Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change Regarding Investments of the Janus Henderson Mortgage-Backed Securities ETF Currently Listed and Traded on the Exchange Under NYSE Arca Rule 8.600-E, 57921-57924 [2019-23549]

Download as PDF Federal Register / Vol. 84, No. 209 / Tuesday, October 29, 2019 / Notices and that such documents be available for examination by the Commission. There are 34 entities required to comply with the rule: 23 National securities exchanges, 1 national securities association, 9 registered clearing agencies, and the Municipal Securities Rulemaking Board. The Commission staff estimates that the average number of hours necessary for compliance with the requirements of Rule 17a–1 is 52 hours per year. In addition, 4 national securities exchanges notice-registered pursuant to Section 6(g) of the Act (15 U.S.C. 78f(g)) are required to preserve records of determinations made under Rule 3a55– 1 under the Act (17 CFR 240.3a55–1), which the Commission staff estimates will take 1 hour per exchange, for a total of 4 hours. Accordingly, the Commission staff estimates that the total number of hours necessary to comply with the requirements of Rule 17a–1 is 1,772 hours. The total internal cost of compliance for all respondents is $124,040, based on an average cost per hour of $70. Compliance with Rule 17a–1 is mandatory. Rule 17a–1 does not assure confidentiality for the records maintained pursuant to the rule. The records required by Rule 17a–1 are available only for examination by the Commission staff, state securities authorities, and the self-regulatory organizations. Subject to the provisions of the Freedom of Information Act, 5 U.S.C. 522, and the Commission’s rules thereunder (17 CFR 200.80(b)(4)(iii)), the Commission does not generally publish or make available information contained in any reports, summaries, analyses, letters, or memoranda arising out of, in anticipation of, or in connection with an examination or inspection of the books and records of any person or any other investigation. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number. The public may view background documentation for this information collection at the following website: www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an email to: Lindsay.M.Abate@omb.eop.gov; and (ii) Charles Riddle, Acting Director/Chief Information Officer, Securities and Exchange Commission, c/o Candace Kenner, 100 F Street NE, Washington, VerDate Sep<11>2014 17:05 Oct 28, 2019 Jkt 250001 DC 20549, or by sending an email to: PRA_Mailbox@sec.gov. Comments must be submitted to OMB within 30 days of this notice. Dated: October 24, 2019. Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–23601 Filed 10–28–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release Nos. 33–10721; 34–87398; File No. 265–28] Investor Advisory Committee Meeting Securities and Exchange Commission. ACTION: Notice of meeting of Securities and Exchange Commission Dodd-Frank Investor Advisory Committee. AGENCY: The Securities and Exchange Commission Investor Advisory Committee, established pursuant to Section 911 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, is providing notice that it will hold a public meeting. The public is invited to submit written statements to the Committee. DATES: The meeting will be held on Thursday, November 7, 2019 from 9:30 a.m. until 3:00 p.m. (ET). Written statements should be received on or before November 7, 2019. ADDRESSES: The meeting will be held in Multi-Purpose Room LL–006 at the Commission’s headquarters, 100 F Street NE, Washington, DC 20549. The meeting will be webcast on the Commission’s website at www.sec.gov. Written statements may be submitted by any of the following methods: SUMMARY: Electronic Statements D Use the Commission’s internet submission form (https://www.sec.gov/ rules/other.shtml); or D Send an email message to rulescomments@sec.gov. Please include File No. 265–28 on the subject line; or Paper Statements D Send paper statements to Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File No. 265–28. This file number should be included on the subject line if email is used. To help us process and review your statement more efficiently, please use only one method. Statements also will be available for website viewing and printing in the PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 57921 Commission’s Public Reference Room, 100 F Street NE, Room 1503, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. All statements received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. FOR FURTHER INFORMATION CONTACT: Marc Oorloff Sharma, Chief Counsel, Office of the Investor Advocate, at (202) 551–3302, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. SUPPLEMENTARY INFORMATION: The meeting will be open to the public, except during that portion of the meeting reserved for an administrative work session during lunch. Persons needing special accommodations to take part because of a disability should notify the contact person listed in the section above entitled FOR FURTHER INFORMATION CONTACT. The agenda for the meeting includes: Welcome remarks; a discussion regarding whether investors use environmental, social, and governance (ESG) data in investment/capital allocation decisions; a discussion regarding the SEC’s Concept Release on Harmonization of Securities Offering Exemptions; subcommittee reports; and a nonpublic administrative work session during lunch. Dated: October 24, 2019. Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–23607 Filed 10–28–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87385; File No. SR– NYSEArca–2019–51] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change Regarding Investments of the Janus Henderson MortgageBacked Securities ETF Currently Listed and Traded on the Exchange Under NYSE Arca Rule 8.600–E October 23, 2019. On July 9, 2019, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities E:\FR\FM\29OCN1.SGM 29OCN1 57922 Federal Register / Vol. 84, No. 209 / Tuesday, October 29, 2019 / Notices Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to make certain changes to the investments of the Janus Henderson Mortgage-Backed Securities ETF (‘‘Fund’’), the shares (‘‘Shares’’) of which are currently listed and traded on the Exchange under NYSE Arca Rule 8.600–E. The proposed rule change was published for comment in the Federal Register on July 25, 2019.3 On September 3, 2019, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to approve or disapprove the proposed rule change.5 The Commission has received no comment letters on the proposal. The Commission is publishing this order to institute proceedings under Section 19(b)(2)(B) of the Act 6 to determine whether to approve or disapprove the proposed rule change. I. Exchange’s Description of the Proposal 7 The Exchange proposes to make certain changes to the investments of the Fund. According to the Exchange, the Shares of the Fund commenced listing and trading on the Exchange on September 12, 2018 pursuant to the generic listing standards under Commentary .01 to NYSE Arca Rule 8.600–E, which governs the listing and trading of Managed Fund Shares 8 on the Exchange. The Fund is a series of Janus Detroit Street Trust (‘‘Trust’’).9 Janus Capital 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 86417 (July 19, 2019), 84 FR 35910 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 86855, 84 FR 47337 (September 9, 2019). The Commission designated October 23, 2019, as the date by which it should approve, disapprove, or institute proceedings to determine whether to approve or disapprove the proposed rule change. 6 15 U.S.C. 78s(b)(2)(B). 7 The Commission notes that additional information regarding, among other things, the Shares, Fund, investment objective, permitted investments, investment strategies and methodology, investment restrictions, investment adviser, creation and redemption procedures, availability of information, trading rules and halts, and surveillance procedures, can be found in the Notice (see supra note 3) and the Registration Statement (see infra note 9), as applicable. 8 A Managed Fund Share is a security that represents an interest in an investment company registered under the Investment Company Act of 1940 (‘‘1940 Act’’) organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment adviser consistent with its investment objectives and policies. 9 The Trust is registered under the 1940 Act. On February 28, 2019, the Trust filed with the 2 17 VerDate Sep<11>2014 17:05 Oct 28, 2019 Jkt 250001 Management LLC is the Fund’s investment adviser (‘‘Adviser’’).10 State Street Bank and Trust Company is the custodian and transfer agent for the Fund, and ALPS Distributors, Inc. is the distributor for the Fund’s Shares. A. Principal Investments of the Fund According to the Exchange, the Fund’s investment objective is to seek a high level of total return consisting of income and capital appreciation. Under normal market conditions,11 the Fund invests at least 80% of its net assets in a portfolio of mortgage-related fixed income instruments of varying maturities. The mortgage-related fixed income instruments in which the Fund may invest are the following: Residential mortgage-backed securities; commercial mortgage-backed securities; collateralized mortgage obligations; stripped mortgage-backed securities; mortgage pass-through securities; and other securities representing an interest in or secured by or related to mortgages, including asset-backed securities (‘‘ABS’’).12 Under normal market conditions, the Fund will invest at least 80% of its net assets in mortgage-related securities issued by the U.S. government and its agencies, such as the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). The Fund will typically Commission a registration statement on Form N–1A under the Securities Act of 1933 and the 1940 Act relating to the Fund (File Nos. 333–207814 and 811–23112) (‘‘Registration Statement’’). In addition, the Exchange represents that the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. 31540 (March 30, 2015). 10 The Exchange represents that the Adviser is not registered as a broker-dealer, but is affiliated with a broker-dealer and has implemented and will maintain a fire wall with respect to such brokerdealer affiliate regarding access to information concerning the composition of, and/or changes to, the portfolio. In the event (a) the Adviser becomes registered as a broker-dealer or newly affiliated with one or more broker-dealers, or (b) any new adviser or sub-adviser is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement and maintain a fire wall with respect to its relevant personnel or its broker-dealer affiliate regarding access to information concerning the composition of, and/or changes to, the portfolio, and will be subject to procedures designed to prevent the use and dissemination of material, nonpublic information regarding such portfolio. 11 The term ‘‘normal market conditions’’ is defined in NYSE Arca Rule 8.600–E(c)(5). 12 The Fund will typically invest in asset-backed securities backed by pools of home equity loans and other mortgage-related debt. Asset-backed securities are collateralized by pools of obligations or assets. Asset-backed securities may take the form of commercial paper, notes, or pass-through certificates, and may be structured as floaters, inverse floaters, interest-only, and principal-only obligations. PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 enter into ‘‘to be announced’’ or ‘‘TBA’’ commitments when purchasing mortgage-backed securities. The Fund also may invest in exchange-traded funds (‘‘ETFs’’).13 B. Other Investments of the Fund While the Fund, under normal market conditions, will invest at least 80% of its assets in the mortgage-related securities issued by the U.S. government and its agencies as described above under Principal Investments, the Fund may invest up to 20% of its assets in the securities and financial instruments described below. The Fund may hold cash and cash equivalents.14 In addition, the Fund may hold the following fixed income securities (‘‘Fixed Income Securities’’): • U.S. government securities; • industrial development bonds; • inflation-indexed bonds, including municipal inflation-indexed bonds and corporate inflation-indexed bonds; or in derivatives that are linked to these securities; • municipal lease obligations; • pass-through securities; • variable and floating rate obligations (including ‘‘inverse floaters’’); • subordinated or junior debt; • corporate bonds, debentures, notes, and other similar corporate debt instruments; • non-agency, or privately-issued, residential and commercial mortgagebacked securities, and other mortgagerelated securities.15 The Fund may enter into mortgage dollar rolls and may invest in TBA transactions. The Fund may enter into short sales of any securities in which the Fund may invest. The Fund also may hold the following listed derivative instruments: Futures, options (including options on futures), and swaps on commodities, currencies, U.S. and non-U.S. equity securities, fixed income securities as defined in Commentary .01(b) to Rule 8.600–E, interest rates, U.S. Treasuries, or a basket or index of any of the foregoing. Such listed derivatives will comply with the criteria in Commentary .01(d) of NYSE Arca Rule 8.600–E. 13 For purposes of this filing, ‘‘ETFs’’ are Investment Company Units (as described in NYSE Arca Rule 5.2–E(j)(3)); Portfolio Depositary Receipts (as described in NYSE Arca Rule 8.100–E); and Managed Fund Shares (as described in NYSE Arca Rule 8.600–E). All ETFs will be listed and traded in the U.S. on a national securities exchange. 14 For purposes of this filing, cash equivalents include the securities included in Commentary .01(c) to NYSE Arca Rule 8.600–E. 15 Non-agency, or privately-issued, residential and commercial MBS, and other mortgage-related securities and other asset-backed securities are referred to herein as ‘‘Private ABS/MBS.’’ E:\FR\FM\29OCN1.SGM 29OCN1 Federal Register / Vol. 84, No. 209 / Tuesday, October 29, 2019 / Notices The Fund may hold the following over-the-counter (‘‘OTC’’) derivative instruments: Forwards, options, and OTC total return swaps on commodities, currencies, U.S. and non-U.S. equity securities, fixed income securities as defined in Commentary .01(b) to Rule 8.600–E, interest rates, or a basket or index of any of the foregoing. The Fund also may hold OTC credit default swaps and may enter into OTC options on swap agreements. The Fund may invest in securities of non-exchange-traded investment company securities, subject to applicable limitations under Section 12(d)(1) of the 1940 Act, and may invest in private placements, restricted securities, and Rule 144A securities. The Fund will not invest in securities or other financial instruments that have not been described in this proposed rule change. C. Application of Generic Listing Requirements The Exchange represents that it is submitting this proposed rule change because the portfolio for the Fund will not meet all of the ‘‘generic’’ listing requirements of Commentary .01 to NYSE Arca Rule 8.600–E applicable to the listing of Managed Fund Shares. The Fund’s portfolio would meet all such requirements except for those set forth in Commentaries .01(a) 16 and Commentary .01(b)(4) 17 to NYSE Arca Rule 8.600–E. The Fund may invest in nonexchange-traded investment company securities, which are equity securities. Because such securities have a net asset value based on the value of securities and financial assets the investment company holds, the Exchange believes it is both unnecessary and inappropriate to apply to such investment company securities the criteria in Commentary .01(a)(1). The Exchange notes that the Commission has previously approved the listing of Managed Fund Shares with 16 Commentary .01(a)(1) to NYSE Arca Rule 8.600–E (U.S. Component Stocks) requires that the component stocks of the equity portion of a portfolio that are U.S. Component Stocks meet certain criteria initially and on a continuing basis. 17 Commentary .01(b)(4) to NYSE Arca Rule 8.600–E provides that component securities that in the aggregate account for at least 90% of the fixed income weight of the portfolio must be either: (a) From issuers that are required to file reports pursuant to Sections 13 and 15(d) of the Act; (b) from issuers that have a worldwide market value of its outstanding common equity held by nonaffiliates of $700 million or more; (c) from issuers that have outstanding securities that are notes, bonds debentures, or evidence of indebtedness having a total remaining principal amount of at least $1 billion; (d) exempted securities as defined in Section 3(a)(12) of the Act; or (e) from issuers that are a government of a foreign country or a political subdivision of a foreign country. VerDate Sep<11>2014 17:05 Oct 28, 2019 Jkt 250001 similar investment objectives and strategies where such funds were permitted to invest in the shares of other registered investment companies that are not ETFs or money market funds. In addition, the Exchange represents that the Fund will not comply with the requirements in Commentary .01(b)(4) to NYSE Arca Rule 8.600–E that component securities that in the aggregate account for at least 90% of the fixed income weight of the portfolio meet one of the criteria specified in Commentary .01(b)(4), because certain Private ABS/MBS by their nature cannot satisfy the criteria in Commentary .01(b)(4).18 Instead, the Exchange proposes that the Fund’s investments in Fixed Income Securities other than Private ABS/MBS will be required to comply with the requirements of Commentary .01(b)(4). The Exchange believes that excluding Private ABS/ MBS from the 90% calculation in Commentary .01(b)(4) is consistent with the Act because the Fund’s portfolio will minimize the risk to the overall Fund associated with any particular holding of the Fund as a result of the diversification provided by the investments and the Adviser’s selection process, which closely monitors investments to ensure maintenance of credit and liquidity standards. Further, the Exchange believes that this alternative limitation is appropriate because Commentary .01(b)(4) to NYSE Arca Rule 8.600–E is not designed for structured finance vehicles such as Private ABS/MBS. The Exchange notes that the Commission has previously approved the listing of Managed Fund Shares with similar investment objectives and strategies without imposing requirements that a certain percentage of such funds’ securities meet one of the criteria comparable to those set forth in Commentary .01(b)(4). The Adviser represents that the proposed exceptions from the requirements of Commentary .01 to NYSE Arca Rule 8.600–E described above are consistent with the Fund’s investment objective and will further assist the Adviser to achieve such investment objective. Deviations from the generic requirements are necessary for the Fund to achieve its investment objective in a manner that is costeffective and that maximizes investors’ 18 According to the Exchange, Private ABS/MBS are generally issued by special purpose vehicles in amounts smaller than the minimum dollar threshold set forth in Commentary .01(b)(4), so the criteria in Commentary .01(b)(4) to NYSE Arca Rule 8.600–E regarding an issuer’s market capitalization and the remaining principal amount of an issuer’s securities are typically unavailable with respect to Private ABS/MBS, even though such Private ABS/ MBS may own significant assets. PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 57923 returns. Further, the proposed alternative requirements are narrowly tailored to allow the Fund to achieve its investment objective in manner that is consistent with the principles of Section 6(b)(5) of the Act. As a result, the Exchange represents that it is in the public interest to approve listing and trading of Shares of the Fund on the Exchange pursuant to the requirements set forth herein. The Exchange represents that, other than Commentaries .01(a) and (b)(4) to NYSE Arca Rule 8.600–E, as described above, the Fund’s portfolio will meet all other requirements of NYSE Arca Rule 8.600–E. II. Proceedings To Determine Whether To Approve or Disapprove SR– NYSEArca–2019–51 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act 19 to determine whether the proposed rule change should be approved or disapproved. Institution of such proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described below, the Commission seeks and encourages interested persons to provide comments on the proposed rule change. Pursuant to Section 19(b)(2)(B) of the Act,20 the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’s consistency with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be ‘‘designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and ‘‘to protect investors and the public interest.’’ 21 The Commission asks that commenters address the sufficiency of the Exchange’s statements in support of the proposal, which are set forth in the Notice,22 in addition to any other comments they may wish to submit about the proposed rule change. In particular, the Commission seeks commenters’ views regarding whether the Exchange has adequately described 19 15 U.S.C. 78s(b)(2)(B). 20 Id. 21 15 U.S.C. 78f(b)(5). Notice, supra note 3. 22 See E:\FR\FM\29OCN1.SGM 29OCN1 57924 Federal Register / Vol. 84, No. 209 / Tuesday, October 29, 2019 / Notices and provided clear information about the proposed portfolio for the Commission to make a determination under Section 6(b)(5) of the Act. III. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposal is consistent with Section 6(b)(5) or any other provision of the Act, or the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b–4, any request for an opportunity to make an oral presentation.23 Interested persons are invited to submit written data, views, and arguments regarding whether the proposal should be approved or disapproved by November 19, 2019. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by December 3, 2019. The Commission asks that commenters address the sufficiency of the Exchange’s statements in support of the proposal, in addition to any other comments they may wish to submit about the proposed rule change. Comments may be submitted by any of the following methods: 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– NYSEArca–2019–51 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2019–51. This 23 Section 19(b)(2) of the Act, as amended by the Securities Acts Amendments of 1975, Public Law 94–29 (June 4, 1975), grants the Commission flexibility to determine what type of proceeding— either oral or notice and opportunity for written comments—is appropriate for consideration of a particular proposal by a self-regulatory organization. See Securities Acts Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). VerDate Sep<11>2014 17:05 Oct 28, 2019 Jkt 250001 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 website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSEArca–2019–51 and should be submitted by November 19, 2019. Rebuttal comments should be submitted by December 3, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–23549 Filed 10–28–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request Upon Written Request, Copy Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 Extension: Rule 31a–2, SEC File No. 270–174, OMB Control No. 3235–0179 Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities 24 17 PO 00000 CFR 200.30–3(a)(57). Frm 00081 Fmt 4703 Sfmt 4703 and Exchange Commission (the ‘‘Commission’’) has submitted to the Office of Management and Budget (‘‘OMB’’) a request for extension of the previously approved collection of information discussed below. Section 31(a)(1) of the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.) (the ‘‘Act’’) requires registered investment companies (‘‘funds’’) and certain underwriters, broker-dealers, investment advisers, and depositors to maintain and preserve records as prescribed by Commission rules. Rule 31a–1 (17 CFR 270.31a–1) under the Act specifies the books and records that each of these entities must maintain. Rule 31a–2 (17 CFR 270.31a–2) under the Act specifies the time periods that entities must retain certain books and records, including those required to be maintained under rule 31a–1. The retention of records, as required by the rule, is necessary to ensure access to material business and financial information about funds and certain related entities. We periodically inspect the operations of funds to ensure they are in compliance with the Act and regulations under the Act. Due to the limits on our resources, however, each fund may only be inspected at intervals of several years. In addition, the prosecution of persons who have engaged in certain violations of the federal securities laws may not be limited by timing restrictions. For these reasons, we often need information relating to events or transactions that occurred years ago. Without the requirement to preserve books, records, and other documents, our staff would have difficulty determining whether the fund was in compliance with the law in such areas as valuation of its portfolio securities, computation of the prices investors paid, and, when purchasing and selling fund shares, types and amounts of expenses the fund incurred, kinds of investments the fund purchased, actions of affiliated persons, or whether the fund had engaged in any illegal or fraudulent activities. As part of our examinations of funds, our staff also reviews the materials that directors consider in approving the advisory contract. There are 3,160 funds currently operating as of December 31, 2018, all of which are required to comply with rule 31a–2. The Commission staff estimates that, on average, a fund spends 220.4 hours annually to comply with the rule. The Commission therefore estimates the total annual hour burden of the rule’s and form’s paperwork requirements to be 696,464 hours. In addition to the burden hours, the Commission staff estimates that the E:\FR\FM\29OCN1.SGM 29OCN1

Agencies

[Federal Register Volume 84, Number 209 (Tuesday, October 29, 2019)]
[Notices]
[Pages 57921-57924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-23549]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87385; File No. SR-NYSEArca-2019-51]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting 
Proceedings To Determine Whether To Approve or Disapprove a Proposed 
Rule Change Regarding Investments of the Janus Henderson Mortgage-
Backed Securities ETF Currently Listed and Traded on the Exchange Under 
NYSE Arca Rule 8.600-E

October 23, 2019.
    On July 9, 2019, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities

[[Page 57922]]

Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to make certain changes to the investments of the 
Janus Henderson Mortgage-Backed Securities ETF (``Fund''), the shares 
(``Shares'') of which are currently listed and traded on the Exchange 
under NYSE Arca Rule 8.600-E. The proposed rule change was published 
for comment in the Federal Register on July 25, 2019.\3\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 86417 (July 19, 
2019), 84 FR 35910 (``Notice'').
---------------------------------------------------------------------------

    On September 3, 2019, pursuant to Section 19(b)(2) of the Act,\4\ 
the Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to approve or disapprove the proposed 
rule change.\5\ The Commission has received no comment letters on the 
proposal. The Commission is publishing this order to institute 
proceedings under Section 19(b)(2)(B) of the Act \6\ to determine 
whether to approve or disapprove the proposed rule change.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 86855, 84 FR 47337 
(September 9, 2019). The Commission designated October 23, 2019, as 
the date by which it should approve, disapprove, or institute 
proceedings to determine whether to approve or disapprove the 
proposed rule change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

I. Exchange's Description of the Proposal 7
---------------------------------------------------------------------------

    \7\ The Commission notes that additional information regarding, 
among other things, the Shares, Fund, investment objective, 
permitted investments, investment strategies and methodology, 
investment restrictions, investment adviser, creation and redemption 
procedures, availability of information, trading rules and halts, 
and surveillance procedures, can be found in the Notice (see supra 
note 3) and the Registration Statement (see infra note 9), as 
applicable.
---------------------------------------------------------------------------

    The Exchange proposes to make certain changes to the investments of 
the Fund. According to the Exchange, the Shares of the Fund commenced 
listing and trading on the Exchange on September 12, 2018 pursuant to 
the generic listing standards under Commentary .01 to NYSE Arca Rule 
8.600-E, which governs the listing and trading of Managed Fund Shares 
\8\ on the Exchange.
---------------------------------------------------------------------------

    \8\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (``1940 Act'') organized as an open-end 
investment company or similar entity that invests in a portfolio of 
securities selected by its investment adviser consistent with its 
investment objectives and policies.
---------------------------------------------------------------------------

    The Fund is a series of Janus Detroit Street Trust (``Trust'').\9\ 
Janus Capital Management LLC is the Fund's investment adviser 
(``Adviser'').\10\ State Street Bank and Trust Company is the custodian 
and transfer agent for the Fund, and ALPS Distributors, Inc. is the 
distributor for the Fund's Shares.
---------------------------------------------------------------------------

    \9\ The Trust is registered under the 1940 Act. On February 28, 
2019, the Trust filed with the Commission a registration statement 
on Form N-1A under the Securities Act of 1933 and the 1940 Act 
relating to the Fund (File Nos. 333-207814 and 811-23112) 
(``Registration Statement''). In addition, the Exchange represents 
that the Commission has issued an order granting certain exemptive 
relief to the Trust under the 1940 Act. See Investment Company Act 
Release No. 31540 (March 30, 2015).
    \10\ The Exchange represents that the Adviser is not registered 
as a broker-dealer, but is affiliated with a broker-dealer and has 
implemented and will maintain a fire wall with respect to such 
broker-dealer affiliate regarding access to information concerning 
the composition of, and/or changes to, the portfolio. In the event 
(a) the Adviser becomes registered as a broker-dealer or newly 
affiliated with one or more broker-dealers, or (b) any new adviser 
or sub-adviser is a registered broker-dealer or becomes affiliated 
with a broker-dealer, it will implement and maintain a fire wall 
with respect to its relevant personnel or its broker-dealer 
affiliate regarding access to information concerning the composition 
of, and/or changes to, the portfolio, and will be subject to 
procedures designed to prevent the use and dissemination of 
material, non-public information regarding such portfolio.
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A. Principal Investments of the Fund

    According to the Exchange, the Fund's investment objective is to 
seek a high level of total return consisting of income and capital 
appreciation. Under normal market conditions,\11\ the Fund invests at 
least 80% of its net assets in a portfolio of mortgage-related fixed 
income instruments of varying maturities. The mortgage-related fixed 
income instruments in which the Fund may invest are the following: 
Residential mortgage-backed securities; commercial mortgage-backed 
securities; collateralized mortgage obligations; stripped mortgage-
backed securities; mortgage pass-through securities; and other 
securities representing an interest in or secured by or related to 
mortgages, including asset-backed securities (``ABS'').\12\
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    \11\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5).
    \12\ The Fund will typically invest in asset-backed securities 
backed by pools of home equity loans and other mortgage-related 
debt. Asset-backed securities are collateralized by pools of 
obligations or assets. Asset-backed securities may take the form of 
commercial paper, notes, or pass-through certificates, and may be 
structured as floaters, inverse floaters, interest-only, and 
principal-only obligations.
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    Under normal market conditions, the Fund will invest at least 80% 
of its net assets in mortgage-related securities issued by the U.S. 
government and its agencies, such as the Government National Mortgage 
Association (Ginnie Mae), the Federal National Mortgage Association 
(Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie 
Mac). The Fund will typically enter into ``to be announced'' or ``TBA'' 
commitments when purchasing mortgage-backed securities. The Fund also 
may invest in exchange-traded funds (``ETFs'').\13\
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    \13\ For purposes of this filing, ``ETFs'' are Investment 
Company Units (as described in NYSE Arca Rule 5.2-E(j)(3)); 
Portfolio Depositary Receipts (as described in NYSE Arca Rule 8.100-
E); and Managed Fund Shares (as described in NYSE Arca Rule 8.600-
E). All ETFs will be listed and traded in the U.S. on a national 
securities exchange.
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B. Other Investments of the Fund

    While the Fund, under normal market conditions, will invest at 
least 80% of its assets in the mortgage-related securities issued by 
the U.S. government and its agencies as described above under Principal 
Investments, the Fund may invest up to 20% of its assets in the 
securities and financial instruments described below.
    The Fund may hold cash and cash equivalents.\14\ In addition, the 
Fund may hold the following fixed income securities (``Fixed Income 
Securities''):
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    \14\ For purposes of this filing, cash equivalents include the 
securities included in Commentary .01(c) to NYSE Arca Rule 8.600-E.
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     U.S. government securities;
     industrial development bonds;
     inflation-indexed bonds, including municipal inflation-
indexed bonds and corporate inflation-indexed bonds; or in derivatives 
that are linked to these securities;
     municipal lease obligations;
     pass-through securities;
     variable and floating rate obligations (including 
``inverse floaters'');
     subordinated or junior debt;
     corporate bonds, debentures, notes, and other similar 
corporate debt instruments;
     non-agency, or privately-issued, residential and 
commercial mortgage-backed securities, and other mortgage-related 
securities.\15\
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    \15\ Non-agency, or privately-issued, residential and commercial 
MBS, and other mortgage-related securities and other asset-backed 
securities are referred to herein as ``Private ABS/MBS.''
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    The Fund may enter into mortgage dollar rolls and may invest in TBA 
transactions. The Fund may enter into short sales of any securities in 
which the Fund may invest.
    The Fund also may hold the following listed derivative instruments: 
Futures, options (including options on futures), and swaps on 
commodities, currencies, U.S. and non-U.S. equity securities, fixed 
income securities as defined in Commentary .01(b) to Rule 8.600-E, 
interest rates, U.S. Treasuries, or a basket or index of any of the 
foregoing. Such listed derivatives will comply with the criteria in 
Commentary .01(d) of NYSE Arca Rule 8.600-E.

[[Page 57923]]

    The Fund may hold the following over-the-counter (``OTC'') 
derivative instruments: Forwards, options, and OTC total return swaps 
on commodities, currencies, U.S. and non-U.S. equity securities, fixed 
income securities as defined in Commentary .01(b) to Rule 8.600-E, 
interest rates, or a basket or index of any of the foregoing. The Fund 
also may hold OTC credit default swaps and may enter into OTC options 
on swap agreements.
    The Fund may invest in securities of non-exchange-traded investment 
company securities, subject to applicable limitations under Section 
12(d)(1) of the 1940 Act, and may invest in private placements, 
restricted securities, and Rule 144A securities. The Fund will not 
invest in securities or other financial instruments that have not been 
described in this proposed rule change.

C. Application of Generic Listing Requirements

    The Exchange represents that it is submitting this proposed rule 
change because the portfolio for the Fund will not meet all of the 
``generic'' listing requirements of Commentary .01 to NYSE Arca Rule 
8.600-E applicable to the listing of Managed Fund Shares. The Fund's 
portfolio would meet all such requirements except for those set forth 
in Commentaries .01(a) \16\ and Commentary .01(b)(4) \17\ to NYSE Arca 
Rule 8.600-E.
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    \16\ Commentary .01(a)(1) to NYSE Arca Rule 8.600-E (U.S. 
Component Stocks) requires that the component stocks of the equity 
portion of a portfolio that are U.S. Component Stocks meet certain 
criteria initially and on a continuing basis.
    \17\ Commentary .01(b)(4) to NYSE Arca Rule 8.600-E provides 
that component securities that in the aggregate account for at least 
90% of the fixed income weight of the portfolio must be either: (a) 
From issuers that are required to file reports pursuant to Sections 
13 and 15(d) of the Act; (b) from issuers that have a worldwide 
market value of its outstanding common equity held by non-affiliates 
of $700 million or more; (c) from issuers that have outstanding 
securities that are notes, bonds debentures, or evidence of 
indebtedness having a total remaining principal amount of at least 
$1 billion; (d) exempted securities as defined in Section 3(a)(12) 
of the Act; or (e) from issuers that are a government of a foreign 
country or a political subdivision of a foreign country.
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    The Fund may invest in non-exchange-traded investment company 
securities, which are equity securities. Because such securities have a 
net asset value based on the value of securities and financial assets 
the investment company holds, the Exchange believes it is both 
unnecessary and inappropriate to apply to such investment company 
securities the criteria in Commentary .01(a)(1). The Exchange notes 
that the Commission has previously approved the listing of Managed Fund 
Shares with similar investment objectives and strategies where such 
funds were permitted to invest in the shares of other registered 
investment companies that are not ETFs or money market funds.
    In addition, the Exchange represents that the Fund will not comply 
with the requirements in Commentary .01(b)(4) to NYSE Arca Rule 8.600-E 
that component securities that in the aggregate account for at least 
90% of the fixed income weight of the portfolio meet one of the 
criteria specified in Commentary .01(b)(4), because certain Private 
ABS/MBS by their nature cannot satisfy the criteria in Commentary 
.01(b)(4).\18\ Instead, the Exchange proposes that the Fund's 
investments in Fixed Income Securities other than Private ABS/MBS will 
be required to comply with the requirements of Commentary .01(b)(4). 
The Exchange believes that excluding Private ABS/MBS from the 90% 
calculation in Commentary .01(b)(4) is consistent with the Act because 
the Fund's portfolio will minimize the risk to the overall Fund 
associated with any particular holding of the Fund as a result of the 
diversification provided by the investments and the Adviser's selection 
process, which closely monitors investments to ensure maintenance of 
credit and liquidity standards. Further, the Exchange believes that 
this alternative limitation is appropriate because Commentary .01(b)(4) 
to NYSE Arca Rule 8.600-E is not designed for structured finance 
vehicles such as Private ABS/MBS. The Exchange notes that the 
Commission has previously approved the listing of Managed Fund Shares 
with similar investment objectives and strategies without imposing 
requirements that a certain percentage of such funds' securities meet 
one of the criteria comparable to those set forth in Commentary 
.01(b)(4).
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    \18\ According to the Exchange, Private ABS/MBS are generally 
issued by special purpose vehicles in amounts smaller than the 
minimum dollar threshold set forth in Commentary .01(b)(4), so the 
criteria in Commentary .01(b)(4) to NYSE Arca Rule 8.600-E regarding 
an issuer's market capitalization and the remaining principal amount 
of an issuer's securities are typically unavailable with respect to 
Private ABS/MBS, even though such Private ABS/MBS may own 
significant assets.
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    The Adviser represents that the proposed exceptions from the 
requirements of Commentary .01 to NYSE Arca Rule 8.600-E described 
above are consistent with the Fund's investment objective and will 
further assist the Adviser to achieve such investment objective. 
Deviations from the generic requirements are necessary for the Fund to 
achieve its investment objective in a manner that is cost-effective and 
that maximizes investors' returns. Further, the proposed alternative 
requirements are narrowly tailored to allow the Fund to achieve its 
investment objective in manner that is consistent with the principles 
of Section 6(b)(5) of the Act. As a result, the Exchange represents 
that it is in the public interest to approve listing and trading of 
Shares of the Fund on the Exchange pursuant to the requirements set 
forth herein.
    The Exchange represents that, other than Commentaries .01(a) and 
(b)(4) to NYSE Arca Rule 8.600-E, as described above, the Fund's 
portfolio will meet all other requirements of NYSE Arca Rule 8.600-E.

II. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2019-51 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \19\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of such 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the proposed rule change. Institution of proceedings 
does not indicate that the Commission has reached any conclusions with 
respect to any of the issues involved. Rather, as described below, the 
Commission seeks and encourages interested persons to provide comments 
on the proposed rule change.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\20\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of the proposed rule change's consistency with Section 6(b)(5) 
of the Act, which requires, among other things, that the rules of a 
national securities exchange be ``designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, and ``to protect investors and the public 
interest.'' \21\
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    \20\ Id.
    \21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission asks that commenters address the sufficiency of the 
Exchange's statements in support of the proposal, which are set forth 
in the Notice,\22\ in addition to any other comments they may wish to 
submit about the proposed rule change. In particular, the Commission 
seeks commenters' views regarding whether the Exchange has adequately 
described

[[Page 57924]]

and provided clear information about the proposed portfolio for the 
Commission to make a determination under Section 6(b)(5) of the Act.
---------------------------------------------------------------------------

    \22\ See Notice, supra note 3.
---------------------------------------------------------------------------

III. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Section 6(b)(5) or any other provision of the Act, or 
the rules and regulations thereunder. Although there do not appear to 
be any issues relevant to approval or disapproval that would be 
facilitated by an oral presentation of views, data, and arguments, the 
Commission will consider, pursuant to Rule 19b-4, any request for an 
opportunity to make an oral presentation.\23\
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    \23\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Acts Amendments of 1975, Senate Comm. 
on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by November 19, 2019. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
December 3, 2019. The Commission asks that commenters address the 
sufficiency of the Exchange's statements in support of the proposal, in 
addition to any other comments they may wish to submit about the 
proposed rule change.
    Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2019-51 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2019-51. 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 website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2019-51 and should be submitted 
by November 19, 2019. Rebuttal comments should be submitted by December 
3, 2019.
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    \24\ 17 CFR 200.30-3(a)(57).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-23549 Filed 10-28-19; 8:45 am]
 BILLING CODE 8011-01-P
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