Document ID: SEC-2017-1664-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2017-10-06T04:00Z

[Federal Register Volume 82, Number 193 (Friday, October 6, 2017)]
[Notices]
[Pages 46870-46877]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21537]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81794; File No. SR-NYSEArca-2017-56]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting 
Proceedings To Determine Whether To Approve or Disapprove a Proposed 
Rule Change, as Modified by Amendment No. 1, To List and Trade Pursuant 
to NYSE Arca Rule 5.2-E(j)(3) Twelve Series of Investment Company Units

DATE: October 2, 2017.

I. Introduction

    On June 19, 2017, 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 certain series of Investment Company Units listed 
pursuant to NYSE Arca Rule 5.2-E(j)(3). The proposed rule change was 
published for comment in the Federal Register on July 7, 2017.\3\ On 
August 7, 2017, the Exchange filed Amendment No. 1 to the proposed rule 
change, which amended and superseded the

[[Page 46871]]

proposed rule change as originally filed.\4\ On August 15, 2017, 
pursuant to Section 19(b)(2) of the Act,\5\ the Commission designated a 
longer period within which to approve the proposed rule change, 
disapprove the proposed rule change, or institute proceedings to 
determine whether to disapprove the proposed rule change.\6\ The 
Commission has received no comment letters on the proposed rule change. 
This order institutes proceedings under Section 19(b)(2)(B) of the Act 
\7\ to determine whether to approve or disapprove the proposed rule 
change, as modified by Amendment No. 1.
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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. 81062 (June 30, 
2017), 82 FR 31651.
    \4\ In Amendment No. 1, the Exchange: (1) Described the 
investment objective of each fund; (2) described investment 
eligibility criteria and restrictions for each fund; (3) clarified 
that the Web site for each fund will contain its prospectus and 
additional data; (4) clarified that the Exchange has obtained a 
representation from each fund issuer that the applicable net asset 
value for each fund will be calculated daily and made available to 
all market participants at the same time; (5) clarified that none of 
the indexes underlying the funds are maintained by a broker-dealer; 
and (6) made technical changes. Amendment No. 1 to the proposed rule 
change is available at: https://www.sec.gov/comments/sr-nysearca-2017-56/nysearca201756.htm.
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 81400, 82 FR 39643 
(August 21, 2017). The Commission designated October 5, 2017, as the 
date by which the Commission shall either approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \7\ 15 U.S.C. 78s(b)(2)(B).
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II. Exchange's Description of the Proposed Rule Change, as Modified by 
Amendment No. 1

    The Exchange proposes to list and trade pursuant to NYSE Arca Rule 
5.2-E(j)(3) shares (``Shares'') of the following series of Investment 
Company Units: (1) iShares National Muni Bond ETF; (2) iShares Short-
Term National Muni Bond ETF; (3) VanEck Vectors AMT-Free Intermediate 
Municipal Index ETF; (4) VanEck Vectors AMT-Free Long Municipal Index 
ETF; (5) VanEck Vectors AMT-Free Short Municipal Index ETF; (6) VanEck 
Vectors High-Yield Municipal Index ETF; (7) VanEck Vectors Pre-Refunded 
Municipal Index ETF; (8) PowerShares VRDO Tax-Free Weekly Portfolio; 
(9) SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF; (10) 
SPDR Nuveen Bloomberg Barclays Municipal Bond ETF (collectively, the 
``Multistate Municipal Bond Funds''); (11) iShares California Muni Bond 
ETF; and (12) iShares New York Muni Bond ETF (collectively, the 
``Single-State Municipal Bond Funds'' and, together with the Multistate 
Municipal Bond Funds, the ``Municipal Bond Funds'').\8\ The Single-
State Municipal Bond Funds overlie an index comprised of the fixed 
income municipal bond securities of one State; the Multistate Municipal 
Bond Funds overlie an index comprised of the fixed income municipal 
bond securities of more than one State.
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    \8\ The Commission notes that, although the Shares do not meet 
the standards set forth in Commentary .02 to Rule 5.2-E(j)(3), the 
Exchange nevertheless listed the Shares prior to 2010.
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    Commentary .02 to Rule 5.2(j)(3) sets forth the generic listing 
requirements for an index of fixed income securities underlying a 
series of Investment Company Units. One of the enumerated listing 
requirements is that component fixed income securities that, in the 
aggregate, account for at least 75% of the weight of the index each 
shall have a minimum principal amount outstanding of $100 million or 
more.\9\ The Exchange states that none of the indexes underlying the 
Municipal Bond Funds satisfy this criterion but represents that each of 
the underlying indexes meet all of the other requirements of such rule.
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    \9\ See Commentary .02(a)(2) to NYSE Arca Rule 5.2-E(j)(3).
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A. The Exchange's Description of the Municipal Bond Funds and Their 
Underlying Indexes \10\
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    \10\ Additional information regarding the Funds and their 
underlying indexes can be found in Amendment No. 1. See supra note 
4.
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1. iShares National Muni Bond ETF
    The iShares National Muni Bond ETF seeks to track the investment 
results of the S&P National AMT-Free Municipal Bond Index, which 
measures the performance of the investment grade segment of the U.S. 
municipal bond market. The S&P National AMT-Free Municipal Bond Index 
primarily includes municipal bonds from issuers that are state or local 
governments or agencies such that the interest on each such bond is 
exempt from U.S. federal income taxes and the federal alternative 
minimum tax. Each bond in the S&P National AMT-Free Municipal Bond 
Index must have a rating of at least BBB- by S&P Global Ratings 
(``S&P''), Baa3 by Moody's Investors Service, Inc. (``Moody's''), or 
BBB- by Fitch Ratings, Inc. (``Fitch''). Each bond in the S&P National 
AMT-Free Municipal Bond Index must be denominated in U.S. dollars, must 
be a constituent of an offering where the original offering amount was 
at least $100 million, and must have a minimum par amount of $25 
million. To remain in the S&P National AMT-Free Municipal Bond Index, 
bonds must maintain a minimum par amount greater than or equal to $25 
million as of the next rebalancing date.
    As of April 1, 2017, the S&P National AMT-Free Municipal Bond Index 
included 11,333 component fixed income municipal bond securities from 
issuers in 47 different states or U.S. territories. The most heavily 
weighted security in the index represented approximately 0.25% of the 
total weight of the index and the aggregate weight of the top five most 
heavily weighted securities in the index represented less than 1% of 
the total weight of the index. Approximately 99.29% of the weight of 
the index components was composed of individual maturities that were 
part of an entire municipal bond offering with a minimum original 
principal amount outstanding of $100 million or more for all maturities 
in the offering. Approximately 31.79% of the weight of the components 
in the index had a minimum original principal amount outstanding of 
$100 million or more. In addition, the total dollar amount outstanding 
of issues in the index was approximately $628,460,731,594, and the 
average dollar amount outstanding of issues in the index was 
approximately $55,454,048.
    Generally, the iShares National Muni Bond ETF invests at least 90% 
of its assets in the component securities of the S&P National AMT-Free 
Municipal Bond Index and may invest up to 10% of its assets in certain 
futures, options and swap contracts, cash and cash equivalents, 
including shares of money market funds, as well as in securities not 
included in the S&P National AMT-Free Municipal Bond Index, but which 
the fund's investment advisor believes will help the fund track the S&P 
National AMT-Free Municipal Bond Index.
2. iShares Short Term National Muni Bond ETF
    The iShares Short Term National Muni Bond ETF seeks to track the 
investment results of the S&P Short Term National AMT-Free Municipal 
Bond Index, which measures the performance of the short-term investment 
grade segment of the U.S. municipal bond market. The S&P Short Term 
National AMT-Free Municipal Bond Index primarily includes municipal 
bonds from issuers that are state or local governments or agencies such 
that the interest on each such bond is exempt from U.S. federal income 
taxes and the federal alternative minimum tax (``AMT''). Each bond in 
the S&P Short Term National AMT-Free Municipal Bond Index must have a 
rating of at least BBB- by S&P, Baa3 by Moody's, or BBB- by Fitch. Each 
bond in the S&P Short Term National AMT-Free Municipal Bond Index must 
be

[[Page 46872]]

denominated in U.S. dollars, must be a constituent of an offering where 
the original offering amount was at least $100 million, and must have a 
minimum par amount of $25 million. To remain in the S&P Short Term 
National AMT-Free Municipal Bond Index, bonds must maintain a minimum 
par amount greater than or equal to $25 million as of the next 
rebalancing date.
    As of April 1, 2017, the S&P Short Term National AMT-Free Municipal 
Bond Index included 3,309 component fixed income municipal bond 
securities from issuers in 44 different states or U.S. territories. The 
most heavily weighted security in the index represented approximately 
1% of the total weight of the index and the aggregate weight of the top 
five most heavily weighted securities in the index represented 
approximately 2% of the total weight of the index. Approximately 98.22% 
of the weight of the index components was composed of individual 
maturities that were part of an entire municipal bond offering with a 
minimum original principal amount outstanding of $100 million or more 
for all maturities in the offering. Approximately 27.63% of the weight 
of the components in the index had a minimum original principal amount 
outstanding of $100 million or more. In addition, the total dollar 
amount outstanding of issues in the index was approximately 
$166,147,941,156, and the average dollar amount outstanding of issues 
in the index was approximately $50,210,922.
    Generally, the iShares National Muni Bond ETF invests at least 90% 
of its assets in the component securities of the S&P Short Term 
National AMT-Free Municipal Bond Index and may invest up to 10% of its 
assets in certain futures, options and swap contracts, cash and cash 
equivalents, including shares of money market funds, as well as in 
securities not included in the S&P Short Term National AMT-Free 
Municipal Bond Index, but which the fund's investment advisor believes 
will help the fund track the S&P Short Term National AMT-Free Municipal 
Bond Index.
3. VanEck Vectors AMT-Free Intermediate Municipal Index ETF
    The VanEck Vectors AMT-Free Intermediate Municipal Index ETF seeks 
to replicate as closely as possible, before fees and expenses, the 
price and yield performance of the Bloomberg Barclays AMT-Free 
Intermediate Continuous Municipal Index. The Bloomberg Barclays AMT-
Free Intermediate Continuous Municipal Index is a market size weighted 
index comprised of publicly traded municipal bonds that cover the U.S. 
dollar-denominated intermediate term tax-exempt bond market. To be 
included in the Bloomberg Barclays AMT-Free Intermediate Continuous 
Municipal Index, a bond must be rated Baa3/BBB- or higher by at least 
two of the following ratings agencies if all three agencies rate the 
security: Moody's, S&P, and Fitch. If only one of the three agencies 
rates a security, the rating must be at least Baa3/BBB-. Constituent 
securities of the Bloomberg Barclays AMT-Free Intermediate Continuous 
Municipal Index must have an outstanding par value of at least $7 
million and be issued as part of a transaction of at least $75 million.
    As of April 1, 2017, the Bloomberg Barclays AMT-Free Intermediate 
Continuous Municipal Index included 17,272 component fixed income 
municipal bond securities from issuers in 50 different states or U.S. 
territories. The most heavily weighted security in the index 
represented less than 0.25% of the total weight of the index and the 
aggregate weight of the top five most heavily weighted securities in 
the index represented approximately 0.50% of the total weight of the 
index. Approximately 96.13% of the weight of the index components was 
composed of individual maturities that were part of an entire municipal 
bond offering with a minimum original principal amount outstanding of 
$100 million or more for all maturities in the offering. Approximately 
7.75% of the weight of the components in the index had a minimum 
original principal amount outstanding of $100 million or more. In 
addition, the total dollar amount outstanding of issues in the index 
was approximately $340,102,539,050, and the average dollar amount 
outstanding of issues in the index was approximately $19,690,976.
    Normally, the VanEck Vectors AMT-Free Intermediate Municipal Index 
ETF invests at least 80% of its total assets in fixed income securities 
that comprise the Bloomberg Barclays AMT-Free Intermediate Continuous 
Municipal Index.
4. VanEck Vectors AMT-Free Long Municipal Index ETF
    The VanEck Vectors AMT-Free Long Municipal Index ETF seeks to 
replicate as closely as possible, before fees and expenses, the price 
and yield performance of the Bloomberg Barclays AMT-Free Long 
Continuous Municipal Index. The Bloomberg Barclays AMT-Free Long 
Continuous Municipal Index is a market size weighted index comprised of 
publicly traded municipal bonds that cover the U.S. dollar denominated 
long-term tax-exempt bond market. To be included in the Bloomberg 
Barclays AMT-Free Long Continuous Municipal Index, bonds must be rated 
Baa3/BBB- or higher by at least two of the following ratings agencies 
if all three agencies rate the security: Moody's, S&P, and Fitch. If 
only one of the three agencies rates a security, the rating must be at 
least Baa3/BBB-. Constituent securities of the Bloomberg Barclays AMT-
Free Long Continuous Municipal Index must have an outstanding par value 
of at least $7 million and be issued as part of a transaction of at 
least $75 million.
    As of April 1, 2017, the Bloomberg Barclays AMT-Free Long 
Continuous Municipal Index included 7,657 component fixed income 
municipal bond securities from issuers in 50 different states or U.S. 
territories. The most heavily weighted security in the index 
represented less than 0.50% of the total weight of the index and the 
aggregate weight of the top five most heavily weighted securities in 
the index represented approximately 1.25% of the total weight of the 
index. Approximately 93.84% of the weight of the index components was 
composed of individual maturities that were part of an entire municipal 
bond offering with a minimum original principal amount outstanding of 
$100 million or more for all maturities in the offering. Approximately 
32.34% of the weight of the components in the index had a minimum 
original principal amount outstanding of $100 million or more. In 
addition, the total dollar amount outstanding of issues in the index 
was approximately $279,575,285,082, and the average dollar amount 
outstanding of issues in the index was approximately $36,512,379.
    Normally, the VanEck Vectors AMT-Free Long Municipal Index ETF 
invests at least 80% of its total assets in fixed income securities 
that comprise the Bloomberg Barclays AMT-Free Long Continuous Municipal 
Index.
5. VanEck Vectors AMT-Free Short Municipal Index ETF
    The VanEck Vectors AMT-Free Short Municipal Index ETF seeks to 
replicate as closely as possible, before fees and expenses, the price 
and yield performance of the Bloomberg Barclays AMT-Free Short 
Continuous Municipal Index. The Bloomberg Barclays AMT-Free Short 
Continuous Municipal Index is a market size weighted index comprised of 
publicly traded municipal bonds that cover the U.S. dollar denominated 
short-term tax-exempt bond market. To be included in the

[[Page 46873]]

Bloomberg Barclays AMT-Free Short Continuous Municipal Index, bonds 
must be rated Baa3/BBB- or higher by at least two of the following 
ratings agencies if all three agencies rate the security: Moody's, S&P, 
and Fitch. If only one of the three agencies rates a security, the 
rating must be at least Baa3/BBB-. Constituent securities of the 
Bloomberg Barclays AMT-Free Short Continuous Municipal Index must have 
an outstanding par value of at least $7 million and be issued as part 
of a transaction of at least $75 million.
    As of April 1, 2017, the Bloomberg Barclays AMT-Free Short 
Continuous Municipal Index included 7,229 component fixed income 
municipal bond securities from issuers in 48 different states or U.S. 
territories. The most heavily weighted security in the index 
represented approximately 1% of the total weight of the index and the 
aggregate weight of the top five most heavily weighted securities in 
the index represented approximately 2.25% of the total weight of the 
index. Approximately 94.4% of the weight of the index components was 
composed of individual maturities that were part of an entire municipal 
bond offering with a minimum original principal amount outstanding of 
$100 million or more for all maturities in the offering. Approximately 
13.60% of the weight of the components in the index had a minimum 
original principal amount outstanding of $100 million or more. In 
addition, the total dollar amount outstanding of issues in the index 
was approximately $152,020,140,995, and the average dollar amount 
outstanding of issues in the index was approximately $21,026,299.
    Normally, the VanEck Vectors AMT-Free Short Municipal Index ETF 
invests at least 80% of its total assets in fixed income securities 
that comprise the Bloomberg Barclays AMT-Free Short Continuous 
Municipal Index.
6. VanEck Vectors High-Yield Municipal Index ETF
    The VanEck Vectors High-Yield Municipal Index ETF seeks to 
replicate as closely as possible, before fees and expenses, the price 
and yield performance of the Bloomberg Barclays Municipal Custom High 
Yield Composite Index. The Bloomberg Barclays Municipal Custom High 
Yield Composite Index is a market size weighted index composed of 
publicly traded municipal bonds that cover the U.S. dollar denominated 
high yield long-term tax-exempt bond market. The Bloomberg Barclays 
Municipal Custom High Yield Composite Index is calculated using a 
market value weighting methodology, provided that the total allocation 
to issuers from each individual territory of the United States 
(including Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, 
and the Northern Mariana Islands) does not exceed 4%. The Bloomberg 
Barclays Municipal Custom High Yield Composite Index tracks the high 
yield municipal bond market with a 75% weight in non-investment grade 
municipal bonds and a targeted 25% weight in Baa/BBB rated investment 
grade municipal bonds.
    As of April 1, 2017, the Bloomberg Barclays Municipal Custom High 
Yield Composite Index included 4,702 component fixed income municipal 
bond securities from issuers in 50 different states or U.S. 
territories. The most heavily weighted security in the index 
represented approximately 1.25% of the total weight of the index, and 
the aggregate weight of the top five most heavily weighted securities 
in the index represented approximately 6% of the total weight of the 
index. Approximately 75.16% of the weight of the index components was 
composed of individual maturities that were part of an entire municipal 
bond offering with a minimum original principal amount outstanding of 
$100 million or more for all maturities in the offering. Approximately 
43.26% of the weight of the components in the index had a minimum 
original principal amount outstanding of $100 million or more. In 
addition, the total dollar amount outstanding of issues in the index 
was approximately $224,318,153,150, and the average dollar amount 
outstanding of issues in the index was approximately $47,706,966.
    Normally, the VanEck Vectors High-Yield Municipal Index ETF invests 
at least 80% of its total assets in securities that comprise the 
Bloomberg Barclays Municipal Custom High Yield Composite Index.
7. VanEck Vectors Pre-Refunded Municipal Index ETF
    The VanEck Vectors Pre-Refunded Municipal Index ETF seeks to 
replicate as closely as possible, before fees and expenses, the price 
and yield performance of the Bloomberg Barclays Municipal Pre-
Refunded--Treasury-Escrowed Index. The Bloomberg Barclays Municipal 
Pre-Refunded--Treasury-Escrowed Index is a market size weighted index 
comprised of publicly traded municipal bonds that cover the U.S. dollar 
denominated tax-exempt bond market. The Bloomberg Barclays Municipal 
Pre-Refunded--Treasury-Escrowed Index is comprised of pre-refunded and/
or escrowed-to-maturity municipal bonds. To be included in the 
Bloomberg Barclays Municipal Pre-Refunded--Treasury-Escrowed Index, 
bonds must have an explicit or implicit credit rating of AAA. 
Constituent securities of the Bloomberg Barclays Municipal Pre-
Refunded--Treasury-Escrowed Index must have an outstanding par value of 
at least $7 million and be issued as part of a transaction of at least 
$75 million in market value.
    As of April 1, 2017, the Bloomberg Barclays Municipal Pre-Refunded-
Treasury-Escrowed Index included 3,691 component fixed income municipal 
bond securities from issuers in 50 different states or U.S. 
territories. The most heavily weighted security in the index 
represented approximately 0.50% of the total weight of the index and 
the aggregate weight of the top five most heavily weighted securities 
in the index represented approximately 2.25% of the total weight of the 
index. Approximately 93.70% of the weight of the index components was 
composed of individual maturities that were part of an entire municipal 
bond offering with a minimum original principal amount outstanding of 
$100 million or more for all maturities in the offering. Approximately 
19.23% of the weight of the components in the index had a minimum 
original principal amount outstanding of $100 million or more. In 
addition, the total dollar amount outstanding of issues in the index 
was approximately $94,289,476,486, and the average dollar amount 
outstanding of issues in the index was approximately $25,545,780.
    Normally, the VanEck Vectors Pre-Refunded Municipal Index ETF 
invests at least 80% of its total assets in securities that comprise 
the Bloomberg Barclays Municipal Pre-Refunded--Treasury-Escrowed Index.
8. PowerShares VRDO Tax-Free Weekly Portfolio
    The PowerShares VRDO Tax-Free Weekly Portfolio seeks investment 
results that generally correspond (before fees and expenses) to the 
price and yield of the Bloomberg U.S. Municipal AMT-Free Weekly VRDO 
Index. The Bloomberg U.S. Municipal AMT-Free Weekly VRDO Index is 
comprised of municipal securities issued in the primary market as 
variable rate demand obligation (``VRDO'') bonds. Only VRDOs whose 
interest rates are reset weekly are included in the Bloomberg U.S. 
Municipal AMT-Free Weekly VRDO Index, and the Bloomberg U.S. Municipal 
AMT-Free Weekly VRDO Index excludes secondary or derivative VRDOs 
(tender option bonds). To be

[[Page 46874]]

included in the Bloomberg U.S. Municipal AMT-Free Weekly VRDO Index, 
constituents must be rated by at least one of the following statistical 
rating agencies at the following minimum ratings: Moody's as A-3 for 
long-term bonds or Prime-2 for short-term bonds; by S&P as A- for long-
term bonds or A-2 for short-term bonds; and by Fitch as A- for long-
term bonds or F-2 for short-term bonds.
    As of April 1, 2017, the Bloomberg US Municipal AMT-Free Weekly 
VRDO Index included 1,494 component fixed income municipal bond 
securities from issuers in 49 different states or U.S. territories. The 
most heavily weighted security in the index represented approximately 
0.75% of the total weight of the index and the aggregate weight of the 
top five most heavily weighted securities in the index represented 
approximately 2.75% of the total weight of the index. Approximately 
44.76% of the weight of the index components was composed of individual 
maturities that were part of an entire municipal bond offering with a 
minimum original principal amount outstanding of $100 million or more 
for all maturities in the offering. Approximately 34.88% of the weight 
of the components in the index had a minimum original principal amount 
outstanding of $100 million or more. In addition, the total dollar 
amount outstanding of issues in the index was approximately 
$68,489,564,000, and the average dollar amount outstanding of issues in 
the index was approximately $45,843,082.
    Generally, the PowerShares VRDO Tax-Free Weekly Portfolio invests 
at least 80% of its total assets in VRDO bonds that are exempt from 
federal income tax with interest rates that reset weekly that comprise 
the Bloomberg U.S. Municipal AMT-Free Weekly VRDO Index.
9. SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF
    The SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF 
seeks to provide investment results that, before fees and expenses, 
correspond generally to the price and yield performance of the 
Bloomberg Barclays Managed Money Municipal Short Term Index which 
tracks the short term tax exempt municipal bond market. The Bloomberg 
Barclays Managed Money Municipal Short Term Index is designed to track 
the publicly traded municipal bonds that cover the U.S. dollar 
denominated short term tax exempt bond market, including state and 
local general obligation bonds, revenue bonds, pre-refunded bonds, and 
insured bonds. All bonds in the Bloomberg Barclays Managed Money 
Municipal Short Term Index must be rated Aa3/AA- or higher by at least 
two of the following statistical ratings agencies: Moody's, S&P, or 
Fitch. If only one of the agencies rates the security, the rating must 
be at least Aa3/AA-. Each security in the Bloomberg Barclays Managed 
Money Municipal Short Term Index must have an outstanding par value of 
at least $7 million and be issued as part of a transaction of at least 
$75 million.
    As of April 1, 2017, the Bloomberg Barclays Managed Money Municipal 
Short Term Index included 4,263 component fixed income municipal bond 
securities from issuers in 44 different states or U.S. territories. The 
most heavily weighted security in the index represented approximately 
0.75% of the total weight of the index, and the aggregate weight of the 
top five most heavily weighted securities in the index represented 
approximately 2% of the total weight of the index. Approximately 94.54% 
of the weight of the index components was composed of individual 
maturities that were part of an entire municipal bond offering with a 
minimum original principal amount outstanding of $100 million or more 
for all maturities in the offering. Approximately 10.82% of the weight 
of the components in the index had a minimum original principal amount 
outstanding of $100 million or more. In addition, the total dollar 
amount outstanding of issues in the index was approximately 
$85,187,709,681, and the average dollar amount outstanding of issues in 
the index was approximately $19,983,042.
    Under normal market conditions, the SPDR Nuveen Bloomberg Barclays 
Short Term Municipal Bond ETF generally invests substantially all, but 
at least 80%, of its total assets in the securities comprising the 
Bloomberg Barclays Managed Money Municipal Short Term Index or in 
securities that the fund's sub-adviser determines have economic 
characteristics that are substantially identical to the economic 
characteristics of the securities that comprise the Bloomberg Barclays 
Managed Money Municipal Short Term Index. In addition, the SPDR Nuveen 
Bloomberg Barclays Short Term Municipal Bond ETF may invest in debt 
securities that are not included in the Bloomberg Barclays Managed 
Money Municipal Short Term Index, cash and cash equivalents or money 
market instruments, such as repurchase agreements and money market 
funds.
10. SPDR Nuveen Bloomberg Barclays Municipal Bond ETF
    The Exchange states that, according to its prospectus, the SPDR 
Nuveen Bloomberg Barclays Municipal Bond ETF seeks to provide 
investment results that, before fees and expenses, correspond generally 
to the price and yield performance of the Bloomberg Barclays Municipal 
Managed Money Index which tracks the U.S. municipal bond market. The 
Bloomberg Barclays Municipal Managed Money Index is designed to track 
the U.S. long term tax-exempt bond market, including state and local 
general obligation bonds, revenue bonds, pre-refunded bonds, and 
insured bonds. The Bloomberg Barclays Municipal Managed Money Index is 
comprised of tax-exempt municipal securities issued by states, cities, 
counties, districts and their respective agencies. The Bloomberg 
Barclays Municipal Managed Money Index also includes municipal lease 
obligations, which are securities issued by state and local governments 
and authorities to finance the acquisition of equipment and facilities. 
All bonds in the Bloomberg Barclays Municipal Managed Money Index must 
be rated Aa3/AA- or higher by at least two of the following statistical 
ratings agencies: Moody's, S&P, and Fitch. If only one of the agencies 
rates the security, the rating must be at least Aa3/AA-. Each security 
in the Bloomberg Barclays Municipal Managed Money Index must have an 
outstanding par value of at least $7 million and be issued as part of a 
transaction of at least $75 million.
    As of April 1, 2017, the Bloomberg Barclays Municipal Managed Money 
Index included 22,247 component fixed income municipal bond securities 
from issuers in 48 different states or U.S. territories. The most 
heavily weighted security in the index represented less than 0.25% of 
the total weight of the index, and the aggregate weight of the top five 
most heavily weighted securities in the index represented approximately 
0.50% of the total weight of the index. Approximately 95.05% of the 
weight of the index components was composed of individual maturities 
that were part of an entire municipal bond offering with a minimum 
original principal amount outstanding of $100 million or more for all 
maturities in the offering. Approximately 13.35% of the weight of the 
components in the index had a minimum original principal amount 
outstanding of $100 million or more. In addition, the total dollar 
amount outstanding of issues in the index was approximately 
$496,240,108,998, and the average

[[Page 46875]]

dollar amount outstanding of issues in the index was approximately 
$22,305,934.
    Under normal market conditions, the SPDR Nuveen Bloomberg Barclays 
Municipal Bond ETF generally invests substantially all, but at least 
80%, of its total assets in the securities comprising the Bloomberg 
Barclays Municipal Managed Money Index or in securities that the fund's 
sub-adviser determines have economic characteristics that are 
substantially identical to the economic characteristics of the 
securities that comprise the Bloomberg Barclays Municipal Managed Money 
Index. In addition, the SPDR Nuveen Bloomberg Barclays Municipal Bond 
ETF may invest in debt securities that are not included in the 
Bloomberg Barclays Municipal Managed Money Index, cash and cash 
equivalents or money market instruments, such as repurchase agreements 
and money market funds.
11. iShares California Muni Bond ETF
    The iShares California Muni Bond ETF seeks to track the investment 
results of the S&P California AMT-Free Municipal Bond Index, which 
measures the performance of the investment grade segment of the 
California municipal bond market. The S&P California AMT-Free Municipal 
Bond Index is a subset of the S&P National AMT-Free Municipal Bond 
Index and is comprised of municipal bonds issued in the State of 
California. The S&P California AMT-Free Municipal Bond Index primarily 
includes municipal bonds from issuers in California that are California 
state or local governments or agencies whose interest payments are 
exempt from U.S. federal and California state income taxes and the 
federal alternative minimum tax. Each bond in the S&P California AMT-
Free Municipal Bond Index must have a rating of at least BBB- by S&P, 
Baa3 by Moody's, or BBB- by Fitch. Each bond in the S&P California AMT-
Free Municipal Bond Index must be denominated in U.S. dollars, must be 
a constituent of an offering where the original offering amount was at 
least $100 million, and must have a minimum par amount of $25 million. 
To remain in the S&P California AMT-Free Municipal Bond Index, bonds 
must maintain a minimum par amount greater than or equal to $25 million 
as of the next rebalancing date.
    As of April 1, 2017, the S&P California AMT-Free Municipal Bond 
Index included 2,115 component fixed income municipal bond securities 
from more than 150 distinct municipal bond issuers in the State of 
California. The most heavily weighted security in the index represented 
approximately 0.50% of the total weight of the index, and the aggregate 
weight of the top five most heavily weighted securities in the index 
represented approximately 2.75% of the total weight of the index. 
Approximately 96.31% of the weight of the index components was composed 
of individual maturities that were part of an entire municipal bond 
offering with a minimum original principal amount outstanding of $100 
million or more for all maturities in the offering. Approximately 
38.89% of the weight of the components in the index had a minimum 
original principal amount outstanding of $100 million or more. In 
addition, the total dollar amount outstanding of issues in the index 
was approximately $137,796,471,640, and the average dollar amount 
outstanding of issues in the index was approximately $65,151,996.
    Generally, the iShares California Muni Bond ETF invests at least 
90% of its assets in the component securities of the S&P California 
AMT-Free Municipal Bond Index and may invest up to 10% of its assets in 
certain futures, options and swap contracts, cash and cash equivalents, 
including shares of money market funds, as well as in securities not 
included in the S&P California AMT-Free Municipal Bond Index, but which 
the fund's investment advisor believes will help the fund track the S&P 
California AMT-Free Municipal Bond Index.
12. iShares New York Muni Bond ETF
    The iShares New York Muni Bond ETF seeks to track the investment 
results of the S&P New York AMT-Free Municipal Bond Index, which 
measures the performance of the investment grade segment of the New 
York municipal bond market. The S&P New York AMT-Free Municipal Bond 
Index is a subset of the S&P National AMT-Free Municipal Bond Index and 
is comprised of municipal bonds issued in the State of New York. The 
S&P New York AMT-Free Municipal Bond Index primarily includes municipal 
bonds from issuers in New York that are New York state or local 
governments or agencies whose interest payments are exempt from U.S. 
federal and New York State personal income taxes and the federal 
alternative minimum tax. Each bond in the S&P New York AMT-Free 
Municipal Bond Index must have a rating of at least BBB- by S&P, Baa3 
by Moody's, or BBB- by Fitch. Each bond in the S&P New York AMT-Free 
Municipal Bond Index must be denominated in U.S. dollars, must be a 
constituent of an offering where the original offering amount was at 
least $100 million, and must have a minimum par amount of $25 million. 
To remain in the S&P New York AMT-Free Municipal Bond Index, bonds must 
maintain a minimum par amount greater than or equal to $25 million as 
of the next rebalancing date.
    As of April 1, 2017, the S&P New York AMT-Free Municipal Bond Index 
included 2,191 component fixed income municipal bond securities from 
more than 20 distinct municipal bond issuers in the State of New York. 
The most heavily weighted security in the index represented 
approximately 1.50% of the total weight of the index, and the aggregate 
weight of the top five most heavily weighted securities in the index 
represented approximately 4.25% of the total weight of the index. 
Approximately 98.63% of the weight of the index components was composed 
of individual maturities that were part of an entire municipal bond 
offering with a minimum original principal amount outstanding of $100 
million or more for all maturities in the offering. Approximately 
34.50% of the weight of the components in the index had a minimum 
original principal amount outstanding of $100 million or more. In 
addition, the total dollar amount outstanding of issues in the index 
was approximately $124,381,556,872, and the average dollar amount 
outstanding of issues in the index was approximately $56,769,309.
    Generally, the iShares New York Muni Bond ETF invests at least 90% 
of its assets in the component securities of the S&P New York AMT-Free 
Municipal Bond Index and may invest up to 10% of its assets in certain 
futures, options and swap contracts, cash and cash equivalents, 
including shares of money market funds, as well as in securities not 
included in the S&P New York AMT-Free Municipal Bond Index x, but which 
the fund's investment advisor believes will help the fund track the S&P 
New York AMT-Free Municipal Bond Index.

B. The Continued Listing and Trading of the Shares

    The Exchange states that it is appropriate to continue to list and 
trade the Shares based on the characteristics of the indexes underlying 
the Municipal Bond Funds. According to the Exchange, each index 
underlying the Municipal Bond Funds satisfies all of the generic 
listing requirements for Investment Company Units based on a fixed 
income index, except for the minimum principal amount outstanding 
requirement of Commentary .02(a)(2) to Rule 5.2(j)(3). The Exchange 
asserts that a fundamental purpose behind the minimum principal amount 
outstanding requirement is to ensure that component

[[Page 46876]]

securities of an index are sufficiently liquid such that the potential 
for index manipulation is reduced.\11\ The Exchange asserts that each 
index underlying the Municipal Bond Funds is a broad-based index of 
fixed income municipal bond securities that is not readily susceptible 
to manipulation.
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    \11\ See Amendment No. 1, supra note 4, at 16.
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    With respect to the Multistate Municipal Bond Funds, the Exchange 
states: (1) Each underlying index is broad-based and currently 
includes, on average, more than 8,000 component securities; (2) 
currently each underlying index includes securities issued by municipal 
entities in more than 40 states or U.S. territories, and notes that the 
applicable generic listing criterion requires that an index contain 
securities issued by at least 13 non-affiliated issuers; \12\ and (3) 
no single security currently represents more than approximately 1.5% of 
the weight of any underlying index, the aggregate weight of the five 
most heavily weighted securities in each index does not exceed 
approximately 6% of the weight of the index, and notes the applicable 
generic listing criterion permits a single component security to 
represent up to 30% of the weight of an index and the top five 
component securities to, in aggregate, represent up to 65% of the 
weight of an index.\13\ The Exchange asserts that this index 
diversification is significant, and that the absence of constituent 
concentration in the underlying indexes provides a strong degree of 
protection against manipulation of the indexes.\14\
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    \12\ See Commentary .02(a)(5) to NYSE Arca Rule 5.2-E(j)(3).
    \13\ See Commentary .02(a)(4) to NYSE Arca Rule 5.2-E(j)(3).
    \14\ See Amendment No. 1, supra note 4, at 17.
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    With respect to the Single-State Municipal Bond Funds, the Exchange 
states that each underlying index is well-diversified to protect 
against index manipulation. To support this, the Exchange states: (1) 
On average, the underlying indexes include more than 1,500 securities; 
(2) each underlying index includes securities from at least 20 distinct 
municipal bond issuers; and (3) the most heavily weighted security in 
any of the underlying indexes represents approximately 2% of the weight 
of the index, and the aggregate weight of the five most heavily 
weighted securities in any of the indexes represents approximately 
6.25% of the total index weight.
    The Exchange represents that: (1) On a continuous basis, each index 
underlying a Municipal Bond Fund will contain at least 500 component 
securities; (2) currently, each index satisfies all of the generic 
listing requirements under NYSE Arca Rule 5.2-E(j)(3) except for 
Commentary .02(a)(2); (3) the continued listing criteria under Rules 
5.2(j)(3) (except for Commentary .02(a)(2)) and 5.5(g)(2) applicable to 
Investment Company Units will apply to the Shares; and (4) the issuer 
of each Municipal Bond Fund is required to comply with Rule 10A-3 \15\ 
under the Act for the initial and continued listing of the Shares of 
each Municipal Bond Fund. In addition, the Exchange represents that the 
Shares will comply with all other requirements applicable to Investment 
Company Units including, but not limited to, requirements relating to 
the dissemination of key information such as the value of the 
underlying index and the applicable Intraday Indicative Value 
(``IIV''),\16\ rules governing the trading of equity securities, 
trading hours, trading halts, surveillance, information barriers and 
the Information Bulletin to Equity Trading Permit Holders, as set forth 
in Exchange rules applicable to Investment Company Units and prior 
Commission orders approving the generic listing rules applicable to the 
listing and trading of Investment Company Units.
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    \15\ 17 CFR 240.10A-3.
    \16\ An IIV for each Municipal Bond Fund will be widely 
disseminated by one or more major market data vendors at least every 
15 seconds during the Exchange's Core Trading Session of 9:30 a.m. 
to 4:00 p.m., Eastern time. See Amendment No. 1, supra note 4, at 
18, n.10. The Exchange states that currently it understands that 
several major market data vendors display and/or make widely 
available IIVs taken from the Consolidated Tape Association or other 
data feeds.
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III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2017-56, as Modified by Amendment No. 1, and Grounds for 
Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \17\ to determine whether the proposed rule 
change, as modified by Amendment No. 1, should be approved or 
disapproved. Institution of such proceedings is appropriate at this 
time in view of the legal and policy issues raised by the proposed rule 
change. Institution of proceedings does not indicate that the 
Commission has reached any conclusions with respect to any of the 
issues involved. Rather, as described below, the Commission seeks and 
encourages interested persons to provide comments on the proposed rule 
change, as modified by Amendment No. 1.
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    \17\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\18\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of the proposal's consistency with Section 6(b)(5) of the Act, 
which requires, among other things, that the rules of a national 
securities exchange be ``designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade,'' and ``to protect investors and the public 
interest.'' \19\
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    \18\ Id.
    \19\ 15 U.S.C. 78f(b)(5).
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    As noted above, the Exchange has submitted this proposed rule 
change because the Shares of the Municipal Bond Funds do not meet all 
of the generic listing requirements set forth in Commentary.02 to NYSE 
Arca Rule 5.2-E(j)(3). In the proposal, the Exchange describes certain 
characteristics of the underlying indexes as of April 1, 2017,\20\ and 
asserts that those characteristics demonstrate that ``each . . . fund 
is based on a broad-based index that is not readily susceptible to 
manipulation.'' \21\ Further, the Exchange contends that the 
``significant diversification and the lack of concentration among 
constituent securities provides a strong degree of protection against 
index manipulation.'' \22\ For purposes of continued listing of the 
Shares, however, apart from the representation that each index will 
have at least 500 component securities on an ongoing basis, the 
Exchange has not provided any criteria governing the extent to which 
the indexes may deviate from the initial set of characteristics that 
the Exchange relies on to determine the susceptibility of the indexes 
to manipulation. Accordingly, the Commission seeks commenters' views on 
whether the Exchange's statements and representations support a 
determination that the continued listing and trading of the Shares of 
the Municipal Bond Funds would be consistent with Section 6(b)(5) of 
the Act, which, among other things, requires that the rules of an 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, and to 
protect investors and the public interest.
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    \20\ See supra Section II.A.
    \21\ See supra note 3, 82 FR at 31652.
    \22\ See supra note 3, 82 FR at 31653.

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[[Page 46877]]

IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Section 6(b)(5) or any other provision of the Act, or 
the rules and regulations thereunder. Although there do not appear to 
be any issues relevant to approval or disapproval that would be 
facilitated by an oral presentation of views, data, and arguments, the 
Commission will consider, pursuant to Rule 19b-4, any request for an 
opportunity to make an oral presentation.\23\
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    \23\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Acts Amendments of 1975, Senate Comm. 
on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by October 27, 2017. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
November 13, 2017. The Commission asks that commenters address the 
sufficiency of the Exchange's statements in support of the proposal, 
which are set forth in Amendment No. 1,\24\ in addition to any other 
comments they may wish to submit about the proposed rule change.
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    \24\ See supra note 3.
---------------------------------------------------------------------------

    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-2017-56 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-2017-56. 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-2017-56 and should 
be submitted on or before October 27, 2017. Rebuttal comments should be 
submitted by November 13, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(57).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-21537 Filed 10-5-17; 8:45 am]
 BILLING CODE 8011-01-P