Order Granting Limited Exemptions From Exchange Act Rule 10b-17 and Rules 101 and 102 of Regulation M to First Trust Dorsey Wright Dynamic Focus 5 ETF Pursuant to Exchange Act Rule 10b-17(b)(2) and Rules 101(d) and 102(e) of Regulation M, 15382-15384 [2016-06340]

Download as PDF 15382 Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices Exchange Act,28 because the proposed rule change would be consistent with and facilitate a governance and regulatory structure that is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, 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. As discussed above, the Exchange believes that by expanding the ability of stockholders to nominate directors that could constitute a significant percent (20%) of the number of directors currently serving on the ICE Board, the proposed rule change would ensure better corporate governance and accountability to stockholders, thereby protecting investors and the public interest. 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 Exchange Act. The proposed rule change is not designed to address any competitive issue in the U.S. or European securities markets or have any impact on competition in those markets; rather, adoption of a proxy access bylaw by ICE is intended to enhance corporate governance and accountability to stockholders. asabaliauskas on DSK3SPTVN1PROD with NOTICES 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 28 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 17:34 Mar 21, 2016 Jkt 238001 (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 Robert W. Errett, Deputy Secretary. 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: [FR Doc. 2016–06363 Filed 3–21–16; 8:45 am] Electronic Comments Order Granting Limited Exemptions From Exchange Act Rule 10b–17 and Rules 101 and 102 of Regulation M to First Trust Dorsey Wright Dynamic Focus 5 ETF Pursuant to Exchange Act Rule 10b–17(b)(2) and Rules 101(d) and 102(e) of Regulation M • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEARCA–2016–25 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–2016–25. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the 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; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEARCA–2016–25 and should be submitted on or before April 12, 2016. PO 00000 Frm 00163 Fmt 4703 Sfmt 4703 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77380; File No. TP 16–5] March 16, 2016. By letter dated March 16, 2016 (the ‘‘Letter’’), as supplemented by conversations with the staff of the Division of Trading and Markets, counsel for First Trust Exchange-Traded Fund VI (the ‘‘Trust’’) on behalf of the Trust, First Trust Dorsey Wright Dynamic Focus 5 ETF (the ‘‘Fund’’), any national securities exchange on or through which shares of the Fund (‘‘Shares’’) are listed and/or 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 Dorsey Wright Dynamic Focus Five Index (‘‘Underlying Index’’). The Underlying Index is designed to provide targeted exposure to the five First Trust sector-based and industry-based ETFs that the index provider determines offer the greatest potential to outperform the other First Trust sector-based and industry-based ETFs. The Underlying Index is also designed to decrease overall equity exposure when the cash equivalents 1 29 17 CFR 200.30–3(a)(12). cash equivalents in which the Fund may invest are 1- to 3-month U.S. Treasury Bills representing the component securities of an index (the Nasdaq US T-Bill Index (the ‘‘Cash Index’’)) that is a component of the Underlying Index. 1 The E:\FR\FM\22MRN1.SGM 22MRN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices gain strength. The allocation of the Cash Index is evaluated and adjusted periodically. The Cash Index may constitute between 0% and 95% of the weight of the Underlying Index. The Fund will seek to track the performance of its Underlying Index by normally investing at least 80% of its total assets in the underlying exchangetraded funds and the cash equivalents that comprise the Underlying Index. In light of the composition of the Underlying Index, the Fund intends to operate as an ‘‘ETF of ETFs.’’ Except for the fact that the Fund will operate as an ETF of ETFs, the Fund will operate in a manner identical to the underlying ETFs. 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 of a request for redemption 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 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 ‘‘Listing Exchange’’); 2 • The Fund seeks to track the performance of the Underlying Index, all the components of which have publicly available last sale trade information; • The Listing Exchange will disseminate continuously every 15 seconds throughout the trading day, through the facilities of the Consolidated Tape Association, the market value of a Share; • The Listing Exchange, market data vendors or other information providers will disseminate, every 15 seconds throughout the trading day, a calculation of the intraday indicative value of a Share; • On each business day before the opening of business on the Listing Exchange, the Fund will cause to be published through the National Securities Clearing Corporation the list of the names and the quantities of securities of the Fund’s portfolio that 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. VerDate Sep<11>2014 17:34 Mar 21, 2016 Jkt 238001 will be applicable that day to creation and redemption requests; • The arbitrage mechanism will be facilitated by the transparency of the Fund’s portfolio and the availability of the intraday indicative value, the liquidity of securities held by the Fund, the ability to acquire such securities, as well as 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; • All ETFs in which the Fund invests will either meet all conditions set forth in one or more class relief letters,3 will have received individual relief from the Commission, will be able to rely on individual relief even though they are not named parties, or will be able to rely on applicable class relief for activelymanaged ETFs; 4 • 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 Rule 101 and 102 of Regulation M, the Requestors may not rely upon that exception for the Shares.5 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 3 Exchange Act Rel. No. 67215 (Jun. 19, 2012), 77 FR 37941 (Jun. 25, 2012); Letter from Catherine McGuire, Esq., Chief Counsel, Division of Market Regulation, to the Securities Industry Association Derivative Products Committee (Nov. 21, 2005); Letter from Racquel L. Russell, Branch Chief, Division of Market Regulation, to George T. Simon, Esq., Foley & Lardner LLP (Jun. 21, 2006); Letter from James A. Brigagliano, Acting Associate Director, Division of Market Regulation, to Stuart M. Strauss, Esq., Clifford Chance US LLP (Oct. 24, 2006); Letter from James A. Brigagliano, Associate Director, Division of Market Regulation, to Benjamin Haskin, Esq., Willkie. Farr & Gallagher LLP (Apr. 9, 2007); or Letter from Josephine Tao, Assistant Director, Division of Trading and Markets, to Domenick Pugliese, Esq., Paul, Hastings, Janofsky and Walker LLP (Jun. 27, 2007). 4 See Staff Legal Bulletin No. 9, ‘‘Frequently Asked Questions About Regulation M’’ (Apr. 12, 2002) (regarding actively-managed ETFs). 5 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. PO 00000 Frm 00164 Fmt 4703 Sfmt 4703 15383 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.6 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 6 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. E:\FR\FM\22MRN1.SGM 22MRN1 15384 Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices 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. asabaliauskas on DSK3SPTVN1PROD with NOTICES 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.7 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 7 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. VerDate Sep<11>2014 17:34 Mar 21, 2016 Jkt 238001 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 Listing Exchange as soon as practicable before trading begins on the ex-dividend date, but in no event later than the time when the Listing 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 these exemptions. 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. PO 00000 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–06340 Filed 3–21–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. IC–32029; File No. 812–14600] Principal Life Insurance Company, et al., Notice of Application March 17, 2016. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice of application for an order approving the substitution of certain securities pursuant to Section 26(c) of the Investment Company Act of 1940 (the ‘‘Act’’). AGENCY: Applicants: Principal Life Insurance Company (‘‘PLIC’’) and Principal Life Insurance Company Separate Account B (‘‘Separate Account’’) (together, the ‘‘Applicants’’). SUMMARY: Summary of Application: Applicants seek an order pursuant to Section 26(c) of the Act approving the substitution of shares of Fidelity Variable Insurance Products Fund V Government Money Market Portfolio (the ‘‘Replacement Fund’’) for shares of Principal Variable Contracts Funds, Inc. Money Market Account (the ‘‘Existing Fund’’) held by the Separate Account to support variable annuity contracts (each, a ‘‘Contract’’ and collectively, the ‘‘Contracts’’) issued by PLIC. DATES: Filing Dates: The application was filed on January 14, 2016 and amended on February 29, 2016, March 7, 2016, and March 14, 2016. Hearing or Notification of Hearing: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission’s Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on April 7, 2016, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Pursuant to Rule 0–5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a 8 17 Frm 00165 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(6) and (9). E:\FR\FM\22MRN1.SGM 22MRN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 55 (Tuesday, March 22, 2016)]
[Notices]
[Pages 15382-15384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06340]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77380; File No. TP 16-5]


Order Granting Limited Exemptions From Exchange Act Rule 10b-17 
and Rules 101 and 102 of Regulation M to First Trust Dorsey Wright 
Dynamic Focus 5 ETF Pursuant to Exchange Act Rule 10b-17(b)(2) and 
Rules 101(d) and 102(e) of Regulation M

March 16, 2016.
    By letter dated March 16, 2016 (the ``Letter''), as supplemented by 
conversations with the staff of the Division of Trading and Markets, 
counsel for First Trust Exchange-Traded Fund VI (the ``Trust'') on 
behalf of the Trust, First Trust Dorsey Wright Dynamic Focus 5 ETF (the 
``Fund''), any national securities exchange on or through which shares 
of the Fund (``Shares'') are listed and/or 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 Dorsey Wright Dynamic Focus Five Index 
(``Underlying Index''). The Underlying Index is designed to provide 
targeted exposure to the five First Trust sector-based and industry-
based ETFs that the index provider determines offer the greatest 
potential to outperform the other First Trust sector-based and 
industry-based ETFs. The Underlying Index is also designed to decrease 
overall equity exposure when the cash equivalents \1\

[[Page 15383]]

gain strength. The allocation of the Cash Index is evaluated and 
adjusted periodically. The Cash Index may constitute between 0% and 95% 
of the weight of the Underlying Index.
---------------------------------------------------------------------------

    \1\ The cash equivalents in which the Fund may invest are 1- to 
3-month U.S. Treasury Bills representing the component securities of 
an index (the Nasdaq US T-Bill Index (the ``Cash Index'')) that is a 
component of the Underlying Index.
---------------------------------------------------------------------------

    The Fund will seek to track the performance of its Underlying Index 
by normally investing at least 80% of its total assets in the 
underlying exchange-traded funds and the cash equivalents that comprise 
the Underlying Index. In light of the composition of the Underlying 
Index, the Fund intends to operate as an ``ETF of ETFs.'' Except for 
the fact that the Fund will operate as an ETF of ETFs, the Fund will 
operate in a manner identical to the underlying ETFs.
    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 of a request for 
redemption 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 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 ``Listing 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.
---------------------------------------------------------------------------

     The Fund seeks to track the performance of the Underlying 
Index, all the components of which have publicly available last sale 
trade information;
     The Listing Exchange will disseminate continuously every 
15 seconds throughout the trading day, through the facilities of the 
Consolidated Tape Association, the market value of a Share;
     The Listing Exchange, market data vendors or other 
information providers will disseminate, every 15 seconds throughout the 
trading day, a calculation of the intraday indicative value of a Share;
     On each business day before the opening of business on the 
Listing Exchange, the Fund will cause to be published through the 
National Securities Clearing Corporation the list of the names and the 
quantities of securities of the Fund's portfolio that will be 
applicable that day to creation and redemption requests;
     The arbitrage mechanism will be facilitated by the 
transparency of the Fund's portfolio and the availability of the 
intraday indicative value, the liquidity of securities held by the 
Fund, the ability to acquire such securities, as well as 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;
     All ETFs in which the Fund invests will either meet all 
conditions set forth in one or more class relief letters,\3\ will have 
received individual relief from the Commission, will be able to rely on 
individual relief even though they are not named parties, or will be 
able to rely on applicable class relief for actively-managed ETFs; \4\
---------------------------------------------------------------------------

    \3\ Exchange Act Rel. No. 67215 (Jun. 19, 2012), 77 FR 37941 
(Jun. 25, 2012); Letter from Catherine McGuire, Esq., Chief Counsel, 
Division of Market Regulation, to the Securities Industry 
Association Derivative Products Committee (Nov. 21, 2005); Letter 
from Racquel L. Russell, Branch Chief, Division of Market 
Regulation, to George T. Simon, Esq., Foley & Lardner LLP (Jun. 21, 
2006); Letter from James A. Brigagliano, Acting Associate Director, 
Division of Market Regulation, to Stuart M. Strauss, Esq., Clifford 
Chance US LLP (Oct. 24, 2006); Letter from James A. Brigagliano, 
Associate Director, Division of Market Regulation, to Benjamin 
Haskin, Esq., Willkie. Farr & Gallagher LLP (Apr. 9, 2007); or 
Letter from Josephine Tao, Assistant Director, Division of Trading 
and Markets, to Domenick Pugliese, Esq., Paul, Hastings, Janofsky 
and Walker LLP (Jun. 27, 2007).
    \4\ See Staff Legal Bulletin No. 9, ``Frequently Asked Questions 
About Regulation M'' (Apr. 12, 2002) (regarding actively-managed 
ETFs).
---------------------------------------------------------------------------

     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 Rule 101 and 102 
of Regulation M, the Requestors may not rely upon that exception for 
the Shares.\5\ 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.
---------------------------------------------------------------------------

    \5\ 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.
---------------------------------------------------------------------------

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.\6\
---------------------------------------------------------------------------

    \6\ 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.
---------------------------------------------------------------------------

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

[[Page 15384]]

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.\7\
---------------------------------------------------------------------------

    \7\ 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.
---------------------------------------------------------------------------

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 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 Listing Exchange as soon as 
practicable before trading begins on the ex-dividend date, but in no 
event later than the time when the Listing 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 these exemptions. 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.\8\
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    \8\ 17 CFR 200.30-3(a)(6) and (9).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-06340 Filed 3-21-16; 8:45 am]
 BILLING CODE 8011-01-P

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