Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change to Amend NYSE Arca Rule 8.601-E To Adopt Generic Listing Standards for Active Proxy Portfolio Shares, 59338-59342 [2020-20699]

Download as PDF 59338 Federal Register / Vol. 85, No. 183 / Monday, September 21, 2020 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–89874; File No. SR– NYSEArca–2020–77] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change to Amend NYSE Arca Rule 8.601–E To Adopt Generic Listing Standards for Active Proxy 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 August 31, 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 amend NYSE Arca Rule 8.601–E to adopt generic listing standards for Active Proxy Portfolio Shares. 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. 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. jbell on DSKJLSW7X2PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend NYSE Arca Rule 8.601–E to adopt 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 VerDate Sep<11>2014 19:59 Sep 18, 2020 Jkt 250001 generic listing standards for Active Proxy Portfolio Shares. Under the Exchange’s current rules, a proposed rule change must be filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) for the listing and trading of each new series of Active Proxy Portfolio Shares. The Exchange believes that it is appropriate to codify certain rules within Rule 8.601–E that would generally eliminate the need for such proposed rule changes, which would create greater efficiency and promote uniform standards in the listing process. The Commission has previously approved listing and trading on the Exchange of series of Active Proxy Portfolio Shares under NYSE Arca Rule 8.601–E.4 Currently, six series of Active Proxy Portfolio Shares are listed and traded on the Exchange—the American Century Mid Cap Growth Impact ETF and American Century Sustainable Equity ETF 5; and the T. Rowe Price Blue Chip Growth ETF; T. Rowe Price Dividend Growth ETF; T. Rowe Price Growth Stock ETF; and T. Rowe Price Equity Income ETF.6 4 See Securities Exchange Act Release Nos. 89185 (June 29, 2020), 85 FR 40328 (July 6, 2020) (SR– NYSEArca–2019–95) (Notice of Filing of Amendment No. 6 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 6, to Adopt NYSE Arca Rule 8.601–E to Permit the Listing and Trading of Active Proxy Portfolio Shares and To List and Trade Shares of the Natixis U.S. Equity Opportunities ETF Under Proposed NYSE Arca Rule 8.601–E) (the ‘‘Natixis Approval Order’’); 89192 (June 30, 2020), 85 FR 40699 (July 7, 2020) (SR–NYSEArca–2019– 96) (Notice of Filing of Amendment No. 5 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 5, to List and Trade Two Series of Active Proxy Portfolio Shares Issued by the American Century ETF Trust under NYSE Arca Rule 8.601–E) (‘‘American Century Approval Order’’); 89191 (June 30, 2020), 85 FR 40358 (July 6, 2020) (SR–NYSEArca–2019– 92) (Notice of Filing of Amendment No. 3 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 3, to List and Trade Four Series of Active Proxy Portfolio Shares Issued by T. Rowe Price Exchange-Traded Funds, Inc. under NYSE Arca Rule 8.601–E) (‘‘T. Rowe Price Approval Order’’); 89438 (July 31, 2020) (SR–NYSEArca–2020–51)(Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 2, to List and Trade Shares of Natixis Vaughan Nelson Select ETF and Natixis Vaughan Nelson MidCap ETF under NYSE Arca Rule 8.601–E) (collectively, the ‘‘Approval Orders’’). See also, Securities Exchange Act Release No. 88887 (May 15, 2020), 85 FR 30990 (May 21, 2020) (SR–CboeBZX–2019–107) (Notice of Filing of Amendment No. 5 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 5, to Adopt Rule 14.11(m), Tracking Fund Shares, and to List and Trade Shares of the Fidelity Blue Chip Value ETF, Fidelity Blue Chip Growth ETF, and Fidelity New Millennium ETF). 5 See American Century Approval Order, referenced in note 4, supra. 6 See T. Rowe Price Approval Order, referenced in note 4, supra PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 Background Rule 8.601–E sets forth certain rules related to the listing and trading of Active Proxy Portfolio Shares.7 Under Rule 8.601–E(c)(1), the term Active Proxy Portfolio Shares means a security that (a) is issued by an investment company registered under the Investment Company Act of 1940 (‘‘1940 Act’’) (‘‘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 specified minimum number of shares, or multiples thereof, in return for a deposit by the purchaser of the Proxy Portfolio and/or cash with a value equal to the next determined net asset value (‘‘NAV’’); (c) when aggregated in the same specified minimum number of Active Proxy Portfolio Shares, or multiples thereof, may be redeemed at a holder’s request in return for the Proxy Portfolio and/or cash to the holder by the issuer with a value equal to the next determined NAV; and (d) the portfolio holdings for which are disclosed within at least 60 days following the end of every fiscal quarter. Rule 8.601–E(c)(2) defines the term ‘‘Actual Portfolio’’ as identities and quantities of the securities and other assets held by the Investment Company that shall form the basis for the Investment Company’s calculation of NAV at the end of the business day. Rule 8.601–E(c)(3) defines the term ‘‘Proxy Portfolio’’ as a specified portfolio of securities, other financial instruments and/or cash designed to track closely the daily performance of the Actual Portfolio of a series of Active Proxy Portfolio Shares as provided in the exemptive relief pursuant to the 1940 Act applicable to such series. The website for each series of Active Proxy Portfolio Shares shall disclose the information regarding the Proxy Portfolio as provided in the exemptive relief pursuant to the 1940 Act applicable to such series, including the following, to the extent applicable: (i) Ticker symbol; (ii) CUSIP or other identifier; (iii) Description of holding; (iv) Quantity of each security or other asset held; and (v) Percentage weighting of the holding in the portfolio. 7 See the Natixis Approval Order, note 4, supra, in which the Commission approved Exchange rules permitting the listing and trading of Active Proxy Portfolio Shares, and the listing and trading of shares of an individual series of Active Proxy Portfolio Shares. E:\FR\FM\21SEN1.SGM 21SEN1 Federal Register / Vol. 85, No. 183 / Monday, September 21, 2020 / Notices jbell on DSKJLSW7X2PROD with NOTICES Key Features of Active Proxy Portfolio Shares While funds issuing Active Proxy Portfolio Shares are actively-managed and, to that extent, are similar, for example, to Managed Fund Shares, which are actively-managed funds listed and traded under NYSE Arca Rule 8.600–E,8 Active Proxy Portfolio Shares differ from Managed Fund Shares in the following important respects. First, in contrast to Managed Fund Shares and for which a ‘‘Disclosed Portfolio’’ is required to be disseminated at least once daily,9 the portfolio for an issue of Active Proxy Portfolio Shares is publicly disclosed within at least 60 days following the end of every fiscal quarter in accordance with normal disclosure requirements otherwise applicable to open-end management investment companies registered under the 1940 Act.10 The composition of the 8 The Commission has previously approved listing and trading on the Exchange of a number of issues of Managed Fund Shares under NYSE Arca Rule 8.600–E. See, e.g., Securities Exchange Act Release Nos. 87434 (October 31, 2019), 84 FR 59849 (November 6, 2019) (SR–NYSEArca–2019–12) (Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 2, to List and Trade Shares of the iShares Commodity Curve Carry Strategy ETF under NYSE Arca Rule 8.600– E); 88924 (May 21, 2020), 85 FR 32062 (May 28, 2020) (SR–NYSEArca–2020—07) (Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 2, to List and Trade Shares of the SPDR SSGA Responsible Reserves ESG ETF under NYSE Arca Rule 8.600–E). The Commission also has approved a proposed rule change relating to generic listing standards for Managed Fund Shares. See Securities Exchange Act Release No. 78397 (July 22, 2016), 81 FR 49320 (July 27, 2016) (SR–NYSEArca–2015–110) (amending NYSE Arca Equities Rule 8.600 to adopt generic listing standards for Managed Fund Shares). 9 NYSE Arca Rule 8.600–E(c)(2) defines the term ‘‘Disclosed Portfolio’’ as the identities and quantities of the securities and other assets held by the Investment Company that will form the basis for the Investment Company’s calculation of net asset value at the end of the business day. NYSE Arca Rule 8.600–E(d)(2)(B)(i) requires that the Disclosed Portfolio will be disseminated at least once daily and will be made available to all market participants at the same time. 10 A mutual fund is required to file with the Commission its complete portfolio schedules for the second and fourth fiscal quarters on Form N–CSR under the 1940 Act. Information reported on Form N–PORT for the third month of a fund’s fiscal quarter will be made publicly available 60 days after the end of a fund’s fiscal quarter. Form N– PORT requires reporting of a fund’s complete portfolio holdings on a position-by-position basis on a quarterly basis within 60 days after fiscal quarter end. Investors can obtain a series of Active Proxy Portfolio Shares’ Statement of Additional Information (‘‘SAI’’), its Shareholder Reports, its Form N–CSR, filed twice a year, and its Form N– CEN, filed annually. A series of Active Proxy Portfolio Shares’ SAI and Shareholder Reports will be available free upon request from the Investment Company, and those documents and the Form N– PORT, Form N–CSR, and Form N–CEN may be viewed on-screen or downloaded from the Commission’s website at www.sec.gov. VerDate Sep<11>2014 19:59 Sep 18, 2020 Jkt 250001 portfolio of an issue of Active Proxy Portfolio Shares is not available at commencement of Exchange listing and trading. Second, in connection with the creation and redemption of Active Proxy Portfolio Shares, such creation or redemption may be exchanged for a Proxy Portfolio with a value equal to the next-determined NAV. A series of Active Proxy Portfolio Shares discloses the Proxy Portfolio on a daily basis, which, as described above, is designed to track closely the daily performance of the Actual Portfolio of a series of Active Proxy Portfolio Shares, instead of the actual holdings of the Investment Company, as provided by a series of Managed Fund Shares. In addition, Rule 8.601–E(d) currently provides criteria that Active Proxy Portfolio Shares must satisfy for initial and continued listing on the Exchange, including, for example, that a minimum number of Active Proxy Portfolio Shares are required to be outstanding at the time of commencement of trading on the Exchange. However, the current process for listing and trading new series of Active Proxy Portfolio Shares on the Exchange requires that the Exchange submit a proposed rule change with the Commission. In this regard, Commentary .01 to Rule 8.601–E specifies that the Exchange will file separate proposals under Section 19(b) of the Act before listing and trading of shares of a series of Active Proxy Portfolio Shares. Proposed Changes to Rule 8.601–E The Exchange proposes to amend Commentary .01 to Rule 8.601–E to specify that the Exchange may approve Active Proxy Portfolio Shares for listing and/or trading (including pursuant to unlisted trading privileges) pursuant to SEC Rule 19b–4(e) under the Act, which pertains to derivative securities products (‘‘SEC Rule 19b–4(e)’’).11 SEC Rule 19b–4(e)(1) provides that the listing and trading of a new derivative securities product by a self-regulatory organization (‘‘SRO’’) is not deemed a proposed rule change, pursuant to paragraph (c)(1) of Rule 19b–4,12 if the Commission has approved, pursuant to section 19(b) of the Act, the SRO’s 11 17 CFR 240.19b–4(e). As provided under SEC Rule 19b–4(e), the term ‘‘new derivative securities product’’ means any type of option, warrant, hybrid securities product or any other security, other than a single equity option or a security futures product, whose value is based, in whole or in part, upon the performance of, or interest in, an underlying instrument. 12 17 CFR 240.19b–4(c)(1). As provided under SEC Rule 19b–4(c)(1), a stated policy, practice, or interpretation of the SRO shall be deemed to be a proposed rule change unless it is reasonably and fairly implied by an existing rule of the SRO. PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 59339 trading rules, procedures and listing standards for the product class that would include the new derivative securities product and the SRO has a surveillance program for the product class. This is the current method pursuant to which ‘‘passive’’ ETFs are listed under NYSE Arca Rule 5.2–E(j)(3), actively-managed ETFs are listed under NYSE Arca Rule 8.600–E, and Exchange-Traded Fund Shares are listed under NYSE Arca Rule 5.2–E(j)(8). The Exchange would also specify within Commentary .01 to Rule 8.601– E that components of a series of Active Proxy Portfolio Shares listed pursuant to Rule 19b–4(e) shall satisfy the criteria set forth in Rule 8.601–E upon initial listing and on a continual basis. The Exchange will file separate proposals under Section 19(b) of the Act before the listing and trading of a series of Active Proxy Portfolio Shares with components that do not satisfy the criteria set forth in proposed amended Commentary .01 or components other than those specified in amended Commentary .01. For example, if the components of a series of Active Proxy Portfolio Shares included a security or asset that is not specified in proposed amended Commentary .01, the Exchange would file a separate proposed rule change. Proposed Commentary .01 (a) provides that the Actual Portfolio and Proxy Portfolio for a series of Active Proxy Portfolio Shares shall include only the following: (1) U.S. exchange-traded securities that are common stocks; preferred stocks; American Depositary Receipts; and real estate investment trusts; (2) Foreign common stocks that (1) are listed on a foreign exchange that is a member of the Intermarket Surveillance Group or with which the Exchange has in place a comprehensive surveillance sharing agreement; and (2) trade on such foreign exchange contemporaneously with shares of a series of Active Proxy Portfolio Shares in the Exchange’s Core Trading Session; (3) U.S. exchange-traded funds that are listed under the following rules: Investment Company Units (Rule 5.2– E(j)(3)); Exchange-Traded Fund Shares (Rule 5.2–E(j)(8)); Portfolio Depositary Receipts (Rule 8.100–E); Managed Fund Shares (Rule 8.600–E); Active Proxy Portfolio Shares (Rule 8.601–E); and Managed Portfolio Shares (Rule 8.900– E); (4) Equity Gold Shares (Rule 5.2– E(j)(5)) (5) Index-Linked Securities (Rule 5.2– E(j)(6)); (6) Commodity-Based Trust Shares (Rule 8.201–E); E:\FR\FM\21SEN1.SGM 21SEN1 59340 Federal Register / Vol. 85, No. 183 / Monday, September 21, 2020 / Notices (7) Currency Trust Shares (Rule 8.202–E); (8) The following securities, which are required to be organized as commodity pools: Commodity Index Trust Shares (Rule 8.203–E); Commodity Futures Trust Shares (Rule 8.204–E); Trust Units (Rule 8.500–E); and Managed Trust Securities (Rule 8.700–E); (9) The following securities if organized as commodity pools: Trust Issued Receipts (Rule 8.200–E) and Partnership Units (Rule 8.300–E); (10) U.S. exchange-traded futures that trade contemporaneously with shares of a series of Active Proxy Portfolio Shares in the Exchange’s Core Trading Session; and (11) Cash and cash equivalents. Cash equivalents are the following: Shortterm U.S. Treasury securities, government money market funds, and repurchase agreements. Proposed Commentary .01(b) provides that a series of Active Proxy Portfolio Shares will not hold short positions in securities and other financial instruments referenced in proposed Commentary .01(a)(1)–(11). Proposed Commentary .01(c) provides that the securities referenced above in proposed Commentary .01(a)(3)–(9) shall include securities listed on another national securities exchange pursuant to substantially equivalent listing rules. The securities and financial instruments enumerated in proposed Commentary .01 (a) to Rule 8.601–E are consistent with, and limited to, the ‘‘permissible investments’’ for series of Active Proxy Portfolio Shares previously approved by the Commission for Exchange listing and trading, as described in the Approval Orders.13 Each such series has filed an application for an order under Section 6(c) of the 1940 Act for exemptions from various provisions of the 1940 Act and rules thereunder, and the Commission has issued orders under the 1940 Act granting the exemptions requested in such applications.14 Such applications made substantially identical 13 See note 4, supra. e.g., Seventh Amended and Restated Application, filed by the Natixis ETF Trust II and NYSE Group, Inc., for an Order under Section 6(c) of the 1940 Act for exemptions from various provisions of the 1940 Act and rules thereunder (File No. 812–14870), dated October 21, 2019 (‘‘Application’’). On November 14, 2019, the Commission issued a notice regarding the Application. Investment Company Release No. 33684 (File No. 812–14870). On December 10, 2019, the Commission issued an order (‘‘Exemptive Order’’) under the 1940 Act granting the exemptions requested in the Application (Investment Company Act Release No. 33711 (December 10, 2019)). jbell on DSKJLSW7X2PROD with NOTICES 14 See, VerDate Sep<11>2014 19:59 Sep 18, 2020 Jkt 250001 representations specifying the instruments that a series of Active Proxy Portfolio Shares is permitted to hold, and a series of Active Proxy Portfolio Shares would be limited to such holdings on an initial and continued listing basis.15 The regulatory staff of the Exchange, or the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’), on behalf of the Exchange, will communicate as needed regarding trading in Active Proxy Portfolio Shares, other exchangetraded equity securities and futures contracts with other markets that are members of the Intermarket Surveillance Group (‘‘ISG’’), including U.S. and foreign exchanges on which the components are traded. In addition, the Exchange may obtain information regarding trading in Active Proxy Portfolio Shares from other markets that are members of the ISG, including all U.S. securities exchanges and futures exchanges on which the equity securities and futures contracts are traded, or with which the Exchange has in place a comprehensive surveillance sharing agreement. With respect to the proposed amendment to Commentary .01(a)(11) relating to cash and cash equivalents, the enumerated cash equivalents— short-term U.S. Treasury securities, government money market funds, and repurchase agreements—also are included as cash equivalents for purposes of the generic listing criteria applicable to Managed Fund Shares in Commentary .01(c) to Rule 8.600–E. Such instruments are short-term, highly liquid, and of high credit quality, making them less susceptible than other 15 For example, the Natixis Approval Order relating to listing of shares of the Natixis U.S. Equity Opportunities ETF (‘‘Fund’’) states: ‘‘Pursuant to the Application and Exemptive Order, the permissible investments for the Fund include only the following instruments: ETFs traded on a U.S. exchange; exchange-traded notes (‘‘ETNs’’) traded on a U.S. exchange; U.S. exchange-traded common stocks; common stocks listed on a foreign exchange that trade on such exchange contemporaneously with the Shares (‘‘foreign common stocks’’) in the Exchange’s Core Trading Session (normally 9:30 a.m. and 4:00 p.m. Eastern time (‘‘E.T.’’)); U.S. exchange-traded preferred stocks; U.S. exchange-traded American Depositary Receipts (‘‘ADRs’’); U.S. exchange-traded real estate investment trusts; U.S. exchange-traded commodity pools; U.S. exchange-traded metals trusts; U.S. exchange-traded currency trusts; and U.S. exchange-traded futures that trade contemporaneously with the Fund’s Shares. In addition, the Fund may hold cash and cash equivalents (short-term U.S. Treasury securities, government money market funds, and repurchase agreements). Pursuant to the Application and Exemptive Order, the Fund will not hold short positions or invest in derivatives other than U.S. exchange-traded futures, will not borrow for investment purposes, and will not purchase any securities that are illiquid investments at the time of purchase.’’ PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 asset classes both to price manipulation and volatility.16 The Exchange believes that the proposed standards would continue to ensure transparency surrounding the listing process for Active Proxy Portfolio Shares. In addition, the Exchange believes that the proposed portfolio standards for listing and trading Active Proxy Portfolio Shares are reasonably designed to promote a fair and orderly market for such Active Proxy Portfolio Shares. These proposed standards would also work in conjunction with the existing initial and continued listing criteria related to surveillance procedures and trading guidelines. In support of this proposal, the Exchange represents that: (1) The Active Proxy Portfolio Shares will conform to the initial and continued listing criteria under Rule 8.601–E; (2) the Exchange’s surveillance procedures are adequate to continue to properly monitor the trading of Active Proxy Portfolio Shares in all trading sessions and to deter and detect violations of Exchange rules. Specifically, the Exchange intends to utilize its existing surveillance procedures applicable to derivative products, which will include Active Proxy Portfolio Shares, to monitor trading in the Active Proxy Portfolio Shares; (3) the issuer of a series of Active Proxy Portfolio Shares will be required to comply with Rule 10A–3 under the Act for the initial and continued listing of Active Proxy Portfolio Shares, as provided under NYSE Arca Rule 5.3–E. Prior to listing pursuant to proposed amended Commentary .01 to Rule 8.601–E, an issuer would be required to represent to the Exchange that it will notify the Exchange of any failure by a series of Active Proxy Portfolio Shares to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. If a series of Active Proxy Portfolio Shares is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Rule 5.5– E(m). All Active Proxy Portfolio Shares listed and/or traded pursuant to Rule 8.601–E (including pursuant to unlisted trading privileges) are subject to all Exchange rules and procedures that 16 See Securities Exchange Act Release No. 78397 (July 22, 2016), 81 FR 49320 (July 27, 2016) (SR– NYSEArca–2015–110) (amending NYSE Arca Equities Rule 8.600 to adopt generic listing standards for Managed Fund Shares). E:\FR\FM\21SEN1.SGM 21SEN1 Federal Register / Vol. 85, No. 183 / Monday, September 21, 2020 / Notices jbell on DSKJLSW7X2PROD with NOTICES currently govern the trading of equity securities on the Exchange. The Exchange notes that the proposed change is not otherwise intended to address any other issues and that the Exchange is not aware of any problems that Equity Trading Permit Holders or issuers would have in complying with the proposed change. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,17 in general, and furthers the objectives of Section 6(b)(5) of the Act,18 in particular, because 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, in general, to protect investors and the public interest. 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 because it would facilitate the listing and trading of additional Active Proxy Portfolio Shares, which would enhance competition among market participants, to the benefit of investors and the marketplace. The Exchange believes that, in view of the Commission’s approval of Exchange rules for Active Proxy Portfolio Shares and commencement of Exchange trading of shares of series of Active Proxy Portfolio Shares,19 it is appropriate to codify certain rules within Rule 8.601–E that would generally eliminate the need for separate proposed rule changes. The Exchange believes that this would facilitate the listing and trading of additional types of Active Proxy Portfolio Shares that have investment portfolios that are similar to investment portfolios for other exchange-traded funds that have been approved for listing and trading, thereby creating greater efficiencies in the listing process for the Exchange and the Commission. The securities and financial instruments enumerated in proposed Commentary .01 (a)(1)–(11) to Rule 8.601–E are consistent with, and limited to, the ‘‘permissible investments’’ for series of Active Proxy Portfolio Shares previously approved by the Commission for Exchange listing and trading, as described in the Approval Orders.20 The Exchange notes that all exchange-traded equity securities held by a series of Active Proxy Portfolio Shares would 17 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 19 See notes 4–6, supra. 20 See notes 4 and 15, supra. 18 15 VerDate Sep<11>2014 19:59 Sep 18, 2020 either be listed and traded on a national securities exchange in the United States or, with respect to foreign common stocks, traded on a foreign exchange that is a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. In addition, such foreign common stocks would be required to trade on such foreign exchange contemporaneously with shares of a series of Active Proxy Portfolio Shares in the Exchange’s Core Trading Session (as defined in NYSE Arca Rule 7.34–E). Futures contracts held by a series of Active Proxy Portfolio Shares would be traded on a U.S. futures exchange. With respect to the proposed amendment to Commentary .01(a)(11) relating to cash and cash equivalents, the enumerated cash equivalents— short-term U.S. Treasury securities, government money market funds, and repurchase agreements—also are included as cash equivalents for purposes of the generic listing criteria applicable to Managed Fund Shares in Commentary .01(c) to Rule 8.600–E. Such instruments are short-term, highly liquid, and of high credit quality, making them less susceptible than other asset classes both to price manipulation and volatility.21 As noted above, NYSE Arca Rule 8.601–E(c)(3) requires that the website for each series of Active Proxy Portfolio Shares shall disclose the information regarding the Proxy Portfolio as provided in the exemptive relief pursuant to the 1940 Act applicable to such series, including specified information, to the extent applicable. Quotation and last sale information for U.S. exchange-traded equity securities in the applicable Proxy Portfolio will be available via the Consolidated Tape Association highspeed line or from the exchange on which such securities trade. Price information for foreign common stocks in the applicable Proxy Portfolio will be available from the exchange on which such securities trade or from market data vendors. Intraday pricing information for cash equivalents will be available through subscription services and/or pricing services. Quotation and other market information relating to futures contracts is available from the U.S. futures exchanges listing such instruments as well as from market data vendors. The proposed rule change is also designed to protect investors and the public interest because Active Proxy Portfolio Shares listed and traded pursuant to Rule 8.601–E, including 21 See Jkt 250001 PO 00000 note 16, supra. Frm 00063 Fmt 4703 Sfmt 4703 59341 pursuant to the proposed portfolio standards, would continue to be subject to the full panoply of Exchange rules and procedures that currently govern the trading of equity securities on the Exchange. The Exchange believes that the proposed standards would continue to ensure transparency surrounding the listing process for Active Proxy Portfolio Shares. In addition, the Exchange believes that the proposed portfolio standards for listing and trading Active Proxy Portfolio Shares are reasonably designed to promote a fair and orderly market for such Active Proxy Portfolio Shares. These proposed standards would also work in conjunction with the existing initial and continued listing criteria related to surveillance procedures and trading guidelines. The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices because the Active Proxy Portfolio Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in Rule 8.601–E. The Exchange has in place surveillance procedures that are adequate to properly monitor trading in Active Proxy Portfolio Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. FINRA, on behalf of the Exchange, or the regulatory staff of the Exchange, will communicate as needed regarding trading in Active Proxy Portfolio Shares, other exchange-traded equity securities, and futures contracts with other markets that are members of the ISG, including all U.S. and foreign exchanges on which the components are traded. In addition, the Exchange may obtain information regarding trading in Active Proxy Portfolio Shares from other markets that are members of the ISG, including all U.S. securities exchanges and futures exchanges on which the equity securities and futures contracts are traded, or with which the Exchange has in place a comprehensive surveillance sharing agreement. The Exchange also believes that the proposed rule change would fulfill the intended objective of Rule 19b–4(e) under the Act by allowing Active Proxy Portfolio Shares that satisfy the proposed listing standards to be listed and traded without separate Commission approval. However, as proposed, the Exchange would continue to file separate proposed rule changes before the listing and trading of Active Proxy Portfolio Shares that do not satisfy the additional criteria described above. E:\FR\FM\21SEN1.SGM 21SEN1 59342 Federal Register / Vol. 85, No. 183 / Monday, September 21, 2020 / Notices Prior to listing pursuant to proposed amended Commentary .01 to Rule 8.601–E, an issuer would be required to represent to the Exchange that it will advise the Exchange of any failure by a series of Active Proxy Portfolio Shares to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. If a series of Active Proxy Portfolio Shares is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Rule 5.5– E(m). For these reasons, the Exchange believes that the proposal is consistent with the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,22 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. Instead, the Exchange believes that the proposed rule change would facilitate the listing and trading of additional types of Active Proxy Portfolio Shares and result in a significantly more efficient process surrounding the listing and trading of Active Proxy Portfolio Shares, which will enhance competition among market participants, to the benefit of investors and the marketplace. The Exchange believes that this would reduce the time frame for bringing Active Proxy Portfolio Shares to market, thereby reducing the burdens on issuers and other market participants and promoting competition. In turn, the Exchange believes that the proposed change would make the process for listing Active Proxy Portfolio Shares more competitive by applying uniform listing standards with respect to Active Proxy Portfolio Shares. jbell on DSKJLSW7X2PROD with NOTICES 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 such longer period up to 90 days (i) as the Commission may 22 15 U.S.C. 78f(b)(8). VerDate Sep<11>2014 19:59 Sep 18, 2020 Jkt 250001 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–2020–77 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–2020–77. 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 PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 to make available publicly. All submissions should refer to File Number SR–NYSEArca–2020–77 and should be submitted on or before October 13, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–20699 Filed 9–18–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736. Extension: Rule 10b–17, SEC File No. 270–427, OMB Control No. 3235–0476. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget (‘‘OMB’’) a request for approval of extension of the previously approved collection of information provided for in Rule 10b–17 (17 CFR 240.10b–17), under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). Rule 10b–17 requires any issuer of a class of securities publicly traded by the use of any means or instrumentality of interstate commerce or of the mails or of any facility of any national securities exchange to give notice of the following specific distributions relating to such class of securities: (1) A dividend or other distribution in cash or in kind other than interest payments on debt securities; (2) a stock split or reverse stock split; or (3) a rights or other subscription offering. Notice shall be either given to the Financial Industry Regulatory Authority, Inc. as successor to the National Association of Securities Dealers, Inc. or in accordance with the procedures of the national securities exchange upon which the securities are registered. The Commission may exempt an issuer of over-the-counter (but not listed) securities from the notice requirement. The requirements of Rule 10b–17 do not apply to redeemable securities of registered open-end investment companies or unit investment trusts. 23 17 E:\FR\FM\21SEN1.SGM CFR 200.30–3(a)(12). 21SEN1

Agencies

[Federal Register Volume 85, Number 183 (Monday, September 21, 2020)]
[Notices]
[Pages 59338-59342]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20699]



[[Page 59338]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89874; File No. SR-NYSEArca-2020-77]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change to Amend NYSE Arca Rule 8.601-E To Adopt 
Generic Listing Standards for Active Proxy 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 August 31, 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.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Rule 8.601-E to adopt 
generic listing standards for Active Proxy Portfolio Shares. 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.

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
    The Exchange proposes to amend NYSE Arca Rule 8.601-E to adopt 
generic listing standards for Active Proxy Portfolio Shares. Under the 
Exchange's current rules, a proposed rule change must be filed with the 
Securities and Exchange Commission (``SEC'' or ``Commission'') for the 
listing and trading of each new series of Active Proxy Portfolio 
Shares. The Exchange believes that it is appropriate to codify certain 
rules within Rule 8.601-E that would generally eliminate the need for 
such proposed rule changes, which would create greater efficiency and 
promote uniform standards in the listing process.
    The Commission has previously approved listing and trading on the 
Exchange of series of Active Proxy Portfolio Shares under NYSE Arca 
Rule 8.601-E.\4\ Currently, six series of Active Proxy Portfolio Shares 
are listed and traded on the Exchange--the American Century Mid Cap 
Growth Impact ETF and American Century Sustainable Equity ETF \5\; and 
the T. Rowe Price Blue Chip Growth ETF; T. Rowe Price Dividend Growth 
ETF; T. Rowe Price Growth Stock ETF; and T. Rowe Price Equity Income 
ETF.\6\
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    \4\ See Securities Exchange Act Release Nos. 89185 (June 29, 
2020), 85 FR 40328 (July 6, 2020) (SR-NYSEArca-2019-95) (Notice of 
Filing of Amendment No. 6 and Order Granting Accelerated Approval of 
a Proposed Rule Change, as Modified by Amendment No. 6, to Adopt 
NYSE Arca Rule 8.601-E to Permit the Listing and Trading of Active 
Proxy Portfolio Shares and To List and Trade Shares of the Natixis 
U.S. Equity Opportunities ETF Under Proposed NYSE Arca Rule 8.601-E) 
(the ``Natixis Approval Order''); 89192 (June 30, 2020), 85 FR 40699 
(July 7, 2020) (SR-NYSEArca-2019-96) (Notice of Filing of Amendment 
No. 5 and Order Granting Accelerated Approval of a Proposed Rule 
Change, as Modified by Amendment No. 5, to List and Trade Two Series 
of Active Proxy Portfolio Shares Issued by the American Century ETF 
Trust under NYSE Arca Rule 8.601-E) (``American Century Approval 
Order''); 89191 (June 30, 2020), 85 FR 40358 (July 6, 2020) (SR-
NYSEArca-2019-92) (Notice of Filing of Amendment No. 3 and Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified 
by Amendment No. 3, to List and Trade Four Series of Active Proxy 
Portfolio Shares Issued by T. Rowe Price Exchange-Traded Funds, Inc. 
under NYSE Arca Rule 8.601-E) (``T. Rowe Price Approval Order''); 
89438 (July 31, 2020) (SR-NYSEArca-2020-51)(Order Granting Approval 
of a Proposed Rule Change, as Modified by Amendment No. 2, to List 
and Trade Shares of Natixis Vaughan Nelson Select ETF and Natixis 
Vaughan Nelson MidCap ETF under NYSE Arca Rule 8.601-E) 
(collectively, the ``Approval Orders''). See also, Securities 
Exchange Act Release No. 88887 (May 15, 2020), 85 FR 30990 (May 21, 
2020) (SR-CboeBZX-2019-107) (Notice of Filing of Amendment No. 5 and 
Order Granting Accelerated Approval of a Proposed Rule Change, as 
Modified by Amendment No. 5, to Adopt Rule 14.11(m), Tracking Fund 
Shares, and to List and Trade Shares of the Fidelity Blue Chip Value 
ETF, Fidelity Blue Chip Growth ETF, and Fidelity New Millennium 
ETF).
    \5\ See American Century Approval Order, referenced in note 4, 
supra.
    \6\ See T. Rowe Price Approval Order, referenced in note 4, 
supra
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Background

    Rule 8.601-E sets forth certain rules related to the listing and 
trading of Active Proxy Portfolio Shares.\7\ Under Rule 8.601-E(c)(1), 
the term Active Proxy Portfolio Shares means a security that (a) is 
issued by an investment company registered under the Investment Company 
Act of 1940 (``1940 Act'') (``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 specified minimum number of shares, or 
multiples thereof, in return for a deposit by the purchaser of the 
Proxy Portfolio and/or cash with a value equal to the next determined 
net asset value (``NAV''); (c) when aggregated in the same specified 
minimum number of Active Proxy Portfolio Shares, or multiples thereof, 
may be redeemed at a holder's request in return for the Proxy Portfolio 
and/or cash to the holder by the issuer with a value equal to the next 
determined NAV; and (d) the portfolio holdings for which are disclosed 
within at least 60 days following the end of every fiscal quarter.
---------------------------------------------------------------------------

    \7\ See the Natixis Approval Order, note 4, supra, in which the 
Commission approved Exchange rules permitting the listing and 
trading of Active Proxy Portfolio Shares, and the listing and 
trading of shares of an individual series of Active Proxy Portfolio 
Shares.
---------------------------------------------------------------------------

    Rule 8.601-E(c)(2) defines the term ``Actual Portfolio'' as 
identities and quantities of the securities and other assets held by 
the Investment Company that shall form the basis for the Investment 
Company's calculation of NAV at the end of the business day.
    Rule 8.601-E(c)(3) defines the term ``Proxy Portfolio'' as a 
specified portfolio of securities, other financial instruments and/or 
cash designed to track closely the daily performance of the Actual 
Portfolio of a series of Active Proxy Portfolio Shares as provided in 
the exemptive relief pursuant to the 1940 Act applicable to such 
series. The website for each series of Active Proxy Portfolio Shares 
shall disclose the information regarding the Proxy Portfolio as 
provided in the exemptive relief pursuant to the 1940 Act applicable to 
such series, including the following, to the extent applicable:
    (i) Ticker symbol;
    (ii) CUSIP or other identifier;
    (iii) Description of holding;
    (iv) Quantity of each security or other asset held; and
    (v) Percentage weighting of the holding in the portfolio.

[[Page 59339]]

Key Features of Active Proxy Portfolio Shares
    While funds issuing Active Proxy Portfolio Shares are actively-
managed and, to that extent, are similar, for example, to Managed Fund 
Shares, which are actively-managed funds listed and traded under NYSE 
Arca Rule 8.600-E,\8\ Active Proxy Portfolio Shares differ from Managed 
Fund Shares in the following important respects. First, in contrast to 
Managed Fund Shares and for which a ``Disclosed Portfolio'' is required 
to be disseminated at least once daily,\9\ the portfolio for an issue 
of Active Proxy Portfolio Shares is publicly disclosed within at least 
60 days following the end of every fiscal quarter in accordance with 
normal disclosure requirements otherwise applicable to open-end 
management investment companies registered under the 1940 Act.\10\ The 
composition of the portfolio of an issue of Active Proxy Portfolio 
Shares is not available at commencement of Exchange listing and 
trading. Second, in connection with the creation and redemption of 
Active Proxy Portfolio Shares, such creation or redemption may be 
exchanged for a Proxy Portfolio with a value equal to the next-
determined NAV. A series of Active Proxy Portfolio Shares discloses the 
Proxy Portfolio on a daily basis, which, as described above, is 
designed to track closely the daily performance of the Actual Portfolio 
of a series of Active Proxy Portfolio Shares, instead of the actual 
holdings of the Investment Company, as provided by a series of Managed 
Fund Shares.
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    \8\ The Commission has previously approved listing and trading 
on the Exchange of a number of issues of Managed Fund Shares under 
NYSE Arca Rule 8.600-E. See, e.g., Securities Exchange Act Release 
Nos. 87434 (October 31, 2019), 84 FR 59849 (November 6, 2019) (SR-
NYSEArca-2019-12) (Notice of Filing of Amendment No. 2 and Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified 
by Amendment No. 2, to List and Trade Shares of the iShares 
Commodity Curve Carry Strategy ETF under NYSE Arca Rule 8.600-E); 
88924 (May 21, 2020), 85 FR 32062 (May 28, 2020) (SR-NYSEArca-2020--
07) (Notice of Filing of Amendment No. 2 and Order Granting 
Accelerated Approval of a Proposed Rule Change, as Modified by 
Amendment No. 2, to List and Trade Shares of the SPDR SSGA 
Responsible Reserves ESG ETF under NYSE Arca Rule 8.600-E). The 
Commission also has approved a proposed rule change relating to 
generic listing standards for Managed Fund Shares. See Securities 
Exchange Act Release No. 78397 (July 22, 2016), 81 FR 49320 (July 
27, 2016) (SR-NYSEArca-2015-110) (amending NYSE Arca Equities Rule 
8.600 to adopt generic listing standards for Managed Fund Shares).
    \9\ NYSE Arca Rule 8.600-E(c)(2) defines the term ``Disclosed 
Portfolio'' as the identities and quantities of the securities and 
other assets held by the Investment Company that will form the basis 
for the Investment Company's calculation of net asset value at the 
end of the business day. NYSE Arca Rule 8.600-E(d)(2)(B)(i) requires 
that the Disclosed Portfolio will be disseminated at least once 
daily and will be made available to all market participants at the 
same time.
    \10\ A mutual fund is required to file with the Commission its 
complete portfolio schedules for the second and fourth fiscal 
quarters on Form N-CSR under the 1940 Act. Information reported on 
Form N-PORT for the third month of a fund's fiscal quarter will be 
made publicly available 60 days after the end of a fund's fiscal 
quarter. Form N-PORT requires reporting of a fund's complete 
portfolio holdings on a position-by-position basis on a quarterly 
basis within 60 days after fiscal quarter end. Investors can obtain 
a series of Active Proxy Portfolio Shares' Statement of Additional 
Information (``SAI''), its Shareholder Reports, its Form N-CSR, 
filed twice a year, and its Form N-CEN, filed annually. A series of 
Active Proxy Portfolio Shares' SAI and Shareholder Reports will be 
available free upon request from the Investment Company, and those 
documents and the Form N-PORT, Form N-CSR, and Form N-CEN may be 
viewed on-screen or downloaded from the Commission's website at 
www.sec.gov.
---------------------------------------------------------------------------

    In addition, Rule 8.601-E(d) currently provides criteria that 
Active Proxy Portfolio Shares must satisfy for initial and continued 
listing on the Exchange, including, for example, that a minimum number 
of Active Proxy Portfolio Shares are required to be outstanding at the 
time of commencement of trading on the Exchange. However, the current 
process for listing and trading new series of Active Proxy Portfolio 
Shares on the Exchange requires that the Exchange submit a proposed 
rule change with the Commission. In this regard, Commentary .01 to Rule 
8.601-E specifies that the Exchange will file separate proposals under 
Section 19(b) of the Act before listing and trading of shares of a 
series of Active Proxy Portfolio Shares.

Proposed Changes to Rule 8.601-E

    The Exchange proposes to amend Commentary .01 to Rule 8.601-E to 
specify that the Exchange may approve Active Proxy Portfolio Shares for 
listing and/or trading (including pursuant to unlisted trading 
privileges) pursuant to SEC Rule 19b-4(e) under the Act, which pertains 
to derivative securities products (``SEC Rule 19b-4(e)'').\11\ SEC Rule 
19b-4(e)(1) provides that the listing and trading of a new derivative 
securities product by a self-regulatory organization (``SRO'') is not 
deemed a proposed rule change, pursuant to paragraph (c)(1) of Rule 
19b-4,\12\ if the Commission has approved, pursuant to section 19(b) of 
the Act, the SRO's trading rules, procedures and listing standards for 
the product class that would include the new derivative securities 
product and the SRO has a surveillance program for the product class. 
This is the current method pursuant to which ``passive'' ETFs are 
listed under NYSE Arca Rule 5.2-E(j)(3), actively-managed ETFs are 
listed under NYSE Arca Rule 8.600-E, and Exchange-Traded Fund Shares 
are listed under NYSE Arca Rule 5.2-E(j)(8).
---------------------------------------------------------------------------

    \11\ 17 CFR 240.19b-4(e). As provided under SEC Rule 19b-4(e), 
the term ``new derivative securities product'' means any type of 
option, warrant, hybrid securities product or any other security, 
other than a single equity option or a security futures product, 
whose value is based, in whole or in part, upon the performance of, 
or interest in, an underlying instrument.
    \12\ 17 CFR 240.19b-4(c)(1). As provided under SEC Rule 19b-
4(c)(1), a stated policy, practice, or interpretation of the SRO 
shall be deemed to be a proposed rule change unless it is reasonably 
and fairly implied by an existing rule of the SRO.
---------------------------------------------------------------------------

    The Exchange would also specify within Commentary .01 to Rule 
8.601-E that components of a series of Active Proxy Portfolio Shares 
listed pursuant to Rule 19b-4(e) shall satisfy the criteria set forth 
in Rule 8.601-E upon initial listing and on a continual basis. The 
Exchange will file separate proposals under Section 19(b) of the Act 
before the listing and trading of a series of Active Proxy Portfolio 
Shares with components that do not satisfy the criteria set forth in 
proposed amended Commentary .01 or components other than those 
specified in amended Commentary .01. For example, if the components of 
a series of Active Proxy Portfolio Shares included a security or asset 
that is not specified in proposed amended Commentary .01, the Exchange 
would file a separate proposed rule change.
    Proposed Commentary .01 (a) provides that the Actual Portfolio and 
Proxy Portfolio for a series of Active Proxy Portfolio Shares shall 
include only the following:
    (1) U.S. exchange-traded securities that are common stocks; 
preferred stocks; American Depositary Receipts; and real estate 
investment trusts;
    (2) Foreign common stocks that (1) are listed on a foreign exchange 
that is a member of the Intermarket Surveillance Group or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement; and (2) trade on such foreign exchange contemporaneously 
with shares of a series of Active Proxy Portfolio Shares in the 
Exchange's Core Trading Session;
    (3) U.S. exchange-traded funds that are listed under the following 
rules: Investment Company Units (Rule 5.2-E(j)(3)); Exchange-Traded 
Fund Shares (Rule 5.2-E(j)(8)); Portfolio Depositary Receipts (Rule 
8.100-E); Managed Fund Shares (Rule 8.600-E); Active Proxy Portfolio 
Shares (Rule 8.601-E); and Managed Portfolio Shares (Rule 8.900-E);
    (4) Equity Gold Shares (Rule 5.2-E(j)(5))
    (5) Index-Linked Securities (Rule 5.2-E(j)(6));
    (6) Commodity-Based Trust Shares (Rule 8.201-E);

[[Page 59340]]

    (7) Currency Trust Shares (Rule 8.202-E);
    (8) The following securities, which are required to be organized as 
commodity pools: Commodity Index Trust Shares (Rule 8.203-E); Commodity 
Futures Trust Shares (Rule 8.204-E); Trust Units (Rule 8.500-E); and 
Managed Trust Securities (Rule 8.700-E);
    (9) The following securities if organized as commodity pools: Trust 
Issued Receipts (Rule 8.200-E) and Partnership Units (Rule 8.300-E);
    (10) U.S. exchange-traded futures that trade contemporaneously with 
shares of a series of Active Proxy Portfolio Shares in the Exchange's 
Core Trading Session; and
    (11) Cash and cash equivalents. Cash equivalents are the following: 
Short-term U.S. Treasury securities, government money market funds, and 
repurchase agreements.
    Proposed Commentary .01(b) provides that a series of Active Proxy 
Portfolio Shares will not hold short positions in securities and other 
financial instruments referenced in proposed Commentary .01(a)(1)-(11).
    Proposed Commentary .01(c) provides that the securities referenced 
above in proposed Commentary .01(a)(3)-(9) shall include securities 
listed on another national securities exchange pursuant to 
substantially equivalent listing rules.
    The securities and financial instruments enumerated in proposed 
Commentary .01 (a) to Rule 8.601-E are consistent with, and limited to, 
the ``permissible investments'' for series of Active Proxy Portfolio 
Shares previously approved by the Commission for Exchange listing and 
trading, as described in the Approval Orders.\13\ Each such series has 
filed an application for an order under Section 6(c) of the 1940 Act 
for exemptions from various provisions of the 1940 Act and rules 
thereunder, and the Commission has issued orders under the 1940 Act 
granting the exemptions requested in such applications.\14\ Such 
applications made substantially identical representations specifying 
the instruments that a series of Active Proxy Portfolio Shares is 
permitted to hold, and a series of Active Proxy Portfolio Shares would 
be limited to such holdings on an initial and continued listing 
basis.\15\
---------------------------------------------------------------------------

    \13\ See note 4, supra.
    \14\ See, e.g., Seventh Amended and Restated Application, filed 
by the Natixis ETF Trust II and NYSE Group, Inc., for an Order under 
Section 6(c) of the 1940 Act for exemptions from various provisions 
of the 1940 Act and rules thereunder (File No. 812-14870), dated 
October 21, 2019 (``Application''). On November 14, 2019, the 
Commission issued a notice regarding the Application. Investment 
Company Release No. 33684 (File No. 812-14870). On December 10, 
2019, the Commission issued an order (``Exemptive Order'') under the 
1940 Act granting the exemptions requested in the Application 
(Investment Company Act Release No. 33711 (December 10, 2019)).
    \15\ For example, the Natixis Approval Order relating to listing 
of shares of the Natixis U.S. Equity Opportunities ETF (``Fund'') 
states: ``Pursuant to the Application and Exemptive Order, the 
permissible investments for the Fund include only the following 
instruments: ETFs traded on a U.S. exchange; exchange-traded notes 
(``ETNs'') traded on a U.S. exchange; U.S. exchange-traded common 
stocks; common stocks listed on a foreign exchange that trade on 
such exchange contemporaneously with the Shares (``foreign common 
stocks'') in the Exchange's Core Trading Session (normally 9:30 a.m. 
and 4:00 p.m. Eastern time (``E.T.'')); U.S. exchange-traded 
preferred stocks; U.S. exchange-traded American Depositary Receipts 
(``ADRs''); U.S. exchange-traded real estate investment trusts; U.S. 
exchange-traded commodity pools; U.S. exchange-traded metals trusts; 
U.S. exchange-traded currency trusts; and U.S. exchange-traded 
futures that trade contemporaneously with the Fund's Shares. In 
addition, the Fund may hold cash and cash equivalents (short-term 
U.S. Treasury securities, government money market funds, and 
repurchase agreements). Pursuant to the Application and Exemptive 
Order, the Fund will not hold short positions or invest in 
derivatives other than U.S. exchange-traded futures, will not borrow 
for investment purposes, and will not purchase any securities that 
are illiquid investments at the time of purchase.''
---------------------------------------------------------------------------

    The regulatory staff of the Exchange, or the Financial Industry 
Regulatory Authority, Inc. (``FINRA''), on behalf of the Exchange, will 
communicate as needed regarding trading in Active Proxy Portfolio 
Shares, other exchange-traded equity securities and futures contracts 
with other markets that are members of the Intermarket Surveillance 
Group (``ISG''), including U.S. and foreign exchanges on which the 
components are traded. In addition, the Exchange may obtain information 
regarding trading in Active Proxy Portfolio Shares from other markets 
that are members of the ISG, including all U.S. securities exchanges 
and futures exchanges on which the equity securities and futures 
contracts are traded, or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
    With respect to the proposed amendment to Commentary .01(a)(11) 
relating to cash and cash equivalents, the enumerated cash 
equivalents--short-term U.S. Treasury securities, government money 
market funds, and repurchase agreements--also are included as cash 
equivalents for purposes of the generic listing criteria applicable to 
Managed Fund Shares in Commentary .01(c) to Rule 8.600-E. Such 
instruments are short-term, highly liquid, and of high credit quality, 
making them less susceptible than other asset classes both to price 
manipulation and volatility.\16\
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 78397 (July 22, 
2016), 81 FR 49320 (July 27, 2016) (SR-NYSEArca-2015-110) (amending 
NYSE Arca Equities Rule 8.600 to adopt generic listing standards for 
Managed Fund Shares).
---------------------------------------------------------------------------

    The Exchange believes that the proposed standards would continue to 
ensure transparency surrounding the listing process for Active Proxy 
Portfolio Shares. In addition, the Exchange believes that the proposed 
portfolio standards for listing and trading Active Proxy Portfolio 
Shares are reasonably designed to promote a fair and orderly market for 
such Active Proxy Portfolio Shares. These proposed standards would also 
work in conjunction with the existing initial and continued listing 
criteria related to surveillance procedures and trading guidelines.
    In support of this proposal, the Exchange represents that:
    (1) The Active Proxy Portfolio Shares will conform to the initial 
and continued listing criteria under Rule 8.601-E;
    (2) the Exchange's surveillance procedures are adequate to continue 
to properly monitor the trading of Active Proxy Portfolio Shares in all 
trading sessions and to deter and detect violations of Exchange rules. 
Specifically, the Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products, which will include Active 
Proxy Portfolio Shares, to monitor trading in the Active Proxy 
Portfolio Shares;
    (3) the issuer of a series of Active Proxy Portfolio Shares will be 
required to comply with Rule 10A-3 under the Act for the initial and 
continued listing of Active Proxy Portfolio Shares, as provided under 
NYSE Arca Rule 5.3-E.
    Prior to listing pursuant to proposed amended Commentary .01 to 
Rule 8.601-E, an issuer would be required to represent to the Exchange 
that it will notify the Exchange of any failure by a series of Active 
Proxy Portfolio Shares to comply with the continued listing 
requirements, and, pursuant to its obligations under Section 19(g)(1) 
of the Act, the Exchange will monitor for compliance with the continued 
listing requirements. If a series of Active Proxy Portfolio Shares is 
not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under NYSE Arca Rule 5.5-
E(m).
    All Active Proxy Portfolio Shares listed and/or traded pursuant to 
Rule 8.601-E (including pursuant to unlisted trading privileges) are 
subject to all Exchange rules and procedures that

[[Page 59341]]

currently govern the trading of equity securities on the Exchange.
    The Exchange notes that the proposed change is not otherwise 
intended to address any other issues and that the Exchange is not aware 
of any problems that Equity Trading Permit Holders or issuers would 
have in complying with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\17\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\18\ in particular, because 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, in general, to protect investors and the public interest.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
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    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 because it would facilitate the listing and trading of 
additional Active Proxy Portfolio Shares, which would enhance 
competition among market participants, to the benefit of investors and 
the marketplace. The Exchange believes that, in view of the 
Commission's approval of Exchange rules for Active Proxy Portfolio 
Shares and commencement of Exchange trading of shares of series of 
Active Proxy Portfolio Shares,\19\ it is appropriate to codify certain 
rules within Rule 8.601-E that would generally eliminate the need for 
separate proposed rule changes. The Exchange believes that this would 
facilitate the listing and trading of additional types of Active Proxy 
Portfolio Shares that have investment portfolios that are similar to 
investment portfolios for other exchange-traded funds that have been 
approved for listing and trading, thereby creating greater efficiencies 
in the listing process for the Exchange and the Commission.
---------------------------------------------------------------------------

    \19\ See notes 4-6, supra.
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    The securities and financial instruments enumerated in proposed 
Commentary .01 (a)(1)-(11) to Rule 8.601-E are consistent with, and 
limited to, the ``permissible investments'' for series of Active Proxy 
Portfolio Shares previously approved by the Commission for Exchange 
listing and trading, as described in the Approval Orders.\20\ The 
Exchange notes that all exchange-traded equity securities held by a 
series of Active Proxy Portfolio Shares would either be listed and 
traded on a national securities exchange in the United States or, with 
respect to foreign common stocks, traded on a foreign exchange that is 
a member of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement. In addition, such foreign common stocks 
would be required to trade on such foreign exchange contemporaneously 
with shares of a series of Active Proxy Portfolio Shares in the 
Exchange's Core Trading Session (as defined in NYSE Arca Rule 7.34-E). 
Futures contracts held by a series of Active Proxy Portfolio Shares 
would be traded on a U.S. futures exchange.
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    \20\ See notes 4 and 15, supra.
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    With respect to the proposed amendment to Commentary .01(a)(11) 
relating to cash and cash equivalents, the enumerated cash 
equivalents--short-term U.S. Treasury securities, government money 
market funds, and repurchase agreements--also are included as cash 
equivalents for purposes of the generic listing criteria applicable to 
Managed Fund Shares in Commentary .01(c) to Rule 8.600-E. Such 
instruments are short-term, highly liquid, and of high credit quality, 
making them less susceptible than other asset classes both to price 
manipulation and volatility.\21\
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    \21\ See note 16, supra.
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    As noted above, NYSE Arca Rule 8.601-E(c)(3) requires that the 
website for each series of Active Proxy Portfolio Shares shall disclose 
the information regarding the Proxy Portfolio as provided in the 
exemptive relief pursuant to the 1940 Act applicable to such series, 
including specified information, to the extent applicable.
    Quotation and last sale information for U.S. exchange-traded equity 
securities in the applicable Proxy Portfolio will be available via the 
Consolidated Tape Association high-speed line or from the exchange on 
which such securities trade. Price information for foreign common 
stocks in the applicable Proxy Portfolio will be available from the 
exchange on which such securities trade or from market data vendors. 
Intraday pricing information for cash equivalents will be available 
through subscription services and/or pricing services. Quotation and 
other market information relating to futures contracts is available 
from the U.S. futures exchanges listing such instruments as well as 
from market data vendors.
    The proposed rule change is also designed to protect investors and 
the public interest because Active Proxy Portfolio Shares listed and 
traded pursuant to Rule 8.601-E, including pursuant to the proposed 
portfolio standards, would continue to be subject to the full panoply 
of Exchange rules and procedures that currently govern the trading of 
equity securities on the Exchange.
    The Exchange believes that the proposed standards would continue to 
ensure transparency surrounding the listing process for Active Proxy 
Portfolio Shares. In addition, the Exchange believes that the proposed 
portfolio standards for listing and trading Active Proxy Portfolio 
Shares are reasonably designed to promote a fair and orderly market for 
such Active Proxy Portfolio Shares. These proposed standards would also 
work in conjunction with the existing initial and continued listing 
criteria related to surveillance procedures and trading guidelines.
    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices because the 
Active Proxy Portfolio Shares will be listed and traded on the Exchange 
pursuant to the initial and continued listing criteria in Rule 8.601-E. 
The Exchange has in place surveillance procedures that are adequate to 
properly monitor trading in Active Proxy Portfolio Shares in all 
trading sessions and to deter and detect violations of Exchange rules 
and applicable federal securities laws. FINRA, on behalf of the 
Exchange, or the regulatory staff of the Exchange, will communicate as 
needed regarding trading in Active Proxy Portfolio Shares, other 
exchange-traded equity securities, and futures contracts with other 
markets that are members of the ISG, including all U.S. and foreign 
exchanges on which the components are traded. In addition, the Exchange 
may obtain information regarding trading in Active Proxy Portfolio 
Shares from other markets that are members of the ISG, including all 
U.S. securities exchanges and futures exchanges on which the equity 
securities and futures contracts are traded, or with which the Exchange 
has in place a comprehensive surveillance sharing agreement.
    The Exchange also believes that the proposed rule change would 
fulfill the intended objective of Rule 19b-4(e) under the Act by 
allowing Active Proxy Portfolio Shares that satisfy the proposed 
listing standards to be listed and traded without separate Commission 
approval. However, as proposed, the Exchange would continue to file 
separate proposed rule changes before the listing and trading of Active 
Proxy Portfolio Shares that do not satisfy the additional criteria 
described above.

[[Page 59342]]

    Prior to listing pursuant to proposed amended Commentary .01 to 
Rule 8.601-E, an issuer would be required to represent to the Exchange 
that it will advise the Exchange of any failure by a series of Active 
Proxy Portfolio Shares to comply with the continued listing 
requirements, and, pursuant to its obligations under Section 19(g)(1) 
of the Act, the Exchange will monitor for compliance with the continued 
listing requirements. If a series of Active Proxy Portfolio Shares is 
not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under NYSE Arca Rule 5.5-
E(m).
    For these reasons, the Exchange believes that the proposal is 
consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\22\ 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. Instead, the Exchange believes that the 
proposed rule change would facilitate the listing and trading of 
additional types of Active Proxy Portfolio Shares and result in a 
significantly more efficient process surrounding the listing and 
trading of Active Proxy Portfolio Shares, which will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. The Exchange believes that this would reduce the time 
frame for bringing Active Proxy Portfolio Shares to market, thereby 
reducing the burdens on issuers and other market participants and 
promoting competition. In turn, the Exchange believes that the proposed 
change would make the process for listing Active Proxy Portfolio Shares 
more competitive by applying uniform listing standards with respect to 
Active Proxy Portfolio Shares.
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    \22\ 15 U.S.C. 78f(b)(8).
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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 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-2020-77 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-2020-77. 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-2020-77 and should be submitted 
on or before October 13, 2020.
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    \23\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-20699 Filed 9-18-20; 8:45 am]
BILLING CODE 8011-01-P
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