Document ID: SEC-2015-0743-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2015-05-01T04:00Z

[Federal Register Volume 80, Number 84 (Friday, May 1, 2015)]
[Notices]
[Pages 24986-24989]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-10160]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74814; File No. SR-NYSEArca-2014-107]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment Nos. 2 and 3 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment Nos. 1, 2, and 3, To 
Reflect Changes to the Means of Achieving the Investment Objective 
Applicable to the Guggenheim Enhanced Short Duration ETF

April 27, 2015.

I. Introduction

    On October 21, 2014, NYSE Arca, Inc. (``Exchange'') 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 reflect certain 
changes to the description of the Guggenheim Enhanced Short Duration 
ETF (``Fund''), a series of Claymore Exchange-Traded Fund Trust 
(``Trust'').\3\ On October 29, 2014, the Exchange filed Amendment No. 1 
to the proposed rule change. The proposed rule change, as modified by 
Amendment No. 1 thereto, was published for comment in the Federal 
Register on November 7, 2014.\4\ The Commission received one comment on 
the proposal.\5\ On December 10, 2014, 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\ On 
February 3, 2015, the Commission instituted proceedings to determine 
whether to approve or disapprove the proposed rule change.\7\ On March 
16, 2015, the Exchange filed Amendment No. 2 to the proposed rule 
change,\8\ and on March 24, 2015, the Exchange filed Amendment No. 3 to 
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proposed rule change.\9\ The Commission is publishing this notice to 
solicit comments on Amendments Nos. 2 and 3 from interested persons, 
and is approving the proposed rule change, as modified by Amendment 
Nos. 1, 2, and 3, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Commission previously approved the listing and trading 
of the shares (``Shares'') of the Fund. See Securities Exchange Act 
Release No. 64550 (May 26, 2011), 76 FR 32005 (Jun. 2, 2011) (SR-
NYSEArca-2011-11) (``Prior Order''). See also Securities Exchange 
Act Release No. 64224 (Apr. 7, 2011), 76 FR 20401 (Apr. 12, 2011) 
(SR-NYSEArca-2011-11) (``Prior Notice,'' and together with the Prior 
Order, collectively ``Prior Release''). The Exchange represents that 
the Shares are currently listed and trading on the Exchange under 
NYSE Arca Equities Rule 8.600, which governs the listing and trading 
of Managed Fund Shares.
    \4\ See Securities Exchange Act Release No. 73512 (Nov. 3, 
2014), 79 FR 66442 (``Notice''). In Amendment No. 1 to the proposed 
rule change, the Exchange clarified that asset-backed securities in 
which the Fund may invest include collateralized debt obligations, 
as described in the Prior Release.
    \5\ Comments on the proposed rule change, including Amendment 
Nos. 2 and 3, can be found on the Commission's Web site, available 
at http://www.sec.gov/comments/sr-nysearca-2014-107/nysearca2014107.shtml.
    \6\ See Securities Exchange Act Release No. 73810, 79 FR 74783 
(Dec. 16, 2014). The Commission determined that it was appropriate 
to designate a longer period within which to take action on the 
proposed rule change so that it has sufficient time to consider the 
proposed rule change. Accordingly, the Commission designated 
February 5, 2015 as the date by which it should approve, disapprove, 
or institute proceedings to determine whether to disapprove the 
proposed rule change.
    \7\ See Securities Exchange Act Release No. 74199, 80 FR 7050 
(Feb. 9, 2015) (``Order Instituting Proceedings''). In the Order 
Instituting Proceedings, the Commission noted, among other things, 
that questions remain as to whether the Exchange's proposal is 
consistent with the requirements of 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 and asked questions regarding the liquidity and 
transparency of the Fund's proposed holdings in asset-backed 
securities.
    \8\ In Amendment No. 2, the Exchange: (1) Modified the proposal 
to permit the Fund to invest up to 20% of its assets in MBS and ABS 
that are privately issued, non-agency, and non-government sponsored 
entity, collectively defined as ``Private MBS/ABS'' and (2) made 
conforming changes in the proposal to reflect the defined term 
``Private MBS/ABS.''
    \9\ In Amendment No. 3, the Exchange made additional conforming 
changes in the proposal to reflect the defined term ``Private MBS/
ABS,'' the preponderance of which will be investment grade.
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II. The Exchange's Description of the Proposal

    The Exchange proposes to reflect certain changes to the measures 
that Guggenheim Funds Investment Advisors, LLC (``Adviser'') may use to 
implement the Fund's investment objective, which is to seek maximum 
current income, consistent with preservation of capital and daily 
liquidity.\10\
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    \10\ According to the Prior Release, the Fund uses a low 
duration strategy to seek to outperform the 1-3 month Treasury Bill 
Index, in addition to providing returns in excess of those available 
in U.S. Treasury bills, government repurchase agreements, and money 
market funds, while providing preservation of capital and daily 
liquidity. The Prior Release also stated that the Fund would hold, 
under normal circumstances, a diversified portfolio of fixed income 
instruments of varying maturities, but that have an average duration 
of less than one year.
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    First, the Prior Release stated that the Fund may invest up to 10% 
of its assets in mortgage-backed securities (``MBS'') or in other 
asset-backed securities (``ABS'').\11\ The Exchange proposes to modify 
this limitation to permit the Fund to invest up to 20% of its assets in 
MBS and ABS that are privately-issued, non-agency, and non-government 
sponsored entity (``Private MBS/ABS''). The Exchange notes that the 
holdings in Private MBS/ABS would be subject to the respective 
limitations on the Fund's investments in illiquid assets and high yield 
securities, as described below. According to the Exchange, this change 
to the Fund's investment limitations would allow the Adviser to better 
achieve the Fund's investment objective to seek maximum current income, 
consistent with preservation of capital and daily liquidity. In 
addition, the Exchange represents that the Fund's increased investment 
in Private MBS/ABS will continue to adhere to the Fund's investment 
strategy of investing in short duration, fixed income securities. The 
Exchange further notes that, because the Fund may invest no more than 
10% of its net assets in high yield securities, the preponderance of 
the Fund's investments in Private MBS/ABS will be in investment grade 
instruments. Due to the quality of Private MBS/ABS in which the Fund 
will invest, the Exchange states that the Fund's additional investments 
in Private MBS/ABS should not expose the Fund to additional liquidity 
risk.
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    \11\ As stated in the Prior Release, this 10% limitation does 
not apply to securities issued or guaranteed by federal agencies or 
U.S. government sponsored instrumentalities, such as the Government 
National Mortgage Administration, the Federal Housing 
Administration, the Federal National Mortgage Association, and the 
Federal Home Loan Mortgage Corporation.
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    Second, the Prior Release stated that the Fund may invest up to an 
aggregate amount of 15% of its net assets in: (1) Illiquid securities; 
and (2) Rule 144A securities. The Exchange proposes to modify this 
limitation and permit the Fund to hold up to an aggregate amount of 15% 
of its net assets in illiquid assets (calculated at the time of 
investment),\12\ including Rule 144A securities deemed illiquid by the 
Adviser, consistent with Commission guidance. According to the 
Exchange, the Adviser and the Trust's Board of Trustees will continue 
to evaluate each Rule 144A security based on the Fund's valuation 
procedures to oversee liquidity and valuation concerns. With respect to 
investment in illiquid assets, if changes in the values of the Fund's 
assets cause the Fund's holdings of illiquid assets to exceed the 15% 
limitation (as if liquid assets have become illiquid), the Fund will 
take such actions as it deems appropriate and practicable to attempt to 
reduce its holdings of illiquid assets.
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    \12\ In reaching liquidity decisions, the Adviser may consider 
the following factors: The frequency of trades and quotes for the 
security; the number of dealers wishing to purchase or sell the 
security and the number of other potential purchasers; dealer 
undertakings to make a market in the security; and the nature of the 
security and the nature of the marketplace trades (e.g., the time 
needed to dispose of the security, the method of soliciting offers, 
and the mechanics of transfer).
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    Third, the Prior Release stated that the Fund primarily will invest 
in U.S. dollar-denominated, investment grade debt securities rated Baa 
or higher by Moody's Investors Service, Inc. (``Moody's''), or 
equivalently rated by Standard & Poor's Rating Group (``S&P'') or Fitch 
Investor Services (``Fitch''), or, if unrated, determined by the 
Adviser to be of comparable quality. The Exchange proposes to modify 
this representation, as described above, to a representation that the 
Fund primarily will invest in U.S. dollar-denominated, investment grade 
debt securities rated Baa3 or higher by Moody's,\13\ or equivalently 
rated by S&P, Fitch, or by any other nationally recognized statistical 
rating organizations, or, if unrated, determined by the Adviser to be 
of comparable quality.
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    \13\ According to the Exchange, ``Baa3'' is the lowest tier 
within the ``Baa'' rating.
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    Fourth, the Prior Release stated that the Fund will invest at least 
80% of its net assets in fixed income securities. The Fund proposes to 
modify this statement to permit the Fund to invest at least 80% of its 
net assets in fixed income securities and in exchange-traded funds 
(``ETFs'') and closed-end funds that invest substantially all of their 
assets in fixed income securities.\14\ The Exchange represents that the 
shares of these ETFs and closed-end funds will be listed on a U.S. 
national securities exchange.
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    \14\ According to the Exchange, ETFs include Investment Company 
Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); Portfolio 
Depositary Receipts (as described in NYSE Arca Equities Rule 8.100); 
and Managed Fund Shares (as described in NYSE Arca Equities Rule 
8.600). The Fund will invest in the securities of ETFs registered 
under the Investment Company Act of 1940 (``1940 Act'') consistent 
with the requirements of Section 12(d)(1) of the 1940 Act, or any 
rule, regulation or order of the Commission or interpretation 
thereof.
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    The Exchange represents that there is no change to the Fund's 
investment objective, and that the Fund will continue to comply with 
all initial and continued listing requirements under NYSE Arca Equities 
Rule 8.600. In addition, the Exchange represents that, except for the 
changes noted above, all other facts presented and representations made 
in the Prior Release remain unchanged.\15\
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    \15\ The Prior Release also stated that the Fund is considered 
non-diversified under the 1940 Act and can invest a greater portion 
of assets in securities of individual issuers than a diversified 
fund. According to the Exchange, Trust changed this representation 
in an amendment to the Trust's registration statement to state that 
the Fund is considered a diversified fund. To reflect this change in 
the registration statement, the Exchange's current proposed rule 
change states that the Fund is considered a diversified fund.
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    Additional information regarding the Trust, Fund, and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosure policies, trading 
halts, dissemination and availability of information, distributions, 
and taxes can be found in the Prior Release, Notice, as modified by 
Amendment Nos. 1, 2, and 3, and the registration statement, as 
applicable.\16\
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    \16\ See supra notes 3 and 4; see also Notice, supra note 4, at 
66443 n.6 (referring to the registration statement on Form N-1A 
relating to the Fund (File Nos. 333-134551 and 811-21906)).
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act \17\ 
and the rules and

[[Page 24988]]

regulations thereunder applicable to a national securities 
exchange.\18\ In particular, the Commission finds that the proposal is 
consistent with Section 6(b)(5) of the Act,\19\ which requires, among 
other things, that the Exchange's rules be designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \17\ 15 U.S.C. 78f.
    \18\ 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).
    \19\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the changes proposed by the Exchange 
with respect to the Fund are consistent with the listing standards 
applicable to other existing ETFs. Specifically, the Commission notes 
that, with respect to proposals to list and trade other Managed Fund 
Shares on the Exchange, it has previously approved similar limitations 
on MBS and ABS holdings and on illiquid assets.\20\ The Commission also 
notes that it has previously approved the listing and trading of other 
series of Managed Fund Shares based on portfolios comprising fixed 
income securities of any credit rating, including investment grade 
securities rated Baa3 or higher,\21\ and shares of other ETFs and 
exchange-traded closed-end funds.\22\
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    \20\ See, e.g., Securities Exchange Act Release Nos. 74109 (Jan. 
21, 2015), 80 FR 4327 (Jan. 27, 2015) (SR-NYSEArca-2014-134) 
(providing for similar limitations on MBS and ABS with respect to 
the IQ Wilshire Alternative Strategies ETF); and 70282 (Aug. 29, 
2013), 78 FR 54700 (Sept. 5, 2013) (providing for similar 
limitations on illiquid assets with respect to the First Trust 
Inflation Managed Fund).
    \21\ See, e.g., Securities Exchange Act Release Nos. 74093 (Jan. 
20, 2015), 80 FR 4015 (Jan. 26, 2015) (SR-NYSEArca-2014-126) 
(approving the listing and trading of shares of the AdvisorShares 
Pacific Asset Enhanced Floating Rate ETF based on a portfolio of 
non-investment grade fixed income securities defined as being rated 
below ``Baa3,'' among other investments); and 71617 (Feb. 26, 2014), 
79 FR 12257 (Mar. 4, 2014) (SR-NYSEArca-2013-135) (approving the 
listing and trading of shares of the db-X Ultra-Short Duration Fund 
based on a portfolio of investment grade fixed income securities 
defined as being rated ``Baa3'' or higher, among other investments).
    \22\ See, e.g., Securities Exchange Act Release No. 67277 (Jun. 
27, 2012), 80 FR 4327 (July 3, 2012) (SR-NYSEArca-2012-39) 
(approving the listing and trading of shares of the Global Alpha & 
Beta ETF based on a portfolio of other exchange-traded products that 
include other ETFs and closed-end funds, among other investments).
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    In support of its proposal, the Exchange has made the following 
representations:
    (1) The Fund and the Shares are currently in compliance with the 
listing standards and other rules of the Exchange and the requirements 
set forth in the Prior Release.
    (2) The Fund will continue to comply with all initial and continued 
listing requirements under NYSE Arca Equities Rule 8.600, which sets 
forth the initial and continued listing criteria applicable to Managed 
Fund Shares.
    (3) There is no change to the Fund's investment objective.
    (4) Except for the changes noted above, all other facts presented 
and representations made in the Prior Release remain unchanged.
    This approval order is based on all of the Exchange's 
representations, including those set forth above; in the Notice, as 
modified by Amendment No. 1 thereto; in Amendment Nos. 2 and 3 to the 
proposed rule change; and in the Prior Release.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment Nos. 1, 2, and 3, is consistent 
with Section 6(b)(5) of the Act \23\ and the rules and regulations 
thereunder applicable to a national securities exchange.
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    \23\ 17 CFR 240.10A-3.
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IV. Solicitation of Comments on Amendment Nos. 2 and 3 to the Proposed 
Rule Change

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment Nos. 2 and 3 to the proposed 
rule change are consistent with the Act. Comments may be submitted by 
any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2014-107 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-2014-107. 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-2014-107 and should 
be submitted on or before May 22, 2015.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment Nos. 1, 2, and 3

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment Nos. 1, 2, and 3, prior to the 
thirtieth day after the date of publication of notice of the amendments 
in the Federal Register. Amendment Nos. 2 and 3 modify the proposed 
rule change by permitting the Fund to invest up to 20% of its assets in 
Private MBS/ABS. The Commission believes that the proposed rule change 
is consistent with the permitted allocation of such MBS and ABS 
holdings with respect to other issues of Managed Fund Shares previously 
approved by the Commission for Exchange listing and trading.\24\ 
Accordingly, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Act,\25\ to approve the proposed rule change, as 
modified by Amendment Nos. 1, 2, and 3, on an accelerated basis.
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    \24\ See supra note 20 and accompanying text.
    \25\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\26\ that the proposed rule change (SR-NYSEArca-2014-107), as 
modified by Amendment Nos. 1, 2, and 3, be, and it hereby is, approved 
on an accelerated basis.
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    \26\ 15 U.S.C. 78s(b)(2).

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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-10160 Filed 4-30-15; 8:45 am]
 BILLING CODE 8011-01-P