Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the Alger Mid Cap 40 ETF and Alger 25 ETF Under Rule 8.900-E, Managed Portfolio Shares, 59354-59361 [2020-20696]
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Federal Register / Vol. 85, No. 183 / Monday, September 21, 2020 / Notices
of the Act,3 in general, and furthers the
objectives of Section 6(b)(5) of the Act,4
in particular, in that it is designed 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 the
proposed rule change removes
impediments to and perfects the
mechanism of a free and open market
because updating its data feeds table of
market centers for which the exchange
consumes quotation data through a
direct feed will provide clarity to market
participants. Additionally, it is
necessary and consistent with the
public interest and the protection of
investors to update the Exchange’s table
of market centers in Rule 3304 in order
to provide transparency with respect to
all the direct proprietary and network
processor feeds from which the
Exchange obtains market data.
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 not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change is not designed to
address any competitive issue; instead,
its purpose is to enhance transparency
with respect to the operation of the
Exchange and its use of market data
feeds.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 5 and Rule 19b–
4(f)(6) thereunder.6
3 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
5 15 U.S.C. 78s(b)(3)(A).
6 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–Phlx–2020–44, and should
be submitted on or before October 13,
2020.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
J. Matthew DeLesDernier,
Assistant Secretary.
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–
Phlx–2020–44 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
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–Phlx–2020–44. 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
4 15
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description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
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[FR Doc. 2020–20697 Filed 9–18–20; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–89869; File No. SR–
NYSEArca–2020–80]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To List and Trade Shares
of the Alger Mid Cap 40 ETF and Alger
25 ETF Under Rule 8.900–E, Managed
Portfolio Shares
September 15, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 1, 2020, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. 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 list and
trade shares of the following under Rule
8.900–E (Managed Portfolio Shares):
Alger Mid Cap 40 ETF and Alger 25
ETF. The proposed change is available
on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
7 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NYSE Arca Rule 8.900–E permits the
listing and trading, or trading pursuant
to unlisted trading privileges, of
Managed Portfolio Shares, which are
securities issued by an actively managed
open-end investment management
company.4 Rule 8.900–E(b)(1) requires
the Exchange to file separate proposals
under Section 19(b) of the Act before
listing and trading any series of
Managed Portfolio Shares on the
Exchange. Therefore, the Exchange is
submitting this proposal in order to list
and trade Managed Portfolio Shares of
the Alger Mid Cap 40 ETF and the Alger
25 ETF (each a ‘‘Fund’’ and,
collectively, the ‘‘Funds’’) under Rule
8.900–E.
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Description of the Funds and the Trust
The shares of each Fund (the
‘‘Shares’’) will be issued by The Alger
ETF Trust (the ‘‘Trust’’), a business trust
organized under the laws of the state of
4 Rule 8.900–E(c)(1) provides that the term
‘‘Managed Portfolio Share’’ means a security that (a)
represents an interest in an investment company
registered under the Investment Company Act of
1940 (‘‘Investment Company’’) organized as an
open-end management investment company that
invests in a portfolio of securities selected by the
Investment Company’s investment adviser
consistent with the Investment Company’s
investment objectives and policies; (b) is issued in
a Creation Unit, or multiples thereof, in return for
a designated portfolio of instruments (and/or an
amount of cash) with a value equal to the next
determined net asset value and delivered to the
Authorized Participant (as defined in the
Investment Company’s Form N–1A filed with the
Commission) through a Confidential Account; (c)
when aggregated into a Redemption Unit, or
multiples thereof, may be redeemed for a
designated portfolio of instruments (and/or an
amount of cash) with a value equal to the next
determined net asset value delivered to the
Confidential Account for the benefit of the
Authorized Participant; and (d) the portfolio
holdings for which are disclosed within at least 60
days following the end of every fiscal quarter.
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Massachusetts and registered with the
Commission as an open-end
management investment company.5 The
investment adviser to each Fund will be
Fred Alger Management, LLC (the
‘‘Adviser’’). Fred Alger & Company, LLC
(the ‘‘Distributor’’) will serve as the
distributor of each of the Funds’ Shares.
All statements and representations
made in this filing regarding (a) the
description of the portfolio or reference
assets, (b) limitations on portfolio
holdings or reference assets, or (c) the
applicability of Exchange rules shall
constitute continued listing
requirements for listing the Shares on
the Exchange, as provided under Rule
8.900–E(b)(1).
Rule 8.900–E(b)(4) provides that, if
the investment adviser to the
Investment Company issuing Managed
Portfolio Shares is registered as a
broker-dealer or is affiliated with a
broker-dealer, such investment adviser
will erect and maintain a ‘‘fire wall’’
between the investment adviser and
personnel of the broker-dealer or brokerdealer affiliate, as applicable, with
respect to access to information
concerning the composition of and/or
changes to such Investment Company
portfolio and/or the Creation Basket.6
Any person related to the investment
adviser or Investment Company who
makes decisions pertaining to the
Investment Company’s portfolio
composition or has access to
information regarding the Investment
Company’s portfolio composition or
changes thereto or the Creation Basket
must be subject to procedures designed
to prevent the use and dissemination of
material non-public information
regarding the applicable Investment
5 The Trust is registered under the Investment
Company Act of 1940 (the ‘‘1940 Act’’). On August
17, 2020, the Trust filed a registration statement on
Form N–1A under the Securities Act of 1933 (the
‘‘1933 Act’’) and the 1940 Act for the Funds (File
No. 811–23603) (‘‘Registration Statement’’). The
Commission issued an order granting exemptive
relief to the Trust (‘‘Exemptive Order’’) under the
1940 Act on May 19, 2020 (Investment Company
Act Release No. 33869). The Exemptive Order was
granted in response to the Trust’s application for
exemptive relief (the ‘‘Exemptive Application’’)
(File No. 812–15117). The description of the
operation of the Trust and the Funds herein is
based, in part, on the Registration Statement.
6 Rule 8.900–E(c)(5) provides that the term
‘‘Creation Basket’’ means, on any given business
day, the names and quantities of the specified
instruments (and/or an amount of cash) that are
required for an AP Representative to deposit inkind on behalf of an Authorized Participant in
exchange for a Creation Unit and the names and
quantities of the specified instruments (and/or an
amount of cash) that will be transferred in-kind to
an AP Representative on behalf of an Authorized
Participant in exchange for a Redemption Unit,
which will be identical and will be transmitted to
each AP Representative before the commencement
of trading.
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59355
Company portfolio or changes thereto or
the Creation Basket.
Rule 8.900–E(b)(4) is similar to
Commentary .03(a)(i) and (iii) to Rule
5.2–E(j)(3); however, Commentary .03(a)
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.7 Rule 8.900–E(b)(4) is also
similar to Commentary .06 to Rule
8.600–E related to Managed Fund
Shares, except that Rule 8.900–E(b)(4)
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, with respect to
an Investment Company’s portfolio and
Creation Basket, and not just to the
underlying portfolio, as is the case with
Managed Fund Shares. 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 a
Fund’s portfolio and/or Creation Basket.
In the event (a) the Adviser or any
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 personnel of the broker-dealer
or broker-dealer affiliate regarding
7 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (the ‘‘Advisers Act’’). As a
result, the Adviser and its related personnel will be
subject to the provisions of Rule 204A–1 under the
Advisers Act relating to codes of ethics. This Rule
requires investment advisers to adopt a code of
ethics that reflects 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. The Funds will also
be required to comply with Exchange rules relating
to disclosure, including Rule 5.3–E(i).
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access to information concerning the
composition and/or changes to the
portfolio and/or Creation Basket. Any
person related to the Adviser or the
Trust who makes decisions pertaining to
a Fund’s portfolio composition or that
has access to information regarding a
Fund’s portfolio composition or that has
access to information regarding a Fund’s
portfolio or changes thereto or the
Creation Basket will be subject to
procedures designed to prevent the use
and dissemination of material nonpublic information regarding such
portfolio or changes thereto and the
Creation Basket.
Further, Rule 8.900–E(b)(5) requires
that any person or entity, including an
AP Representative, custodian, Reporting
Authority, distributor, or administrator,
who has access to non-public
information regarding the Investment
Company’s portfolio composition or
changes thereto or the Creation Basket,
must be subject to procedures
reasonably designed to prevent the use
and dissemination of material nonpublic information regarding the
applicable Investment Company
portfolio or changes thereto or the
Creation Basket. Moreover, if any such
person or entity is registered as a brokerdealer or affiliated with a broker-dealer,
such person or entity will erect and
maintain a ‘‘fire wall’’ between the
person or entity and the broker-dealer
with respect to access to information
concerning the composition and/or
changes to such Investment Company
portfolio or Creation Basket.
Description of the Funds 8
Each Fund’s holdings will conform to
the permissible investments as set forth
in the Exemptive Application and
Exemptive Order and the holdings will
be consistent with all requirements in
the Exemptive Application and
Exemptive Order.9
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Alger Mid Cap 40 ETF
The Fund’s primary objective is to
seek long-term capital appreciation. The
Fund will primarily invest in equity
8 The Exchange represents that, for initial and/or
continued listing, each Fund will be in compliance
with Rule 10A–3 under the Act. See 17 CFR
240.10A–3.
9 Pursuant to the Exemptive Order, the only
permissible investments for a Fund are the
following: exchange-traded funds (‘‘ETFs’’),
exchange-traded notes, exchange-listed common
stocks, exchange-traded American Depositary
Receipts, exchange-traded real estate investment
trusts, exchange-traded commodity pools,
exchange-traded metals trusts, exchange-traded
currency trusts and exchange-traded futures that
trade contemporaneously with Shares of a Fund, as
well as cash and cash equivalents (short-term U.S.
Treasury securities, government money market
funds, and repurchase agreements).
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securities, including common or
preferred stocks listed on U.S.
exchanges, of mid-cap companies.
Alger 25 ETF
The Fund’s primary objective is to
seek long-term capital appreciation. The
Fund will primarily invest in equity
securities of companies listed on U.S.
exchanges, including common or
preferred stocks.
Investment Restrictions
Each Fund’s holdings will be
consistent with all requirements
described in the Exemptive Application
and Exemptive Order.10
Each 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, for each Fund, 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).11
Creations and Redemptions of Shares
Creations and redemptions of Shares
will take place as described in Rule
8.900–E. Specifically, in connection
with the creation and redemption of
Creation Units 12 and Redemption
Units,13 the delivery or receipt of any
portfolio securities in-kind will be
required to be effected through a
separate confidential brokerage account
(a ‘‘Confidential Account’’).14
Authorized Participants (‘‘AP’’), as
defined in the applicable Form N–1A
10 See
id.
Fund’s broad-based securities benchmark
index will be identified in a future amendment to
the Registration Statement following that Fund’s
first full calendar year of performance.
12 Rule 8.900–E(c)(6) provides that the term
‘‘Creation Unit’’ means a specified minimum
number of Managed Portfolio Shares issued by an
Investment Company at the request of an
Authorized Participant in return for a designated
portfolio of instruments and/or cash.
13 Rule 8.900–E(c)(7) provides that the term
‘‘Redemption Unit’’ means a specified minimum
number of Managed Portfolio Shares that may be
redeemed to an Investment Company at the request
of an Authorized Participant in return for a
portfolio of instruments and/or cash.
14 Rule 8.900–E(c)(4) provides that the term
‘‘Confidential Account’’ means an account owned
by an Authorized Participant and held with an AP
Representative on behalf of the Authorized
Participant. The account will be established and
governed by contractual agreement between the AP
Representative and the Authorized Participant
solely for the purposes of creation and redemption,
while keeping confidential the Creation Basket
constituents of each series of Managed Portfolio
Shares, including from the Authorized Participant.
The books and records of the Confidential Account
will be maintained by the AP Representative on
behalf of the Authorized Participant.
11 Each
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filed with the Commission, will sign an
agreement with an AP Representative 15
establishing the Confidential Account
for the benefit of the AP. AP
Representatives will be broker-dealers.
An AP must be a Depository Trust
Company Participant that has executed
an authorized participant agreement
(‘‘Participant Agreement’’) with the
Distributor with respect to the creation
and redemption of Creation Units and
Redemption Units and formed a
Confidential Account for its benefit in
accordance with the terms of the
Participant Agreement. For purposes of
creations or redemptions, all
transactions will be effected through the
respective AP’s Confidential Account,
for the benefit of the AP, without
disclosing the identity of such securities
to the AP.
Each day, the Funds’ custodian will
transmit the Funds’ Creation Basket (as
described below) to each AP
Representative. This information will
permit an AP that has established a
Confidential Account with an AP
Representative to transact in the
underlying securities of the Creation
Basket through their AP
Representatives, enabling them to
engage in in-kind creation or
redemption activity without knowing
the identity or weighting of those
securities. Fund Shares will be issued
and redeemed in Creation Units and
Redemption Units, the size of which
will be specified in the Registration
Statement. The Funds will offer and
redeem Creation Units and Redemption
Units on a continuous basis at the net
asset value (‘‘NAV’’) per Share next
determined after receipt of an order in
proper form. The Funds’ NAVs will be
determined as of the scheduled closing
time of the regular trading session on
the NYSE (ordinarily, 4:00 p.m. E.T.) on
each business day.
To keep costs low and permit the
Funds to be as fully invested as
possible, Shares are generally purchased
and redeemed in Creation Units and
Redemption Units on an in-kind basis.
Except in limited circumstances where
the purchase or redemption will include
cash, purchasers, through the AP
Representative, purchase Creation Units
by making an in-kind deposit of
specified instruments (‘‘Deposit
15 Rule 8.900–E(c)(3) provides that the term ‘‘AP
Representative’’ means an unaffiliated brokerdealer, with which an Authorized Participant has
signed an agreement to establish a Confidential
Account for the benefit of such Authorized
Participant, that will deliver or receive, on behalf
of the Authorized Participant, all consideration to
or from the Investment Company in a creation or
redemption. An AP Representative will not be
permitted to disclose the Creation Basket to any
person, including the Authorized Participants.
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Instruments’’), and the AP
Representative, acting on behalf of an
Authorized Participant that is
redeeming shares, receives an in-kind
transfer of specified instruments
(‘‘Redemption Instruments’’). The
names and quantities of the instruments
that constitute the Deposit Instruments
and the names and quantities of the
instruments that constitute the
Redemption Instruments correspond pro
rata to the positions in the Fund’s
portfolio (including cash positions) and
thus will be identical. These
instruments may be referred to, in the
case of either a purchase or a
redemption, as the ‘‘Creation Basket.’’
Placement of Purchase Orders
Each Fund will issue Shares through
the Distributor on a continuous basis at
NAV. The Exchange represents that the
issuance of Shares will operate in a
manner substantially similar to that of
other ETFs. Each Fund will issue Shares
only at the NAV per Share next
determined after an order in proper
form is received.
The Distributor will furnish
acknowledgements to those placing
such orders that the orders have been
accepted, but the Distributor may reject
any order which is not submitted in
proper form, as described in each
Fund’s prospectus or Statement of
Additional Information (‘‘SAI’’). The
NAV of each Fund is expected to be
determined once each business day at a
time determined by the Trust’s Board of
Trustees, currently anticipated to be as
of the close of the regular trading
session on the NYSE (ordinarily, 4:00
p.m. E.T.) (the ‘‘Valuation Time’’). Each
Fund will establish a cut-off time
(‘‘Order Cut-Off Time’’) for purchase
orders in proper form. The Order CutOff Time will be specified in a Fund’s
SAI and/or the Participant Agreement.
To initiate a purchase of Shares, an AP
must submit to the Distributor an
irrevocable order to purchase such
Shares after the most recent prior
Valuation Time. In purchasing the
necessary securities, the AP
Representative will use methods, such
as breaking the transaction into multiple
transactions and transacting in multiple
marketplaces, to avoid revealing the
composition of the Creation Basket.
Generally, all orders to purchase
Creation Units must be received by the
Distributor no later than the end of the
Core Trading Session (ordinarily, 9:30
a.m. to 4:00 p.m. E.T.) on the date such
order is placed (‘‘Transmittal Date’’) in
order for the purchaser to receive the
NAV per Share determined on the
Transmittal Date. As with all existing
ETFs, if there is a difference between
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the NAV attributable to a Creation Unit
and the aggregate market value of the
Creation Basket exchanged for the
Creation Unit, the party conveying
instruments with the lower value will
also pay to the other an amount in cash
equal to that difference (the ‘‘Balancing
Amount’’).
Purchases of Shares will be settled inkind and/or in cash for an amount equal
to the applicable NAV per Share
purchased plus applicable transaction
fees.16 Other than the Balancing
Amount, the Fund will substitute cash
only under exceptional circumstances
and as set forth under the Fund’s
policies and procedures governing the
composition of Creation Baskets.
Authorized Participant Redemption
The Shares may be redeemed to a
Fund in Redemption Unit size or
multiples thereof as described below.
Redemption orders of Redemption Units
must be placed by or through an AP
(‘‘AP Redemption Order’’). Each Fund
will establish an Order Cut-Off Time for
redemption orders of Redemption Units
in proper form. Redemption Units of a
Fund will be redeemable at their NAV
per Share next determined after receipt
of a request for redemption by the Trust
in the manner specified below before
the Order Cut-Off Time. To initiate an
AP Redemption Order, an AP must
submit to the Distributor an irrevocable
order to redeem such Redemption Unit
after the most recent prior Valuation
Time, but not later than the Order CutOff Time.
In the case of a redemption, the AP
would enter into an irrevocable
redemption order, and then the
applicable Fund would instruct its
custodian to deliver the Redemption
Instruments to the appropriate
Confidential Account. The AP would
direct the AP Representative on that day
to liquidate those securities. As with the
purchase of securities, the AP
Representative will use methods, such
as breaking the transaction into multiple
transactions and transacting in multiple
marketplaces, to avoid revealing the
composition of the Creation Basket.
Redemptions will occur primarily inkind, although redemption payments
may also be made partly or wholly in
cash. The Participant Agreement signed
by each AP will require establishment of
a Confidential Account to receive
distributions of securities in-kind upon
redemption. Each AP will be required to
open a Confidential Account with an AP
16 To the extent that a Fund allows creations or
redemptions to be conducted in cash, such
transactions will be effected in the same manner for
all APs transacting in cash.
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59357
Representative in order to facilitate
orderly processing of redemptions.
Net Asset Value
The NAV will be calculated
separately for the Shares of each Fund
on each Business Day. Each Fund’s
NAV is determined as of the close of
regular trading on the NYSE, normally
4:00 p.m., Eastern Time. The NAV of
each Fund is computed by adding the
value of the Fund’s investments plus
cash and other assets allocable to the
class, deducting liabilities, and then
dividing the result by the number of
Shares outstanding at the time the
determination is made.
The assets of the Funds are generally
valued on the basis of market
quotations. Securities for which such
information is readily available are
generally valued at the last reported
sales price, the official closing price as
reported by an independent pricing
service on the primary market or
exchange on which they are traded, or,
in the absence of reported sales, at the
bid price. Other investments and other
assets, including restricted securities
and securities for which market
quotations are not readily available, are
valued at fair value under procedures
approved by the Board of Trustees.
Information regarding each Fund’s
NAV and how often Shares of each
Fund traded at a price above (i.e., at a
premium) or below (i.e., at a discount)
a Fund’s NAV will be posted to the
Funds’ website when it becomes
available.
Availability of Information
The Funds’ website, www.alger.com,
will include the prospectus for each
Fund that may be downloaded. The
Funds’ website will include additional
quantitative information updated on a
daily basis, including, for each Fund,
the prior Business Day’s NAV, market
closing price or mid-point of the bid/ask
spread at the time of calculation of such
NAV (the ‘‘Bid/Ask Price’’),17 and a
calculation of the premium and
discount of the market closing price or
Bid/Ask Price against the NAV. The
website and information will be
publicly available at no charge.
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 Fund’s SAI,
its shareholder reports, its Form N–CSR,
17 The Bid/Ask Price of a Fund’s Shares is
determined using the mid-point between the
current national best bid and offer at the time of
calculation of such Fund’s NAV. The records
relating to Bid/Ask Prices will be retained by the
Funds or their service providers.
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filed twice a year, and its Form N–CEN,
filed annually. Each Fund’s SAI and
shareholder reports are available free
upon request from the Fund, and those
documents and the Form N–PORT,
Form N–CSR, and Form N–CEN may be
viewed onscreen or downloaded from
the Commission’s website at
www.sec.gov.
Information regarding market price
and trading volume of the Shares will be
continually available on a real-time
basis throughout the day on brokers’
computer screens and other electronic
services. Information 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 will
be available via the Consolidated Tape
Association (‘‘CTA’’) high-speed line. In
addition, the Verified Intraday
Indicative Value (‘‘VIIV’’), as defined in
Rule 8.900–E(c)(2),18 will be widely
disseminated by the Reporting
Authority 19 and/or one or more major
market data vendors in one second
intervals during the Exchange’s Core
Trading Session.
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Dissemination of the VIIV
With respect to trading of the Shares,
the ability of market participants to buy
and sell Shares at prices near the VIIV
is dependent upon their assessment that
the VIIV is a reliable, indicative realtime value for a Fund’s underlying
holdings. Market participants are
expected to accept the VIIV as a reliable,
indicative real-time value because (1)
the VIIV will be calculated and
disseminated based on a Fund’s actual
portfolio holdings, (2) the securities in
which a Fund plans to invest are
generally highly liquid and actively
traded and trade at the same time as the
Fund and therefore generally have
18 Rule 8.900–E(c)(2) provides that the term
‘‘Verified Intraday Indicative Value’’ is the
indicative value of a Managed Portfolio Share based
on all of the holdings of a series of Managed
Portfolio Shares as of the close of business on the
prior business day and, for corporate actions, based
on the applicable holdings as of the opening of
business on the current business day, priced and
disseminated in one second intervals during the
Core Trading Session by the Reporting Authority.
19 Rule 8.900–E(c)(8) provides that the term
‘‘Reporting Authority’’ in respect of a particular
series of Managed Portfolio Shares means the
Exchange, an institution, or a reporting service
designated by the Exchange or by the exchange that
lists a particular series of Managed 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, the NAV,
the VIIV, or other information relating to the
issuance, redemption, or trading of Managed
Portfolio Shares. A series of Managed Portfolio
Shares may have more than one Reporting
Authority, each having different functions.
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accurate real time pricing available, and
(3) market participants will have a daily
opportunity to evaluate whether the
VIIV at or near the close of trading is
indeed predictive of the actual NAV.
Information regarding the VIIV will be
calculated and disseminated by the
Reporting Authority and/or by one or
more major market data vendors in one
second intervals during the Core
Trading Session. The VIIV will also be
available on the Funds’ website and on
websites that publish updated market
quotations during the trading day. The
VIIV is based on the current market
value of the securities in a Fund’s
portfolio that day. The VIIV is intended
to provide investors and other market
participants with a highly correlated per
Share value of the underlying portfolio
that can be compared to the current
market price. The methodology for
calculating the fund’s VIIV, which will
be overseen by the Board, is available on
the Funds’ website.
Rule 8.900–E(d)(2)(C)(ii) provides
that, if the Exchange becomes aware
that: (i) The VIIV of a series of Managed
Portfolio Shares is not being calculated
or disseminated in one second intervals,
as required; (ii) the NAV with respect to
a series of Managed Portfolio Shares is
not disseminated to all market
participants at the same time; (iii) the
holdings of a series of Managed
Portfolio Shares are not made available
on at least a quarterly basis as required
under the 1940 Act; or (iv) such
holdings are not made available to all
market participants at the same time
(except as otherwise permitted under
the currently applicable exemptive
order or no-action relief granted by the
Commission or Commission staff to the
Investment Company with respect to the
series of Managed Portfolio Shares), it
will halt trading in such series until
such time as the Verified Intraday
Indicative Value, the net asset value, or
the holdings are available, as required.
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
a Fund.20 Trading in Shares of a Fund
will be halted if the circuit breaker
parameters in 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 Rule 8.900–E(d)(2)(C),
which sets forth circumstances under
which Shares of a Fund will be halted.
Specifically, Rule 8.900–E(d)(2)(C)(i)
provides that the Exchange may
consider all relevant factors in
exercising its discretion to halt trading
in a series of Managed Portfolio Shares.
Trading may be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the series of Managed Portfolio
Shares inadvisable. These may include:
(a) The extent to which trading is not
occurring in the securities and/or the
financial instruments composing the
portfolio; or (b) whether other unusual
conditions or circumstances detrimental
to the maintenance of a fair and orderly
market are present.21
Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. Shares will trade on
the Exchange in all trading sessions in
accordance with Rule 7.34–E(a). As
provided in 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
Rule 8.900–E, as well as all terms in the
Exemptive Order. The Exchange will
obtain a representation from the issuer
of the Shares of each Fund that the NAV
per Share of each Fund will be
calculated daily and will be made
available to all market participants at
the same time.
20 See
Rule 7.12–E.
21 The Exemptive Application provides that the
Investment Company or their agent will request that
the Exchange halt trading in the applicable series
of Managed Portfolio Shares where: (i) The intraday
indicative values calculated by the calculation
engines differ by more than 25 basis points for 60
seconds in connection with pricing of the Verified
Intraday Indicative Value; or (ii) holdings
representing 10% or more of a series of Managed
Portfolio Shares’ portfolio have become subject to
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Frm 00080
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Surveillance
The Exchange believes that its
surveillance procedures are adequate to
properly monitor the trading of Shares
on the Exchange during all trading
a trading halt or otherwise do not have readily
available market quotations. Any such requests will
be one of many factors considered in order to
determine whether to halt trading in a series of
Managed Portfolio Shares and the Exchange retains
sole discretion in determining whether trading
should be halted. As provided in the Exemptive
Application, each series of Managed Portfolio
Shares would employ a pricing verification agent to
continuously compare two intraday indicative
values during regular trading hours in order to
ensure the accuracy of the VIIV.
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sessions and to deter and detect
violations of Exchange rules and the
applicable federal securities laws.
Trading of Shares through the Exchange
will be subject to the Exchange’s
surveillance procedures for derivative
products. As part of these surveillance
procedures and consistent with Rule
8.900–E(b)(3) and 8.900–E(d)(2)(B), the
Adviser will upon request make
available to the Exchange and/or the
Financial Industry Regulatory Authority
(‘‘FINRA’’), on behalf of the Exchange,
the daily portfolio holdings of a Fund.
The issuer of the Shares of each Fund
will be required to represent to the
Exchange that it will advise the
Exchange of any failure by a Fund to
comply with the continued listing
requirements, and, pursuant to its
obligations under Section 19(g)(1) of the
Exchange Act, the Exchange will surveil
for compliance with the continued
listing requirements. If a Fund is not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
Exchange Rule 5.5–E(m).
FINRA, on behalf of the Exchange, or
the regulatory staff of the Exchange, or
both, will communicate as needed
regarding trading in the Shares and
certain exchange-traded instruments
with other markets and other entities
that are members of the Intermarket
Surveillance Group (‘‘ISG’’), and FINRA,
on behalf of the Exchange, or the
regulatory staff of the Exchange, or both,
may obtain trading information
regarding trading such securities from
such markets and other entities. In
addition, the Exchange may obtain
information regarding trading in the
Shares and certain 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.
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit (‘‘ETP’’) Holders
in an Information Bulletin (‘‘Bulletin’’)
of the special characteristics and risks
associated with trading the Shares.
Specifically, the Bulletin will discuss
the following: (1) The procedures for
purchases and redemptions of Shares;
(2) Rule 9.2–E(a), which imposes a duty
of due diligence on its ETP Holders to
learn the essential facts relating to every
customer prior to trading the Shares; (3)
how information regarding the VIIV is
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disseminated; (4) the requirement that
ETP Holders deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; (5) trading
information; and (6) that the portfolio
holdings of the Shares are not disclosed
on a daily basis.
In addition, the Bulletin will
reference that the Funds are subject to
various fees and expenses described in
the Registration Statement. The Bulletin
will discuss any exemptive, no-action,
and interpretive relief granted by the
Commission from any rules under the
Act. The Bulletin will also disclose that
the NAV for the Shares will be
calculated after 4:00 p.m., ET each
trading day.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,22 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,23 in particular, in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
The Exchange believes that this
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Funds
would meet each of the rules relating to
listing and trading of Managed Portfolio
Shares. To the extent that a Fund is not
in compliance with such rules, the
Exchange would either prevent the
Fund from listing and trading on the
Exchange or commence delisting
procedures under Rule 8.900–E(d)(2)(B).
Specifically, the Exchange would
consider the suspension of trading, and
commence delisting proceedings under
Rule 8.900–E(d)(2)(B), of a Fund under
any of the following circumstances: (a)
If, following the initial twelve-month
period after commencement of trading
on the Exchange, there are fewer than 50
beneficial holders of the Fund; (b) if the
Exchange has halted trading in a Fund
because the VIIV is interrupted pursuant
to Rule 8.900–E(d)(2)(C)(ii) and such
interruption persists past the trading
day in which it occurred or is no longer
available; (c) if the Exchange has halted
trading in a Fund because the net asset
value with respect to such Fund is not
disseminated to all market participants
at the same time, the holdings of such
Fund are not made available on at least
22 15
23 15
PO 00000
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U.S.C. 78f(b)(5).
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59359
a quarterly basis as required under the
1940 Act, or such holdings are not made
available to all market participants at
the same time pursuant to Rule 8.900–
E(d)(2)(C)(ii) and such issue persists
past the trading day in which it
occurred; (d) if the Exchange has halted
trading in Shares of a Fund pursuant to
Rule 8.900–E(d)(2)(C)(i) and such issue
persists past the trading day in which it
occurred; (e) if a Fund has failed to file
any filings required by the Commission
or if the Exchange is aware that a Fund
is not in compliance with the conditions
of any currently applicable exemptive
order or no-action relief granted by the
Commission or Commission staff with
respect to the Fund; (f) if any of the
continued listing requirements set forth
in Rule 8.900–E are not continuously
maintained; (g) if any of the statements
of representations regarding (a) the
description of the portfolio, (b)
limitations on portfolio holdings, or (c)
the applicability of Exchange listing
rules as specified herein to permit the
listing and trading of a Fund, are not
continuously maintained; or (h) if such
other event shall occur or condition
exists which, in the opinion of the
Exchange, makes further dealings on the
Exchange inadvisable.
As discussed above, 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 affiliate
broker-dealer regarding access to
information concerning the composition
and/or changes to a Fund’s portfolio and
Creation Basket. In the event that (a) the
Adviser becomes registered as a brokerdealer or becomes newly affiliated with
a broker-dealer, or (b) any new adviser
or sub-adviser is a registered brokerdealer or becomes affiliated with a
broker-dealer, the Adviser will
implement and maintain a fire wall with
respect to personnel of the broker-dealer
or broker-dealer affiliate regarding
access to information concerning the
composition and/or changes to the
portfolio and/or Creation Basket. Any
person related to the Adviser or the
Trust who makes decisions pertaining to
a Fund’s portfolio composition or that
has access to information regarding a
Fund’s portfolio or changes thereto or
the Creation Basket will be subject to
procedures designed to prevent the use
and dissemination of material nonpublic information regarding such
portfolio or changes thereto and the
Creation Basket.
In addition, Rule 8.900–E(b)(5)
requires that any person or entity,
including an AP Representative,
custodian, Reporting Authority,
distributor, or administrator, who has
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access to non-public information
regarding the Investment Company’s
portfolio composition or changes thereto
or the Creation Basket, must be subject
to procedures designed to prevent the
use and dissemination of material nonpublic information regarding the
applicable Investment Company
portfolio or changes thereto or the
Creation Basket. Moreover, if any such
person or entity is registered as a brokerdealer or affiliated with a broker-dealer,
such person or entity will erect and
maintain a ‘‘fire wall’’ between the
person or entity and the broker-dealer
with respect to access to information
concerning the composition and/or
changes to such Investment Company
portfolio or Creation Basket. Any person
or entity who has access to information
regarding a Fund’s portfolio
composition or changes thereto or the
Creation Basket will be subject to
procedures designed to prevent the use
and dissemination of material
nonpublic information regarding the
portfolio or changes thereto or the
Creation Basket.
The Exchange further believes that
Rule 8.900–E is designed to prevent
fraudulent and manipulative acts and
practices related to the listing and
trading of Shares of the Funds because
it provides meaningful requirements
about both the data that will be made
publicly available about the Shares, as
well as the information that will only be
available to certain parties and the
controls on such information.
Specifically, the Exchange believes that
the requirements related to information
protection set forth in Rule 8.900–
E(b)(5) will act as a safeguard against
misuse and improper dissemination of
information related to a Fund’s portfolio
composition, the Creation Basket, or
changes thereto. The requirement that
any person or entity implement
procedures to prevent the use and
dissemination of material non-public
information regarding the portfolio or
Creation Basket will act to prevent any
individual or entity from sharing such
information externally and the internal
‘‘fire wall’’ requirements applicable
where an entity is a registered brokerdealer or affiliated with a broker-dealer
will act to make sure that no entity will
be able to misuse the data for their own
purposes. Accordingly, the Exchange
believes that this proposal is designed to
prevent fraudulent and manipulative
acts and practices.
The Exchange further believes that the
proposal is designed to prevent
fraudulent and manipulative acts and
practices related to the listing and
trading of Shares of the Funds and to
promote just and equitable principles of
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19:59 Sep 18, 2020
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trade and to protect investors and the
public interest because the Exchange
would halt trading under certain
circumstances under which trading in
the Shares of a Fund may be
inadvisable. Specifically, trading in the
Shares will be subject to Rule 8.900–
E(d)(2)(C)(i), which provides that the
Exchange may consider all relevant
factors in exercising its discretion to
halt trading in a Fund. Trading may be
halted because of market conditions or
for reasons that, in the view of the
Exchange, make trading in the series of
Managed Portfolio Shares inadvisable.
These may include: (a) The extent to
which trading is not occurring in the
securities and/or the financial
instruments composing the portfolio; or
(b) whether other unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market are present.24 Additionally,
trading in the Shares will be subject to
Rule 8.900–E(d)(2)(C)(ii), which
provides that the Exchange would halt
trading where the Exchange becomes
aware that: (a) The VIIV of a series of
Managed Portfolio Shares is not being
calculated or disseminated in one
second intervals, as required; (b) the net
asset value with respect to a series of
Managed Portfolio Shares is not
disseminated to all market participants
at the same time; (c) the holdings of a
series of Managed Portfolio Shares are
not made available on at least a
quarterly basis as required under the
1940 Act; or (d) such holdings are not
made available to all market
participants at the same time (except as
otherwise permitted under the currently
applicable exemptive order or no-action
relief granted by the Commission or
Commission staff to the Investment
Company with respect to the series of
Managed Portfolio Shares). The
Exchange would halt trading in such
Shares until such time as the VIIV, the
NAV, or the holdings are available, as
required.
With respect to the proposed listing
and trading of Shares of the Funds, the
Exchange believes that the proposed
rule change is designed to prevent
fraudulent and manipulative acts and
practices in that the Shares will be
listed and traded on the Exchange
pursuant to the initial and continued
listing criteria in Rule 8.900–E.25 Each
Fund’s holdings will conform to the
permissible investments as set forth in
the Exemptive Application and
24 See
supra note 21.
Exchange represents that, for initial and/
or continued listing, each Fund will be in
compliance with Rule 10A–3 under the Act. See 17
CFR 240.10A–3.
25 The
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Exemptive Order.26 As noted above,
FINRA, on behalf of the Exchange, or
the regulatory staff of the Exchange, or
both, will communicate as needed
regarding trading in the Shares and the
underlying exchange-traded instruments
with other markets and other entities
that are members of the ISG, and
FINRA, on behalf of the Exchange, or
the regulatory staff of the Exchange, or
both, may obtain trading information
regarding trading such instruments from
such markets and other entities. In
addition, the Exchange may obtain
information regarding trading in the
Shares and the underlying exchangetraded instruments from markets and
other entities that are members of ISG or
with which the Exchange has in place
a comprehensive surveillance sharing
agreement.
With respect to trading of Shares of
the Funds, the ability of market
participants to buy and sell Shares at
prices near the VIIV is dependent upon
their assessment that the VIIV is a
reliable, indicative real-time value for a
Fund’s underlying holdings. Market
participants are expected to accept the
VIIV as a reliable, indicative real-time
value because (1) the VIIV will be
calculated and disseminated based on a
Fund’s actual portfolio holdings, (2) the
securities in which the Funds plan to
invest are generally highly liquid and
actively traded and trade at the same
time as the Funds and therefore
generally have accurate real time pricing
available, and (3) market participants
will have a daily opportunity to
evaluate whether the VIIV at or near the
close of trading is indeed predictive of
the actual NAV.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest in that the Exchange will
obtain a representation that the NAV per
Share of the Funds will be calculated
daily and that the NAV will be made
available to all market participants at
the same time. Investors can also obtain
a Fund’s SAI, its shareholder reports, its
Form N–CSR (filed twice a year), and its
Form N–CEN (filed annually). A Fund’s
SAI and shareholder reports will be
available free upon request from the
applicable Fund, and those documents
and the Form N–PORT, Form N–CSR,
and Form N–CEN may be viewed onscreen or downloaded from the
Commission’s website at www.sec.gov.
In addition, a large amount of
information will be publicly available
regarding the Funds and the Shares,
thereby promoting market transparency.
Quotation and last sale information for
26 See
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the Shares will be available via the CTA
high-speed line. Information regarding
the VIIV will be widely disseminated in
one second intervals throughout the
Core Trading Session by the Reporting
Authority and/or one or more major
market data vendors. The website for
the Funds will include a prospectus for
the Funds that may be downloaded, and
additional data relating to NAV and
other applicable quantitative
information, updated on a daily basis.
Moreover, prior to the commencement
of trading, the Exchange will inform its
members in an Information Bulletin of
the special characteristics and risks
associated with trading the Shares.
In addition, as noted above, investors
will have ready access to the VIIV, and
quotation and last sale information for
the Shares. The Shares will conform to
the initial and continued listing criteria
under Rule 8.900–E. Each 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 Exchange also believes that 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 actively-managed exchange-traded
products that will enhance competition
among market participants, to the
benefit of investors and the marketplace.
As noted above, the Exchange has in
place surveillance procedures relating to
trading in the Shares and may obtain
information via ISG from other
exchanges that are members of ISG or
with which the Exchange has entered
into a comprehensive surveillance
sharing agreement. In addition, as noted
above, investors will have ready access
to information regarding the VIIV and
quotation and last sale information for
the Shares.
For the above reasons, the Exchange
believes that the proposed rule change
is consistent with the requirements of
Section 6(b)(5) of the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
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Exchange believes the proposed rule
change would permit the listing and
trading of additional actively-managed
exchange-traded products, thereby
promoting competition among
exchange-traded products to the benefit
of investors and the marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received from
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic comments:
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca-2020–80 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-2020–80. 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
PO 00000
Frm 00083
Fmt 4703
Sfmt 4703
59361
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEArca-2020–80 and
should be submitted on or before
October 13, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–20696 Filed 9–18–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89879; File No. SR–NYSE–
2020–73]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change To
Establish Procedures for the
Allocation of Cabinets to its CoLocated Users
September 15, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’),2 and Rule 19b–4 thereunder,3
notice is hereby given that on
September 2, 2020, New York Stock
Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
27 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
E:\FR\FM\21SEN1.SGM
21SEN1
]]>Agencies
[Federal Register Volume 85, Number 183 (Monday, September 21, 2020)]
[Notices]
[Pages 59354-59361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20696]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89869; File No. SR-NYSEArca-2020-80]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To List and Trade Shares of the Alger Mid Cap
40 ETF and Alger 25 ETF Under Rule 8.900-E, Managed Portfolio Shares
September 15, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on September 1, 2020, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade shares of the following
under Rule 8.900-E (Managed Portfolio Shares): Alger Mid Cap 40 ETF and
Alger 25 ETF. The proposed change is available on the Exchange's
website at www.nyse.com, at the principal office of the Exchange, and
at the Commission's Public Reference Room.
[[Page 59355]]
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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
NYSE Arca Rule 8.900-E permits the listing and trading, or trading
pursuant to unlisted trading privileges, of Managed Portfolio Shares,
which are securities issued by an actively managed open-end investment
management company.\4\ Rule 8.900-E(b)(1) requires the Exchange to file
separate proposals under Section 19(b) of the Act before listing and
trading any series of Managed Portfolio Shares on the Exchange.
Therefore, the Exchange is submitting this proposal in order to list
and trade Managed Portfolio Shares of the Alger Mid Cap 40 ETF and the
Alger 25 ETF (each a ``Fund'' and, collectively, the ``Funds'') under
Rule 8.900-E.
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\4\ Rule 8.900-E(c)(1) provides that the term ``Managed
Portfolio Share'' means a security that (a) represents an interest
in an investment company registered under the Investment Company Act
of 1940 (``Investment Company'') organized as an open-end management
investment company that invests in a portfolio of securities
selected by the Investment Company's investment adviser consistent
with the Investment Company's investment objectives and policies;
(b) is issued in a Creation Unit, or multiples thereof, in return
for a designated portfolio of instruments (and/or an amount of cash)
with a value equal to the next determined net asset value and
delivered to the Authorized Participant (as defined in the
Investment Company's Form N-1A filed with the Commission) through a
Confidential Account; (c) when aggregated into a Redemption Unit, or
multiples thereof, may be redeemed for a designated portfolio of
instruments (and/or an amount of cash) with a value equal to the
next determined net asset value delivered to the Confidential
Account for the benefit of the Authorized Participant; and (d) the
portfolio holdings for which are disclosed within at least 60 days
following the end of every fiscal quarter.
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Description of the Funds and the Trust
The shares of each Fund (the ``Shares'') will be issued by The
Alger ETF Trust (the ``Trust''), a business trust organized under the
laws of the state of Massachusetts and registered with the Commission
as an open-end management investment company.\5\ The investment adviser
to each Fund will be Fred Alger Management, LLC (the ``Adviser''). Fred
Alger & Company, LLC (the ``Distributor'') will serve as the
distributor of each of the Funds' Shares. All statements and
representations made in this filing regarding (a) the description of
the portfolio or reference assets, (b) limitations on portfolio
holdings or reference assets, or (c) the applicability of Exchange
rules shall constitute continued listing requirements for listing the
Shares on the Exchange, as provided under Rule 8.900-E(b)(1).
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\5\ The Trust is registered under the Investment Company Act of
1940 (the ``1940 Act''). On August 17, 2020, the Trust filed a
registration statement on Form N-1A under the Securities Act of 1933
(the ``1933 Act'') and the 1940 Act for the Funds (File No. 811-
23603) (``Registration Statement''). The Commission issued an order
granting exemptive relief to the Trust (``Exemptive Order'') under
the 1940 Act on May 19, 2020 (Investment Company Act Release No.
33869). The Exemptive Order was granted in response to the Trust's
application for exemptive relief (the ``Exemptive Application'')
(File No. 812-15117). The description of the operation of the Trust
and the Funds herein is based, in part, on the Registration
Statement.
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Rule 8.900-E(b)(4) provides that, if the investment adviser to the
Investment Company issuing Managed Portfolio Shares is registered as a
broker-dealer or is affiliated with a broker-dealer, such investment
adviser will erect and maintain a ``fire wall'' between the investment
adviser and personnel of the broker-dealer or broker-dealer affiliate,
as applicable, with respect to access to information concerning the
composition of and/or changes to such Investment Company portfolio and/
or the Creation Basket.\6\ Any person related to the investment adviser
or Investment Company who makes decisions pertaining to the Investment
Company's portfolio composition or has access to information regarding
the Investment Company's portfolio composition or changes thereto or
the Creation Basket must be subject to procedures designed to prevent
the use and dissemination of material non-public information regarding
the applicable Investment Company portfolio or changes thereto or the
Creation Basket.
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\6\ Rule 8.900-E(c)(5) provides that the term ``Creation
Basket'' means, on any given business day, the names and quantities
of the specified instruments (and/or an amount of cash) that are
required for an AP Representative to deposit in-kind on behalf of an
Authorized Participant in exchange for a Creation Unit and the names
and quantities of the specified instruments (and/or an amount of
cash) that will be transferred in-kind to an AP Representative on
behalf of an Authorized Participant in exchange for a Redemption
Unit, which will be identical and will be transmitted to each AP
Representative before the commencement of trading.
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Rule 8.900-E(b)(4) is similar to Commentary .03(a)(i) and (iii) to
Rule 5.2-E(j)(3); however, Commentary .03(a) 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.\7\
Rule 8.900-E(b)(4) is also similar to Commentary .06 to Rule 8.600-E
related to Managed Fund Shares, except that Rule 8.900-E(b)(4) 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, with respect to an Investment Company's
portfolio and Creation Basket, and not just to the underlying
portfolio, as is the case with Managed Fund Shares. 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 a Fund's portfolio and/
or Creation Basket.
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\7\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser and its related personnel will be
subject to the provisions of Rule 204A-1 under the Advisers Act
relating to codes of ethics. This Rule requires investment advisers
to adopt a code of ethics that reflects 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. The Funds will also be required to comply
with Exchange rules relating to disclosure, including Rule 5.3-E(i).
---------------------------------------------------------------------------
In the event (a) the Adviser or any 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 personnel of the broker-dealer or broker-
dealer affiliate regarding
[[Page 59356]]
access to information concerning the composition and/or changes to the
portfolio and/or Creation Basket. Any person related to the Adviser or
the Trust who makes decisions pertaining to a Fund's portfolio
composition or that has access to information regarding a Fund's
portfolio composition or that has access to information regarding a
Fund's portfolio or changes thereto or the Creation Basket will be
subject to procedures designed to prevent the use and dissemination of
material non-public information regarding such portfolio or changes
thereto and the Creation Basket.
Further, Rule 8.900-E(b)(5) requires that any person or entity,
including an AP Representative, custodian, Reporting Authority,
distributor, or administrator, who has access to non-public information
regarding the Investment Company's portfolio composition or changes
thereto or the Creation Basket, must be subject to procedures
reasonably designed to prevent the use and dissemination of material
non-public information regarding the applicable Investment Company
portfolio or changes thereto or the Creation Basket. Moreover, if any
such person or entity is registered as a broker-dealer or affiliated
with a broker-dealer, such person or entity will erect and maintain a
``fire wall'' between the person or entity and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such Investment Company portfolio or Creation Basket.
Description of the Funds \8\
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\8\ The Exchange represents that, for initial and/or continued
listing, each Fund will be in compliance with Rule 10A-3 under the
Act. See 17 CFR 240.10A-3.
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Each Fund's holdings will conform to the permissible investments as
set forth in the Exemptive Application and Exemptive Order and the
holdings will be consistent with all requirements in the Exemptive
Application and Exemptive Order.\9\
---------------------------------------------------------------------------
\9\ Pursuant to the Exemptive Order, the only permissible
investments for a Fund are the following: exchange-traded funds
(``ETFs''), exchange-traded notes, exchange-listed common stocks,
exchange-traded American Depositary Receipts, exchange-traded real
estate investment trusts, exchange-traded commodity pools, exchange-
traded metals trusts, exchange-traded currency trusts and exchange-
traded futures that trade contemporaneously with Shares of a Fund,
as well as cash and cash equivalents (short-term U.S. Treasury
securities, government money market funds, and repurchase
agreements).
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Alger Mid Cap 40 ETF
The Fund's primary objective is to seek long-term capital
appreciation. The Fund will primarily invest in equity securities,
including common or preferred stocks listed on U.S. exchanges, of mid-
cap companies.
Alger 25 ETF
The Fund's primary objective is to seek long-term capital
appreciation. The Fund will primarily invest in equity securities of
companies listed on U.S. exchanges, including common or preferred
stocks.
Investment Restrictions
Each Fund's holdings will be consistent with all requirements
described in the Exemptive Application and Exemptive Order.\10\
---------------------------------------------------------------------------
\10\ See id.
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Each 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, for each Fund, 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).\11\
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\11\ Each Fund's broad-based securities benchmark index will be
identified in a future amendment to the Registration Statement
following that Fund's first full calendar year of performance.
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Creations and Redemptions of Shares
Creations and redemptions of Shares will take place as described in
Rule 8.900-E. Specifically, in connection with the creation and
redemption of Creation Units \12\ and Redemption Units,\13\ the
delivery or receipt of any portfolio securities in-kind will be
required to be effected through a separate confidential brokerage
account (a ``Confidential Account'').\14\ Authorized Participants
(``AP''), as defined in the applicable Form N-1A filed with the
Commission, will sign an agreement with an AP Representative \15\
establishing the Confidential Account for the benefit of the AP. AP
Representatives will be broker-dealers. An AP must be a Depository
Trust Company Participant that has executed an authorized participant
agreement (``Participant Agreement'') with the Distributor with respect
to the creation and redemption of Creation Units and Redemption Units
and formed a Confidential Account for its benefit in accordance with
the terms of the Participant Agreement. For purposes of creations or
redemptions, all transactions will be effected through the respective
AP's Confidential Account, for the benefit of the AP, without
disclosing the identity of such securities to the AP.
---------------------------------------------------------------------------
\12\ Rule 8.900-E(c)(6) provides that the term ``Creation Unit''
means a specified minimum number of Managed Portfolio Shares issued
by an Investment Company at the request of an Authorized Participant
in return for a designated portfolio of instruments and/or cash.
\13\ Rule 8.900-E(c)(7) provides that the term ``Redemption
Unit'' means a specified minimum number of Managed Portfolio Shares
that may be redeemed to an Investment Company at the request of an
Authorized Participant in return for a portfolio of instruments and/
or cash.
\14\ Rule 8.900-E(c)(4) provides that the term ``Confidential
Account'' means an account owned by an Authorized Participant and
held with an AP Representative on behalf of the Authorized
Participant. The account will be established and governed by
contractual agreement between the AP Representative and the
Authorized Participant solely for the purposes of creation and
redemption, while keeping confidential the Creation Basket
constituents of each series of Managed Portfolio Shares, including
from the Authorized Participant. The books and records of the
Confidential Account will be maintained by the AP Representative on
behalf of the Authorized Participant.
\15\ Rule 8.900-E(c)(3) provides that the term ``AP
Representative'' means an unaffiliated broker-dealer, with which an
Authorized Participant has signed an agreement to establish a
Confidential Account for the benefit of such Authorized Participant,
that will deliver or receive, on behalf of the Authorized
Participant, all consideration to or from the Investment Company in
a creation or redemption. An AP Representative will not be permitted
to disclose the Creation Basket to any person, including the
Authorized Participants.
---------------------------------------------------------------------------
Each day, the Funds' custodian will transmit the Funds' Creation
Basket (as described below) to each AP Representative. This information
will permit an AP that has established a Confidential Account with an
AP Representative to transact in the underlying securities of the
Creation Basket through their AP Representatives, enabling them to
engage in in-kind creation or redemption activity without knowing the
identity or weighting of those securities. Fund Shares will be issued
and redeemed in Creation Units and Redemption Units, the size of which
will be specified in the Registration Statement. The Funds will offer
and redeem Creation Units and Redemption Units on a continuous basis at
the net asset value (``NAV'') per Share next determined after receipt
of an order in proper form. The Funds' NAVs will be determined as of
the scheduled closing time of the regular trading session on the NYSE
(ordinarily, 4:00 p.m. E.T.) on each business day.
To keep costs low and permit the Funds to be as fully invested as
possible, Shares are generally purchased and redeemed in Creation Units
and Redemption Units on an in-kind basis. Except in limited
circumstances where the purchase or redemption will include cash,
purchasers, through the AP Representative, purchase Creation Units by
making an in-kind deposit of specified instruments (``Deposit
[[Page 59357]]
Instruments''), and the AP Representative, acting on behalf of an
Authorized Participant that is redeeming shares, receives an in-kind
transfer of specified instruments (``Redemption Instruments''). The
names and quantities of the instruments that constitute the Deposit
Instruments and the names and quantities of the instruments that
constitute the Redemption Instruments correspond pro rata to the
positions in the Fund's portfolio (including cash positions) and thus
will be identical. These instruments may be referred to, in the case of
either a purchase or a redemption, as the ``Creation Basket.''
Placement of Purchase Orders
Each Fund will issue Shares through the Distributor on a continuous
basis at NAV. The Exchange represents that the issuance of Shares will
operate in a manner substantially similar to that of other ETFs. Each
Fund will issue Shares only at the NAV per Share next determined after
an order in proper form is received.
The Distributor will furnish acknowledgements to those placing such
orders that the orders have been accepted, but the Distributor may
reject any order which is not submitted in proper form, as described in
each Fund's prospectus or Statement of Additional Information
(``SAI''). The NAV of each Fund is expected to be determined once each
business day at a time determined by the Trust's Board of Trustees,
currently anticipated to be as of the close of the regular trading
session on the NYSE (ordinarily, 4:00 p.m. E.T.) (the ``Valuation
Time''). Each Fund will establish a cut-off time (``Order Cut-Off
Time'') for purchase orders in proper form. The Order Cut-Off Time will
be specified in a Fund's SAI and/or the Participant Agreement. To
initiate a purchase of Shares, an AP must submit to the Distributor an
irrevocable order to purchase such Shares after the most recent prior
Valuation Time. In purchasing the necessary securities, the AP
Representative will use methods, such as breaking the transaction into
multiple transactions and transacting in multiple marketplaces, to
avoid revealing the composition of the Creation Basket.
Generally, all orders to purchase Creation Units must be received
by the Distributor no later than the end of the Core Trading Session
(ordinarily, 9:30 a.m. to 4:00 p.m. E.T.) on the date such order is
placed (``Transmittal Date'') in order for the purchaser to receive the
NAV per Share determined on the Transmittal Date. As with all existing
ETFs, if there is a difference between the NAV attributable to a
Creation Unit and the aggregate market value of the Creation Basket
exchanged for the Creation Unit, the party conveying instruments with
the lower value will also pay to the other an amount in cash equal to
that difference (the ``Balancing Amount'').
Purchases of Shares will be settled in-kind and/or in cash for an
amount equal to the applicable NAV per Share purchased plus applicable
transaction fees.\16\ Other than the Balancing Amount, the Fund will
substitute cash only under exceptional circumstances and as set forth
under the Fund's policies and procedures governing the composition of
Creation Baskets.
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\16\ To the extent that a Fund allows creations or redemptions
to be conducted in cash, such transactions will be effected in the
same manner for all APs transacting in cash.
---------------------------------------------------------------------------
Authorized Participant Redemption
The Shares may be redeemed to a Fund in Redemption Unit size or
multiples thereof as described below. Redemption orders of Redemption
Units must be placed by or through an AP (``AP Redemption Order'').
Each Fund will establish an Order Cut-Off Time for redemption orders of
Redemption Units in proper form. Redemption Units of a Fund will be
redeemable at their NAV per Share next determined after receipt of a
request for redemption by the Trust in the manner specified below
before the Order Cut-Off Time. To initiate an AP Redemption Order, an
AP must submit to the Distributor an irrevocable order to redeem such
Redemption Unit after the most recent prior Valuation Time, but not
later than the Order Cut-Off Time.
In the case of a redemption, the AP would enter into an irrevocable
redemption order, and then the applicable Fund would instruct its
custodian to deliver the Redemption Instruments to the appropriate
Confidential Account. The AP would direct the AP Representative on that
day to liquidate those securities. As with the purchase of securities,
the AP Representative will use methods, such as breaking the
transaction into multiple transactions and transacting in multiple
marketplaces, to avoid revealing the composition of the Creation
Basket.
Redemptions will occur primarily in-kind, although redemption
payments may also be made partly or wholly in cash. The Participant
Agreement signed by each AP will require establishment of a
Confidential Account to receive distributions of securities in-kind
upon redemption. Each AP will be required to open a Confidential
Account with an AP Representative in order to facilitate orderly
processing of redemptions.
Net Asset Value
The NAV will be calculated separately for the Shares of each Fund
on each Business Day. Each Fund's NAV is determined as of the close of
regular trading on the NYSE, normally 4:00 p.m., Eastern Time. The NAV
of each Fund is computed by adding the value of the Fund's investments
plus cash and other assets allocable to the class, deducting
liabilities, and then dividing the result by the number of Shares
outstanding at the time the determination is made.
The assets of the Funds are generally valued on the basis of market
quotations. Securities for which such information is readily available
are generally valued at the last reported sales price, the official
closing price as reported by an independent pricing service on the
primary market or exchange on which they are traded, or, in the absence
of reported sales, at the bid price. Other investments and other
assets, including restricted securities and securities for which market
quotations are not readily available, are valued at fair value under
procedures approved by the Board of Trustees.
Information regarding each Fund's NAV and how often Shares of each
Fund traded at a price above (i.e., at a premium) or below (i.e., at a
discount) a Fund's NAV will be posted to the Funds' website when it
becomes available.
Availability of Information
The Funds' website, www.alger.com, will include the prospectus for
each Fund that may be downloaded. The Funds' website will include
additional quantitative information updated on a daily basis,
including, for each Fund, the prior Business Day's NAV, market closing
price or mid-point of the bid/ask spread at the time of calculation of
such NAV (the ``Bid/Ask Price''),\17\ and a calculation of the premium
and discount of the market closing price or Bid/Ask Price against the
NAV. The website and information will be publicly available at no
charge.
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\17\ The Bid/Ask Price of a Fund's Shares is determined using
the mid-point between the current national best bid and offer at the
time of calculation of such Fund's NAV. The records relating to Bid/
Ask Prices will be retained by the Funds or their service providers.
---------------------------------------------------------------------------
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 Fund's SAI, its
shareholder reports, its Form N-CSR,
[[Page 59358]]
filed twice a year, and its Form N-CEN, filed annually. Each Fund's SAI
and shareholder reports are available free upon request from the Fund,
and those documents and the Form N-PORT, Form N-CSR, and Form N-CEN may
be viewed onscreen or downloaded from the Commission's website at
www.sec.gov.
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. Information
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 will be available via the Consolidated Tape Association
(``CTA'') high-speed line. In addition, the Verified Intraday
Indicative Value (``VIIV''), as defined in Rule 8.900-E(c)(2),\18\ will
be widely disseminated by the Reporting Authority \19\ and/or one or
more major market data vendors in one second intervals during the
Exchange's Core Trading Session.
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\18\ Rule 8.900-E(c)(2) provides that the term ``Verified
Intraday Indicative Value'' is the indicative value of a Managed
Portfolio Share based on all of the holdings of a series of Managed
Portfolio Shares as of the close of business on the prior business
day and, for corporate actions, based on the applicable holdings as
of the opening of business on the current business day, priced and
disseminated in one second intervals during the Core Trading Session
by the Reporting Authority.
\19\ Rule 8.900-E(c)(8) provides that the term ``Reporting
Authority'' in respect of a particular series of Managed Portfolio
Shares means the Exchange, an institution, or a reporting service
designated by the Exchange or by the exchange that lists a
particular series of Managed 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, the NAV, the VIIV, or
other information relating to the issuance, redemption, or trading
of Managed Portfolio Shares. A series of Managed Portfolio Shares
may have more than one Reporting Authority, each having different
functions.
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Dissemination of the VIIV
With respect to trading of the Shares, the ability of market
participants to buy and sell Shares at prices near the VIIV is
dependent upon their assessment that the VIIV is a reliable, indicative
real-time value for a Fund's underlying holdings. Market participants
are expected to accept the VIIV as a reliable, indicative real-time
value because (1) the VIIV will be calculated and disseminated based on
a Fund's actual portfolio holdings, (2) the securities in which a Fund
plans to invest are generally highly liquid and actively traded and
trade at the same time as the Fund and therefore generally have
accurate real time pricing available, and (3) market participants will
have a daily opportunity to evaluate whether the VIIV at or near the
close of trading is indeed predictive of the actual NAV.
Information regarding the VIIV will be calculated and disseminated
by the Reporting Authority and/or by one or more major market data
vendors in one second intervals during the Core Trading Session. The
VIIV will also be available on the Funds' website and on websites that
publish updated market quotations during the trading day. The VIIV is
based on the current market value of the securities in a Fund's
portfolio that day. The VIIV is intended to provide investors and other
market participants with a highly correlated per Share value of the
underlying portfolio that can be compared to the current market price.
The methodology for calculating the fund's VIIV, which will be overseen
by the Board, is available on the Funds' website.
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of a Fund.\20\ Trading in Shares of a Fund will
be halted if the circuit breaker parameters in 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 Rule 8.900-
E(d)(2)(C), which sets forth circumstances under which Shares of a Fund
will be halted.
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\20\ See Rule 7.12-E.
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Specifically, Rule 8.900-E(d)(2)(C)(i) provides that the Exchange
may consider all relevant factors in exercising its discretion to halt
trading in a series of Managed Portfolio Shares. Trading may be halted
because of market conditions or for reasons that, in the view of the
Exchange, make trading in the series of Managed Portfolio Shares
inadvisable. These may include: (a) The extent to which trading is not
occurring in the securities and/or the financial instruments composing
the portfolio; or (b) whether other unusual conditions or circumstances
detrimental to the maintenance of a fair and orderly market are
present.\21\
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\21\ The Exemptive Application provides that the Investment
Company or their agent will request that the Exchange halt trading
in the applicable series of Managed Portfolio Shares where: (i) The
intraday indicative values calculated by the calculation engines
differ by more than 25 basis points for 60 seconds in connection
with pricing of the Verified Intraday Indicative Value; or (ii)
holdings representing 10% or more of a series of Managed Portfolio
Shares' portfolio have become subject to a trading halt or otherwise
do not have readily available market quotations. Any such requests
will be one of many factors considered in order to determine whether
to halt trading in a series of Managed Portfolio Shares and the
Exchange retains sole discretion in determining whether trading
should be halted. As provided in the Exemptive Application, each
series of Managed Portfolio Shares would employ a pricing
verification agent to continuously compare two intraday indicative
values during regular trading hours in order to ensure the accuracy
of the VIIV.
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Rule 8.900-E(d)(2)(C)(ii) provides that, if the Exchange becomes
aware that: (i) The VIIV of a series of Managed Portfolio Shares is not
being calculated or disseminated in one second intervals, as required;
(ii) the NAV with respect to a series of Managed Portfolio Shares is
not disseminated to all market participants at the same time; (iii) the
holdings of a series of Managed Portfolio Shares are not made available
on at least a quarterly basis as required under the 1940 Act; or (iv)
such holdings are not made available to all market participants at the
same time (except as otherwise permitted under the currently applicable
exemptive order or no-action relief granted by the Commission or
Commission staff to the Investment Company with respect to the series
of Managed Portfolio Shares), it will halt trading in such series until
such time as the Verified Intraday Indicative Value, the net asset
value, or the holdings are available, as required.
Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the Exchange in all trading sessions in accordance with Rule 7.34-E(a).
As provided in 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 Rule 8.900-E, as well as all terms in the Exemptive
Order. The Exchange will obtain a representation from the issuer of the
Shares of each Fund that the NAV per Share of each Fund will be
calculated daily and will be made available to all market participants
at the same time.
Surveillance
The Exchange believes that its surveillance procedures are adequate
to properly monitor the trading of Shares on the Exchange during all
trading
[[Page 59359]]
sessions and to deter and detect violations of Exchange rules and the
applicable federal securities laws. Trading of Shares through the
Exchange will be subject to the Exchange's surveillance procedures for
derivative products. As part of these surveillance procedures and
consistent with Rule 8.900-E(b)(3) and 8.900-E(d)(2)(B), the Adviser
will upon request make available to the Exchange and/or the Financial
Industry Regulatory Authority (``FINRA''), on behalf of the Exchange,
the daily portfolio holdings of a Fund. The issuer of the Shares of
each Fund will be required to represent to the Exchange that it will
advise the Exchange of any failure by a Fund to comply with the
continued listing requirements, and, pursuant to its obligations under
Section 19(g)(1) of the Exchange Act, the Exchange will surveil for
compliance with the continued listing requirements. If a Fund is not in
compliance with the applicable listing requirements, the Exchange will
commence delisting procedures under Exchange Rule 5.5-E(m).
FINRA, on behalf of the Exchange, or the regulatory staff of the
Exchange, or both, will communicate as needed regarding trading in the
Shares and certain exchange-traded instruments with other markets and
other entities that are members of the Intermarket Surveillance Group
(``ISG''), and FINRA, on behalf of the Exchange, or the regulatory
staff of the Exchange, or both, may obtain trading information
regarding trading such securities from such markets and other entities.
In addition, the Exchange may obtain information regarding trading in
the Shares and certain 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.
In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
Equity Trading Permit (``ETP'') Holders in an Information Bulletin
(``Bulletin'') of the special characteristics and risks associated with
trading the Shares. Specifically, the Bulletin will discuss the
following: (1) The procedures for purchases and redemptions of Shares;
(2) Rule 9.2-E(a), which imposes a duty of due diligence on its ETP
Holders to learn the essential facts relating to every customer prior
to trading the Shares; (3) how information regarding the VIIV is
disseminated; (4) the requirement that ETP Holders deliver a prospectus
to investors purchasing newly issued Shares prior to or concurrently
with the confirmation of a transaction; (5) trading information; and
(6) that the portfolio holdings of the Shares are not disclosed on a
daily basis.
In addition, the Bulletin will reference that the Funds are subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Act. The
Bulletin will also disclose that the NAV for the Shares will be
calculated after 4:00 p.m., ET each trading day.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\22\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\23\ 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.
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\22\ 15 U.S.C. 78f(b).
\23\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that this proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Funds would meet each of the rules relating to listing and trading of
Managed Portfolio Shares. To the extent that a Fund is not in
compliance with such rules, the Exchange would either prevent the Fund
from listing and trading on the Exchange or commence delisting
procedures under Rule 8.900-E(d)(2)(B). Specifically, the Exchange
would consider the suspension of trading, and commence delisting
proceedings under Rule 8.900-E(d)(2)(B), of a Fund under any of the
following circumstances: (a) If, following the initial twelve-month
period after commencement of trading on the Exchange, there are fewer
than 50 beneficial holders of the Fund; (b) if the Exchange has halted
trading in a Fund because the VIIV is interrupted pursuant to Rule
8.900-E(d)(2)(C)(ii) and such interruption persists past the trading
day in which it occurred or is no longer available; (c) if the Exchange
has halted trading in a Fund because the net asset value with respect
to such Fund is not disseminated to all market participants at the same
time, the holdings of such Fund are not made available on at least a
quarterly basis as required under the 1940 Act, or such holdings are
not made available to all market participants at the same time pursuant
to Rule 8.900-E(d)(2)(C)(ii) and such issue persists past the trading
day in which it occurred; (d) if the Exchange has halted trading in
Shares of a Fund pursuant to Rule 8.900-E(d)(2)(C)(i) and such issue
persists past the trading day in which it occurred; (e) if a Fund has
failed to file any filings required by the Commission or if the
Exchange is aware that a Fund is not in compliance with the conditions
of any currently applicable exemptive order or no-action relief granted
by the Commission or Commission staff with respect to the Fund; (f) if
any of the continued listing requirements set forth in Rule 8.900-E are
not continuously maintained; (g) if any of the statements of
representations regarding (a) the description of the portfolio, (b)
limitations on portfolio holdings, or (c) the applicability of Exchange
listing rules as specified herein to permit the listing and trading of
a Fund, are not continuously maintained; or (h) if such other event
shall occur or condition exists which, in the opinion of the Exchange,
makes further dealings on the Exchange inadvisable.
As discussed above, 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 affiliate broker-
dealer regarding access to information concerning the composition and/
or changes to a Fund's portfolio and Creation Basket. In the event that
(a) the Adviser becomes registered as a broker-dealer or becomes newly
affiliated with a broker-dealer, or (b) any new adviser or sub-adviser
is a registered broker-dealer or becomes affiliated with a broker-
dealer, the Adviser will implement and maintain a fire wall with
respect to personnel of the broker-dealer or broker-dealer affiliate
regarding access to information concerning the composition and/or
changes to the portfolio and/or Creation Basket. Any person related to
the Adviser or the Trust who makes decisions pertaining to a Fund's
portfolio composition or that has access to information regarding a
Fund's portfolio or changes thereto or the Creation Basket will be
subject to procedures designed to prevent the use and dissemination of
material non-public information regarding such portfolio or changes
thereto and the Creation Basket.
In addition, Rule 8.900-E(b)(5) requires that any person or entity,
including an AP Representative, custodian, Reporting Authority,
distributor, or administrator, who has
[[Page 59360]]
access to non-public information regarding the Investment Company's
portfolio composition or changes thereto or the Creation Basket, must
be subject to procedures designed to prevent the use and dissemination
of material non-public information regarding the applicable Investment
Company portfolio or changes thereto or the Creation Basket. Moreover,
if any such person or entity is registered as a broker-dealer or
affiliated with a broker-dealer, such person or entity will erect and
maintain a ``fire wall'' between the person or entity and the broker-
dealer with respect to access to information concerning the composition
and/or changes to such Investment Company portfolio or Creation Basket.
Any person or entity who has access to information regarding a Fund's
portfolio composition or changes thereto or the Creation Basket will be
subject to procedures designed to prevent the use and dissemination of
material nonpublic information regarding the portfolio or changes
thereto or the Creation Basket.
The Exchange further believes that Rule 8.900-E is designed to
prevent fraudulent and manipulative acts and practices related to the
listing and trading of Shares of the Funds because it provides
meaningful requirements about both the data that will be made publicly
available about the Shares, as well as the information that will only
be available to certain parties and the controls on such information.
Specifically, the Exchange believes that the requirements related to
information protection set forth in Rule 8.900-E(b)(5) will act as a
safeguard against misuse and improper dissemination of information
related to a Fund's portfolio composition, the Creation Basket, or
changes thereto. The requirement that any person or entity implement
procedures to prevent the use and dissemination of material non-public
information regarding the portfolio or Creation Basket will act to
prevent any individual or entity from sharing such information
externally and the internal ``fire wall'' requirements applicable where
an entity is a registered broker-dealer or affiliated with a broker-
dealer will act to make sure that no entity will be able to misuse the
data for their own purposes. Accordingly, the Exchange believes that
this proposal is designed to prevent fraudulent and manipulative acts
and practices.
The Exchange further believes that the proposal is designed to
prevent fraudulent and manipulative acts and practices related to the
listing and trading of Shares of the Funds and to promote just and
equitable principles of trade and to protect investors and the public
interest because the Exchange would halt trading under certain
circumstances under which trading in the Shares of a Fund may be
inadvisable. Specifically, trading in the Shares will be subject to
Rule 8.900-E(d)(2)(C)(i), which provides that the Exchange may consider
all relevant factors in exercising its discretion to halt trading in a
Fund. Trading may be halted because of market conditions or for reasons
that, in the view of the Exchange, make trading in the series of
Managed Portfolio Shares inadvisable. These may include: (a) The extent
to which trading is not occurring in the securities and/or the
financial instruments composing the portfolio; or (b) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present.\24\ Additionally, trading in the
Shares will be subject to Rule 8.900-E(d)(2)(C)(ii), which provides
that the Exchange would halt trading where the Exchange becomes aware
that: (a) The VIIV of a series of Managed Portfolio Shares is not being
calculated or disseminated in one second intervals, as required; (b)
the net asset value with respect to a series of Managed Portfolio
Shares is not disseminated to all market participants at the same time;
(c) the holdings of a series of Managed Portfolio Shares are not made
available on at least a quarterly basis as required under the 1940 Act;
or (d) such holdings are not made available to all market participants
at the same time (except as otherwise permitted under the currently
applicable exemptive order or no-action relief granted by the
Commission or Commission staff to the Investment Company with respect
to the series of Managed Portfolio Shares). The Exchange would halt
trading in such Shares until such time as the VIIV, the NAV, or the
holdings are available, as required.
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\24\ See supra note 21.
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With respect to the proposed listing and trading of Shares of the
Funds, the Exchange believes that the proposed rule change is designed
to prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in Rule 8.900-E.\25\ Each Fund's
holdings will conform to the permissible investments as set forth in
the Exemptive Application and Exemptive Order.\26\ As noted above,
FINRA, on behalf of the Exchange, or the regulatory staff of the
Exchange, or both, will communicate as needed regarding trading in the
Shares and the underlying exchange-traded instruments with other
markets and other entities that are members of the ISG, and FINRA, on
behalf of the Exchange, or the regulatory staff of the Exchange, or
both, may obtain trading information regarding trading such instruments
from such markets and other entities. In addition, the Exchange may
obtain information regarding trading in the Shares and the underlying
exchange-traded instruments from markets and other entities that are
members of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement.
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\25\ The Exchange represents that, for initial and/or continued
listing, each Fund will be in compliance with Rule 10A-3 under the
Act. See 17 CFR 240.10A-3.
\26\ See supra note 9.
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With respect to trading of Shares of the Funds, the ability of
market participants to buy and sell Shares at prices near the VIIV is
dependent upon their assessment that the VIIV is a reliable, indicative
real-time value for a Fund's underlying holdings. Market participants
are expected to accept the VIIV as a reliable, indicative real-time
value because (1) the VIIV will be calculated and disseminated based on
a Fund's actual portfolio holdings, (2) the securities in which the
Funds plan to invest are generally highly liquid and actively traded
and trade at the same time as the Funds and therefore generally have
accurate real time pricing available, and (3) market participants will
have a daily opportunity to evaluate whether the VIIV at or near the
close of trading is indeed predictive of the actual NAV.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Exchange will obtain a representation that the NAV per Share
of the Funds will be calculated daily and that the NAV will be made
available to all market participants at the same time. Investors can
also obtain a Fund's SAI, its shareholder reports, its Form N-CSR
(filed twice a year), and its Form N-CEN (filed annually). A Fund's SAI
and shareholder reports will be available free upon request from the
applicable Fund, 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. In addition, a large amount of
information will be publicly available regarding the Funds and the
Shares, thereby promoting market transparency. Quotation and last sale
information for
[[Page 59361]]
the Shares will be available via the CTA high-speed line. Information
regarding the VIIV will be widely disseminated in one second intervals
throughout the Core Trading Session by the Reporting Authority and/or
one or more major market data vendors. The website for the Funds will
include a prospectus for the Funds that may be downloaded, and
additional data relating to NAV and other applicable quantitative
information, updated on a daily basis. Moreover, prior to the
commencement of trading, the Exchange will inform its members in an
Information Bulletin of the special characteristics and risks
associated with trading the Shares.
In addition, as noted above, investors will have ready access to
the VIIV, and quotation and last sale information for the Shares. The
Shares will conform to the initial and continued listing criteria under
Rule 8.900-E. Each 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 Exchange also believes that 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 actively-managed exchange-traded
products that will enhance competition among market participants, to
the benefit of investors and the marketplace. As noted above, the
Exchange has in place surveillance procedures relating to trading in
the Shares and may obtain information via ISG from other exchanges that
are members of ISG or with which the Exchange has entered into a
comprehensive surveillance sharing agreement. In addition, as noted
above, investors will have ready access to information regarding the
VIIV and quotation and last sale information for the Shares.
For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes the
proposed rule change would permit the listing and trading of additional
actively-managed exchange-traded products, thereby promoting
competition among exchange-traded products to the benefit of investors
and the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic comments:
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEArca-2020-80 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-2020-80.
This file number should be included on the subject line if email is
used. To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for website
viewing and printing in the Commission's Public Reference Room, 100 F
Street NE, Washington, DC 20549 on official business days between the
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2020-80 and should
be submitted on or before October 13, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-20696 Filed 9-18-20; 8:45 am]
BILLING CODE 8011-01-P
