Order Granting Limited Exemptions From Exchange Act Rule 10b-17 and Rules 101 and 102 of Regulation M to VanEck Vectors NDR CMG Long/Flat Allocation ETF Pursuant to Exchange Act Rule 10b-17(b)(2) and Rules 101(d) and 102(e) of Regulation M, 46546-46548 [2017-21400]
Download as PDF
<![CDATA[
46546
Federal Register / Vol. 82, No. 192 / Thursday, October 5, 2017 / Notices
comments electronically should contact
the person identified in the FOR FURTHER
INFORMATION CONTACT section by
telephone for advice on filing
alternatives.
FOR FURTHER INFORMATION CONTACT:
David A. Trissell, General Counsel, at
202–789–6820.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Docketed Proceeding(s)
ethrower on DSK3G9T082PROD with NOTICES
I. Introduction
The Commission gives notice that the
Postal Service filed request(s) for the
Commission to consider matters related
to negotiated service agreement(s). The
request(s) may propose the addition or
removal of a negotiated service
agreement from the market dominant or
the competitive product list, or the
modification of an existing product
currently appearing on the market
dominant or the competitive product
list.
Section II identifies the docket
number(s) associated with each Postal
Service request, the title of each Postal
Service request, the request’s acceptance
date, and the authority cited by the
Postal Service for each request. For each
request, the Commission appoints an
officer of the Commission to represent
the interests of the general public in the
proceeding, pursuant to 39 U.S.C. 505
(Public Representative). Section II also
establishes comment deadline(s)
pertaining to each request.
The public portions of the Postal
Service’s request(s) can be accessed via
the Commission’s Web site (https://
www.prc.gov). Non-public portions of
the Postal Service’s request(s), if any,
can be accessed through compliance
with the requirements of 39 CFR
3007.40.
The Commission invites comments on
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent
with the policies of title 39. For
request(s) that the Postal Service states
concern market dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
U.S.C. 3642, 39 CFR part 3010, and 39
CFR part 3020, subpart B. For request(s)
that the Postal Service states concern
competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3015, and
39 CFR part 3020, subpart B. Comment
deadline(s) for each request appear in
section II.
VerDate Sep<11>2014
19:52 Oct 04, 2017
Jkt 244001
II. Docketed Proceeding(s)
1. Docket No(s).: MC2017–213 and
CP2017–321; Filing Title: Request of the
United States Postal Service to Add
Priority Mail Contract 365 to
Competitive Product List and Notice of
Filing (Under Seal) of Unredacted
Governors’ Decision, Contract, and
Supporting Data; Filing Acceptance
Date: September 29, 2017; Filing
Authority: 39 U.S.C. 3642 and 39 CFR
3020.30 et seq.; Public Representative:
Michael L. Leibert; Comments Due:
October 10, 2017.
2. Docket No(s).: MC2017–214 and
CP2017–322; Filing Title: Request of the
United States Postal Service to Add
Priority Mail & First-Class Package
Service Contract 58 to Competitive
Product List and Notice of Filing (Under
Seal) of Unredacted Governors’
Decision, Contract, and Supporting
Data; Filing Acceptance Date:
September 29, 2017; Filing Authority: 39
U.S.C. 3642 and 39 CFR 3020.30 et seq.;
Public Representative: Michael L.
Leibert; Comments Due: October 10,
2017.
This notice will be published in the
Federal Register.
Stacy L. Ruble,
Secretary.
[FR Doc. 2017–21457 Filed 10–4–17; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81771; File No. TP 17–11]
Order Granting Limited Exemptions
From Exchange Act Rule 10b–17 and
Rules 101 and 102 of Regulation M to
VanEck Vectors NDR CMG Long/Flat
Allocation ETF Pursuant to Exchange
Act Rule 10b–17(b)(2) and Rules 101(d)
and 102(e) of Regulation M
September 29, 2017.
By letter dated September 29, 2017
(the ‘‘Letter’’), counsel for VanEck
Vectors ETF Trust (the ‘‘Trust’’), on
behalf of the Trust, VanEck Vectors NDR
CMG Long/Flat Allocation ETF (the
‘‘Fund’’), any national securities
exchange on or through which shares
issued by the Fund (‘‘Shares’’) may
subsequently trade, Van Eck Securities
Corporation (the ‘‘Distributor’’), and
persons or entities engaging in
transactions in Shares (collectively, the
‘‘Applicants’’), requested exemptions, or
interpretive or no-action relief, from
Rule 10b–17 of the Securities Exchange
Act of 1934, as amended (the ‘‘Exchange
Act’’), and Rules 101 and 102 of
Regulation M, in connection with
PO 00000
Frm 00071
Fmt 4703
Sfmt 4703
secondary market transactions in Shares
and the creation or redemption of
aggregations of Shares of at least 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 will seek to provide
investment results that closely
correspond, before fees and expenses, to
the performance of the Ned Davis
Research CMG US Large Cap Long/Flat
Index (the ‘‘Index’’).1 The Fund intends,
at least initially, to operate as an ‘‘ETF
of ETFs’’ by seeking to track the
performance of its underlying Index by
holding shares of one or more ETFs
(each, an ‘‘Underlying ETF’’) whose
investment objective is to track the
performance of the S&P 500.2
In order to track the Index, the Fund
will invest at least 80% of its total assets
(but typically far more) in component
securities of the Index (directly or by
indirect investments through one or
more Underlying ETFs). The Fund may
invest the remaining 20% of its total
assets in securities not included in the
Index, money market instruments,
including repurchase agreements or
other funds which invest exclusively in
money market instruments, convertible
securities, structured notes, and certain
derivatives, which the Investment
Advisor believes will help the Fund
track the Index. Depositary receipts not
included in the Index may also be used
by the Fund in seeking performance that
1 The Index is a rules-based index that follows a
proprietary model developed by Ned Davis
Research, Inc. in conjunction with Capital
Management Group, Inc. To help limit loss
associated with adverse market conditions, the
model produces trade signals that dictate the
Index’s equity allocation ranging from 100% fully
invested (i.e., ‘‘long’’) to 100% in cash (i.e., ‘‘flat’’).
The Index 100% replicates the S&P 500 Index (the
‘‘S&P 500’’) when the Index is long and holds U.S.
Treasury Bills when the Index is flat (i.e., it will be
allocated to the Solactive 13-week U.S. T-bill
Index). When the Index is not completely long or
flat, either 80% or 40% of it will be allocated to
the S&P 500, with the remaining portion (20% or
60% respectively) allocated to U.S. Treasury Bills.
2 The Fund will operate as an ETF of ETFs until
the Fund reaches, in the opinion of the Investment
Adviser, an adequate asset size. When the Fund
reaches an adequate size and the Index has an
equity allocation, the Fund will then seek to track
the Index by investing directly in the shares of the
500 companies comprising the S&P 500. In the rare
event the Fund does not operate as an ETF of ETFs
for that day, the Fund will operate to meet the
conditions of the ETF Class Relief, including the
Equity ETF Class Letter. Applicants do not believe
that either option will have an effect on the efficacy
of the arbitrage process for the Fund.
E:\FR\FM\05OCN1.SGM
05OCN1
Federal Register / Vol. 82, No. 192 / Thursday, October 5, 2017 / Notices
ethrower on DSK3G9T082PROD with NOTICES
corresponds to the Index.3 Except for
the fact that the Fund will operate as an
ETF of ETFs, the Fund will operate in
a manner similar to the Underlying
ETFs.
The Applicants represent, among
other things, the following:
• Shares of the Fund will be issued
by the Trust, an open-end management
investment company that is registered
with the Commission;
• Creation Units will be continuously
redeemable at the net asset value (the
‘‘NAV’’) next determined after receipt of
a request for redemption by the Fund,4
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 NYSE Arca, 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
‘‘Listing Exchange’’);
• 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 indicative value of
the Fund per share and the intra-day
value of the Index will be publicly
disseminated every 15 seconds
throughout the trading day through the
facilities of the Consolidated Tape
Association;
• On each business day before 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 will
disseminate continuously every 15
seconds throughout the trading day,
through the facilities of the
Consolidated Tape Association, the
market value of a Share, and the Listing
Exchange, market data vendors, or other
information providers will disseminate,
every 15 seconds throughout the trading
3 American depositary receipts not included in
the Index may be used by the Fund in seeking
performance that corresponds to the Index, and in
managing cash flows, and may count towards
compliance with the Fund’s 80% policy.
4 The NAV of the Fund generally is determined
each business day as of the close of trading
(ordinarily 4:00 p.m., Eastern Time) on the New
York Stock Exchange.
VerDate Sep<11>2014
19:52 Oct 04, 2017
Jkt 244001
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 and other assets
held by the Fund, 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 Applicants believe that
arbitrageurs are expected to take
advantage of price variations between
the Fund’s market price and its NAV;
and
• A close alignment between the
market price of Shares and the Fund’s
NAV is expected.
Regulation M
While redeemable securities issued by
an open-end management investment
company are excepted from the
provisions of Rule 101 and 102 of
Regulation M, the Applicants may not
rely upon that exception for the Shares.5
However, we find that it is appropriate
in the public interest and is consistent
with the protection of investors to grant
a conditional exemption from Rules 101
and 102 to persons who may be deemed
to be participating in a distribution of
Shares of the Fund as described in more
detail below.
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
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 00072
Fmt 4703
Sfmt 4703
46547
persons who have agreed to participate
or are participating in a distribution of
securities. The-Shares are in a
continuous distribution and, as such,
the restricted period in which
distribution participants and their
affiliated purchasers are prohibited from
bidding for, purchasing, or attempting to
induce others to bid for or purchase
extends indefinitely.
Based on the representations and facts
presented in the Letter, particularly that
the Trust is a registered open-end
management investment company, that
Creation Unit size aggregations of the
Shares of the Fund will be continuously
redeemable at the NAV next determined
after receipt of a request for redemption
by the Fund, and that a close alignment
between the market price of Shares and
the Fund’s NAV is expected, the
Commission finds that it is appropriate
in the public interest and consistent
with the protection of investors to grant
the Trust an exemption under paragraph
(d) of Rule 101 of Regulation M with
respect to the Fund, thus permitting
persons participating in a distribution of
Shares of the Fund to bid for or
purchase such Shares during their
participation in such distribution.6
Rule 102 of Regulation M
Rule 102 of Regulation M prohibits
issuers, selling security holders, and any
affiliated purchaser of such person from
bidding for, purchasing, or attempting to
induce any person to bid for or purchase
a covered security during the applicable
restricted period in connection with a
distribution of securities effected by or
on behalf of an issuer or selling security
holder.
Based on the representations and facts
presented in the Letter, particularly that
the Trust is a registered open-end
management investment company, that
Creation Unit size aggregations of the
Shares of the Fund will be continuously
redeemable at the NAV next determined
after receipt of a request for redemption
by the Fund, and that a close alignment
between the market price of Shares and
the Fund’s NAV is expected, the
Commission finds that it is appropriate
in the public interest and consistent
with the protection of investors to grant
the Trust an exemption under paragraph
(e) of Rule 102 of Regulation M with
respect to the Fund, thus permitting the
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\05OCN1.SGM
05OCN1
46548
Federal Register / Vol. 82, No. 192 / Thursday, October 5, 2017 / Notices
Fund to redeem Shares of the Fund
during the continuous offering of such
Shares.
Rule 10b–17
Rule 10b–17, with certain exceptions,
requires an issuer of a class of publicly
traded securities to give notice of certain
specified actions (for example, a
dividend distribution) relating to such
class of securities in accordance with
Rule 10b–17(b). Based on the
representations and facts in the Letter,
and subject to the conditions below, we
find that it is appropriate in the public
interest, and consistent with the
protection of investors to grant the Trust
a conditional exemption from Rule 10b–
17 because market participants will
receive timely notification of the
existence and timing of a pending
distribution, and thus the concerns that
the Commission raised in adopting Rule
10b–17 will not be implicated.7
Conclusion
ethrower on DSK3G9T082PROD with NOTICES
It is hereby ordered, pursuant to Rule
101(d) of Regulation M, that the Trust,
based on the representations and facts
presented in the Letter, is exempt from
the requirements of Rule 101 with
respect to the Fund, thus permitting
persons who may be deemed to be
participating in a distribution of Shares
of the Fund to bid for or purchase such
Shares during their participation in
such distribution.
It is further ordered, pursuant to Rule
102(e) of Regulation M, that the Trust,
based on the representations and the
facts presented in the Letter, is exempt
from the requirements of Rule 102 with
respect to the Fund, thus permitting the
Fund to redeem Shares of the Fund
during the continuous offering of such
Shares.
It is further ordered, pursuant to Rule
10b–17(b)(2), that the Trust, based on
the representations and the facts
presented in the Letter and subject to
the conditions below, is exempt from
the requirements of Rule 10b–17 with
respect to transactions in the shares of
the Fund.
This exemptive relief is subject to the
following conditions:
7 We also note that timely compliance with Rule
10b–17(b)(1)(v)(a) and (b) would be impractical in
light of the nature of the Fund. This is because it
is not possible for the Fund to accurately project ten
days in advance what dividend, if any, would be
paid on a particular record date. Further, the
Commission finds, based on the Applicants’
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
19:52 Oct 04, 2017
Jkt 244001
• The Trust will comply with Rule
10b–17 except for Rule 10b–
17(b)(1)(v)(a) and (b); and
• The Trust will provide the
information required by Rule 10b–
17(b)(1)(v)(a) and (b) to the Exchange as
soon as practicable before trading begins
on the ex-dividend date, but in no event
later than the time when the Exchange
last accepts information relating to
distributions on the day before the exdividend date.
This exemptive relief is subject to
modification or revocation at any time
the Commission determines that such
action is necessary or appropriate in
furtherance of the purposes of the
Exchange Act. Persons relying upon this
exemptive relief shall discontinue
transactions involving the Shares of the
Fund, pending presentation of the facts
for the Commission’s consideration, in
the event that any material change
occurs with respect to any of the facts
or representations made by the
Applicants and, consistent with all
preceding letters, particularly with
respect to the close alignment between
the market price of Shares and the
Fund’s NAV. In addition, persons
relying on this exemption are directed
to the anti-fraud and anti-manipulation
provisions of the Exchange Act,
particularly Sections 9(a) and 10(b), and
Rule 10b–5 thereunder.
Responsibility for compliance with
these and any other applicable
provisions of the federal securities laws
must rest with the persons relying on
this exemption. This order should not
be considered a view with respect to
any other question that the proposed
transactions may raise, including, but
not limited to the adequacy of the
disclosure concerning, and the
applicability of other federal or state
laws to, the proposed transactions.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–21400 Filed 10–4–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–81776; File No. SR–NYSE–
2017–49]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Make
Technical and Conforming Changes to
Section 703.02 of the NYSE Listed
Company Manual
September 29, 2017.
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
September 20, 2017, New York Stock
Exchange LLC (‘‘NYSE’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to make
technical and conforming changes to
Section 703.02 (part2) (Stock Split/
Stock Rights/Stock Dividend Listing
Process) (‘‘Section 703.02 (part2)’’) of
the NYSE Listed Company Manual
(‘‘Listed Company Manual’’). 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
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.
1 15
U.S.C.78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
8 17
PO 00000
CFR 200.30–3(a)(6) and (9).
Frm 00073
Fmt 4703
Sfmt 4703
E:\FR\FM\05OCN1.SGM
05OCN1
]]>Agencies
[Federal Register Volume 82, Number 192 (Thursday, October 5, 2017)]
[Notices]
[Pages 46546-46548]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21400]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-81771; File No. TP 17-11]
Order Granting Limited Exemptions From Exchange Act Rule 10b-17
and Rules 101 and 102 of Regulation M to VanEck Vectors NDR CMG Long/
Flat Allocation ETF Pursuant to Exchange Act Rule 10b-17(b)(2) and
Rules 101(d) and 102(e) of Regulation M
September 29, 2017.
By letter dated September 29, 2017 (the ``Letter''), counsel for
VanEck Vectors ETF Trust (the ``Trust''), on behalf of the Trust,
VanEck Vectors NDR CMG Long/Flat Allocation ETF (the ``Fund''), any
national securities exchange on or through which shares issued by the
Fund (``Shares'') may subsequently trade, Van Eck Securities
Corporation (the ``Distributor''), and persons or entities engaging in
transactions in Shares (collectively, the ``Applicants''), requested
exemptions, or interpretive or no-action relief, from Rule 10b-17 of
the Securities Exchange Act of 1934, as amended (the ``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 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 will seek to provide investment results that closely
correspond, before fees and expenses, to the performance of the Ned
Davis Research CMG US Large Cap Long/Flat Index (the ``Index'').\1\ The
Fund intends, at least initially, to operate as an ``ETF of ETFs'' by
seeking to track the performance of its underlying Index by holding
shares of one or more ETFs (each, an ``Underlying ETF'') whose
investment objective is to track the performance of the S&P 500.\2\
---------------------------------------------------------------------------
\1\ The Index is a rules-based index that follows a proprietary
model developed by Ned Davis Research, Inc. in conjunction with
Capital Management Group, Inc. To help limit loss associated with
adverse market conditions, the model produces trade signals that
dictate the Index's equity allocation ranging from 100% fully
invested (i.e., ``long'') to 100% in cash (i.e., ``flat''). The
Index 100% replicates the S&P 500 Index (the ``S&P 500'') when the
Index is long and holds U.S. Treasury Bills when the Index is flat
(i.e., it will be allocated to the Solactive 13-week U.S. T-bill
Index). When the Index is not completely long or flat, either 80% or
40% of it will be allocated to the S&P 500, with the remaining
portion (20% or 60% respectively) allocated to U.S. Treasury Bills.
\2\ The Fund will operate as an ETF of ETFs until the Fund
reaches, in the opinion of the Investment Adviser, an adequate asset
size. When the Fund reaches an adequate size and the Index has an
equity allocation, the Fund will then seek to track the Index by
investing directly in the shares of the 500 companies comprising the
S&P 500. In the rare event the Fund does not operate as an ETF of
ETFs for that day, the Fund will operate to meet the conditions of
the ETF Class Relief, including the Equity ETF Class Letter.
Applicants do not believe that either option will have an effect on
the efficacy of the arbitrage process for the Fund.
---------------------------------------------------------------------------
In order to track the Index, the Fund will invest at least 80% of
its total assets (but typically far more) in component securities of
the Index (directly or by indirect investments through one or more
Underlying ETFs). The Fund may invest the remaining 20% of its total
assets in securities not included in the Index, money market
instruments, including repurchase agreements or other funds which
invest exclusively in money market instruments, convertible securities,
structured notes, and certain derivatives, which the Investment Advisor
believes will help the Fund track the Index. Depositary receipts not
included in the Index may also be used by the Fund in seeking
performance that
[[Page 46547]]
corresponds to the Index.\3\ Except for the fact that the Fund will
operate as an ETF of ETFs, the Fund will operate in a manner similar to
the Underlying ETFs.
---------------------------------------------------------------------------
\3\ American depositary receipts not included in the Index may
be used by the Fund in seeking performance that corresponds to the
Index, and in managing cash flows, and may count towards compliance
with the Fund's 80% policy.
---------------------------------------------------------------------------
The Applicants represent, among other things, the following:
Shares of the Fund will be issued by the Trust, an open-
end management investment company that is registered with the
Commission;
Creation Units will be continuously redeemable at the net
asset value (the ``NAV'') next determined after receipt of a request
for redemption by the Fund,\4\ and the secondary market price of the
Shares should not vary substantially from the NAV of such Shares;
---------------------------------------------------------------------------
\4\ The NAV of the Fund generally is determined each business
day as of the close of trading (ordinarily 4:00 p.m., Eastern Time)
on the New York Stock Exchange.
---------------------------------------------------------------------------
Shares of the Fund will be listed and traded on NYSE Arca,
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 ``Listing Exchange'');
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 indicative value of the Fund per share and
the intra-day value of the Index will be publicly disseminated every 15
seconds throughout the trading day through the facilities of the
Consolidated Tape Association;
On each business day before 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 will disseminate continuously every
15 seconds throughout the trading day, through the facilities of the
Consolidated Tape Association, the market value of a Share, and the
Listing 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 and other assets held
by the Fund, 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 Applicants believe that arbitrageurs are expected to
take advantage of price variations between the Fund's market price and
its NAV; and
A close alignment between the market price of Shares and
the Fund's NAV is expected.
Regulation M
While redeemable securities issued by an open-end management
investment company are excepted from the provisions of Rule 101 and 102
of Regulation M, the Applicants may not rely upon that exception for
the Shares.\5\ However, we find that it is appropriate in the public
interest and is consistent with the protection of investors to grant a
conditional exemption from Rules 101 and 102 to persons who may be
deemed to be participating in a distribution of Shares of the Fund as
described in more detail below.
---------------------------------------------------------------------------
\5\ While ETFs operate under exemptions from the definitions of
``open-end company'' under Section 5(a)(1) of the 1940 Act and
``redeemable security'' under Section 2(a)(32) of the 1940 Act, the
Fund and its securities do not meet those definitions.
---------------------------------------------------------------------------
Rule 101 of Regulation M
Generally, Rule 101 of Regulation M is an anti-manipulation rule
that, subject to certain exceptions, prohibits any ``distribution
participant'' and its ``affiliated purchasers'' from bidding for,
purchasing, or attempting to induce any person to bid for or purchase
any security which is the subject of a distribution until after the
applicable restricted period, except as specifically permitted in the
rule. Rule 100 of Regulation M defines ``distribution'' to mean any
offering of securities that is distinguished from ordinary trading
transactions by the magnitude of the offering and the presence of
special selling efforts and selling methods. The provisions of Rule 101
of Regulation M apply to underwriters, prospective underwriters,
brokers, dealers, or other persons who have agreed to participate or
are participating in a distribution of securities. The-Shares are in a
continuous distribution and, as such, the restricted period in which
distribution participants and their affiliated purchasers are
prohibited from bidding for, purchasing, or attempting to induce others
to bid for or purchase extends indefinitely.
Based on the representations and facts presented in the Letter,
particularly that the Trust is a registered open-end management
investment company, that Creation Unit size aggregations of the Shares
of the Fund will be continuously redeemable at the NAV next determined
after receipt of a request for redemption by the Fund, and that a close
alignment between the market price of Shares and the Fund's NAV is
expected, the Commission finds that it is appropriate in the public
interest and consistent with the protection of investors to grant the
Trust an exemption under paragraph (d) of Rule 101 of Regulation M with
respect to the Fund, thus permitting persons participating in a
distribution of Shares of the Fund to bid for or purchase such Shares
during their participation in such distribution.\6\
---------------------------------------------------------------------------
\6\ Additionally, we confirm the interpretation that a
redemption of Creation Unit size aggregations of Shares of the Fund
and the receipt of securities in exchange by a participant in a
distribution of Shares of the Fund would not constitute an ``attempt
to induce any person to bid for or purchase, a covered security
during the applicable restricted period'' within the meaning of Rule
101 of Regulation M and, therefore, would not violate that rule.
---------------------------------------------------------------------------
Rule 102 of Regulation M
Rule 102 of Regulation M prohibits issuers, selling security
holders, and any affiliated purchaser of such person from bidding for,
purchasing, or attempting to induce any person to bid for or purchase a
covered security during the applicable restricted period in connection
with a distribution of securities effected by or on behalf of an issuer
or selling security holder.
Based on the representations and facts presented in the Letter,
particularly that the Trust is a registered open-end management
investment company, that Creation Unit size aggregations of the Shares
of the Fund will be continuously redeemable at the NAV next determined
after receipt of a request for redemption by the Fund, and that a close
alignment between the market price of Shares and the Fund's NAV is
expected, the Commission finds that it is appropriate in the public
interest and consistent with the protection of investors to grant the
Trust an exemption under paragraph (e) of Rule 102 of Regulation M with
respect to the Fund, thus permitting the
[[Page 46548]]
Fund to redeem Shares of the Fund during the continuous offering of
such Shares.
Rule 10b-17
Rule 10b-17, with certain exceptions, requires an issuer of a class
of publicly traded securities to give notice of certain specified
actions (for example, a dividend distribution) relating to such class
of securities in accordance with Rule 10b-17(b). Based on the
representations and facts in the Letter, and subject to the conditions
below, we find that it is appropriate in the public interest, and
consistent with the protection of investors to grant the Trust a
conditional exemption from Rule 10b-17 because market participants will
receive timely notification of the existence and timing of a pending
distribution, and thus the concerns that the Commission raised in
adopting Rule 10b-17 will not be implicated.\7\
---------------------------------------------------------------------------
\7\ We also note that timely compliance with Rule 10b-
17(b)(1)(v)(a) and (b) would be impractical in light of the nature
of the Fund. This is because it is not possible for the Fund to
accurately project ten days in advance what dividend, if any, would
be paid on a particular record date. Further, the Commission finds,
based on the Applicants' 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.
---------------------------------------------------------------------------
Conclusion
It is hereby ordered, pursuant to Rule 101(d) of Regulation M, that
the Trust, based on the representations and facts presented in the
Letter, is exempt from the requirements of Rule 101 with respect to the
Fund, thus permitting persons who may be deemed to be participating in
a distribution of Shares of the Fund to bid for or purchase such Shares
during their participation in such distribution.
It is further ordered, pursuant to Rule 102(e) of Regulation M,
that the Trust, based on the representations and the facts presented in
the Letter, is exempt from the requirements of Rule 102 with respect to
the Fund, thus permitting the Fund to redeem Shares of the Fund during
the continuous offering of such Shares.
It is further ordered, pursuant to Rule 10b-17(b)(2), that the
Trust, based on the representations and the facts presented in the
Letter and subject to the conditions below, is exempt from the
requirements of Rule 10b-17 with respect to transactions in the shares
of the Fund.
This exemptive relief is subject to the following conditions:
The Trust will comply with Rule 10b-17 except for Rule
10b-17(b)(1)(v)(a) and (b); and
The Trust will provide the information required by Rule
10b-17(b)(1)(v)(a) and (b) to the Exchange as soon as practicable
before trading begins on the ex-dividend date, but in no event later
than the time when the Exchange last accepts information relating to
distributions on the day before the ex-dividend date.
This exemptive relief is subject to modification or revocation at
any time the Commission determines that such action is necessary or
appropriate in furtherance of the purposes of the Exchange Act. Persons
relying upon this exemptive relief shall discontinue transactions
involving the Shares of the Fund, pending presentation of the facts for
the Commission's consideration, in the event that any material change
occurs with respect to any of the facts or representations made by the
Applicants and, consistent with all preceding letters, particularly
with respect to the close alignment between the market price of Shares
and the Fund's NAV. In addition, persons relying on this exemption are
directed to the anti-fraud and anti-manipulation provisions of the
Exchange Act, particularly Sections 9(a) and 10(b), and Rule 10b-5
thereunder.
Responsibility for compliance with these and any other applicable
provisions of the federal securities laws must rest with the persons
relying on this exemption. This order should not be considered a view
with respect to any other question that the proposed transactions may
raise, including, but not limited to the adequacy of the disclosure
concerning, and the applicability of other federal or state laws to,
the proposed transactions.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
---------------------------------------------------------------------------
\8\ 17 CFR 200.30-3(a)(6) and (9).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-21400 Filed 10-4-17; 8:45 am]
BILLING CODE 8011-01-P
