Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend NYSE Arca Rule 8.601-E To Adopt Generic Listing Standards for Active Proxy Portfolio Shares, 82011-82014 [2020-27731]

Download as PDF Federal Register / Vol. 85, No. 243 / Thursday, December 17, 2020 / Notices adviser under section 203A of the Act, the Commission shall by order, cancel the registration of such person. Section 203A of the Act prohibits an investment adviser from registering with the Commission under certain circumstances. Rule 203A–2(d) under the Act provides an exemption to this prohibition, permitting an adviser to register with the Commission if the adviser would otherwise be required to register as an investment adviser with 15 or more state securities authorities (‘‘multi-state adviser exemption’’). The registrant indicated on its most recently filed Form ADV that it is relying on the multi-state adviser exemption to register with the Commission and that it has no clients and no assets under management.1 It appears that the registrant is not eligible for the multistate adviser exemption because it is not required to register as an investment adviser with 15 or more state securities authorities. Therefore, it appears that the registrant is prohibited from registering as an investment adviser with the Commission. Furthermore, the registrant has not filed a Form ADV annual updating amendment as required by rule 204–1 under the Act.2 Therefore, it appears that the registrant is not in existence or otherwise not engaged in business as an investment adviser. Accordingly, the Commission believes that reasonable grounds exist for a finding that the registrant is not eligible to be registered with the Commission as an investment adviser and that the registration should be cancelled pursuant to section 203(h) of the Act. Notice is also given that any interested person may, January 8, 2021, at 5:30 p.m., submit to the Commission in writing a request for a hearing on the cancellation, accompanied by a statement as to the nature of his or her interest, the reason for such request, and the issues, if any, of fact or law proposed to be controverted, and he or she may request that he or she be notified if the Commission should order a hearing thereon. Any such communication should be emailed to the Commission’s Secretary at Secretarys-Office@sec.gov. At any time after January 8, 2021, the Commission may issue an order cancelling the registration, upon the basis of the information stated above, unless an order for a hearing on the 1 The registrant filed its most recent Form ADV, which was an ‘‘other-than-annual amendment,’’ on May 31, 2017. 2 Rule 204–1 under the Act requires any adviser that is required to complete Form ADV to amend the form at least annually and to submit the amendments electronically through the Investment Adviser Registration Depository. VerDate Sep<11>2014 18:52 Dec 16, 2020 Jkt 253001 cancellation shall be issued upon request or upon the Commission’s own motion. Persons who requested a hearing, or who requested to be advised as to whether a hearing is ordered, will receive any notices and orders issued in this matter, including the date of the hearing (if ordered) and any postponements thereof. Any adviser whose registration is cancelled under delegated authority may appeal that decision directly to the Commission in accordance with rules 430 and 431 of the Commission’s rules of practice (17 CFR 201.430 and 431). ADDRESSES: The Commission: Secretarys-Office@sec.gov. FOR FURTHER INFORMATION CONTACT: Alexis Palascak, Senior Counsel at 202– 551–6999; SEC, Division of Investment Management, Investment Adviser Regulation Office, 100 F Street NE, Washington, DC 20549–8549. For the Commission, by the Division of Investment Management, pursuant to delegated authority.3 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–27788 Filed 12–16–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–90652; File No. SR– NYSEArca–2020–77] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend NYSE Arca Rule 8.601–E To Adopt Generic Listing Standards for Active Proxy Portfolio Shares December 11, 2020. I. Introduction On August 31, 2020, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend NYSE Arca Rule 8.601–E to adopt generic listing standards for Active Proxy Portfolio Shares. The proposed rule change was published for comment in the Federal Register on September 21, 2020.3 On October 30, 3 17 CFR 200.30–5(e)(2). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 89874 (September 15, 2020), 85 FR 59338 (‘‘Notice’’). 1 15 PO 00000 Frm 00143 Fmt 4703 Sfmt 4703 82011 2020, pursuant to Section 19(b)(2) of the Exchange Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 The Commission has received no comments on the proposed rule change. The Commission is publishing this order to solicit comments on the proposed rule change from interested persons and to institute proceedings pursuant to Section 19(b)(2)(B) of the Act 6 to determine whether to approve or disapprove the proposed rule change. II. Description of the Proposed Rule Change Earlier this year, the Commission approved the Exchange’s proposal to adopt listing standards for Active Proxy Portfolio Shares as set forth in NYSE Arca Rule 8.601–E.7 Active Proxy Portfolio Shares are securities (a) issued by an investment company (‘‘Investment Company’’) registered under the Investment Company Act of 1940 (‘‘1940 Act’’) 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) issued in a specified minimum number of shares, or multiples thereof, in return for a deposit by the purchaser of the Proxy Portfolio 8 and/or cash with a value equal to the next determined net asset value (‘‘NAV’’); (c) when aggregated in the 4 15 U.S.C. 78s(b)(2). Securities Exchange Act Release No. 90296, 85 FR 70696 (November 5, 2020). The Commission designated December 20, 2020, as the date by which the Commission shall approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. 6 15 U.S.C. 78s(b)(2)(B). 7 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) (‘‘Active Proxy Portfolio Shares Approval Order’’). 8 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. 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. 5 See E:\FR\FM\17DEN1.SGM 17DEN1 82012 Federal Register / Vol. 85, No. 243 / Thursday, December 17, 2020 / Notices 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.9 Further, a series of Active Proxy Portfolio Shares discloses its Proxy Portfolio on a daily basis,10 and discloses its Actual Portfolio on a quarterly basis.11 NYSE Arca Rule 8.601–E, Commentary .01, currently requires that the Exchange submit a proposed rule change with the Commission to list and trade each new series of Active Proxy Portfolio Shares.12 The Exchange proposes to amend NYSE Arca Rule 8.601–E to adopt ‘‘generic’’ listing standards that would allow the 9 See NYSE Arca Rule 8.601–E(c)(1). 8.601–E(d)(2)(A) requires for continued listing on the Exchange that each series of Active Proxy Portfolio Shares must make its Proxy Portfolio publicly available on its website at least once daily and must make it available to all market participants at the same time. Pursuant to Rule 8.601–E(c)(3), the website for each series of Active Proxy Portfolio Shares must 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. 11 Rule 8.601–E(d)(2)(A) requires for continued listing on the Exchange that each series of Active Proxy Portfolio Shares must publicly disseminate its Actual Portfolio within at least 60 days following the end of every fiscal quarter and must make it publicly available to all market participants at the same time. 12 The Commission has approved the listing and trading on the Exchange of series of Active Proxy Portfolio Shares pursuant to NYSE Arca Rule 8.601–E. See Active Proxy Portfolio Shares Approval Order, supra note 7, Securities Exchange Act Release Nos. 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) (‘‘Natixis Approval Order,’’ and collectively with the Natixis Approval Order, American Century Approval Order, and T. Rowe Price Approval Order, the ‘‘Approval Orders’’). 10 Rule VerDate Sep<11>2014 18:52 Dec 16, 2020 Jkt 253001 Exchange to approve the listing and trading (including pursuant to unlisted trading privileges) of series of Active Proxy Portfolio Shares that satisfy those generic listing standards pursuant to Rule 19b–4(e) under the Act.13 A. Proposed Amendments to Rule 8.601–E, Commentary .01 The Exchange proposes to amend Commentary .01 to Rule 8.601–E to state that the Exchange may approve Active Proxy Portfolio Shares for listing and/or trading (including pursuant to unlisted trading privileges) pursuant to Rule 19b–4(e) under the Act. The Exchange would also specify within Commentary .01 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. In addition, the Exchange would specify that it 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 .01.14 Proposed Commentary .01(a) to Rule 8.601–E would provide that the Actual Portfolio and Proxy Portfolio for a series of Active Proxy Portfolio Shares would include only the following components: (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 (a) are listed on a foreign exchange that is a 13 17 CFR 240.19b–4(e). Rule 19b–4(e)(1) under the Act provides that the listing and trading of a new derivative securities product by a selfregulatory organization (‘‘SRO’’) is not deemed a proposed rule change, pursuant to paragraph (c)(1) of Rule 19b–4, 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. See 17 CFR 240.19b–4(e)(1). Under 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. See 17 CFR 240.19b–4(e). Under 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. 17 CFR 240.19b–4(c)(1). 17 CFR 240.19b–4(c)(1). 14 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 with the Commission to list the series of Active Proxy Portfolio Shares. PO 00000 Frm 00144 Fmt 4703 Sfmt 4703 member of the Intermarket Surveillance Group or with which the Exchange has in place a comprehensive surveillance sharing agreement; and (b) 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 NYSE Arca 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 (listed under NYSE Arca Rule 5.2–E(j)(5)); (5) Index-Linked Securities (listed under NYSE Arca Rule 5.2–E(j)(6)); (6) Commodity-Based Trust Shares (listed under NYSE Arca Rule 8.201–E); (7) Currency Trust Shares (listed under NYSE Arca Rule 8.202–E); (8) The following securities, which are required to be organized as commodity pools: Commodity Index Trust Shares (listed under NYSE Arca Rule 8.203–E); Commodity Futures Trust Shares (listed under NYSE Arca Rule 8.204–E); Trust Units (listed under NYSE Arca Rule 8.500–E); and Managed Trust Securities (listed under NYSE Arca Rule 8.700–E); (9) The following securities if organized as commodity pools: Trust Issued Receipts (listed under NYSE Arca Rule 8.200–E) and Partnership Units (listed under NYSE Arca 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, which cash equivalents would be limited to short-term U.S. Treasury securities, government money market funds, and repurchase agreements. Proposed Commentary .01(b) to Rule 8.601–E would provide that a series of Active Proxy Portfolio Shares will not hold short positions in securities and other financial instruments referenced in the list of permitted investments in Commentary .01(a). Proposed Commentary .01(c) would provide that the securities referenced in proposed Commentary .01(a)(3)–(9) would also include securities listed on another national securities exchange pursuant to substantially equivalent listing rules. The Exchange states that the securities and financial instruments enumerated in proposed Commentary .01(a) to Rule 8.601–E are consistent E:\FR\FM\17DEN1.SGM 17DEN1 Federal Register / Vol. 85, No. 243 / Thursday, December 17, 2020 / Notices 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,15 and as permitted by their respective exemptive relief under the 1940 Act. The Exchange states that 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. The Exchange represents that its 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. The Exchange states that the Active Proxy Portfolio Shares will conform to the initial and continued listing criteria under Rule 8.601–E. 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 currently govern the trading of equity securities on the Exchange. 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). III. Proceedings To Determine Whether To Approve or Disapprove SR– NYSEArca–2020–77 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act 16 to determine whether the proposed rule change should be approved or disapproved. Institution of such proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described below, the Commission seeks and encourages interested persons to provide additional comment on the proposed rule change to inform the Commission’s analysis of whether to approve or disapprove the proposed rule change. Pursuant to Section 19(b)(2)(B) of the Act,17 the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’s consistency with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and to protect investors and the public interest, and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers.18 The Exchange proposes to adopt generic listing standards for Active Proxy Portfolio Shares, which would allow the Exchange to list and trade 16 15 U.S.C. 78s(b)(2)(B). 17 Id. 15 See supra note 12. VerDate Sep<11>2014 18:52 Dec 16, 2020 18 15 Jkt 253001 PO 00000 U.S.C. 78f(b)(5). Frm 00145 Fmt 4703 Sfmt 4703 82013 Active Proxy Portfolio Shares that meet the requirements of Commentary .01 without filing a proposed rule change with the Commission. As noted above, however, the Commission only recently approved the listing and trading of Active Proxy Portfolio Shares on the Exchange.19 Further, the Exchange states that only six series of Active Proxy Portfolio Shares are currently listed and traded on the Exchange.20 Accordingly, the Commission and the Exchange, as well as the marketplace, more generally, have limited experience with respect to this type of new derivative securities product.21 In the past, a new derivative securities product typically had a significant history of being listed and traded on an exchange before the Commission approved its generic listing standards. For example, the Commission approved the Exchange’s listing standards for Managed Fund Shares in 2008, but did not approve the generic listing 19 See supra note 7 and accompanying text. The Commission notes that it also recently approved substantively similar rules for Cboe BZX Exchange, Inc.’s Tracking Fund Shares and The Nasdaq Stock Market LLC’s Proxy Portfolio Shares. See Securities Exchange Act Release Nos. 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) and 89110 (June 22, 2020), 85 FR 38461 (June 26, 2020) (SR–NASDAQ– 2020–032) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Adopt Nasdaq Rule 5750 to List and Trade Proxy Portfolio Shares). 20 The Exchange states that the following series of Active Proxy Portfolio Shares are currently listed and traded on the Exchange: American Century Mid Cap Growth Impact ETF, American Century Sustainable Equity ETF, 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. See American Century Approval Order and T. Rowe Price Approval Order, supra note 12. The Commission notes that the three Natixis funds noted above have also been approved for listing and trading on the Exchange. See supra notes 7 and 12. In addition, shares of similar products have been approved or filed for immediate effectiveness for listing and trading on Cboe BZX Exchange, Inc. See, for example, supra note 19 and 90530 (November 30, 2020), 85 FR 78366 (December 4, 2020) (SR–CboeBZX–2020–085) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to List and Trade Shares of the Fidelity Growth Opportunities ETF, Fidelity Magellan ETF, Fidelity Real Estate Investment ETF, and Fidelity Small-Mid Cap Opportunities ETF Under Rule 14.11(m) (Tracking Fund Shares)). 21 Under 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. See 17 CFR 240.19b–4(e). E:\FR\FM\17DEN1.SGM 17DEN1 82014 Federal Register / Vol. 85, No. 243 / Thursday, December 17, 2020 / Notices standards for the same until 2016.22 Given the relatively short amount of time the Commission has had to oversee and observe Active Proxy Portfolio Shares and other similarly structured exchange traded products, the Commission is concerned that there is insufficient experience to determine that the proposal to permit generic listing and trading of Active Proxy Portfolio Shares is consistent with Section 6(b)(5) of the Act, including whether the proposal is designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest. Under the Commission’s Rules of Practice, the ‘‘burden to demonstrate that a proposed rule change is consistent with the Exchange Act and the rules and regulations issued thereunder . . . is on the [SRO] that proposed the rule change.’’ 23 The description of a proposed rule change, its purpose and operation, its effect, and a legal analysis of its consistency with applicable requirements must all be sufficiently detailed and specific to support an affirmative Commission finding,24 and any failure of an SRO to provide this information may result in the Commission not having a sufficient basis to make an affirmative finding that a proposed rule change is consistent with the Act and the applicable rules and regulations.25 The Commission notes that the Exchange has provided no data or analysis to support the determination that, in the absence of significant market or regulatory experience, its proposal to permit the listing and trading of Active Proxy Portfolio Shares pursuant to a generic listing standards raises no new or novel concerns. Accordingly, the Commission is instituting proceedings to allow for additional consideration and comment on the issues raised herein, including 22 See Securities Exchange Act Release No. 78397 (July 22, 2016), 81 FR 49320 (July 27, 2016 (SR– NYSEArca–2015–110) (Order Granting Approval of Proposed Rule Change, as Modified by Amendment No. 7 Thereto, Amending NYSE Arca Equities Rule 8.600 to Adopt Generic Listing Standards for Managed Fund Shares) and Securities Exchange Act Release No. 57619 (April 4, 2008), 73 FR 19544 (April 10, 2008) (Notice of Filing of Amendment No. 1 to Proposed Rule Change and Order Granting Accelerated Approval of Such Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to Rules Permitting the Listing and Trading of Managed Fund Shares, Trading Hours and Halts, Listing Fees Applicable to Managed Fund Shares, and the Listing and Trading of Shares of the PowerShares Active AlphaQ Fund, PowerShares Active Alpha Multi-Cap Fund, PowerShares Active Mega-Cap Portfolio, and the PowerShares Active Low Duration Portfolio). 23 17 CFR 201.700(b)(3). 24 See id. 25 See id. VerDate Sep<11>2014 18:52 Dec 16, 2020 Jkt 253001 whether the proposal is consistent with the Act. IV. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposal is consistent with Section 6(b)(5) 26 of the Act or any other provision of the Act, or the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b–4 under the Act,27 any request for an opportunity to make an oral presentation.28 Interested persons are invited to submit written data, views, and arguments regarding whether the proposal should be approved or disapproved by January 7, 2021. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by January 21, 2021. The Commission asks that commenters address the sufficiency of the Exchange’s statements in support of the proposal, which are set forth in the Notice,29 in addition to any other comments they may wish to submit about the proposed rule change. 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 to make available publicly. All submissions should refer to File Number SR–NYSEArca–2020–77 and should be submitted by January 7, 2021. Rebuttal comments should be submitted by January 21, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.30 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–27731 Filed 12–16–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 34139; 812–15113] Palmer Square Capital BDC Inc., et al. 26 15 U.S.C. 78f(b)(5). 27 17 CFR 240.19b–4. 28 Section 19(b)(2) of the Act, as amended by the Securities Act Amendments of 1975, Public Law 94–29 (June 4, 1975), grants the Commission flexibility to determine what type of proceeding— either oral or notice and opportunity for written comments—is appropriate for consideration of a particular proposal by a self-regulatory organization. See Securities Act Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). 29 See Notice, supra note 3. PO 00000 Frm 00146 Fmt 4703 Sfmt 4703 December 14, 2020. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice. AGENCY: Notice of application for an order (‘‘Order’’) under sections 17(d) and 57(i) of the Investment Company Act of 1940 (the ‘‘Act’’) and rule 17d–1 under the 30 17 E:\FR\FM\17DEN1.SGM CFR 200.30–3(a)(57). 17DEN1

Agencies

[Federal Register Volume 85, Number 243 (Thursday, December 17, 2020)]
[Notices]
[Pages 82011-82014]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27731]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90652; File No. SR-NYSEArca-2020-77]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting 
Proceedings To Determine Whether To Approve or Disapprove a Proposed 
Rule Change To Amend NYSE Arca Rule 8.601-E To Adopt Generic Listing 
Standards for Active Proxy Portfolio Shares

December 11, 2020.

I. Introduction

    On August 31, 2020, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend NYSE Arca Rule 8.601-E to adopt generic 
listing standards for Active Proxy Portfolio Shares. The proposed rule 
change was published for comment in the Federal Register on September 
21, 2020.\3\ On October 30, 2020, pursuant to Section 19(b)(2) of the 
Exchange Act,\4\ the Commission designated a longer period within which 
to approve the proposed rule change, disapprove the proposed rule 
change, or institute proceedings to determine whether to disapprove the 
proposed rule change.\5\ The Commission has received no comments on the 
proposed rule change. The Commission is publishing this order to 
solicit comments on the proposed rule change from interested persons 
and to institute proceedings pursuant to Section 19(b)(2)(B) of the Act 
\6\ to determine whether to approve or disapprove the proposed rule 
change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 89874 (September 15, 
2020), 85 FR 59338 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 90296, 85 FR 70696 
(November 5, 2020). The Commission designated December 20, 2020, as 
the date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change

    Earlier this year, the Commission approved the Exchange's proposal 
to adopt listing standards for Active Proxy Portfolio Shares as set 
forth in NYSE Arca Rule 8.601-E.\7\ Active Proxy Portfolio Shares are 
securities (a) issued by an investment company (``Investment Company'') 
registered under the Investment Company Act of 1940 (``1940 Act'') 
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) issued in a specified minimum number of 
shares, or multiples thereof, in return for a deposit by the purchaser 
of the Proxy Portfolio \8\ and/or cash with a value equal to the next 
determined net asset value (``NAV''); (c) when aggregated in the

[[Page 82012]]

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.\9\ Further, a series of Active Proxy Portfolio 
Shares discloses its Proxy Portfolio on a daily basis,\10\ and 
discloses its Actual Portfolio on a quarterly basis.\11\
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    \7\ 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) 
(``Active Proxy Portfolio Shares Approval Order'').
    \8\ 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. 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.
    \9\ See NYSE Arca Rule 8.601-E(c)(1).
    \10\ Rule 8.601-E(d)(2)(A) requires for continued listing on the 
Exchange that each series of Active Proxy Portfolio Shares must make 
its Proxy Portfolio publicly available on its website at least once 
daily and must make it available to all market participants at the 
same time. Pursuant to Rule 8.601-E(c)(3), the website for each 
series of Active Proxy Portfolio Shares must 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.
    \11\ Rule 8.601-E(d)(2)(A) requires for continued listing on the 
Exchange that each series of Active Proxy Portfolio Shares must 
publicly disseminate its Actual Portfolio within at least 60 days 
following the end of every fiscal quarter and must make it publicly 
available to all market participants at the same time.
---------------------------------------------------------------------------

    NYSE Arca Rule 8.601-E, Commentary .01, currently requires that the 
Exchange submit a proposed rule change with the Commission to list and 
trade each new series of Active Proxy Portfolio Shares.\12\ The 
Exchange proposes to amend NYSE Arca Rule 8.601-E to adopt ``generic'' 
listing standards that would allow the Exchange to approve the listing 
and trading (including pursuant to unlisted trading privileges) of 
series of Active Proxy Portfolio Shares that satisfy those generic 
listing standards pursuant to Rule 19b-4(e) under the Act.\13\
---------------------------------------------------------------------------

    \12\ The Commission has approved the listing and trading on the 
Exchange of series of Active Proxy Portfolio Shares pursuant to NYSE 
Arca Rule 8.601-E. See Active Proxy Portfolio Shares Approval Order, 
supra note 7, Securities Exchange Act Release Nos. 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) (``Natixis Approval Order,'' and collectively with the 
Natixis Approval Order, American Century Approval Order, and T. Rowe 
Price Approval Order, the ``Approval Orders'').
    \13\ 17 CFR 240.19b-4(e). Rule 19b-4(e)(1) under the Act 
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, 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. See 17 CFR 240.19b-4(e)(1). Under 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. See 17 CFR 240.19b-4(e). Under 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. 17 CFR 240.19b-
4(c)(1). 17 CFR 240.19b-4(c)(1).
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A. Proposed Amendments to Rule 8.601-E, Commentary .01

    The Exchange proposes to amend Commentary .01 to Rule 8.601-E to 
state that the Exchange may approve Active Proxy Portfolio Shares for 
listing and/or trading (including pursuant to unlisted trading 
privileges) pursuant to Rule 19b-4(e) under the Act. The Exchange would 
also specify within Commentary .01 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. In addition, the Exchange would specify that it 
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.\14\
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    \14\ 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 with the Commission to list the series 
of Active Proxy Portfolio Shares.
---------------------------------------------------------------------------

    Proposed Commentary .01(a) to Rule 8.601-E would provide that the 
Actual Portfolio and Proxy Portfolio for a series of Active Proxy 
Portfolio Shares would include only the following components:
    (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 (a) 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 (b) 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 
NYSE Arca 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 (listed under NYSE Arca Rule 5.2-E(j)(5));
    (5) Index-Linked Securities (listed under NYSE Arca Rule 5.2-
E(j)(6));
    (6) Commodity-Based Trust Shares (listed under NYSE Arca Rule 
8.201-E);
    (7) Currency Trust Shares (listed under NYSE Arca Rule 8.202-E);
    (8) The following securities, which are required to be organized as 
commodity pools: Commodity Index Trust Shares (listed under NYSE Arca 
Rule 8.203-E); Commodity Futures Trust Shares (listed under NYSE Arca 
Rule 8.204-E); Trust Units (listed under NYSE Arca Rule 8.500-E); and 
Managed Trust Securities (listed under NYSE Arca Rule 8.700-E);
    (9) The following securities if organized as commodity pools: Trust 
Issued Receipts (listed under NYSE Arca Rule 8.200-E) and Partnership 
Units (listed under NYSE Arca 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, which cash equivalents would be 
limited to short-term U.S. Treasury securities, government money market 
funds, and repurchase agreements.
    Proposed Commentary .01(b) to Rule 8.601-E would provide that a 
series of Active Proxy Portfolio Shares will not hold short positions 
in securities and other financial instruments referenced in the list of 
permitted investments in Commentary .01(a). Proposed Commentary .01(c) 
would provide that the securities referenced in proposed Commentary 
.01(a)(3)-(9) would also include securities listed on another national 
securities exchange pursuant to substantially equivalent listing rules.
    The Exchange states that the securities and financial instruments 
enumerated in proposed Commentary .01(a) to Rule 8.601-E are consistent

[[Page 82013]]

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,\15\ 
and as permitted by their respective exemptive relief under the 1940 
Act.
---------------------------------------------------------------------------

    \15\ See supra note 12.
---------------------------------------------------------------------------

    The Exchange states that 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. The 
Exchange represents that its 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.
    The Exchange states that the Active Proxy Portfolio Shares will 
conform to the initial and continued listing criteria under Rule 8.601-
E. 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 currently govern the 
trading of equity securities on the Exchange. 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).

III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2020-77 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \16\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of such 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the proposed rule change. Institution of proceedings 
does not indicate that the Commission has reached any conclusions with 
respect to any of the issues involved. Rather, as described below, the 
Commission seeks and encourages interested persons to provide 
additional comment on the proposed rule change to inform the 
Commission's analysis of whether to approve or disapprove the proposed 
rule change.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\17\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of the proposed rule change's consistency with Section 6(b)(5) 
of the Act, which requires, among other things, that the rules of a 
national securities exchange be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and to protect 
investors and the public interest, and not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.\18\
---------------------------------------------------------------------------

    \17\ Id.
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange proposes to adopt generic listing standards for Active 
Proxy Portfolio Shares, which would allow the Exchange to list and 
trade Active Proxy Portfolio Shares that meet the requirements of 
Commentary .01 without filing a proposed rule change with the 
Commission. As noted above, however, the Commission only recently 
approved the listing and trading of Active Proxy Portfolio Shares on 
the Exchange.\19\ Further, the Exchange states that only six series of 
Active Proxy Portfolio Shares are currently listed and traded on the 
Exchange.\20\ Accordingly, the Commission and the Exchange, as well as 
the marketplace, more generally, have limited experience with respect 
to this type of new derivative securities product.\21\ In the past, a 
new derivative securities product typically had a significant history 
of being listed and traded on an exchange before the Commission 
approved its generic listing standards. For example, the Commission 
approved the Exchange's listing standards for Managed Fund Shares in 
2008, but did not approve the generic listing

[[Page 82014]]

standards for the same until 2016.\22\ Given the relatively short 
amount of time the Commission has had to oversee and observe Active 
Proxy Portfolio Shares and other similarly structured exchange traded 
products, the Commission is concerned that there is insufficient 
experience to determine that the proposal to permit generic listing and 
trading of Active Proxy Portfolio Shares is consistent with Section 
6(b)(5) of the Act, including whether the proposal is designed to 
prevent fraudulent and manipulative acts and practices and to protect 
investors and the public interest.
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    \19\ See supra note 7 and accompanying text. The Commission 
notes that it also recently approved substantively similar rules for 
Cboe BZX Exchange, Inc.'s Tracking Fund Shares and The Nasdaq Stock 
Market LLC's Proxy Portfolio Shares. See Securities Exchange Act 
Release Nos. 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) and 
89110 (June 22, 2020), 85 FR 38461 (June 26, 2020) (SR-NASDAQ-2020-
032) (Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change to Adopt Nasdaq Rule 5750 to List and Trade Proxy Portfolio 
Shares).
    \20\ The Exchange states that the following series of Active 
Proxy Portfolio Shares are currently listed and traded on the 
Exchange: American Century Mid Cap Growth Impact ETF, American 
Century Sustainable Equity ETF, 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. See American Century Approval 
Order and T. Rowe Price Approval Order, supra note 12. The 
Commission notes that the three Natixis funds noted above have also 
been approved for listing and trading on the Exchange. See supra 
notes 7 and 12. In addition, shares of similar products have been 
approved or filed for immediate effectiveness for listing and 
trading on Cboe BZX Exchange, Inc. See, for example, supra note 19 
and 90530 (November 30, 2020), 85 FR 78366 (December 4, 2020) (SR-
CboeBZX-2020-085) (Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to List and Trade Shares of the 
Fidelity Growth Opportunities ETF, Fidelity Magellan ETF, Fidelity 
Real Estate Investment ETF, and Fidelity Small-Mid Cap Opportunities 
ETF Under Rule 14.11(m) (Tracking Fund Shares)).
    \21\ Under 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. See 17 CFR 240.19b-4(e).
    \22\ See Securities Exchange Act Release No. 78397 (July 22, 
2016), 81 FR 49320 (July 27, 2016 (SR-NYSEArca-2015-110) (Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment 
No. 7 Thereto, Amending NYSE Arca Equities Rule 8.600 to Adopt 
Generic Listing Standards for Managed Fund Shares) and Securities 
Exchange Act Release No. 57619 (April 4, 2008), 73 FR 19544 (April 
10, 2008) (Notice of Filing of Amendment No. 1 to Proposed Rule 
Change and Order Granting Accelerated Approval of Such Proposed Rule 
Change, as Modified by Amendment No. 1 Thereto, Relating to Rules 
Permitting the Listing and Trading of Managed Fund Shares, Trading 
Hours and Halts, Listing Fees Applicable to Managed Fund Shares, and 
the Listing and Trading of Shares of the PowerShares Active AlphaQ 
Fund, PowerShares Active Alpha Multi-Cap Fund, PowerShares Active 
Mega-Cap Portfolio, and the PowerShares Active Low Duration 
Portfolio).
---------------------------------------------------------------------------

    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the Exchange 
Act and the rules and regulations issued thereunder . . . is on the 
[SRO] that proposed the rule change.'' \23\ The description of a 
proposed rule change, its purpose and operation, its effect, and a 
legal analysis of its consistency with applicable requirements must all 
be sufficiently detailed and specific to support an affirmative 
Commission finding,\24\ and any failure of an SRO to provide this 
information may result in the Commission not having a sufficient basis 
to make an affirmative finding that a proposed rule change is 
consistent with the Act and the applicable rules and regulations.\25\ 
The Commission notes that the Exchange has provided no data or analysis 
to support the determination that, in the absence of significant market 
or regulatory experience, its proposal to permit the listing and 
trading of Active Proxy Portfolio Shares pursuant to a generic listing 
standards raises no new or novel concerns.
---------------------------------------------------------------------------

    \23\ 17 CFR 201.700(b)(3).
    \24\ See id.
    \25\ See id.
---------------------------------------------------------------------------

    Accordingly, the Commission is instituting proceedings to allow for 
additional consideration and comment on the issues raised herein, 
including whether the proposal is consistent with the Act.

IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Section 6(b)(5) \26\ of the Act or any other provision 
of the Act, or the rules and regulations thereunder. Although there do 
not appear to be any issues relevant to approval or disapproval that 
would be facilitated by an oral presentation of views, data, and 
arguments, the Commission will consider, pursuant to Rule 19b-4 under 
the Act,\27\ any request for an opportunity to make an oral 
presentation.\28\
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    \26\ 15 U.S.C. 78f(b)(5).
    \27\ 17 CFR 240.19b-4.
    \28\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by January 7, 2021. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
January 21, 2021. The Commission asks that commenters address the 
sufficiency of the Exchange's statements in support of the proposal, 
which are set forth in the Notice,\29\ in addition to any other 
comments they may wish to submit about the proposed rule change.
---------------------------------------------------------------------------

    \29\ See Notice, supra note 3.
---------------------------------------------------------------------------

    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 
by January 7, 2021. Rebuttal comments should be submitted by January 
21, 2021.
---------------------------------------------------------------------------

    \30\ 17 CFR 200.30-3(a)(57).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27731 Filed 12-16-20; 8:45 am]
BILLING CODE 8011-01-P
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