[Federal Register Volume 85, Number 107 (Wednesday, June 3, 2020)]
[Notices]
[Pages 34262-34270]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11919]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88970; File No. SR-NYSEArca-2020-48]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To List and Trade Shares of Gabelli ETFs Under
Rule 8.900-E, Managed Portfolio Shares
May 28, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934
[[Page 34263]]
(``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on May 15, 2020, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been 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 to list and trade shares of the following
under Rule 8.900-E (Managed Portfolio Shares): Gabelli Growth
Innovators ETF, Gabelli Financial Services ETF, Gabelli Small Cap
Growth ETF, Gabelli Small & Mid Cap ETF, Gabelli Micro Cap ETF, Gabelli
ESG ETF, Gabelli Asset ETF, Gabelli Equity Income ETF, and Gabelli
Green Energy ETF. 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 has added new Rule 8.900-E for the purpose of
permitting the listing and trading, or trading pursuant to unlisted
trading privileges (``UTP''), of Managed Portfolio Shares, which are
securities issued by an actively managed open-end investment management
company.\4\ Rule 8.900-E(b)(1) requires the Exchange to file separate
proposals under Section 19(b) of the Act before listing and trading any
series of Managed Portfolio Shares on the Exchange. Therefore, the
Exchange is submitting this proposal in order to list and trade Managed
Portfolio Shares of the Gabelli Growth Innovators ETF, Gabelli
Financial Services ETF, Gabelli Small Cap Growth ETF, Gabelli Small &
Mid Cap ETF, Gabelli Micro Cap ETF, Gabelli ESG ETF, Gabelli Asset ETF,
Gabelli Equity Income ETF, and Gabelli Green Energy ETF (each a
``Fund'' and, collectively, the ``Funds'') under Rule 8.900-E.
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\4\ See Securities Exchange Act Release No. 88648 (April 15,
2020), 85 FR 22200 (April 21, 2020). Rule 8.900-E(c)(1) provides
that the term ``Managed Portfolio Share'' means a security that (a)
represents an interest in an investment company registered under the
Investment Company Act of 1940 (``Investment Company'') organized as
an open-end management investment company that invests in a
portfolio of securities selected by the Investment Company's
investment adviser consistent with the Investment Company's
investment objectives and policies; (b) is issued in a Creation
Unit, or multiples thereof, in return for a designated portfolio of
instruments (and/or an amount of cash) with a value equal to the
next determined net asset value and delivered to the Authorized
Participant (as defined in the Investment Company's Form N-1A filed
with the Commission) through a Confidential Account; (c) when
aggregated into a Redemption Unit, or multiples thereof, may be
redeemed for a designated portfolio of instruments (and/or an amount
of cash) with a value equal to the next determined net asset value
delivered to the Confidential Account for the benefit of the
Authorized Participant; and (d) the portfolio holdings for which are
disclosed within at least 60 days following the end of every fiscal
quarter.
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Description of the Funds and the Trust
The shares of each Fund (the ``Shares'') will be issued by the
Gabelli ETFs Trust (the ``Trust''), a statutory trust organized under
the laws of the State of Delaware and registered with the Commission as
an open-end management investment company.\5\ The investment adviser to
each Fund will be Gabelli Funds, LLC (the ``Adviser''). G.distributors,
LLC (the ``Distributor'') will serve as the distributor of each of the
Funds' Shares. 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 rules shall constitute continued listing
requirements for listing the Shares on the Exchange, as provided under
Rule 8.900-E(b)(1).
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\5\ The Trust is registered under the 1940 Act. On May 8, 2020,
the Trust filed a registration statement on Form N-1A under the
Securities Act of 1933 and the 1940 Act for the Funds (File No. 812-
15036) (``Registration Statement''). The Commission issued an order
granting exemptive relief to the Trust (``Exemptive Order'') under
the 1940 Act on December 3, 2019 (Investment Company Act Release No.
33708). The Exemptive Order was granted in response to the Trust's
application for exemptive relief (the ``Exemptive Application'')
(File No. 812-15036). The description of the operation of the Trust
and the Funds herein is based, in part, on the Registration
Statement.
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Rule 8.900-E(b)(4) provides that, if the investment adviser to the
Investment Company issuing Managed Portfolio Shares is registered as a
broker-dealer or is affiliated with a broker-dealer, such investment
adviser will erect and maintain a ``fire wall'' between the investment
adviser and personnel of the broker-dealer or broker-dealer affiliate,
as applicable, with respect to access to information concerning the
composition and/or changes to such Investment Company portfolio and/or
the Creation Basket.\6\ Any person related to the investment adviser or
Investment Company who makes decisions pertaining to the Investment
Company's portfolio composition or has access to information regarding
the Investment Company's portfolio composition or changes thereto or
the Creation Basket must be subject to procedures designed to prevent
the use and dissemination of material non-public information regarding
the applicable Investment Company portfolio or changes thereto or the
Creation Basket.
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\6\ Rule 8.900-E(c)(5) provides that the term ``Creation
Basket'' means, on any given business day, the names and quantities
of the specified instruments (and/or an amount of cash) that are
required for an AP Representative to deposit in-kind on behalf of an
Authorized Participant in exchange for a Creation Unit and the names
and quantities of the specified instruments (and/or an amount of
cash) that will be transferred in-kind to an AP Representative on
behalf of an Authorized Participant in exchange for a Redemption
Unit, which will be identical and will be transmitted to each AP
Representative before the commencement of trading.
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Rule 8.900-E(5) is similar to Commentary .03(a)(i) and (iii) to
Rule 5.2-E(j)(3); however, Commentary .03(a) in connection with the
establishment of a ``fire wall'' between the investment adviser and the
broker-dealer reflects the applicable open-end fund's portfolio, not an
underlying benchmark index, as is the case with index-based funds.\7\
Rule 8.900-E(5) is also similar
[[Page 34264]]
to Commentary .06 to Rule 8.600-E related to Managed Fund Shares,
except that Rule 8.900-E(5) relates to establishment and maintenance of
a ``fire wall'' between the investment adviser and the broker-dealer
applicable to an Investment Company's portfolio and Creation Basket,
and not just to the underlying portfolio, as is the case with Managed
Fund Shares. The Adviser is not registered as a broker-dealer but is
affiliated with a broker-dealer. The Adviser has implemented and will
maintain a ``fire wall'' with respect to such broker-dealer affiliate
regarding access to information concerning the composition of and/or
changes to a Fund's portfolio and/or Creation Basket.
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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 will be
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
violations, 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. The Funds will also be required to comply
with Exchange rules relating to disclosure, including Rule 5.3-E(i).
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In the event (a) the Adviser or any sub-adviser becomes registered
as a broker-dealer or becomes 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/or Creation Basket. Any person
related to the Adviser or the Trust who makes decisions pertaining to a
Fund's portfolio composition or that has access to information
regarding a Fund's portfolio composition or that has access to
information regarding a Fund's portfolio or changes thereto or the
Creation Basket will be subject to procedures designed to prevent the
use and dissemination of material non-public information regarding such
portfolio or changes thereto and the Creation Basket.
Further, Rule 8.900-E(b)(5) requires that any person or entity,
including an AP Representative, custodian, Reporting Authority,
distributor, or administrator, who has access to information regarding
the Investment Company's portfolio composition or changes thereto or
the Creation Basket, must be subject to procedures reasonably designed
to prevent the use and dissemination of material non-public information
regarding the applicable Investment Company portfolio or changes
thereto or the Creation Basket. Moreover, if any such person or entity
is registered as a broker-dealer or affiliated with a broker-dealer,
such person or entity will erect and maintain a ``fire wall'' between
the person or entity and the broker-dealer with respect to access to
information concerning the composition and/or changes to such
Investment Company portfolio or Creation Basket.
Description of the Funds
Gabelli Growth Innovators ETF
The Fund's holdings will conform to the permissible investments as
set forth in the Exemptive Application and Exemptive Order and the
holdings will be consistent with all requirements in the Exemptive
Application and Exemptive Order.\8\
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\8\ Pursuant to the Exemptive Order, the only permissible
investments for a Fund are the following: Exchange-traded funds
(``ETFs''), exchange-traded notes, exchange-listed common stocks,
exchange-traded American Depositary Receipts, exchange-traded real
estate investment trusts, exchange-traded commodity pools, exchange-
traded metals trusts, exchange-traded currency trusts and exchange-
traded futures that trade contemporaneously with Fund Shares, as
well as cash and cash equivalents (short-term U.S. Treasury
securities, government money market funds, and repurchase
agreements).
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The Fund's primary objective is to seek to provide capital
appreciation, and current income is a secondary objective. The Fund
will primarily invest in common stocks of companies that the Adviser
believes are relevant to the Fund's investment theme of innovation,
with assets invested primarily in a broad range of readily marketable
equity securities consisting of common stock and preferred stock.
Gabelli Financial Services ETF
The Fund's holdings will conform to the permissible investments as
set forth in the Exemptive Application and Exemptive Order and the
holdings will be consistent with all requirements in the Exemptive
Application and Exemptive Order.\9\
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\9\ See id.
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The Fund seeks to provide capital appreciation. The Fund intends to
invest in the securities, including common stock and preferred stock,
of companies principally engaged in the group of industries comprising
the financial services sector.
Gabelli Small Cap Growth ETF
The Fund's holdings will conform to the permissible investments as
set forth in the Exemptive Application and Exemptive Order and the
holdings will be consistent with all requirements in the Exemptive
Application and Exemptive Order.\10\
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\10\ See id.
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The Fund seeks to provide a high level of capital appreciation. The
Fund intends to invest primarily in the common stocks of companies
which the Adviser believes are likely to have rapid growth in revenues
and above average rates of earnings growth.
Gabelli Small & Mid Cap ETF
The Fund's holdings will conform to the permissible investments as
set forth in the Exemptive Application and Exemptive Order and the
holdings will be consistent with all requirements in the Exemptive
Application and Exemptive Order.\11\
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\11\ See id.
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The Fund seeks long term capital growth. The Fund intends to invest
primarily in equity securities (such as common stock and preferred
stock) of companies with small or medium sized market capitalizations.
Gabelli Micro Cap ETF
The Fund's holdings will conform to the permissible investments as
set forth in the Exemptive Application and Exemptive Order and the
holdings will be consistent with all requirements in the Exemptive
Application and Exemptive Order.\12\
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\12\ See id.
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The Fund primarily seeks to provide investors with long term
capital appreciation. The Fund intends to invest primarily in equity
securities of micro-cap companies (as defined by the Fund). The Fund
seeks to invest in equity securities including common stocks (including
indirect holdings of common stock through depositary receipts) and
preferred stocks.
Gabelli ESG ETF
The Fund's holdings will conform to the permissible investments as
set forth in the Exemptive Application and Exemptive Order and the
holdings will be consistent with all requirements in the Exemptive
Application and Exemptive Order.\13\
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\13\ See id.
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The Fund's investment objective is capital appreciation. The Fund
seeks to invest primarily in companies that the Adviser believes meet
the Fund's guidelines for social responsibility. The Fund intends to
invest in common and preferred stocks that are listed on a national
securities exchange or similar market.
Gabelli Asset ETF
The Fund's holdings will conform to the permissible investments as
set forth in the Exemptive Application and Exemptive Order and the
holdings will
[[Page 34265]]
be consistent with all requirements in the Exemptive Application and
Exemptive Order.\14\
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\14\ See id.
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The Fund primarily seeks to provide growth of capital, with a
secondary goal of providing current income. The Fund intends to invest
primarily in common stocks and preferred stocks and may also invest in
foreign securities by investing in depositary receipts.
Gabelli Equity Income ETF
The Fund's holdings will conform to the permissible investments as
set forth in the Exemptive Application and Exemptive Order and the
holdings will be consistent with all requirements in the Exemptive
Application and Exemptive Order.\15\
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\15\ See id.
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The Fund seeks a high level of total return on its assets with an
emphasis on income. The Fund intends to invest in income producing
equity securities including common stock and preferred stock.
Gabelli Green Energy ETF
The Fund's holdings will conform to the permissible investments as
set forth in the Exemptive Application and Exemptive Order and the
holdings will be consistent with all requirements in the Exemptive
Application and Exemptive Order.\16\
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\16\ See id.
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The Fund seeks total return through current income and capital
appreciation. The Fund intends to invest primarily in U.S. equity
securities and depositary receipts issued by clean energy companies.
Investment Restrictions
Each Fund's holdings will be consistent with all requirements
described in the Exemptive Application and Exemptive Order.\17\
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\17\ See id.
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Each Fund's investments, including derivatives, will be consistent
with its 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 primary broad-based securities benchmark index (as
defined in Form N-1A).\18\
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\18\ A Fund's broad-based securities benchmark index will be
identified in a future amendment to the Registration Statement
following a Fund's first full calendar year of performance.
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Creations and Redemptions of Shares
Creations and redemptions of Shares will take place as described in
Rule 8.900-E. Specifically, in connection with the creation and
redemption of Creation Units \19\ and Redemption Units,\20\ the
delivery or receipt of any portfolio securities in-kind will be
required to be effected through a separate confidential brokerage
account (a ``Confidential Account'').\21\ Authorized Participants
(``AP''), as defined in the applicable Form N-1A filed with the
Commission, will sign an agreement with an AP Representative \22\
establishing the Confidential Account for the benefit of the AP. AP
Representatives will be broker-dealers. An AP must be a Depository
Trust Company (``DTC'') Participant that has executed an authorized
participant agreement with the Distributor with respect to the creation
and redemption of Creation Units and Redemption Units and formed a
Confidential Account for its benefit in accordance with the terms of
the Participant Agreement. For purposes of creations or redemptions,
all transactions will be effected through the respective AP's
Confidential Account, for the benefit of the AP, without disclosing the
identity of such securities to the AP.
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\19\ Rule 8.900-E(c)(6) provides that the term ``Creation Unit''
means a specified number of Managed Portfolio Shares issued by an
Investment Company at the request of an Authorized Participant in
return for a designated portfolio of instruments and/or cash.
\20\ Rule 8.900-E(c)(7) provides that the term ``Redemption
Unit'' means a specified minimum number of Managed Portfolio Shares
that may be redeemed to an Investment Company at the request of an
Authorized Participant in return for a portfolio of instruments and/
or cash.
\21\ Rule 8.900-E(c)(4) provides that the term ``Confidential
Account'' means an account owned by an Authorized Participant and
held with an AP Representative on behalf of the Authorized
Participant. The account will be established and governed by
contractual agreement between the AP Representative and the
Authorized Participant solely for the purposes of creation and
redemption, while keeping confidential the Creation Basket
constituents of each series of Managed Portfolio Shares, including
from the Authorized Participant. The books and records of the
Confidential Account will be maintained by the AP Representative on
behalf of the Authorized Participant.
\22\ Rule 8.900-E(c)(3) provides that the term ``AP
Representative'' means an unaffiliated broker-dealer, with which an
Authorized Participant has signed an agreement to establish a
Confidential Account for the benefit of such Authorized Participant,
that will deliver or receive, on behalf of the Authorized
Participant, all consideration to or from the Investment Company in
a creation or redemption. An AP Representative will not be permitted
to disclose the Creation Basket to any person, including the
Authorized Participants.
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Each AP Representative will be given, before the commencement of
trading each Business Day (as defined below), the Creation Basket (as
described below) for that day. This information will permit an AP that
has established a Confidential Account with an AP Representative to
instruct the AP Representative to buy and sell positions in the
portfolio securities to permit creation and redemption of Creation
Units and Redemption Units. Shares of each Fund will initially be
issued and redeemed in Creation Units and Redemption Units of 5,000 or
more Shares, subject to change at the Adviser's discretion. The Funds
will offer and redeem Creation Units and Redemption Units on a
continuous basis at the net asset value (``NAV'') per Share next
determined after receipt of an order in proper form. The NAV per Share
of each Fund will be determined as of the close of regular trading on
the Exchange on each day that the Exchange is open (a ``Business
Day''). The Funds will sell and redeem Creation Units and Redemption
Units only on Business Days.
In order to keep costs low and permit each Fund to be as fully
invested as possible, Shares will be purchased and redeemed in Creation
Units and Redemption Units and generally on an in-kind basis.
Accordingly, except where the purchase or redemption will include cash
under the circumstances described in the Exemptive Application, APs
will be required to purchase Creation Units by making an in-kind
deposit of specified instruments (``Deposit Instruments''), and APs
redeeming their Shares will receive an in-kind transfer of specified
instruments (``Redemption Instruments'') through the AP Representative
in their Confidential Account.\23\ On any given Business Day, the names
and quantities of the instruments that constitute the Deposit
Instruments and the names and quantities of the instruments that
constitute the Redemption Instruments will be identical, and these
instruments may be referred to, in the case of either a purchase or a
redemption, as the ``Creation Basket.''
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\23\ According to the Registration Statement, the Funds must
comply with the federal securities laws in accepting Deposit
Instruments and satisfying redemptions with Redemption Instruments,
including that the Deposit Instruments and Redemption Instruments
are sold in transactions that would be exempt from registration
under the 1933 Act.
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Placement of Purchase Orders
Each Fund will issue Shares through the Distributor on a continuous
basis at NAV. The Exchange represents that the issuance of Shares will
operate in a manner substantially similar to that of other ETFs. Each
Fund will issue Shares only at the NAV per Share next determined after
an order in proper form is received.
The Distributor will furnish acknowledgements to those placing
[[Page 34266]]
such orders that the orders have been accepted, but the Distributor may
reject any order which is not submitted in proper form, as described in
a Fund's prospectus or SAI. The NAV of each Fund is expected to be
determined once each Business Day at a time determined by the Trust's
Board of Trustees, currently anticipated to be as of the close of the
regular trading session on the NYSE (ordinarily 4:00 p.m. E.T.) (the
``Valuation Time''). Each Fund will establish a cut-off time (``Order
Cut-Off Time'') for purchase orders in proper form. To initiate a
purchase of Shares, an AP must submit to the Distributor an irrevocable
order to purchase such Shares after the most recent prior Valuation
Time.
Purchases of Shares will be settled in-kind and/or cash for an
amount equal to the applicable NAV per Share purchased plus applicable
transaction fees.
Generally, all orders to purchase Creation Units must be received
by the Distributor no later than the end of the Core Trading Session on
the date such order is placed (``Transmittal Date'') in order for the
purchaser to receive the NAV per Share determined on the Transmittal
Date.
Authorized Participant Redemption
The Shares may be redeemed to a Fund in Redemption Unit size or
multiples thereof as described below. Redemption orders of Redemption
Units must be placed by or through an AP (``AP Redemption Order'').
Each Fund will establish an Order Cut-Off Time for redemption orders of
Redemption Units in proper form. Redemption Units of a Fund will be
redeemable at their NAV per Share next determined after receipt of a
request for redemption by the Trust in the manner specified below
before the Order Cut-Off Time. To initiate an AP Redemption Order, an
AP must submit to the Distributor an irrevocable order to redeem such
Redemption Unit after the most recent prior Valuation Time, but not
later than the Order Cut-Off Time.
In the case of a redemption, the AP would enter into an irrevocable
redemption order, and then instruct the AP Representative to sell the
underlying basket of securities that it will receive in the redemption.
As with the purchase of securities, the AP Representative will use
methods, such as breaking the transaction into multiple transactions
and transacting in multiple marketplaces, to avoid revealing the
composition of the Creation Basket.
Redemptions will occur primarily in-kind, although redemption
payments may also be made partly or wholly in cash. The Participant
Agreement signed by each AP will require establishment of a
Confidential Account to receive distributions of securities in-kind
upon redemption. Each AP will be required to open a Confidential
Account with an AP Representative in order to facilitate orderly
processing of redemptions.
Net Asset Value
The NAV will be calculated separately for the Shares of each Fund
on each Business Day. Each Fund's NAV is determined as of the close of
regular trading on the NYSE, normally 4:00 p.m., Eastern Time. The NAV
of each Fund is computed by dividing the value of the applicable Fund's
net assets, i.e., the value of its securities and other assets less its
liabilities, including expenses payable or accrued by the total number
of Shares outstanding at the time the determination is made.
Equity securities listed or traded on a national securities
exchange are valued at the last quoted sale or a market's official
closing price at the close of the exchange's or other market's regular
trading hours, as of or prior to the time and day as of which such
value is being determined. Portfolio securities traded on more than one
national securities exchange or market are valued according to the
broadest and most representative market as determined by the Adviser.
Information regarding a Fund's NAV and how often Shares of a Fund
traded on the Exchange at a price above (i.e., at a premium) or below
(i.e., at a discount) the NAV of a Fund will be posted to a Fund's
website when it becomes available.
Availability of Information
The Funds' website, which will be publicly available prior to the
listing and trading of Shares, will include a form of the prospectus
for each Fund that may be downloaded. The Funds' website will include
additional quantitative information updated on a daily basis,
including, for each Fund, the prior Business Day's NAV, market closing
price or mid-point of the bid/ask spread at the time of calculation of
such NAV (the ``Bid/Ask Price''),\24\ and a calculation of the premium
and discount of the market closing price or Bid/Ask Price against the
NAV. The website and information will be publicly available at no
charge.
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\24\ The Bid/Ask Price of a Fund's Shares is determined using
the mid-point between the current national best bid and offer at the
time of calculation of such Fund's NAV. The records relating to Bid/
Ask Prices will be retained by the Funds or their service providers.
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Form N-PORT requires reporting of a fund's complete portfolio
holdings on a position-by-position basis on a quarterly basis within 60
days after fiscal quarter end. Investors can obtain a fund's SAI, its
shareholder reports, its Form N-CSR, filed twice a year, and its Form
N-CEN, filed annually. Each Fund's SAI and shareholder reports are
available free upon request from the Investment Company, and those
documents and the Form N-PORT, Form N-CSR, and Form N-CEN may be viewed
onscreen or downloaded from the Commission's website at www.sec.gov.
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. In addition, the Verified Intraday
Indicative Value (``VIIV''), as defined in Rule 8.900-E(c)(2),\25\ will
be widely disseminated by the Reporting Authority and/or one or more
major market data vendors in one second intervals during the Exchange's
Core Trading Session.
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\25\ Rule 8.900-E(c)(2) provides that the term ``Verified
Intraday Indicative Value'' is the indicative value of a Managed
Portfolio Share based on all of the holdings of a series of Managed
Portfolio Shares as of the close of business on the prior business
day and, for corporate actions, based on the applicable holdings as
of the opening of business on the current business day, priced and
disseminated in one second intervals during the Core Trading Session
by the Reporting Authority.
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Dissemination of the VIIV
With respect to trading of the Shares, the ability of market
participants to buy and sell Shares at prices near the VIIV is
dependent upon their assessment that the VIIV is a reliable, indicative
real-time value for a Fund's underlying holdings. Market participants
are expected to accept the VIIV as a reliable, indicative real-time
value because (1) the VIIV will be calculated and disseminated based on
a Fund's actual portfolio holdings, (2) the securities in which a Fund
plans to invest are generally highly liquid and actively traded and
trade at the same time as the Funds and therefore generally have
accurate real time pricing available, and (3) market participants will
have a daily opportunity to evaluate whether the VIIV at or near the
close of trading is indeed predictive of the actual NAV.
[[Page 34267]]
Information regarding the VIIV is disseminated every second
throughout each trading day by the Exchange or by market data vendors
or other information providers. The VIIV is based on the current market
value of the securities in a Fund's portfolio that day. The methodology
for calculating the VIIV is available on the Funds' website. The VIIV
is intended to provide investors and other market participants with a
highly correlated per Share value of the underlying portfolio that can
be compared to the current market price. Therefore, under normal
circumstances the VIIV is effectively a ``real-time'' update of a
Fund's NAV, which is computed only once a day.
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 a Fund.\26\ Trading in Shares of a Fund will
be halted if the circuit breaker parameters in Rule 7.12-E 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. Trading in the Shares will be subject to Rule 8.900-
E(d)(2)(C), which sets forth circumstances under which Shares of a Fund
will be halted.
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\26\ See Rule 7.12-E.
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Specifically, Rule 8.900-E(d)(2)(C)(i) provides that the Exchange
may consider all relevant factors in exercising its discretion to halt
trading in a series of Managed Portfolio Shares. Trading may be halted
because of market conditions or for reasons that, in the view of the
Exchange, make trading in the series of Managed Portfolio Shares
inadvisable. These may include: (a) The extent to which trading is not
occurring in the securities and/or the financial instruments composing
the portfolio; or (b) whether other unusual conditions or circumstances
detrimental to the maintenance of a fair and orderly market are
present.\27\
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\27\ The Exemptive Application provides that the Investment
Company or their agent will request that the Exchange halt trading
in the applicable series of Managed Portfolio Shares where: (i) The
intraday indicative values calculated by the calculation engines
differ by more than 25 basis points for 60 seconds in connection
with pricing of the Verified Intraday Indicative Value; or (ii)
holdings representing 10% or more of a series of Managed Portfolio
Shares' portfolio have become subject to a trading halt or otherwise
do not have readily available market quotations. Any such requests
will be one of many factors considered in order to determine whether
to halt trading in a series of Managed Portfolio Shares and the
Exchange retains sole discretion in determining whether trading
should be halted.
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Rule 8.900-E(d)(2)(C)(ii) provides that, if the Exchange becomes
aware that: (i) The Verified Intraday Indicative Value of a series of
Managed Portfolio Shares is not being calculated or disseminated in one
second intervals, as required; (ii) the net asset value with respect to
a series of Managed Portfolio Shares is not disseminated to all market
participants at the same time; (iii) the holdings of a series of
Managed Portfolio Shares are not made available on at least a quarterly
basis as required under the 1940 Act; or (iv) such holdings are not
made available to all market participants at the same time (except as
otherwise permitted under the currently applicable exemptive order or
no-action relief granted by the Commission or Commission staff to the
Investment Company with respect to the series of Managed Portfolio
Shares), it will halt trading in such series until such time as the
Verified Intraday Indicative Value, the net asset value, or the
holdings are available, as required.
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 Exchange in all trading sessions in accordance with Rule 7.34-E(a).
As provided in 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.
The Shares will conform to the initial and continued listing
criteria under Rule 8.900-E, as well as all terms in the Exemptive
Order. The Exchange will obtain a representation from the issuer of the
Shares of each Fund that the NAV per Share of each Fund will be
calculated daily and will be made available to all market participants
at the same time.
Surveillance
The Exchange believes that its surveillance procedures are adequate
to properly monitor the trading of Shares on the Exchange during all
trading sessions and to deter and detect violations of Exchange rules
and the applicable federal securities laws. Trading of Shares through
the Exchange will be subject to the Exchange's surveillance procedures
for derivative products. As part of these surveillance procedures and
consistent with Rule 8.900-E(b)(3), the Adviser will upon request make
available to the Exchange and/or FINRA, on behalf of the Exchange, the
daily portfolio holdings of a Fund. The issuer of the Shares of each
Fund will be required to represent to the Exchange that it will advise
the Exchange of any failure by a Fund to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Exchange Act, the Exchange will surveil for compliance
with the continued listing requirements. If a Fund is not in compliance
with the applicable listing requirements, the Exchange will commence
delisting procedures under Exchange Rule 5.5-E(m).
FINRA, on behalf of the Exchange, or the regulatory staff of the
Exchange, or both, will communicate as needed regarding trading in the
Shares and certain exchange-traded instruments with other markets and
other entities that are members of the Intermarket Surveillance Group
(``ISG''), and FINRA, on behalf of the Exchange, or the regulatory
staff of the Exchange, or both, may obtain trading information
regarding trading such securities from such markets and other entities.
In addition, the Exchange may obtain information regarding trading in
the Shares and certain 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, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
Equity Trading Permit (``ETP'') 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;
(2) Rule 9.2-E(a), which imposes a duty of due diligence on its ETP
Holders to learn the essential facts relating to every customer prior
to trading the Shares; (3) how information regarding the VIIV is
disseminated; (4) the requirement that ETP Holders deliver a prospectus
to investors purchasing newly issued Shares prior to or concurrently
with the confirmation of a transaction; (5) trading information; and
(6) that the portfolio holdings of the Shares are not disclosed on a
daily basis.
In addition, the Bulletin will reference that the Funds are subject
to various fees and expenses described in the Registration Statement.
The Bulletin
[[Page 34268]]
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., E.T. each trading day.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\28\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\29\ in particular, in that it
is 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.
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\28\ 15 U.S.C. 78f(b).
\29\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that this proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Funds would meet each of the rules relating to listing and trading of
Managed Portfolio Shares. To the extent that a Fund is not in
compliance with such rules, the Exchange would either prevent the Fund
from listing and trading on the Exchange or commence delisting
procedures under Rule 8.900-E(d)(2)(B). Specifically, the Exchange
would consider the suspension of trading, and commence delisting
proceedings under Rule 8.900-E(d)(2)(B), of a Fund under any of the
following circumstances: (a) If, following the initial twelve-month
period after commencement of trading on the Exchange, there are fewer
than 50 beneficial holders of the Fund; (b) if the Exchange has halted
trading in a Fund because the VIIV is interrupted pursuant to Rule
8.900-E(d)(2)(C)(ii) and such interruption persists past the trading
day in which it occurred or is no longer available; (c) if the Exchange
has halted trading in a Fund because the net asset value with respect
to such Fund is not disseminated to all market participants at the same
time, the holdings of such Fund are not made available on at least a
quarterly basis as required under the 1940 Act, or such holdings are
not made available to all market participants at the same time pursuant
to Rule 8.900-E(d)(2)(C)(ii) and such issue persists past the trading
day in which it occurred; (d) if the Exchange has halted trading in
Shares of a Fund pursuant to Rule 8.900-E(d)(2)(C)(i) and such issue
persists past the trading day in which it occurred; (e) if a Fund has
failed to file any filings required by the Commission or if the
Exchange is aware that a Fund is not in compliance with the conditions
of any currently applicable exemptive order or no-action relief granted
by the Commission or Commission staff with respect to the Fund; (f) if
any of the continued listing requirements set forth in Rule 8.900-E are
not continuously maintained; (g) if any of the statements of
representations regarding (a) the description of the portfolio, (b)
limitations on portfolio holdings, or (c) the applicability of Exchange
listing rules as specified herein to permit the listing and trading of
a Fund, are not continuously maintained; or (h) if such other event
shall occur or condition exists which, in the opinion of the Exchange,
makes further dealings on the Exchange inadvisable.
As discussed above, 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 such affiliate broker-
dealer regarding access to information concerning the composition and/
or changes to a Fund's portfolio and Creation Basket. In the event that
(a) the Adviser becomes registered as a broker-dealer or becomes 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, the Adviser 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/or Creation Basket. Any person related to
the Adviser or the Trust who makes decisions pertaining to a Fund's
portfolio composition or that has access to information regarding a
Fund's portfolio or changes thereto or the Creation Basket will be
subject to procedures designed to prevent the use and dissemination of
material non-public information regarding such portfolio or changes
thereto and the Creation Basket.
In addition, Rule 8.900-E(b)(5) requires that any person or entity,
including an AP Representative, custodian, Reporting Authority,
distributor, or administrator, who has access to non-public information
regarding the Investment Company's portfolio composition or changes
thereto or the Creation Basket, must be subject to procedures designed
to prevent the use and dissemination of material non-public information
regarding the applicable Investment Company portfolio or changes
thereto or the Creation Basket. Moreover, if any such person or entity
is registered as a broker-dealer or affiliated with a broker-dealer,
such person or entity will erect and maintain a ``fire wall'' between
the person or entity and the broker-dealer with respect to access to
information concerning the composition and/or changes to such
Investment Company portfolio or Creation Basket. Any person or entity
who has access to information regarding a Fund's portfolio composition
or changes thereto or the Creation Basket will be subject to procedures
designed to prevent the use and dissemination of material nonpublic
information regarding the portfolio or changes thereto or the Creation
Basket.
The Exchange further believes that Rule 8.900-E is designed to
prevent fraudulent and manipulative acts and practices related to the
listing and trading of Shares of the Funds because it provides
meaningful requirements about both the data that will be made publicly
available about the Shares, as well as the information that will only
be available to certain parties and the controls on such information.
Specifically, the Exchange believes that the requirements related to
information protection set forth in Rule 8.900-E(b)(5) will act as a
safeguard against misuse and improper dissemination of information
related to a Fund's portfolio composition, the Creation Basket, or
changes thereto. The requirement that any person or entity implement
procedures to prevent the use and dissemination of material non-public
information regarding the portfolio or Creation Basket will act to
prevent any individual or entity from sharing such information
externally and the internal ``fire wall'' requirements applicable where
an entity is a registered broker-dealer or affiliated with a broker-
dealer will act to make sure that no entity will be able to misuse the
data for their own purposes. Accordingly, the Exchange believes that
this proposal is designed to prevent fraudulent and manipulative acts
and practices.
The Exchange further believes that the proposal is designed to
prevent fraudulent and manipulative acts and practices related to the
listing and trading of Shares of the Funds and to promote just and
equitable principles of trade and to protect investors and the public
interest because the Exchange would halt trading under certain
circumstances under which trading in the Shares of a Fund may be
inadvisable. Specifically, trading in the Shares will be subject to
Rule 8.900-E(d)(2)(C)(i), which provides that the Exchange may consider
all relevant factors in exercising its discretion to halt trading in a
Fund. Trading may be halted because of market conditions or
[[Page 34269]]
for reasons that, in the view of the Exchange, make trading in the
series of Managed Portfolio Shares inadvisable. These may include: (a)
The extent to which trading is not occurring in the securities and/or
the financial instruments composing the portfolio; or (b) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present.\30\ Additionally, trading in the
Shares will be subject to Rule 8.900-E(d)(2)(C)(ii), which provides
that the Exchange would halt trading where the Exchange becomes aware
that: (a) The VIIV of a series of Managed Portfolio Shares is not being
calculated or disseminated in one second intervals, as required; (b)
the net asset value with respect to a series of Managed Portfolio
Shares is not disseminated to all market participants at the same time;
(c) the holdings of a series of Managed Portfolio Shares are not made
available on at least a quarterly basis as required under the 1940 Act;
or (d) such holdings are not made available to all market participants
at the same time (except as otherwise permitted under the currently
applicable exemptive order or no-action relief granted by the
Commission or Commission staff to the Investment Company with respect
to the series of Managed Portfolio Shares). The Exchange would halt
trading in such Shares until such time as the VIIV, the NAV, or the
holdings are available, as required.
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\30\ See supra note 27.
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With respect to the proposed listing and trading of Shares of the
Funds, 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 Rule 8.900-E.\31\ Each Fund's
holdings will conform to the permissible investments as set forth in
the Exemptive Application and Exemptive Order.\32\ As noted above,
FINRA, on behalf of the Exchange, or the regulatory staff of the
Exchange, or both, will communicate as needed regarding trading in the
Shares and the underlying exchange-traded instruments with other
markets and other entities that are members of the ISG, and FINRA, on
behalf of the Exchange, or the regulatory staff of the Exchange, or
both, may obtain trading information regarding trading such instruments
from such markets and other entities. In addition, the Exchange may
obtain information regarding trading in the Shares and the underlying
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.
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\31\ The Exchange represents that, for initial and/or continued
listing, each Fund will be in compliance with Rule 10A-3 under the
Act. See 17 CFR 240.10A-3.
\32\ See supra note 8.
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With respect to trading of Shares of the Funds, the ability of
market participants to buy and sell Shares at prices near the VIIV is
dependent upon their assessment that the VIIV is a reliable, indicative
real-time value for a Fund's underlying holdings. Market participants
are expected to accept the VIIV as a reliable, indicative real-time
value because (1) the VIIV will be calculated and disseminated based on
a Fund's actual portfolio holdings, (2) the securities in which the
Funds plan to invest are generally highly liquid and actively traded
and trade at the same time as the Funds and therefore generally have
accurate real time pricing available, and (3) market participants will
have a daily opportunity to evaluate whether the VIIV at or near the
close of trading is indeed predictive of the actual NAV.
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 that the NAV per Share
of the Funds will be calculated daily and that the NAV will be made
available to all market participants at the same time. Investors can
also obtain a Fund's SAI, its shareholder reports, its Form N-CSR
(filed twice a year), and its Form N-CEN (filed annually). A Fund's SAI
and shareholder reports will be available free upon request from the
applicable Fund, and those documents and the Form N-PORT, Form N-CSR,
and Form N-CEN may be viewed on-screen or downloaded from the
Commission's website at www.sec.gov. In addition, a large amount of
information will be publicly available regarding the Funds and the
Shares, thereby promoting market transparency. Quotation and last sale
information for the Shares will be available via the CTA high-speed
line. Information regarding the VIIV will be widely disseminated in one
second intervals throughout the Core Trading Session by the Reporting
Authority and/or one or more major market data vendors. The website for
the Funds will include a prospectus for the Funds that may be
downloaded, and additional data relating to NAV and other applicable
quantitative information, updated on a daily basis. Moreover, prior to
the commencement of trading, the Exchange will inform its members in an
Information Bulletin of the special characteristics and risks
associated with trading the Shares.
In addition, as noted above, investors will have ready access to
the VIIV, and quotation and last sale information for the Shares. The
Shares will conform to the initial and continued listing criteria under
Rule 8.900-E. Each Fund's investments, including derivatives, will be
consistent with its 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 primary broad-based securities
benchmark index (as defined in Form N-1A).
The Exchange also believes that 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 actively-managed exchange-traded
products that 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 will have ready access to information regarding the
VIIV and quotation and last sale information for the Shares.
For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act.
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 purposes of the Act. The Exchange believes the
proposed rule change would permit the listing and trading of additional
actively-managed exchange-traded products, thereby promoting
competition among exchange-traded products to the benefit of investors
and the marketplace.
[[Page 34270]]
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 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-2020-48 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-2020-48. 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-2020-48 and should be submitted
on or before June 24, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-11919 Filed 6-2-20; 8:45 am]
BILLING CODE 8011-01-P