Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To List and Trade Shares of the FM Compounders Equity ETF Under Rule 8.900-E (Managed Portfolio Shares), 88317-88326 [2024-25837]
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Federal Register / Vol. 89, No. 216 / Thursday, November 7, 2024 / Notices
that subscribe to SQF and SQF Purge
Ports to quote on the Exchange. Market
Makers are the only market participants
that are assessed SQF Port and SQF
Purge Port fees because they are the
only market participants that are
permitted to quote on the Exchange.17
These liquidity providers are critical
market participants in that they are the
only market participants that provide
liquidity to the Exchange on a
continuous basis. SQF Ports and SQF
Purge Ports are only utilized in a Market
Maker’s assigned options series.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed pricing changes will
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
Intra-Market Competition
The Exchange believes that the
proposed fees do not put any market
participants at a relative disadvantage
compared to other market participants.
As noted above, the Exchange would
apply the proposed 10% increase to the
SQF Port and SQF Purge Port fees to all
Market Makers uniformly. Market
Makers are the only market participants
that are assessed SQF Port and SQF
Purge Port fees because they are the
only market participants that are
permitted to quote on the Exchange.
These liquidity providers are critical
market participants in that they are the
only market participants that provide
liquidity to the Exchange on a
continuous basis. SQF Ports and SQF
Purge Ports are only utilized in a Market
Maker’s assigned options series.
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Intermarket Competition
The Exchange believes that the
proposed fees do not impose a burden
on intermarket competition or on other
SROs that is not necessary or
appropriate. In determining the
proposed fees, the Exchange utilized an
objective and stable metric with limited
volatility. Utilizing Data PPI over a
specified period of time is a reasonable
means of recouping the Exchange’s
investment in maintaining and
enhancing its port offerings such as the
SQF and SQF Purge Ports. The
Exchange believes utilizing Data PPI, a
tailored measure of inflation, to increase
the fees for the SQF Port and SQF Purge
Port, to recoup the Exchange’s
investment in maintaining and
enhancing such offerings would not
17 Unlike
other market participants, Market
Makers are subject to market making and quoting
obligations. See Options 2, Sections 4 and 5.
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18:15 Nov 06, 2024
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impose a burden on intermarket
competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.18
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: (i) necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
ISE–2024–51 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–ISE–2024–51. 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
18 15
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
Frm 00088
Fmt 4703
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88317
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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–ISE–2024–51 and should be
submitted on or before November 28,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–25835 Filed 11–6–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101503; File No. SR–
NYSEARCA–2024–88]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To List and Trade Shares
of the FM Compounders Equity ETF
Under Rule 8.900–E (Managed Portfolio
Shares)
November 1, 2024.
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 October
24, 2024, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 89, No. 216 / Thursday, November 7, 2024 / Notices
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 Rule
8.900–E (Managed Portfolio Shares): FM
Compounders Equity 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
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
NYSE Arca Rule 8.900–E permits the
listing and trading, or trading pursuant
to unlisted trading privileges, of
Managed Portfolio Shares, which are
securities issued by an actively managed
open-end investment management
company.4 Rule 8.900–E(b)(1) requires
the Exchange to file separate proposals
under Section 19(b) of the Act before
listing and trading any series of
Managed Portfolio Shares on the
4 Rule 8.900–E(c)(1) provides that the term
‘‘Managed Portfolio Share’’ means a security that (a)
represents an interest in an investment company
registered under the Investment Company Act of
1940 (‘‘Investment Company’’) organized as an
open-end management investment company that
invests in a portfolio of securities selected by the
Investment Company’s investment adviser
consistent with the Investment Company’s
investment objectives and policies; (b) is issued in
a Creation Unit, or multiples thereof, in return for
a designated portfolio of instruments (and/or an
amount of cash) with a value equal to the next
determined net asset value and delivered to the
Authorized Participant (as defined in the
Investment Company’s Form N–1A filed with the
Commission) through a Confidential Account; (c)
when aggregated into a Redemption Unit, or
multiples thereof, may be redeemed for a
designated portfolio of instruments (and/or an
amount of cash) with a value equal to the next
determined net asset value delivered to the
Confidential Account for the benefit of the
Authorized Participant; and (d) the portfolio
holdings for which are disclosed within at least 60
days following the end of every fiscal quarter.
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Exchange. Therefore, the Exchange is
submitting this proposal in order to list
and trade Managed Portfolio Shares of
the FM Compounders Equity ETF (the
‘‘Fund’’) under Rule 8.900–E.
The Commission has previously
approved 5 and noticed for immediate
effectiveness 6 listing and trading on the
Exchange of Managed Portfolio Shares
under NYSE Arca Rule 8.900–E.
Description of the Fund and the Trust
The shares of the Fund (the ‘‘Shares’’)
will be issued by Northern Lights Fund
Trust IV (the ‘‘Trust’’), a statutory trust
organized under the laws of the state of
Delaware and registered with the
Commission as an open-end
management investment company.7 The
investment adviser to the Fund will be
First Manhattan Co. LLC (the
‘‘Adviser’’). The sub-adviser to the Fund
will be Vident Advisory, LLC dba
Vident Asset Management (the ‘‘Sub5 See Securities Exchange Act Release Nos. 89663
(August 25, 2020), 85 FR 53868 (August 31, 2020)
(SR–NYSEArca–2020–48) (Order Approving a
Proposed Rule Change, as Modified by Amendment
No. 1, To List and Trade Shares of Gabelli ETFs
Under Rule 8.900–E, Managed Portfolio Shares);
90528 (November 30, 2020), 85 FR 78389
(December 4, 2020) (SR–NYSEArca–2020–80)
(Order Approving a Proposed Rule Change, as
Modified by Amendment No. 2, To List and Trade
Shares of Alger Mid Cap 40 ETF and Alger 25 ETF
Under Rule 8.900–E); and 90683 (December 16,
2020), 85 FR 83665 (December 22, 2020) (SR–
NYSEArca–2020–94) (Order Approving a Proposed
Rule Change, as Modified by Amendments No. 1
and No. 2, To List and Trade Shares of the
AdvisorShares Q Portfolio Blended Allocation ETF
and AdvisorShares Q Dynamic Growth ETF Under
NYSE Arca Rule 8.900–E).
6 See Securities Exchange Act Release Nos. 92349
(July 19, 2021), 86 FR 39084 (July 23, 2021) (SR–
NYSEArca–2021–54) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
to List and Trade Shares of the Cambiar Large Cap
ETF, Cambiar Small Cap ETF and Cambiar SMID
ETF); 94569 (March 31, 2022), 87 FR 19990 (April
6, 2022) (SR–NYSEARCA–2022–16) (Notice of
Filing and Immediate Effectiveness of Proposed
Rule Change to List and Trade Shares of the
DoubleLine Shiller CAPE U.S. Equities ETF under
Rule 8.900–E (Managed Portfolio Shares)); and
97029 (March 2, 2023), 88 FR 14419 (March 8,
2023) (SR–NYSEARCA–2023–16) (Notice of Filing
and Immediate Effectiveness of Proposed Rule
Change To List and Trade Shares of Alger
Weatherbie Enduring Growth ETF).
7 The Trust is registered under the Investment
Company Act of 1940 (the ‘‘1940 Act’’). On August
9, 2024, the Trust filed a registration statement on
Form N–1A under the Securities Act of 1933 (the
‘‘1933 Act’’) and the 1940 Act for the Fund (File
No.811–23066) (the ‘‘Registration Statement’’). The
Commission issued an order granting exemptive
relief to the Trust (‘‘Exemptive Order’’) under the
1940 Act on March 22, 2022 (Investment Company
Act Release No. 34537). The Exemptive Order was
granted in response to the Trust’s application for
exemptive relief (the ‘‘Exemptive Application’’)
(File No. 812–15282). The description of the
operation of the Trust and the Fund herein is based,
in part, on the Registration Statement. The
Exchange will not commence trading in Shares of
the Fund until this proposed rule change is
operative.
PO 00000
Frm 00089
Fmt 4703
Sfmt 4703
Adviser’’). Northern Lights Distributors,
LLC (the ‘‘Distributor’’) will serve as the
distributor for the Fund’s Shares. All
statements and representations made in
this filing regarding (a) the description
of the portfolio or reference assets, (b)
limitations on portfolio holdings or
reference assets, or (c) the applicability
of Exchange rules shall constitute
continued listing requirements for
listing the Shares on the Exchange, as
provided under Rule 8.900–E(b)(1).
Rule 8.900–E(b)(4) provides that, if
the investment adviser to the
Investment Company issuing Managed
Portfolio Shares is registered as a
broker-dealer or is affiliated with a
broker-dealer, such investment adviser
will erect and maintain a ‘‘fire wall’’
between the investment adviser and
personnel of the broker-dealer or brokerdealer affiliate, as applicable, with
respect to access to information
concerning the composition of and/or
changes to such Investment Company
portfolio and/or the Creation Basket.8
Any person related to the investment
adviser or Investment Company who
makes decisions pertaining to the
Investment Company’s portfolio
composition or has access to
information regarding the Investment
Company’s portfolio composition or
changes thereto or the Creation Basket
must be subject to procedures designed
to prevent the use and dissemination of
material non-public information
regarding the applicable Investment
Company portfolio or changes thereto or
the Creation Basket.
Rule 8.900–E(b)(4) is similar to
Commentary .03(a)(i) and (iii) to Rule
5.2–E(j)(3); however, Commentary .03(a)
in connection with the establishment of
a ‘‘fire wall’’ 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.9 Rule 8.900–E(b)(4) is also
8 Rule 8.900–E(c)(5) provides that the term
‘‘Creation Basket’’ means, on any given business
day, the names and quantities of the specified
instruments (and/or an amount of cash) that are
required for an AP Representative to deposit inkind on behalf of an Authorized Participant in
exchange for a Creation Unit and the names and
quantities of the specified instruments (and/or an
amount of cash) that will be transferred in-kind to
an AP Representative on behalf of an Authorized
Participant in exchange for a Redemption Unit,
which will be identical and will be transmitted to
each AP Representative before the commencement
of trading.
9 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 its 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
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Federal Register / Vol. 89, No. 216 / Thursday, November 7, 2024 / Notices
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similar to Commentary .06 to Rule
8.600–E related to Managed Fund
Shares, except that Rule 8.900–E(b)(4)
relates to establishment and
maintenance of a ‘‘fire wall’’ between
the investment adviser and personnel of
the broker-dealer or broker-dealer
affiliate, as applicable, with respect to
an Investment Company’s portfolio and
Creation Basket, and not just to the
underlying portfolio, as is the case with
Managed Fund Shares. Neither the
Adviser nor the Sub-Adviser is
registered as a broker-dealer. The SubAdviser is not affiliated with a brokerdealer. The Adviser, however, is
affiliated with a broker-dealer. The
Adviser has implemented and will
maintain a ‘‘fire wall’’ with respect to
such broker-dealer affiliate regarding
access to information concerning the
composition of and/or changes to the
Fund’s portfolio and/or Creation Basket.
In the event (a) the Adviser or the
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 a
registered broker-dealer, or becomes
affiliated with a broker-dealer, it will
implement and maintain a fire wall with
respect to personnel of the broker-dealer
or broker-dealer affiliate regarding
access to information concerning the
composition and/or changes to the
portfolio and/or Creation Basket. Any
person related to the Adviser, the SubAdviser or the Trust who makes
decisions pertaining to the Fund’s
portfolio composition or that has access
to information regarding the Fund’s
portfolio composition or that has access
to information regarding the Fund’s
portfolio or changes thereto or the
Creation Basket will be subject to
procedures designed to prevent the use
and dissemination of material nonpublic information regarding such
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. The Fund will also
be required to comply with Exchange rules relating
to disclosure, including Rule 5.3–E(i).
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portfolio or changes thereto and the
Creation Basket.
Further, Rule 8.900–E(b)(5) requires
that any person or entity, including an
AP Representative (as defined below),
custodian, Reporting Authority,
distributor, or administrator, who has
access to non-public information
regarding the Investment Company’s
portfolio composition or changes thereto
or the Creation Basket, must be subject
to procedures reasonably designed to
prevent the use and dissemination of
material non-public information
regarding the applicable Investment
Company portfolio or changes thereto or
the Creation Basket. Moreover, if any
such person or entity is registered as a
broker-dealer or affiliated with a brokerdealer, such person or entity will erect
and maintain a ‘‘fire wall’’ 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
portfolio or Creation Basket.
Description of the Fund 10
The Fund’s holdings will conform to
the permissible investments as set forth
in the Exemptive Application and
Exemptive Order, and the holdings will
be consistent with all requirements in
the Exemptive Application and
Exemptive Order.11
According to the Registration
Statement, the Fund’s primary objective
is to seek long-term capital appreciation.
The Fund will seek to invest in 25–35
U.S. exchange-traded common stocks of
various market capitalization. From
time to time, the Fund may hold a
greater number of stocks.
Under normal circumstances, the
Fund will invest at least 80% of its net
10 The Exchange represents that, for initial and
continued listing, the Fund will be in compliance
with Rule 10A–3 under the Act. See 17 CFR
240.10A–3.
11 Pursuant to the Exemptive Order, the only
permissible investments for the Fund are the
following that trade on a U.S. exchange
contemporaneously with Shares of the Fund:
exchange-traded funds (‘‘ETFs’’), exchange-traded
notes, exchange-listed common stocks, exchangetraded preferred stocks, exchange-traded American
Depositary Receipts, exchange-traded real estate
investment trusts, exchange-traded commodity
pools, exchange-traded metal trusts, exchangetraded currency trusts, and exchange-traded futures
for which the reference asset is one in which the
Fund may invest directly, in the case of an index
future traded on a U.S. exchange, is based on an
index, the components of which are a type of asset
in which the Fund could invest directly, as well as
cash and cash equivalents (which are short-term
U.S. Treasury securities, government money market
funds, and repurchase agreements). All of the
equity instruments or futures held by the Fund will
be traded on an exchange that is a member of the
Intermarket Surveillance Group (‘‘ISG’’) or affiliated
with a member of ISG or with which the Exchange
has in place a comprehensive surveillance sharing
agreement.
PO 00000
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Fmt 4703
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88319
assets in equity securities. According to
the Registration Statement, the Adviser
and/or the Sub-Adviser focuses on
companies that it expects to generate
free cash flow and that it believes to
possess durable competitive advantages,
earn higher than average returns on
capital, and have opportunities to
reinvest excess cash flows at aboveaverage rates of return. The Adviser
and/or the Sub-Adviser seeks
investments that may include: (1)
compounders (highly resilient
businesses that reliably generate and
compound free cash flow), (2)
undervalued businesses (companies,
often out of favor, that the Adviser and/
or the Sub-Adviser believes are
undervalued relative to their earnings
power, cash flow, and/or tangible
assets), and/or (3) special situations
(companies undergoing restructuring,
refinancing, management changes, and/
or comparable corporate actions that
cause temporary disconnects between
the share price and what the Adviser
and/or the Sub-Adviser believes to be
the company’s intrinsic value).
According to the Registration
Statement, in effecting its investment
strategy, once an investment
opportunity is identified, the Adviser
and/or the Sub-Adviser will seek to
purchase the shares at valuations that
are favorable relative to the quality of
the company’s business, its earnings,
and the Adviser’s and/or the SubAdviser’s expectation for long-term
growth in value-per-share. Generally,
the Fund will focus on making longterm investments. However, the Adviser
and/or the Sub-Adviser may sell a Fund
holding when: (1) the holding no longer
meets the Adviser’s and/or the SubAdviser’s investment criteria or the
requirements of the Exemptive Order or
its Exchange listing requirements; (2)
the holding’s long-term earnings and
reinvestment prospects deteriorate; (3)
the Adviser and/or the Sub-Adviser
loses confidence in the leadership and
governance of the holding; (4) a new
holding is judged to be comparatively
more attractive than a current position;
and/or (5) the valuation of a holding
appears excessively higher than the
Adviser’s and/or the Sub-Adviser’s
estimates of long-term value.
According to the Registration
Statement, the Fund is a non-diversified
investment company, which means that
a meaningful portion of its assets may
be invested in the securities of a smaller
number of companies and/or a more
limited number of sectors.
The Fund is a non-transparent,
actively managed ETF that does not seek
to replicate the performance of a
specified index.
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Federal Register / Vol. 89, No. 216 / Thursday, November 7, 2024 / Notices
According to the Registration
Statement, the Fund will invest in cash
(and cash equivalents) when the Fund is
unable to find enough attractive longterm investments to meet its investment
objective.
Investment Restrictions
The Fund’s holdings will be
consistent with all requirements
described in the Exemptive Application
and Exemptive Order.12
The Fund’s investments, including
derivatives, will be consistent with its
investment objective and will not be
used to enhance leverage (although
certain derivatives 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 any securities benchmark index.
As noted above, the Fund will not seek
to replicate the performance of a
specified index.
Creations and Redemptions of Shares
Creations and redemptions of Shares
will take place as described in Rule
8.900–E. Specifically, in connection
with the creation and redemption of
Creation Units 13 the delivery or receipt
of any portfolio securities in-kind will
be required to be effected through a
separate confidential brokerage account
(a ‘‘Confidential Account’’).14 An
Authorized Participant (‘‘AP’’), as
defined in the applicable Form N–1A
filed with the Commission, will sign an
agreement with an AP Representative 15
12 See
note 11, supra.
8.900–E(c)(6) provides that the term
‘‘Creation Unit’’ means a specified minimum
number of Managed Portfolio Shares issued by an
Investment Company at the request of an
Authorized Participant in return for a designated
portfolio of instruments and/or cash. Rule 8.900–
E(c)(7) provides that the term ‘‘Redemption Unit’’
means a specified minimum number of Managed
Portfolio Shares that may be redeemed to an
Investment Company at the request of an
Authorized Participant in return for a portfolio of
instruments and/or cash. For purposes of this filing,
the terms ‘‘Creation Unit’’ means either a Creation
Unit as defined in Rules 8.900–E(c)(6) or a
Redemption Unit as defined in Rule 8.900–E(c)(7).
14 Rule 8.900–E(c)(4) provides that the term
‘‘Confidential Account’’ means an account owned
by an Authorized Participant and held with an AP
Representative on behalf of the Authorized
Participant. The account will be established and
governed by contractual agreement between the AP
Representative and the Authorized Participant
solely for the purposes of creation and redemption,
while keeping confidential the Creation Basket
constituents of each series of Managed Portfolio
Shares, including from the Authorized Participant.
The books and records of the Confidential Account
will be maintained by the AP Representative on
behalf of the Authorized Participant.
15 Rule 8.900–E(c)(3) provides that the term ‘‘AP
Representative’’ means an unaffiliated brokerdealer, with which an Authorized Participant has
signed an agreement to establish a Confidential
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13 Rule
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establishing the Confidential Account
for the benefit of the AP. AP
Representatives will be broker-dealers.
An AP must be a participant in the
Continuous Net Settlement System of
the National Securities Clearing
Corporation (‘‘NSCC’’) or a participant
in the Depository Trust Company
(‘‘DTC’’) and must have executed an
authorized participant agreement
(‘‘Participant Agreement’’) with the
Distributor with respect to the creation
and redemption of Creation Units and
formed a Confidential Account for its
benefit in accordance with the terms of
the Participant Agreement. For purposes
of creations or redemptions, all
transactions will be effected through the
respective AP’s Confidential Account,
for the benefit of the AP, without
disclosing the identity of such securities
to the AP.
Each business day, the Fund’s
custodian will transmit the composition
of the Fund’s Creation Basket (as
described below) to each AP
Representative. This information will
permit an AP that has established a
Confidential Account with an AP
Representative to transact in the
underlying securities of the Creation
Basket through their AP
Representatives, enabling them to
engage in in-kind creation or
redemption activity without knowing
the identity or weighting of those
securities. Fund Shares will be issued
and redeemed in Creation Units of 5,000
Shares. The size of a Creation Unit is
subject to change. The Fund will offer
and redeem Creation Units on a
continuous basis at the net asset value
(‘‘NAV’’) per Share next determined
after receipt of an order in proper form.
The Fund’s NAV per Share will be
determined as of the closing time of the
regular trading session on the Exchange
(ordinarily, 4:00 p.m. E.T.) on each day
that the Exchange is open.
In order to keep costs low and permit
the Fund to be as fully invested as
possible, Shares will be purchased and
redeemed in Creation Units and
principally in-kind for securities or in
cash for the value of such securities.
The Fund will issue Creation Units
principally in exchange for (i) the inkind deposit of a designated portfolio of
securities (the ‘‘Deposit Securities’’),
which for each Creation Unit will
constitute a substantial replication, or a
representation, of the securities
Account for the benefit of such Authorized
Participant, that will deliver or receive, on behalf
of the Authorized Participant, all consideration to
or from the Investment Company in a creation or
redemption. An AP Representative will not be
permitted to disclose the Creation Basket to any
person, including the Authorized Participants.
PO 00000
Frm 00091
Fmt 4703
Sfmt 4703
included in the Fund’s portfolio, and (ii)
if applicable, an amount of cash (the
‘‘Cash Component’’). Together, the
Deposit Securities and the Cash
Component, if applicable, constitute the
‘‘Fund Deposit.’’ The Deposit Securities
and the securities that will be delivered
in an in-kind transfer in a redemption
(the ‘‘Fund Securities’’) will be
identical. The Cash Component is an
amount equal to the difference between
the NAV of the Shares of the Fund (per
Creation Unit) and the market value of
the Deposit Securities. The Cash
Component serves the function of
compensating for any differences
between the NAV per Creation Unit and
the market value of the Deposit
Securities.
On each business day, prior to the
opening of business on the Exchange
(ordinarily, 9:30 a.m. E.T.), the
custodian will make available through
NSCC the list of the company names
and the required number of shares of
each Deposit Security, as applicable,
and Cash Component, as applicable, to
be included in the current Fund Deposit
(based on information at the end of the
previous business day) for the Fund.
The Deposit Securities, as applicable,
and Cash Component, as applicable,
announced are applicable to purchases
of Creation Units until the nextannounced composition of the Fund
Deposit. When full or partial cash
purchases of Creation Units are
available or specified for the Fund, they
will be effected in essentially the same
manner as in-kind purchases thereof.
On any given business day, the names
and quantities of the instruments that
constitute the Deposit Securities and the
names and quantities of the instruments
that constitute the Fund Securities will
be identical to and will correspond pro
rata to the positions in the Fund’s
portfolio (including cash positions), and
these instruments may be referred to, in
the case of either a purchase or a
redemption, as the ‘‘Creation Basket.’’
Placement of Purchase Orders
The Fund will issue Shares through
the Distributor on a continuous basis at
NAV. The Exchange represents that the
issuance of Shares will operate in a
manner substantially similar to that of
other ETFs. The Fund will issue Shares
only at the NAV per Share next
determined after an order in proper
form is received.
A creation transaction, which is
subject to acceptance by the Distributor,
generally begins when an AP enters into
an irrevocable creation order with the
Fund and delivers to the AP
Representative the cash necessary to
purchase the designated portfolio of
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securities that constitute the Creation
Basket in the Confidential Account. The
AP Representative then purchases and
delivers the designated portfolio of
securities to the Fund’s custodian, and
the Fund then instructs the custodian to
exchange such portfolio of securities for
a specified number of Shares in volumes
of Creation Units. The AP
Representative will seek to assemble the
shares of the Creation Basket in a
manner that will not reveal its
composition. The Distributor will
furnish acknowledgements to those
placing such orders that the orders have
been accepted, but the Distributor may
reject any order which is not submitted
in proper form, as described in the
Fund’s prospectus or Statement of
Additional Information (‘‘SAI’’).
The NAV of the Fund is expected to
be determined once each business day
as of the close of the regular trading
session on the Exchange (ordinarily,
4:00 p.m. E.T.). An AP must submit an
irrevocable purchase order by the time
set forth in the Participant Agreement
and/or applicable order form, on any
business day in order to receive that
business day’s NAV. On days when the
Exchange closes or is anticipated to
close earlier than normal, the Fund may
require purchase orders to be placed
earlier in the day. The date on which an
order to purchase (or redeem, as further
described below) Creation Units is
received and accepted is referred to as
the ‘‘Order Placement Date.’’
Purchases of Shares will be settled inkind and/or in cash for an amount equal
to the applicable NAV per Share
purchased plus applicable transaction
fees.16 The Fund may permit full or
partial cash purchases of Creation Units
of the Fund under the circumstances
described above. When full or partial
cash purchases of Creation Units are
available or specified for the Fund, they
will be effected in essentially the same
manner as in-kind purchases thereof. In
the case of a full or partial cash
purchase, the AP, through the AP
Representative, must pay the cash
equivalent of the Deposit Securities it
would otherwise provide through an inkind purchase, plus the same Cash
Component required to be paid in
connection with an in-kind purchase.
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Authorized Participant Redemption
The Shares may be redeemed to the
Fund in Creation Unit size or multiples
thereof as described below. Redemption
orders of Creation Units must be placed
16 To the extent that the Fund allows creations or
redemptions to be conducted in cash, such
transactions will be effected in the same manner for
all APs transacting in cash.
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by or through an AP. Creation Units of
the Fund will be redeemable at their
NAV per Share next determined after
receipt of a redemption request in
proper form. Orders to redeem Creation
Units must be submitted in proper form
prior to the time as set forth in the
Participant Agreement.
Each business day, prior to the
opening of trading on the Exchange
(currently 9:30 a.m., Eastern time), the
custodian will transmit to each AP
Representative the identity and the
required number of each Fund Security
and, as applicable and under the
circumstances described below, the cash
value of the Fund Securities that will be
applicable to redemption requests for
that day, and the amount of the Cash
Redemption Amount (as defined below,
if any). A redemption transaction
generally begins when an AP enters into
an irrevocable redemption order with
the Fund. The Fund then instructs the
custodian to deliver a designated
portfolio of securities that constitute the
Creation Basket to the appropriate AP
Representative’s Confidential Account
in exchange for the Fund Shares in
volumes of Creation Units being
redeemed. Orders to redeem Creation
Units must submitted in proper form
prior to the time as set forth in the
Participant Agreement.
Redemption proceeds for a Creation
Unit are paid in-kind, in cash, or
combination thereof, as determined by
the Trust. With respect to in-kind
redemptions of a Fund, redemption
proceeds for a Creation Unit will consist
of Fund Securities, as announced by the
custodian on the business day of the
request for redemption received in
proper form plus cash in an amount
equal to the difference between the NAV
of the Shares of the Fund being
redeemed, as next determined after a
receipt of a request in proper form, and
the value of Fund Securities (the ‘‘Cash
Redemption Amount’’), less any fixed
redemption transaction fee as set forth
below and any applicable additional
variable charge as set forth below. In the
event that the Fund’s securities have a
value greater than the NAV of the
Shares of the Fund, the Cash
Redemption Amount equal to the
differential is required to be made by
the AP to the Fund. The Participant
Agreement signed by each AP will
require establishment of a Confidential
Account to receive distributions of
securities in-kind upon redemption.
Each AP will be required to open a
Confidential Account with an AP
Representative in order to facilitate
orderly processing of redemptions.
PO 00000
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88321
Net Asset Value
The NAV will be calculated for the
Shares of the Fund on each business
day. The Fund’s NAV is determined as
of the close of regular trading on the
New York Stock Exchange, normally
4:00 p.m., E.T. The NAV of the Fund’s
Shares is determined by adding the total
value of its assets, subtracting its
liabilities and then dividing the result
by the number of Shares outstanding.
In computing the Fund’s NAV, the
Fund’s securities holdings are valued
based on their last readily available
market price. Securities for which such
information is readily available are
generally valued at the last reported
sales price, the official closing price as
reported by an independent pricing
service on the primary market or
exchange on which they are traded, or,
in the absence of reported sales, at the
mean between the current bid and ask
prices on such exchange. If market
prices are unavailable or the Fund
thinks that they are unreliable, or when
the value of a security has been
materially affected by events occurring
after the relevant market closes, the
Fund will price those securities at fair
value as determined in good faith using
methods approved by the Fund’s Board.
More information about the valuation
of the Fund’s holdings can be found in
the SAI.
Information regarding the Fund’s
NAV and how often Shares of the Fund
traded at a price above (i.e., at a
premium) or below (i.e., at a discount)
the Fund’s NAV will be available on the
Fund’s website
(www.firstmanhattan.com).
Availability of Information
The Fund’s website,
(www.firstmanhattan.com), will include
the prospectus for the Fund that may be
downloaded. The Fund’s website will
include additional quantitative
information updated on a daily basis,
including the prior business day’s NAV,
market closing price or mid-point of the
bid/ask spread at the time of calculation
of such NAV (the ‘‘Bid/Ask Price’’),17
and a calculation of the premium and
discount of the market closing price or
Bid/Ask Price against the NAV. The
website and information will be
publicly available at no charge.
Form N–PORT requires reporting of a
Fund’s complete portfolio holdings on a
position-by-position basis on a quarterly
17 The Bid/Ask Price of the Fund’s Shares is
determined using the mid-point between the
current national best bid and offer at the time of
calculation of the Fund’s NAV. The records relating
to Bid/Ask Prices will be retained by the Fund or
its service providers.
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Federal Register / Vol. 89, No. 216 / Thursday, November 7, 2024 / Notices
basis within 60 days after fiscal quarter
end. Investors can obtain a Fund’s SAI,
its shareholder reports, its Form N–CSR,
filed twice a year, and its Form N–CEN,
filed annually. The Fund’s SAI and
shareholder reports are available free
upon request from the Fund, and those
documents and the Form N–PORT,
Form N–CSR, and Form N–CEN may be
viewed onscreen or downloaded from
the Commission’s website at
www.sec.gov.
Information regarding market price
and trading volume of the Shares will be
continually available to market
participants on a real-time basis
throughout the day on brokers’
computer screens and other electronic
services. Information regarding 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 will
be available via the Consolidated Tape
Association (‘‘CTA’’) high-speed line. In
addition, the Verified Intraday
Indicative Value (‘‘VIIV’’), as defined in
Rule 8.900–E(c)(2),18 will be widely
disseminated by the Reporting
Authority 19 and/or one or more major
market data vendors in one second
intervals during the Exchange’s Core
Trading Session.
lotter on DSK11XQN23PROD with NOTICES1
Dissemination of the VIIV
With respect to trading of the Shares,
the ability of market participants to buy
and sell Shares at prices near the VIIV
is dependent upon their assessment that
the VIIV is a reliable, indicative realtime value for the Fund’s underlying
holdings. Market participants are
expected to accept the VIIV as a reliable,
indicative real-time value because (1)
the VIIV will be calculated and
disseminated based on the Fund’s actual
portfolio holdings, (2) the securities in
18 Rule 8.900–E(c)(2) provides that the term
‘‘Verified Intraday Indicative Value’’ is the
indicative value of a Managed Portfolio Share based
on all of the holdings of a series of Managed
Portfolio Shares as of the close of business on the
prior business day and, for corporate actions, based
on the applicable holdings as of the opening of
business on the current business day, priced and
disseminated in one second intervals during the
Core Trading Session by the Reporting Authority.
19 Rule 8.900–E(c)(8) provides that the term
‘‘Reporting Authority’’ in respect of a particular
series of Managed Portfolio Shares means the
Exchange, an institution, or a reporting service
designated by the Exchange or by the exchange that
lists a particular series of Managed Portfolio Shares
(if the Exchange is trading such series pursuant to
unlisted trading privileges), as the official source for
calculating and reporting information relating to
such series, including, but not limited to, the NAV,
the VIIV, or other information relating to the
issuance, redemption, or trading of Managed
Portfolio Shares. A series of Managed Portfolio
Shares may have more than one Reporting
Authority, each having different functions.
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18:15 Nov 06, 2024
Jkt 265001
which the Fund plans to invest are
generally highly liquid and actively
traded and trade at the same time as the
Fund and therefore generally have
accurate real time pricing available, and
(3) market participants will have a daily
opportunity to evaluate whether the
VIIV at or near the close of trading is
indeed predictive of the actual NAV.
The VIIV will be widely disseminated
by the Reporting Authority and/or by
one or more major market data vendors
in one second intervals during the Core
Trading Session and will be
disseminated to all market participants
at the same time. The VIIV is based on
the current market value of the
securities in the Fund’s portfolio that
day. The methodology for calculating
the Fund’s VIIV will be available on the
Fund’s website. The VIIV is intended to
provide investors and other market
participants with a highly correlated per
Share value of the underlying portfolio
that can be compared to the current
market price. Therefore, under normal
circumstances the VIIV would be
effectively a near real time
approximation of the Fund’s NAV,
which will be computed only once a
day, and is available free of charge from
one or more market data vendors.
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.20 Trading in Shares of the
Fund will be halted if the circuit breaker
parameters in 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 Rule 8.900–E(d)(2)(C),
which sets forth circumstances under
which Shares of the Fund will be
halted.
Specifically, Rule 8.900–E(d)(2)(C)(i)
provides that the Exchange may
consider all relevant factors in
exercising its discretion to halt trading
in a series of Managed 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 Managed 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
portfolio; or (b) whether other unusual
conditions or circumstances detrimental
20 See
PO 00000
Rule 7.12–E.
Frm 00093
Fmt 4703
Sfmt 4703
to the maintenance of a fair and orderly
market are present.21
Rule 8.900–E(d)(2)(C)(ii) provides
that, if the Exchange becomes aware
that: (i) the VIIV of a series of Managed
Portfolio Shares is not being calculated
or disseminated in one second intervals,
as required; (ii) the NAV with respect to
a series of Managed Portfolio Shares is
not disseminated to all market
participants at the same time; (iii) the
holdings of a series of Managed
Portfolio Shares are not made available
on at least a quarterly basis as required
under the 1940 Act; or (iv) such
holdings are not made available to all
market participants at the same time
(except as otherwise permitted under
the currently applicable exemptive
order or no-action relief granted by the
Commission or Commission staff to the
Investment Company with respect to the
series of Managed Portfolio Shares), it
will halt trading in such series until
such time as the VIIV, the NAV, or the
holdings are available, as required.
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
equity securities. Shares will trade on
the Exchange in all trading sessions in
accordance with Rule 7.34–E(a). As
provided in 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. A minimum of 50,000 Shares
of the Fund will be outstanding at the
commencement of trading on the
Exchange.
The Shares will conform to the initial
and continued listing criteria under
Rule 8.900–E, as well as all terms in the
Exemptive Order. The Exchange will
obtain a representation from the issuer
21 The Exemptive Application provides that the
Investment Company or their agent will request that
the Exchange halt trading in the applicable series
of Managed Portfolio Shares where: (i) the intraday
indicative values calculated by the calculation
engines differ by more than 25 basis points for 60
seconds in connection with pricing of the VIIV; or
(ii) holdings representing 10% or more of a series
of Managed Portfolio Shares’ portfolio have become
subject to a trading halt or otherwise do not have
readily available market quotations. Any such
requests will be one of many factors considered in
order to determine whether to halt trading in a
series of Managed Portfolio Shares and the
Exchange retains sole discretion in determining
whether trading should be halted. As provided in
the Exemptive Application, each series of Managed
Portfolio Shares would employ a pricing
verification agent to continuously compare two
intraday indicative values during regular trading
hours in order to ensure the accuracy of the VIIV.
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of the Shares of the Fund that the NAV
per Share of the Fund will be calculated
daily and will be made available to all
market participants at the same time.
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Surveillance
The Exchange believes that its
surveillance procedures are adequate to
properly monitor the trading of Shares
on the Exchange during all trading
sessions and to deter and detect
violations of Exchange rules and the
applicable federal securities laws.
Trading of Shares through the Exchange
will be subject to the Exchange’s
surveillance procedures for derivative
products. As part of these surveillance
procedures and consistent with Rule
8.900–E(b)(3) and 8.900–E(d)(2)(B), the
Adviser will upon request make
available to the Exchange and/or the
Financial Industry Regulatory Authority
(‘‘FINRA’’), on behalf of the Exchange,
the daily portfolio holdings of the Fund.
The issuer of the Shares of the Fund
will be required to represent to the
Exchange 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 surveil 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
Exchange Rule 5.5–E(m).
FINRA, on behalf of the Exchange, or
the regulatory staff of the Exchange, or
both, will communicate as needed
regarding trading in the Shares and
certain exchange-traded instruments
with other markets and other entities
that are members of the Intermarket
Surveillance Group (‘‘ISG’’), and FINRA,
on behalf of the Exchange, or the
regulatory staff of the Exchange, or both,
may obtain trading information
regarding trading such securities from
such markets and other entities. In
addition, the Exchange may obtain
information regarding trading in the
Shares and certain 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.
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
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18:15 Nov 06, 2024
Jkt 265001
Section 6(b) of the Act,22 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,23 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
system, and, in general, to protect
investors and the public interest.
The Exchange believes that this
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Fund
would meet each of the rules relating to
listing and trading of Managed Portfolio
Shares. To the extent that the Fund is
not in compliance with such rules, the
Exchange would either prevent the
Fund from listing and trading on the
Exchange or commence delisting
procedures under Rule 8.900–E(d)(2)(B).
Specifically, the Exchange would
consider the suspension of trading, and
commence delisting proceedings under
Rule 8.900–E(d)(2)(B), of the Fund
under any of the following
circumstances: (a) if, following the
initial twelve-month period after
commencement of trading on the
Exchange, there are fewer than 50
beneficial holders of the Fund; (b) if the
Exchange has halted trading in the Fund
because the VIIV is interrupted pursuant
to Rule 8.900–E(d)(2)(C)(ii) and such
interruption persists past the trading
day in which it occurred or is no longer
available; (c) if the Exchange has halted
trading in the Fund because the net
asset value with respect to such Fund is
not disseminated to all market
participants at the same time, the
holdings of such Fund are not made
available on at least a quarterly basis as
required under the 1940 Act, or such
holdings are not made available to all
market participants at the same time
pursuant to Rule 8.900–E(d)(2)(C)(ii)
and such issue persists past the trading
day in which it occurred; (d) if the
Exchange has halted trading in Shares of
the Fund pursuant to Rule 8.900–
E(d)(2)(C)(i) and such issue persists past
the trading day in which it occurred; (e)
if the Fund has failed to file any filings
required by the Commission or if the
Exchange is aware that the Fund is not
in compliance with the conditions of
any currently applicable exemptive
order or no-action relief granted by the
Commission or Commission staff with
respect to the Fund; (f) if any of the
continued listing requirements set forth
in Rule 8.900–E are not continuously
maintained; (g) if any of the statements
22 15
23 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00094
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88323
of representations regarding (a) the
description of the portfolio, (b)
limitations on portfolio holdings, or (c)
the applicability of Exchange listing
rules as specified herein to permit the
listing and trading of the Fund, are not
continuously maintained; or (h) if such
other event shall occur or condition
exists which, in the opinion of the
Exchange, makes further dealings on the
Exchange inadvisable.
As discussed above, neither the
Adviser nor the Sub-Adviser is
registered as a broker-dealer. The SubAdviser is not affiliated with a brokerdealer. The Adviser, however, is
affiliated with a broker-dealer and has
implemented and will maintain a ‘‘fire
wall’’ with respect to such affiliate
broker-dealer regarding access to
information concerning the composition
and/or changes to the Fund’s portfolio
and Creation Basket. In the event that (a)
the Adviser or the 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 a
registered broker-dealer or becomes
affiliated with a broker-dealer, the
Adviser and/or the Sub-Adviser will
implement and maintain a fire wall with
respect to personnel of the broker-dealer
or broker-dealer affiliate regarding
access to information concerning the
composition and/or changes to the
portfolio and/or Creation Basket. Any
person related to the Adviser, the SubAdviser or the Trust who makes
decisions pertaining to the Fund’s
portfolio composition or that has access
to information regarding the Fund’s
portfolio or changes thereto or the
Creation Basket will be subject to
procedures designed to prevent the use
and dissemination of material nonpublic information regarding such
portfolio or changes thereto and the
Creation Basket.
In addition, Rule 8.900–E(b)(5)
requires that any person or entity,
including an AP Representative,
custodian, Reporting Authority,
distributor, or administrator, who has
access to non-public information
regarding the Investment Company’s
portfolio composition or changes thereto
or the Creation Basket, must be subject
to procedures designed to prevent the
use and dissemination of material nonpublic information regarding the
applicable Investment Company
portfolio or changes thereto or the
Creation Basket. Moreover, if any such
person or entity is registered as a brokerdealer or affiliated with a broker-dealer,
such person or entity will erect and
maintain a ‘‘fire wall’’ between the
person or entity and the broker-dealer
with respect to access to information
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Federal Register / Vol. 89, No. 216 / Thursday, November 7, 2024 / Notices
concerning the composition and/or
changes to such Investment Company
portfolio or Creation Basket. Any person
or entity who has access to information
regarding the Fund’s portfolio
composition or changes thereto or the
Creation Basket will be subject to
procedures designed to prevent the use
and dissemination of material
nonpublic information regarding the
portfolio or changes thereto or the
Creation Basket.
The Exchange further believes that
Rule 8.900–E is designed to prevent
fraudulent and manipulative acts and
practices related to the listing and
trading of Shares of the Fund because it
provides meaningful requirements about
both the data that will be made publicly
available about the Shares, as well as
the information that will only be
available to certain parties and the
controls on such information.
Specifically, the Exchange believes that
the requirements related to information
protection set forth in Rule 8.900–
E(b)(5) will act as a safeguard against
misuse and improper dissemination of
information related to the Fund’s
portfolio composition, the Creation
Basket, or changes thereto. The
requirement that any person or entity
implement procedures to prevent the
use and dissemination of material nonpublic information regarding the
portfolio or Creation Basket will act to
prevent any individual or entity from
sharing such information externally and
the internal ‘‘fire wall’’ requirements
applicable where an entity is a
registered broker-dealer or affiliated
with a broker-dealer will act to make
sure that no entity will be able to misuse
the data for their own purposes.
Accordingly, the Exchange believes that
this proposal is designed to prevent
fraudulent and manipulative acts and
practices.
The Exchange further believes that the
proposal is designed to prevent
fraudulent and manipulative acts and
practices related to the listing and
trading of Shares of the Fund and to
promote just and equitable principles of
trade and to protect investors and the
public interest because the Exchange
would halt trading under certain
circumstances under which trading in
the Shares of the Fund may be
inadvisable. Specifically, trading in the
Shares will be subject to Rule 8.900–
E(d)(2)(C)(i), which provides that the
Exchange may consider all relevant
factors in exercising its discretion to
halt trading in the Fund. Trading may
be halted because of market conditions
or for reasons that, in the view of the
Exchange, make trading in the series of
Managed Portfolio Shares inadvisable.
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These may include: (a) the extent to
which trading is not occurring in the
securities and/or the financial
instruments composing the portfolio; or
(b) whether other unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market are present.24 Additionally,
trading in the Shares will be subject to
Rule 8.900–E(d)(2)(C)(ii), which
provides that the Exchange would halt
trading where the Exchange becomes
aware that: (a) the VIIV of a series of
Managed Portfolio Shares is not being
calculated or disseminated in one
second intervals, as required; (b) the net
asset value with respect to a series of
Managed Portfolio Shares is not
disseminated to all market participants
at the same time; (c) the holdings of a
series of Managed Portfolio Shares are
not made available on at least a
quarterly basis as required under the
1940 Act; or (d) such holdings are not
made available to all market
participants at the same time (except as
otherwise permitted under the currently
applicable exemptive order or no-action
relief granted by the Commission or
Commission staff to the Investment
Company with respect to the series of
Managed Portfolio Shares). The
Exchange would halt trading in such
Shares until such time as the VIIV, the
NAV, or the holdings are available, as
required.
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 Rule 8.900–E.25 The
Fund’s holdings will conform to the
permissible investments as set forth in
the Exemptive Application and
Exemptive Order.26 As noted above,
FINRA, on behalf of the Exchange, or
the regulatory staff of the Exchange, or
both, will communicate as needed
regarding trading in the Shares and the
underlying exchange-traded instruments
with other markets and other entities
that are members of the ISG, and
FINRA, on behalf of the Exchange, or
the regulatory staff of the Exchange, or
both, may obtain trading information
regarding trading such instruments from
such markets and other entities. In
addition, the Exchange may obtain
24 See
note 20, supra.
Exchange represents that, for initial and
continued listing, the Fund will be in compliance
with Rule 10A–3 under the Act. See 17 CFR
240.10A–3.
26 See note 11, supra.
25 The
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Sfmt 4703
information regarding trading in the
Shares and the 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.
With respect to trading of Shares of
the Fund, the ability of market
participants to buy and sell Shares at
prices near the VIIV is dependent upon
their assessment that the VIIV is a
reliable, indicative real-time value for
the Fund’s underlying holdings. Market
participants are expected to accept the
VIIV as a reliable, indicative real-time
value because (1) the VIIV will be
calculated and disseminated based on
the Fund’s actual portfolio holdings, (2)
the securities in which the Fund plans
to invest are generally highly liquid and
actively traded and trade at the same
time as the Fund and therefore generally
have accurate real time pricing
available, and (3) market participants
will have a daily opportunity to
evaluate whether the VIIV at or near the
close of trading is indeed predictive of
the actual NAV.
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 that the NAV per
Share of the Fund will be calculated
daily and that the NAV will be made
available to all market participants at
the same time. Investors can also obtain
the Fund’s SAI, its shareholder reports,
its Form N–CSR (filed twice a year), and
its Form N–CEN (filed annually). The
Fund’s SAI and shareholder reports will
be available free upon request from the
Fund, and those documents and the
Form N–PORT, Form N–CSR, and Form
N–CEN may be viewed on-screen or
downloaded from the Commission’s
website at www.sec.gov. In addition, 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 will be
available via the CTA high-speed line.
Information regarding the VIIV will be
widely disseminated in one second
intervals throughout the Core Trading
Session by the Reporting Authority and/
or one or more major market data
vendors. The website for the Fund will
include a prospectus for the Fund that
may be downloaded, and additional
data relating to NAV and other
applicable quantitative information,
updated on a daily basis. Moreover,
prior to the commencement of trading,
the Exchange will inform its members in
an Information Bulletin of the special
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Federal Register / Vol. 89, No. 216 / Thursday, November 7, 2024 / Notices
characteristics and risks associated with
trading the Shares.
In addition, as noted above, investors
will have ready access to the VIIV, and
quotation and last sale information for
the Shares. The Shares will conform to
the initial and continued listing criteria
under Rule 8.900–E. The Fund’s
investments, including derivatives, will
be consistent with its investment
objective and will not be used to
enhance leverage (although certain
derivatives 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
any securities benchmark index.
The Exchange also believes that 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 actively-managed exchange-traded
products that will enhance competition
among market participants, to the
benefit of investors and the marketplace.
As noted above, 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, investors will have ready access
to information regarding the VIIV and
quotation and last sale information for
the Shares.
For the above reasons, the Exchange
believes that the proposed rule change
is consistent with the requirements of
Section 6(b)(5) of the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
lotter on DSK11XQN23PROD with NOTICES1
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 the listing and
trading of an additional activelymanaged exchange-traded product,
thereby promoting competition among
exchange-traded products to the benefit
of investors and the marketplace.
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.
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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 27 and Rule 19b–
4(f)(6) thereunder.28
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act normally does not become operative
for 30 days after the date of its filing.
However, Rule 19b–4(f)(6)(iii) 29 permits
the Commission to designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has requested
that the Commission waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange notes that the
Commission has noticed for immediate
effectiveness proposed rule changes to
permit listing and trading on the
Exchange of Managed Portfolio Shares
similar to the Fund.30 The proposed
listing rule for the Fund raises no novel
legal or regulatory issues. Thus, the
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the 30-day
operative delay and designates the
proposed rule change operative upon
filing.31
At any time within 60 days of the
filing of such 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.
27 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.
29 17 CFR 240.19b–4(f)(6)(iii).
30 See supra note 6.
31 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
28 17
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88325
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
NYSEARCA–2024–88 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–2024–88. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NYSEARCA–2024–88 and should be
submitted on or before November 29,
2024.
E:\FR\FM\07NON1.SGM
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88326
Federal Register / Vol. 89, No. 216 / Thursday, November 7, 2024 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–25837 Filed 11–6–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101498; File No. SR–Phlx–
2024–55]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Options 7,
Section 9
November 1, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
18, 2024, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III 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 amend
Options 7, Section 9.
While these amendments are effective
upon filing, the Exchange has
designated the proposed amendments to
be operative on January 1, 2025.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/phlx/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
lotter on DSK11XQN23PROD with NOTICES1
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
Exchange 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 these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
32 17
CFR 200.30–3(a)(12), (59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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18:15 Nov 06, 2024
Jkt 265001
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Exchange’s SQF
Port Fee and SQF Purge Port Fee.
Specifically, the Exchange proposes to
raise its SQF Port Fee and SQF Purge
Port Fee in Options 7, Section 9, B by
10%.
Today, Phlx assesses $1,250 per port,
per month up to a maximum of $42,000
per month for an SQF Port that receives
inbound quotes at any time within that
month.3 With this proposal, Phlx would
assess Market Makers $1,375 per port,
per month (a 10% increase from $1,250)
up to a maximum of $46,200 per month
(a 10% increase from $42,000). Also,
today, Phlx assesses $500 per port, per
month for each of the first 5 SQF Purge
Ports and $100 per port, per month for
each port thereafter. With this proposal,
Phlx would assess Market Makers $550
per port, per month for each of the first
5 SQF Purge Ports (a 10% increase from
$500) and $110 per port, per month for
each port thereafter (a 10% increase
from $100).4
The proposed SQF Port Fee and SQF
Purge Port Fee increases would enable
the Exchange to maintain and improve
its market technology and services to
remain competitive with its peers. Over
the years, customer demand for risk
protections and capacity has increased.
The Exchange continues to invest in
maintaining, improving, and enhancing
its port protocols—for the benefit and
often at the behest of its customers.
Such enhancements include refreshing
hardware, upgrading risk protections
and information security, and offering
customers additional capacity. The
Exchange has not increased Phlx’s SQF
Port Fee since 2015,5 and has not
increased its SQF Purge Port Fee since
3 An active port shall mean that the port was
utilized to submit a quote to the System during a
given month. See Options 7, Section 9, B. Today,
Market Makers are not assessed an active SQF Port
Fee for additional ports acquired for ten business
days for the purpose of transitioning technology.
The member organization is required to provide the
Exchange with written notification of the transition
and all additional ports, provided at no cost, will
be removed at the end of the ten business days. See
Options 7, Section 9, B.
4 Phlx proposes to add commas between per port
and per month on the Pricing Schedule for the SQF
Purge Port Fee.
5 See Securities Exchange Act Release No. 74833
(April 29, 2015), 80 FR 25749 (May 5, 2015) (SR–
Phlx–2015–36).
PO 00000
Frm 00097
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Sfmt 4703
2016 6 where inflation has been between
roughly 15%–16%, as measured using
the metric described below.
Nevertheless, the Exchange proposes to
increase its SQF Port Fee by 10%, only
with respect to inflation that has
occurred since 2015, and its SQF Purge
Port Fee by 10%, only with respect to
inflation that has occurred since 2016.
Further, the Exchange also proposes to
increase the maximum monthly fee that
may be assessed for an SQF Port by 10%
so as to align with the increase to the
SQF Port Fee.
As discussed below, the Exchange
proposes to adjust its fees by an
industry- and product-specific
inflationary measure. It is reasonable
and consistent with the Act for the
Exchange to recoup its investments, at
least in part, by adjusting its fees.
Continuing to operate at fees frozen at
2015 and 2016 levels, respectively,
impacts the Exchange’s ability to
enhance its offerings and the interests of
market participants and investors.
The fee increases the Exchange
proposes are based on an industryspecific Producer Price Index (‘‘PPI’’),
which is a tailored measure of
inflation.7 As a general matter, the
Producer Price Index is a family of
indexes that measures the average
change over time in selling prices
received by domestic producers of
goods and services. PPI measures price
change from the perspective of the
seller. This contrasts with other metrics,
such as the Consumer Price Index
(‘‘CPI’’), that measure price change from
the purchaser’s perspective.8 About
10,000 PPIs for individual products and
groups of products are tracked and
released each month.9 PPIs are available
for the output of nearly all industries in
the goods-producing sectors of the U.S.
economy—mining, manufacturing,
agriculture, fishing, and forestry—as
well as natural gas, electricity, and
construction, among others. The PPI
program covers approximately 69
percent of the service sector’s output, as
measured by revenue reported in the
2017 Economic Census.
For purposes of this proposal, the
relevant industry-specific PPI is the
Hosting, Activer Server Pages, and
Other IT Infrastructure Provisioning
Services (‘‘Data PPI’’) within the Data
Processing and Related Services
Industry, which is an industry netoutput PPI that measures the average
6 See Securities Exchange Act Release No. 77613
(April 13, 2016), 81 FR 23023 (April 19, 2016) (SR–
Phlx–2016–45).
7 See https://data.bls.gov/timeseries/
PCU5182105182105.
8 See https://www.bls.gov/ppi/overview.htm.
9 See Id.
E:\FR\FM\07NON1.SGM
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]]>Agencies
[Federal Register Volume 89, Number 216 (Thursday, November 7, 2024)]
[Notices]
[Pages 88317-88326]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25837]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101503; File No. SR-NYSEARCA-2024-88]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To List and Trade
Shares of the FM Compounders Equity ETF Under Rule 8.900-E (Managed
Portfolio Shares)
November 1, 2024.
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 October 24, 2024, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
[[Page 88318]]
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 Rule 8.900-E (Managed Portfolio Shares): FM Compounders Equity
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
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
NYSE Arca Rule 8.900-E permits the listing and trading, or trading
pursuant to unlisted trading privileges, of Managed Portfolio Shares,
which are securities issued by an actively managed open-end investment
management company.\4\ Rule 8.900-E(b)(1) requires the Exchange to file
separate proposals under Section 19(b) of the Act before listing and
trading any series of Managed Portfolio Shares on the Exchange.
Therefore, the Exchange is submitting this proposal in order to list
and trade Managed Portfolio Shares of the FM Compounders Equity ETF
(the ``Fund'') under Rule 8.900-E.
---------------------------------------------------------------------------
\4\ Rule 8.900-E(c)(1) provides that the term ``Managed
Portfolio Share'' means a security that (a) represents an interest
in an investment company registered under the Investment Company Act
of 1940 (``Investment Company'') organized as an open-end management
investment company that invests in a portfolio of securities
selected by the Investment Company's investment adviser consistent
with the Investment Company's investment objectives and policies;
(b) is issued in a Creation Unit, or multiples thereof, in return
for a designated portfolio of instruments (and/or an amount of cash)
with a value equal to the next determined net asset value and
delivered to the Authorized Participant (as defined in the
Investment Company's Form N-1A filed with the Commission) through a
Confidential Account; (c) when aggregated into a Redemption Unit, or
multiples thereof, may be redeemed for a designated portfolio of
instruments (and/or an amount of cash) with a value equal to the
next determined net asset value delivered to the Confidential
Account for the benefit of the Authorized Participant; and (d) the
portfolio holdings for which are disclosed within at least 60 days
following the end of every fiscal quarter.
---------------------------------------------------------------------------
The Commission has previously approved \5\ and noticed for
immediate effectiveness \6\ listing and trading on the Exchange of
Managed Portfolio Shares under NYSE Arca Rule 8.900-E.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release Nos. 89663 (August 25,
2020), 85 FR 53868 (August 31, 2020) (SR-NYSEArca-2020-48) (Order
Approving a Proposed Rule Change, as Modified by Amendment No. 1, To
List and Trade Shares of Gabelli ETFs Under Rule 8.900-E, Managed
Portfolio Shares); 90528 (November 30, 2020), 85 FR 78389 (December
4, 2020) (SR-NYSEArca-2020-80) (Order Approving a Proposed Rule
Change, as Modified by Amendment No. 2, To List and Trade Shares of
Alger Mid Cap 40 ETF and Alger 25 ETF Under Rule 8.900-E); and 90683
(December 16, 2020), 85 FR 83665 (December 22, 2020) (SR-NYSEArca-
2020-94) (Order Approving a Proposed Rule Change, as Modified by
Amendments No. 1 and No. 2, To List and Trade Shares of the
AdvisorShares Q Portfolio Blended Allocation ETF and AdvisorShares Q
Dynamic Growth ETF Under NYSE Arca Rule 8.900-E).
\6\ See Securities Exchange Act Release Nos. 92349 (July 19,
2021), 86 FR 39084 (July 23, 2021) (SR-NYSEArca-2021-54) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change to List
and Trade Shares of the Cambiar Large Cap ETF, Cambiar Small Cap ETF
and Cambiar SMID ETF); 94569 (March 31, 2022), 87 FR 19990 (April 6,
2022) (SR-NYSEARCA-2022-16) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change to List and Trade Shares of
the DoubleLine Shiller CAPE U.S. Equities ETF under Rule 8.900-E
(Managed Portfolio Shares)); and 97029 (March 2, 2023), 88 FR 14419
(March 8, 2023) (SR-NYSEARCA-2023-16) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To List and Trade
Shares of Alger Weatherbie Enduring Growth ETF).
---------------------------------------------------------------------------
Description of the Fund and the Trust
The shares of the Fund (the ``Shares'') will be issued by Northern
Lights Fund Trust IV (the ``Trust''), a statutory trust organized under
the laws of the state of Delaware and registered with the Commission as
an open-end management investment company.\7\ The investment adviser to
the Fund will be First Manhattan Co. LLC (the ``Adviser''). The sub-
adviser to the Fund will be Vident Advisory, LLC dba Vident Asset
Management (the ``Sub-Adviser''). Northern Lights Distributors, LLC
(the ``Distributor'') will serve as the distributor for the Fund's
Shares. All statements and representations made in this filing
regarding (a) the description of the portfolio or reference assets, (b)
limitations on portfolio holdings or reference assets, or (c) the
applicability of Exchange rules shall constitute continued listing
requirements for listing the Shares on the Exchange, as provided under
Rule 8.900-E(b)(1).
---------------------------------------------------------------------------
\7\ The Trust is registered under the Investment Company Act of
1940 (the ``1940 Act''). On August 9, 2024, the Trust filed a
registration statement on Form N-1A under the Securities Act of 1933
(the ``1933 Act'') and the 1940 Act for the Fund (File No.811-23066)
(the ``Registration Statement''). The Commission issued an order
granting exemptive relief to the Trust (``Exemptive Order'') under
the 1940 Act on March 22, 2022 (Investment Company Act Release No.
34537). The Exemptive Order was granted in response to the Trust's
application for exemptive relief (the ``Exemptive Application'')
(File No. 812-15282). The description of the operation of the Trust
and the Fund herein is based, in part, on the Registration
Statement. The Exchange will not commence trading in Shares of the
Fund until this proposed rule change is operative.
---------------------------------------------------------------------------
Rule 8.900-E(b)(4) provides that, if the investment adviser to the
Investment Company issuing Managed Portfolio Shares is registered as a
broker-dealer or is affiliated with a broker-dealer, such investment
adviser will erect and maintain a ``fire wall'' 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 of and/or changes to such Investment Company portfolio and/
or the Creation Basket.\8\ Any person related to the investment adviser
or Investment Company who makes decisions pertaining to the Investment
Company's portfolio composition or has access to information regarding
the Investment Company's portfolio composition or changes thereto or
the Creation Basket must be subject to procedures designed to prevent
the use and dissemination of material non-public information regarding
the applicable Investment Company portfolio or changes thereto or the
Creation Basket.
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\8\ Rule 8.900-E(c)(5) provides that the term ``Creation
Basket'' means, on any given business day, the names and quantities
of the specified instruments (and/or an amount of cash) that are
required for an AP Representative to deposit in-kind on behalf of an
Authorized Participant in exchange for a Creation Unit and the names
and quantities of the specified instruments (and/or an amount of
cash) that will be transferred in-kind to an AP Representative on
behalf of an Authorized Participant in exchange for a Redemption
Unit, which will be identical and will be transmitted to each AP
Representative before the commencement of trading.
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Rule 8.900-E(b)(4) is similar to Commentary .03(a)(i) and (iii) to
Rule 5.2-E(j)(3); however, Commentary .03(a) in connection with the
establishment of a ``fire wall'' 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.\9\
Rule 8.900-E(b)(4) is also
[[Page 88319]]
similar to Commentary .06 to Rule 8.600-E related to Managed Fund
Shares, except that Rule 8.900-E(b)(4) relates to establishment and
maintenance of a ``fire wall'' between the investment adviser and
personnel of the broker-dealer or broker-dealer affiliate, as
applicable, with respect to an Investment Company's portfolio and
Creation Basket, and not just to the underlying portfolio, as is the
case with Managed Fund Shares. Neither the Adviser nor the Sub-Adviser
is registered as a broker-dealer. The Sub-Adviser is not affiliated
with a broker-dealer. The Adviser, however, is affiliated with a
broker-dealer. The Adviser has implemented and will maintain a ``fire
wall'' with respect to such broker-dealer affiliate regarding access to
information concerning the composition of and/or changes to the Fund's
portfolio and/or Creation Basket.
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\9\ 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 its 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. The Fund will also be required to comply
with Exchange rules relating to disclosure, including Rule 5.3-E(i).
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In the event (a) the Adviser or the 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 a registered broker-dealer, or
becomes affiliated with a broker-dealer, it will implement and maintain
a fire wall with respect to personnel of the broker-dealer or broker-
dealer affiliate regarding access to information concerning the
composition and/or changes to the portfolio and/or Creation Basket. Any
person related to the Adviser, the Sub-Adviser or the Trust who makes
decisions pertaining to the Fund's portfolio composition or that has
access to information regarding the Fund's portfolio composition or
that has access to information regarding the Fund's portfolio or
changes thereto or the Creation Basket will be subject to procedures
designed to prevent the use and dissemination of material non-public
information regarding such portfolio or changes thereto and the
Creation Basket.
Further, Rule 8.900-E(b)(5) requires that any person or entity,
including an AP Representative (as defined below), custodian, Reporting
Authority, distributor, or administrator, who has access to non-public
information regarding the Investment Company's portfolio composition or
changes thereto or the Creation Basket, must be subject to procedures
reasonably designed to prevent the use and dissemination of material
non-public information regarding the applicable Investment Company
portfolio or changes thereto or the Creation Basket. 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
``fire wall'' 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 portfolio or Creation Basket.
Description of the Fund \10\
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\10\ The Exchange represents that, for initial and continued
listing, the Fund will be in compliance with Rule 10A-3 under the
Act. See 17 CFR 240.10A-3.
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The Fund's holdings will conform to the permissible investments as
set forth in the Exemptive Application and Exemptive Order, and the
holdings will be consistent with all requirements in the Exemptive
Application and Exemptive Order.\11\
---------------------------------------------------------------------------
\11\ Pursuant to the Exemptive Order, the only permissible
investments for the Fund are the following that trade on a U.S.
exchange contemporaneously with Shares of the Fund: exchange-traded
funds (``ETFs''), exchange-traded notes, exchange-listed common
stocks, exchange-traded preferred stocks, exchange-traded American
Depositary Receipts, exchange-traded real estate investment trusts,
exchange-traded commodity pools, exchange-traded metal trusts,
exchange-traded currency trusts, and exchange-traded futures for
which the reference asset is one in which the Fund may invest
directly, in the case of an index future traded on a U.S. exchange,
is based on an index, the components of which are a type of asset in
which the Fund could invest directly, as well as cash and cash
equivalents (which are short-term U.S. Treasury securities,
government money market funds, and repurchase agreements). All of
the equity instruments or futures held by the Fund will be traded on
an exchange that is a member of the Intermarket Surveillance Group
(``ISG'') or affiliated with a member of ISG or with which the
Exchange has in place a comprehensive surveillance sharing
agreement.
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According to the Registration Statement, the Fund's primary
objective is to seek long-term capital appreciation. The Fund will seek
to invest in 25-35 U.S. exchange-traded common stocks of various market
capitalization. From time to time, the Fund may hold a greater number
of stocks.
Under normal circumstances, the Fund will invest at least 80% of
its net assets in equity securities. According to the Registration
Statement, the Adviser and/or the Sub-Adviser focuses on companies that
it expects to generate free cash flow and that it believes to possess
durable competitive advantages, earn higher than average returns on
capital, and have opportunities to reinvest excess cash flows at above-
average rates of return. The Adviser and/or the Sub-Adviser seeks
investments that may include: (1) compounders (highly resilient
businesses that reliably generate and compound free cash flow), (2)
undervalued businesses (companies, often out of favor, that the Adviser
and/or the Sub-Adviser believes are undervalued relative to their
earnings power, cash flow, and/or tangible assets), and/or (3) special
situations (companies undergoing restructuring, refinancing, management
changes, and/or comparable corporate actions that cause temporary
disconnects between the share price and what the Adviser and/or the
Sub-Adviser believes to be the company's intrinsic value).
According to the Registration Statement, in effecting its
investment strategy, once an investment opportunity is identified, the
Adviser and/or the Sub-Adviser will seek to purchase the shares at
valuations that are favorable relative to the quality of the company's
business, its earnings, and the Adviser's and/or the Sub-Adviser's
expectation for long-term growth in value-per-share. Generally, the
Fund will focus on making long-term investments. However, the Adviser
and/or the Sub-Adviser may sell a Fund holding when: (1) the holding no
longer meets the Adviser's and/or the Sub-Adviser's investment criteria
or the requirements of the Exemptive Order or its Exchange listing
requirements; (2) the holding's long-term earnings and reinvestment
prospects deteriorate; (3) the Adviser and/or the Sub-Adviser loses
confidence in the leadership and governance of the holding; (4) a new
holding is judged to be comparatively more attractive than a current
position; and/or (5) the valuation of a holding appears excessively
higher than the Adviser's and/or the Sub-Adviser's estimates of long-
term value.
According to the Registration Statement, the Fund is a non-
diversified investment company, which means that a meaningful portion
of its assets may be invested in the securities of a smaller number of
companies and/or a more limited number of sectors.
The Fund is a non-transparent, actively managed ETF that does not
seek to replicate the performance of a specified index.
[[Page 88320]]
According to the Registration Statement, the Fund will invest in
cash (and cash equivalents) when the Fund is unable to find enough
attractive long-term investments to meet its investment objective.
Investment Restrictions
The Fund's holdings will be consistent with all requirements
described in the Exemptive Application and Exemptive Order.\12\
---------------------------------------------------------------------------
\12\ See note 11, supra.
---------------------------------------------------------------------------
The Fund's investments, including derivatives, will be consistent
with its investment objective and will not be used to enhance leverage
(although certain derivatives 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 any securities benchmark index. As noted above, the Fund will not
seek to replicate the performance of a specified index.
Creations and Redemptions of Shares
Creations and redemptions of Shares will take place as described in
Rule 8.900-E. Specifically, in connection with the creation and
redemption of Creation Units \13\ the delivery or receipt of any
portfolio securities in-kind will be required to be effected through a
separate confidential brokerage account (a ``Confidential
Account'').\14\ An Authorized Participant (``AP''), as defined in the
applicable Form N-1A filed with the Commission, will sign an agreement
with an AP Representative \15\ establishing the Confidential Account
for the benefit of the AP. AP Representatives will be broker-dealers.
An AP must be a participant in the Continuous Net Settlement System of
the National Securities Clearing Corporation (``NSCC'') or a
participant in the Depository Trust Company (``DTC'') and must have
executed an authorized participant agreement (``Participant
Agreement'') with the Distributor with respect to the creation and
redemption of Creation Units and formed a Confidential Account for its
benefit in accordance with the terms of the Participant Agreement. For
purposes of creations or redemptions, all transactions will be effected
through the respective AP's Confidential Account, for the benefit of
the AP, without disclosing the identity of such securities to the AP.
---------------------------------------------------------------------------
\13\ Rule 8.900-E(c)(6) provides that the term ``Creation Unit''
means a specified minimum number of Managed Portfolio Shares issued
by an Investment Company at the request of an Authorized Participant
in return for a designated portfolio of instruments and/or cash.
Rule 8.900-E(c)(7) provides that the term ``Redemption Unit'' means
a specified minimum number of Managed Portfolio Shares that may be
redeemed to an Investment Company at the request of an Authorized
Participant in return for a portfolio of instruments and/or cash.
For purposes of this filing, the terms ``Creation Unit'' means
either a Creation Unit as defined in Rules 8.900-E(c)(6) or a
Redemption Unit as defined in Rule 8.900-E(c)(7).
\14\ Rule 8.900-E(c)(4) provides that the term ``Confidential
Account'' means an account owned by an Authorized Participant and
held with an AP Representative on behalf of the Authorized
Participant. The account will be established and governed by
contractual agreement between the AP Representative and the
Authorized Participant solely for the purposes of creation and
redemption, while keeping confidential the Creation Basket
constituents of each series of Managed Portfolio Shares, including
from the Authorized Participant. The books and records of the
Confidential Account will be maintained by the AP Representative on
behalf of the Authorized Participant.
\15\ Rule 8.900-E(c)(3) provides that the term ``AP
Representative'' means an unaffiliated broker-dealer, with which an
Authorized Participant has signed an agreement to establish a
Confidential Account for the benefit of such Authorized Participant,
that will deliver or receive, on behalf of the Authorized
Participant, all consideration to or from the Investment Company in
a creation or redemption. An AP Representative will not be permitted
to disclose the Creation Basket to any person, including the
Authorized Participants.
---------------------------------------------------------------------------
Each business day, the Fund's custodian will transmit the
composition of the Fund's Creation Basket (as described below) to each
AP Representative. This information will permit an AP that has
established a Confidential Account with an AP Representative to
transact in the underlying securities of the Creation Basket through
their AP Representatives, enabling them to engage in in-kind creation
or redemption activity without knowing the identity or weighting of
those securities. Fund Shares will be issued and redeemed in Creation
Units of 5,000 Shares. The size of a Creation Unit is subject to
change. The Fund will offer and redeem Creation Units on a continuous
basis at the net asset value (``NAV'') per Share next determined after
receipt of an order in proper form. The Fund's NAV per Share will be
determined as of the closing time of the regular trading session on the
Exchange (ordinarily, 4:00 p.m. E.T.) on each day that the Exchange is
open.
In order to keep costs low and permit the Fund to be as fully
invested as possible, Shares will be purchased and redeemed in Creation
Units and principally in-kind for securities or in cash for the value
of such securities. The Fund will issue Creation Units principally in
exchange for (i) the in-kind deposit of a designated portfolio of
securities (the ``Deposit Securities''), which for each Creation Unit
will constitute a substantial replication, or a representation, of the
securities included in the Fund's portfolio, and (ii) if applicable, an
amount of cash (the ``Cash Component''). Together, the Deposit
Securities and the Cash Component, if applicable, constitute the ``Fund
Deposit.'' The Deposit Securities and the securities that will be
delivered in an in-kind transfer in a redemption (the ``Fund
Securities'') will be identical. The Cash Component is an amount equal
to the difference between the NAV of the Shares of the Fund (per
Creation Unit) and the market value of the Deposit Securities. The Cash
Component serves the function of compensating for any differences
between the NAV per Creation Unit and the market value of the Deposit
Securities.
On each business day, prior to the opening of business on the
Exchange (ordinarily, 9:30 a.m. E.T.), the custodian will make
available through NSCC the list of the company names and the required
number of shares of each Deposit Security, as applicable, and Cash
Component, as applicable, to be included in the current Fund Deposit
(based on information at the end of the previous business day) for the
Fund. The Deposit Securities, as applicable, and Cash Component, as
applicable, announced are applicable to purchases of Creation Units
until the next-announced composition of the Fund Deposit. When full or
partial cash purchases of Creation Units are available or specified for
the Fund, they will be effected in essentially the same manner as in-
kind purchases thereof.
On any given business day, the names and quantities of the
instruments that constitute the Deposit Securities and the names and
quantities of the instruments that constitute the Fund Securities will
be identical to and will correspond pro rata to the positions in the
Fund's portfolio (including cash positions), and these instruments may
be referred to, in the case of either a purchase or a redemption, as
the ``Creation Basket.''
Placement of Purchase Orders
The Fund will issue Shares through the Distributor on a continuous
basis at NAV. The Exchange represents that the issuance of Shares will
operate in a manner substantially similar to that of other ETFs. The
Fund will issue Shares only at the NAV per Share next determined after
an order in proper form is received.
A creation transaction, which is subject to acceptance by the
Distributor, generally begins when an AP enters into an irrevocable
creation order with the Fund and delivers to the AP Representative the
cash necessary to purchase the designated portfolio of
[[Page 88321]]
securities that constitute the Creation Basket in the Confidential
Account. The AP Representative then purchases and delivers the
designated portfolio of securities to the Fund's custodian, and the
Fund then instructs the custodian to exchange such portfolio of
securities for a specified number of Shares in volumes of Creation
Units. The AP Representative will seek to assemble the shares of the
Creation Basket in a manner that will not reveal its composition. The
Distributor will furnish acknowledgements to those placing such orders
that the orders have been accepted, but the Distributor may reject any
order which is not submitted in proper form, as described in the Fund's
prospectus or Statement of Additional Information (``SAI'').
The NAV of the Fund is expected to be determined once each business
day as of the close of the regular trading session on the Exchange
(ordinarily, 4:00 p.m. E.T.). An AP must submit an irrevocable purchase
order by the time set forth in the Participant Agreement and/or
applicable order form, on any business day in order to receive that
business day's NAV. On days when the Exchange closes or is anticipated
to close earlier than normal, the Fund may require purchase orders to
be placed earlier in the day. The date on which an order to purchase
(or redeem, as further described below) Creation Units is received and
accepted is referred to as the ``Order Placement Date.''
Purchases of Shares will be settled in-kind and/or in cash for an
amount equal to the applicable NAV per Share purchased plus applicable
transaction fees.\16\ The Fund may permit full or partial cash
purchases of Creation Units of the Fund under the circumstances
described above. When full or partial cash purchases of Creation Units
are available or specified for the Fund, they will be effected in
essentially the same manner as in-kind purchases thereof. In the case
of a full or partial cash purchase, the AP, through the AP
Representative, must pay the cash equivalent of the Deposit Securities
it would otherwise provide through an in-kind purchase, plus the same
Cash Component required to be paid in connection with an in-kind
purchase.
---------------------------------------------------------------------------
\16\ To the extent that the Fund allows creations or redemptions
to be conducted in cash, such transactions will be effected in the
same manner for all APs transacting in cash.
---------------------------------------------------------------------------
Authorized Participant Redemption
The Shares may be redeemed to the Fund in Creation Unit size or
multiples thereof as described below. Redemption orders of Creation
Units must be placed by or through an AP. Creation Units of the Fund
will be redeemable at their NAV per Share next determined after receipt
of a redemption request in proper form. Orders to redeem Creation Units
must be submitted in proper form prior to the time as set forth in the
Participant Agreement.
Each business day, prior to the opening of trading on the Exchange
(currently 9:30 a.m., Eastern time), the custodian will transmit to
each AP Representative the identity and the required number of each
Fund Security and, as applicable and under the circumstances described
below, the cash value of the Fund Securities that will be applicable to
redemption requests for that day, and the amount of the Cash Redemption
Amount (as defined below, if any). A redemption transaction generally
begins when an AP enters into an irrevocable redemption order with the
Fund. The Fund then instructs the custodian to deliver a designated
portfolio of securities that constitute the Creation Basket to the
appropriate AP Representative's Confidential Account in exchange for
the Fund Shares in volumes of Creation Units being redeemed. Orders to
redeem Creation Units must submitted in proper form prior to the time
as set forth in the Participant Agreement.
Redemption proceeds for a Creation Unit are paid in-kind, in cash,
or combination thereof, as determined by the Trust. With respect to in-
kind redemptions of a Fund, redemption proceeds for a Creation Unit
will consist of Fund Securities, as announced by the custodian on the
business day of the request for redemption received in proper form plus
cash in an amount equal to the difference between the NAV of the Shares
of the Fund being redeemed, as next determined after a receipt of a
request in proper form, and the value of Fund Securities (the ``Cash
Redemption Amount''), less any fixed redemption transaction fee as set
forth below and any applicable additional variable charge as set forth
below. In the event that the Fund's securities have a value greater
than the NAV of the Shares of the Fund, the Cash Redemption Amount
equal to the differential is required to be made by the AP to the Fund.
The Participant Agreement signed by each AP will require establishment
of a Confidential Account to receive distributions of securities in-
kind upon redemption. Each AP will be required to open a Confidential
Account with an AP Representative in order to facilitate orderly
processing of redemptions.
Net Asset Value
The NAV will be calculated for the Shares of the Fund on each
business day. The Fund's NAV is determined as of the close of regular
trading on the New York Stock Exchange, normally 4:00 p.m., E.T. The
NAV of the Fund's Shares is determined by adding the total value of its
assets, subtracting its liabilities and then dividing the result by the
number of Shares outstanding.
In computing the Fund's NAV, the Fund's securities holdings are
valued based on their last readily available market price. Securities
for which such information is readily available are generally valued at
the last reported sales price, the official closing price as reported
by an independent pricing service on the primary market or exchange on
which they are traded, or, in the absence of reported sales, at the
mean between the current bid and ask prices on such exchange. If market
prices are unavailable or the Fund thinks that they are unreliable, or
when the value of a security has been materially affected by events
occurring after the relevant market closes, the Fund will price those
securities at fair value as determined in good faith using methods
approved by the Fund's Board.
More information about the valuation of the Fund's holdings can be
found in the SAI.
Information regarding the Fund's NAV and how often Shares of the
Fund traded at a price above (i.e., at a premium) or below (i.e., at a
discount) the Fund's NAV will be available on the Fund's website
(www.firstmanhattan.com).
Availability of Information
The Fund's website, (www.firstmanhattan.com), will include the
prospectus for the Fund that may be downloaded. The Fund's website will
include additional quantitative information updated on a daily basis,
including the prior business day's NAV, market closing price or mid-
point of the bid/ask spread at the time of calculation of such NAV (the
``Bid/Ask Price''),\17\ and a calculation of the premium and discount
of the market closing price or Bid/Ask Price against the NAV. The
website and information will be publicly available at no charge.
---------------------------------------------------------------------------
\17\ The Bid/Ask Price of the Fund's Shares is determined using
the mid-point between the current national best bid and offer at the
time of calculation of the Fund's NAV. The records relating to Bid/
Ask Prices will be retained by the Fund or its service providers.
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Form N-PORT requires reporting of a Fund's complete portfolio
holdings on a position-by-position basis on a quarterly
[[Page 88322]]
basis within 60 days after fiscal quarter end. Investors can obtain a
Fund's SAI, its shareholder reports, its Form N-CSR, filed twice a
year, and its Form N-CEN, filed annually. The Fund's SAI and
shareholder reports are available free upon request from the Fund, and
those documents and the Form N-PORT, Form N-CSR, and Form N-CEN may be
viewed onscreen or downloaded from the Commission's website at
www.sec.gov.
Information regarding market price and trading volume of the Shares
will be continually available to market participants on a real-time
basis throughout the day on brokers' computer screens and other
electronic services. Information regarding 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 will be available via the Consolidated Tape
Association (``CTA'') high-speed line. In addition, the Verified
Intraday Indicative Value (``VIIV''), as defined in Rule 8.900-
E(c)(2),\18\ will be widely disseminated by the Reporting Authority
\19\ and/or one or more major market data vendors in one second
intervals during the Exchange's Core Trading Session.
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\18\ Rule 8.900-E(c)(2) provides that the term ``Verified
Intraday Indicative Value'' is the indicative value of a Managed
Portfolio Share based on all of the holdings of a series of Managed
Portfolio Shares as of the close of business on the prior business
day and, for corporate actions, based on the applicable holdings as
of the opening of business on the current business day, priced and
disseminated in one second intervals during the Core Trading Session
by the Reporting Authority.
\19\ Rule 8.900-E(c)(8) provides that the term ``Reporting
Authority'' in respect of a particular series of Managed Portfolio
Shares means the Exchange, an institution, or a reporting service
designated by the Exchange or by the exchange that lists a
particular series of Managed Portfolio Shares (if the Exchange is
trading such series pursuant to unlisted trading privileges), as the
official source for calculating and reporting information relating
to such series, including, but not limited to, the NAV, the VIIV, or
other information relating to the issuance, redemption, or trading
of Managed Portfolio Shares. A series of Managed Portfolio Shares
may have more than one Reporting Authority, each having different
functions.
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Dissemination of the VIIV
With respect to trading of the Shares, the ability of market
participants to buy and sell Shares at prices near the VIIV is
dependent upon their assessment that the VIIV is a reliable, indicative
real-time value for the Fund's underlying holdings. Market participants
are expected to accept the VIIV as a reliable, indicative real-time
value because (1) the VIIV will be calculated and disseminated based on
the Fund's actual portfolio holdings, (2) the securities in which the
Fund plans to invest are generally highly liquid and actively traded
and trade at the same time as the Fund and therefore generally have
accurate real time pricing available, and (3) market participants will
have a daily opportunity to evaluate whether the VIIV at or near the
close of trading is indeed predictive of the actual NAV.
The VIIV will be widely disseminated by the Reporting Authority
and/or by one or more major market data vendors in one second intervals
during the Core Trading Session and will be disseminated to all market
participants at the same time. The VIIV is based on the current market
value of the securities in the Fund's portfolio that day. The
methodology for calculating the Fund's VIIV will be available on the
Fund's website. The VIIV is intended to provide investors and other
market participants with a highly correlated per Share value of the
underlying portfolio that can be compared to the current market price.
Therefore, under normal circumstances the VIIV would be effectively a
near real time approximation of the Fund's NAV, which will be computed
only once a day, and is available free of charge from one or more
market data vendors.
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.\20\ Trading in Shares of the Fund
will be halted if the circuit breaker parameters in 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 Rule
8.900-E(d)(2)(C), which sets forth circumstances under which Shares of
the Fund will be halted.
---------------------------------------------------------------------------
\20\ See Rule 7.12-E.
---------------------------------------------------------------------------
Specifically, Rule 8.900-E(d)(2)(C)(i) provides that the Exchange
may consider all relevant factors in exercising its discretion to halt
trading in a series of Managed 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 Managed 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 portfolio; or (b) whether other unusual conditions or circumstances
detrimental to the maintenance of a fair and orderly market are
present.\21\
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\21\ The Exemptive Application provides that the Investment
Company or their agent will request that the Exchange halt trading
in the applicable series of Managed Portfolio Shares where: (i) the
intraday indicative values calculated by the calculation engines
differ by more than 25 basis points for 60 seconds in connection
with pricing of the VIIV; or (ii) holdings representing 10% or more
of a series of Managed Portfolio Shares' portfolio have become
subject to a trading halt or otherwise do not have readily available
market quotations. Any such requests will be one of many factors
considered in order to determine whether to halt trading in a series
of Managed Portfolio Shares and the Exchange retains sole discretion
in determining whether trading should be halted. As provided in the
Exemptive Application, each series of Managed Portfolio Shares would
employ a pricing verification agent to continuously compare two
intraday indicative values during regular trading hours in order to
ensure the accuracy of the VIIV.
---------------------------------------------------------------------------
Rule 8.900-E(d)(2)(C)(ii) provides that, if the Exchange becomes
aware that: (i) the VIIV of a series of Managed Portfolio Shares is not
being calculated or disseminated in one second intervals, as required;
(ii) the NAV with respect to a series of Managed Portfolio Shares is
not disseminated to all market participants at the same time; (iii) the
holdings of a series of Managed Portfolio Shares are not made available
on at least a quarterly basis as required under the 1940 Act; or (iv)
such holdings are not made available to all market participants at the
same time (except as otherwise permitted under the currently applicable
exemptive order or no-action relief granted by the Commission or
Commission staff to the Investment Company with respect to the series
of Managed Portfolio Shares), it will halt trading in such series until
such time as the VIIV, the NAV, or the holdings are available, as
required.
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 equity securities. Shares will trade on
the Exchange in all trading sessions in accordance with Rule 7.34-E(a).
As provided in 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. A
minimum of 50,000 Shares of the Fund will be outstanding at the
commencement of trading on the Exchange.
The Shares will conform to the initial and continued listing
criteria under Rule 8.900-E, as well as all terms in the Exemptive
Order. The Exchange will obtain a representation from the issuer
[[Page 88323]]
of the Shares of the Fund that the NAV per Share of the Fund will be
calculated daily and will be made available to all market participants
at the same time.
Surveillance
The Exchange believes that its surveillance procedures are adequate
to properly monitor the trading of Shares on the Exchange during all
trading sessions and to deter and detect violations of Exchange rules
and the applicable federal securities laws. Trading of Shares through
the Exchange will be subject to the Exchange's surveillance procedures
for derivative products. As part of these surveillance procedures and
consistent with Rule 8.900-E(b)(3) and 8.900-E(d)(2)(B), the Adviser
will upon request make available to the Exchange and/or the Financial
Industry Regulatory Authority (``FINRA''), on behalf of the Exchange,
the daily portfolio holdings of the Fund. The issuer of the Shares of
the Fund will be required to represent to the Exchange 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 surveil 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 Exchange Rule 5.5-E(m).
FINRA, on behalf of the Exchange, or the regulatory staff of the
Exchange, or both, will communicate as needed regarding trading in the
Shares and certain exchange-traded instruments with other markets and
other entities that are members of the Intermarket Surveillance Group
(``ISG''), and FINRA, on behalf of the Exchange, or the regulatory
staff of the Exchange, or both, may obtain trading information
regarding trading such securities from such markets and other entities.
In addition, the Exchange may obtain information regarding trading in
the Shares and certain 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.
In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\22\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\23\ 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 system, and, in general, to protect investors and the
public interest.
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\22\ 15 U.S.C. 78f(b).
\23\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that this proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the Fund
would meet each of the rules relating to listing and trading of Managed
Portfolio Shares. To the extent that the Fund is not in compliance with
such rules, the Exchange would either prevent the Fund from listing and
trading on the Exchange or commence delisting procedures under Rule
8.900-E(d)(2)(B). Specifically, the Exchange would consider the
suspension of trading, and commence delisting proceedings under Rule
8.900-E(d)(2)(B), of the Fund under any of the following circumstances:
(a) if, following the initial twelve-month period after commencement of
trading on the Exchange, there are fewer than 50 beneficial holders of
the Fund; (b) if the Exchange has halted trading in the Fund because
the VIIV is interrupted pursuant to Rule 8.900-E(d)(2)(C)(ii) and such
interruption persists past the trading day in which it occurred or is
no longer available; (c) if the Exchange has halted trading in the Fund
because the net asset value with respect to such Fund is not
disseminated to all market participants at the same time, the holdings
of such Fund are not made available on at least a quarterly basis as
required under the 1940 Act, or such holdings are not made available to
all market participants at the same time pursuant to Rule 8.900-
E(d)(2)(C)(ii) and such issue persists past the trading day in which it
occurred; (d) if the Exchange has halted trading in Shares of the Fund
pursuant to Rule 8.900-E(d)(2)(C)(i) and such issue persists past the
trading day in which it occurred; (e) if the Fund has failed to file
any filings required by the Commission or if the Exchange is aware that
the Fund is not in compliance with the conditions of any currently
applicable exemptive order or no-action relief granted by the
Commission or Commission staff with respect to the Fund; (f) if any of
the continued listing requirements set forth in Rule 8.900-E are not
continuously maintained; (g) if any of the statements of
representations regarding (a) the description of the portfolio, (b)
limitations on portfolio holdings, or (c) the applicability of Exchange
listing rules as specified herein to permit the listing and trading of
the Fund, are not continuously maintained; or (h) if such other event
shall occur or condition exists which, in the opinion of the Exchange,
makes further dealings on the Exchange inadvisable.
As discussed above, neither the Adviser nor the Sub-Adviser is
registered as a broker-dealer. The Sub-Adviser is not affiliated with a
broker-dealer. The Adviser, however, is affiliated with a broker-dealer
and has implemented and will maintain a ``fire wall'' with respect to
such affiliate broker-dealer regarding access to information concerning
the composition and/or changes to the Fund's portfolio and Creation
Basket. In the event that (a) the Adviser or the 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 a registered
broker-dealer or becomes affiliated with a broker-dealer, the Adviser
and/or the Sub-Adviser will implement and maintain a fire wall with
respect to personnel of the broker-dealer or broker-dealer affiliate
regarding access to information concerning the composition and/or
changes to the portfolio and/or Creation Basket. Any person related to
the Adviser, the Sub-Adviser or the Trust who makes decisions
pertaining to the Fund's portfolio composition or that has access to
information regarding the Fund's portfolio or changes thereto or the
Creation Basket will be subject to procedures designed to prevent the
use and dissemination of material non-public information regarding such
portfolio or changes thereto and the Creation Basket.
In addition, Rule 8.900-E(b)(5) requires that any person or entity,
including an AP Representative, custodian, Reporting Authority,
distributor, or administrator, who has access to non-public information
regarding the Investment Company's portfolio composition or changes
thereto or the Creation Basket, must be subject to procedures designed
to prevent the use and dissemination of material non-public information
regarding the applicable Investment Company portfolio or changes
thereto or the Creation Basket. 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 ``fire wall'' between
the person or entity and the broker-dealer with respect to access to
information
[[Page 88324]]
concerning the composition and/or changes to such Investment Company
portfolio or Creation Basket. Any person or entity who has access to
information regarding the Fund's portfolio composition or changes
thereto or the Creation Basket will be subject to procedures designed
to prevent the use and dissemination of material nonpublic information
regarding the portfolio or changes thereto or the Creation Basket.
The Exchange further believes that Rule 8.900-E is designed to
prevent fraudulent and manipulative acts and practices related to the
listing and trading of Shares of the Fund because it provides
meaningful requirements about both the data that will be made publicly
available about the Shares, as well as the information that will only
be available to certain parties and the controls on such information.
Specifically, the Exchange believes that the requirements related to
information protection set forth in Rule 8.900-E(b)(5) will act as a
safeguard against misuse and improper dissemination of information
related to the Fund's portfolio composition, the Creation Basket, or
changes thereto. The requirement that any person or entity implement
procedures to prevent the use and dissemination of material non-public
information regarding the portfolio or Creation Basket will act to
prevent any individual or entity from sharing such information
externally and the internal ``fire wall'' requirements applicable where
an entity is a registered broker-dealer or affiliated with a broker-
dealer will act to make sure that no entity will be able to misuse the
data for their own purposes. Accordingly, the Exchange believes that
this proposal is designed to prevent fraudulent and manipulative acts
and practices.
The Exchange further believes that the proposal is designed to
prevent fraudulent and manipulative acts and practices related to the
listing and trading of Shares of the Fund and to promote just and
equitable principles of trade and to protect investors and the public
interest because the Exchange would halt trading under certain
circumstances under which trading in the Shares of the Fund may be
inadvisable. Specifically, trading in the Shares will be subject to
Rule 8.900-E(d)(2)(C)(i), which provides that the Exchange may consider
all relevant factors in exercising its discretion to halt trading in
the Fund. Trading may be halted because of market conditions or for
reasons that, in the view of the Exchange, make trading in the series
of Managed 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 portfolio; or (b) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present.\24\ Additionally, trading in the
Shares will be subject to Rule 8.900-E(d)(2)(C)(ii), which provides
that the Exchange would halt trading where the Exchange becomes aware
that: (a) the VIIV of a series of Managed Portfolio Shares is not being
calculated or disseminated in one second intervals, as required; (b)
the net asset value with respect to a series of Managed Portfolio
Shares is not disseminated to all market participants at the same time;
(c) the holdings of a series of Managed Portfolio Shares are not made
available on at least a quarterly basis as required under the 1940 Act;
or (d) such holdings are not made available to all market participants
at the same time (except as otherwise permitted under the currently
applicable exemptive order or no-action relief granted by the
Commission or Commission staff to the Investment Company with respect
to the series of Managed Portfolio Shares). The Exchange would halt
trading in such Shares until such time as the VIIV, the NAV, or the
holdings are available, as required.
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\24\ See note 20, supra.
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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 Rule 8.900-E.\25\ The Fund's
holdings will conform to the permissible investments as set forth in
the Exemptive Application and Exemptive Order.\26\ As noted above,
FINRA, on behalf of the Exchange, or the regulatory staff of the
Exchange, or both, will communicate as needed regarding trading in the
Shares and the underlying exchange-traded instruments with other
markets and other entities that are members of the ISG, and FINRA, on
behalf of the Exchange, or the regulatory staff of the Exchange, or
both, may obtain trading information regarding trading such instruments
from such markets and other entities. In addition, the Exchange may
obtain information regarding trading in the Shares and the 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.
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\25\ The Exchange represents that, for initial and continued
listing, the Fund will be in compliance with Rule 10A-3 under the
Act. See 17 CFR 240.10A-3.
\26\ See note 11, supra.
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With respect to trading of Shares of the Fund, the ability of
market participants to buy and sell Shares at prices near the VIIV is
dependent upon their assessment that the VIIV is a reliable, indicative
real-time value for the Fund's underlying holdings. Market participants
are expected to accept the VIIV as a reliable, indicative real-time
value because (1) the VIIV will be calculated and disseminated based on
the Fund's actual portfolio holdings, (2) the securities in which the
Fund plans to invest are generally highly liquid and actively traded
and trade at the same time as the Fund and therefore generally have
accurate real time pricing available, and (3) market participants will
have a daily opportunity to evaluate whether the VIIV at or near the
close of trading is indeed predictive of the actual NAV.
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 that the NAV per Share
of the Fund will be calculated daily and that the NAV will be made
available to all market participants at the same time. Investors can
also obtain the Fund's SAI, its shareholder reports, its Form N-CSR
(filed twice a year), and its Form N-CEN (filed annually). The Fund's
SAI and shareholder reports will be available free upon request from
the Fund, and those documents and the Form N-PORT, Form N-CSR, and Form
N-CEN may be viewed on-screen or downloaded from the Commission's
website at www.sec.gov. In addition, 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 will be available via the CTA high-speed line. Information
regarding the VIIV will be widely disseminated in one second intervals
throughout the Core Trading Session by the Reporting Authority and/or
one or more major market data vendors. The website for the Fund will
include a prospectus for the Fund that may be downloaded, and
additional data relating to NAV and other applicable quantitative
information, updated on a daily basis. Moreover, prior to the
commencement of trading, the Exchange will inform its members in an
Information Bulletin of the special
[[Page 88325]]
characteristics and risks associated with trading the Shares.
In addition, as noted above, investors will have ready access to
the VIIV, and quotation and last sale information for the Shares. The
Shares will conform to the initial and continued listing criteria under
Rule 8.900-E. The Fund's investments, including derivatives, will be
consistent with its investment objective and will not be used to
enhance leverage (although certain derivatives 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 any securities benchmark index.
The Exchange also believes that 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 actively-managed exchange-traded
products that will enhance competition among market participants, to
the benefit of investors and the marketplace. As noted above, 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, investors will have ready access to information regarding the
VIIV and quotation and last sale information for the Shares.
For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act.
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 the listing and trading of an
additional actively-managed exchange-traded product, thereby promoting
competition among exchange-traded products to the benefit of investors
and the marketplace.
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 \27\ and Rule 19b-
4(f)(6) thereunder.\28\
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\27\ 15 U.S.C. 78s(b)(3)(A).
\28\ 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.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act normally does not become operative for 30 days after the date of
its filing. However, Rule 19b-4(f)(6)(iii) \29\ permits the Commission
to designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has
requested that the Commission waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. The Exchange
notes that the Commission has noticed for immediate effectiveness
proposed rule changes to permit listing and trading on the Exchange of
Managed Portfolio Shares similar to the Fund.\30\ The proposed listing
rule for the Fund raises no novel legal or regulatory issues. Thus, the
Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest.
Accordingly, the Commission hereby waives the 30-day operative delay
and designates the proposed rule change operative upon filing.\31\
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\29\ 17 CFR 240.19b-4(f)(6)(iii).
\30\ See supra note 6.
\31\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of such 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-2024-88 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-2024-88. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NYSEARCA-2024-88 and should
be submitted on or before November 29, 2024.
[[Page 88326]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12), (59).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-25837 Filed 11-6-24; 8:45 am]
BILLING CODE 8011-01-P
