Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 2, Regarding Investments of the Janus Henderson Mortgage-Backed Securities ETF, 3458-3467 [2020-00800]
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Federal Register / Vol. 85, No. 13 / Tuesday, January 21, 2020 / Notices
the Regulated Funds will receive any
additional compensation or
remuneration of any kind as a result of
or in connection with a Co-Investment
Transaction other than (i) in the case of
the Regulated Funds, the Affiliated
Funds and the FE Proprietary Accounts,
the pro rata transaction fees described
above and fees or other compensation
described in Condition 2(c)(iii)(B)(z), (ii)
brokerage or underwriting
compensation permitted by section
17(e) or 57(k) or (iii) in the case of the
Advisers, investment advisory
compensation paid in accordance with
investment advisory agreements
between the applicable Regulated
Fund(s) or Affiliated Fund(s) and its
Adviser.
15. Independence. If the Holders own
in the aggregate more than 25 percent of
the Shares of a Regulated Fund, then the
Holders will vote such Shares as
directed by an independent third party
when voting on (1) the election of
directors; (2) the removal of one or more
directors; or (3) any other matter under
either the Act or applicable State law
affecting the Board’s composition, size
or manner of election.
16. FE Proprietary Accounts. The FE
Proprietary Accounts will not be
permitted to invest in a Potential CoInvestment Transaction except to the
extent that the aggregate Internal Orders
for a Potential Co-Investment
Transaction, as described in section
III.A.1.b of the application, are less than
the total investment opportunity.
For the Commission, by the Division of
Investment Management, under delegated
authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–00805 Filed 1–17–20; 8:45 am]
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change regarding investments of the
Janus Henderson Mortgage-Backed
Securities ETF (‘‘Fund’’), shares of
which are currently listed and traded on
the Exchange under NYSE Arca Rule
8.600–E (‘‘Managed Fund Shares’’). The
proposed rule change was published for
comment in the Federal Register on July
25, 2019.3
On September 3, 2019, pursuant to
Section 19(b)(2) of the Act,4 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.5 On October 23,
2019, the Commission instituted
proceedings under Section 19(b)(2)(B) of
the Act 6 to determine whether to
approve or disapprove the proposed
rule change.7 On November 13, 2019,
the Exchange filed Amendment No. 1 to
the proposed rule change. On December
9, 2019, the Exchange filed Amendment
No. 2 to the proposed rule change.8 The
Commission has received no comment
letters on the proposal. The Commission
is publishing this notice to solicit
comments on Amendment No. 2 from
interested persons, and is approving the
proposed rule change, as modified by
Amendment No. 2, on an accelerated
basis.
II. The Exchange’s Description of the
Proposed Rule Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes certain
changes regarding investments of the
Janus Henderson Mortgage-Backed
Securities ETF (‘‘Fund’’), shares
(‘‘Shares’’) of which are currently listed
and traded on the Exchange under
NYSE Arca Rule 8.600–E, which
governs the listing and trading of
Managed Fund Shares 9 on the
Exchange. Shares of the Fund
commenced listing and trading on the
Exchange on September 12, 2018 under
the generic listing standards under
Commentary .01 to NYSE Arca Rule
8.600–E.
The Fund is a series of Janus Detroit
Street Trust (‘‘Trust’’).10 Janus Capital
Management LLC is the Fund’s
investment adviser (‘‘Adviser’’). State
Street Bank and Trust Company is the
custodian and transfer agent (‘‘Transfer
Agent’’) for the Fund. ALPS
Distributors, Inc. is the distributor
(‘‘Distributor’’) for the Fund’s Shares.
Commentary .06 to Rule 8.600–E
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 and maintain a ‘‘fire wall’’
between the investment adviser and the
broker-dealer with respect to access to
BILLING CODE 8011–01–P
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 86417
(July 19, 2019), 84 FR 35910.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 86855,
84 FR 47337 (September 9, 2019).
6 15 U.S.C. 78s(b)(2)(B).
7 See Securities Exchange Act Release No.87385,
84 FR 57921 (October 29, 2019).
8 In Amendment No. 2, which amended and
replaced the proposed rule change, as modified by
Amendment No. 1, in its entirety, the Exchange (i)
clarified the principal and non-principal
investments of the Fund; (ii) clarified the Fund’s
compliance and non-compliance with specific
provisions of NYSE Arca Rule 8.600–E; (iii) stated
where to find price and quotation information for
certain holdings of the Fund; (iv) made additional
representations regarding surveillance of trading
with respect to options on futures and municipal
obligations, which are permitted investments of the
Fund; and (v) made conforming, non-substantive
and technical changes. Amendment No. 2 is
available at: https://www.sec.gov/comments/srnysearca-2019-51/srnysearca201951-6523187200391.pdf.
2 17
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87963; File No. SR–
NYSEArca–2019–51]
jbell on DSKJLSW7X2PROD with NOTICES
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of
Amendment No. 2 and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Modified by
Amendment No. 2, Regarding
Investments of the Janus Henderson
Mortgage-Backed Securities ETF
January 14, 2020.
I. Introduction
On July 9, 2019, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
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9 A Managed Fund Share is a security that
represents an interest in an investment company
registered under the Investment Company Act of
1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as
an open-end investment company or similar entity
that invests in a portfolio of securities selected by
its investment adviser consistent with its
investment objectives and policies. In contrast, an
open-end investment company that issues
Investment Company Units, listed and traded on
the Exchange under NYSE Arca Rule 5.2–E(j)(3),
seeks to provide investment results that correspond
generally to the price and yield performance of a
specific foreign or domestic stock index, fixed
income securities index or combination thereof.
10 The Trust is registered under the 1940 Act. On
February 28, 2019, the Trust filed with the
Commission a registration statement on Form N–1A
under the Securities Act of 1933 (15 U.S.C. 77a) and
the 1940 Act relating to the Fund (File Nos. 333–
207814 and 811–23112) (the ‘‘Registration
Statement’’). The description of the operation of the
Trust and the Fund herein is based, in part, on the
Registration Statement. In addition, the
Commission has issued an order granting certain
exemptive relief to the Trust under the 1940 Act.
See Investment Company Act Release No. 31540
(March 30, 2015) (‘‘Exemptive Order’’).
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Federal Register / Vol. 85, No. 13 / Tuesday, January 21, 2020 / Notices
information concerning the composition
and/or changes to such investment
company portfolio.11 In addition,
Commentary .06 further requires that
personnel who make decisions on the
open-end fund’s portfolio composition
must be subject to procedures designed
to prevent the use and dissemination of
material nonpublic information
regarding the open-end fund’s portfolio.
The Adviser is not registered as a
broker-dealer but is affiliated with a
broker-dealer and has implemented and
will maintain a fire wall with respect to
such broker-dealer affiliate regarding
access to information concerning the
composition and/or changes to the
portfolio. In the event (a) the Adviser
becomes registered as a broker-dealer or
newly affiliated with one or more
broker-dealers, or (b) any new adviser or
sub-adviser is a registered broker-dealer
or becomes affiliated with a brokerdealer, it will implement and maintain
a fire wall with respect to its relevant
personnel or its broker-dealer affiliate
regarding access to information
concerning the composition and/or
changes to the portfolio, and will be
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding such portfolio.
Janus Henderson Mortgage-Backed
Securities ETF
Principal Investments
jbell on DSKJLSW7X2PROD with NOTICES
According to the Registration
Statement, the Fund’s investment
objective is to seek a high level of total
return consisting of income and capital
appreciation.
11 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (the ‘‘Advisers Act’’). As a
result, the Adviser 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.
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Under normal market conditions,12
the Fund will invest at least 80% of its
net assets in a portfolio of ‘‘MortgageRelated Fixed Income Instruments’’ (as
described below) of varying maturities,
and in exchange-traded funds
(‘‘ETFs’’) 13 that invest principally in
mortgage-backed securities. The
Mortgage-Related Fixed Income
Instruments 14 in which the Fund may
invest are the following: 15 Agency and
non-agency residential mortgage-backed
securities (‘‘RMBS’’), agency and nonagency commercial mortgage-backed
securities (‘‘CMBS’’), agency and nonagency collateralized mortgage
obligations, including stripped
mortgage-backed securities 16 (‘‘CMOs’’),
and asset-backed securities (‘‘ABS’’).17
For purposes of this filing, nonagency RMBS, non-agency CMBS, nonagency CMOs, and ABS are referred to
collectively as ‘‘Private ABS/MBS.’’
The Fund will typically enter into ‘‘to
be announced’’ or ‘‘TBA’’ commitments
and utilize mortgage dollar rolls when
purchasing mortgage-backed securities.
The Fund may enter into short sales
of any securities in which the Fund may
invest.
Other Investments
While the Fund, under normal market
conditions, will invest at least 80% of
its net assets in the securities and other
financial instruments described under
‘‘Principal Investments’’ above, the
Fund may invest its remaining assets in
the securities and financial instruments
described below.
12 The term ‘‘normal market conditions’’ is
defined in NYSE Arca Rule 8.600–E(c)(5).
13 For purposes of this filing, ‘‘ETFs’’ are
Investment Company Units (as described in NYSE
Arca Rule 5.2–E(j)(3)); Portfolio Depositary Receipts
(as described in NYSE Arca Rule 8.100–E); and
Managed Fund Shares (as described in NYSE Arca
Rule 8.600–E). All ETFs will be listed and traded
in the U.S. on a national securities exchange.
14 The Mortgage-Related Fixed Income
Instruments in which the Fund invests may be
structured as pass-through securities.
15 Under normal market conditions, the Fund will
invest principally in Mortgage-Related Fixed
Income Instruments issued by the U.S. government
and its agencies and government-sponsored entities,
such as the Government National Mortgage
Association (‘‘GNMA’’ or ‘‘Ginnie Mae’’), the
Federal National Mortgage Association (‘‘FNMA’’ or
‘‘Fannie Mae’’) or the Federal Home Loan Mortgage
Corporation (‘‘FHLMC’’ or ‘‘Freddie Mac’’).
16 Stripped mortgage-backed securities are
securities where mortgage payments are divided up
between paying the loan’s principal and paying the
loan’s interest.
17 The Fund will typically invest in ABS backed
by pools of home equity loans and other mortgagerelated debt. ABS are collateralized by pools of
obligations or assets. ABS may take the form of
commercial paper, notes, or pass-through
certificates and may be structured as floaters,
inverse floaters, interest-only and principal-only
obligations.
PO 00000
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3459
The Fund may hold cash and cash
equivalents.18
The Fund may hold the following
fixed income securities (‘‘Other Fixed
Income Securities’’):
• U.S. government securities (other
than cash equivalents);
• industrial development bonds;
• inflation-indexed bonds, including
municipal inflation-indexed bonds and
corporate inflation-indexed bonds;
• municipal obligations, including
municipal lease obligations, prerefunded municipal bonds, municipal
warrants, municipal obligations with
credit enhancements, residual interest
bonds, custodial receipts, and Build
America Bonds;
• variable and floating rate
obligations (including inverse floaters
and floaters);
• subordinated or junior debt;
• corporate bonds, debentures, and
notes;
• zero coupon, step coupon and payin-kind securities;
• agency and non-agency
collateralized loan obligations
(‘‘CLOs’’); 19
• strip bonds;
• when-issued and/or delayeddelivery securities (other than mortgage
TBAs);
• tender option bonds;
• bank obligations, including standby
commitments, and bank capital
securities; and
• trade claims.
The Fund may hold the following
U.S. exchange-listed derivative
instruments: Futures, options (including
options on futures), and swaps on
commodities, currencies, U.S. and nonU.S. equity securities, fixed income
securities as defined in Commentary
.01(b) to Rule 8.600–E, interest rates,
U.S. Treasuries, or a basket or index of
any of the foregoing. Such listed
derivatives will comply with the criteria
in Commentary .01(d) of NYSE Arca
Rule 8.600–E.
18 For purposes of this filing, cash equivalents are
the securities included in Commentary .01(c) to
NYSE Arca Rule 8.600–E.
19 For purposes of this filing, non-agency CLOs
are excluded from the definition of ‘‘Private ABS/
MBS.’’ For avoidance of doubt, the Fund will
comply with Commentary.01(b)(5) to NYSE Arca
Rule 8.600–E, which provides that non-agency,
non-government-sponsored entity (‘‘GSE’’) and
privately-issued mortgage-related and other assetbacked securities components of a portfolio shall
not account, in the aggregate, for more than 20%
of the weight of the portfolio. For purposes of this
filing, all non-agency, non- GSE and privatelyissued mortgage-related and other asset-backed
securities components of the Fund’s portfolio,
including, without limitation, Private ABS/MBS
and non-agency CLOs, shall not account, in the
aggregate, for more than 20% of the weight of the
Fund’s portfolio.
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Federal Register / Vol. 85, No. 13 / Tuesday, January 21, 2020 / Notices
The Fund may hold the following
over-the-counter (‘‘OTC’’) derivative
instruments: Forwards, options, and
OTC total return swaps on commodities,
currencies, U.S. and non-U.S. equity
securities, fixed income securities as
defined in Commentary .01(b) to Rule
8.600–E, interest rates, or a basket or
index of any of the foregoing. The Fund
also may hold OTC credit default swaps.
The Fund may enter into OTC options
on swap agreements (‘‘swaptions’’).
The Fund’s holdings in OTC
derivatives will comply with the criteria
in Commentary .01(e) of NYSE Arca
Rule 8.600–E.
The Fund may invest in ETFs other
than ETFs that invest principally in
mortgage-backed securities.20
The Fund may invest in securities of
non-exchange-traded investment
company securities, subject to
applicable limitations under Section
12(d)(1) of the 1940 Act.
The Fund may invest in private
placements, restricted securities and
Rule 144A securities.
All (1) Mortgage-Related Fixed
Income Instruments other than Private
ABS/MBS, and (2) Other Fixed Income
Securities will meet the requirements of
Commentary .01(b)(4) to Rule 8.600–E.
The Fund will not invest in securities
or other financial instruments that have
not been described in this proposed rule
change.
jbell on DSKJLSW7X2PROD with NOTICES
Other Restrictions
The Fund’s investments, including
derivatives, will be consistent with the
Fund’s investment objective and will
not be used to enhance leverage
(although certain derivatives and other
investments may result in leverage).
That is, while the Fund will be
permitted to borrow as permitted under
the 1940 Act, the Fund’s investments
will not be used to seek performance
that is the multiple or inverse multiple
(e.g., 2Xs and 3Xs) of the Fund’s
primary broad-based securities
benchmark index (as defined in Form
N–1A).21
The Fund’s Use of Derivatives
Investments in derivative instruments
will be made in accordance with the
Fund’s investment objective and
policies.
To limit the potential risk associated
with such transactions, the Fund will
enter into offsetting transactions or
segregate or ‘‘earmark’’ assets
determined to be liquid by the Adviser
20 See
note 13, supra.
Fund’s broad-based securities benchmark
index will be identified in a future amendment to
the Registration Statement following the Fund’s
first full calendar year of performance.
21 The
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18:20 Jan 17, 2020
Jkt 250001
in accordance with procedures
established by the Trust’s Board of
Trustees (the ‘‘Board’’). In addition, the
Fund has included appropriate risk
disclosure in its offering documents,
including leveraging risk. Leveraging
risk is the risk that certain transactions
of the Fund, including the Fund’s use of
derivatives, may give rise to leverage,
causing the Fund to be more volatile
than if it had not been leveraged.
Creation and Redemption of Shares
According to the Registration
Statement, the Trust will issue and
redeem Shares only in ‘‘Creation Units’’
of at least 25,000 Shares on a
continuous basis at their NAV per Share
next determined after receipt of an order
on any business day. The size of a
Creation Unit is subject to change. The
consideration for purchase of Creation
Units of the Fund generally consists of
cash. If creations are not conducted in
cash, the consideration for purchase of
Creation Units of the Fund generally
consists of the in-kind deposit of a
designated portfolio of securities
(including any portion of such securities
for which cash may be substituted)
(‘‘Deposit Securities’’) and the Cash
Component computed as described
below. Together, the Deposit Securities
and the Cash Component constitute the
‘‘Fund Deposit,’’ which will be
applicable to creation requests received
in proper form. The Fund Deposit
represents the minimum initial and
subsequent investment amount for a
Creation Unit of a Fund.
The ‘‘Cash Component’’ is an amount
equal to the difference between the NAV
of the Shares (per Creation Unit) and the
‘‘Deposit Amount,’’ which is an amount
equal to the market value of the Deposit
Securities, and serves to compensate for
any differences between the NAV per
Creation Unit and the Deposit Amount.
Janus Capital makes available through
the National Securities Clearing
Corporation (‘‘NSCC’’) on each business
day prior to the opening of business on
the Exchange, the list of names and the
required number or par value of each
Deposit Security and the amount of the
Cash Component to be included in the
current Fund Deposit (based on
information as of the end of the
previous business day for the Fund).
Such Fund Deposit is applicable to
purchases of Creation Units of Shares of
the Fund until such time as the nextannounced Fund Deposit is made
available.
The Fund reserves the right to permit
or require the substitution of a ‘‘cash in
lieu’’ amount to be added to the Cash
Component to replace any Deposit
Security that may not be available in
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sufficient quantity for delivery or that
may not be eligible for transfer through
Depository Trust Company (‘‘DTC’’) or
the Clearing Process (as discussed
below). The Fund also reserves the right
to permit or require a ‘‘cash in lieu’’
amount in certain circumstances,
including circumstances in which (i) the
delivery of the Deposit Security by the
Authorized Participant (as described
below) would be restricted under
applicable securities or other local laws
or (ii) the delivery of the Deposit
Security to the Authorized Participant
would result in the disposition of the
Deposit Security by the Authorized
Participant becoming restricted under
applicable securities or other local laws,
or in certain other situations.
Procedures for Creating Creation Units
To be eligible to place orders with the
Distributor and to create a Creation Unit
of the Fund, an entity must be: (i) A
‘‘Participating Party,’’ i.e., a brokerdealer or other participant in the
clearing process through the Continuous
Net Settlement System of the NSCC (the
‘‘Clearing Process’’) or (ii) a DTC
Participant, and must have executed an
agreement with the Distributor, with
respect to creations and redemptions of
Creation Units (‘‘Authorized Participant
Agreement’’). A Participating Party or
DTC Participant who has executed an
Authorized Participant Agreement is
referred to as an ‘‘Authorized
Participant.’’ Creation Units may be
purchased only by or through a DTC
Participant that has entered into an
Authorized Participant Agreement with
the Distributor.
Purchase Orders
To initiate an order for a Creation
Unit, an Authorized Participant must
submit to the Distributor or its agent an
irrevocable order to purchase Shares of
the Fund, in proper form, by the ‘‘Cutoff
Time’’ (as defined below).
An Authorized Participant must
submit an irrevocable order to purchase
Shares of the Fund generally before 3:00
p.m. (‘‘Cutoff Time’’), Eastern time
(‘‘E.T.’’) on any business day in order to
receive that day’s NAV. Purchase orders
and redemption requests, if accepted by
the Trust, will be processed based on
the NAV next determined after such
acceptance.
Redemption of Creation Units
Shares of the Fund may be redeemed
by Authorized Participants only in
Creation Units at their NAV next
determined after receipt of a redemption
request in proper form by the Transfer
Agent or its agent and only on a
business day.
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Janus Capital will make available
through the NSCC, prior to the opening
of business on the Exchange (currently
9:30 a.m. E.T.) on each business day, the
designated portfolio of securities
(including any portion of such securities
for which cash may be substituted) that
will be applicable to redemption
requests received in proper form on that
day (‘‘Fund Securities’’), and an amount
of cash (the ‘‘Cash Amount,’’ as
described below). Fund Securities
received on redemption may not be
identical to Deposit Securities that are
applicable to creations of Creation
Units.
The redemption proceeds for a
Creation Unit generally consist of Fund
Securities, plus the Cash Amount,
which is an amount equal to the
difference between the net asset value of
the Shares being redeemed, as next
determined after the receipt of a
redemption request in proper form, and
the value of Fund Securities, less a
redemption transaction fee.
The Trust may, in its sole discretion,
substitute a ‘‘cash in lieu’’ amount to
replace any Fund Security. The Trust
also reserves the right to permit or
require a ‘‘cash in lieu’’ amount in
certain circumstances. The amount of
cash paid out in such cases will be
equivalent to the value of the
substituted security listed as a Fund
Security. In the event that the Fund
Securities have a value greater than the
NAV of the Shares, a compensating cash
payment equal to the difference is
required to be made by or through an
Authorized Participant by the
redeeming shareholder. The Fund
generally redeems Creation Units in
Fund Securities, plus any Cash Amount
due.
jbell on DSKJLSW7X2PROD with NOTICES
Cash Redemption Method
Although the Trust will not ordinarily
permit partial or full cash redemptions
of Creation Units of the Fund, when
partial or full cash redemptions of
Creation Units are available or specified
they will be effected in essentially the
same manner as in-kind redemptions
thereof. In the case of partial or full cash
redemption, the Authorized Participant
receives the cash equivalent of the Fund
Securities it would otherwise receive
through an in-kind redemption, plus the
same Cash Amount to be paid to an inkind redeemer.22
22 The Adviser represents that, to the extent the
Trust effects the creation or redemption of Shares
in cash on any given day, such transactions will be
effected in the same manner for all Authorized
Participants placing trades with the Fund on that
day.
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Placement of Redemption Orders
Redemption requests for Creation
Units of the Fund must be submitted to
the Transfer Agent by or through an
Authorized Participant. An Authorized
Participant must submit an irrevocable
request to redeem Shares of the Fund
generally before 3:00 p.m., E.T. on any
business day, in order to receive that
day’s NAV.
Disclosed Portfolio
The Fund’s disclosure of derivative
positions in the applicable Disclosed
Portfolio includes information that
market participants can use to value
these positions intraday. On a daily
basis, the Fund will disclose the
information regarding the Disclosed
Portfolio required under NYSE Arca
Rule 8.600–E (c)(2) to the extent
applicable. The Fund’s website
information will be publicly available at
no charge.
Impact on Arbitrage Mechanism
The Adviser believes there will be
minimal impact to the arbitrage
mechanism as a result of the use of
derivatives. Market makers and
participants should be able to value
derivatives as long as the positions are
disclosed with relevant information.
The Adviser believes that the price at
which Shares trade will continue to be
disciplined by arbitrage opportunities
created by the ability to purchase or
redeem Shares at their NAV, which
should ensure that Shares will not trade
at a material discount or premium in
relation to their NAV.
The Adviser does not believe there
will be any significant impacts to the
settlement or operational aspects of the
Fund’s arbitrage mechanism due to the
use of derivatives. Because derivatives
generally are not eligible for in-kind
transfer, they will typically be
substituted with a ‘‘cash in lieu’’
amount when the Fund processes
purchases or redemptions of creation
units in-kind.
Application of Generic Listing
Requirements
The Exchange is submitting this
proposed rule change because the
portfolio for the Fund will not meet all
of the ‘‘generic’’ listing requirements of
Commentary .01 to NYSE Arca Rule
8.600–E applicable to the listing of
Managed Fund Shares. The Fund’s
portfolio would meet all such
requirements except for those set forth
in Commentary .01(a)(1) with respect to
non-exchange traded investment
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3461
company securities 23 and Commentary
.01(b)(4) 24 to NYSE Arca Rule 8.600–E
with respect to Private ABS/MBS.
The Fund will not comply with the
requirements in Commentary .01(b)(4)
to Rule 8.600–E that component
securities that in the aggregate account
for at least 90% of the fixed income
weight of the portfolio meet one of the
criteria specified in Commentary
.01(b)(4), because certain Private ABS/
MBS by their nature cannot satisfy the
23 Commentary .01(a) to Rule 8.600–E specifies
the equity securities accommodated by the generic
criteria in Commentary .01(a), namely, U.S.
Component Stocks (as described in Rule 5.2–E(j)(3))
and Non-U.S. Component Stocks (as described in
Rule 5.2–E(j)(3)). Commentary .01(a)(1) to Rule
8.600–E (U.S. Component Stocks) provides that the
component stocks of the equity portion of a
portfolio that are U.S. Component Stocks shall meet
the following criteria initially and on a continuing
basis:
(A) Component stocks (excluding Derivative
Securities Products and Index-Linked Securities)
that in the aggregate account for at least 90% of the
equity weight of the portfolio (excluding such
Derivative Securities Products and Index-Linked
Securities) each shall have a minimum market
value of at least $75 million;
(B) Component stocks (excluding Derivative
Securities Products and Index-Linked Securities)
that in the aggregate account for at least 70% of the
equity weight of the portfolio (excluding such
Derivative Securities Products and Index-Linked
Securities) each shall have a minimum monthly
trading volume of 250,000 shares, or minimum
notional volume traded per month of $25,000,000,
averaged over the last six months;
(C) The most heavily weighted component stock
(excluding Derivative Securities Products and
Index-Linked Securities) shall not exceed 30% of
the equity weight of the portfolio, and, to the extent
applicable, the five most heavily weighted
component stocks (excluding Derivative Securities
Products and Index-Linked Securities) shall not
exceed 65% of the equity weight of the portfolio;
(D) Where the equity portion of the portfolio does
not include Non-U.S. Component Stocks, the equity
portion of the portfolio shall include a minimum of
13 component stocks; provided, however, that there
shall be no minimum number of component stocks
if (i) one or more series of Derivative Securities
Products or Index-Linked Securities constitute, at
least in part, components underlying a series of
Managed Fund Shares, or (ii) one or more series of
Derivative Securities Products or Index-Linked
Securities account for 100% of the equity weight of
the portfolio of a series of Managed Fund Shares;
and
(E) Except as provided herein, equity securities in
the portfolio shall be U.S. Component Stocks listed
on a national securities exchange and shall be NMS
Stocks as defined in Rule 600 of Regulation NMS
under the Securities Exchange Act of 1934.
24 Commentary .01(b)(4) provides that component
securities that in the aggregate account for at least
90% of the fixed income weight of the portfolio
must be either: (a) From issuers that are required
to file reports pursuant to Sections 13 and 15(d) of
the Act; (b) from issuers that have a worldwide
market value of its outstanding common equity held
by non-affiliates of $700 million or more; (c) from
issuers that have outstanding securities that are
notes, bonds debentures, or evidence of
indebtedness having a total remaining principal
amount of at least $1 billion; (d) exempted
securities as defined in Section 3(a)(12) of the Act;
or (e) from issuers that are a government of a foreign
country or a political subdivision of a foreign
country.
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criteria in Commentary .01(b)(4).25
Instead, the Exchange proposes that the
Fund’s investments in (1) MortgageRelated Fixed Income Instruments other
than Private ABS/MBS, and (2) Other
Fixed Income Securities will be
required to comply with the
requirements of Commentary .01(b)(4).
The Exchange believes that excluding
Private ABS/MBS from the 90%
calculation in Commentary .01(b)(4) is
consistent with the Act because the
Fund’s portfolio will minimize the risk
to the overall Fund associated with any
particular holding of the Fund as a
result of the diversification provided by
the investments and the Adviser’s
selection process, which closely
monitors investments to ensure
maintenance of credit and liquidity
standards. Further, the Exchange
believes that this alternative limitation
is appropriate because Commentary
.01(b)(4) to Rule 8.600–E is not designed
for structured finance vehicles such as
Private ABS/MBS. The Exchange notes
that all (1) Mortgage-Related Fixed
Income Instruments other than Private
ABS/MBS, and (2) Other Fixed Income
Securities will meet the requirements of
Commentary .01(b)(4) to Rule 8.600–E.
The Exchange notes that the
Commission has previously approved
the listing of Managed Fund Shares with
similar investment objectives and
strategies without imposing
requirements that a certain percentage
of such funds’ securities meet one of the
criteria comparable to those set forth in
Commentary .01(b)(4).26
25 Private ABS/MBS are generally issued by
special purpose vehicles in amounts smaller than
the minimum dollar threshold set forth in
Commentary .01(b)(4), so the criteria in
Commentary .01(b)(4) to Rule 8.600–E regarding an
issuer’s market capitalization and the remaining
principal amount of an issuer’s securities are
typically unavailable with respect to Private ABS/
MBS, even though such Private ABS/MBS may own
significant assets.
26 See, e.g., Securities Exchange Act Release Nos.
67894 (September 20, 2012), 77 FR 59227
(September 26, 2012) (SR–BATS–2012–033) (order
approving the listing and trading of shares of the
iShares Short Maturity Bond Fund); 70342
(September 6, 2013), 78 FR 56256 (September 12,
2013) (SR–NYSEArca19–2013–71) (order approving
the listing and trading of shares of the SPDR SSgA
Ultra Short Term Bond ETF, SPDR SSgA
Conservative Ultra Short Term Bond ETF and SPDR
SSgA Aggressive Ultra Short Term Bond ETF). See
also, Securities Exchange Act Release Nos. 84047
(September 6, 2018), 83 FR 46200 (September 12,
2018) (SR–NASDAQ–2017–128) (Notice of Filing of
Amendment No. 3 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified
by Amendment No. 3, to List and Trade Shares of
the Western Asset Total Return ETF); 85022
(January 31, 2019), 25 FR 2265 (February 6, 2019)
(SR–NASDAQ–2018–080) (Notice of Filing of
Amendment No. 3 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified
by Amendment Nos. 1, 2 and 3, To List and Trade
Shares of the BrandywineGLOBAL-Global Total
Return ETF).
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The Fund may invest in nonexchange-traded investment company
securities, which are equity securities.
Because such securities have a net asset
value based on the value of securities
and financial assets the investment
company holds, the Exchange believes it
is both unnecessary and inappropriate
to apply to such investment company
securities the criteria in Commentary
.01(a)(1).27
The Exchange notes that the
Commission has previously approved
the listing of Managed Fund Shares with
similar investment objectives and
strategies where such funds were
permitted to invest in the shares of other
registered investment companies that
are not ETFs or money market funds.28
The Adviser represents that the
proposed exceptions from the
requirements of Commentary .01 to Rule
8.600–E described above are consistent
with the Fund’s investment objective,
and will further assist the Adviser to
achieve such investment objective.
Deviations from the generic
requirements are necessary for the Fund
to achieve its investment objective in a
manner that is cost-effective and that
maximizes investors’ returns. Further,
the proposed alternative requirements
are narrowly tailored to allow the Fund
to achieve its investment objective in
manner that is consistent with the
principles of Section 6(b)(5) of the Act.
As a result, it is in the public interest
to approve listing and trading of Shares
of the Fund on the Exchange pursuant
to the requirements set forth herein.
The Exchange notes that, other than
Commentary .01(a)(1) with respect to
non-exchange traded investment
company securities and Commentary
27 The Commission has previously approved
proposed rule changes under Section 19(b) of the
Act for series of Managed Fund Shares that may
invest in non-exchange traded investment company
securities. See, e.g., Securities Exchange Act
Release No. 85244 (March 4, 2019), 84 FR 8553
(March 8, 2019) (SR–NYSEArca19–2018–82) (Order
Granting Approval of a Proposed Rule Change, as
Modified by Amendment Nos. 1 and 2, Regarding
Certain Changes Relating to Investments of the
PGIM Active High Yield Bond ETF).
28 See, e.g., Securities Exchange Act Release Nos.
79053 (October 5, 2016), 81 FR 70468 (October 12,
2016) (SR19–BatsBZX–2016–35) (permitting the
JPMorgan Global Bond Opportunities ETF to invest
in ‘‘investment company securities that are not
ETFs’’); 74297 (February 18, 2015), 80 FR 9788
(February 24, 2015) (SR–BATS–2014–056)
(permitting the U.S. Fixed Income Balanced Risk
ETF to invest in ‘‘exchange traded and nonexchange traded investment companies (including
investment companies advised by the Adviser or its
affiliates) that invest in such Fixed Income
Securities’’); 83319 (May 24, 2018), 83 FR 25097
(May 31, 2018) (SR–NYSEArca19–2018–15), (Order
Approving a Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, to Continue Listing and
Trading Shares of the PGIM Ultra Short Bond ETF
under NYSE Arca Rule 8.600–E).
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.01(b)(4) to Rule 8.600–E with respect to
Private ABS/MBS, as described above,
the Fund’s portfolio will meet all other
requirements of Rule 8.600–E.
Availability of Information
The Fund’s website
(www.janushenderson.com), which is
publicly available, includes a form of
the prospectus for the Fund that may be
downloaded. The Fund’s website
includes additional quantitative
information updated on a daily basis,
including, for the 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/
Ask Price’’),29 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 in
the Core Trading Session on the
Exchange, the Adviser discloses on the
Fund’s website the Disclosed Portfolio
for the Fund as defined in NYSE Arca
Rule 8.600–E(c)(2) that will form the
basis for the Fund’s calculation of NAV
at the end of the business day.30
Investors can also obtain the Trust’s
Statement of Additional Information
(‘‘SAI’’), the Fund’s Shareholder
Reports, and its Form N–CSR and Form
N–SAR, filed twice a year. 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–SAR may be
viewed on-screen or downloaded from
the Commission’s website at
www.sec.gov.
Quotation and last sale information
for the Shares and ETFs will be
available via the CTA high speed line.
Price information for U.S. and foreign
exchange-traded futures, options,
options on futures and swaps will be
available from the exchange on which
they are listed. Quotation and last sale
information for exchange-listed options
29 The Bid/Ask Price of the Fund’s Shares 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 Fund’s NAV. The records
relating to Bid/Ask Prices are retained by the Fund
and/or its service providers.
30 Under accounting procedures to be followed by
the Fund, trades made on the prior business day
(‘‘T’’) are booked and reflected in NAV on the
current business day (‘‘T+1’’). Accordingly, the
Fund is 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.
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cleared via the Options Clearing
Corporation also will be available via
the Options Price Reporting Authority.
Information regarding market price and
trading volume for the Shares is
continually available on a real-time
basis throughout the day on brokers’
computer screens and other electronic
services. Information regarding the
previous day’s closing price and trading
volume information for the Shares are
published daily in the financial section
of newspapers.
Quotation information for MortgageRelated Fixed Income Instruments,
Other Fixed Income Securities, OTC
derivatives and cash equivalents may be
obtained from brokers and dealers who
make markets in such securities or
through nationally recognized pricing
services through subscription
agreements. Price information for OTC
derivative instruments 144A securities,
non-exchange-traded investment
company securities, private placement
securities and restricted securities is
available from major market data
vendors. Price information relating to
municipal obligations is available
through the Municipal Securities
Rulemaking Board’s (‘‘MSRB’’) EMMA
system.
In addition, the Portfolio Indicative
Value (‘‘PIV’’), as defined in NYSE Arca
Rule 8.600–E(c)(3), is widely
disseminated by one or more major
market data vendors at least every 15
seconds during the Core Trading
Session.31 The dissemination of the PIV,
together with the Disclosed Portfolio,
allows investors to determine the
approximate value of the underlying
portfolio of the Fund on a daily basis
and provides a close estimate of that
value throughout the trading day.
Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
the Fund.32 Trading in Shares of the
Fund will be halted if the circuit breaker
parameters in NYSE Arca Rule 7.12–E
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 of
the Fund inadvisable.
Trading in the Shares will be subject
to NYSE Arca Rule 8.600–E(d)(2)(D),
which sets forth circumstances under
which Shares of the 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. Shares will trade on
the NYSE Arca Marketplace from 4:00
a.m. to 8:00 p.m. E.T. in accordance
with NYSE Arca Rule 7.34–E (Early,
Core, and Late Trading Sessions). The
Exchange has appropriate rules to
facilitate transactions in the Shares
during all trading sessions. As provided
in NYSE Arca Rule 7.6–E, the minimum
price variation (‘‘MPV’’) for quoting and
entry of orders in equity securities
traded on the NYSE Arca Marketplace is
$0.01, with the exception of securities
that are priced less than $1.00 for which
the MPV for order entry is $0.0001.
Except as described herein, the Shares
of the Fund will conform to the
continued listing criteria under NYSE
Arca Rule 8.600–E. The Exchange
represents that, for continued listing,
the Fund will be in compliance with
Rule 10A–3 33 under the Act, as
provided by NYSE Arca Rule 5.3–E. The
Exchange has obtained a representation
from the issuer of the Shares of the
Fund that the NAV and the Disclosed
Portfolio will be made available to all
market participants at the same time.
Surveillance
The Exchange represents that trading
in the Shares is subject to the existing
trading surveillances administered by
the Exchange, as well as cross-market
surveillances administered by the
Financial Industry Regulatory Authority
(‘‘FINRA’’) on behalf of the Exchange,
which are designed to detect violations
of Exchange rules and applicable federal
securities laws.34 The Exchange
represents that these procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and
applicable federal securities laws.
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows and
investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
33 17
31 Currently,
it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available PIVs taken from the CTA
or other data feeds.
32 See NYSE Arca Rule 7.12–E.
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CFR 240 10A–3.
conducts cross-market surveillances on
behalf of the Exchange pursuant to a regulatory
services agreement. The Exchange is responsible for
FINRA’s performance under this regulatory services
agreement.
34 FINRA
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3463
The Exchange or FINRA, on behalf of
the Exchange, or both, will
communicate as needed regarding
trading in the Shares, ETFs, certain
futures, and certain exchange-traded
options and options on futures with
other markets and other entities that are
members of the Intermarket
Surveillance Group (‘‘ISG’’), and the
Exchange or FINRA, on behalf of the
Exchange, or both, may obtain trading
information regarding trading such
securities and financial instruments
from such markets and other entities. In
addition, the Exchange may obtain
information regarding trading in such
securities and financial instruments
from markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.35
FINRA, on behalf of the Exchange, is
able to access, as needed, trade
information for certain fixed income
securities held by the Fund reported to
FINRA’s Trade Reporting and
Compliance Engine (‘‘TRACE’’). FINRA
also can access data obtained from the
MSRB relating to municipal obligations
trading activity for surveillance
purposes in connection with trading in
the Shares.
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
All statements and representations
made in this filing regarding (a) the
description of the portfolio holdings or
reference assets, (b) limitations on
portfolio holdings or reference assets, or
(c) the applicability of Exchange listing
rules specified in this rule filing shall
constitute continued listing
requirements for listing the Shares on
the Exchange.
The issuer has represented to the
Exchange that it will advise the
Exchange of any failure by the Fund to
comply with the continued listing
requirements, and, pursuant to its
obligations under Section 19(g)(1) of the
Act, the Exchange will monitor for
compliance with the continued listing
requirements. If the Fund is not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
NYSE Arca Rule 5.5–E(m).
Information Bulletin
The Exchange will inform its Equity
Trading Permit (‘‘ETP’’) Holders in an
35 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 the Fund
may trade on markets that are members of ISG or
with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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Information Bulletin (‘‘Bulletin’’) of the
special characteristics and risks
associated with trading the Shares of the
Fund. Specifically, the Bulletin will
discuss the following: (1) The
procedures for purchases and
redemptions of Shares in Creation Units
(and that Shares are not individually
redeemable); (2) NYSE Arca 9.2–E(a),
which imposes a duty of due diligence
on its ETP Holders to learn the essential
facts relating to every customer prior to
trading the Shares; (3) the risks involved
in trading the Shares during the Early
and Late Trading Sessions when an
updated PIV will not be calculated or
publicly disseminated; (4) how
information regarding the PIV and the
Disclosed Portfolio is disseminated; (5)
the requirement that ETP Holders
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 Bulletin will
reference that the Fund is subject to
various fees and expenses described in
the Registration Statement. The Bulletin
will discuss any exemptive, no-action,
and interpretive relief granted by the
Commission from any rules under the
Act. The Bulletin will also disclose that
the NAV for the Shares of the Fund will
be calculated after 4:00 p.m. E.T. each
trading day.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 36 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 believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares will
be listed and traded on the Exchange
pursuant to the initial and continued
listing criteria in NYSE Arca Rule
8.600–E. The Adviser is not registered
as a broker-dealer but is affiliated with
a broker-dealer and has implemented
and will maintain a fire wall with
respect to such broker-dealer affiliate
regarding access to information
concerning the composition and/or
changes to the portfolio. The Exchange
represents that trading in the Shares is
subject to the existing trading
surveillances administered by the
36 15
U.S.C. 78f(b)(5).
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Exchange, as well as cross-market
surveillances administered by FINRA on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws. The Exchange
represents that these procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and
applicable federal securities laws.
The Exchange or FINRA, on behalf of
the Exchange, or both, will
communicate as needed regarding
trading in the Shares, ETFs, certain
futures, and certain exchange-traded
options and options on futures with
other markets and other entities that are
members of the ISG, and the Exchange
or FINRA, on behalf of the Exchange, or
both, may obtain trading information
regarding trading such securities and
financial instruments from such markets
and other entities. In addition, the
Exchange may obtain information
regarding trading in such securities and
financial instruments from markets and
other entities that are members of ISG or
with which the Exchange has in place
a comprehensive surveillance sharing
agreement. FINRA, on behalf of the
Exchange, is able to access, as needed,
trade information for certain fixed
income securities held by the Fund
reported to FINRA’s TRACE. FINRA
also can access data obtained from the
MSRB relating to municipal obligations
trading activity for surveillance
purposes in connection with trading in
the Shares.
Except as described herein, the Shares
of the Fund will conform to the
continued listing criteria under NYSE
Arca Rule 8.600–E. The Exchange
represents that, for continued listing,
the Fund will be in compliance with
Rule 10A–3 under the Act, as provided
by NYSE Arca Rule 5.3–E. The
Exchange has obtained a representation
from the issuer of the Shares of the
Fund that the NAV per Share is
calculated daily and that the NAV and
the Disclosed Portfolio are made
available to all market participants at
the same time. In addition, a large
amount of information is publicly
available regarding the Fund and the
Shares, thereby promoting market
transparency. The Fund’s portfolio
holdings are disclosed on its website
daily after the close of trading on the
Exchange and prior to the opening of
trading on the Exchange the following
day. On a daily basis, the Fund
discloses the information regarding the
Disclosed Portfolio required under
NYSE Arca Rule 8.600–E (c)(2) to the
extent applicable. The Fund’s website
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information is publicly available at no
charge.
Investors can also obtain the Trust’s
SAI, the Fund’s Shareholder Reports,
and its Form N–CSR and Form N–SAR,
filed twice a year. 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–SAR may be viewed on-screen
or downloaded from the Commission’s
website at www.sec.gov.
The website for the Fund includes a
form of the prospectus for the Fund and
additional data relating to NAV and
other applicable quantitative
information. Trading in Shares of the
Fund will be halted if the circuit breaker
parameters in NYSE Arca Rule 7.12–E
have been reached or because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable, and trading in
the Shares will be subject to NYSE Arca
Rule 8.600–E(d)(2)(D), which sets forth
circumstances under which Shares of
the Fund may be halted. In addition, as
noted above, investors have ready
access to information regarding the
Fund’s holdings, the PIV, the Disclosed
Portfolio, and quotation and last sale
information for the Shares. The Fund’s
investments, including derivatives, will
be consistent with the Fund’s
investment objective and will not be
used to enhance leverage (although
certain derivatives and other
investments may result in leverage).
That is, while the Fund will be
permitted to borrow as permitted under
the 1940 Act, the Fund’s investments
will not be used to seek performance
that is the multiple or inverse multiple
(e.g., 2Xs and 3Xs) of the Fund’s
primary broad-based securities
benchmark index (as defined in Form
N–1A).
With respect to the Fund’s investment
in Private ABS/MBS, the proposed noncompliance with the requirements in
Commentary .01(b)(4) to Rule 8.600–E
that component securities that in the
aggregate account for at least 90% of the
fixed income weight of the portfolio
meet one of the criteria specified in
Commentary .01(b)(4) is appropriate
because certain Private ABS/MBS by
their nature cannot satisfy the criteria in
Commentary .01(b)(4). Instead, the
Exchange proposes that the Fund’s
investments in (1) Mortgage-Related
Fixed Income Instruments other than
Private ABS/MBS, and (2) Other Fixed
Income Securities will be required to
comply with the requirements of
Commentary .01(b)(4). The Exchange
believes that excluding Private ABS/
MBS from the 90% calculation in
Commentary .01(b)(4) is consistent with
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the Act because the Fund’s portfolio
will minimize the risk to the overall
Fund associated with any particular
holding of the Fund as a result of the
diversification provided by the
investments and the Adviser’s selection
process, which closely monitors
investments to ensure maintenance of
credit and liquidity standards. Further,
the Exchange believes that this
alternative limitation is appropriate
because Commentary .01(b)(4) to Rule
8.600–E is not designed for structured
finance vehicles such as Private ABS/
MBS. The Exchange notes that all (1)
Mortgage-Related Fixed Income
Instruments other than Private ABS/
MBS, and (2) Other Fixed Income
Securities will meet the requirements of
Commentary .01(b)(4) to Rule 8.600–E.
Non-agency, non-GSE and privatelyissued mortgage-related and other assetbacked securities components of the
Fund’s portfolio shall not account, in
the aggregate, for more than 20% of the
weight of the portfolio and, therefore,
the Fund will comply with
Commentary.01(b)(5) to NYSE Arca
Rule 8.600–E.
The Exchange notes that the
Commission has previously approved
the listing of Managed Fund Shares with
similar investment objectives and
strategies without imposing
requirements that a certain percentage
of such funds’ securities meet one of the
criteria set forth in Commentary
.01(b)(4).37
The Fund may invest in shares of
non-exchange-traded open-end
management investment company
securities, which are equity securities.
Therefore, the Fund will not comply
with the requirements of Commentary
.01(a)(1) to NYSE Arca Rule 8.600–E
(U.S. Component Stocks) with respect to
its equity securities holdings. It is
appropriate and in the public interest to
approve listing and trading of Shares of
the Fund notwithstanding that the
Fund’s holdings in such securities
would not meet the requirements of
Commentary .01(a)(1)(A) through (E) to
Rule 8.600–E. The Fund’s investment in
shares of non-exchange-traded open-end
management investment company
securities will be utilized in order to
obtain income on short-term cash
balances while awaiting attractive
investment opportunities, to provide
liquidity in preparation for anticipated
redemptions or for defensive purposes,
which will allow the Fund to obtain the
benefits of a more diversified portfolio
available in the shares of non-exchangetraded open-end management
investment company securities than
37 See
note 24, supra.
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might otherwise be available. Moreover,
such investments, which may include
mutual funds that invest, for example,
principally in fixed income securities,
would be utilized to help the Fund meet
its investment objective and to equitize
cash in the short term. The Fund will
invest in such securities only to the
extent that those investments would be
consistent with the requirements of
Section 12(d)(1) of the 1940 Act and the
rules thereunder. Because such
securities must satisfy applicable 1940
Act diversification requirements, and
have a net asset value based on the
value of securities and financial assets
the investment company holds, it is
both unnecessary and inappropriate to
apply to such investment company
securities the criteria in Commentary
.01(a)(1).
The Exchange notes that it would be
difficult or impossible to apply to
mutual fund shares certain of the
generic quantitative criteria (e.g., market
capitalization, trading volume, or
portfolio criteria) in Commentary
.01(a)(1) (A) through (D) applicable to
U.S. Component Stocks. For example,
the requirements for U.S. Component
Stocks in Commentary .01(a)(1)(B) that
there be minimum monthly trading
volume of 250,000 shares, or minimum
notional volume traded per month of
$25,000,000, averaged over the last six
months are tailored to exchange-traded
securities (i.e., U.S. Component Stocks)
and not to mutual fund shares, which
do not trade in the secondary market
and for which no such volume
information is reported. In addition,
Commentary .01(a)(1)(A) relating to
minimum market value of portfolio
component stocks, Commentary
.01(a)(1)(C) relating to weighting of
portfolio component stocks, and
Commentary .01(a)(1)(D) relating to
minimum number of portfolio
components are not appropriately
applied to open-end management
investment company securities; openend investment companies hold
multiple individual securities as
disclosed publicly in accordance with
the 1940 Act, and application of
Commentary .01(a)(1)(A) through (D)
would not serve the purposes served
with respect to U.S. Component Stocks,
namely, to establish minimum liquidity
and diversification criteria for U.S.
Component Stocks held by series of
Managed Fund Shares.
The Exchange accordingly believes
that it is appropriate and in the public
interest to approve listing and trading of
Shares of the Fund on the Exchange
notwithstanding that the Fund would
not meet the requirements of
Commentary .01(a)(1)(A) through (D)
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Sfmt 4703
3465
and (b)(4) to Rule 8.600–E. The
Exchange notes that, other than
Commentary .01(a)(1) and (b)(4) to Rule
8.600–E, the Fund’s portfolio will meet
all other requirements of Rule 8.600–E.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of an additional type of activelymanaged exchange-traded product that
principally holds fixed income
securities and derivatives and that will
enhance competition among market
participants, to the benefit of investors
and the marketplace. As noted above,
the Exchange has in place surveillance
procedures relating to trading in the
Shares of the Fund and may obtain
information via ISG from other
exchanges that are members of ISG or
with which the Exchange has entered
into a comprehensive surveillance
sharing agreement. In addition, as noted
above, investors have ready access to
information regarding the Fund’s
holdings, the PIV, the Disclosed
Portfolio for the Fund, and quotation
and last sale information for the Shares
of the Fund.
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 will
facilitate the listing and trading of an
additional type of actively-managed
exchange-traded product that
principally holds fixed income
securities, ETFs, derivatives, cash and
cash equivalents, and that will enhance
competition among market participants,
to the benefit of investors and the
marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Discussion and Commission’s
Findings
After careful review, the Commission
finds that the proposed rule change, as
modified by Amendment No. 2, is
consistent with the Act and the rules
and regulations thereunder applicable to
a national securities exchange.38 In
38 In approving this proposed rule change, the
Commission has considered the proposed rule’s
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particular, the Commission finds that
the proposed rule change, as modified
by Amendment No. 2, is consistent with
Section 6(b)(5) of the Act,39 which
requires, among other things, that the
Exchange’s rules be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
According to the Exchange, other than
Commentary .01(a)(1) relating to nonexchange-traded open-end management
investment company securities and
Commentary .01(b)(4) relating to Private
ABS/MBS, as described above, the Fund
will meet all other requirements of
NYSE Arca Rule 8.600–E.
With respect to the Fund’s
investments in shares of non-exchangetraded open-end management
investment company securities, which
will not comply with Commentary
.01(a)(1) to NYSE Arca Rule 8.600–E,
the Commission notes that: (1) Such
securities must satisfy applicable 1940
Act diversification requirements; and (2)
the value of such securities is based on
the value of securities and financial
assets held by those investment
companies.40 The Commission therefore
believes that the Fund’s investments in
non-exchange-traded open-end
management investment company
securities would not make the Shares
susceptible to fraudulent or
manipulative acts and practices.41
In addition, while the Fund will not
meet the requirement that component
securities that in the aggregate account
for at least 90% of the fixed income
weight of the portfolio meet one of the
criteria set forth in in Commentary
.01(b)(4) to NYSE Arca Rule 8.600–E,
the Commission believes that the
diversification of the Fund’s portfolio,
the Fund’s representation that it will
continue to comply with Commentary
.01(b)(5), and the fact that the fixed
income portion of the portfolio,
excluding Private ABS/MBS, will
comply, and will continue to comply,
with Commentary .01(b)(4), mitigate
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
39 15 U.S.C. 78f(b)(5).
40 See supra Section II.A.2 (Application of
Generic Listing Standards).
41 The Commission notes it has approved other
exchange-traded funds that can hold non-exchangetraded open-end management investment company
securities in a manner that does not comply with
Commentary .01(a)(1) to Rule 8.600–E. See, e.g.,
Securities Exchange Act Release No. 86362 (July 12,
2019), 84 FR 34457 (July 18, 2019) (SR–NYSEArca–
2019–36).
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manipulation concerns relating to the
Shares.
The Exchange represents that all
statements and representations made in
the filing regarding (a) the description of
the portfolio holdings or reference
assets, (b) limitations on portfolio
holdings or reference assets, or (c) the
applicability of Exchange listing rules
specified in the rule filing constitute
continued listing requirements for
listing the Shares on the Exchange. In
addition, the issuer has represented to
the Exchange that it will advise the
Exchange of any failure by the Fund to
comply with the continued listing
requirements, and, pursuant to its
obligations under Section 19(g)(1) of the
Act, the Exchange will monitor 42 for
compliance with the continued listing
requirements. If the Fund is not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
NYSE Arca Rule 5.5–E(m).
For the foregoing reasons, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 2, is consistent with Section 6(b)(5)
of the Act 43 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Solicitation of Comments on
Amendment No. 2 to the Proposed Rule
Change
Interested persons are invited to
submit written views, data, and
arguments concerning whether
Amendment No. 2 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–
NYSEArca–2019–51 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
42 The Commission notes that certain proposals
for the listing and trading of exchange-traded
products include a representation that the exchange
will ‘‘surveil’’ for compliance with the continued
listing requirements. See, e.g., Securities Exchange
Act Release No. 77499 (April 1, 2016), 81 FR 20428,
20432 (April 7, 2016) (SR–BATS–2016–04). In the
context of this representation, it is the
Commission’s view that ‘‘monitor’’ and ‘‘surveil’’
both mean ongoing oversight of compliance with
the continued listing requirements. Therefore, the
Commission does not view ‘‘monitor’’ as a more or
less stringent obligation than ‘‘surveil’’ with respect
to the continued listing requirements.
43 15 U.S.C. 78f(b)(5).
PO 00000
Frm 00132
Fmt 4703
Sfmt 4703
All submissions should refer to File
Number SR–NYSEArca–2019–51. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEArca–2019–51 and
should be submitted on or before
February 11, 2020.
V. Accelerated Approval of the
Proposed Rule Change, as Modified by
Amendment No. 2
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 2, prior to
the thirtieth day after the date of
publication of notice of the filing of
Amendment No. 2 in the Federal
Register. The Commission notes that
Amendment No. 2 clarified the
investments of the Fund and the
application of NYSE Arca Rule 8.600–E,
Commentary .01 to the Fund’s
investments. Amendment No. 2 also
provided other clarifications and
additional information related to the
proposed rule change. The changes and
additional information in Amendment
No. 2 assist the Commission in
evaluating the Exchange’s proposal and
in determining that it is consistent with
the Act. Accordingly, the Commission
finds good cause, pursuant to Section
19(b)(2) of the Act,44 to approve the
44 15
E:\FR\FM\21JAN1.SGM
U.S.C. 78s(b)(2).
21JAN1
Federal Register / Vol. 85, No. 13 / Tuesday, January 21, 2020 / Notices
proposed rule change, as modified by
Amendment No. 2, on an accelerated
basis.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,45 that the
proposed rule change (SR–NYSEArca–
2019–51), as modified by Amendment
No. 2, be, and it hereby is, approved on
an accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.46
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–00800 Filed 1–17–20; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
Data Collection Available for Public
Comments
60-Day notice and request for
comments.
ACTION:
In accordance with the
Paperwork Reduction Act of 1995, this
notice announces the Small Business
Administration’s intentions to request
approval on a new and/or currently
approved information collection.
DATES: Submit comments on or before
March 23, 2020.
ADDRESSES: Send all comments
regarding whether this information
collection is necessary for the proper
performance of the function of the
agency, whether the burden estimates
are accurate, and if there are ways to
minimize the estimated burden and
enhance the quality of the collection, to
Alison Amann, Attorney Advisor, Office
of General Counsel, Small Business
Administration, 409 3rd Street, 7th
Floor, Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT:
Alison Amann, Attorney Advisor, 202–
205–6841, alison.amann@sba.gov,
Curtis B. Rich, Management Analyst,
202–205–7030, curtis.rich@sba.gov.
SUPPLEMENTARY INFORMATION: This
collection is essential to the Agency’s
mission because if SBA designates an
area as a Governor-designated covered
area, based on the information provided
by the State Governor, additional small
businesses may become eligible for
certification as HUBZone small business
concerns, which in turn will provide
them with more contracting
opportunities. These additional
contracting opportunities create
jbell on DSKJLSW7X2PROD with NOTICES
SUMMARY:
45 Id.
46 17
CFR 200.30–3(a)(12).
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18:20 Jan 17, 2020
Jkt 250001
incentives for individuals to start small
businesses and allow existing small
businesses to grow. SBA has taken all
practicable steps to consult with
interested agencies and members of the
public to minimize the burden of this
information collection. SBA intends to
make available on its website a list of
the areas within each State that meet the
statutory definition of ‘‘covered area’’
according to the most recent Bureau of
the Census data. This will minimize the
burden on State governments by
eliminating the need to gather this data
and do the necessary analysis to
determine which areas may meet the
definition of ‘‘covered area.’’ Finally,
pursuant to 5 CFR 1320.13(d), SBA also
requests a waiver from the requirement
to publish a 60-day notice in the
Federal Register requesting comments
on this information collection. SBA will
publish the required notice as part of
the standard submission process before
the emergency approval expires.
Summary of Information Collection
Title: HUBZone Program Petition for
Governor-Designated Covered Areas.
Description of Respondents:
HUBZone Small Business concerns.
Form Number: N/A.
Annual Responses: 53.
Annual Burden: 265.
Curtis Rich,
Management Analyst.
[FR Doc. 2020–00817 Filed 1–17–20; 8:45 am]
BILLING CODE P
3467
FOR FURTHER INFORMATION CONTACT:
Louis Cupp, New Markets Policy
Analyst, 202–619–0511, louis.cupp@
sba.gov. Curtis B. Rich, Management
Analyst, 202–205–7030, curtis.rich@
sba.gov.
Reporting
and recordkeeping requirements,
Investment companies, Finance,
Business/Industry, Small Business.
Conduct standards.
SUPPLEMENTARY INFORMATION:
Solicitation of Public Comments
SBA is requesting comments on (a)
Whether the collection of information is
necessary for the agency to properly
perform its functions; (b) whether the
burden estimates are accurate; (c)
whether there are ways to minimize the
burden, including through the use of
automated techniques or other forms of
information technology; and (d) whether
there are ways to enhance the quality,
utility, and clarity of the information.
Title: Financing Eligibility
Statement—Social Disadvantage/
Economic: Disadvantage.
Frequency: On Occasion.
SBA Form Numbers: 1941A, 1941B,
1941C.
Description of Respondents: Small
Business Investment Companies and
Small Businesses.
Responses: 10.
Annual Burden: 15.
Curtis Rich,
Management Analyst.
[FR Doc. 2020–00818 Filed 1–17–20; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
Data Collection Available for Public
Comments
60-Day notice and request for
comments.
DEPARTMENT OF STATE
[Public Notice 11005]
ACTION:
In accordance with the
Paperwork Reduction Act of 1995, this
notice announces the Small Business
Administration’s intentions to request
approval on a new and/or currently
approved information collection.
DATES: Submit comments on or before
March 23, 2020.
ADDRESSES: Send all comments
regarding whether this information
collection is necessary for the proper
performance of the function of the
agency, whether the burden estimates
are accurate, and if there are ways to
minimize the estimated burden and
enhance the quality of the collections, to
Louis Cupp, New Markets Policy
Analyst, Office of Investment and
Innovation, Small Business
Administration, 409 3rd Street, 6th
Floor, Washington, DC 20416.
SUMMARY:
PO 00000
Frm 00133
Fmt 4703
Sfmt 4703
Raw or Semi-Finished Metals Covered
Under IFCA 1245(d)
ACTION:
Notice of reports.
The Iran Freedom and
Counter-Proliferation Act (IFCA) of 2012
Section 1245(d) describes ‘‘graphite, raw
or semi-finished metals such as
aluminum and steel, coal, and software
for integrating industrial processes.’’
The Department of State is providing
notice of a list of materials that
constitute ‘‘raw or semi-finished
metals’’ under IFCA 1245(d) for the
purpose of implementing provisions of
IFCA delegated to the Secretary of State,
including Sections 1245(a)(1)(B),
1245(a)(1)(C), and 1245(e).
DATES: The Secretary of State approved
this action January 9, 2020.
FOR FURTHER INFORMATION CONTACT:
Alexander Stolar, Office of
SUMMARY:
E:\FR\FM\21JAN1.SGM
21JAN1
]]>Agencies
[Federal Register Volume 85, Number 13 (Tuesday, January 21, 2020)]
[Notices]
[Pages 3458-3467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00800]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87963; File No. SR-NYSEArca-2019-51]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 2 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 2, Regarding
Investments of the Janus Henderson Mortgage-Backed Securities ETF
January 14, 2020.
I. Introduction
On July 9, 2019, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change
regarding investments of the Janus Henderson Mortgage-Backed Securities
ETF (``Fund''), shares of which are currently listed and traded on the
Exchange under NYSE Arca Rule 8.600-E (``Managed Fund Shares''). The
proposed rule change was published for comment in the Federal Register
on July 25, 2019.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 86417 (July 19,
2019), 84 FR 35910.
---------------------------------------------------------------------------
On September 3, 2019, pursuant to Section 19(b)(2) of the Act,\4\
the Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\5\ On October 23, 2019, the Commission instituted proceedings
under Section 19(b)(2)(B) of the Act \6\ to determine whether to
approve or disapprove the proposed rule change.\7\ On November 13,
2019, the Exchange filed Amendment No. 1 to the proposed rule change.
On December 9, 2019, the Exchange filed Amendment No. 2 to the proposed
rule change.\8\ The Commission has received no comment letters on the
proposal. The Commission is publishing this notice to solicit comments
on Amendment No. 2 from interested persons, and is approving the
proposed rule change, as modified by Amendment No. 2, on an accelerated
basis.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 86855, 84 FR 47337
(September 9, 2019).
\6\ 15 U.S.C. 78s(b)(2)(B).
\7\ See Securities Exchange Act Release No.87385, 84 FR 57921
(October 29, 2019).
\8\ In Amendment No. 2, which amended and replaced the proposed
rule change, as modified by Amendment No. 1, in its entirety, the
Exchange (i) clarified the principal and non-principal investments
of the Fund; (ii) clarified the Fund's compliance and non-compliance
with specific provisions of NYSE Arca Rule 8.600-E; (iii) stated
where to find price and quotation information for certain holdings
of the Fund; (iv) made additional representations regarding
surveillance of trading with respect to options on futures and
municipal obligations, which are permitted investments of the Fund;
and (v) made conforming, non-substantive and technical changes.
Amendment No. 2 is available at: https://www.sec.gov/comments/sr-nysearca-2019-51/srnysearca201951-6523187-200391.pdf.
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II. The Exchange's Description of the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes certain changes regarding investments of the
Janus Henderson Mortgage-Backed Securities ETF (``Fund''), shares
(``Shares'') of which are currently listed and traded on the Exchange
under NYSE Arca Rule 8.600-E, which governs the listing and trading of
Managed Fund Shares \9\ on the Exchange. Shares of the Fund commenced
listing and trading on the Exchange on September 12, 2018 under the
generic listing standards under Commentary .01 to NYSE Arca Rule 8.600-
E.
---------------------------------------------------------------------------
\9\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an
open-end investment company or similar entity that invests in a
portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Investment Company Units,
listed and traded on the Exchange under NYSE Arca Rule 5.2-E(j)(3),
seeks to provide investment results that correspond generally to the
price and yield performance of a specific foreign or domestic stock
index, fixed income securities index or combination thereof.
---------------------------------------------------------------------------
The Fund is a series of Janus Detroit Street Trust (``Trust'').\10\
Janus Capital Management LLC is the Fund's investment adviser
(``Adviser''). State Street Bank and Trust Company is the custodian and
transfer agent (``Transfer Agent'') for the Fund. ALPS Distributors,
Inc. is the distributor (``Distributor'') for the Fund's Shares.
---------------------------------------------------------------------------
\10\ The Trust is registered under the 1940 Act. On February 28,
2019, the Trust filed with the Commission a registration statement
on Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a) and
the 1940 Act relating to the Fund (File Nos. 333-207814 and 811-
23112) (the ``Registration Statement''). The description of the
operation of the Trust and the Fund herein is based, in part, on the
Registration Statement. In addition, the Commission has issued an
order granting certain exemptive relief to the Trust under the 1940
Act. See Investment Company Act Release No. 31540 (March 30, 2015)
(``Exemptive Order'').
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Commentary .06 to Rule 8.600-E 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
and maintain a ``fire wall'' between the investment adviser and the
broker-dealer with respect to access to
[[Page 3459]]
information concerning the composition and/or changes to such
investment company portfolio.\11\ In addition, Commentary .06 further
requires that personnel who make decisions on the open-end fund's
portfolio composition must be subject to procedures designed to prevent
the use and dissemination of material nonpublic information regarding
the open-end fund's portfolio. The Adviser is not registered as a
broker-dealer but is affiliated with a broker-dealer and has
implemented and will maintain a fire wall with respect to such broker-
dealer affiliate regarding access to information concerning the
composition and/or changes to the portfolio. In the event (a) the
Adviser becomes registered as a broker-dealer or newly affiliated with
one or more broker-dealers, or (b) any new adviser or sub-adviser is a
registered broker-dealer or becomes affiliated with a broker-dealer, it
will implement and maintain a fire wall with respect to its relevant
personnel or its broker-dealer affiliate regarding access to
information concerning the composition and/or changes to the portfolio,
and will be subject to procedures designed to prevent the use and
dissemination of material non-public information regarding such
portfolio.
---------------------------------------------------------------------------
\11\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser 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.
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Janus Henderson Mortgage-Backed Securities ETF
Principal Investments
According to the Registration Statement, the Fund's investment
objective is to seek a high level of total return consisting of income
and capital appreciation.
Under normal market conditions,\12\ the Fund will invest at least
80% of its net assets in a portfolio of ``Mortgage-Related Fixed Income
Instruments'' (as described below) of varying maturities, and in
exchange-traded funds (``ETFs'') \13\ that invest principally in
mortgage-backed securities. The Mortgage-Related Fixed Income
Instruments \14\ in which the Fund may invest are the following: \15\
Agency and non-agency residential mortgage-backed securities
(``RMBS''), agency and non-agency commercial mortgage-backed securities
(``CMBS''), agency and non-agency collateralized mortgage obligations,
including stripped mortgage-backed securities \16\ (``CMOs''), and
asset-backed securities (``ABS'').\17\
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\12\ The term ``normal market conditions'' is defined in NYSE
Arca Rule 8.600-E(c)(5).
\13\ For purposes of this filing, ``ETFs'' are Investment
Company Units (as described in NYSE Arca Rule 5.2-E(j)(3));
Portfolio Depositary Receipts (as described in NYSE Arca Rule 8.100-
E); and Managed Fund Shares (as described in NYSE Arca Rule 8.600-
E). All ETFs will be listed and traded in the U.S. on a national
securities exchange.
\14\ The Mortgage-Related Fixed Income Instruments in which the
Fund invests may be structured as pass-through securities.
\15\ Under normal market conditions, the Fund will invest
principally in Mortgage-Related Fixed Income Instruments issued by
the U.S. government and its agencies and government-sponsored
entities, such as the Government National Mortgage Association
(``GNMA'' or ``Ginnie Mae''), the Federal National Mortgage
Association (``FNMA'' or ``Fannie Mae'') or the Federal Home Loan
Mortgage Corporation (``FHLMC'' or ``Freddie Mac'').
\16\ Stripped mortgage-backed securities are securities where
mortgage payments are divided up between paying the loan's principal
and paying the loan's interest.
\17\ The Fund will typically invest in ABS backed by pools of
home equity loans and other mortgage-related debt. ABS are
collateralized by pools of obligations or assets. ABS may take the
form of commercial paper, notes, or pass-through certificates and
may be structured as floaters, inverse floaters, interest-only and
principal-only obligations.
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For purposes of this filing, non-agency RMBS, non-agency CMBS, non-
agency CMOs, and ABS are referred to collectively as ``Private ABS/
MBS.''
The Fund will typically enter into ``to be announced'' or ``TBA''
commitments and utilize mortgage dollar rolls when purchasing mortgage-
backed securities.
The Fund may enter into short sales of any securities in which the
Fund may invest.
Other Investments
While the Fund, under normal market conditions, will invest at
least 80% of its net assets in the securities and other financial
instruments described under ``Principal Investments'' above, the Fund
may invest its remaining assets in the securities and financial
instruments described below.
The Fund may hold cash and cash equivalents.\18\
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\18\ For purposes of this filing, cash equivalents are the
securities included in Commentary .01(c) to NYSE Arca Rule 8.600-E.
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The Fund may hold the following fixed income securities (``Other
Fixed Income Securities''):
U.S. government securities (other than cash equivalents);
industrial development bonds;
inflation-indexed bonds, including municipal inflation-
indexed bonds and corporate inflation-indexed bonds;
municipal obligations, including municipal lease
obligations, pre-refunded municipal bonds, municipal warrants,
municipal obligations with credit enhancements, residual interest
bonds, custodial receipts, and Build America Bonds;
variable and floating rate obligations (including inverse
floaters and floaters);
subordinated or junior debt;
corporate bonds, debentures, and notes;
zero coupon, step coupon and pay-in-kind securities;
agency and non-agency collateralized loan obligations
(``CLOs''); \19\
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\19\ For purposes of this filing, non-agency CLOs are excluded
from the definition of ``Private ABS/MBS.'' For avoidance of doubt,
the Fund will comply with Commentary.01(b)(5) to NYSE Arca Rule
8.600-E, which provides that non-agency, non-government-sponsored
entity (``GSE'') and privately-issued mortgage-related and other
asset-backed securities components of a portfolio shall not account,
in the aggregate, for more than 20% of the weight of the portfolio.
For purposes of this filing, all non-agency, non- GSE and privately-
issued mortgage-related and other asset-backed securities components
of the Fund's portfolio, including, without limitation, Private ABS/
MBS and non-agency CLOs, shall not account, in the aggregate, for
more than 20% of the weight of the Fund's portfolio.
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strip bonds;
when-issued and/or delayed-delivery securities (other than
mortgage TBAs);
tender option bonds;
bank obligations, including standby commitments, and bank
capital securities; and
trade claims.
The Fund may hold the following U.S. exchange-listed derivative
instruments: Futures, options (including options on futures), and swaps
on commodities, currencies, U.S. and non-U.S. equity securities, fixed
income securities as defined in Commentary .01(b) to Rule 8.600-E,
interest rates, U.S. Treasuries, or a basket or index of any of the
foregoing. Such listed derivatives will comply with the criteria in
Commentary .01(d) of NYSE Arca Rule 8.600-E.
[[Page 3460]]
The Fund may hold the following over-the-counter (``OTC'')
derivative instruments: Forwards, options, and OTC total return swaps
on commodities, currencies, U.S. and non-U.S. equity securities, fixed
income securities as defined in Commentary .01(b) to Rule 8.600-E,
interest rates, or a basket or index of any of the foregoing. The Fund
also may hold OTC credit default swaps.
The Fund may enter into OTC options on swap agreements
(``swaptions'').
The Fund's holdings in OTC derivatives will comply with the
criteria in Commentary .01(e) of NYSE Arca Rule 8.600-E.
The Fund may invest in ETFs other than ETFs that invest principally
in mortgage-backed securities.\20\
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\20\ See note 13, supra.
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The Fund may invest in securities of non-exchange-traded investment
company securities, subject to applicable limitations under Section
12(d)(1) of the 1940 Act.
The Fund may invest in private placements, restricted securities
and Rule 144A securities.
All (1) Mortgage-Related Fixed Income Instruments other than
Private ABS/MBS, and (2) Other Fixed Income Securities will meet the
requirements of Commentary .01(b)(4) to Rule 8.600-E.
The Fund will not invest in securities or other financial
instruments that have not been described in this proposed rule change.
Other Restrictions
The Fund's investments, including derivatives, will be consistent
with the Fund's investment objective and will not be used to enhance
leverage (although certain derivatives and other investments may result
in leverage). That is, while the Fund will be permitted to borrow as
permitted under the 1940 Act, the Fund's investments will not be used
to seek performance that is the multiple or inverse multiple (e.g., 2Xs
and 3Xs) of the Fund's primary broad-based securities benchmark index
(as defined in Form N-1A).\21\
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\21\ The Fund's broad-based securities benchmark index will be
identified in a future amendment to the Registration Statement
following the Fund's first full calendar year of performance.
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The Fund's Use of Derivatives
Investments in derivative instruments will be made in accordance
with the Fund's investment objective and policies.
To limit the potential risk associated with such transactions, the
Fund will enter into offsetting transactions or segregate or
``earmark'' assets determined to be liquid by the Adviser in accordance
with procedures established by the Trust's Board of Trustees (the
``Board''). In addition, the Fund has included appropriate risk
disclosure in its offering documents, including leveraging risk.
Leveraging risk is the risk that certain transactions of the Fund,
including the Fund's use of derivatives, may give rise to leverage,
causing the Fund to be more volatile than if it had not been leveraged.
Creation and Redemption of Shares
According to the Registration Statement, the Trust will issue and
redeem Shares only in ``Creation Units'' of at least 25,000 Shares on a
continuous basis at their NAV per Share next determined after receipt
of an order on any business day. The size of a Creation Unit is subject
to change. The consideration for purchase of Creation Units of the Fund
generally consists of cash. If creations are not conducted in cash, the
consideration for purchase of Creation Units of the Fund generally
consists of the in-kind deposit of a designated portfolio of securities
(including any portion of such securities for which cash may be
substituted) (``Deposit Securities'') and the Cash Component computed
as described below. Together, the Deposit Securities and the Cash
Component constitute the ``Fund Deposit,'' which will be applicable to
creation requests received in proper form. The Fund Deposit represents
the minimum initial and subsequent investment amount for a Creation
Unit of a Fund.
The ``Cash Component'' is an amount equal to the difference between
the NAV of the Shares (per Creation Unit) and the ``Deposit Amount,''
which is an amount equal to the market value of the Deposit Securities,
and serves to compensate for any differences between the NAV per
Creation Unit and the Deposit Amount.
Janus Capital makes available through the National Securities
Clearing Corporation (``NSCC'') on each business day prior to the
opening of business on the Exchange, the list of names and the required
number or par value of each Deposit Security and the amount of the Cash
Component to be included in the current Fund Deposit (based on
information as of the end of the previous business day for the Fund).
Such Fund Deposit is applicable to purchases of Creation Units of
Shares of the Fund until such time as the next-announced Fund Deposit
is made available.
The Fund reserves the right to permit or require the substitution
of a ``cash in lieu'' amount to be added to the Cash Component to
replace any Deposit Security that may not be available in sufficient
quantity for delivery or that may not be eligible for transfer through
Depository Trust Company (``DTC'') or the Clearing Process (as
discussed below). The Fund also reserves the right to permit or require
a ``cash in lieu'' amount in certain circumstances, including
circumstances in which (i) the delivery of the Deposit Security by the
Authorized Participant (as described below) would be restricted under
applicable securities or other local laws or (ii) the delivery of the
Deposit Security to the Authorized Participant would result in the
disposition of the Deposit Security by the Authorized Participant
becoming restricted under applicable securities or other local laws, or
in certain other situations.
Procedures for Creating Creation Units
To be eligible to place orders with the Distributor and to create a
Creation Unit of the Fund, an entity must be: (i) A ``Participating
Party,'' i.e., a broker-dealer or other participant in the clearing
process through the Continuous Net Settlement System of the NSCC (the
``Clearing Process'') or (ii) a DTC Participant, and must have executed
an agreement with the Distributor, with respect to creations and
redemptions of Creation Units (``Authorized Participant Agreement''). A
Participating Party or DTC Participant who has executed an Authorized
Participant Agreement is referred to as an ``Authorized Participant.''
Creation Units may be purchased only by or through a DTC Participant
that has entered into an Authorized Participant Agreement with the
Distributor.
Purchase Orders
To initiate an order for a Creation Unit, an Authorized Participant
must submit to the Distributor or its agent an irrevocable order to
purchase Shares of the Fund, in proper form, by the ``Cutoff Time'' (as
defined below).
An Authorized Participant must submit an irrevocable order to
purchase Shares of the Fund generally before 3:00 p.m. (``Cutoff
Time''), Eastern time (``E.T.'') on any business day in order to
receive that day's NAV. Purchase orders and redemption requests, if
accepted by the Trust, will be processed based on the NAV next
determined after such acceptance.
Redemption of Creation Units
Shares of the Fund may be redeemed by Authorized Participants only
in Creation Units at their NAV next determined after receipt of a
redemption request in proper form by the Transfer Agent or its agent
and only on a business day.
[[Page 3461]]
Janus Capital will make available through the NSCC, prior to the
opening of business on the Exchange (currently 9:30 a.m. E.T.) on each
business day, the designated portfolio of securities (including any
portion of such securities for which cash may be substituted) that will
be applicable to redemption requests received in proper form on that
day (``Fund Securities''), and an amount of cash (the ``Cash Amount,''
as described below). Fund Securities received on redemption may not be
identical to Deposit Securities that are applicable to creations of
Creation Units.
The redemption proceeds for a Creation Unit generally consist of
Fund Securities, plus the Cash Amount, which is an amount equal to the
difference between the net asset value of the Shares being redeemed, as
next determined after the receipt of a redemption request in proper
form, and the value of Fund Securities, less a redemption transaction
fee.
The Trust may, in its sole discretion, substitute a ``cash in
lieu'' amount to replace any Fund Security. The Trust also reserves the
right to permit or require a ``cash in lieu'' amount in certain
circumstances. The amount of cash paid out in such cases will be
equivalent to the value of the substituted security listed as a Fund
Security. In the event that the Fund Securities have a value greater
than the NAV of the Shares, a compensating cash payment equal to the
difference is required to be made by or through an Authorized
Participant by the redeeming shareholder. The Fund generally redeems
Creation Units in Fund Securities, plus any Cash Amount due.
Cash Redemption Method
Although the Trust will not ordinarily permit partial or full cash
redemptions of Creation Units of the Fund, when partial or full cash
redemptions of Creation Units are available or specified they will be
effected in essentially the same manner as in-kind redemptions thereof.
In the case of partial or full cash redemption, the Authorized
Participant receives the cash equivalent of the Fund Securities it
would otherwise receive through an in-kind redemption, plus the same
Cash Amount to be paid to an in-kind redeemer.\22\
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\22\ The Adviser represents that, to the extent the Trust
effects the creation or redemption of Shares in cash on any given
day, such transactions will be effected in the same manner for all
Authorized Participants placing trades with the Fund on that day.
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Placement of Redemption Orders
Redemption requests for Creation Units of the Fund must be
submitted to the Transfer Agent by or through an Authorized
Participant. An Authorized Participant must submit an irrevocable
request to redeem Shares of the Fund generally before 3:00 p.m., E.T.
on any business day, in order to receive that day's NAV.
Disclosed Portfolio
The Fund's disclosure of derivative positions in the applicable
Disclosed Portfolio includes information that market participants can
use to value these positions intraday. On a daily basis, the Fund will
disclose the information regarding the Disclosed Portfolio required
under NYSE Arca Rule 8.600-E (c)(2) to the extent applicable. The
Fund's website information will be publicly available at no charge.
Impact on Arbitrage Mechanism
The Adviser believes there will be minimal impact to the arbitrage
mechanism as a result of the use of derivatives. Market makers and
participants should be able to value derivatives as long as the
positions are disclosed with relevant information. The Adviser believes
that the price at which Shares trade will continue to be disciplined by
arbitrage opportunities created by the ability to purchase or redeem
Shares at their NAV, which should ensure that Shares will not trade at
a material discount or premium in relation to their NAV.
The Adviser does not believe there will be any significant impacts
to the settlement or operational aspects of the Fund's arbitrage
mechanism due to the use of derivatives. Because derivatives generally
are not eligible for in-kind transfer, they will typically be
substituted with a ``cash in lieu'' amount when the Fund processes
purchases or redemptions of creation units in-kind.
Application of Generic Listing Requirements
The Exchange is submitting this proposed rule change because the
portfolio for the Fund will not meet all of the ``generic'' listing
requirements of Commentary .01 to NYSE Arca Rule 8.600-E applicable to
the listing of Managed Fund Shares. The Fund's portfolio would meet all
such requirements except for those set forth in Commentary .01(a)(1)
with respect to non-exchange traded investment company securities \23\
and Commentary .01(b)(4) \24\ to NYSE Arca Rule 8.600-E with respect to
Private ABS/MBS.
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\23\ Commentary .01(a) to Rule 8.600-E specifies the equity
securities accommodated by the generic criteria in Commentary
.01(a), namely, U.S. Component Stocks (as described in Rule 5.2-
E(j)(3)) and Non-U.S. Component Stocks (as described in Rule 5.2-
E(j)(3)). Commentary .01(a)(1) to Rule 8.600-E (U.S. Component
Stocks) provides that the component stocks of the equity portion of
a portfolio that are U.S. Component Stocks shall meet the following
criteria initially and on a continuing basis:
(A) Component stocks (excluding Derivative Securities Products
and Index-Linked Securities) that in the aggregate account for at
least 90% of the equity weight of the portfolio (excluding such
Derivative Securities Products and Index-Linked Securities) each
shall have a minimum market value of at least $75 million;
(B) Component stocks (excluding Derivative Securities Products
and Index-Linked Securities) that in the aggregate account for at
least 70% of the equity weight of the portfolio (excluding such
Derivative Securities Products and Index-Linked Securities) each
shall have a minimum monthly trading volume of 250,000 shares, or
minimum notional volume traded per month of $25,000,000, averaged
over the last six months;
(C) The most heavily weighted component stock (excluding
Derivative Securities Products and Index-Linked Securities) shall
not exceed 30% of the equity weight of the portfolio, and, to the
extent applicable, the five most heavily weighted component stocks
(excluding Derivative Securities Products and Index-Linked
Securities) shall not exceed 65% of the equity weight of the
portfolio;
(D) Where the equity portion of the portfolio does not include
Non-U.S. Component Stocks, the equity portion of the portfolio shall
include a minimum of 13 component stocks; provided, however, that
there shall be no minimum number of component stocks if (i) one or
more series of Derivative Securities Products or Index-Linked
Securities constitute, at least in part, components underlying a
series of Managed Fund Shares, or (ii) one or more series of
Derivative Securities Products or Index-Linked Securities account
for 100% of the equity weight of the portfolio of a series of
Managed Fund Shares; and
(E) Except as provided herein, equity securities in the
portfolio shall be U.S. Component Stocks listed on a national
securities exchange and shall be NMS Stocks as defined in Rule 600
of Regulation NMS under the Securities Exchange Act of 1934.
\24\ Commentary .01(b)(4) provides that component securities
that in the aggregate account for at least 90% of the fixed income
weight of the portfolio must be either: (a) From issuers that are
required to file reports pursuant to Sections 13 and 15(d) of the
Act; (b) from issuers that have a worldwide market value of its
outstanding common equity held by non-affiliates of $700 million or
more; (c) from issuers that have outstanding securities that are
notes, bonds debentures, or evidence of indebtedness having a total
remaining principal amount of at least $1 billion; (d) exempted
securities as defined in Section 3(a)(12) of the Act; or (e) from
issuers that are a government of a foreign country or a political
subdivision of a foreign country.
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The Fund will not comply with the requirements in Commentary
.01(b)(4) to Rule 8.600-E that component securities that in the
aggregate account for at least 90% of the fixed income weight of the
portfolio meet one of the criteria specified in Commentary .01(b)(4),
because certain Private ABS/MBS by their nature cannot satisfy the
[[Page 3462]]
criteria in Commentary .01(b)(4).\25\ Instead, the Exchange proposes
that the Fund's investments in (1) Mortgage-Related Fixed Income
Instruments other than Private ABS/MBS, and (2) Other Fixed Income
Securities will be required to comply with the requirements of
Commentary .01(b)(4). The Exchange believes that excluding Private ABS/
MBS from the 90% calculation in Commentary .01(b)(4) is consistent with
the Act because the Fund's portfolio will minimize the risk to the
overall Fund associated with any particular holding of the Fund as a
result of the diversification provided by the investments and the
Adviser's selection process, which closely monitors investments to
ensure maintenance of credit and liquidity standards. Further, the
Exchange believes that this alternative limitation is appropriate
because Commentary .01(b)(4) to Rule 8.600-E is not designed for
structured finance vehicles such as Private ABS/MBS. The Exchange notes
that all (1) Mortgage-Related Fixed Income Instruments other than
Private ABS/MBS, and (2) Other Fixed Income Securities will meet the
requirements of Commentary .01(b)(4) to Rule 8.600-E.
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\25\ Private ABS/MBS are generally issued by special purpose
vehicles in amounts smaller than the minimum dollar threshold set
forth in Commentary .01(b)(4), so the criteria in Commentary
.01(b)(4) to Rule 8.600-E regarding an issuer's market
capitalization and the remaining principal amount of an issuer's
securities are typically unavailable with respect to Private ABS/
MBS, even though such Private ABS/MBS may own significant assets.
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The Exchange notes that the Commission has previously approved the
listing of Managed Fund Shares with similar investment objectives and
strategies without imposing requirements that a certain percentage of
such funds' securities meet one of the criteria comparable to those set
forth in Commentary .01(b)(4).\26\
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\26\ See, e.g., Securities Exchange Act Release Nos. 67894
(September 20, 2012), 77 FR 59227 (September 26, 2012) (SR-BATS-
2012-033) (order approving the listing and trading of shares of the
iShares Short Maturity Bond Fund); 70342 (September 6, 2013), 78 FR
56256 (September 12, 2013) (SR-NYSEArca19-2013-71) (order approving
the listing and trading of shares of the SPDR SSgA Ultra Short Term
Bond ETF, SPDR SSgA Conservative Ultra Short Term Bond ETF and SPDR
SSgA Aggressive Ultra Short Term Bond ETF). See also, Securities
Exchange Act Release Nos. 84047 (September 6, 2018), 83 FR 46200
(September 12, 2018) (SR-NASDAQ-2017-128) (Notice of Filing of
Amendment No. 3 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 3, to List and
Trade Shares of the Western Asset Total Return ETF); 85022 (January
31, 2019), 25 FR 2265 (February 6, 2019) (SR-NASDAQ-2018-080)
(Notice of Filing of Amendment No. 3 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1,
2 and 3, To List and Trade Shares of the BrandywineGLOBAL-Global
Total Return ETF).
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The Fund may invest in non-exchange-traded investment company
securities, which are equity securities. Because such securities have a
net asset value based on the value of securities and financial assets
the investment company holds, the Exchange believes it is both
unnecessary and inappropriate to apply to such investment company
securities the criteria in Commentary .01(a)(1).\27\
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\27\ The Commission has previously approved proposed rule
changes under Section 19(b) of the Act for series of Managed Fund
Shares that may invest in non-exchange traded investment company
securities. See, e.g., Securities Exchange Act Release No. 85244
(March 4, 2019), 84 FR 8553 (March 8, 2019) (SR-NYSEArca19-2018-82)
(Order Granting Approval of a Proposed Rule Change, as Modified by
Amendment Nos. 1 and 2, Regarding Certain Changes Relating to
Investments of the PGIM Active High Yield Bond ETF).
---------------------------------------------------------------------------
The Exchange notes that the Commission has previously approved the
listing of Managed Fund Shares with similar investment objectives and
strategies where such funds were permitted to invest in the shares of
other registered investment companies that are not ETFs or money market
funds.\28\
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\28\ See, e.g., Securities Exchange Act Release Nos. 79053
(October 5, 2016), 81 FR 70468 (October 12, 2016) (SR19-BatsBZX-
2016-35) (permitting the JPMorgan Global Bond Opportunities ETF to
invest in ``investment company securities that are not ETFs'');
74297 (February 18, 2015), 80 FR 9788 (February 24, 2015) (SR-BATS-
2014-056) (permitting the U.S. Fixed Income Balanced Risk ETF to
invest in ``exchange traded and non-exchange traded investment
companies (including investment companies advised by the Adviser or
its affiliates) that invest in such Fixed Income Securities'');
83319 (May 24, 2018), 83 FR 25097 (May 31, 2018) (SR-NYSEArca19-
2018-15), (Order Approving a Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, to Continue Listing and Trading Shares of
the PGIM Ultra Short Bond ETF under NYSE Arca Rule 8.600-E).
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The Adviser represents that the proposed exceptions from the
requirements of Commentary .01 to Rule 8.600-E described above are
consistent with the Fund's investment objective, and will further
assist the Adviser to achieve such investment objective. Deviations
from the generic requirements are necessary for the Fund to achieve its
investment objective in a manner that is cost-effective and that
maximizes investors' returns. Further, the proposed alternative
requirements are narrowly tailored to allow the Fund to achieve its
investment objective in manner that is consistent with the principles
of Section 6(b)(5) of the Act. As a result, it is in the public
interest to approve listing and trading of Shares of the Fund on the
Exchange pursuant to the requirements set forth herein.
The Exchange notes that, other than Commentary .01(a)(1) with
respect to non-exchange traded investment company securities and
Commentary .01(b)(4) to Rule 8.600-E with respect to Private ABS/MBS,
as described above, the Fund's portfolio will meet all other
requirements of Rule 8.600-E.
Availability of Information
The Fund's website (www.janushenderson.com), which is publicly
available, includes a form of the prospectus for the Fund that may be
downloaded. The Fund's website includes additional quantitative
information updated on a daily basis, including, for the 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''),\29\ 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 in the Core
Trading Session on the Exchange, the Adviser discloses on the Fund's
website the Disclosed Portfolio for the Fund as defined in NYSE Arca
Rule 8.600-E(c)(2) that will form the basis for the Fund's calculation
of NAV at the end of the business day.\30\
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\29\ The Bid/Ask Price of the Fund's Shares 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 Fund's NAV. The
records relating to Bid/Ask Prices are retained by the Fund and/or
its service providers.
\30\ Under accounting procedures to be followed by the Fund,
trades made on the prior business day (``T'') are booked and
reflected in NAV on the current business day (``T+1''). Accordingly,
the Fund is 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.
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Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. 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-SAR may be viewed on-screen or
downloaded from the Commission's website at www.sec.gov.
Quotation and last sale information for the Shares and ETFs will be
available via the CTA high speed line. Price information for U.S. and
foreign exchange-traded futures, options, options on futures and swaps
will be available from the exchange on which they are listed. Quotation
and last sale information for exchange-listed options
[[Page 3463]]
cleared via the Options Clearing Corporation also will be available via
the Options Price Reporting Authority. Information regarding market
price and trading volume for the Shares is continually available on a
real-time basis throughout the day on brokers' computer screens and
other electronic services. Information regarding the previous day's
closing price and trading volume information for the Shares are
published daily in the financial section of newspapers.
Quotation information for Mortgage-Related Fixed Income
Instruments, Other Fixed Income Securities, OTC derivatives and cash
equivalents may be obtained from brokers and dealers who make markets
in such securities or through nationally recognized pricing services
through subscription agreements. Price information for OTC derivative
instruments 144A securities, non-exchange-traded investment company
securities, private placement securities and restricted securities is
available from major market data vendors. Price information relating to
municipal obligations is available through the Municipal Securities
Rulemaking Board's (``MSRB'') EMMA system.
In addition, the Portfolio Indicative Value (``PIV''), as defined
in NYSE Arca Rule 8.600-E(c)(3), is widely disseminated by one or more
major market data vendors at least every 15 seconds during the Core
Trading Session.\31\ The dissemination of the PIV, together with the
Disclosed Portfolio, allows investors to determine the approximate
value of the underlying portfolio of the Fund on a daily basis and
provides a close estimate of that value throughout the trading day.
---------------------------------------------------------------------------
\31\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available PIVs
taken from the CTA or other data feeds.
---------------------------------------------------------------------------
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund.\32\ Trading in Shares of the Fund
will be halted if the circuit breaker parameters in NYSE Arca Rule
7.12-E 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 of the Fund inadvisable.
---------------------------------------------------------------------------
\32\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------
Trading in the Shares will be subject to NYSE Arca Rule 8.600-
E(d)(2)(D), which sets forth circumstances under which Shares of the
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. Shares will trade on
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. in
accordance with NYSE Arca Rule 7.34-E (Early, Core, and Late Trading
Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. As provided in
NYSE Arca Rule 7.6-E, the minimum price variation (``MPV'') for quoting
and entry of orders in equity securities traded on the NYSE Arca
Marketplace is $0.01, with the exception of securities that are priced
less than $1.00 for which the MPV for order entry is $0.0001.
Except as described herein, the Shares of the Fund will conform to
the continued listing criteria under NYSE Arca Rule 8.600-E. The
Exchange represents that, for continued listing, the Fund will be in
compliance with Rule 10A-3 \33\ under the Act, as provided by NYSE Arca
Rule 5.3-E. The Exchange has obtained a representation from the issuer
of the Shares of the Fund that the NAV and the Disclosed Portfolio will
be made available to all market participants at the same time.
---------------------------------------------------------------------------
\33\ 17 CFR 240 10A-3.
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Surveillance
The Exchange represents that trading in the Shares is subject to
the existing trading surveillances administered by the Exchange, as
well as cross-market surveillances administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws.\34\ The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to deter and detect violations
of Exchange rules and applicable federal securities laws.
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\34\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares, ETFs, certain
futures, and certain exchange-traded options and options on futures
with other markets and other entities that are members of the
Intermarket Surveillance Group (``ISG''), and the Exchange or FINRA, on
behalf of the Exchange, or both, may obtain trading information
regarding trading such securities and financial instruments from such
markets and other entities. In addition, the Exchange may obtain
information regarding trading in such securities and financial
instruments from markets and other entities that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement.\35\ FINRA, on behalf of the Exchange, is able to
access, as needed, trade information for certain fixed income
securities held by the Fund reported to FINRA's Trade Reporting and
Compliance Engine (``TRACE''). FINRA also can access data obtained from
the MSRB relating to municipal obligations trading activity for
surveillance purposes in connection with trading in the Shares.
---------------------------------------------------------------------------
\35\ 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 the 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.
All statements and representations made in this filing regarding
(a) the description of the portfolio holdings or reference assets, (b)
limitations on portfolio holdings or reference assets, or (c) the
applicability of Exchange listing rules specified in this rule filing
shall constitute continued listing requirements for listing the Shares
on the Exchange.
The issuer has represented to the Exchange that it will advise the
Exchange of any failure by the Fund to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will monitor for compliance with the
continued listing requirements. If the Fund is not in compliance with
the applicable listing requirements, the Exchange will commence
delisting procedures under NYSE Arca Rule 5.5-E(m).
Information Bulletin
The Exchange will inform its Equity Trading Permit (``ETP'')
Holders in an
[[Page 3464]]
Information Bulletin (``Bulletin'') of the special characteristics and
risks associated with trading the Shares of the Fund. Specifically, the
Bulletin will discuss the following: (1) The procedures for purchases
and redemptions of Shares in Creation Units (and that Shares are not
individually redeemable); (2) NYSE Arca 9.2-E(a), which imposes a duty
of due diligence on its ETP Holders to learn the essential facts
relating to every customer prior to trading the Shares; (3) the risks
involved in trading the Shares during the Early and Late Trading
Sessions when an updated PIV will not be calculated or publicly
disseminated; (4) how information regarding the PIV and the Disclosed
Portfolio is disseminated; (5) the requirement that ETP Holders 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 Bulletin will reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Act. The
Bulletin will also disclose that the NAV for the Shares of the Fund
will be calculated after 4:00 p.m. E.T. each trading day.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \36\ 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.
---------------------------------------------------------------------------
\36\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Rule 8.600-E. The
Adviser is not registered as a broker-dealer but is affiliated with a
broker-dealer and has implemented and will maintain a fire wall with
respect to such broker-dealer affiliate regarding access to information
concerning the composition and/or changes to the portfolio. The
Exchange represents that trading in the Shares is subject to the
existing trading surveillances administered by the Exchange, as well as
cross-market surveillances administered by FINRA on behalf of the
Exchange, which are designed to detect violations of Exchange rules and
applicable federal securities laws. The Exchange represents that these
procedures are adequate to properly monitor Exchange trading of the
Shares in all trading sessions and to deter and detect violations of
Exchange rules and applicable federal securities laws.
The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares, ETFs, certain
futures, and certain exchange-traded options and options on futures
with other markets and other entities that are members of the ISG, and
the Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading such securities and financial
instruments from such markets and other entities. In addition, the
Exchange may obtain information regarding trading in such securities
and financial instruments from markets and other entities that are
members of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement. FINRA, on behalf of the Exchange, is
able to access, as needed, trade information for certain fixed income
securities held by the Fund reported to FINRA's TRACE. FINRA also can
access data obtained from the MSRB relating to municipal obligations
trading activity for surveillance purposes in connection with trading
in the Shares.
Except as described herein, the Shares of the Fund will conform to
the continued listing criteria under NYSE Arca Rule 8.600-E. The
Exchange represents that, for continued listing, the Fund will be in
compliance with Rule 10A-3 under the Act, as provided by NYSE Arca Rule
5.3-E. The Exchange has obtained a representation from the issuer of
the Shares of the Fund that the NAV per Share is calculated daily and
that the NAV and the Disclosed Portfolio are made available to all
market participants at the same time. In addition, a large amount of
information is publicly available regarding the Fund and the Shares,
thereby promoting market transparency. The Fund's portfolio holdings
are disclosed on its website daily after the close of trading on the
Exchange and prior to the opening of trading on the Exchange the
following day. On a daily basis, the Fund discloses the information
regarding the Disclosed Portfolio required under NYSE Arca Rule 8.600-E
(c)(2) to the extent applicable. The Fund's website information is
publicly available at no charge.
Investors can also obtain the Trust's SAI, the Fund's Shareholder
Reports, and its Form N-CSR and Form N-SAR, filed twice a year. 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-SAR
may be viewed on-screen or downloaded from the Commission's website at
www.sec.gov.
The website for the Fund includes a form of the prospectus for the
Fund and additional data relating to NAV and other applicable
quantitative information. Trading in Shares of the Fund will be halted
if the circuit breaker parameters in NYSE Arca Rule 7.12-E have been
reached or because of market conditions or for reasons that, in the
view of the Exchange, make trading in the Shares inadvisable, and
trading in the Shares will be subject to NYSE Arca Rule 8.600-
E(d)(2)(D), which sets forth circumstances under which Shares of the
Fund may be halted. In addition, as noted above, investors have ready
access to information regarding the Fund's holdings, the PIV, the
Disclosed Portfolio, and quotation and last sale information for the
Shares. The Fund's investments, including derivatives, will be
consistent with the Fund's investment objective and will not be used to
enhance leverage (although certain derivatives and other investments
may result in leverage). That is, while the Fund will be permitted to
borrow as permitted under the 1940 Act, the Fund's investments will not
be used to seek performance that is the multiple or inverse multiple
(e.g., 2Xs and 3Xs) of the Fund's primary broad-based securities
benchmark index (as defined in Form N-1A).
With respect to the Fund's investment in Private ABS/MBS, the
proposed non-compliance with the requirements in Commentary .01(b)(4)
to Rule 8.600-E that component securities that in the aggregate account
for at least 90% of the fixed income weight of the portfolio meet one
of the criteria specified in Commentary .01(b)(4) is appropriate
because certain Private ABS/MBS by their nature cannot satisfy the
criteria in Commentary .01(b)(4). Instead, the Exchange proposes that
the Fund's investments in (1) Mortgage-Related Fixed Income Instruments
other than Private ABS/MBS, and (2) Other Fixed Income Securities will
be required to comply with the requirements of Commentary .01(b)(4).
The Exchange believes that excluding Private ABS/MBS from the 90%
calculation in Commentary .01(b)(4) is consistent with
[[Page 3465]]
the Act because the Fund's portfolio will minimize the risk to the
overall Fund associated with any particular holding of the Fund as a
result of the diversification provided by the investments and the
Adviser's selection process, which closely monitors investments to
ensure maintenance of credit and liquidity standards. Further, the
Exchange believes that this alternative limitation is appropriate
because Commentary .01(b)(4) to Rule 8.600-E is not designed for
structured finance vehicles such as Private ABS/MBS. The Exchange notes
that all (1) Mortgage-Related Fixed Income Instruments other than
Private ABS/MBS, and (2) Other Fixed Income Securities will meet the
requirements of Commentary .01(b)(4) to Rule 8.600-E. Non-agency, non-
GSE and privately-issued mortgage-related and other asset-backed
securities components of the Fund's portfolio shall not account, in the
aggregate, for more than 20% of the weight of the portfolio and,
therefore, the Fund will comply with Commentary.01(b)(5) to NYSE Arca
Rule 8.600-E.
The Exchange notes that the Commission has previously approved the
listing of Managed Fund Shares with similar investment objectives and
strategies without imposing requirements that a certain percentage of
such funds' securities meet one of the criteria set forth in Commentary
.01(b)(4).\37\
---------------------------------------------------------------------------
\37\ See note 24, supra.
---------------------------------------------------------------------------
The Fund may invest in shares of non-exchange-traded open-end
management investment company securities, which are equity securities.
Therefore, the Fund will not comply with the requirements of Commentary
.01(a)(1) to NYSE Arca Rule 8.600-E (U.S. Component Stocks) with
respect to its equity securities holdings. It is appropriate and in the
public interest to approve listing and trading of Shares of the Fund
notwithstanding that the Fund's holdings in such securities would not
meet the requirements of Commentary .01(a)(1)(A) through (E) to Rule
8.600-E. The Fund's investment in shares of non-exchange-traded open-
end management investment company securities will be utilized in order
to obtain income on short-term cash balances while awaiting attractive
investment opportunities, to provide liquidity in preparation for
anticipated redemptions or for defensive purposes, which will allow the
Fund to obtain the benefits of a more diversified portfolio available
in the shares of non-exchange-traded open-end management investment
company securities than might otherwise be available. Moreover, such
investments, which may include mutual funds that invest, for example,
principally in fixed income securities, would be utilized to help the
Fund meet its investment objective and to equitize cash in the short
term. The Fund will invest in such securities only to the extent that
those investments would be consistent with the requirements of Section
12(d)(1) of the 1940 Act and the rules thereunder. Because such
securities must satisfy applicable 1940 Act diversification
requirements, and have a net asset value based on the value of
securities and financial assets the investment company holds, it is
both unnecessary and inappropriate to apply to such investment company
securities the criteria in Commentary .01(a)(1).
The Exchange notes that it would be difficult or impossible to
apply to mutual fund shares certain of the generic quantitative
criteria (e.g., market capitalization, trading volume, or portfolio
criteria) in Commentary .01(a)(1) (A) through (D) applicable to U.S.
Component Stocks. For example, the requirements for U.S. Component
Stocks in Commentary .01(a)(1)(B) that there be minimum monthly trading
volume of 250,000 shares, or minimum notional volume traded per month
of $25,000,000, averaged over the last six months are tailored to
exchange-traded securities (i.e., U.S. Component Stocks) and not to
mutual fund shares, which do not trade in the secondary market and for
which no such volume information is reported. In addition, Commentary
.01(a)(1)(A) relating to minimum market value of portfolio component
stocks, Commentary .01(a)(1)(C) relating to weighting of portfolio
component stocks, and Commentary .01(a)(1)(D) relating to minimum
number of portfolio components are not appropriately applied to open-
end management investment company securities; open-end investment
companies hold multiple individual securities as disclosed publicly in
accordance with the 1940 Act, and application of Commentary
.01(a)(1)(A) through (D) would not serve the purposes served with
respect to U.S. Component Stocks, namely, to establish minimum
liquidity and diversification criteria for U.S. Component Stocks held
by series of Managed Fund Shares.
The Exchange accordingly believes that it is appropriate and in the
public interest to approve listing and trading of Shares of the Fund on
the Exchange notwithstanding that the Fund would not meet the
requirements of Commentary .01(a)(1)(A) through (D) and (b)(4) to Rule
8.600-E. The Exchange notes that, other than Commentary .01(a)(1) and
(b)(4) to Rule 8.600-E, the Fund's portfolio will meet all other
requirements of Rule 8.600-E.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of actively-managed exchange-traded product that
principally holds fixed income securities and derivatives and that will
enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, the Exchange has in
place surveillance procedures relating to trading in the Shares of the
Fund and may obtain information via ISG from other exchanges that are
members of ISG or with which the Exchange has entered into a
comprehensive surveillance sharing agreement. In addition, as noted
above, investors have ready access to information regarding the Fund's
holdings, the PIV, the Disclosed Portfolio for the Fund, and quotation
and last sale information for the Shares of the Fund.
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 will facilitate the listing and trading of an
additional type of actively-managed exchange-traded product that
principally holds fixed income securities, ETFs, derivatives, cash and
cash equivalents, and that will enhance competition among market
participants, to the benefit of investors and the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 2, is consistent with the Act and
the rules and regulations thereunder applicable to a national
securities exchange.\38\ In
[[Page 3466]]
particular, the Commission finds that the proposed rule change, as
modified by Amendment No. 2, is consistent with Section 6(b)(5) of the
Act,\39\ which requires, among other things, that the Exchange's rules
be designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, to protect investors and the
public interest.
---------------------------------------------------------------------------
\38\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\39\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
According to the Exchange, other than Commentary .01(a)(1) relating
to non-exchange-traded open-end management investment company
securities and Commentary .01(b)(4) relating to Private ABS/MBS, as
described above, the Fund will meet all other requirements of NYSE Arca
Rule 8.600-E.
With respect to the Fund's investments in shares of non-exchange-
traded open-end management investment company securities, which will
not comply with Commentary .01(a)(1) to NYSE Arca Rule 8.600-E, the
Commission notes that: (1) Such securities must satisfy applicable 1940
Act diversification requirements; and (2) the value of such securities
is based on the value of securities and financial assets held by those
investment companies.\40\ The Commission therefore believes that the
Fund's investments in non-exchange-traded open-end management
investment company securities would not make the Shares susceptible to
fraudulent or manipulative acts and practices.\41\
---------------------------------------------------------------------------
\40\ See supra Section II.A.2 (Application of Generic Listing
Standards).
\41\ The Commission notes it has approved other exchange-traded
funds that can hold non-exchange-traded open-end management
investment company securities in a manner that does not comply with
Commentary .01(a)(1) to Rule 8.600-E. See, e.g., Securities Exchange
Act Release No. 86362 (July 12, 2019), 84 FR 34457 (July 18, 2019)
(SR-NYSEArca-2019-36).
---------------------------------------------------------------------------
In addition, while the Fund will not meet the requirement that
component securities that in the aggregate account for at least 90% of
the fixed income weight of the portfolio meet one of the criteria set
forth in in Commentary .01(b)(4) to NYSE Arca Rule 8.600-E, the
Commission believes that the diversification of the Fund's portfolio,
the Fund's representation that it will continue to comply with
Commentary .01(b)(5), and the fact that the fixed income portion of the
portfolio, excluding Private ABS/MBS, will comply, and will continue to
comply, with Commentary .01(b)(4), mitigate manipulation concerns
relating to the Shares.
The Exchange represents that all statements and representations
made in the filing regarding (a) the description of the portfolio
holdings or reference assets, (b) limitations on portfolio holdings or
reference assets, or (c) the applicability of Exchange listing rules
specified in the rule filing constitute continued listing requirements
for listing the Shares on the Exchange. In addition, the issuer has
represented to the Exchange that it will advise the Exchange of any
failure by the Fund to comply with the continued listing requirements,
and, pursuant to its obligations under Section 19(g)(1) of the Act, the
Exchange will monitor \42\ for compliance with the continued listing
requirements. If the Fund is not in compliance with the applicable
listing requirements, the Exchange will commence delisting procedures
under NYSE Arca Rule 5.5-E(m).
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\42\ The Commission notes that certain proposals for the listing
and trading of exchange-traded products include a representation
that the exchange will ``surveil'' for compliance with the continued
listing requirements. See, e.g., Securities Exchange Act Release No.
77499 (April 1, 2016), 81 FR 20428, 20432 (April 7, 2016) (SR-BATS-
2016-04). In the context of this representation, it is the
Commission's view that ``monitor'' and ``surveil'' both mean ongoing
oversight of compliance with the continued listing requirements.
Therefore, the Commission does not view ``monitor'' as a more or
less stringent obligation than ``surveil'' with respect to the
continued listing requirements.
---------------------------------------------------------------------------
For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 2, is consistent with Section
6(b)(5) of the Act \43\ and the rules and regulations thereunder
applicable to a national securities exchange.
---------------------------------------------------------------------------
\43\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule
Change
Interested persons are invited to submit written views, data, and
arguments concerning whether Amendment No. 2 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-NYSEArca-2019-51 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2019-51. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEArca-2019-51 and should be submitted
on or before February 11, 2020.
V. Accelerated Approval of the Proposed Rule Change, as Modified by
Amendment No. 2
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 2, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
2 in the Federal Register. The Commission notes that Amendment No. 2
clarified the investments of the Fund and the application of NYSE Arca
Rule 8.600-E, Commentary .01 to the Fund's investments. Amendment No. 2
also provided other clarifications and additional information related
to the proposed rule change. The changes and additional information in
Amendment No. 2 assist the Commission in evaluating the Exchange's
proposal and in determining that it is consistent with the Act.
Accordingly, the Commission finds good cause, pursuant to Section
19(b)(2) of the Act,\44\ to approve the
[[Page 3467]]
proposed rule change, as modified by Amendment No. 2, on an accelerated
basis.
---------------------------------------------------------------------------
\44\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\45\ that the proposed rule change (SR-NYSEArca-2019-51), as
modified by Amendment No. 2, be, and it hereby is, approved on an
accelerated basis.
---------------------------------------------------------------------------
\45\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
J. Matthew DeLesDernier,
Assistant Secretary.
---------------------------------------------------------------------------
\46\ 17 CFR 200.30-3(a)(12).
[FR Doc. 2020-00800 Filed 1-17-20; 8:45 am]
BILLING CODE 8011-01-P
