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]
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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 (https://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 (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
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
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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
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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.
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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.
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17:43 May 04, 2017
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• 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.
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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.
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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.
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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
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Frm 00097
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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
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]]>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.
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\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.
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Rule 101 of Regulation M
Generally, Rule 101 of Regulation M is an anti-manipulation rule
that, subject to certain exceptions, prohibits any ``distribution
participant'' and its ``affiliated purchasers'' from bidding for,
purchasing, or attempting to induce any person to bid for or purchase
any security that is the subject of a distribution until after the
applicable restricted period, except as specifically permitted in the
Rule. Rule 100 of Regulation M defines ``distribution'' to mean any
offering of securities that is distinguished from ordinary trading
transactions by the magnitude of the offering and the presence of
special selling efforts and selling methods. The provisions of Rule 101
of Regulation M apply to underwriters, prospective underwriters,
brokers, dealers, or other persons who have agreed to participate 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\
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\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.
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Rule 102 of Regulation M
Rule 102 of Regulation M prohibits issuers, selling security
holders, and any affiliated purchaser of such person from bidding for,
purchasing, or attempting to induce any person to bid for or purchase a
covered security during the applicable restricted period in connection
with a distribution of securities effected by or on behalf of an issuer
or selling security holder.
Based on the representations and 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\
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\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
