return swaps on U.S. and foreign 

equities and U.S. and foreign equity 

indices. 

The Fund may invest in forward 

currency transactions. Such investments 

consist of non-deliverable forwards 

(‘‘NDFs’’), foreign forward currency 

contracts,10 caps and floors. 

The Fund may invest in exchangetraded real estate investment trusts 

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

be traded on U.S. national securities 

exchanges and on non-U.S. exchanges. 

The Fund may invest in U.S. and 

foreign exchange-listed and OTC 

Depositary Receipts.11

The Fund may invest in OTC-traded 

convertible securities (bonds or 

preferred stock that can convert to 

common stock). 

The Fund may engage in short sales 

of equity securities. 

Other Investments 

While the Fund, under normal market 

conditions, will invest at least eighty 

percent (80%) of its assets in the 

securities and financial instruments 

described above, the Fund may invest 

its remaining assets in other assets and 

financial instruments, as described 

below. 

The Fund may invest in 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 OTC-traded 

contingent value rights (‘‘CVRs’’). 

The Fund may invest in U.S. 

Government obligations, which may 

include direct obligations of the U.S. 

Treasury, including Treasury bills, notes 

and bonds, all of which are backed as 

to principal and interest payments by 

the full faith and credit of the United 

States, and separately traded principal 

and interest component parts of such 

obligations that are transferable through 

the Federal book-entry system known as 

Separate Trading of Registered Interest 

and Principal of Securities (STRIPS) and 

Coupons Under Book Entry Safekeeping 

(‘‘CUBES’’). 

The Fund may invest in U.S. and 

foreign corporate debt. 

The Fund may invest in sovereign 

obligations, which are investments in 

debt obligations issued or guaranteed by 

a foreign sovereign government or its 

agencies, authorities or political 

subdivisions. The Fund may also invest 

in obligations of supranational entities 

including securities designated or 

supported by governmental entities to 

promote economic reconstruction or 

development of international banking 

institutions and related government 

agencies. 

The Fund may invest in spot currency 

transactions. 

The Fund may invest in repurchase 

and reverse repurchase agreements. 

The Fund may invest in Rule 144A 

securities and Regulation S securities. 

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 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).14

The Fund’s Use of Derivatives 

The Fund proposes to seek certain 

exposures through transactions in the 

specific derivative instruments 

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 


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15To mitigate leveraging risk, the Adviser will 

segregate or ‘‘earmark’’ liquid assets or otherwise 

cover the transactions that may give rise to such 

risk. 

16The 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. 

than if it had not been leveraged.15

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 Unit 

will be 50,000 Shares and will be 

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 

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, such instruments 

are 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 for 

other reasons as described in the 

Registration Statement, or which may 

not be eligible for trading by a 

Participating Party.16


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17Commentary .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. 

18Commentary .01(b)(3) to NYSE Arca 8.600–E 

provides that an underlying portfolio (excluding 

exempted securities) that includes fixed income 

securities shall include a minimum of 13 nonaffiliated issuers, provided, however, that there 

shall be no minimum number of non-affiliated 

issuers required for fixed income securities if at 

least 70% of the weight of the portfolio consists of 

equity securities as described in Commentary .01(a) 

to Rule 8.600–E. 19See note 5, supra. 

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. 

• 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. 

• OTC options may be valued 

intraday through option valuation 

models (e.g., Black-Scholes) or using 

exchange traded options as a proxy, 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) to NYSE Arca 

Rule 8.600–E 17 and Commentary 

.01(b)(3) to NYSE Arca Rule 8.600–E.18

With respect to Commentary .01(e), 

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, 

total return swaps on equities (which 

swaps may be traded OTC) and OTC 

options (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 total return 

swaps will be traded OTC, and, as such, 

it is not possible to implement these 

strategies efficiently using listed 

derivatives. In addition, use of OTC 

options on equity securities and equity 

securities indexes may be an important 

means to reduce risk in the Fund’s 

equity investments, or, depending on 

market conditions, to enhance returns of 

the such investments. 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 Alternatives 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. 

With respect to Commentary .01(b)(3), 

the Fund’s investment in fixed income 

securities, including corporate debt and 

OTC-traded convertible securities, will 

not meet the requirement that a 

portfolio (excluding exempted 

securities) that includes fixed income 

securities shall include a minimum of 

13 non-affiliated issuers. The Fund’s 

investment in corporate debt will not 

exceed 5% of the Fund’s assets and the 

Fund’s investment in OTC-traded 

convertible securities also will not 

exceed 5% of the Fund’s assets. The 

Adviser believes that it is appropriate to 

permit a small investment in corporate 

debt and OTC-traded convertible 

securities in order to permit the Fund to 

diversify its investments to enhance 

investor returns. Because such 

investments would be de minimis, it 

would be difficult for the Fund to 


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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. 

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 

diversify such investments in order to 

comply with the requirement that fixed 

income securities include at least 13 

non-affiliated issuers. 

The Exchange notes that, other than 

Commentary .01(e) and Commentary 

.01(b)(3) 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 certain options (as 

described above), common stocks, 

warrants, rights, MLPs, preferred stocks, 

REITs, and Depositary Receipts will be 

available via the CTA high speed line. 

Quotation and last sale information for 

such U.S. exchange-listed securities, as 

well as U.S. 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. 

Quotation and last sale information for 

foreign exchange-listed equity securities 

will be available from the exchanges on 

which they trade and from major market 

data vendors, as applicable. Price 

information for preferred stocks will be 

available from one or more major market 

data vendors or from broker-dealers. 

Quotation information for OTC 

options, cash equivalents, swaps, 

obligations of supranational agencies, 

money market funds, U.S. Government 

obligations, U.S. Government agency 

obligations, sovereign obligations, 

repurchase and reverse repurchase 

agreements, and U.S. and foreign 

corporate debt may be obtained from 

brokers and dealers who make markets 

in such securities or through nationally 

recognized pricing services through 

subscription agreements. The U.S. 

dollar value of foreign securities, 

instruments and currencies can be 

derived by using foreign currency 

exchange rate quotations obtained from 

nationally recognized pricing services. 

Forwards and spot currency price 

information will be available from major 

market data vendors. Price information 

for OTC Depositary Receipts, CVRs, 

convertible securities, 144A securities 

and Regulation S securities is 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 (Early, 

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 


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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. 27 15 U.S.C. 78f(b)(5). 

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, certain exchangelisted 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 9.2–E(a), 

which imposes a duty of due diligence 

on its ETP Holders to learn the essential 

facts relating to every customer prior to 

trading the Shares; (3) the risks involved 

in trading the Shares during the 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, 

certain exchange-listed equity 

securities, certain futures, and certain 

exchange-traded 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 


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48134 Federal Register / Vol. 82, No. 198 / Monday, October 16, 2017 / Notices 

28See note 5, supra. 

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 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. 

Investors can also obtain the Trust’s 

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. exchange listed, including 

common stocks, preferred stocks, MLPs, 

REITs, and U.S. exchange-traded ADRs 

will be available via the CTA high speed 

line. 

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–E of 

portfolio assets that may be invested in 

OTC derivatives. Because the Fund, in 

furtherance of its investment objective, 

may invest a substantial percentage of 

its investments in foreign currency 

forward transactions, total return swaps 

on equities (which will be traded OTC) 

and OTC options (as described above), 

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. 

The inability of the Fund to adequately 

hedge its holdings would effectively 

limit the Fund’s ability to invest in 

certain instruments, or could expose the 

Fund to additional investment risk. In 

addition, use of OTC options on equity 

securities and equity securities indexes 

may be an important means to reduce 

risk in the Fund’s equity investments. 

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. 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 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) of the Act.28 The 

Exchange further believes that the Fund 

would be placed at a competitive 

disadvantage to the JP Morgan 

Diversified Alternatives ETF other, [sic] 

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. 

With respect to Commentary .01(b)(3) 

to Rule 8.600–E, the Exchange believes 

that it is appropriate and in the public 

interest to allow the Fund to hold fixed 

income securities that include fewer 

than 13 non-affiliated issuers because 

the Fund’s investment in corporate debt 

will not exceed 5% of the Fund’s assets 

and the Fund’s investment in OTCtraded convertible securities also will 

not exceed 5% of the Fund’s assets. 

Such investments would be de minimis 

and, therefore, it could be difficult for 

the Fund to diversify such investments 

in order to comply with the requirement 

that fixed income securities include at 

least 13 non-affiliated issuers. Because 

the Fund’s investment in such fixed 

income securities would constitute only 

a small portion of the Fund’s portfolio, 

the Exchange believes the Fund would 

not be susceptible to manipulation. 

The Exchange notes that, other than 

Commentary .01(e) and Commentary 

.01(b)(3) to Rule 8.600–E, the Fund 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 

that holds fixed income securities, 

equity securities and derivatives and 

that will enhance competition among 

market participants, to the benefit of 


ethrower on DSK3G9T082PROD with NOTICES
Federal Register / Vol. 82, No. 198 / Monday, October 16, 2017 / Notices 48135 

29 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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 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–2017–87 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–2017–87. 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–2017–87 and should be 

submitted on or before November 6, 

2017. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–22263 Filed 10–13–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81841; File No. SR–MSRB– 

2017–07] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change to MSRB Rule A–11, on 

Assessments for Municipal Advisor 

Professionals, To Amend the Annual 

Municipal Advisor Professional Fee 

October 10, 2017. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 

19b–4 thereunder,2 notice is hereby 

given that on September 29, 2017 the 

Municipal Securities Rulemaking Board 

(‘‘MSRB’’ or ‘‘Board’’) filed with the 

Securities and Exchange Commission 

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

rule change as described in Items I, II, 

and III below, which Items have been 

prepared by the MSRB. 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 MSRB filed with the Commission 

a proposed rule change to amend MSRB 

Rule A–11, on assessments for 

municipal advisor professionals, to 

increase the annual municipal advisor 

professional fee from $300 to $500 and 

make other technical changes (the 

‘‘proposed rule change’’). The MSRB has 

designated the proposed rule change for 

immediate effectiveness. The MSRB will 

send the first invoice at the new fee 

level to firms in April 2018 for payment 

by April 30, 2018. 

The text of the proposed rule change 

is available on the MSRB’s Web site at 

www.msrb.org/Rules-andInterpretations/SEC-Filings/2017- 

Filings.aspx, at the MSRB’s principal 

office, 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 

MSRB 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 


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