Document ID: SEC-2015-1728-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2015-10-26T04:00Z

[Federal Register Volume 80, Number 206 (Monday, October 26, 2015)]
[Notices]
[Pages 65266-65269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27073]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76202; File No. SR-NYSEArca-2015-77]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade 
Shares of the First Trust Heitman Global Prime Real Estate ETF Under 
NYSE Arca Equities Rule 8.600

October 20, 2015.

I. Introduction

    On August 28, 2015, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares (``Shares'') of the First Trust Heitman Global 
Prime Real Estate ETF (the ``Fund,'') under NYSE Arca Equities Rule 
8.600. The proposed rule change was published for comment in the 
Federal Register on September 17, 2015.\3\ On October 1, 2015, the 
Exchange filed Amendment No. 1 to the proposed rule change.\4\ The 
Commission received no comments on the proposed rule change. The 
Commission is publishing this notice to solicit comments on Amendment 
No. 1 from interested persons, and is approving the proposed rule 
change, as modified by Amendment No. 1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 75901 (September 11, 
2015), 80 FR 55892 (``Notice'').
    \4\ In Amendment No. 1, the Exchange: (1) Identified the 
investment objective of the Fund; (2) clarified the scope of the 
Fund's permitted investments; (3) modified its description of the 
Fund's Share redemption process; (4) supplemented its description of 
the availability of price information for the Shares and the 
underlying assets; (5) identified another entity as the 
administrator, custodian, and transfer agent for the Fund; and (6) 
made other technical changes. Amendment No. 1 is available at: 
http://www.sec.gov/rules/sro/nysearca/2015/34-75901-amendment1.pdf.
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II. The Exchange's Description of the Proposed Rule Change \5\
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    \5\ The Commission notes that additional information regarding 
the Trust, the Fund, its investments, and the Shares, including 
investment strategies, risks, creation and redemption procedures, 
fees, portfolio holdings disclosure policies, calculation of net 
asset value (``NAV''), distributions, and taxes, among other things, 
can be found in the Notice and the Registration Statement, as 
applicable. See Notice, supra note 3, and Registration Statement, 
infra note 6.
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    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.600, which governs the listing and trading of Managed 
Fund Shares. The Shares will be offered by First Trust Exchange-Traded 
Fund IV (``Trust''), a Massachusetts business trust which is registered 
with the Commission as an open-end management investment company.\6\ 
First Trust Advisors L.P. (``First Trust'' or the ``Adviser'') will 
serve as the investment adviser of the Fund. Heitman Real Estate 
Securities LLC (``Sub-Adviser'') will be the sub-adviser to the Fund. 
Heitman International Real Estate Securities HK Limited and Heitman 
International Real Estate Securities GmbH (``Sub-Sub-Advisers'') will 
be the sub-sub-advisers to the Fund. First Trust Portfolios L.P. will 
be the principal underwriter and distributor of the Fund's Shares. 
Brown Brothers Harriman & Co. (the ``BBH'') will serve as 
administrator, custodian and transfer agent for the Fund.
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    \6\ The Exchange states that the Trust is registered under the 
1940 Act. According to the Exchange, on August 27, 2014, the Trust 
filed an amendment to the Trust's registration statement on Form N-
1A under the Securities Act of 1933 (the ``1933 Act'') (15 U.S.C. 
77a), and under the 1940 Act relating to the Fund (File Nos. 333-
174332 and 811-22559) (the ``Registration Statement''). The Exchange 
states that the Commission has issued an order granting certain 
exemptive relief to the Trust under the 1940 Act. See Investment 
Company Act Release No. 28468 (October 27, 2008) (File No. 812-
13477).
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Principal Investments

    The Exchange states that, under normal market conditions,\7\ at 
least 80% of the Fund's net assets in the following U.S. and non-U.S. 
exchange-traded real estate securities: Real estate investment trusts 
(``REITs''), real estate operating companies (``REOCs'') and common 
stocks or ``Depositary Receipts'' of companies primarily engaged in the 
real estate industry (collectively, ``Real Estate Securities'').\8\ The 
Fund may invest in non-U.S. securities (including securities of certain 
non-U.S. companies), which include securities issued or guaranteed by 
companies

[[Page 65267]]

organized under the laws of countries other than the United States 
(including emerging markets). Certain Real Estate Securities in which 
the Fund invests may be restricted securities (Rule 144A 
securities).\9\ During the initial invest-up period, the Fund may 
depart from its principal investment strategies and invest a larger 
amount or all of its assets in cash equivalents or it may hold cash.
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    \7\ The term ``under normal market conditions'' includes, but is 
not limited to, the absence of extreme volatility or trading halts 
in the equity markets or the financial markets generally; 
operational issues causing dissemination of inaccurate market 
information; or force majeure type events such as systems failure, 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption or any similar intervening 
circumstance.
    \8\ The Fund's investments in Real Estate Securities and certain 
non-U.S. companies (as referred to below under ``Non-Principal 
Investments'') may be in the form of Depositary Receipts, which 
include American Depositary Receipts, Global Depositary Receipts, 
and European Depositary Receipts. All Depositary Receipts in which 
the Fund invests will be traded on a U.S. or a non-U.S. exchange.
    \9\ Any such Real Estate Securities will be traded on a non-U.S. 
exchange and will not be traded on a U.S. exchange.
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Other Investments

    According to the Exchange, the Fund, under normal market 
conditions, will invest up to 20% of the value of its net assets (plus 
borrowings for investment purposes) in the following securities and 
financial instruments described below.
    Equity securities, other than Real Estate Securities, in which the 
Fund will invest may include common and preferred stocks. The Fund may 
also invest in warrants and rights related to common stocks, preferred 
equity securities and restricted securities (Rule 144A securities) that 
are not also Real Estate Securities. The Fund may invest in exchange-
traded pooled investment vehicles, open-end or closed-end investment 
company securities, other exchange-traded funds (``ETFs'') and business 
development companies (``BDCs'') that invest primarily in securities of 
the types in which the Fund may invest directly.
    The Fund may invest in companies that are considered to be 
``passive foreign investment companies'' (``PFICs''), which are 
generally certain non-U.S. corporations that receive at least 75% of 
their annual gross income from passive sources (such as interest, 
dividends, certain rents and royalties or capital gains) or that hold 
at least 50% of their assets in investments producing such passive 
income.
    Fixed income investments and cash equivalents held by the Fund may 
include, the following types of investments: (1) U.S. government 
securities, including bills, notes and bonds differing as to maturity 
and rates of interest, which are either issued or guaranteed by the 
U.S. Treasury or by U.S. government agencies or instrumentalities; (2) 
certificates of deposit issued against funds deposited in a bank or 
savings and loan association; (3) bankers' acceptances, which are 
short-term credit instruments used to finance commercial transactions; 
(4) repurchase agreements, which involve purchases of debt securities 
with counterparties that are deemed by the Adviser to present 
acceptable credit risks; (5) bank time deposits, which are monies kept 
on deposit with banks or savings and loan associations for a stated 
period of time at a fixed rate of interest; (6) commercial paper, which 
are short-term unsecured promissory notes, including variable rate 
master demand notes (direct lending arrangements between the Fund and a 
corporation) issued by corporations to finance their current 
operations; (7) shares of money market funds.
    The Fund may invest in the following types of non-U.S. fixed income 
securities (including securities of certain non-U.S. companies): 
Securities issued or guaranteed by companies organized under the laws 
of countries other than the United States (including emerging markets), 
securities issued or guaranteed by foreign, national, provincial, 
state, municipal or other governments with taxing authority or by their 
agencies or instrumentalities and debt obligations of supranational 
governmental entities such as the World Bank or European Union. Non-
U.S. securities may also include U.S. dollar-denominated debt 
obligations, such as ``Yankee Dollar'' obligations (U.S. dollar-
denominated obligations issued in the U.S. capital markets by foreign 
corporations, banks and governments) of foreign issuers and of supra-
national government entities.
    The Fund also may invest in forward foreign currency exchange 
contracts.

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of section 6 of the Act \10\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\11\ In particular, the Commission finds that the 
proposed rule change is consistent with section 6(b)(5) of the Act,\12\ 
which requires, among other things, that the Exchange's rules be 
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 a national 
market system, and, in general, to protect investors and the public 
interest. The Commission notes that the Fund and the Shares must comply 
with the requirements of NYSE Arca Equities Rule 8.600 for the Shares 
to be listed and traded on the Exchange.
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    \10\ 15 U.S.C. 78f.
    \11\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with section 11A(a)(1)(C)(iii) of the 
Act,\13\ which sets forth Congress's finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. According to the 
Exchange, quotation and last sale information for the Shares and the 
following U.S. exchange-traded equity securities will be available via 
the Consolidated Tape Association high-speed line, and from the 
national securities exchange on which they are listed: Real Estate 
Securities, common stocks, preferred stocks, warrants, rights, pooled 
investment vehicles, ETFs, closed end investment company securities, 
BDCs, and PFICs. In addition, the Portfolio Indicative Value (``PIV'') 
as defined in NYSE Arca Equities Rule 8.600 (c)(3), will be widely 
disseminated every 15 seconds throughout the Exchange's Core Trading 
Session by one or more major market data vendors. On each business day, 
before commencement of trading in Shares in the Core Trading Session 
(as defined in NYSE Arca Equities Rule 7.34(a)(2)), each Fund will 
disclose on its Web site the Disclosed Portfolio (as defined in NYSE 
Arca Equities Rule 8.600(c)(2)) that will form the basis for such 
Fund's calculation of NAV at the end of the business day.\14\ The 
Fund's NAV will be determined as of the close of regular trading on the 
NYSE on each day the NYSE is open for trading. A basket composition 
file, which will include the security names and share quantities 
required to be delivered in exchange for the Shares, together with 
estimates and actual cash components, will be publicly disseminated 
daily prior to the opening of the New York Stock Exchange via the 
National Securities Clearing Corporation. Information regarding market 
price and trading volume of the Shares will be

[[Page 65268]]

continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers. 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.
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    \13\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \14\ On a daily basis, the Fund will disclose on the Fund's Web 
site the following information regarding each portfolio holding, as 
applicable to the type of holding: Ticker symbol, CUSIP number or 
other identifier, if any; a description of the holding (including 
the type of holding); the identity of the security, commodity, index 
or other asset or instrument underlying the holding, if any; 
maturity date, if any; coupon rate, if any; effective date, if any; 
market value of the holding; and the percentage weighting of the 
holding in the Fund's portfolio. This information will be publicly 
available at no charge.
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    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Commission notes that the Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily and that the NAV and the Disclosed Portfolio 
will be made available to all market participants at the same time.\15\ 
In addition, trading in the Shares will be subject to NYSE Arca 
Equities Rule 8.600(d)(2)(D), which sets forth circumstances under 
which Shares of a Fund may be halted. The Exchange may halt trading in 
the Shares if trading is not occurring in the securities and/or the 
financial instruments constituting the Disclosed Portfolio of a Fund, 
or if other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present.\16\ Further, the 
Commission notes that the Reporting Authority that provides the 
Disclosed Portfolio of the Fund must implement and maintain, or be 
subject to, procedures designed to prevent the use and dissemination of 
material, non-public information regarding the actual components of the 
portfolio.\17\ The Commission notes that the Financial Industry 
Regulatory Authority (``FINRA''), on behalf of the Exchange,\18\ will 
communicate as needed regarding trading in the Shares and certain 
exchange-traded equity securities with other markets and other entities 
that are members of the Intermarket Surveillance Group (``ISG''), and 
FINRA, on behalf of the Exchange, may obtain trading information 
regarding trading in the Shares and certain exchange-traded equity 
securities from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in the Shares and 
certain exchange-traded equity securities from markets and other 
entities that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement. The Exchange 
states that it has a general policy prohibiting the distribution of 
material, non-public information by its employees. According to the 
Exchange, the Adviser, the Sub-Adviser and the Sub-Sub-Advisers are not 
broker-dealers, but the Adviser is affiliated with First Trust 
Portfolios L.P., a broker-dealer, and the Sub-Adviser and the Sub-Sub-
Advisers are affiliated with Heitman Securities LLC and Heitman UK 
Limited, each a broker-dealer. The Exchange states that the Adviser, 
the Sub-Adviser and the Sub-Sub-Advisers have each implemented fire 
walls with respect to their respective broker-dealer affiliate(s) 
regarding access to information concerning the composition and/or 
changes to the portfolio. In the event (a) the Adviser, the Sub-Adviser 
or either Sub-Sub-Adviser becomes registered as a broker-dealer or 
newly affiliated with a broker-dealer, or (b) any new adviser, sub-
adviser or sub-sub-adviser is a registered broker-dealer or becomes 
affiliated with a broker-dealer, the Exchange states that it will 
implement a fire wall with respect to its relevant personnel or its 
broker-dealer affiliate regarding access to information concerning the 
composition and/or changes to the portfolio, and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding such portfolio.
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    \15\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \16\ See NYSE Arca Equities Rule 8.600(d)(2)(C) (providing 
additional considerations for the suspension of trading in or 
removal from listing of Managed Fund Shares on the Exchange). 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 each Fund. Trading in Shares of a Fund will be halted 
if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 
have been reached. Trading also may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable.
    \17\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
    \18\ The Exchange states that, while FINRA surveils trading on 
the Exchange pursuant to a regulatory services agreement, the 
Exchange is responsible for FINRA's performance under this 
regulatory services agreement.
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    The Exchange deems the Shares to be equity securities, which 
renders trading in the Shares subject to the Exchange's existing rules 
governing the trading of equity securities.
    In support of this proposal, the Exchange has made additional 
representations, including:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) The Exchange represents that trading in the Shares will be 
subject to the existing trading 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 federal securities laws 
applicable to trading on the Exchange.
    (4) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit (``ETP'') Holders in an Information Bulletin 
of the special characteristics and risks associated with trading the 
Shares. Specifically, the Bulletin will discuss the following: (a) The 
procedures for purchases and redemptions of Shares in Creation Units 
(and that Shares are not individually redeemable); (b) NYSE Arca 
Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP 
Holders to learn the essential facts relating to every customer prior 
to trading the Shares; (c) the risks involved in trading the Shares 
during the Opening and Late Trading Sessions when an updated PIV will 
not be calculated or publicly disseminated; (d) how information 
regarding the PIV will be disseminated; (e) 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 (f) trading information.
    (5) For initial and/or continued listing, the Fund will be in 
compliance with Rule 10A-3\19\ under the Act, as provided by NYSE Arca 
Equities Rule 5.3.
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    \19\ 17 CFR 240.10A-3.
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    (6) A minimum of 100,000 Shares for the Fund will be outstanding at 
the commencement of trading on the Exchange.
    (7) Not more than 10% of the net assets of the Fund in the 
aggregate invested in equity securities (other than non-exchange-traded 
investment company securities) shall consist of equity securities whose 
principal market is not a member of the ISG or is a market with which 
the Exchange does not have a comprehensive surveillance sharing 
agreement.
    This approval order is based on all of the Exchange's 
representations.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1, is consistent with section 
6(b)(5) of the Act \20\ and the rules and

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regulations thereunder applicable to a national securities exchange.
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    \20\ 15 U.S.C. 78f(b)(5).
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IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 1 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-2015-77 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-2015-77. 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-2015-77 and should 
be submitted on or before November 16, 2015.

V. Accelerated Approval of Proposed Rule Change as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the thirtieth day 
after the date of publication of notice in the Federal Register. 
Amendment No. 1 supplements the proposed rule change by, among other 
things, clarifying the scope of the Fund's permitted investments and 
adding additional information about the availability of prices for the 
Shares and underlying assets. This new information aided the Commission 
in evaluating the likelihood of effective arbitrage in the Shares. 
Accordingly, the Commission finds good cause, pursuant to section 
19(b)(2) of the Act,\21\ to approve the proposed rule change, as 
modified by Amendment No. 1, on an accelerated basis.
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    \21\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\22\ that the proposed rule change (SR-NYSEArca-2015-77), as 
modified by Amendment No. 1, be, and it hereby is, approved on an 
accelerated basis.
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    \22\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-27073 Filed 10-23-15; 8:45 am]
BILLING CODE 8011-01-P