67438 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices 

294 15 U.S.C. 78mm. 

1Applicants request that the order apply to the 

initial fund and any additional series of the Trust, 

and any other existing or future open-end 

the Act, from the rule filing 

requirements of Section 19(b) of the Act 

with respect to the rules that MIAX 

EMERALD proposes to incorporate by 

reference. The exemption is conditioned 

upon MIAX EMERALD providing 

written notice to MIAX EMERALD 

members whenever MIAX Exchange, 

Cboe, NYSE or FINRA proposes to 

change an incorporated by reference 

rule and when the Commission 

approves any such changes. The 

Commission believes that the exemption 

is appropriate in the public interest and 

consistent with the protection of 

investors because it will promote more 

efficient use of Commission’s and SROs’ 

resources by avoiding duplicative rule 

filings based on simultaneous changes 

to identical rule text sought to be 

implemented by more than one SRO. 

V. Conclusion 

It is ordered that the application of 

MIAX EMERALD for registration as a 

national securities exchange be, and it 

hereby is, granted. 

It is further ordered that operation of 

MIAX EMERALD is conditioned on the 

satisfaction of the requirements below: 

A. Participation in National Market 

System Plans Relating to Options 

Trading. MIAX EMERALD must join: (1) 

The Plan for the Reporting of 

Consolidated Options Last Sale Reports 

and Quotation Information (Options 

Price Reporting Authority); (2) the 

OLPP; (3) the Linkage Plan; (4) the Plan 

of the Options Regulatory Surveillance 

Authority; and (5) the Plan Governing 

the Consolidated Audit Trail; 

B. Participation in Multiparty Rule 

17d–2 Plans. MIAX EMERALD must 

become a party to the multiparty Rule 

17d–2 agreements concerning options 

sales practice regulation and market 

surveillance, and covered Regulation 

NMS rules; 

C. Participation in the Options 

Clearing Corporation. MIAX EMERALD 

must become an Options Clearing 

Corporation participant exchange; and 

D. Participation in the Intermarket 

Surveillance Group. MIAX EMERALD 

must join the Intermarket Surveillance 

Group. 

It is further ordered, pursuant to 

Section 36 of the Act,294 that MIAX 

EMERALD shall be exempted from the 

rule filing requirements of Section 19(b) 

of the Act with respect to the MIAX 

Exchange, Cboe, NYSE and FINRA rules 

that MIAX EMERALD proposes to 

incorporate by reference, subject to the 

conditions specified in this order that 

MIAX EMERALD provide written notice 

to MIAX EMERALD members whenever 

MIAX Exchange, 

Cboe, NYSE or FINRA proposes to 

change an incorporated by reference 

rule and when the Commission 

approves any such changes. 

By the Commission. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–28179 Filed 12–27–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

33343; 812–14812] 

AQR Trust and AQR Capital 

Management, LLC; Notice of 

Application 

December 21, 2018. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice. 

Notice of an application for an order 

under section 6(c) of the Investment 

Company Act of 1940 (the ‘‘Act’’) for an 

exemption from sections 2(a)(32), 

5(a)(1), 22(d), and 22(e) of the Act and 

rule 22c–1 under the Act, under 

sections 6(c) and 17(b) of the Act for an 

exemption from sections 17(a)(1) and 

17(a)(2) of the Act, and under section 

12(d)(1)(J) for an exemption from 

sections 12(d)(1)(A) and 12(d)(1)(B) of 

the Act. The requested order would 

permit (a) index-based series of certain 

open-end management investment 

companies (‘‘Funds’’) to issue shares 

redeemable in large aggregations 

(‘‘Creation Units’’); (b) secondary market 

transactions in Fund shares to occur at 

negotiated market prices rather than at 

net asset value (‘‘NAV’’); (c) certain 

Funds to pay redemption proceeds, 

under certain circumstances, more than 

seven days after the tender of shares for 

redemption; (d) certain affiliated 

persons of a Fund to deposit securities 

into, and receive securities from, the 

Fund in connection with the purchase 

and redemption of Creation Units; (e) 

certain registered management 

investment companies and unit 

investment trusts outside of the same 

group of investment companies as the 

Funds (‘‘Funds of Funds’’) to acquire 

shares of the Funds; (f) certain Funds 

(‘‘Feeder Funds’’) to create and redeem 

Creation Units in-kind in a masterfeeder structure; and (g) certain Funds 

to issue Shares in less than Creation 

Unit size to investors participating in a 

distribution reinvestment program. 

APPLICANTS: AQR Trust (the ‘‘Trust’’), a 

Delaware statutory trust that will 

register under the Act as an open-end 

management investment company with 

multiple series and AQR Capital 

Management, LLC (the ‘‘Initial 

Adviser’’), a Delaware corporation 

registered as an investment adviser 

under the Investment Advisers Act of 

1940. 

FILING DATES: The application was filed 

on August 17, 2017 and amended on 

April 9, 2018, August 8, 2018, and 

December 12, 2018. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the requested relief will 

be issued unless the Commission orders 

a hearing. Interested persons may 

request a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on January 15, 2019, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit, or for lawyers, a certificate of 

service. Pursuant to rule 0–5 under the 

Act, hearing requests should state the 

nature of the writer’s interest, any facts 

bearing upon the desirability of a 

hearing on the matter, the reason for the 

request, and the issues contested. 

Persons who wish to be notified of a 

hearing may request notification by 

writing to the Commission’s Secretary. 

ADDRESSES: Secretary, Securities and 

Exchange Commission, 100 F Street NE, 

Washington, DC 20549–1090; 

Applicants: William J. Fenrich, Esq., 

AQR Capital Management, LLC, Two 

Greenwich Plaza, 4th Floor, Greenwich, 

Connecticut 06830. 

FOR FURTHER INFORMATION CONTACT: 

Steven I. Amchan, Senior Counsel, at 

(202) 551–6826, Hae-Sung Lee, Senior 

Counsel, at (202) 551–7345, or Andrea 

Ottomanelli Magovern, Branch Chief, at 

(202) 551–6825 (Division of Investment 

Management, Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

website by searching for the file 

number, or for an applicant using the 

Company name box, at http://

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Summary of the Application 

1. Applicants request an order that 

would allow Funds to operate as index 

exchange traded funds (‘‘ETFs’’).1 Fund 


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Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices 67439 

management investment company or existing or 

future series thereof (each, included in the term 

‘‘Fund’’), each of which will operate as an ETF, and 

their respective existing or future Master Funds and 

will track a specified index comprised of domestic 

and/or foreign equity securities and/or domestic 

and/or foreign fixed income securities (each, an 

‘‘Underlying Index’’). Any Fund will (a) be advised 

by the Initial Adviser or an entity controlling, 

controlled by, or under common control with the 

Initial Adviser (each such entity and any successor 

thereto, an ‘‘Adviser’’) and (b) comply with the 

terms and conditions of the application. For 

purposes of the requested order, a ‘‘successor’’ is 

limited to an entity or entities that result from a 

reorganization into another jurisdiction or a change 

in the type of business organization. 

2Each Self-Indexing Fund will post on its website 

the identities and quantities of the investment 

positions that will form the basis for the Fund’s 

calculation of its NAV at the end of the day. 

Applicants believe that requiring Self-Indexing 

Funds to maintain full portfolio transparency will 

help address, together with other protections, 

conflicts of interest with respect to such Funds. 

3The requested relief would apply to direct sales 

of shares in Creation Units by a Fund to a Fund of 

Funds and redemptions of those shares. Applicants, 

moreover, are not seeking relief from section 17(a) 

for, and the requested relief will not apply to, 

transactions where a Fund could be deemed an 

Affiliated Person, or a Second-Tier Affiliate, of a 

Fund of Funds because an Adviser or an entity 

controlling, controlled by or under common control 

with an Adviser provides investment advisory 

services to that Fund of Funds. 

shares will be purchased and redeemed 

at their NAV in Creation Units (other 

than pursuant to a distribution 

reinvestment program), as described in 

the application. All orders to purchase 

Creation Units and all redemption 

requests will be placed by or through an 

‘‘Authorized Participant’’, which will 

have signed a participant agreement 

with the Distributor. Shares will be 

listed and traded individually on a 

national securities exchange, where 

share prices will be based on the current 

bid/offer market. Certain Funds may 

operate as Feeder Funds in a masterfeeder structure. Any order granting the 

requested relief would be subject to the 

terms and conditions stated in the 

application. 

2. Each Fund will hold investment 

positions selected to correspond closely 

to the performance of an Underlying 

Index. In the case of Self-Indexing 

Funds, an affiliated person, as defined 

in section 2(a)(3) of the Act (‘‘Affiliated 

Person’’), or an affiliated person of an 

Affiliated Person (‘‘Second-Tier 

Affiliate’’), of the Trust or a Fund, of the 

Adviser, of any sub-adviser to or 

promoter of a Fund, or of the Distributor 

will compile, create, sponsor or 

maintain the Underlying Index.2

3. Shares will be purchased and 

redeemed in Creation Units and 

generally on an in-kind basis, or issued 

in less than Creation Unit size to 

investors participating in a distribution 

reinvestment program. Except where the 

purchase or redemption will include 

cash under the limited circumstances 

specified in the application, purchasers 

will be required to purchase Creation 

Units by depositing specified 

instruments (‘‘Deposit Instruments’’), 

and shareholders redeeming their shares 

will receive specified instruments 

(‘‘Redemption Instruments’’). The 

Deposit Instruments and the 

Redemption Instruments will each 

correspond pro rata to the positions in 

the Fund’s portfolio (including cash 

positions) except as specified in the 

application. 

4. Because shares will not be 

individually redeemable, applicants 

request an exemption from Section 

5(a)(1) and Section 2(a)(32) of the Act 

that would permit the Funds to register 

as open-end management investment 

companies and issue shares that are 

redeemable in Creation Units (other 

than pursuant to a dividend 

reinvestment program). 

5. Applicants also request an 

exemption from section 22(d) of the Act 

and rule 22c–1 under the Act as 

secondary market trading in shares will 

take place at negotiated prices, not at a 

current offering price described in a 

Fund’s prospectus, and not at a price 

based on NAV. Applicants state that (a) 

secondary market trading in shares does 

not involve a Fund as a party and will 

not result in dilution of an investment 

in shares, and (b) to the extent different 

prices exist during a given trading day, 

or from day to day, such variances occur 

as a result of third-party market forces, 

such as supply and demand. Therefore, 

applicants assert that secondary market 

transactions in shares will not lead to 

discrimination or preferential treatment 

among purchasers. Finally, applicants 

represent that share market prices will 

be disciplined by arbitrage 

opportunities, which should prevent 

shares from trading at a material 

discount or premium from NAV. 

6. With respect to Funds that effect 

creations and redemptions of Creation 

Units in kind and that are based on 

certain Underlying Indexes that include 

foreign securities, applicants request 

relief from the requirement imposed by 

section 22(e) in order to allow such 

Funds to pay redemption proceeds 

within fifteen calendar days following 

the tender of Creation Units for 

redemption. Applicants assert that the 

requested relief would not be 

inconsistent with the spirit and intent of 

section 22(e) to prevent unreasonable, 

undisclosed or unforeseen delays in the 

actual payment of redemption proceeds. 

7. Applicants request an exemption to 

permit Funds of Funds to acquire Fund 

shares beyond the limits of section 

12(d)(1)(A) of the Act; and the Funds, 

and any principal underwriter for the 

Funds, and/or any broker or dealer 

registered under the Exchange Act, to 

sell shares to Funds of Funds beyond 

the limits of section 12(d)(1)(B) of the 

Act. The application’s terms and 

conditions are designed to, among other 

things, help prevent any potential (i) 

undue influence over a Fund through 

control or voting power, or in 

connection with certain services, 

transactions, and underwritings, (ii) 

excessive layering of fees, and (iii) 

overly complex fund structures, which 

are the concerns underlying the limits 

in sections 12(d)(1)(A) and (B) of the 

Act. 

8. Applicants request an exemption 

from sections 17(a)(1) and 17(a)(2) of the 

Act to permit persons that are Affiliated 

Persons, or Second Tier Affiliates, of the 

Funds, solely by virtue of certain 

ownership interests, to effectuate 

purchases and redemptions in-kind. The 

deposit procedures for in-kind 

purchases of Creation Units and the 

redemption procedures for in-kind 

redemptions of Creation Units will be 

the same for all purchases and 

redemptions and Deposit Instrument 

and Redemption Instruments will be 

valued in the same manner as those 

investment positions currently held by 

the Funds. Applicants also seek relief 

from the prohibitions on affiliated 

transactions in section 17(a) to permit a 

Fund to sell its shares to and redeem its 

shares from a Fund of Funds, and to 

engage in the accompanying in-kind 

transactions with the Fund of Funds.3

The purchase of Creation Units by a 

Fund of Funds directly from a Fund will 

be accomplished in accordance with the 

policies of the Fund of Funds and will 

be based on the NAVs of the Funds. 

9. Applicants also request relief to 

permit a Feeder Fund to acquire shares 

of another registered investment 

company managed by the Adviser 

having substantially the same 

investment objectives as the Feeder 

Fund (‘‘Master Fund’’) beyond the 

limitations in section 12(d)(1)(A) and 

permit the Master Fund, and any 

principal underwriter for the Master 

Fund, to sell shares of the Master Fund 

to the Feeder Fund beyond the 

limitations in section 12(d)(1)(B). 

10. Section 6(c) of the Act permits the 

Commission to exempt any persons or 

transactions from any provision of the 

Act if such exemption is necessary or 

appropriate in the public interest and 

consistent with the protection of 

investors and the purposes fairly 

intended by the policy and provisions of 

the Act. Section 12(d)(1)(J) of the Act 


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67440 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The term ‘‘System’’ means the electronic system 

operated by the Exchange that receives and 

disseminates quotes, executes orders and reports 

transactions. See Rule 100(a)(63). 

4See Securities Exchange Act Release No. 84741 

(December 6, 2018), 83 FR 63922 (December 12, 

2018) (SR–ISE–2018–97). 

5 If the previously placed order is already filled 

partially or in its entirety, the replacement order is 

automatically cancelled or reduced by the number 

of contracts that were executed. See Supplementary 

Material .02 to Rule 715. Supplementary Material 

.02 to Rule 715 further provides how the 

replacement portion may retain the priority of the 

original order, provided certain specified 

conditions are met. The manner in which the 

Exchange treats priority with respect to Cancel and 

Replace Orders is not changing under this proposal. 

6See Securities Exchange Act Release No. 80432 

(April 11, 2017), 82 FR 18191 (April 17, 2017) (SR– 

ISE–2017–03) (memorializing Cancel and Replace 

Orders in Supplementary Material .02 to Rule 715 

as part of the Exchange’s system migration to INET 

technology). 

7See note 4 above. 

8 Id. In this instance, the System would simply 

reject the cancel and replace message as an invalid 

instruction. The Exchange notes that the previous 

T7 system likewise treated Cancel and Replace 

Orders in this manner. 

provides that the Commission may 

exempt any person, security, or 

transaction, or any class or classes of 

persons, securities, or transactions, from 

any provision of section 12(d)(1) if the 

exemption is consistent with the public 

interest and the protection of investors. 

Section 17(b) of the Act authorizes the 

Commission to grant an order 

permitting a transaction otherwise 

prohibited by section 17(a) if it finds 

that (a) the terms of the proposed 

transaction are fair and reasonable and 

do not involve overreaching on the part 

of any person concerned; (b) the 

proposed transaction is consistent with 

the policies of each registered 

investment company involved; and (c) 

the proposed transaction is consistent 

with the general purposes of the Act. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2018–28291 Filed 12–27–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–84897; File No. SR–ISE– 

2018–100] 

Self-Regulatory Organizations; Nasdaq 

ISE, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend 

Supplementary Material .02 to Rule 715 

December 20, 2018. 

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 December 

20, 2018, Nasdaq ISE, LLC (‘‘ISE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘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 

Supplementary Material .02 to Rule 715, 

which relates to Cancel and Replace 

Orders, to correct an inadvertent error in 

the rule text. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://ise.cchwallstreet.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 

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 

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 Exchange recently filed a 

proposal to amend Supplementary 

Material .02 to Rule 715 regarding 

Cancel and Replace Orders to correct an 

inconsistency between the Exchange’s 

rule text and the operation of the 

System 3 by removing the reference to 

Rule 710, which relates to minimum 

price variations applicable to single leg 

options series traded on the Exchange.4

The Exchange, however, inadvertently 

omitted the deletion of Rule 722(c)(1) 

from this rule. Rule 722(c)(1) 

corresponds to Rule 710 in that it relates 

to minimum price variations of complex 

strategies. Accordingly, the Exchange is 

proposing herein to delete the reference 

to Rule 722(c)(1) from Supplementary 

Material .02 to Rule 715. 

By way of background, a member 

currently has the option of either 

sending in a cancel order and then 

separately sending in a new order which 

serves as a replacement of the original 

order (two separate messages), or 

sending a single cancel and replace 

order in one message (i.e., a Cancel and 

Replace Order). Specifically, 

Supplementary Material .02 to Rule 715 

defines a Cancel and Replace Order as 

a single message for the immediate 

cancellation of a previously received 

order and the replacement of that order 

with a new order.5 The replacement 

portion of the Cancel and Replace Order 

is treated as a new order and as a result, 

goes through price or other reasonability 

checks conducted by the System to 

validate such order against current 

market conditions prior to proceeding 

with request to modify the order.6 If the 

replacement portion of a Cancel and 

Replace Order does not satisfy the 

System’s price or other reasonability 

checks, the existing order will be 

cancelled and not replaced. 

Accordingly, the reference to Rule 710, 

which relates to minimum price 

variations applicable to single leg 

options series traded on the Exchange, 

was deleted from Supplementary 

Material .02 to Rule 715 as part of SR– 

ISE–2018–97, because Rule 710 does not 

involve the System considering the 

current market at the time of the Cancel 

and Replace Order.7 The Exchange 

further explained in SR–ISE–2018–97 

that an incoming Cancel and Replace 

Order that fails the minimum price 

variation checks in Rule 710 would not 

result in the existing order being 

cancelled and not replaced.8

Accordingly, the Exchange removed the 

reference to Rule 710 from the list of 

price or other reasonability checks to 

conform its rule text to the System. 

As noted above, Rule 722(c)(1) relates 

to minimum price variations of complex 

strategies, and is therefore analogous to 

the single leg rule in ISE Rule 710. The 

Exchange therefore proposes to delete 

Rule 722(c)(1) from Supplementary 

Material .02 to Rule 715 for the same 

reasons provided above for Rule 710. 

Similar to Rule 710, Rule 722(c)(1) does 

not involve the System considering the 

current market at the time of the Cancel 

and Replace Order, and an incoming 

Cancel and Replace Order that fails the 

minimum price variation checks for 

complex strategies in Rule 722(c)(1) 

would likewise not result in the existing 


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