Justia Agencies And Commissions Securities And Exchange Commission Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 6 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 6, To Adopt NYSE Arca Rule 8.601-E To Permit the Listing and Trading of Active Proxy Portfolio Shares and To List and Trade Shares of the Natixis U.S. Equity Opportunities ETF Under Proposed NYSE Arca Rule 8.601-E, 40328-40342 [2020-14388]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 6 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 6, To Adopt NYSE Arca Rule 8.601-E To Permit the Listing and Trading of Active Proxy Portfolio Shares and To List and Trade Shares of the Natixis U.S. Equity Opportunities ETF Under Proposed NYSE Arca Rule 8.601-E, 40328-40342 [2020-14388]

Download as PDF 40328 Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices Acceptance Date: June 26, 2020; Filing Authority: 39 U.S.C. 3642, 39 CFR 3040.130 through 3040.135, and 39 CFR 3035.105; Public Representative: Kenneth R. Moeller; Comments Due: July 7, 2020. This Notice will be published in the Federal Register. Erica A. Barker, Secretary. [FR Doc. 2020–14340 Filed 7–2–20; 8:45 am] BILLING CODE 7710–FW–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–89185; File No. SR– NYSEArca-2019–95] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 6 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 6, To Adopt NYSE Arca Rule 8.601–E To Permit the Listing and Trading of Active Proxy Portfolio Shares and To List and Trade Shares of the Natixis U.S. Equity Opportunities ETF Under Proposed NYSE Arca Rule 8.601–E June 29, 2020. khammond on DSKJM1Z7X2PROD with NOTICES I. Introduction On December 23, 2019, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to (1) adopt NYSE Arca Rule 8.601–E to permit the Exchange to list and trade Active Proxy Portfolio Shares, which are shares of actively managed exchangetraded funds for which the portfolio is disclosed in accordance with standard mutual fund disclosure rules; and (2) list and trade shares (‘‘Shares’’) of the Natixis U.S. Equity Opportunities ETF (‘‘Fund’’) under NYSE Arca Rule 8.601– E. The proposed rule change was published for comment in the Federal Register on January 3, 2020.3 On February 13, 2020, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 87866 (December 30, 2019), 85 FR 357. 4 15 U.S.C. 78s(b)(2). 2 17 VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 determine whether to disapprove the proposed rule change.5 On March 31, 2020, the Exchange filed Amendment No. 2 to the proposed rule change, which replaced and superseded the proposed rule change as originally filed.6 On April 1, 2020, the Commission published Amendment No. 2 for notice and comment and instituted proceedings under Section 19(b)(2)(B) of the Act 7 to determine whether to approve or disapprove the proposed rule change.8 On May 19, 2020, the Exchange filed Amendment No. 3 to the proposed rule change, which replaced and superseded the proposed rule change, as amended by Amendment No. 2.9 On May 27, 2020, the Exchange filed Amendment No. 4 to the proposed rule change, which replaced and superseded the proposed rule change, as amended by Amendment No. 3.10 On June 11, 2020, the Exchange filed Amendment No. 5 to the proposed rule change, which replaced and superseded the proposed rule change, as amended by Amendment No. 4.11 On June 19, 2020, the Exchange filed Amendment No. 6 to the proposed rule change, which replaced and superseded the proposed rule change, as amended by Amendment No. 5.12 The Commission has received no comments on the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 6, from interested persons and is approving the proposed rule change, as modified by Amendment No. 6, on an accelerated basis. 5 See Securities Exchange Act Release No. 88199, 85 FR 9888 (February 20, 2020). The Commission designated April 2, 2020, as the date by which the Commission shall approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. 6 Amendment No. 1 to the proposed rule change was filed on March 26, 2020, and subsequently withdrawn on March 31, 2020. Amendment No. 2 is available on the Commission’s website at https:// www.sec.gov/comments/sr-nysearca-2019-95/ srnysearca201995-7015545-214987.pdf. 7 15 U.S.C. 78s(b)(2)(B). 8 See Securities Exchange Act Release No. 88533, 85 FR 19526 (April 7, 2020). 9 Amendment No. 3 is available on the Commission’s website https://www.sec.gov/ comments/sr-nysearca-2019-95/srnysearca2019957214369-216889.pdf. 10 Amendment No. 4 is available on the Commission’s website at https://www.sec.gov/ comments/sr-nysearca-2019-95/srnysearca2019957245193-217209.pdf. 11 Amendment No. 5 is available on the Commission’s website at https://www.sec.gov/ comments/sr-nysearca-2019-95/srnysearca2019957306918-218149.pdf. 12 Amendment No. 6 is available on the Commission’s website at https://www.sec.gov/ comments/sr-nysearca-2019-95/srnysearca2019957329866-218548.pdf. PO 00000 Frm 00145 Fmt 4703 Sfmt 4703 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change, as Modified by Amendment No. 6 In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to add new NYSE Arca Rule 8.601–E for the purpose of permitting the listing and trading, or trading pursuant to unlisted trading privileges (‘‘UTP’’), of Active Proxy Portfolio Shares, which are securities issued by an actively managed open-end investment management company. The Exchange also proposes to list and trade shares (‘‘Shares’’) of the following under proposed NYSE Arca Rule 8.601–E: Natixis U.S. Equity Opportunities ETF (the ‘‘Fund’’).13 Proposed Listing Rules Proposed Rule 8.601–E (a) provides that the Exchange will consider for trading, whether by listing or pursuant to UTP, Active Proxy Portfolio Shares that meet the criteria of Rule 8.601–E. Proposed Rule 8.601–E (b) provides that Rule 8.601–E is applicable only to Active Proxy Portfolio Shares and that, except to the extent inconsistent with Rule 8.601–E, or unless the context otherwise requires, the rules and procedures of the Exchange’s Board of Directors shall be applicable to the trading on the Exchange of such securities. Proposed Rule 8.601–E (b) provides further that Active Proxy Portfolio Shares are included within the definition of ‘‘security’’ or ‘‘securities’’ as such terms are used in the Rules of the Exchange. Proposed Rule 8.601–E(c)(1) defines the ‘‘Active Proxy Portfolio Share’’ as a security that (a) is issued by an investment company registered under the Investment Company Act of 1940 (‘‘Investment Company’’) organized as 13 The Natixis U.S. Equity Opportunities ETF was referred to as the Natixis ETF in SR–NYSEArca– 2019–95 as originally filed and in Amendment 2 thereto. E:\FR\FM\06JYN1.SGM 06JYN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices 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 specified minimum number of shares, or multiples thereof, in return for a deposit by the purchaser of the Proxy Portfolio and/or cash with a value equal to the next determined net asset value (‘‘NAV’’); (c) when aggregated in the same specified minimum number of Active Proxy Portfolio Shares, or multiples thereof, may be redeemed at a holder’s request in return for the Proxy Portfolio and/or cash to the holder by the issuer with a value equal to the next determined NAV; and (d) the portfolio holdings for which are disclosed within at least 60 days following the end of every fiscal quarter. Proposed Rule 8.601–E(c)(2) defines the term ‘‘Actual Portfolio’’ as the identities and quantities of the securities and other assets held by the Investment Company that shall form the basis for the Investment Company’s calculation of NAV at the end of the business day. Proposed Rule 8.601–E(c)(3) defines the term ‘‘Proxy Portfolio’’ as a specified portfolio of securities, other financial instruments and/or cash designed to track closely the daily performance of the Actual Portfolio of a series of Active Proxy Portfolio Shares as provided in the exemptive relief pursuant to the Investment Company Act of 1940 applicable to such series. The website for each series of Active Proxy Portfolio Shares shall disclose the information regarding the Proxy Portfolio as provided in the exemptive relief pursuant to the Investment Company Act of 1940 applicable to such series, including the following, to the extent applicable: (i) Ticker symbol; (ii) CUSIP or other identifier; (iii) Description of holding; (iv) Quantity of each security or other asset held; and (v) Percentage weighting of the holding in the portfolio.14 Proposed Rule 8.601–E(c)(4) defines the term ‘‘Reporting Authority’’ in respect of a particular series of Active Proxy Portfolio Shares as the Exchange, an institution, or a reporting service designated by the Exchange or by the exchange that lists a particular series of Active Proxy Portfolio Shares (if the Exchange is trading such series pursuant to unlisted trading privileges) as the official source for calculating and reporting information relating to such series, including, but not limited to, NAV, the Actual Portfolio, Proxy Portfolio, or other information relating to the issuance, redemption or trading of Active Proxy Portfolio Shares. A series of Active Proxy Portfolio Shares may have more than one Reporting Authority, each having different functions. Proposed Rule 8.601–E(c)(5) defines the term ‘‘normal market conditions’’ as including, but not limited to, the absence of trading halts in the applicable financial markets generally; operational issues (e.g., systems failure) causing dissemination of inaccurate market information; or force majeure type events such as natural or manmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. Proposed Rule 8.601–E (d) sets forth initial and continued listing criteria applicable to Active Proxy Portfolio Shares. Proposed Rule 8.601–E(d)(1) provides that each series of Active Proxy Portfolio Shares shall be listed and traded on the Exchange subject to application of the following initial listing criteria: (A) For each series, the Exchange shall establish a minimum number of Active Proxy Portfolio Shares required to be outstanding at the time of commencement of trading on the Exchange. (B) The Exchange shall obtain a representation from the issuer of each series of Active Proxy Portfolio Shares that the NAV per share for the series shall be calculated daily and that the NAV, the Proxy Portfolio, and the Actual Portfolio shall be made publicly available to all market participants at the same time. 14 The information required in proposed Rule 8.601–E(c)(3) for the Proxy Portfolio is the same as that required in SEC Rule 6c–11(c)(1)(i)(A) through (E) under the 1940 Act for exchange-traded funds operating in compliance with Rule 6c-11. See Release Nos. 33–10695; IC–33646; File No. S7–15– 18 (Exchange-Traded Funds) (September 25, 2019), 84 FR 57162 (October 24, 2019) (the ‘‘Rule 6c–11 Release’’). The Exchange believes it is appropriate to require such information, rather than all information required under Rule 8.600–E(c)(2). In adopting this requirement for funds operating in compliance with Rule 6c–11, the Commission stated that ‘‘a more streamlined requirement will provide standardized portfolio holdings disclosure in a more efficient, less costly, and less burdensome format, while still providing market participants with relevant information. Accordingly, rule 6c–11 will require an ETF to post a subset of the information required by the listing exchanges’ current generic listing standards for actively managed ETFs.’’ The Commission stated further that ‘‘this framework will provide market participants with the information necessary to support an effective arbitrage mechanism and eliminate potential investor confusion due to a lack of standardization.’’ See Rule 6c–11 Release, notes 249–260 and accompanying text. VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 PO 00000 Frm 00146 Fmt 4703 Sfmt 4703 40329 (C) All Active Proxy Portfolio Shares shall have a stated investment objective, which shall be adhered to under normal market conditions. Proposed Rule 8.601–E(d)(2) provides that each series of Active Proxy Portfolio Shares shall be listed and traded subject to application of the following continued listing criteria: the Actual Portfolio shall be publicly disseminated within at least 60 days following the end of every fiscal quarter and shall be made publicly available to all market participants at the same time (proposed Rule 8.601–E(d)(2)(A)(i)), and the Proxy Portfolio will be made publicly available on the website for each series of Active Proxy Portfolio Shares at least once daily and will be made available to all market participants at the same time (proposed Rule 8.601–E(d)(2)(B)(i)). Proposed Rule 8.601–E(d)(2)(C) provides that the Exchange will consider the suspension of trading in, and will commence delisting proceedings under Rule 5.5–E(m) for, a series of Active Proxy Portfolio Shares under any of the following circumstances: (i) if any of the continued listing requirements set forth in Rule 8.601–E are not continuously maintained; (ii) if either the Proxy Portfolio or Actual Portfolio is not made available to all market participants at the same time; (iii) if, following the initial twelve month period after commencement of trading on the Exchange of a series of Active Proxy Portfolio Shares, there are fewer than 50 beneficial holders of such series of Active Proxy Portfolio Shares; (iv) if the Exchange is notified, or otherwise becomes aware, that the Investment Company has failed to file any filings required by the Commission or is not in compliance with the conditions of any currently applicable exemptive order or no-action relief granted by the Commission or Commission staff to the Investment Company with respect to a series of Active Proxy Portfolio Shares; (v) if any of the statements or representations regarding (a) the description of the portfolio, (b) limitations on portfolio holdings, or (c) the applicability of Exchange listing rules, specified in the Exchange’s rule filing pursuant to Section 19(b) of the Act to permit the listing and trading of a series of Active Proxy Portfolio Shares, is not continuously maintained; or (vi) if such other event shall occur or condition exists which, in the opinion of the Exchange, makes further dealings on the Exchange inadvisable. Proposed Rule 8.601–E(d)(2)(D) (Trading Halt) provides that (i) The E:\FR\FM\06JYN1.SGM 06JYN1 khammond on DSKJM1Z7X2PROD with NOTICES 40330 Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices Exchange may consider all relevant factors in exercising its discretion to halt trading in a series of Active Proxy 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 Active Proxy Portfolio Shares inadvisable. These may include: (a) The extent to which trading is not occurring in the securities and/or the financial instruments composing the Proxy Portfolio and/or Actual Portfolio; or (b) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present; (ii) If a series of Active Proxy Portfolio Shares is trading on the Exchange pursuant to unlisted trading privileges, the Exchange shall halt trading in that series as specified in Rule 7.18–E(d)(1); and (iii) If the Exchange becomes aware that the NAV, Proxy Portfolio or Actual Portfolio with respect to a series of Active Proxy Portfolio Shares is not made available to all market participants at the same time, the Exchange shall halt trading in such series until such time as the NAV, Proxy Portfolio or Actual Portfolio is available to all market participants at the same time, as applicable. Proposed Rule 8.601–E(d)(2)(E) provides that, upon termination of an Investment Company, the Exchange requires that Active Proxy Portfolio Shares issued in connection with such entity be removed from Exchange listing. Proposed Rule 8.601–E(d)(2)(F) provides that voting rights shall be as set forth in the applicable Investment Company prospectus. Proposed Rule 8.601–E(e) (Limitation of Exchange Liability) provides that neither the Exchange, the Reporting Authority, when the Exchange is acting in the capacity of a Reporting Authority, nor any agent of the Exchange shall have any liability for damages, claims, losses or expenses caused by any errors, omissions, or delays in calculating or disseminating any current portfolio value; the current value of the portfolio of securities required to be deposited to the Investment Company in connection with issuance of Active Proxy Portfolio Shares; the amount of any dividend equivalent payment or cash distribution to holders of Active Proxy Portfolio Shares; NAV; or other information relating to the purchase, redemption, or trading of Active Proxy Portfolio Shares, resulting from any negligent act or omission by the Exchange, the Reporting Authority, when the Exchange is acting in the capacity of a Reporting Authority, or any agent of the Exchange, or any act, condition, or VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 cause beyond the reasonable control of the Exchange, its agent, or the Reporting Authority, when the Exchange is acting in the capacity of a Reporting Authority, including, but not limited to, an act of God; fire; flood; extraordinary weather conditions; war; insurrection; riot; strike; accident; action of government; communications or power failure; equipment or software malfunction; or any error, omission, or delay in the reports of transactions in one or more underlying securities. Proposed Commentary .01 to Rule 8.601–E provides that the Exchange will file separate proposals under Section 19(b) of the Act before the listing and trading of a series of Active Proxy Portfolio Shares. All statements or representations contained in such rule filing regarding (a) the description of the portfolio, (b) limitations on portfolio holdings, or (c) the applicability of Exchange listing rules specified in such rule filing will constitute continued listing requirements. An issuer of such securities must notify the Exchange of any failure to comply with such continued listing requirements. Proposed Commentary .02 provides that transactions in Active Proxy Portfolio Shares shall occur during the trading hours specified in NYSE Arca Rule 7.34–E(a). Proposed Commentary .03 provides that the Exchange will implement and maintain written surveillance procedures for Active Proxy Portfolio Shares. As part of these surveillance procedures, the Investment Company’s investment adviser will upon request by the Exchange or FINRA, on behalf of the Exchange, make available to the Exchange or FINRA the daily Actual Portfolio holdings of each series of Active Proxy Portfolio Shares. Proposed Commentary.04 provides that, if the investment adviser to the Investment Company issuing Active Proxy 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 and/or changes to such Investment Company’s Actual Portfolio and/or Proxy Portfolio. Any person related to the investment adviser or Investment Company who makes decisions pertaining to the Investment Company’s Actual Portfolio and/or Proxy Portfolio or has access to non-public information regarding the Investment Company’s Actual Portfolio and/or the Proxy Portfolio or changes thereto must be subject to procedures PO 00000 Frm 00147 Fmt 4703 Sfmt 4703 reasonably designed to prevent the use and dissemination of material nonpublic information regarding the Actual Portfolio and/or the Proxy Portfolio or changes thereto.15 Proposed Commentary .05 provides that any person or entity, including a custodian, Reporting Authority, distributor, or administrator, who has access to non-public information regarding the Investment Company’s Actual Portfolio or the Proxy Portfolio or changes thereto, must be subject to procedures reasonably designed to prevent the use and dissemination of material non-public information regarding the applicable Investment Company Actual Portfolio or the Proxy Portfolio or changes thereto. 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 Actual Portfolio or Proxy Portfolio. The Exchange also proposes nonsubstantive amendments to include Active Proxy Portfolio Shares in other Exchange rules. Specifically, the Exchange proposes to amend current Rule 5.3–E to include Active Proxy Portfolio Shares listed pursuant to proposed Rule 8.601–E among the derivative or special purpose securities that are subject to a limited set of corporate governance and disclosure policies. Similarly, the Exchange proposes to amend Rule 5.3–E(e) to include Active Proxy Portfolio Shares listed pursuant to proposed Rule 8.601– E among the derivative or special purpose securities to which the requirements concerning shareholder/ annual meetings do not apply. Key Features of Active Proxy Portfolio Shares While funds issuing Active Proxy Portfolio Shares will be activelymanaged and, to that extent, will be similar to Managed Fund Shares, Active Proxy Portfolio Shares differ from Managed Fund Shares in the following important respects. First, in contrast to Managed Fund Shares, which are actively-managed funds listed and traded under NYSE Arca Rule 8.600– E 16 and for which a ‘‘Disclosed 15 The Exchange will propose applicable NYSE Arca listing fees for Active Proxy Portfolio Shares in the NYSE Arca Equities Schedule of Fees and Charges via a separate proposed rule change. 16 The Commission has previously approved listing and trading on the Exchange of a number of issues of Managed Fund Shares under NYSE Arca E:\FR\FM\06JYN1.SGM 06JYN1 Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES Portfolio’’ is required to be disseminated at least once daily,17 the portfolio for an issue of Active Proxy Portfolio Shares will be publicly disclosed within at least 60 days following the end of every fiscal quarter in accordance with normal disclosure requirements otherwise applicable to open-end management investment companies registered under the 1940 Act.18 The composition of the portfolio of an issue of Active Proxy Portfolio Shares would not be available at commencement of Exchange listing and trading. Second, in connection with the creation and redemption of Active Proxy Portfolio Shares, such creation or redemption may be exchanged for a Proxy Portfolio with a value equal to the next-determined NAV. A series of Active Proxy Portfolio Shares will disclose the Proxy Portfolio on a daily basis, which, as described above, is designed to track closely the daily performance of the Actual Portfolio of a Rule 8.600–E. See, e.g., Securities Exchange Act Release Nos. 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR–NYSEArca–2008–31) (order approving Exchange listing and trading of twelve actively-managed funds of the WisdomTree Trust); 60460 (August 7, 2009), 74 FR 41468 (August 17, 2009) (SR–NYSEArca–2009–55) (order approving listing of Dent Tactical ETF); 63076 (October 12, 2010), 75 FR 63874 (October 18, 2010) (SR– NYSEArca–2010–79) (order approving Exchange listing and trading of Cambria Global Tactical ETF); 63802 (January 31, 2011), 76 FR 6503 (February 4, 2011) (SR–NYSEArca–2010–118) (order approving Exchange listing and trading of the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic Allocation Growth Income ETF). The Commission also has approved a proposed rule change relating to generic listing standards for Managed Fund Shares. Securities Exchange Act Release No. 78397 (July 22, 2016), 81 FR 49320 (July 27, 2016 (SR–NYSEArca–2015–110) (amending NYSE Arca Equities Rule 8.600 to adopt generic listing standards for Managed Fund Shares). 17 NYSE Arca Rule 8.600–E(c)(2) defines the term ‘‘Disclosed Portfolio’’ as the identities and quantities of the securities and other assets held by the Investment Company that will form the basis for the Investment Company’s calculation of net asset value at the end of the business day. NYSE Arca Rule 8.600–E(d)(2)(B)(i) requires that the Disclosed Portfolio will be disseminated at least once daily and will be made available to all market participants at the same time. 18 A mutual fund is required to file with the Commission its complete portfolio schedules for the second and fourth fiscal quarters on Form N–CSR under the 1940 Act. Information reported on Form N–PORT for the third month of a fund’s fiscal quarter will be made publicly available 60 days after the end of a fund’s fiscal quarter. Form N– PORT requires reporting of a fund’s complete portfolio holdings on a position-by-position basis on a quarterly basis within 60 days after fiscal quarter end. Investors can obtain a series of Active Proxy Portfolio Shares’ Statement of Additional Information (‘‘SAI’’), its Shareholder Reports, its Form N–CSR, filed twice a year, and its Form N– CEN, filed annually. A series of Active Proxy Portfolio Shares’ SAI and Shareholder Reports will be available free upon request from the Investment Company, and those documents and the Form N– PORT, Form N–CSR, and Form N–CEN may be viewed on-screen or downloaded from the Commission’s website at www.sec.gov. VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 series of Active Proxy Portfolio Shares, instead of the actual holdings of the Investment Company, as provided by a series of Managed Fund Shares. The Exchange, after consulting with various Lead Market Makers (‘‘LMMs’’) 19 that trade exchange-traded funds (‘‘ETFs’’) on the Exchange, believes that market makers will be able to make efficient and liquid markets priced near the ETF’s intraday value, and market makers employ market making techniques such as ‘‘statistical arbitrage,’’ including correlation hedging, beta hedging, and dispersion trading, which is currently used throughout the financial services industry, to make efficient markets in exchange-traded products.20 For Active Proxy Portfolio Shares, market makers may use the knowledge of a fund’s means of achieving its investment objective, as described in the applicable fund registration statement, as well as a fund’s disclosed Proxy Portfolio, to construct a hedging proxy for a fund to manage a market maker’s quoting risk in connection with trading fund shares. Market makers can then conduct statistical arbitrage between their hedging proxy (for example, the Russell 1000 Index) and shares of a fund, buying and selling one against the other over the course of the trading day. This ability should permit market makers to make efficient markets in an issue of Active Proxy Portfolio Shares without precise knowledge of a fund’s 19 The term ‘‘Lead Market Maker’’ is defined in Rule 1.1(w) to mean a registered Market Maker that is the exclusive Designated Market Maker in listings for which the Exchange is the primary market. 20 Statistical arbitrage enables a trader to construct an accurate proxy for another instrument, allowing it to hedge the other instrument or buy or sell the instrument when it is cheap or expensive in relation to the proxy. Statistical analysis permits traders to discover correlations based purely on trading data without regard to other fundamental drivers. These correlations are a function of differentials, over time, between one instrument or group of instruments and one or more other instruments. Once the nature of these price deviations have been quantified, a universe of securities is searched in an effort to, in the case of a hedging strategy, minimize the differential. Once a suitable hedging proxy has been identified, a trader can minimize portfolio risk by executing the hedging basket. The trader then can monitor the performance of this hedge throughout the trade period making corrections where warranted. In the case of correlation hedging, the analysis seeks to find a proxy that matches the pricing behavior of a fund. In the case of beta hedging, the analysis seeks to determine the relationship between the price movement over time of a fund and that of another stock. Dispersion trading is a hedged strategy designed to take advantage of relative value differences in implied volatilities between an index and the component stocks of that index. Such trading strategies will allow market participants to engage in arbitrage between series of Active Proxy Portfolio Shares and other instruments, both through the creation and redemption process and strictly through arbitrage without such processes. PO 00000 Frm 00148 Fmt 4703 Sfmt 4703 40331 underlying portfolio. This is similar to certain other existing exchange-traded products (for example, ETFs that invest in foreign securities that do not trade during U.S. trading hours), in which spreads may be generally wider in the early days of trading and then narrow as market makers gain more confidence in their real-time hedges. Description of the Fund and the Trust The Fund will be a series of Natixis ETF Trust II (‘‘Trust’’), which will be registered with the Commission as an open-end management investment company.21 Natixis Advisors, L.P. (‘‘Adviser’’) will be the investment adviser to the Fund. Harris Associates L.P and Loomis, Sayles & Company are sub-advisers (‘‘Sub-Advisers’’) for the Fund. ALPS Distributors, Inc. will act as the distributor and principal underwriter (‘‘Distributor’’) for the Fund. As noted above, proposed Commentary.04 provides that, if the investment adviser to the Investment Company issuing Active Proxy 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 and/or changes to such Investment Company’s Actual Portfolio and/or Proxy Portfolio. Any person related to the investment adviser or Investment Company who makes decisions pertaining to the Investment Company’s Actual Portfolio and/or Proxy Portfolio or has access to non-public information regarding the Investment Company’s Actual Portfolio and/or Proxy Portfolio or changes thereto must be subject to procedures reasonably designed to prevent the use and dissemination of 21 The Trust is registered under the 1940 Act. On April 24, 2020, the Trust filed a registration statement on Form N–1A under the Securities Act of 1933 (the ‘‘1933 Act’’) (15 U.S.C. 77a), and under the 1940 Act relating to the Fund (File Nos. 333– 235466 and 811–23500) (the ‘‘Registration Statement’’). The Trust and NYSE Group, Inc. filed a Seventh Amended and Restated Application for an Order under Section 6(c) of the 1940 Act for exemptions from various provisions of the 1940 Act and rules thereunder (File No. 812–14870), dated October 21, 2019 (‘‘Application’’). On November 14, 2019, the Commission issued a notice regarding the Application. Investment Company Release No. 33684 (File No. 812–14870). On December 10, 2019, the Commission issued an order (‘‘Exemptive Order’’) under the 1940 Act granting the exemptions requested in the Application (Investment Company Act Release No. 33711 (December 10, 2019)). The description of the operation of the Trust and the Fund herein is based, in part, on the Registration Statement and the Application. E:\FR\FM\06JYN1.SGM 06JYN1 40332 Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES material non-public information regarding the Actual Portfolio and/or Proxy Portfolio or changes thereto. Proposed Commentary .04 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca Rule 5.2–E(j)(3); however, proposed Commentary .04, in connection with the establishment of a ‘‘fire wall’’ between the investment adviser and the broker-dealer, reflects the applicable open-end fund’s portfolio, not an underlying benchmark index, as is the case with index-based funds.22 Proposed Commentary .04 is also similar to Commentary .06 to Rule 8.600–E related to Managed Fund Shares, except that proposed Commentary .04 relates to establishment and maintenance of a ‘‘fire wall’’ between the investment adviser and personnel of the broker-dealer or brokerdealer affiliate, as applicable, applicable to an Investment Company’s Actual Portfolio and/or Proxy Portfolio or changes thereto, and not just to the underlying portfolio, as is the case with Managed Fund Shares. In addition, proposed Commentary.05 provides that any person or entity, including a custodian, Reporting Authority, distributor, or administrator, who has access to non-public information regarding the Investment Company’s Actual Portfolio or the Proxy Portfolio or changes thereto, must be subject to procedures reasonably designed to prevent the use and dissemination of material non-public information regarding the applicable Investment Company Actual Portfolio or the Proxy Portfolio or changes thereto. Moreover, if any such person or entity is registered as a broker-dealer or affiliated with a broker-dealer, such 22 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 Sub-Advisers and their related personnel will be subject to the provisions of Rule 204A–1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with other applicable securities laws. Accordingly, procedures designed to prevent the communication and misuse of non-public information by an investment adviser must be consistent with Rule 204A–1 under the Advisers Act. In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful for an investment adviser to provide investment advice to clients unless such investment adviser has (i) adopted and implemented written policies and procedures reasonably designed to prevent violations, by the investment adviser and its supervised persons, of the Advisers Act and the Commission rules adopted thereunder; (ii) implemented, at a minimum, an annual review regarding the adequacy of the policies and procedures established pursuant to subparagraph (i) above and the effectiveness of their implementation; and (iii) designated an individual (who is a supervised person) responsible for administering the policies and procedures adopted under subparagraph (i) above. VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 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 Actual Portfolio or Proxy Portfolio. The Adviser is not registered as a broker-dealer but is affiliated with a broker-dealer. The Adviser has implemented and will maintain a ‘‘fire wall’’ with respect to such broker-dealer affiliate regarding access to information concerning the composition of and/or changes to the Fund’s Actual Portfolio and/or Proxy Portfolio. Harris Associates L.P. and Loomis, Sayles & Company are not registered as a brokerdealer but are affiliated with a brokerdealer. Each of the Sub-Advisers has implemented and will maintain a ‘‘fire wall’’ with respect to its respective broker-dealer affiliate regarding access to information concerning the composition of and/or changes to the Fund’s Actual Portfolio and/or Proxy Portfolio. In the event (a) the Adviser or a SubAdviser 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 Fund’s Actual Portfolio and/or Proxy Portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding the Fund’s Actual Portfolio and/or Proxy Portfolio or changes thereto. Any person related to the Adviser, each Sub-Adviser or the Fund who makes decisions pertaining to the Fund’s Actual Portfolio or the Proxy Portfolio or has access to non-public information regarding the Fund’s Actual Portfolio and/or the Proxy Portfolio or changes thereto are subject to procedures reasonably designed to prevent the use and dissemination of material non-public information regarding the Fund’s Actual Portfolio and/or the Proxy Portfolio or changes thereto. In addition, any person or entity, including any service provider for the Fund, who has access to non-public information regarding the Fund’s Actual Portfolio or the Proxy Portfolio or changes thereto, will be subject to procedures reasonably designed to prevent the use and dissemination of material non-public information regarding the Fund’s Actual Portfolio PO 00000 Frm 00149 Fmt 4703 Sfmt 4703 and/or the Proxy Portfolio or changes thereto. Moreover, if any such person or entity is registered as a broker-dealer or affiliated with a broker-dealer, such person or entity has erected and will 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 the Fund’s Actual Portfolio and/or Proxy Portfolio. Natixis U.S. Equity Opportunities ETF According to the Application, the Adviser believes the Fund would allow for efficient trading of Shares through an effective Fund portfolio transparency substitute and publication of related information metrics, while still shielding the identity of the full Fund portfolio contents to protect the Fund’s performance-seeking strategies. Even though the Fund would not publish its full portfolio contents daily, the Adviser believes that the NYSE Proxy Portfolio Methodology would allow market participants to assess the intraday value and associated risk of the Fund’s Actual Portfolio. As a result, the Adviser believes that investors would be able to purchase and sell Shares in the secondary market at prices that are close to their NAV. In this regard, the Fund will utilize a proxy portfolio methodology— the ‘‘NYSE Proxy Portfolio Methodology’’— that would allow market participants to assess the intraday value and associated risk of the Fund’s Actual Portfolio and thereby facilitate the purchase and sale of Shares by investors in the secondary market at prices that do not vary materially from their NAV.23 The NYSE Proxy Portfolio Methodology would utilize creation of a Proxy Portfolio for hedging and arbitrage purposes.24 The Fund’s holdings will conform to the permissible investments as set forth in the Application and Exemptive Order and the holdings will be consistent with all requirements in the Application and Exemptive Order.25 Any foreign 23 The NYSE Proxy Portfolio Methodology is owned by the NYSE Group, Inc. and licensed for use by the Fund. NYSE Group, Inc. is not affiliated with the Fund, Adviser or Distributor. Not all series of Active Proxy Portfolio Shares will utilize the NYSE Proxy Portfolio Methodology. 24 With respect to the Fund, the Fund will have in place policies and procedures regarding the construction and composition of its Proxy Portfolio. Such policies and procedures will be covered by the Fund’s compliance program and other requirements under Rule 38a–1 under the 1940 Act. 25 Pursuant to the Application and Exemptive Order, the permissible investments for the Fund include only the following instruments: ETFs traded on a U.S. exchange; exchange-traded notes (‘‘ETNs’’) traded on a U.S. exchange; U.S. exchangetraded common stocks; common stocks listed on a foreign exchange that trade on such exchange E:\FR\FM\06JYN1.SGM 06JYN1 Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices common stocks held by the Fund will be traded on an exchange that is a member of the Intermarket Surveillance Group (‘‘ISG’’) or with which the Exchange has in place a comprehensive surveillance sharing agreement. According to the Registration Statement, the Fund’s investment objective is to seek long-term growth of capital. The Fund, under normal market conditions,26 will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in equity securities, including exchange-traded common stocks and exchange-traded preferred stocks. Under normal market conditions, the Fund will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in securities of U.S. issuers. khammond on DSKJM1Z7X2PROD with NOTICES Creations and Redemptions of Shares According to the Registration Statement, the Trust will offer, issue and sell Shares of the Fund to investors only in specified minimum size ‘‘Creation Units’’ through the Distributor on a continuous basis at the NAV per Share next determined after an order in proper form is received. The NAV of the Fund is expected to be determined as of 4:00 p.m. E.T. on each Business Day. The Trust will sell and redeem Creation Units of the Fund only on a Business Day. Creation Units of the Fund may be purchased and/or redeemed entirely for cash, as permissible under the procedures described below. The ‘‘Creation Basket’’ (as defined below) for the Fund’s Shares will be based on the Fund’s Proxy Portfolio, which is designed to approximate the value and performance of the Actual Portfolio. All Creation Basket instruments will be valued in the same manner as they are valued for purposes of calculating the Fund’s NAV, and such valuation will be made in the same manner regardless of the identity of the contemporaneously with the Shares (‘‘foreign common stocks’’) in the Exchange’s Core Trading Session (normally 9:30 a.m. and 4:00 p.m. Eastern time (‘‘E.T.’’)); U.S. exchange-traded preferred stocks; U.S. exchange-traded American Depositary Receipts (‘‘ADRs’’); U.S. exchange-traded real estate investment trusts; U.S. exchange-traded commodity pools; U.S. exchange-traded metals trusts; U.S. exchange-traded currency trusts; and U.S. exchange-traded futures that trade contemporaneously with the Fund’s Shares. In addition, the Fund may hold cash and cash equivalents (short-term U.S. Treasury securities, government money market funds, and repurchase agreements). Pursuant to the Application and Exemptive Order, the Fund will not hold short positions or invest in derivatives other than U.S. exchange-traded futures, will not borrow for investment purposes, and will not purchase any securities that are illiquid investments at the time of purchase. 26 The term ‘‘normal market conditions’’ is defined in proposed Rule 8.601–E(c)(6). VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 purchaser or redeemer. Further, the total consideration paid for the purchase or redemption of a Creation Unit of Shares will be based on the NAV of the Fund, as calculated in accordance with the policies and procedures set forth in the Registration Statement. According to the Application, Shares will be purchased and redeemed in Creation Units and generally on an inkind basis. Accordingly, except where the purchase or redemption will include cash under the circumstances specified below, purchasers will be required to purchase Creation Units by making an in-kind deposit of specified instruments (‘‘Deposit Instruments’’), and shareholders redeeming their Shares will receive an in-kind transfer of specified instruments (‘‘Redemption Instruments’’). The names and quantities of the instruments that constitute the Deposit Instruments and the Redemption Instruments for the Fund (collectively, the ‘‘Creation Basket’’) will be the same as the Fund’s Proxy Portfolio, except to the extent purchases and redemptions are made entirely or in part on a cash basis. 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 ‘‘Cash Amount’’). While the Fund normally will issue and redeem Shares in kind, the Fund may require purchases and redemptions to be made entirely or in part on a cash basis. In such an instance, the Fund will announce, before the open of trading in the Core Trading Session (normally, 9:30 a.m. to 4:00 p.m. E.T.) on a given Business Day, that all purchases, all redemptions, or all purchases and redemptions on that day will be made wholly or partly in cash. The Fund may also determine, upon receiving a purchase or redemption order from an Authorized Participant, to have the purchase or redemption, as applicable, be made entirely or in part in cash.27 Each Business Day, before the open of trading on the Exchange, the Fund will cause to be published through the National Securities Clearing Corporation (‘‘NSCC’’) the names and quantities of the instruments comprising the Creation Basket, as well as the estimated Cash Amount (if any), for that day. The 27 The Adviser represents that, to the extent the Trust effects the creation or redemption of Shares in cash on any given day, such transactions will be effected in the same manner for all Authorized Participants placing trades with the Fund on that day. PO 00000 Frm 00150 Fmt 4703 Sfmt 4703 40333 published Creation Basket will apply until a new Creation Basket is announced on the following Business Day, and there will be no intra-day changes to the Creation Basket except to correct errors in the published Creation Basket. All orders to purchase Creation Units must be placed with the Distributor by or through an Authorized Participant, which is either: (1) A ‘‘participating party’’ (i.e., a broker or other participant), in the Continuous Net Settlement (‘‘CNS’’) System of the NSCC, a clearing agency registered with the Commission and affiliated with the Depository Trust Company (‘‘DTC’’), or (2) a DTC Participant, which in any case has executed a participant agreement with the Distributor and the transfer agent. Timing and Transmission of Purchase Orders All orders to purchase (or redeem) Creation Units, whether using the NSCC Process or the DTC Process, must be received by the Distributor no later than the NAV calculation time (‘‘NAV Calculation Time’’), generally 4:00 p.m. E.T. on the date the order is placed (‘‘Transmittal Date’’) in order for the purchaser (or redeemer) to receive the NAV determined on the Transmittal Date. Daily Disclosures With respect to the Fund, the following information will comprise the ‘‘Proxy Portfolio Disclosures’’ and, pursuant to the Application and Exemptive Order, will be publicly available on the Fund’s website before the commencement of trading in Shares on each Business Day: • The Proxy Portfolio holdings (including the identity and quantity of investments in the Proxy Portfolio) will be publicly available on the Fund’s website before the commencement of trading in Shares on each Business Day. • The historical ‘‘Tracking Error’’ between the Fund’s last published NAV per share and the value, on a per Share basis, of the Fund’s Proxy Portfolio calculated as of the close of trading on the prior Business Day will be publicly available on the Fund’s website before the commencement of trading in Shares each Business Day. • The ‘‘Proxy Overlap’’ will be publicly available on the Fund’s website before the commencement of trading in Shares on each Business Day. The Proxy Overlap is the percentage weight overlap between the Proxy Portfolio’s holdings compared to the Actual Portfolio’s holdings that formed the basis for the Fund’s calculation of NAV E:\FR\FM\06JYN1.SGM 06JYN1 40334 Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices at the end of the prior Business Day. The Proxy Overlap will be calculated by taking the lesser weight of each asset held in common between the Actual Portfolio and the Proxy Portfolio and adding the totals. khammond on DSKJM1Z7X2PROD with NOTICES Availability of Information The Fund’s website (www.im.natixis.com), which will be publicly available prior to the public offering of Shares, will include a form of the prospectus for the Fund that may be downloaded. The Fund’s website will include on a daily basis, per Share for the Fund, the prior Business Day’s NAV and the ‘‘Closing Price’’ or ‘‘Bid/ Ask Price,’’ 28 and a calculation of the premium/discount of the Closing Price or Bid/Ask Price against such NAV. The Adviser has represented that the Fund’s website will also provide: (1) Any other information regarding premiums/ discounts as may be required for other ETFs under Rule 6c–11 under the 1940 Act, as amended, and (2) any information regarding the bid/ask spread for the Fund as may be required for other ETFs under Rule 6c–11 under the 1940 Act, as amended. The website and information will be publicly available at no charge. The Proxy Portfolio holdings (including the identity and quantity of investments in the Proxy Portfolio) will be publicly available on the Fund’s website before the commencement of trading in Shares on each Business Day. Typical mutual fund-style annual, semi-annual and quarterly disclosures contained in the Fund’s Commission filings will be provided on the Fund’s website on a current basis.29 Thus, the Fund will publish the portfolio contents of its Actual Portfolio on a periodic basis, and no less than 60 days after the end of every fiscal quarter. Investors can also obtain the Fund’s SAI, Shareholder Reports, Form N–CSR, N–PORT and Form N–CEN. The prospectus, SAI and Shareholder Reports are available free upon request from the Trust, and those documents and the Form N–CSR, N–PORT, and Form N–CEN may be viewed on-screen or downloaded from the Commission’s website. The Exchange also notes that pursuant to its Exemptive Order, the 28 The records relating to Bid/Ask Prices will be retained by the Fund or its service providers. The ‘‘Bid/Ask Price’’ is the midpoint of the highest bid and lowest offer based upon the National Best Bid and Offer as of the time of calculation of the Fund’s NAV. The ‘‘National Best Bid and Offer’’ is the current national best bid and national best offer as disseminated by the Consolidated Quotation System or UTP Plan Securities Information Processor. The ‘‘Closing Price’’ of Shares is the official closing price of the Shares on the Exchange. 29 See note 18, supra. VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 Fund must comply with Regulation Fair Disclosure, which prohibits selective disclosure of any material non-public information. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Quotation and last sale information for the Shares, equity securities and ETFs will be available via the Consolidated Tape Association (‘‘CTA’’) high-speed line or from the exchange on which such securities trade. Intraday pricing information for all constituents of the Proxy Portfolio that are exchangetraded, which includes all eligible instruments except cash and cash equivalents, will be available on the exchanges on which they are traded and through subscription services. Intraday pricing information for cash equivalents will be available through subscription services and/or pricing services. Investment Restrictions The Shares of the Fund will conform to the initial and continued listing criteria under proposed Rule 8.601–E. The Fund’s holdings will be limited to and consistent with permissible holdings as described in the Application and all requirements in the Application and Exemptive Order.30 The Fund’s investments, including derivatives, will be consistent with its investment objective and will not be used to enhance leverage (although certain derivatives and other investments may result in leverage). That is, the Fund’s investments will not be used to seek performance that is the multiple or inverse multiple (e.g., 2X or –3X) of the Fund’s primary broad-based securities benchmark index (as defined in Form N–1A).31 Trading Halts With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund.32 Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Rule 7.12–E have been reached. Trading also may be halted because of market conditions or note 25, supra. Fund’s broad-based securities benchmark index will be identified in a future amendment to its Registration Statement following the Fund’s first full calendar year of performance. 32 See NYSE Arca Rule 7.12–E. PO 00000 30 See 31 The Frm 00151 Fmt 4703 Sfmt 4703 for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. Trading in the Shares will be subject to NYSE Arca Rule 8.601– E(d)(2)(D), which sets forth circumstances under which Shares of the Fund will be halted. Specifically, proposed Rule 8.601– E(d)(2)(D) provides that the Exchange may consider all relevant factors in exercising its discretion to halt trading in a series of Active Proxy 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 Active Proxy Portfolio Shares inadvisable. These may include: (a) The extent to which trading is not occurring in the securities and/or the financial instruments composing the Proxy Portfolio and/or Actual Portfolio; or (b) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. If a series of Active Proxy Portfolio Shares is trading on the Exchange pursuant to unlisted trading privileges, the Exchange shall halt trading in that series as specified in Rule 7.18–E(d)(1). If the Exchange becomes aware that the NAV, Proxy Portfolio or Actual Portfolio with respect to a series of Active Proxy Portfolio Shares is not disseminated to all market participants at the same time, the Exchange shall halt trading in such series until such time as the NAV, Proxy Portfolio or Actual Portfolio is available to all market participants at the same time. Trading Rules The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. Shares will trade on the NYSE Arca Marketplace in all trading sessions in accordance with NYSE Arca Rule 7.34–E(a). As provided in NYSE Arca Rule 7.6–E, the minimum price variation (‘‘MPV’’) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001. The Shares will conform to the initial and continued listing criteria under proposed NYSE Arca Rule 8.601–E. The Exchange has appropriate rules to facilitate trading in the Shares during all trading sessions. A minimum of 100,000 Shares for the Fund will be outstanding at the commencement of trading on the Exchange. In addition, pursuant to proposed Rule 8.601–E(d)(1)(B), the Exchange, prior to commencement of E:\FR\FM\06JYN1.SGM 06JYN1 Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices khammond on DSKJM1Z7X2PROD with NOTICES trading in the Shares, will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV, Proxy Portfolio and the Actual Portfolio for the Fund will be made available to all market participants at the same time. With respect to Active Proxy Portfolio Shares, all of the Exchange member obligations relating to product description and prospectus delivery requirements will continue to apply in accordance with Exchange rules and federal securities laws, and the Exchange and the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) will continue to monitor Exchange members for compliance with such requirements. Surveillance The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by the Exchange, as well as cross-market surveillances administered by FINRA on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws.33 The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange. The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares and 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 securities and exchange-traded instruments from such markets and other entities. In addition, the Exchange may obtain information regarding trading in such securities and exchange-traded instruments from markets and other entities that are 33 FINRA conducts cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.34 The Adviser will make available daily to FINRA and the Exchange the Actual Portfolio of the Fund, upon request, in order to facilitate the performance of the surveillances referred to above. In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. As noted above, proposed Commentary .03 to NYSE Arca Rule 8.601–E provides that the Exchange will implement and maintain written surveillance procedures for Active Proxy Portfolio Shares. As part of these surveillance procedures, the Investment Company’s investment adviser will upon request by the Exchange or FINRA, on behalf of the Exchange, make available to the Exchange or FINRA the daily Actual Portfolio holdings of each series of Active Proxy Portfolio Shares. The Exchange believes that the ability to access the information on an as needed basis will provide it with sufficient information to perform the necessary regulatory functions associated with listing and trading series of Active Proxy Portfolio Shares on the Exchange, including the ability to monitor compliance with the initial and continued listing requirements as well as the ability to surveil for manipulation of Active Proxy Portfolio Shares. The Exchange will utilize its existing procedures to monitor issuer compliance with the requirements of proposed Rule 8.601–E. For example, the Exchange will continue to use intraday alerts that will notify Exchange personnel of trading activity throughout the day that may indicate that unusual conditions or circumstances are present that could be detrimental to the maintenance of a fair and orderly market. The Exchange will require from the issuer of Active Proxy Portfolio Shares, upon initial listing and periodically thereafter, a representation that it is in compliance with Rule 8.601–E. The Exchange notes that proposed Commentary .01 to Rule 8.601–E would require an issuer of Active Proxy Portfolio Shares to notify the Exchange of any failure to comply with the continued listing requirements of Rule 8.601–E. In addition, the Exchange will require issuers to represent that they will notify the Exchange of any failure to comply with the terms of applicable exemptive and no-action relief. As part of its surveillance procedures, the Exchange 34 For a list of the current members of ISG, see www.isgportal.org. PO 00000 Frm 00152 Fmt 4703 Sfmt 4703 40335 will rely on the foregoing procedures to become aware of any non-compliance with the requirements of Rule 8.601–E. With respect to the Fund, all statements and representations made in this filing regarding (a) the description of the portfolio or reference asset, (b) limitations on portfolio holdings or reference assets, or (c) the applicability of Exchange listing rules specified in this rule filing shall constitute continued listing requirements for listing the Shares on the Exchange. The Adviser has represented to the Exchange that it will advise the Exchange of any failure by the Fund to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Rule 5.5– E(m). 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,35 in general, and furthers the objectives of Section 6(b)(5) of the Act,36 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 proposed Rule 8.601–E is designed to prevent fraudulent and manipulative acts and practices in that the proposed rules relating to listing and trading of Active Proxy Portfolio Shares provide specific initial and continued listing criteria required to be met by such securities.37 Proposed Rule 8.601–E (d) sets forth initial and continued listing criteria applicable to Active Proxy Portfolio Shares. Proposed Rule 8.601–E(d)(1)(A) provides that, for each series of Active Proxy Portfolio Shares, the Exchange will establish a minimum number of Active Proxy Portfolio Shares required to be outstanding at the time of commencement of trading on the Exchange. In addition, proposed Rule 8.601–E(d)(1)(B) provides, and the Exchange represents, that the Exchange will obtain a representation from the 35 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 37 The Exchange represents that, for initial and continued listing, the Fund will be in compliance with Rule 10A–3 under the Act, as provided by NYSE Arca Rule 5.3–E. 36 15 E:\FR\FM\06JYN1.SGM 06JYN1 khammond on DSKJM1Z7X2PROD with NOTICES 40336 Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices issuer of each series of Active Proxy Portfolio Shares that the NAV per share for the series will be calculated daily and that the NAV, Proxy Portfolio and the Actual Portfolio will be made available to all market participants at the same time. Proposed Rule 8.601– E(d)(1)(C) provides that all Active Proxy Portfolio Shares shall have a stated investment objective, which shall be adhered to under normal market conditions. Proposed Rule 8.601–E(d)(2) provides that each series of Active Proxy Portfolio Shares will be listed and traded subject to application of specified continued listing criteria, as set forth above. Proposed Rule 8.601–E(d)(2)(D)(i) provides that the Exchange may consider all relevant factors in exercising its discretion to halt trading in a series of Active Proxy 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 Active Proxy Portfolio Shares inadvisable. These may include: (a) The extent to which trading is not occurring in the securities and/or the financial instruments composing the Proxy Portfolio and/or Actual Portfolio; or (b) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. Proposed Rule 8.601–E(d)(2)(D)(iii) provides that, if the Exchange becomes aware that the NAV, Proxy Portfolio or Actual Portfolio with respect to a series of Active Proxy Portfolio Shares is not made available to all market participants at the same time, the Exchange shall halt trading in such series until such time as the NAV, Proxy Portfolio or Actual Portfolio is available to all market participants at the same time, as applicable. The Exchange believes that these proposed halt procedures will help ensure that market participants have fair and uniform access to information regarding a fund’s NAV, Proxy Portfolio or Actual Portfolio and, therefore, reduce the potential for manipulation and help ensure a fair and orderly market in trading of Active Proxy Portfolio Shares. Proposed Commentary .01 to NYSE Arca Rule 8.601–E provides that the Exchange will file separate proposals under Section 19(b) of the Act before the listing and trading of Active Proxy Portfolio Shares. All statements or representations contained in such rule filing regarding (a) the description of the portfolio, (b) limitations on portfolio holdings, or (c) the applicability of Exchange listing rules specified in such rule filing will constitute continued listing requirements. An issuer of such securities must notify the Exchange of VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 any failure to comply with such continued listing requirements. Proposed Commentary .03 to NYSE Arca Rule 8.601–E provides that the Exchange will implement and maintain written surveillance procedures for Active Proxy Portfolio Shares. As part of these surveillance procedures, the Investment Company’s investment adviser will, upon request by the Exchange or FINRA, on behalf of the Exchange, make available to the Exchange or FINRA the daily Actual Portfolio holdings of each series of Active Proxy Portfolio Shares. Proposed Commentary .04 provides that, if the investment adviser to the Investment Company issuing Active Proxy 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 and/or changes to such Investment Company’s Actual Portfolio and/or Proxy Portfolio. Any person related to the investment adviser or Investment Company who makes decisions pertaining to the Investment Company’s Actual Portfolio and/or Actual Portfolio or has access to non-public information regarding the Investment Company’s Actual Portfolio and/or the Proxy Portfolio or changes thereto must be subject to procedures reasonably designed to prevent the use and dissemination of material nonpublic information regarding the Actual Portfolio or to the Proxy Portfolio and/ or changes thereto. Proposed Commentary .05 provides that any person or entity, including a custodian, Reporting Authority, distributor, or administrator, who has access to non-public information regarding the Investment Company’s Actual Portfolio or the Proxy Portfolio or changes thereto, must be subject to procedures reasonably designed to prevent the use and dissemination of material non-public information regarding the applicable Investment Company Actual Portfolio or the Proxy Portfolio or changes thereto. 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 Actual Portfolio or Proxy Portfolio. The Exchange believes proposed Commentary .04 and proposed PO 00000 Frm 00153 Fmt 4703 Sfmt 4703 Commentary .05 will act as a safeguard against any misuse and improper dissemination of non-public information related to the Fund’s Actual Portfolio or Proxy Portfolio or changes thereto. The requirement that any person or entity implement procedures reasonably designed to prevent the use and dissemination of material nonpublic information regarding the Actual Portfolio or Proxy Portfolio 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 purpose. As such, the Exchange believes that this proposal is designed to prevent fraudulent and manipulative acts and practices. The proposed addition of Active Proxy Portfolio Shares to the enumerated derivative and special purpose securities that are subject to the provisions of Rule 5.3–E (Corporate Governance and Disclosure Policies) and Rule 5.3–E (e) (Shareholder/Annual Meetings) would subject Active Proxy Portfolio Shares to the same requirements currently applicable to other 1940 Act-registered investment company securities (i.e., Investment Company Units, Managed Fund Shares and Portfolio Depositary Receipts. With respect to the proposed listing and trading of Shares of the Fund, the Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Rule 8.601–E. The Fund’s holdings will conform to the permissible investments as set forth in the Application and Exemptive Order and the holdings will be consistent with all requirements in the Application and Exemptive Order.38 Any foreign common stocks held by the Fund will be traded on an exchange that is a member of the ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. The Adviser has represented to the Exchange that it will advise the Exchange of any failure by the Fund to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. If the Fund is not in compliance with the applicable listing requirements, the Exchange will 38 See E:\FR\FM\06JYN1.SGM note 25, supra. 06JYN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices commence delisting procedures under NYSE Arca Rule 5.5–E(m). The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares and 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 securities and exchange-traded instruments from such markets and other entities. In addition, the Exchange may obtain information regarding trading in such securities and 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. The Exchange, after consulting with various LMMs that trade ETFs on the Exchange, believes that market makers will be able to make efficient and liquid markets priced near the ETF’s intraday value, and market makers employ market making techniques such as ‘‘statistical arbitrage,’’ including correlation hedging, beta hedging, and dispersion trading, which is currently used throughout the financial services industry, to make efficient markets in exchange-traded products.39 For Active Proxy Portfolio Shares, market makers may use the knowledge of a fund’s means of achieving its investment objective, as described in the applicable fund registration statement, as well as a fund’s disclosed Proxy Portfolio, to construct a hedging proxy for a fund to manage a market maker’s quoting risk in connection with trading fund shares. Market makers can then conduct statistical arbitrage between their hedging proxy and shares of a fund, buying and selling one against the other over the course of the trading day. This ability should permit market makers to make efficient markets in an issue of Active Proxy Portfolio Shares without precise knowledge of a fund’s underlying portfolio. This is similar to certain other existing exchange-traded products (for example, ETFs that invest in foreign securities that do not trade during U.S. trading hours), in which spreads may be generally wider in the early days of trading and then narrow as market makers gain more confidence in their real-time hedges. The daily dissemination of the identity and quantity of Proxy Portfolio component investments, together with the right of Authorized Participants to create and redeem each day at the NAV, will be sufficient for market participants 39 See note 20, supra. VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 to value and trade shares in a manner that will not lead to significant deviations between the Bid/Ask Price and NAV of shares of a series of Active Proxy Portfolio Shares. The pricing efficiency with respect to trading a series of Active Proxy Portfolio Shares will generally rest on the ability of market participants to arbitrage between the shares and a fund’s portfolio, in addition to the ability of market participants to assess a fund’s underlying value accurately enough throughout the trading day in order to hedge positions in shares effectively. Professional traders can buy shares that they perceive to be trading at a price less than that which will be available at a subsequent time and sell shares they perceive to be trading at a price higher than that which will be available at a subsequent time. It is expected that, as part of their normal day-to-day trading activity, market makers assigned to shares by the Exchange, off-exchange market makers, firms that specialize in electronic trading, hedge funds and other professionals specializing in shortterm, non-fundamental trading strategies will assume the risk of being ‘‘long’’ or ‘‘short’’ shares through such trading and will hedge such risk wholly or partly by simultaneously taking positions in correlated assets 40 or by netting the exposure against other, offsetting trading positions—much as such firms do with existing ETFs and other equities. Disclosure of a fund’s investment objective and principal investment strategies in its prospectus and SAI should permit professional investors to engage easily in this type of hedging activity. The Exchange believes that the Fund and Active Proxy Portfolio Shares generally, will provide investors with a greater choice of active portfolio managers and active strategies through which they can manage their assets in an ETF structure. This greater choice of active asset management is expected to be similar to the diversity of active managers and strategies available to mutual fund investors. Unlike mutual fund investors, investors in Active 40 Price correlation trading is used throughout the financial industry. It is used to discover both trading opportunities to be exploited, such as currency pairs and statistical arbitrage, as well as for risk mitigation such as dispersion trading and beta hedging. These correlations are a function of differentials, over time, between one or multiple securities pricing. Once the nature of these price deviations have been quantified, a universe of securities is searched in an effort to, in the case of a hedging strategy, minimize the differential. Once a suitable hedging basket has been identified, a trader can minimize portfolio risk by executing the hedging basket. The trader then can monitor the performance of this hedge throughout the trade period, making corrections where warranted. PO 00000 Frm 00154 Fmt 4703 Sfmt 4703 40337 Proxy Portfolio Shares would also accrue the benefits derived from the ETF structure, such as lower fund costs, tax efficiencies, intraday liquidity, and pricing that reflects current market conditions rather than end-of-day pricing. The Adviser represents that, unlike ETFs that publish their portfolios on a daily basis, the Fund, as Active Proxy Portfolio Shares, proposes to allow for efficient trading of Shares through an effective Fund portfolio transparency substitute—Proxy Portfolio transparency. The Adviser believes that this approach will provide an important benefit to investors by protecting the Fund from the potential for frontrunning of portfolio transactions and the potential for free-riding on the Fund’s portfolio strategies, each of which could adversely impact the performance of the Fund. The Fund will utilize the NYSE Proxy Portfolio Methodology, allowing market participants to assess the intraday value and associated risk of the Fund’s Actual Portfolio and thereby facilitate the purchase and sale of Shares by investors in the secondary market at prices that do not vary materially from their NAV. The Exchange believes that Active Proxy Portfolio Shares will provide the platform for many more asset managers to launch ETFs, increasing the investment choices for consumers of actively managed funds, which should lead to a greater competitive landscape that can help to reduce the overall costs of active investment management for retail investors. Unlike mutual funds, Active Proxy Portfolio Shares would be able to use the efficient share settlement system in place for ETFs today, translating into a lower cost of maintaining shareholder accounts and processing transactions. The Fund’s investments, including derivatives, will be consistent with its investment objective and will not be used to enhance leverage (although certain derivatives and other investments may result in leverage). That is, the Fund’s investments will not be used to seek performance that is the multiple or inverse multiple (e.g., 2X or –3X) of the Fund’s primary broad-based securities benchmark index (as defined in Form N–1A). The Adviser represents that investors will also benefit because the Fund’s operating costs, such as transfer agency costs, are generally lower in ETFs than in mutual funds. The Fund will have access to the identical clearing and settlement procedures now used by U.S. domiciled ETFs, and therefore, should experience many of the operational and E:\FR\FM\06JYN1.SGM 06JYN1 khammond on DSKJM1Z7X2PROD with NOTICES 40338 Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices cost efficiencies benefitting current ETF investors. The Adviser represents further that in-kind Share creation/redemption orders will allow the Fund to enjoy overall transaction costs lower than those experienced by mutual funds. The Fund’s in-kind Share creation and redemption process will facilitate and enhance active management strategies by generally limiting the portfolio manager’s need to transact in a large volume of trades in order to maintain desired investment exposures. In addition, the Adviser represents that the Fund will receive tax efficiency benefits of the ETF structure because of in-kind Share creation and redemption activity. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange will obtain a representation from the issuer of a series of Active Proxy Portfolio Shares that the NAV per share of a fund will be calculated daily and that the NAV, Proxy Portfolio and Actual Portfolio will be made available to all market participants at the same time. With respect to the Fund, investors can also obtain the Fund’s SAI, shareholder reports, and its Form N–CSR, Form N– PORT and Form N–CEN. The Fund’s SAI and shareholder reports will be available free upon request from the Fund, and those documents and the Form N–CSR, Form N–PORT and Form N–CEN 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. The website for the Fund will include a form of the prospectus for the Fund that may be downloaded, and additional data relating to NAV and other applicable quantitative information, updated on a daily basis. The Proxy Portfolio holdings (including the identity and quantity of investments in the Proxy Portfolio) will be publicly available on the Fund’s website before the commencement of trading in Shares on each Business Day. Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Rule 7.12–E have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. Trading in the Shares will be subject to NYSE Arca Rule 8.601–E (d)(2)(D), which sets forth circumstances under which Shares of the Fund will be halted. In addition, as noted above, VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 investors will have ready access to quotation and last sale information for the Shares. The Shares will conform to the initial and continued listing criteria under proposed Rule 8.601–E. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of an additional type of activelymanaged exchange-traded product that 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 quotation and last sale information for the Shares. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes the proposed rule change would permit listing and trading of another type of actively-managed ETF that has characteristics different from existing actively-managed and index ETFs and would introduce additional competition among various ETF products to the benefit of investors. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change, as modified by Amendment No. 6, is consistent with the Act and rules and regulations thereunder applicable to a national securities exchange.41 In particular, the Commission finds that the proposed rule change, as modified by Amendment No. 6 is consistent with Section 6(b)(5) of the Act,42 which requires, among other things, that the 41 In approving this proposed rule change, the Commission notes that it has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 42 15 U.S.C. 78f(b)(5). PO 00000 Frm 00155 Fmt 4703 Sfmt 4703 Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. A. Proposed NYSE Arca Rule 8.601–E Pursuant to the Exemptive Order,43 Active Proxy Portfolio Shares would not be required to disclose the actual holdings of the Investment Company on a daily basis. Instead, Active Proxy Portfolio Shares would be required to publicly disclose the Proxy Portfolio, which is designed to closely track the performance of the holdings of the Investment Company, on a daily basis. Like other registered management investment companies, Active Proxy Portfolio Shares would be required to disclose the actual holdings of the Investment Company within at least 60 days following the end of every fiscal quarter. For reasons described below, the Commission believes that NYSE Arca Rule 8.601–E is sufficiently designed to be consistent with the Act and to help prevent fraudulent and manipulative acts and practices and to maintain a fair and orderly market for Active Proxy Portfolio Shares. The Commission finds that the Exchange’s proposal contains adequate rules and procedures to govern the listing and trading of Active Proxy Portfolio Shares on the Exchange. The Commission notes that the proposed listing and trading rules for Active Proxy Portfolio Shares, where appropriate, are similar to existing Exchange rules relating to exchangetraded funds, in particular, Managed Fund Shares and Managed Portfolio Shares.44 The Commission also notes that it recently approved Cboe BZX Exchange, Inc.’s proposed listing requirements for Tracking Fund Shares that are substantively identical to the Exchange’s proposal.45 Moreover, prior to listing and/or trading on the Exchange, the Exchange must file a 43 See supra note 21. proposed rules relating to limitation of liability (proposed NYSE Arca Rule 8.601–E(e)), termination (proposed NYSE Arca Rule 8.601– E(d)(2)(E)), and voting (proposed NYSE Arca Rule 8.601–E(d)(2)(F)) are substantively similar or identical to existing provisions for Managed Fund Shares and Managed Portfolio Shares. See NYSE Arca Rule 8.600–E(e) and NYSE Arca Rule 8.900– E(e), NYSE Arca Rule 8.600–E(d)(2)(E) and NYSE Arca Rule 8.900–E(d)(2)(D), and NYSE Arca Rule 8.600–E(d)(2)(F) and NYSE Arca Rule 8.900– E(d)(2)(E), respectively. 45 See Securities Exchange Act Release No. 88887 (May 15, 2020), 85 FR 30990 (May 21, 2020) (SRCboeBZX–2019–107). 44 The E:\FR\FM\06JYN1.SGM 06JYN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices separate proposed rule change pursuant to Section 19(b) of the Act for each series of Active Proxy Portfolio Shares.46 All such shares listed and/or traded under proposed NYSE Arca Rule 8.601–E will be subject to the full panoply of NYSE Arca rules and procedures that currently govern the trading of equity securities on the Exchange. For the initial listing of each series of Active Proxy Portfolio Shares under proposed NYSE Arca Rule 8.601–E, the Exchange must establish a minimum number of Active Proxy Portfolio Shares required to be outstanding at the commencement of trading. In addition, the Exchange must obtain a representation from the issuer of each series of Active Proxy Portfolio Shares that the NAV per share for the series will be calculated daily and that the NAV, Proxy Portfolio, and Actual Portfolio will be made publicly available to all market participants at the same time. Moreover, all Active Proxy Portfolio Shares must have a stated investment objective, which must be adhered to under normal market conditions.47 Although the actual portfolio holdings of the Active Proxy Portfolio Shares are not publicly disclosed on a daily basis, the Commission believes that the proposed listing standards under proposed NYSE Arca Rule 8.601–E, along with the required dissemination of the Proxy Portfolio, are adequate to ensure transparency of key information regarding the Active Proxy Portfolio Shares and that such information is made available to market participants at the same time. Namely, the Proxy Portfolio would be made publicly available on the website for each series of Active Proxy Portfolio Shares at least once daily and would be made available to all market participants at the same time.48 In addition, like all other registered management investment companies, each series of Active Proxy Portfolio Shares would be required to publicly disclose its portfolio holdings information on a quarterly basis, within at least 60 days following the end of every fiscal quarter.49 If the Exchange becomes aware that the NAV, Proxy Portfolio, or Actual Portfolio is not being made available to all market participants at the same time, then the Exchange will halt trading in such series 46 See proposed NYSE Arca Rule 8.601–E, Commentary .01. 47 See proposed NYSE Arca Rule 8.601–E(d)(1). 48 See proposed NYSE Arca Rule 8.601– E(d)(2)(B)(i). 49 See proposed NYSE Arca Rule 8.601– E(d)(2)(A)(i). See also Rules 30e–1, 30d–1, and 30b1–5 under the 1940 Act. VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 until such time as the NAV, Proxy Portfolio, or Actual Portfolio is available to all market participants at the same time, as applicable.50 Further, if either the Proxy Portfolio or Actual Portfolio is not made available to all market participants at the same time, the Exchange will consider the suspension of trading in and will commence delisting proceedings for a series of Active Proxy Portfolio Shares.51 Moreover, the Exchange represents that a series of Active Proxy Portfolio Shares’ Statement of Additional Information and shareholder reports will be available for free upon request from the Investment Company, and that those documents and the Form N–PORT, Form N–CSR, and Form N–CEN may be viewed on-screen or downloaded from the Commission’s website at www.sec.gov. The Commission also finds that the Exchange’s rules with respect to trading halts and suspensions under proposed NYSE Arca Rule 8.601–E are designed to help maintain a fair and orderly market. According to the proposal, the Exchange may consider all relevant factors in exercising its discretion to halt trading in a series of Active Proxy Portfolio Shares. Further, trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the series of Active Proxy Portfolio Shares inadvisable. These may include the extent to which trading is not occurring in the securities and/or the financial instruments comprising the Proxy Portfolio and/or Actual Portfolio, or whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present.52 Other provisions of the Exchange’s rule pertaining to suspension are substantially consistent with provisions that currently exist for Managed Fund Shares and Managed Portfolio Shares. Those provisions state that the Exchange will consider the suspension of trading in, and will commence delisting proceedings under NYSE Arca Rule 5.5–E(m) for, a series of Active Proxy Portfolio Shares if: (1) Any of the continued listing requirements set forth in NYSE Arca Rule 8.601–E are not 50 See proposed NYSE Arca Rule 8.601– E(d)(2)(D)(iii). 51 See proposed NYSE Arca Rule 8.601– E(d)(2)(C)(ii). 52 See proposed NYSE Arca Rule 8.601– E(d)(2)(D)(i). In addition, if a series of Active Proxy Portfolio Shares is trading on the Exchange pursuant to unlisted trading privileges, the Exchange shall halt trading in that series as specified in NYSE Arca Rule 7.18–E(d)(1) (Trading Halts for UTP Derivative Securities Products). See proposed NYSE Arca Rule 8.601–E(d)(2)(D)(ii). PO 00000 Frm 00156 Fmt 4703 Sfmt 4703 40339 continuously maintained; (2) following the initial twelve-month period after commencement of trading on the Exchange of a series of Active Proxy Portfolio Shares, there are fewer than 50 beneficial holders of the series of Active Proxy Portfolio Shares; (3) the Exchange is notified, or otherwise becomes aware, that the Investment Company has failed to file any filings required by the Commission or is not in compliance with the conditions of any 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 Active Proxy Portfolio Shares; (4) any of the statements or representations regarding the description of the portfolio, limitations on portfolio holdings, or the applicability of Exchange listing rules, specified in the Exchange’s rule filing pursuant to Section 19(b) of the Act to permit the listing and trading of a series of Active Proxy Portfolio Shares, is not continuously maintained; or (5) such other event shall occur or condition exists which, in the opinion of the Exchange, makes further dealings of the Active Proxy Portfolio Shares on the Exchange inadvisable.53 Finally, the Commission believes that the requirements of proposed NYSE Arca Rule 8.601–E are consistent with the Act and, more specifically, are reasonably designed to help prevent fraudulent and manipulative acts and practices. The Commission notes that, because Actual Proxy Portfolio Shares would not publicly disclose on a daily basis information about the holdings of the Actual Portfolio, it is vital that such information be kept confidential and not be subject to misuse. Accordingly, to help ensure that the portfolio information be kept confidential and the shares not be susceptible to fraud or manipulation, proposed NYSE Arca Rule 8.601–E, Commentary .04 requires that, if the investment adviser to the Investment Company issuing Active Proxy Portfolio Shares is registered as a broker-dealer or is affiliated with a broker-dealer, such investment adviser must 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’s Actual Portfolio and/or Proxy Portfolio. Further, proposed Commentary .04 also requires that any person related to the 53 See proposed NYSE Arca Rule 8.601– E(d)(2)(C). See also supra note 51 and accompanying text. E:\FR\FM\06JYN1.SGM 06JYN1 khammond on DSKJM1Z7X2PROD with NOTICES 40340 Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices investment adviser or Investment Company who makes decisions pertaining to the Investment Company’s Actual Portfolio and/or Proxy Portfolio or has access to non-public information regarding the Investment Company’s Actual Portfolio and/or the Proxy Portfolio or changes thereto must be subject to procedures reasonably designed to prevent the use and dissemination of material non-public information regarding the Actual Portfolio and/or the Proxy Portfolio or changes thereto. In addition, proposed NYSE Arca Rule 8.601–E, Commentary .05 provides that any person or entity, including a custodian, Reporting Authority, distributor, or administrator, who has access to non-public information regarding the Investment Company’s Actual Portfolio or the Proxy Portfolio or changes thereto, must be subject to procedures reasonably designed to prevent the use and dissemination of material non-public information regarding the applicable Investment Company Actual Portfolio or the Proxy Portfolio or changes thereto. Moreover, if any such person or entity is registered as a broker-dealer or affiliated with a broker-dealer, such person or entity must erect and maintain a ‘‘fire wall’’ between the person or entity and the broker-dealer with respect to access to information concerning the composition of and/or changes to such Investment Company Actual Portfolio or Proxy Portfolio. The proposed rules also require that the Exchange implement and maintain written surveillance procedures for Active Proxy Portfolio Shares.54 Finally, to ensure that the Exchange has the appropriate information to monitor and surveil its market, proposed NYSE Arca Rule 8.601–E, Commentary .03 also requires that the Investment Company’s investment adviser will, upon request by the Exchange or FINRA, on behalf of the Exchange, make available to the Exchange or FINRA the daily Actual Portfolio holdings of each series of Active Proxy Portfolio Shares. For the reasons discussed above, the Commission finds that proposed NYSE Arca Rule 8.601–E for Active Proxy Portfolio Shares is consistent with Section 6(b)(5) of the Act. Further, the Commission finds that the proposed amendments to NYSE Arca Rule 5.3–E and NYSE Arca Rule 5.3–E(e) to include Active Proxy Portfolio Shares among the list of derivative or special purpose securities that are subject to a limited set of corporate governance and disclosure policies, and among the derivative or special purpose securities to which the requirements concerning shareholder annual meetings do not apply, are consistent with Section 6(b)(5) of the Act because these amendments will provide that Active Proxy Portfolio Shares will be treated in a manner consistent with other derivative securities listed and traded on the Exchange. B. Listing and Trading of Natixis U.S. Equity Opportunities ETF The Commission believes that the proposal is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading in the Shares when a reasonable degree of certain pricing transparency cannot be assured. As such, the Commission believes the proposal is reasonably designed to maintain a fair and orderly market for trading the Shares. The Commission also finds that the proposal is consistent with Section 11A(a)(1)(C)(iii) of the Act, which sets forth Congress’s finding that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure the availability to brokers, dealers, and investors of information with respect to quotations for, and transactions in, securities. Specifically, the Commission notes that the Exchange, prior to commencement of trading in the Shares, will obtain a representation from the issuer of the Shares that the NAV per Share of the Fund will be calculated daily and that the NAV, Proxy Portfolio, and Actual Portfolio of the Fund will be made available to all market participants at the same time.55 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, equity securities, and ETFs will be available via the Consolidated Tape Association high-speed line or from the exchange on which such securities trade. Moreover, the Fund’s website will include additional information updated on a daily basis, including, on a per Share basis for the Fund, the prior business day’s NAV, the closing price or bid/ask price at the time of calculation of such NAV, and a calculation of the premium or discount of the closing price or bid/ ask price against such NAV. The website will also disclose the percentage 54 See proposed NYSE Arca Rule 8.601–E, Commentary .03. VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 55 See PO 00000 NYSE Arca Rule 8.601–E(d)(1)(B). Frm 00157 Fmt 4703 Sfmt 4703 weight overlap between the holdings of the Proxy Portfolio compared to the Actual Portfolio holdings for the prior business day, and any other information regarding premiums and discounts and the bid/ask spread for the Fund as may be required for other ETFs under Rule 6c-11 under the 1940 Act. The website and information will be publicly available at no charge. In addition, the Exchange states that intraday pricing information for all constituents of the Proxy Portfolio that are exchange-traded, which includes all eligible instruments except cash and cash equivalents, will be available on the exchanges on which they are traded and through subscription services, and that intraday pricing information for cash equivalents will be available through subscription services and/or pricing services. The Commission also believes that the proposal is reasonably designed to help prevent fraudulent and manipulative acts and practices. Specifically, the Exchange provides that: • The Adviser is not registered as a broker-dealer but is affiliated with a broker-dealer and has implemented and will maintain a ‘‘fire wall’’ with respect to such broker-dealer affiliate regarding access to information concerning the composition of and/or changes to the Fund’s Actual Portfolio and/or Proxy Portfolio; • The Fund’s Sub-Advisers are not registered as a broker-dealer but are affiliated with a broker-dealer, and each Sub-Adviser has implemented and will maintain a ‘‘fire wall’’ with respect to its respective broker-dealer affiliate regarding access to information concerning the composition of and/or changes to the Fund’s Actual Portfolio and/or Proxy Portfolio; • Any person related to the Adviser, each Sub-Adviser, or the Fund who makes decisions pertaining to the Fund’s Actual Portfolio or Proxy Portfolio or who has access to nonpublic information regarding the Fund’s Actual Portfolio and/or the Proxy Portfolio or changes thereto are subject to procedures reasonably designed to prevent the use and dissemination of material non-public information regarding the Fund’s Actual Portfolio and/or the Proxy Portfolio or changes thereto; • In the event (a) the Adviser or a Sub-Adviser becomes registered as a broker-dealer or becomes newly affiliated with a broker-dealer or (b) any new adviser or sub-adviser is a registered broker-dealer, or becomes affiliated with a broker-dealer, it will implement and maintain a fire wall with respect to its relevant personnel or its E:\FR\FM\06JYN1.SGM 06JYN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices broker-dealer affiliate regarding access to information concerning the composition of and/or changes to the Fund’s Actual Portfolio and/or Proxy Portfolio, and will be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the Fund’s Actual Portfolio and/or Proxy Portfolio or changes thereto; and • Any person or entity, including any service provider for the Fund, who has access to non-public information regarding the Fund’s Actual Portfolio or the Proxy Portfolio or changes thereto will be subject to procedures reasonably designed to prevent the use and dissemination of material non-public information regarding the Fund’s Actual Portfolio and/or the Proxy Portfolio or changes thereto, and if any such person or entity is registered as a broker-dealer or affiliated with a broker-dealer, such person or entity has erected and will maintain a ‘‘fire wall’’ between the person or entity and the broker-dealer with respect to access to information concerning the composition of and/or changes to the Fund’s Actual Portfolio and/or Proxy Portfolio. Finally, the Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by the Exchange, as well as cross-market surveillances administered by FINRA on behalf of the Exchange,56 and that these surveillance procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange. 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. In support of this proposal, the Exchange represents that: (1) The Shares will conform to the initial and continued listing criteria under NYSE Arca Rule 8.601–E. (2) A minimum of 100,000 Shares for the Fund will be outstanding at the commencement of trading on the Exchange. (3) The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed, and may obtain information, regarding trading in the Shares and underlying exchange56 See NYSE Arca Rule 8.601–E, Commentary .03, which requires, as part of the surveillance procedures for Active Proxy Portfolio Shares, the Fund’s investment adviser to, upon request by the Exchange or FINRA, on behalf of the Exchange, make available to the Exchange or FINRA the daily Actual Portfolio holdings of the Fund. VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 traded instruments with other markets and other entities that are members of the ISG. In addition, the Exchange may obtain information regarding trading in such securities and exchange-traded instruments from markets and other entities with which the Exchange has in place a comprehensive surveillance sharing agreement. Any foreign common stocks held by the Fund will be traded on an exchange that is a member of the ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. (4) The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. (5) For initial and continued listing, the Fund will be in compliance with Rule 10A–3 under the Act.57 (6) The Fund’s holdings will conform to the permissible investments as set forth in the Application and Exemptive Order and the holdings will be consistent with all requirements set forth in the Application and Exemptive Order. The Fund’s investments, including derivatives, will be consistent with its investment objective and will not be used to enhance leverage (although certain derivatives and other investments may result in leverage). (7) With respect to Active Proxy Portfolio Shares, all of the Exchange member obligations relating to product description and prospectus delivery requirements will continue to apply in accordance with Exchange rules and federal securities laws, and the Exchange and FINRA will continue to monitor Exchange members for compliance with such requirements. The Exchange also represents that all statements and representations made in the filing regarding: (1) The description of the portfolio or reference assets; (2) limitations on portfolio holdings or reference assets; or (3) the applicability of Exchange listing rules specified in the filing constitute continued listing requirements for listing the Shares on the Exchange. In addition, the Exchange represents that the Adviser will advise the Exchange of any failure by the Fund to comply with the continued listing requirements and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor 58 for 17 CFR 240.10A–3. Commission notes that certain proposals for the listing and trading of exchange-traded products include a representation that the exchange will ‘‘surveil’’ for compliance with the continued listing requirements. See, e.g., Securities Exchange Act Release No. 77499 (April 1, 2016), 81 FR 20428, 20432 (April 7, 2016) (SR–BATS–2016–04). In the context of this representation, it is the Commission’s view that ‘‘monitor’’ and ‘‘surveil’’ both mean ongoing oversight of compliance with the continued listing requirements. Therefore, the PO 00000 57 See 58 The Frm 00158 Fmt 4703 Sfmt 4703 40341 compliance with the continued listing requirements. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Rule 5.5–E(m). IV. Solicitation of Comments on Amendment No. 6 to the Proposed Rule Change Interested persons are invited to submit written data, views, and arguments concerning whether the proposed rule change, as modified by Amendment No. 6, is consistent with the Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2019–95 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2019–95. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit Commission does not view ‘‘monitor’’ as a more or less stringent obligation than ‘‘surveil’’ with respect to the continued listing requirements. E:\FR\FM\06JYN1.SGM 06JYN1 40342 Federal Register / Vol. 85, No. 129 / Monday, July 6, 2020 / Notices personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSEArca-2019–95, and should be submitted on or before July 27, 2020. khammond on DSKJM1Z7X2PROD with NOTICES V. Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 6 The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 6, prior to the thirtieth day after the date of publication of notice of the filing of Amendment No. 6 in the Federal Register. In Amendment No. 6, the Exchange amended proposed Rule 8.601–E to, among other things, (i) revise the circumstances under which it would consider the suspension of trading in, and commence delisting proceedings for, a series of Active Proxy Portfolio Shares; (ii) require that any person or entity who has access to nonpublic information regarding the Investment Company’s Actual Portfolio or the Proxy Portfolio or changes thereto, (a) be subject to procedures reasonably designed to prevent the use and dissemination of material nonpublic information regarding the applicable Investment Company Actual Portfolio or the Proxy Portfolio or changes thereto, and (b) if such person or entity is registered as a broker-dealer or affiliated with a broker-dealer, to erect and maintain a ‘‘fire wall’’ between the person or entity and the broker-dealer with respect to access to information concerning the composition of and/or changes to such Investment Company Actual Portfolio or Proxy Portfolio; and (iii) remove unnecessary discussion about an information bulletin to be provided to the Exchange’s members regarding trading in the Shares. Amendment No. 6 also provides other clarifications and additional information related to the Fund.59 The changes and additional information in Amendment No. 6 assist the Commission in finding that the proposal is consistent with the Exchange Act. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Exchange Act,60 to approve the proposed rule change, as modified by Amendment No. 6, on an accelerated basis. VI. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act 61 that the proposed rule change (SR–NYSEArca2019–95), as modified by Amendment No. 6, be, and it hereby is, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.62 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–14388 Filed 7–2–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–89196; File No. SR–BOX– 2020–25] Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend the Fee Schedule on the BOX Options Market LLC Facility June 30, 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 June 22, 2020, BOX Exchange LLC (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act,3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Fee Schedule on the BOX Options Market LLC (‘‘BOX’’) facility. The text of the proposed rule change is available from the principal office of the Exchange, at the Commission’s Public Reference Room and also on the Exchange’s internet website at https:// boxoptions.com. 59 See 60 15 Amendment No. 6, supra note 12. U.S.C. 78s(b)(2). VerDate Sep<11>2014 04:41 Jul 03, 2020 Jkt 250001 PO 00000 61 Id. 62 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). Frm 00159 Fmt 4703 Sfmt 4703 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the Fee Schedule on BOX facility to make non-substantive, clerical changes in order to conform the Fee Schedule with the Exchange’s adoption of the new Penny Interval Program.5 Specifically, the Exchange proposes to delete references to the Penny Pilot Program 6 and Non-Penny Pilot Program and replace those references with Penny Interval Program or Non-Penny Interval Program throughout the Fee Schedule. 2. Statutory Basis The Exchange believes that the proposal is consistent with the requirements of Section 6(b) of the Act,7 in general, and Section 6(b)(5) of the Act,8 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, 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 the proposed rule change would remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, protect investors and the public interest because the proposed conforming non-substantive changes would add clarity, transparency and consistency to the Exchange’s Fee 5 See Securities Exchange Act Release No. 88959 (May 27, 2020), 85 FR 33769 (June 2, 2020) (SR– BOX–2020–17). 6 See BOX Rule 7260. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). E:\FR\FM\06JYN1.SGM 06JYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 85, Number 129 (Monday, July 6, 2020)]
[Notices]
[Pages 40328-40342]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14388]


=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89185; File No. SR-NYSEArca-2019-95]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 6 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 6, To Adopt NYSE 
Arca Rule 8.601-E To Permit the Listing and Trading of Active Proxy 
Portfolio Shares and To List and Trade Shares of the Natixis U.S. 
Equity Opportunities ETF Under Proposed NYSE Arca Rule 8.601-E

June 29, 2020.

I. Introduction

    On December 23, 2019, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to (1) adopt NYSE Arca Rule 
8.601-E to permit the Exchange to list and trade Active Proxy Portfolio 
Shares, which are shares of actively managed exchange-traded funds for 
which the portfolio is disclosed in accordance with standard mutual 
fund disclosure rules; and (2) list and trade shares (``Shares'') of 
the Natixis U.S. Equity Opportunities ETF (``Fund'') under NYSE Arca 
Rule 8.601-E. The proposed rule change was published for comment in the 
Federal Register on January 3, 2020.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 87866 (December 30, 
2019), 85 FR 357.
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    On February 13, 2020, pursuant to Section 19(b)(2) of the Act,\4\ 
the Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\5\ On March 31, 2020, the Exchange filed Amendment No. 2 to the 
proposed rule change, which replaced and superseded the proposed rule 
change as originally filed.\6\ On April 1, 2020, the Commission 
published Amendment No. 2 for notice and comment and instituted 
proceedings under Section 19(b)(2)(B) of the Act \7\ to determine 
whether to approve or disapprove the proposed rule change.\8\ On May 
19, 2020, the Exchange filed Amendment No. 3 to the proposed rule 
change, which replaced and superseded the proposed rule change, as 
amended by Amendment No. 2.\9\ On May 27, 2020, the Exchange filed 
Amendment No. 4 to the proposed rule change, which replaced and 
superseded the proposed rule change, as amended by Amendment No. 3.\10\ 
On June 11, 2020, the Exchange filed Amendment No. 5 to the proposed 
rule change, which replaced and superseded the proposed rule change, as 
amended by Amendment No. 4.\11\ On June 19, 2020, the Exchange filed 
Amendment No. 6 to the proposed rule change, which replaced and 
superseded the proposed rule change, as amended by Amendment No. 5.\12\ 
The Commission has received no comments on the proposed rule change. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change, as modified by Amendment No. 6, from interested 
persons and is approving the proposed rule change, as modified by 
Amendment No. 6, on an accelerated basis.
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 88199, 85 FR 9888 
(February 20, 2020). The Commission designated April 2, 2020, as the 
date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \6\ Amendment No. 1 to the proposed rule change was filed on 
March 26, 2020, and subsequently withdrawn on March 31, 2020. 
Amendment No. 2 is available on the Commission's website at https://www.sec.gov/comments/sr-nysearca-2019-95/srnysearca201995-7015545-214987.pdf.
    \7\ 15 U.S.C. 78s(b)(2)(B).
    \8\ See Securities Exchange Act Release No. 88533, 85 FR 19526 
(April 7, 2020).
    \9\ Amendment No. 3 is available on the Commission's website 
https://www.sec.gov/comments/sr-nysearca-2019-95/srnysearca201995-7214369-216889.pdf.
    \10\ Amendment No. 4 is available on the Commission's website at 
https://www.sec.gov/comments/sr-nysearca-2019-95/srnysearca201995-7245193-217209.pdf.
    \11\ Amendment No. 5 is available on the Commission's website at 
https://www.sec.gov/comments/sr-nysearca-2019-95/srnysearca201995-7306918-218149.pdf.
    \12\ Amendment No. 6 is available on the Commission's website at 
https://www.sec.gov/comments/sr-nysearca-2019-95/srnysearca201995-7329866-218548.pdf.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change, as Modified by Amendment 
No. 6

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

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

1. Purpose
    The Exchange proposes to add new NYSE Arca Rule 8.601-E for the 
purpose of permitting the listing and trading, or trading pursuant to 
unlisted trading privileges (``UTP''), of Active Proxy Portfolio 
Shares, which are securities issued by an actively managed open-end 
investment management company. The Exchange also proposes to list and 
trade shares (``Shares'') of the following under proposed NYSE Arca 
Rule 8.601-E: Natixis U.S. Equity Opportunities ETF (the ``Fund'').\13\
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    \13\ The Natixis U.S. Equity Opportunities ETF was referred to 
as the Natixis ETF in SR-NYSEArca-2019-95 as originally filed and in 
Amendment 2 thereto.
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Proposed Listing Rules
    Proposed Rule 8.601-E (a) provides that the Exchange will consider 
for trading, whether by listing or pursuant to UTP, Active Proxy 
Portfolio Shares that meet the criteria of Rule 8.601-E.
    Proposed Rule 8.601-E (b) provides that Rule 8.601-E is applicable 
only to Active Proxy Portfolio Shares and that, except to the extent 
inconsistent with Rule 8.601-E, or unless the context otherwise 
requires, the rules and procedures of the Exchange's Board of Directors 
shall be applicable to the trading on the Exchange of such securities. 
Proposed Rule 8.601-E (b) provides further that Active Proxy Portfolio 
Shares are included within the definition of ``security'' or 
``securities'' as such terms are used in the Rules of the Exchange.
    Proposed Rule 8.601-E(c)(1) defines the ``Active Proxy Portfolio 
Share'' as a security that (a) is issued by an investment company 
registered under the Investment Company Act of 1940 (``Investment 
Company'') organized as

[[Page 40329]]

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 specified minimum number of shares, or 
multiples thereof, in return for a deposit by the purchaser of the 
Proxy Portfolio and/or cash with a value equal to the next determined 
net asset value (``NAV''); (c) when aggregated in the same specified 
minimum number of Active Proxy Portfolio Shares, or multiples thereof, 
may be redeemed at a holder's request in return for the Proxy Portfolio 
and/or cash to the holder by the issuer with a value equal to the next 
determined NAV; and (d) the portfolio holdings for which are disclosed 
within at least 60 days following the end of every fiscal quarter.
    Proposed Rule 8.601-E(c)(2) defines the term ``Actual Portfolio'' 
as the identities and quantities of the securities and other assets 
held by the Investment Company that shall form the basis for the 
Investment Company's calculation of NAV at the end of the business day.
    Proposed Rule 8.601-E(c)(3) defines the term ``Proxy Portfolio'' as 
a specified portfolio of securities, other financial instruments and/or 
cash designed to track closely the daily performance of the Actual 
Portfolio of a series of Active Proxy Portfolio Shares as provided in 
the exemptive relief pursuant to the Investment Company Act of 1940 
applicable to such series. The website for each series of Active Proxy 
Portfolio Shares shall disclose the information regarding the Proxy 
Portfolio as provided in the exemptive relief pursuant to the 
Investment Company Act of 1940 applicable to such series, including the 
following, to the extent applicable:
    (i) Ticker symbol;
    (ii) CUSIP or other identifier;
    (iii) Description of holding;
    (iv) Quantity of each security or other asset held; and
    (v) Percentage weighting of the holding in the portfolio.\14\
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    \14\ The information required in proposed Rule 8.601-E(c)(3) for 
the Proxy Portfolio is the same as that required in SEC Rule 6c-
11(c)(1)(i)(A) through (E) under the 1940 Act for exchange-traded 
funds operating in compliance with Rule 6c-11. See Release Nos. 33-
10695; IC-33646; File No. S7-15-18 (Exchange-Traded Funds) 
(September 25, 2019), 84 FR 57162 (October 24, 2019) (the ``Rule 6c-
11 Release''). The Exchange believes it is appropriate to require 
such information, rather than all information required under Rule 
8.600-E(c)(2). In adopting this requirement for funds operating in 
compliance with Rule 6c-11, the Commission stated that ``a more 
streamlined requirement will provide standardized portfolio holdings 
disclosure in a more efficient, less costly, and less burdensome 
format, while still providing market participants with relevant 
information. Accordingly, rule 6c-11 will require an ETF to post a 
subset of the information required by the listing exchanges' current 
generic listing standards for actively managed ETFs.'' The 
Commission stated further that ``this framework will provide market 
participants with the information necessary to support an effective 
arbitrage mechanism and eliminate potential investor confusion due 
to a lack of standardization.'' See Rule 6c-11 Release, notes 249-
260 and accompanying text.
---------------------------------------------------------------------------

    Proposed Rule 8.601-E(c)(4) defines the term ``Reporting 
Authority'' in respect of a particular series of Active Proxy Portfolio 
Shares as the Exchange, an institution, or a reporting service 
designated by the Exchange or by the exchange that lists a particular 
series of Active Proxy Portfolio Shares (if the Exchange is trading 
such series pursuant to unlisted trading privileges) as the official 
source for calculating and reporting information relating to such 
series, including, but not limited to, NAV, the Actual Portfolio, Proxy 
Portfolio, or other information relating to the issuance, redemption or 
trading of Active Proxy Portfolio Shares. A series of Active Proxy 
Portfolio Shares may have more than one Reporting Authority, each 
having different functions.
    Proposed Rule 8.601-E(c)(5) defines the term ``normal market 
conditions'' as including, but not limited to, the absence of trading 
halts in the applicable financial markets generally; operational issues 
(e.g., systems failure) causing dissemination of inaccurate market 
information; or force majeure type events such as natural or manmade 
disaster, act of God, armed conflict, act of terrorism, riot or labor 
disruption or any similar intervening circumstance.
    Proposed Rule 8.601-E (d) sets forth initial and continued listing 
criteria applicable to Active Proxy Portfolio Shares. Proposed Rule 
8.601-E(d)(1) provides that each series of Active Proxy Portfolio 
Shares shall be listed and traded on the Exchange subject to 
application of the following initial listing criteria:
    (A) For each series, the Exchange shall establish a minimum number 
of Active Proxy Portfolio Shares required to be outstanding at the time 
of commencement of trading on the Exchange.
    (B) The Exchange shall obtain a representation from the issuer of 
each series of Active Proxy Portfolio Shares that the NAV per share for 
the series shall be calculated daily and that the NAV, the Proxy 
Portfolio, and the Actual Portfolio shall be made publicly available to 
all market participants at the same time.
    (C) All Active Proxy Portfolio Shares shall have a stated 
investment objective, which shall be adhered to under normal market 
conditions.
    Proposed Rule 8.601-E(d)(2) provides that each series of Active 
Proxy Portfolio Shares shall be listed and traded subject to 
application of the following continued listing criteria: the Actual 
Portfolio shall be publicly disseminated within at least 60 days 
following the end of every fiscal quarter and shall be made publicly 
available to all market participants at the same time (proposed Rule 
8.601-E(d)(2)(A)(i)), and the Proxy Portfolio will be made publicly 
available on the website for each series of Active Proxy Portfolio 
Shares at least once daily and will be made available to all market 
participants at the same time (proposed Rule 8.601-E(d)(2)(B)(i)).
    Proposed Rule 8.601-E(d)(2)(C) provides that the Exchange will 
consider the suspension of trading in, and will commence delisting 
proceedings under Rule 5.5-E(m) for, a series of Active Proxy Portfolio 
Shares under any of the following circumstances:
    (i) if any of the continued listing requirements set forth in Rule 
8.601-E are not continuously maintained;
    (ii) if either the Proxy Portfolio or Actual Portfolio is not made 
available to all market participants at the same time;
    (iii) if, following the initial twelve month period after 
commencement of trading on the Exchange of a series of Active Proxy 
Portfolio Shares, there are fewer than 50 beneficial holders of such 
series of Active Proxy Portfolio Shares;
    (iv) if the Exchange is notified, or otherwise becomes aware, that 
the Investment Company has failed to file any filings required by the 
Commission or is not in compliance with the conditions of any currently 
applicable exemptive order or no-action relief granted by the 
Commission or Commission staff to the Investment Company with respect 
to a series of Active Proxy Portfolio Shares;
    (v) if any of the statements or representations regarding (a) the 
description of the portfolio, (b) limitations on portfolio holdings, or 
(c) the applicability of Exchange listing rules, specified in the 
Exchange's rule filing pursuant to Section 19(b) of the Act to permit 
the listing and trading of a series of Active Proxy Portfolio Shares, 
is not continuously maintained; or
    (vi) if such other event shall occur or condition exists which, in 
the opinion of the Exchange, makes further dealings on the Exchange 
inadvisable.
    Proposed Rule 8.601-E(d)(2)(D) (Trading Halt) provides that (i) The

[[Page 40330]]

Exchange may consider all relevant factors in exercising its discretion 
to halt trading in a series of Active Proxy 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 Active Proxy 
Portfolio Shares inadvisable. These may include: (a) The extent to 
which trading is not occurring in the securities and/or the financial 
instruments composing the Proxy Portfolio and/or Actual Portfolio; or 
(b) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present; (ii) If a 
series of Active Proxy Portfolio Shares is trading on the Exchange 
pursuant to unlisted trading privileges, the Exchange shall halt 
trading in that series as specified in Rule 7.18-E(d)(1); and (iii) If 
the Exchange becomes aware that the NAV, Proxy Portfolio or Actual 
Portfolio with respect to a series of Active Proxy Portfolio Shares is 
not made available to all market participants at the same time, the 
Exchange shall halt trading in such series until such time as the NAV, 
Proxy Portfolio or Actual Portfolio is available to all market 
participants at the same time, as applicable.
    Proposed Rule 8.601-E(d)(2)(E) provides that, upon termination of 
an Investment Company, the Exchange requires that Active Proxy 
Portfolio Shares issued in connection with such entity be removed from 
Exchange listing.
    Proposed Rule 8.601-E(d)(2)(F) provides that voting rights shall be 
as set forth in the applicable Investment Company prospectus.
    Proposed Rule 8.601-E(e) (Limitation of Exchange Liability) 
provides that neither the Exchange, the Reporting Authority, when the 
Exchange is acting in the capacity of a Reporting Authority, nor any 
agent of the Exchange shall have any liability for damages, claims, 
losses or expenses caused by any errors, omissions, or delays in 
calculating or disseminating any current portfolio value; the current 
value of the portfolio of securities required to be deposited to the 
Investment Company in connection with issuance of Active Proxy 
Portfolio Shares; the amount of any dividend equivalent payment or cash 
distribution to holders of Active Proxy Portfolio Shares; NAV; or other 
information relating to the purchase, redemption, or trading of Active 
Proxy Portfolio Shares, resulting from any negligent act or omission by 
the Exchange, the Reporting Authority, when the Exchange is acting in 
the capacity of a Reporting Authority, or any agent of the Exchange, or 
any act, condition, or cause beyond the reasonable control of the 
Exchange, its agent, or the Reporting Authority, when the Exchange is 
acting in the capacity of a Reporting Authority, including, but not 
limited to, an act of God; fire; flood; extraordinary weather 
conditions; war; insurrection; riot; strike; accident; action of 
government; communications or power failure; equipment or software 
malfunction; or any error, omission, or delay in the reports of 
transactions in one or more underlying securities.
    Proposed Commentary .01 to Rule 8.601-E provides that the Exchange 
will file separate proposals under Section 19(b) of the Act before the 
listing and trading of a series of Active Proxy Portfolio Shares. All 
statements or representations contained in such rule filing regarding 
(a) the description of the portfolio, (b) limitations on portfolio 
holdings, or (c) the applicability of Exchange listing rules specified 
in such rule filing will constitute continued listing requirements. An 
issuer of such securities must notify the Exchange of any failure to 
comply with such continued listing requirements.
    Proposed Commentary .02 provides that transactions in Active Proxy 
Portfolio Shares shall occur during the trading hours specified in NYSE 
Arca Rule 7.34-E(a).
    Proposed Commentary .03 provides that the Exchange will implement 
and maintain written surveillance procedures for Active Proxy Portfolio 
Shares. As part of these surveillance procedures, the Investment 
Company's investment adviser will upon request by the Exchange or 
FINRA, on behalf of the Exchange, make available to the Exchange or 
FINRA the daily Actual Portfolio holdings of each series of Active 
Proxy Portfolio Shares.
    Proposed Commentary.04 provides that, if the investment adviser to 
the Investment Company issuing Active Proxy 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 and/or changes to such Investment Company's 
Actual Portfolio and/or Proxy Portfolio. Any person related to the 
investment adviser or Investment Company who makes decisions pertaining 
to the Investment Company's Actual Portfolio and/or Proxy Portfolio or 
has access to non-public information regarding the Investment Company's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto must be 
subject to procedures reasonably designed to prevent the use and 
dissemination of material non-public information regarding the Actual 
Portfolio and/or the Proxy Portfolio or changes thereto.\15\
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    \15\ The Exchange will propose applicable NYSE Arca listing fees 
for Active Proxy Portfolio Shares in the NYSE Arca Equities Schedule 
of Fees and Charges via a separate proposed rule change.
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    Proposed Commentary .05 provides that any person or entity, 
including a custodian, Reporting Authority, distributor, or 
administrator, who has access to non-public information regarding the 
Investment Company's Actual Portfolio or the Proxy Portfolio or changes 
thereto, must be subject to procedures reasonably designed to prevent 
the use and dissemination of material non-public information regarding 
the applicable Investment Company Actual Portfolio or the Proxy 
Portfolio or changes thereto. 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 Actual Portfolio or Proxy Portfolio.
    The Exchange also proposes non-substantive amendments to include 
Active Proxy Portfolio Shares in other Exchange rules. Specifically, 
the Exchange proposes to amend current Rule 5.3-E to include Active 
Proxy Portfolio Shares listed pursuant to proposed Rule 8.601-E among 
the derivative or special purpose securities that are subject to a 
limited set of corporate governance and disclosure policies. Similarly, 
the Exchange proposes to amend Rule 5.3-E(e) to include Active Proxy 
Portfolio Shares listed pursuant to proposed Rule 8.601-E among the 
derivative or special purpose securities to which the requirements 
concerning shareholder/annual meetings do not apply.
Key Features of Active Proxy Portfolio Shares
    While funds issuing Active Proxy Portfolio Shares will be actively-
managed and, to that extent, will be similar to Managed Fund Shares, 
Active Proxy Portfolio Shares differ from Managed Fund Shares in the 
following important respects. First, in contrast to Managed Fund 
Shares, which are actively-managed funds listed and traded under NYSE 
Arca Rule 8.600-E \16\ and for which a ``Disclosed

[[Page 40331]]

Portfolio'' is required to be disseminated at least once daily,\17\ the 
portfolio for an issue of Active Proxy Portfolio Shares will be 
publicly disclosed within at least 60 days following the end of every 
fiscal quarter in accordance with normal disclosure requirements 
otherwise applicable to open-end management investment companies 
registered under the 1940 Act.\18\ The composition of the portfolio of 
an issue of Active Proxy Portfolio Shares would not be available at 
commencement of Exchange listing and trading. Second, in connection 
with the creation and redemption of Active Proxy Portfolio Shares, such 
creation or redemption may be exchanged for a Proxy Portfolio with a 
value equal to the next-determined NAV. A series of Active Proxy 
Portfolio Shares will disclose the Proxy Portfolio on a daily basis, 
which, as described above, is designed to track closely the daily 
performance of the Actual Portfolio of a series of Active Proxy 
Portfolio Shares, instead of the actual holdings of the Investment 
Company, as provided by a series of Managed Fund Shares.
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    \16\ The Commission has previously approved listing and trading 
on the Exchange of a number of issues of Managed Fund Shares under 
NYSE Arca Rule 8.600-E. See, e.g., Securities Exchange Act Release 
Nos. 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-
2008-31) (order approving Exchange listing and trading of twelve 
actively-managed funds of the WisdomTree Trust); 60460 (August 7, 
2009), 74 FR 41468 (August 17, 2009) (SR-NYSEArca-2009-55) (order 
approving listing of Dent Tactical ETF); 63076 (October 12, 2010), 
75 FR 63874 (October 18, 2010) (SR-NYSEArca-2010-79) (order 
approving Exchange listing and trading of Cambria Global Tactical 
ETF); 63802 (January 31, 2011), 76 FR 6503 (February 4, 2011) (SR-
NYSEArca-2010-118) (order approving Exchange listing and trading of 
the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic 
Allocation Growth Income ETF). The Commission also has approved a 
proposed rule change relating to generic listing standards for 
Managed Fund Shares. Securities Exchange Act Release No. 78397 (July 
22, 2016), 81 FR 49320 (July 27, 2016 (SR-NYSEArca-2015-110) 
(amending NYSE Arca Equities Rule 8.600 to adopt generic listing 
standards for Managed Fund Shares).
    \17\ NYSE Arca Rule 8.600-E(c)(2) defines the term ``Disclosed 
Portfolio'' as the identities and quantities of the securities and 
other assets held by the Investment Company that will form the basis 
for the Investment Company's calculation of net asset value at the 
end of the business day. NYSE Arca Rule 8.600-E(d)(2)(B)(i) requires 
that the Disclosed Portfolio will be disseminated at least once 
daily and will be made available to all market participants at the 
same time.
    \18\ A mutual fund is required to file with the Commission its 
complete portfolio schedules for the second and fourth fiscal 
quarters on Form N-CSR under the 1940 Act. Information reported on 
Form N-PORT for the third month of a fund's fiscal quarter will be 
made publicly available 60 days after the end of a fund's fiscal 
quarter. Form N-PORT requires reporting of a fund's complete 
portfolio holdings on a position-by-position basis on a quarterly 
basis within 60 days after fiscal quarter end. Investors can obtain 
a series of Active Proxy Portfolio Shares' Statement of Additional 
Information (``SAI''), its Shareholder Reports, its Form N-CSR, 
filed twice a year, and its Form N-CEN, filed annually. A series of 
Active Proxy Portfolio Shares' SAI and Shareholder Reports will be 
available free upon request from the Investment Company, and those 
documents and the Form N-PORT, Form N-CSR, and Form N-CEN may be 
viewed on-screen or downloaded from the Commission's website at 
www.sec.gov.
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    The Exchange, after consulting with various Lead Market Makers 
(``LMMs'') \19\ that trade exchange-traded funds (``ETFs'') on the 
Exchange, believes that market makers will be able to make efficient 
and liquid markets priced near the ETF's intraday value, and market 
makers employ market making techniques such as ``statistical 
arbitrage,'' including correlation hedging, beta hedging, and 
dispersion trading, which is currently used throughout the financial 
services industry, to make efficient markets in exchange-traded 
products.\20\ For Active Proxy Portfolio Shares, market makers may use 
the knowledge of a fund's means of achieving its investment objective, 
as described in the applicable fund registration statement, as well as 
a fund's disclosed Proxy Portfolio, to construct a hedging proxy for a 
fund to manage a market maker's quoting risk in connection with trading 
fund shares. Market makers can then conduct statistical arbitrage 
between their hedging proxy (for example, the Russell 1000 Index) and 
shares of a fund, buying and selling one against the other over the 
course of the trading day. This ability should permit market makers to 
make efficient markets in an issue of Active Proxy Portfolio Shares 
without precise knowledge of a fund's underlying portfolio. This is 
similar to certain other existing exchange-traded products (for 
example, ETFs that invest in foreign securities that do not trade 
during U.S. trading hours), in which spreads may be generally wider in 
the early days of trading and then narrow as market makers gain more 
confidence in their real-time hedges.
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    \19\ The term ``Lead Market Maker'' is defined in Rule 1.1(w) to 
mean a registered Market Maker that is the exclusive Designated 
Market Maker in listings for which the Exchange is the primary 
market.
    \20\ Statistical arbitrage enables a trader to construct an 
accurate proxy for another instrument, allowing it to hedge the 
other instrument or buy or sell the instrument when it is cheap or 
expensive in relation to the proxy. Statistical analysis permits 
traders to discover correlations based purely on trading data 
without regard to other fundamental drivers. These correlations are 
a function of differentials, over time, between one instrument or 
group of instruments and one or more other instruments. Once the 
nature of these price deviations have been quantified, a universe of 
securities is searched in an effort to, in the case of a hedging 
strategy, minimize the differential. Once a suitable hedging proxy 
has been identified, a trader can minimize portfolio risk by 
executing the hedging basket. The trader then can monitor the 
performance of this hedge throughout the trade period making 
corrections where warranted. In the case of correlation hedging, the 
analysis seeks to find a proxy that matches the pricing behavior of 
a fund. In the case of beta hedging, the analysis seeks to determine 
the relationship between the price movement over time of a fund and 
that of another stock. Dispersion trading is a hedged strategy 
designed to take advantage of relative value differences in implied 
volatilities between an index and the component stocks of that 
index. Such trading strategies will allow market participants to 
engage in arbitrage between series of Active Proxy Portfolio Shares 
and other instruments, both through the creation and redemption 
process and strictly through arbitrage without such processes.
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Description of the Fund and the Trust
    The Fund will be a series of Natixis ETF Trust II (``Trust''), 
which will be registered with the Commission as an open-end management 
investment company.\21\
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    \21\ The Trust is registered under the 1940 Act. On April 24, 
2020, the Trust filed a registration statement on Form N-1A under 
the Securities Act of 1933 (the ``1933 Act'') (15 U.S.C. 77a), and 
under the 1940 Act relating to the Fund (File Nos. 333-235466 and 
811-23500) (the ``Registration Statement''). The Trust and NYSE 
Group, Inc. filed a Seventh Amended and Restated Application for an 
Order under Section 6(c) of the 1940 Act for exemptions from various 
provisions of the 1940 Act and rules thereunder (File No. 812-
14870), dated October 21, 2019 (``Application''). On November 14, 
2019, the Commission issued a notice regarding the Application. 
Investment Company Release No. 33684 (File No. 812-14870). On 
December 10, 2019, the Commission issued an order (``Exemptive 
Order'') under the 1940 Act granting the exemptions requested in the 
Application (Investment Company Act Release No. 33711 (December 10, 
2019)). The description of the operation of the Trust and the Fund 
herein is based, in part, on the Registration Statement and the 
Application.
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    Natixis Advisors, L.P. (``Adviser'') will be the investment adviser 
to the Fund. Harris Associates L.P and Loomis, Sayles & Company are 
sub-advisers (``Sub-Advisers'') for the Fund. ALPS Distributors, Inc. 
will act as the distributor and principal underwriter (``Distributor'') 
for the Fund.
    As noted above, proposed Commentary.04 provides that, if the 
investment adviser to the Investment Company issuing Active Proxy 
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 and/or changes to 
such Investment Company's Actual Portfolio and/or Proxy Portfolio. Any 
person related to the investment adviser or Investment Company who 
makes decisions pertaining to the Investment Company's Actual Portfolio 
and/or Proxy Portfolio or has access to non-public information 
regarding the Investment Company's Actual Portfolio and/or Proxy 
Portfolio or changes thereto must be subject to procedures reasonably 
designed to prevent the use and dissemination of

[[Page 40332]]

material non-public information regarding the Actual Portfolio and/or 
Proxy Portfolio or changes thereto. Proposed Commentary .04 is similar 
to Commentary .03(a)(i) and (iii) to NYSE Arca Rule 5.2-E(j)(3); 
however, proposed Commentary .04, in connection with the establishment 
of a ``fire wall'' between the investment adviser and the broker-
dealer, reflects the applicable open-end fund's portfolio, not an 
underlying benchmark index, as is the case with index-based funds.\22\ 
Proposed Commentary .04 is also similar to Commentary .06 to Rule 
8.600-E related to Managed Fund Shares, except that proposed Commentary 
.04 relates to establishment and maintenance of a ``fire wall'' between 
the investment adviser and personnel of the broker-dealer or broker-
dealer affiliate, as applicable, applicable to an Investment Company's 
Actual Portfolio and/or Proxy Portfolio or changes thereto, and not 
just to the underlying portfolio, as is the case with Managed Fund 
Shares.
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    \22\ 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 Sub-Advisers and their related 
personnel will be subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violations, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
---------------------------------------------------------------------------

    In addition, proposed Commentary.05 provides that any person or 
entity, including a custodian, Reporting Authority, distributor, or 
administrator, who has access to non-public information regarding the 
Investment Company's Actual Portfolio or the Proxy Portfolio or changes 
thereto, must be subject to procedures reasonably designed to prevent 
the use and dissemination of material non-public information regarding 
the applicable Investment Company Actual Portfolio or the Proxy 
Portfolio or changes thereto. 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 Actual Portfolio or Proxy Portfolio.
    The Adviser is not registered as a broker-dealer but is affiliated 
with a broker-dealer. The Adviser has implemented and will maintain a 
``fire wall'' with respect to such broker-dealer affiliate regarding 
access to information concerning the composition of and/or changes to 
the Fund's Actual Portfolio and/or Proxy Portfolio. Harris Associates 
L.P. and Loomis, Sayles & Company are not registered as a broker-dealer 
but are affiliated with a broker-dealer. Each of the Sub-Advisers has 
implemented and will maintain a ``fire wall'' with respect to its 
respective broker-dealer affiliate regarding access to information 
concerning the composition of and/or changes to the Fund's Actual 
Portfolio and/or Proxy Portfolio.
    In the event (a) the Adviser or a Sub-Adviser becomes registered as 
a broker-dealer or becomes newly affiliated with a broker-dealer, or 
(b) any new adviser or sub-adviser is a registered broker-dealer, or 
becomes affiliated with a broker-dealer, it will implement and maintain 
a fire wall with respect to its relevant personnel or its broker-dealer 
affiliate regarding access to information concerning the composition 
and/or changes to the Fund's Actual Portfolio and/or Proxy Portfolio, 
and will be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding the Fund's 
Actual Portfolio and/or Proxy Portfolio or changes thereto. Any person 
related to the Adviser, each Sub-Adviser or the Fund who makes 
decisions pertaining to the Fund's Actual Portfolio or the Proxy 
Portfolio or has access to non-public information regarding the Fund's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto are 
subject to procedures reasonably designed to prevent the use and 
dissemination of material non-public information regarding the Fund's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto.
    In addition, any person or entity, including any service provider 
for the Fund, who has access to non-public information regarding the 
Fund's Actual Portfolio or the Proxy Portfolio or changes thereto, will 
be subject to procedures reasonably designed to prevent the use and 
dissemination of material non-public information regarding the Fund's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto. 
Moreover, if any such person or entity is registered as a broker-dealer 
or affiliated with a broker-dealer, such person or entity has erected 
and will 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 the Fund's Actual Portfolio and/or Proxy 
Portfolio.
Natixis U.S. Equity Opportunities ETF
    According to the Application, the Adviser believes the Fund would 
allow for efficient trading of Shares through an effective Fund 
portfolio transparency substitute and publication of related 
information metrics, while still shielding the identity of the full 
Fund portfolio contents to protect the Fund's performance-seeking 
strategies. Even though the Fund would not publish its full portfolio 
contents daily, the Adviser believes that the NYSE Proxy Portfolio 
Methodology would allow market participants to assess the intraday 
value and associated risk of the Fund's Actual Portfolio. As a result, 
the Adviser believes that investors would be able to purchase and sell 
Shares in the secondary market at prices that are close to their NAV.
    In this regard, the Fund will utilize a proxy portfolio 
methodology-- the ``NYSE Proxy Portfolio Methodology''-- that would 
allow market participants to assess the intraday value and associated 
risk of the Fund's Actual Portfolio and thereby facilitate the purchase 
and sale of Shares by investors in the secondary market at prices that 
do not vary materially from their NAV.\23\ The NYSE Proxy Portfolio 
Methodology would utilize creation of a Proxy Portfolio for hedging and 
arbitrage purposes.\24\
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    \23\ The NYSE Proxy Portfolio Methodology is owned by the NYSE 
Group, Inc. and licensed for use by the Fund. NYSE Group, Inc. is 
not affiliated with the Fund, Adviser or Distributor. Not all series 
of Active Proxy Portfolio Shares will utilize the NYSE Proxy 
Portfolio Methodology.
    \24\ With respect to the Fund, the Fund will have in place 
policies and procedures regarding the construction and composition 
of its Proxy Portfolio. Such policies and procedures will be covered 
by the Fund's compliance program and other requirements under Rule 
38a-1 under the 1940 Act.
---------------------------------------------------------------------------

    The Fund's holdings will conform to the permissible investments as 
set forth in the Application and Exemptive Order and the holdings will 
be consistent with all requirements in the Application and Exemptive 
Order.\25\ Any foreign

[[Page 40333]]

common stocks held by the Fund will be traded on an exchange that is a 
member of the Intermarket Surveillance Group (``ISG'') or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement.
---------------------------------------------------------------------------

    \25\ Pursuant to the Application and Exemptive Order, the 
permissible investments for the Fund include only the following 
instruments: ETFs traded on a U.S. exchange; exchange-traded notes 
(``ETNs'') traded on a U.S. exchange; U.S. exchange-traded common 
stocks; common stocks listed on a foreign exchange that trade on 
such exchange contemporaneously with the Shares (``foreign common 
stocks'') in the Exchange's Core Trading Session (normally 9:30 a.m. 
and 4:00 p.m. Eastern time (``E.T.'')); U.S. exchange-traded 
preferred stocks; U.S. exchange-traded American Depositary Receipts 
(``ADRs''); U.S. exchange-traded real estate investment trusts; U.S. 
exchange-traded commodity pools; U.S. exchange-traded metals trusts; 
U.S. exchange-traded currency trusts; and U.S. exchange-traded 
futures that trade contemporaneously with the Fund's Shares. In 
addition, the Fund may hold cash and cash equivalents (short-term 
U.S. Treasury securities, government money market funds, and 
repurchase agreements). Pursuant to the Application and Exemptive 
Order, the Fund will not hold short positions or invest in 
derivatives other than U.S. exchange-traded futures, will not borrow 
for investment purposes, and will not purchase any securities that 
are illiquid investments at the time of purchase.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund's investment 
objective is to seek long-term growth of capital. The Fund, under 
normal market conditions,\26\ will invest at least 80% of its net 
assets (plus any borrowings made for investment purposes) in equity 
securities, including exchange-traded common stocks and exchange-traded 
preferred stocks. Under normal market conditions, the Fund will invest 
at least 80% of its net assets (plus any borrowings made for investment 
purposes) in securities of U.S. issuers.
---------------------------------------------------------------------------

    \26\ The term ``normal market conditions'' is defined in 
proposed Rule 8.601-E(c)(6).
---------------------------------------------------------------------------

Creations and Redemptions of Shares
    According to the Registration Statement, the Trust will offer, 
issue and sell Shares of the Fund to investors only in specified 
minimum size ``Creation Units'' through the Distributor on a continuous 
basis at the NAV per Share next determined after an order in proper 
form is received. The NAV of the Fund is expected to be determined as 
of 4:00 p.m. E.T. on each Business Day. The Trust will sell and redeem 
Creation Units of the Fund only on a Business Day. Creation Units of 
the Fund may be purchased and/or redeemed entirely for cash, as 
permissible under the procedures described below.
    The ``Creation Basket'' (as defined below) for the Fund's Shares 
will be based on the Fund's Proxy Portfolio, which is designed to 
approximate the value and performance of the Actual Portfolio. All 
Creation Basket instruments will be valued in the same manner as they 
are valued for purposes of calculating the Fund's NAV, and such 
valuation will be made in the same manner regardless of the identity of 
the purchaser or redeemer. Further, the total consideration paid for 
the purchase or redemption of a Creation Unit of Shares will be based 
on the NAV of the Fund, as calculated in accordance with the policies 
and procedures set forth in the Registration Statement.
    According to the Application, Shares will be purchased and redeemed 
in Creation Units and generally on an in-kind basis. Accordingly, 
except where the purchase or redemption will include cash under the 
circumstances specified below, purchasers will be required to purchase 
Creation Units by making an in-kind deposit of specified instruments 
(``Deposit Instruments''), and shareholders redeeming their Shares will 
receive an in-kind transfer of specified instruments (``Redemption 
Instruments''). The names and quantities of the instruments that 
constitute the Deposit Instruments and the Redemption Instruments for 
the Fund (collectively, the ``Creation Basket'') will be the same as 
the Fund's Proxy Portfolio, except to the extent purchases and 
redemptions are made entirely or in part on a cash basis.
    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 ``Cash Amount'').
    While the Fund normally will issue and redeem Shares in kind, the 
Fund may require purchases and redemptions to be made entirely or in 
part on a cash basis. In such an instance, the Fund will announce, 
before the open of trading in the Core Trading Session (normally, 9:30 
a.m. to 4:00 p.m. E.T.) on a given Business Day, that all purchases, 
all redemptions, or all purchases and redemptions on that day will be 
made wholly or partly in cash. The Fund may also determine, upon 
receiving a purchase or redemption order from an Authorized 
Participant, to have the purchase or redemption, as applicable, be made 
entirely or in part in cash.\27\ Each Business Day, before the open of 
trading on the Exchange, the Fund will cause to be published through 
the National Securities Clearing Corporation (``NSCC'') the names and 
quantities of the instruments comprising the Creation Basket, as well 
as the estimated Cash Amount (if any), for that day. The published 
Creation Basket will apply until a new Creation Basket is announced on 
the following Business Day, and there will be no intra-day changes to 
the Creation Basket except to correct errors in the published Creation 
Basket.
---------------------------------------------------------------------------

    \27\ The Adviser represents that, to the extent the Trust 
effects the creation or redemption of Shares in cash on any given 
day, such transactions will be effected in the same manner for all 
Authorized Participants placing trades with the Fund on that day.
---------------------------------------------------------------------------

    All orders to purchase Creation Units must be placed with the 
Distributor by or through an Authorized Participant, which is either: 
(1) A ``participating party'' (i.e., a broker or other participant), in 
the Continuous Net Settlement (``CNS'') System of the NSCC, a clearing 
agency registered with the Commission and affiliated with the 
Depository Trust Company (``DTC''), or (2) a DTC Participant, which in 
any case has executed a participant agreement with the Distributor and 
the transfer agent.
Timing and Transmission of Purchase Orders
    All orders to purchase (or redeem) Creation Units, whether using 
the NSCC Process or the DTC Process, must be received by the 
Distributor no later than the NAV calculation time (``NAV Calculation 
Time''), generally 4:00 p.m. E.T. on the date the order is placed 
(``Transmittal Date'') in order for the purchaser (or redeemer) to 
receive the NAV determined on the Transmittal Date.
Daily Disclosures
    With respect to the Fund, the following information will comprise 
the ``Proxy Portfolio Disclosures'' and, pursuant to the Application 
and Exemptive Order, will be publicly available on the Fund's website 
before the commencement of trading in Shares on each Business Day:
     The Proxy Portfolio holdings (including the identity and 
quantity of investments in the Proxy Portfolio) will be publicly 
available on the Fund's website before the commencement of trading in 
Shares on each Business Day.
     The historical ``Tracking Error'' between the Fund's last 
published NAV per share and the value, on a per Share basis, of the 
Fund's Proxy Portfolio calculated as of the close of trading on the 
prior Business Day will be publicly available on the Fund's website 
before the commencement of trading in Shares each Business Day.
     The ``Proxy Overlap'' will be publicly available on the 
Fund's website before the commencement of trading in Shares on each 
Business Day. The Proxy Overlap is the percentage weight overlap 
between the Proxy Portfolio's holdings compared to the Actual 
Portfolio's holdings that formed the basis for the Fund's calculation 
of NAV

[[Page 40334]]

at the end of the prior Business Day. The Proxy Overlap will be 
calculated by taking the lesser weight of each asset held in common 
between the Actual Portfolio and the Proxy Portfolio and adding the 
totals.
Availability of Information
    The Fund's website (www.im.natixis.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Fund's 
website will include on a daily basis, per Share for the Fund, the 
prior Business Day's NAV and the ``Closing Price'' or ``Bid/Ask 
Price,'' \28\ and a calculation of the premium/discount of the Closing 
Price or Bid/Ask Price against such NAV. The Adviser has represented 
that the Fund's website will also provide: (1) Any other information 
regarding premiums/discounts as may be required for other ETFs under 
Rule 6c-11 under the 1940 Act, as amended, and (2) any information 
regarding the bid/ask spread for the Fund as may be required for other 
ETFs under Rule 6c-11 under the 1940 Act, as amended. The website and 
information will be publicly available at no charge.
---------------------------------------------------------------------------

    \28\ The records relating to Bid/Ask Prices will be retained by 
the Fund or its service providers. The ``Bid/Ask Price'' is the 
midpoint of the highest bid and lowest offer based upon the National 
Best Bid and Offer as of the time of calculation of the Fund's NAV. 
The ``National Best Bid and Offer'' is the current national best bid 
and national best offer as disseminated by the Consolidated 
Quotation System or UTP Plan Securities Information Processor. The 
``Closing Price'' of Shares is the official closing price of the 
Shares on the Exchange.
---------------------------------------------------------------------------

    The Proxy Portfolio holdings (including the identity and quantity 
of investments in the Proxy Portfolio) will be publicly available on 
the Fund's website before the commencement of trading in Shares on each 
Business Day.
    Typical mutual fund-style annual, semi-annual and quarterly 
disclosures contained in the Fund's Commission filings will be provided 
on the Fund's website on a current basis.\29\ Thus, the Fund will 
publish the portfolio contents of its Actual Portfolio on a periodic 
basis, and no less than 60 days after the end of every fiscal quarter.
---------------------------------------------------------------------------

    \29\ See note 18, supra.
---------------------------------------------------------------------------

    Investors can also obtain the Fund's SAI, Shareholder Reports, Form 
N-CSR, N-PORT and Form N-CEN. The prospectus, SAI and Shareholder 
Reports are available free upon request from the Trust, and those 
documents and the Form N-CSR, N-PORT, and Form N-CEN may be viewed on-
screen or downloaded from the Commission's website. The Exchange also 
notes that pursuant to its Exemptive Order, the Fund must comply with 
Regulation Fair Disclosure, which prohibits selective disclosure of any 
material non-public information.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers. Quotation and last sale information for the 
Shares, equity securities and ETFs will be available via the 
Consolidated Tape Association (``CTA'') high-speed line or from the 
exchange on which such securities trade. Intraday pricing information 
for all constituents of the Proxy Portfolio that are exchange-traded, 
which includes all eligible instruments except cash and cash 
equivalents, will be available on the exchanges on which they are 
traded and through subscription services. Intraday pricing information 
for cash equivalents will be available through subscription services 
and/or pricing services.
Investment Restrictions
    The Shares of the Fund will conform to the initial and continued 
listing criteria under proposed Rule 8.601-E. The Fund's holdings will 
be limited to and consistent with permissible holdings as described in 
the Application and all requirements in the Application and Exemptive 
Order.\30\
---------------------------------------------------------------------------

    \30\ See note 25, supra.
---------------------------------------------------------------------------

    The Fund's investments, including derivatives, will be consistent 
with its investment objective and will not be used to enhance leverage 
(although certain derivatives and other investments may result in 
leverage). That is, the Fund's investments will not be used to seek 
performance that is the multiple or inverse multiple (e.g., 2X or -3X) 
of the Fund's primary broad-based securities benchmark index (as 
defined in Form N-1A).\31\
---------------------------------------------------------------------------

    \31\ The Fund's broad-based securities benchmark index will be 
identified in a future amendment to its Registration Statement 
following the Fund's first full calendar year of performance.
---------------------------------------------------------------------------

Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund.\32\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Rule 
7.12-E have been reached. Trading also may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. Trading in the Shares will be 
subject to NYSE Arca Rule 8.601-E(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund will be halted.
---------------------------------------------------------------------------

    \32\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

    Specifically, proposed Rule 8.601-E(d)(2)(D) provides that the 
Exchange may consider all relevant factors in exercising its discretion 
to halt trading in a series of Active Proxy 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 Active Proxy 
Portfolio Shares inadvisable. These may include: (a) The extent to 
which trading is not occurring in the securities and/or the financial 
instruments composing the Proxy Portfolio and/or Actual Portfolio; or 
(b) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. If a series 
of Active Proxy Portfolio Shares is trading on the Exchange pursuant to 
unlisted trading privileges, the Exchange shall halt trading in that 
series as specified in Rule 7.18-E(d)(1). If the Exchange becomes aware 
that the NAV, Proxy Portfolio or Actual Portfolio with respect to a 
series of Active Proxy Portfolio Shares is not disseminated to all 
market participants at the same time, the Exchange shall halt trading 
in such series until such time as the NAV, Proxy Portfolio or Actual 
Portfolio is available to all market participants at the same time.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace in all trading sessions in accordance with 
NYSE Arca Rule 7.34-E(a). As provided in NYSE Arca Rule 7.6-E, the 
minimum price variation (``MPV'') for quoting and entry of orders in 
equity securities traded on the NYSE Arca Marketplace is $0.01, with 
the exception of securities that are priced less than $1.00 for which 
the MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under proposed NYSE Arca Rule 8.601-E. The Exchange has 
appropriate rules to facilitate trading in the Shares during all 
trading sessions.
    A minimum of 100,000 Shares for the Fund will be outstanding at the 
commencement of trading on the Exchange. In addition, pursuant to 
proposed Rule 8.601-E(d)(1)(B), the Exchange, prior to commencement of

[[Page 40335]]

trading in the Shares, will obtain a representation from the issuer of 
the Shares that the NAV per Share will be calculated daily and that the 
NAV, Proxy Portfolio and the Actual Portfolio for the Fund will be made 
available to all market participants at the same time.
    With respect to Active Proxy Portfolio Shares, all of the Exchange 
member obligations relating to product description and prospectus 
delivery requirements will continue to apply in accordance with 
Exchange rules and federal securities laws, and the Exchange and the 
Financial Industry Regulatory Authority, Inc. (``FINRA'') will continue 
to monitor Exchange members for compliance with such requirements.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Exchange, as 
well as cross-market surveillances administered by FINRA on behalf of 
the Exchange, which are designed to detect violations of Exchange rules 
and applicable federal securities laws.\33\ The Exchange represents 
that these procedures are adequate to properly monitor Exchange trading 
of the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and federal securities laws applicable to 
trading on the Exchange.
---------------------------------------------------------------------------

    \33\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and 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 securities and exchange-traded instruments from such markets and 
other entities. In addition, the Exchange may obtain information 
regarding trading in such securities and 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.\34\
---------------------------------------------------------------------------

    \34\ For a list of the current members of ISG, see 
www.isgportal.org.
---------------------------------------------------------------------------

    The Adviser will make available daily to FINRA and the Exchange the 
Actual Portfolio of the Fund, upon request, in order to facilitate the 
performance of the surveillances referred to above.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    As noted above, proposed Commentary .03 to NYSE Arca Rule 8.601-E 
provides that the Exchange will implement and maintain written 
surveillance procedures for Active Proxy Portfolio Shares. As part of 
these surveillance procedures, the Investment Company's investment 
adviser will upon request by the Exchange or FINRA, on behalf of the 
Exchange, make available to the Exchange or FINRA the daily Actual 
Portfolio holdings of each series of Active Proxy Portfolio Shares. The 
Exchange believes that the ability to access the information on an as 
needed basis will provide it with sufficient information to perform the 
necessary regulatory functions associated with listing and trading 
series of Active Proxy Portfolio Shares on the Exchange, including the 
ability to monitor compliance with the initial and continued listing 
requirements as well as the ability to surveil for manipulation of 
Active Proxy Portfolio Shares.
    The Exchange will utilize its existing procedures to monitor issuer 
compliance with the requirements of proposed Rule 8.601-E. For example, 
the Exchange will continue to use intraday alerts that will notify 
Exchange personnel of trading activity throughout the day that may 
indicate that unusual conditions or circumstances are present that 
could be detrimental to the maintenance of a fair and orderly market. 
The Exchange will require from the issuer of Active Proxy Portfolio 
Shares, upon initial listing and periodically thereafter, a 
representation that it is in compliance with Rule 8.601-E. The Exchange 
notes that proposed Commentary .01 to Rule 8.601-E would require an 
issuer of Active Proxy Portfolio Shares to notify the Exchange of any 
failure to comply with the continued listing requirements of Rule 
8.601-E. In addition, the Exchange will require issuers to represent 
that they will notify the Exchange of any failure to comply with the 
terms of applicable exemptive and no-action relief. As part of its 
surveillance procedures, the Exchange will rely on the foregoing 
procedures to become aware of any non-compliance with the requirements 
of Rule 8.601-E.
    With respect to the Fund, all statements and representations made 
in this filing regarding (a) the description of the portfolio or 
reference asset, (b) limitations on portfolio holdings or reference 
assets, or (c) the applicability of Exchange listing rules specified in 
this rule filing shall constitute continued listing requirements for 
listing the Shares on the Exchange. The Adviser has represented to the 
Exchange that it will advise the Exchange of any failure by the Fund to 
comply with the continued listing requirements, and, pursuant to its 
obligations under Section 19(g)(1) of the Act, the Exchange will 
monitor for compliance with the continued listing requirements. If the 
Fund is not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under NYSE Arca Rule 5.5-
E(m).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\35\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\36\ 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.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78f(b).
    \36\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that proposed Rule 8.601-E is designed to 
prevent fraudulent and manipulative acts and practices in that the 
proposed rules relating to listing and trading of Active Proxy 
Portfolio Shares provide specific initial and continued listing 
criteria required to be met by such securities.\37\
---------------------------------------------------------------------------

    \37\ The Exchange represents that, for initial and continued 
listing, the Fund will be in compliance with Rule 10A-3 under the 
Act, as provided by NYSE Arca Rule 5.3-E.
---------------------------------------------------------------------------

    Proposed Rule 8.601-E (d) sets forth initial and continued listing 
criteria applicable to Active Proxy Portfolio Shares. Proposed Rule 
8.601-E(d)(1)(A) provides that, for each series of Active Proxy 
Portfolio Shares, the Exchange will establish a minimum number of 
Active Proxy Portfolio Shares required to be outstanding at the time of 
commencement of trading on the Exchange. In addition, proposed Rule 
8.601-E(d)(1)(B) provides, and the Exchange represents, that the 
Exchange will obtain a representation from the

[[Page 40336]]

issuer of each series of Active Proxy Portfolio Shares that the NAV per 
share for the series will be calculated daily and that the NAV, Proxy 
Portfolio and the Actual Portfolio will be made available to all market 
participants at the same time. Proposed Rule 8.601-E(d)(1)(C) provides 
that all Active Proxy Portfolio Shares shall have a stated investment 
objective, which shall be adhered to under normal market conditions. 
Proposed Rule 8.601-E(d)(2) provides that each series of Active Proxy 
Portfolio Shares will be listed and traded subject to application of 
specified continued listing criteria, as set forth above.
    Proposed Rule 8.601-E(d)(2)(D)(i) provides that the Exchange may 
consider all relevant factors in exercising its discretion to halt 
trading in a series of Active Proxy 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 Active Proxy Portfolio 
Shares inadvisable. These may include: (a) The extent to which trading 
is not occurring in the securities and/or the financial instruments 
composing the Proxy Portfolio and/or Actual Portfolio; or (b) whether 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. Proposed Rule 
8.601-E(d)(2)(D)(iii) provides that, if the Exchange becomes aware that 
the NAV, Proxy Portfolio or Actual Portfolio with respect to a series 
of Active Proxy Portfolio Shares is not made available to all market 
participants at the same time, the Exchange shall halt trading in such 
series until such time as the NAV, Proxy Portfolio or Actual Portfolio 
is available to all market participants at the same time, as 
applicable. The Exchange believes that these proposed halt procedures 
will help ensure that market participants have fair and uniform access 
to information regarding a fund's NAV, Proxy Portfolio or Actual 
Portfolio and, therefore, reduce the potential for manipulation and 
help ensure a fair and orderly market in trading of Active Proxy 
Portfolio Shares.
    Proposed Commentary .01 to NYSE Arca Rule 8.601-E provides that the 
Exchange will file separate proposals under Section 19(b) of the Act 
before the listing and trading of Active Proxy Portfolio Shares. All 
statements or representations contained in such rule filing regarding 
(a) the description of the portfolio, (b) limitations on portfolio 
holdings, or (c) the applicability of Exchange listing rules specified 
in such rule filing will constitute continued listing requirements. An 
issuer of such securities must notify the Exchange of any failure to 
comply with such continued listing requirements.
    Proposed Commentary .03 to NYSE Arca Rule 8.601-E provides that the 
Exchange will implement and maintain written surveillance procedures 
for Active Proxy Portfolio Shares. As part of these surveillance 
procedures, the Investment Company's investment adviser will, upon 
request by the Exchange or FINRA, on behalf of the Exchange, make 
available to the Exchange or FINRA the daily Actual Portfolio holdings 
of each series of Active Proxy Portfolio Shares.
    Proposed Commentary .04 provides that, if the investment adviser to 
the Investment Company issuing Active Proxy 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 and/or changes to such Investment Company's 
Actual Portfolio and/or Proxy Portfolio. Any person related to the 
investment adviser or Investment Company who makes decisions pertaining 
to the Investment Company's Actual Portfolio and/or Actual Portfolio or 
has access to non-public information regarding the Investment Company's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto must be 
subject to procedures reasonably designed to prevent the use and 
dissemination of material non-public information regarding the Actual 
Portfolio or to the Proxy Portfolio and/or changes thereto.
    Proposed Commentary .05 provides that any person or entity, 
including a custodian, Reporting Authority, distributor, or 
administrator, who has access to non-public information regarding the 
Investment Company's Actual Portfolio or the Proxy Portfolio or changes 
thereto, must be subject to procedures reasonably designed to prevent 
the use and dissemination of material non-public information regarding 
the applicable Investment Company Actual Portfolio or the Proxy 
Portfolio or changes thereto. 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 Actual Portfolio or Proxy Portfolio.
    The Exchange believes proposed Commentary .04 and proposed 
Commentary .05 will act as a safeguard against any misuse and improper 
dissemination of non-public information related to the Fund's Actual 
Portfolio or Proxy Portfolio or changes thereto. The requirement that 
any person or entity implement procedures reasonably designed to 
prevent the use and dissemination of material non-public information 
regarding the Actual Portfolio or Proxy Portfolio 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 
purpose. As such, the Exchange believes that this proposal is designed 
to prevent fraudulent and manipulative acts and practices.
    The proposed addition of Active Proxy Portfolio Shares to the 
enumerated derivative and special purpose securities that are subject 
to the provisions of Rule 5.3-E (Corporate Governance and Disclosure 
Policies) and Rule 5.3-E (e) (Shareholder/Annual Meetings) would 
subject Active Proxy Portfolio Shares to the same requirements 
currently applicable to other 1940 Act-registered investment company 
securities (i.e., Investment Company Units, Managed Fund Shares and 
Portfolio Depositary Receipts.
    With respect to the proposed listing and trading of Shares of the 
Fund, the Exchange believes that the proposed rule change is designed 
to prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Rule 8.601-E. The 
Fund's holdings will conform to the permissible investments as set 
forth in the Application and Exemptive Order and the holdings will be 
consistent with all requirements in the Application and Exemptive 
Order.\38\ Any foreign common stocks held by the Fund will be traded on 
an exchange that is a member of the ISG or with which the Exchange has 
in place a comprehensive surveillance sharing agreement. The Adviser 
has represented to the Exchange that it will advise the Exchange of any 
failure by the Fund to comply with the continued listing requirements, 
and, pursuant to its obligations under Section 19(g)(1) of the Act, the 
Exchange will monitor for compliance with the continued listing 
requirements. If the Fund is not in compliance with the applicable 
listing requirements, the Exchange will

[[Page 40337]]

commence delisting procedures under NYSE Arca Rule 5.5-E(m).
---------------------------------------------------------------------------

    \38\ See note 25, supra.
---------------------------------------------------------------------------

    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and 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 securities and exchange-traded instruments from such markets and 
other entities. In addition, the Exchange may obtain information 
regarding trading in such securities and 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.
    The Exchange, after consulting with various LMMs that trade ETFs on 
the Exchange, believes that market makers will be able to make 
efficient and liquid markets priced near the ETF's intraday value, and 
market makers employ market making techniques such as ``statistical 
arbitrage,'' including correlation hedging, beta hedging, and 
dispersion trading, which is currently used throughout the financial 
services industry, to make efficient markets in exchange-traded 
products.\39\ For Active Proxy Portfolio Shares, market makers may use 
the knowledge of a fund's means of achieving its investment objective, 
as described in the applicable fund registration statement, as well as 
a fund's disclosed Proxy Portfolio, to construct a hedging proxy for a 
fund to manage a market maker's quoting risk in connection with trading 
fund shares. Market makers can then conduct statistical arbitrage 
between their hedging proxy and shares of a fund, buying and selling 
one against the other over the course of the trading day. This ability 
should permit market makers to make efficient markets in an issue of 
Active Proxy Portfolio Shares without precise knowledge of a fund's 
underlying portfolio. This is similar to certain other existing 
exchange-traded products (for example, ETFs that invest in foreign 
securities that do not trade during U.S. trading hours), in which 
spreads may be generally wider in the early days of trading and then 
narrow as market makers gain more confidence in their real-time hedges.
---------------------------------------------------------------------------

    \39\ See note 20, supra.
---------------------------------------------------------------------------

    The daily dissemination of the identity and quantity of Proxy 
Portfolio component investments, together with the right of Authorized 
Participants to create and redeem each day at the NAV, will be 
sufficient for market participants to value and trade shares in a 
manner that will not lead to significant deviations between the Bid/Ask 
Price and NAV of shares of a series of Active Proxy Portfolio Shares.
    The pricing efficiency with respect to trading a series of Active 
Proxy Portfolio Shares will generally rest on the ability of market 
participants to arbitrage between the shares and a fund's portfolio, in 
addition to the ability of market participants to assess a fund's 
underlying value accurately enough throughout the trading day in order 
to hedge positions in shares effectively. Professional traders can buy 
shares that they perceive to be trading at a price less than that which 
will be available at a subsequent time and sell shares they perceive to 
be trading at a price higher than that which will be available at a 
subsequent time. It is expected that, as part of their normal day-to-
day trading activity, market makers assigned to shares by the Exchange, 
off-exchange market makers, firms that specialize in electronic 
trading, hedge funds and other professionals specializing in short-
term, non-fundamental trading strategies will assume the risk of being 
``long'' or ``short'' shares through such trading and will hedge such 
risk wholly or partly by simultaneously taking positions in correlated 
assets \40\ or by netting the exposure against other, offsetting 
trading positions--much as such firms do with existing ETFs and other 
equities. Disclosure of a fund's investment objective and principal 
investment strategies in its prospectus and SAI should permit 
professional investors to engage easily in this type of hedging 
activity.
---------------------------------------------------------------------------

    \40\ Price correlation trading is used throughout the financial 
industry. It is used to discover both trading opportunities to be 
exploited, such as currency pairs and statistical arbitrage, as well 
as for risk mitigation such as dispersion trading and beta hedging. 
These correlations are a function of differentials, over time, 
between one or multiple securities pricing. Once the nature of these 
price deviations have been quantified, a universe of securities is 
searched in an effort to, in the case of a hedging strategy, 
minimize the differential. Once a suitable hedging basket has been 
identified, a trader can minimize portfolio risk by executing the 
hedging basket. The trader then can monitor the performance of this 
hedge throughout the trade period, making corrections where 
warranted.
---------------------------------------------------------------------------

    The Exchange believes that the Fund and Active Proxy Portfolio 
Shares generally, will provide investors with a greater choice of 
active portfolio managers and active strategies through which they can 
manage their assets in an ETF structure. This greater choice of active 
asset management is expected to be similar to the diversity of active 
managers and strategies available to mutual fund investors. Unlike 
mutual fund investors, investors in Active Proxy Portfolio Shares would 
also accrue the benefits derived from the ETF structure, such as lower 
fund costs, tax efficiencies, intraday liquidity, and pricing that 
reflects current market conditions rather than end-of-day pricing.
    The Adviser represents that, unlike ETFs that publish their 
portfolios on a daily basis, the Fund, as Active Proxy Portfolio 
Shares, proposes to allow for efficient trading of Shares through an 
effective Fund portfolio transparency substitute--Proxy Portfolio 
transparency. The Adviser believes that this approach will provide an 
important benefit to investors by protecting the Fund from the 
potential for front-running of portfolio transactions and the potential 
for free-riding on the Fund's portfolio strategies, each of which could 
adversely impact the performance of the Fund.
    The Fund will utilize the NYSE Proxy Portfolio Methodology, 
allowing market participants to assess the intraday value and 
associated risk of the Fund's Actual Portfolio and thereby facilitate 
the purchase and sale of Shares by investors in the secondary market at 
prices that do not vary materially from their NAV.
    The Exchange believes that Active Proxy Portfolio Shares will 
provide the platform for many more asset managers to launch ETFs, 
increasing the investment choices for consumers of actively managed 
funds, which should lead to a greater competitive landscape that can 
help to reduce the overall costs of active investment management for 
retail investors. Unlike mutual funds, Active Proxy Portfolio Shares 
would be able to use the efficient share settlement system in place for 
ETFs today, translating into a lower cost of maintaining shareholder 
accounts and processing transactions.
    The Fund's investments, including derivatives, will be consistent 
with its investment objective and will not be used to enhance leverage 
(although certain derivatives and other investments may result in 
leverage). That is, the Fund's investments will not be used to seek 
performance that is the multiple or inverse multiple (e.g., 2X or -3X) 
of the Fund's primary broad-based securities benchmark index (as 
defined in Form N-1A).
    The Adviser represents that investors will also benefit because the 
Fund's operating costs, such as transfer agency costs, are generally 
lower in ETFs than in mutual funds. The Fund will have access to the 
identical clearing and settlement procedures now used by U.S. domiciled 
ETFs, and therefore, should experience many of the operational and

[[Page 40338]]

cost efficiencies benefitting current ETF investors.
    The Adviser represents further that in-kind Share creation/
redemption orders will allow the Fund to enjoy overall transaction 
costs lower than those experienced by mutual funds. The Fund's in-kind 
Share creation and redemption process will facilitate and enhance 
active management strategies by generally limiting the portfolio 
manager's need to transact in a large volume of trades in order to 
maintain desired investment exposures. In addition, the Adviser 
represents that the Fund will receive tax efficiency benefits of the 
ETF structure because of in-kind Share creation and redemption 
activity.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of a 
series of Active Proxy Portfolio Shares that the NAV per share of a 
fund will be calculated daily and that the NAV, Proxy Portfolio and 
Actual Portfolio will be made available to all market participants at 
the same time. With respect to the Fund, investors can also obtain the 
Fund's SAI, shareholder reports, and its Form N-CSR, Form N-PORT and 
Form N-CEN. The Fund's SAI and shareholder reports will be available 
free upon request from the Fund, and those documents and the Form N-
CSR, Form N-PORT and Form N-CEN 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. The website for the Fund will include a form of the 
prospectus for the Fund that may be downloaded, and additional data 
relating to NAV and other applicable quantitative information, updated 
on a daily basis. The Proxy Portfolio holdings (including the identity 
and quantity of investments in the Proxy Portfolio) will be publicly 
available on the Fund's website before the commencement of trading in 
Shares on each Business Day.
    Trading in Shares of the Fund will be halted if the circuit breaker 
parameters in NYSE Arca Rule 7.12-E have been reached or because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. Trading in the Shares will be 
subject to NYSE Arca Rule 8.601-E (d)(2)(D), which sets forth 
circumstances under which Shares of the Fund will be halted. In 
addition, as noted above, investors will have ready access to quotation 
and last sale information for the Shares. The Shares will conform to 
the initial and continued listing criteria under proposed Rule 8.601-E.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
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 quotation and last sale 
information for the Shares.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes the 
proposed rule change would permit listing and trading of another type 
of actively-managed ETF that has characteristics different from 
existing actively-managed and index ETFs and would introduce additional 
competition among various ETF products to the benefit of investors.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 6, is consistent with the Act and 
rules and regulations thereunder applicable to a national securities 
exchange.\41\ In particular, the Commission finds that the proposed 
rule change, as modified by Amendment No. 6 is consistent with Section 
6(b)(5) of the Act,\42\ which requires, among other things, that the 
Exchange's rules be designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest.
---------------------------------------------------------------------------

    \41\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \42\ 15 U.S.C. 78f(b)(5).
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A. Proposed NYSE Arca Rule 8.601-E

    Pursuant to the Exemptive Order,\43\ Active Proxy Portfolio Shares 
would not be required to disclose the actual holdings of the Investment 
Company on a daily basis. Instead, Active Proxy Portfolio Shares would 
be required to publicly disclose the Proxy Portfolio, which is designed 
to closely track the performance of the holdings of the Investment 
Company, on a daily basis. Like other registered management investment 
companies, Active Proxy Portfolio Shares would be required to disclose 
the actual holdings of the Investment Company within at least 60 days 
following the end of every fiscal quarter. For reasons described below, 
the Commission believes that NYSE Arca Rule 8.601-E is sufficiently 
designed to be consistent with the Act and to help prevent fraudulent 
and manipulative acts and practices and to maintain a fair and orderly 
market for Active Proxy Portfolio Shares.
---------------------------------------------------------------------------

    \43\ See supra note 21.
---------------------------------------------------------------------------

    The Commission finds that the Exchange's proposal contains adequate 
rules and procedures to govern the listing and trading of Active Proxy 
Portfolio Shares on the Exchange. The Commission notes that the 
proposed listing and trading rules for Active Proxy Portfolio Shares, 
where appropriate, are similar to existing Exchange rules relating to 
exchange-traded funds, in particular, Managed Fund Shares and Managed 
Portfolio Shares.\44\ The Commission also notes that it recently 
approved Cboe BZX Exchange, Inc.'s proposed listing requirements for 
Tracking Fund Shares that are substantively identical to the Exchange's 
proposal.\45\ Moreover, prior to listing and/or trading on the 
Exchange, the Exchange must file a

[[Page 40339]]

separate proposed rule change pursuant to Section 19(b) of the Act for 
each series of Active Proxy Portfolio Shares.\46\ All such shares 
listed and/or traded under proposed NYSE Arca Rule 8.601-E will be 
subject to the full panoply of NYSE Arca rules and procedures that 
currently govern the trading of equity securities on the Exchange.
---------------------------------------------------------------------------

    \44\ The proposed rules relating to limitation of liability 
(proposed NYSE Arca Rule 8.601-E(e)), termination (proposed NYSE 
Arca Rule 8.601-E(d)(2)(E)), and voting (proposed NYSE Arca Rule 
8.601-E(d)(2)(F)) are substantively similar or identical to existing 
provisions for Managed Fund Shares and Managed Portfolio Shares. See 
NYSE Arca Rule 8.600-E(e) and NYSE Arca Rule 8.900-E(e), NYSE Arca 
Rule 8.600-E(d)(2)(E) and NYSE Arca Rule 8.900-E(d)(2)(D), and NYSE 
Arca Rule 8.600-E(d)(2)(F) and NYSE Arca Rule 8.900-E(d)(2)(E), 
respectively.
    \45\ See Securities Exchange Act Release No. 88887 (May 15, 
2020), 85 FR 30990 (May 21, 2020) (SR-CboeBZX-2019-107).
    \46\ See proposed NYSE Arca Rule 8.601-E, Commentary .01.
---------------------------------------------------------------------------

    For the initial listing of each series of Active Proxy Portfolio 
Shares under proposed NYSE Arca Rule 8.601-E, the Exchange must 
establish a minimum number of Active Proxy Portfolio Shares required to 
be outstanding at the commencement of trading. In addition, the 
Exchange must obtain a representation from the issuer of each series of 
Active Proxy Portfolio Shares that the NAV per share for the series 
will be calculated daily and that the NAV, Proxy Portfolio, and Actual 
Portfolio will be made publicly available to all market participants at 
the same time. Moreover, all Active Proxy Portfolio Shares must have a 
stated investment objective, which must be adhered to under normal 
market conditions.\47\
---------------------------------------------------------------------------

    \47\ See proposed NYSE Arca Rule 8.601-E(d)(1).
---------------------------------------------------------------------------

    Although the actual portfolio holdings of the Active Proxy 
Portfolio Shares are not publicly disclosed on a daily basis, the 
Commission believes that the proposed listing standards under proposed 
NYSE Arca Rule 8.601-E, along with the required dissemination of the 
Proxy Portfolio, are adequate to ensure transparency of key information 
regarding the Active Proxy Portfolio Shares and that such information 
is made available to market participants at the same time. Namely, the 
Proxy Portfolio would be made publicly available on the website for 
each series of Active Proxy Portfolio Shares at least once daily and 
would be made available to all market participants at the same 
time.\48\ In addition, like all other registered management investment 
companies, each series of Active Proxy Portfolio Shares would be 
required to publicly disclose its portfolio holdings information on a 
quarterly basis, within at least 60 days following the end of every 
fiscal quarter.\49\ If the Exchange becomes aware that the NAV, Proxy 
Portfolio, or Actual Portfolio is not being made available to all 
market participants at the same time, then the Exchange will halt 
trading in such series until such time as the NAV, Proxy Portfolio, or 
Actual Portfolio is available to all market participants at the same 
time, as applicable.\50\ Further, if either the Proxy Portfolio or 
Actual Portfolio is not made available to all market participants at 
the same time, the Exchange will consider the suspension of trading in 
and will commence delisting proceedings for a series of Active Proxy 
Portfolio Shares.\51\ Moreover, the Exchange represents that a series 
of Active Proxy Portfolio Shares' Statement of Additional Information 
and shareholder reports will be available for free upon request from 
the Investment Company, and that those documents and the Form N-PORT, 
Form N-CSR, and Form N-CEN may be viewed on-screen or downloaded from 
the Commission's website at www.sec.gov.
---------------------------------------------------------------------------

    \48\ See proposed NYSE Arca Rule 8.601-E(d)(2)(B)(i).
    \49\ See proposed NYSE Arca Rule 8.601-E(d)(2)(A)(i). See also 
Rules 30e-1, 30d-1, and 30b1-5 under the 1940 Act.
    \50\ See proposed NYSE Arca Rule 8.601-E(d)(2)(D)(iii).
    \51\ See proposed NYSE Arca Rule 8.601-E(d)(2)(C)(ii).
---------------------------------------------------------------------------

    The Commission also finds that the Exchange's rules with respect to 
trading halts and suspensions under proposed NYSE Arca Rule 8.601-E are 
designed to help maintain a fair and orderly market. According to the 
proposal, the Exchange may consider all relevant factors in exercising 
its discretion to halt trading in a series of Active Proxy Portfolio 
Shares. Further, trading may be halted because of market conditions or 
for reasons that, in the view of the Exchange, make trading in the 
series of Active Proxy Portfolio Shares inadvisable. These may include 
the extent to which trading is not occurring in the securities and/or 
the financial instruments comprising the Proxy Portfolio and/or Actual 
Portfolio, or whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present.\52\
---------------------------------------------------------------------------

    \52\ See proposed NYSE Arca Rule 8.601-E(d)(2)(D)(i). In 
addition, if a series of Active Proxy Portfolio Shares is trading on 
the Exchange pursuant to unlisted trading privileges, the Exchange 
shall halt trading in that series as specified in NYSE Arca Rule 
7.18-E(d)(1) (Trading Halts for UTP Derivative Securities Products). 
See proposed NYSE Arca Rule 8.601-E(d)(2)(D)(ii).
---------------------------------------------------------------------------

    Other provisions of the Exchange's rule pertaining to suspension 
are substantially consistent with provisions that currently exist for 
Managed Fund Shares and Managed Portfolio Shares. Those provisions 
state that the Exchange will consider the suspension of trading in, and 
will commence delisting proceedings under NYSE Arca Rule 5.5-E(m) for, 
a series of Active Proxy Portfolio Shares if: (1) Any of the continued 
listing requirements set forth in NYSE Arca Rule 8.601-E are not 
continuously maintained; (2) following the initial twelve-month period 
after commencement of trading on the Exchange of a series of Active 
Proxy Portfolio Shares, there are fewer than 50 beneficial holders of 
the series of Active Proxy Portfolio Shares; (3) the Exchange is 
notified, or otherwise becomes aware, that the Investment Company has 
failed to file any filings required by the Commission or is not in 
compliance with the conditions of any 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 Active Proxy 
Portfolio Shares; (4) any of the statements or representations 
regarding the description of the portfolio, limitations on portfolio 
holdings, or the applicability of Exchange listing rules, specified in 
the Exchange's rule filing pursuant to Section 19(b) of the Act to 
permit the listing and trading of a series of Active Proxy Portfolio 
Shares, is not continuously maintained; or (5) such other event shall 
occur or condition exists which, in the opinion of the Exchange, makes 
further dealings of the Active Proxy Portfolio Shares on the Exchange 
inadvisable.\53\
---------------------------------------------------------------------------

    \53\ See proposed NYSE Arca Rule 8.601-E(d)(2)(C). See also 
supra note 51 and accompanying text.
---------------------------------------------------------------------------

    Finally, the Commission believes that the requirements of proposed 
NYSE Arca Rule 8.601-E are consistent with the Act and, more 
specifically, are reasonably designed to help prevent fraudulent and 
manipulative acts and practices. The Commission notes that, because 
Actual Proxy Portfolio Shares would not publicly disclose on a daily 
basis information about the holdings of the Actual Portfolio, it is 
vital that such information be kept confidential and not be subject to 
misuse. Accordingly, to help ensure that the portfolio information be 
kept confidential and the shares not be susceptible to fraud or 
manipulation, proposed NYSE Arca Rule 8.601-E, Commentary .04 requires 
that, if the investment adviser to the Investment Company issuing 
Active Proxy Portfolio Shares is registered as a broker-dealer or is 
affiliated with a broker-dealer, such investment adviser must 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's Actual Portfolio and/or Proxy 
Portfolio. Further, proposed Commentary .04 also requires that any 
person related to the

[[Page 40340]]

investment adviser or Investment Company who makes decisions pertaining 
to the Investment Company's Actual Portfolio and/or Proxy Portfolio or 
has access to non-public information regarding the Investment Company's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto must be 
subject to procedures reasonably designed to prevent the use and 
dissemination of material non-public information regarding the Actual 
Portfolio and/or the Proxy Portfolio or changes thereto. In addition, 
proposed NYSE Arca Rule 8.601-E, Commentary .05 provides that any 
person or entity, including a custodian, Reporting Authority, 
distributor, or administrator, who has access to non-public information 
regarding the Investment Company's Actual Portfolio or the Proxy 
Portfolio or changes thereto, must be subject to procedures reasonably 
designed to prevent the use and dissemination of material non-public 
information regarding the applicable Investment Company Actual 
Portfolio or the Proxy Portfolio or changes thereto. Moreover, if any 
such person or entity is registered as a broker-dealer or affiliated 
with a broker-dealer, such person or entity must erect and maintain a 
``fire wall'' between the person or entity and the broker-dealer with 
respect to access to information concerning the composition of and/or 
changes to such Investment Company Actual Portfolio or Proxy Portfolio. 
The proposed rules also require that the Exchange implement and 
maintain written surveillance procedures for Active Proxy Portfolio 
Shares.\54\ Finally, to ensure that the Exchange has the appropriate 
information to monitor and surveil its market, proposed NYSE Arca Rule 
8.601-E, Commentary .03 also requires that the Investment Company's 
investment adviser will, upon request by the Exchange or FINRA, on 
behalf of the Exchange, make available to the Exchange or FINRA the 
daily Actual Portfolio holdings of each series of Active Proxy 
Portfolio Shares.
---------------------------------------------------------------------------

    \54\ See proposed NYSE Arca Rule 8.601-E, Commentary .03.
---------------------------------------------------------------------------

    For the reasons discussed above, the Commission finds that proposed 
NYSE Arca Rule 8.601-E for Active Proxy Portfolio Shares is consistent 
with Section 6(b)(5) of the Act.
    Further, the Commission finds that the proposed amendments to NYSE 
Arca Rule 5.3-E and NYSE Arca Rule 5.3-E(e) to include Active Proxy 
Portfolio Shares among the list of derivative or special purpose 
securities that are subject to a limited set of corporate governance 
and disclosure policies, and among the derivative or special purpose 
securities to which the requirements concerning shareholder annual 
meetings do not apply, are consistent with Section 6(b)(5) of the Act 
because these amendments will provide that Active Proxy Portfolio 
Shares will be treated in a manner consistent with other derivative 
securities listed and traded on the Exchange.

B. Listing and Trading of Natixis U.S. Equity Opportunities ETF

    The Commission believes that the proposal is reasonably designed to 
promote fair disclosure of information that may be necessary to price 
the Shares appropriately and to prevent trading in the Shares when a 
reasonable degree of certain pricing transparency cannot be assured. As 
such, the Commission believes the proposal is reasonably designed to 
maintain a fair and orderly market for trading the Shares. The 
Commission also finds that the proposal is consistent with Section 
11A(a)(1)(C)(iii) of the Act, which sets forth Congress's finding that 
it is in the public interest and appropriate for the protection of 
investors and the maintenance of fair and orderly markets to assure the 
availability to brokers, dealers, and investors of information with 
respect to quotations for, and transactions in, securities.
    Specifically, the Commission notes that the Exchange, prior to 
commencement of trading in the Shares, will obtain a representation 
from the issuer of the Shares that the NAV per Share of the Fund will 
be calculated daily and that the NAV, Proxy Portfolio, and Actual 
Portfolio of the Fund will be made available to all market participants 
at the same time.\55\ 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, equity 
securities, and ETFs will be available via the Consolidated Tape 
Association high-speed line or from the exchange on which such 
securities trade. Moreover, the Fund's website will include additional 
information updated on a daily basis, including, on a per Share basis 
for the Fund, the prior business day's NAV, the closing price or bid/
ask price at the time of calculation of such NAV, and a calculation of 
the premium or discount of the closing price or bid/ask price against 
such NAV. The website will also disclose the percentage weight overlap 
between the holdings of the Proxy Portfolio compared to the Actual 
Portfolio holdings for the prior business day, and any other 
information regarding premiums and discounts and the bid/ask spread for 
the Fund as may be required for other ETFs under Rule 6c-11 under the 
1940 Act. The website and information will be publicly available at no 
charge.
---------------------------------------------------------------------------

    \55\ See NYSE Arca Rule 8.601-E(d)(1)(B).
---------------------------------------------------------------------------

    In addition, the Exchange states that intraday pricing information 
for all constituents of the Proxy Portfolio that are exchange-traded, 
which includes all eligible instruments except cash and cash 
equivalents, will be available on the exchanges on which they are 
traded and through subscription services, and that intraday pricing 
information for cash equivalents will be available through subscription 
services and/or pricing services.
    The Commission also believes that the proposal is reasonably 
designed to help prevent fraudulent and manipulative acts and 
practices. Specifically, the Exchange provides that:
     The Adviser is not registered as a broker-dealer but is 
affiliated with a broker-dealer and has implemented and will maintain a 
``fire wall'' with respect to such broker-dealer affiliate regarding 
access to information concerning the composition of and/or changes to 
the Fund's Actual Portfolio and/or Proxy Portfolio;
     The Fund's Sub-Advisers are not registered as a broker-
dealer but are affiliated with a broker-dealer, and each Sub-Adviser 
has implemented and will maintain a ``fire wall'' with respect to its 
respective broker-dealer affiliate regarding access to information 
concerning the composition of and/or changes to the Fund's Actual 
Portfolio and/or Proxy Portfolio;
     Any person related to the Adviser, each Sub-Adviser, or 
the Fund who makes decisions pertaining to the Fund's Actual Portfolio 
or Proxy Portfolio or who has access to non-public information 
regarding the Fund's Actual Portfolio and/or the Proxy Portfolio or 
changes thereto are subject to procedures reasonably designed to 
prevent the use and dissemination of material non-public information 
regarding the Fund's Actual Portfolio and/or the Proxy Portfolio or 
changes thereto;
     In the event (a) the Adviser or a Sub-Adviser becomes 
registered as a broker-dealer or becomes newly affiliated with a 
broker-dealer or (b) any new adviser or sub-adviser is a registered 
broker-dealer, or becomes affiliated with a broker-dealer, it will 
implement and maintain a fire wall with respect to its relevant 
personnel or its

[[Page 40341]]

broker-dealer affiliate regarding access to information concerning the 
composition of and/or changes to the Fund's Actual Portfolio and/or 
Proxy Portfolio, and will be subject to procedures designed to prevent 
the use and dissemination of material non-public information regarding 
the Fund's Actual Portfolio and/or Proxy Portfolio or changes thereto; 
and
     Any person or entity, including any service provider for 
the Fund, who has access to non-public information regarding the Fund's 
Actual Portfolio or the Proxy Portfolio or changes thereto will be 
subject to procedures reasonably designed to prevent the use and 
dissemination of material non-public information regarding the Fund's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto, and if 
any such person or entity is registered as a broker-dealer or 
affiliated with a broker-dealer, such person or entity has erected and 
will maintain a ``fire wall'' between the person or entity and the 
broker-dealer with respect to access to information concerning the 
composition of and/or changes to the Fund's Actual Portfolio and/or 
Proxy Portfolio.
    Finally, the Exchange represents that trading in the Shares will be 
subject to the existing trading surveillances, administered by the 
Exchange, as well as cross-market surveillances administered by FINRA 
on behalf of the Exchange,\56\ and that these surveillance procedures 
are adequate to properly monitor Exchange trading of the Shares in all 
trading sessions and to deter and detect violations of Exchange rules 
and federal securities laws applicable to trading on the Exchange.
---------------------------------------------------------------------------

    \56\ See NYSE Arca Rule 8.601-E, Commentary .03, which requires, 
as part of the surveillance procedures for Active Proxy Portfolio 
Shares, the Fund's investment adviser to, upon request by the 
Exchange or FINRA, on behalf of the Exchange, make available to the 
Exchange or FINRA the daily Actual Portfolio holdings of the Fund.
---------------------------------------------------------------------------

    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.
    In support of this proposal, the Exchange represents that:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Rule 8.601-E.
    (2) A minimum of 100,000 Shares for the Fund will be outstanding at 
the commencement of trading on the Exchange.
    (3) The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed, and may obtain information, regarding trading in 
the Shares and underlying exchange-traded instruments with other 
markets and other entities that are members of the ISG. In addition, 
the Exchange may obtain information regarding trading in such 
securities and exchange-traded instruments from markets and other 
entities with which the Exchange has in place a comprehensive 
surveillance sharing agreement. Any foreign common stocks held by the 
Fund will be traded on an exchange that is a member of the ISG or with 
which the Exchange has in place a comprehensive surveillance sharing 
agreement.
    (4) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (5) For initial and continued listing, the Fund will be in 
compliance with Rule 10A-3 under the Act.\57\
---------------------------------------------------------------------------

    \57\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (6) The Fund's holdings will conform to the permissible investments 
as set forth in the Application and Exemptive Order and the holdings 
will be consistent with all requirements set forth in the Application 
and Exemptive Order. The Fund's investments, including derivatives, 
will be consistent with its investment objective and will not be used 
to enhance leverage (although certain derivatives and other investments 
may result in leverage).
    (7) With respect to Active Proxy Portfolio Shares, all of the 
Exchange member obligations relating to product description and 
prospectus delivery requirements will continue to apply in accordance 
with Exchange rules and federal securities laws, and the Exchange and 
FINRA will continue to monitor Exchange members for compliance with 
such requirements.
    The Exchange also represents that all statements and 
representations made in the filing regarding: (1) The description of 
the portfolio or reference assets; (2) limitations on portfolio 
holdings or reference assets; or (3) the applicability of Exchange 
listing rules specified in the filing constitute continued listing 
requirements for listing the Shares on the Exchange. In addition, the 
Exchange represents that the Adviser will advise the Exchange of any 
failure by the Fund to comply with the continued listing requirements 
and, pursuant to its obligations under Section 19(g)(1) of the Act, the 
Exchange will monitor \58\ for compliance with the continued listing 
requirements. If the Fund is not in compliance with the applicable 
listing requirements, the Exchange will commence delisting procedures 
under NYSE Arca Rule 5.5-E(m).
---------------------------------------------------------------------------

    \58\ The Commission notes that certain proposals for the listing 
and trading of exchange-traded products include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Securities Exchange Act Release No. 
77499 (April 1, 2016), 81 FR 20428, 20432 (April 7, 2016) (SR-BATS-
2016-04). In the context of this representation, it is the 
Commission's view that ``monitor'' and ``surveil'' both mean ongoing 
oversight of compliance with the continued listing requirements. 
Therefore, the Commission does not view ``monitor'' as a more or 
less stringent obligation than ``surveil'' with respect to the 
continued listing requirements.
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 6 to the Proposed Rule 
Change

    Interested persons are invited to submit written data, views, and 
arguments concerning whether the proposed rule change, as modified by 
Amendment No. 6, is consistent with the Exchange Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2019-95 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSEArca-2019-95. 
This file number should be included on the subject line if email is 
used. To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for website 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street NE, Washington, DC 20549, on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit

[[Page 40342]]

personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2019-95, and should 
be submitted on or before July 27, 2020.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 6

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 6, prior to the thirtieth day 
after the date of publication of notice of the filing of Amendment No. 
6 in the Federal Register. In Amendment No. 6, the Exchange amended 
proposed Rule 8.601-E to, among other things, (i) revise the 
circumstances under which it would consider the suspension of trading 
in, and commence delisting proceedings for, a series of Active Proxy 
Portfolio Shares; (ii) require that any person or entity who has access 
to non-public information regarding the Investment Company's Actual 
Portfolio or the Proxy Portfolio or changes thereto, (a) be subject to 
procedures reasonably designed to prevent the use and dissemination of 
material non-public information regarding the applicable Investment 
Company Actual Portfolio or the Proxy Portfolio or changes thereto, and 
(b) if such person or entity is registered as a broker-dealer or 
affiliated with a broker-dealer, to erect and maintain a ``fire wall'' 
between the person or entity and the broker-dealer with respect to 
access to information concerning the composition of and/or changes to 
such Investment Company Actual Portfolio or Proxy Portfolio; and (iii) 
remove unnecessary discussion about an information bulletin to be 
provided to the Exchange's members regarding trading in the Shares. 
Amendment No. 6 also provides other clarifications and additional 
information related to the Fund.\59\ The changes and additional 
information in Amendment No. 6 assist the Commission in finding that 
the proposal is consistent with the Exchange Act. Accordingly, the 
Commission finds good cause, pursuant to Section 19(b)(2) of the 
Exchange Act,\60\ to approve the proposed rule change, as modified by 
Amendment No. 6, on an accelerated basis.
---------------------------------------------------------------------------

    \59\ See Amendment No. 6, supra note 12.
    \60\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\61\ that the proposed rule change (SR-NYSEArca-2019-95), as modified 
by Amendment No. 6, be, and it hereby is, approved on an accelerated 
basis.
---------------------------------------------------------------------------

    \61\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\62\
---------------------------------------------------------------------------

    \62\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-14388 Filed 7-2-20; 8:45 am]
BILLING CODE 8011-01-P

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