Order Granting Limited Exemptions From Exchange Act Rule 10b-17 and Rules 101 and 102 of Regulation M to PowerShares DWA Tactical Sector Rotation Portfolio Pursuant to Exchange Act Rule 10b-17(b)(2) and Rules 101(d) and 102(e) of Regulation M, 62576-62578 [2015-26329]
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62576
Federal Register / Vol. 80, No. 200 / Friday, October 16, 2015 / Notices
25. DATE: November 23, 2015
TIME: 8:30 a.m. to 5:00 p.m.
ROOM: P003
This meeting will discuss
applications for the Dialogues on the
Experience of War grant program,
submitted to the Division of Education
Programs.
26. DATE: November 24, 2015
TIME: 8:30 a.m. to 5:00 p.m.
ROOM: P003
This meeting will discuss
applications for the Dialogues on the
Experience of War grant program,
submitted to the Division of Education
Programs.
Because these meetings will include
review of personal and/or proprietary
financial and commercial information
given in confidence to the agency by
grant applicants, the meetings will be
closed to the public pursuant to sections
552b(c)(4) and 552b(c)(6) of Title 5,
U.S.C., as amended. I have made this
determination pursuant to the authority
granted me by the Chairman’s
Delegation of Authority to Close
Advisory Committee Meetings dated
July 19, 1993.
[FR Doc. 2015–26380 Filed 10–15–15; 8:45 am]
BILLING CODE 7536–01–P
NUCLEAR REGULATORY
COMMISSION
Sunshine Act Meeting Notice
October 19, 26, November 2, 9,
16, 23, 2015.
PLACE: Commissioners’ Conference
Room, 11555 Rockville Pike, Rockville,
Maryland.
STATUS: Public and Closed.
DATE:
Week of October 19, 2015
Monday, October 19, 2015
9:30 a.m. Briefing on Security Issues
(Closed—Ex. 1)
srobinson on DSK5SPTVN1PROD with NOTICES
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the week of November 2, 2015.
Week of November 9, 2015—Tentative
There are no meetings scheduled for
the week of November 9, 2015.
Week of November 16, 2015—Tentative
Wednesday, October 21, 2015
9 a.m. Joint Meeting of the Federal
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(FERC) and the Nuclear Regulatory
Commission (NRC) (Part 1) (Public
Meeting) To be held at FERC
Headquarters, 888 First Street NE.,
Washington, DC. (Contact: Tania
Martinez-Navedo: 301–415–6561)
This meeting will be webcast live at
the Web address—www.ferc.gov.
11:20 a.m. Joint Meeting of the Federal
Energy Regulatory Commission
Jkt 238001
reasonable accommodation will be
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If you would like to be added to the
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Brenda.Akstulewicz@nrc.gov or
Patricia.Jimenez@nrc.gov.
Dated: October 14, 2015.
Denise McGovern,
Policy Coordinator, Office of the Secretary.
[FR Doc. 2015–26482 Filed 10–14–15; 4:15 pm]
BILLING CODE 7590–01–P
Tuesday, November 17, 2015
9 a.m. Briefing on the Status of Lessons
Learned from the Fukushima DiaIchi Accident (Public Meeting)
(Contact: Gregory Bowman: 301–415–
2939)
This meeting will be webcast live at
the Web address—https://www.nrc.gov/.
Thursday, November 19, 2015
Week of November 23, 2015—Tentative
[NRC–2015–0001]
18:54 Oct 15, 2015
Week of October 26, 2015—Tentative
9 a.m. Hearing on Combined Licenses
for South Texas Project, Units 3 and
4: Section 189a. of the Atomic
Energy Act Proceeding (Public
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This meeting will be webcast live at
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Dated: October 8, 2015.
Lisette Voyatzis,
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VerDate Sep<11>2014
(FERC) and the Nuclear Regulatory
Commission (NRC) (Part 2)
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There are no meetings scheduled for
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76117; File No. TP 15–19]
Order Granting Limited Exemptions
From Exchange Act Rule 10b–17 and
Rules 101 and 102 of Regulation M to
PowerShares DWA Tactical Sector
Rotation Portfolio Pursuant to
Exchange Act Rule 10b–17(b)(2) and
Rules 101(d) and 102(e) of Regulation
M
October 8, 2015.
By letter dated October 8, 2015 (the
‘‘Letter’’), as supplemented by
conversations with the staff of the
Division of Trading and Markets,
counsel for PowerShares ExchangeTraded Fund Trust II (the ‘‘Trust’’), on
behalf of the Trust, PowerShares DWA
Tactical Sector Rotation Portfolio (the
‘‘Fund’’), any national securities
exchange on or through which shares
issued by the Fund (‘‘Shares’’) may
subsequently trade, Invesco
Distributors, Inc. (the ‘‘Distributor’’),
and persons or entities engaging in
transactions in Shares (collectively, the
‘‘Requestors’’), requested exemptions, or
interpretive or no-action relief, from
Rule 10b–17 of the Securities Exchange
Act of 1934, as amended (‘‘Exchange
Act’’), and Rules 101 and 102 of
Regulation M, in connection with
secondary market transactions in Shares
and the creation or redemption of
aggregations of Shares of at least 50,000
shares (‘‘Creation Units’’).
The Trust is registered with the
Securities and Exchange Commission
(‘‘Commission’’) under the Investment
Company Act of 1940, as amended
(‘‘1940 Act’’), as an open-end
management investment company. The
Fund seeks to track the performance of
the underlying index, the Dorsey
Wright® Sector 4 Index (the ‘‘Index’’).
E:\FR\FM\16OCN1.SGM
16OCN1
Federal Register / Vol. 80, No. 200 / Friday, October 16, 2015 / Notices
srobinson on DSK5SPTVN1PROD with NOTICES
The Fund intends to operate as an ‘‘ETF
of ETFs’’ by seeking to track the
performance of its underlying Index
through, under normal circumstances,
investing at least 90% of its total assets
in the ETFs that comprise the Index,
and may include U.S. Treasury Bills.1
Except for the fact that the Fund will
operate as an ETF of ETFs, the Fund
will operate in a manner identical to the
ETFs that are included in the Index.
The Requestors represent, among
other things, the following:
• Shares of the Fund will be issued
by the Trust, an open-end management
investment company that is registered
with the Commission;
• The Trust will continuously redeem
Creation Units at net asset value
(‘‘NAV’’), and the secondary market
price of the Shares should not vary
substantially from the NAV of such
Shares;
• Shares of the Fund will be listed
and traded on the NASDAQ Stock
Market LLC or another exchange in
accordance with exchange listing
standards that are, or will become,
effective pursuant to Section 19(b) of the
Exchange Act (the ‘‘Exchange’’); 2
• All ETFs in which the Fund is
invested will meet all conditions set
forth in a relevant class relief letter,3
will have received individual relief from
the Commission, or will be able to rely
upon individual relief even though they
1 At any point, the Index comprises up to four
PowerShares ETFs from a set of nine eligible
PowerShares ETFs. During market periods when
fewer than four eligible PowerShares ETFs
demonstrate sufficient relative strength, however,
the Index may hold up to a 100% cash position,
represented by U.S. Treasury Bills with a duration
ranging from 0–180 days, in an amount equal to the
weight of the PowerShares ETFs that would
otherwise be included in the Index.
2 Further, the Letter states that should the Shares
also trade on a market pursuant to unlisted trading
privileges, such trading will be conducted pursuant
to self-regulatory organization rules that have
become effective pursuant to Section 19(b) of the
Exchange Act.
3 Exchange Act Rel. No. 67215 (June 19, 2012); 77
FR 37941 (June 25, 2012); Letter from Catherine
McGuire, Esq., Chief Counsel, Division of Market
Regulation, to the Securities Industry Association
Derivative Products Committee (November 21,
2005); Letter from Racquel L. Russell, Branch Chief,
Division of Market Regulation, to George T. Simon,
Esq., Foley & Lardner LLP (June 21, 2006); Letter
from James A. Brigagliano, Acting Associate
Director, Division of Market Regulation, to Stuart
M. Strauss, Esq., Clifford Chance US LLP (October
24, 2006); Letter from James A. Brigagliano,
Associate Director, Division of Market Regulation,
to Benjamin Haskin, Esq., Willkie Farr & Gallagher
LLP (April 9, 2007); Letter from Josephine Tao,
Assistant Director, Division of Trading and Markets,
to Domenick Pugliese, Esq., Paul, Hastings, Janofsky
& Walker LLP (June 27, 2007); see also Staff Legal
Bulletin No. 9, ‘‘Frequently Asked Questions About
Regulation M’’ (April 12, 2002) (regarding activelymanaged ETFs).
VerDate Sep<11>2014
18:54 Oct 15, 2015
Jkt 238001
are not named parties (for example, a
no-action letter);
• At least 70% of the Fund is
comprised of component securities that
will meet the minimum public float and
minimum average daily trading volume
thresholds under the ‘‘actively-traded
securities’’ definition found in
Regulation M for excepted securities
during each of the previous two months
of trading prior to formation of the
Fund;
• All the components of the Index
will have publicly available last sale
trade information;
• The intra-day proxy value of the
Fund per share and the value of the
Index will be publicly disseminated by
a major market data vendor throughout
the trading day;
• On each business day before the
opening of business on the Exchange,
the Fund’s custodian, through the
National Securities Clearing
Corporation, will make available the list
of the names and the numbers of
securities and other assets of the Fund’s
portfolio that will be applicable that day
to creation and redemption requests;
• The Exchange or other market
information provider will disseminate
(i) continuously every 15 seconds
throughout the trading day, through the
facilities of the consolidated tape, the
market value of a Share, and (ii) every
15 seconds throughout the trading day,
a calculation of the intra-day indicative
value of a Share;
• The arbitrage mechanism will be
facilitated by the transparency of the
Fund’s portfolio and the availability of
the intra-day indicative value, the
liquidity of securities held by the Fund,
and the ability to acquire such
securities, as well as the arbitrageurs’
ability to create workable hedges;
• The Fund will invest solely in
liquid securities;
• The Fund will invest in securities
that will facilitate an effective and
efficient arbitrage mechanism and the
ability to create workable hedges;
• The Trust believes that arbitrageurs
are expected to take advantage of price
variations between the Fund’s market
price and its NAV; and
• A close alignment between the
market price of Shares and the Fund’s
NAV is expected.
62577
Shares.4 However, we find that it is
appropriate in the public interest and is
consistent with the protection of
investors to grant a conditional
exemption from Rules 101 and 102 to
persons who may be deemed to be
participating in a distribution of Shares
of the Fund as described in more detail
below.
Rule 101 of Regulation M
Generally, Rule 101 of Regulation M
is an anti-manipulation rule that,
subject to certain exceptions, prohibits
any ‘‘distribution participant’’ and its
‘‘affiliated purchasers’’ from bidding for,
purchasing, or attempting to induce any
person to bid for or purchase any
security that is the subject of a
distribution until after the applicable
restricted period, except as specifically
permitted in the Rule. Rule 100 of
Regulation M defines ‘‘distribution’’ to
mean any offering of securities that is
distinguished from ordinary trading
transactions by the magnitude of the
offering and the presence of special
selling efforts and selling methods. The
provisions of Rule 101 of Regulation M
apply to underwriters, prospective
underwriters, brokers, dealers, or other
persons who have agreed to participate
or are participating in a distribution of
securities. The Shares are in a
continuous distribution, and, as such,
the restricted period in which
distribution participants and their
affiliated purchasers are prohibited from
bidding for, purchasing, or attempting to
induce others to bid for or purchase
extends indefinitely.
Based on the representations and the
facts presented in the Letter,
particularly that the Trust is a registered
open-end management investment
company that will continuously redeem
at the NAV Creation Unit size
aggregations of the Shares of the Fund
and that a close alignment between the
market price of Shares and the Fund’s
NAV is expected, the Commission finds
that it is appropriate in the public
interest, and consistent with the
protection of investors to grant the Trust
an exemption under paragraph (d) of
Rule 101 of Regulation M with respect
to the Fund, thus permitting persons
participating in a distribution of Shares
of the Fund to bid for or purchase such
Shares during their participation in
such distribution.5
Regulation M
While redeemable securities issued by
an open-end management investment
company are excepted from the
provisions of Rules 101 and 102 of
Regulation M, the Requestors may not
rely upon those exceptions for the
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Frm 00065
Fmt 4703
Sfmt 4703
4 While ETFs operate under exemptions from the
definitions of ‘‘open-end company’’ under Section
5(a)(1) of the 1940 Act and ‘‘redeemable security’’
under Section 2(a)(32) of the 1940 Act, the Fund
and its securities do not meet those definitions.
5 Additionally, we confirm the interpretation that
a redemption of Creation Unit size aggregations of
E:\FR\FM\16OCN1.SGM
Continued
16OCN1
62578
Federal Register / Vol. 80, No. 200 / Friday, October 16, 2015 / Notices
Rule 102 of Regulation M
Rule 102 of Regulation M prohibits
issuers, selling security holders, and any
affiliated purchaser of such person from
bidding for, purchasing, or attempting to
induce any person to bid for or purchase
a covered security during the applicable
restricted period in connection with a
distribution of securities effected by or
on behalf of an issuer or selling security
holder.
Based on the representations and the
facts presented in the Letter,
particularly that the Trust is a registered
open-end management investment
company that will redeem at the NAV
Creation Unit size aggregations of
Shares of the Fund and that a close
alignment between the market price of
Shares and the Fund’s NAV is expected,
the Commission finds that it is
appropriate in the public interest, and
consistent with the protection of
investors to grant the Trust an
exemption under paragraph (e) of Rule
102 of Regulation M with respect to the
Fund, thus permitting the Fund to
redeem Shares of the Fund during the
continuous offering of such Shares.
Rule 10b–17
Rule 10b–17, with certain exceptions,
requires an issuer of a class of publicly
traded securities to give notice of certain
specified actions (for example, a
dividend distribution) relating to such
class of securities in accordance with
Rule 10b–17(b). Based on the
representations and the facts presented
in the Letter, and subject to the
conditions below, the Commission finds
that it is appropriate in the public
interest, and consistent with the
protection of investors, to grant the
Trust a conditional exemption from
Rule 10b–17 because market
participants will receive timely
notification of the existence and timing
of a pending distribution, and thus the
concerns that the Commission raised in
adopting Rule 10b–17 will not be
implicated.6
srobinson on DSK5SPTVN1PROD with NOTICES
Conclusion
It is hereby ordered, pursuant to Rule
101(d) of Regulation M, that the Trust,
based on the representations and facts
Shares of the Fund and the receipt of securities in
exchange by a participant in a distribution of Shares
of the Fund would not constitute an ‘‘attempt to
induce any person to bid for or purchase[] a covered
security during the applicable restricted period’’
within the meaning of Rule 101 of Regulation M
and therefore would not violate that rule.
6 We also note that timely compliance with Rule
10b–17(b)(1)(v)(a) and (b) would be impractical in
light of the Fund’s nature because it is not possible
for the Fund to accurately project ten days in
advance what dividend, if any, would be paid on
a particular record date.
VerDate Sep<11>2014
18:54 Oct 15, 2015
Jkt 238001
presented in the Letter, is exempt from
the requirements of Rule 101 with
respect to the Fund, thus permitting
persons who may be deemed to be
participating in a distribution of Shares
of the Fund to bid for or purchase such
Shares during their participation in
such distribution.
It is further ordered, pursuant to Rule
102(e) of Regulation M, that the Trust,
based on the representations and the
facts presented in the Letter, is exempt
from the requirements of Rule 102 with
respect to the Fund, thus permitting the
Fund to redeem Shares of the Fund
during the continuous offering of such
Shares.
It is further ordered, pursuant to Rule
10b–17(b)(2), that the Trust, based on
the representations and the facts
presented in the Letter and subject to
the conditions below, is exempt from
the requirements of Rule 10b–17 with
respect to the transactions in the Shares
of the Fund.
This exemptive relief is subject to the
following conditions:
• The Trust will comply with Rule
10b–17, except for Rule 10b–
17(b)(1)(v)(a) and (b); and
• The Trust will provide the
information required by Rule 10b–
17(b)(1)(v)(a) and (b) to the Exchange as
soon as practicable before trading begins
on the ex-dividend date, but in no event
later than the time when the Exchange
last accepts information relating to
distributions on the day before the exdividend date.
This exemptive relief is subject to
modification or revocation at any time
the Commission determines that such
action is necessary or appropriate in
furtherance of the purposes of the
Exchange Act. This exemption is based
on the facts presented and the
representations made in the Letter. Any
different facts or representations may
require a different response. Persons
relying upon this exemptive relief shall
discontinue transactions involving the
Shares of the Fund, pending
presentation of the facts for the
Commission’s consideration, in the
event that any material change occurs
with respect to any of the facts or
representations made by the Requestors,
and as is the case with all preceding
letters, particularly with respect to the
close alignment between the market
price of Shares and the Fund’s NAV. In
addition, persons relying on this
exemption are directed to the anti-fraud
and anti-manipulation provisions of the
Exchange Act, particularly Sections 9(a),
10(b), and Rule 10b–5 thereunder.
Responsibility for compliance with
these and any other applicable
provisions of the federal securities laws
PO 00000
Frm 00066
Fmt 4703
Sfmt 4703
must rest with the persons relying on
this exemption. This Order should not
be considered a view with respect to
any other question that the proposed
transactions may raise, including, but
not limited to, the adequacy of the
disclosure concerning, and the
applicability of other federal or state
laws to, the proposed transactions.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–26329 Filed 10–15–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76121; File No. SR–FINRA–
2015–037]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Extend the TRACE
Pilot Program in FINRA Rule 6730(e)(4)
October 9, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 28, 2015, Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by FINRA. FINRA
has designated the proposed rule change
as constituting a ‘‘non-controversial’’
rule change under paragraph (f)(6) of
Rule 19b–4 under the Act,3 which
renders the proposal effective upon
receipt of this filing by the Commission.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
FINRA is proposing to extend the
pilot program in FINRA Rule 6730(e)(4)
to October 27, 2017. The pilot program
exempts from TRACE reporting
transactions in TRACE-Eligible
Securities that are executed on a facility
of the New York Stock Exchange
7 17
CFR 200.30–3(a)(6) and (9).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 17 CFR 240.19b–4(f)(6).
1 15
E:\FR\FM\16OCN1.SGM
16OCN1
]]>Agencies
[Federal Register Volume 80, Number 200 (Friday, October 16, 2015)]
[Notices]
[Pages 62576-62578]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26329]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76117; File No. TP 15-19]
Order Granting Limited Exemptions From Exchange Act Rule 10b-17
and Rules 101 and 102 of Regulation M to PowerShares DWA Tactical
Sector Rotation Portfolio Pursuant to Exchange Act Rule 10b-17(b)(2)
and Rules 101(d) and 102(e) of Regulation M
October 8, 2015.
By letter dated October 8, 2015 (the ``Letter''), as supplemented
by conversations with the staff of the Division of Trading and Markets,
counsel for PowerShares Exchange-Traded Fund Trust II (the ``Trust''),
on behalf of the Trust, PowerShares DWA Tactical Sector Rotation
Portfolio (the ``Fund''), any national securities exchange on or
through which shares issued by the Fund (``Shares'') may subsequently
trade, Invesco Distributors, Inc. (the ``Distributor''), and persons or
entities engaging in transactions in Shares (collectively, the
``Requestors''), requested exemptions, or interpretive or no-action
relief, from Rule 10b-17 of the Securities Exchange Act of 1934, as
amended (``Exchange Act''), and Rules 101 and 102 of Regulation M, in
connection with secondary market transactions in Shares and the
creation or redemption of aggregations of Shares of at least 50,000
shares (``Creation Units'').
The Trust is registered with the Securities and Exchange Commission
(``Commission'') under the Investment Company Act of 1940, as amended
(``1940 Act''), as an open-end management investment company. The Fund
seeks to track the performance of the underlying index, the Dorsey
Wright[supreg] Sector 4 Index (the ``Index'').
[[Page 62577]]
The Fund intends to operate as an ``ETF of ETFs'' by seeking to track
the performance of its underlying Index through, under normal
circumstances, investing at least 90% of its total assets in the ETFs
that comprise the Index, and may include U.S. Treasury Bills.\1\ Except
for the fact that the Fund will operate as an ETF of ETFs, the Fund
will operate in a manner identical to the ETFs that are included in the
Index.
---------------------------------------------------------------------------
\1\ At any point, the Index comprises up to four PowerShares
ETFs from a set of nine eligible PowerShares ETFs. During market
periods when fewer than four eligible PowerShares ETFs demonstrate
sufficient relative strength, however, the Index may hold up to a
100% cash position, represented by U.S. Treasury Bills with a
duration ranging from 0-180 days, in an amount equal to the weight
of the PowerShares ETFs that would otherwise be included in the
Index.
---------------------------------------------------------------------------
The Requestors represent, among other things, the following:
Shares of the Fund will be issued by the Trust, an open-
end management investment company that is registered with the
Commission;
The Trust will continuously redeem Creation Units at net
asset value (``NAV''), and the secondary market price of the Shares
should not vary substantially from the NAV of such Shares;
Shares of the Fund will be listed and traded on the NASDAQ
Stock Market LLC or another exchange in accordance with exchange
listing standards that are, or will become, effective pursuant to
Section 19(b) of the Exchange Act (the ``Exchange''); \2\
---------------------------------------------------------------------------
\2\ Further, the Letter states that should the Shares also trade
on a market pursuant to unlisted trading privileges, such trading
will be conducted pursuant to self-regulatory organization rules
that have become effective pursuant to Section 19(b) of the Exchange
Act.
---------------------------------------------------------------------------
All ETFs in which the Fund is invested will meet all
conditions set forth in a relevant class relief letter,\3\ will have
received individual relief from the Commission, or will be able to rely
upon individual relief even though they are not named parties (for
example, a no-action letter);
---------------------------------------------------------------------------
\3\ Exchange Act Rel. No. 67215 (June 19, 2012); 77 FR 37941
(June 25, 2012); Letter from Catherine McGuire, Esq., Chief Counsel,
Division of Market Regulation, to the Securities Industry
Association Derivative Products Committee (November 21, 2005);
Letter from Racquel L. Russell, Branch Chief, Division of Market
Regulation, to George T. Simon, Esq., Foley & Lardner LLP (June 21,
2006); Letter from James A. Brigagliano, Acting Associate Director,
Division of Market Regulation, to Stuart M. Strauss, Esq., Clifford
Chance US LLP (October 24, 2006); Letter from James A. Brigagliano,
Associate Director, Division of Market Regulation, to Benjamin
Haskin, Esq., Willkie Farr & Gallagher LLP (April 9, 2007); Letter
from Josephine Tao, Assistant Director, Division of Trading and
Markets, to Domenick Pugliese, Esq., Paul, Hastings, Janofsky &
Walker LLP (June 27, 2007); see also Staff Legal Bulletin No. 9,
``Frequently Asked Questions About Regulation M'' (April 12, 2002)
(regarding actively-managed ETFs).
---------------------------------------------------------------------------
At least 70% of the Fund is comprised of component
securities that will meet the minimum public float and minimum average
daily trading volume thresholds under the ``actively-traded
securities'' definition found in Regulation M for excepted securities
during each of the previous two months of trading prior to formation of
the Fund;
All the components of the Index will have publicly
available last sale trade information;
The intra-day proxy value of the Fund per share and the
value of the Index will be publicly disseminated by a major market data
vendor throughout the trading day;
On each business day before the opening of business on the
Exchange, the Fund's custodian, through the National Securities
Clearing Corporation, will make available the list of the names and the
numbers of securities and other assets of the Fund's portfolio that
will be applicable that day to creation and redemption requests;
The Exchange or other market information provider will
disseminate (i) continuously every 15 seconds throughout the trading
day, through the facilities of the consolidated tape, the market value
of a Share, and (ii) every 15 seconds throughout the trading day, a
calculation of the intra-day indicative value of a Share;
The arbitrage mechanism will be facilitated by the
transparency of the Fund's portfolio and the availability of the intra-
day indicative value, the liquidity of securities held by the Fund, and
the ability to acquire such securities, as well as the arbitrageurs'
ability to create workable hedges;
The Fund will invest solely in liquid securities;
The Fund will invest in securities that will facilitate an
effective and efficient arbitrage mechanism and the ability to create
workable hedges;
The Trust believes that arbitrageurs are expected to take
advantage of price variations between the Fund's market price and its
NAV; and
A close alignment between the market price of Shares and
the Fund's NAV is expected.
Regulation M
While redeemable securities issued by an open-end management
investment company are excepted from the provisions of Rules 101 and
102 of Regulation M, the Requestors may not rely upon those exceptions
for the Shares.\4\ However, we find that it is appropriate in the
public interest and is consistent with the protection of investors to
grant a conditional exemption from Rules 101 and 102 to persons who may
be deemed to be participating in a distribution of Shares of the Fund
as described in more detail below.
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\4\ While ETFs operate under exemptions from the definitions of
``open-end company'' under Section 5(a)(1) of the 1940 Act and
``redeemable security'' under Section 2(a)(32) of the 1940 Act, the
Fund and its securities do not meet those definitions.
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Rule 101 of Regulation M
Generally, Rule 101 of Regulation M is an anti-manipulation rule
that, subject to certain exceptions, prohibits any ``distribution
participant'' and its ``affiliated purchasers'' from bidding for,
purchasing, or attempting to induce any person to bid for or purchase
any security that is the subject of a distribution until after the
applicable restricted period, except as specifically permitted in the
Rule. Rule 100 of Regulation M defines ``distribution'' to mean any
offering of securities that is distinguished from ordinary trading
transactions by the magnitude of the offering and the presence of
special selling efforts and selling methods. The provisions of Rule 101
of Regulation M apply to underwriters, prospective underwriters,
brokers, dealers, or other persons who have agreed to participate or
are participating in a distribution of securities. The Shares are in a
continuous distribution, and, as such, the restricted period in which
distribution participants and their affiliated purchasers are
prohibited from bidding for, purchasing, or attempting to induce others
to bid for or purchase extends indefinitely.
Based on the representations and the facts presented in the Letter,
particularly that the Trust is a registered open-end management
investment company that will continuously redeem at the NAV Creation
Unit size aggregations of the Shares of the Fund and that a close
alignment between the market price of Shares and the Fund's NAV is
expected, the Commission finds that it is appropriate in the public
interest, and consistent with the protection of investors to grant the
Trust an exemption under paragraph (d) of Rule 101 of Regulation M with
respect to the Fund, thus permitting persons participating in a
distribution of Shares of the Fund to bid for or purchase such Shares
during their participation in such distribution.\5\
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\5\ Additionally, we confirm the interpretation that a
redemption of Creation Unit size aggregations of Shares of the Fund
and the receipt of securities in exchange by a participant in a
distribution of Shares of the Fund would not constitute an ``attempt
to induce any person to bid for or purchase[] a covered security
during the applicable restricted period'' within the meaning of Rule
101 of Regulation M and therefore would not violate that rule.
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[[Page 62578]]
Rule 102 of Regulation M
Rule 102 of Regulation M prohibits issuers, selling security
holders, and any affiliated purchaser of such person from bidding for,
purchasing, or attempting to induce any person to bid for or purchase a
covered security during the applicable restricted period in connection
with a distribution of securities effected by or on behalf of an issuer
or selling security holder.
Based on the representations and the facts presented in the Letter,
particularly that the Trust is a registered open-end management
investment company that will redeem at the NAV Creation Unit size
aggregations of Shares of the Fund and that a close alignment between
the market price of Shares and the Fund's NAV is expected, the
Commission finds that it is appropriate in the public interest, and
consistent with the protection of investors to grant the Trust an
exemption under paragraph (e) of Rule 102 of Regulation M with respect
to the Fund, thus permitting the Fund to redeem Shares of the Fund
during the continuous offering of such Shares.
Rule 10b-17
Rule 10b-17, with certain exceptions, requires an issuer of a class
of publicly traded securities to give notice of certain specified
actions (for example, a dividend distribution) relating to such class
of securities in accordance with Rule 10b-17(b). Based on the
representations and the facts presented in the Letter, and subject to
the conditions below, the Commission finds that it is appropriate in
the public interest, and consistent with the protection of investors,
to grant the Trust a conditional exemption from Rule 10b-17 because
market participants will receive timely notification of the existence
and timing of a pending distribution, and thus the concerns that the
Commission raised in adopting Rule 10b-17 will not be implicated.\6\
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\6\ We also note that timely compliance with Rule 10b-
17(b)(1)(v)(a) and (b) would be impractical in light of the Fund's
nature because it is not possible for the Fund to accurately project
ten days in advance what dividend, if any, would be paid on a
particular record date.
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Conclusion
It is hereby ordered, pursuant to Rule 101(d) of Regulation M, that
the Trust, based on the representations and facts presented in the
Letter, is exempt from the requirements of Rule 101 with respect to the
Fund, thus permitting persons who may be deemed to be participating in
a distribution of Shares of the Fund to bid for or purchase such Shares
during their participation in such distribution.
It is further ordered, pursuant to Rule 102(e) of Regulation M,
that the Trust, based on the representations and the facts presented in
the Letter, is exempt from the requirements of Rule 102 with respect to
the Fund, thus permitting the Fund to redeem Shares of the Fund during
the continuous offering of such Shares.
It is further ordered, pursuant to Rule 10b-17(b)(2), that the
Trust, based on the representations and the facts presented in the
Letter and subject to the conditions below, is exempt from the
requirements of Rule 10b-17 with respect to the transactions in the
Shares of the Fund.
This exemptive relief is subject to the following conditions:
The Trust will comply with Rule 10b-17, except for Rule
10b-17(b)(1)(v)(a) and (b); and
The Trust will provide the information required by Rule
10b-17(b)(1)(v)(a) and (b) to the Exchange as soon as practicable
before trading begins on the ex-dividend date, but in no event later
than the time when the Exchange last accepts information relating to
distributions on the day before the ex-dividend date.
This exemptive relief is subject to modification or revocation at
any time the Commission determines that such action is necessary or
appropriate in furtherance of the purposes of the Exchange Act. This
exemption is based on the facts presented and the representations made
in the Letter. Any different facts or representations may require a
different response. Persons relying upon this exemptive relief shall
discontinue transactions involving the Shares of the Fund, pending
presentation of the facts for the Commission's consideration, in the
event that any material change occurs with respect to any of the facts
or representations made by the Requestors, and as is the case with all
preceding letters, particularly with respect to the close alignment
between the market price of Shares and the Fund's NAV. In addition,
persons relying on this exemption are directed to the anti-fraud and
anti-manipulation provisions of the Exchange Act, particularly Sections
9(a), 10(b), and Rule 10b-5 thereunder. Responsibility for compliance
with these and any other applicable provisions of the federal
securities laws must rest with the persons relying on this exemption.
This Order should not be considered a view with respect to any other
question that the proposed transactions may raise, including, but not
limited to, the adequacy of the disclosure concerning, and the
applicability of other federal or state laws to, the proposed
transactions.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(6) and (9).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26329 Filed 10-15-15; 8:45 am]
BILLING CODE 8011-01-P
