Document ID: SEC-2013-1597-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-09-12T04:00Z

[Federal Register Volume 78, Number 177 (Thursday, September 12, 2013)]
[Notices]
[Pages 56256-56261]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22166]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70342; File No. SR-NYSEArca-2013-71]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change to List and Trade Shares of the SPDR 
SSgA Ultra Short Term Bond ETF; SPDR SSgA Conservative Ultra Short Term 
Bond ETF; and SPDR SSgA Aggressive Ultra Short Term Bond ETF under NYSE 
Arca Equities Rule 8.600

September 6, 2013.

I. Introduction

    On July 9, 2013, 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'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares (``Shares'') of the SPDR 
SSgA Ultra Short Term Bond ETF; SPDR SSgA Conservative Ultra Short Term 
Bond ETF; and SPDR SSgA Aggressive Ultra Short Term Bond ETF (each a 
``Fund'' and collectively, ``Funds'') under NYSE Arca Equities Rule 
8.600. The proposed rule change was published for comment in the 
Federal Register on July 24, 2013.\3\ The Commission received no 
comments on the proposed rule change. This order grants approval of the 
proposed rule change.
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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. 70005 (July 18, 
2013), 78 FR 44609 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade Shares of the Funds under 
NYSE Arca Equities Rule 8.600, which governs the listing and trading of 
Managed Fund Shares on the Exchange. The Shares will be offered by SSgA 
Active ETF Trust (``Trust''), which is organized as a Massachusetts 
business trust and is registered with the Commission as an open-end 
management investment company.\4\ The investment adviser to the Funds 
will be SSgA Funds Management, Inc. (``Adviser''). State Street Global 
Markets, LLC (``Distributor'') will be the principal underwriter and 
distributor of the Funds' Shares. State Street Bank and Trust Company 
(``Administrator,'' ``Custodian,'' or ``Transfer Agent'') will serve as 
administrator, custodian, and transfer agent for the Funds.
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    \4\ The Trust is registered under the Investment Company Act of 
1940 (``1940 Act''). On August 2, 2012, the Trust filed with the 
Commission an amendment to its registration statement on Form N-1A 
under the Securities Act of 1933 (``Securities Act'') and the 1940 
Act relating to the Funds (File Nos. 333-173276 and 811-22542) 
(``Registration Statement''). The Commission has issued an order 
granting certain exemptive relief to the Trust under the 1940 Act. 
See Investment Company Act Release No. 29524 (December 13, 2010) 
(File No. 812-13487) (``Exemptive Order'').
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    The Exchange states that the Adviser is not a broker-dealer but is 
affiliated with a broker-dealer and has implemented a fire wall with 
respect to its broker-dealer affiliate regarding access to information 
concerning the composition of and changes to the Funds' portfolio.\5\
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    \5\ See NYSE Arca Equities Rule 8.600, Commentary .06. In the 
event (a) the Adviser or any sub-adviser becomes newly affiliated 
with a broker-dealer, or (b) any new adviser or sub-adviser is a 
registered broker-dealer or becomes affiliated with a broker-dealer, 
it will implement a fire wall with respect to its relevant personnel 
or its broker-dealer affiliate regarding access to information 
concerning the composition of and changes to a portfolio, and will 
be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio.
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SPDR SSgA Ultra Short Term Bond ETF

    The SPDR SSgA Ultra Short Term Bond ETF will seek to provide 
current income consistent with preservation of capital and daily 
liquidity through short duration high quality investments. Under normal 
circumstances,\6\ the Fund will invest all of its assets in the SSgA 
Ultra Short Term Bond Portfolio (``Bond Portfolio''), a separate series 
of the SSgA Master Trust with an identical investment objective as the 
Fund. As a result, the Fund will invest indirectly through the Bond 
Portfolio.
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    \6\ The term ``under normal circumstances'' includes, but is not 
limited to, the absence of extreme volatility or trading halts in 
the fixed income 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.
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    The Adviser will invest, under normal circumstances, at least 80% 
of the Bond Portfolio's net assets (plus the amount of borrowings for 
investment purposes) in a diversified portfolio of U.S. dollar-
denominated investment grade fixed income securities. The Bond 
Portfolio primarily will invest in investment grade fixed income 
securities that are rated a minimum of the lowest A rating by any 
Nationally Recognized Statistical Ratings Organization (``NRSRO''), or, 
if unrated, determined by the management team (who are employees of the 
Adviser) to be of equivalent quality.\7\ The Bond Portfolio will invest 
in fixed and floating rate securities of varying maturities,\8\ such as 
corporate obligations (including commercial paper of U.S. and foreign 
entities, master demand notes (subject to the 15% illiquid securities 
limit), and medium term notes); government bonds (including U.S. 
Treasury Bills, notes, and bonds); agency securities, including U.S. 
government agency securities, and non-U.S. sovereign and supranational 
debt; privately-issued securities (which,

[[Page 56257]]

for example, can be Rule 144A securities); asset-backed and mortgage-
backed securities; and money market instruments (including U.S. and 
foreign bank time deposits, certificates of deposit, and banker's 
acceptances). Under normal circumstances, the effective duration of the 
Bond Portfolio is expected to be between three and nine months. \9\ In 
addition, the Bond Portfolio expects to maintain a weighted average 
maturity between six and eighteen months.\10\ For the purposes of 
determining the Bond Portfolio's weighted average maturity, a 
security's final maturity date or, for amortizing securities such as 
asset-backed and mortgage-backed securities, its weighted average life 
will be used for calculation purposes.
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    \7\ According to the Adviser, the Adviser may determine that 
unrated securities are of ``equivalent quality'' based on such 
credit quality factors that it deems appropriate, which may include, 
among other things, performing an analysis similar, to the extent 
possible, to that performed by an NRSRO when rating similar 
securities and issuers. In making such a determination, the Adviser 
may consider internal analyses and risk ratings, third party 
research and analysis, and other sources of information, as deemed 
appropriate by the Adviser.
    \8\ A floating rate security provides for the automatic 
adjustment of its interest rate whenever a specified interest rate 
changes. Interest rates on these securities are ordinarily tied to, 
and are a percentage of, a widely recognized interest rate, such as 
the yield on 90-day U.S. Treasury bills or the prime rate of a 
specified bank. These rates may change as often as twice daily.
    \9\ Effective duration is a measure of the Bond Portfolio's 
price sensitivity to changes in yields or interest rates. Duration 
will be a distinguishing factor among the Funds, and each of the 
Funds' respective portfolios will have different effective 
durations, as described below.
    \10\ Weighted average maturity is a U.S. dollar-weighted average 
of the remaining term to maturity of the underlying securities in 
the Bond Portfolio.
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SPDR SSgA Conservative Ultra Short Term Bond ETF

    The SPDR SSgA Conservative Ultra Short Term Bond ETF will seek to 
provide current income consistent with preservation of capital and 
daily liquidity through short duration high quality investments with 
the avoidance of excessive portfolio volatility.
    Under normal circumstances, the Fund will invest all of its assets 
in the SSgA Conservative Ultra Short Term Bond Portfolio 
(``Conservative Portfolio''), a separate series of the SSgA Master 
Trust with an identical investment objective as the Fund. As a result, 
the Fund will invest indirectly through the Conservative Portfolio.
    The Adviser will invest, under normal circumstances, at least 80% 
of the Conservative Portfolio's net assets (plus the amount of 
borrowings for investment purposes) in a diversified portfolio of U.S. 
dollar-denominated investment grade fixed income securities. The 
Conservative Portfolio primarily will invest in investment grade fixed 
income securities that are rated a minimum of the lowest A rating by 
any NRSRO, or, if unrated, determined by the portfolio management team 
(who are employees of the Adviser) to be of equivalent quality, 
determined as described above.\11\ The Conservative Portfolio will 
invest in fixed and floating rate securities of varying maturities, 
such as corporate obligations (including commercial paper of U.S. and 
foreign entities, master demand notes (subject to the 15% illiquid 
securities limit), and medium term notes); government bonds (including 
U.S. Treasury Bills, notes, and bonds); agency securities; privately-
issued securities (which, for example, can be Rule 144A securities); 
asset-backed and mortgage-backed securities; and money market 
instruments (including U.S. and foreign bank time deposits, 
certificates of deposit, and banker's acceptances).
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    \11\ See note 7, supra.
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    Under normal circumstances, the effective duration of the 
Conservative Portfolio is expected to be four months or less. In 
addition, the Conservative Portfolio expects to maintain a weighted 
average maturity between six and eighteen months. For the purposes of 
determining the Conservative Portfolio's weighted average maturity, a 
security's final maturity date or, for amortizing securities such as 
asset-backed and mortgage-backed securities, its weighted average life 
will be used for calculation purposes.

SPDR SSgA Aggressive Ultra Short Term Bond ETF

    The SPDR SSgA Aggressive Ultra Short Term Bond ETF will seek to 
maximize income consistent with preservation of capital through short 
duration high quality investments.
    Under normal circumstances, the Fund will invest all of its assets 
in the SSgA Aggressive Ultra Short Term Bond Portfolio (``Aggressive 
Portfolio'' and, together with the Bond Portfolio and the Conservative 
Portfolio, collectively, ``Portfolios''), a separate series of the SSgA 
Master Trust with an identical investment objective as the Fund. As a 
result, the Fund will invest indirectly through the Aggressive 
Portfolio.
    The Adviser will invest, under normal circumstances, at least 80% 
of the Aggressive Portfolio's net assets (plus the amount of borrowings 
for investment purposes) in a diversified portfolio of U.S. dollar-
denominated investment grade fixed income securities. The Aggressive 
Portfolio primarily will invest in investment grade fixed income 
securities that are rated a minimum of the lowest BBB rating by any 
NRSRO or, if unrated, determined by the portfolio management team (who 
are employees of the Adviser) to be of equivalent quality, determined 
as described above.\12\
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    \12\ See note 7, supra.
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    The Aggressive Portfolio will invest in fixed and floating rate 
securities of varying maturities, such as corporate obligations 
(including commercial paper of U.S. and foreign entities, master demand 
notes (subject to the 15% illiquid securities limit), and medium term 
notes); government bonds (including U.S. Treasury Bills, notes, and 
bonds); agency securities; privately-issued securities (which, for 
example, can be Rule 144A securities); asset-backed and mortgage-backed 
securities; and money market instruments (including U.S. and foreign 
bank time deposits, certificates of deposit, and banker's acceptances).
    Under normal circumstances, the effective duration of the 
Aggressive Portfolio is expected to be between six and twelve months. 
In addition, the Aggressive Portfolio expects to maintain a weighted 
average maturity between 1.5 and 2.5 years. For the purposes of 
determining the Aggressive Portfolio's weighted average maturity, a 
security's final maturity date or, for amortizing securities such as 
asset-backed and mortgage-backed securities, its weighted average life 
will be used for calculation purposes.

Principal Investments

    Each Portfolio will invest in bonds, including zero coupon 
bonds,\13\ fixed rate bonds,\14\ and ``floating-rate'' or ``variable-
rate'' bonds.\15\ In addition, each Portfolio may invest in U.S. and 
non-U.S. corporate bonds, which will be denominated in U.S. dollars.
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    \13\ A zero coupon bond pays no interest to its holder during 
its life. The value of a zero coupon bond to a fund consists of the 
difference between such bond's face value at the time of maturity 
and the price for which it was acquired, which may be an amount 
significantly less than its face value (sometimes referred to as a 
``deep discount'' price).
    \14\ The value of a fixed rate bond usually rises when market 
interest rates fall, and falls when market interest rates rise. 
Accordingly, a fixed rate bond's yield (income as a percent of the 
bond's current value) may differ from its coupon rate as its value 
rises or falls. Fixed rate bonds generally are also subject to 
inflation risk, which is the risk that the value of the bond or 
income from the bond will be worth less in the future as inflation 
decreases the value of money. This could mean that, as inflation 
increases, the ``real'' value of the assets of a fund holding fixed 
rate bonds can decline, as can the value of the fund's 
distributions.
    \15\ Variable rate securities are instruments issued or 
guaranteed by entities such as (1) the U.S. Government, or an agency 
or instrumentality thereof, (2) corporations, (3) financial 
institutions, (4) insurance companies or (5) trusts that have a rate 
of interest subject to adjustment at regular intervals but less 
frequently than annually. A variable rate security provides for the 
automatic establishment of a new interest rate on set dates. 
Variable rate obligations whose interest is readjusted no less 
frequently than annually will be deemed to have a maturity equal to 
the period remaining until the next readjustment of the interest 
rate.
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    Each Portfolio may invest in collateralized loan obligations 
(``CLOs'') to the extent they meet the minimum NRSRO rating requirement 
described

[[Page 56258]]

above for each Portfolio. While the assets underlying CLOs are 
typically ``Senior Loans,''\16\ the assets may also include (i) 
unsecured loans, (ii) other debt securities that are rated below 
investment grade, (iii) debt tranches of other CLOs,\17\ and (iv) 
equity securities incidental to investments in Senior Loans.
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    \16\ A Senior Loan is an advance or commitment of funds made by 
one or more banks or similar financial institutions, including the 
Portfolios, to one or more corporations, partnerships or other 
business entities and typically pays interest at a floating or 
adjusting rate that is determined periodically at a designated 
premium above a base lending rate, most commonly the London-
Interbank Offered Rate (``LIBOR''). A Senior Loan is considered 
senior to all other unsecured claims against the borrower, senior to 
or pari passu with all other secured claims, meaning that in the 
event of a bankruptcy the Senior Loan, together with other first 
lien claims, are entitled to be the first to be repaid out of 
proceeds of the assets securing the loans, before other existing 
claims or interests receive repayment. However, in bankruptcy 
proceedings, there may be other claims, such as taxes or additional 
advances, that take precedence. Senior Loans consist generally of 
obligations of companies and other entities (collectively, 
``borrowers'') incurred for the purpose of reorganizing the assets 
and liabilities of a borrower; acquiring another company; taking 
over control of a company (leveraged buyout); temporary refinancing; 
or financing internal growth or other general business purposes. 
Senior Loans are often obligations of borrowers who have incurred a 
significant percentage of debt compared to equity issued and thus 
are highly leveraged.
    \17\ When investing in CLOs, each Portfolio will not invest in 
equity tranches, which are the lowest tranche. However, each 
Portfolio may invest in lower debt tranches of CLOs, which typically 
experience a lower recovery, greater risk of loss or deferral or 
non-payment of interest than more senior debt tranches of the CLO. 
In addition, each Portfolio intends to invest in CLOs consisting 
primarily of individual Senior Loans of borrowers and not repackaged 
CLO obligations from other high risk pools. The underlying Senior 
Loans purchased by CLOs are generally performing at the time of 
purchase but may become non-performing, distressed, or defaulted. 
CLOs with underlying assets of non-performing, distressed, or 
defaulted loans are not contemplated to constitute a significant 
portion of a Portfolio's investments in CLOs. The key feature of the 
CLO structure is the prioritization of the cash flows from a pool of 
debt securities among the several classes of the CLO. The SPV is a 
company founded solely for the purpose of securitizing payment 
claims arising out of this diversified asset pool. On this basis, 
marketable securities are issued by the SPV, which, due to the 
diversification of the underlying risk, generally represent a lower 
level of risk than the original assets. The redemption of the 
securities issued by the SPV typically takes place at maturity out 
of the cash flow generated by the collected claims.
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    Each Portfolio may invest in sovereign debt, which will be 
denominated in U.S. dollars, and in U.S. Government obligations. U.S. 
Government obligations include securities issued or guaranteed as to 
principal and interest by the U.S. Government or its agencies or 
instrumentalities.\18\ The Portfolios may invest in asset-backed and 
commercial mortgaged-backed securities.\19\ The percentage limitation 
of investments in asset backed and commercial mortgage-backed 
securities for the Bond Portfolio, the Conservative Portfolio, and the 
Aggressive Portfolio will be 50%, 35%, and 65%, respectively. The 
percentage limitation of an investment in each single structured 
collateral type of asset backed and commercial mortgage-backed 
securities for the Bond Portfolio, the Conservative Portfolio, and the 
Aggressive Portfolio will be 15%, 20%, and 25%, respectively. Non-
agency residential mortgage-backed and commercial mortgage-backed 
investments each will be limited to 10% for each of the Portfolios.
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    \18\ One type of U.S. Government obligation, U.S. Treasury 
obligations, are backed by the full faith and credit of the U.S. 
Treasury and differ only in their interest rates, maturities, and 
times of issuance. U.S. Treasury bills have initial maturities of 
one-year or less; U.S. Treasury notes have initial maturities of one 
to ten years; and U.S. Treasury bonds generally have initial 
maturities of greater than ten years.
    Other U.S. Government obligations are issued or guaranteed by 
agencies or instrumentalities of the U.S. Government including, but 
not limited to, Federal National Mortgage Association (``Fannie 
Mae''), the Government National Mortgage Association (``Ginnie 
Mae''), the Small Business Administration, the Federal Farm Credit 
Administration, the Federal Home Loan Mortgage Corporation 
(``Freddie Mac''), the Federal Home Loan Banks (``FHLB''), Banks for 
Cooperatives (including the Central Bank for Cooperatives), the 
Federal Land Banks, the Federal Intermediate Credit Banks, the 
Tennessee Valley Authority, the Export-Import Bank of the United 
States, the Commodity Credit Corporation, the Federal Financing 
Bank, the Student Loan Marketing Association, the National Credit 
Union Administration, and the Federal Agricultural Mortgage 
Corporation (``Farmer Mac'').
    \19\ Asset-backed securities are securities backed by 
installment contracts, credit-card receivables, or other assets. 
Commercial mortgage-backed securities are securities backed by 
commercial real estate properties. Both asset-backed and commercial 
mortgage-backed securities represent interests in ``pools'' of 
assets in which payments of both interest and principal on the 
securities are made on a regular basis.
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    Each Portfolio may invest a substantial portion of its assets in 
U.S. agency mortgage pass-through securities. Each Portfolio may invest 
in restricted securities.\20\ Each Portfolio may invest in short-term 
instruments, including money market instruments, repurchase agreements, 
cash, and cash equivalents, on an ongoing basis to provide liquidity or 
for other reasons. Money market instruments are generally short-term 
investments that may include but are not limited to: (i) shares of 
money market funds (including those advised by the Adviser); (ii) 
obligations issued or guaranteed by the U.S. government or its agencies 
or instrumentalities (including government-sponsored enterprises); 
(iii) negotiable certificates of deposit, banker's acceptances, fixed 
time deposits and other obligations of U.S. and foreign banks 
(including foreign branches) and similar institutions; (iv) commercial 
paper rated at the date of purchase ``Prime-1'' by Moody's or ``A-1'' 
by S&P, or if unrated, of comparable quality as determined by the 
Adviser;\21\ (v) non-convertible corporate debt securities (e.g., bonds 
and debentures) that have remaining maturities at the date of purchase 
of not more than 397 days and that satisfy the rating requirements set 
forth in Rule 2a-7 under the 1940 Act; and (vi) short-term U.S. dollar-
denominated obligations of foreign banks (including U.S. branches) 
that, in the opinion of the Adviser, are of comparable quality to 
obligations of U.S. banks that may be purchased by a Portfolio.
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    \20\ Restricted securities are securities that are not 
registered under the Securities Act, but which can be offered and 
sold to ``qualified institutional buyers'' under Rule 144A under the 
Securities Act.
    \21\ Commercial paper consists of short-term promissory notes 
issued by banks, corporations, and other entities to finance short-
term credit needs. These securities generally are discounted but 
sometimes may be interest bearing.
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    The Funds are actively-managed and are not tied to an index. The 
Exchange notes, however, that each Fund's Portfolio will meet certain 
criteria for index-based, fixed income exchange-traded funds contained 
in NYSEArca Equities Rule 5.2(j)(3), Commentary .02.\22\
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    \22\ See NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 
governing fixed income based Investment Company Units. Each of the 
Funds' Portfolios will meet the following requirements of Rule 
5.2(j)(3), Commentary .02(a): (i) Components that in the aggregate 
account for at least 75% of the weight of the index or portfolio 
must each have a minimum original principal amount outstanding of 
$100 million or more (Rule 5.2(j)(3), Commentary.02(a)(2)); (ii) no 
component fixed-income security (excluding Treasury Securities and 
government-sponsored entity securities) will represent more than 30% 
of the weight of the index or portfolio, and the five highest 
weighted component fixed-income securities will not in the aggregate 
account for more than 65% of the weight of the index or portfolio 
(Rule 5.2(j)(3), Commentary.02(a)(4)); and (iii) an underlying index 
or portfolio (excluding exempted securities) must include securities 
from a minimum of 13 non-affiliated issuers (Rule 5.2(j)(3), 
Commentary.02(a)(5)).
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Other Investments

    The following are additional possible investments of each Portfolio 
that are not included under the 80% investment policies described above 
for each Fund.
    Each Portfolio may invest in the securities of other investment 
companies, including money market funds and closed-end funds, exchange 
traded products (``ETPs''),\23\ including

[[Page 56259]]

exchange-traded funds registered under the 1940 Act that seek to track 
the performance of a market index (``Underlying ETFs'') and exchange 
traded notes (``ETNs'').\24\
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    \23\ For each of the Funds, ETPs include Investment Company 
Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); Index-
Linked Securities (as described in NYSE Arca Equities Rule 
5.2(j)(6)); Portfolio Depositary Receipts (as described in NYSE Arca 
Equities Rule 8.100); Trust Issued Receipts (as described in NYSE 
Arca Equities Rule 8.200); Commodity-Based Trust Shares (as 
described in NYSE Arca Equities Rule 8.201); Currency Trust Shares 
(as described in NYSE Arca Equities Rule 8.202); Commodity Index 
Trust Shares (as described in NYSE Arca Equities Rule 8.203); Trust 
Units (as described in NYSE Arca Equities Rule 8.500); Managed Fund 
Shares (as described in NYSE Arca Equities Rule 8.600), and closed-
end funds. The ETPs all will be listed and traded in the U.S. on 
registered exchanges. While a Fund may invest in inverse ETPs, a 
Fund will not invest in leveraged (e.g., 2X or 3X) or leveraged 
inverse ETPs.
    \24\ ETNs are debt obligations of investment banks; they are 
traded on exchanges and their returns are linked to the performance 
of reference assets, including market indexes. In addition to 
trading ETNs on exchanges, investors may redeem ETNs directly with 
the issuer on a weekly basis, typically in a minimum amount of 
50,000 units, or hold the ETNs until maturity.
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    Each Portfolio may invest in one or more ETPs that are qualified 
publicly traded partnerships (``QPTPs'') and whose principal activities 
are the buying and selling of commodities or options, futures, or 
forwards with respect to commodities.\25\ Additionally, each Portfolio 
may invest in preferred securities, convertible securities, high yield 
debt securities, and Variable Rate Demand Obligations.
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    \25\ Examples of such entities are the PowerShares DB Energy 
Fund, PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, 
PowerShares DB Gold Fund, PowerShares DB Silver Fund, PowerShares DB 
Base Metals Fund, and PowerShares DB Agriculture Fund, which are 
listed and traded on the Exchange pursuant to NYSE Arca Equities 
Rule 8.200.
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    The Portfolios may invest in inflation-protected public 
obligations, commonly known as ``TIPS,'' of the U.S. Treasury, as well 
as TIPS of major governments and emerging market countries, excluding 
the United States. Each Portfolio may invest a portion of its assets in 
Build America Bonds. The Build America Bond program allows state and 
local governments to issue taxable bonds for capital projects and to 
receive a direct federal subsidy payment from the Treasury Department 
for a portion of their borrowing costs.\26\
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    \26\ Issuance of Build America Bonds ceased on December 31, 
2010. The Build America Bonds outstanding continue to be eligible 
for the federal interest rate subsidy, which continues for the life 
of the Build America Bonds; however, no bonds issued following 
expiration of the Build America Bond program are eligible for the 
federal tax subsidy.
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    Further, the Portfolios may seek to obtain exposure to U.S. agency 
mortgage pass-through securities through the use of ``to-be-announced'' 
or ``TBA transactions.'' ``TBA'' refers to a commonly used mechanism 
for the forward settlement of U.S. agency mortgage pass-through 
securities, and not to a separate type of mortgage-backed security. 
Most transactions in mortgage pass-through securities occur through the 
use of TBA transactions.
    Each Portfolio may invest in repurchase agreements with commercial 
banks, brokers, or dealers to generate income from its excess cash 
balances. Additionally, each Portfolio may invest in sovereign debt, 
which may be denominated in local currencies. Each Portfolio may also 
invest in foreign currency transactions on a spot (cash) basis and 
currency forwards for hedging or trade settlement purposes.
    Each Portfolio may enter into reverse repurchase agreements, which 
involve the sale of securities with an agreement to repurchase the 
securities at an agreed-upon price, date, and interest payment and 
which have the characteristics of borrowing.
    Each Portfolio may hold up to an aggregate amount of 15% of its net 
assets in illiquid securities (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Adviser, master 
demand notes, privately-issued securities (which, for example, can be 
Rule 144A securities), loans, and loan participations. Each Portfolio 
will monitor its portfolio liquidity on an ongoing basis to determine 
whether, in light of current circumstances, an adequate level of 
liquidity is being maintained, and will consider taking appropriate 
steps in order to maintain adequate liquidity if, through a change in 
values, net assets, or other circumstances, more than 15% of each 
Fund's (indirectly through its respective Portfolio) net assets are 
held in illiquid securities. Illiquid securities include securities 
subject to contractual or other restrictions on resale and other 
instruments that lack readily available markets as determined in 
accordance with Commission staff guidance.\27\
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    \27\ The Exchange represents that the Trust's Board of Trustees 
(``Board'') has delegated the responsibility for determining the 
liquidity of Rule 144A restricted securities that a Portfolio may 
invest in to the Adviser. In reaching liquidity decisions, the 
Adviser may consider the following factors: the frequency of trades 
and quotes for the security; the number of dealers wishing to 
purchase or sell the security and the number of other potential 
purchasers; dealer undertakings to make a market in the security; 
and the nature of the security and the nature of the marketplace in 
which it trades (e.g., the time needed to dispose of the security, 
the method of soliciting offers and the mechanics of transfer).
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    Each Portfolio will be classified as a ``non-diversified'' 
investment company under the 1940 Act and will not concentrate its 
investments in any particular industry or sector. The Portfolios intend 
to qualify for and to elect treatment as a separate regulated 
investment company under Subchapter M of the Internal Revenue Code.
    In extreme situations or market conditions,\28\ a Fund may (either 
directly or through the corresponding Portfolio) temporarily depart 
from its normal investment policies and strategies provided that the 
alternative is consistent with the Fund's investment objective and is 
in the best interest of the Fund. For example, a Portfolio may hold a 
higher than normal proportion of its assets in cash in times of extreme 
market stress.
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    \28\ Such situations and conditions include, but are not limited 
to, trading halts in the fixed income markets or disruptions in 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.
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    Except for ETPs that may hold non-U.S. equity issues, the Funds and 
the Portfolios will not otherwise invest in non-U.S equity issues. 
Neither the Funds nor the Portfolios will invest in options contracts, 
futures contracts, or swap agreements.

Master-Feeder Structure of the Funds

    The Funds are intended to be managed in a ``master-feeder'' 
structure under which each Fund invests substantially all of its assets 
in a corresponding Portfolio (i.e., ``master fund''), which is a 
separate mutual fund registered under the 1940 Act that has an 
identical investment objective. As a result, each Fund (i.e., ``feeder 
fund'') has an indirect interest in all of the securities and other 
assets owned by the corresponding Portfolio. Because of this indirect 
interest, each Fund's investment returns should be the same as those of 
the corresponding Portfolio, adjusted for the expenses of the Fund. In 
extraordinary instances, each Fund reserves the right to make direct 
investments in securities.
    The Adviser will manage the investments of each Portfolio. Under 
the master-feeder arrangement, and pursuant to an Investment Advisory 
Agreement between the Adviser and the Trust, investment advisory fees 
charged at the Portfolio level are deducted from the advisory fees 
charged at the Fund level. This arrangement avoids a ``layering'' of 
fees, i.e., a Fund's total annual operating expenses would be no higher 
as a result of investing in a master-feeder arrangement than they would 
be if the Fund pursued its investment objectives directly. In addition, 
each Fund may discontinue investing through the master-feeder

[[Page 56260]]

arrangement and pursue its investment objectives directly if the 
Trust's Board determines that doing so would be in the best interests 
of shareholders.

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 \29\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\30\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\31\ 
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 foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, 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 Shares of the Funds must comply with the requirements of NYSE Arca 
Equities Rule 8.600 to be listed and traded on the Exchange.
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    \29\ 15 U.S.C. 78f.
    \30\ 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).
    \31\ 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,\32\ 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. Quotation and last-
sale information for the Shares will be available via the Consolidated 
Tape Association (``CTA'') high-speed line. In addition, an indicative 
optimized portfolio value, which is the Portfolio Indicative Value as 
defined in NYSE Arca Equities Rule 8.600(c)(3), relating to each Fund 
will be widely disseminated every 15 seconds during the Core Trading 
Session by one or more major market data vendors.\33\ On each business 
day, before commencement of trading in Shares in the Core Trading 
Session on the Exchange, the Adviser 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 the Funds' calculation of NAV at the end 
of the business day.\34\ The NAV of a Fund will be determined once each 
business day, normally as of the closing of the regular trading session 
on the New York Stock Exchange (normally 4:00 p.m. Eastern Time). A 
basket composition file, which will include the security names and 
share quantities, if applicable, required to be delivered in exchange 
for a Fund's Shares, together with estimates and actual cash 
components, will be publicly disseminated daily prior to the opening of 
the New York Stock Exchange via National Securities Clearing 
Corporation. Information regarding market price and trading volume of 
the Shares will be continually available on a real-time basis 
throughout the day on brokers' computer screens and other electronic 
services. Information regarding the previous day's closing price and 
trading volume information for the Shares will be published daily in 
the financial section of newspapers. The intra-day, closing, and 
settlement prices of the Portfolio securities and other assets will 
also be readily available from the national securities exchanges 
trading those securities, automated quotation systems, published or 
other public sources, or on-line information services such as Bloomberg 
or Reuters. The Funds' Web site will include a form of the prospectus 
for the Funds and additional data relating to NAV and other applicable 
quantitative information.
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    \32\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \33\ According to the Exchange, several major market data 
vendors widely disseminate or make widely available Portfolio 
Indicative Values taken from CTA or other data feeds.
    \34\ On a daily basis, the Adviser will disclose for each 
portfolio security and other financial instrument of the Funds and 
of the Portfolios the following information on the Funds' Web site: 
Ticker symbol (if applicable); name of security and financial 
instrument; number of shares, if applicable, or dollar value of 
financial instruments and securities held in the portfolio; and 
percentage weighting of the security and financial instrument in the 
portfolio. The Web site information will be publicly available at no 
charge.
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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 for each Fund 
will be calculated daily and that the NAV and the Disclosed Portfolio 
will be made available to all market participants at the same time.\35\ 
In addition, trading in Shares of the Funds will be subject to NYSE 
Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under 
which Shares of the Funds may be halted. The Exchange may halt trading 
in the Shares if trading is not occurring in the securities or the 
financial instruments constituting the Disclosed Portfolio of the 
Funds, or if other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present.\36\ Further, 
the Commission notes that the Reporting Authority that provides the 
Disclosed Portfolio 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.\37\ The Commission also notes that the Financial Industry 
Regulatory Authority (``FINRA'') on behalf of the Exchange,\38\ will 
communicate as needed regarding trading in the Shares with other 
markets that are members of the Intermarket Surveillance Group 
(``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. \39\ The Exchange also states that the 
Adviser is affiliated with a broker-dealer, and the Adviser has 
implemented a fire wall with respect to its broker-dealer affiliate 
regarding access to information concerning the composition of and 
changes to the portfolio.\40\
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    \35\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \36\ 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 the Fund. Trading in Shares of the 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.
    \37\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
    \38\ 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.
    \39\ The SSgA Master Trust's Pricing and Investment Committee 
has implemented procedures designed to prevent the use and 
dissemination of material, non-public information regarding the 
Portfolios and the Funds.
    \40\ See supra note 4. An investment adviser to an open-end fund 
is required to be registered under the Investment Advisers Act of 
1940 (``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.

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[[Page 56261]]

    The Exchange represents that the Shares are deemed to be equity 
securities, thus rendering 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 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 and 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.
    (4) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit Holders in an Information Bulletin of the 
special characteristics and risks associated with trading the Shares. 
Specifically, the Information 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 
Equity Trading Permit 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 Portfolio Indicative Value will not be calculated or publicly 
disseminated; (d) how information regarding the Portfolio Indicative 
Value will be disseminated; (e) the requirement that Equity Trading 
Permit 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 continued listing, the Funds will be in 
compliance with Rule 10A-3 under the Exchange Act,\41\ as provided by 
NYSE Arca Equities Rule 5.3.
---------------------------------------------------------------------------

    \41\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (6) All equity securities held by the Funds or Portfolios, 
including shares of ETPs, will trade on U.S. national securities 
exchanges, all of which are members of ISG.
    (7) For each of the Portfolios, the Adviser will invest, under 
normal circumstances, at least 80% of each Portfolio's net assets in a 
diversified portfolio of U.S. dollar-denominated investment grade fixed 
income securities. The Bond Portfolio and the Conservative Portfolio 
primarily will invest in investment grade fixed income securities that 
are rated a minimum of the lowest A rating by any NRSRO (and for the 
Aggressive Portfolio, a minimum of the lowest BBB rating by any NRSRO), 
or, if unrated, determined by the Adviser to be of equivalent quality.
    (8) Each Fund's Portfolio will meet certain criteria for index-
based fixed income exchange-traded funds contained in NYSEArca Equities 
Rule 5.2(j)(3), Commentary .02.\42\
---------------------------------------------------------------------------

    \42\ See note 22, supra.
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    (9) Except for ETPs that may hold non-U.S. equity issues, the Funds 
and the Portfolios will not otherwise invest in non-U.S. equity issues. 
Neither the Funds nor the Portfolios will invest in options contracts, 
futures contracts, or swap agreements. The Funds' investments will be 
consistent with its respective investment objective and will not be 
used to enhance leverage.
    (10) Non-agency residential mortgage-backed and commercial 
mortgage-backed investments each will be limited to 10% for each of the 
Portfolios.
    (11) The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid securities (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Adviser, master 
demand notes, other privately issued securities, loans, and loan 
participations.
    (12) A minimum of 100,000 Shares for each Fund will be outstanding 
at the commencement of trading on the Exchange.
This approval order is based on all of the Exchange's representations 
and description of the Funds, including those set forth above and in 
the Notice.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \43\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \43\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\44\ that the proposed rule change (SR-NYSEArca-2013-71) be, and it 
hereby is, approved.
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    \44\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\45\
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    \45\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-22166 Filed 9-11-13; 8:45 am]
BILLING CODE 8011-01-P