Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, Amending NYSE Arca Rule 8.900-E To Adopt Generic Listing Standards for Managed Portfolio Shares, 64598-64603 [2020-22630]
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Federal Register / Vol. 85, No. 198 / Tuesday, October 13, 2020 / Notices
are able to take and pass the appropriate
qualification examination during the
120-calendar day period required under
the rules. Shelter-in-place orders,
quarantining, restrictions on business
and social activity and adherence to
other social distancing guidelines
consistent with the recommendation of
public officials remain in place in
various states.22 Further, NYSE
American states that Prometric test
centers have experienced serious
interruptions in the administration of
FINRA qualification examinations,
resulting in a backlog of individuals
waiting to take these examinations.
Following a nationwide closure of all
test centers earlier in the year, some test
centers have re-opened, but are
operating at limited capacity or are only
delivering certain examinations that
have been deemed essential by the local
government.23 FINRA has launched an
online test delivery service to help
address this backlog. However, the
General Securities Principal (Series 24)
Examination is not available online.
NYSE American states that the
temporary proposed rule change will
provide needed flexibility to ensure that
these positions remain filled and is
tailored to address the constraints on
Members’ operations during the
COVID–19 pandemic without
significantly compromising critical
investor protection.24
The Commission also notes that the
proposal provides only temporary relief
from the requirement to pass certain
qualification examinations within the
120-day period in the rules. As
proposed, this relief would extend the
120-day period that certain individuals
can function as principals through
December 31, 2020. NYSE American has
also stated that if it requires temporary
relief from the rule requirements
identified in this proposal beyond
December 31, 2020, it may submit a
separate rule filing to extend the
effectiveness of the temporary relief
under these rules.25 For these reasons,
the Commission believes that waiver of
the 30-day operative delay is consistent
with the protection of investors and the
public interest.26 Accordingly, the
22 See
supra note 14.
supra notes 11 and 12. NYSE American
states that Prometric has also had to close some
reopened test centers due to incidents of COVID–
19 cases.
24 NYSE American states that Members remain
subject to the continued requirement to supervise
the activities of these designated individuals and
ensure compliance with federal securities laws and
regulations, as well as NYSE American rules.
25 See supra note 5.
26 As noted above by the Exchange, this proposed
temporary change is based on a recent filing by
FINRA that the Commission approved with a
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23 See
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Commission hereby waives the 30-day
operative delay and designates the
proposal operative upon filing.27
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or 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–
NYSEAMER–2020–71 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–NYSEAMER–2020–71. 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
waiver of the 30-day operative delay. See supra
note 6, 85 FR at 55538.
27 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule change’s impact on efficiency,
competition, and capital formation. See 15 U.S.C.
78c(f).
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printing in the Commission’s Public
Reference Room, on business days
between the hours of 10:00 a.m. and
3:00 p.m., located at 100 F Street NE,
Washington, DC 20549. Copies of such
filing also will be available for
inspection and copying at the principal
office of NYSE American. 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–NYSEAMER–2020–71 and
should be submitted on or before
November 3, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–22634 Filed 10–9–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90104; File No. SR–
NYSEArca–2020–84]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change, as Modified by
Amendment No. 1, Amending NYSE
Arca Rule 8.900–E To Adopt Generic
Listing Standards for Managed
Portfolio Shares
October 7, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
September 22, 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. On October 2, 2020, the
Exchange filed Amendment No. 1 to the
proposed rule change. The Commission
is publishing this notice to solicit
comments on the proposed rule change,
as modified by Amendment No. 1, from
interested persons.
28 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 85, No. 198 / Tuesday, October 13, 2020 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
NYSE Arca Rule 8.900–E to adopt
generic listing standards for Managed
Portfolio Shares. This Amendment No.
1 to SR–NYSEArca–2020–84 replaces
SR–NYSEArca–2020–84 as originally
filed and supersedes such filing in its
entirety. 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
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1. Purpose
The Exchange proposes to amend
NYSE Arca Rule 8.900–E to adopt
generic listing standards for Managed
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 Managed
Portfolio Shares. The Exchange believes
that it is appropriate to codify certain
rules within Rule 8.900–E that would
generally reduce the need for such
proposed rule changes, which would
create greater efficiency and promote
uniform standards in the listing process.
Background
Rule 8.900–E sets forth certain rules
related to the listing and trading of
Managed Portfolio Shares.4
The Commission has previously
approved listing and trading of series of
Managed Portfolio Shares on the
Exchange under NYSE Arca Rule 8.900–
4 See Securities Exchange Act Release No. 88648
(April 15, 2020), 85 FR 22200 (April 21, 2020) (SR–
NYSEArca–2020–32) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
to Adopt a New NYSE Arca Rule 8.900–E).
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E and on other national securities
exchanges under substantially
equivalent listing rules.5 Currently,
three series of Managed Portfolio Shares
are listed and traded on the Cboe BZX
Exchange, Inc.6
Rule 8.900–E(b)(1) provides that the
Exchange will file separate proposals
under Section 19(b) of the Act before the
listing and trading of a series of
Managed Portfolio Shares. The rule
further provides that all statements or
representations contained in such rule
filing regarding (a) the description of the
portfolio or reference asset, (b)
limitations on portfolio holdings or
reference assets, or (c) the applicability
of Exchange listing rules specified in
such rule filing will constitute
continued listing requirements. An
issuer of such securities must notify the
Exchange of any failure to comply with
such continued listing requirements.
Key Features of Managed Portfolio
Shares
While each series of Managed
Portfolio Shares will be actively
managed and, to that extent, will be
similar, for example, to Managed Fund
Shares (as defined in Rule 8.600–E),7
5 See Securities Exchange Act Release Nos. 89633
(August 25, 2020), 85 FR 53868 (August 31, 2020)
(SR–NYSEArca–2020–48) (Order Approving a
Proposed Rule Change, as Modified by Amendment
No. 1, to List and Trade Shares of Gabelli ETFs
under Rule 8.900–E) (the ‘‘Gabelli Approval
Order’’); 88247 (February 20, 2020), 85 FR 11137
(February 26, 2020) (SR–CboeBZX–2019–102)
(Notice of Filing of Amendment No. 3 and Order
Granting Accelerated Approval of a Proposed Rule
Change, as Modified by Amendment No. 3 thereto,
to List and Trade Shares of the ClearBridge Focus
Value ETF under BZX Rule 14.11(k)) (‘‘ClearBridge
Approval Order’’); 88175 (February 12, 2020), 85 FR
9494 (February 19, 2020) (SR–CboeBZX–2019–057)
(Notice of Filing of Amendment No. 2 and Order
Granting Accelerated Approval of a Proposed Rule
Change, as Modified by Amendment No. 2 thereto,
to List and Trade Shares of the American Century
Focused Dynamic Growth ETF and American
Century Focused Large Cap Value ETF under BZX
Rule 14.11(k)) (‘‘American Century Approval
Order’’, together with the Gabelli Approval Order,
ClearBridge Approval Order and American Century
Approval Order, the ‘‘Approval Orders’’).
6 See ClearBridge Approval Order and American
Century Approval Order, referenced in note 5,
supra.
7 The Commission approved a proposed rule
change to adopt rules permitting the listing and
trading of Managed Fund Shares. See Securities
Exchange Act Release No. 57619 (April 4, 2008), 73
FR 19544 (April 10, 2008) (SR–NYSEArca–2008–25)
(Order Granting Accelerated Approval of Rules
Permitting the Listing and Trading of Managed
Fund Shares, Trading Hours and Halts, Listing Fees
Applicable To Managed Fund Shares). The
Commission has also previously approved listing
and trading on the Exchange of a number of issues
of Managed Fund Shares under Rule 8.600–E. See,
e.g., Securities Exchange Act Release Nos. 57801
(May 8, 2008), 73 FR 27878 (May 14, 2008) (SR–
NYSEArca–2008–31) (order approving Exchange
listing and trading of twelve actively-managed
funds of the WisdomTree Trust; 63802 (January 31,
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64599
Managed Portfolio Shares differ from
Managed Fund Shares in the following
important respects.8 First, in contrast to
Managed Fund Shares, which require a
‘‘Disclosed Portfolio’’ to be
disseminated at least once daily,9 the
portfolio for a series of Managed
Portfolio Shares will be disclosed
quarterly in accordance with normal
disclosure requirements otherwise
applicable to open-end investment
companies registered under the
Investment Company Act of 1940
(‘‘1940 Act’’).10 The composition of the
portfolio of a series of Managed
Portfolio Shares would not be available
at commencement of Exchange listing
and/or trading. Second, in connection
with the creation and redemption of
shares in ‘‘Creation Unit’’ or
‘‘Redemption Unit’’ size, the delivery of
any portfolio securities in kind will be
effected through a ‘‘Confidential
Account’’ for the benefit of the creating
or redeeming Authorized Participant
2011), 76 FR 6503 (February 4, 2011) (SR–
NYSEArca–2010–118) (order approving Exchange
listing and trading of the SiM Dynamic Allocation
Diversified Income ETF and SiM Dynamic
Allocation Growth Income ETF).
8 Rule 8.900–E(c)(1) defines the term ‘‘Managed
Portfolio Share’’ as a security that (a) represents an
interest in an investment company registered under
the Investment Company Act of 1940 (‘‘Investment
Company’’) organized as an open-end management
investment company, that invests in a portfolio of
securities selected by the Investment Company’s
investment adviser consistent with the Investment
Company’s investment objectives and policies; (b)
is issued in a Creation Unit, or multiples thereof,
in return for a designated portfolio of instruments
(and/or an amount of cash) with a value equal to
the next determined net asset value and delivered
to the Authorized Participant (as defined in the
Investment Company’s Form N–1A filed with the
Commission) through a Confidential Account; (c)
when aggregated into a Redemption Unit, or
multiples thereof, may be redeemed for a
designated portfolio of instruments (and/or an
amount of cash) with a value equal to the next
determined net asset value delivered to the
Confidential Account for the benefit of the
Authorized Participant; and (d) the portfolio
holdings for which are disclosed within at least 60
days following the end of every fiscal quarter.
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 be disseminated at least once daily and be
made available to all market participants at the
same time.
10 Form N–PORT requires reporting of a fund’s
complete portfolio holdings on a position-byposition basis on a quarterly basis within 60 days
after fiscal quarter end. Investors can obtain a
fund’s Statement of Additional Information, its
Shareholder Reports, its Form N–CSR, filed twice
a year, and its Form N–CEN, filed annually. A
fund’s SAI and Shareholder Reports are available
free upon request from the Investment Company,
and those documents and the Form N–PORT, Form
N–CSR, and Form N–CEN may be viewed on-screen
or downloaded from the Commission’s website at
www.sec.gov.
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(‘‘AP’’) without disclosing the identity
of such securities to the AP.11
For each series of Managed Portfolio
Shares, an estimated value—the Verified
Intraday Indicative Value or ‘‘VIIV’’—
that reflects an estimated intraday value
of a fund’s portfolio will be
disseminated.12 Specifically, the VIIV
will be based upon all of a series’
holdings as of the close of the prior
business day and, for corporate actions,
based on the applicable holdings as of
the opening of business on the current
business day. The VIIV will be widely
disseminated by the ‘‘Reporting
Authority’’ and/or one or more major
market data vendors in one second
intervals during the Exchange’s Core
Trading Session and will be
disseminated to all market participants
at the same time. The dissemination of
the VIIV will allow investors to
determine the estimated intra-day value
of the underlying portfolio of a series of
Managed Portfolio Shares and will
provide a close estimate of that value
throughout the trading day.
In addition, Rule 8.900–E currently
provides criteria that Managed Portfolio
Shares must satisfy for initial and
continued listing on the Exchange,
including, for example, that a minimum
number of Managed 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
Managed Portfolio Shares on the
Exchange requires that the Exchange
11 NYSE Arca Rule 8.900–E(c)(4) defines the term
‘‘Confidential Account’’ as ‘‘an account owned by
an Authorized Participant and held with an AP
Representative on behalf of the Authorized
Participant. The account will be established and
governed by contractual agreement between the AP
Representative and the Authorized Participant
solely for the purposes of creation and redemption,
while keeping confidential the Creation Basket
constituents of each series of Managed Portfolio
Shares, including from the Authorized Participant.
The books and records of the Confidential Account
will be maintained by the AP Representative on
behalf of the Authorized Participant.’’ NYSE Arca
Rule 8.900–E(c)(3) defines the term ‘‘AP
Representative’’ as ‘‘an unaffiliated broker-dealer,
with which an Authorized Participant has signed an
agreement to establish a Confidential Account for
the benefit of such Authorized Participant, that will
deliver or receive, on behalf of the Authorized
Participant, all consideration to or from the
Investment Company in a creation or redemption.
An AP Representative will not be permitted to
disclose the Creation Basket to any person,
including the Authorized Participants.’’
12 Rule 8.900–E(c)(2) defines the term ‘‘Verified
Intraday Indicative Value (‘‘VIIV’’) as the indicative
value of a Managed Portfolio Share based on all of
the holdings of a series of Managed Portfolio Shares
as of the close of business on the prior business day
and, for corporate actions, based on the applicable
holdings as of the opening of business on the
current business day, priced and disseminated in
one second intervals during the Core Trading
Session by the Reporting Authority.
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submit a proposed rule change with the
Commission. In this regard, as noted
above, Rule 8.900–E(b)(1) 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 Managed Portfolio Shares.
Proposed Changes To Rule 8.900–E
The Exchange proposes to amend
Rule 8.900–E(b) to specify that the
Exchange may approve Managed
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)’’).13 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–4,14 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).
The Exchange would also specify in
Rule 8.900–E(b) that components of a
series of Managed Portfolio Shares listed
pursuant to Rule 19b–4(e) shall satisfy
the criteria set forth in Rule 8.900–E and
proposed Commentary .01 thereto 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 Managed Portfolio Shares with
components that do not satisfy the
criteria set forth in proposed
Commentary .01 or components other
than those specified in Commentary
.01(a). For example, if the components
of a series of Managed Portfolio Shares
included a security or asset that is not
specified in proposed Commentary
13 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.
14 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.
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.01(a), the Exchange would file a
separate proposed rule change.
Proposed Commentary .01(a) provides
that the portfolio holdings for a series of
Managed Portfolio Shares listed
pursuant to Rule 19b–4(e) 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) 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);
(3) Equity Gold Shares (Rule 5.2–
E(j)(5))
(4) Index-Linked Securities (Rule 5.2–
E(j)(6));
(5) Commodity-Based Trust Shares
(Rule 8.201–E);
(6) Currency Trust Shares (Rule
8.202–E);
(7) 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);
(8) the following securities if
organized as commodity pools: Trust
Issued Receipts (Rule 8.200–E) and
Partnership Units (Rule 8.300–E);
(9) U.S. exchange-traded futures that
trade contemporaneously with shares of
a series of Managed Portfolio Shares in
the Exchange’s Core Trading Session;
and
(10) 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 Managed Portfolio Shares
listed pursuant to Rule 19b–4(e) will not
hold short positions in securities and
other financial instruments referenced
in proposed Commentary .01(a)(1)–(10).
Proposed Commentary .01(c) provides
that the securities referenced above in
proposed Commentary .01(a)(2)–(8)
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 8.900–E are
consistent with, and limited to, the
‘‘permissible investments’’ for series of
Managed Portfolio Shares previously
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approved by the Commission for
Exchange listing and trading, as
described in the Approval Orders.15
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.16 Such applications
made substantially identical
representations specifying the
instruments that a series of Managed
Portfolio Shares is permitted to hold,
and a series of Managed Portfolio Shares
listed generically pursuant to
Commentary .01 would be limited to
such holdings on an initial and
continued listing basis.17
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 Managed
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. exchanges on
which the components are traded. In
addition, the Exchange may obtain
information regarding trading in
Managed 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. Pursuant to Rule 8.900–
E(b)(3), an Investment Company’s
investment adviser will upon request by
the Exchange or FINRA, on behalf of the
Exchange, make available to the
Exchange or FINRA the daily portfolio
holdings of each series of Managed
Portfolio Shares.
With respect to the proposed
amendment to Commentary .01(a)(10)
relating to cash and cash equivalents,
15 See
note 5, supra.
e.g., Application for exemptive relief (File
No. 812–14405) and order granting exemptive relief
applicable to the Precidian ETFs Trust under the
1940 Act (Investment Company Act Release No.
33477) (May 20, 2019).
17 For example, the ClearBridge Approval Order
(see note 5, supra) relating to listing of shares of the
ClearBridge Focus Value ETF states: ‘‘Pursuant to
the Exemptive Order, the permissible investments
include only the following instruments that trade
on a U.S. exchange contemporaneously with the
Shares: ETFs and exchange-traded notes, common
stocks, preferred stocks, American depositary
receipts, real estate investment trusts, commodity
pools, metals trusts, currency trusts, and futures for
which the reference asset the Fund may invest in
directly or, in the case of an index future, based on
an index of a type of asset that the Fund could
invest in directly; as well as cash and cash
equivalents (short-term U.S. Treasury securities,
government money market funds and repurchase
agreements).’’
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16 See,
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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.18
The Exchange believes that the
proposed standards would continue to
ensure transparency surrounding the
listing process for Managed Portfolio
Shares. In addition, the Exchange
believes that the proposed portfolio
standards for listing and trading
Managed Portfolio Shares are reasonably
designed to promote a fair and orderly
market for such Managed 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) Managed Portfolio Shares listed
generically pursuant to Commentary .01
will conform to the initial and
continued listing criteria under Rule
8.900–E as it is proposed to be amended
and proposed Commentary .01 thereto;
(2) the Exchange’s surveillance
procedures are adequate to continue to
properly monitor the trading of
Managed 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 Managed
Portfolio Shares, to monitor trading in
the Managed Portfolio Shares;
(3) the issuer of a series of Managed
Portfolio Shares will be required to
comply with Rule 10A–3 under the Act
for the initial and continued listing of
Managed Portfolio Shares, as provided
under NYSE Arca Rule 5.3–E.
Prior to listing, pursuant to Rule
8.900–E(b) an issuer would be required
to represent to the Exchange that it will
notify the Exchange of any failure by a
series of Managed 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
18 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).
PO 00000
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Sfmt 4703
64601
requirements. If a series of Managed
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 Managed Portfolio Shares listed
and/or traded pursuant to Rule 8.900–E
(including pursuant to unlisted trading
privileges) are subject to all Exchange
rules and procedures that 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,19 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,20 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 Managed
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 Managed
Portfolio Shares and commencement of
Exchange trading of shares of series of
Managed Portfolio Shares,21 it is
appropriate to codify certain rules
within Rule 8.900–E that would
generally reduce the need for separate
proposed rule changes. The Exchange
believes that this would facilitate the
listing and trading of additional types of
Managed 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
19 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
21 See notes 4–6, supra.
20 15
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Federal Register / Vol. 85, No. 198 / Tuesday, October 13, 2020 / Notices
Commentary .01 (a)(1)–(10) to Rule
8.900–E are consistent with, and limited
to, the ‘‘permissible investments’’ for
series of Managed Portfolio Shares
previously approved by the Commission
for Exchange listing and trading, as
described in the Approval Orders.22 The
Exchange notes that all exchange-traded
equity securities held by a series of
Managed Portfolio Shares would be
listed and traded on a national
securities exchange in the United States.
Futures contracts held by a series of
Managed Portfolio Shares would be
traded on a U.S. futures exchange.
With respect to the proposed
amendment to Commentary .01(a)(10)
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.23
Quotation and last sale information
for Managed Portfolio Shares and
exchange-traded equities will be
available via the Consolidated Tape
Association high-speed line or from the
exchange on which such securities
trade. Price information for futures
contracts is available from the exchange
on which such futures trade and from
major market data vendors. Intraday
pricing information for cash equivalents
will be available through subscription
services and/or pricing services.
The proposed rule change is also
designed to protect investors and the
public interest because Managed
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 Managed Portfolio
Shares. In addition, the Exchange
believes that the proposed portfolio
standards for listing and trading
Managed Portfolio Shares are reasonably
designed to promote a fair and orderly
market for such Managed Portfolio
Shares. These proposed standards
22 See
23 See
notes 5 and 17, supra.
note 18, supra.
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18:52 Oct 09, 2020
Jkt 253001
would also work in conjunction with
the existing initial and continued listing
criteria related to surveillance
procedures and trading halts.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices because the Managed
Portfolio Shares will be listed and
traded on the Exchange pursuant to the
initial and continued listing criteria in
Rule 8.900–E. The Exchange has in
place surveillance procedures that are
adequate to properly monitor trading in
Managed 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 Managed Portfolio Shares,
other exchange-traded equity securities,
and futures contracts with other markets
that are members of the ISG. In addition,
the Exchange may obtain information
regarding trading in Managed 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.
The Exchange also believes that the
proposed rule change would fulfill the
intended objective of Rule 19b–4(e)
under the Act by allowing Managed
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
Managed Portfolio Shares that do not
satisfy the additional criteria described
above.
Prior to listing pursuant to proposed
amended Rule 8.900–E and
Commentary .01 thereto, an issuer
would be required to represent to the
Exchange that it will advise the
Exchange of any failure by a series of
Managed 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 Managed 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.
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Fmt 4703
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,24 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 Managed Portfolio Shares and
result in a significantly more efficient
process surrounding the listing and
trading of Managed 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
Managed 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 Managed Portfolio Shares more
competitive by applying uniform listing
standards with respect to Managed
Portfolio Shares.
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, as modified by Amendment No.
1, is consistent with the Act. Comments
may be submitted by any of the
following methods:
24 15
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Federal Register / Vol. 85, No. 198 / Tuesday, October 13, 2020 / Notices
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–2020–84 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.
khammond on DSKJM1Z7X2PROD with NOTICES
All submissions should refer to File
Number SR–NYSEArca–2020–84. 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–2020–84 and
should be submitted on or before
November 3, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–22630 Filed 10–9–20; 8:45 am]
BILLING CODE 8011–01–P
25 17
CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90100; File No. SR–OCC–
2020–010]
Self-Regulatory Organizations; The
Options Clearing Corporation; Order
Approving Proposed Rule Change
Concerning the Commingling of
Certain Non-Customer Margin Assets
With Clearing Fund Contributions in
the Options Clearing Corporation’s
Account at the Federal Reserve Bank
of Chicago
October 6, 2020.
I. Introduction
On August 7, 2020, the Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change SR–OCC–2020–
010 (‘‘Proposed Rule Change’’) pursuant
to Section 19(b) of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 1 and Rule 19b–4 2 thereunder to
provide OCC with express authority to
hold cash Clearing Fund contributions
and certain non-customer cash margin
assets in its account at the Federal
Reserve Bank of Chicago at the same
time.3 The Proposed Rule Change was
published for public comment in the
Federal Register on August 24, 2020.4
The Commission has received no
comments regarding the Proposed Rule
Change. This order approves the
Proposed Rule Change.
II. Background
Since March 15, 2016, OCC has
maintained an account at the Federal
Reserve Bank of Chicago to hold cash
deposits from its Clearing Members to
satisfy margin and Clearing Fund
requirements.5 OCC’s current rules
restrict the manner in which OCC may
hold Clearing Fund contributions and
margin assets.6 As a result, OCC holds
cash Clearing Fund contributions in its
Federal Reserve Bank Account, but
separately holds Clearing Members’
cash margin assets in accounts with
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Notice of Filing infra note 4, 85 FR at 52176.
4 Securities Exchange Act Release No. 89590
(Aug. 18, 2020), 85 FR 52176 (Aug. 24, 2020) (File
No. SR–OCC–2020–010) (‘‘Notice of Filing’’).
5 See Federal Reserve Bank of Chicago
authorization to provide accounts and services to
Options Clearing Corporation and Chicago
Mercantile Exchange, Inc., in accordance with the
Dodd-Frank Act and Regulation HH, approved
March 15, 2016 (https://www.federalreserve.gov/
releases/h2/20160319/h2.pdf).
6 See OCC Rules at https://www.theocc.com/
getmedia/9d3854cd-b782-450f-bcf7-33169b0576ce/
occ_rules.pdf.
2 17
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64603
commercial banks. To authorize OCC to
comingle certain cash margin and cash
Clearing Fund contributions, OCC
proposes to amend its Rules 604 and
1002 as described below.
Current rules. OCC Rule 604(d)
requires that certain cash margin assets
of Clearing Members (‘‘Specified Cash
Margin Assets’’) must be deposited to
the credit of OCC in an account or
accounts,7 designated as Clearing
Member margin accounts, with such
banks, trust companies or other
depositories as the Board of Directors
may select. Rule 604(d) further prohibits
OCC from commingling Specified Cash
Margin Assets with OCC’s funds of OCC
or using such assets as working capital.
OCC Rule 1002(c) requires, among
other things, that cash Clearing Fund
contributions not otherwise invested
shall be deposited by OCC in accounts
with approved custodians, which
include the Federal Reserve Bank of
Chicago. Rule 1002(c) permits the
comingling of Clearing Fund
contributions from different Clearing
Members.8 OCC currently holds cash
Clearing Fund contributions in its
Federal Reserve Bank Account.
Proposed Rule Change to OCC. OCC
proposes to add language to Rule 604 to
allow OCC to deposit Specified Cash
Margin Assets in a Federal Reserve Bank
Account not designated as a Clearing
Member margin account. The proposed
change would apply only to noncustomer margin assets.9 OCC proposes
further to add language to its Rules 604
and 1002 to allow OCC to commingle
such assets and cash Clearing Fund
contributions deposited in a Federal
Reserve Bank Account.
III. Discussion and Commission
Findings
Section 19(b)(2)(C) of the Exchange
Act directs the Commission to approve
a proposed rule change of a selfregulatory organization if it finds that
7 OCC Rule 604(d) expressly excludes from these
Specified Cash Margin Assets those funds that are:
(i) Deposited in respect of a segregated futures
account (which must be held in accordance with
the provisions of Section 4d of the Commodity
Exchange Act and regulations thereunder); (ii)
invested by OCC pursuant to Rule 604(a); or (iii)
credited by OCC to a liquidating settlement account
pursuant to Chapter XI of OCC’s Rules.
8 See OCC Rule 1002(c) available at https://
www.theocc.com/getmedia/9d3854cd-b782-450fbcf7-33169b0576ce/occ_rules.pdf.
9 See Notice of Filing, 85 FR at 52177 (stating that
OCC proposes to add Interpretation and Policy .18
to Rule 604 to provide that, notwithstanding
anything else in Rule 604, Specified Cash Margin
Assets held by OCC as non-customer margin assets
and deposited to the credit of OCC in its Federal
Reserve Bank Account may be deposited in
accounts that are not designated as Clearing
Member margin accounts and may be commingled
with cash Clearing Fund contributions.)
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]]>Agencies
[Federal Register Volume 85, Number 198 (Tuesday, October 13, 2020)]
[Notices]
[Pages 64598-64603]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22630]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90104; File No. SR-NYSEArca-2020-84]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change, as Modified by Amendment No. 1, Amending NYSE
Arca Rule 8.900-E To Adopt Generic Listing Standards for Managed
Portfolio Shares
October 7, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on September 22, 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. On October 2, 2020, the Exchange filed Amendment No. 1 to
the proposed rule change. The Commission is publishing this notice to
solicit comments on the proposed rule change, as modified by Amendment
No. 1, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
[[Page 64599]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend NYSE Arca Rule 8.900-E to adopt
generic listing standards for Managed Portfolio Shares. This Amendment
No. 1 to SR-NYSEArca-2020-84 replaces SR-NYSEArca-2020-84 as originally
filed and supersedes such filing in its entirety. 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 8.900-E to adopt
generic listing standards for Managed 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 Managed Portfolio Shares. The
Exchange believes that it is appropriate to codify certain rules within
Rule 8.900-E that would generally reduce the need for such proposed
rule changes, which would create greater efficiency and promote uniform
standards in the listing process.
Background
Rule 8.900-E sets forth certain rules related to the listing and
trading of Managed Portfolio Shares.\4\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 88648 (April 15,
2020), 85 FR 22200 (April 21, 2020) (SR-NYSEArca-2020-32) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to Adopt
a New NYSE Arca Rule 8.900-E).
---------------------------------------------------------------------------
The Commission has previously approved listing and trading of
series of Managed Portfolio Shares on the Exchange under NYSE Arca Rule
8.900-E and on other national securities exchanges under substantially
equivalent listing rules.\5\ Currently, three series of Managed
Portfolio Shares are listed and traded on the Cboe BZX Exchange,
Inc.\6\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release Nos. 89633 (August 25,
2020), 85 FR 53868 (August 31, 2020) (SR-NYSEArca-2020-48) (Order
Approving a Proposed Rule Change, as Modified by Amendment No. 1, to
List and Trade Shares of Gabelli ETFs under Rule 8.900-E) (the
``Gabelli Approval Order''); 88247 (February 20, 2020), 85 FR 11137
(February 26, 2020) (SR-CboeBZX-2019-102) (Notice of Filing of
Amendment No. 3 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 3 thereto, to
List and Trade Shares of the ClearBridge Focus Value ETF under BZX
Rule 14.11(k)) (``ClearBridge Approval Order''); 88175 (February 12,
2020), 85 FR 9494 (February 19, 2020) (SR-CboeBZX-2019-057) (Notice
of Filing of Amendment No. 2 and Order Granting Accelerated Approval
of a Proposed Rule Change, as Modified by Amendment No. 2 thereto,
to List and Trade Shares of the American Century Focused Dynamic
Growth ETF and American Century Focused Large Cap Value ETF under
BZX Rule 14.11(k)) (``American Century Approval Order'', together
with the Gabelli Approval Order, ClearBridge Approval Order and
American Century Approval Order, the ``Approval Orders'').
\6\ See ClearBridge Approval Order and American Century Approval
Order, referenced in note 5, supra.
---------------------------------------------------------------------------
Rule 8.900-E(b)(1) provides that the Exchange will file separate
proposals under Section 19(b) of the Act before the listing and trading
of a series of Managed Portfolio Shares. The rule further provides that
all statements or representations contained in such rule filing
regarding (a) the description of the portfolio or reference asset, (b)
limitations on portfolio holdings or reference assets, or (c) the
applicability of Exchange listing rules specified in such rule filing
will constitute continued listing requirements. An issuer of such
securities must notify the Exchange of any failure to comply with such
continued listing requirements.
Key Features of Managed Portfolio Shares
While each series of Managed Portfolio Shares will be actively
managed and, to that extent, will be similar, for example, to Managed
Fund Shares (as defined in Rule 8.600-E),\7\ Managed Portfolio Shares
differ from Managed Fund Shares in the following important respects.\8\
First, in contrast to Managed Fund Shares, which require a ``Disclosed
Portfolio'' to be disseminated at least once daily,\9\ the portfolio
for a series of Managed Portfolio Shares will be disclosed quarterly in
accordance with normal disclosure requirements otherwise applicable to
open-end investment companies registered under the Investment Company
Act of 1940 (``1940 Act'').\10\ The composition of the portfolio of a
series of Managed Portfolio Shares would not be available at
commencement of Exchange listing and/or trading. Second, in connection
with the creation and redemption of shares in ``Creation Unit'' or
``Redemption Unit'' size, the delivery of any portfolio securities in
kind will be effected through a ``Confidential Account'' for the
benefit of the creating or redeeming Authorized Participant
[[Page 64600]]
(``AP'') without disclosing the identity of such securities to the
AP.\11\
---------------------------------------------------------------------------
\7\ The Commission approved a proposed rule change to adopt
rules permitting the listing and trading of Managed Fund Shares. See
Securities Exchange Act Release No. 57619 (April 4, 2008), 73 FR
19544 (April 10, 2008) (SR-NYSEArca-2008-25) (Order Granting
Accelerated Approval of Rules Permitting the Listing and Trading of
Managed Fund Shares, Trading Hours and Halts, Listing Fees
Applicable To Managed Fund Shares). The Commission has also
previously approved listing and trading on the Exchange of a number
of issues of Managed Fund Shares under Rule 8.600-E. See, e.g.,
Securities Exchange Act Release Nos. 57801 (May 8, 2008), 73 FR
27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order approving Exchange
listing and trading of twelve actively-managed funds of the
WisdomTree Trust; 63802 (January 31, 2011), 76 FR 6503 (February 4,
2011) (SR-NYSEArca-2010-118) (order approving Exchange listing and
trading of the SiM Dynamic Allocation Diversified Income ETF and SiM
Dynamic Allocation Growth Income ETF).
\8\ Rule 8.900-E(c)(1) defines the term ``Managed Portfolio
Share'' as a security that (a) represents an interest in an
investment company registered under the Investment Company Act of
1940 (``Investment Company'') organized as an open-end management
investment company, that invests in a portfolio of securities
selected by the Investment Company's investment adviser consistent
with the Investment Company's investment objectives and policies;
(b) is issued in a Creation Unit, or multiples thereof, in return
for a designated portfolio of instruments (and/or an amount of cash)
with a value equal to the next determined net asset value and
delivered to the Authorized Participant (as defined in the
Investment Company's Form N-1A filed with the Commission) through a
Confidential Account; (c) when aggregated into a Redemption Unit, or
multiples thereof, may be redeemed for a designated portfolio of
instruments (and/or an amount of cash) with a value equal to the
next determined net asset value delivered to the Confidential
Account for the benefit of the Authorized Participant; and (d) the
portfolio holdings for which are disclosed within at least 60 days
following the end of every fiscal quarter.
\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 be disseminated at least once daily and
be made available to all market participants at the same time.
\10\ Form N-PORT requires reporting of a fund's complete
portfolio holdings on a position-by-position basis on a quarterly
basis within 60 days after fiscal quarter end. Investors can obtain
a fund's Statement of Additional Information, its Shareholder
Reports, its Form N-CSR, filed twice a year, and its Form N-CEN,
filed annually. A fund's SAI and Shareholder Reports are 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.
\11\ NYSE Arca Rule 8.900-E(c)(4) defines the term
``Confidential Account'' as ``an account owned by an Authorized
Participant and held with an AP Representative on behalf of the
Authorized Participant. The account will be established and governed
by contractual agreement between the AP Representative and the
Authorized Participant solely for the purposes of creation and
redemption, while keeping confidential the Creation Basket
constituents of each series of Managed Portfolio Shares, including
from the Authorized Participant. The books and records of the
Confidential Account will be maintained by the AP Representative on
behalf of the Authorized Participant.'' NYSE Arca Rule 8.900-E(c)(3)
defines the term ``AP Representative'' as ``an unaffiliated broker-
dealer, with which an Authorized Participant has signed an agreement
to establish a Confidential Account for the benefit of such
Authorized Participant, that will deliver or receive, on behalf of
the Authorized Participant, all consideration to or from the
Investment Company in a creation or redemption. An AP Representative
will not be permitted to disclose the Creation Basket to any person,
including the Authorized Participants.''
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For each series of Managed Portfolio Shares, an estimated value--
the Verified Intraday Indicative Value or ``VIIV''-- that reflects an
estimated intraday value of a fund's portfolio will be
disseminated.\12\ Specifically, the VIIV will be based upon all of a
series' holdings as of the close of the prior business day and, for
corporate actions, based on the applicable holdings as of the opening
of business on the current business day. The VIIV will be widely
disseminated by the ``Reporting Authority'' and/or one or more major
market data vendors in one second intervals during the Exchange's Core
Trading Session and will be disseminated to all market participants at
the same time. The dissemination of the VIIV will allow investors to
determine the estimated intra-day value of the underlying portfolio of
a series of Managed Portfolio Shares and will provide a close estimate
of that value throughout the trading day.
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\12\ Rule 8.900-E(c)(2) defines the term ``Verified Intraday
Indicative Value (``VIIV'') as the indicative value of a Managed
Portfolio Share based on all of the holdings of a series of Managed
Portfolio Shares as of the close of business on the prior business
day and, for corporate actions, based on the applicable holdings as
of the opening of business on the current business day, priced and
disseminated in one second intervals during the Core Trading Session
by the Reporting Authority.
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In addition, Rule 8.900-E currently provides criteria that Managed
Portfolio Shares must satisfy for initial and continued listing on the
Exchange, including, for example, that a minimum number of Managed
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 Managed Portfolio Shares on the
Exchange requires that the Exchange submit a proposed rule change with
the Commission. In this regard, as noted above, Rule 8.900-E(b)(1)
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
Managed Portfolio Shares.
Proposed Changes To Rule 8.900-E
The Exchange proposes to amend Rule 8.900-E(b) to specify that the
Exchange may approve Managed 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)'').\13\ 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,\14\
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).
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\13\ 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.
\14\ 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.
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The Exchange would also specify in Rule 8.900-E(b) that components
of a series of Managed Portfolio Shares listed pursuant to Rule 19b-
4(e) shall satisfy the criteria set forth in Rule 8.900-E and proposed
Commentary .01 thereto 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 Managed Portfolio
Shares with components that do not satisfy the criteria set forth in
proposed Commentary .01 or components other than those specified in
Commentary .01(a). For example, if the components of a series of
Managed Portfolio Shares included a security or asset that is not
specified in proposed Commentary .01(a), the Exchange would file a
separate proposed rule change.
Proposed Commentary .01(a) provides that the portfolio holdings for
a series of Managed Portfolio Shares listed pursuant to Rule 19b-4(e)
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) 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);
(3) Equity Gold Shares (Rule 5.2-E(j)(5))
(4) Index-Linked Securities (Rule 5.2-E(j)(6));
(5) Commodity-Based Trust Shares (Rule 8.201-E);
(6) Currency Trust Shares (Rule 8.202-E);
(7) 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);
(8) the following securities if organized as commodity pools: Trust
Issued Receipts (Rule 8.200-E) and Partnership Units (Rule 8.300-E);
(9) U.S. exchange-traded futures that trade contemporaneously with
shares of a series of Managed Portfolio Shares in the Exchange's Core
Trading Session; and
(10) 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 Managed
Portfolio Shares listed pursuant to Rule 19b-4(e) will not hold short
positions in securities and other financial instruments referenced in
proposed Commentary .01(a)(1)-(10).
Proposed Commentary .01(c) provides that the securities referenced
above in proposed Commentary .01(a)(2)-(8) 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 8.900-E are consistent with, and limited to,
the ``permissible investments'' for series of Managed Portfolio Shares
previously
[[Page 64601]]
approved by the Commission for Exchange listing and trading, as
described in the Approval Orders.\15\ 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.\16\ Such
applications made substantially identical representations specifying
the instruments that a series of Managed Portfolio Shares is permitted
to hold, and a series of Managed Portfolio Shares listed generically
pursuant to Commentary .01 would be limited to such holdings on an
initial and continued listing basis.\17\
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\15\ See note 5, supra.
\16\ See, e.g., Application for exemptive relief (File No. 812-
14405) and order granting exemptive relief applicable to the
Precidian ETFs Trust under the 1940 Act (Investment Company Act
Release No. 33477) (May 20, 2019).
\17\ For example, the ClearBridge Approval Order (see note 5,
supra) relating to listing of shares of the ClearBridge Focus Value
ETF states: ``Pursuant to the Exemptive Order, the permissible
investments include only the following instruments that trade on a
U.S. exchange contemporaneously with the Shares: ETFs and exchange-
traded notes, common stocks, preferred stocks, American depositary
receipts, real estate investment trusts, commodity pools, metals
trusts, currency trusts, and futures for which the reference asset
the Fund may invest in directly or, in the case of an index future,
based on an index of a type of asset that the Fund could invest in
directly; as well as cash and cash equivalents (short-term U.S.
Treasury securities, government money market funds and repurchase
agreements).''
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The 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 Managed 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. exchanges on which the components are traded.
In addition, the Exchange may obtain information regarding trading in
Managed 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. Pursuant
to Rule 8.900-E(b)(3), an Investment Company's investment adviser will
upon request by the Exchange or FINRA, on behalf of the Exchange, make
available to the Exchange or FINRA the daily portfolio holdings of each
series of Managed Portfolio Shares.
With respect to the proposed amendment to Commentary .01(a)(10)
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.\18\
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\18\ 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).
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The Exchange believes that the proposed standards would continue to
ensure transparency surrounding the listing process for Managed
Portfolio Shares. In addition, the Exchange believes that the proposed
portfolio standards for listing and trading Managed Portfolio Shares
are reasonably designed to promote a fair and orderly market for such
Managed 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) Managed Portfolio Shares listed generically pursuant to
Commentary .01 will conform to the initial and continued listing
criteria under Rule 8.900-E as it is proposed to be amended and
proposed Commentary .01 thereto;
(2) the Exchange's surveillance procedures are adequate to continue
to properly monitor the trading of Managed 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
Managed Portfolio Shares, to monitor trading in the Managed Portfolio
Shares;
(3) the issuer of a series of Managed Portfolio Shares will be
required to comply with Rule 10A-3 under the Act for the initial and
continued listing of Managed Portfolio Shares, as provided under NYSE
Arca Rule 5.3-E.
Prior to listing, pursuant to Rule 8.900-E(b) an issuer would be
required to represent to the Exchange that it will notify the Exchange
of any failure by a series of Managed 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
Managed 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 Managed Portfolio Shares listed and/or traded pursuant to Rule
8.900-E (including pursuant to unlisted trading privileges) are subject
to all Exchange rules and procedures that 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,\19\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\20\ 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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\19\ 15 U.S.C. 78f(b).
\20\ 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 Managed 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 Managed Portfolio Shares and
commencement of Exchange trading of shares of series of Managed
Portfolio Shares,\21\ it is appropriate to codify certain rules within
Rule 8.900-E that would generally reduce the need for separate proposed
rule changes. The Exchange believes that this would facilitate the
listing and trading of additional types of Managed 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.
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\21\ See notes 4-6, supra.
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The securities and financial instruments enumerated in proposed
[[Page 64602]]
Commentary .01 (a)(1)-(10) to Rule 8.900-E are consistent with, and
limited to, the ``permissible investments'' for series of Managed
Portfolio Shares previously approved by the Commission for Exchange
listing and trading, as described in the Approval Orders.\22\ The
Exchange notes that all exchange-traded equity securities held by a
series of Managed Portfolio Shares would be listed and traded on a
national securities exchange in the United States. Futures contracts
held by a series of Managed Portfolio Shares would be traded on a U.S.
futures exchange.
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\22\ See notes 5 and 17, supra.
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With respect to the proposed amendment to Commentary .01(a)(10)
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.\23\
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\23\ See note 18, supra.
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Quotation and last sale information for Managed Portfolio Shares
and exchange-traded equities will be available via the Consolidated
Tape Association high-speed line or from the exchange on which such
securities trade. Price information for futures contracts is available
from the exchange on which such futures trade and from major market
data vendors. Intraday pricing information for cash equivalents will be
available through subscription services and/or pricing services.
The proposed rule change is also designed to protect investors and
the public interest because Managed 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 Managed
Portfolio Shares. In addition, the Exchange believes that the proposed
portfolio standards for listing and trading Managed Portfolio Shares
are reasonably designed to promote a fair and orderly market for such
Managed Portfolio Shares. These proposed standards would also work in
conjunction with the existing initial and continued listing criteria
related to surveillance procedures and trading halts.
The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices because the
Managed Portfolio Shares will be listed and traded on the Exchange
pursuant to the initial and continued listing criteria in Rule 8.900-E.
The Exchange has in place surveillance procedures that are adequate to
properly monitor trading in Managed 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 Managed Portfolio Shares, other exchange-traded
equity securities, and futures contracts with other markets that are
members of the ISG. In addition, the Exchange may obtain information
regarding trading in Managed 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.
The Exchange also believes that the proposed rule change would
fulfill the intended objective of Rule 19b-4(e) under the Act by
allowing Managed 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 Managed
Portfolio Shares that do not satisfy the additional criteria described
above.
Prior to listing pursuant to proposed amended Rule 8.900-E and
Commentary .01 thereto, an issuer would be required to represent to the
Exchange that it will advise the Exchange of any failure by a series of
Managed 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 Managed 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,\24\ 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 Managed Portfolio Shares and result in a
significantly more efficient process surrounding the listing and
trading of Managed 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 Managed 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 Managed Portfolio Shares more
competitive by applying uniform listing standards with respect to
Managed Portfolio Shares.
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\24\ 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, as modified by Amendment No. 1, is consistent with the Act.
Comments may be submitted by any of the following methods:
[[Page 64603]]
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-2020-84 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-2020-84. 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-2020-84 and should be submitted
on or before November 3, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22630 Filed 10-9-20; 8:45 am]
BILLING CODE 8011-01-P
