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
<![CDATA[
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]]
-----------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\20\ See notes 4 and 15, supra.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\21\ See note 16, supra.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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
