Citation: "79 FR 36361"
Document Number: "Release No. 34-72439; File No. SR-NYSEArca-2014-47"
June 20, 2014.
FOOTNOTE 1 15 U.S.C. 78s(b)(1). END FOOTNOTE
FOOTNOTE 2 15 U.S.C. 78a. END FOOTNOTE
FOOTNOTE 3 17 CFR 240.19b-4. END FOOTNOTE
FOOTNOTE 4 Amendment No. 1 replaced SR-NYSEArca-2014-47 as originally filed and supersedes such filing in its entirety. END FOOTNOTE
FOOTNOTE 5 See Securities Exchange Act Release No. 72068 (
FOOTNOTE 6 In Amendment No. 2, the Exchange: (1) Clarified its description of the reference assets that may underlie the derivative investments held by the Fund; (2) deleted a representation that the Fund's investments in preferred securities are generally not expected to be exchange-listed, thus making clearer that the Fund may invest in both exchange-listed and non-exchange-listed preferred securities; (3) clarified that information regarding only U.S. exchange-listed options is available via the
FOOTNOTE 7 In Amendment No. 3, the Exchange: (1) Expanded the list of reference assets underlying the futures contracts which the Fund may hold to include both rates and indexes of rates; (2) added that futures contracts currently overlie both rates and indexes of rates; and (3) deleted an unnecessary reference to other entities in which the Fund may invest. END FOOTNOTE
II. Description of the Proposed Rule Change
The Exchange has proposed to list and trade the Shares under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares on the Exchange. The Shares will be offered by
FOOTNOTE 8 The Trust is registered under the 1940 Act. On
FOOTNOTE 9 See Commentary .06 to NYSE Arca Equities Rule 8.600. The Exchange represents that in the event (a) the Manager or any of the Sub-Advisers become registered as a broker-dealer or become newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser is a registered broker-dealer or becomes affiliated with a broker-dealer, they will implement a firewall with respect to their relevant personnel or broker-dealer affiliate regarding access to information concerning the composition of 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. END FOOTNOTE
The Exchange has made the following representations and statements regarding the Fund. /10/
FOOTNOTE 10 Additional information regarding the Trust, the Fund, the Shares, investment strategies, investment restrictions, risks, net asset value ("NAV") calculation, creation and redemption procedures, fees, portfolio holdings, disclosure policies, distributions, and taxes, among other information, is included in the Notice and the Registration Statement, as applicable.
Fidelity Corporate Bond ETF
The Fund will seek a high level of current income and normally /11/ and will invest at least 80% of its assets in investment-grade corporate bonds and other corporate debt securities. The Fund may hold uninvested cash or may invest in cash equivalents such as money market securities, shares of short-term bond exchanged-traded funds registered under the 1940 Act ("ETFs"), /12/ or mutual funds or money market funds, including Fidelity central funds (which are special types of investment vehicles created by Fidelity for use by the Fidelity funds and other advisory clients). /13/ FMR also may invest the Fund's assets in debt securities of foreign issuers in addition to securities of domestic issuers.
FOOTNOTE 11 The term "normally" includes, but is not limited to, the absence of adverse market, economic, political, or other conditions, including extreme volatility or trading halts in the fixed-income markets or the financial markets generally; operational issues causing dissemination of inaccurate market information; or force-majeure-type events such as systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot, labor disruption, or any similar intervening circumstance. END FOOTNOTE
FOOTNOTE 12 ETFs, which will be listed on a national securities exchange, include the following: Investment Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); Portfolio Depositary Receipts (as described in NYSE Arca Equities Rule 8.100); and Managed Fund Shares (as described in NYSE Arca Equities Rule 8.600).
FOOTNOTE 13 It is currently expected that the Fund will only invest in central funds that are money market funds. See id. END FOOTNOTE
While FMR normally will invest at least 80% of assets of the Fund in investment-grade corporate bonds and other corporate debt securities, as described above, FMR may invest up to 20% of the Fund's assets in other securities and financial instruments, as summarized below. /14/
FOOTNOTE 14 The Fund's holdings of investment-grade corporate bonds and other corporate debt securities are generally expected to be U.S. dollar denominated. See id. END FOOTNOTE
In addition to corporate debt securities, the debt securities in which the Fund may invest are
The Fund may invest in securities of other investment companies, including shares of ETFs registered under the 1940 Act, closed-end investment companies (which include business development companies), unit investment trusts, and open-end investment companies. In addition, the Fund may invest in other exchange-traded products ("ETPs") such as commodity pools. /15/ It is anticipated that the Fund's investments in other ETFs and ETPs will generally be limited to fixed-income ETFs and ETPs.
FOOTNOTE 15 See Amendment No. 3, supra note 7. END FOOTNOTE
The Fund may invest in inverse ETFs (also called "short ETFs" or "bear ETFs"), shares of which are expected to increase in value as the value of the underlying benchmark decreases.
The Fund also may invest in leveraged ETFs, which seek to deliver multiples or inverse multiples of the performance of an index or other benchmark they track and which use derivatives in an effort to amplify the returns of the underlying index or benchmark.
The Fund may invest in exchange-traded notes ("ETNs"), which are a type of senior, unsecured, unsubordinated debt security that is issued by a financial institution and that pays a return based on the performance of a reference asset. It is anticipated that the Fund's investments in other ETNs will generally be limited to fixed-income ETNs. The Fund may invest in leveraged ETNs.
The Fund may invest in American Depositary Receipts ("ADRs") as well as other "hybrid" forms of ADRs, including European Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs"), which are certificates evidencing ownership of shares of a foreign issuer. /16/
FOOTNOTE 16 The Fund will invest only in ADRs, EDRs and GDRs that are traded on an exchange that is a member of the
FMR may make investments in derivatives--regardless of whether the Fund may own the asset, instrument, or components of the index underlying the derivative, as applicable (e.g., a swap based on the Barclays U.S. Credit Bond Index)--and in forward-settling securities. The Fund's derivative investments, as described further below, may reference: Corporate debt securities;
The Fund may conduct foreign currency transactions on a spot (i.e., cash) or forward basis (i.e., by entering into forward contracts to purchase or sell foreign currencies). The Fund may invest in options and futures relating to foreign currencies.
The Fund may invest in exchange-listed futures. The exchange-listed futures contracts in which the Fund may invest will have various types of underlying instruments, including specific assets or securities, baskets of assets or securities, commodities or commodities indexes, indexes of securities prices, indexes of rates, or rates. /17/
FOOTNOTE 17 See Amendment No. 3, supra note 7. END FOOTNOTE
The Fund may invest in U.S. exchange-traded option, as well as over-the-counter ("OTC") options. The OTC options in which the Fund may invest will have various types of underlying instruments, including specific assets or securities, baskets of assets or securities, indexes of securities or commodities prices, and futures contracts (including commodity futures contracts). To the extent that the Fund invests in OTC options, not more than 10% of the net assets of the Fund in the aggregate shall consist of futures contracts or exchange-traded options contracts whose principal market is not a member of ISG or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement.
The Fund may also buy and sell options on swaps (swaptions), which are generally options on interest-rate swaps. The Fund may hold swap agreements, a portion of which may be cleared swaps. The Fund may enter into, among other things, interest rate swaps (where the parties exchange a floating rate for a fixed rate), asset swaps (e.g., where parties combine the purchase or sale of a bond with an interest rate swap), total return swaps, and credit default swaps.
The Fund may invest in lower-quality
The Fund may invest in preferred securities. Preferred securities, which may take the form of preferred stock, represent an equity or ownership interest in an issuer that pays dividends at a specified rate and have precedence over common stock in the payment of dividends.
The Fund may invest in real estate investment trusts ("REITS"). The Fund may invest in exchange-listed and non-exchange-listed REITs.
The Fund may invest in restricted securities, which are subject to legal restrictions on their sale.
III. Discussion and Commission Findings
After careful review, the Commission finds that the Exchange's proposal to list and trade the Shares is consistent with the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange. /18/ In particular, the Commission finds that the proposed rule change, as modified by Amendments No. 1, No. 2, and No. 3, is consistent with Section 6(b)(5) of the Exchange Act, /19/ which requires, among other things, that the Exchange's rules be 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 a national market system, and, in general, to protect investors and the public interest. The Commission notes that the Fund and the Shares must comply with the requirements of NYSE Arca Equities Rule 8.600 to be listed and traded on the Exchange.
FOOTNOTE 18 In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). END FOOTNOTE
FOOTNOTE 19 15 U.S.C. 78f(b)(5). END FOOTNOTE
The Commission finds that the proposal to list and trade the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Exchange Act, /20/ which sets forth
FOOTNOTE 20 15 U.S.C. 78k-1(a)(1)(C)(iii). END FOOTNOTE
FOOTNOTE 21 See Amendment No. 2, supra note 6. END FOOTNOTE
Quotation information for
FOOTNOTE 22 See id. END FOOTNOTE
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. /23/ 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. /24/
FOOTNOTE 23 See Notice, supra note 5, 79 FR at 25930. END FOOTNOTE
FOOTNOTE 24 See id. END FOOTNOTE
In addition, the Portfolio Indicative Value, as defined in NYSE Arca Equities Rule 8.600(c)(3), will be widely disseminated by one or more major market-data vendors at least every 15 seconds during the Core Trading Session. /25/ The dissemination of the Portfolio Indicative Value, together with the Disclosed Portfolio, will allow investors to determine the approximate value of the underlying portfolio of the Fund on a daily basis and will provide a close estimate of that value throughout the trading day. /26/
FOOTNOTE 25 Several major market data vendors display or make widely available Portfolio Indicative Values taken from the CTA or other data feeds. See id. at 25931. END FOOTNOTE
FOOTNOTE 26 See id. END FOOTNOTE
The net asset value ("NAV") of the
FOOTNOTE 27 See id. at 25931-32. END FOOTNOTE
FOOTNOTE 28 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. END FOOTNOTE
Further, the Commission believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. On each business day, before commencement of trading in Shares in the Core Trading Session (
FOOTNOTE 29 See id. at 25930. On a daily basis, the Fund will disclose for each portfolio security and other financial instrument of the Fund the following information: ticker symbol (if applicable), name of security or financial instrument, number of shares (if applicable) and dollar value of each of the securities and financial instruments held in the portfolio, and percentage weighting of the security and financial instrument in the portfolio. The Web site information will be publicly available at no charge. 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. See id. END FOOTNOTE
FOOTNOTE 30 See id. at 25931. END FOOTNOTE
In addition, the Fund will make available through the NSCC on each business day, prior to the opening of trading on the
FOOTNOTE 31 See id. at 25929. END FOOTNOTE
FOOTNOTE 32 See id. END FOOTNOTE
Further, the Commission notes that personnel who make decisions on the 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. /33/
FOOTNOTE 33 See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii). END FOOTNOTE
The Exchange represents that the Manager and the Sub-Advisers are not broker-dealers but are affiliated with one or more broker-dealers and have implemented a firewall with respect to such broker-dealers regarding access to information concerning the composition of or changes to the Fund's portfolio and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding the Fund's portfolio. /34/ The Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees.
FOOTNOTE 34 See supra note 9 and accompanying text. END FOOTNOTE
With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares. /35/ Trading in Shares will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities or the financial instruments constituting the Disclosed Portfolio of the Fund; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. Trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares may be halted.
FOOTNOTE 35 See NYSE Arca Equities Rule 7.12. END FOOTNOTE
The Exchange has represented that the Shares are deemed to be equity securities, thus rendering trading in the Shares subject to the Exchange's rules governing the trading of equity securities. /36/
FOOTNOTE 36 See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii). END FOOTNOTE
In support of this proposal, the Exchange has made additional representations, including:
(1) The Shares will conform to the initial and continuing listing criteria under NYSE Arca Equities Rule 8.600.
(2) The Exchange's surveillance procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. /37/
FOOTNOTE 37 The
(3) FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares and underlying exchange-traded options, futures, exchange-traded equity securities (including ADRs, EDRs, and GDRs), and other exchange-traded instruments with other markets and other entities that are members of the ISG, and FINRA, on behalf of the Exchange, may obtain trading information regarding trading in the Shares and underlying exchange-traded options, futures, exchange-traded equity securities (including ADRs, EDRs, and GDRs), and other exchange-traded instruments from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares and underlying exchange-traded options, futures, exchange-traded equity securities (including ADRs, EDRs, and GDRs), and other exchange-traded 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 Trade Reporting and Compliance Engine.
(4) The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions.
(5) Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit Holders in an Information Bulletin ("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 Equities Rule 9.2(a), which imposes a duty of due diligence on its Equity Trading Permit Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated Portfolio Indicative Value will not be calculated or publicly disseminated; (4) how information regarding the Portfolio Indicative Value 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.
(6) For initial and continued listing, the Fund will be in compliance with Rule 10A-3 under the Exchange Act, /38/ as provided by NYSE Arca Equities Rule 5.3. /39/
FOOTNOTE 38 17 CFR 240.10A-3. END FOOTNOTE
FOOTNOTE 39 See Notice, supra note 5, 79 FR at 25931. END FOOTNOTE
(7) The Fund's investments will be consistent with its investment objective.
(8) The Fund may hold up to an aggregate amount of 15% of its net assets in illiquid assets (calculated at the time of investment), including Rule 144A securities deemed illiquid by the Manager or Sub-Advisers. The Fund will monitor its portfolio liquidity on an ongoing basis to determine whether, in light of current circumstances, an adequate level of liquidity is being maintained, and will consider taking appropriate steps in order to maintain adequate liquidity if, through a change in values, net assets, or other circumstances, more than 15% of the Fund's net assets are held in illiquid assets.
(9) A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange.
This order is based on all of the Exchange's representations, including those set forth above and in the Notice.
For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the Exchange Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning whether the Amendments are consistent with the Act. Comments may be submitted by any of the following methods:
* Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
* Send an email to email@example.com. Please include File Number SR-NYSEArca-2014-47 on the subject line.
* Send paper comments in triplicate to Secretary,
All submissions should refer to File Number SR-NYSEArca-2014-47. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the
V. Accelerated Approval of Proposed Rule Change as Modified by Amendments No. 1, No. 2, and No. 3
The Commission finds good cause to approve the proposed rule change, as modified by Amendments Nos. 1, No. 2, and No. 3, prior to the thirtieth day after the date of publication of notice in the
It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act, /40/ that the proposed rule change, as modified by Amendments No. 1, No. 2, and No. 3 (SR-NYSEArca-2014-47), be, and it hereby is, approved on an accelerated basis.
FOOTNOTE 40 15 U.S.C. 78s(b)(2). END FOOTNOTE
For the Commission, by the
FOOTNOTE 41 17 CFR 200.30-3(a)(12). END FOOTNOTE
Kevin M. O'Neill,
[FR Doc. 2014-14939 Filed 6-25-14;
BILLING CODE 8011-01-P
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