Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To List and Trade Shares of the Schwab Ariel ESG ETF, 56989-56996 [2021-22170]

Download as PDF Federal Register / Vol. 86, No. 195 / Wednesday, October 13, 2021 / Notices Agenda I. Call to Order II. Executive Session Sunshine Act III. Executive Session Other Matter IV. Executive Session: Report from CEO V. Executive Session: Report from CFO VI. Executive Session: NeighborWorks CompassTM Update VII. Action Item Approval of Minutes VIII. Action Item Final 2022–2024 Strategic Plan IX. Action Item Procurement System (NEST) Replacement X. Discussion Item Interim CIO Report XI. Discussion Item DC Office Lease XII. Discussion Item Large AV Event Services Contract XIII. Discussion Item Financial Management Systems (FMS) Rebid XIV. Discussion Item Events and Training Management System (ETMS) XV. Adjournment PORTIONS OPEN TO THE PUBLIC: Everything except the Executive Session. PORTIONS CLOSED TO THE PUBLIC: Executive Session CONTACT PERSON FOR MORE INFORMATION: Lakeyia Thompson, Special Assistant, (202) 524–9940; Lthompson@nw.org. Lakeyia Thompson, Special Assistant. [FR Doc. 2021–22313 Filed 10–8–21; 11:15 am] BILLING CODE 7570–02–P POSTAL REGULATORY COMMISSION [Docket Nos. MC2022–3 and CP2022–3] New Postal Product Postal Regulatory Commission. Notice. AGENCY: ACTION: The Commission is noticing a recent Postal Service filing for the Commission’s consideration concerning a negotiated service agreement. This notice informs the public of the filing, invites public comment, and takes other administrative steps. DATES: Comments are due: October 14, 2021. ADDRESSES: Submit comments electronically via the Commission’s Filing Online system at https:// www.prc.gov. Those who cannot submit comments electronically should contact the person identified in the FOR FURTHER INFORMATION CONTACT section by telephone for advice on filing alternatives. jspears on DSK121TN23PROD with NOTICES1 SUMMARY: FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 202–789–6820. VerDate Sep<11>2014 18:01 Oct 12, 2021 Jkt 256001 SUPPLEMENTARY INFORMATION: Table of Contents I. Introduction II. Docketed Proceeding(s) I. Introduction The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the market dominant or the competitive product list, or the modification of an existing product currently appearing on the market dominant or the competitive product list. Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request’s acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request. The public portions of the Postal Service’s request(s) can be accessed via the Commission’s website (https:// www.prc.gov). Non-public portions of the Postal Service’s request(s), if any, can be accessed through compliance with the requirements of 39 CFR 3011.301.1 The Commission invites comments on whether the Postal Service’s request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3030, and 39 CFR part 3040, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3035, and 39 CFR part 3040, subpart B. Comment deadline(s) for each request appear in section II. II. Docketed Proceeding(s) 1. Docket No(s).: MC2022–3 and CP2022–3; Filing Title: USPS Request to Add Priority Mail Contract 724 to Competitive Product List and Notice of Filing Materials Under Seal; Filing 1 See Docket No. RM2018–3, Order Adopting Final Rules Relating to Non-Public Information, June 27, 2018, Attachment A at 19–22 (Order No. 4679). PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 56989 Acceptance Date: October 6, 2021; Filing Authority: 39 U.S.C. 3642, 39 CFR 3040.130 through 3040.135, and 39 CFR 3035.105; Public Representative: Kenneth R. Moeller; Comments Due: October 14, 2021. This Notice will be published in the Federal Register. Erica A. Barker, Secretary. [FR Doc. 2021–22236 Filed 10–12–21; 8:45 am] BILLING CODE 7710–FW–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–93264; File No. SR– NYSEArca–2021–84] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To List and Trade Shares of the Schwab Ariel ESG ETF October 6, 2021. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on September 24, 2021, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade shares of the following under NYSE Arca Rule 8.601–E: Schwab Ariel ESG ETF. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 E:\FR\FM\13OCN1.SGM 13OCN1 56990 Federal Register / Vol. 86, No. 195 / Wednesday, October 13, 2021 / Notices 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 has adopted NYSE Arca Rule 8.601–E for the purpose of permitting the listing and trading, or trading pursuant to unlisted trading privileges (‘‘UTP’’), of Active Proxy Portfolio Shares, which are securities issued by an actively-managed open-end investment management company.4 Commentary .01 to Rule 8.601–E requires the Exchange to file separate proposals under Section 19(b) of the Act before listing and trading any series of Active Proxy Portfolio Shares on the Exchange. Therefore, the Exchange is submitting this proposal in order to list and trade shares (‘‘Shares’’) of Active Proxy Portfolio Shares of the Schwab Ariel ESG ETF (the ‘‘Fund’’) under Rule 8.601–E. jspears on DSK121TN23PROD with NOTICES1 Key Features of Active Proxy Portfolio Shares While funds issuing Active Proxy Portfolio Shares will be activelymanaged and, to that extent, will be similar to Managed Fund Shares, Active Proxy Portfolio Shares differ from 4 See Securities Exchange Act Release No. 89185 (June 29, 2020), 85 FR 40328 (July 6, 2020) (SR– NYSEArca–2019–95). Rule 8.601–E(c)(1) provides that ‘‘[t]he term ‘‘Active Proxy Portfolio Share’’ means a security that (a) is issued by a investment company registered under the Investment Company Act of 1940 (‘‘Investment Company’’) organized as an open-end management investment company that invests in a portfolio of securities selected by the Investment Company’s investment adviser consistent with the Investment Company’s investment objectives and policies; (b) is issued in a specified minimum number of shares, or multiples thereof, in return for a deposit by the purchaser of the Proxy Portfolio and/or cash with a value equal to the next determined net asset value (‘‘NAV’’); (c) when aggregated in the same specified minimum number of Active Proxy Portfolio Shares, or multiples thereof, may be redeemed at a holder’s request in return for the Proxy Portfolio and/or cash to the holder by the issuer with a value equal to the next determined NAV; and (d) the portfolio holdings for which are disclosed within at least 60 days following the end of every fiscal quarter.’’ Rule 8.601–E(c)(2) provides that ‘‘[t]he term ‘‘Actual Portfolio’’ means the identities and quantities of the securities and other assets held by the Investment Company that shall form the basis for the Investment Company’s calculation of NAV at the end of the business day.’’ Rule 8.601–E(c)(3) provides that ‘‘[t]he term ‘‘Proxy Portfolio’’ means 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 Investment Company Act of 1940 applicable to such series.’’ VerDate Sep<11>2014 18:01 Oct 12, 2021 Jkt 256001 Managed Fund Shares in the following important respects. First, in contrast to Managed Fund Shares, which are actively-managed funds listed and traded under NYSE Arca Rule 8.600–E 5 and for which a ‘‘Disclosed Portfolio’’ is required to be disseminated at least once daily,6 the portfolio for an issue of Active Proxy Portfolio Shares will be publicly disclosed within at least 60 days following the end of every fiscal quarter in accordance with normal disclosure requirements otherwise applicable to open-end management investment companies registered under the Investment Company Act of 1940 (the ‘‘1940 Act’’).7 The composition of the portfolio of an issue of Active Proxy Portfolio Shares would not be available at commencement of Exchange listing and trading. Second, in connection with the creation and redemption of Active 5 The Commission has previously approved listing and trading on the Exchange of a number of issues of Managed Fund Shares under NYSE Arca Rule 8.600–E. See, e.g., Securities Exchange Act Release Nos. 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR–NYSEArca–2008–31) (order approving Exchange listing and trading of twelve actively-managed funds of the WisdomTree Trust); 60460 (August 7, 2009), 74 FR 41468 (August 17, 2009) (SR–NYSEArca–2009–55) (order approving listing of Dent Tactical ETF); 63076 (October 12, 2010), 75 FR 63874 (October 18, 2010) (SR– NYSEArca–2010–79) (order approving Exchange listing and trading of Cambria Global Tactical ETF); 63802 (January 31, 2011), 76 FR 6503 (February 4, 2011) (SR–NYSEArca–2010–118) (order approving Exchange listing and trading of the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic Allocation Growth Income ETF). The Commission also has approved a proposed rule change relating to generic listing standards for Managed Fund Shares. See Securities Exchange Act Release No. 78397 (July 22, 2016), 81 FR 49320 (July 27, 2016) (SR–NYSEArca–2015–110) (amending NYSE Arca Equities Rule 8.600 to adopt generic listing standards for Managed Fund Shares). 6 NYSE Arca Rule 8.600–E(c)(2) defines the term ‘‘Disclosed Portfolio’’ as the identities and quantities of the securities and other assets held by the Investment Company that will form the basis for the Investment Company’s calculation of net asset value at the end of the business day. NYSE Arca Rule 8.600–E(d)(2)(B)(i) requires that the Disclosed Portfolio will be disseminated at least once daily and will be made available to all market participants at the same time. 7 A mutual fund is required to file with the Commission its complete portfolio schedules for the second and fourth fiscal quarters on Form N–CSR under the 1940 Act. Information reported on Form N–PORT for the third month of a fund’s fiscal quarter will be made publicly available 60 days after the end of a fund’s fiscal quarter. Form N–PORT requires reporting of a fund’s complete portfolio holdings on a position-by-position basis on a quarterly basis within 60 days after fiscal quarter end. Investors can obtain a series of Active Proxy Portfolio Shares’ Statement of Additional Information (‘‘SAI’’), its Shareholder Reports, its Form N–CSR, filed twice a year, and its Form N–CEN, filed annually. A series of Active Proxy Portfolio Shares’ SAI and Shareholder Reports will be available free upon request from the Investment Company, and those documents and the Form N–PORT, Form N–CSR, and Form N–CEN may be viewed on-screen or downloaded from the Commission’s website at www.sec.gov. PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 Proxy Portfolio Shares, such creation or redemption may be exchanged for a Proxy Portfolio and/or cash with a value equal to the next-determined NAV. A series of Active Proxy Portfolio Shares will disclose the Proxy Portfolio on a daily basis, which, as described above, is designed to track closely the daily performance of the Actual Portfolio of a series of Active Proxy Portfolio Shares, instead of the actual holdings of the Investment Company, as provided by a series of Managed Fund Shares. The Commission has previously approved 8 and noticed for immediate effectiveness 9 proposals for the listing and trading on the Exchange of series of Active Proxy Portfolio Shares under NYSE Arca Rule 8.601–E. The Shares of the Fund will be issued by the Schwab Strategic Trust (the ‘‘Trust’’), which is organized as a statutory trust under the laws of the state of Delaware and registered with the Commission as an open-end management investment company. 10 8 See Securities Exchange Act Release Nos. 89185 (June 29, 2020), 85 FR 40328 (July 6, 2020) (SR– NYSEArca–2019–95) (Notice of Filing of Amendment No. 6 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 6, to Adopt NYSE Arca Rule 8.601–E to Permit the Listing and Trading of Active Proxy Portfolio Shares and To List and Trade Shares of the Natixis U.S. Equity Opportunities ETF Under Proposed NYSE Arca Rule 8.601–E) (the ‘‘Natixis Order’’); 89192 (June 30, 2020), 85 FR 40699 (July 7, 2020) (SR–NYSEArca–2019–96) (Notice of Filing of Amendment No. 5 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 5, to List and Trade Two Series of Active Proxy Portfolio Shares Issued by the American Century ETF Trust under NYSE Arca Rule 8.601–E); 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); 89438 (July 31, 2020), 85 FR 47821 (August 6, 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). See also 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). 9 See Securities Exchange Act Release No. 92104 (June 3, 2021), 86 FR 30635 (June 9, 2021) (NYSEArca–2021–46) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change to List and Trade Shares of the Nuveen Santa Barbara Dividend Growth ETF, Nuveen Small Cap Select ETF, and Nuveen Winslow Large-Cap Growth ESG ETF Under NYSE Arca Rule 8.601–E (Active Proxy Portfolio Shares). 10 The Trust is registered under the 1940 Act. On April 5, 2021, the Trust filed a registration E:\FR\FM\13OCN1.SGM 13OCN1 Federal Register / Vol. 86, No. 195 / Wednesday, October 13, 2021 / Notices jspears on DSK121TN23PROD with NOTICES1 Charles Schwab Investment Management, Inc., will be the investment adviser to the Fund (the ‘‘Adviser’’). Ariel Investments, LLC will be the sub-adviser (the ‘‘Sub-Adviser’’) for the Fund. State Street Bank and Trust Company will serve as the Fund’s custodian and transfer agent. SEI Investments Distribution Co. will act as the distributor (the ‘‘Distributor’’) for the Fund. Commentary .04 to NYSE Arca Rule 8.601–E provides that, if the investment adviser to the Investment Company issuing Active Proxy Portfolio Shares is registered as a broker-dealer or is affiliated with a broker-dealer, such investment adviser will erect and maintain a ‘‘firewall’’ between the investment adviser and personnel of the broker-dealer or broker-dealer affiliate, as applicable, with respect to access to information concerning the composition and/or changes to such Investment Company’s Actual Portfolio and/or Proxy Portfolio. Any person related to the investment adviser or Investment Company who makes decisions pertaining to the Investment Company’s Actual Portfolio and/or Proxy Portfolio or has access to non-public information regarding the Investment Company’s Actual Portfolio and/or Proxy Portfolio or changes thereto must be subject to procedures reasonably designed to prevent the use and dissemination of material non-public information regarding the Actual Portfolio and/or Proxy Portfolio or changes thereto. Commentary .04 is similar to Commentary .03(a)(i) and (iii) to NYSE statement on Form N–1A under the under the Securities Act of 1933 (the ‘‘1933 Act’’) and the 1940 Act relating to the Fund (File No. 811–22311) (the ‘‘Registration Statement’’). The effectiveness of the Registration Statement was delayed by PostEffective Amendment No. 134 to the Registration Statement, which was filed on July 1, 2021, PostEffective Amendment No. 135 to the Registration Statement, which was filed on July 29, 2021, and Post-Effective Amendment No. 136 to the Registration Statement, which was filed on August 26, 2021, each filed pursuant to paragraph (a) of Rule 485 of the 1933 Act for the sole purpose of delaying the effectiveness of the Registration Statement. The Trust filed an application for an order under Section 6(c) of the 1940 Act for exemptions from various provisions of the 1940 Act and rules thereunder (File No. 812–15216), dated April 5, 2021, and an amendment to the application on May 20, 2021 (the ‘‘Application’’). On July 7, 2021, the Commission issued an order (the ‘‘Exemptive Order’’) under the 1940 Act granting the exemptions requested in the Application (Investment Company Act Release No. 34323, July 7, 2021). Investments made by the Fund will comply with the conditions set forth in the Application and the Exemptive Order. The description of the operation of the Fund herein is based, in part, on the Registration Statement, the Application and the Exemptive Order. The Exchange will not commence trading in Shares of the Fund until the Registration Statement is effective. VerDate Sep<11>2014 18:01 Oct 12, 2021 Jkt 256001 Arca Rule 5.2–E(j)(3); however, Commentary .04, in connection with the establishment of a ‘‘firewall’’ between the investment adviser and the brokerdealer, reflects the applicable open-end fund’s portfolio, not an underlying benchmark index, as is the case with index-based funds.11 Commentary .04 is also similar to Commentary .06 to Rule 8.600–E related to Managed Fund Shares, except that Commentary .04 relates to establishment and maintenance of a ‘‘firewall’’ between the investment adviser and personnel of the broker-dealer or broker-dealer affiliate, as applicable, applicable to an Investment Company’s Actual Portfolio and/or Proxy Portfolio or changes thereto, and not just to the underlying portfolio, as is the case with Managed Fund Shares. In addition, Commentary .05 to Rule 8.601–E provides that any person or entity, including a custodian, Reporting Authority, distributor, or administrator, who has access to non-public information regarding the Investment Company’s Actual Portfolio or the Proxy Portfolio or changes thereto, must be subject to procedures reasonably designed to prevent the use and dissemination of material non-public information regarding the applicable Investment Company Actual Portfolio or the Proxy Portfolio or changes thereto. Moreover, if any such person or entity is registered as a broker-dealer or affiliated with a broker-dealer, such person or entity will erect and maintain a ‘‘firewall’’ between the person or entity and the broker-dealer with respect to access to information concerning the composition and/or 11 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’). As a result, the Adviser and Sub-Adviser and their related personnel will be subject to the provisions of Rule 204A–1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with other applicable securities laws. Accordingly, procedures designed to prevent the communication and misuse of non-public information by an investment adviser must be consistent with Rule 204A–1 under the Advisers Act. In addition, Rule 206(4)–7 under the Advisers Act makes it unlawful for an investment adviser to provide investment advice to clients unless such investment adviser has (i) adopted and implemented written policies and procedures reasonably designed to prevent violations, by the investment adviser and its supervised persons, of the Advisers Act and the Commission rules adopted thereunder; (ii) implemented, at a minimum, an annual review regarding the adequacy of the policies and procedures established pursuant to subparagraph (i) above and the effectiveness of their implementation; and (iii) designated an individual (who is a supervised person) responsible for administering the policies and procedures adopted under subparagraph (i) above. PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 56991 changes to such Investment Company Actual Portfolio or Proxy Portfolio. The Adviser and Sub-Adviser are not registered as broker-dealers but are affiliated with broker-dealers. The Adviser and Sub-Adviser each have implemented and will maintain a ‘‘firewall’’ with respect to such brokerdealer affiliates regarding access to information concerning the composition of and/or changes to the Fund’s Actual Portfolio and/or Proxy Portfolio. In the event (a) the Adviser and/or Sub-Adviser becomes registered as a broker-dealer or becomes newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser is or becomes a registered broker-dealer, or becomes affiliated with a broker-dealer, it will implement and maintain a ‘‘firewall’’ with respect to its relevant personnel or its broker-dealer affiliate regarding access to information concerning the composition and/or changes to the Fund’s Actual Portfolio and/or Proxy Portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding the Fund’s Actual Portfolio and/or Proxy Portfolio or changes thereto. Any person related to the Adviser, Sub-Adviser, or the Fund who makes decisions pertaining to the Fund’s Actual Portfolio or the Proxy Portfolio or has access to non-public information regarding the Fund’s Actual Portfolio and/or the Proxy Portfolio or changes thereto are subject to procedures reasonably designed to prevent the use and dissemination of material non-public information regarding the Fund’s Actual Portfolio and/or the Proxy Portfolio or changes thereto. In addition, any person or entity, including any service provider for the Fund, who has access to non-public information regarding the Fund’s Actual Portfolio or the Proxy Portfolio or changes thereto, will be subject to procedures reasonably designed to prevent the use and dissemination of material non-public information regarding the Fund’s Actual Portfolio and/or the Proxy Portfolio or changes thereto. Moreover, if any such person or entity is registered as a broker-dealer or affiliated with a broker-dealer, such person or entity has erected and will maintain a ‘‘firewall’’ between the person or entity and the broker-dealer with respect to access to information concerning the composition and/or changes to the Fund’s Actual Portfolio and/or Proxy Portfolio. E:\FR\FM\13OCN1.SGM 13OCN1 56992 Federal Register / Vol. 86, No. 195 / Wednesday, October 13, 2021 / Notices Description of the Fund According to the Registration Statement, the Adviser or Sub-Adviser will identify a Proxy Portfolio for the Fund. The Fund’s Proxy Portfolio is not the Fund’s Actual Portfolio but will be designed to closely track the daily performance of the Fund through a ‘‘Factor Model’’ analysis of the Actual Portfolio. The Fund will generate the Proxy Portfolio by applying the Factor Model to a ‘‘Model Universe’’ comprised of securities that the Fund can purchase. The Proxy Portfolio will only include investments the Fund is permitted to hold. While the Proxy Portfolio and the Actual Portfolio will likely hold some or many of the same securities, the Proxy Portfolio and Actual Portfolio may not include identical securities. The composition of the Proxy Portfolio will be published on the Fund’s website each Business Day 12 before commencement of trading in the Shares and will include the following information for each portfolio holding in the Proxy Portfolio: (1) Ticker symbol; (2) CUSIP or other identifier; (3) description of holding; (4) quantity of each security or other asset held; and (5) percentage weight of the holding in the Proxy Portfolio. The Proxy Portfolio may be reconstituted daily, and the Adviser will not make intra-day changes to the Proxy Portfolio except to correct errors in the published Proxy Portfolio. In addition to the Proxy Portfolio, the Fund’s website will publish a variety of other information metrics regarding the relative behavior of the Proxy Portfolio and the Actual Portfolio, including the ‘‘Proxy Overlap’’ 13 and the ‘‘Tracking Error’’ 14 for the Fund. jspears on DSK121TN23PROD with NOTICES1 Schwab Ariel ESG ETF The Fund’s holdings will conform to the permissible investments as set forth in the Application and Exemptive Order, and the holdings will be consistent with all requirements in the Application and Exemptive Order.15 12 ‘‘Business Day’’ is defined to mean any day that the Exchange is open, including any day when a Fund satisfies redemption requests as required by Section 22(e) of the 1940 Act. 13 According to the Registration Statement, ‘‘Proxy Overlap’’ is the percentage weight overlap between the holdings of the prior Business Day’s Proxy Portfolio compared to the Actual Portfolio’s holdings that formed the basis for the Fund’s calculation of NAV at the end of the prior Business Day. 14 According to the Registration Statement, ‘‘Tracking Error’’ is the standard deviation over the past three months of the daily proxy spread (i.e., the difference, in percentage terms, between the Proxy Portfolio per Share NAV and that of the Actual Portfolio at the end of the trading day). 15 Pursuant to the Application and Exemptive Order, the permissible investments for the Fund VerDate Sep<11>2014 18:01 Oct 12, 2021 Jkt 256001 Any foreign common stocks held by the Fund will be traded on an exchange that is a member of the Intermarket Surveillance Group (‘‘ISG’’) or with which the Exchange has in place a comprehensive surveillance sharing agreement. According to the Registration Statement, the Fund’s investment objective is to seek long-term capital appreciation. The Fund will invest primarily in exchange-traded equity securities of U.S. companies that have been evaluated based on certain environmental, social, and governance (‘‘ESG’’) criteria, as determined by the Sub-Adviser. The Fund will normally invest in exchange-traded equity securities of small- and midcapitalization companies. Investment Restrictions The Shares of the Fund will conform to the initial and continued listing criteria under Rule 8.601–E. The Fund’s holdings will be limited to those described herein and consistent with permissible holdings as described in the Application and Exemptive Order and all requirements in the Application and Exemptive Order.16 The Fund’s investments, including U.S. exchange traded futures, will be consistent with its investment objective and will not be used to enhance leverage (although certain U.S. exchange traded futures and other investments may result in leverage). That is, the Fund’s investments will not be used to seek performance that is the multiple or inverse multiple (e.g., 2X or –3X) of the Fund’s primary broad-based securities benchmark index (as defined in Form N–1A).17 include only the following instruments: ETFs traded on a U.S. exchange; exchange-traded notes (‘‘ETNs’’) traded on a U.S. exchange; U.S. exchangetraded common stocks; common stocks listed on a foreign exchange that trade on such exchange contemporaneously with the Shares (‘‘foreign common stocks’’) in the Exchange’s Core Trading Session (normally, 9:30 a.m. to 4:00 p.m. Eastern time (‘‘E.T.’’)); U.S. exchange-traded preferred stocks; U.S. exchange-traded American Depositary Receipts (‘‘ADRs’’); U.S. exchange-traded real estate investment trusts; U.S. exchange-traded commodity pools; U.S. exchange-traded metals trusts; U.S. exchange-traded currency trusts; and U.S. exchange-traded futures that trade contemporaneously with the Fund’s Shares. In addition, the Fund may hold cash and cash equivalents (short-term U.S. Treasury securities, government money market funds, and repurchase agreements). Pursuant to the Application and Exemptive Order, the Fund will not hold short positions or invest in derivatives other than U.S. exchange-traded futures, will not borrow for investment purposes, and will not purchase any securities that are illiquid investments at the time of purchase. 16 Id. 17 The Fund’s broad-based securities benchmark index will be identified in a future amendment to PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 Creations and Redemptions of Shares According to the Registration Statement, the Trust will issue and sell Shares of the Fund only in specified minimum size ‘‘Creation Units’’ through the Distributor on a continuous basis at their NAV next determined after receipt of an order in proper form on any Business Day. The NAV of the Fund’s Shares will be calculated each Business Day as of the close of regular trading on the Exchange, ordinarily 4:00 p.m. E.T. A Creation Unit will generally consist of at least 5,000 Shares. According to the Registration Statement, Shares of the Fund will be purchased and redeemed in Creation Units. Creation Units are typically purchased and redeemed in-kind, but they may also be purchased and redeemed, in whole or in part, for cash in the Adviser’s discretion. Accordingly, purchasers will generally be required to purchase Creation Units by making an in-kind deposit of a designated portfolio of securities (the ‘‘Deposit Securities’’). If there is a difference between the NAV attributable to a Creation Unit and the aggregate market value of the Creation Basket exchanged for the Creation Unit, the party conveying instruments with the lower value will also pay to the other an amount in cash equal to that difference (the ‘‘Cash Component’’). Together, the Deposit Securities and the Cash Component will constitute the ‘‘Fund Deposit.’’ Redemption of Creation Units would work much like the process to purchase Creation Units, but in reverse. Shareholders redeeming their Shares will generally receive an in-kind transfer of specified instruments (‘‘Redemption Instruments’’). The names and quantities of the instruments that constitute the Deposit Securities and Redemption Instruments for the Fund (collectively, the ‘‘Creation Basket’’) will be the same as the Fund’s Proxy Portfolio, except to the extent purchases and redemptions are made entirely or in part on a cash basis. Creation Units of the Fund may be purchased and/or redeemed entirely for cash. When full or partial cash purchases or redemptions of Creation Units are available or specified for the Fund, they will be effected in essentially the same manner as in-kind purchases or redemptions thereof. The Fund may determine, upon receiving a purchase or redemption order from an authorized participant (‘‘Authorized Participant’’), to have the purchase or redemption, as applicable, be made entirely or in part in cash. its Registration Statement following the Fund’s first full calendar year of performance. E:\FR\FM\13OCN1.SGM 13OCN1 Federal Register / Vol. 86, No. 195 / Wednesday, October 13, 2021 / Notices Each Business Day, prior to the opening of trading on the Exchange, the Fund will publish the Creation Basket for that day through the National Securities Clearing Corporation or another method of public dissemination. The published Creation Basket will apply until a new Creation Basket is announced on the following Business Day, and there will be no intraday changes to the Creation Basket except to correct errors in the published Creation Basket. All orders to purchase or redeem Creation Units must be placed by or through an Authorized Participant that has entered into an Authorized Participant Agreement with the Fund’s Distributor. Orders must be transmitted by an Authorized Participant pursuant to procedures set forth in the Participant Agreement. The date on which an order to purchase or redeem Creation Units is received and accepted is referred to as the ‘‘Transmittal Date.’’ All Creation Unit orders must be received no later than the Order Cut-Off Time in order to receive the NAV determined on the Transmittal Date. When the Exchange closes earlier than normal, the Fund may require orders for Creation Units to be placed earlier in the Business Day. jspears on DSK121TN23PROD with NOTICES1 Availability of Information The Fund’s website (www.schwabassetmanagement.com), which will be publicly available prior to the public offering of Shares, will include a form of the prospectus for the Fund that may be downloaded. The Fund’s website will include on a daily basis, per Share for the Fund, the prior Business Day’s NAV and the ‘‘Closing Price’’ or ‘‘Bid/Ask Price,’’ 18 and a calculation of the premium/discount of the Closing Price or Bid/Ask Price against such NAV.19 The Adviser has represented that the Fund’s website will also provide: (1) Any other information regarding premiums/discounts as may be required for other ETFs under Rule 6c-11 under the 1940 Act, as amended, and (2) any information regarding the bid/ask spread for the Fund as may be required for other ETFs under Rule 6c– 18 The records relating to Bid/Ask Prices will be retained by the Fund or its service providers. The ‘‘Bid/Ask Price’’ is the midpoint of the highest bid and lowest offer based upon the National Best Bid and Offer as of the time of calculation of the Fund’s NAV. The ‘‘National Best Bid and Offer’’ is the current national best bid and national best offer as disseminated by the Consolidated Quotation System or UTP Plan Securities Information Processor. The ‘‘Closing Price’’ of Shares is the official closing price of the Shares on the Exchange. 19 The ‘‘premium/discount’’ refers to the premium or discount to the NAV at the end of a trading day and will be calculated based on the last Bid/Ask Price or the Closing Price on a given trading day. VerDate Sep<11>2014 18:01 Oct 12, 2021 Jkt 256001 11 under the 1940 Act, as amended. The Fund’s website also will disclose the information required under Rule 8.601– E(c)(3).20 The website and information will be publicly available at no charge. The identity and quantity of investments in the Proxy Portfolio will be publicly available on the Fund’s website before the commencement of trading in Shares on each Business Day. The website will also include information relating to the Proxy Overlap and Tracking Error, as discussed above. Typical mutual fund-style annual, semi-annual and quarterly disclosures contained in the Fund’s Commission filings will be provided on the Fund’s website on a current basis.21 Thus, the Fund will publish the portfolio contents of its Actual Portfolio on a periodic basis, and no less than 60 days after the end of every fiscal quarter. Investors can also obtain the Fund’s SAI, Shareholder Reports, Form N–CSR, N–PORT, and Form N–CEN. The prospectus, SAI, and Shareholder Reports are available free upon request by contacting the Fund or each document can be downloaded from the Fund’s website, and those documents and the Form N–CSR, N–PORT, and Form N–CEN may be viewed on-screen or downloaded from the Commission’s website. The Exchange also notes that, pursuant to the Application, the Fund must comply with Regulation Fair Disclosure, which prohibits selective disclosure of any material non-public information. Information regarding the market price of Shares and trading volume in Shares, will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. The previous day’s closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Quotation and last sale information for the Shares and U.S. exchange-traded instruments (excluding futures contracts) will be available via the Consolidated Tape Association (‘‘CTA’’) high-speed line, from the exchanges on which such securities trade, or through major market data vendors or 20 See note 4, supra. Rule 8.601–E (c)(3) provides that the website for each series of Active Proxy Portfolio Shares shall disclose the information regarding the Proxy Portfolio as provided in the exemptive relief pursuant to the 1940 Act applicable to such series, including 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. 21 See note 7, supra. PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 56993 subscription services. Quotation and last sale information for futures contracts will be available from the exchanges on which they trade. Intraday price information for all exchangetraded instruments, which include all eligible instruments except cash and cash equivalents, will be available from the exchanges on which they trade, or through major market data vendors or subscription services. Intraday price information for cash equivalents is available through major market data vendors, subscription services, and/or pricing services. Trading Halts With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund.22 Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Rule 7.12–E have been reached. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. Trading in the Shares will be subject to NYSE Arca Rule 8.601– E(d)(2)(D), which sets forth circumstances under which Shares of the Fund will be halted. Specifically, Rule 8.601–E(d)(2)(D) provides that the Exchange may consider all relevant factors in exercising its discretion to halt trading in a series of Active Proxy Portfolio Shares. Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the series of Active Proxy Portfolio Shares inadvisable. These may include: (a) The extent to which trading is not occurring in the securities and/or the financial instruments composing the Proxy Portfolio and/or Actual Portfolio; or (b) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. If the Exchange becomes aware that the NAV, Proxy Portfolio, or Actual Portfolio with respect to a series of Active Proxy Portfolio Shares is not disseminated to all market participants at the same time, the Exchange shall halt trading in such series until such time as the NAV, Proxy Portfolio, or Actual Portfolio is available to all market participants at the same time. Trading Rules The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of 22 See E:\FR\FM\13OCN1.SGM NYSE Arca Rule 7.12–E. 13OCN1 56994 Federal Register / Vol. 86, No. 195 / Wednesday, October 13, 2021 / Notices jspears on DSK121TN23PROD with NOTICES1 equity securities. Shares will trade on the NYSE Arca Marketplace in all trading sessions in accordance with NYSE Arca Rule 7.34–E(a). As provided in NYSE Arca Rule 7.6–E, the minimum price variation (‘‘MPV’’) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001. The Shares will conform to the initial and continued listing criteria under NYSE Arca Rule 8.601–E. The Exchange has appropriate rules to facilitate trading in the Shares during all trading sessions. A minimum of 100,000 Shares for the Fund will be outstanding at the commencement of trading on the Exchange. In addition, pursuant to Rule 8.601–E(d)(1)(B), the Exchange, prior to commencement of trading in the Shares, will obtain a representation from the Trust that the NAV per Share of the Fund will be calculated daily and that the NAV, Proxy Portfolio, and the Actual Portfolio for the Fund will be made available to all market participants at the same time. With respect to Active Proxy Portfolio Shares, all of the Exchange member obligations relating to product description and prospectus delivery requirements will continue to apply in accordance with Exchange rules and federal securities laws, and the Exchange and the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) will continue to monitor Exchange members for compliance with such requirements. Surveillance The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by the Exchange, as well as cross-market surveillances administered by FINRA on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws.23 The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange. The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of 23 FINRA conducts cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. VerDate Sep<11>2014 18:01 Oct 12, 2021 Jkt 256001 manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares and underlying exchange-traded instruments with other markets and other entities that are members of the ISG, and the Exchange or FINRA, on behalf of the Exchange, or both, may obtain trading information regarding trading such securities and underlying exchange-traded instruments from such markets and other entities. In addition, the Exchange may obtain information regarding trading in such securities and underlying exchangetraded instruments from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.24 The Adviser will make available daily to FINRA and the Exchange the Actual Portfolio of the Fund, upon request, in order to facilitate the performance of the surveillances referred to above. In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. Commentary .03 to NYSE Arca Rule 8.601–E provides that the Exchange will implement and maintain written surveillance procedures for Active Proxy Portfolio Shares. As part of these surveillance procedures, the Investment Company’s investment adviser will, upon request by the Exchange or FINRA, on behalf of the Exchange, make available to the Exchange or FINRA the daily Actual Portfolio holdings of each series of Active Proxy Portfolio Shares. The Exchange believes that the ability to access the information on an as needed basis will provide it with sufficient information to perform the necessary regulatory functions associated with listing and trading series of Active Proxy Portfolio Shares on the Exchange, including the ability to monitor compliance with the initial and continued listing requirements as well as the ability to surveil for manipulation of Active Proxy Portfolio Shares. The Exchange will utilize its existing procedures to monitor issuer compliance with the requirements of Rule 8.601–E. For example, the Exchange will continue to use intraday alerts that will notify Exchange 24 For a list of the current members of ISG, see www.isgportal.org. PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 personnel of trading activity throughout the day that may indicate that unusual conditions or circumstances are present that could be detrimental to the maintenance of a fair and orderly market. The Exchange will require from the issuer of a series of Active Proxy Portfolio Shares, upon initial listing and periodically thereafter, a representation that it is in compliance with Rule 8.601–E. The Exchange notes that Commentary .01 to Rule 8.601–E requires an issuer of Active Proxy Portfolio Shares to notify the Exchange of any failure to comply with the continued listing requirements of Rule 8.601–E. In addition, the Exchange will require issuers to represent that they will notify the Exchange of any failure to comply with the terms of applicable exemptive and no-action relief. As part of its surveillance procedures, the Exchange will rely on the foregoing procedures to become aware of any noncompliance with the requirements of Rule 8.601–E. With respect to the Fund, all statements and representations made in this filing regarding (a) the description of the portfolio or reference asset, (b) limitations on portfolio holdings or reference assets, or (c) the applicability of Exchange listing rules specified in this rule filing shall constitute continued listing requirements for listing the Shares on the Exchange. The Exchange will obtain a representation from the Trust, prior to commencement of trading in the Shares of the Fund, that it will advise the Exchange of any failure by the Fund 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 the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Rule 5.5– E(m). 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,25 in general, and furthers the objectives of Section 6(b)(5) of the Act,26 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market 25 15 26 15 E:\FR\FM\13OCN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 13OCN1 jspears on DSK121TN23PROD with NOTICES1 Federal Register / Vol. 86, No. 195 / Wednesday, October 13, 2021 / Notices system, and, in general, to protect investors and the public interest.27 With respect to the proposed listing and trading of Shares of the Fund, the Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Rule 8.601–E. One hundred percent of the value of the Fund’s Actual Portfolio (except for cash and cash equivalents) at the time of purchase will be listed on U.S. or foreign securities exchanges (or, in the limited case of futures contracts, U.S. futures exchanges). The listing and trading of such U.S. securities is subject to rules of the exchanges on which they are listed and traded, as approved by the Commission. The Fund’s holdings will conform to the permissible investments as set forth in the Application and Exemptive Order, and the holdings will be consistent with all requirements in the Application and Exemptive Order.28 The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares and underlying exchange-traded instruments with other markets and other entities that are members of the ISG, and the Exchange or FINRA, on behalf of the Exchange, or both, may obtain trading information regarding trading in the Shares and underlying exchange-traded instruments from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares and underlying exchange-traded instruments from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. Any foreign common stocks held by the Fund will be traded on an exchange that is a member of the ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. The daily dissemination of the identity and quantity of Proxy Portfolio component investments, together with the right of Authorized Participants to create and redeem each day at the NAV, will be sufficient for market participants to value and trade Shares in a manner that will not lead to significant deviations between the Shares’ Bid/Ask Price and NAV. 27 The Exchange represents that, for initial and continued listing, the Fund will be in compliance with Rule 10A–3 under the Act, as provided by NYSE Arca Rule 5.3–E. 28 See note 14 [sic], supra. VerDate Sep<11>2014 18:01 Oct 12, 2021 Jkt 256001 The Fund’s investments, including U.S. exchange-traded futures, will be consistent with its investment objective and will not be used to enhance leverage (although certain U.S. exchange-traded futures and other investments may result in leverage). That is, the Fund’s investments will not be used to seek performance that is the multiple or inverse multiple (e.g., 2X or –3X) of the Fund’s primary broad-based securities benchmark index (as defined in Form N–1A). The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange will obtain a representation from the Trust that the NAV per Share of the Fund will be calculated daily and that the NAV, Proxy Portfolio, and Actual Portfolio for the Fund will be made available to all market participants at the same time. Investors can obtain the Fund’s SAI, shareholder reports, and its Form N– CSR, Form N–PORT, and Form N–CEN. The Fund’s SAI and shareholder reports will be available free upon request from the Fund, and those documents and the Form N–CSR, Form N–PORT, and Form N–CEN may be viewed on-screen or downloaded from the Commission’s website. Commentary .03 to NYSE Arca Rule 8.601–E provides that the Exchange will implement and maintain written surveillance procedures for Active Proxy Portfolio Shares. As part of these surveillance procedures, the Investment Company’s investment adviser will, upon request by the Exchange or FINRA, on behalf of the Exchange, make available to the Exchange or FINRA the daily portfolio holdings of each series of Active Proxy Portfolio Shares. The Exchange believes that the ability to access the information on an as needed basis will provide it with sufficient information to perform the necessary regulatory functions associated with listing and trading series of Active Proxy Portfolio Shares on the Exchange, including the ability to monitor compliance with the initial and continued listing requirements as well as the ability to surveil for manipulation of Active Proxy Portfolio Shares. With respect to the Fund, the Adviser will make available daily to FINRA and the Exchange the portfolio holdings of the Fund upon request in order to facilitate the performance of the surveillances referred to above. The Exchange will utilize its existing procedures to monitor compliance with the requirements of Rule 8.601–E. For example, the Exchange will continue to use intraday alerts that will notify Exchange personnel of trading activity PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 56995 throughout the day that may indicate that unusual conditions or circumstances are present that could be detrimental to the maintenance of a fair and orderly market. The Exchange will require from the Trust, upon initial listing and periodically thereafter, a representation that the Fund is in compliance with Rule 8.601–E. The Exchange notes that Commentary .01 to Rule 8.601–E requires the issuer of the Shares to notify the Exchange of any failure to comply with the continued listing requirements of Rule 8.601–E. In addition, the Exchange will require the issuer to represent that it will notify the Exchange of any failure to comply with the terms of applicable exemptive and no-action relief. The Exchange will rely on the foregoing procedures to become aware of any non-compliance with the requirements of Rule 8.601–E. In addition, with respect to the Fund, a large amount of information will be publicly available regarding the Fund and the Shares, thereby promoting market transparency. Quotation and last sale information for the Shares and U.S. exchange-traded instruments (excluding futures contracts) will be available via the CTA high-speed line, from the exchanges on which such securities trade, or through major market data vendors or subscription services. Intraday price information for all exchange-traded instruments, which include all eligible instruments except cash and cash equivalents, will be available from the exchanges on which they trade, or through major market data vendors or subscription services. Quotation and last sale information for futures contracts will be available from the exchanges on which they trade. Intraday price information for cash equivalents is available through major market data vendors, subscription services, and/or pricing services. The website for the Fund will include a form of the prospectus that may be downloaded, and additional data relating to NAV and other applicable quantitative information, updated on a daily basis. Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Rule 7.12–E have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. Trading in the Shares will be subject to NYSE Arca Rule 8.601–E(d)(2)(D), which sets forth circumstances under which Shares of the Fund will be halted. In addition, as noted above, investors will have ready access to the Proxy Portfolio and quotation and last sale information for the Shares. The identity and quantity of E:\FR\FM\13OCN1.SGM 13OCN1 jspears on DSK121TN23PROD with NOTICES1 56996 Federal Register / Vol. 86, No. 195 / Wednesday, October 13, 2021 / Notices investments in the Proxy Portfolio will be publicly available on the Fund’s website before the commencement of trading in Shares on each Business Day. The Shares will conform to the initial and continued listing criteria under Rule 8.601–E.29 The Fund’s holdings will conform to the permissible investments as set forth in the Application and Exemptive Order, and the holdings will be consistent with all requirements in the Application and Exemptive Order.30 Any foreign common stocks held by the Fund will be traded on an exchange that is a member of the ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. The components of the Fund’s Actual Portfolio will (a) be listed on an exchange and the primary trading session of such exchange will trade synchronously with the Exchange’s Core Trading Session, as defined in Rule 7.34–E(a); (b) with respect to exchangetraded futures, be listed on a U.S. futures exchange; or (c) consist of cash and cash equivalents. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of an additional type of activelymanaged exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. The Exchange will obtain a representation from the Adviser, prior to commencement of trading in the Shares of the Fund, that it will advise the Exchange of any failure by the Fund 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 the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Rule 5.5– E(m). As noted above, with respect to the Fund, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, as noted above, with respect to the Fund, investors will have ready access to information regarding the Proxy 29 See 30 See note 4, supra. note 14 [sic], supra. VerDate Sep<11>2014 18:01 Oct 12, 2021 Jkt 256001 Portfolio and quotation and last sale information for the Shares. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes the proposed rule change would permit listing and trading of another type of actively-managed ETF that has characteristics different from existing actively-managed and index ETFs and would introduce additional competition among various ETF products to the benefit of investors. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 31 and Rule 19b– 4(f)(6) thereunder.32 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 31 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 32 17 PO 00000 Frm 00112 Fmt 4703 Sfmt 9990 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–2021–84 on the subject line. Paper Comments • Send paper comments in triplicate to: Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2021–84. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSEArca–2021–84 and should be submitted on or before November 3, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.33 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–22170 Filed 10–12–21; 8:45 am] BILLING CODE 8011–01–P 33 17 E:\FR\FM\13OCN1.SGM CFR 200.30–3(a)(12). 13OCN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 195 (Wednesday, October 13, 2021)]
[Notices]
[Pages 56989-56996]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-22170]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93264; File No. SR-NYSEArca-2021-84]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To List and Trade 
Shares of the Schwab Ariel ESG ETF

October 6, 2021.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on September 24, 2021, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the following 
under NYSE Arca Rule 8.601-E: Schwab Ariel ESG ETF. The proposed rule 
change is available on the Exchange's website at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at

[[Page 56990]]

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 has adopted NYSE Arca Rule 8.601-E for the purpose of 
permitting the listing and trading, or trading pursuant to unlisted 
trading privileges (``UTP''), of Active Proxy Portfolio Shares, which 
are securities issued by an actively-managed open-end investment 
management company.\4\ Commentary .01 to Rule 8.601-E requires the 
Exchange to file separate proposals under Section 19(b) of the Act 
before listing and trading any series of Active Proxy Portfolio Shares 
on the Exchange. Therefore, the Exchange is submitting this proposal in 
order to list and trade shares (``Shares'') of Active Proxy Portfolio 
Shares of the Schwab Ariel ESG ETF (the ``Fund'') under Rule 8.601-E.
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    \4\ See Securities Exchange Act Release No. 89185 (June 29, 
2020), 85 FR 40328 (July 6, 2020) (SR-NYSEArca-2019-95). Rule 8.601-
E(c)(1) provides that ``[t]he term ``Active Proxy Portfolio Share'' 
means a security that (a) is issued by a investment company 
registered under the Investment Company Act of 1940 (``Investment 
Company'') organized as an open-end management investment company 
that invests in a portfolio of securities selected by the Investment 
Company's investment adviser consistent with the Investment 
Company's investment objectives and policies; (b) is issued in a 
specified minimum number of shares, or multiples thereof, in return 
for a deposit by the purchaser of the Proxy Portfolio and/or cash 
with a value equal to the next determined net asset value (``NAV''); 
(c) when aggregated in the same specified minimum number of Active 
Proxy Portfolio Shares, or multiples thereof, may be redeemed at a 
holder's request in return for the Proxy Portfolio and/or cash to 
the holder by the issuer with a value equal to the next determined 
NAV; and (d) the portfolio holdings for which are disclosed within 
at least 60 days following the end of every fiscal quarter.'' Rule 
8.601-E(c)(2) provides that ``[t]he term ``Actual Portfolio'' means 
the identities and quantities of the securities and other assets 
held by the Investment Company that shall form the basis for the 
Investment Company's calculation of NAV at the end of the business 
day.'' Rule 8.601-E(c)(3) provides that ``[t]he term ``Proxy 
Portfolio'' means 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 Investment Company Act of 1940 applicable to such series.''
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Key Features of Active Proxy Portfolio Shares
    While funds issuing Active Proxy Portfolio Shares will be actively-
managed and, to that extent, will be similar to Managed Fund Shares, 
Active Proxy Portfolio Shares differ from Managed Fund Shares in the 
following important respects. First, in contrast to Managed Fund 
Shares, which are actively-managed funds listed and traded under NYSE 
Arca Rule 8.600-E \5\ and for which a ``Disclosed Portfolio'' is 
required to be disseminated at least once daily,\6\ the portfolio for 
an issue of Active Proxy Portfolio Shares will be publicly disclosed 
within at least 60 days following the end of every fiscal quarter in 
accordance with normal disclosure requirements otherwise applicable to 
open-end management investment companies registered under the 
Investment Company Act of 1940 (the ``1940 Act'').\7\ The composition 
of the portfolio of an issue of Active Proxy Portfolio Shares would not 
be available at commencement of Exchange listing and trading. Second, 
in connection with the creation and redemption of Active Proxy 
Portfolio Shares, such creation or redemption may be exchanged for a 
Proxy Portfolio and/or cash with a value equal to the next-determined 
NAV. A series of Active Proxy Portfolio Shares will disclose the Proxy 
Portfolio on a daily basis, which, as described above, is designed to 
track closely the daily performance of the Actual Portfolio of a series 
of Active Proxy Portfolio Shares, instead of the actual holdings of the 
Investment Company, as provided by a series of Managed Fund Shares.
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    \5\ The Commission has previously approved listing and trading 
on the Exchange of a number of issues of Managed Fund Shares under 
NYSE Arca Rule 8.600-E. See, e.g., Securities Exchange Act Release 
Nos. 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-
2008-31) (order approving Exchange listing and trading of twelve 
actively-managed funds of the WisdomTree Trust); 60460 (August 7, 
2009), 74 FR 41468 (August 17, 2009) (SR-NYSEArca-2009-55) (order 
approving listing of Dent Tactical ETF); 63076 (October 12, 2010), 
75 FR 63874 (October 18, 2010) (SR-NYSEArca-2010-79) (order 
approving Exchange listing and trading of Cambria Global Tactical 
ETF); 63802 (January 31, 2011), 76 FR 6503 (February 4, 2011) (SR-
NYSEArca-2010-118) (order approving Exchange listing and trading of 
the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic 
Allocation Growth Income ETF). The Commission also has approved a 
proposed rule change relating to generic listing standards for 
Managed Fund Shares. See Securities Exchange Act Release No. 78397 
(July 22, 2016), 81 FR 49320 (July 27, 2016) (SR-NYSEArca-2015-110) 
(amending NYSE Arca Equities Rule 8.600 to adopt generic listing 
standards for Managed Fund Shares).
    \6\ NYSE Arca Rule 8.600-E(c)(2) defines the term ``Disclosed 
Portfolio'' as the identities and quantities of the securities and 
other assets held by the Investment Company that will form the basis 
for the Investment Company's calculation of net asset value at the 
end of the business day. NYSE Arca Rule 8.600-E(d)(2)(B)(i) requires 
that the Disclosed Portfolio will be disseminated at least once 
daily and will be made available to all market participants at the 
same time.
    \7\ A mutual fund is required to file with the Commission its 
complete portfolio schedules for the second and fourth fiscal 
quarters on Form N-CSR under the 1940 Act. Information reported on 
Form N-PORT for the third month of a fund's fiscal quarter will be 
made publicly available 60 days after the end of a fund's fiscal 
quarter. Form N-PORT requires reporting of a fund's complete 
portfolio holdings on a position-by-position basis on a quarterly 
basis within 60 days after fiscal quarter end. Investors can obtain 
a series of Active Proxy Portfolio Shares' Statement of Additional 
Information (``SAI''), its Shareholder Reports, its Form N-CSR, 
filed twice a year, and its Form N-CEN, filed annually. A series of 
Active Proxy Portfolio Shares' SAI and Shareholder Reports will be 
available free upon request from the Investment Company, and those 
documents and the Form N-PORT, Form N-CSR, and Form N-CEN may be 
viewed on-screen or downloaded from the Commission's website at 
www.sec.gov.
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    The Commission has previously approved \8\ and noticed for 
immediate effectiveness \9\ proposals for the listing and trading on 
the Exchange of series of Active Proxy Portfolio Shares under NYSE Arca 
Rule 8.601-E.
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    \8\ See Securities Exchange Act Release Nos. 89185 (June 29, 
2020), 85 FR 40328 (July 6, 2020) (SR-NYSEArca-2019-95) (Notice of 
Filing of Amendment No. 6 and Order Granting Accelerated Approval of 
a Proposed Rule Change, as Modified by Amendment No. 6, to Adopt 
NYSE Arca Rule 8.601-E to Permit the Listing and Trading of Active 
Proxy Portfolio Shares and To List and Trade Shares of the Natixis 
U.S. Equity Opportunities ETF Under Proposed NYSE Arca Rule 8.601-E) 
(the ``Natixis Order''); 89192 (June 30, 2020), 85 FR 40699 (July 7, 
2020) (SR-NYSEArca-2019-96) (Notice of Filing of Amendment No. 5 and 
Order Granting Accelerated Approval of a Proposed Rule Change, as 
Modified by Amendment No. 5, to List and Trade Two Series of Active 
Proxy Portfolio Shares Issued by the American Century ETF Trust 
under NYSE Arca Rule 8.601-E); 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); 89438 
(July 31, 2020), 85 FR 47821 (August 6, 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). See also 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).
    \9\ See Securities Exchange Act Release No. 92104 (June 3, 
2021), 86 FR 30635 (June 9, 2021) (NYSEArca-2021-46) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to List 
and Trade Shares of the Nuveen Santa Barbara Dividend Growth ETF, 
Nuveen Small Cap Select ETF, and Nuveen Winslow Large-Cap Growth ESG 
ETF Under NYSE Arca Rule 8.601-E (Active Proxy Portfolio Shares).
---------------------------------------------------------------------------

    The Shares of the Fund will be issued by the Schwab Strategic Trust 
(the ``Trust''), which is organized as a statutory trust under the laws 
of the state of Delaware and registered with the Commission as an open-
end management investment company. \10\

[[Page 56991]]

Charles Schwab Investment Management, Inc., will be the investment 
adviser to the Fund (the ``Adviser''). Ariel Investments, LLC will be 
the sub-adviser (the ``Sub-Adviser'') for the Fund. State Street Bank 
and Trust Company will serve as the Fund's custodian and transfer 
agent. SEI Investments Distribution Co. will act as the distributor 
(the ``Distributor'') for the Fund.
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    \10\ The Trust is registered under the 1940 Act. On April 5, 
2021, the Trust filed a registration statement on Form N-1A under 
the under the Securities Act of 1933 (the ``1933 Act'') and the 1940 
Act relating to the Fund (File No. 811-22311) (the ``Registration 
Statement''). The effectiveness of the Registration Statement was 
delayed by Post-Effective Amendment No. 134 to the Registration 
Statement, which was filed on July 1, 2021, Post-Effective Amendment 
No. 135 to the Registration Statement, which was filed on July 29, 
2021, and Post-Effective Amendment No. 136 to the Registration 
Statement, which was filed on August 26, 2021, each filed pursuant 
to paragraph (a) of Rule 485 of the 1933 Act for the sole purpose of 
delaying the effectiveness of the Registration Statement. The Trust 
filed an application for an order under Section 6(c) of the 1940 Act 
for exemptions from various provisions of the 1940 Act and rules 
thereunder (File No. 812-15216), dated April 5, 2021, and an 
amendment to the application on May 20, 2021 (the ``Application''). 
On July 7, 2021, the Commission issued an order (the ``Exemptive 
Order'') under the 1940 Act granting the exemptions requested in the 
Application (Investment Company Act Release No. 34323, July 7, 
2021). Investments made by the Fund will comply with the conditions 
set forth in the Application and the Exemptive Order. The 
description of the operation of the Fund herein is based, in part, 
on the Registration Statement, the Application and the Exemptive 
Order. The Exchange will not commence trading in Shares of the Fund 
until the Registration Statement is effective.
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    Commentary .04 to NYSE Arca Rule 8.601-E provides that, if the 
investment adviser to the Investment Company issuing Active Proxy 
Portfolio Shares is registered as a broker-dealer or is affiliated with 
a broker-dealer, such investment adviser will erect and maintain a 
``firewall'' between the investment adviser and personnel of the 
broker-dealer or broker-dealer affiliate, as applicable, with respect 
to access to information concerning the composition and/or changes to 
such Investment Company's Actual Portfolio and/or Proxy Portfolio. Any 
person related to the investment adviser or Investment Company who 
makes decisions pertaining to the Investment Company's Actual Portfolio 
and/or Proxy Portfolio or has access to non-public information 
regarding the Investment Company's Actual Portfolio and/or Proxy 
Portfolio or changes thereto must be subject to procedures reasonably 
designed to prevent the use and dissemination of material non-public 
information regarding the Actual Portfolio and/or Proxy Portfolio or 
changes thereto. Commentary .04 is similar to Commentary .03(a)(i) and 
(iii) to NYSE Arca Rule 5.2-E(j)(3); however, Commentary .04, in 
connection with the establishment of a ``firewall'' between the 
investment adviser and the broker-dealer, reflects the applicable open-
end fund's portfolio, not an underlying benchmark index, as is the case 
with index-based funds.\11\ Commentary .04 is also similar to 
Commentary .06 to Rule 8.600-E related to Managed Fund Shares, except 
that Commentary .04 relates to establishment and maintenance of a 
``firewall'' between the investment adviser and personnel of the 
broker-dealer or broker-dealer affiliate, as applicable, applicable to 
an Investment Company's Actual Portfolio and/or Proxy Portfolio or 
changes thereto, and not just to the underlying portfolio, as is the 
case with Managed Fund Shares.
---------------------------------------------------------------------------

    \11\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and Sub-Adviser and their related 
personnel will be subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violations, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
---------------------------------------------------------------------------

    In addition, Commentary .05 to Rule 8.601-E provides that any 
person or entity, including a custodian, Reporting Authority, 
distributor, or administrator, who has access to non-public information 
regarding the Investment Company's Actual Portfolio or the Proxy 
Portfolio or changes thereto, must be subject to procedures reasonably 
designed to prevent the use and dissemination of material non-public 
information regarding the applicable Investment Company Actual 
Portfolio or the Proxy Portfolio or changes thereto. Moreover, if any 
such person or entity is registered as a broker-dealer or affiliated 
with a broker-dealer, such person or entity will erect and maintain a 
``firewall'' between the person or entity and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such Investment Company Actual Portfolio or Proxy Portfolio.
    The Adviser and Sub-Adviser are not registered as broker-dealers 
but are affiliated with broker-dealers. The Adviser and Sub-Adviser 
each have implemented and will maintain a ``firewall'' with respect to 
such broker-dealer affiliates regarding access to information 
concerning the composition of and/or changes to the Fund's Actual 
Portfolio and/or Proxy Portfolio.
    In the event (a) the Adviser and/or Sub-Adviser becomes registered 
as a broker-dealer or becomes newly affiliated with a broker-dealer, or 
(b) any new adviser or sub-adviser is or becomes a registered broker-
dealer, or becomes affiliated with a broker-dealer, it will implement 
and maintain a ``firewall'' with respect to its relevant personnel or 
its broker-dealer affiliate regarding access to information concerning 
the composition and/or changes to the Fund's Actual Portfolio and/or 
Proxy Portfolio, and will be subject to procedures designed to prevent 
the use and dissemination of material non-public information regarding 
the Fund's Actual Portfolio and/or Proxy Portfolio or changes thereto. 
Any person related to the Adviser, Sub-Adviser, or the Fund who makes 
decisions pertaining to the Fund's Actual Portfolio or the Proxy 
Portfolio or has access to non-public information regarding the Fund's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto are 
subject to procedures reasonably designed to prevent the use and 
dissemination of material non-public information regarding the Fund's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto.
    In addition, any person or entity, including any service provider 
for the Fund, who has access to non-public information regarding the 
Fund's Actual Portfolio or the Proxy Portfolio or changes thereto, will 
be subject to procedures reasonably designed to prevent the use and 
dissemination of material non-public information regarding the Fund's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto. 
Moreover, if any such person or entity is registered as a broker-dealer 
or affiliated with a broker-dealer, such person or entity has erected 
and will maintain a ``firewall'' between the person or entity and the 
broker-dealer with respect to access to information concerning the 
composition and/or changes to the Fund's Actual Portfolio and/or Proxy 
Portfolio.

[[Page 56992]]

Description of the Fund
    According to the Registration Statement, the Adviser or Sub-Adviser 
will identify a Proxy Portfolio for the Fund. The Fund's Proxy 
Portfolio is not the Fund's Actual Portfolio but will be designed to 
closely track the daily performance of the Fund through a ``Factor 
Model'' analysis of the Actual Portfolio. The Fund will generate the 
Proxy Portfolio by applying the Factor Model to a ``Model Universe'' 
comprised of securities that the Fund can purchase. The Proxy Portfolio 
will only include investments the Fund is permitted to hold. While the 
Proxy Portfolio and the Actual Portfolio will likely hold some or many 
of the same securities, the Proxy Portfolio and Actual Portfolio may 
not include identical securities.
    The composition of the Proxy Portfolio will be published on the 
Fund's website each Business Day \12\ before commencement of trading in 
the Shares and will include the following information for each 
portfolio holding in the Proxy Portfolio: (1) Ticker symbol; (2) CUSIP 
or other identifier; (3) description of holding; (4) quantity of each 
security or other asset held; and (5) percentage weight of the holding 
in the Proxy Portfolio. The Proxy Portfolio may be reconstituted daily, 
and the Adviser will not make intra-day changes to the Proxy Portfolio 
except to correct errors in the published Proxy Portfolio.
---------------------------------------------------------------------------

    \12\ ``Business Day'' is defined to mean any day that the 
Exchange is open, including any day when a Fund satisfies redemption 
requests as required by Section 22(e) of the 1940 Act.
---------------------------------------------------------------------------

    In addition to the Proxy Portfolio, the Fund's website will publish 
a variety of other information metrics regarding the relative behavior 
of the Proxy Portfolio and the Actual Portfolio, including the ``Proxy 
Overlap'' \13\ and the ``Tracking Error'' \14\ for the Fund.
---------------------------------------------------------------------------

    \13\ According to the Registration Statement, ``Proxy Overlap'' 
is the percentage weight overlap between the holdings of the prior 
Business Day's Proxy Portfolio compared to the Actual Portfolio's 
holdings that formed the basis for the Fund's calculation of NAV at 
the end of the prior Business Day.
    \14\ According to the Registration Statement, ``Tracking Error'' 
is the standard deviation over the past three months of the daily 
proxy spread (i.e., the difference, in percentage terms, between the 
Proxy Portfolio per Share NAV and that of the Actual Portfolio at 
the end of the trading day).
---------------------------------------------------------------------------

Schwab Ariel ESG ETF
    The Fund's holdings will conform to the permissible investments as 
set forth in the Application and Exemptive Order, and the holdings will 
be consistent with all requirements in the Application and Exemptive 
Order.\15\ Any foreign common stocks held by the Fund will be traded on 
an exchange that is a member of the Intermarket Surveillance Group 
(``ISG'') or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.
---------------------------------------------------------------------------

    \15\ Pursuant to the Application and Exemptive Order, the 
permissible investments for the Fund include only the following 
instruments: ETFs traded on a U.S. exchange; exchange-traded notes 
(``ETNs'') traded on a U.S. exchange; U.S. exchange-traded common 
stocks; common stocks listed on a foreign exchange that trade on 
such exchange contemporaneously with the Shares (``foreign common 
stocks'') in the Exchange's Core Trading Session (normally, 9:30 
a.m. to 4:00 p.m. Eastern time (``E.T.'')); U.S. exchange-traded 
preferred stocks; U.S. exchange-traded American Depositary Receipts 
(``ADRs''); U.S. exchange-traded real estate investment trusts; U.S. 
exchange-traded commodity pools; U.S. exchange-traded metals trusts; 
U.S. exchange-traded currency trusts; and U.S. exchange-traded 
futures that trade contemporaneously with the Fund's Shares. In 
addition, the Fund may hold cash and cash equivalents (short-term 
U.S. Treasury securities, government money market funds, and 
repurchase agreements). Pursuant to the Application and Exemptive 
Order, the Fund will not hold short positions or invest in 
derivatives other than U.S. exchange-traded futures, will not borrow 
for investment purposes, and will not purchase any securities that 
are illiquid investments at the time of purchase.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund's investment 
objective is to seek long-term capital appreciation. The Fund will 
invest primarily in exchange-traded equity securities of U.S. companies 
that have been evaluated based on certain environmental, social, and 
governance (``ESG'') criteria, as determined by the Sub-Adviser. The 
Fund will normally invest in exchange-traded equity securities of 
small- and mid-capitalization companies.
Investment Restrictions
    The Shares of the Fund will conform to the initial and continued 
listing criteria under Rule 8.601-E. The Fund's holdings will be 
limited to those described herein and consistent with permissible 
holdings as described in the Application and Exemptive Order and all 
requirements in the Application and Exemptive Order.\16\
---------------------------------------------------------------------------

    \16\ Id.
---------------------------------------------------------------------------

    The Fund's investments, including U.S. exchange traded futures, 
will be consistent with its investment objective and will not be used 
to enhance leverage (although certain U.S. exchange traded futures and 
other investments may result in leverage). That is, the Fund's 
investments will not be used to seek performance that is the multiple 
or inverse multiple (e.g., 2X or -3X) of the Fund's primary broad-based 
securities benchmark index (as defined in Form N-1A).\17\
---------------------------------------------------------------------------

    \17\ The Fund's broad-based securities benchmark index will be 
identified in a future amendment to its Registration Statement 
following the Fund's first full calendar year of performance.
---------------------------------------------------------------------------

Creations and Redemptions of Shares
    According to the Registration Statement, the Trust will issue and 
sell Shares of the Fund only in specified minimum size ``Creation 
Units'' through the Distributor on a continuous basis at their NAV next 
determined after receipt of an order in proper form on any Business 
Day. The NAV of the Fund's Shares will be calculated each Business Day 
as of the close of regular trading on the Exchange, ordinarily 4:00 
p.m. E.T. A Creation Unit will generally consist of at least 5,000 
Shares.
    According to the Registration Statement, Shares of the Fund will be 
purchased and redeemed in Creation Units. Creation Units are typically 
purchased and redeemed in-kind, but they may also be purchased and 
redeemed, in whole or in part, for cash in the Adviser's discretion. 
Accordingly, purchasers will generally be required to purchase Creation 
Units by making an in-kind deposit of a designated portfolio of 
securities (the ``Deposit Securities''). If there is a difference 
between the NAV attributable to a Creation Unit and the aggregate 
market value of the Creation Basket exchanged for the Creation Unit, 
the party conveying instruments with the lower value will also pay to 
the other an amount in cash equal to that difference (the ``Cash 
Component''). Together, the Deposit Securities and the Cash Component 
will constitute the ``Fund Deposit.''
    Redemption of Creation Units would work much like the process to 
purchase Creation Units, but in reverse. Shareholders redeeming their 
Shares will generally receive an in-kind transfer of specified 
instruments (``Redemption Instruments'').
    The names and quantities of the instruments that constitute the 
Deposit Securities and Redemption Instruments for the Fund 
(collectively, the ``Creation Basket'') will be the same as the Fund's 
Proxy Portfolio, except to the extent purchases and redemptions are 
made entirely or in part on a cash basis.
    Creation Units of the Fund may be purchased and/or redeemed 
entirely for cash. When full or partial cash purchases or redemptions 
of Creation Units are available or specified for the Fund, they will be 
effected in essentially the same manner as in-kind purchases or 
redemptions thereof. The Fund may determine, upon receiving a purchase 
or redemption order from an authorized participant (``Authorized 
Participant''), to have the purchase or redemption, as applicable, be 
made entirely or in part in cash.

[[Page 56993]]

    Each Business Day, prior to the opening of trading on the Exchange, 
the Fund will publish the Creation Basket for that day through the 
National Securities Clearing Corporation or another method of public 
dissemination. The published Creation Basket will apply until a new 
Creation Basket is announced on the following Business Day, and there 
will be no intra-day changes to the Creation Basket except to correct 
errors in the published Creation Basket.
    All orders to purchase or redeem Creation Units must be placed by 
or through an Authorized Participant that has entered into an 
Authorized Participant Agreement with the Fund's Distributor. Orders 
must be transmitted by an Authorized Participant pursuant to procedures 
set forth in the Participant Agreement. The date on which an order to 
purchase or redeem Creation Units is received and accepted is referred 
to as the ``Transmittal Date.'' All Creation Unit orders must be 
received no later than the Order Cut-Off Time in order to receive the 
NAV determined on the Transmittal Date. When the Exchange closes 
earlier than normal, the Fund may require orders for Creation Units to 
be placed earlier in the Business Day.
Availability of Information
    The Fund's website (www.schwabassetmanagement.com), which will be 
publicly available prior to the public offering of Shares, will include 
a form of the prospectus for the Fund that may be downloaded. The 
Fund's website will include on a daily basis, per Share for the Fund, 
the prior Business Day's NAV and the ``Closing Price'' or ``Bid/Ask 
Price,'' \18\ and a calculation of the premium/discount of the Closing 
Price or Bid/Ask Price against such NAV.\19\ The Adviser has 
represented that the Fund's website will also provide: (1) Any other 
information regarding premiums/discounts as may be required for other 
ETFs under Rule 6c-11 under the 1940 Act, as amended, and (2) any 
information regarding the bid/ask spread for the Fund as may be 
required for other ETFs under Rule 6c-11 under the 1940 Act, as 
amended. The Fund's website also will disclose the information required 
under Rule 8.601-E(c)(3).\20\ The website and information will be 
publicly available at no charge.
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    \18\ The records relating to Bid/Ask Prices will be retained by 
the Fund or its service providers. The ``Bid/Ask Price'' is the 
midpoint of the highest bid and lowest offer based upon the National 
Best Bid and Offer as of the time of calculation of the Fund's NAV. 
The ``National Best Bid and Offer'' is the current national best bid 
and national best offer as disseminated by the Consolidated 
Quotation System or UTP Plan Securities Information Processor. The 
``Closing Price'' of Shares is the official closing price of the 
Shares on the Exchange.
    \19\ The ``premium/discount'' refers to the premium or discount 
to the NAV at the end of a trading day and will be calculated based 
on the last Bid/Ask Price or the Closing Price on a given trading 
day.
    \20\ See note 4, supra. Rule 8.601-E (c)(3) provides that the 
website for each series of Active Proxy Portfolio Shares shall 
disclose the information regarding the Proxy Portfolio as provided 
in the exemptive relief pursuant to the 1940 Act applicable to such 
series, including 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.
---------------------------------------------------------------------------

    The identity and quantity of investments in the Proxy Portfolio 
will be publicly available on the Fund's website before the 
commencement of trading in Shares on each Business Day. The website 
will also include information relating to the Proxy Overlap and 
Tracking Error, as discussed above.
    Typical mutual fund-style annual, semi-annual and quarterly 
disclosures contained in the Fund's Commission filings will be provided 
on the Fund's website on a current basis.\21\ Thus, the Fund will 
publish the portfolio contents of its Actual Portfolio on a periodic 
basis, and no less than 60 days after the end of every fiscal quarter.
---------------------------------------------------------------------------

    \21\ See note 7, supra.
---------------------------------------------------------------------------

    Investors can also obtain the Fund's SAI, Shareholder Reports, Form 
N-CSR, N-PORT, and Form N-CEN. The prospectus, SAI, and Shareholder 
Reports are available free upon request by contacting the Fund or each 
document can be downloaded from the Fund's website, and those documents 
and the Form N-CSR, N-PORT, and Form N-CEN may be viewed on-screen or 
downloaded from the Commission's website. The Exchange also notes that, 
pursuant to the Application, the Fund must comply with Regulation Fair 
Disclosure, which prohibits selective disclosure of any material non-
public information.
    Information regarding the market price of Shares and trading volume 
in Shares, will be continually available on a real-time basis 
throughout the day on brokers' computer screens and other electronic 
services. The previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers.
    Quotation and last sale information for the Shares and U.S. 
exchange-traded instruments (excluding futures contracts) will be 
available via the Consolidated Tape Association (``CTA'') high-speed 
line, from the exchanges on which such securities trade, or through 
major market data vendors or subscription services. Quotation and last 
sale information for futures contracts will be available from the 
exchanges on which they trade. Intraday price information for all 
exchange-traded instruments, which include all eligible instruments 
except cash and cash equivalents, will be available from the exchanges 
on which they trade, or through major market data vendors or 
subscription services. Intraday price information for cash equivalents 
is available through major market data vendors, subscription services, 
and/or pricing services.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund.\22\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Rule 
7.12-E have been reached. Trading also may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. Trading in the Shares will be 
subject to NYSE Arca Rule 8.601-E(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund will be halted.
---------------------------------------------------------------------------

    \22\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

    Specifically, Rule 8.601-E(d)(2)(D) provides that the Exchange may 
consider all relevant factors in exercising its discretion to halt 
trading in a series of Active Proxy Portfolio Shares. Trading may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the series of Active Proxy Portfolio 
Shares inadvisable. These may include: (a) The extent to which trading 
is not occurring in the securities and/or the financial instruments 
composing the Proxy Portfolio and/or Actual Portfolio; or (b) whether 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. If the Exchange 
becomes aware that the NAV, Proxy Portfolio, or Actual Portfolio with 
respect to a series of Active Proxy Portfolio Shares is not 
disseminated to all market participants at the same time, the Exchange 
shall halt trading in such series until such time as the NAV, Proxy 
Portfolio, or Actual Portfolio is available to all market participants 
at the same time.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of

[[Page 56994]]

equity securities. Shares will trade on the NYSE Arca Marketplace in 
all trading sessions in accordance with NYSE Arca Rule 7.34-E(a). As 
provided in NYSE Arca Rule 7.6-E, the minimum price variation (``MPV'') 
for quoting and entry of orders in equity securities traded on the NYSE 
Arca Marketplace is $0.01, with the exception of securities that are 
priced less than $1.00 for which the MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Rule 8.601-E. The Exchange has appropriate 
rules to facilitate trading in the Shares during all trading sessions.
    A minimum of 100,000 Shares for the Fund will be outstanding at the 
commencement of trading on the Exchange. In addition, pursuant to Rule 
8.601-E(d)(1)(B), the Exchange, prior to commencement of trading in the 
Shares, will obtain a representation from the Trust that the NAV per 
Share of the Fund will be calculated daily and that the NAV, Proxy 
Portfolio, and the Actual Portfolio for the Fund will be made available 
to all market participants at the same time.
    With respect to Active Proxy Portfolio Shares, all of the Exchange 
member obligations relating to product description and prospectus 
delivery requirements will continue to apply in accordance with 
Exchange rules and federal securities laws, and the Exchange and the 
Financial Industry Regulatory Authority, Inc. (``FINRA'') will continue 
to monitor Exchange members for compliance with such requirements.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Exchange, as 
well as cross-market surveillances administered by FINRA on behalf of 
the Exchange, which are designed to detect violations of Exchange rules 
and applicable federal securities laws.\23\ The Exchange represents 
that these procedures are adequate to properly monitor Exchange trading 
of the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and federal securities laws applicable to 
trading on the Exchange.
---------------------------------------------------------------------------

    \23\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
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    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and underlying 
exchange-traded instruments with other markets and other entities that 
are members of the ISG, and the Exchange or FINRA, on behalf of the 
Exchange, or both, may obtain trading information regarding trading 
such securities and underlying exchange-traded instruments from such 
markets and other entities. In addition, the Exchange may obtain 
information regarding trading in such securities and underlying 
exchange-traded instruments from markets and other entities that are 
members of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.\24\
---------------------------------------------------------------------------

    \24\ For a list of the current members of ISG, see 
www.isgportal.org.
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    The Adviser will make available daily to FINRA and the Exchange the 
Actual Portfolio of the Fund, upon request, in order to facilitate the 
performance of the surveillances referred to above.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    Commentary .03 to NYSE Arca Rule 8.601-E provides that the Exchange 
will implement and maintain written surveillance procedures for Active 
Proxy Portfolio Shares. As part of these surveillance procedures, the 
Investment Company's investment adviser will, upon request by the 
Exchange or FINRA, on behalf of the Exchange, make available to the 
Exchange or FINRA the daily Actual Portfolio holdings of each series of 
Active Proxy Portfolio Shares. The Exchange believes that the ability 
to access the information on an as needed basis will provide it with 
sufficient information to perform the necessary regulatory functions 
associated with listing and trading series of Active Proxy Portfolio 
Shares on the Exchange, including the ability to monitor compliance 
with the initial and continued listing requirements as well as the 
ability to surveil for manipulation of Active Proxy Portfolio Shares.
    The Exchange will utilize its existing procedures to monitor issuer 
compliance with the requirements of Rule 8.601-E. For example, the 
Exchange will continue to use intraday alerts that will notify Exchange 
personnel of trading activity throughout the day that may indicate that 
unusual conditions or circumstances are present that could be 
detrimental to the maintenance of a fair and orderly market. The 
Exchange will require from the issuer of a series of Active Proxy 
Portfolio Shares, upon initial listing and periodically thereafter, a 
representation that it is in compliance with Rule 8.601-E. The Exchange 
notes that Commentary .01 to Rule 8.601-E requires an issuer of Active 
Proxy Portfolio Shares to notify the Exchange of any failure to comply 
with the continued listing requirements of Rule 8.601-E. In addition, 
the Exchange will require issuers to represent that they will notify 
the Exchange of any failure to comply with the terms of applicable 
exemptive and no-action relief. As part of its surveillance procedures, 
the Exchange will rely on the foregoing procedures to become aware of 
any non-compliance with the requirements of Rule 8.601-E.
    With respect to the Fund, all statements and representations made 
in this filing regarding (a) the description of the portfolio or 
reference asset, (b) limitations on portfolio holdings or reference 
assets, or (c) the applicability of Exchange listing rules specified in 
this rule filing shall constitute continued listing requirements for 
listing the Shares on the Exchange. The Exchange will obtain a 
representation from the Trust, prior to commencement of trading in the 
Shares of the Fund, that it will advise the Exchange of any failure by 
the Fund 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 the Fund is not in compliance with the applicable 
listing requirements, the Exchange will commence delisting procedures 
under NYSE Arca Rule 5.5-E(m).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\25\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\26\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market

[[Page 56995]]

system, and, in general, to protect investors and the public 
interest.\27\
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f(b).
    \26\ 15 U.S.C. 78f(b)(5).
    \27\ The Exchange represents that, for initial and continued 
listing, the Fund will be in compliance with Rule 10A-3 under the 
Act, as provided by NYSE Arca Rule 5.3-E.
---------------------------------------------------------------------------

    With respect to the proposed listing and trading of Shares of the 
Fund, the Exchange believes that the proposed rule change is designed 
to prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Rule 8.601-E. One 
hundred percent of the value of the Fund's Actual Portfolio (except for 
cash and cash equivalents) at the time of purchase will be listed on 
U.S. or foreign securities exchanges (or, in the limited case of 
futures contracts, U.S. futures exchanges). The listing and trading of 
such U.S. securities is subject to rules of the exchanges on which they 
are listed and traded, as approved by the Commission.
    The Fund's holdings will conform to the permissible investments as 
set forth in the Application and Exemptive Order, and the holdings will 
be consistent with all requirements in the Application and Exemptive 
Order.\28\
---------------------------------------------------------------------------

    \28\ See note 14 [sic], supra.
---------------------------------------------------------------------------

    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and underlying 
exchange-traded instruments with other markets and other entities that 
are members of the ISG, and the Exchange or FINRA, on behalf of the 
Exchange, or both, may obtain trading information regarding trading in 
the Shares and underlying exchange-traded instruments from such markets 
and other entities. In addition, the Exchange may obtain information 
regarding trading in the Shares and underlying exchange-traded 
instruments from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement. Any foreign common stocks held by the Fund will be 
traded on an exchange that is a member of the ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement.
    The daily dissemination of the identity and quantity of Proxy 
Portfolio component investments, together with the right of Authorized 
Participants to create and redeem each day at the NAV, will be 
sufficient for market participants to value and trade Shares in a 
manner that will not lead to significant deviations between the Shares' 
Bid/Ask Price and NAV.
    The Fund's investments, including U.S. exchange-traded futures, 
will be consistent with its investment objective and will not be used 
to enhance leverage (although certain U.S. exchange-traded futures and 
other investments may result in leverage). That is, the Fund's 
investments will not be used to seek performance that is the multiple 
or inverse multiple (e.g., 2X or -3X) of the Fund's primary broad-based 
securities benchmark index (as defined in Form N-1A).
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the Trust that the 
NAV per Share of the Fund will be calculated daily and that the NAV, 
Proxy Portfolio, and Actual Portfolio for the Fund will be made 
available to all market participants at the same time. Investors can 
obtain the Fund's SAI, shareholder reports, and its Form N-CSR, Form N-
PORT, and Form N-CEN. The Fund's SAI and shareholder reports will be 
available free upon request from the Fund, and those documents and the 
Form N-CSR, Form N-PORT, and Form N-CEN may be viewed on-screen or 
downloaded from the Commission's website.
    Commentary .03 to NYSE Arca Rule 8.601-E provides that the Exchange 
will implement and maintain written surveillance procedures for Active 
Proxy Portfolio Shares. As part of these surveillance procedures, the 
Investment Company's investment adviser will, upon request by the 
Exchange or FINRA, on behalf of the Exchange, make available to the 
Exchange or FINRA the daily portfolio holdings of each series of Active 
Proxy Portfolio Shares. The Exchange believes that the ability to 
access the information on an as needed basis will provide it with 
sufficient information to perform the necessary regulatory functions 
associated with listing and trading series of Active Proxy Portfolio 
Shares on the Exchange, including the ability to monitor compliance 
with the initial and continued listing requirements as well as the 
ability to surveil for manipulation of Active Proxy Portfolio Shares. 
With respect to the Fund, the Adviser will make available daily to 
FINRA and the Exchange the portfolio holdings of the Fund upon request 
in order to facilitate the performance of the surveillances referred to 
above.
    The Exchange will utilize its existing procedures to monitor 
compliance with the requirements of Rule 8.601-E. For example, the 
Exchange will continue to use intraday alerts that will notify Exchange 
personnel of trading activity throughout the day that may indicate that 
unusual conditions or circumstances are present that could be 
detrimental to the maintenance of a fair and orderly market. The 
Exchange will require from the Trust, upon initial listing and 
periodically thereafter, a representation that the Fund is in 
compliance with Rule 8.601-E. The Exchange notes that Commentary .01 to 
Rule 8.601-E requires the issuer of the Shares to notify the Exchange 
of any failure to comply with the continued listing requirements of 
Rule 8.601-E. In addition, the Exchange will require the issuer to 
represent that it will notify the Exchange of any failure to comply 
with the terms of applicable exemptive and no-action relief. The 
Exchange will rely on the foregoing procedures to become aware of any 
non-compliance with the requirements of Rule 8.601-E.
    In addition, with respect to the Fund, a large amount of 
information will be publicly available regarding the Fund and the 
Shares, thereby promoting market transparency.
    Quotation and last sale information for the Shares and U.S. 
exchange-traded instruments (excluding futures contracts) will be 
available via the CTA high-speed line, from the exchanges on which such 
securities trade, or through major market data vendors or subscription 
services. Intraday price information for all exchange-traded 
instruments, which include all eligible instruments except cash and 
cash equivalents, will be available from the exchanges on which they 
trade, or through major market data vendors or subscription services. 
Quotation and last sale information for futures contracts will be 
available from the exchanges on which they trade. Intraday price 
information for cash equivalents is available through major market data 
vendors, subscription services, and/or pricing services.
    The website for the Fund will include a form of the prospectus that 
may be downloaded, and additional data relating to NAV and other 
applicable quantitative information, updated on a daily basis. Trading 
in Shares of the Fund will be halted if the circuit breaker parameters 
in NYSE Arca Rule 7.12-E have been reached or because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. Trading in the Shares will be 
subject to NYSE Arca Rule 8.601-E(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund will be halted. In 
addition, as noted above, investors will have ready access to the Proxy 
Portfolio and quotation and last sale information for the Shares. The 
identity and quantity of

[[Page 56996]]

investments in the Proxy Portfolio will be publicly available on the 
Fund's website before the commencement of trading in Shares on each 
Business Day. The Shares will conform to the initial and continued 
listing criteria under Rule 8.601-E.\29\
---------------------------------------------------------------------------

    \29\ See note 4, supra.
---------------------------------------------------------------------------

    The Fund's holdings will conform to the permissible investments as 
set forth in the Application and Exemptive Order, and the holdings will 
be consistent with all requirements in the Application and Exemptive 
Order.\30\ Any foreign common stocks held by the Fund will be traded on 
an exchange that is a member of the ISG or with which the Exchange has 
in place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    \30\ See note 14 [sic], supra.
---------------------------------------------------------------------------

    The components of the Fund's Actual Portfolio will (a) be listed on 
an exchange and the primary trading session of such exchange will trade 
synchronously with the Exchange's Core Trading Session, as defined in 
Rule 7.34-E(a); (b) with respect to exchange-traded futures, be listed 
on a U.S. futures exchange; or (c) consist of cash and cash 
equivalents.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. The Exchange will obtain a 
representation from the Adviser, prior to commencement of trading in 
the Shares of the Fund, that it will advise the Exchange of any failure 
by the Fund 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 the Fund is not in compliance with the applicable 
listing requirements, the Exchange will commence delisting procedures 
under NYSE Arca Rule 5.5-E(m).
    As noted above, with respect to the Fund, the Exchange has in place 
surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, as noted above, with 
respect to the Fund, investors will have ready access to information 
regarding the Proxy Portfolio and quotation and last sale information 
for the Shares.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes the 
proposed rule change would permit listing and trading of another type 
of actively-managed ETF that has characteristics different from 
existing actively-managed and index ETFs and would introduce additional 
competition among various ETF products to the benefit of investors.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \31\ and Rule 19b-
4(f)(6) thereunder.\32\
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(3)(A).
    \32\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2021-84 on the subject line.

Paper Comments

     Send paper comments in triplicate to: Secretary, 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549-1090.

All submissions should refer to File Number SR-NYSEArca-2021-84. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2021-84 and should be submitted 
on or before November 3, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-22170 Filed 10-12-21; 8:45 am]
BILLING CODE 8011-01-P

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