Blue Tractor ETF Trust and Blue Tractor Group, LLC, 9976-9978 [2021-03086]
Download as PDF
<![CDATA[
9976
Federal Register / Vol. 86, No. 30 / Wednesday, February 17, 2021 / Notices
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
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–
NASDAQ–2021–004 on the subject line.
jbell on DSKJLSW7X2PROD with NOTICES
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–NASDAQ–2021–004. 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
20:43 Feb 16, 2021
Jkt 253001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–03089 Filed 2–16–21; 8:45 am]
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:
VerDate Sep<11>2014
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–NASDAQ–2021–004, and
should be submitted on or before March
10, 2021.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
34194; 812–15162]
Blue Tractor ETF Trust and Blue
Tractor Group, LLC
February 10, 2021.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application to
amend a prior order for exemptive
relief.
AGENCY:
Applicants
request an order (‘‘Amended Order’’)
that would amend a prior order to
permit the Funds, as defined below, to
use Creation Baskets (as defined below)
that include instruments that are not
included, or are included with different
weightings, in the Fund’s Dynamic SSR
Portfolio (as defined below).
APPLICANTS: Blue Tractor ETF Trust and
Blue Tractor Group, LLC.
FILING DATES: The application was filed
on September 18, 2020, and amended
on January 19, 2021.
HEARING OR NOTIFICATION OF HEARING:
An order granting the requested relief
will be issued unless the Commission
orders a hearing. Interested persons may
request a hearing by emailing the
Commission’s Secretary at SecretarysOffice@sec.gov and serving Applicants
with a copy of the request by email.
SUMMARY OF APPLICATION:
32 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00072
Fmt 4703
Sfmt 4703
Hearing requests should be received by
the Commission by 5:30 p.m. on March
8, 2021 and should be accompanied by
proof of service on the Applicants, in
the form of an affidavit, or, for lawyers,
a certificate of service. Pursuant to rule
0–5 under the Investment Company Act
of 1940 (‘‘Act’’), hearing requests should
state the nature of the writer’s interest,
any facts bearing upon the desirability
of a hearing on the matter, the reason for
the request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
emailing to the Commission’s Secretary
at Secretarys-Office@sec.gov.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicants:
MMundt@stradley.com.
FOR FURTHER INFORMATION CONTACT:
Marc Mehrespand, Senior Counsel;
Trace W. Rakestraw, Branch Chief, at
(202) 551–6825 (Division of Investment
Management, Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
website by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
I. Introduction
1. On December 10, 2019, the
Commission issued an order (‘‘Prior
Order’’) 1 under section 6(c) of the Act
for an exemption from sections 2(a)(32),
5(a)(1), 22(d), and 22(e) of the Act and
rule 22c–1 under the Act, under
sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and
17(a)(2) of the Act, and under section
12(d)(1)(J) of the Act for an exemption
from sections 12(d)(1)(A) and
12(d)(1)(B) of the Act.2 The Prior Order
permitted Applicants to introduce a
novel type of actively-managed
1 See Blue Tractor ETF Trust and Blue Tractor
Group, LLC, Investment Company Act Release No.
33682 (Nov. 14, 2019) (notice) and Investment
Company Act Release No. 33710 (Dec. 10, 2019)
(order). Except as specifically noted in the
application, all representations and conditions
contained in the application previously submitted
with the Commission (File No. 812–14625), as
amended and restated, and filed with the
Commission on October 23, 2019 (the ‘‘Prior
Application’’) remain applicable to the operation of
the Funds and will apply to any Funds relying on
the Amended Order.
2 The relief granted in the Prior Order under
section 12(d)(1)(J) of the Act for an exemption from
sections 12(d)(1)(A) and 12(d)(1)(B) of the 1940 Act
(the ‘‘Section 12(d)(1) Relief’’), and relief under
sections 6(c) and 17(b) of the Act for an exemption
from sections 17(a)(1) and 17(a)(2) of the Act
relating to the Section 12(d)(1) Relief, will expire
one year from the effective date of rule 12d1–4. See
Fund of Funds Arrangements, Investment Company
Act Rel. No. 10871 (Oct. 7, 2020), at III.
E:\FR\FM\17FEN1.SGM
17FEN1
Federal Register / Vol. 86, No. 30 / Wednesday, February 17, 2021 / Notices
exchange-traded fund (‘‘ETF’’) that is
not required to disclose its full portfolio
holdings on a daily basis (each, a
‘‘Fund’’). Rather, pursuant to the Prior
Order, each Business Day 3 a Fund
publishes a basket of securities and cash
that, while different from the Fund’s
portfolio, is designed to closely track its
daily performance (the ‘‘Dynamic SSR
Portfolio’’).
2. Pursuant to the Prior Order, a Fund
sells and redeems its shares (‘‘Shares’’)
only in Creation Units and generally on
an in-kind basis. Purchasers are
required to purchase Creation Units by
making a deposit of Deposit Instruments
and shareholders redeeming their
Shares receive a transfer of Redemption
Instruments.4 Under the Prior Order, the
names and quantities of the instruments
that constitute the Deposit Instruments
and the Redemption Instruments for a
Fund (collectively, the ‘‘Creation
Basket’’) are the same as the Fund’s
Dynamic SSR Portfolio, except to the
extent purchases and redemptions are
made entirely or in part on a cash basis.
3. Applicants now seek to amend the
Prior Order to, in effect, give the Funds
the same flexibility with respect to
Creation Basket composition as afforded
to ETFs relying on rule 6c–11.5 More
specifically, Applicants have requested
that the Funds be allowed to use
Creation Baskets that include
instruments that are not included, or are
included with different weightings, in
the Fund’s Dynamic SSR Portfolio.
II. The Application
A. Applicants’ Proposal
jbell on DSKJLSW7X2PROD with NOTICES
4. Upon amending the Prior Order,
the names and quantities of the
instruments that may constitute a
Creation Basket will generally be the
same as the Fund’s Dynamic SSR
Portfolio, but a Fund may accept
Creation Baskets that differ from the
Dynamic SSR Portfolio. Each Business
Day, before the open of trading on the
Exchange where a Fund is listed, the
Fund will publish on its website the
composition of any Creation Basket
exchanged with an authorized
participant on the previous Business
Day that differed from such Business
3 All capitalized terms not otherwise defined in
this notice have the meanings ascribed to them in
the Prior Application.
4 Deposit Instruments and Redemption
Instruments may include cash and/or securities.
5 The Funds are not be able to operate in reliance
on rule 6c–11 because they do not disclose their full
portfolio holdings on a daily basis as required by
the rule. See rule 6c–11(c)(1)(i) (requiring an ETF
to disclose prominently on its website, publicly
available and free of charge, the portfolio holdings
that will form the basis for each calculation of NAV
per share).
VerDate Sep<11>2014
20:43 Feb 16, 2021
Jkt 253001
Day’s Dynamic SSR Portfolio other than
with respect to cash.
5. Applicants represent that, for
portfolio management or other reasons,
the Funds may determine that it is
desirable to use Creation Baskets that
differ from the Dynamic SSR Portfolio
(beyond cash substitutions). For
example, a Fund may want to use a
Creation Basket that contains
instruments that are not included in a
Fund’s Dynamic SSR Portfolio if the
Adviser or Sub-Adviser seeks to add an
instrument to the Fund’s Actual
Portfolio) without incurring transaction
costs associated with the purchase of
the instrument for cash. Similarly, if the
Adviser or Sub-Adviser decides to sell
an instrument from a Fund’s Actual
Portfolio, the instrument may be
included in a Creation Basket with the
expectation that the Fund will deliver it
in-kind during a redemption
transaction.
6. The Funds will use the requested
basket flexibility only in circumstances
under which Applicants believe there
will be no harm to the Funds or their
shareholders, and in order to benefit the
Funds and their shareholders by
reducing costs, increasing efficiency and
improving trading.
7. Pursuant to condition A.10 herein,
each Fund will adopt and implement
written policies and procedures
regarding the construction of its
Creation Baskets in accordance with
rule 6c–11 under the Act. For purposes
of the requirement to comply with the
policies and procedures provision in
rule 6c–11, only Creation Baskets that
differ from a Fund’s Dynamic SSR
Portfolio will be treated as a ‘‘custom
basket’’ under rule 6c–11(c)(3).
8. Furthermore, pursuant to condition
A.9 herein, each Fund will comply with
the recordkeeping requirements of rule
6c–11.6 For purposes of the requirement
to comply with the recordkeeping
provision in rule 6c–11, only Creation
Baskets different from a Fund’s
Dynamic SSR Portfolio will be treated as
a ‘‘custom basket’’ under rule 6c–
11(d)(2)(ii).
B. Considerations Relating to the
Requested Relief
9. Applicants represent that the
ability to utilize a Creation Basket that
includes instruments that are not
included, or are included with different
weightings, in a Fund’s Dynamic SSR
Portfolio, or are included in different
weightings, does not raise any new
6 Pursuant to condition A.9, each Fund will also
maintain and preserve a copy of the Dynamic SSR
Portfolio published on the Fund’s website for each
Business Day and a copy of each Creation Basket
made available.
PO 00000
Frm 00073
Fmt 4703
Sfmt 4703
9977
policy concerns about reverse
engineering of a Fund’s portfolio, selfdealing or overreaching, or selective
disclosure beyond those concerns
addressed in connection with the Prior
Order.
10. Reverse Engineering. Applicants
acknowledge that, by using a Creation
Basket that includes instruments that
are not included in a Fund’s Dynamic
SSR Portfolio, or are included in
different percentages, and by publishing
such Creation Basket on its website, the
Fund would provide market
participants with additional information
about which instruments it adds or
removes from the Fund’s Actual
Portfolio. However, Applicants
represent that they will operate the
Funds in a manner designed to
minimize the risk of reverse engineering
and, for the reasons set forth in the
application, believe successful frontrunning or free-riding is highly unlikely.
11. Self-Dealing or Overreaching.
Applicants state that authorized
participants and other market
participants will not have the ability to
disadvantage the Funds by
manipulating or influencing the
composition of Creation Baskets,
including those that differ from the
Dynamic SSR Portfolio. Like the basket
and custom basket policies and
procedures required of ETFs by rule 6c–
11, the Funds will adopt and implement
written policies and procedures that
govern the construction of Creation
Baskets and the process that will be
used for the acceptance of Creation
Baskets to safeguard the best interests of
the Funds and their shareholders.7
12. Selective Disclosure. The Funds
and each person acting on behalf of the
Funds will continue to be required to
comply with Regulation Fair Disclosure
as if it applied to them (except that the
exemptions provided in rule
100(b)(2)(iii) therein shall not apply).
Applicants believe that the new
Creation Basket flexibility being sought
by the Applicants does not raise any
new concerns about selective disclosure
of non-public material information.
First, a Fund’s use of, or conversations
with authorized participants about,
Creation Baskets that would result in
such disclosure would effectively be
limited by the Funds’ obligation to
comply with Regulation Fair Disclosure.
Second, as noted above, each Business
Day, before the open of trading on the
7 See Exchange-Traded Funds, Investment
Company Act Release No. 33646 (Sept. 25, 2019)
(‘‘ETF Adopting Release’’), at 80–94 (discussion of
rule 6c–11 requirement for ETF policies and
procedures concerning basket construction and
acceptance and heightened policies and procedures
for custom baskets).
E:\FR\FM\17FEN1.SGM
17FEN1
9978
Federal Register / Vol. 86, No. 30 / Wednesday, February 17, 2021 / Notices
Exchange where a Fund is listed, the
Fund will publish on its website the
composition of any basket accepted by
the Fund on the previous Business Day
that differed from such Business Day’s
Dynamic SSR Portfolio other than with
respect to cash.
III. Requested Exemptive Relief
For the reasons stated above,
Applicants believe that the Prior Order,
as amended, continues to meet the
relevant standards for relief pursuant to
section 6(c) of the Act for an exemption
from sections 2(a)(32), 5(a)(1), 22(d), and
22(e) of the Act and rule 22c–1 under
the Act, and under sections 6(c) and
17(b) of the Act for an exemption from
sections 17(a)(1) and 17(a)(2) of the Act,
and under section 12(d)(1)(J) of the Act
for an exemption from sections
12(d)(1)(A) and 12(d)(1)(B) of the Act.8
jbell on DSKJLSW7X2PROD with NOTICES
IV. Applicants’ Conditions
Applicants agree that the Amended
Order granting the requested relief will
be subject to all of the conditions in the
Prior Order, except that condition A.9 of
the Prior Order is deleted in its entirety
and replaced with the conditions A.9
and A.10 as follows:
9. Each Fund will comply with the
recordkeeping requirements of rule 6c–
11 under the Act, as amended, except
that for purposes of this condition, only
Creation Baskets different from the
Fund’s Dynamic SSR Portfolio will be
treated as a ‘‘custom basket’’ under rule
6c–11(d)(2)(ii). In addition, each Fund
will maintain and preserve, for a period
of not less than five years, in an easily
accessible place, (i) a copy of the
Dynamic SSR Portfolio published on the
Fund’s website for each Business Day;
and (ii) a copy of each Creation Basket
made available.
10. Each Fund will adopt and
implement written policies and
procedures that govern the construction
of Creation Baskets, as required under
rule 6c–11(c)(3) under the Act, as
amended, except that for purposes of
this condition, only Creation Baskets
different from the Fund’s Dynamic SSR
Portfolio will be treated as a ‘‘Custom
Basket’’. The Fund’s basket policies and
procedures will be covered by the
Fund’s compliance program and other
requirements under rule 38a–1 under
the Act, as amended.
For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–03086 Filed 2–16–21; 8:45 am]
BILLING CODE 8011–01–P
8 See
supra note 2.
VerDate Sep<11>2014
20:43 Feb 16, 2021
Jkt 253001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91095; File No. SR–NYSE–
2020–89]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Amendment No. 1 and Order
Instituting Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change, as Modified by
Amendment No. 1, To Amend Rule
7.35C
February 10, 2021.
I. Introduction
On October 23, 2020, New York Stock
Exchange LLC (‘‘NYSE’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend Rule 7.35C (Exchange-Facilitated
Auctions) to (1) provide the Exchange
authority to facilitate a Trading Halt
Auction if a security has not reopened
by 3:30 p.m. following a MWCB Halt; (2)
widen the Auction Collar for an
Exchange-facilitated Trading Halt
Auction following an MWCB Halt; (3)
provide that certain DMM Interest
would not be canceled following an
Exchange-facilitated Auction; and (4)
change the Auction Reference Price for
Exchange-facilitated Core Open
Auctions.
The proposed rule change was
published for comment in the Federal
Register on November 12, 2020.3 On
December 18, 2020, the Commission
extended the time period within which
to either approve the proposed rule
change, disapprove the proposed rule
change, or institute proceedings to
determine whether to approve or
disapprove the proposed rule change, to
February 10, 2020.4 On February 5,
2020, the Exchange filed Amendment
No. 1 to the proposed rule change.5 The
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 90363
(Nov. 5, 2020), 85 FR 71964 (Nov. 12 2020)
(‘‘Notice’’).
4 See Securities Exchange Act Release No. 90726
(Dec. 20, 2020), 85 FR 84431 (Dec. 28, 2020).
5 In Amendment No. 1, the Exchange removed
one of the proposed changes from the original
proposal. Specifically, the Exchange removed the
proposed change to adopt a new definition of
Auction Reference Price for exchange-facilitated
Core Open Auctions and to amend the temporary
rule related to such auctions set forth in
Commentary .04 to Rule 7.35C. This aspect of the
original proposal is now the subject of a separate
proposed rule change filed by the Exchange on
February 8, 2021 (SR–NYSE–2021–13).
2 17
PO 00000
Frm 00074
Fmt 4703
Sfmt 4703
Commission has received no comments
on 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 and is instituting proceedings
under Section 19(b)(2)(B) of the Act to
determine whether to approve or
disapprove the proposed rule change, as
modified by Amendment No. 1.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change, as Modified by Amendment
No. 1
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
Rule 7.35C (Exchange-Facilitated
Auctions) to (1) provide the Exchange
authority to facilitate a Trading Halt
Auction 6 if a security has not reopened
following a Level 1 or Level 2 trading
halt due to extraordinary market
volatility under Rule 7.12 (‘‘MWCB
Halt’’) by 3:30 p.m.; (2) widen the
Auction Collar for an Exchangefacilitated Trading Halt Auction
following a MWCB Halt; and (3) provide
that certain DMM Interest 7 would not
be cancelled following an Exchangefacilitated Auction.8
6 As defined in Rule 7.35(a)(1), an ‘‘Auction’’
refers to the process for opening, reopening, or
closing of trading of Auction-Eligible Securities on
the Exchange, which can result in either a trade or
a quote.
7 For purposes of Auctions, the term ‘‘DMM
Interest’’ is defined in Rule 7.35(a)(8) to mean all
buy and sell interest entered by a DMM unit in its
assigned securities and includes: ‘‘DMM Auction
Liquidity,’’ which is non-displayed buy and sell
interest that is designated for an Auction only (see
Rule 7.35(a)(8)(A)); ‘‘DMM Orders’’ which are
orders, as defined under Rule 7.31, entered by a
DMM unit (see Rule 7.35(a)(8)(B)); and ‘‘DMM
After-Auction Orders,’’ which are orders entered by
a DMM unit before either the Core Open Auction
or Trading Halt Auction that do not participate in
an Auction and are intended instead to maintain
price continuity with reasonable depth following an
Auction (see Rule 7.35(a)(8)(C)).
8 In this Amendment No. 1, the Exchange is
removing its proposed change to Rule 7.35C(b)(1)
E:\FR\FM\17FEN1.SGM
17FEN1
]]>Agencies
[Federal Register Volume 86, Number 30 (Wednesday, February 17, 2021)]
[Notices]
[Pages 9976-9978]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03086]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 34194; 812-15162]
Blue Tractor ETF Trust and Blue Tractor Group, LLC
February 10, 2021.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application to amend a prior order for exemptive
relief.
-----------------------------------------------------------------------
Summary of Application: Applicants request an order (``Amended
Order'') that would amend a prior order to permit the Funds, as defined
below, to use Creation Baskets (as defined below) that include
instruments that are not included, or are included with different
weightings, in the Fund's Dynamic SSR Portfolio (as defined below).
Applicants: Blue Tractor ETF Trust and Blue Tractor Group, LLC.
Filing Dates: The application was filed on September 18, 2020, and
amended on January 19, 2021.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by emailing the Commission's
Secretary at [email protected] and serving Applicants with a
copy of the request by email. Hearing requests should be received by
the Commission by 5:30 p.m. on March 8, 2021 and should be accompanied
by proof of service on the Applicants, in the form of an affidavit, or,
for lawyers, a certificate of service. Pursuant to rule 0-5 under the
Investment Company Act of 1940 (``Act''), hearing requests should state
the nature of the writer's interest, any facts bearing upon the
desirability of a hearing on the matter, the reason for the request,
and the issues contested. Persons who wish to be notified of a hearing
may request notification by emailing to the Commission's Secretary at
[email protected].
ADDRESSES: The Commission: [email protected]. Applicants:
[email protected].
FOR FURTHER INFORMATION CONTACT: Marc Mehrespand, Senior Counsel; Trace
W. Rakestraw, Branch Chief, at (202) 551-6825 (Division of Investment
Management, Chief Counsel's Office).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's website by searching for the file number, or for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.
I. Introduction
1. On December 10, 2019, the Commission issued an order (``Prior
Order'') \1\ under section 6(c) of the Act for an exemption from
sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c-1
under the Act, under sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under
section 12(d)(1)(J) of the Act for an exemption from sections
12(d)(1)(A) and 12(d)(1)(B) of the Act.\2\ The Prior Order permitted
Applicants to introduce a novel type of actively-managed
[[Page 9977]]
exchange-traded fund (``ETF'') that is not required to disclose its
full portfolio holdings on a daily basis (each, a ``Fund''). Rather,
pursuant to the Prior Order, each Business Day \3\ a Fund publishes a
basket of securities and cash that, while different from the Fund's
portfolio, is designed to closely track its daily performance (the
``Dynamic SSR Portfolio'').
---------------------------------------------------------------------------
\1\ See Blue Tractor ETF Trust and Blue Tractor Group, LLC,
Investment Company Act Release No. 33682 (Nov. 14, 2019) (notice)
and Investment Company Act Release No. 33710 (Dec. 10, 2019)
(order). Except as specifically noted in the application, all
representations and conditions contained in the application
previously submitted with the Commission (File No. 812-14625), as
amended and restated, and filed with the Commission on October 23,
2019 (the ``Prior Application'') remain applicable to the operation
of the Funds and will apply to any Funds relying on the Amended
Order.
\2\ The relief granted in the Prior Order under section
12(d)(1)(J) of the Act for an exemption from sections 12(d)(1)(A)
and 12(d)(1)(B) of the 1940 Act (the ``Section 12(d)(1) Relief''),
and relief under sections 6(c) and 17(b) of the Act for an exemption
from sections 17(a)(1) and 17(a)(2) of the Act relating to the
Section 12(d)(1) Relief, will expire one year from the effective
date of rule 12d1-4. See Fund of Funds Arrangements, Investment
Company Act Rel. No. 10871 (Oct. 7, 2020), at III.
\3\ All capitalized terms not otherwise defined in this notice
have the meanings ascribed to them in the Prior Application.
---------------------------------------------------------------------------
2. Pursuant to the Prior Order, a Fund sells and redeems its shares
(``Shares'') only in Creation Units and generally on an in-kind basis.
Purchasers are required to purchase Creation Units by making a deposit
of Deposit Instruments and shareholders redeeming their Shares receive
a transfer of Redemption Instruments.\4\ Under the Prior Order, the
names and quantities of the instruments that constitute the Deposit
Instruments and the Redemption Instruments for a Fund (collectively,
the ``Creation Basket'') are the same as the Fund's Dynamic SSR
Portfolio, except to the extent purchases and redemptions are made
entirely or in part on a cash basis.
---------------------------------------------------------------------------
\4\ Deposit Instruments and Redemption Instruments may include
cash and/or securities.
---------------------------------------------------------------------------
3. Applicants now seek to amend the Prior Order to, in effect, give
the Funds the same flexibility with respect to Creation Basket
composition as afforded to ETFs relying on rule 6c-11.\5\ More
specifically, Applicants have requested that the Funds be allowed to
use Creation Baskets that include instruments that are not included, or
are included with different weightings, in the Fund's Dynamic SSR
Portfolio.
---------------------------------------------------------------------------
\5\ The Funds are not be able to operate in reliance on rule 6c-
11 because they do not disclose their full portfolio holdings on a
daily basis as required by the rule. See rule 6c-11(c)(1)(i)
(requiring an ETF to disclose prominently on its website, publicly
available and free of charge, the portfolio holdings that will form
the basis for each calculation of NAV per share).
---------------------------------------------------------------------------
II. The Application
A. Applicants' Proposal
4. Upon amending the Prior Order, the names and quantities of the
instruments that may constitute a Creation Basket will generally be the
same as the Fund's Dynamic SSR Portfolio, but a Fund may accept
Creation Baskets that differ from the Dynamic SSR Portfolio. Each
Business Day, before the open of trading on the Exchange where a Fund
is listed, the Fund will publish on its website the composition of any
Creation Basket exchanged with an authorized participant on the
previous Business Day that differed from such Business Day's Dynamic
SSR Portfolio other than with respect to cash.
5. Applicants represent that, for portfolio management or other
reasons, the Funds may determine that it is desirable to use Creation
Baskets that differ from the Dynamic SSR Portfolio (beyond cash
substitutions). For example, a Fund may want to use a Creation Basket
that contains instruments that are not included in a Fund's Dynamic SSR
Portfolio if the Adviser or Sub-Adviser seeks to add an instrument to
the Fund's Actual Portfolio) without incurring transaction costs
associated with the purchase of the instrument for cash. Similarly, if
the Adviser or Sub-Adviser decides to sell an instrument from a Fund's
Actual Portfolio, the instrument may be included in a Creation Basket
with the expectation that the Fund will deliver it in-kind during a
redemption transaction.
6. The Funds will use the requested basket flexibility only in
circumstances under which Applicants believe there will be no harm to
the Funds or their shareholders, and in order to benefit the Funds and
their shareholders by reducing costs, increasing efficiency and
improving trading.
7. Pursuant to condition A.10 herein, each Fund will adopt and
implement written policies and procedures regarding the construction of
its Creation Baskets in accordance with rule 6c-11 under the Act. For
purposes of the requirement to comply with the policies and procedures
provision in rule 6c-11, only Creation Baskets that differ from a
Fund's Dynamic SSR Portfolio will be treated as a ``custom basket''
under rule 6c-11(c)(3).
8. Furthermore, pursuant to condition A.9 herein, each Fund will
comply with the recordkeeping requirements of rule 6c-11.\6\ For
purposes of the requirement to comply with the recordkeeping provision
in rule 6c-11, only Creation Baskets different from a Fund's Dynamic
SSR Portfolio will be treated as a ``custom basket'' under rule 6c-
11(d)(2)(ii).
---------------------------------------------------------------------------
\6\ Pursuant to condition A.9, each Fund will also maintain and
preserve a copy of the Dynamic SSR Portfolio published on the Fund's
website for each Business Day and a copy of each Creation Basket
made available.
---------------------------------------------------------------------------
B. Considerations Relating to the Requested Relief
9. Applicants represent that the ability to utilize a Creation
Basket that includes instruments that are not included, or are included
with different weightings, in a Fund's Dynamic SSR Portfolio, or are
included in different weightings, does not raise any new policy
concerns about reverse engineering of a Fund's portfolio, self-dealing
or overreaching, or selective disclosure beyond those concerns
addressed in connection with the Prior Order.
10. Reverse Engineering. Applicants acknowledge that, by using a
Creation Basket that includes instruments that are not included in a
Fund's Dynamic SSR Portfolio, or are included in different percentages,
and by publishing such Creation Basket on its website, the Fund would
provide market participants with additional information about which
instruments it adds or removes from the Fund's Actual Portfolio.
However, Applicants represent that they will operate the Funds in a
manner designed to minimize the risk of reverse engineering and, for
the reasons set forth in the application, believe successful front-
running or free-riding is highly unlikely.
11. Self-Dealing or Overreaching. Applicants state that authorized
participants and other market participants will not have the ability to
disadvantage the Funds by manipulating or influencing the composition
of Creation Baskets, including those that differ from the Dynamic SSR
Portfolio. Like the basket and custom basket policies and procedures
required of ETFs by rule 6c-11, the Funds will adopt and implement
written policies and procedures that govern the construction of
Creation Baskets and the process that will be used for the acceptance
of Creation Baskets to safeguard the best interests of the Funds and
their shareholders.\7\
---------------------------------------------------------------------------
\7\ See Exchange-Traded Funds, Investment Company Act Release
No. 33646 (Sept. 25, 2019) (``ETF Adopting Release''), at 80-94
(discussion of rule 6c-11 requirement for ETF policies and
procedures concerning basket construction and acceptance and
heightened policies and procedures for custom baskets).
---------------------------------------------------------------------------
12. Selective Disclosure. The Funds and each person acting on
behalf of the Funds will continue to be required to comply with
Regulation Fair Disclosure as if it applied to them (except that the
exemptions provided in rule 100(b)(2)(iii) therein shall not apply).
Applicants believe that the new Creation Basket flexibility being
sought by the Applicants does not raise any new concerns about
selective disclosure of non-public material information. First, a
Fund's use of, or conversations with authorized participants about,
Creation Baskets that would result in such disclosure would effectively
be limited by the Funds' obligation to comply with Regulation Fair
Disclosure. Second, as noted above, each Business Day, before the open
of trading on the
[[Page 9978]]
Exchange where a Fund is listed, the Fund will publish on its website
the composition of any basket accepted by the Fund on the previous
Business Day that differed from such Business Day's Dynamic SSR
Portfolio other than with respect to cash.
III. Requested Exemptive Relief
For the reasons stated above, Applicants believe that the Prior
Order, as amended, continues to meet the relevant standards for relief
pursuant to section 6(c) of the Act for an exemption from sections
2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c-1 under the
Act, and under sections 6(c) and 17(b) of the Act for an exemption from
sections 17(a)(1) and 17(a)(2) of the Act, and under section
12(d)(1)(J) of the Act for an exemption from sections 12(d)(1)(A) and
12(d)(1)(B) of the Act.\8\
---------------------------------------------------------------------------
\8\ See supra note 2.
---------------------------------------------------------------------------
IV. Applicants' Conditions
Applicants agree that the Amended Order granting the requested
relief will be subject to all of the conditions in the Prior Order,
except that condition A.9 of the Prior Order is deleted in its entirety
and replaced with the conditions A.9 and A.10 as follows:
9. Each Fund will comply with the recordkeeping requirements of
rule 6c-11 under the Act, as amended, except that for purposes of this
condition, only Creation Baskets different from the Fund's Dynamic SSR
Portfolio will be treated as a ``custom basket'' under rule 6c-
11(d)(2)(ii). In addition, each Fund will maintain and preserve, for a
period of not less than five years, in an easily accessible place, (i)
a copy of the Dynamic SSR Portfolio published on the Fund's website for
each Business Day; and (ii) a copy of each Creation Basket made
available.
10. Each Fund will adopt and implement written policies and
procedures that govern the construction of Creation Baskets, as
required under rule 6c-11(c)(3) under the Act, as amended, except that
for purposes of this condition, only Creation Baskets different from
the Fund's Dynamic SSR Portfolio will be treated as a ``Custom
Basket''. The Fund's basket policies and procedures will be covered by
the Fund's compliance program and other requirements under rule 38a-1
under the Act, as amended.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-03086 Filed 2-16-21; 8:45 am]
BILLING CODE 8011-01-P
