Document ID: SEC-2015-0238-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2015-02-09T05:00Z

[Federal Register Volume 80, Number 26 (Monday, February 9, 2015)]
[Notices]
[Pages 7050-7052]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-02512]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74199; File No. SR-NYSEArca-2014-107]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting 
Proceedings To Determine Whether To Approve or Disapprove Proposed Rule 
Change, as Modified by Amendment No. 1 Thereto, To Reflect Changes to 
the Means of Achieving the Investment Objective Applicable to the 
Guggenheim Enhanced Short Duration ETF

February 3, 2015.
    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''). On October 29, 2014, the Exchange filed Amendment No. 1 to 
the proposed rule change. The proposed rule change was published for 
comment in the Federal Register on November 7, 2014.\3\ The Commission 
received one comment on the proposal.\4\ 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.\5\ This Order institutes proceedings under Section 19(b)(2)(B) 
of the Act \6\ to determine whether to approve or disapprove the 
proposed rule change, as modified by Amendment No. 1 thereto.
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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. 73512 (Nov. 3, 
2014), 79 FR 66442 (``Notice'').
    \4\ All comments on the proposed rule change, including 
Amendment No. 1, are available on the Commission's Web site at: 
http://www.sec.gov/comments/sr-nysearca-2014-107/nysearca2014107.shtml.
    \5\ 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.
    \6\ 15 U.S.C. 78s(b)(2)(B).
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I. Description of the Proposal

    The Exchange proposes to reflect a change, as described below, to 
the

[[Page 7051]]

description of 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.\7\ The shares of the Fund (``Shares'') 
are currently listed and traded on the Exchange under NYSE Arca 
Equities Rule 8.600,\8\ which governs the listing and trading of 
Managed Fund Shares. The Shares are offered by the Trust, a statutory 
trust organized under the laws of the State of Delaware and registered 
with the Commission as an open-end management investment company.\9\ 
The Exchange represents that 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.
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    \7\ According to the Prior Release (defined below), 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 states 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 1 year.
    \8\ See Securities Exchange Act Release No. 64550 (May 26, 
2011), 76 FR 32005 (June 2, 2011) (SR-NYSEArca-2011-11) (order 
approving listing and trading on the Exchange of the Guggenheim 
Enhanced Core Bond ETF and Guggenheim Enhanced Ultra-Short Bond ETF) 
(``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'').
    \9\ The Trust is registered under the Investment Company Act of 
1940 (``1940 Act''). On September 27, 2013, the Trust filed with the 
Commission an amendment to its registration statement on Form N-1A 
under the Securities Act of 1933 (``Securities Act'') and the 1940 
Act relating to the Fund (File Nos. 333-134551 and 811-21906) 
(``Registration Statement''). In addition, according to the 
Exchange, the Trust has obtained certain exemptive relief under 
the1940 Act. See Investment Company Act Release No. 29271, May 18, 
2010 (File No. 812-13534).
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    Specifically, the proposal seeks to reflect a change to the Fund's 
limitation on investments in certain asset-backed securities 
(``ABS'').\10\ According to the Prior Release, the Fund may invest up 
to 10% of its assets in mortgage-backed securities (``MBS'') or in 
other ABS.\11\ 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 (``GNMA''), the Federal Housing Administration 
(``FHA''), the Federal National Mortgage Association (``FNMA''), and 
the Federal Home Loan Mortgage Corporation (``FHLMC''). Under the 
proposal, the Fund would be permitted to invest up to 50% of its assets 
in ABS that are not mortgage-related.\12\ This 50% limitation would not 
apply to securities issued or guaranteed by federal agencies or U.S. 
government sponsored instrumentalities, such as GNMA, FHA, FNMA, and 
FHLMC. The Fund would continue to be subject to a 10% limit on 
investments in MBS that are not issued or guaranteed by federal 
agencies or U.S. government sponsored instrumentalities. In addition, 
the Fund's holdings in MBS and ABS would be subject to the respective 
limitations on the Fund's investments in illiquid assets (as described 
below) and high yield securities.\13\
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    \10\ Under the proposal, the Exchange seeks to reflect certain 
other conforming or clarifying changes to the description of the 
measures that the Adviser will utilize to implement the Fund's 
investment objective. These other proposed changes can be found in 
more detail in the Notice. See supra note 3.
    \11\ As stated in the Prior Release, the Fund may invest in MBS 
or other ABS issued or guaranteed by private issuers. The MBS in 
which the Fund may invest may also include residential MBS, 
collateralized mortgage obligations, and commercial MBS. In 
addition, the ABS in which the Fund may invest include 
collateralized debt obligations.
    \12\ Specifically, the Exchange notes that such ABS are bonds 
backed by pools of loans or other receivables and are securitized by 
a wide variety of assets that are generally broken into three 
categories: Consumer, commercial, and corporate. The consumer 
category includes credit card, auto loan, student loan, and 
timeshare loan ABS. The commercial category includes trade 
receivables, equipment leases, oil receivables, film receivables, 
rental cars, aircraft securitizations, ship and container 
securitizations, whole business securitizations, and diversified 
payment right securitizations. Corporate ABS include cash flow 
collateralized loan obligations, collateralized by both middle 
market and broadly syndicated bank loans. ABS are issued through 
special purpose vehicles that are bankruptcy remote from the issuer 
of the collateral. The credit quality of an ABS tranche depends on 
the performance of the underlying assets and the structure. To 
protect ABS investors from the possibility that some borrowers could 
miss payments or even default on their loans, ABS include various 
forms of credit enhancement.
    \13\ According to the Prior Release, the Fund may invest no more 
than 10% of its net assets in high yield securities, which are debt 
securities that are rated below investment grade by nationally 
recognized statistical rating organizations, or are unrated 
securities that the Adviser believes are of comparable quality.
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    The Exchange states that 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, according to 
the Exchange, the Fund's increased investment in ABS that are not 
mortgage-related would continue to adhere to the Fund's investment 
strategy of investing in short duration fixed income securities.\14\ 
The Exchange asserts that, due to the quality of ABS in which the Fund 
will invest, the Adviser does not expect that the Fund's additional 
investments in ABS that are not mortgage-related will expose the Fund 
to additional liquidity risk.
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    \14\ The Fund will target floating rate, shorter maturity, 
shorter spread duration and other amortizing securities. These 
securities' maturity and spread duration are consistent with the 
Fund's investment objective.
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    The Exchange states that there is no change to the Fund's 
investment objective and represents 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, 
other than the proposed change described above and in the Notice, all 
other facts presented and representations made in the Prior Release 
remain unchanged.

II. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2014-107 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \15\ to determine whether the proposed rule 
change 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.
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    \15\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\16\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of the proposed rule change'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.'' \17\
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    \16\ Id.
    \17\ 15 U.S.C. 78f(b)(5).
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III. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written

[[Page 7052]]

submissions of their views, data, and arguments with respect to the 
proposal summarized above and information described in the Notice,\18\ 
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.\19\
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    \18\ See supra note 3.
    \19\ Section 19(b)(2) of the Act, as amended by the Securities 
Act 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 Act 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 March 2, 2015. Any person who wishes to file a rebuttal 
to any other person's submission must file that rebuttal by March 16, 
2015.
    The Commission asks that commenters address the sufficiency and 
merit of the Exchange's and commenter's statements in support of the 
proposal, in addition to any other comments they may wish to submit 
about the proposed rule change. In particular, the Commission seeks 
comment on the following:
    1. Does the Notice contain sufficient information about the Fund's 
proposed investments in ABS for commenters to evaluate the liquidity 
and transparency of the underlying markets for those ABS?
    2. What are commenters' views on the liquidity of the Fund's 
proposed holdings in ABS? What are commenters' views on pricing 
transparency in the market for these ABS? Does the pricing transparency 
vary for investors, market makers, and other market participants? If 
so, how and why?
    3. The Exchange states that, because the preponderance of the 
Fund's investments in ABS will be in investment-grade instruments, 
``the Adviser does not expect that the proposed additional investments 
in ABS that are not mortgage-related will expose the Fund to additional 
liquidity risk.'' Do commenters agree? Why or why not?
    4. Do commenters believe that the proposal to increase the Fund's 
holdings in ABS would have any effect on the arbitrage mechanism with 
respect to the Fund? If so, what effect and why? If not, why not? Do 
commenters believe that the proposed change in the Fund's investments 
would have any effect on market pricing of the Fund relative to its net 
asset value? Why or why not?
    5. What are commenters' views on whether the Fund's proposal to 
increase its ABS holdings would affect the ability of market makers to 
make markets in the Shares of the Fund?
    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 Numbers 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 these filings 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 March 2, 2015. Rebuttal comments should be 
submitted by March 16, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(57).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-02512 Filed 2-6-15; 8:45 am]
BILLING CODE 8011-01-P