Document ID: SEC-2018-1304-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2018-08-20T04:00Z

[Federal Register Volume 83, Number 161 (Monday, August 20, 2018)]
[Notices]
[Pages 42188-42193]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17832]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83845; File No. SR-NYSEArca-2018-57]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change, as Modified by Amendment No. 1, To List and 
Trade Shares of the Amplify BlackSwan Growth & Treasury Core ETF Under 
Commentary .02 to NYSE Arca Rule 5.2-E(j)(3)

August 14, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on July 31, 2018, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change. On August 10, 2018, the Exchange filed Amendment 
No. 1 to the proposed rule change, as described in Items I and II 
below, which Items have been prepared by the Exchange. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change, as modified by Amendment No. 1, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade the shares of the following 
fund of the Amplify ETF Trust under Commentary .02 to NYSE Arca Rule 
5.2-E(j)(3) (``Investment Company Units''): the Amplify BlackSwan 
Growth & Treasury Core ETF. This Amendment No. 1 to SR-NYSEArca-2018-57 
replaces SR-NYSEArca-2018-57 as originally filed and supersedes such 
filing in its entirety. The proposed change is available on the 
Exchange's website at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
Amplify BlackSwan Growth & Treasury Core ETF (``Fund'') under 
Commentary .02 to NYSE Arca Rule 5.2-E(j)(3), which governs the listing 
and trading of Investment Company Units (``Units'') on the Exchange.\4\ 
The Fund will be an index-based exchange traded fund (``ETF''). The 
Shares will be offered by the Amplify ETF Trust (``Trust''), which is 
registered with the Commission as an investment company and has filed a 
registration statement on Form N-1A (``Registration Statement'') with 
the Commission on behalf of the Fund.\5\
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    \4\ NYSE Arca Rule 5.2-E(j)(3)(A) provides that an Investment 
Company Unit is a security that represents an interest in a 
registered investment company that holds securities comprising, or 
otherwise based on or representing an interest in, an index or 
portfolio of securities (or holds securities in another registered 
investment company that holds securities comprising, or otherwise 
based on or representing an interest in, an index or portfolio of 
securities).
    \5\ See Post-Effective Amendment No. 65 to Registration 
Statement on Form N-1A for the Trust, dated June 26, 2018 (File Nos. 
333-207937 and 811-23108). The descriptions of the Fund and the 
Shares contained herein are based, in part, on information in the 
Registration Statement. In addition, the Commission has issued an 
order granting certain exemptive relief to the Trust under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act''). See 
Investment Company Act Release No. 31822 (September 14, 2015) (File 
No. 812-14424) (``Exemptive Order'').
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    Amplify Investments LLC will be the investment adviser 
(``Adviser'') to the Fund. CSAT Investment Advisory, L.P., d/b/a 
Exponential ETFs will serve as sub-adviser for the Fund (``Sub-
Adviser''). U.S. Bancorp Fund Services, LLC will be the administrator, 
custodian and fund accounting and transfer agent for the Fund. Quasar 
Distributors LLC will serve as the distributor for the Fund.
    Commentary .02(b)(i) to Rule 5.2-E(j)(3) provides that, if the 
applicable index is maintained by a broker-dealer or fund advisor, the 
broker-dealer or fund advisor shall erect and maintain a ``fire wall'' 
around the personnel who have access to information concerning changes 
and adjustments to the index.\6\

[[Page 42189]]

The ``Index Provider'' (``ARGI Investment Services LLC'') is registered 
as an investment adviser but is not registered as a broker-dealer or 
affiliated with a broker-dealer.\7\ The Adviser is not registered as a 
broker-dealer but is affiliated with a broker-dealer and has 
implemented and will maintain a fire wall with respect to its broker-
dealer affiliate regarding access to information concerning the 
composition and/or changes to the Fund's portfolio. The Sub-Adviser is 
not registered as a broker-dealer or affiliated with a broker-dealer. 
In the event (a) the Adviser or the Sub-Adviser becomes registered as a 
broker-dealer or newly affiliated with a broker-dealer, or (b) any new 
adviser or sub-adviser is a registered broker-dealer or becomes 
affiliated with a broker-dealer, it will implement and maintain a fire 
wall with respect to its relevant personnel or its broker-dealer 
affiliate regarding access to information concerning the composition 
and/or changes to the 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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    \6\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and Sub-adviser are subject to the 
provisions of Rule 204A-1 under the Advisers Act relating to codes 
of ethics. This Rule requires investment advisers to adopt a code of 
ethics that reflects the fiduciary nature of the relationship to 
clients as well as compliance with other applicable securities laws. 
Accordingly, procedures designed to prevent the communication and 
misuse of non-public information by an investment adviser must be 
consistent with Rule 204A-1 under the Advisers Act.
    \7\ The Index Provider is not affiliated with the Fund, Adviser 
or Sub-Adviser.
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    The Exchange is submitting this proposed rule change because the 
Index for the Fund does not meet all of the ``generic'' listing 
requirements of Commentary .02(a) to NYSE Arca Rule 5.2-E(j)(3), 
applicable to the listing of Units based on an index of ``Fixed Income 
Securities.'' \8\ Specifically, Commentary .02(a) to NYSE Arca Rule 
5.2-E(j)(3) sets forth the requirements to be met by components of an 
index or portfolio of Fixed Income Securities underlying a series of 
Units. Because, as discussed in more detail herein, the ARGI BlackSwan 
Core Index (the ``Index'') will include ``LEAPS'' (as described below), 
the Index does not satisfy the requirements of Commentary .02(a)(1) to 
Rule 5.2-E(j)(3).\9\ The Exchange represents that the Index will meet 
each of the initial and continued listing criteria in Commentary .02 to 
Rule 5.2-E(j)(3) with the exception of the requirements of Commentary 
.02 (a)(1) to Rule 5.2-E(j)(3).
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    \8\ Commentary .02 to NYSE Arca Rule 5.2-E(j)(3) states that 
Fixed Income Securities are debt securities that are notes, bonds, 
debentures or evidence of indebtedness that include, but are not 
limited to, U.S. Department of Treasury securities, government-
sponsored entity securities, municipal securities, trust preferred 
securities, supranational debt and debt of a foreign country or a 
subdivision thereof.
    \9\ Commentary .02(a)(1) to Rule 5.2-E(j)(3) provides that, with 
respect to components of an index or portfolio underlying a series 
of Units listed pursuant to Rule 19b-4(e) under the Act, the 
following criterion shall be met on an initial and continued listing 
basis: The index or portfolio must consist of (a) only Fixed Income 
Securities or (b) Fixed Income Securities and cash.
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Amplify BlackSwan Growth & Treasury Core ETF
Principal Investments
    According to the Registration Statement, the Fund will seek 
investment results that generally correspond (before fees and expenses) 
to the price and yield of the Index. Under normal market 
conditions,\10\ the Fund will invest at least 80% of its total assets 
in the securities that comprise the Index, which are U.S. Treasury 
securities and long-dated call options (``LEAPS'') \11\ on the SPDR S&P 
500 ETF Trust (``SPY'').\12\ These options are referred to herein as 
``SPY LEAPS''. The Fund, using an indexing investment approach, 
attempts to replicate, before fees and expenses, the performance of the 
Index.\13\ The Index was created and is maintained by the Index 
Provider.
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    \10\ For purposes of this filing, the term ``normal market 
conditions'' is as that term is defined in NYSE Arca Rule 8.600-
E(c)(5).
    \11\ Long-term Equity AnticiPation Securities\SM\ 
(``LEAPS[supreg]'') are long-term exchange-traded call options. Call 
options allow holders the opportunity to participate in the 
underlying securities' appreciation in excess of a specified strike 
price without receiving payments equivalent to any cash dividends 
declared on the underlying securities. A holder of a LEAPS will be 
entitled to receive a specified number of shares of the underlying 
stock upon payment of the strike price, and therefore the LEAPS will 
be exercisable when the price of the underlying stock is above the 
strike price. However, if at expiration the price of the underlying 
stock is at or below the strike price, the LEAPS will expire and be 
worthless. LEAPS are traded on U.S. options exchanges.
    \12\ Shares of the SPDR S&P 500 ETF Trust are listed and traded 
on the Exchange.
    \13\ The Index is compiled by the Index Provider and calculated 
by S-Network Global Indexes, Inc. (the ``Calculation Agent'').
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    According to the Registration Statement, the Index is a rules-
based, quantitative index that seeks to provide capital protection 
against the unpredictable, rare and highly disruptive events that have 
come to be referred to as ``Black Swans.'' The Index endeavors to 
provide investment returns that correspond to those of the S&P 500 
Index, while mitigating against significant losses. One portion of the 
Index is a portfolio of U.S. Treasury securities and the other is a 
portfolio of SPY LEAPS. Twice a year, in June and December, on the 
Index reconstitution and rebalance date, the Index places 90% of its 
index market capitalization in the portfolio of U.S. Treasury 
securities and 10% of its index market capitalization in the portfolio 
of LEAPS.
    According to the Registration Statement, the U.S. Treasury 
portfolio of the Index is comprised of 2-, 3-, 5-, 7-, 10- and 30-year 
U.S. Treasury securities that cumulatively provide a portfolio duration 
that matches the initial duration of the 10-year U.S. Treasury 
security.
    The LEAPS portfolio of the Index is composed of in-the-money LEAPS 
that, at the time of purchase, had expirations of at least one year and 
one day in the future and expire in either June or December, as 
applicable.\14\ For the LEAPS in the Index and in which the Fund 
invests, the reference asset is SPY. The LEAPS will generally have a 
delta of 70 at the time of purchase, meaning that for every $1.00 of 
movement in the share price of SPY, the price of the LEAPS will have a 
corresponding movement of $0.70. LEAPS positions are reconstituted 
twice per year on the first trading day of June and December. At each 
June reconstitution, the Index liquidates its existing June LEAPS and 
purchases LEAPS that expire the following June. The December LEAPS 
positions will remain unchanged at each June reconstitution. At each 
December reconstitution, the Index liquidates its existing December 
LEAPS and purchases LEAPS that expire the following December. The June 
LEAPS positions will remain unchanged at each December reconstitution. 
Net gains or losses derived from the reconstitutions of the LEAPS 
positions will be added to or subtracted from the U.S. Treasury 
portfolio at each reconstitution.
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    \14\ An ``in-the-money'' call option contract is an option 
contract with a strike price that is below the current price of the 
underlying reference asset.
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Other Investments
    While, under normal market conditions, the Fund will invest at 
least 80% of its total assets in the securities that comprise the 
Index, as described above, the Fund may hold other securities and 
financial instruments, as described below.
    The Fund may hold cash and cash equivalents.\15\
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    \15\ For purposes of this filing, the term ``cash equivalents'' 
has the meaning specified in Commentary .01(c) to NYSE Arca Rule 
8.600-E.
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The ARGI BlackSwan Core Index
    According to the Registration Statement, the ARGI BlackSwan Core 
Index is composed of U.S. Treasury securities and SPY LEAPS. The Index 
seeks to realize capital appreciation in

[[Page 42190]]

line with the performance of SPY while avoiding substantial capital 
drawdowns.
    On each rebalancing date, the Index places 90% of its index market 
capitalization in treasuries and 10% in SPY LEAPS. The weighting among 
U.S. Treasury securities is determined by the option reconstitution 
schedule.
    The option portion of the portfolio holds 5% of Index market 
capitalization in June 70-delta SPY LEAPS and 5% in December 70-delta 
SPY LEAPS. Initially and at each Index rebalance date, calls that are 
purchased should all have at least one year plus one day until 
expiration. The 70-delta rule only applies to initial purchases on the 
rebalance date. Should there not be a 70-delta option, the closest 
option above 70 will be utilized.
    The treasury position holds 5% of its allocated portion of Index 
market capitalization in a ``barbell'' portfolio of 2- and 30-year 
treasuries, and 95% of its allocated portion of market capitalization 
in a core portfolio that invests in 3-, 5-, 7-, 10- and 30-year 
treasuries.
    The Index is overseen by a committee (the ``Committee'') that is 
responsible for overseeing the activities of the Calculation Agent and 
approving all changes to the Index related to its semi-annual 
reconstitutions and quarterly rebalances. All members of the Committee 
and their advisors shall comply with the Calculation Agent's code of 
conduct and ethics with respect to the disclosure and use of material 
non-public information.
Surveillance
    The Exchange believes that sufficient protections are in place to 
protect against market manipulation of the Fund's Shares and SPY LEAPS 
for several reasons: (i) The diversity, liquidity, and market cap of 
the securities underlying the S&P 500 Index, which deters manipulation 
of the S&P 500 Index and mitigates risk associated with manipulation in 
SPY LEAPS; \16\ (ii) liquidity in the market for SPY LEAPS and shares 
of the SPDR S&P 500 ETF Trust; \17\ and (iii) surveillances by the 
Exchange and the Financial Industry Regulatory Authority (``FINRA'') 
designed to detect violations of self-regulatory organization (``SRO'') 
rules and the federal securities laws.\18\ In this regard, the Exchange 
has in place a surveillance program for transactions in ETFs to ensure 
the availability of information necessary to detect and deter potential 
manipulations and other trading abuses, thereby making the Shares less 
readily susceptible to manipulation. The Exchange notes that the Fund's 
portfolio is not readily susceptible to manipulation as assets in the 
portfolio, comprised primarily of U.S. Treasury securities \19\ and SPY 
LEAPS, will be acquired in extremely liquid and highly regulated 
markets.
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    \16\ Intraday quotations and last sale information for LEAPS are 
available directly from the exchange on which they are traded or 
through the Options Price Reporting Authority. Information about 
existing outstanding interest in LEAPS is available on the Options 
Clearing Corporation's (``OCC'') website.
    \17\ The Exchange notes that the S&P 500 Index underlying SPY 
would meet the generic listing standards applicable to an index 
composed of U.S. Component Stocks in Commentary .01(a) to NYSE Arca 
Rule 5.2-E(j)(3), including criteria relating to liquidity, market 
capitalization and diversification.
    \18\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
    \19\ The U.S. Treasury securities market is highly liquid. The 
Treasury market and its participants are subject to a wide range of 
oversight and regulations, including requirements designed to 
prevent market manipulation and other abuses. For example, Treasury 
market participants and the Treasury market, itself, are subject to 
significant oversight by a number of regulatory authorities, 
including the Treasury, the Commission, federal bank regulators, and 
FINRA. The Exchange believes that the U.S. Treasury securities that 
the Fund will acquire as part of its strategy are not readily 
susceptible to market manipulation due to the liquidity and 
extensive oversight associated with the U.S. Treasury securities 
market.
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    Exchange and FINRA surveillances referred to above generally focus 
on detecting securities trading outside their normal patterns, which 
could be indicative of manipulative or other violative activity. When 
such situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and SPY LEAPS 
with other markets and other entities that are members of the 
Intermarket Surveillance Group (``ISG''), and the Exchange or FINRA, on 
behalf of the Exchange, or both, may obtain trading information 
regarding trading in the Shares and SPY LEAPS from such markets and 
other entities.\20\ In addition, the Exchange may obtain information 
regarding trading in the Shares and SPY LEAPS from markets and other 
entities that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement. In addition, 
FINRA, on behalf of the Exchange, is able to access, as needed, trade 
information for certain fixed income securities held by the Fund 
reported to FINRA's Trade Reporting and Compliance Engine (``TRACE'').
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    \20\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Fund's portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
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    All statements and representations made in this filing regarding 
(a) the description of the portfolio or reference asset, (b) 
limitations on portfolio holdings or reference assets, or (c) the 
applicability of Exchange listing rules specified in this rule filing 
shall constitute continued listing requirements for listing the Shares 
of the Fund on the Exchange.
    The issuer must notify the Exchange of any failure by the Fund to 
comply with the continued listing requirements, and, pursuant to its 
obligations under Section 19(g)(1) of the Act, the Exchange will 
monitor for compliance with the continued listing requirements. If the 
Fund is not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under NYSE Arca Rule 5.5-
E(m).
    SPY LEAPS are highly liquid and derive their value from the 
actively traded S&P 500 Index components. The contracts are cash-
settled, and trade in competitive auction markets with price and quote 
transparency. The Exchange believes the highly regulated options 
markets and the broad base and scope of the S&P 500 Index make 
securities that derive their value from that index less susceptible to 
market manipulation in view of market capitalization and liquidity of 
the S&P 500 Index components, price and quote transparency, and 
arbitrage opportunities.
    The Exchange believes that the liquidity of the markets for U.S. 
Treasury securities in the Fund's portfolio, S&P 500 Index securities, 
and SPY LEAPS is sufficiently great to deter fraudulent or manipulative 
acts associated with the price of a Fund's Shares.\21\ The Exchange 
also believes that such liquidity is sufficient to support the creation 
and redemption mechanism. The Fund's investments will be consistent 
with its investment objective and will not be used to enhance leverage. 
The Fund's investments will not be used to seek

[[Page 42191]]

performance that is the multiple or inverse multiple (e.g., 2x or -2x) 
of the Index. The Fund's use of derivative instruments will be 
collateralized. The Exchange represents that, except as described 
above, the Fund and the Index will meet each of the initial and 
continued listing criteria in Commentary .02 to Rule 5.2-E (j)(3) with 
the exception of meeting the requirements of Commentary .02(a)(1) to 
Rule 5.2-E(j)(3) with respect to SPY LEAPS applicable to the listing of 
Units based upon an index of Fixed Income Securities. In addition, the 
Exchange represents that the Shares of the Fund will comply with all 
other requirements applicable to Units, which includes requirements 
relating to the dissemination of key information such as the Index 
value, the net asset value (``NAV''), and the Intraday Indicative Value 
(``IIV''), rules governing the trading of equity securities, trading 
hours, trading halts, firewalls for the Index Provider and Adviser, 
surveillance, and the Information Bulletin, as set forth in Exchange 
rules applicable to Units and the orders approving such rules.
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    \21\ As of August 9, 2018, open interest in SPY LEAPS was 
1,072,869 contracts. In addition, options on SPY have the highest 
liquidity among all exchange-traded fund options, with open interest 
far in excess of other ETFs in option market liquidity. As of June 
19, 2018, open interest on SPY contracts were 17,771,528, whereas 
the next highest ETF options were iShares MSCI Emerging Markets ETF 
(EEM) and PowerShares QQQ Trust (QQQ) at 6,635,087 and 6,488,055, 
respectively. Source: Bloomberg.
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    Quotation and last sale information for U.S. exchange-listed 
options contracts cleared by the OCC is available via the Options Price 
Reporting Authority. Quotation information for LEAPS is available 
directly from the exchange on which they are traded. The intra-day, 
closing and settlement prices of exchange-traded options will be 
readily available from the options exchanges, automated quotation 
systems, published or other public sources, or online information 
services such as Bloomberg or Reuters. Price information on Treasury 
bills, cash equivalents and other short-term instruments is available 
from major broker-dealer firms or market data vendors, as well as from 
automated quotation systems, published or other public sources, or 
online information services. On each business day, before commencement 
of trading in the Shares on the Exchange during the Exchange's Core 
Trading Session, the portfolio that will form the basis for the Fund's 
calculation of the NAV at the end of the business day will be provided 
on the Adviser's website at www.amplifyetfs.com.
Suitability
    NYSE Arca Rule 9.2-E(a) provides that every ETP Holder shall use 
due diligence to learn the essential facts relative to every customer, 
every order, every account accepted or carried by such ETP Holder and 
every person holding power of attorney over any account accepted or 
carried by such ETP Holder.
    In recommending to a customer the purchase, sale or exchange of any 
security, an ETP Holder shall have reasonable grounds for believing 
that the recommendation is suitable for such customer upon the basis of 
any facts disclosed by the customer as to his or her other security 
holdings, financial situation and needs.
Availability of Information
    The Trust's website (www.amplifyetfs.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The website will 
include additional quantitative information updated on a daily basis, 
including, for the Fund: (1) The prior business day's reported NAV, 
mid-point of the bid/ask spread at the time of calculation of such NAV 
(the ``Bid/Ask Price''),\22\ and a calculation of the premium and 
discount of the Bid/Ask Price against the NAV; and (2) data in chart 
format displaying the frequency distribution of discounts and premiums 
of the daily Bid/Ask Price against the NAV, within appropriate ranges, 
for each of the four previous calendar quarters.
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    \22\ The Bid/Ask Price of the Fund's Shares will be determined 
using the midpoint of the highest bid and the lowest offer on the 
Exchange as of the time of calculation of the Fund's NAV. The 
records relating to Bid/Ask Prices will be retained by the Fund and 
its service providers.
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    On each business day, before commencement of trading in Shares in 
the Core Trading Session \23\ on the Exchange, the Trust will disclose 
on its website the following information regarding each portfolio 
holding, as applicable to the type of holding: Ticker symbol, CUSIP 
number or other identifier, if any; a description of the holding 
(including the type of holding); the identity of the security, index or 
other asset or instrument underlying the holding, if any; for options, 
the option strike price; quantity held (as measured by, for example, 
par value, notional value or number of shares, contracts or units); 
maturity date, if any; coupon rate, if any; market value of the 
holding; and the percentage weighting of the holding in the Fund's 
portfolio. The website information will be publicly available at no 
charge.
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    \23\ The Core Trading Session is 9:30 a.m. to 4:00 p.m. Eastern 
Time (``E.T'').
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    In addition, a portfolio composition file, which will include the 
security names and quantities of securities and other assets required 
to be delivered in exchange for the Fund's Shares, together with 
estimates and actual cash components, will be publicly disseminated 
prior to the opening of the Exchange via the National Securities 
Clearing Corporation. The portfolio will represent one Creation Unit of 
the Fund. Authorized Participants may refer to the portfolio 
composition file for information regarding LEAPS, U.S. Treasury 
Securities, money market instruments, and any other instrument that may 
comprise the Fund's portfolio on a given day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR, filed twice a year. The Trust's SAI and Shareholder Reports will 
be available free upon request from the Trust, and those documents and 
the Form N-CSR may be viewed on screen or downloaded from the 
Commission's website at www.sec.gov. Information regarding market price 
and trading volume for the Shares will be continually available on a 
real-time basis throughout the day on brokers' computer screens and 
other electronic services. Information regarding the previous day's 
closing price and trading volume information for the Shares will be 
published daily in the financial section of newspapers. Quotation and 
last sale information for the Shares will be available via the 
Consolidated Tape Association (``CTA'') high-speed line. Quotation and 
last sale information for LEAPS will be available via the Options Price 
Reporting Authority. Price information on fixed income portfolio 
securities, including U.S. Treasury securities, cash equivalents and 
other short term instruments is available from major broker-dealer 
firms or market data vendors, as well as from automated quotation 
systems, published or other public sources, or online information 
services. In addition, the value of the Index will be published by one 
or more major market data vendors every 15 seconds during the NYSE Arca 
Core Trading Session. Information about the Index constituents, the 
weighting of the constituents, the Index's methodology and the Index's 
rules will be available on the Index Provider's website.
    In addition, the IIV as defined in NYSE Arca Rule 5.2-E (j)(3), 
Commentary .02 (c) will be widely disseminated at least every 15 
seconds during the Core Trading Session by one or more major market 
data vendors.\24\

[[Page 42192]]

All Fund holdings will be included in calculating the IIV.
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    \24\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available IIV's 
taken from the CTA or other data feeds.
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    The dissemination of the IIV is intended to allow investors to 
determine the value of the underlying portfolio of the Fund on a daily 
basis and to approximate that value throughout the trading day. The 
intra-day, closing and settlement prices of the portfolio securities 
and other Fund investments will also be readily available from the 
exchanges trading such instruments, automated quotation systems, 
published or other public sources. The intra-day, closing and 
settlement prices of treasuries and money market instruments will be 
readily available from published and other public sources or on-line 
information services.
Initial and Continued Listing
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Rules 5.2-E(j)(3) and 5.5-E(g)(2), except that 
the Index will not meet the requirements of NYSE Arca Rule 5.2-E(j)(3), 
Commentary .02(a)(1) in that the Index will include of SPY LEAPS. The 
Exchange represents that, for initial and/or continued listing, the 
Fund will be in compliance with Rule 10A-3 \25\ under the Act, as 
provided by NYSE Arca Rule 5.3-E. A minimum of 100,000 Shares for the 
Fund will be outstanding at the commencement of trading on the 
Exchange. The Exchange will obtain a representation from the issuer of 
the Shares that the NAV per Share will be calculated daily every day 
the New York Stock Exchange is open and that the NAV and will be made 
available to all market participants at the same time.
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    \25\ See 17 CFR 240.10A-3.
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \26\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
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    \26\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed on the Exchange pursuant to the initial and 
continued listing criteria in NYSE Arca Commentary .02 to Rule 5.2-
E(j)(3) and NYSE Arca Rule 5.2-E(g)(2) [sic], except that the Index 
includes SPY LEAPS, rather than only Fixed Income Securities. Under 
normal market conditions, the Fund will invest at least 80% of its 
total assets in the securities that comprise the Index, which will be 
composed of U.S. Treasury securities and SPY LEAPS.
    As noted above, SPY LEAPS are highly liquid and derive their value 
from the actively traded S&P 500 Index components. The Exchange 
believes the highly regulated options markets and the broad base and 
scope of the S&P 500 Index make securities that derive their value from 
that index less susceptible to market manipulation in view of market 
capitalization and liquidity of the S&P 500 Index components, price and 
quote transparency, and arbitrage opportunities.
    The Exchange believes that the liquidity of the markets for U.S. 
Treasury securities in the Fund's portfolio, S&P 500 Index securities, 
and SPY LEAPS is sufficiently great to deter fraudulent or manipulative 
acts associated with the price of a Fund's Shares. The Exchange also 
believes that such liquidity is sufficient to support the creation and 
redemption mechanism.
    The Shares will be subject to the existing trading surveillances 
administered by the Exchange or FINRA on behalf of the Exchange, which 
are designed to deter and detect violations of Exchange rules and 
applicable federal securities laws relating to trading on the Exchange. 
FINRA and the Exchange, as applicable, may each obtain information via 
ISG from other exchanges that are members of ISG, and in the case of 
the Exchange, from other market or entities with which the Exchange has 
entered into a comprehensive surveillance sharing agreement.
    The Index Provider is registered as an investment adviser but is 
not registered as a broker-dealer or affiliated with a broker-dealer. 
The Adviser is not registered as a broker-dealer but is affiliated with 
a broker-dealer and has implemented and will maintain a fire wall with 
respect to its broker-dealer affiliate regarding access to information 
concerning the composition and/or changes to the Fund's portfolio. The 
Sub-Adviser is not registered as a broker-dealer or affiliated with a 
broker-dealer. In the event that (a) the Adviser or Sub-Adviser becomes 
registered as a broker-dealer or newly affiliated with another broker-
dealer; or (b) any new adviser or sub-adviser is a registered broker-
dealer or becomes affiliated with a broker-dealer, it will implement 
and maintain a fire wall with respect to its relevant personnel or such 
broker-dealer affiliate, as applicable, regarding access to information 
concerning the composition and/or changes to the portfolio, and will be 
subject to procedures designed to prevent the use and dissemination of 
material non-public information regarding such portfolio.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily every day the 
New York Stock Exchange is open, and that the NAV will be made 
available to all market participants at the same time. In addition, a 
large amount of publicly available information will be publicly 
available regarding the Fund and the Shares, thereby promoting market 
transparency. Moreover, the IIV will be widely disseminated by one or 
more major market data vendors at least every 15 seconds during the 
Exchange's Core Trading Session.
    On each business day, before commencement of trading in the Shares 
in the Core Trading Session on the Exchange, the Fund will disclose on 
its website the portfolio that will form the basis for the Fund's 
calculation of NAV at the end of the business day. 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 quotations 
and last sale information will be available via the CTA high-speed 
line.
    Information relating to U.S. exchange-listed options is available 
via the Options Price Reporting Authority. Quotation and last sale 
information for the Shares will be available via the CTA high-speed 
line. Quotation and last sale information for U.S. exchange-listed 
options contracts cleared by the OCC is available via the Options Price 
Reporting Authority. Quotation information for LEAPS is available 
directly from the exchange on which they are traded. The intra-day, 
closing and settlement prices of exchange-traded options will be 
readily available from the options exchanges, automated quotation 
systems, published or other public sources, or online information 
services such as Bloomberg or Reuters. Such price information on fixed 
income portfolio securities, including U.S. Treasury securities, cash 
equivalents and other short term instruments is available from major 
broker-dealer firms or market data vendors, as well as from automated 
quotation systems, published or other public sources, or online 
information services.

[[Page 42193]]

    The website for the Fund will include the prospectus for the Fund 
and additional data relating to NAV and other applicable quantitative 
information. Moreover, prior to commencement of trading, the Exchange 
will inform its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. Trading 
in Shares of the Fund will be halted if the circuit breaker parameters 
in NYSE Arca Rule 7.12-E have been reached or because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading the Shares inadvisable. In addition, as noted above, investors 
will have ready access to information regarding the Fund's holdings, 
the IIV, the Fund's portfolio, and quotation and last sale information 
for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of exchange-traded product that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Shares will be subject to the 
existing trading surveillances administered by the Exchange or FINRA on 
behalf of the Exchange, which are designed to detect violations of 
Exchange rules and federal securities laws applicable to trading on the 
Exchange. The Exchange or FINRA, on behalf of the Exchange, will 
communicate as needed regarding trading in the Shares and LEAPS with 
other market and other entities that are members of ISG, and the 
Exchange or FINRA, on behalf of the Exchange, may obtain trading 
information in the Shares and LEAPS from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares and LEAPS from markets and other entities that 
are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. In addition, as noted 
above, investors will have ready access to information regarding the 
Fund's holdings, the IIV, and quotation and last sale information for 
the Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of an 
additional type of Units that can hold options contracts and that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as modified by 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 [email protected]. Please include 
File Number SR-NYSEArca-2018-57 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-2018-57. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2018-57, and should be 
submitted on or before September 10, 2018.

    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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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-17832 Filed 8-17-18; 8:45 am]
 BILLING CODE 8011-01-P