Order Granting Limited Exemptions From Exchange Act Rule 10b-17 and Rules 101 and 102 of Regulation M to WisdomTree Put Write Strategy Fund Pursuant to Exchange Act Rule 10b-17(b)(2) and Rules 101(d) and 102(e) of Regulation M, 9231-9233 [2016-03792]
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<![CDATA[
Federal Register / Vol. 81, No. 36 / Wednesday, February 24, 2016 / Notices
copy of the Governors’ Decision
authorizing the product, proposed
changes to the Mail Classification
Schedule, a Statement of Supporting
Justification, a certification of
compliance with 39 U.S.C. 3633(a), and
an application for non-public treatment
of certain materials. It also filed
supporting financial workpapers.
II. Notice of Commission Action
The Commission establishes Docket
Nos. MC2016–81 and CP2016–106 to
consider the Request pertaining to the
proposed First-Class Package Service
Contract 43 product and the related
contract, respectively.
The Commission invites comments on
whether the Postal Service’s filings in
the captioned dockets are consistent
with the policies of 39 U.S.C. 3632,
3633, or 3642, 39 CFR part 3015, and 39
CFR part 3020, subpart B. Comments are
due no later than February 26, 2016.
The public portions of these filings can
be accessed via the Commission’s Web
site (https://www.prc.gov).
The Commission appoints Kenneth R.
Moeller to serve as Public
Representative in these dockets.
III. Ordering Paragraphs
It is ordered:
1. The Commission establishes Docket
Nos. MC2016–81 and CP2016–106 to
consider the matters raised in each
docket.
2. Pursuant to 39 U.S.C. 505, Kenneth
R. Moeller is appointed to serve as an
officer of the Commission to represent
the interests of the general public in
these proceedings (Public
Representative).
3. Comments are due no later than
February 26, 2016.
4. The Secretary shall arrange for
publication of this order in the Federal
Register.
By the Commission.
Stacy L. Ruble,
Secretary.
[FR Doc. 2016–03889 Filed 2–23–16; 8:45 am]
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BILLING CODE 7710–FW–P
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77173; File No. TP 15–15]
Order Granting Limited Exemptions
From Exchange Act Rule 10b–17 and
Rules 101 and 102 of Regulation M to
WisdomTree Put Write Strategy Fund
Pursuant to Exchange Act Rule 10b–
17(b)(2) and Rules 101(d) and 102(e) of
Regulation M
February 18, 2016.
By letter dated February 18, 2016 (the
‘‘Letter’’), as supplemented by
conversations with the staff of the
Division of Trading and Markets,
counsel for WisdomTree Trust (the
‘‘Trust’’) on behalf of the Trust,
WisdomTree Put Write Strategy Fund
(the ‘‘Fund’’), any national securities
exchange on or through which shares
issued by the Fund (‘‘Shares’’) may
subsequently trade, 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 50,000 shares (‘‘Creation Units’’).
The Trust is registered with the
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
an underlying index, the CBOE S&P 500
Put Write Index (‘‘Index’’). The Index is
based on a passive investment strategy
which consists of overlapping
hypothetical investments in a single
series of exchange-listed S&P 500 Index
options (‘‘SPX Puts’’) over a money
market account hypothetically invested
in one and three-month Treasury bills.
Specifically, the Index hypothetically
writes at-the-money SPX Puts on a
monthly basis, usually on the third
Friday of the month (i.e., the ‘‘Roll
Date’’), which match the expiration date
of the hypothetical SPX Puts. All SPX
Puts hypothetically invested in by the
Index are standardized options traded
on the Chicago Board Options
Exchange. At each Roll Date, any
settlement loss in the Index based on
the expiring SPX Puts is financed by the
Treasury bill account and a new batch
of hypothetical at-the-money SPX Puts
is sold. Revenue from their sale is added
to the Index’s hypothetical Treasury bill
account. On each Roll Date in March,
June, September, and December
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9231
(‘‘March quarterly cycle months’’), the
proceeds from the hypothetical sales of
the SPX Puts are invested in
hypothetical three-month Treasury bills.
On each Roll Date in a March quarterly
cycle month, the three month Treasury
bills hypothetically purchased in the
prior March quarterly cycle month, and
any one-month Treasury bills
hypothetically purchased in the prior
month are deemed to mature, and the
proceeds are hypothetically invested in
new three-month Treasury bills at the
three-month Treasury bill rate. In other
months, the revenue from the
hypothetical sale of SPX Puts is
hypothetically invested separately at the
one-month Treasury bill rate, and where
applicable, any one-month Treasury
bills purchased in the prior month are
deemed to mature and hypothetically
invested in new one-month Treasury
bills at the one-month Treasury bill rate.
As stated above, all investments used to
determine Index value are hypothetical.
In order to track the Index, under
normal circumstances, as described in
the Letter, the Fund will invest not less
than 80% of its assets in SPX Puts and
one and three month U.S. Treasury bills.
The Fund may invest up to 20% of its
net assets (in the aggregate) in other
investments, as described in the Letter,
that are not included in the Index, but
which WisdomTree Asset Management,
Inc. (‘‘Adviser’’) or Mellon Capital
Management (‘‘Sub-Adviser’’) believes
will help the Fund to track the Index
and that will be disclosed at the end of
each trading day (‘‘Other Assets’).1 The
Fund’s investment strategy will be
designed to write a sequence of onemonth, at-the-money, SPX Puts and
invest cash and Other Assets targeted to
achieve one- and three-month Treasury
bill rates. The number of SPX Puts
written will vary from month to month,
but will be limited to permit the amount
held in the Fund’s investment in
Treasury bills to finance the maximum
possible loss from final settlement of the
SPX Puts.
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;
• Creation Units will be continuously
redeemable at the net asset value
(‘‘NAV’’) next determined after receipt
1 For example, the Requestors represent that there
may be instances in which the Adviser or SubAdviser may choose to purchase or sell financial
instruments not in the Index which the Adviser or
Sub-Adviser believes are appropriate to substitute
for one or more Index components in seeking to
replicate, before fees and expenses, the performance
of the Index.
E:\FR\FM\24FEN1.SGM
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Federal Register / Vol. 81, No. 36 / Wednesday, February 24, 2016 / Notices
of a request for redemptions by the
Fund 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 an Exchange;
• The Fund seeks to replicate the
performance of the Index, all the
components of which have publicly
available last sale trade information;
• The intra-day indicative value of
the Fund per share and the intra-day
value of the Index will be publicly
disseminated every 15 seconds
throughout the trading day through the
facilities of the Consolidated Tape
Association;
• On each business day before
commencement of trading in Shares on
the Exchange, the Fund will disclose on
its Web site the identities and quantities
of the Fund’s options positions as well
as Other Assets held by the Fund that
will form the basis for the calculation of
the Fund’s NAV at the end of the
business day;
• The Exchange or other market
information provider will disseminate
every 15 seconds throughout the trading
day through the facilities of the
Consolidated Tape Association an
amount representing on a per-share
basis, the current value of the cash to be
deposited as consideration for the
purchase of Creation Units;
• 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 and Other Assets
held by the Fund, the ability to access
the options sold by the Fund, as well as
arbitrageurs’ ability to create workable
hedges;
• The Fund will invest solely in
liquid securities;
• The options sold by the Fund will
facilitate an effective and efficient
arbitrage mechanism and the ability to
create workable hedges;
• The Requestors expect arbitrageurs
to be able 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.
mstockstill on DSK4VPTVN1PROD with NOTICES
Regulation M
While redeemable securities issued by
an open-end management investment
company are excepted from the
provisions of Rule 101 and 102 of
Regulation M, the Requestors may not
rely upon that exception for the Shares.2
2 While ETFs operate under exemptions from the
definitions of ‘‘open-end company’’ under Section
5(a)(1) of the 1940 Act and ‘‘redeemable security’’
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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 which 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 facts
presented in the Letter, particularly that
the Trust is a registered open-end
management investment company, that
Creation Unit size aggregations of the
Shares of the Fund will be continuously
redeemable at the NAV next determined
after receipt of a request for redemption
by 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.3
under Section 2(a)(32) of the 1940 Act, the Fund
and its securities do not meet those definitions.
3 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
PO 00000
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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 facts
presented in the Letter, particularly that
the Trust is a registered open-end
management investment company, that
Creation Unit size aggregations of the
Shares of the Fund will be continuously
redeemable at the NAV next determined
after receipt of a request for redemption
by 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 facts in the Letter,
and subject to the conditions below, we
find 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.4
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
security during the applicable restricted period’’
within the meaning of Rule 101 of Regulation M
and therefore would not violate that rule.
4 We also note that timely compliance with Rule
10b–17(b)(1)(v)(a) and (b) would be impractical in
light of the nature of the Fund. This is 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.
E:\FR\FM\24FEN1.SGM
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Federal Register / Vol. 81, No. 36 / Wednesday, February 24, 2016 / Notices
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 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. 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, consistent 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) and 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,
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17:59 Feb 23, 2016
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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.5
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–03792 Filed 2–23–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77174; File No. SR–
NYSEMKT–2016–22]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending Rule
341A(a)(4) To Provide for Web-Based
Delivery of the Exchange’s Continuing
Education Program
February 18, 2016.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on February
4, 2016, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
the Securities and Exchange
Commission (the ‘‘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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 341A(a)(4) to provide for webbased delivery of the Exchange’s
continuing education (‘‘CE’’) program.
The proposed rule change would phase
out the current option of completing the
Regulatory Element in a test center,
delete the current option for in-house
delivery of the Regulatory Element of
the CE program and also delete the
existing text of Rule 341A(a)(4). The
Exchange’s proposal is materially
similar to a recent FINRA filing to
amend FINRA Rule 1250, which was
recently approved by the Securities and
Exchange Commission
(‘‘Commission’’).4 The proposed rule
5 17
CFR 200.30–3(a)(6) and (9).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 See Securities Exchange Act Release No. 75581
(July 31, 2015), 80 FR 47018 (August 6, 2015)
(Order Approving a Proposed Rule Change to
1 15
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9233
change is available on the Exchange’s
Web site 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 CE requirements under Rule
341A consist of a Regulatory Element 5
and a Firm Element.6 The Regulatory
Element applies to all registered persons
and consists of periodic computer-based
training on regulatory, compliance,
ethical, and supervisory subjects and
sales practice standards, which must be
completed within prescribed
timeframes.7 In addition, unless
otherwise determined by the Exchange,
a registered person is required to re-take
the Regulatory Element of the program
and satisfy the program’s requirements
in their entirety in the event such
person: (i) Becomes subject to any
statutory disqualification as defined in
Section 3(a)(39) of the Securities
Exchange Act of 1934; (ii) becomes
subject to suspension or to the
imposition of a fine of $5,000 or more
Provide a Web-based Delivery Method for
Completing the Regulatory Element of the
Continuing Education Requirements) (SR–FINRA–
2015–015). See also Securities Exchange Act
Release No. 76880 (January 12, 2016), 81 FR 2928
(January 19, 2016) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Amend
Section (a)(4) of Rule 640, Continuing Education for
Registered Persons) (SR–PHLX–2015–118).
5 See Rule 341A(a) (Regulatory Element).
6 See Rule 341A(b) (Firm Element).
7 Pursuant to Rule 341A, each registered person
shall complete the Regulatory Element of the
continuing education program on the occurrence of
their second registration anniversary date(s), and
every three years thereafter or as otherwise
prescribed by the Exchange. On each occasion, the
Regulatory Element must be completed within 120
days after the person’s registration anniversary date.
A person’s initial registration date, also known as
the ‘‘base date,’’ shall establish the cycle of
anniversary dates for purposes of this Rule.
E:\FR\FM\24FEN1.SGM
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]]>Agencies
[Federal Register Volume 81, Number 36 (Wednesday, February 24, 2016)]
[Notices]
[Pages 9231-9233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-03792]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77173; File No. TP 15-15]
Order Granting Limited Exemptions From Exchange Act Rule 10b-17
and Rules 101 and 102 of Regulation M to WisdomTree Put Write Strategy
Fund Pursuant to Exchange Act Rule 10b-17(b)(2) and Rules 101(d) and
102(e) of Regulation M
February 18, 2016.
By letter dated February 18, 2016 (the ``Letter''), as supplemented
by conversations with the staff of the Division of Trading and Markets,
counsel for WisdomTree Trust (the ``Trust'') on behalf of the Trust,
WisdomTree Put Write Strategy Fund (the ``Fund''), any national
securities exchange on or through which shares issued by the Fund
(``Shares'') may subsequently trade, 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 50,000 shares (``Creation Units'').
The Trust is registered with the 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 an underlying index, the CBOE S&P 500 Put Write Index (``Index'').
The Index is based on a passive investment strategy which consists of
overlapping hypothetical investments in a single series of exchange-
listed S&P 500 Index options (``SPX Puts'') over a money market account
hypothetically invested in one and three-month Treasury bills.
Specifically, the Index hypothetically writes at-the-money SPX Puts on
a monthly basis, usually on the third Friday of the month (i.e., the
``Roll Date''), which match the expiration date of the hypothetical SPX
Puts. All SPX Puts hypothetically invested in by the Index are
standardized options traded on the Chicago Board Options Exchange. At
each Roll Date, any settlement loss in the Index based on the expiring
SPX Puts is financed by the Treasury bill account and a new batch of
hypothetical at-the-money SPX Puts is sold. Revenue from their sale is
added to the Index's hypothetical Treasury bill account. On each Roll
Date in March, June, September, and December (``March quarterly cycle
months''), the proceeds from the hypothetical sales of the SPX Puts are
invested in hypothetical three-month Treasury bills. On each Roll Date
in a March quarterly cycle month, the three month Treasury bills
hypothetically purchased in the prior March quarterly cycle month, and
any one-month Treasury bills hypothetically purchased in the prior
month are deemed to mature, and the proceeds are hypothetically
invested in new three-month Treasury bills at the three-month Treasury
bill rate. In other months, the revenue from the hypothetical sale of
SPX Puts is hypothetically invested separately at the one-month
Treasury bill rate, and where applicable, any one-month Treasury bills
purchased in the prior month are deemed to mature and hypothetically
invested in new one-month Treasury bills at the one-month Treasury bill
rate. As stated above, all investments used to determine Index value
are hypothetical.
In order to track the Index, under normal circumstances, as
described in the Letter, the Fund will invest not less than 80% of its
assets in SPX Puts and one and three month U.S. Treasury bills. The
Fund may invest up to 20% of its net assets (in the aggregate) in other
investments, as described in the Letter, that are not included in the
Index, but which WisdomTree Asset Management, Inc. (``Adviser'') or
Mellon Capital Management (``Sub-Adviser'') believes will help the Fund
to track the Index and that will be disclosed at the end of each
trading day (``Other Assets').\1\ The Fund's investment strategy will
be designed to write a sequence of one-month, at-the-money, SPX Puts
and invest cash and Other Assets targeted to achieve one- and three-
month Treasury bill rates. The number of SPX Puts written will vary
from month to month, but will be limited to permit the amount held in
the Fund's investment in Treasury bills to finance the maximum possible
loss from final settlement of the SPX Puts.
---------------------------------------------------------------------------
\1\ For example, the Requestors represent that there may be
instances in which the Adviser or Sub-Adviser may choose to purchase
or sell financial instruments not in the Index which the Adviser or
Sub-Adviser believes are appropriate to substitute for one or more
Index components in seeking to replicate, before fees and expenses,
the performance of 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;
Creation Units will be continuously redeemable at the net
asset value (``NAV'') next determined after receipt
[[Page 9232]]
of a request for redemptions by the Fund 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 an
Exchange;
The Fund seeks to replicate the performance of the Index,
all the components of which have publicly available last sale trade
information;
The intra-day indicative value of the Fund per share and
the intra-day value of the Index will be publicly disseminated every 15
seconds throughout the trading day through the facilities of the
Consolidated Tape Association;
On each business day before commencement of trading in
Shares on the Exchange, the Fund will disclose on its Web site the
identities and quantities of the Fund's options positions as well as
Other Assets held by the Fund that will form the basis for the
calculation of the Fund's NAV at the end of the business day;
The Exchange or other market information provider will
disseminate every 15 seconds throughout the trading day through the
facilities of the Consolidated Tape Association an amount representing
on a per-share basis, the current value of the cash to be deposited as
consideration for the purchase of Creation Units;
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 and Other Assets held
by the Fund, the ability to access the options sold by the Fund, as
well as arbitrageurs' ability to create workable hedges;
The Fund will invest solely in liquid securities;
The options sold by the Fund will facilitate an effective
and efficient arbitrage mechanism and the ability to create workable
hedges;
The Requestors expect arbitrageurs to be able 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 Rule 101 and 102
of Regulation M, the Requestors may not rely upon that exception for
the Shares.\2\ 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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\2\ 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 which 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 facts presented in the Letter,
particularly that the Trust is a registered open-end management
investment company, that Creation Unit size aggregations of the Shares
of the Fund will be continuously redeemable at the NAV next determined
after receipt of a request for redemption by 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.\3\
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\3\ 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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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 facts presented in the Letter,
particularly that the Trust is a registered open-end management
investment company, that Creation Unit size aggregations of the Shares
of the Fund will be continuously redeemable at the NAV next determined
after receipt of a request for redemption by 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 facts in the Letter, and subject to the conditions
below, we find 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.\4\
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\4\ We also note that timely compliance with Rule 10b-
17(b)(1)(v)(a) and (b) would be impractical in light of the nature
of the Fund. This is 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
[[Page 9233]]
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 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. 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, consistent 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) and 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.
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\5\ 17 CFR 200.30-3(a)(6) and (9).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\5\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-03792 Filed 2-23-16; 8:45 am]
BILLING CODE 8011-01-P
