Order Granting Limited Exemptions From Exchange Act Rule 10b-17 and Rules 101 and 102 of Regulation M to Alpha Architect Value Momentum Trend ETF Pursuant to Exchange Act Rule 10b-17(b)(2) and Rules 101(d) and 102(e) of Regulation M, 21280-21282 [2017-09080]

Download as PDF 21280 Federal Register / Vol. 82, No. 86 / Friday, May 5, 2017 / Notices burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 9 and subparagraph (f)(6) of Rule 19b–4 thereunder.10 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: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule 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: 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–ISE– 2017–34 and should be submitted on or before May 26, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–09061 Filed 5–4–17; 8:45 am] BILLING CODE 8011–01–P Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– ISE–2017–34 on the subject line. SRADOVICH on DSK3GMQ082PROD with NOTICES 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–ISE–2017–34. 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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the 9 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 10 17 VerDate Sep<11>2014 17:43 May 04, 2017 Jkt 241001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80567; File No. TP 17–08] Order Granting Limited Exemptions From Exchange Act Rule 10b–17 and Rules 101 and 102 of Regulation M to Alpha Architect Value Momentum Trend ETF Pursuant to Exchange Act Rule 10b–17(b)(2) and Rules 101(d) and 102(e) of Regulation M May 1, 2017. By letter dated May 01, 2017 (the ‘‘Letter’’), counsel for Alpha Architect ETF Trust (the ‘‘Trust’’), on behalf of the Trust, Alpha Architect Value Momentum Trend ETF (the ‘‘Fund’’), any national securities exchange or national securities association on or through which shares issued by the Fund (‘‘Shares’’) are listed and/or may subsequently trade, Quasar Distributors, LLC (the ‘‘Distributor’’), and other persons 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 11 17 PO 00000 CFR 200.30–3(a)(12). Frm 00095 Fmt 4703 Sfmt 4703 or redemption of aggregations of 50,000 Shares (‘‘Creation Units’’). The Trust is registered with the Securities and Exchange Commission (‘‘Commission’’) under the Investment Company Act of 1940, as amended (‘‘1940 Act’’), as an open-end management investment company. The Fund is an exchange-traded fund (‘‘ETF’’) organized as a series of the Trust. The Fund seeks to track the performance of the Alpha Architect Value Momentum Trend Index (the ‘‘Index’’). The Fund intends to operate as an ‘‘ETF of ETFs’’ by seeking to track the performance of its underlying Index through, under normal circumstances,1 investing at least 80% of its total assets 2 in up to four ETFs that comprise the Index (‘‘Underlying ETFs’’). The Fund also intends to invest the remaining twenty percent of its total assets in cash and cash equivalents, other investment companies, as well as securities and other types of financial instruments that may not be components of the Index, but which will help the Fund track the Index (e.g., the Fund may invest in securities that are not components of the Index to reflect various corporate actions and other changes to the Index such as reconstitutions, additions, and deletions).3 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; • The Trust will continuously redeem Creation Units at net asset value (‘‘NAV’’), and the secondary market price of the Shares should not vary 1 The term ‘‘under normal circumstances’’ includes, but is not limited to, the absence of adverse market, economic, political, or other conditions, including extreme volatility or trading halts in the securities markets or the financial markets generally; operational issues causing dissemination of inaccurate market information; or force majeure type events, such as systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption, or any similar intervening circumstance. 2 Regardless of the representation that the Fund generally will invest at least 80% of its total assets in securities that comprise the underlying Index, the Fund seeks to have a tracking error of less than five percent in any given month over a one-year period. 3 The Fund intends, under normal circumstances, to hold shares of the Underlying ETFs and, from time to time, for hedging purposes, the Fund intends to short index ETFs or various types of financial instruments including, but not limited to, futures contracts and options on securities, indices, and futures contracts (‘‘Financial Instruments’’). Financial Instruments held or shorted by the Fund, if any, will be expected to provide a hedge against potential adverse market movements. E:\FR\FM\05MYN1.SGM 05MYN1 SRADOVICH on DSK3GMQ082PROD with NOTICES Federal Register / Vol. 82, No. 86 / Friday, May 5, 2017 / Notices substantially from the NAV of such Shares; • Shares of the Fund will be listed and traded on BATS Exchange, Inc. or another exchange in accordance with exchange listing standards that are, or will become, effective pursuant to Section 19(b) of the Exchange Act (the ‘‘Exchange’’); 4 • All Underlying ETFs in which the Fund invests will either meet all conditions set forth in relevant class relief, will have received individual relief from the Commission, or will be able to rely upon individual relief even though they are not named parties; • All of the components of the Index will have publicly available last sale trade information; • The intra-day proxy value of the Fund per share and the value of the Index will be publicly disseminated by a major market data vendor throughout the trading day; • On each business day before the opening of business on the Exchange, the Fund’s custodian, through the National Securities Clearing Corporation, will make available the list of the names and the required number of shares of each security to be included in the consideration for purchase of a Creation Unit that day; • The Exchange will disseminate continuously every 15 seconds throughout the trading day, through the facilities of the consolidated tape, the market value of a Share, and the Exchange, market data vendors, or other information providers will disseminate, every 15 seconds throughout the trading day, a calculation of the intra-day indicative value of a Share; • The arbitrage mechanism will be facilitated by the transparency of the Fund’s portfolio and the availability of the intra-day indicative value, the liquidity of securities held by the Fund, and the ability to acquire such securities, as well as the arbitrageurs’ ability to create workable hedges; • The Fund will invest solely in liquid securities and Financial Instruments; • The Fund will invest in securities that will facilitate an effective and efficient arbitrage mechanism and the ability to create workable hedges; • The Trust believes that arbitrageurs are expected to take advantage of price variations between the Fund’s market price and its NAV; and 4 Further, Requestors represent in the Letter 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 17:43 May 04, 2017 Jkt 241001 • A close alignment between the market price of Shares and the Fund’s NAV is expected. Regulation M While redeemable securities issued by an open-end management investment company are excepted from the provisions of Rules 101 and 102 of Regulation M, the Requestors may not rely upon those exceptions for the Shares.5 However, we find that it is appropriate in the public interest and is consistent with the protection of investors to grant exemptions from Rules 101 and 102 to persons who may be deemed to be participating in a distribution of Shares of the Fund as described in more detail below. Rule 101 of Regulation M Generally, Rule 101 of Regulation M is an anti-manipulation rule that, subject to certain exceptions, prohibits any ‘‘distribution participant’’ and its ‘‘affiliated purchasers’’ from bidding for, purchasing, or attempting to induce any person to bid for or purchase any security that is the subject of a distribution until after the applicable restricted period, except as specifically permitted in the Rule. Rule 100 of Regulation M defines ‘‘distribution’’ to mean any offering of securities that is distinguished from ordinary trading transactions by the magnitude of the offering and the presence of special selling efforts and selling methods. The provisions of Rule 101 of Regulation M apply to underwriters, prospective underwriters, brokers, dealers, or other persons who have agreed to participate in, 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, the Shares extends indefinitely. Based on the representations and the facts presented in the Letter, particularly that the Trust is a registered open-end management investment company that will continuously redeem, at NAV, Creation Unit aggregations of Shares of the Fund and that a close alignment between the market price of the 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 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 00096 Fmt 4703 Sfmt 4703 21281 exemption from Rule 101 pursuant to paragraph (d) of Rule 101 of Regulation M with respect to the Shares of 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 induce any person to bid for or purchase a covered security during the applicable restricted period in connection with a distribution of securities effected by or on behalf of an issuer or selling security holder. Based on the representations and the facts presented in the Letter, particularly that the Trust is a registered open-end management investment company that will redeem, at the NAV, Creation Unit aggregations of Shares of the Fund and that a close alignment between the market price of the 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 from Rule 102 pursuant to 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 distribution of such Shares. Rule 10b–17 Rule 10b–17, with certain exceptions, requires an issuer of a class of publicly traded securities to give notice of certain specified actions (for example, a dividend distribution) relating to such class of securities in accordance with Rule 10b–17(b). Based on the representations and the facts presented in the Letter, and subject to the conditions below, the Commission finds that it is appropriate in the public interest, and consistent with the protection of investors, to grant the Trust a conditional exemption from Rule 10b–17 because market participants will receive timely notification of the existence and timing of a pending distribution, and thus the concerns that the Commission raised in 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\05MYN1.SGM 05MYN1 21282 Federal Register / Vol. 82, No. 86 / Friday, May 5, 2017 / Notices adopting Rule 10b–17 will not be implicated.7 SRADOVICH on DSK3GMQ082PROD with NOTICES 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 Shares of the Fund, thus permitting persons who may be deemed to be participating in a distribution of Shares of the Fund to bid for or purchase such Shares during their participation in such distribution. It is further ordered, pursuant to Rule 102(e) of Regulation M, that the Trust, based on the representations and the facts presented in the Letter, is exempt from the requirements of Rule 102 with respect to the Fund, thus permitting the Fund to redeem Shares of the Fund during the continuous offering of such Shares. It is further ordered, pursuant to Rule 10b–17(b)(2), that the Trust, based on the representations and the facts presented in the Letter and subject to the conditions below, is exempt from the requirements of Rule 10b–17 with respect to the transactions in the Shares of the Fund. The exemption from Rule 10b–17 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. These exemptions are based on the facts presented and the representations made in the Letter. Any different facts or representations may require a different response. Persons relying upon this exemptive relief shall promptly present the facts for the Commission’s consideration in 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 Fund’s nature because it is not possible for the Fund to accurately project ten days in advance what dividend, if any, would be paid on a particular record date. Further, the Commission finds, based on the Requestors representations in the Letter, that the provision of 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 17:43 May 04, 2017 Jkt 241001 event that any material change occurs with respect to any of the facts or representations made by the Requestors, and, as is the case with all preceding relief for ETFs, particularly with respect to the close alignment between the market price of Shares and the Fund’s NAV. In addition, persons relying on these exemptions are directed to the anti-fraud and anti-manipulation provisions of the Exchange Act, particularly Sections 9(a), 10(b), and Rule 10b–5 thereunder. Responsibility for compliance with these and any other applicable provisions of the federal securities laws must rest with the persons relying on 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 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–09080 Filed 5–4–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 32620; 812–14739] ClearShares, LLC et al. May 1, 2017. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice. AGENCY: Notice of an application for an order under section 6(c) of the Investment Company Act of 1940 (the ‘‘Act’’) for an exemption from sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c–1 under the Act, under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under section 12(d)(1)(J) of the Act for an exemption from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act. The requested order would permit (a) activelymanaged series of certain open-end management investment companies (‘‘Funds’’) to issue shares redeemable in large aggregations only (‘‘Creation Units’’); (b) secondary market transactions in Fund shares to occur at negotiated market prices rather than at net asset value (‘‘NAV’’); (c) certain 8 17 PO 00000 CFR 200.30–3(a)(6) and (9). Frm 00097 Fmt 4703 Sfmt 4703 Funds to pay redemption proceeds, under certain circumstances, more than seven days after the tender of shares for redemption; (d) certain affiliated persons of a Fund to deposit securities into, and receive securities from, the Fund in connection with the purchase and redemption of Creation Units; (e) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the Funds (‘‘Funds of Funds’’) to acquire shares of the Funds; and (f) certain Funds (‘‘Feeder Funds’’) to create and redeem Creation Units in-kind in a master-feeder structure. APPLICANTS: ETF Series Solutions (‘‘Trust’’), a Delaware statutory trust registered under the Act as an open-end management investment company with multiple series, ClearShares LLC (‘‘ClearShares’’), a Delaware limited liability company that is registered as an investment adviser under the Investment Advisers Act of 1940, and Quasar Distributors, LLC (‘‘Distributor’’), a Delaware limited liability company and broker-dealer registered under the Securities Exchange Act of 1934 (‘‘Exchange Act’’). FILING DATES: The application was filed on January 24, 2017. 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 May 26, 2017, 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 hearing may request notification by writing to the Commission’s Secretary. ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090; Applicants: W. John McGuire, Esq., Morgan, Lewis & Bockius, LLP, 1111 Pennsylvania Avenue NW., Washington, DC 20004–2541 and Michael D. Barolsky, Esq., U.S. Bancorp Fund Services, LLC, 615 E. Michigan Street, Milwaukee, WI 53202. FOR FURTHER INFORMATION CONTACT: Rochelle Kauffman Plesset, Senior Counsel, at (202) 551–6840 or Daniele E:\FR\FM\05MYN1.SGM 05MYN1

Agencies

[Federal Register Volume 82, Number 86 (Friday, May 5, 2017)]
[Notices]
[Pages 21280-21282]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-09080]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80567; File No. TP 17-08]


Order Granting Limited Exemptions From Exchange Act Rule 10b-17 
and Rules 101 and 102 of Regulation M to Alpha Architect Value Momentum 
Trend ETF Pursuant to Exchange Act Rule 10b-17(b)(2) and Rules 101(d) 
and 102(e) of Regulation M

May 1, 2017.
    By letter dated May 01, 2017 (the ``Letter''), counsel for Alpha 
Architect ETF Trust (the ``Trust''), on behalf of the Trust, Alpha 
Architect Value Momentum Trend ETF (the ``Fund''), any national 
securities exchange or national securities association on or through 
which shares issued by the Fund (``Shares'') are listed and/or may 
subsequently trade, Quasar Distributors, LLC (the ``Distributor''), and 
other persons 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 50,000 Shares (``Creation 
Units'').
    The Trust is registered with the Securities and Exchange Commission 
(``Commission'') under the Investment Company Act of 1940, as amended 
(``1940 Act''), as an open-end management investment company. The Fund 
is an exchange-traded fund (``ETF'') organized as a series of the 
Trust. The Fund seeks to track the performance of the Alpha Architect 
Value Momentum Trend Index (the ``Index''). The Fund intends to operate 
as an ``ETF of ETFs'' by seeking to track the performance of its 
underlying Index through, under normal circumstances,\1\ investing at 
least 80% of its total assets \2\ in up to four ETFs that comprise the 
Index (``Underlying ETFs''). The Fund also intends to invest the 
remaining twenty percent of its total assets in cash and cash 
equivalents, other investment companies, as well as securities and 
other types of financial instruments that may not be components of the 
Index, but which will help the Fund track the Index (e.g., the Fund may 
invest in securities that are not components of the Index to reflect 
various corporate actions and other changes to the Index such as 
reconstitutions, additions, and deletions).\3\ 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.
---------------------------------------------------------------------------

    \1\ The term ``under normal circumstances'' includes, but is not 
limited to, the absence of adverse market, economic, political, or 
other conditions, including extreme volatility or trading halts in 
the securities markets or the financial markets generally; 
operational issues causing dissemination of inaccurate market 
information; or force majeure type events, such as systems failure, 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption, or any similar intervening 
circumstance.
    \2\ Regardless of the representation that the Fund generally 
will invest at least 80% of its total assets in securities that 
comprise the underlying Index, the Fund seeks to have a tracking 
error of less than five percent in any given month over a one-year 
period.
    \3\ The Fund intends, under normal circumstances, to hold shares 
of the Underlying ETFs and, from time to time, for hedging purposes, 
the Fund intends to short index ETFs or various types of financial 
instruments including, but not limited to, futures contracts and 
options on securities, indices, and futures contracts (``Financial 
Instruments''). Financial Instruments held or shorted by the Fund, 
if any, will be expected to provide a hedge against potential 
adverse market movements.
---------------------------------------------------------------------------

    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

[[Page 21281]]

substantially from the NAV of such Shares;
     Shares of the Fund will be listed and traded on BATS 
Exchange, Inc. or another exchange in accordance with exchange listing 
standards that are, or will become, effective pursuant to Section 19(b) 
of the Exchange Act (the ``Exchange''); \4\
---------------------------------------------------------------------------

    \4\ Further, Requestors represent in the Letter that, should the 
Shares also trade on a market pursuant to unlisted trading 
privileges, such trading will be conducted pursuant to self-
regulatory organization rules that have become effective pursuant to 
Section 19(b) of the Exchange Act.
---------------------------------------------------------------------------

     All Underlying ETFs in which the Fund invests will either 
meet all conditions set forth in relevant class relief, will have 
received individual relief from the Commission, or will be able to rely 
upon individual relief even though they are not named parties;
     All of the components of the Index will have publicly 
available last sale trade information;
     The intra-day proxy value of the Fund per share and the 
value of the Index will be publicly disseminated by a major market data 
vendor throughout the trading day;
     On each business day before the opening of business on the 
Exchange, the Fund's custodian, through the National Securities 
Clearing Corporation, will make available the list of the names and the 
required number of shares of each security to be included in the 
consideration for purchase of a Creation Unit that day;
     The Exchange will disseminate continuously every 15 
seconds throughout the trading day, through the facilities of the 
consolidated tape, the market value of a Share, and the Exchange, 
market data vendors, or other information providers will disseminate, 
every 15 seconds throughout the trading day, a calculation of the 
intra-day indicative value of a Share;
     The arbitrage mechanism will be facilitated by the 
transparency of the Fund's portfolio and the availability of the intra-
day indicative value, the liquidity of securities held by the Fund, and 
the ability to acquire such securities, as well as the arbitrageurs' 
ability to create workable hedges;
     The Fund will invest solely in liquid securities and 
Financial Instruments;
     The Fund will invest in securities that will facilitate an 
effective and efficient arbitrage mechanism and the ability to create 
workable hedges;
     The Trust believes that arbitrageurs are expected to take 
advantage of price variations between the Fund's market price and its 
NAV; and
     A close alignment between the market price of Shares and 
the Fund's NAV is expected.

Regulation M

    While redeemable securities issued by an open-end management 
investment company are excepted from the provisions of Rules 101 and 
102 of Regulation M, the Requestors may not rely upon those exceptions 
for the Shares.\5\ However, we find that it is appropriate in the 
public interest and is consistent with the protection of investors to 
grant exemptions 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 that is the subject of a distribution until after the 
applicable restricted period, except as specifically permitted in the 
Rule. Rule 100 of Regulation M defines ``distribution'' to mean any 
offering of securities that is distinguished from ordinary trading 
transactions by the magnitude of the offering and the presence of 
special selling efforts and selling methods. The provisions of Rule 101 
of Regulation M apply to underwriters, prospective underwriters, 
brokers, dealers, or other persons who have agreed to participate in, 
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, the Shares extends indefinitely.
    Based on the representations and the facts presented in the Letter, 
particularly that the Trust is a registered open-end management 
investment company that will continuously redeem, at NAV, Creation Unit 
aggregations of Shares of the Fund and that a close alignment between 
the market price of the 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 from Rule 101 pursuant to paragraph (d) of Rule 101 of 
Regulation M with respect to the Shares of 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 induce any person to bid for or purchase a 
covered security during the applicable restricted period in connection 
with a distribution of securities effected by or on behalf of an issuer 
or selling security holder.
    Based on the representations and the facts presented in the Letter, 
particularly that the Trust is a registered open-end management 
investment company that will redeem, at the NAV, Creation Unit 
aggregations of Shares of the Fund and that a close alignment between 
the market price of the 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 from Rule 102 pursuant to 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 distribution of such Shares.

Rule 10b-17

    Rule 10b-17, with certain exceptions, requires an issuer of a class 
of publicly traded securities to give notice of certain specified 
actions (for example, a dividend distribution) relating to such class 
of securities in accordance with Rule 10b-17(b). Based on the 
representations and the facts presented in the Letter, and subject to 
the conditions below, the Commission finds that it is appropriate in 
the public interest, and consistent with the protection of investors, 
to grant the Trust a conditional exemption from Rule 10b-17 because 
market participants will receive timely notification of the existence 
and timing of a pending distribution, and thus the concerns that the 
Commission raised in

[[Page 21282]]

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 Fund's 
nature because it is not possible for the Fund to accurately project 
ten days in advance what dividend, if any, would be paid on a 
particular record date. Further, the Commission finds, based on the 
Requestors representations in the Letter, that the provision of 
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 facts presented in the 
Letter, is exempt from the requirements of Rule 101 with respect to 
Shares of the Fund, thus permitting persons who may be deemed to be 
participating in a distribution of Shares of the Fund to bid for or 
purchase such Shares during their participation in such distribution.
    It is further ordered, pursuant to Rule 102(e) of Regulation M, 
that the Trust, based on the representations and the facts presented in 
the Letter, is exempt from the requirements of Rule 102 with respect to 
the Fund, thus permitting the Fund to redeem Shares of the Fund during 
the continuous offering of such Shares.
    It is further ordered, pursuant to Rule 10b-17(b)(2), that the 
Trust, based on the representations and the facts presented in the 
Letter and subject to the conditions below, is exempt from the 
requirements of Rule 10b-17 with respect to the transactions in the 
Shares of the Fund.
    The exemption from Rule 10b-17 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. These 
exemptions are based on the facts presented and the representations 
made in the Letter. Any different facts or representations may require 
a different response. Persons relying upon this exemptive relief shall 
promptly present the facts for the Commission's consideration in the 
event that any material change occurs with respect to any of the facts 
or representations made by the Requestors, and, as is the case with all 
preceding relief for ETFs, particularly with respect to the close 
alignment between the market price of Shares and the Fund's NAV. In 
addition, persons relying on these exemptions are directed to the anti-
fraud and anti-manipulation provisions of the Exchange Act, 
particularly Sections 9(a), 10(b), and Rule 10b-5 thereunder. 
Responsibility for compliance with these and any other applicable 
provisions of the federal securities laws must rest with the persons 
relying on 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.
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    \8\ 17 CFR 200.30-3(a)(6) and (9).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09080 Filed 5-4-17; 8:45 am]
 BILLING CODE 8011-01-P