Document ID: SEC-2013-2155-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-12-18T05:00Z

[Federal Register Volume 78, Number 243 (Wednesday, December 18, 2013)]
[Notices]
[Pages 76669-76674]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30050]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71067; File No. SR-NYSEArca-2013-105]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade 
Shares of the SPDR MFS Systematic Core Equity ETF, SPDR MFS Systematic 
Growth Equity ETF, and SPDR MFS Systematic Value Equity ETF Under NYSE 
Arca Equities Rule 8.600

December 12, 2013.

I. Introduction

    On October 10, 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 MFS Systematic Core Equity ETF, SPDR MFS 
Systematic Growth Equity ETF, and SPDR MFS Systematic Value Equity ETF 
(each a ``Fund'' and, collectively, the ``Funds'') under NYSE Arca 
Equities Rule 8.600. The proposed rule change was published for comment 
in the Federal Register on October 31,

[[Page 76670]]

2013.\3\ On November 18, 2013, the Exchange filed Amendment No. 1 to 
the proposed rule change.\4\
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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. 70754 (Oct. 25, 
2013), 78 FR 65407 (``Notice'').
    \4\ In Amendment No. 1, the Exchange amended its proposal to 
provide additional details with respect to the net asset value 
(``NAV'') calculation of the Funds and the availability of price 
information for securities and other financial instruments held by 
the Funds. Specifically, in Amendment No. 1, the Exchange deleted 
the following sentence: ``Portfolio securities traded in the over-
the-counter market will be valued at the last reported sale price on 
the valuation date'' and replaced it with the following language:
    ``Common stocks and equity securities (including shares of ETPs) 
traded on a national securities exchange generally will be valued at 
the last reported sale price or the official closing price on that 
exchange where the stock is primarily traded on the day that the 
valuation is made. Securities of investment companies (other than 
exchange-traded funds registered under the 1940 Act), including 
affiliated funds, money market funds and closed-end funds, will be 
valued at NAV.'' The Exchange also added the following language:
    Unsponsored ADRs, which are traded in the over-the-counter 
market, will be valued at the last reported sale price from the OTC 
Bulletin Board or OTC Link LLC on the valuation date . . . TBA 
transactions, Rule 144A securities, repurchase agreements and 
reverse repurchase agreements will generally be valued at bid prices 
received from independent pricing services as of the announced 
closing time for trading in such instruments. Spot currency 
transactions will generally be valued at mid prices received from 
independent pricing service converted into U.S. dollars at current 
market rates on the date of valuation. Foreign currency forwards 
normally will be valued on the basis of quotes obtained from broker-
dealers or third party pricing services.
    Finally, with respect to the availability of price information 
for securities and other financial instruments held by the Funds, 
the Exchange added the following language:
    Intra-day and closing price information regarding equity 
securities traded on a national securities exchange, including 
common stocks, preferred stocks, securities convertible into stocks, 
ETPs and REITs, will be available from the exchange on which such 
securities are traded. Intra-day and closing price information 
regarding unsponsored ADRs will be available from major market data 
vendors such as Bloomberg and Reuters. Intra-day and closing price 
information regarding fixed income securities, including municipal 
bonds, mortgage-backed securities, treasuries, corporate bonds, and 
foreign bonds, will be available from major market data vendors. 
Price information regarding investment company securities, TBA 
transactions, Rule 144A securities, repurchase agreements, reverse 
repurchase agreements, and foreign currency spot prices will be 
available from major market data vendors. Price information 
regarding foreign currency forwards will be available from major 
market data vendors.
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    The Commission received no comments on the proposal. The Commission 
is publishing this notice to solicit comments on Amendment No. 1 from 
interested persons, and is approving the proposed rule change, as 
modified by Amendment No. 1, on an accelerated basis.

II. Description of the Proposal \5\
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    \5\ Additional information regarding the Funds; Shares; 
investment objective, strategies, methodology, and restrictions; 
risks; fees and expenses; creations and redemptions of Shares; 
availability of information; trading rules and halts; and 
surveillance procedures, among other things, can be found in the 
Registration Statement and in the Notice. See Notice supra note 3 
and Registration Statement infra note 7, respectively.
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    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.600, which governs the listing and trading of Managed 
Fund Shares.\6\ The Shares will be offered by SSgA Active ETF Trust 
(the ``Trust''), which is organized as a Massachusetts business trust 
and is registered with the Commission as an open-end management 
investment company.\7\ SSgA Funds Management, Inc. (the ``Adviser'' or 
``SSgA FM'') will serve as the investment adviser to the Funds. 
Massachusetts Financial Services Company (the ``Sub-Adviser'' or 
``MFS'') will be the sub-adviser for the Funds.\8\ State Street Global 
Markets, LLC (the ``Distributor'' or ``Principal Underwriter'') will be 
the principal underwriter and distributor of the Funds' Shares. State 
Street Bank and Trust Company (the ``Administrator,'' ``Custodian'' or 
``Transfer Agent'') will serve as administrator, custodian and transfer 
agent for the Funds.\9\ According to the Exchange, the Adviser and Sub-
Adviser are not registered as broker-dealers but are affiliated with 
one or more broker-dealers and have implemented a ``fire wall'' with 
respect to such broker-dealers regarding access to information 
concerning the composition and/or changes to the Funds' portfolios.\10\
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    \6\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an 
open-end investment company or similar entity that invests in a 
portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Equities Rule 
5.2(j)(3), seeks to provide investment results that correspond 
generally to the price and yield performance of a specific foreign 
or domestic stock index, fixed income securities index or 
combination thereof.
    \7\ The Trust is registered under the 1940 Act. On December 21, 
2012, the Trust filed with the Commission an amendment to its 
registration statement on Form N-1A under the Securities Act of 1933 
(15 U.S.C. 77a) (``Securities Act''), and under the 1940 Act 
relating to the Funds (File Nos. 333-173276 and 811- 22542) 
(``Registration Statement''). The description of the operation of 
the Trust and the Funds herein is based, in part, on the 
Registration Statement. In addition, the Commission has issued an 
order granting certain exemptive relief to the Trust under the1940 
Act. See Investment Company Act Release No. 29524 (December 13, 
2010) (File No. 812-13487) (``Exemptive Order'').
    \8\ MFS is a subsidiary of Sun Life of Canada (U.S.) Financial 
Services Holdings, Inc., which in turn is an indirect majority owned 
subsidiary of Sun Life Financial Inc. (a diversified financial 
services organization).
    \9\ The Commission has previously approved listing and trading 
on the Exchange of a number of actively managed funds under Rule 
8.600. See, e.g., Securities Exchange Act Release Nos. 57801 (May 8, 
2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order 
approving Exchange listing and trading of twelve actively-managed 
funds of the WisdomTree Trust); 60460 (August 7, 2009), 74 FR 41468 
(August 17, 2009) (SR-NYSEArca-2009-55) (order approving listing of 
Dent Tactical ETF); 62502 (July 15, 2010), 75 FR 42471 (July 21, 
2010) (SR-NYSEArca-2010-57) (order approving listing of 
AdviserShares WCM/BNY Mellon Focused Growth ADR ETF); 63076 (October 
12, 2010), 75 FR 63874 (October 18, 2010) (SR-NYSEArca-2010-79) 
(order approving listing of Cambria Global Tactical ETF).
    \10\ See NYSE Arca Equities Rule 8.600, Commentary .06. In the 
event (a) the Adviser or Sub-Adviser becomes a registered broker-
dealer or 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, they will implement a fire wall 
with respect to their relevant personnel or broker-dealer affiliate 
regarding access to information concerning the composition and/or 
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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A. Principal Investments (Under Normal Circumstances) \11\
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    \11\ The term ``under normal circumstances'' includes, but is 
not limited to, the absence of extreme volatility or trading halts 
in the equity markets or the financial markets generally; 
operational issues causing dissemination of inaccurate market 
information; or force majeure type events such as systems failure, 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption or any similar intervening 
circumstance. In the absence of normal circumstances, a Fund may 
(either directly or through the corresponding Portfolio (as 
described below) temporarily depart from its normal investment 
policies and strategies provided that the alternative is consistent 
with a Fund's investment objective and is in the best interest of a 
Fund. For example, a Fund may hold a higher than normal proportion 
of its assets in cash in times of extreme market stress.
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1. SPDR MFS Systematic Core Equity ETF
    The SPDR MFS Systematic Core Equity ETF's investment objective will 
be to seek capital appreciation. The Fund will invest substantially all 
of its assets in the SSgA MFS Systematic Core Equity Portfolio (the 
``Core Equity 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 Core Equity Portfolio (as 
described below).\12\
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    \12\ According to the Registration Statement, the Funds are 
intended to be managed in a ``master-feeder'' structure, under which 
each Fund will invest substantially all of its assets in, 
respectively, the Core Equity Portfolio, and, as described further 
below, the SSgA MFS Systematic Growth Equity Portfolio or the SSgA 
MFS Systematic Value Equity Portfolio (each of which is also 
referred to herein as ``Portfolio'' and, collectively, the 
``Portfolios''). Each Portfolio is a ``master fund, which is a 
separate mutual fund that has an identical investment objective to 
its respective Portfolio. As a result, each Fund (i.e., a ``feeder 
fund'') has an indirect interest in all of the securities 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 a Fund. In 
extraordinary instances, each Fund reserves the right to make direct 
investments in securities. Each Fund may discontinue investing 
through the master-feeder arrangement and pursue its investment 
objectives directly if the Fund's Board of Trustees determines that 
doing so would be in the best interests of shareholders.

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[[Page 76671]]

    The Adviser or Sub-Adviser, with respect to the Core Equity 
Portfolio, will invest at least 80% of such Portfolio's net assets 
(plus the amount of borrowings for investment purposes) in equity 
securities. Equity securities in which the Portfolio may invest include 
common stocks, preferred stocks, securities convertible into stocks, 
and real estate investment trusts (``REITs''). REITs pool investors' 
funds for investment primarily in income producing real estate or real 
estate loans or interests.
    The Adviser or Sub-Adviser may invest in exchange-traded products 
(``ETPs'').\13\ ETPs include exchange-traded funds registered under the 
1940 Act; exchange-traded commodity trusts; and exchange-traded notes 
(``ETNs'').\14\ The Adviser or Sub-Adviser may invest up to 20% of its 
total assets 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.
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    \13\ For each of the Portfolios, 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 the Funds may invest in inverse ETPs, 
the Funds will not invest in leveraged or inverse leveraged ETPs 
(e.g., 2X or 3X).
    \14\ ETNs are debt obligations of investment banks which are 
traded on exchanges and the returns of which are linked to the 
performance of 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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2. SPDR MFS Systematic Growth Equity ETF
    The SPDR MFS Systematic Growth Equity ETF's investment objective 
will be to seek capital appreciation. The Fund will invest 
substantially all of its assets in the SSgA MFS Systematic Growth 
Equity Portfolio (the ``Growth Equity 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 Growth 
Equity Portfolio.
    With respect to the Growth Equity Portfolio, the Adviser or Sub-
Adviser will invest at least 80% of such Portfolio's net assets (plus 
the amount of borrowings for investment purposes) in equity securities. 
Equity securities in which the Growth Equity Portfolio may invest 
include common stocks, preferred stocks, securities convertible into 
stocks, and REITs.
    The Adviser or Sub-Adviser may invest in ETPs.\15\ The Adviser or 
Sub-Adviser may invest up to 20% of the Fund's total assets in one or 
more ETPs that are QPTPs and whose principal activities are the buying 
and selling of commodities or options, futures, or forwards with 
respect to commodities.
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    \15\ See note 13, supra.
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3. SPDR MFS Systematic Value Equity ETF
    The SPDR MFS Systematic Value Equity ETF's investment objective 
will be to seek capital appreciation. The Fund will invest 
substantially all of its assets in the SSgA MFS Systematic Value Equity 
Portfolio (the ``Value Equity 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 Value Equity 
Portfolio.
    The Adviser or Sub-Adviser, with respect to the Value Equity 
Portfolio, will invest at least 80% of such Portfolio's net assets 
(plus the amount of borrowings for investment purposes) in equity 
securities. Equity securities in which the Value Equity Portfolio may 
invest include common stocks, preferred stocks, securities convertible 
into stocks, and REITs.
    The Adviser or Sub-Adviser may invest in ETPs.\16\ The Adviser or 
Sub-Adviser may invest up to 20% of the Fund's total assets in one or 
more ETPs that are QPTPs and whose principal activities are the buying 
and selling of commodities or options, futures, or forwards with 
respect to commodities.
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    \16\ See note 13, supra.
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B. Other Investments (Under Normal Circumstances)

    The Adviser or Sub-Adviser, with respect to each Portfolio, may 
invest up to 20% of a Portfolio's net assets in other securities and 
financial instruments. A Fund may (indirectly through its investments 
in the respective Portfolio or, in extraordinary circumstances, 
directly) invest in these securities and financial instruments.
    Each Portfolio may invest in bonds, including corporate bonds and 
collateralized loan obligations (``CLOs''). While the assets underlying 
CLOs are typically ``senior loans,'' the assets may also include (i) 
unsecured loans, (ii) other debt securities that are rated below 
investment grade, (iii) debt tranches of other CLOs and (iv) equity 
securities incidental to investments in senior loans. Each Portfolio 
may invest up to 10% of a Portfolio's net assets in high yield debt 
securities.
    The Portfolios may purchase U.S.-listed common stocks and U.S.-
listed preferred securities of foreign corporations, as well as U.S. 
registered, dollar-denominated bonds of foreign corporations, 
governments, agencies and supra-national entities. Each Portfolio may 
purchase investments in common stock of foreign corporations in the 
form of depositary receipts, including American Depositary Receipts 
(``ADRs''), Global Depositary Receipts (``GDRs'') and European 
Depositary Receipts (``EDRs'').\17\
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    \17\ A Portfolio may invest in unsponsored ADRs. Not more than 
10% of the net assets of a Fund will be invested in unsponsored 
ADRs.
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    Each Portfolio may invest in sovereign debt, which may be in the 
form of conventional securities or other types of debt instruments such 
as loans or loan participations. Each Portfolio may invest in U.S. 
Government obligations. U.S. Government obligations include securities 
issued or guaranteed as to principal and interest by the U.S. 
Government, its agencies or instrumentalities.
    The Portfolios may invest in variable and floating rate securities. 
A variable rate security provides for the automatic establishment of a 
new interest rate on set dates. The Portfolios may also purchase 
floating rate securities. 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. Each Portfolio may also invest in Variable Rate Demand 
Obligations, which are short-term tax-exempt fixed income instruments 
whose yield is reset on a periodic basis.
    The Portfolios may invest in inflation-protected public 
obligations, commonly known as ``TIPS,'' of the U.S. Treasury,

[[Page 76672]]

as well as TIPS of major governments and emerging market countries, 
excluding the United States.
    The Portfolios may each invest in U.S. agency mortgage pass-through 
securities primarily through the use of ``to-be-announced'' or ``TBA 
transactions.'' TBA transactions generally are conducted in accordance 
with widely-accepted guidelines which establish commonly observed terms 
and conditions for execution, settlement and delivery. In a TBA 
transaction, the buyer and seller decide on general trade parameters, 
such as agency, settlement date, par amount, and price.\18\
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    \18\ To minimize the risk of default by a counterparty, a 
Portfolio will enter into TBA transactions only with established 
counterparties (such as major broker-dealers) and the Adviser will 
monitor the creditworthiness of such counterparties.
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    The Portfolios may invest up to 15% of net assets in asset-backed 
and commercial mortgaged-backed securities. 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. The payments are, in effect, 
``passed through'' to the holder of the securities (net of any fees 
paid to the issuer or guarantor of the securities).
    Each Portfolio may invest in restricted securities. 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.\19\
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    \19\ 15 U.S.C. 77a.
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    The Portfolios may conduct foreign currency transactions on a spot 
(i.e., cash) or forward basis (i.e., by entering into forward contracts 
to purchase or sell foreign currencies). At the discretion of the 
Adviser, the Portfolios may enter into forward currency exchange 
contracts for hedging purposes to help reduce the risks and volatility 
caused by changes in foreign currency exchange rates, or to gain 
exposure to certain currencies.
    Each Portfolio may invest a portion of its assets in Build America 
Bonds.\20\
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    \20\ Build America Bonds offer an alternative form of financing 
to state and local governments whose primary means for accessing the 
capital markets has historically been through the issuance of tax-
free municipal bonds. 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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    Each Portfolio may invest in repurchase agreements with commercial 
banks, brokers or dealers to generate income from its excess cash 
balances and to invest securities lending cash collateral. Each 
Portfolio may also 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 have 
the characteristics of borrowing. The securities purchased with the 
funds obtained from the agreement and securities collateralizing the 
agreement will have maturity dates no later than the repayment date. In 
addition to repurchase agreements, each Portfolio may invest in short-
term instruments, including money market instruments, (including money 
market funds advised by the Adviser), cash and cash equivalents, on an 
ongoing basis to provide liquidity or for other reasons.\21\ Each 
Portfolio may also invest in commercial paper.
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    \21\ 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, its 
agencies or instrumentalities (including government-sponsored 
enterprises); (iii) negotiable certificates of deposit (``CDs''), 
bankers' 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 Investor's Service or ``A-1'' by Standard & 
Poor's, or if unrated, of comparable quality as determined by the 
Adviser; (v) non-convertible corporate debt securities (e.g., bonds 
and debentures) with 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 which may be purchased by a 
Portfolio. Commercial paper consists of short-term, promissory notes 
issued by banks, corporations and other entities to finance short-
term credit needs. Any of these instruments may be purchased on a 
current or a forward-settled basis.
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    Each Portfolio may invest in the securities of other investment 
companies, including affiliated funds, money market funds and closed-
end funds, subject to applicable limitations under Section 12(d)(1) of 
the 1940 Act. Each Fund will invest substantially all of its assets in 
the corresponding Portfolio.

C. Fund Investment Restrictions

    Each Portfolio will be classified as ``diversified.'' \22\ The 
Portfolios do not intend to concentrate their investments in any 
particular industry.\23\ The Portfolios intend to qualify for and to 
elect treatment as a separate regulated investment company (``RIC'') 
under Subchapter M of the Internal Revenue Code.\24\
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    \22\ The diversification standard is set forth in Section 
5(b)(1) of the 1940 Act (15 U.S.C. 80a-5(b)(1)).
    \23\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
    \24\ 26 U.S.C. 851 et seq.
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    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 or Sub-
Adviser, consistent with Commission guidance. The Portfolios will 
monitor their respective 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 a Fund's 
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.
    Neither the Funds nor the Portfolios will invest in options 
contracts, futures contracts, or swap agreements.
    With the exception of unsponsored ADRs, which will comprise no more 
than 10% of a Fund's net assets, all equity securities in which the 
Funds may invest will trade on markets that are members of the 
Intermarket Surveillance Group (``ISG'') or that have entered into a 
comprehensive surveillance agreement with the Exchange.\25\
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    \25\ See note 38, infra.
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    Each Fund's investments will be consistent with its respective 
investment objective and will not be used to enhance leverage.

II. Discussion and Commission's Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\26\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Exchange 
Act,\27\ which requires, among other things, that the Exchange's rules 
be designed to promote just and equitable

[[Page 76673]]

principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest. The Commission 
notes that the Fund and the Shares must comply with the requirements of 
NYSE Arca Equities Rule 8.600 to be listed and traded on the Exchange.
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    \26\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \27\ 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 
Exchange Act,\28\ which sets forth Congress' 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. 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, and 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 Portfolio 
Indicative Value (``PIV''), as defined in NYSE Arca Equities Rule 
8.600(c)(3), will be widely disseminated at least every 15 seconds 
during the Core Trading Session through one or more major market data 
vendors.\29\
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    \28\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \29\ See Notice, supra note 3, 78 FR at 65413. According to the 
Exchange, several major market data vendors display and/or make 
widely available PIVs taken from CTA or other data feeds.
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    Intra-day and closing price information regarding equity securities 
traded on a national securities exchange, including common stocks, 
preferred stocks, securities convertible into stocks, ETPs and REITs, 
will be available from the exchange on which such securities are 
traded. Intra-day and closing price information regarding unsponsored 
ADRs will be available from major market data vendors such as Bloomberg 
and Reuters.\30\ Intra-day and closing price information regarding 
fixed income securities, including municipal bonds, mortgage-backed 
securities, treasuries, corporate bonds, and foreign bonds, will be 
available from major market data vendors.\31\ Price information 
regarding investment company securities, TBA transactions, Rule 144A 
securities, repurchase agreements, reverse repurchase agreements, and 
foreign currency spot prices will be available from major market data 
vendors. Price information regarding foreign currency forwards will be 
available from major market data vendors.\32\
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    \30\ See Amendment No. 1, supra note 4.
    \31\ See id.
    \32\ See id.
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    On each business day, before commencement of trading in Shares in 
the Core Trading Session on the Exchange, the Funds will disclose on 
their 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.\33\ The NAV of each Fund will be 
calculated by the Custodian and determined at the close of the regular 
trading session on the New York Stock Exchange (``NYSE'') (ordinarily 
4:00 p.m. Eastern time on each day that such exchange is open, provided 
that fixed-income assets (and, accordingly, a Fund's NAV) may be valued 
as of the announced closing time for trading in fixed-income 
instruments on any day that the Securities Industry and Financial 
Markets Association (or applicable exchange or market on which a 
Portfolio's investments are traded) announces an early closing time. 
The Web site for the Funds 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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    \33\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Funds 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
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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 Exchange will obtain a representation from the issuer of 
the Shares that the NAV per Share will be calculated daily and that the 
NAV and the Disclosed Portfolio will be made available to all market 
participants at the same time. Trading in Shares of the Funds 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,\34\ and trading in the Shares will 
be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of a Fund may be halted.\35\ The 
Exchange states that it has a general policy prohibiting the 
distribution of material, non-public information by its employees. 
Consistent with NYSE Arca Equities Rule 8.600(d)(2)(B)(ii), the 
Adviser, as the Reporting Authority, 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 
each Fund's portfolio.\36\ The Exchange states that the Adviser and 
Sub-Adviser, neither of which is registered as a broker-dealer, have 
implemented a ``fire wall'' with respect to affiliated broker-dealers 
regarding access to information concerning the composition and/or 
changes to the Funds' portfolios. 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. The Commission notes that the 
Financial Industry Regulatory Authority (``FINRA''), on behalf of the 
Exchange,\37\ will communicate as needed regarding trading in the 
Shares and exchange-traded securities underlying the Shares with other 
markets and other entities that are members of the ISG or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement (``CSSA'').\38\
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    \34\ These reasons may include: (1) The extent to which trading 
is not occurring in the securities and/or the financial instruments 
composing the Disclosed Portfolio of the Fund; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance 
of a fair and orderly market are present.
    \35\ See NYSE Arca Equities Rule 8.600(d)(2)(D).
    \36\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
    \37\ 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.
    \38\ For a list of the current members of ISG, see http://www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for the Funds may trade on markets that are 
members of ISG or with which the Exchange has in place a CSSA.
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    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 continuing listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange represents that trading in the Shares will be 
subject to the existing trading surveillances,

[[Page 76674]]

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.
    (3) Except for up to 10% of unsponsored ADRs, all equity securities 
that the Funds will invest in will trade in markets that are members of 
the ISG or are parties to a CSSA with the Exchange.
    (4) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (5) 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 PIV will not be calculated or publicly disseminated; (d) how 
information regarding the PIV is 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.
    (6) For initial and continued listing, the Funds will be in 
compliance with Rule 10A-3 under the Exchange Act,\39\ as provided by 
NYSE Arca Equities Rule 5.3.\40\
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    \39\ 17 CFR 240.10A-3.
    \40\ See Notice, supra note 3, 78 FR at 65414.
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    (7) Neither the Funds nor the Portfolios will invest in options 
contracts, futures contracts, or swap agreements.
    (8) Each Fund's investments will be consistent with its respective 
investment objective and will not be used to enhance leverage.
    (9) 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 or Sub-Adviser.
    (10) 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, including those set forth above and in the Notice, and 
the Exchange's description of the Funds.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
is consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File No. SR-NYSEArca-2013-105 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File No. SR-NYSEArca-2013-105. 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 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 such 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 No. SR-NYSEArca-2013-105 and should be 
submitted on or before January 8, 2014.

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

    As discussed above,\41\ through Amendment No. 1, the Exchange 
revises the proposed rule change by providing greater detail about how 
the Funds' NAVs are calculated and the availability of price 
information regarding the Funds' holdings. The Commission believes that 
Amendment No. 1 provides more support for the Exchange's contention 
that its proposed rule change consistent with the Section 6(b)(5) of 
the Act.\42\ In particular, Amendment No. 1 provides: (1) Greater 
clarity regarding the valuation of the Shares; and (2) information 
regarding the ability of market participants to independently value the 
Shares. Accordingly, the Commission finds good cause, pursuant to 
Section 19(b)(2) of the Act,\43\ to approve the proposed rule change, 
as modified by Amendment No. 1, prior to the 30th day after the date of 
publication of notice in the Federal Register.
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    \41\ See note 4, supra.
    \42\ 15 U.S.C. 78s(b)(5).
    \43\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\44\ that the proposed rule change (SR-NYSEArca-2013-105), 
as modified by Amendment No. 1, is hereby approved on an accelerated 
basis.
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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. 2013-30050 Filed 12-17-13; 8:45 am]
BILLING CODE 8011-01-P