Order Granting Limited Exemptions From Exchange Act Rule 10b-17 and Rules 101 and 102 of Regulation M to SPDR Series Trust and SPDR Dorsey Wright Fixed Income Allocation ETF Pursuant to Exchange Act Rule 10b-17(b)(2) and Rules 101(d) and 102(e) of Regulation M, 35423-35425 [2016-13041]

Download as PDF Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices market participants are welcome to become CBOE market participants. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and paragraph (f) of Rule 19b–4 11 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: asabaliauskas on DSK3SPTVN1PROD with NOTICES Electronic Comments • 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– CBOE–2016–045 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–CBOE–2016–045. 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 10 15 11 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). VerDate Sep<11>2014 18:30 Jun 01, 2016 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–CBOE– 2016–045, and should be submitted on or before June 23, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Brent J. Fields, Secretary. [FR Doc. 2016–12873 Filed 6–1–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77942; File No. TP 16–8] Order Granting Limited Exemptions From Exchange Act Rule 10b–17 and Rules 101 and 102 of Regulation M to SPDR Series Trust and SPDR Dorsey Wright Fixed Income Allocation ETF Pursuant to Exchange Act Rule 10b– 17(b)(2) and Rules 101(d) and 102(e) of Regulation M May 27, 2016. By letter dated May 27, 2016 (the ‘‘Letter’’), as supplemented by conversations with the staff of the Division of Trading and Markets, counsel for SPDR Series Trust (the ‘‘Trust’’), on behalf of the Trust, SPDR Dorsey Wright Fixed Income Allocation ETF (the ‘‘Fund’’), any national securities exchange on or through which shares issued by the Fund (‘‘Shares’’) may subsequently trade, State Street Global Markets, LLC (the ‘‘Distributor’’), and persons or entities engaging in transactions in Shares (collectively, the ‘‘Requestors’’), requested exemptions, or interpretive or no-action relief, from 12 17 Jkt 238001 PO 00000 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 25,000 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 SPDR Dorsey Wright Fixed Income Allocation ETF will seek results that correspond generally to the performance, before fees and expenses, of the Dorsey Wright Fixed Income Allocation Index (the ‘‘Index’’). In doing so, the Fund will, under normal circumstances, invest at least 80% (but typically substantially all) of its total assets in the four ETFs that comprise the Index (the ‘‘Underlying ETFs’’).1 In light of the Index’s composition, 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 substantially 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; • 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 NASDAQ Stock Market LLC or other 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’’); • All Underlying ETFs in which the Fund invests will either meet all conditions set forth in one or more of the ETF class relief letters,2 will have 1 At any given time, the underlying Index will be composed of four SPDR ETFs from a universe that currently consists of 21 eligible SPDR ETFs that each invest in a different sub-asset class in the fixed income market. While the Fund typically will invest substantially all of its assets in the four Underlying ETFs, the Fund may also invest in instruments not included in the Index, such as convertible securities, variable rate demand notes, commercial paper, structured notes, swaps, options and futures contracts, which the Fund may use in seeking performance that corresponds to its Index and in managing cash flows. 2 See, e.g., Letter from James A. Brigagliano, Acting Associate Director, Division of Market Regulation, to Stuart M. Strauss, Esq., Clifford CFR 200.30–3(a)(12). Frm 00131 Fmt 4703 Sfmt 4703 35423 Continued E:\FR\FM\02JNN1.SGM 02JNN1 35424 Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES received individual relief from the Commission, will be able to rely on individual relief even though they are not named parties (for example, a noaction letter), or will be able to rely on applicable class relief for activelymanaged ETFs; 3 • All of the components of the Index will have publicly available last sale trade information; • The intra-day proxy (or ‘‘indicative’’) 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 Listing Exchange, the Fund’s custodian, through the National Securities Clearing Corporation, will make publicly available the list of the names and the numbers of securities of the Fund’s portfolio that will be applicable that day to creation and redemption requests; • The Listing 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 intraday indicative value of a Share; • The Fund will invest in securities that will facilitate an effective and efficient arbitrage mechanism and the ability to create workable hedges; • The Requestors believe that arbitrageurs are expected to take advantage of price variations between the Fund’s market price and its NAV; • 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 Chance US LLP (October 24, 2006) regarding class relief for exchange-traded index funds; 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) regarding commoditybased investment vehicles; Letter from James A. Brigagliano, Associate Director, Division of Market Regulation, to Benjamin Haskin, Esq., Willkie. Farr & Gallagher LLP (April 9, 2007) regarding class relief for fixed income exchange traded funds; or Letter from Josephine Tao, Assistant Director, Division of Trading and Markets, to Domenick Pugliese, Esq., Paul, Hastings, Janofsky and Walker LLP (June 27, 2007) regarding class relief for combination exchange-traded funds. 3 See Division of Market Regulation Staff Legal Bulletin No. 9, as revised on September 10, 2010, with respect to Rules 101 and 102 of Regulation M, and Securities Exchange Act Rel. No. 67215 (June 19, 2012), with respect to Rule 10b-17. VerDate Sep<11>2014 18:30 Jun 01, 2016 Jkt 238001 securities, as well as arbitrageurs’ ability to create workable hedges; 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.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 and 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 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 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. PO 00000 Frm 00132 Fmt 4703 Sfmt 4703 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 Rule 102 of Regulation M Rule 102 of Regulation M prohibits issuers, selling security holders, or 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 will redeem at the NAV Creation Units 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 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 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. E:\FR\FM\02JNN1.SGM 02JNN1 Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices adopting Rule 10b–17 will not be implicated.6 asabaliauskas on DSK3SPTVN1PROD with NOTICES Conclusion It is hereby ordered, pursuant to Rule 101(d) of Regulation M, that the Trust, based on the representations and the 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 6 We also note that timely compliance with Rule 10b–17(b)(1)(v)(a) and (b) would be impractical 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. Further, the Commission finds, based upon the representations in the Letter, that the provision of the notices as described in the Letter would not constitute a manipulative or deceptive device or contrivance comprehended within the purpose of Rule 10b–17. VerDate Sep<11>2014 18:30 Jun 01, 2016 Jkt 238001 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 exemptive relief are directed to the antifraud and antimanipulation 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 exemptive relief. 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. 35425 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade shares of the following under NYSE Arca Equities Rule 8.600 (‘‘Managed Fund Shares’’): BlackRock Government Collateral Pledge Unit under NYSE Arca Equities Rule 8.600 [sic]. The proposed rule 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 BILLING CODE 8011–01–P 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. SECURITIES AND EXCHANGE COMMISSION A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–13041 Filed 6–1–16; 8:45 am] [Release No. 34–77941; File No. SR– NYSEArca–2016–63] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of Shares of BlackRock Government Collateral Pledge Unit Under NYSE Arca Equities Rule 8.600 May 27, 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 May 19, 2016, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III 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. 7 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. 1 15 PO 00000 Frm 00133 Fmt 4703 Sfmt 4703 1. Purpose The Exchange proposes to list and trade shares (‘‘Shares’’) of the following under NYSE Arca Equities Rule 8.600,4 which governs the listing and trading of Managed Fund Shares: 5 BlackRock 4 The Commission has previously approved listing and trading on the Exchange of actively managed funds under Rule 8.600. See, e.g., Securities Exchange Act Release Nos. 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR– NYSEArca–2008–31) (order approving Exchange listing and trading of twelve actively-managed funds of the WisdomTree Trust); 66321 (February 3, 2012), 77 FR 6850 (February 9, 2012) (SR– NYSEArca–2011–95) (order approving listing and trading of PIMCO Total Return Exchange Traded Fund); 66670 (March 28, 2012), 77 FR 20087 (April 3, 2012) (SR–NYSEArca–2012–09) (order approving listing and trading of PIMCO Global Advantage Inflation-Linked Bond Strategy Fund). 5 A Managed Fund Share is a security that represents an interest in an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment adviser consistent with its investment objectives and policies. In contrast, an open-end investment company that issues Investment Company Units, listed and traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(3), seeks to provide investment results that correspond generally to the price and yield performance of a specific foreign or domestic stock Continued E:\FR\FM\02JNN1.SGM 02JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 106 (Thursday, June 2, 2016)]
[Notices]
[Pages 35423-35425]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-13041]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77942; File No. TP 16-8]


Order Granting Limited Exemptions From Exchange Act Rule 10b-17 
and Rules 101 and 102 of Regulation M to SPDR Series Trust and SPDR 
Dorsey Wright Fixed Income Allocation ETF Pursuant to Exchange Act Rule 
10b-17(b)(2) and Rules 101(d) and 102(e) of Regulation M

May 27, 2016.
    By letter dated May 27, 2016 (the ``Letter''), as supplemented by 
conversations with the staff of the Division of Trading and Markets, 
counsel for SPDR Series Trust (the ``Trust''), on behalf of the Trust, 
SPDR Dorsey Wright Fixed Income Allocation ETF (the ``Fund''), any 
national securities exchange on or through which shares issued by the 
Fund (``Shares'') may subsequently trade, State Street Global Markets, 
LLC (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 25,000 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 SPDR 
Dorsey Wright Fixed Income Allocation ETF will seek results that 
correspond generally to the performance, before fees and expenses, of 
the Dorsey Wright Fixed Income Allocation Index (the ``Index''). In 
doing so, the Fund will, under normal circumstances, invest at least 
80% (but typically substantially all) of its total assets in the four 
ETFs that comprise the Index (the ``Underlying ETFs'').\1\ In light of 
the Index's composition, 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 substantially identical to the 
Underlying ETFs.
---------------------------------------------------------------------------

    \1\ At any given time, the underlying Index will be composed of 
four SPDR ETFs from a universe that currently consists of 21 
eligible SPDR ETFs that each invest in a different sub-asset class 
in the fixed income market. While the Fund typically will invest 
substantially all of its assets in the four Underlying ETFs, the 
Fund may also invest in instruments not included in the Index, such 
as convertible securities, variable rate demand notes, commercial 
paper, structured notes, swaps, options and futures contracts, which 
the Fund may use in seeking performance that corresponds to its 
Index and in managing cash flows.
---------------------------------------------------------------------------

    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 NASDAQ 
Stock Market LLC or other 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'');
     All Underlying ETFs in which the Fund invests will either 
meet all conditions set forth in one or more of the ETF class relief 
letters,\2\ will have

[[Page 35424]]

received individual relief from the Commission, will be able to rely on 
individual relief even though they are not named parties (for example, 
a no-action letter), or will be able to rely on applicable class relief 
for actively-managed ETFs; \3\
---------------------------------------------------------------------------

    \2\ See, e.g., Letter from James A. Brigagliano, Acting 
Associate Director, Division of Market Regulation, to Stuart M. 
Strauss, Esq., Clifford Chance US LLP (October 24, 2006) regarding 
class relief for exchange-traded index funds; 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) regarding commodity-based investment 
vehicles; Letter from James A. Brigagliano, Associate Director, 
Division of Market Regulation, to Benjamin Haskin, Esq., Willkie. 
Farr & Gallagher LLP (April 9, 2007) regarding class relief for 
fixed income exchange traded funds; or Letter from Josephine Tao, 
Assistant Director, Division of Trading and Markets, to Domenick 
Pugliese, Esq., Paul, Hastings, Janofsky and Walker LLP (June 27, 
2007) regarding class relief for combination exchange-traded funds.
    \3\ See Division of Market Regulation Staff Legal Bulletin No. 
9, as revised on September 10, 2010, with respect to Rules 101 and 
102 of Regulation M, and Securities Exchange Act Rel. No. 67215 
(June 19, 2012), with respect to Rule 10b-17.
---------------------------------------------------------------------------

     All of the components of the Index will have publicly 
available last sale trade information;
     The intra-day proxy (or ``indicative'') 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 
Listing Exchange, the Fund's custodian, through the National Securities 
Clearing Corporation, will make publicly available the list of the 
names and the numbers of securities of the Fund's portfolio that will 
be applicable that day to creation and redemption requests;
     The Listing 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 Fund will invest in securities that will facilitate an 
effective and efficient arbitrage mechanism and the ability to create 
workable hedges;
     The Requestors believe that arbitrageurs are expected to 
take advantage of price variations between the Fund's market price and 
its NAV;
     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 arbitrageurs' 
ability to create workable hedges; 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.\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 and the Fund as 
described in more detail below.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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 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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

Rule 102 of Regulation M

    Rule 102 of Regulation M prohibits issuers, selling security 
holders, or 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 will redeem at the NAV Creation Units 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 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

[[Page 35425]]

adopting Rule 10b-17 will not be implicated.\6\
---------------------------------------------------------------------------

    \6\ We also note that timely compliance with Rule 10b-
17(b)(1)(v)(a) and (b) would be impractical 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. 
Further, the Commission finds, based upon the representations in the 
Letter, that the provision of the notices as described in the Letter 
would not constitute a manipulative or deceptive device or 
contrivance comprehended within the purpose of Rule 10b-17.
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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 the 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 exemptive 
relief are directed to the antifraud 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 exemptive relief.
    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. 2016-13041 Filed 6-1-16; 8:45 am]
 BILLING CODE 8011-01-P

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