Document ID: SEC-2019-0016-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2018-12-31T05:00Z

[Federal Register Volume 83, Number 249 (Monday, December 31, 2018)]
[Notices]
[Pages 67741-67749]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28393]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84931; File No. SR-NYSEArca-2018-83]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Changes Regarding Investments of the iShares Bloomberg 
Roll Select Commodity Strategy ETF

December 21, 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 December 19, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been

[[Page 67742]]

prepared by the self-regulatory organization. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
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 certain changes regarding investments of the 
iShares Bloomberg Roll Select Commodity Strategy ETF, shares of which 
are currently listed and traded on the Exchange under NYSE Arca Rule 
8.600-E (``Managed Fund Shares''). 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 certain changes regarding investments of the 
iShares Bloomberg Roll Select Commodity Strategy ETF (``Fund''), shares 
(``Shares'') of which are currently listed and traded on the Exchange 
under NYSE Arca Rule 8.600-E, which governs the listing and trading of 
Managed Fund Shares \4\ on the Exchange. Shares of the Fund commenced 
listing and trading on the Exchange on April 5, 2018 under 
Commentary.01(b) to NYSE Arca Rule 8.600-E.
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    \4\ 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 Rule 5.2-E(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.
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    The Shares are offered by iShares U.S. ETF Trust (the ``Trust''), 
which is registered with the Commission as an open-end management 
investment company.\5\ The Fund is a series of the Trust.\6\
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    \5\ The Trust is registered under the 1940 Act. On February 21, 
2018, the Trust filed with the Securities and Exchange Commission 
(``SEC'' or Commission'') its registration statement on Form N-1A 
under the Securities Act of 1933 (15 U.S.C. 77a), and under the 1940 
Act relating to the Fund (File Nos. 333-179904 and 811-22649) 
(``Registration Statement''). The description of the operation of 
the Trust and the Fund herein is based, in part, on the Registration 
Statement. In addition, the Commission has issued an order upon 
which the Trust may rely, granting certain exemptive relief under 
the 1940 Act. See Investment Company Act Release No. 29571 (January 
24, 2011) (File No. 812-13601).
    \6\ The Fund is currently in compliance with the provisions of 
Commentary.01(b) to NYSE Arca Rule 8.600-E. The Trust will not 
implement the changes proposed herein until this proposed rule 
change is approved by the Commission.
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    BlackRock Fund Advisors (``BFA'' or ``Adviser'') is the investment 
adviser for the Fund. BlackRock Investments, LLC is the distributor 
(``Distributor'') for the Fund's Shares. State Street Bank and Trust 
Company serves as the administrator, custodian and transfer agent 
(``Custodian'' or ``Transfer Agent'') for the Fund.
    Commentary .06 to Rule 8.600-E provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect 
and maintain a ``fire wall'' between the investment adviser and the 
broker-dealer with respect to access to information concerning the 
composition and/or changes to such investment company portfolio.\7\ In 
addition, Commentary .06 further requires that personnel who make 
decisions on the open-end fund's portfolio composition must be subject 
to procedures designed to prevent the use and dissemination of material 
nonpublic information regarding the open-end fund's portfolio. 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 portfolio. In the 
event (a) the 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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    \7\ 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 its related personnel 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. 
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful 
for an investment adviser to provide investment advice to clients 
unless such investment adviser has (i) adopted and implemented 
written policies and procedures reasonably designed to prevent 
violation, by the investment adviser and its supervised persons, of 
the Advisers Act and the Commission rules adopted thereunder; (ii) 
implemented, at a minimum, an annual review regarding the adequacy 
of the policies and procedures established pursuant to subparagraph 
(i) above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
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iShares Bloomberg Roll Select Commodity Strategy ETF
Fund Investments
    According to the Registration Statement, the Fund's investment 
objective is to seek to provide exposure, on a total return basis, to a 
diversified group of commodities. The Fund is actively managed and 
seeks to achieve its investment objective in part \8\ by, under normal 
market conditions,\9\ investing in listed and over-the-counter 
(``OTC'') swaps referencing the Bloomberg Roll Select Commodity Index 
(the ``Reference Benchmark'').\10\ In connection with investments in 
swaps on the Reference Benchmark, the Fund is expected to establish new 
swaps contracts on an ongoing basis and

[[Page 67743]]

replace expiring contracts.\11\ Swaps subsequently entered into by the 
Fund may have terms that differ from the swaps the Fund currently 
holds. The Fund expects generally to pay a fixed payment rate and 
certain swap related fees to the swap counterparty and receive the 
total return of the Reference Benchmark, including in the event of 
negative performance by the Reference Benchmark, negative return (i.e., 
a payment from the Fund to the swap counterparty). In seeking total 
return, the Fund additionally aims to generate interest income and 
capital appreciation through a cash management strategy consisting 
primarily of cash, cash equivalents,\12\ and fixed income securities 
other than cash equivalents, as described below.
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    \8\ The Fund's investment objective is also achieved by 
investing in cash, cash equivalents, Commodity Investments, Fixed 
Income Securities and Short-Term Fixed Income Securities (each as 
defined or described below).
    \9\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5).
    \10\ The Bloomberg Roll Select Commodity Index is a version of 
the Bloomberg Commodity Index (``BCOM'') that aims to mitigate the 
effects of contango on index performance (as described further 
below). For each commodity, the index rolls into the futures 
contract showing the most backwardation or least contango, selecting 
from those contracts with nine months or fewer until expiration. 
(Source: Bloomberg)
    \11\ Swaps on the Reference Benchmark are included in 
``Commodity Investments'' as defined below.
    \12\ For purposes of this filing, cash equivalents are the 
short-term instruments enumerated in Commentary .01(c) to Rule 
8.600-E.
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    The Fund's investment strategy seeks to maximize correlation with 
the Reference Benchmark, which is composed of 22 futures contracts 
across 20 physical agricultural, energy, precious metals and industrial 
metals commodities. The Reference Benchmark reflects the returns from 
these commodities and provides broad-based exposure to commodities as 
an asset class by using liquidity and sector caps to avoid 
overconcentration in any single commodity or commodity sector. The 
Reference Benchmark employs a contract roll strategy intended to 
minimize the effects of contango and maximize the effects of 
backwardation.\13\
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    \13\ In order to maintain exposure to a futures contract on a 
particular commodity, an investor must sell the position in the 
expiring contract and buy a new position in a contract with a later 
delivery month, which is referred to as ``rolling.'' If the price 
for the new futures contract is less than the price of the expiring 
contract, then the market for the commodity is said to be in 
``backwardation.'' In these markets, roll returns are positive, 
which is referred to as ``positive carry.'' The term ``contango'' is 
used to describe a market in which the price for a new futures 
contract is more than the price of the expiring contract. In these 
markets, roll returns are negative, which is referred to as 
``negative carry.'' The Reference Benchmark seeks to employ a 
positive carry strategy that emphasizes commodities and futures 
contract months with the greatest degree of backwardation and lowest 
degree of contango, resulting in net gains through positive roll 
returns.
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    The Fund will invest in financial instruments described below that 
provide exposure to commodities and not in the physical commodities 
themselves.
    The Fund (through its Subsidiary (as defined below)) may hold the 
following listed derivative instruments: Futures, forwards, options and 
swaps (including swaps referencing the Reference Benchmark) on 
commodities, currencies and financial instruments (e.g., stocks, fixed 
income, interest rates, U.S. Treasuries, and volatility) or a basket or 
index of any of the foregoing (collectively, ``Listed 
Derivatives'').\14\ Listed Derivatives will comply with the criteria in 
Commentary .01(d) of NYSE Arca Rule 8.600-E.
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    \14\ Examples of Listed Derivatives the Fund may invest in 
include exchange traded futures contracts similar to those found in 
the Reference Benchmark, exchange traded futures contracts on the 
Reference Benchmark, swaps on commodity futures contracts similar to 
those found in the Reference Benchmark, as well as futures and 
options that correlate to the investment returns of commodities 
without investing directly in physical commodities.
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    The Fund (through its Subsidiary (as defined below)) may hold the 
following over-the-counter (``OTC'') derivative instruments: Forwards, 
options and swaps (including swaps referencing the Reference Benchmark) 
on commodities, currencies and financial instruments (e.g., stocks, 
fixed income, interest rates, and volatility) or a basket or index of 
any of the foregoing (collectively, ``OTC Derivatives'',\15\ and 
together with Listed Derivatives, ``Commodity Investments'').\16\
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    \15\ Examples of OTC Derivatives the Fund may invest in include 
swaps on commodity futures contracts similar to those found in the 
Reference Benchmark, options that correlate to the investment 
returns of commodities without investing directly in physical 
commodities, OTC commodity-linked instruments such as OTC commodity-
linked notes, forward contracts and OTC options.
    \16\ As discussed below under ``Application of Generic Listing 
Requirements'' below, the Fund's and the Subsidiary's holdings in 
OTC derivatives will not comply with the criteria in Commentary 
.01(e) of NYSE Arca Rule 8.600-E.
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    The Fund's exposure to Commodity Investments is obtained by 
investing through a wholly-owned subsidiary organized in the Cayman 
Islands (the ``Subsidiary'').\17\ The Subsidiary is advised by BFA and 
has the same investment objective as the Fund.
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    \17\ All statements included in this application related to the 
Fund's investments and restrictions are applicable to the Fund and 
Subsidiary collectively.
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    In compliance with the requirements of Sub-Chapter M of the 
Internal Revenue Code of 1986, the Fund may invest up to 25% of its 
total assets in the Subsidiary. The Fund's Commodity Investments held 
in the Subsidiary are intended to provide the Fund with exposure to 
broad commodities.
    The Fund may hold cash, cash equivalents and fixed income 
securities other than cash equivalents, as described further below.
    Specifically, the Fund may invest in Short-Term Fixed Income 
Securities (as defined below) other than cash equivalents on an ongoing 
basis to provide liquidity or for other reasons.\18\ Short-Term Fixed 
Income Securities will have a maturity of no longer than 397 days and 
include the following: (i) Money market instruments; (ii) obligations 
issued or guaranteed by the U.S. government, its agencies or 
instrumentalities (including government-sponsored enterprises); (iii) 
negotiable certificates of deposit, bankers' acceptances, fixed-time 
deposits and other obligations of U.S. and non-U.S. banks (including 
non-U.S. branches) and similar institutions; (iv) commercial paper; (v) 
non-convertible corporate debt securities (e.g., bonds and debentures); 
(vi) repurchase agreements; (vii) short-term U.S. dollar-denominated 
obligations of non-U.S. banks (including U.S. branches) that, in the 
opinion of BFA, are of comparable quality to obligations of U. S. banks 
that may be purchased by the Fund; (viii) and sovereign obligations 
(collectively, ``Short-Term Fixed Income Securities''). Any of these 
securities may be purchased on a current or forward-settled basis.\19\
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    \18\ As discussed under ``Application of Generic Listing 
Requirements'' below, the Exchange proposes that such Short-Term 
Fixed Income Securities be excluded from the requirements of 
Commentary .01(b)(1)-(4) to NYSE Arca Rule 8.600-E.
    \19\ To the extent that the Fund and the Subsidiary invest in 
cash and Short-Term Fixed Income Securities that are cash 
equivalents (i.e., that have maturities of less than 3 months) as 
specified in Commentary .01(c) to NYSE Arca Rule 8.600-E, such 
investments will comply with Commentary .01(c) and may be held 
without limitation. Non-convertible corporate debt securities and 
sovereign obligations are not included as cash equivalents in 
Commentary .01(c).
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    The Fund also may invest in fixed income securities as defined in 
Commentary .01(b) to NYSE Arca Rule 8.600-E, other than cash 
equivalents and Short-Term Fixed Income Securities, with remaining 
maturities longer than 397 days (``Fixed Income Securities''). Such 
Fixed Income Securities will comply with requirements of Commentary 
.01(b) to NYSE Arca Rule 8.600-E.
    The Subsidiary may hold cash and cash equivalents.
    The Fund will seek to gain exposure to swaps and other Commodity 
Investments by investing in its Subsidiary. The Fund wholly owns and 
controls the Subsidiary, and the Fund and the Subsidiary are managed by 
BFA. The Subsidiary is not an investment company registered under the 
1940 Act and is a company organized under the laws of the Cayman 
Islands.
    The Trust's Board of Trustees has oversight responsibility for the 
investment activities of the Fund,

[[Page 67744]]

including its investment in the Subsidiary and the Fund's role as sole 
shareholder of the Subsidiary.
    The Fund and the Subsidiary will not invest in securities or other 
financial instruments that have not been described in this proposed 
rule change.
Other Restrictions
    The Fund's investments, including derivatives, will be consistent 
with the Fund's investment objective and will not be used to enhance 
leverage (although certain derivatives and other investments may result 
in leverage). That is, the Fund's investments will not be used to seek 
performance that is the multiple or inverse multiple (e.g., 2X or -3X) 
of the Fund's Reference Benchmark.
Use of Derivatives by the Fund
    The Fund may invest in the types of derivatives described in the 
``Principal Investments'' section above for the purposes described in 
that section. Investments in derivative instruments will be made in 
accordance with the Fund's investment objective and policies.
    To limit the potential risk associated with such transactions, the 
Fund will enter into offsetting transactions or segregate or 
``earmark'' assets determined to be liquid by the Adviser in accordance 
with procedures established by the Trust's Board of Trustees (the 
``Board''). In addition, the Fund has included appropriate risk 
disclosure in its offering documents, including leveraging risk. 
Leveraging risk is the risk that certain transactions of the Fund, 
including the Fund's use of derivatives, may give rise to leverage, 
causing the Fund to be more volatile than if it had not been leveraged.
Impact on Arbitrage Mechanism
    The Adviser believes there will be minimal, if any, impact to the 
arbitrage mechanism as a result of the Fund's use of derivatives. The 
Adviser understands that market makers and participants should be able 
to value derivatives as long as the positions are disclosed with 
relevant information. The Adviser believes that the price at which 
Shares of the Fund trade will continue to be disciplined by arbitrage 
opportunities created by the ability to purchase or redeem Shares of 
the Fund at their net asset value (``NAV''), which should ensure that 
Shares of the Fund will not trade at a material discount or premium in 
relation to their NAV.
    The Adviser does not believe there will be any significant impacts 
to the settlement or operational aspects of the Fund's arbitrage 
mechanism due to the use of derivatives.
Creation and Redemption of Shares
    According to the Registration Statement, the Trust will issue and 
sell Shares of the Fund only in Creation Units on a continuous basis 
through the Distributor or its agent at a price based on the Fund's NAV 
next determined after receipt, on any business day of an order received 
by the Distributor or its agent in proper form. The size of a Creation 
Unit is 50,000 Shares. The Trust may increase or decrease the number of 
the Fund's Shares that constitute a Creation Unit.
    The consideration for purchase of Creation Units of the Fund is 
generally cash (which may include the currency in which the underlying 
securities are denominated). However, in some cases the consideration 
consists of an in-kind deposit of a designated portfolio of securities 
(``Deposit Securities'') and the Cash Component computed as described 
below. Together, the Deposit Securities and the Cash Component 
constitute the ``Fund Deposit,'' which, when combined with the Fund's 
portfolio securities, is designed to generate performance that has a 
collective investment profile similar to that of the Reference 
Benchmark. The Fund Deposit represents the minimum initial and 
subsequent investment amount for a Creation Unit of the Fund.
    The ``Cash Component'' is an amount equal to the difference between 
the NAV of the shares (per Creation Unit) and the ``Deposit Amount,'' 
which is an amount equal to the market value of the Deposit Securities, 
and serves to compensate for any differences between the NAV per 
Creation Unit and the Deposit Amount.
    The Fund's current policy is to accept cash in substitution for the 
Deposit Securities it might otherwise accept as in-kind consideration 
for the purchase of Creation Units. The Fund may, at times, elect to 
receive Deposit Securities (i.e., the in-kind deposit of a designated 
portfolio of securities) and a Cash Component as consideration for the 
purchase of Creation Units. If the Fund elects to accept Deposit 
Securities, a purchaser's delivery of the Deposit Securities together 
with the Cash Component will constitute the ``Fund Deposit,'' which 
will represent the consideration for a Creation Unit of the Fund.
    The Fund reserves the right to permit or require the substitution 
of a ``cash in lieu'' amount to be added to the Cash Component to 
replace any Deposit Security that may not be available in sufficient 
quantity for delivery or that may not be eligible for transfer through 
the Depository Trust Company (``DTC'') or the clearing process (as 
discussed below) or that the ``Authorized Participant'' as defined 
below, is not able to trade due to a trading restriction, during times 
the Fund has elected to receive Deposit Securities. The Fund also 
reserves the right to permit or require a ``cash in lieu'' amount in 
certain circumstances.
    To be eligible to place orders with the Distributor and to create a 
Creation Unit of the Fund, an entity must be: (i) A ``Participating 
Party,'' i.e., a broker-dealer or other participant in the clearing 
process through the Continuous Net Settlement System of the National 
Securities Clearing Corporation (``NSCC'') (the ``Clearing Process''), 
a clearing agency that is registered with the SEC, or (ii) a DTC 
Participant, and must have executed an agreement with the Distributor, 
with respect to creations and redemptions of Creation Units 
(``Authorized Participant Agreement'') (discussed below). A 
Participating Party or DTC Participant who has executed an Authorized 
Participant Agreement is referred to as an ``Authorized Participant.
    To initiate an order for a Creation Unit, an Authorized Participant 
must submit to the Distributor or its agent an irrevocable order to 
purchase shares of the Fund, in proper form, generally before 4:00 
p.m., Eastern time on any business day to receive that day's NAV.
    Shares of the Fund may be redeemed by only in Creation Units at 
their NAV next determined after receipt of a redemption request in 
proper form by the Distributor or its agent and only on a business day. 
The Fund generally redeems Creation Units solely for cash (which may 
include the currency in which the underlying securities are 
denominated).
    BFA makes available through the NSCC, prior to the opening of 
business on the Exchange on each business day, the designated portfolio 
of securities (including any portion of such securities for which cash 
may be substituted) that will be applicable (subject to possible 
amendment or correction) to redemption requests received in proper form 
(as defined below) on that day (``Fund Securities''), and an amount of 
cash (the ``Cash Amount,'' as described below). Such Fund Securities 
and the corresponding Cash Amount (each subject to possible amendment 
or correction) are applicable, in order to effect redemptions of 
Creation Units of the Fund until such time as the next announced 
composition of the Fund Securities and Cash Amount is made available. 
Where redemptions are permitted in-kind, Fund Securities

[[Page 67745]]

received on redemption may not be identical to Deposit Securities that 
are applicable to creations of Creation Units. Procedures and 
requirements governing redemption transactions are set forth in the 
handbook for Authorized Participants and may change from time to time.
    The Trust may, in its sole discretion, substitute a ``cash in 
lieu'' amount to replace any Fund Security. The Trust also reserves the 
right to permit or require a ``cash in lieu'' amount in certain 
circumstances. The amount of cash paid out in such cases will be 
equivalent to the value of the substituted security listed as a Fund 
Security. In the event that the Fund Securities have a value greater 
than the NAV of the shares, a compensating cash payment equal to the 
difference is required to be made by or through an Authorized 
Participant by the redeeming shareholder. The Fund generally redeems 
Creation Units for cash.
    Redemption requests for Creation Units of the Fund must be 
submitted to the Distributor or its agent by or through an Authorized 
Participant. An Authorized Participant must submit an irrevocable 
request to redeem shares of the Fund generally before 4:00 p.m., 
Eastern time on any business day in order to receive that day's NAV.
Application of Generic Listing Requirements
    The Exchange is submitting this proposed rule change because the 
portfolio for the Fund will not meet all of the ``generic'' listing 
requirements of Commentary .01 to NYSE Arca Rule 8.600-E applicable to 
the listing of Managed Fund Shares. The Fund's portfolio will meet all 
such requirements except for those set forth in Commentary .01 (b)(1)-
(4) (with respect to Short-Term Fixed Income Securities) and (e) (with 
respect to OTC Derivatives), as described below.
    The Fund's Short-Term Fixed Income Securities will not comply with 
the requirements set forth in Commentary .01(b)(1)-(4) to NYSE Arca 
Rule 8.600-E.\20\ While the requirements set forth in Commentary 
.01(b)(1)-(4) include rules intended to ensure that the fixed income 
securities included in a fund's portfolio are sufficiently large and 
diverse and have sufficient publicly available information regarding 
the issuances, the Exchange believes that any concerns related to non-
compliance are mitigated by the types of instruments that the Fund 
would hold. The Fund's Short-Term Fixed Income Securities primarily 
will include those instruments that are included in the definition of 
cash and cash equivalents, but are not considered cash and cash 
equivalents because they have maturities of three months or longer. The 
Exchange believes, however, that, because all Short-Term Fixed Income 
Securities, including non-convertible corporate debt securities and 
sovereign obligations (which are not cash equivalents as enumerated in 
Commentary .01(c) to Rule 8.600-E), are highly liquid, they are less 
susceptible than other types of fixed income instruments both to price 
manipulation and volatility and that the holdings as proposed are 
generally consistent with the policy concerns which Commentary 
.01(b)(1)-(4) is intended to address. Because the Short-Term Fixed 
Income Securities will consist of high-quality fixed income securities 
described above, the Exchange believes that the policy concerns that 
Commentary .01(b)(1)-(4) is intended to address are otherwise mitigated 
and that the Fund should be permitted to hold these securities in a 
manner that may not comply with Commentary .01(b)(1)-(4).
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    \20\ Commentary .01(b)(1)-(4) to NYSE Arca Rule 8.600-E provides 
as follows:
    ``(b) Fixed Income--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 (``Treasury Securities''), government-sponsored entity 
securities (``GSE Securities''), municipal securities, trust 
preferred securities, supranational debt and debt of a foreign 
country or a subdivision thereof, investment grade and high yield 
corporate debt, bank loans, mortgage and asset backed securities, 
and commercial paper. To the extent that a portfolio includes 
convertible securities, the fixed income security into which such 
security is converted shall meet the criteria of this Commentary 
.01(b) after converting. The components of the fixed income portion 
of a portfolio shall meet the following criteria initially and on a 
continuing basis:
    (1) Components that in the aggregate account for at least 75% of 
the fixed income weight of the portfolio each shall have a minimum 
original principal amount outstanding of $100 million or more;
    (2) No component fixed-income security (excluding Treasury 
Securities and GSE Securities) shall represent more than 30% of the 
fixed income weight of the portfolio, and the five most heavily 
weighted component fixed income securities in the portfolio 
(excluding Treasury Securities and GSE Securities) shall not in the 
aggregate account for more than 65% of the fixed income weight of 
the portfolio;
    (3) An underlying portfolio (excluding exempted securities) that 
includes fixed income securities shall include a minimum of 13 non-
affiliated issuers, provided, however, that there shall be no 
minimum number of non-affiliated issuers required for fixed income 
securities if at least 70% of the weight of the portfolio consists 
of equity securities as described in Commentary .01(a) above;
    (4) Component securities that in aggregate account for at least 
90% of the fixed income weight of the portfolio must be either (a) 
from issuers that are required to file reports pursuant to Sections 
13 and 15(d) of the Securities Exchange Act of 1934; (b) from 
issuers that have a worldwide market value of its outstanding common 
equity held by non-affiliates of $700 million or more; (c) from 
issuers that have outstanding securities that are notes, bonds 
debentures, or evidence of indebtedness having a total remaining 
principal amount of at least $1 billion; (d) exempted securities as 
defined in Section 3(a)(12) of the Securities Exchange Act of 1934; 
or (e) from issuers that are a government of a foreign country or a 
political subdivision of a foreign country''.
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    The Fund's portfolio also will not comply with the requirements set 
forth in Commentary .01(e) (with respect to OTC Derivatives) to NYSE 
Arca Rule 8.600-E.\21\ Specifically, the Fund's investments in OTC 
Derivatives may exceed 20% of Fund assets, calculated as the aggregate 
gross notional value of such OTC Derivatives. The Exchange proposes 
that up to 60% of the Fund's assets (calculated as the aggregate gross 
notional value) may be invested in OTC Derivatives. The Adviser 
believes that it is important to provide the Fund with additional 
flexibility to manage risk associated with its investments. Depending 
on market conditions, it may be critical that the Fund be able to 
utilize available OTC Derivatives to efficiently gain exposure to the 
multiple commodities that underlie the Reference Benchmark, as well as 
commodity futures contracts similar to those found in the Reference 
Benchmark.
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    \21\ Commentary .01(e) of NYSE Arca Rule 8.600-E provides as 
follows: ``The portfolio may hold OTC derivatives, including 
forwards, options and swaps on commodities, currencies and financial 
instruments (e.g., stocks, fixed income, interest rates, and 
volatility) or a basket or index of any of the foregoing; however, 
on both an initial and continuing basis, no more than 20% of the 
assets in the portfolio may be invested in OTC derivatives. For 
purposes of calculating this limitation, a portfolio's investment in 
OTC derivatives will be calculated as the aggregate gross notional 
value of the OTC derivatives.''
---------------------------------------------------------------------------

    OTC Derivatives can be tailored to provide specific exposure to the 
Fund's Reference Benchmark, as well as commodity futures contracts 
similar to those found in the Reference Benchmark,, allowing the Fund 
to more efficiently meet its investment objective. For example, the 
Reference Benchmark is composed of 22 futures contracts across 20 
physical commodities, which may not be sufficiently liquid and would 
not provide the commodity exposure the Fund requires to meet its 
investment objective if the Fund were to invest in the futures 
directly. A total return swap can be structured to provide exposure to 
the same futures contracts as exist in the Reference Benchmark, as well 
as commodity futures contracts similar to those found in the Reference 
Benchmark, while providing sufficient efficiency to allow the Fund to 
more easily meet its investment objective.

[[Page 67746]]

    In addition, if the Fund were to gain commodity exposure 
exclusively through the use of listed futures, the Fund's holdings in 
Listed Derivatives would be subject to position limits and 
accountability levels established by an exchange. Such limitations 
would restrict the Fund's ability to gain efficient exposure to the 
commodities in the Reference Benchmark, or futures contracts similar to 
those found in the Reference Benchmark, thereby impeding the Fund's 
ability to satisfy its investment objective.
    The Adviser represents that the basket or index on which much of 
the Fund's OTC Derivatives will be based will satisfy the criteria 
applicable to holdings in Listed Derivatives in Commentary .01(d)(2) on 
an initial and continued listing basis.\22\ With respect to the Fund's 
holdings in OTC Derivatives, the aggregate gross notional value of OTC 
Derivatives based on any five or fewer underlying reference assets will 
not exceed 65% of the weight of the portfolio (including gross notional 
exposures), and the aggregate gross notional value of OTC Derivatives 
based on any single underlying reference asset will not exceed 30% of 
the weight of the portfolio (including gross notional exposures). In 
addition, the Adviser represents that futures on all commodities in the 
Reference Benchmark are traded on futures exchanges that are members of 
the Intermarket Surveillance Group (``ISG'').
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    \22\ Commentary .01(d)(2) to Rule 8.600-E provides that, with 
respect to a fund's portfolio, the aggregate gross notional value of 
listed derivatives based on any five or fewer underlying reference 
assets shall not exceed 65% of the weight of the portfolio 
(including gross notional exposures), and the aggregate gross 
notional value of listed derivatives based on any single underlying 
reference asset shall not exceed 30% of the weight of the portfolio 
(including gross notional exposures).
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    The Exchange notes that, other than Commentary .01(b)(1)-(4) (with 
respect to Short-Term Fixed Income Securities) and .01(e)(with respect 
to OTC Derivatives) to Rule 8.600-E, as described above, the Fund's 
portfolio will meet all other requirements of Rule 8.600-E.
Availability of Information
    The Fund's website (www.iShares.com) will include the prospectus 
for the Fund that may be downloaded. The Fund's website will include 
additional quantitative information updated on a daily basis including, 
for the Fund, (1) daily trading volume, the prior business day's 
reported closing price, NAV and midpoint of the bid/ask spread at the 
time of calculation of such NAV (the ``Bid/Ask Price''),\23\ 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. On each business day, before commencement 
of trading in Shares in the Core Trading Session on the Exchange, the 
Fund will disclose on its website the Disclosed Portfolio as defined in 
NYSE Arca Rule 8.600-E(c)(2) that forms the basis for the Fund's 
calculation of NAV at the end of the business day.\24\
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    \23\ The Bid/Ask Price of the Fund's Shares will be determined 
using the mid-point 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.
    \24\ Under accounting procedures followed by the Fund, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Fund 
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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    On a daily basis, the Fund will disclose the information required 
under NYSE Arca Rule 8.600-E(c)(2) to the extent applicable. The 
website information will be publicly available at no charge.
    In addition, a basket composition file, which includes the asset 
names and share quantities, if applicable, required to be delivered in 
exchange for the Fund's Shares, together with estimates and actual cash 
components, will be publicly disseminated daily prior to the opening of 
the Exchange via the NSCC. The basket represents one Creation Unit of 
the Fund. Authorized Participants may refer to the basket composition 
file for information regarding financial instruments that may comprise 
the Fund's basket on a given day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and the Fund's 
Forms N-CSR and Forms N-SAR, filed twice a year. The Fund's SAI and 
Shareholder Reports will be available free upon request from the Trust, 
and those documents and the Form N-CSR, Form N-PX and Form N-SAR may be 
viewed on-screen or downloaded from the Commission's website at 
www.sec.gov.
    Intra-day and closing price information regarding futures and other 
Listed Derivatives will be available from the exchange on which such 
instruments are traded and from major market data vendors. Price 
information regarding OTC Derivatives, cash equivalents, Commodity 
Investments, Short-Term Fixed Income Securities, and Fixed Income 
Securities also will be available from major market data vendors. 
Additionally, the Trade Reporting and Compliance Engine (``TRACE'') of 
the Financial Industry Regulatory Authority (``FINRA'') will be a 
source of price information for certain fixed income securities to the 
extent transactions in such securities are reported to TRACE.\25\ Price 
information regarding U.S. government securities and other cash 
equivalents generally may be obtained from brokers and dealers who make 
markets in such securities or through nationally recognized pricing 
services through subscription agreements. The BCOM index methodology, 
constituent list, and index price are available via Bloomberg.
---------------------------------------------------------------------------

    \25\ Broker-dealers that are FINRA member firms have an 
obligation to report transactions in specified debt securities to 
TRACE to the extent required under applicable FINRA rules. 
Generally, such debt securities will have at issuance a maturity 
that exceeds one calendar year. For fixed income securities that are 
not reported to TRACE, (i) intraday price quotations will generally 
be available from broker-dealers and trading platforms (as 
applicable) and (ii) price information will be available from feeds 
from market data vendors, published or other public sources, or 
online information services, as described above.
---------------------------------------------------------------------------

    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. 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. Exchange-traded options quotation and last sale information for 
options cleared via the Options Clearing Corporation are available via 
the Options Price Reporting Authority. In addition, the Portfolio 
Indicative Value (``PIV''), as defined in NYSE Arca Rule 8.600-E(c)(3), 
will be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the Core Trading Session.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund.\26\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Rule 
7.12-E have been reached. Trading also may be halted because of market 
conditions or

[[Page 67747]]

for reasons that, in the view of the Exchange, make trading in the 
Shares inadvisable. Trading in the Fund's Shares also will be subject 
to Rule 8.600-E(d)(2)(D) (``Trading Halts'').
---------------------------------------------------------------------------

    \26\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m., E.T. in accordance 
with NYSE Arca Rule 7.34-E (Early, Core, and Late Trading Sessions). 
The Exchange has appropriate rules to facilitate transactions in the 
Shares during all trading sessions. As provided in NYSE Arca Rule 7.6-
E, the minimum price variation (``MPV'') for quoting and entry of 
orders in equity securities traded on the NYSE Arca Marketplace is 
$0.01, with the exception of securities that are priced less than $1.00 
for which the MPV for order entry is $0.0001.
    With the exception of the requirements of Commentary .01(b)(1)-(4) 
(with respect to Short-Term Fixed Income Securities) and (e) (with 
respect to OTC Derivatives) to Rule 8.600-E as described above in 
``Application of Generic Listing Requirements,'' the Shares of the Fund 
will conform to the initial and continued listing criteria under NYSE 
Arca Rule 8.600-E. Consistent with NYSE Arca Rule 8.600-E(d)(2)(B)(ii), 
the Adviser will 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 the Fund's portfolio. 
The Exchange represents that, for initial and continued listing, the 
Fund will be in compliance with Rule 10A-3 \27\ under the Act, as 
provided by NYSE Arca Rule 5.3-E. A minimum of 100,000 Shares 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 and that the NAV and 
the Disclosed Portfolio will be made available to all market 
participants at the same time. The Fund's investments will be 
consistent with its investment goal and will not be used to provide 
multiple returns of a benchmark or to produce leveraged returns.
---------------------------------------------------------------------------

    \27\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by FINRA on behalf 
of the Exchange, or by regulatory staff of the Exchange, which are 
designed to detect violations of Exchange rules and applicable federal 
securities laws. The Exchange represents 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 federal securities laws applicable to trading on the Exchange.\28\
---------------------------------------------------------------------------

    \28\ 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.
---------------------------------------------------------------------------

    The 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, futures, and 
certain listed options with other markets and other entities that are 
members of the ISG, and the Exchange or FINRA, on behalf of the 
Exchange, or both, may obtain trading information regarding trading in 
such securities and financial instruments from such markets and other 
entities.\29\ In addition, the Exchange may obtain information 
regarding trading in such securities and financial instruments 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 TRACE.
---------------------------------------------------------------------------

    \29\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding 
(a) the description of the portfolio or reference assets, (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).
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'') 
of the special characteristics and risks associated with trading the 
Shares. Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Rule 9.2-E(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; (3) the risks involved in 
trading the Shares during the Early and Late Trading Sessions when an 
updated PIV will not be calculated or publicly disseminated; (4) how 
information regarding the PIV and the Disclosed Portfolio is 
disseminated; (5) 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 (6) 
trading information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m., Eastern time each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \30\ 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.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78f(b)(5).

---------------------------------------------------------------------------

[[Page 67748]]

    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 and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Rule 8.600-E. The 
Exchange has in place surveillance procedures that are adequate to 
properly monitor trading in the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws. The Exchange or FINRA, on behalf of the Exchange, or 
both, will communicate as needed regarding trading in the Shares, 
futures, and certain listed options with other markets and other 
entities that are members of the ISG, and the Exchange or FINRA, on 
behalf of the Exchange, or both, may obtain trading information 
regarding trading in such securities and financial instruments from 
such markets and other entities. In addition, the Exchange may obtain 
information regarding trading in such securities and financial 
instruments 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 TRACE. The Adviser is 
not registered as a broker-dealer, but is affiliated with 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 portfolio.
    The Exchange notes that, other than Commentary .01(b)(1)-(4) (with 
respect to Short-Term Fixed Income Securities) and .01(e) (with respect 
to OTC Derivatives) to Rule 8.600-E, as described above, the Fund's 
portfolio will meet all other requirements of Rule 8.600-E.
    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 and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information will be publicly available regarding the Fund and the 
Shares, thereby promoting market transparency. Quotation and last sale 
information for the Shares will be available via the CTA high-speed 
line. 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. 
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 in the Shares inadvisable. Trading in the Shares will be 
subject to NYSE Arca Rule 8.600-E (d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted. In 
addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, NAV, the PIV, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.
    With respect to the Fund's proposed non-compliance with Commentary 
.01(b)(1)-(4) (with respect to Short-Term Fixed Income Securities),\31\ 
Commentary.01(b) include rules intended to ensure that the fixed income 
securities included in a fund's portfolio are sufficiently large and 
diverse and have sufficient publicly available information regarding 
the issuances, the Exchange believes that any concerns related to non-
compliance are mitigated by the types of instruments that the Fund 
would hold. The Fund's Short-Term Fixed Income Securities primarily 
will include those instruments that are included in the definition of 
cash and cash equivalents, but are not considered cash and cash 
equivalents because they have maturities of three months or longer. 
Short-Term Fixed Income Securities that are cash equivalents under 
Commentary .01(c) to Rule 8.600-E (that is, short-term instruments with 
maturities of less than three months, as described in Commentary 
.01(c)(2)) would comply with Commentary .01(c) and could be held 
without limit. The Exchange believes, however, that because all Short-
Term Fixed Income Securities, including non-convertible corporate debt 
securities and sovereign obligations, are high-quality instruments and 
are highly liquid they are less susceptible than other types of fixed 
income instruments both to price manipulation and volatility, and that 
the holdings as proposed are generally consistent with the policy 
concerns which Commentary .01(b) is intended to address. Because of 
these factors, the Exchange believes that the policy concerns that 
Commentary .01(b) is intended to address are otherwise mitigated and 
that the Fund should be permitted to hold these securities in a manner 
that may not comply with Commentary .01(b).
---------------------------------------------------------------------------

    \31\ See note 20, supra.
---------------------------------------------------------------------------

    With respect to the Fund's proposed non-compliance with the 
requirements set forth in Commentary .01(e) (with respect to OTC 
Derivatives) to NYSE Arca Rule 8.600-E,\32\ specifically the proposal 
that up to 60% of the Fund's assets (calculated as the aggregate gross 
notional value) may be invested in OTC Derivatives, the Adviser 
believes that it is important to provide the Fund with additional 
flexibility to manage risk associated with its investments. Depending 
on market conditions, it may be critical that the Fund be able to 
utilize available OTC Derivatives to efficiently gain exposure to the 
multiple commodities markets that underlie the Reference Benchmark.\33\
---------------------------------------------------------------------------

    \32\ See note 21, supra.
    \33\ The Commission has previously approved an exception from 
requirements set forth in Commentary .01(e) relating to investments 
in OTC derivatives similar to that proposed with respect to the Fund 
in Securities Exchange Act Release No. 80657 (May 11, 2017), 82 FR 
22702 (May 17, 2017) (SR-NYSEArca-2017-09) (Notice of Filing of 
Amendment No. 2 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 2, Regarding 
Investments of the Janus Short Duration Income ETF Listed Under NYSE 
Arca Equities Rule 8.600).
---------------------------------------------------------------------------

    OTC Derivatives can be tailored to provide specific exposure to the 
Fund's Reference Benchmark, allowing the Fund to more efficiently meet 
its investment objective. For example, the Reference Benchmark is 
composed of 22 futures contracts across 20 physical commodities, which 
may not be sufficiently liquid and would not provide the commodity 
exposure the Fund requires to meet its investment objective if the Fund 
were to invest in the futures directly. A total return swap can be 
structured to provide exposure to the same futures contracts as exist 
in the Reference Benchmark, while providing sufficient efficiency to 
allow the Fund to more easily meet its investment objective.
    In addition, if the Fund were to gain commodity exposure 
exclusively through the use of listed futures, the Fund's holdings in 
Listed Derivatives would be subject to position limits and 
accountability levels established by an exchange. Such limitations 
would restrict the Fund's ability to gain efficient exposure to the 
commodities in the Reference Benchmark, thereby impeding the Fund's 
ability to satisfy its investment objective.
    The Adviser represents that the basket or index on which much of 
the Fund's OTC Derivatives will be based will satisfy the criteria 
applicable to holdings in Listed Derivatives in Commentary .01(d)(2) on 
an initial and

[[Page 67749]]

continued listing basis.\34\ With respect to the Fund's holdings in OTC 
Derivatives, the aggregate gross notional value of OTC Derivatives 
based on any five or fewer underlying reference assets will not exceed 
65% of the weight of the portfolio (including gross notional 
exposures), and the aggregate gross notional value of OTC Derivatives 
based on any single underlying reference asset will not exceed 30% of 
the weight of the portfolio (including gross notional exposures). 
Futures on all commodities in the Reference Benchmark are traded on 
futures exchanges that are members of the ISG.
---------------------------------------------------------------------------

    \34\ See note 22, supra.
---------------------------------------------------------------------------

    The Adviser represents that it is in the best interests of the 
Fund's shareholders for the Fund to be allowed to reduce commodities-
related risks arising from the Fund's investments using the most 
efficient financial instruments. While certain risks can be hedged via 
Listed Derivatives, OTC Derivatives can be customized to hedge against 
precise risks. Accordingly, the Adviser believes that OTC Derivatives 
may frequently be a more efficient hedging vehicle than Listed 
Derivatives. Depending on market conditions, it may be critical that 
the Fund be able to utilize available OTC Derivatives for this purpose 
to gain exposure to the commodities in the Reference Benchmark in an 
efficient manner. Therefore, the Exchange believes that increasing the 
percentage limit in Commentary .01(e) (with respect to OTC 
Derivatives), as described above, to the Fund's investments in OTC 
Derivatives would help protect investors and the public interest.
    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 actively-managed exchange-traded product that, through permitted use 
of an increased level of OTC derivatives above that currently permitted 
by the generic listing requirements of Commentary .01 to NYSE Arca Rule 
8.600-E, will enhance competition among market participants, to the 
benefit of investors and the marketplace. As noted above, the Exchange 
has in place surveillance procedures relating to trading in the Shares 
and may obtain information via ISG from other exchanges that are 
members of ISG or with which the Exchange has entered into a 
comprehensive surveillance sharing agreement. In addition, as noted 
above, investors have ready access to information regarding the Fund's 
holdings, the PIV, the Disclosed Portfolio, 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 actively-managed exchange-traded product 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 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 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 Number SR-NYSEArca-2018-83 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-2018-83. 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 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. 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-2018-83 and should be submitted 
on or before January 22, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
---------------------------------------------------------------------------

    \35\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2018-28393 Filed 12-28-18; 8:45 am]
 BILLING CODE 8011-01-P