Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of the JPMorgan Large Cap Growth ETF Under Rule 14.11(k), Managed Portfolio Shares, 19971-19979 [2020-07444]

Download as PDF Federal Register / Vol. 85, No. 69 / Thursday, April 9, 2020 / Notices Participants from adding liquidity and competing in the Facilitation and Solicitation mechanisms, and will help promote competition by providing incentives for market participants to submit Facilitation and Solicitation Orders, and thus benefit all Participants trading on the Exchange by attracting customer order flow. Lastly, the Exchange believes that eliminating the Liquidity Fees and Credits for Facilitation and Solicitation Transactions will not burden competition as the proposed change applies to all market participants. As discussed above, the Exchange believes that eliminating the Liquidity Fees and Credits for Facilitation and Solicitation Transactions is reasonable as the Exchange, pursuant to this proposal, has eliminated Facilitation and Solicitation Order fees. Therefore, the credit for removing liquidity is no longer needed to incentivize Participants to submit order flow to the Facilitation and Solicitation auction mechanisms. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act 16 and Rule 19b–4(f)(2) thereunder,17 because it establishes or changes a due, or fee. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. khammond on DSKJM1Z7X2PROD with NOTICES IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 16 15 17 17 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). VerDate Sep<11>2014 16:28 Apr 08, 2020 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– BOX–2020–08 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–BOX–2020–08. 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 such 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–BOX–2020–08, and should be submitted on or before April 30, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–07445 Filed 4–8–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–88551; File No. SR– CboeBZX–2020–029] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of the JPMorgan Large Cap Growth ETF Under Rule 14.11(k), Managed Portfolio Shares April 3, 2020. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 25, 2020, Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) is filing with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change to list and trade shares of the JPMorgan Large Cap Growth ETF under Rule 14.11(k), Managed Portfolio Shares. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/bzx/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 1 15 18 17 Jkt 250001 PO 00000 CFR 200.30–3(a)(12). Frm 00052 Fmt 4703 Sfmt 4703 19971 2 17 E:\FR\FM\09APN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 09APN1 19972 Federal Register / Vol. 85, No. 69 / Thursday, April 9, 2020 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange received approval to add new Rule 14.11(k) for the purpose of permitting the listing and trading of Managed Portfolio Shares, which are securities issued by an actively managed open-end management investment company,3 on December 16, 2019.4 Rule 14.11(k)(2)(A) requires the Exchange to file separate proposals under Section 19(b) of the Act before listing and trading any series of Managed Portfolio Shares on the Exchange. As such, the Exchange is submitting this proposal in order to list and trade shares of the JPMorgan Large Cap Growth ETF (the ‘‘Fund’’) under Rule 14.11(k). khammond on DSKJM1Z7X2PROD with NOTICES Description of the Fund and the Trust The shares of the Fund (the ‘‘Shares’’) will be issued by J.P. Morgan ExchangeTraded Fund Trust (the ‘‘Trust’’), a statutory trust organized under the laws of the State of Delaware and registered with the Commission as an open-end management investment company.5 The 3 As defined in Rule 14.11(k)(3)(A), the term ‘‘Managed Portfolio Share’’ means a security that (a) represents an interest in an investment company registered under the Investment Company Act of 1940 (‘‘Investment Company’’) organized as an open-end management investment company, that invests in a portfolio of securities selected by the Investment Company’s investment adviser consistent with the Investment Company’s investment objectives and policies; (b) is issued in a Creation Unit (as defined below), or multiples thereof, in return for a designated portfolio of instruments (and/or an amount of cash) with a value equal to the next determined net asset value and delivered to the Authorized Participant (as defined in the Investment Company’s Form N–1A filed with the Commission) through a Confidential Account; (c) when aggregated into a Redemption Unit (as defined below), or multiples thereof, may be redeemed for a designated portfolio of instruments (and/or an amount of cash) with a value equal to the next determined net asset value delivered to the Confidential Account (as defined below) for the benefit of the Authorized Participant; and (d) the portfolio holdings for which are disclosed within at least 60 days following the end of every fiscal quarter. 4 See Securities Exchange Act Release No. 87759 (December 16, 2019), 84 FR 70223 (December 20, 2019) (SR–CboeBZX–2019–047). 5 The Trust is registered under the 1940 Act. On February 3, 2020, the Trust filed a registration statement on Form N–1A relating to the Fund (File No. 811–22903) (the ‘‘Registration Statement’’). The Commission has not yet issued an order granting exemptive relief to the Trust under the 1940 Act, however, the Trust has submitted an application for exemptive relief (the ‘‘Exemptive Application’’) (File No. 812–15093). The Exchange notes that the Exemptive Application incorporates by reference the terms and conditions of the exemptive order granted to Precidian ETFs Trust, et al (the ‘‘Exemptive Order’’) and expects any exemptive relief granted to the Trust to be substantively identical to the Exemptive Order. As such, this proposal refers throughout to the Exemptive Order VerDate Sep<11>2014 16:28 Apr 08, 2020 Jkt 250001 investment adviser to the Trust will be J.P. Morgan Investment Management Inc. (the ‘‘Adviser’’). JPMorgan Distribution Services, Inc. (the ‘‘Distributor’’) will serve as the distributor of the Fund’s Shares. All statements and representations made in this filing regarding the description of the portfolio or reference assets, limitations on portfolio holdings or reference assets, dissemination and availability of the Verified Intraday Indicative Value (‘‘VIIV’’),6 reference assets, and intraday indicative values, and the applicability of Exchange rules shall constitute continued listing requirements for listing the Shares on the Exchange, as provided under Rule 14.11(a). Rule 14.11(k)(2)(D) provides that if the investment adviser to the Investment Company issuing Managed Portfolio Shares is registered as a broker-dealer or is affiliated with a broker-dealer, such investment adviser will erect and maintain a ‘‘fire wall’’ between the investment adviser and personnel of the broker-dealer or brokerdealer affiliate, as applicable, with respect to access to information concerning the composition of and/or changes to such Investment Company portfolio and/or the Creation Basket.7 when discussing numerous aspects of the Trust and the Fund. The Exchange will not allow the Fund to be listed and traded on the Exchange until it receives all necessary exemptive relief and its Registration Statement is effective. Investments made by the Fund will comply with the conditions set forth in the Exemptive Order. The description of the operation of the Trust and the Fund herein is based, in part, on the Registration Statement. The Exemptive Order specifically notes that ‘‘granting the requested exemptions is appropriate in and consistent with the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. It is further found that the terms of the proposed transactions, including the consideration to be paid or received, are reasonable and fair and do not involve overreaching on the part of any person concerned, and that the proposed transactions are consistent with the policy of each registered investment company concerned and with the general purposes of the Act.’’ See Investment Company Act Release Nos. 33440, April 8, 2019 (notice) and 33477, May 20, 2019 (order) for information on the Exemptive Order. 6 Rule 14.11(k)(3)(B) defines the term VIIV as the indicative value of a Managed Portfolio Share based on all of the holdings of a series of Managed Portfolio Shares as of the close of business on the prior business day and, for corporate actions, based on the applicable holdings as of the opening of business on the current business day, priced and disseminated in one second intervals during Regular Trading Hours (as defined in Rule 1.5(w)) by the Reporting Authority, as defined below. 7 Rule 14.11(k)(3)(E) defines the term ‘‘Creation Basket’’ as on any given business day the names and quantities of the specified instruments (and/or an amount of cash) that are required for an AP Representative (as defined below) to deposit in-kind on behalf of an Authorized Participant in exchange for a Creation Unit and the names and quantities of the specified instruments (and/or an amount of PO 00000 Frm 00053 Fmt 4703 Sfmt 4703 Any person related to the investment adviser or Investment Company who makes decisions pertaining to the Investment Company’s portfolio composition or has access to information regarding the Investment Company’s portfolio composition or changes thereto or the Creation Basket must be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the applicable Investment Company portfolio or changes thereto or the Creation Basket.8 Rule 14.11(k)(2)(D) is similar to Rule 14.11(c)(5)(A)(i), related to Index Fund Shares, except that Rule 14.11(k)(2)(D) relates to the establishment of a ‘‘fire wall’’ between the investment adviser and the brokerdealer as applicable to an Investment Company’s portfolio and/or Creation Basket, not an underlying benchmark index, as is the case with index-based funds. Rule 14.11(k)(2)(D) is also similar to Rule 14.11(i)(7), related to Managed Fund Shares, except that Rule 14.11(k)(2)(D) relates to the establishment of a ‘‘fire wall’’ between the investment adviser and the brokerdealer as applicable to an Investment Company’s portfolio and Creation Basket, and not just the underlying portfolio, as is the case with Managed Fund Shares. The Adviser is not registered as a broker-dealer, but is affiliated with multiple broker-dealers and has implemented and will maintain a ‘‘fire wall’’ with respect to such cash) that will be transferred in-kind to an AP Representative on behalf of an Authorized Participant in exchange for a Redemption Unit, which will be identical and will be transmitted to each AP Representative before the commencement of trading. 8 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 will be subject to the provisions of Rule 204A–1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects its fiduciary obligations 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 (i) adopts and implements written policies and procedures reasonably designed to prevent violations, by the investment adviser and its supervised persons, of the Advisers Act and the Commission rules adopted thereunder; (ii) reviews, at least annually, the adequacy of the policies and procedures established pursuant to subparagraph (i) above and the effectiveness of their implementation; and (iii) designates an individual (who is a supervised person) responsible for administering the policies and procedures adopted under subparagraph (i) above. The Fund will also comply with the requirements of Regulation Fair Disclosure, as provided in the Exemptive Application. E:\FR\FM\09APN1.SGM 09APN1 Federal Register / Vol. 85, No. 69 / Thursday, April 9, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES affiliate broker-dealer regarding access to information concerning the composition and/or changes to the Fund’s portfolio and Creation Basket. In the event (a) the Adviser becomes registered as a broker-dealer or becomes newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement and maintain a fire wall with respect to its relevant personnel or its broker-dealer affiliate regarding access to information concerning the composition and/or changes to the portfolio and/or Creation Basket. Any person related to the Adviser or the Trust who makes decisions pertaining to the Fund’s portfolio composition or that has access to information regarding the Fund’s portfolio or changes thereto or the Creation Basket will be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding such portfolio or changes thereto and the Creation Basket. Further, Rule 14.11(k)(2)(E) requires that any person or entity, including an AP Representative, custodian, Reporting Authority, distributor, or administrator, who has access to information regarding the Investment Company’s portfolio composition or changes thereto or the Creation Basket, must be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the applicable Investment Company portfolio or changes thereto or the Creation Basket. Moreover, if any such person or entity is registered as a brokerdealer or affiliated with a broker-dealer, such person or entity will erect and maintain a ‘‘fire wall’’ between the person or entity and the broker-dealer with respect to access to information concerning the composition and/or changes to such Investment Company portfolio or Creation Basket. Any person or entity who has access to information regarding the Fund’s portfolio composition or changes thereto or the Creation Basket will be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the portfolio composition or changes thereto or the Creation Basket. Description of the Fund JPMorgan Large Cap Growth ETF The Fund’s holdings will conform to the permissible investments as set forth in the Exemptive Application and Exemptive Order and the holdings will be consistent with all requirements in VerDate Sep<11>2014 16:28 Apr 08, 2020 Jkt 250001 the Exemptive Application and Exemptive Order.9 The Fund seeks long-term capital appreciation. Typically, in implementing its strategy, the Fund invests in common stocks of companies with a history of above-average growth or companies expected to enter periods of above-average growth. In managing the Fund, the Adviser employs a fundamental bottom-up approach (focusing on the characteristics of individual securities) that seeks to identify companies with positive price momentum and attractive fundamentals. The Adviser seeks structural disconnects which allow businesses to exceed market expectations. These disconnects may result from: Demographic/cultural changes, technological advancements and/or regulatory changes. Investment Restrictions The Fund will not purchase any securities that are illiquid investments at the time of purchase and the Fund’s holdings will be consistent with all requirements described in the Exemptive Application and Exemptive Order. The Shares of the Fund will conform to the initial and continued listing criteria under Rule 14.11(k). The Fund’s holdings will be limited to and consistent with what is permissible under the Exemptive Order. The Fund’s investments will be consistent with its investment objective and will not be used to enhance leverage. Creations and Redemptions of Shares Creations and redemptions of the Shares will occur as described in Rule 14.11(k). More specifically, in connection with the creation and redemption of Creation Units 10 and Redemption Units,11 the delivery or 9 Pursuant to the Exemptive Order, the permissible investments include only the following instruments that trade on a U.S. exchange contemporaneously with the Shares: ETFs and exchange-traded notes, common stocks, preferred stocks, American depositary receipts, real estate investment trusts, commodity pools, metals trusts, currency trusts, and futures for which the reference asset the Fund may invest in directly or, in the case of an index future, based on an index of a type of asset that the Fund could invest in directly; as well as cash and cash equivalents (short-term U.S. Treasury securities, government money market funds and repurchase agreements). 10 Rule 14.11(k)(3)(F) defines the term ‘‘Creation Unit’’ as a specified minimum number of Managed Portfolio Shares issued by an Investment Company at the request of an Authorized Participant in return for a designated portfolio of instruments and/or cash. 11 Rule 14.11(k)(3)(G) defines the term ‘‘Redemption Unit’’ as a specified minimum number of Managed Portfolio Shares that may be PO 00000 Frm 00054 Fmt 4703 Sfmt 4703 19973 receipt of any portfolio securities inkind will be required to be effected through a separate confidential brokerage account (a ‘‘Confidential Account’’).12 Authorized Participants (as defined in the Fund’s Form N–1A filed with the Commission, ‘‘AP’’) will sign an agreement with an AP Representative 13 establishing the Confidential Account for the benefit of the AP. AP Representatives will be broker-dealers. An AP must be a Depository Trust Company (‘‘DTC’’) Participant that has executed a ‘‘Participant Agreement’’ with the Distributor with respect to the creation and redemption of Creation Units and Redemption Units and formed a Confidential Account for its benefit in accordance with the terms of the Participant Agreement. For purposes of creations or redemptions, all transactions will be effected through the respective AP’s Confidential Account, for the benefit of the AP, without disclosing the identity of such securities to the AP. Each AP Representative will be given, before the commencement of trading each Business Day (defined below), the Creation Basket (as described below) for that day. This information will permit an AP that has established a Confidential Account with an AP Representative, to instruct the AP Representative to buy and sell positions in the portfolio securities to permit creation and redemption of Creation Units and Redemption Units. Shares of the Fund will be issued and redeemed in Creation Units and Redemption Units of 5,000 or more Shares. The Fund will offer and redeem Creation Units and Redemption Units on a continuous basis at the net asset value (‘‘NAV’’) per share redeemed to an Investment Company at the request of an Authorized Participant in return for a portfolio of instruments and/or cash. 12 Rule 14.11(k)(3)(D) defines the term ‘‘Confidential Account’’ as an account owned by an Authorized Participant and held with an AP Representative on behalf of the Authorized Participant. The account will be established and governed by contractual agreement between the AP Representative and the Authorized Participant solely for the purposes of creation and redemption, while keeping confidential the Creation Basket constituents of each series of Managed Portfolio Shares, including from the Authorized Participant. The books and records of the Confidential Account will be maintained by the AP Representative on behalf of the Authorized Participant. 13 Rule 14.11(k)(3)(C) defines the term ‘‘AP Representative’’ as an unaffiliated broker-dealer, with which an Authorized Participant has signed an agreement to establish a Confidential Account for the benefit of such Authorized Participant, that will deliver or receive, on behalf of the Authorized Participant, all consideration to or from the Investment Company in a creation or redemption. An AP Representative will not be permitted to disclose the Creation Basket to any person, including the Authorized Participants. E:\FR\FM\09APN1.SGM 09APN1 19974 Federal Register / Vol. 85, No. 69 / Thursday, April 9, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES next determined after receipt of an order in proper form. The NAV per share of the Fund will be determined as of the close of regular trading on the Exchange on each day that the Exchange is open (a ‘‘Business Day’’). The Fund will sell and redeem Creation Units and Redemption Units only on Business Days. To keep costs low and permit the Fund to be as fully invested as possible, Shares will be purchased and redeemed in Creation Units and Redemption Units and generally on an in-kind basis. Accordingly, except where the purchase or redemption will include cash under the circumstances described in the Exemptive Application, APs will be required to purchase Creation Units by making an in-kind deposit of specified instruments (‘‘Deposit Instruments’’), and APs redeeming their Shares will receive an in-kind transfer of specified instruments (‘‘Redemption Instruments’’) through the AP Representative in their Confidential Account.14 On any given Business Day, the names and quantities of the instruments that constitute the Deposit Instruments and the names and quantities of the instruments that constitute the Redemption Instruments will be identical, and these instruments may be referred to, in the case of either a purchase or a redemption, as the ‘‘Creation Basket.’’ Placement of Purchase Orders The Fund will issue Shares through the Distributor on a continuous basis at NAV. The Exchange represents that the issuance of Shares will operate in a manner similar to that of other ETFs. The Fund will issue Shares only at the NAV per share next determined after an order in proper form is received. In the case of a creation, the AP would enter an irrevocable creation order with the Fund and direct the AP Representative to purchase the Deposit Instruments. The AP Representative would then purchase the necessary securities in the Confidential Account. In purchasing the necessary securities, the AP Representative will use methods, such as breaking the transaction into multiple transactions and transacting in multiple marketplaces, to avoid revealing the composition of the Creation Basket. Once the Deposit Instruments have been acquired in the Confidential Account, the AP 14 The Fund must comply with the federal securities laws in accepting Deposit Instruments and satisfying redemptions with Redemption Instruments, including that the Deposit Instruments and Redemption Instruments are sold in transactions that would be exempt from registration under the 1933 Act. VerDate Sep<11>2014 16:28 Apr 08, 2020 Jkt 250001 Representative would contribute the Deposit Instruments in-kind to the Fund. The Distributor will furnish acknowledgements to those placing such orders that the orders have been accepted, but the Distributor may reject any order which is not submitted in proper form, as described in the Fund’s prospectus or Statement of Additional Information (‘‘SAI’’). The NAV of the Fund is expected to be determined once each Business Day at a time determined by the Trust’s Board of Trustees (‘‘Board’’), currently anticipated to be as of the close of the regular trading session on the Exchange (ordinarily 4:00 p.m. E.T.) (the ‘‘Valuation Time’’). The Fund will establish a cut-off time (‘‘Order Cut-Off Time’’) for purchase orders in proper form. Such Order CutOff Time will be provided in the Registration Statement. To initiate a purchase of Shares, an AP must submit to the Distributor an irrevocable order to purchase such Shares after the most recent prior Valuation Time. All orders to purchase Creation Units must be received by the Distributor no later than the Order Cut-Off Time in each case on the date such order is placed (‘‘Transmittal Date’’) for the AP to receive the NAV per share determined on the Transmittal Date. As with all existing ETFs, if there is a difference between the NAV attributable to a Creation Unit and the aggregate market value of the Creation Basket exchanged for the Creation Unit, the party conveying instruments with the lower value will also pay to the other an amount in cash equal to that difference (the ‘‘Balancing Amount’’). Purchases of Shares will be settled inkind and/or cash for an amount equal to the applicable NAV per share purchased plus applicable transaction fees.15 Other than the Balancing Amount, the Fund will substitute cash only under exceptional circumstances and as set forth under the Fund’s policies and procedures governing the composition of Creation Baskets. The Shares may be redeemed to the Fund in Redemption Unit size or multiples thereof as described below. Redemption orders of Redemption Units must be placed by an AP (‘‘AP Redemption Order’’). The Fund will establish in its Registration Statement an Order Cut-Off Time for redemption orders of Redemption Units in proper form. Redemption Units of the Fund will be redeemable at their NAV per share next determined after receipt of a request for redemption by the Trust in the manner specified below before the Order Cut-Off Time. A transaction fee may also be imposed on redemption orders. To initiate an AP Redemption Order, an AP must submit to the Distributor an irrevocable order to redeem such Redemption Unit after the most recent prior Valuation Time, but not later than the Order Cut-Off Time. In the case of a redemption, the AP would enter into an irrevocable redemption order, and then the Fund would instruct its custodian to deliver the Redemption Instruments to the appropriate Confidential Account. The Authorized Participant would direct the AP Representative on when that day to liquidate those securities. As with the purchase of securities, the AP Representative will use methods, such as breaking the transaction into multiple transactions and transacting in multiple marketplaces, to avoid revealing the composition of the Creation Basket. Consistent with the provisions of Section 22(e) of the 1940 Act and Rule 22e–2 thereunder, the right to redeem will not be suspended, nor payment upon redemption delayed, except for: (1) Any period during which the Exchange is closed other than customary weekend and holiday closings, (2) any period during which trading on the Exchange is restricted, (3) any period during which an emergency exists as a result of which disposal by the Fund of securities owned by it is not reasonably practicable or it is not reasonably practicable for the Fund to determine its NAV, and (4) for such other periods as the Commission may by order permit for the protection of shareholders. Redemptions will occur primarily inkind, although redemption payments may also be made partly or wholly in cash.16 The Participant Agreement signed by each AP will require establishment of a Confidential Account to receive distributions of securities inkind upon redemption. Each AP will be required to open a Confidential Account with an AP Representative in order to facilitate orderly processing of redemptions. Other than the Balancing Amount, the Fund will substitute cash only under exceptional circumstances and as set forth under the Fund’s policies and procedures governing the composition of Creation Baskets.17 15 To the extent that the Fund allows creations or redemptions to be conducted in cash, such transactions will be effected in the same manner for all APs transacting in cash. 16 The value of any positions not susceptible to in-kind settlement may be paid in cash. 17 To the extent that the Fund allows creations or redemptions to be conducted in cash, such Authorized Participant Redemption PO 00000 Frm 00055 Fmt 4703 Sfmt 4703 E:\FR\FM\09APN1.SGM 09APN1 Federal Register / Vol. 85, No. 69 / Thursday, April 9, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES Net Asset Value The NAV per share of the Fund will be computed by dividing the value of the net assets of the Fund (i.e., the value of its total assets less total liabilities) by the total number of Shares of the Fund outstanding, rounded to the nearest cent. Expenses and fees, including the Fund’s management fees, will be accrued daily and taken into account for purposes of determining NAV. Interest and investment income on the Trust’s assets accrue daily and will be included in the Fund’s total assets. The NAV per share for the Fund will be calculated by the Fund’s administrator and determined as of the close of the regular trading session on the Exchange (ordinarily 4:00 p.m., E.T.) on each day that the Exchange is open. Exchange-traded instruments will be valued at market value, which will generally be determined using the last reported official closing or last trading price on the exchange or market on which the securities are primarily traded at the time of valuation. Other holdings of the Fund will generally be valued on the basis of independent pricing services, quotes obtained from brokers and dealers or price quotations or other equivalent indications of value provided by a third-party pricing service, reported net asset value, or at cost. Availability of Information The Fund’s website (www.JPMorgan.com/etfs), which will be publicly available prior to the listing and trading of Shares, will include a form of the prospectus for the Fund that may be downloaded. The Fund’s website will include additional quantitative information updated on a daily basis, including, on a per Share basis for the Fund, the prior Business Day’s NAV and the market closing price and a calculation of the premium and discount of the market closing price. The Fund’s website will also disclose each day the median bid/ask spread for the Fund’s most recent 30 days based on the National Best Bid (‘‘NBB’’) and National Best Offer (‘‘NBO’’) at the time of calculation of such NAV (the ‘‘Bid/ Ask Price’’).18 In addition, the Fund will provide any other information on its website regarding premiums/discounts that ETFs registered under the 1940 Act are required to provide or that are transactions will be effected in the same manner for all APs transacting in cash. 18 The Bid/Ask Price of the Fund will be determined using the mid-point between the current NBB and NBO as of the time of calculation of the Fund’s NAV. The records relating to Bid/Ask Prices will be retained by the Fund and/or its service providers. VerDate Sep<11>2014 16:28 Apr 08, 2020 Jkt 250001 otherwise required under the Exemptive Order. The website and information will be publicly available at no charge. The Trust’s SAI and the Fund’s shareholder reports will be available free upon request from the Trust. These documents and forms may be viewed on-screen or downloaded from the Commission’s website at www.sec.gov. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. Quotation and last sale information for the Shares will be available via the Consolidated Tape Association (‘‘CTA’’) high-speed line. In addition, the VIIV, as defined in Rule 14.11(k)(3)(B) and as described further below, will be widely disseminated by the Reporting Authority 19 and/or one or more major market data vendors in onesecond intervals during Regular Trading Hours. Dissemination of the VIIV With respect to trading of the Shares, the ability of market participants to buy and sell Shares at prices near the VIIV is dependent upon their assessment that the VIIV is a reliable, indicative realtime value for the Fund’s underlying holdings. Market participants are expected to accept the VIIV as a reliable, indicative real-time value because (1) the VIIV will be calculated and disseminated based on the Fund’s actual portfolio holdings, (2) the securities in which the Fund plans to invest are generally highly liquid and actively traded and trade at the same time as the Fund and therefore generally have accurate real time pricing available, and (3) market participants will have a daily opportunity to evaluate whether the VIIV at or near the close of trading is indeed predictive of the actual NAV. The VIIV for the Fund will be disseminated by the Reporting Authority and/or one or more major market data vendors in one-second intervals during Regular Trading Hours. For purposes of the VIIV, securities held by the Fund will be valued throughout 19 Rule 14.11(k)(3)(H) defines the term ‘‘Reporting Authority’’ in respect of a particular series of Managed Portfolio Shares as the Exchange, the exchange that lists a particular series of Managed Portfolio Shares (if the Exchange is trading such series pursuant to unlisted trading privileges), an institution, or a reporting service designated by the Investment Company as the official source for calculating and reporting information relating to such series, including, the net asset value, the Verified Intraday Indicative Value, or other information relating to the issuance, redemption or trading of Managed Portfolio Shares. A series of Managed Portfolio Shares may have more than one Reporting Authority, each having different functions. PO 00000 Frm 00056 Fmt 4703 Sfmt 4703 19975 the day based on the mid-point between the disseminated current NBB and NBO. If the Adviser determines that a portfolio security does not have a readily available market quotation, that fact along with the identity and weighting of that security in the Fund’s VIIV calculation will be publicly disclosed on the Fund’s website. Trading Halts With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund. The Exchange will halt trading in the Shares under the conditions specified in BZX Rule 11.18. Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable, including whether unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. Trading in the Shares also will be subject to Rule 14.11(k)(4)(B)(iii)(a) and (b), which set forth circumstances under which trading in the Shares of the Fund will be halted. Specifically, Rule 14.11(k)(4)(B)(iii)(a) provides that the Exchange may consider all relevant factors in exercising its discretion to halt trading in a series of Managed Portfolio Shares. Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the series of Managed Portfolio Shares inadvisable. These may include: (i) The extent to which trading is not occurring in the securities and/or the financial instruments composing the portfolio; or (ii) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present.20 The Adviser has represented to the Exchange that it will 20 The Exemptive Application provides that the Investment Company or their agent will request that the Exchange halt trading in the applicable series of Managed Portfolio Shares where: (i) The intraday indicative values calculated by the calculation engines differ by more than 25 basis points for 60 seconds in connection with pricing of the Verified Intraday Indicative Value; or (ii) holdings representing 10% or more of a series of Managed Portfolio Shares’ portfolio have become subject to a trading halt or otherwise do not have readily available market quotations. Any such requests will be one of many factors considered in order to determine whether to halt trading in a series of Managed Portfolio Shares and the Exchange retains sole discretion in determining whether trading should be halted. As provided in the Exemptive Application, each series of Managed Portfolio Shares would employ a pricing verification agent to continuously compare two intraday indicative values during Regular Trading Hours in order to ensure the accuracy of the Verified Intraday Indicative Value. E:\FR\FM\09APN1.SGM 09APN1 19976 Federal Register / Vol. 85, No. 69 / Thursday, April 9, 2020 / Notices provide the Exchange with prompt notification upon the existence of any such condition or set of conditions. Rule 14.11(k)(4)(B)(iii)(b) provides that, if the Exchange becomes aware that: (i) The VIIV of a series of Managed Portfolio Shares is not being calculated or disseminated in one second intervals, as required; (ii) the NAV with respect to a series of Managed Portfolio Shares is not disseminated to all market participants at the same time; (iii) the holdings of a series of Managed Portfolio Shares are not made available on at least a quarterly basis as required under the 1940 Act; or (iv) such holdings are not made available to all market participants at the same time, (except as otherwise permitted under the currently applicable exemptive order or no-action relief granted by the Commission or Commission staff to the Investment Company with respect to the series of Managed Portfolio Shares), it will halt trading in such series until such time as the VIIV, the NAV, or the holdings are available, as required. khammond on DSKJM1Z7X2PROD with NOTICES Trading Rules The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. Shares will trade on the Exchange only during Regular Trading Hours as provided in Rule 14.11(k)(2)(B). The Exchange has appropriate rules in place to facilitate trading during all trading sessions in which the Shares will trade. As provided in BZX Rule 11.11(a), the minimum price variation for quoting and entry of orders in securities traded on the Exchange is $0.01, with the exception of securities that are priced less than $1.00, for which the minimum price variation for order entry is $0.0001. The Shares will conform to the initial and continued listing criteria under Rule 14.11(k) as well as all terms in the Exemptive Order. The Exchange represents that, for initial and/or continued listing, the Fund will be in compliance with Rule 10A–3 under the Act.21 A minimum of 100,000 Shares of the Fund will be outstanding at the commencement of trading on the Exchange. The Exchange has obtained a representation from the issuer of the Shares of the Fund that the NAV per share of the Fund will be calculated daily and will be made available to all market participants at the same time. 21 See 16:28 Apr 08, 2020 Information Circular Prior to the commencement of trading, the Exchange will inform its members in an Information Circular (‘‘Circular’’) of the special characteristics and risks associated with trading the Shares. Specifically, the Circular will discuss the following: (1) The procedures for purchases and redemptions of Shares; (2) BZX Rule 22 For a list of the current members of ISG, see www.isgportal.org. 17 CFR 240.10A–3. VerDate Sep<11>2014 Surveillance The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of the Shares on the Exchange during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws. Trading of the Shares through the Exchange will be subject to the Exchange’s surveillance procedures for derivative products, including Managed Portfolio Shares. As part of these surveillance procedures and consistent with Rule 14.11(k)(2)(C), the Adviser will upon request make available to the Exchange and/or FINRA, on behalf of the Exchange, the daily portfolio holdings of the Fund. The issuer has represented to the Exchange that it will advise the Exchange of any failure by the Fund to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Exchange Act, the Exchange will surveil for compliance with the continued listing requirements. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under Exchange Rule 14.12. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares and the underlying exchange-traded instruments with other markets and other entities that are members of the Intermarket Surveillance Group (‘‘ISG’’), and the Exchange or FINRA, on behalf of the Exchange, or both, may obtain trading information regarding trading such securities from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares and the underlying exchange-traded instruments from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.22 In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. Jkt 250001 PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 3.7, which imposes suitability obligations on Exchange members with respect to recommending transactions in the Shares to customers; (3) how information regarding the VIIV is disseminated; (4) the requirement that members deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; (5) trading information; and (6) that the portfolio holdings will be disclosed within at least 60 days following the end of every fiscal quarter. In addition, the Circular will reference that the Fund is subject to various fees and expenses described in the Registration Statement. The Circular will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. The Circular will also disclose that the NAV for the Shares will be calculated after 4:00 p.m., E.T. each trading day. 2. Statutory Basis The Exchange believes that this proposal is consistent with Section 6(b) of the Act 23 in general and Section 6(b)(5) of the Act 24 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes that this proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Fund would meet each of the rules relating to listing and trading of Managed Portfolio Shares and, to the extent that the Fund is not in compliance with such rules, the Exchange would either prevent the Fund from listing and trading if it hadn’t started trading on the Exchange or would commence delisting procedures under Exchange Rule 14.12. More specifically, the Exchange will consider the suspension of trading in, and will commence delisting proceedings under Rule 14.12 for, the Fund under any of the following circumstances: (a) If, following the initial twelve-month period after commencement of trading on the Exchange, there are fewer than 50 beneficial holders of the Fund for 30 or more consecutive trading days; (b) if the Exchange has halted trading in the Fund because the VIIV is interrupted pursuant to Rule 14.11(k)(4)(B)(iii)(b) and such 23 15 24 15 E:\FR\FM\09APN1.SGM U.S.C. 78f. U.S.C. 78f(b)(5). 09APN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 85, No. 69 / Thursday, April 9, 2020 / Notices interruption persists past the trading day in which it occurred or is no longer available; (c) if the Exchange has halted trading in the Fund because the NAV with respect to such Fund is not disseminated to all market participants at the same time, the holdings of such Fund are not made available on at least a quarterly basis as required under the 1940 Act, or such holdings are not made available to all market participants at the same time pursuant to Rule 14.11(k)(4)(B)(iii)(b) and such issue persists past the trading day in which it occurred; (d) if the Exchange has halted trading in the Fund pursuant to Rule 14.11(k)(4)(B)(iii)(a) and such issue persists past the trading day in which it occurred; (e) if the Fund has failed to file any filings required by the Commission or if the Exchange is aware that the Fund is not in compliance with the conditions of any currently applicable exemptive order or no-action relief granted by the Commission or Commission staff with respect to the Fund; (f) if any of the continued listing requirements set forth in Rule 14.11(k) are not continuously maintained; (g) if any of the applicable Continued Listing Representations, as defined in Rule 14.11(a), for the Fund are not continuously met; or (h) if such other event shall occur or condition exists which, in the opinion of the Exchange, makes further dealings on the Exchange inadvisable. The Adviser is not registered as a broker-dealer, but is affiliated with multiple broker-dealers and has implemented and will maintain a ‘‘fire wall’’ with respect to such affiliate broker-dealer regarding access to information concerning the composition and/or changes to the Fund’s portfolio and Creation Basket. In the event (a) the Adviser becomes registered as a brokerdealer or becomes newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser is a registered brokerdealer or becomes affiliated with a broker-dealer, it will implement and maintain a fire wall with respect to its relevant personnel or its broker-dealer affiliate regarding access to information concerning the composition and/or changes to the portfolio and/or Creation Basket. Any person related to the Adviser or the Trust who makes decisions pertaining to the Fund’s portfolio composition or that has access to information regarding the Fund’s portfolio or changes thereto or the Creation Basket will be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding such VerDate Sep<11>2014 16:28 Apr 08, 2020 Jkt 250001 portfolio or changes thereto and the Creation Basket. Further, Rule 14.11(k)(2)(E) requires that any person or entity, including an AP Representative, custodian, Reporting Authority, distributor, or administrator, who has access to information regarding the Investment Company’s portfolio composition or changes thereto or the Creation Basket, must be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the applicable Investment Company portfolio or changes thereto or the Creation Basket. Moreover, if any such person or entity is registered as a brokerdealer or affiliated with a broker-dealer, such person or entity will erect and maintain a ‘‘fire wall’’ between the person or entity and the broker-dealer with respect to access to information concerning the composition and/or changes to such Investment Company portfolio or Creation Basket. Any person or entity who has access to information regarding the Fund’s portfolio composition or changes thereto or the Creation Basket will be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the portfolio or changes thereto or the Creation Basket. The Exchange further believes that Rule 14.11(k) is designed to prevent fraudulent and manipulative acts and practices related to the listing and trading of Managed Portfolio Shares because it provides meaningful requirements about both the data that will be made publicly available about the Shares as well as the information that will only be available to certain parties and the controls on such information. Specifically, the Exchange believes that the requirements related to information protection enumerated under Rule 14.11(k)(2)(E) will act as a strong safeguard against misuse and improper dissemination of information related to the Fund’s portfolio composition or changes thereto or the Creation Basket. The requirement that any person or entity implement procedures to prevent the use and dissemination of material nonpublic information regarding the portfolio or Creation Basket will act to prevent any individual or entity from sharing such information externally and the internal ‘‘fire wall’’ requirements applicable where an entity is a registered brokerdealer or affiliated with a broker-dealer will act to make sure that no entity will be able to misuse the data for their own purposes. As such, the Exchange believes that this proposal is designed to PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 19977 prevent fraudulent and manipulative acts and practices. The Exchange further believes that the proposal is designed to prevent fraudulent and manipulative acts and practices related to the listing and trading of Managed Portfolio Shares and to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange would halt trading under certain circumstances under which trading in the Shares may be inadvisable. Specifically, trading in the Shares will be subject to Rule 14.11(k)(4)(B)(iii)(a), which provides that the Exchange may consider all relevant factors in exercising its discretion to halt trading in a series of Managed Portfolio Shares. Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the series of Managed Portfolio Shares inadvisable. These may include: (i) The extent to which trading is not occurring in the securities and/or the financial instruments composing the portfolio; or (ii) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present.25 The Adviser has represented to the Exchange that it will provide the Exchange with prompt notification upon the existence of any such condition or set of conditions. Trading in the Shares will also be subject to Rule 14.11(k)(4)(B)(iii)(b), which provides that if the Exchange becomes aware that: (i) The VIIV of a series of Managed Portfolio Shares is not being calculated or disseminated in one second intervals, as required; (ii) the NAV with respect to a series of Managed Portfolio Shares is not disseminated to all market participants at the same time; (iii) the holdings of a series of Managed Portfolio Shares are not made available on at least a quarterly basis as required under the 1940 Act; or (iv) such holdings are not made available to all market participants at the same time, (except as otherwise permitted under the currently applicable exemptive order or no-action relief granted by the Commission or Commission staff to the Investment Company with respect to the series of Managed Portfolio Shares), it will halt trading in such series until such time as the VIIV, the NAV, or the holdings are available, as required. With respect to the proposed listing and trading of Shares of the Fund, the Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange 25 See E:\FR\FM\09APN1.SGM supra note 20. 09APN1 khammond on DSKJM1Z7X2PROD with NOTICES 19978 Federal Register / Vol. 85, No. 69 / Thursday, April 9, 2020 / Notices pursuant to the initial and continued listing criteria in Rule 14.11(k). The Fund’s holdings will conform to the permissible investments as set forth in the Exemptive Application and Exemptive Order. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares and the underlying exchange-traded instruments 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 instruments from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares and the underlying exchange-traded instruments from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. With respect to trading of the Shares, the ability of market participants to buy and sell Shares at prices near the VIIV is dependent upon their assessment that the VIIV is a reliable, indicative realtime value for the Fund’s underlying holdings. Market participants are expected to accept the VIIV as a reliable, indicative real-time value because (1) the VIIV will be calculated and disseminated based on the Fund’s actual portfolio holdings, (2) the securities in which the Fund plans to invest are generally highly liquid and actively traded and trade at the same time as the Fund and therefore generally have accurate real time pricing available, and (3) market participants will have a daily opportunity to evaluate whether the VIIV at or near the close of trading is indeed predictive of the actual NAV. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange will obtain a representation that the NAV per share of the Fund will be calculated daily and that the NAV will be made available to all market participants at the same time. Investors can also obtain the Fund’s SAI, shareholder reports, Form N–CSR, and Form N–PORT. The Fund’s SAI and shareholder reports will be available free upon request from the applicable fund, and those documents and the Form N–CSR and Form N– PORT may be viewed on-screen or downloaded from the Commission’s website. In addition, with respect to the Fund, a large amount of information will be publicly available regarding the Fund and the Shares, thereby promoting market transparency. Quotation and last sale information for the Shares will be available via the CTA high-speed line. VerDate Sep<11>2014 16:28 Apr 08, 2020 Jkt 250001 Information regarding the VIIV will be widely disseminated every second throughout Regular Trading Hours by the Reporting Authority and/or one or more major market data vendors. The website for the Fund will include a prospectus for the Fund that may be downloaded, and additional data relating to NAV and other applicable quantitative information, updated on a daily basis. Moreover, prior to the commencement of trading, the Exchange will inform its members in a Circular of the special characteristics and risks associated with trading the Shares. The Exchange will halt trading in the Shares under the conditions specified in BZX Rule 11.18 or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. Trading in the Shares will be subject to Rule 14.11(k)(4)(B)(iii)(a) and (b), which set forth circumstances under which Shares of the Fund will be halted. In addition, as noted above, investors will have ready access to the VIIV, and quotation and last sale information for the Shares. The Shares will conform to the initial and continued listing criteria under Rule 14.11(k). The Fund’s holdings will be limited to and consistent with what is permissible under the Exemptive Order. The Fund’s investments will be consistent with its investment objective and will not be used to enhance leverage. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of an actively-managed exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, as noted above, investors will have ready access to information regarding the VIIV and quotation and last sale information for the Shares. For the above reasons, the Exchange believes that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 of the purpose of the Act. The Exchange notes that the proposed rule change, rather will facilitate the listing and trading of an actively-managed exchange-traded product that will enhance competition among both market participants and listing venues, to the benefit of investors and the marketplace. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: A. By order approve or disapprove such proposed rule change, or B. institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CboeBZX–2020–029 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–CboeBZX–2020–029. 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 E:\FR\FM\09APN1.SGM 09APN1 Federal Register / Vol. 85, No. 69 / Thursday, April 9, 2020 / Notices amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CboeBZX–2020–029, and should be submitted on or before April 30, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–07444 Filed 4–8–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–88557; File No. SR–FICC– 2020–002] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Proposed Rule Change To Amend the Government Securities Division Rulebook Relating to the Legal Entity Identifier Requirement khammond on DSKJM1Z7X2PROD with NOTICES April 3, 2020. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on March 25, 2020, Fixed Income Clearing Corporation (‘‘FICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the clearing agency. The Commission is publishing this notice to solicit 26 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 16:28 Apr 08, 2020 Jkt 250001 comments on the proposed rule change from interested persons. I. Clearing Agency’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change consists of a proposal to amend the FICC Government Securities Division (‘‘GSD’’) Rulebook (‘‘GSD Rules’’) 3 to require: (i) Each applicant to become a Netting Member and CCIT Member to obtain and provide a ‘‘Legal Entity Identifier’’ 4 to FICC as part of its membership application, (ii) each Netting Member and CCIT Member to have a current Legal Entity Identifier on file with FICC at all times and to indemnify FICC for any losses and Legal Actions 5 that arise due to the failure of a Netting Member or CCIT Member to do so, as further described below, and (iii) each Sponsoring Member to provide FICC with a Legal Entity Identifier for each of their current Sponsored Members and for each newly added Sponsored Member going forward and to indemnify FICC for any losses and Legal Actions that arise due to the failure of a Sponsoring Member to do so, as further described below. II. Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the clearing agency included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 3 Capitalized terms not defined herein are defined in the GSD Rules, available at https:// www.dtcc.com/legal/rules-and-procedures. 4 A ‘‘Legal Entity Identifier’’ is a 20-character reference code to uniquely identify legally distinct entities that engage in financial transactions. The Legal Entity Identifier is based on the ISO 17442 standard developed by the International Organization for Standardization and satisfies the standards implemented by the Global Legal Entity Identifier Foundation. See https://www.gleif.org/en/ about-lei/introducing-the-legal-entity-identifier-lei. FICC is proposing to add a new definition for the term ‘‘Legal Entity Identifier’’ in the GSD Rules, as further discussed below. 5 ‘‘Legal Action’’ (as defined below and in the proposed rule change) means and includes any claim, counterclaim, demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation before any federal, state or foreign court or other tribunal, or any investigative or regulatory agency or self-regulatory organization. PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 19979 (A) Clearing Agency’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend the GSD Rules to require: (i) Each applicant to become a Netting Member and CCIT Member to obtain and provide a Legal Entity Identifier to FICC as part of its membership application, (ii) each Netting Member and CCIT Member to have a current Legal Entity Identifier on file with FICC at all times and to indemnify FICC for any losses and Legal Actions that arise due to the failure of a Netting Member or CCIT Member to do so, as further described below, and (iii) each Sponsoring Member to provide FICC with a Legal Entity Identifier for each of their current Sponsored Members and for each newly added Sponsored Member going forward and to indemnify FICC for any losses and Legal Actions that arise due to the failure of a Sponsoring Member to do so, as further described below. Background The Office of Financial Research (‘‘OFR’’) of the U.S. Department of the Treasury has adopted a rule (‘‘OFR Regulation’’) establishing a data collection requirement covering centrally cleared transactions in the U.S. repurchase agreement (‘‘repo’’) market.6 This collection requires daily reporting to the OFR by ‘‘covered reporters,’’ which is defined to include central counterparties meeting certain criteria (i.e., clearing repurchase agreement transactions), such as FICC. The OFR Regulation requires covered reporters, such as FICC, to submit the Legal Entity Identifier of each clearing member involved in a reportable repo transaction. A Legal Entity Identifier is a 20-character, alpha-numeric code based on the ISO 17442 standard developed by the International Organization for Standardization.7 Each Legal Entity Identifier contains information about an entity’s ownership structure.8 In the OFR Release, the OFR stated that the submission of Legal Entity Identifiers by covered reporters would enhance the ability of the Financial Stability Oversight Council (‘‘Council’’),9 Council member 6 84 FR 4975 (February 20, 2019) (hereinafter the ‘‘OFR Release’’). The OFR Regulation is codified at 12 CFR part 1610. 7 See supra note 4. 8 See id. 9 The Council was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act. E:\FR\FM\09APN1.SGM Continued 09APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 85, Number 69 (Thursday, April 9, 2020)]
[Notices]
[Pages 19971-19979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07444]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88551; File No. SR-CboeBZX-2020-029]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To List and Trade Shares of the 
JPMorgan Large Cap Growth ETF Under Rule 14.11(k), Managed Portfolio 
Shares

April 3, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 25, 2020, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') is filing 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change to list and trade shares of the JPMorgan Large Cap Growth 
ETF under Rule 14.11(k), Managed Portfolio Shares.
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 19972]]

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

1. Purpose
    The Exchange received approval to add new Rule 14.11(k) for the 
purpose of permitting the listing and trading of Managed Portfolio 
Shares, which are securities issued by an actively managed open-end 
management investment company,\3\ on December 16, 2019.\4\ Rule 
14.11(k)(2)(A) requires the Exchange to file separate proposals under 
Section 19(b) of the Act before listing and trading any series of 
Managed Portfolio Shares on the Exchange. As such, the Exchange is 
submitting this proposal in order to list and trade shares of the 
JPMorgan Large Cap Growth ETF (the ``Fund'') under Rule 14.11(k).
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    \3\ As defined in Rule 14.11(k)(3)(A), the term ``Managed 
Portfolio Share'' means a security that (a) represents an interest 
in an investment company registered under the Investment Company Act 
of 1940 (``Investment Company'') organized as an open-end management 
investment company, that invests in a portfolio of securities 
selected by the Investment Company's investment adviser consistent 
with the Investment Company's investment objectives and policies; 
(b) is issued in a Creation Unit (as defined below), or multiples 
thereof, in return for a designated portfolio of instruments (and/or 
an amount of cash) with a value equal to the next determined net 
asset value and delivered to the Authorized Participant (as defined 
in the Investment Company's Form N-1A filed with the Commission) 
through a Confidential Account; (c) when aggregated into a 
Redemption Unit (as defined below), or multiples thereof, may be 
redeemed for a designated portfolio of instruments (and/or an amount 
of cash) with a value equal to the next determined net asset value 
delivered to the Confidential Account (as defined below) for the 
benefit of the Authorized Participant; and (d) the portfolio 
holdings for which are disclosed within at least 60 days following 
the end of every fiscal quarter.
    \4\ See Securities Exchange Act Release No. 87759 (December 16, 
2019), 84 FR 70223 (December 20, 2019) (SR-CboeBZX-2019-047).
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Description of the Fund and the Trust
    The shares of the Fund (the ``Shares'') will be issued by J.P. 
Morgan Exchange-Traded Fund Trust (the ``Trust''), a statutory trust 
organized under the laws of the State of Delaware and registered with 
the Commission as an open-end management investment company.\5\ The 
investment adviser to the Trust will be J.P. Morgan Investment 
Management Inc. (the ``Adviser''). JPMorgan Distribution Services, Inc. 
(the ``Distributor'') will serve as the distributor of the Fund's 
Shares. All statements and representations made in this filing 
regarding the description of the portfolio or reference assets, 
limitations on portfolio holdings or reference assets, dissemination 
and availability of the Verified Intraday Indicative Value 
(``VIIV''),\6\ reference assets, and intraday indicative values, and 
the applicability of Exchange rules shall constitute continued listing 
requirements for listing the Shares on the Exchange, as provided under 
Rule 14.11(a).
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    \5\ The Trust is registered under the 1940 Act. On February 3, 
2020, the Trust filed a registration statement on Form N-1A relating 
to the Fund (File No. 811-22903) (the ``Registration Statement''). 
The Commission has not yet issued an order granting exemptive relief 
to the Trust under the 1940 Act, however, the Trust has submitted an 
application for exemptive relief (the ``Exemptive Application'') 
(File No. 812-15093). The Exchange notes that the Exemptive 
Application incorporates by reference the terms and conditions of 
the exemptive order granted to Precidian ETFs Trust, et al (the 
``Exemptive Order'') and expects any exemptive relief granted to the 
Trust to be substantively identical to the Exemptive Order. As such, 
this proposal refers throughout to the Exemptive Order when 
discussing numerous aspects of the Trust and the Fund. The Exchange 
will not allow the Fund to be listed and traded on the Exchange 
until it receives all necessary exemptive relief and its 
Registration Statement is effective. Investments made by the Fund 
will comply with the conditions set forth in the Exemptive Order. 
The description of the operation of the Trust and the Fund herein is 
based, in part, on the Registration Statement. The Exemptive Order 
specifically notes that ``granting the requested exemptions is 
appropriate in and consistent with the public interest and 
consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Act. It is further 
found that the terms of the proposed transactions, including the 
consideration to be paid or received, are reasonable and fair and do 
not involve overreaching on the part of any person concerned, and 
that the proposed transactions are consistent with the policy of 
each registered investment company concerned and with the general 
purposes of the Act.'' See Investment Company Act Release Nos. 
33440, April 8, 2019 (notice) and 33477, May 20, 2019 (order) for 
information on the Exemptive Order.
    \6\ Rule 14.11(k)(3)(B) defines the term VIIV as the indicative 
value of a Managed Portfolio Share based on all of the holdings of a 
series of Managed Portfolio Shares as of the close of business on 
the prior business day and, for corporate actions, based on the 
applicable holdings as of the opening of business on the current 
business day, priced and disseminated in one second intervals during 
Regular Trading Hours (as defined in Rule 1.5(w)) by the Reporting 
Authority, as defined below.
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    Rule 14.11(k)(2)(D) provides that if the investment adviser to the 
Investment Company issuing Managed Portfolio Shares is registered as a 
broker-dealer or is affiliated with a broker-dealer, such investment 
adviser will erect and maintain a ``fire wall'' between the investment 
adviser and personnel of the broker-dealer or broker-dealer affiliate, 
as applicable, with respect to access to information concerning the 
composition of and/or changes to such Investment Company portfolio and/
or the Creation Basket.\7\ Any person related to the investment adviser 
or Investment Company who makes decisions pertaining to the Investment 
Company's portfolio composition or has access to information regarding 
the Investment Company's portfolio composition or changes thereto or 
the Creation Basket must be subject to procedures designed to prevent 
the use and dissemination of material nonpublic information regarding 
the applicable Investment Company portfolio or changes thereto or the 
Creation Basket.\8\ Rule 14.11(k)(2)(D) is similar to Rule 
14.11(c)(5)(A)(i), related to Index Fund Shares, except that Rule 
14.11(k)(2)(D) relates to the establishment of a ``fire wall'' between 
the investment adviser and the broker-dealer as applicable to an 
Investment Company's portfolio and/or Creation Basket, not an 
underlying benchmark index, as is the case with index-based funds. Rule 
14.11(k)(2)(D) is also similar to Rule 14.11(i)(7), related to Managed 
Fund Shares, except that Rule 14.11(k)(2)(D) relates to the 
establishment of a ``fire wall'' between the investment adviser and the 
broker-dealer as applicable to an Investment Company's portfolio and 
Creation Basket, and not just the underlying portfolio, as is the case 
with Managed Fund Shares. The Adviser is not registered as a broker-
dealer, but is affiliated with multiple broker-dealers and has 
implemented and will maintain a ``fire wall'' with respect to such

[[Page 19973]]

affiliate broker-dealer regarding access to information concerning the 
composition and/or changes to the Fund's portfolio and Creation Basket.
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    \7\ Rule 14.11(k)(3)(E) defines the term ``Creation Basket'' as 
on any given business day the names and quantities of the specified 
instruments (and/or an amount of cash) that are required for an AP 
Representative (as defined below) to deposit in-kind on behalf of an 
Authorized Participant in exchange for a Creation Unit and the names 
and quantities of the specified instruments (and/or an amount of 
cash) that will be transferred in-kind to an AP Representative on 
behalf of an Authorized Participant in exchange for a Redemption 
Unit, which will be identical and will be transmitted to each AP 
Representative before the commencement of trading.
    \8\ 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 will be 
subject to the provisions of Rule 204A-1 under the Advisers Act 
relating to codes of ethics. This Rule requires investment advisers 
to adopt a code of ethics that reflects its fiduciary obligations 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 (i) adopts and implements written policies 
and procedures reasonably designed to prevent violations, by the 
investment adviser and its supervised persons, of the Advisers Act 
and the Commission rules adopted thereunder; (ii) reviews, at least 
annually, the adequacy of the policies and procedures established 
pursuant to subparagraph (i) above and the effectiveness of their 
implementation; and (iii) designates an individual (who is a 
supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above. The Fund will also 
comply with the requirements of Regulation Fair Disclosure, as 
provided in the Exemptive Application.
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    In the event (a) the Adviser becomes registered as a broker-dealer 
or becomes newly affiliated with a broker-dealer, or (b) any new 
adviser or sub-adviser is a registered broker-dealer or becomes 
affiliated with a broker-dealer, it will implement and maintain a fire 
wall with respect to its relevant personnel or its broker-dealer 
affiliate regarding access to information concerning the composition 
and/or changes to the portfolio and/or Creation Basket.
    Any person related to the Adviser or the Trust who makes decisions 
pertaining to the Fund's portfolio composition or that has access to 
information regarding the Fund's portfolio or changes thereto or the 
Creation Basket will be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding such 
portfolio or changes thereto and the Creation Basket.
    Further, Rule 14.11(k)(2)(E) requires that any person or entity, 
including an AP Representative, custodian, Reporting Authority, 
distributor, or administrator, who has access to information regarding 
the Investment Company's portfolio composition or changes thereto or 
the Creation Basket, must be subject to procedures designed to prevent 
the use and dissemination of material nonpublic information regarding 
the applicable Investment Company portfolio or changes thereto or the 
Creation Basket. Moreover, if any such person or entity is registered 
as a broker-dealer or affiliated with a broker-dealer, such person or 
entity will erect and maintain a ``fire wall'' between the person or 
entity and the broker-dealer with respect to access to information 
concerning the composition and/or changes to such Investment Company 
portfolio or Creation Basket. Any person or entity who has access to 
information regarding the Fund's portfolio composition or changes 
thereto or the Creation Basket will be subject to procedures designed 
to prevent the use and dissemination of material nonpublic information 
regarding the portfolio composition or changes thereto or the Creation 
Basket.
Description of the Fund
JPMorgan Large Cap Growth ETF
    The Fund's holdings will conform to the permissible investments as 
set forth in the Exemptive Application and Exemptive Order and the 
holdings will be consistent with all requirements in the Exemptive 
Application and Exemptive Order.\9\
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    \9\ Pursuant to the Exemptive Order, the permissible investments 
include only the following instruments that trade on a U.S. exchange 
contemporaneously with the Shares: ETFs and exchange-traded notes, 
common stocks, preferred stocks, American depositary receipts, real 
estate investment trusts, commodity pools, metals trusts, currency 
trusts, and futures for which the reference asset the Fund may 
invest in directly or, in the case of an index future, based on an 
index of a type of asset that the Fund could invest in directly; as 
well as cash and cash equivalents (short-term U.S. Treasury 
securities, government money market funds and repurchase 
agreements).
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    The Fund seeks long-term capital appreciation. Typically, in 
implementing its strategy, the Fund invests in common stocks of 
companies with a history of above-average growth or companies expected 
to enter periods of above-average growth. In managing the Fund, the 
Adviser employs a fundamental bottom-up approach (focusing on the 
characteristics of individual securities) that seeks to identify 
companies with positive price momentum and attractive fundamentals. The 
Adviser seeks structural disconnects which allow businesses to exceed 
market expectations. These disconnects may result from: Demographic/
cultural changes, technological advancements and/or regulatory changes.
Investment Restrictions
    The Fund will not purchase any securities that are illiquid 
investments at the time of purchase and the Fund's holdings will be 
consistent with all requirements described in the Exemptive Application 
and Exemptive Order.
    The Shares of the Fund will conform to the initial and continued 
listing criteria under Rule 14.11(k). The Fund's holdings will be 
limited to and consistent with what is permissible under the Exemptive 
Order.
    The Fund's investments will be consistent with its investment 
objective and will not be used to enhance leverage.
Creations and Redemptions of Shares
    Creations and redemptions of the Shares will occur as described in 
Rule 14.11(k). More specifically, in connection with the creation and 
redemption of Creation Units \10\ and Redemption Units,\11\ the 
delivery or receipt of any portfolio securities in-kind will be 
required to be effected through a separate confidential brokerage 
account (a ``Confidential Account'').\12\ Authorized Participants (as 
defined in the Fund's Form N-1A filed with the Commission, ``AP'') will 
sign an agreement with an AP Representative \13\ establishing the 
Confidential Account for the benefit of the AP. AP Representatives will 
be broker-dealers. An AP must be a Depository Trust Company (``DTC'') 
Participant that has executed a ``Participant Agreement'' with the 
Distributor with respect to the creation and redemption of Creation 
Units and Redemption Units and formed a Confidential Account for its 
benefit in accordance with the terms of the Participant Agreement. For 
purposes of creations or redemptions, all transactions will be effected 
through the respective AP's Confidential Account, for the benefit of 
the AP, without disclosing the identity of such securities to the AP.
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    \10\ Rule 14.11(k)(3)(F) defines the term ``Creation Unit'' as a 
specified minimum number of Managed Portfolio Shares issued by an 
Investment Company at the request of an Authorized Participant in 
return for a designated portfolio of instruments and/or cash.
    \11\ Rule 14.11(k)(3)(G) defines the term ``Redemption Unit'' as 
a specified minimum number of Managed Portfolio Shares that may be 
redeemed to an Investment Company at the request of an Authorized 
Participant in return for a portfolio of instruments and/or cash.
    \12\ Rule 14.11(k)(3)(D) defines the term ``Confidential 
Account'' as an account owned by an Authorized Participant and held 
with an AP Representative on behalf of the Authorized Participant. 
The account will be established and governed by contractual 
agreement between the AP Representative and the Authorized 
Participant solely for the purposes of creation and redemption, 
while keeping confidential the Creation Basket constituents of each 
series of Managed Portfolio Shares, including from the Authorized 
Participant. The books and records of the Confidential Account will 
be maintained by the AP Representative on behalf of the Authorized 
Participant.
    \13\ Rule 14.11(k)(3)(C) defines the term ``AP Representative'' 
as an unaffiliated broker-dealer, with which an Authorized 
Participant has signed an agreement to establish a Confidential 
Account for the benefit of such Authorized Participant, that will 
deliver or receive, on behalf of the Authorized Participant, all 
consideration to or from the Investment Company in a creation or 
redemption. An AP Representative will not be permitted to disclose 
the Creation Basket to any person, including the Authorized 
Participants.
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    Each AP Representative will be given, before the commencement of 
trading each Business Day (defined below), the Creation Basket (as 
described below) for that day. This information will permit an AP that 
has established a Confidential Account with an AP Representative, to 
instruct the AP Representative to buy and sell positions in the 
portfolio securities to permit creation and redemption of Creation 
Units and Redemption Units. Shares of the Fund will be issued and 
redeemed in Creation Units and Redemption Units of 5,000 or more 
Shares. The Fund will offer and redeem Creation Units and Redemption 
Units on a continuous basis at the net asset value (``NAV'') per share

[[Page 19974]]

next determined after receipt of an order in proper form. The NAV per 
share of the Fund will be determined as of the close of regular trading 
on the Exchange on each day that the Exchange is open (a ``Business 
Day''). The Fund will sell and redeem Creation Units and Redemption 
Units only on Business Days.
    To keep costs low and permit the Fund to be as fully invested as 
possible, Shares will be purchased and redeemed in Creation Units and 
Redemption Units and generally on an in-kind basis. Accordingly, except 
where the purchase or redemption will include cash under the 
circumstances described in the Exemptive Application, APs will be 
required to purchase Creation Units by making an in-kind deposit of 
specified instruments (``Deposit Instruments''), and APs redeeming 
their Shares will receive an in-kind transfer of specified instruments 
(``Redemption Instruments'') through the AP Representative in their 
Confidential Account.\14\ On any given Business Day, the names and 
quantities of the instruments that constitute the Deposit Instruments 
and the names and quantities of the instruments that constitute the 
Redemption Instruments will be identical, and these instruments may be 
referred to, in the case of either a purchase or a redemption, as the 
``Creation Basket.''
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    \14\ The Fund must comply with the federal securities laws in 
accepting Deposit Instruments and satisfying redemptions with 
Redemption Instruments, including that the Deposit Instruments and 
Redemption Instruments are sold in transactions that would be exempt 
from registration under the 1933 Act.
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Placement of Purchase Orders
    The Fund will issue Shares through the Distributor on a continuous 
basis at NAV. The Exchange represents that the issuance of Shares will 
operate in a manner similar to that of other ETFs. The Fund will issue 
Shares only at the NAV per share next determined after an order in 
proper form is received.
    In the case of a creation, the AP would enter an irrevocable 
creation order with the Fund and direct the AP Representative to 
purchase the Deposit Instruments. The AP Representative would then 
purchase the necessary securities in the Confidential Account. In 
purchasing the necessary securities, the AP Representative will use 
methods, such as breaking the transaction into multiple transactions 
and transacting in multiple marketplaces, to avoid revealing the 
composition of the Creation Basket. Once the Deposit Instruments have 
been acquired in the Confidential Account, the AP Representative would 
contribute the Deposit Instruments in-kind to the Fund.
    The Distributor will furnish acknowledgements to those placing such 
orders that the orders have been accepted, but the Distributor may 
reject any order which is not submitted in proper form, as described in 
the Fund's prospectus or Statement of Additional Information (``SAI''). 
The NAV of the Fund is expected to be determined once each Business Day 
at a time determined by the Trust's Board of Trustees (``Board''), 
currently anticipated to be as of the close of the regular trading 
session on the Exchange (ordinarily 4:00 p.m. E.T.) (the ``Valuation 
Time''). The Fund will establish a cut-off time (``Order Cut-Off 
Time'') for purchase orders in proper form. Such Order Cut-Off Time 
will be provided in the Registration Statement. To initiate a purchase 
of Shares, an AP must submit to the Distributor an irrevocable order to 
purchase such Shares after the most recent prior Valuation Time. All 
orders to purchase Creation Units must be received by the Distributor 
no later than the Order Cut-Off Time in each case on the date such 
order is placed (``Transmittal Date'') for the AP to receive the NAV 
per share determined on the Transmittal Date. As with all existing 
ETFs, if there is a difference between the NAV attributable to a 
Creation Unit and the aggregate market value of the Creation Basket 
exchanged for the Creation Unit, the party conveying instruments with 
the lower value will also pay to the other an amount in cash equal to 
that difference (the ``Balancing Amount'').
    Purchases of Shares will be settled in-kind and/or cash for an 
amount equal to the applicable NAV per share purchased plus applicable 
transaction fees.\15\ Other than the Balancing Amount, the Fund will 
substitute cash only under exceptional circumstances and as set forth 
under the Fund's policies and procedures governing the composition of 
Creation Baskets.
---------------------------------------------------------------------------

    \15\ To the extent that the Fund allows creations or redemptions 
to be conducted in cash, such transactions will be effected in the 
same manner for all APs transacting in cash.
---------------------------------------------------------------------------

Authorized Participant Redemption
    The Shares may be redeemed to the Fund in Redemption Unit size or 
multiples thereof as described below. Redemption orders of Redemption 
Units must be placed by an AP (``AP Redemption Order''). The Fund will 
establish in its Registration Statement an Order Cut-Off Time for 
redemption orders of Redemption Units in proper form. Redemption Units 
of the Fund will be redeemable at their NAV per share next determined 
after receipt of a request for redemption by the Trust in the manner 
specified below before the Order Cut-Off Time. A transaction fee may 
also be imposed on redemption orders. To initiate an AP Redemption 
Order, an AP must submit to the Distributor an irrevocable order to 
redeem such Redemption Unit after the most recent prior Valuation Time, 
but not later than the Order Cut-Off Time.
    In the case of a redemption, the AP would enter into an irrevocable 
redemption order, and then the Fund would instruct its custodian to 
deliver the Redemption Instruments to the appropriate Confidential 
Account. The Authorized Participant would direct the AP Representative 
on when that day to liquidate those securities. As with the purchase of 
securities, the AP Representative will use methods, such as breaking 
the transaction into multiple transactions and transacting in multiple 
marketplaces, to avoid revealing the composition of the Creation 
Basket.
    Consistent with the provisions of Section 22(e) of the 1940 Act and 
Rule 22e-2 thereunder, the right to redeem will not be suspended, nor 
payment upon redemption delayed, except for: (1) Any period during 
which the Exchange is closed other than customary weekend and holiday 
closings, (2) any period during which trading on the Exchange is 
restricted, (3) any period during which an emergency exists as a result 
of which disposal by the Fund of securities owned by it is not 
reasonably practicable or it is not reasonably practicable for the Fund 
to determine its NAV, and (4) for such other periods as the Commission 
may by order permit for the protection of shareholders.
    Redemptions will occur primarily in-kind, although redemption 
payments may also be made partly or wholly in cash.\16\ The Participant 
Agreement signed by each AP will require establishment of a 
Confidential Account to receive distributions of securities in-kind 
upon redemption. Each AP will be required to open a Confidential 
Account with an AP Representative in order to facilitate orderly 
processing of redemptions. Other than the Balancing Amount, the Fund 
will substitute cash only under exceptional circumstances and as set 
forth under the Fund's policies and procedures governing the 
composition of Creation Baskets.\17\
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    \16\ The value of any positions not susceptible to in-kind 
settlement may be paid in cash.
    \17\ To the extent that the Fund allows creations or redemptions 
to be conducted in cash, such transactions will be effected in the 
same manner for all APs transacting in cash.

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[[Page 19975]]

Net Asset Value
    The NAV per share of the Fund will be computed by dividing the 
value of the net assets of the Fund (i.e., the value of its total 
assets less total liabilities) by the total number of Shares of the 
Fund outstanding, rounded to the nearest cent. Expenses and fees, 
including the Fund's management fees, will be accrued daily and taken 
into account for purposes of determining NAV. Interest and investment 
income on the Trust's assets accrue daily and will be included in the 
Fund's total assets. The NAV per share for the Fund will be calculated 
by the Fund's administrator and determined as of the close of the 
regular trading session on the Exchange (ordinarily 4:00 p.m., E.T.) on 
each day that the Exchange is open.
    Exchange-traded instruments will be valued at market value, which 
will generally be determined using the last reported official closing 
or last trading price on the exchange or market on which the securities 
are primarily traded at the time of valuation. Other holdings of the 
Fund will generally be valued on the basis of independent pricing 
services, quotes obtained from brokers and dealers or price quotations 
or other equivalent indications of value provided by a third-party 
pricing service, reported net asset value, or at cost.
Availability of Information
    The Fund's website (www.JPMorgan.com/etfs), which will be publicly 
available prior to the listing and trading of Shares, will include a 
form of the prospectus for the Fund that may be downloaded. The Fund's 
website will include additional quantitative information updated on a 
daily basis, including, on a per Share basis for the Fund, the prior 
Business Day's NAV and the market closing price and a calculation of 
the premium and discount of the market closing price. The Fund's 
website will also disclose each day the median bid/ask spread for the 
Fund's most recent 30 days based on the National Best Bid (``NBB'') and 
National Best Offer (``NBO'') at the time of calculation of such NAV 
(the ``Bid/Ask Price'').\18\ In addition, the Fund will provide any 
other information on its website regarding premiums/discounts that ETFs 
registered under the 1940 Act are required to provide or that are 
otherwise required under the Exemptive Order. The website and 
information will be publicly available at no charge.
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    \18\ The Bid/Ask Price of the Fund will be determined using the 
mid-point between the current NBB and NBO as of the time of 
calculation of the Fund's NAV. The records relating to Bid/Ask 
Prices will be retained by the Fund and/or its service providers.
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    The Trust's SAI and the Fund's shareholder reports will be 
available free upon request from the Trust. These documents and forms 
may be viewed on-screen or downloaded from the Commission's website at 
www.sec.gov.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Quotation 
and last sale information for the Shares will be available via the 
Consolidated Tape Association (``CTA'') high-speed line. In addition, 
the VIIV, as defined in Rule 14.11(k)(3)(B) and as described further 
below, will be widely disseminated by the Reporting Authority \19\ and/
or one or more major market data vendors in one-second intervals during 
Regular Trading Hours.
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    \19\ Rule 14.11(k)(3)(H) defines the term ``Reporting 
Authority'' in respect of a particular series of Managed Portfolio 
Shares as the Exchange, the exchange that lists a particular series 
of Managed Portfolio Shares (if the Exchange is trading such series 
pursuant to unlisted trading privileges), an institution, or a 
reporting service designated by the Investment Company as the 
official source for calculating and reporting information relating 
to such series, including, the net asset value, the Verified 
Intraday Indicative Value, or other information relating to the 
issuance, redemption or trading of Managed Portfolio Shares. A 
series of Managed Portfolio Shares may have more than one Reporting 
Authority, each having different functions.
---------------------------------------------------------------------------

Dissemination of the VIIV
    With respect to trading of the Shares, the ability of market 
participants to buy and sell Shares at prices near the VIIV is 
dependent upon their assessment that the VIIV is a reliable, indicative 
real-time value for the Fund's underlying holdings. Market participants 
are expected to accept the VIIV as a reliable, indicative real-time 
value because (1) the VIIV will be calculated and disseminated based on 
the Fund's actual portfolio holdings, (2) the securities in which the 
Fund plans to invest are generally highly liquid and actively traded 
and trade at the same time as the Fund and therefore generally have 
accurate real time pricing available, and (3) market participants will 
have a daily opportunity to evaluate whether the VIIV at or near the 
close of trading is indeed predictive of the actual NAV. The VIIV for 
the Fund will be disseminated by the Reporting Authority and/or one or 
more major market data vendors in one-second intervals during Regular 
Trading Hours. For purposes of the VIIV, securities held by the Fund 
will be valued throughout the day based on the mid-point between the 
disseminated current NBB and NBO. If the Adviser determines that a 
portfolio security does not have a readily available market quotation, 
that fact along with the identity and weighting of that security in the 
Fund's VIIV calculation will be publicly disclosed on the Fund's 
website.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. The Exchange will halt trading in 
the Shares under the conditions specified in BZX Rule 11.18. Trading 
may be halted because of market conditions or for reasons that, in the 
view of the Exchange, make trading in the Shares inadvisable, including 
whether unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. Trading in the 
Shares also will be subject to Rule 14.11(k)(4)(B)(iii)(a) and (b), 
which set forth circumstances under which trading in the Shares of the 
Fund will be halted.
    Specifically, Rule 14.11(k)(4)(B)(iii)(a) provides that the 
Exchange may consider all relevant factors in exercising its discretion 
to halt trading in a series of Managed Portfolio Shares. Trading may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the series of Managed Portfolio Shares 
inadvisable. These may include: (i) The extent to which trading is not 
occurring in the securities and/or the financial instruments composing 
the portfolio; or (ii) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present.\20\ The Adviser has represented to the Exchange 
that it will

[[Page 19976]]

provide the Exchange with prompt notification upon the existence of any 
such condition or set of conditions.
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    \20\ The Exemptive Application provides that the Investment 
Company or their agent will request that the Exchange halt trading 
in the applicable series of Managed Portfolio Shares where: (i) The 
intraday indicative values calculated by the calculation engines 
differ by more than 25 basis points for 60 seconds in connection 
with pricing of the Verified Intraday Indicative Value; or (ii) 
holdings representing 10% or more of a series of Managed Portfolio 
Shares' portfolio have become subject to a trading halt or otherwise 
do not have readily available market quotations. Any such requests 
will be one of many factors considered in order to determine whether 
to halt trading in a series of Managed Portfolio Shares and the 
Exchange retains sole discretion in determining whether trading 
should be halted. As provided in the Exemptive Application, each 
series of Managed Portfolio Shares would employ a pricing 
verification agent to continuously compare two intraday indicative 
values during Regular Trading Hours in order to ensure the accuracy 
of the Verified Intraday Indicative Value.
---------------------------------------------------------------------------

    Rule 14.11(k)(4)(B)(iii)(b) provides that, if the Exchange becomes 
aware that: (i) The VIIV of a series of Managed Portfolio Shares is not 
being calculated or disseminated in one second intervals, as required; 
(ii) the NAV with respect to a series of Managed Portfolio Shares is 
not disseminated to all market participants at the same time; (iii) the 
holdings of a series of Managed Portfolio Shares are not made available 
on at least a quarterly basis as required under the 1940 Act; or (iv) 
such holdings are not made available to all market participants at the 
same time, (except as otherwise permitted under the currently 
applicable exemptive order or no-action relief granted by the 
Commission or Commission staff to the Investment Company with respect 
to the series of Managed Portfolio Shares), it will halt trading in 
such series until such time as the VIIV, the NAV, or the holdings are 
available, as required.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the Exchange only during Regular Trading Hours as provided in Rule 
14.11(k)(2)(B). The Exchange has appropriate rules in place to 
facilitate trading during all trading sessions in which the Shares will 
trade. As provided in BZX Rule 11.11(a), the minimum price variation 
for quoting and entry of orders in securities traded on the Exchange is 
$0.01, with the exception of securities that are priced less than 
$1.00, for which the minimum price variation for order entry is 
$0.0001.
    The Shares will conform to the initial and continued listing 
criteria under Rule 14.11(k) as well as all terms in the Exemptive 
Order. The Exchange represents that, for initial and/or continued 
listing, the Fund will be in compliance with Rule 10A-3 under the 
Act.\21\ A minimum of 100,000 Shares of the Fund will be outstanding at 
the commencement of trading on the Exchange. The Exchange has obtained 
a representation from the issuer of the Shares of the Fund that the NAV 
per share of the Fund will be calculated daily and will be made 
available to all market participants at the same time.
---------------------------------------------------------------------------

    \21\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the Shares on the Exchange during 
all trading sessions and to deter and detect violations of Exchange 
rules and the applicable federal securities laws. Trading of the Shares 
through the Exchange will be subject to the Exchange's surveillance 
procedures for derivative products, including Managed Portfolio Shares. 
As part of these surveillance procedures and consistent with Rule 
14.11(k)(2)(C), the Adviser will upon request make available to the 
Exchange and/or FINRA, on behalf of the Exchange, the daily portfolio 
holdings of the Fund. The issuer has represented to the Exchange that 
it will advise the Exchange of any failure by the Fund to comply with 
the continued listing requirements, and, pursuant to its obligations 
under Section 19(g)(1) of the Exchange Act, the Exchange will surveil 
for compliance with the continued listing requirements. If the Fund is 
not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under Exchange Rule 14.12.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and the 
underlying exchange-traded instruments with other markets and other 
entities that are members of the Intermarket Surveillance Group 
(``ISG''), and the Exchange or FINRA, on behalf of the Exchange, or 
both, may obtain trading information regarding trading such securities 
from such markets and other entities. In addition, the Exchange may 
obtain information regarding trading in the Shares and the underlying 
exchange-traded instruments from markets and other entities that are 
members of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.\22\
---------------------------------------------------------------------------

    \22\ For a list of the current members of ISG, see 
www.isgportal.org.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular (``Circular'') of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Circular will discuss the following: (1) The 
procedures for purchases and redemptions of Shares; (2) BZX Rule 3.7, 
which imposes suitability obligations on Exchange members with respect 
to recommending transactions in the Shares to customers; (3) how 
information regarding the VIIV is disseminated; (4) the requirement 
that members deliver a prospectus to investors purchasing newly issued 
Shares prior to or concurrently with the confirmation of a transaction; 
(5) trading information; and (6) that the portfolio holdings will be 
disclosed within at least 60 days following the end of every fiscal 
quarter.
    In addition, the Circular will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Circular will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Circular will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m., E.T. each trading day.
2. Statutory Basis
    The Exchange believes that this proposal is consistent with Section 
6(b) of the Act \23\ in general and Section 6(b)(5) of the Act \24\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f.
    \24\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that this proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the Fund 
would meet each of the rules relating to listing and trading of Managed 
Portfolio Shares and, to the extent that the Fund is not in compliance 
with such rules, the Exchange would either prevent the Fund from 
listing and trading if it hadn't started trading on the Exchange or 
would commence delisting procedures under Exchange Rule 14.12. More 
specifically, the Exchange will consider the suspension of trading in, 
and will commence delisting proceedings under Rule 14.12 for, the Fund 
under any of the following circumstances: (a) If, following the initial 
twelve-month period after commencement of trading on the Exchange, 
there are fewer than 50 beneficial holders of the Fund for 30 or more 
consecutive trading days; (b) if the Exchange has halted trading in the 
Fund because the VIIV is interrupted pursuant to Rule 
14.11(k)(4)(B)(iii)(b) and such

[[Page 19977]]

interruption persists past the trading day in which it occurred or is 
no longer available; (c) if the Exchange has halted trading in the Fund 
because the NAV with respect to such Fund is not disseminated to all 
market participants at the same time, the holdings of such Fund are not 
made available on at least a quarterly basis as required under the 1940 
Act, or such holdings are not made available to all market participants 
at the same time pursuant to Rule 14.11(k)(4)(B)(iii)(b) and such issue 
persists past the trading day in which it occurred; (d) if the Exchange 
has halted trading in the Fund pursuant to Rule 14.11(k)(4)(B)(iii)(a) 
and such issue persists past the trading day in which it occurred; (e) 
if the Fund has failed to file any filings required by the Commission 
or if the Exchange is aware that the Fund is not in compliance with the 
conditions of any currently applicable exemptive order or no-action 
relief granted by the Commission or Commission staff with respect to 
the Fund; (f) if any of the continued listing requirements set forth in 
Rule 14.11(k) are not continuously maintained; (g) if any of the 
applicable Continued Listing Representations, as defined in Rule 
14.11(a), for the Fund are not continuously met; or (h) if such other 
event shall occur or condition exists which, in the opinion of the 
Exchange, makes further dealings on the Exchange inadvisable.
    The Adviser is not registered as a broker-dealer, but is affiliated 
with multiple broker-dealers and has implemented and will maintain a 
``fire wall'' with respect to such affiliate broker-dealer regarding 
access to information concerning the composition and/or changes to the 
Fund's portfolio and Creation Basket. In the event (a) the Adviser 
becomes registered as a broker-dealer or becomes newly affiliated with 
a broker-dealer, or (b) any new adviser or sub-adviser is a registered 
broker-dealer or becomes affiliated with a broker-dealer, it will 
implement and maintain a fire wall with respect to its relevant 
personnel or its broker-dealer affiliate regarding access to 
information concerning the composition and/or changes to the portfolio 
and/or Creation Basket. Any person related to the Adviser or the Trust 
who makes decisions pertaining to the Fund's portfolio composition or 
that has access to information regarding the Fund's portfolio or 
changes thereto or the Creation Basket will be subject to procedures 
designed to prevent the use and dissemination of material non-public 
information regarding such portfolio or changes thereto and the 
Creation Basket.
    Further, Rule 14.11(k)(2)(E) requires that any person or entity, 
including an AP Representative, custodian, Reporting Authority, 
distributor, or administrator, who has access to information regarding 
the Investment Company's portfolio composition or changes thereto or 
the Creation Basket, must be subject to procedures designed to prevent 
the use and dissemination of material nonpublic information regarding 
the applicable Investment Company portfolio or changes thereto or the 
Creation Basket. Moreover, if any such person or entity is registered 
as a broker-dealer or affiliated with a broker-dealer, such person or 
entity will erect and maintain a ``fire wall'' between the person or 
entity and the broker-dealer with respect to access to information 
concerning the composition and/or changes to such Investment Company 
portfolio or Creation Basket. Any person or entity who has access to 
information regarding the Fund's portfolio composition or changes 
thereto or the Creation Basket will be subject to procedures designed 
to prevent the use and dissemination of material nonpublic information 
regarding the portfolio or changes thereto or the Creation Basket.
    The Exchange further believes that Rule 14.11(k) is designed to 
prevent fraudulent and manipulative acts and practices related to the 
listing and trading of Managed Portfolio Shares because it provides 
meaningful requirements about both the data that will be made publicly 
available about the Shares as well as the information that will only be 
available to certain parties and the controls on such information. 
Specifically, the Exchange believes that the requirements related to 
information protection enumerated under Rule 14.11(k)(2)(E) will act as 
a strong safeguard against misuse and improper dissemination of 
information related to the Fund's portfolio composition or changes 
thereto or the Creation Basket. The requirement that any person or 
entity implement procedures to prevent the use and dissemination of 
material nonpublic information regarding the portfolio or Creation 
Basket will act to prevent any individual or entity from sharing such 
information externally and the internal ``fire wall'' requirements 
applicable where an entity is a registered broker-dealer or affiliated 
with a broker-dealer will act to make sure that no entity will be able 
to misuse the data for their own purposes. As such, the Exchange 
believes that this proposal is designed to prevent fraudulent and 
manipulative acts and practices.
    The Exchange further believes that the proposal is designed to 
prevent fraudulent and manipulative acts and practices related to the 
listing and trading of Managed Portfolio Shares and to promote just and 
equitable principles of trade and to protect investors and the public 
interest in that the Exchange would halt trading under certain 
circumstances under which trading in the Shares may be inadvisable. 
Specifically, trading in the Shares will be subject to Rule 
14.11(k)(4)(B)(iii)(a), which provides that the Exchange may consider 
all relevant factors in exercising its discretion to halt trading in a 
series of Managed Portfolio Shares. Trading may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the series of Managed Portfolio Shares inadvisable. 
These may include: (i) The extent to which trading is not occurring in 
the securities and/or the financial instruments composing the 
portfolio; or (ii) whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present.\25\ The Adviser has represented to the Exchange that it will 
provide the Exchange with prompt notification upon the existence of any 
such condition or set of conditions. Trading in the Shares will also be 
subject to Rule 14.11(k)(4)(B)(iii)(b), which provides that if the 
Exchange becomes aware that: (i) The VIIV of a series of Managed 
Portfolio Shares is not being calculated or disseminated in one second 
intervals, as required; (ii) the NAV with respect to a series of 
Managed Portfolio Shares is not disseminated to all market participants 
at the same time; (iii) the holdings of a series of Managed Portfolio 
Shares are not made available on at least a quarterly basis as required 
under the 1940 Act; or (iv) such holdings are not made available to all 
market participants at the same time, (except as otherwise permitted 
under the currently applicable exemptive order or no-action relief 
granted by the Commission or Commission staff to the Investment Company 
with respect to the series of Managed Portfolio Shares), it will halt 
trading in such series until such time as the VIIV, the NAV, or the 
holdings are available, as required.
---------------------------------------------------------------------------

    \25\ See supra note 20.
---------------------------------------------------------------------------

    With respect to the proposed listing and trading of Shares of the 
Fund, the Exchange believes that the proposed rule change is designed 
to prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange

[[Page 19978]]

pursuant to the initial and continued listing criteria in Rule 
14.11(k). The Fund's holdings will conform to the permissible 
investments as set forth in the Exemptive Application and Exemptive 
Order. The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and the 
underlying exchange-traded instruments 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 instruments from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares and the underlying exchange-traded instruments 
from markets and other entities that are members of ISG or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement.
    With respect to trading of the Shares, the ability of market 
participants to buy and sell Shares at prices near the VIIV is 
dependent upon their assessment that the VIIV is a reliable, indicative 
real-time value for the Fund's underlying holdings. Market participants 
are expected to accept the VIIV as a reliable, indicative real-time 
value because (1) the VIIV will be calculated and disseminated based on 
the Fund's actual portfolio holdings, (2) the securities in which the 
Fund plans to invest are generally highly liquid and actively traded 
and trade at the same time as the Fund and therefore generally have 
accurate real time pricing available, and (3) market participants will 
have a daily opportunity to evaluate whether the VIIV at or near the 
close of trading is indeed predictive of the actual NAV.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation that the NAV per share 
of the Fund will be calculated daily and that the NAV will be made 
available to all market participants at the same time. Investors can 
also obtain the Fund's SAI, shareholder reports, Form N-CSR, and Form 
N-PORT. The Fund's SAI and shareholder reports will be available free 
upon request from the applicable fund, and those documents and the Form 
N-CSR and Form N-PORT may be viewed on-screen or downloaded from the 
Commission's website. In addition, with respect to the Fund, a large 
amount of information will be publicly available regarding the Fund and 
the Shares, thereby promoting market transparency. Quotation and last 
sale information for the Shares will be available via the CTA high-
speed line. Information regarding the VIIV will be widely disseminated 
every second throughout Regular Trading Hours by the Reporting 
Authority and/or one or more major market data vendors. The website for 
the Fund will include a prospectus for the Fund that may be downloaded, 
and additional data relating to NAV and other applicable quantitative 
information, updated on a daily basis.
    Moreover, prior to the commencement of trading, the Exchange will 
inform its members in a Circular of the special characteristics and 
risks associated with trading the Shares. The Exchange will halt 
trading in the Shares under the conditions specified in BZX Rule 11.18 
or for reasons that, in the view of the Exchange, make trading in the 
Shares inadvisable. Trading in the Shares will be subject to Rule 
14.11(k)(4)(B)(iii)(a) and (b), which set forth circumstances under 
which Shares of the Fund will be halted.
    In addition, as noted above, investors will have ready access to 
the VIIV, and quotation and last sale information for the Shares. The 
Shares will conform to the initial and continued listing criteria under 
Rule 14.11(k). The Fund's holdings will be limited to and consistent 
with what is permissible under the Exemptive Order. The Fund's 
investments will be consistent with its investment objective and will 
not be used to enhance leverage.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an actively-managed exchange-traded product that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. In addition, as noted above, investors will have ready 
access to information regarding the VIIV and quotation and last sale 
information for the Shares.
    For the above reasons, the Exchange believes that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act.

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

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

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

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

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeBZX-2020-029 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CboeBZX-2020-029. 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

[[Page 19979]]

amendments, all written statements with respect to the proposed rule 
change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for website viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE, Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change. Persons submitting comments are cautioned that we do 
not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
CboeBZX-2020-029, and should be submitted on or before April 30, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07444 Filed 4-8-20; 8:45 am]
 BILLING CODE 8011-01-P

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