Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of the Clearbridge Focus Value ETF Under Currently Proposed Rule 14.11(k), 68999-69007 [2019-27089]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 84, Number 242 (Tuesday, December 17, 2019)]
[Notices]
[Pages 68999-69007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27089]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87719; File No. SR-CboeBZX-2019-102]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To List and Trade Shares of the 
Clearbridge Focus Value ETF Under Currently Proposed Rule 14.11(k)

December 11, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on November 27, 2019, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes a rule change to list and trade shares of the 
Clearbridge Focus Value ETF under currently proposed Rule 14.11(k).
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, 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 Exchange 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 these 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange has submitted a proposal and four subsequent 
amendments to add new Rule 14.11(k) for the purpose of permitting the 
listing and trading of Managed Portfolio Shares, which are securities 
issued by an actively managed open-end management investment 
company.\3\

[[Page 69000]]

Proposed Rule 14.11(k)(2)(A) would require the Exchange to file 
separate proposals under Section 19(b) of the Act before listing and 
trading any series of Managed Portfolio Shares on the Exchange. As 
such, the Exchange is submitting this proposal in order to list and 
trade shares of the ClearBridge Focus Value ETF (the ``Fund'') under 
proposed Rule 14.11(k).
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    \3\ As proposed, the term ``Managed Portfolio Share'' means a 
security that (a) represents an interest in an investment company 
registered under the Investment Company Act of 1940 (``Investment 
Company'') organized as an open-end management investment company, 
that invests in a portfolio of securities selected by the Investment 
Company's investment adviser consistent with the Investment 
Company's investment objectives and policies; (b) is issued in a 
Creation Unit, or multiples thereof, in return for a designated 
portfolio of instruments (and/or an amount of cash) with a value 
equal to the next determined net asset value and delivered to the 
Authorized Participant (as defined in the Investment Company's Form 
N-1A filed with the SEC) through a Confidential Account; (c) when 
aggregated into a Redemption Unit, or multiples thereof, may be 
redeemed for a designated portfolio of instruments (and/or an amount 
of cash) with a value equal to the next determined net asset value 
delivered to the Confidential Account for the benefit of the 
Authorized Participant; and (d) the portfolio holdings for which are 
disclosed within at least 60 days following the end of every 
calendar quarter. See Securities Exchange Act Release No. 86157 
(June 19, 2019), 84 FR 29892 (June 25, 2019) and 87062 (September 
23, 2019) (SR-CboeBZX-2019-047) (the ``Proposal'').
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Description of the Fund and the Trust
    The shares of the Fund (the ``Shares'') will be issued by 
ActiveShares ETF Trust (the ``Trust''), a statutory trust organized 
under the laws of the State of Maryland and registered with the 
Commission as an open-end management investment company.\4\ The 
investment adviser to the Trust will be Precidian Funds LLC (the 
``Adviser''). The Sub-Adviser to the Fund will be ClearBridge 
Investments, LLC (``ClearBridge''). Western Asset Management Company, 
LLC, (``Western Asset'' and, collectively with ClearBridge, the ``Sub-
Adviser'') manages the portion of the Fund's cash and short-term 
instruments allocated to it by the Adviser. Legg Mason Investor 
Services, LLC (the ``Distributor'') will serve as the distributor of 
the Fund's Shares. All statements and representations made in this 
filing regarding the description of the portfolio or reference assets, 
limitations on portfolio holdings or reference assets, dissemination 
and availability of the Verified Intraday Indicative Value 
(``VIIV''),\5\ reference assets, and intraday indicative values, and 
the applicability of Exchange rules shall constitute continued listing 
requirements for listing the Shares on the Exchange, as provided under 
proposed Rule 14.11(a).
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    \4\ The Trust is registered under the 1940 Act. The Trust has 
filed a registration statement on Form N-1A relating to the Fund 
(the ``Registration Statement''). An order granting exemptive relief 
to the Adviser was issued on May 20, 2019 (File No. 812-14405) (the 
``Exemptive Order''). Investments made by the Fund will comply with 
the conditions set forth in the Exemptive Order. The description of 
the operation of the Trust and the Fund herein is based, in part, on 
the Exemptive Order. The Exemptive Order specifically notes that 
``granting the requested exemptions is appropriate in and consistent 
with the public interest and consistent with the protection of 
investors and the purposes fairly intended by the policy and 
provisions of the Act. It is further found that the terms of the 
proposed transactions, including the consideration to be paid or 
received, are reasonable and fair and do not involve overreaching on 
the part of any person concerned, and that the proposed transactions 
are consistent with the policy of each registered investment company 
concerned and with the general purposes of the Act.'' See Investment 
Company Act Release Nos. 33440 and 33477.
    \5\ Proposed Rule 14.11(k)(3)(B) defines the term VIIV as the 
indicative value of a Managed Portfolio Share based on all of the 
holdings of a series of Managed Portfolio Shares as of the close of 
business on the prior business day and, for corporate actions, based 
on the applicable holdings as of the opening of business on the 
current business day, priced and disseminated in one second 
intervals during Regular Trading Hours by the Reporting Authority.
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    Proposed Rule 14.11(k)(2)(D) provides that if the investment 
adviser to the Investment Company issuing Managed Portfolio Shares is 
registered as a broker-dealer or is affiliated with a broker-dealer, 
such investment adviser will erect and maintain a ``fire wall'' between 
the investment adviser and personnel of the broker-dealer or broker-
dealer affiliate, as applicable, with respect to access to information 
concerning the composition of and/or changes to such Investment Company 
portfolio and/or the Creation Basket.\6\ Any person related to the 
investment adviser or Investment Company who makes decisions pertaining 
to the Investment Company's portfolio composition or has access to 
information regarding the Investment Company's portfolio composition or 
changes thereto or the Creation Basket must be subject to procedures 
designed to prevent the use and dissemination of material nonpublic 
information regarding the applicable Investment Company portfolio or 
changes thereto or the Creation Basket.\7\ Proposed Rule 14.11(k)(2)(D) 
is similar to Rule 14.11(c)(5)(A)(i), related to Index Fund Shares, 
except that proposed Rule 14.11(k)(2)(D) relates to the establishment 
of a ``fire wall'' between the investment adviser and the broker-dealer 
as applicable to an Investment Company's portfolio and/or Creation 
Basket, not an underlying benchmark index, as is the case with index-
based funds. Proposed Rule 14.11(k)(2)(D) is also similar to Rule 
14.11(i)(7), related to Managed Fund Shares, except that proposed Rule 
14.11(k)(2)(D) relates to the establishment of a ``fire wall'' between 
the investment adviser and the broker-dealer as applicable to an 
Investment Company's portfolio and/or Creation Basket, and not just the 
underlying portfolio, as is the case with Managed Fund Shares. The 
Adviser is not registered as a broker-dealer or affiliated with a 
broker-dealer. The Sub-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 regarding 
access to information concerning the composition and/or changes to the 
Fund's portfolio and Creation Basket.
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    \6\ Proposed Rule 14.11(K)(3)(E) defines the term ``Creation 
Basket'' as on any given business day the names and quantities of 
the specified instruments (and/or an amount of cash) that are 
required for an AP Representative to deposit in-kind on behalf of an 
Authorized Participant in exchange for a Creation Unit and the names 
and quantities of the specified instruments (and/or an amount of 
cash) that will be transferred in-kind to an AP Representative on 
behalf of an Authorized Participant in exchange for a Redemption 
Unit, which will be identical and will be transmitted to each AP 
Representative before the commencement of trading.
    \7\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser, the Sub-Adviser, and their 
respective related personnel will be subject to the provisions of 
Rule 204A-1 under the Advisers Act relating to codes of ethics. This 
Rule requires investment advisers to adopt a code of ethics that 
reflects the fiduciary nature of the relationship to clients as well 
as compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violations, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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    In the event (a) the Adviser or Sub-Adviser becomes registered as a 
broker-dealer or becomes newly affiliated with a broker-dealer, 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 
and/or changes to the portfolio and/or the Creation Basket, and will be 
subject to procedures designed to prevent the use and dissemination of 
material non-public information regarding such portfolio and/or 
Creation Basket.
    Further, proposed Rule 14.11(k)(2)(E) requires that any person or 
entity, including an AP Representative, custodian, Reporting Authority, 
distributor, or administrator, who has access to information regarding 
the Investment Company's portfolio composition or changes thereto or 
the Creation Basket, must be subject to procedures designed to prevent 
the use and dissemination of material nonpublic information regarding 
the applicable Investment Company portfolio or changes thereto or the 
Creation Basket. Moreover, if any such

[[Page 69001]]

person or entity is registered as a broker-dealer or affiliated with a 
broker-dealer, such person or entity will erect and maintain a ``fire 
wall'' between the person or entity and the broker-dealer with respect 
to access to information concerning the composition and/or changes to 
such Investment Company portfolio or Creation Basket.
Description of the Fund
ClearBridge Focus Value ETF
    The Fund seeks long-term capital appreciation. By employing 
fundamental research, in an effort to identify securities with 
favorable risk-adjusted return characteristics, the Fund's portfolio 
management team constructs the portfolio on a bottom-up basis. The Fund 
will invest primarily in equity securities of large capitalization 
companies, but may also make limited investments in mid-capitalization 
companies. While most investments will be in U.S. companies, the fund 
may also invest in American Depository Receipts (``ADRs'') and U.S.-
listed shares of foreign companies. The team considers a number of 
variables such as business fundamentals, valuation, free cash flow 
generation, earnings growth, management quality and competitive 
positioning. The Fund will invest in a diversified portfolio typically 
consisting of the securities of 30 to 40 issuers.
    In addition, the Fund may also invest in common stocks, preferred 
securities, and warrants and rights of U.S. exchange-listed companies, 
U.S. exchange traded notes, U.S. exchange listed real estate investment 
trusts (``REITs''), U.S. ETFs,\8\ U.S. exchange-listed ADRs, U.S. 
exchange-listed equity futures contracts, and U.S. exchange-listed 
equity index futures contracts. All exchange-listed equity securities 
in which the Fund will invest will be listed and traded on U.S. 
national securities exchanges. The Fund may also hold cash without 
limitation, and may invest in short-term U.S. Treasury securities, 
government money market funds and may enter into repurchase agreements 
for cash management or defensive investment purposes.
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    \8\ For purposes of describing the holdings of the Fund, ETFs 
include Portfolio Depository Receipts (as described in Rule 
14.11(b)); Index Fund Shares (as described in Rule 14.11(c)); and 
Managed Fund Shares (as described in Rule 14.11(i)). The ETFs in 
which the Fund may invest all will be listed and traded on U.S. 
national securities exchanges.
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    The Exchange notes that the Fund's holdings will meet the generic 
listing standards applicable to series of Managed Fund Shares under 
Rule 14.11(i)(4)(C). While such standards do not apply directly to 
series of Managed Portfolio Shares, the Exchange believes that the 
overarching policy issues related to liquidity, market cap, diversity, 
and concentration of portfolio holdings that Rule 14.11(i)(4)(C) is 
intended to address are equally applicable to series of Managed 
Portfolio Shares.
Investment Restrictions
    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets.\9\ Illiquid securities and other illiquid 
assets include those subject to contractual or other restrictions on 
resale and other instruments or assets that lack readily available 
markets as determined in accordance with Commission staff guidance.\10\ 
The Fund will monitor its portfolio liquidity on an ongoing basis to 
determine whether, in light of current circumstances, an adequate level 
of liquidity is being maintained, and will consider taking appropriate 
steps in order to maintain adequate liquidity. In any event, the Fund 
will not purchase any securities that are illiquid investments at the 
time of purchase.
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    \9\ See Rule 22e-4(b)(1)(iv), which prohibits a fund from 
acquiring any illiquid investment if, immediately after the 
acquisition, the fund would have invested more than 15% of its net 
assets in illiquid investments that are assets. See Investment 
Company Act Release No. 32315 (Oct. 13, 2016), 81 FR 82142 (Nov. 18, 
2016) (adopting Rule 22e-4 under the 1940 Act). Prior to the 
adoption of Rule 22e-4 in 2016, the Commission had long-standing 
guidelines that required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), FN 34. See also Investment Company Act 
Release Nos. 5847 (October 21, 1969), 35 FR 19989 (December 31, 
1970) (Statement Regarding ``Restricted Securities''); and 18612 
(March 12, 1992), 57 FR 9828 (March 20, 1992) (Revisions of 
Guidelines to Form N-1A).
    \10\ A fund's portfolio security is illiquid if it cannot be 
disposed of in the ordinary course of business within seven days at 
approximately the value ascribed to it by the fund. See Investment 
Company Act Release Nos. 14983 (March 12, 1986), 51 FR 9773 (March 
21, 1986) (adopting amendments to Rule 2a-7 under the 1940 Act); and 
17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 
144A under the Securities Act of 1933).
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    According to the Registration Statement, the Fund will seek to 
qualify for treatment as a Regulated Investment Company (``RIC'') under 
the Internal Revenue Code.\11\
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    \11\ 26 U.S.C. 851.
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    The Shares of the Fund will conform to the initial and continued 
listing criteria under proposed Rule 14.11(k). The Fund's holdings will 
be limited to and consistent with what is permissible under the 
Exemptive Order and described herein.
    The Fund's investments will be consistent with its investment 
objective and will not be used to enhance leverage. While the Fund may 
invest in inverse ETFs, the Fund will not invest in leveraged (e.g., 
2X, -2X, 3X or -3X) ETFs.
Creations and Redemptions of Shares
    Creations and redemptions of the Shares will occur as described in 
the Proposal. More specifically, in connection with the creation and 
redemption of Creation Units \12\ and Redemption Units,\13\ the 
delivery or receipt of any portfolio securities in-kind will be 
required to be effected through a separate confidential brokerage 
account (a ``Confidential Account'').\14\ Authorized Participants (as 
defined in the Fund's Exemptive Application, ``AP'') will sign an 
agreement with an AP Representative \15\ establishing the Confidential 
Account for the benefit of the AP. AP Representatives will be broker-
dealers. An AP must be a Depository Trust Company (``DTC'') Participant 
that has executed a ``Participant Agreement'' with the Distributor with 
respect to the creation and redemption of Creation Units and Redemption 
Units and formed a Confidential Account for its benefit in accordance 
with the terms of the Participant Agreement. For purposes of creations 
or redemptions, all transactions will be effected through the 
respective AP's Confidential Account, for the benefit of the AP without

[[Page 69002]]

disclosing the identity of such securities to the AP.
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    \12\ Proposed Rule 14.11(k)(3)(F) defines the term ``Creation 
Unit'' as a specified minimum number of Managed Portfolio Shares 
issued by an Investment Company at the request of an Authorized 
Participant in return for a designated portfolio of instruments and/
or cash.
    \13\ Proposed Rule 14.11(k)(3)(G) defines the term ``Redemption 
Unit'' as a specified minimum number of Managed Portfolio Shares 
that may be redeemed to an Investment Company at the request of an 
Authorized Participant in return for a portfolio of instruments and/
or cash.
    \14\ Proposed Rule 14.11(k)(3)(D) defines the term 
``Confidential Account'' as an account owned by an Authorized 
Participant and held with an AP Representative on behalf of the 
Authorized Participant. The account will be established and governed 
by contractual agreement between the AP Representative and the 
Authorized Participant solely for the purposes of creation and 
redemption, while keeping confidential the Creation Basket 
constituents of each series of Managed Portfolio Shares, including 
from the Authorized Participant. The books and records of the 
Confidential Account will be maintained by the AP Representative on 
behalf of the Authorized Participant.
    \15\ Proposed Rule 14.11(k)(3)(C) defines the term ``AP 
Representative'' as an unaffiliated broker-dealer with which an 
Authorized Participant has signed an agreement to establish a 
Confidential Account for the benefit of such Authorized Participant 
that will deliver or receive all consideration to or from the 
Investment Company in a creation or redemption. An AP Representative 
will be restricted from disclosing the Creation Basket. Each AP 
shall enter into its own separate Confidential Account agreement 
(``Confidential Account Agreement'') with an AP Representative.
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    Each AP Representative will be given, before the commencement of 
trading each Business Day (defined below), the Creation Basket for that 
day. This information will permit an AP that has established a 
Confidential Account with an AP Representative, to instruct the AP 
Representative to buy and sell positions in the portfolio securities to 
permit creation and redemption of Creation Units and Redemption Units. 
Shares of the Fund will be issued and redeemed in Creation Units and 
Redemption Units of 5,000 or more Shares. The Fund will offer and 
redeem Creation Units and Redemption Units on a continuous basis at the 
net asset value (the ``NAV'') per share next determined after receipt 
of an order in proper form. The NAV per share of the Fund will be 
determined as of the close of regular trading on the Exchange on each 
day that the Exchange is open (a ``Business Day''). The Fund will sell 
and redeem Creation Units and Redemption Units only on Business Days. 
The Adviser anticipates that the initial price of a share will range 
from $20 to $60, and that the price of a Creation Unit will be at least 
$100,000.
    To keep costs low and permit the Fund to be as fully invested as 
possible, Shares will be purchased and redeemed in Creation Units and 
Redemption Units and generally on an in-kind basis. Accordingly, except 
where the purchase or redemption will include cash under the 
circumstances described in the Exemptive Application, APs will be 
required to purchase Creation Units by making an in-kind deposit of 
specified instruments (``Deposit Instruments''), and APs redeeming 
their Shares will receive an in-kind transfer of specified instruments 
(``Redemption Instruments'') through the AP Representative in their 
Confidential Account.\16\
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    \16\ The Fund must comply with the federal securities laws in 
accepting Deposit Instruments and satisfying redemptions with 
Redemption Instruments, including that the Deposit Instruments and 
Redemption Instruments are sold in transactions that would be exempt 
from registration under the 1933 Act.
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Placement of Purchase Orders
    The Fund will issue Shares through the Distributor on a continuous 
basis at NAV. The Exchange represents that the issuance of Shares will 
operate in a manner similar to that of other ETFs. The Fund will issue 
Shares only at the NAV per share next determined after an order in 
proper form is received.
    In the case of a creation, the AP would enter an irrevocable 
creation order with the Fund and direct the AP Representative to 
purchase the Creation Basket. The AP Representative would then purchase 
the necessary securities in the Confidential Account. In purchasing the 
necessary securities, the AP Representative will use methods, such as 
breaking the transaction into multiple transactions and transacting in 
multiple marketplaces, to avoid revealing the composition of the 
Creation Basket. Once the Creation Basket has been acquired in the 
Confidential Account, the AP Representative would contribute the 
Creation Basket in-kind to the Fund.
    The Distributor will furnish acknowledgements to those placing such 
orders that the orders have been accepted, but the Distributor may 
reject any order which is not submitted in proper form, as described in 
the Fund's prospectus or Statement of Additional Information (``SAI''). 
The NAV of the Fund is expected to be determined once each Business Day 
at a time determined by the Trust's Board of Trustees (``Board''), 
currently anticipated to be as of the close of the regular trading 
session on the Exchange (ordinarily 4:00 p.m. E.T.) (the ``Valuation 
Time''). The Fund will establish a cut-off time (``Order Cut-Off 
Time'') for purchase orders in proper form. Such Order Cut-Off Time 
will be provided in the Registration Statement. To initiate a purchase 
of Shares, an AP must submit to the Distributor an irrevocable order to 
purchase such Shares after the most recent prior Valuation Time. All 
orders to purchase Creation Units must be received by the Distributor 
no later than the Order Cut-Off Time in each case on the date such 
order is placed (``Transmittal Date'') for the AP to receive the NAV 
per share next determined.\17\
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    \17\ To the extent that the Fund allows creations or redemptions 
to be conducted in cash, such transactions will be effected in the 
same manner for all APs.
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    Purchases of Shares will be settled in-kind and/or cash for an 
amount equal to the applicable NAV per share purchased plus applicable 
``Transaction Fees,'' as discussed below. While the Fund will generally 
receive securities in-kind, the Adviser may determine from time to time 
that it is not in the Fund's best interests to receive securities in-
kind, but rather to receive cash.
Authorized Participant Redemption
    The Shares may be redeemed to the Fund in Redemption Unit size or 
multiples thereof as described below. Redemption orders of Redemption 
Units must be placed by an AP (``AP Redemption Order''). The Fund will 
establish in its Registration Statement an Order Cut-Off Time for 
redemption orders of Redemption Units in proper form. Redemption Units 
of the Fund will be redeemable at their NAV per share next determined 
after receipt of a request for redemption by the Trust in the manner 
specified below before the Order Cut-Off Time. To initiate an AP 
Redemption Order, an AP must submit to the Distributor an irrevocable 
order to redeem such Redemption Unit after the most recent prior 
Valuation Time, but not later than the Order Cut-Off Time.
    In the case of a redemption, the AP would enter into an irrevocable 
redemption order, and then immediately instruct the AP Representative 
to sell the Creation Basket that it will receive in the redemption. As 
with the purchase of securities, the AP Representative will use 
methods, such as breaking the transaction into multiple transactions 
and transacting in multiple marketplaces, to avoid revealing the 
composition of the Creation Basket.
    Consistent with the provisions of Section 22(e) of the 1940 Act and 
Rule 22e-2 thereunder, the right to redeem will not be suspended, nor 
payment upon redemption delayed, except for: (1) Any period during 
which the Exchange is closed other than customary weekend and holiday 
closings, (2) any period during which trading on the Exchange is 
restricted, (3) any period during which an emergency exists as a result 
of which disposal by the Fund of securities owned by it is not 
reasonably practicable or it is not reasonably practicable for the Fund 
to determine its NAV, and (4) for such other periods as the Commission 
may by order permit for the protection of shareholders.
    Redemptions will occur primarily in-kind, although redemption 
payments may also be made partly or wholly in cash.\18\ The Participant 
Agreement signed by each AP will require establishment of a 
Confidential Account to receive distributions of securities in-kind 
upon redemption. Each AP will be required to open a Confidential 
Account with an AP Representative in order to facilitate orderly 
processing of redemptions. While the Fund will generally distribute 
securities in-kind, the Adviser may determine from time to time that it 
is not in the Fund's best interests to distribute securities in-kind, 
but rather to sell securities and/or distribute cash. For example, the 
Adviser may distribute cash to facilitate orderly portfolio management 
in

[[Page 69003]]

connection with rebalancing or transitioning a portfolio in line with 
its investment objective, or if there is substantially more creation 
than redemption activity during the period immediately preceding a 
redemption request, or as necessary or appropriate in accordance with 
applicable laws and regulations.\19\
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    \18\ The value of any positions not susceptible to in-kind 
settlement may be paid in cash.
    \19\ To the extent that the Fund allows creations or redemptions 
to be conducted in cash, such transactions will be effected in the 
same manner for all APs.
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Net Asset Value
    The NAV per share of the Fund will be computed by dividing the 
value of the net assets of the Fund (i.e., the value of its total 
assets less total liabilities) by the total number of Shares of the 
Fund outstanding, rounded to the nearest cent. Expenses and fees, 
including, without limitation, the management, administration and 
distribution fees, will be accrued daily and taken into account for 
purposes of determining NAV. Interest and investment income on the 
Trust's assets accrue daily and will be included in the Fund's total 
assets. The NAV per share for the Fund will be calculated by the Fund's 
administrator and determined as of the close of the regular trading 
session on the Exchange (ordinarily 4:00 p.m., E.T.) on each day that 
the Exchange is open.
    Shares of U.S. exchange-listed equity securities, including common 
stocks, preferred securities, securities of other investment companies 
and of REITs, and warrants and rights, as well as ETFs, exchange-listed 
ADRs, and U.S. exchange-listed futures will be valued at market value, 
which will generally be determined using the last reported official 
closing or last trading price on the exchange or market on which the 
securities are primarily traded at the time of valuation.
Availability of Information
    The Fund's website (www.leggmason.com), which will be publicly 
available prior to the listing and trading of Shares, will include a 
form of the prospectus for the Fund that may be downloaded. The Fund's 
website will include additional quantitative information updated on a 
daily basis, including, for the Fund, (1) the prior Business Day's NAV, 
market closing price or mid-point of the bid/ask spread at the time of 
calculation of such NAV (the ``Bid/Ask Price''),\20\ and a calculation 
of the premium and discount of the market closing price or Bid/Ask 
Price against the NAV, and (2) data in chart format displaying the 
frequency distribution of discounts and premiums of the daily Bid/Ask 
Price against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. The website and information will be 
publicly available at no charge.
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    \20\ The Bid/Ask Price of the Fund will be determined using the 
mid-point between the current NBB and NBO as of the time of 
calculation of the Fund's NAV. The records relating to Bid/Ask 
Prices will be retained by the Fund and its service providers.
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    The Trust's SAI and the Fund's shareholder reports will be 
available free upon request from the Trust. These documents and forms 
may be viewed on-screen or downloaded from the Commission's website at 
www.sec.gov.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Quotation 
and last sale information for the Shares will be available via the 
Consolidated Tape Association (``CTA'') high-speed line. In addition, 
the VIIV, as defined in proposed Rule 14.11(k)(3)(B) and as described 
further below, will be widely disseminated by the Reporting Authority 
\21\ and/or one or more major market data vendors in one-second 
intervals during Regular Trading Hours.
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    \21\ Proposed Rule 14.11(k)(3)(H) defines the term ``Reporting 
Authority'' in respect of a particular series of Managed Portfolio 
Shares means the Exchange, the exchange that lists a particular 
series of Managed Portfolio Shares (if the Exchange is trading such 
series pursuant to unlisted trading privileges), an institution, or 
a reporting service designated by the Investment Company as the 
official source for calculating and reporting information relating 
to such series, including, the net asset value, the Verified 
Intraday Indicative Value, or other information relating to the 
issuance, redemption or trading of Managed Portfolio Shares. A 
series of Managed Portfolio Shares may have more than one Reporting 
Authority, each having different functions.
---------------------------------------------------------------------------

Dissemination of the VIIV
    With respect to trading of the Shares, the ability of market 
participants to buy and sell Shares at prices near the VIIV is 
dependent upon their assessment that the VIIV is a reliable, indicative 
real-time value for the Fund's underlying holdings. Market participants 
are expected to accept the VIIV as a reliable, indicative real-time 
value because (1) the VIIV will be calculated and disseminated based on 
the Fund's actual portfolio holdings, (2) the securities in which the 
Fund plans to invest are generally highly liquid and actively traded 
and therefore generally have accurate real time pricing available, and 
(3) market participants will have a daily opportunity to evaluate 
whether the VIIV at or near the close of trading is indeed predictive 
of the actual NAV. The VIIV for the Fund will be disseminated by the 
Reporting Authority and/or one or more major market data vendors in 
one-second intervals during Regular Trading Hours. If the Adviser 
determines that a portfolio security does not have a readily available 
market quotation, that fact along with the identity and weighting of 
that security in a Fund's VIIV calculation will be publicly disclosed 
on the Fund's website.\22\
---------------------------------------------------------------------------

    \22\ The Exchange notes that this is consistent with the 
Exemptive Application, which provides the following: ``Applicants 
acknowledge that, if the bid/ask spread on a security is 
significant, the mid-point may not accurately reflect the price at 
which the security could be bought or sold, which may cause the VIIV 
to deviate from the actual purchase or sale price of a Fund's 
underlying portfolio securities. In light of this possibility, the 
Adviser will monitor the bid and ask quotations for any portfolio 
security that stops trading and, if the Adviser determines pursuant 
to Board-approved procedures that the current quotations for a 
portfolio security are no longer reliable for purposes of 
calculating the VIIV, which could be the situation when, for 
example, an Exchange institutes an extended trading halt in a 
portfolio security, that fact, along with the identity and weighting 
of that security in the Fund's VIIV calculation, will be publicly 
disclosed on the Fund's website. Applicants believe that this mix of 
information will permit market participants to calculate the effect 
of that security on the VIIV calculation, determine their own fair 
value of the disclosed portfolio security, and better judge the 
accuracy of that day's VIIV for the Fund. Nonetheless, the VIIV will 
continue to be calculated using the mid-point of the most recent bid 
and ask quotations. See Exemptive Application at 23.
---------------------------------------------------------------------------

Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. The Exchange will halt trading in 
the Shares under the conditions specified in BZX Rule 11.18. Trading 
may be halted because of market conditions or for reasons that, in the 
view of the Exchange, make trading in the Shares inadvisable, including 
whether unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. Trading in the 
Shares also will be subject to proposed Rule 14.11(k)(4)(B)(iii)(a) and 
(b) in the Proposal, which set forth circumstances under which trading 
in the Shares of the Fund will be halted.
    Specifically, Proposed Rule 14.11(k)(4)(B)(iii)(a) provides that 
the Exchange may consider all relevant factors in exercising its 
discretion to halt trading in a series of Managed Portfolio Shares. 
Trading may be halted because of market conditions or for reasons that, 
in the view of the Exchange, make trading in the series of Managed 
Portfolio Shares inadvisable. These may include: (i) The extent to

[[Page 69004]]

which trading is not occurring in the securities and/or the financial 
instruments composing the portfolio; or (ii) whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present. The Adviser has represented to the 
Exchange that it will provide the Exchange with prompt notification 
upon the existence of any such condition or set of conditions.
    Proposed Rule 14.11(k)(4)(B)(iii)(b) provides that, if the Exchange 
becomes aware that: (i) The Verified Intraday Indicative Value of a 
series of Managed Portfolio Shares is not being calculated or 
disseminated in one second intervals, as required; (ii) the net asset 
value with respect to a series of Managed Portfolio Shares is not 
disseminated to all market participants at the same time; (iii) the 
holdings of a series of Managed Portfolio Shares are not made available 
on at least a quarterly basis as required under the 1940 Act; or (iv) 
such holdings are not made available to all market participants at the 
same time, (except as otherwise permitted under the currently 
applicable exemptive order or no-action relief granted by the 
Commission or Commission staff to the Investment Company with respect 
to the series of Managed Portfolio Shares), it will halt trading in 
such series until such time as the Verified Intraday Indicative Value, 
the net asset value, or the holdings are available, as required.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the Exchange only during Regular Trading Hours as provided in proposed 
Rule 14.11(k)(2)(B). As provided in BZX Rule 11.11(a), the minimum 
price variation for quoting and entry of orders in securities traded on 
the Exchange is $0.01, with the exception of securities that are priced 
less than $1.00, for which the minimum price variation for order entry 
is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under Rule 14.11(k) as well as all terms in the Exemptive 
Order. The Exchange represents that, for initial and/or continued 
listing, the Fund will be in compliance with Rule 10A-3 under the 
Act.\23\ A minimum of 100,000 Shares of the Fund will be outstanding at 
the commencement of trading on the Exchange. The Exchange will obtain a 
representation from the issuer of the Shares of the Fund that the NAV 
per share of the Fund will be calculated daily and will be made 
available to all market participants at the same time.
---------------------------------------------------------------------------

    \23\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the Shares on the Exchange during 
all trading sessions and to deter and detect violations of Exchange 
rules and the applicable federal securities laws. Trading of the Shares 
through the Exchange will be subject to the Exchange's surveillance 
procedures for derivative products, including Managed Portfolio Shares. 
As part of these surveillance procedures and consistent with proposed 
Rule 14.11(k)(2)(C), the Adviser will upon request make available to 
the Exchange and/or FINRA, on behalf of the Exchange, the daily 
portfolio holdings of the Fund. The issuer has represented to the 
Exchange that it will advise the Exchange of any failure by the Fund to 
comply with the continued listing requirements, and, pursuant to its 
obligations under Section 19(g)(1) of the Exchange Act, the Exchange 
will surveil for compliance with the continued listing requirements. If 
the Fund is not in compliance with the applicable listing requirements, 
the Exchange will commence delisting procedures under Exchange Rule 
14.12.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, underlying 
equity securities and U.S. exchange-listed futures with other markets 
and other entities that are members of the Intermarket Surveillance 
Group (``ISG''), and the Exchange or FINRA, on behalf of the Exchange, 
or both, may obtain trading information regarding trading such 
securities from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in the Shares, 
underlying equity securities and U.S. exchange-listed futures from 
markets and other entities that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing 
agreement.\24\
---------------------------------------------------------------------------

    \24\ For a list of the current members of ISG, see 
www.isgportal.org.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular (``Circular'') of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Circular will discuss the following: (1) The 
procedures for purchases and redemptions of Shares; (2) BZX Rule 3.7, 
which imposes suitability obligations on Exchange members with respect 
to recommending transactions in the Shares to customers; (3) how 
information regarding the VIIV is disseminated; (4) the requirement 
that members deliver a prospectus to investors purchasing newly issued 
Shares prior to or concurrently with the confirmation of a transaction; 
(5) trading information; and (6) that the portfolio holdings will be 
disclosed within at least 60 days following the end of every calendar 
quarter.
    In addition, the Circular will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Circular will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Circular will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m., E.T. each trading day.
2. Statutory Basis
    The Exchange believes that this proposal is consistent with Section 
6(b) of the Act \25\ in general and Section 6(b)(5) of the Act \26\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f.
    \26\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that, to the extent that the Proposal and, 
thus proposed Rule 14.11(k), is approved by the Commission, this 
proposed rule change is designed to prevent fraudulent and manipulative 
acts and practices in that the Fund would meet each of the rules 
relating to listing and trading of Managed Portfolio Shares and, to the 
extent that the Fund is not in compliance with such rules, the Exchange 
would either prevent the Fund from listing and trading if it hadn't 
started trading on the Exchange or would commence delisting procedures 
under Exchange Rule 14.12. More specifically, the Exchange will 
consider the suspension of trading in, and will commence delisting 
proceedings under Rule 14.12 for, the Fund under any of the following

[[Page 69005]]

circumstances: (a) If, following the initial twelve-month period after 
commencement of trading on the Exchange, there are fewer than 50 
beneficial holders of the Fund for 30 or more consecutive trading days; 
(b) if the Exchange has halted trading in a Fund because the VIIV is 
interrupted pursuant to Rule 14.11(k)(4)(B)(iii)(b) and such 
interruption persists past the trading day in which it occurred or is 
no longer available; (c) if the Exchange has halted trading in a Fund 
because the net asset value with respect to such Fund is not 
disseminated to all market participants at the same time, the holdings 
of such Fund are not made available on at least a quarterly basis as 
required under the 1940 Act, or such holdings are not made available to 
all market participants at the same time pursuant to Rule 
14.11(k)(4)(B)(iii)(b) and such issue persists past the trading day in 
which it occurred; (d) if the Exchange has halted trading in the Fund 
pursuant to Rule 14.11(k)(4)(B)(iii)(a) and such issue persists past 
the trading day in which it occurred; (e) if the Fund has failed to 
file any filings required by the Commission or if the Exchange is aware 
that the Fund is not in compliance with the conditions of any currently 
applicable exemptive order or no-action relief granted by the 
Commission or Commission staff with respect to the Fund; (f) if any of 
the continued listing requirements set forth in Rule 14.11(k) are not 
continuously maintained; (g) if any of the applicable Continued Listing 
Representations, as defined in Rule 14.11(a), for the Fund are not 
continuously met; or (h) if such other event shall occur or condition 
exists which, in the opinion of the Exchange, makes further dealings on 
the Exchange inadvisable.
    The Adviser is not registered as a broker-dealer or affiliated with 
a broker-dealer. The Sub-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 regarding 
access to information concerning the composition and/or changes to the 
Fund's portfolio and Creation Basket.
    In the event (a) the Adviser or Sub-Adviser becomes registered as a 
broker-dealer or becomes newly affiliated with a broker-dealer, 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 
and/or changes to the portfolio and Creation Basket, and will be 
subject to procedures designed to prevent the use and dissemination of 
material non-public information regarding such portfolio and Creation 
Basket.
    Further, proposed Rule 14.11(k)(2)(E) requires that any person or 
entity, including an AP Representative, custodian, Reporting Authority, 
distributor, or administrator, who has access to information regarding 
the Investment Company's portfolio composition or changes thereto or 
the Creation Basket, must be subject to procedures designed to prevent 
the use and dissemination of material nonpublic information regarding 
the applicable Investment Company portfolio or changes thereto or the 
Creation Basket. Moreover, if any such person or entity is registered 
as a broker-dealer or affiliated with a broker-dealer, such person or 
entity will erect and maintain a ``fire wall'' between the person or 
entity and the broker-dealer with respect to access to information 
concerning the composition and/or changes to such Investment Company 
portfolio or Creation Basket.
    The Exchange further believes that the proposed rules are designed 
to prevent fraudulent and manipulative acts and practices related to 
the listing and trading of Managed Portfolio Shares because they 
provide meaningful requirements about both the data that will be made 
publicly available about the Shares as well as the information that 
will only be available to certain parties and the controls on such 
information. Specifically, the Exchange believes that the requirements 
related to information protection enumerated under proposed Rule 
14.11(k)(2)(E) will act as a strong safeguard against misuse and 
improper dissemination of information related to the Fund's portfolio 
composition or changes thereto or the Creation Basket. The requirement 
that any person or entity implement procedures to prevent the use and 
dissemination of material nonpublic information regarding the portfolio 
or Creation Basket will act to prevent any individual or entity from 
sharing such information externally and the internal ``fire wall'' 
requirements applicable where an entity is a registered broker-dealer 
or affiliated with a broker-dealer will act to make sure that no entity 
will be able to misuse the data for their own purposes. As such, the 
Exchange believes that this proposal is designed to prevent fraudulent 
and manipulative acts and practices.
    The Exchange further believes that the proposal is designed to 
prevent fraudulent and manipulative acts and practices related to the 
listing and trading of Managed Portfolio Shares and to promote just and 
equitable principles of trade and to protect investors and the public 
interest in that the Exchange would halt trading under certain 
circumstances under which trading in the Shares may be inadvisable. 
Specifically, trading in the Shares will be subject to proposed Rule 
14.11(k)(4)(B)(iii)(a), which provides that the Exchange may consider 
all relevant factors in exercising its discretion to halt trading in a 
series of Managed Portfolio Shares. Trading may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the series of Managed Portfolio Shares inadvisable. 
These may include: (i) The extent to which trading is not occurring in 
the securities and/or the financial instruments composing the 
portfolio; or (ii) whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present.\27\ The Adviser has represented to the Exchange that it will 
provide the Exchange with prompt notification upon the existence of any 
such condition or set of conditions. Trading in the Shares will also be 
subject to proposed Rule 14.11(k)(4)(B)(iii)(b), which provides that if 
the Exchange becomes aware that: (i) The Verified Intraday Indicative 
Value of a series of Managed Portfolio Shares is not being calculated 
or disseminated in one second intervals, as required; (ii) the net 
asset value with respect to a series of Managed Portfolio Shares is not 
disseminated to all market participants at the same time; (iii) the 
holdings of a series of Managed Portfolio Shares are not made available 
on at least a quarterly basis as required under the 1940 Act; or (iv) 
such holdings are not made available to all market participants at the 
same time, (except as otherwise permitted under

[[Page 69006]]

the currently applicable exemptive order or no-action relief granted by 
the Commission or Commission staff to the Investment Company with 
respect to the series of Managed Portfolio Shares), it will halt 
trading in such series until such time as the Verified Intraday 
Indicative Value, the net asset value, or the holdings are available, 
as required.
---------------------------------------------------------------------------

    \27\ The Exemptive Application provides that the Investment 
Company or their agent will request that the Exchange halt trading 
in the applicable series of Managed Portfolio Shares where: (i) The 
intraday indicative values calculated by the pricing verification 
agent(s) differ by more than 25 basis points for 60 seconds in 
connection with pricing of the Verified Intraday Indicative Value; 
or (ii) holdings representing 10% or more of a series of Managed 
Portfolio Shares' portfolio have become subject to a trading halt or 
otherwise do not have readily available market quotations. Any such 
requests will be one of many factors considered in order to 
determine whether to halt trading in a series of Managed Portfolio 
Shares and the Exchange retains sole discretion in determining 
whether trading should be halted. As provided in the Application and 
Notice, each series of Managed Portfolio Shares would employ a 
pricing verification agent to continuously compare two intraday 
indicative values during Regular Trading Hours in order to ensure 
the accuracy of the Verified Intraday Indicative Value.
---------------------------------------------------------------------------

    With respect to the proposed listing and trading of Shares of the 
Fund, the Exchange believes that the proposed rule change is designed 
to prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Rule 14.11(k). The Fund will 
invest primarily in equity securities of large capitalization 
companies, but may also make limited investments in mid-capitalization 
companies. While most investments will be in U.S. companies, the fund 
may also invest in ADRs and U.S.-listed shares of foreign companies. 
The team considers a number of variables such as business fundamentals, 
valuation, free cash flow generation, earnings growth, management 
quality and competitive positioning. The Fund will invest in a 
diversified portfolio typically consisting of the securities of 30 to 
40 issuers.
    In addition, the Fund may also invest in common stocks, preferred 
securities, and warrants and rights of U.S. exchange-listed companies, 
U.S. exchange traded notes, U.S. exchange listed REITs, U.S. ETFs, U.S. 
exchange-listed ADRs, U.S. exchange-listed equity futures contracts, 
and U.S. exchange-listed equity index futures contracts. The Fund may 
also hold cash without limitation, and may invest in short-term U.S. 
Treasury securities, government money market funds and may enter into 
repurchase agreements for cash management or defensive investment 
purposes.
    The Exchange notes that the Fund's holdings will meet the generic 
listing standards applicable to series of Managed Fund Shares under 
Rule 14.11(i)(4)(C). All equity securities in which the Fund will 
invest will be listed and traded on U.S. national securities exchanges. 
Price information for the U.S. exchange-listed equity securities held 
by the Fund will be available through major market data vendors or 
securities exchanges listing and trading such securities. Price 
information for any other U.S. exchange-listed instruments held by the 
Fund will be available through major market data vendors or exchanges 
listing and trading such instruments. The Fund's investments will be 
consistent with its investment objective and will not be used to 
enhance leverage. The Fund will not invest in non-U.S. exchange-listed 
securities. All futures held by the Fund will be listed on U.S. futures 
exchanges. The Exchange or FINRA, on behalf of the Exchange, or both, 
will communicate as needed regarding trading in the Shares, underlying 
equity securities and U.S. exchange-listed futures with other markets 
and other entities that are members of the ISG, and the Exchange or 
FINRA, on behalf of the Exchange, or both, may obtain trading 
information regarding trading such securities from such markets and 
other entities. In addition, the Exchange may obtain information 
regarding trading in the Shares, underlying equity securities, and U.S. 
exchange-listed futures from markets and other entities that are 
members of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.
    With respect to trading of the Shares, the ability of market 
participants to buy and sell Shares at prices near the VIIV is 
dependent upon their assessment that the VIIV is a reliable, indicative 
real-time value for the Fund's underlying holdings. Market participants 
are expected to accept the VIIV as a reliable, indicative real-time 
value because (1) the VIIV will be calculated and disseminated based on 
the Fund's actual portfolio holdings, (2) the securities in which the 
Fund plans to invest are generally highly liquid and actively traded 
and therefore generally have accurate real time pricing available, and 
(3) market participants will have a daily opportunity to evaluate 
whether the VIIV at or near the close of trading is indeed predictive 
of the actual NAV.\28\
---------------------------------------------------------------------------

    \28\ The statements in the Statutory Basis section of this 
filing relating to pricing efficiency, arbitrage, and activities of 
market participants, including market makers and APs, are based on 
statements in the Exemptive Order, representations by Precidian, and 
review by the Exchange.
---------------------------------------------------------------------------

    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation that the NAV per share 
of the Fund will be calculated daily and that the NAV will be made 
available to all market participants at the same time. Investors can 
also obtain the Fund's SAI, shareholder reports, Form N-CEN, Form N-
CSR, and Form N-PORT. The Fund's SAI and shareholder reports will be 
available free upon request from the applicable fund, and those 
documents and the Form N-CSR and Form N-PORT may be viewed on-screen or 
downloaded from the Commission's website. In addition, with respect to 
the Fund, a large amount of information will be publicly available 
regarding the Fund and the Shares, thereby promoting market 
transparency. Quotation and last sale information for the Shares will 
be available via the CTA high-speed line. Information regarding the 
VIIV will be widely disseminated every second throughout Regular 
Trading Hours by the Reporting Authority and/or one or more major 
market data vendors. The website for the Fund will include a prospectus 
for the Fund that may be downloaded, and additional data relating to 
NAV and other applicable quantitative information, updated on a daily 
basis.
    Moreover, prior to the commencement of trading, the Exchange will 
inform its members in a Circular of the special characteristics and 
risks associated with trading the Shares. The Exchange will halt 
trading in the Shares under the conditions specified in BZX Rule 11.18 
or for reasons that, in the view of the Exchange, make trading in the 
Shares inadvisable. Trading in the Shares will be subject to proposed 
Rule 14.11(k)(4)(B)(iii)(a) and (b), which set forth circumstances 
under which Shares of the Fund will be halted.
    In addition, as noted above, investors will have ready access to 
the VIIV, and quotation and last sale information for the Shares. The 
Shares will conform to the initial and continued listing criteria under 
proposed Rule 14.11(k). The Fund's holdings will be limited to and 
consistent with what is permissible under the Exemptive Order and 
described herein. The Fund's investments will be consistent with its 
investment objective and will not be used to enhance leverage. While 
the Fund may invest in inverse ETFs, the Fund will not invest in 
leveraged (e.g., 2X, -2X, 3X or -3X) ETFs.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an actively-managed exchange-traded product that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. In addition, as noted above, investors will have ready 
access to information regarding the VIIV and quotation and last sale 
information for the Shares.
    For the above reasons, the Exchange believes that the proposed rule 
change

[[Page 69007]]

is consistent with the requirements of Section 6(b)(5) of the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change, rather will facilitate the listing and trading of 
an actively-managed exchange-traded product that will enhance 
competition among both market participants and listing venues, to the 
benefit of investors and the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

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-CboeBZX-2019-102 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-CboeBZX-2019-102. 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-CboeBZX-2019-102 and should be submitted 
on or before January 7, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27089 Filed 12-16-19; 8:45 am]
BILLING CODE 8011-01-P