Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To List Shares of the ARK Genomic Revolution ETF and ARK Autonomous Technology and Robotics ETF Under Rule 14.11(i), Managed Fund Shares, 370-378 [2019-28362]
Download as PDF
<![CDATA[
370
Federal Register / Vol. 85, No. 2 / Friday, January 3, 2020 / Notices
STATUS:
This meeting will be closed to
the public.
SECURITIES AND EXCHANGE
COMMISSION
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or his designee, has
certified that, in his opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matters of the closed
meeting will consist of the following
topics:
Institution and settlement of
injunctive actions;
Institution and settlement of
administrative proceedings;
Resolution of litigation claims; and
Other matters relating to enforcement
proceedings.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting agenda items that
may consist of adjudicatory,
examination, litigation, or regulatory
matters.
[Release No. 34–87863; File No. SR–
CboeBZX–2019–109]
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Dated: December 31, 2019.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2019–28480 Filed 12–31–19; 11:15 am]
jbell on DSKJLSW7X2PROD with NOTICES
BILLING CODE 8011–01–P
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To List Shares
of the ARK Genomic Revolution ETF
and ARK Autonomous Technology and
Robotics ETF Under Rule 14.11(i),
Managed Fund Shares
December 27, 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 December
23, 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 and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes a rule change
to list shares of the ARK Genomic
Revolution ETF and ARK Autonomous
Technology and Robotics ETF under
Rule 14.11(i) (‘‘Managed Fund Shares’’),
which are currently listed on NYSE
Arca, Inc. (‘‘Arca’’). The shares of the
Fund are referred to herein as the
‘‘Shares.’’ The Exchange has designated
this proposal as non-controversial and
provided the Commission with the
notice required by Rule 19b–4(f)(6)(iii)
under the Act.5
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
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
5 17 CFR 240.19b–4(f)(6)(iii).
VerDate Sep<11>2014
17:29 Jan 02, 2020
Jkt 250001
PO 00000
Frm 00074
Fmt 4703
Sfmt 4703
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 proposes to list shares
of the ARK Genomic Revolution ETF
and ARK Autonomous Technology and
Robotics ETF under Rule 14.11(i)
(‘‘Managed Fund Shares’’) (each, a
‘‘Fund’’ and, collectively, the ‘‘Funds’’),
which governs the listing and trading of
Managed Fund Shares on the
Exchange.6 The Exchange notes that the
Commission previously approved a
proposal to list and trade shares of the
Funds on NYSE Arca, Inc. (‘‘Arca’’).7
This proposal is substantively identical
to the Prior Proposal and the issuer
represents that all material
representations contained within the
Prior Proposal remain true. The
Exchange notes that the Prior Proposal
included two additional funds (the ARK
Innovation ETF and the ARK Web x.0
ETF). The Exchange also notes that the
Prior Proposal refers to the ARK
Industrial Innovation ETF, which was
subsequently renamed to the ARK
Autonomous Technology and Robotics
ETF. As further described below, 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 Fund Shares.
The Shares will be offered by ARK
ETF Trust (the ‘‘Trust’’), which is
organized as a Delaware statutory trust
and is registered with the Commission
as an open-end management investment
company.
6 The Commission approved BZX Rule 14.11(i) in
Securities Exchange Act Release No. 65225 (August
30, 2011), 76 FR 55148 (September 6, 2011) (SR–
BATS–2011–018).
7 See Securities Exchange Act Release No. 72641
(July 18, 2014), 79 FR 43108 (July 18, 2014) (SR–
NYSEArca–2014–64) (the ‘‘Prior Proposal’’).
E:\FR\FM\03JAN1.SGM
03JAN1
Federal Register / Vol. 85, No. 2 / Friday, January 3, 2020 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
Description of the Shares and the Fund
ARK Investment Management LLC
(‘‘Adviser’’) serves as the investment
adviser to the Funds. Foreside Fund
Services, LLC (‘‘Distributor’’) is the
principal underwriter and distributor of
the Funds’ Shares. The Bank of New
York Mellon serves as administrator,
custodian and transfer agent
(‘‘Administrator’’).
Rule 14.11(i)(7) provides that, if the
investment adviser to the investment
company issuing Managed Fund Shares
is affiliated with a broker-dealer, such
investment adviser shall erect a ‘‘fire
wall’’ between the investment adviser
and the broker-dealer with respect to
access to information concerning the
composition and/or changes to such
investment company portfolio.8 In
addition, Rule 14.11(i)(7) further
requires that personnel who make
decisions on the investment company’s
portfolio composition must be subject to
procedures designed to prevent the use
and dissemination of material
nonpublic information regarding the
applicable investment company
portfolio. Rule 14.11(i)(7) is similar to
Rule 14.11(b)(5)(A)(i), however, Rule
14.11(i)(7) in connection with the
establishment of a ‘‘fire wall’’ between
the investment adviser and the brokerdealer reflects the applicable open-end
fund’s portfolio, not an underlying
benchmark index, as is the case with
index-based funds. The Adviser is not
registered as a broker-dealer and is not
affiliated with a broker-dealer. In the
event that (a) the Adviser or any subadviser becomes, or becomes newly
affiliated with, a broker-dealer, or (b)
any new adviser or sub-adviser is, or
8 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940, as amended (the ‘‘Advisers
Act’’). As a result, the Adviser and its related
personnel are 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 violation, 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.
VerDate Sep<11>2014
17:29 Jan 02, 2020
Jkt 250001
becomes affiliated with, a broker-dealer,
it will implement a fire wall with
respect to its relevant personnel or such
broker-dealer affiliate, as applicable,
regarding access to information
concerning the composition and/or
changes to a portfolio, and will be
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding such portfolio.
ARK Genomic Revolution ETF
According to the Registration
Statement, the ARK Genomic
Revolution ETF’s investment objective
is long-term growth of capital.
According to the Registration
Statement, the Fund will invest under
Normal Market Conditions 9 primarily
(at least 80% of its assets) in domestic
and foreign equity securities of
companies that are relevant to the
Fund’s investment theme of genomics.
Companies relevant to this theme are
those that are focused on and are
expected to benefit from extending and
enhancing the quality of human and
other life by incorporating technological
and scientific developments,
improvements and advancements in
genetics into their business, such as by
offering new products or services that
rely on genetic sequencing, analysis,
synthesis or instrumentation. These
companies may include ones that
develop, produce, manufacture or
significantly rely on bionic devices, bioinspired computing, bioinformatics,
molecular medicine, and agricultural
biology.
In selecting companies that the
Adviser believes are relevant to a
particular investment theme, it will seek
to identify, using its own internal
research and analysis, companies
capitalizing on disruptive innovation or
that are enabling the further
development of a theme in the markets
in which they operate. The Adviser’s
internal research and analysis will
leverage insights from diverse sources,
including external research, to develop
and refine its investment themes and
identify and take advantage of trends
that have ramifications for individual
companies or entire industries. The
Adviser will use both ‘‘top down’’
(macro-economic and business cycle
analysis) and ‘‘bottom up’’ (valuation,
9 As defined in Rule 14.11(i)(3)(E), the term
‘‘Normal Market Conditions’’ includes, but is not
limited to, the absence of trading halts in the
applicable financial markets generally; operational
issues causing dissemination of inaccurate market
information or system failures; or force majeure
type events such as natural or man-made disaster,
act of God, armed conflict, act of terrorism, riot or
labor disruption, or any similar intervening
circumstance.
PO 00000
Frm 00075
Fmt 4703
Sfmt 4703
371
fundamental and quantitative measures)
approaches to select investments for the
Fund.
Under Normal Market Conditions,
substantially all of the Fund’s assets
will be invested in equity securities,
including common stocks, partnership
interests, business trust shares and other
equity investments or ownership
interests in business enterprises.10
According to the Registration
Statement, the Fund’s investments will
include issuers of micro-, small-,
medium- and large-capitalizations. The
Fund’s investments in foreign equity
securities will be in both developed and
emerging markets.11
According to the Registration
Statement, the Fund will be
concentrated in issuers in any industry
or group of industries in the health care
sector. Issuers in the health care sector
include manufacturers and distributors
of health care equipment and supplies,
owners and operators of health care
facilities, health maintenance
organizations and managed health care
plans, health care providers and issuers
that provide services to health care
providers.
ARK Autonomous Technology and
Robotics ETF
According to the Registration
Statement, the ARK Autonomous
Technology and Robotics ETF’s
investment objective is long-term
growth of capital.
According to the Registration
Statement, the Fund will invest under
Normal Market Conditions primarily (at
least 80% of its assets) in domestic and
foreign equity securities of companies
that are relevant to the Fund’s
investment theme of disruptive
innovation. Companies relevant to this
theme are those that are expected to
focus on and benefit from the
development of new products or
services, technological improvements
and advancements in scientific research
related to, among other things,
disruptive innovation in energy
(‘‘energy transformation companies’’),
10 According to the Adviser, at least 90% of the
Fund’s investments in equity securities (including
Global Depositary Receipts (‘‘GDRs’’), American
Depositary Receipts (‘‘ADRs’’), rights, warrants and
preferred securities, discussed under ‘‘Other
Investments,’’ below) will be in securities that trade
in markets that are members of the Intermarket
Surveillance Group (‘‘ISG’’) or are parties to a
comprehensive surveillance sharing agreement with
the Exchange.
11 The Adviser generally considers emerging
market countries to be developing market countries
whose gross domestic product per person is
classified below ‘‘high income’’ by the World Bank
(‘‘Emerging Markets’’). Investments in Emerging
Markets equity securities will not exceed 20% of a
Fund’s total assets.
E:\FR\FM\03JAN1.SGM
03JAN1
372
Federal Register / Vol. 85, No. 2 / Friday, January 3, 2020 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
automation and manufacturing
(‘‘automation transformation
companies’’), artificial intelligence
(‘‘artificial intelligence companies’’),
materials, and transportation.12
According to the Registration
Statement, in selecting companies that
the Adviser believes are relevant to a
particular investment theme, it will seek
to identify, using its own internal
research and analysis, companies
capitalizing on disruptive innovation or
that are enabling the further
development of a theme in the markets
in which they operate. The Adviser’s
internal research and analysis will
leverage insights from diverse sources,
including external research, to develop
and refine its investment themes and
identify and take advantage of trends
that have ramifications for individual
companies or entire industries. The
Adviser will use both ‘‘top down’’
(macro-economic and business cycle
analysis) and ‘‘bottom up’’ (valuation,
fundamental and quantitative measures)
approaches to select investments for the
Fund.
Under Normal Market Conditions,
substantially all of the Fund’s assets
will be invested in equity securities,
including common stocks, partnership
interests, business trust shares and other
equity investments or ownership
interests in business enterprises.13
12 According to the Registration Statement, the
Adviser will consider a company to be an energy
transformation company if it seeks to capitalize on
innovations or evolutions in: (i) Ways that energy
is stored or used; (ii) the discovery, collection and/
or implementation of new sources of energy,
including unconventional sources of oil or natural
gas and/or (iii) the production or development of
new materials for use in commercial applications of
energy production, use or storage. The Adviser will
consider a company to be an automation
transformation company if it is focused on man
capitalizing on the productivity of machines, such
as through the automation of functions, processes
or activities previously performed by human labor
or the use of robotics to perform other functions,
activities or processes. The Adviser will consider a
company to be an artificial intelligence (‘‘AI’’)
company if it (i) designs, creates, integrates, or
delivers robotics, autonomous technology, and/or
AI in the form of products, software, or systems; (ii)
develops the building block components for
robotics, autonomous technology, or AI, such as
advanced machinery, semiconductors and
databases used for machine learning; (iii) provides
its own value-added services on top of such
building block components, but are not core to the
company’s product or service offering; and/or (iv)
develops computer systems that are able to perform
tasks that normally require human intelligence,
such as visual perception, speech recognition,
decision-making, and translation between
languages.
13 According to the Adviser, at least 90% of the
Fund’s investments in equity securities (including
GDRs, ADRs, rights, warrants and preferred
securities, discussed under ‘‘Other Investments,’’
below) will be in securities that trade in markets
that are members of the ISG or are parties to a
comprehensive surveillance sharing agreement with
the Exchange.
VerDate Sep<11>2014
17:29 Jan 02, 2020
Jkt 250001
According to the Registration
Statement, the Fund’s investments will
include issuers of micro-, small-,
medium- and large-capitalizations. The
Fund’s investments in foreign equity
securities will be in both developed and
Emerging Markets.
According to the Registration
Statement, the Fund will be
concentrated in issuers in any industry
or group of industries in the
industrials 14 and information
technology sectors, although it will not
concentrate in any specific industry.15
Other Investments
While each Fund will invest, under
Normal Market Conditions, primarily in
the equity securities described above,
each Fund may invest in other
investments, as described below. Under
Normal Market Conditions, such other
investments will not exceed 20% of a
Fund’s assets.
According to the Registration
Statement, each Fund may invest in the
securities of open-end or closed-end
investment companies, subject to
applicable limitations under the 1940
Act. A Fund’s investment in other
investment companies may include
shares of exchange traded funds
registered under the 1940 Act
(‘‘ETFs’’),16 closed-end investment
companies (which include business
development companies), unit
investment trusts, and other open-end
investment companies. In addition, the
Funds may invest in other exchangetraded products (‘‘ETPs’’) such as
commodity pools,17 or other entities
that are traded on an exchange.
In addition, according to the
Registration Statement, each Fund may
14 According to the Registration Statement, the
industrials sector includes companies engaged in
the manufacture and distribution of capital goods,
such as those used in defense, construction and
engineering, companies that manufacture and
distribute electrical equipment and industrial
machinery and those that provide commercial and
transportation services and supplies.
15 According to the Registration Statement, the
information technology sector includes software
developers, providers of information technology
consulting and services and manufacturers and
distributors of computers, peripherals,
communications equipment and semiconductors.
16 For purposes of this filing, ETFs, which will be
listed on a national securities exchange, shall mean
the following: Investment Company Units (as
described in BZX Rule 14.11(c)); Portfolio
Depositary Receipts (as described in BZX Rule
14.11 (b)); and Managed Fund Shares (as described
in BZX Rule 14.11(i)).
17 For purposes of this filing, ETPs shall mean
Trust Issued Receipts (as described in BZX Rule
14.11(f)); Commodity-Based Trust Shares (as
described in BZX Rule 14.11(e)(4)); Currency Trust
Shares (as described in BZX Rule 14.11(e)(5));
Commodity Index Trust Shares (as described in
BZX Rule 14.11(e)(6)); and Trust Units (as described
in BZX Rule 14.11(e)(9)).
PO 00000
Frm 00076
Fmt 4703
Sfmt 4703
use derivative instruments. Specifically,
the Funds may use options, futures,
swaps and forwards, for hedging or risk
management purposes or as part of its
investment practices. Derivative
instruments are contracts whose value
depends on, or is derived from, the
value of an underlying asset, reference
rate or index. These underlying assets,
reference rates or indices may be any
one of the following: Stocks, interest
rates, currency exchange rates and stock
indices.
The options in which the Funds may
invest may be exchanged-traded or OTC.
The exchange-traded options in which
the Funds may invest will trade on
markets that are members of the ISG or
parties to a comprehensive surveillance
sharing agreement with the Exchange.
The futures in which the Funds may
invest will be exchange-traded. Each
Fund will not invest more than 10% of
its assets in futures that trade in markets
that are not members of the ISG or
parties to a comprehensive surveillance
sharing agreement with the Exchange.
The swaps in which the Funds will
invest may be cleared swaps or noncleared. The Funds will collateralize
their obligations with liquid assets
consistent with the 1940 Act and
interpretations thereunder.
The Funds will only enter into
transactions in derivative instruments
with counterparties that the Adviser
reasonably believes are capable of
performing under the contract and will
post as collateral as required by the
counterparty. The Funds will seek,
where possible, to use counterparties, as
applicable, whose financial status is
such that the risk of default is reduced;
however, the risk of losses resulting
from default is still possible. The
Adviser will evaluate the
creditworthiness of counterparties on a
regular basis. In addition to information
provided by credit agencies, the Adviser
will review approved counterparties
using various factors, which may
include the counterparty’s reputation,
the Adviser’s past experience with the
counterparty and the price/market
actions of debt of the counterparty.
According to the Registration
Statement, the Funds may invest in
currency forwards. A currency forward
transaction is a contract to buy or sell
a specified quantity of currency at a
specified date in the future at a
specified price which may be any fixed
number of days from the date of the
contract agreed upon by the parties, at
a price set at the time of the contract.
Currency forward contracts may be used
to increase or reduce exposure to
currency price movements.
E:\FR\FM\03JAN1.SGM
03JAN1
Federal Register / Vol. 85, No. 2 / Friday, January 3, 2020 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
According to the Registration
Statement, the Funds may enter into
futures contracts and options, including
options on futures contracts. Futures
contracts generally provide for the
future sale by one party and purchase by
another party of a specified instrument,
index or commodity at a specified
future time and at a specified price.
Futures contracts are standardized as to
maturity date and underlying
instrument and are traded on futures
exchanges. An option is a contract that
provides the holder the right to buy or
sell shares or futures at a fixed price,
within a specified period of time.
According to the Registration
Statement, the Funds may invest in
participation notes (‘‘P-Notes’’). P-Notes
are issued by banks or broker-dealers
and are designed to offer a return linked
to the performance of a particular
underlying equity security or market. PNotes can have the characteristics or
take the form of various instruments,
including, but not limited to, certificates
or warrants.
According to the Registration
Statement, each Fund may invest in
repurchase agreements with commercial
banks, brokers or dealers and to invest
securities lending cash collateral. A
repurchase agreement is an agreement
under which a Fund acquires a money
market instrument from a seller, subject
to resale to the seller at an agreed upon
price and date.
According to the Registration
Statement, the Funds may invest in
structured notes. A structured note is a
derivative security for which the
amount of principal repayment and/or
interest payments is based on the
movement of one or more ‘‘factors.’’
These factors include, but are not
limited to, currency exchange rates,
interest rates (such as the prime lending
rate or LIBOR), referenced bonds and
stock indices.
Each Fund may hold up to an
aggregate amount of 15% of its net
assets in illiquid investments that are
assets (calculated at the time of
investment), as deemed ‘‘illiquid’’ by
the Adviser under the 1940 Act.18 Each
18 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 also,
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 openend 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),
footnote 34. See also Investment Company Act
Release Nos. 5847 (October 21, 1969), 35 FR 19989
VerDate Sep<11>2014
17:29 Jan 02, 2020
Jkt 250001
373
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 if,
through a change in values, net assets,
or other circumstances, more than 15%
of the Fund’s net assets are held in
illiquid investments that are assets.
Each Fund will be classified as a
‘‘non-diversified’’ investment company
under the 1940 Act 19 and therefore may
concentrate its investments in any
particular industry or group of
industries, such that: (i) ARK Genomic
Revolution ETF will concentrate in
securities of issuers having their
principal business activities in any
industry or group of industries in the
health care sector; and (ii) ARK
Autonomous Technology and Robotics
ETF will concentrate in securities of
issuers having their principal business
activities in any industry or group of
industries in the industrials sector or
the information technology sector.20
Each Fund will consider an issuer to
have its ‘‘principal business activities’’
in an industry or group of industries if
the issuer derives more than 50% of its
revenues from a business considered to
be a part of such industry or group of
industries according to a third party’s
industry classification system or that of
the Adviser.
The Funds intend to qualify for and
to elect treatment as a separate regulated
investment company (‘‘RIC’’) under
Subchapter M of the Internal Revenue
Code.21
According to the Registration
Statement, each Fund may take a
temporary defensive position
(investments in cash or cash
equivalents) in response to adverse
market, economic, political or other
conditions.22 Cash equivalents shall
mean short-term high quality debt
securities and money market
instruments such as commercial paper,
certificates of deposit, bankers’
acceptances, U.S. Government
securities, repurchase agreements and
bonds that are rated BBB or higher and
shares of short-term fixed income or
money market funds.
(December 31, 1970) (Statement Regarding
‘‘Restricted Securities’’); and Investment Company
Act Release 18612 (March 12, 1992), 57 FR 9828
(March 20, 1992) (Revisions of Guidelines to Form
N–1A).
19 The diversification standard is set forth in
Section 5(b)(1) of the 1940 Act.
20 See Form N–1A, Item 9. The Commission has
taken the position that a fund is concentrated if it
invests more than 25% of the value of its total
assets in any one industry. See, e.g., Investment
Company Act Release No. 9011 (October 30, 1975),
40 FR 54241 (November 21, 1975).
21 26 U.S.C. 851 et seq.
22 According to the Adviser, circumstances under
which a Fund may temporarily depart from its
normal investment process include, but are not
limited to, extreme volatility or trading halts in the
equity markets or the financial markets generally;
operational issues causing dissemination of
inaccurate market information; or force majeure
type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of
Creation and Redemption of Shares
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
Initial and Continued Listing
The Shares will be subject to BZX
Rule 14.11(i), which sets forth the initial
and continued listing criteria applicable
to Managed Fund Shares. The Exchange
represents that, for initial and continued
listing, the Fund must be in compliance
with Rule 10A–3 under the Act.23 A
minimum of 100,000 Shares will be
outstanding at the commencement of
listing on the Exchange. The Exchange
will obtain a representation from the
issuer of the Shares that the NAV per
Share will be calculated daily and that
the NAV and the Disclosed Portfolio
will be made available to all market
participants at the same time. Each
Fund’s investments will be consistent
with its respective investment objective
in accordance with the 1940 Act and
will not be used to enhance leverage.
Each Fund’s investments will not be
used to seek performance that is the
multiple or inverse multiple (i.e., 2Xs or
3Xs) of the Fund’s broad-based
securities market index (as defined in
Form N–1A).24 All statements and
representations made in this filing
regarding (a) the description of each
Fund’s portfolio or reference assets, (b)
limitations on portfolio holdings or
reference assets, (c) the dissemination
and availability of the intraday
indicative value and reference assets, or
(d) the applicability of Exchange rules
and surveillance procedures shall
constitute continued listing
requirements for listing the Shares on
the Exchange.
According to the Registration
Statement, each Fund will issue, sell
and redeem Shares only in aggregations
of a specified number of Shares (each,
a ‘‘Creation Unit’’) on a continuous basis
at its net asset value (‘‘NAV’’) next
determined after receipt, on any
business day, of an order in proper
form. A Creation Unit currently consists
of 50,000 Shares.
terrorism, riot or labor disruption or any similar
intervening circumstance.
23 See 17 CFR 240.10A–3.
24 Each Fund’s broad-based securities market
index will be identified in a future amendment to
the Registration Statement following each Fund’s
first full calendar year of performance.
E:\FR\FM\03JAN1.SGM
03JAN1
jbell on DSKJLSW7X2PROD with NOTICES
374
Federal Register / Vol. 85, No. 2 / Friday, January 3, 2020 / Notices
According to the Registration
Statement, the consideration for a
purchase of Creation Units will
generally consist of an in-kind deposit
of specified securities that would be
consistent with the relevant Fund’s
investment objective and portfolio
(‘‘Deposit Instruments’’) and an amount
of cash (‘‘Cash Amount’’) or, as
permitted or required by the Fund, of
cash. The Cash Amount together with
the Deposit Instruments, as applicable,
are referred to as the ‘‘Creation
Deposit,’’ which represents the
minimum initial and subsequent
investment amount for Creation Units.
The Cash Amount represents the
difference between the NAV of a
Creation Unit and the market value of
Deposit Instruments.
According to the Registration
Statement, the Trust reserves the right to
accept a basket of securities or cash that
differs from Deposit Instruments or to
permit or require the substitution of an
amount of cash (i.e., a ‘‘cash in lieu’’
amount) to be added to the Cash
Amount to replace any Deposit
Instrument which may, among other
reasons, not be available in sufficient
quantity for delivery, not be permitted
to be re-registered in the name of the
Trust as a result of an in-kind creation
order pursuant to local law or market
convention or which may not be eligible
for transfer through the clearing process,
or which may not be eligible for trading
by a participating party.
According to the Registration
Statement, all orders to create Creation
Units must be received by the
Distributor no later than the end of
Regular Trading Hours 25 on the date
such order is placed in order for
creation of Creation Units to be effected
based on the NAV of the relevant Fund
as determined on such date.
According to the Registration
Statement, Shares may be redeemed
only in Creation Units at their NAV next
determined after receipt of a redemption
request in proper form by the
Distributor, only on a business day and
only through an authorized participant.
According to the Registration
Statement, unless cash redemptions are
permitted or required for a Fund, the
redemption proceeds for a Creation Unit
will generally consist of in-kind
securities and instruments
(‘‘Redemption Instruments’’) as
announced by the Administrator on the
business day of the request for
redemption, plus cash in an amount
equal to the difference between the NAV
of the Shares being redeemed, as next
25 Regular Trading Hours are 9:30 a.m. to 4:00
p.m. E.T.
VerDate Sep<11>2014
17:29 Jan 02, 2020
Jkt 250001
determined after a receipt of a request
in proper form, and the value of the
Redemption Instruments, less the
applicable fees. Should the Redemption
Instruments have a value greater than
the NAV of the Shares being redeemed,
a compensating cash payment to the
Trust equal to the differential plus the
applicable redemption transaction fee
will be required to be arranged for by or
on behalf of the redeeming shareholder.
Each Fund reserves the right to honor a
redemption request by delivering a
basket of securities or cash that differs
from the Redemption Instruments.
According to the Registration
Statement, an order to redeem Creation
Units of a Fund will be deemed received
on the transmittal date if such order is
received by the Distributor not later
than 4:00 p.m. E.T. on such transmittal
date and all other procedures are
properly followed; such order will be
effected based on the NAV of a Fund as
next determined.
According to the Registration
Statement, the Administrator, through
the NSCC, will make available on each
business day, immediately prior to the
opening of business on the Exchange
(currently 9:30 a.m. E.T.), (a) the list of
the names and the required number of
each Deposit Instrument to be included
in the current Creation Deposit (based
on information at the end of the
previous business day) as well as the
Cash Amount for each Fund and (b) the
Redemption Instruments that will be
applicable to redemption requests
received in proper form on that day. In
addition, the Administrator, through the
NSCC, also makes available on a
continuous basis throughout the day,
the Intraday Indicative Value.26
Availability of Information
The Funds’ website (www.ARKFunds.com) will include a form of the
prospectus for the Funds that may be
downloaded. The Funds’ website will
include additional quantitative
information updated on a daily basis,
including, for each Fund, (1) daily
trading volume, the prior business day’s
reported closing price, NAV and midpoint of the bid/ask spread at the time
of calculation of such NAV (the ‘‘Bid/
26 The
Intraday Indicative Value calculations are
estimates of the value of the Funds’ NAV per Share
using market data converted into U.S. dollars at the
current currency rates. The Intraday Indicative
Value price is based on quotes and closing prices
from the securities’ local market and may not reflect
events that occur subsequent to the local market’s
close. Premiums and discounts between the
Intraday Indicative Value and the market price may
occur. This should not be viewed as a ‘‘real-time’’
update of the NAV per Share of the Funds, which
is calculated only once a day.
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
Ask Price’’),27 and a calculation of the
premium and discount of the 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. On each business day, before
commencement of trading in Shares
during Regular Trading Hours on the
Exchange, the Adviser will disclose on
its website the Disclosed Portfolio, as
defined in BZX Rule 14.11(i)(3)(B), that
will form the basis for each Fund’s
calculation of NAV at the end of the
business day.28
On a daily basis, the Adviser will
disclose for each portfolio security and
other financial instrument of the Funds
the following information on the Funds’
website: Ticker symbol (if applicable),
name of security and/or financial
instrument, number of shares, if
applicable, and dollar value of financial
instruments and securities held in the
portfolio, and percentage weighting of
the security and financial instrument in
the portfolio. The website information
will be publicly available at no charge.
In addition, a basket composition file,
which includes the security names and
share quantities, if applicable, required
to be delivered in exchange for a Fund’s
Shares, together with estimates and
actual cash components, will be
publicly disseminated daily prior to the
opening of BZX via NSCC. The basket
will represent one Creation Unit of the
relevant Fund.
Investors will also be able to obtain
the Trust’s Statement of Additional
Information (‘‘SAI’’), the Funds’
Shareholder Reports, and the Trust’s
Form N–CSR and Form N–CEN. The
Trust’s SAI and Shareholder Reports are
available free upon request from the
Trust, and those documents and the
Form N–CSR and Form N–CEN 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. Information
27 The Bid/Ask Price of each Fund will be
determined using the mid-point of the highest bid
and the lowest offer on the Exchange as of the time
of calculation of the relevant Fund’s NAV. The
records relating to Bid/Ask Prices will be retained
by the Funds and their service providers.
28 Under accounting procedures followed by the
Funds, trades made on the prior business day (‘‘T’’)
will be booked and reflected in NAV on the current
business day (‘‘T+1’’). Accordingly, the Funds will
be able to disclose at the beginning of the business
day the portfolio that will form the basis for the
NAV calculation at the end of the business day.
E:\FR\FM\03JAN1.SGM
03JAN1
jbell on DSKJLSW7X2PROD with NOTICES
Federal Register / Vol. 85, No. 2 / Friday, January 3, 2020 / Notices
regarding the previous day’s closing
price and trading volume information
for the Shares will be published daily in
the financial section of newspapers.
Quotation and last sale information
for the Shares and underlying securities
that are exchange listed, including
equities (including common stock,
partnership interests and business trust
shares, as well as depositary receipts
(excluding ADRs traded OTC and
GDRs), rights, warrants, preferred
securities, ETFs and ETPs (collectively,
‘‘Exchange Traded Equities’’)), will be
available via the Consolidated Tape
Association (‘‘CTA’’) high-speed line
and from the securities exchange on
which they are listed. Quotation and
last sale information for GDRs will be
available from the securities exchange
on which they are listed. Information
relating to futures and options on
futures also will be available from the
exchange on which such instruments
are traded. Information relating to
exchange-traded options will be
available via the Options Price
Reporting Authority. Quotation
information from brokers and dealers or
pricing services will be available for
ADRs traded OTC, investment company
securities (other than ETFs), including
closed end investment companies, unit
investment trusts and open-end
investment companies, non-exchangetraded derivatives, including forwards,
swaps and certain options, and fixed
income securities, including P-Notes,
structured notes, debt securities, money
market instruments such as commercial
paper, certificates of deposit, bankers’
acceptances, U.S. Government
securities, repurchase agreements,
bonds and convertible securities, and
shares of short-term fixed income or
money market funds. Pricing
information regarding each asset class in
which the Funds will invest is generally
available through nationally recognized
data services providers through
subscription agreements.
In addition, for each Fund, an
estimated value, defined in BZX Rule
14.11(i)(3)(C) as the ‘‘Intraday Indicative
Value,’’ that reflects an estimated
intraday value of a Fund’s portfolio, will
be disseminated. Moreover, the Intraday
Indicative Value will be based upon the
current value for the components of the
Disclosed Portfolio and will be updated
and widely disseminated by one or
more major market data vendors at least
every 15 seconds during the Exchange’s
Regular Trading Hours.29 In addition,
29 Currently,
it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available Intraday Indicative Values
published via the Consolidated Tape Association
(‘‘CTA’’) or other data feeds.
VerDate Sep<11>2014
17:29 Jan 02, 2020
Jkt 250001
the quotations of certain of the Fund’s
holdings may not be updated during
U.S. trading hours if such holdings do
not trade in the United States or if
updated prices cannot be ascertained.
Additional information regarding the
Trust and the Shares, including
investment strategies, risks, creation and
redemption procedures, fees, portfolio
holdings disclosure policies,
distributions and taxes is included in
the Registration Statement. All terms
relating to the Funds that are referred to,
but not defined in, this proposed rule
change are defined in the Registration
Statement.
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 Funds.30 Trading in Shares of the
Funds will be halted if the circuit
breaker parameters in BZX Rule 11.18
have been reached. Trading also may be
halted because of market conditions or
for reasons that, in the view of the
Exchange, make trading in the Shares
inadvisable. These may include: (1) The
extent to which trading is not occurring
in the securities and/or the financial
instruments comprising the Disclosed
Portfolio of the Funds; or (2) whether
other unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market are present. Trading in the
Shares will be subject to BZX Rule
11.18, which sets forth circumstances
under which Shares of a Fund may be
halted.
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. The Exchange will
allow trading in the Shares from 8:00
a.m. until 5:00 p.m. E.T. The Exchange
has appropriate rules to facilitate
transactions in the Shares during all
trading sessions. As provided in BZX
Rule 14.11(i)(2)(C), the minimum price
variation for quoting and entry of orders
in Managed Fund Shares traded on the
Exchange is $0.01.
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.
30 See
PO 00000
BZX Rule 11.18.
Frm 00079
Fmt 4703
Sfmt 4703
375
Trading of the Shares through the
Exchange will be subject to the
Exchange’s surveillance procedures for
derivative products, including Managed
Fund Shares.
The Exchange will communicate as
needed regarding trading in the Shares
and underlying Exchange Traded
Equities, exchange traded options and
futures with other markets and other
entities that are members of the ISG, and
the Exchange, or FINRA, on behalf of
the Exchange, may obtain trading
information regarding trading in the
Shares and underlying Exchange Traded
Equities, exchange traded options and
futures from such markets and other
entities. In addition, the Exchange may
obtain information regarding trading in
the Shares and underlying Exchange
Traded Equities, exchange traded
options and futures from markets and
other entities that are members of ISG or
with which the Exchange has in place
a comprehensive surveillance sharing
agreement.31 At least 90% of each
Fund’s investments in equity securities
(including GDRs and ADRs) will be in
securities that trade in markets that are
members of the ISG or are parties to a
comprehensive surveillance sharing
agreement with the Exchange. The
exchange-traded options in which the
Funds may invest will trade on markets
that are members of the ISG or parties
to a comprehensive surveillance sharing
agreement with the Exchange. Each
Fund will not invest more than 10% of
its assets in futures that trade in markets
that are not members of the ISG or
parties to a comprehensive surveillance
sharing agreement with the Exchange.
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 listing
on the Exchange, the Exchange will
inform its members in an Information
Circular of the special characteristics
and risks associated with trading the
Shares. Specifically, the Information
Circular will discuss the following: (1)
The procedures for purchases and
redemptions of Shares in Creation Units
(and that Shares are not individually
redeemable); (2) BZX Rule 3.7, which
imposes suitability obligations on
Exchange members with respect to
recommending transactions in the
Shares to customers; (3) how
31 For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all
components of the Disclosed Portfolio for each
Fund may trade on markets that are members of ISG
or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
E:\FR\FM\03JAN1.SGM
03JAN1
376
Federal Register / Vol. 85, No. 2 / Friday, January 3, 2020 / Notices
information regarding the Intraday
Indicative Value and the Disclosed
Portfolio is disseminated; (4) the risks
involved in trading the Shares during
the Pre-Opening 32 and After Hours
Trading Sessions 33 when an updated
Intraday Indicative Value will not be
calculated or publicly disseminated; (5)
the requirement that members deliver a
prospectus to investors purchasing
newly issued Shares prior to or
concurrently with the confirmation of a
transaction; and (6) trading information.
In addition, the Information Circular
will advise members, prior to the
commencement of trading, of the
prospectus delivery requirements
applicable to the Fund. Members
purchasing Shares from the Funds for
resale to investors will deliver a
prospectus to such investors. The
Information Circular will also discuss
any exemptive, no-action, and
interpretive relief granted by the
Commission from any rules under the
Act.
In addition, the Information Circular
will reference that each Fund is subject
to various fees and expenses described
in the Registration Statement. The
Information Circular will also disclose
the trading hours of the Shares of each
of the Funds and the applicable NAV
Calculation Time for the Shares. The
Information Circular will disclose that
information about the Shares of the
Fund will be publicly available on each
Fund’s website. In addition, the
Information Circular will reference that
the Trust is subject to various fees and
expenses described in each Fund’s
Registration Statement.
jbell on DSKJLSW7X2PROD with NOTICES
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 34 that an
exchange have rules that are 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, in general, to protect investors and
the public interest.
The Exchange notes that the
Commission has previously approved
the listing and trading of the Shares.35
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
32 The Pre-Opening Session is from 8:00 a.m. to
9:30 a.m. E.T.
33 The After Hours Trading Session is from 4:00
p.m. to 5:00 p.m. E.T.
34 15 U.S.C. 78f(b)(5).
35 See Securities Exchange Act Release No. 72641
(July 18, 2014), 79 FR 43108 (July 18, 2014) (SR–
NYSEArca–2014–64).
VerDate Sep<11>2014
17:29 Jan 02, 2020
Jkt 250001
acts and practices in that the Shares will
be listed and traded on the Exchange
pursuant to the applicable initial and
continued listing criteria in BZX Rule
14.11(i). 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. If the
investment adviser to the investment
company issuing Managed Fund Shares
is affiliated with a broker-dealer, such
investment adviser to the investment
company shall erect a ‘‘fire wall’’
between the investment adviser and the
broker-dealer with respect to access to
information concerning the composition
and/or changes to such investment
company portfolio. The Exchange will
communicate as needed regarding
trading in the Shares and underlying
Exchange Traded Equities, exchange
traded options and futures with other
markets and other entities that are
members of the ISG, and may obtain
trading information regarding trading in
the Shares and underlying Exchange
Traded Equities, exchange traded
options and futures from such markets
and other entities. In addition, the
Exchange may obtain information
regarding trading in the Shares and
Exchange Traded Equities, exchange
traded options and futures from markets
and other entities that are members of
ISG or with which the Exchange has in
place a comprehensive surveillance
sharing agreement. At least 90% of each
Fund’s investments in equity securities
(including GDRs and ADRs) will be in
securities that trade in markets that are
members of the ISG or are parties to a
comprehensive surveillance sharing
agreement with the Exchange. The
exchange-traded options in which the
Funds may invest will trade on markets
that are members of the ISG or parties
to a comprehensive surveillance sharing
agreement with the Exchange. Each
Fund will not invest more than 10% of
its assets in futures that trade in markets
that are not members of the ISG or
parties to a comprehensive surveillance
sharing agreement with the Exchange.
Additionally, all statements and
representations made in this filing
regarding (a) the description of each
Fund’s portfolio or reference assets, (b)
limitations on portfolio holdings or
reference assets, (c) the dissemination
and availability of the intraday
indicative value and reference assets, or
(d) the applicability of Exchange rules
and surveillance procedures shall
constitute continued listing
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
requirements for listing the Shares on
the Exchange.
The Adviser is not registered as a
broker-dealer and is not affiliated with
a broker-dealer. In the event (a) the
Adviser or any sub-adviser becomes, or
becomes newly affiliated with, a brokerdealer, or (b) any new adviser or subadviser is, or becomes affiliated with, a
broker-dealer, it will implement a fire
wall with respect to its relevant
personnel or broker-dealer affiliate, as
applicable, regarding access to
information concerning the composition
and/or changes to a portfolio, and will
be subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding such portfolio. Each Fund
may hold up to an aggregate amount of
15% of its net assets in illiquid
securities (calculated at the time of
investment), including Rule 144A
securities deemed illiquid by the
Adviser consistent with Commission
guidance. Each Fund’s investments will
be consistent with its respective
investment objective and will not be
used to enhance leverage.
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 from the issuer
of the Shares that the NAV per Share
will be calculated daily and that the
NAV and the Disclosed Portfolio will be
made available to all market
participants at the same time. In
addition, a large amount of information
is publicly available regarding the
Funds and the Shares, thereby
promoting market transparency.
Moreover, the Intraday Indicative Value
will be widely disseminated by one or
more major market data vendors at least
every 15 seconds during the Regular
Trading Hours. On each business day,
before commencement of trading in
Shares in the Regular Trading Hours on
the Exchange, the Adviser will disclose
on its website the Disclosed Portfolio
that will form the basis for the Funds’
calculation of NAV at the end of the
business day.
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 and
underlying securities that are exchange
listed, including Exchange Traded
Equities, will be available via the CTA
high-speed line and from the securities
exchange on which they are listed.
Quotation and last sale information for
GDRs will be available from the
E:\FR\FM\03JAN1.SGM
03JAN1
jbell on DSKJLSW7X2PROD with NOTICES
Federal Register / Vol. 85, No. 2 / Friday, January 3, 2020 / Notices
securities exchange on which they are
listed. Information relating to futures
and options on futures also will be
available from the exchange on which
such instruments are traded.
Information relating to exchangetraded options will be available via the
Options Price Reporting Authority.
Quotation information from brokers and
dealers or pricing services will be
available for ADRs traded OTC,
investment company securities (other
than ETFs), including closed end
investment companies, unit investment
trusts and open-end investment
companies, non-exchange-traded
derivatives, including forwards, swaps
and certain options, and fixed income
securities, including P-Notes, structured
notes, debt securities, money market
instruments such as commercial paper,
certificates of deposit, bankers’
acceptances, U.S. Government
securities, repurchase agreements,
bonds and convertible securities, and
shares of short-term fixed income or
money market funds. Pricing
information regarding each asset class in
which the Funds will invest is generally
available through nationally recognized
data services providers through
subscription agreements. The website
for the Funds will include a form of the
prospectus for the Funds and additional
data relating to NAV and other
applicable quantitative information.
Moreover, prior to the commencement
of listing on the Exchange, the Exchange
will inform its Members in an
Information Circular of the special
characteristics and risks associated with
trading the Shares. Trading in Shares of
the Fund will be halted under the
conditions specified in BZX Rule 11.18.
Trading may also be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable. Finally,
trading in the Shares will be subject to
BZX Rule 14.11(i)(4)(B)(iv), which sets
forth circumstances under which Shares
of the Fund may be halted. As noted
above, investors will also have ready
access to information regarding the
Fund’s holdings, the Intraday Indicative
Value, the Disclosed Portfolio, and
quotation and last sale information for
the Shares.
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 additional types of actively-managed
exchange-traded products that will
enhance competition among market
participants, to the benefit of investors
and the marketplace. As noted above,
the Exchange may obtain information
VerDate Sep<11>2014
17:29 Jan 02, 2020
Jkt 250001
regarding trading in the Shares from
markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement. In
addition, as noted above, investors will
have ready access to information
regarding the Funds’ holdings, the
Intraday Indicative Value, the Disclosed
Portfolio, and quotation and last sale
information for the Shares.
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 transfer from
Arca and listing of additional activelymanaged exchange-traded products on
the Exchange, which will enhance
competition among listing venues, to
the benefit of issuers, investors, and the
marketplace more broadly.
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
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 36 and Rule 19b–
4(f)(6) thereunder.37
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 38 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 39
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
36 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
38 17 CFR 240.19b–4(f)(6).
39 17 CFR 240.19b–4(f)(6)(iii).
37 17
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
377
public interest. The Exchange has
requested that the Commission waive
the 30-day operative delay so that the
proposed rule change may become
operative upon filing. The Exchange
states that waiver of the 30-day
operative delay would allow the Shares
to be listed on the Exchange in
December 2019, which would allow the
Funds to avoid paying 2020 listing fees
to Arca, fees which would otherwise be
applied at the beginning of January
2020. Further, the Commission notes
that the proposal, with respect to the
Funds, is substantively identical to the
Prior Proposal,40 and the issuer
represents that all material
representations contained within the
Prior Proposal remain true. For these
reasons, the Commission believes that
waiver of the 30-day operative delay is
consistent with the protection of
investors and the public interest.
Accordingly, the Commission hereby
waives the operative delay and
designates the proposed rule change
operative upon filing.41
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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–
CboeBZX–2019–109 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
40 See
supra note 7.
purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
41 For
E:\FR\FM\03JAN1.SGM
03JAN1
378
Federal Register / Vol. 85, No. 2 / Friday, January 3, 2020 / Notices
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CboeBZX–2019–109. 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–2019–109, and
should be submitted on or before
January 24, 2020.
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will begin at 10:00
a.m. (ET) and will be open to the public.
Seating will be on a first-come, firstserved basis. Visitors will be subject to
security checks. The meeting will be
webcast on the Commission’s website at
www.sec.gov.
MATTERS TO BE CONSIDERED: The subject
matter of the Open Meeting will be:
• The Commission will consider
whether to issue for public comment a
proposed order that would require selfregulatory organizations to propose a
single, new national market system
(NMS) plan that would increase
transparency and address inefficiencies,
conflicts of interest and other issues
presented by the current governance
structure of the three NMS plans that
govern the public dissemination of realtime, consolidated equity market data
for NMS stocks.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed, please contact
Vanessa A. Countryman, Office of the
Secretary, at (202) 551–5400.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.42
J. Matthew DeLesDernier,
Assistant Secretary.
[Release No. 34–87861; File No. SR–LTSE–
2019–05]
[FR Doc. 2019–28362 Filed 1–2–20; 8:45 am]
BILLING CODE 8011–01–P
Sunshine Act Meetings
jbell on DSKJLSW7X2PROD with NOTICES
[FR Doc. 2019–28540 Filed 12–31–19; 4:15 pm]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; LongTerm Stock Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to the
Membership Waive-in Process for
FINRA Members
December 27, 2019.
SECURITIES AND EXCHANGE
COMMISSION
Notice is hereby given,
pursuant to the provisions of the
Government in the Sunshine Act, Public
Law 94–409, that the Securities and
Exchange Commission will hold an
Open Meeting on Wednesday, January
8, 2020 at 10:00 a.m.
PLACE: The meeting will be held in
Auditorium LL–002 at the
TIME AND DATE:
Dated: December 31, 2019.
Vanessa A. Countryman,
Secretary.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
20, 2019, Long-Term Stock Exchange,
Inc. (‘‘LTSE’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Commission is publishing this notice to
1 15
42 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:29 Jan 02, 2020
2 17
Jkt 250001
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00082
Fmt 4703
Sfmt 4703
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
LTSE proposes a rule change to adopt
‘‘Special Application Procedures’’ for
Exchange applicants that are already
FINRA members and to modify the
Membership Application form to
incorporate these new procedures and
to more generally align the form to be
consistent with other national securities
exchanges.
The text of the proposed rule change
is available at the Exchange’s website at
https://longtermstockexchange.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of
and basis for the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization 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
Exchange Rule 2.170 prescribes the
application procedures for membership
or to become an associated person of a
member. The Exchange is proposing to
establish a new paragraph (b), entitled
‘‘Special Application Procedures for
Applicants that are FINRA Members.’’ 3
Specifically, the proposed rule change
states that such an applicant will have
the option to ‘‘waive-in’’ to become an
Exchange Member and to register with
the Exchange all persons associated
with it whose registrations FINRA has
approved (in categories recognized by
the Exchange’s rules). The proposed
rule change defines the term ‘‘waive-in’’
to mean that the Exchange will rely
substantially upon FINRA’s prior
determination to approve the applicant
for FINRA membership when the
3 The proposed rule change is modeled on a
similar change adopted by the Nasdaq Stock Market
LLC. See Securities Exchange Act Release No. 34–
85513 (April 4, 2019), 84 FR 14429 (April 10, 2019).
E:\FR\FM\03JAN1.SGM
03JAN1
]]>Agencies
[Federal Register Volume 85, Number 2 (Friday, January 3, 2020)]
[Notices]
[Pages 370-378]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28362]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87863; File No. SR-CboeBZX-2019-109]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To List
Shares of the ARK Genomic Revolution ETF and ARK Autonomous Technology
and Robotics ETF Under Rule 14.11(i), Managed Fund Shares
December 27, 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 December 23, 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 and II
below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes a rule change to list shares of the ARK
Genomic Revolution ETF and ARK Autonomous Technology and Robotics ETF
under Rule 14.11(i) (``Managed Fund Shares''), which are currently
listed on NYSE Arca, Inc. (``Arca''). The shares of the Fund are
referred to herein as the ``Shares.'' The Exchange has designated this
proposal as non-controversial and provided the Commission with the
notice required by Rule 19b-4(f)(6)(iii) under the Act.\5\
---------------------------------------------------------------------------
\5\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
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 proposes to list shares of the ARK Genomic Revolution
ETF and ARK Autonomous Technology and Robotics ETF under Rule 14.11(i)
(``Managed Fund Shares'') (each, a ``Fund'' and, collectively, the
``Funds''), which governs the listing and trading of Managed Fund
Shares on the Exchange.\6\ The Exchange notes that the Commission
previously approved a proposal to list and trade shares of the Funds on
NYSE Arca, Inc. (``Arca'').\7\ This proposal is substantively identical
to the Prior Proposal and the issuer represents that all material
representations contained within the Prior Proposal remain true. The
Exchange notes that the Prior Proposal included two additional funds
(the ARK Innovation ETF and the ARK Web x.0 ETF). The Exchange also
notes that the Prior Proposal refers to the ARK Industrial Innovation
ETF, which was subsequently renamed to the ARK Autonomous Technology
and Robotics ETF. As further described below, 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 Fund Shares.
---------------------------------------------------------------------------
\6\ The Commission approved BZX Rule 14.11(i) in Securities
Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148
(September 6, 2011) (SR-BATS-2011-018).
\7\ See Securities Exchange Act Release No. 72641 (July 18,
2014), 79 FR 43108 (July 18, 2014) (SR-NYSEArca-2014-64) (the
``Prior Proposal'').
---------------------------------------------------------------------------
The Shares will be offered by ARK ETF Trust (the ``Trust''), which
is organized as a Delaware statutory trust and is registered with the
Commission as an open-end management investment company.
[[Page 371]]
Description of the Shares and the Fund
ARK Investment Management LLC (``Adviser'') serves as the
investment adviser to the Funds. Foreside Fund Services, LLC
(``Distributor'') is the principal underwriter and distributor of the
Funds' Shares. The Bank of New York Mellon serves as administrator,
custodian and transfer agent (``Administrator'').
Rule 14.11(i)(7) provides that, if the investment adviser to the
investment company issuing Managed Fund Shares is affiliated with a
broker-dealer, such investment adviser shall erect a ``fire wall''
between the investment adviser and the broker-dealer with respect to
access to information concerning the composition and/or changes to such
investment company portfolio.\8\ In addition, Rule 14.11(i)(7) further
requires that personnel who make decisions on the investment company's
portfolio composition must be subject to procedures designed to prevent
the use and dissemination of material nonpublic information regarding
the applicable investment company portfolio. Rule 14.11(i)(7) is
similar to Rule 14.11(b)(5)(A)(i), however, Rule 14.11(i)(7) in
connection with the establishment of a ``fire wall'' between the
investment adviser and the broker-dealer reflects the applicable open-
end fund's portfolio, not an underlying benchmark index, as is the case
with index-based funds. The Adviser is not registered as a broker-
dealer and is not affiliated with a broker-dealer. In the event that
(a) the Adviser or any sub-adviser becomes, or becomes newly affiliated
with, a broker-dealer, or (b) any new adviser or sub-adviser is, or
becomes affiliated with, a broker-dealer, it will implement a fire wall
with respect to its relevant personnel or such broker-dealer affiliate,
as applicable, regarding access to information concerning the
composition and/or changes to a portfolio, and will be subject to
procedures designed to prevent the use and dissemination of material
non-public information regarding such portfolio.
---------------------------------------------------------------------------
\8\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940, as amended
(the ``Advisers Act''). As a result, the Adviser and its related
personnel are 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 violation, 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.
---------------------------------------------------------------------------
ARK Genomic Revolution ETF
According to the Registration Statement, the ARK Genomic Revolution
ETF's investment objective is long-term growth of capital.
According to the Registration Statement, the Fund will invest under
Normal Market Conditions \9\ primarily (at least 80% of its assets) in
domestic and foreign equity securities of companies that are relevant
to the Fund's investment theme of genomics. Companies relevant to this
theme are those that are focused on and are expected to benefit from
extending and enhancing the quality of human and other life by
incorporating technological and scientific developments, improvements
and advancements in genetics into their business, such as by offering
new products or services that rely on genetic sequencing, analysis,
synthesis or instrumentation. These companies may include ones that
develop, produce, manufacture or significantly rely on bionic devices,
bio-inspired computing, bioinformatics, molecular medicine, and
agricultural biology.
---------------------------------------------------------------------------
\9\ As defined in Rule 14.11(i)(3)(E), the term ``Normal Market
Conditions'' includes, but is not limited to, the absence of trading
halts in the applicable financial markets generally; operational
issues causing dissemination of inaccurate market information or
system failures; or force majeure type events such as natural or
man-made disaster, act of God, armed conflict, act of terrorism,
riot or labor disruption, or any similar intervening circumstance.
---------------------------------------------------------------------------
In selecting companies that the Adviser believes are relevant to a
particular investment theme, it will seek to identify, using its own
internal research and analysis, companies capitalizing on disruptive
innovation or that are enabling the further development of a theme in
the markets in which they operate. The Adviser's internal research and
analysis will leverage insights from diverse sources, including
external research, to develop and refine its investment themes and
identify and take advantage of trends that have ramifications for
individual companies or entire industries. The Adviser will use both
``top down'' (macro-economic and business cycle analysis) and ``bottom
up'' (valuation, fundamental and quantitative measures) approaches to
select investments for the Fund.
Under Normal Market Conditions, substantially all of the Fund's
assets will be invested in equity securities, including common stocks,
partnership interests, business trust shares and other equity
investments or ownership interests in business enterprises.\10\
---------------------------------------------------------------------------
\10\ According to the Adviser, at least 90% of the Fund's
investments in equity securities (including Global Depositary
Receipts (``GDRs''), American Depositary Receipts (``ADRs''),
rights, warrants and preferred securities, discussed under ``Other
Investments,'' below) will be in securities that trade in markets
that are members of the Intermarket Surveillance Group (``ISG'') or
are parties to a comprehensive surveillance sharing agreement with
the Exchange.
---------------------------------------------------------------------------
According to the Registration Statement, the Fund's investments
will include issuers of micro-, small-, medium- and large-
capitalizations. The Fund's investments in foreign equity securities
will be in both developed and emerging markets.\11\
---------------------------------------------------------------------------
\11\ The Adviser generally considers emerging market countries
to be developing market countries whose gross domestic product per
person is classified below ``high income'' by the World Bank
(``Emerging Markets''). Investments in Emerging Markets equity
securities will not exceed 20% of a Fund's total assets.
---------------------------------------------------------------------------
According to the Registration Statement, the Fund will be
concentrated in issuers in any industry or group of industries in the
health care sector. Issuers in the health care sector include
manufacturers and distributors of health care equipment and supplies,
owners and operators of health care facilities, health maintenance
organizations and managed health care plans, health care providers and
issuers that provide services to health care providers.
ARK Autonomous Technology and Robotics ETF
According to the Registration Statement, the ARK Autonomous
Technology and Robotics ETF's investment objective is long-term growth
of capital.
According to the Registration Statement, the Fund will invest under
Normal Market Conditions primarily (at least 80% of its assets) in
domestic and foreign equity securities of companies that are relevant
to the Fund's investment theme of disruptive innovation. Companies
relevant to this theme are those that are expected to focus on and
benefit from the development of new products or services, technological
improvements and advancements in scientific research related to, among
other things, disruptive innovation in energy (``energy transformation
companies''),
[[Page 372]]
automation and manufacturing (``automation transformation companies''),
artificial intelligence (``artificial intelligence companies''),
materials, and transportation.\12\
---------------------------------------------------------------------------
\12\ According to the Registration Statement, the Adviser will
consider a company to be an energy transformation company if it
seeks to capitalize on innovations or evolutions in: (i) Ways that
energy is stored or used; (ii) the discovery, collection and/or
implementation of new sources of energy, including unconventional
sources of oil or natural gas and/or (iii) the production or
development of new materials for use in commercial applications of
energy production, use or storage. The Adviser will consider a
company to be an automation transformation company if it is focused
on man capitalizing on the productivity of machines, such as through
the automation of functions, processes or activities previously
performed by human labor or the use of robotics to perform other
functions, activities or processes. The Adviser will consider a
company to be an artificial intelligence (``AI'') company if it (i)
designs, creates, integrates, or delivers robotics, autonomous
technology, and/or AI in the form of products, software, or systems;
(ii) develops the building block components for robotics, autonomous
technology, or AI, such as advanced machinery, semiconductors and
databases used for machine learning; (iii) provides its own value-
added services on top of such building block components, but are not
core to the company's product or service offering; and/or (iv)
develops computer systems that are able to perform tasks that
normally require human intelligence, such as visual perception,
speech recognition, decision-making, and translation between
languages.
---------------------------------------------------------------------------
According to the Registration Statement, in selecting companies
that the Adviser believes are relevant to a particular investment
theme, it will seek to identify, using its own internal research and
analysis, companies capitalizing on disruptive innovation or that are
enabling the further development of a theme in the markets in which
they operate. The Adviser's internal research and analysis will
leverage insights from diverse sources, including external research, to
develop and refine its investment themes and identify and take
advantage of trends that have ramifications for individual companies or
entire industries. The Adviser will use both ``top down'' (macro-
economic and business cycle analysis) and ``bottom up'' (valuation,
fundamental and quantitative measures) approaches to select investments
for the Fund.
Under Normal Market Conditions, substantially all of the Fund's
assets will be invested in equity securities, including common stocks,
partnership interests, business trust shares and other equity
investments or ownership interests in business enterprises.\13\
---------------------------------------------------------------------------
\13\ According to the Adviser, at least 90% of the Fund's
investments in equity securities (including GDRs, ADRs, rights,
warrants and preferred securities, discussed under ``Other
Investments,'' below) will be in securities that trade in markets
that are members of the ISG or are parties to a comprehensive
surveillance sharing agreement with the Exchange.
---------------------------------------------------------------------------
According to the Registration Statement, the Fund's investments
will include issuers of micro-, small-, medium- and large-
capitalizations. The Fund's investments in foreign equity securities
will be in both developed and Emerging Markets.
According to the Registration Statement, the Fund will be
concentrated in issuers in any industry or group of industries in the
industrials \14\ and information technology sectors, although it will
not concentrate in any specific industry.\15\
---------------------------------------------------------------------------
\14\ According to the Registration Statement, the industrials
sector includes companies engaged in the manufacture and
distribution of capital goods, such as those used in defense,
construction and engineering, companies that manufacture and
distribute electrical equipment and industrial machinery and those
that provide commercial and transportation services and supplies.
\15\ According to the Registration Statement, the information
technology sector includes software developers, providers of
information technology consulting and services and manufacturers and
distributors of computers, peripherals, communications equipment and
semiconductors.
---------------------------------------------------------------------------
Other Investments
While each Fund will invest, under Normal Market Conditions,
primarily in the equity securities described above, each Fund may
invest in other investments, as described below. Under Normal Market
Conditions, such other investments will not exceed 20% of a Fund's
assets.
According to the Registration Statement, each Fund may invest in
the securities of open-end or closed-end investment companies, subject
to applicable limitations under the 1940 Act. A Fund's investment in
other investment companies may include shares of exchange traded funds
registered under the 1940 Act (``ETFs''),\16\ closed-end investment
companies (which include business development companies), unit
investment trusts, and other open-end investment companies. In
addition, the Funds may invest in other exchange-traded products
(``ETPs'') such as commodity pools,\17\ or other entities that are
traded on an exchange.
---------------------------------------------------------------------------
\16\ For purposes of this filing, ETFs, which will be listed on
a national securities exchange, shall mean the following: Investment
Company Units (as described in BZX Rule 14.11(c)); Portfolio
Depositary Receipts (as described in BZX Rule 14.11 (b)); and
Managed Fund Shares (as described in BZX Rule 14.11(i)).
\17\ For purposes of this filing, ETPs shall mean Trust Issued
Receipts (as described in BZX Rule 14.11(f)); Commodity-Based Trust
Shares (as described in BZX Rule 14.11(e)(4)); Currency Trust Shares
(as described in BZX Rule 14.11(e)(5)); Commodity Index Trust Shares
(as described in BZX Rule 14.11(e)(6)); and Trust Units (as
described in BZX Rule 14.11(e)(9)).
---------------------------------------------------------------------------
In addition, according to the Registration Statement, each Fund may
use derivative instruments. Specifically, the Funds may use options,
futures, swaps and forwards, for hedging or risk management purposes or
as part of its investment practices. Derivative instruments are
contracts whose value depends on, or is derived from, the value of an
underlying asset, reference rate or index. These underlying assets,
reference rates or indices may be any one of the following: Stocks,
interest rates, currency exchange rates and stock indices.
The options in which the Funds may invest may be exchanged-traded
or OTC. The exchange-traded options in which the Funds may invest will
trade on markets that are members of the ISG or parties to a
comprehensive surveillance sharing agreement with the Exchange. The
futures in which the Funds may invest will be exchange-traded. Each
Fund will not invest more than 10% of its assets in futures that trade
in markets that are not members of the ISG or parties to a
comprehensive surveillance sharing agreement with the Exchange. The
swaps in which the Funds will invest may be cleared swaps or non-
cleared. The Funds will collateralize their obligations with liquid
assets consistent with the 1940 Act and interpretations thereunder.
The Funds will only enter into transactions in derivative
instruments with counterparties that the Adviser reasonably believes
are capable of performing under the contract and will post as
collateral as required by the counterparty. The Funds will seek, where
possible, to use counterparties, as applicable, whose financial status
is such that the risk of default is reduced; however, the risk of
losses resulting from default is still possible. The Adviser will
evaluate the creditworthiness of counterparties on a regular basis. In
addition to information provided by credit agencies, the Adviser will
review approved counterparties using various factors, which may include
the counterparty's reputation, the Adviser's past experience with the
counterparty and the price/market actions of debt of the counterparty.
According to the Registration Statement, the Funds may invest in
currency forwards. A currency forward transaction is a contract to buy
or sell a specified quantity of currency at a specified date in the
future at a specified price which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at
the time of the contract. Currency forward contracts may be used to
increase or reduce exposure to currency price movements.
[[Page 373]]
According to the Registration Statement, the Funds may enter into
futures contracts and options, including options on futures contracts.
Futures contracts generally provide for the future sale by one party
and purchase by another party of a specified instrument, index or
commodity at a specified future time and at a specified price. Futures
contracts are standardized as to maturity date and underlying
instrument and are traded on futures exchanges. An option is a contract
that provides the holder the right to buy or sell shares or futures at
a fixed price, within a specified period of time.
According to the Registration Statement, the Funds may invest in
participation notes (``P-Notes''). P-Notes are issued by banks or
broker-dealers and are designed to offer a return linked to the
performance of a particular underlying equity security or market. P-
Notes can have the characteristics or take the form of various
instruments, including, but not limited to, certificates or warrants.
According to the Registration Statement, each Fund may invest in
repurchase agreements with commercial banks, brokers or dealers and to
invest securities lending cash collateral. A repurchase agreement is an
agreement under which a Fund acquires a money market instrument from a
seller, subject to resale to the seller at an agreed upon price and
date.
According to the Registration Statement, the Funds may invest in
structured notes. A structured note is a derivative security for which
the amount of principal repayment and/or interest payments is based on
the movement of one or more ``factors.'' These factors include, but are
not limited to, currency exchange rates, interest rates (such as the
prime lending rate or LIBOR), referenced bonds and stock indices.
Each Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid investments that are assets (calculated at the time
of investment), as deemed ``illiquid'' by the Adviser under the 1940
Act.\18\ Each 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 if,
through a change in values, net assets, or other circumstances, more
than 15% of the Fund's net assets are held in illiquid investments that
are assets.
---------------------------------------------------------------------------
\18\ 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 also, 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), footnote 34. See also Investment Company Act
Release Nos. 5847 (October 21, 1969), 35 FR 19989 (December 31,
1970) (Statement Regarding ``Restricted Securities''); and
Investment Company Act Release 18612 (March 12, 1992), 57 FR 9828
(March 20, 1992) (Revisions of Guidelines to Form N-1A).
---------------------------------------------------------------------------
Each Fund will be classified as a ``non-diversified'' investment
company under the 1940 Act \19\ and therefore may concentrate its
investments in any particular industry or group of industries, such
that: (i) ARK Genomic Revolution ETF will concentrate in securities of
issuers having their principal business activities in any industry or
group of industries in the health care sector; and (ii) ARK Autonomous
Technology and Robotics ETF will concentrate in securities of issuers
having their principal business activities in any industry or group of
industries in the industrials sector or the information technology
sector.\20\ Each Fund will consider an issuer to have its ``principal
business activities'' in an industry or group of industries if the
issuer derives more than 50% of its revenues from a business considered
to be a part of such industry or group of industries according to a
third party's industry classification system or that of the Adviser.
---------------------------------------------------------------------------
\19\ The diversification standard is set forth in Section
5(b)(1) of the 1940 Act.
\20\ See Form N-1A, Item 9. The Commission has taken the
position that a fund is concentrated if it invests more than 25% of
the value of its total assets in any one industry. See, e.g.,
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR
54241 (November 21, 1975).
---------------------------------------------------------------------------
The Funds intend to qualify for and to elect treatment as a
separate regulated investment company (``RIC'') under Subchapter M of
the Internal Revenue Code.\21\
---------------------------------------------------------------------------
\21\ 26 U.S.C. 851 et seq.
---------------------------------------------------------------------------
According to the Registration Statement, each Fund may take a
temporary defensive position (investments in cash or cash equivalents)
in response to adverse market, economic, political or other
conditions.\22\ Cash equivalents shall mean short-term high quality
debt securities and money market instruments such as commercial paper,
certificates of deposit, bankers' acceptances, U.S. Government
securities, repurchase agreements and bonds that are rated BBB or
higher and shares of short-term fixed income or money market funds.
---------------------------------------------------------------------------
\22\ According to the Adviser, circumstances under which a Fund
may temporarily depart from its normal investment process include,
but are not limited to, extreme volatility or trading halts in the
equity markets or the financial markets generally; operational
issues causing dissemination of inaccurate market information; or
force majeure type events such as systems failure, natural or man-
made disaster, act of God, armed conflict, act of terrorism, riot or
labor disruption or any similar intervening circumstance.
---------------------------------------------------------------------------
Initial and Continued Listing
The Shares will be subject to BZX Rule 14.11(i), which sets forth
the initial and continued listing criteria applicable to Managed Fund
Shares. The Exchange represents that, for initial and continued
listing, the Fund must be in compliance with Rule 10A-3 under the
Act.\23\ A minimum of 100,000 Shares will be outstanding at the
commencement of listing on the Exchange. The Exchange will obtain a
representation from the issuer of the Shares that the NAV per Share
will be calculated daily and that the NAV and the Disclosed Portfolio
will be made available to all market participants at the same time.
Each Fund's investments will be consistent with its respective
investment objective in accordance with the 1940 Act and will not be
used to enhance leverage. Each Fund's investments will not be used to
seek performance that is the multiple or inverse multiple (i.e., 2Xs or
3Xs) of the Fund's broad-based securities market index (as defined in
Form N-1A).\24\ All statements and representations made in this filing
regarding (a) the description of each Fund's portfolio or reference
assets, (b) limitations on portfolio holdings or reference assets, (c)
the dissemination and availability of the intraday indicative value and
reference assets, or (d) the applicability of Exchange rules and
surveillance procedures shall constitute continued listing requirements
for listing the Shares on the Exchange.
---------------------------------------------------------------------------
\23\ See 17 CFR 240.10A-3.
\24\ Each Fund's broad-based securities market index will be
identified in a future amendment to the Registration Statement
following each Fund's first full calendar year of performance.
---------------------------------------------------------------------------
Creation and Redemption of Shares
According to the Registration Statement, each Fund will issue, sell
and redeem Shares only in aggregations of a specified number of Shares
(each, a ``Creation Unit'') on a continuous basis at its net asset
value (``NAV'') next determined after receipt, on any business day, of
an order in proper form. A Creation Unit currently consists of 50,000
Shares.
[[Page 374]]
According to the Registration Statement, the consideration for a
purchase of Creation Units will generally consist of an in-kind deposit
of specified securities that would be consistent with the relevant
Fund's investment objective and portfolio (``Deposit Instruments'') and
an amount of cash (``Cash Amount'') or, as permitted or required by the
Fund, of cash. The Cash Amount together with the Deposit Instruments,
as applicable, are referred to as the ``Creation Deposit,'' which
represents the minimum initial and subsequent investment amount for
Creation Units. The Cash Amount represents the difference between the
NAV of a Creation Unit and the market value of Deposit Instruments.
According to the Registration Statement, the Trust reserves the
right to accept a basket of securities or cash that differs from
Deposit Instruments or to permit or require the substitution of an
amount of cash (i.e., a ``cash in lieu'' amount) to be added to the
Cash Amount to replace any Deposit Instrument which may, among other
reasons, not be available in sufficient quantity for delivery, not be
permitted to be re-registered in the name of the Trust as a result of
an in-kind creation order pursuant to local law or market convention or
which may not be eligible for transfer through the clearing process, or
which may not be eligible for trading by a participating party.
According to the Registration Statement, all orders to create
Creation Units must be received by the Distributor no later than the
end of Regular Trading Hours \25\ on the date such order is placed in
order for creation of Creation Units to be effected based on the NAV of
the relevant Fund as determined on such date.
---------------------------------------------------------------------------
\25\ Regular Trading Hours are 9:30 a.m. to 4:00 p.m. E.T.
---------------------------------------------------------------------------
According to the Registration Statement, Shares may be redeemed
only in Creation Units at their NAV next determined after receipt of a
redemption request in proper form by the Distributor, only on a
business day and only through an authorized participant.
According to the Registration Statement, unless cash redemptions
are permitted or required for a Fund, the redemption proceeds for a
Creation Unit will generally consist of in-kind securities and
instruments (``Redemption Instruments'') as announced by the
Administrator on the business day of the request for redemption, plus
cash in an amount equal to the difference between the NAV of the Shares
being redeemed, as next determined after a receipt of a request in
proper form, and the value of the Redemption Instruments, less the
applicable fees. Should the Redemption Instruments have a value greater
than the NAV of the Shares being redeemed, a compensating cash payment
to the Trust equal to the differential plus the applicable redemption
transaction fee will be required to be arranged for by or on behalf of
the redeeming shareholder. Each Fund reserves the right to honor a
redemption request by delivering a basket of securities or cash that
differs from the Redemption Instruments.
According to the Registration Statement, an order to redeem
Creation Units of a Fund will be deemed received on the transmittal
date if such order is received by the Distributor not later than 4:00
p.m. E.T. on such transmittal date and all other procedures are
properly followed; such order will be effected based on the NAV of a
Fund as next determined.
According to the Registration Statement, the Administrator, through
the NSCC, will make available on each business day, immediately prior
to the opening of business on the Exchange (currently 9:30 a.m. E.T.),
(a) the list of the names and the required number of each Deposit
Instrument to be included in the current Creation Deposit (based on
information at the end of the previous business day) as well as the
Cash Amount for each Fund and (b) the Redemption Instruments that will
be applicable to redemption requests received in proper form on that
day. In addition, the Administrator, through the NSCC, also makes
available on a continuous basis throughout the day, the Intraday
Indicative Value.\26\
---------------------------------------------------------------------------
\26\ The Intraday Indicative Value calculations are estimates of
the value of the Funds' NAV per Share using market data converted
into U.S. dollars at the current currency rates. The Intraday
Indicative Value price is based on quotes and closing prices from
the securities' local market and may not reflect events that occur
subsequent to the local market's close. Premiums and discounts
between the Intraday Indicative Value and the market price may
occur. This should not be viewed as a ``real-time'' update of the
NAV per Share of the Funds, which is calculated only once a day.
---------------------------------------------------------------------------
Availability of Information
The Funds' website (www.ARK-Funds.com) will include a form of the
prospectus for the Funds that may be downloaded. The Funds' website
will include additional quantitative information updated on a daily
basis, including, for each Fund, (1) daily trading volume, the prior
business day's reported closing price, NAV and mid-point of the bid/ask
spread at the time of calculation of such NAV (the ``Bid/Ask
Price''),\27\ and a calculation of the premium and discount of the 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. On each business day, before commencement
of trading in Shares during Regular Trading Hours on the Exchange, the
Adviser will disclose on its website the Disclosed Portfolio, as
defined in BZX Rule 14.11(i)(3)(B), that will form the basis for each
Fund's calculation of NAV at the end of the business day.\28\
---------------------------------------------------------------------------
\27\ The Bid/Ask Price of each Fund will be determined using the
mid-point of the highest bid and the lowest offer on the Exchange as
of the time of calculation of the relevant Fund's NAV. The records
relating to Bid/Ask Prices will be retained by the Funds and their
service providers.
\28\ Under accounting procedures followed by the Funds, trades
made on the prior business day (``T'') will be booked and reflected
in NAV on the current business day (``T+1''). Accordingly, the Funds
will be able to disclose at the beginning of the business day the
portfolio that will form the basis for the NAV calculation at the
end of the business day.
---------------------------------------------------------------------------
On a daily basis, the Adviser will disclose for each portfolio
security and other financial instrument of the Funds the following
information on the Funds' website: Ticker symbol (if applicable), name
of security and/or financial instrument, number of shares, if
applicable, and dollar value of financial instruments and securities
held in the portfolio, and percentage weighting of the security and
financial instrument in the portfolio. The website information will be
publicly available at no charge.
In addition, a basket composition file, which includes the security
names and share quantities, if applicable, required to be delivered in
exchange for a Fund's Shares, together with estimates and actual cash
components, will be publicly disseminated daily prior to the opening of
BZX via NSCC. The basket will represent one Creation Unit of the
relevant Fund.
Investors will also be able to obtain the Trust's Statement of
Additional Information (``SAI''), the Funds' Shareholder Reports, and
the Trust's Form N-CSR and Form N-CEN. The Trust's SAI and Shareholder
Reports are available free upon request from the Trust, and those
documents and the Form N-CSR and Form N-CEN 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. Information
[[Page 375]]
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers.
Quotation and last sale information for the Shares and underlying
securities that are exchange listed, including equities (including
common stock, partnership interests and business trust shares, as well
as depositary receipts (excluding ADRs traded OTC and GDRs), rights,
warrants, preferred securities, ETFs and ETPs (collectively, ``Exchange
Traded Equities'')), will be available via the Consolidated Tape
Association (``CTA'') high-speed line and from the securities exchange
on which they are listed. Quotation and last sale information for GDRs
will be available from the securities exchange on which they are
listed. Information relating to futures and options on futures also
will be available from the exchange on which such instruments are
traded. Information relating to exchange-traded options will be
available via the Options Price Reporting Authority. Quotation
information from brokers and dealers or pricing services will be
available for ADRs traded OTC, investment company securities (other
than ETFs), including closed end investment companies, unit investment
trusts and open-end investment companies, non-exchange-traded
derivatives, including forwards, swaps and certain options, and fixed
income securities, including P-Notes, structured notes, debt
securities, money market instruments such as commercial paper,
certificates of deposit, bankers' acceptances, U.S. Government
securities, repurchase agreements, bonds and convertible securities,
and shares of short-term fixed income or money market funds. Pricing
information regarding each asset class in which the Funds will invest
is generally available through nationally recognized data services
providers through subscription agreements.
In addition, for each Fund, an estimated value, defined in BZX Rule
14.11(i)(3)(C) as the ``Intraday Indicative Value,'' that reflects an
estimated intraday value of a Fund's portfolio, will be disseminated.
Moreover, the Intraday Indicative Value will be based upon the current
value for the components of the Disclosed Portfolio and will be updated
and widely disseminated by one or more major market data vendors at
least every 15 seconds during the Exchange's Regular Trading Hours.\29\
In addition, the quotations of certain of the Fund's holdings may not
be updated during U.S. trading hours if such holdings do not trade in
the United States or if updated prices cannot be ascertained.
---------------------------------------------------------------------------
\29\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available
Intraday Indicative Values published via the Consolidated Tape
Association (``CTA'') or other data feeds.
---------------------------------------------------------------------------
Additional information regarding the Trust and the Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings disclosure policies, distributions
and taxes is included in the Registration Statement. All terms relating
to the Funds that are referred to, but not defined in, this proposed
rule change are defined in the Registration Statement.
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 Funds.\30\ Trading in Shares of the Funds
will be halted if the circuit breaker parameters in BZX Rule 11.18 have
been reached. Trading also may be halted because of market conditions
or for reasons that, in the view of the Exchange, make trading in the
Shares inadvisable. These may include: (1) The extent to which trading
is not occurring in the securities and/or the financial instruments
comprising the Disclosed Portfolio of the Funds; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present. Trading in the Shares will be
subject to BZX Rule 11.18, which sets forth circumstances under which
Shares of a Fund may be halted.
---------------------------------------------------------------------------
\30\ See BZX Rule 11.18.
---------------------------------------------------------------------------
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. The Exchange will
allow trading in the Shares from 8:00 a.m. until 5:00 p.m. E.T. The
Exchange has appropriate rules to facilitate transactions in the Shares
during all trading sessions. As provided in BZX Rule 14.11(i)(2)(C),
the minimum price variation for quoting and entry of orders in Managed
Fund Shares traded on the Exchange is $0.01.
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 Fund Shares.
The Exchange will communicate as needed regarding trading in the
Shares and underlying Exchange Traded Equities, exchange traded options
and futures with other markets and other entities that are members of
the ISG, and the Exchange, or FINRA, on behalf of the Exchange, may
obtain trading information regarding trading in the Shares and
underlying Exchange Traded Equities, exchange traded options and
futures from such markets and other entities. In addition, the Exchange
may obtain information regarding trading in the Shares and underlying
Exchange Traded Equities, exchange traded options and futures from
markets and other entities that are members of ISG or with which the
Exchange has in place a comprehensive surveillance sharing
agreement.\31\ At least 90% of each Fund's investments in equity
securities (including GDRs and ADRs) will be in securities that trade
in markets that are members of the ISG or are parties to a
comprehensive surveillance sharing agreement with the Exchange. The
exchange-traded options in which the Funds may invest will trade on
markets that are members of the ISG or parties to a comprehensive
surveillance sharing agreement with the Exchange. Each Fund will not
invest more than 10% of its assets in futures that trade in markets
that are not members of the ISG or parties to a comprehensive
surveillance sharing agreement with the Exchange.
---------------------------------------------------------------------------
\31\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for each Fund may trade on markets that are
members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------
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 listing on the Exchange, the Exchange
will inform its members in an Information Circular of the special
characteristics and risks associated with trading the Shares.
Specifically, the Information Circular will discuss the following: (1)
The procedures for purchases and redemptions of Shares in Creation
Units (and that Shares are not individually redeemable); (2) BZX Rule
3.7, which imposes suitability obligations on Exchange members with
respect to recommending transactions in the Shares to customers; (3)
how
[[Page 376]]
information regarding the Intraday Indicative Value and the Disclosed
Portfolio is disseminated; (4) the risks involved in trading the Shares
during the Pre-Opening \32\ and After Hours Trading Sessions \33\ when
an updated Intraday Indicative Value will not be calculated or publicly
disseminated; (5) the requirement that members deliver a prospectus to
investors purchasing newly issued Shares prior to or concurrently with
the confirmation of a transaction; and (6) trading information.
---------------------------------------------------------------------------
\32\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m. E.T.
\33\ The After Hours Trading Session is from 4:00 p.m. to 5:00
p.m. E.T.
---------------------------------------------------------------------------
In addition, the Information Circular will advise members, prior to
the commencement of trading, of the prospectus delivery requirements
applicable to the Fund. Members purchasing Shares from the Funds for
resale to investors will deliver a prospectus to such investors. The
Information Circular will also discuss any exemptive, no-action, and
interpretive relief granted by the Commission from any rules under the
Act.
In addition, the Information Circular will reference that each Fund
is subject to various fees and expenses described in the Registration
Statement. The Information Circular will also disclose the trading
hours of the Shares of each of the Funds and the applicable NAV
Calculation Time for the Shares. The Information Circular will disclose
that information about the Shares of the Fund will be publicly
available on each Fund's website. In addition, the Information Circular
will reference that the Trust is subject to various fees and expenses
described in each Fund's Registration Statement.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \34\ that an exchange have rules that
are 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, in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\34\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange notes that the Commission has previously approved the
listing and trading of the Shares.\35\ 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 applicable initial and continued listing
criteria in BZX Rule 14.11(i). 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. If the investment adviser to the investment company
issuing Managed Fund Shares is affiliated with a broker-dealer, such
investment adviser to the investment company shall erect a ``fire
wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such investment company portfolio. The Exchange will
communicate as needed regarding trading in the Shares and underlying
Exchange Traded Equities, exchange traded options and futures with
other markets and other entities that are members of the ISG, and may
obtain trading information regarding trading in the Shares and
underlying Exchange Traded Equities, exchange traded options and
futures from such markets and other entities. In addition, the Exchange
may obtain information regarding trading in the Shares and Exchange
Traded Equities, exchange traded options and futures from markets and
other entities that are members of ISG or with which the Exchange has
in place a comprehensive surveillance sharing agreement. At least 90%
of each Fund's investments in equity securities (including GDRs and
ADRs) will be in securities that trade in markets that are members of
the ISG or are parties to a comprehensive surveillance sharing
agreement with the Exchange. The exchange-traded options in which the
Funds may invest will trade on markets that are members of the ISG or
parties to a comprehensive surveillance sharing agreement with the
Exchange. Each Fund will not invest more than 10% of its assets in
futures that trade in markets that are not members of the ISG or
parties to a comprehensive surveillance sharing agreement with the
Exchange. Additionally, all statements and representations made in this
filing regarding (a) the description of each Fund's portfolio or
reference assets, (b) limitations on portfolio holdings or reference
assets, (c) the dissemination and availability of the intraday
indicative value and reference assets, or (d) the applicability of
Exchange rules and surveillance procedures shall constitute continued
listing requirements for listing the Shares on the Exchange.
---------------------------------------------------------------------------
\35\ See Securities Exchange Act Release No. 72641 (July 18,
2014), 79 FR 43108 (July 18, 2014) (SR-NYSEArca-2014-64).
---------------------------------------------------------------------------
The Adviser is not registered as a broker-dealer and is not
affiliated with a broker-dealer. In the event (a) the Adviser or any
sub-adviser becomes, or becomes newly affiliated with, a broker-dealer,
or (b) any new adviser or sub-adviser is, or becomes affiliated with, a
broker-dealer, it will implement a fire wall with respect to its
relevant personnel or broker-dealer affiliate, as applicable, regarding
access to information concerning the composition and/or changes to a
portfolio, and will be subject to procedures designed to prevent the
use and dissemination of material non-public information regarding such
portfolio. Each Fund may hold up to an aggregate amount of 15% of its
net assets in illiquid securities (calculated at the time of
investment), including Rule 144A securities deemed illiquid by the
Adviser consistent with Commission guidance. Each Fund's investments
will be consistent with its respective investment objective and will
not be used to enhance leverage.
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 from the issuer of the
Shares that the NAV per Share will be calculated daily and that the NAV
and the Disclosed Portfolio will be made available to all market
participants at the same time. In addition, a large amount of
information is publicly available regarding the Funds and the Shares,
thereby promoting market transparency. Moreover, the Intraday
Indicative Value will be widely disseminated by one or more major
market data vendors at least every 15 seconds during the Regular
Trading Hours. On each business day, before commencement of trading in
Shares in the Regular Trading Hours on the Exchange, the Adviser will
disclose on its website the Disclosed Portfolio that will form the
basis for the Funds' calculation of NAV at the end of the business day.
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 and underlying securities that
are exchange listed, including Exchange Traded Equities, will be
available via the CTA high-speed line and from the securities exchange
on which they are listed. Quotation and last sale information for GDRs
will be available from the
[[Page 377]]
securities exchange on which they are listed. Information relating to
futures and options on futures also will be available from the exchange
on which such instruments are traded.
Information relating to exchange-traded options will be available
via the Options Price Reporting Authority. Quotation information from
brokers and dealers or pricing services will be available for ADRs
traded OTC, investment company securities (other than ETFs), including
closed end investment companies, unit investment trusts and open-end
investment companies, non-exchange-traded derivatives, including
forwards, swaps and certain options, and fixed income securities,
including P-Notes, structured notes, debt securities, money market
instruments such as commercial paper, certificates of deposit, bankers'
acceptances, U.S. Government securities, repurchase agreements, bonds
and convertible securities, and shares of short-term fixed income or
money market funds. Pricing information regarding each asset class in
which the Funds will invest is generally available through nationally
recognized data services providers through subscription agreements. The
website for the Funds will include a form of the prospectus for the
Funds and additional data relating to NAV and other applicable
quantitative information. Moreover, prior to the commencement of
listing on the Exchange, the Exchange will inform its Members in an
Information Circular of the special characteristics and risks
associated with trading the Shares. Trading in Shares of the Fund will
be halted under the conditions specified in BZX Rule 11.18. Trading may
also be halted because of market conditions or for reasons that, in the
view of the Exchange, make trading in the Shares inadvisable. Finally,
trading in the Shares will be subject to BZX Rule 14.11(i)(4)(B)(iv),
which sets forth circumstances under which Shares of the Fund may be
halted. As noted above, investors will also have ready access to
information regarding the Fund's holdings, the Intraday Indicative
Value, the Disclosed Portfolio, and quotation and last sale information
for the Shares.
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
additional types of actively-managed exchange-traded products that will
enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, the Exchange may obtain
information regarding trading in the Shares from markets and other
entities that are members of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement. In addition, as
noted above, investors will have ready access to information regarding
the Funds' holdings, the Intraday Indicative Value, the Disclosed
Portfolio, and quotation and last sale information for the Shares.
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 transfer from Arca
and listing of additional actively-managed exchange-traded products on
the Exchange, which will enhance competition among listing venues, to
the benefit of issuers, investors, and the marketplace more broadly.
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \36\ and Rule 19b-
4(f)(6) thereunder.\37\
---------------------------------------------------------------------------
\36\ 15 U.S.C. 78s(b)(3)(A).
\37\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \38\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \39\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the proposed rule change may become operative upon filing. The
Exchange states that waiver of the 30-day operative delay would allow
the Shares to be listed on the Exchange in December 2019, which would
allow the Funds to avoid paying 2020 listing fees to Arca, fees which
would otherwise be applied at the beginning of January 2020. Further,
the Commission notes that the proposal, with respect to the Funds, is
substantively identical to the Prior Proposal,\40\ and the issuer
represents that all material representations contained within the Prior
Proposal remain true. For these reasons, the Commission believes that
waiver of the 30-day operative delay is consistent with the protection
of investors and the public interest. Accordingly, the Commission
hereby waives the operative delay and designates the proposed rule
change operative upon filing.\41\
---------------------------------------------------------------------------
\38\ 17 CFR 240.19b-4(f)(6).
\39\ 17 CFR 240.19b-4(f)(6)(iii).
\40\ See supra note 7.
\41\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
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-2019-109 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange
[[Page 378]]
Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeBZX-2019-109. 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-2019-109, and should be
submitted on or before January 24, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
---------------------------------------------------------------------------
\42\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-28362 Filed 1-2-20; 8:45 am]
BILLING CODE 8011-01-P
