Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Notices 83637 

20 15 U.S.C. 78mm(a)(1). 

21 17 CFR 242.608(e). 

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

2 17 CFR 240.19b–4. 

3As defined in Rule 14.11(m)(3)(A), the term 

‘‘Tracking Fund Share’’ means a security that: (i) 

Represents an interest in an investment company 

(‘‘Investment Company’’) registered under the 

Investment Company Act of 1940 (the ‘‘1940 Act’’) 

organized as an open-end management investment 

company, that invests in a portfolio of securities 

selected by the Investment Company’s investment 

adviser consistent with the Investment Company’s 

investment objectives and policies; (ii) is issued in 

a specified aggregate minimum number in return for 

a deposit of a specified Tracking Basket and/or a 

cash amount with a value equal to the next 

determined Net Asset Value (‘‘NAV’’); (iii) when 

aggregated in the same specified minimum number, 

may be redeemed at a holder’s request, which 

holder will be paid a specified Tracking Basket and/ 

or a cash amount with a value equal to the next 

determined NAV; and (iv) the portfolio holdings for 

which are disclosed within at least 60 days 

following the end of every fiscal quarter. 

4Rule 14.11(m) was approved along with the 

listing and trading of three series of Tracking Fund 

Shares by the Commission on May 15, 2020. See 

Securities Exchange Act Release No. 88887 (May 

15, 2020), 85 FR 30990 (May 21, 2020) (the 

‘‘Tracking Fund Shares Approval Order’’). 

5As defined in Rule 14.11(m)(3)(A), the term 

‘‘Tracking Fund Share’’ means a security that: (i) 

Represents an interest in an investment company 

(‘‘Investment Company’’) registered under the 

Investment Company Act of 1940 (the ‘‘1940 Act’’) 

organized as an open-end management investment 

company, that invests in a portfolio of securities 

selected by the Investment Company’s investment 

adviser consistent with the Investment Company’s 

investment objectives and policies; (ii) is issued in 

a specified aggregate minimum number in return for 

a deposit of a specified Tracking Basket and/or a 

cash amount with a value equal to the next 

determined Net Asset Value (‘‘NAV’’); (iii) when 

aggregated in the same specified minimum number, 

may be redeemed at a holder’s request, which 

holder will be paid a specified Tracking Basket and/ 

or a cash amount with a value equal to the next 

determined NAV; and (iv) the portfolio holdings for 

which are disclosed within at least 60 days 

following the end of every fiscal quarter. 

reporting of rejected orders. The 

Commission believes that this condition 

would allow the Commission to monitor 

the progress made towards meeting this 

CAT NMS Plan requirement prior to the 

expiration of the exemptive relief. 

III. Conclusion 

For the reasons discussed above, the 

Commission believes that granting 

temporary exemptive relief, pursuant to 

Section 36 of the Exchange Act, is 

appropriate in the public interest and 

consistent with the protection of 

investors, and that pursuant to Rule 

608(e), granting temporary exemptive 

relief is consistent with the public 

interest, the protection of investors, the 

maintenance of fair and orderly markets 

and the removal of impediments to, and 

the perfection of a national market 

system. 

Accordingly, it is hereby ordered, 

pursuant to Section 36(a)(1) of the 

Exchange Act,20 and Rule 608(e) of the 

Exchange Act 21 that the Participants are 

granted an exemption, from: (1) The 

requirement in Section 6.1 of Appendix 

D of the CAT NMS Plan that requires 

Participants to make lifecycle linkages 

of transaction data available by noon 

EST T+1, until July 31, 2023; (2) the 

requirement in Sections 3 and 6.2 of 

Appendix D of the CAT NMS Plan that 

the Participants process and assemble 

the complete lifecycle for corrected 

Reportable Events received by the Plan 

Processor made after T+5, until July 31, 

2021; (3) the requirement in Section 

6(b)(i) of the CAT NMS Plan that 

requires the Participants to ensure that 

information collected pursuant to 

paragraphs (c)(7) and (e)(7) of SEC Rule 

613 shall be linked when made 

available to the Participant regulatory 

staff and the SEC, until July 31, 2023; (4) 

the requirement in Sections 6.3(d)(i)(F), 

(ii)(G), (iii)(F), (iv)(E) and 6.4(d)(i) of the 

CAT NMS Plan that the Participants 

report, and amend their Compliance 

Rules to require Industry Members 

report the Material Terms of an Order 

that are communicated in port-level 

settings or instructions, until July 31, 

2023; (5) the requirement in Section 3, 

Appendix D of the CAT NMS Plan that 

the Participants create the lifecycle 

between customer orders to 

representative orders created in firm 

accounts for the purpose of facilitating 

a customer order, until July 31, 2023, 

and (6) the requirement in Section 

6.3(d) of the CAT NMS Plan that 

requires Participants to report rejected 

orders, until December 13, 2021, subject 

to the conditions described above. 

By the Commission. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–28146 Filed 12–21–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90684; File No. SR– 

CboeBZX–2020–091] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To List and 

Trade Shares of the Invesco Focused 

Discovery Growth ETF and the Invesco 

Select Growth ETF, Each a Series of 

the Invesco Actively Managed 

Exchange-Traded Fund Trust, Under 

Rule 14.11(m) (Tracking Fund Shares) 

December 16, 2020. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

14, 2020, Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade shares of the Invesco Focused 

Discovery Growth ETF and the Invesco 

Select Growth ETF pursuant to Rule 

14.11(m), Tracking Fund Shares,3 which 

are securities issued by an actively 

managed open-end management 

investment company.4 The Exchange is 

submitting this proposal as required by 

Rule 14.11(m)(2)(A), which provides 

that the Exchange must file separate 

proposals under Section 19(b) of the Act 

before listing and trading of a series of 

Tracking Fund Shares. 

The text of the proposed rule change 

is also available on the Exchange’s 

website (http://markets.cboe.com/us/ 

equities/regulation/rule_filings/bzx/), at 

the Exchange’s Office of the Secretary, 

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 proposes to list and 

trade shares of the Invesco Focused 

Discovery Growth ETF and the Invesco 

Select Growth ETF pursuant to Rule 

14.11(m), Tracking Fund Shares,5 which 

are securities issued by an actively 

managed open-end management 


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83638 Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Notices 

6Rule 14.11(m) was approved along with the 

listing and trading of three series of Tracking Fund 

Shares by the Commission on May 15, 2020. See 

Securities Exchange Act Release No. 88887 (May 

15, 2020), 85 FR 30990 (May 21, 2020) (the 

‘‘Tracking Fund Shares Approval Order’’). 

7The Trust is registered under the 1940 Act. On 

September 25, 2020, the Trust filed post-effective 

amendments to its registration statement on Form 

N–1A relating to each Fund (File No. 811–22148) 

(the ‘‘Registration Statement’’). The descriptions of 

the Funds and the Shares contained herein are 

based, in part, on information included in the 

Registration Statement. The Commission has issued 

an order granting certain exemptive relief to the 

Trust (the ‘‘Exemptive Relief’’) under the 1940 Act. 

See Investment Company Act of 1940 Release No. 

34127 (December 2, 2020). 

8As defined in Rule 14.11(m)(3)(E), the term 

‘‘Tracking Basket’’ means the identities and 

quantities of the securities and other assets 

included in a basket that is designed to closely track 

the daily performance of the Fund Portfolio, as 

provided in the exemptive relief under the 1940 Act 

applicable to a series of Tracking Fund Shares. 

Although the Exemptive Relief and Registration 

Statement utilize the term ‘‘Substitute Basket,’’ the 

function and purpose of the Substitute Basket is the 

same as contemplated by Rule 14.11(m)(3)(E) (i.e., 

the Substitute Basket is composed of securities and 

other assets included in a basket that is designed 

to closely track the daily performance of the Fund 

Portfolio). For ease of reference, the Substitute 

Basket is referred to as a Tracking Basket herein. 

9As defined in Rule 14.11(m)(3)(B), the term 

‘‘Fund Portfolio’’ means the identities and 

quantities of the securities and other assets held by 

the Investment Company that will form the basis for 

the Investment Company’s calculation of net asset 

value at the end of the business day. 10See 17 CFR 240.10A–3. 

11The Exemptive Relief and Registration 

Statement provide that the Funds may calculate the 

NAV per Share more than once daily (e.g., at 12:00 

p.m. ET and 4:00 p.m. ET), however, this proposal 

is not intended to allow the calculation of more 

than one NAV. The Exchange will submit and 

receive approval for a separate proposal prior to the 

Funds calculating the NAV per Share more than 

once daily. 

12Pursuant to the Exemptive Relief, the Fund’s 

permissible investments include only the following 

instruments: ETFs, exchange-traded notes, 

exchange-traded common stocks, common stocks 

listed on a foreign exchange that trade on such 

exchange contemporaneously with the Shares 

(‘‘foreign common stocks’’), exchange-traded 

preferred stocks, exchange-traded American 

Depositary Receipts (‘‘ADRs’’), exchange-traded real 

estate investment trusts, exchange-traded 

commodity pools, exchange-traded metals trusts, 

exchange-traded currency trusts, and exchangetraded futures that trade contemporaneously with 

the Shares, as well as cash and cash equivalents. 

With the exception of foreign common stocks and 

cash and cash equivalents, all holdings of the Fund 

will be listed on a U.S. national securities exchange. 

13For a list of the current members of ISG, see 

www.isgportal.com. The Exchange notes that all 

components, except the cash and cash equivalent 

components, of the Funds may trade on markets 

that are members of ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement. 

investment company.6 The Exchange is 

submitting this proposal as required by 

Rule 14.11(m)(2)(A), which provides 

that the Exchange must file separate 

proposals under Section 19(b) of the Act 

before listing and trading of a series of 

Tracking Fund Shares. 

The Shares will be offered by the 

Trust, which was organized as a 

Delaware statutory trust on November 6, 

2007. The Trust is registered with the 

Commission as an open-end investment 

company and has filed a registration 

statement on behalf of the Funds on 

Form N–1A with the Commission.7

Invesco Capital Management LLC (the 

‘‘Adviser’’) will be the investment 

adviser to the Funds. The Adviser is not 

registered as a broker-dealer, but is 

affiliated with broker-dealers. The 

Adviser represents that a fire wall exists 

and will be maintained between the 

respective personnel at the Adviser and 

affiliated broker-dealers with respect to 

access to information concerning the 

composition and/or changes to each 

Fund’s portfolio and Tracking Basket.8

Personnel who make decisions on a 

Fund’s portfolio composition and/or 

Tracking Basket or who have access to 

nonpublic information regarding the 

Fund Portfolio 9 and/or the Tracking 

Basket or changes thereto are subject to 

procedures designed to prevent the use 

and dissemination of material nonpublic information regarding such 

portfolio and/or Tracking Basket. The 

Funds’ sub-adviser, Invesco Advisers, 

Inc. (the ‘‘Sub-Adviser’’), is not 

registered as a broker-dealer but is 

affiliated with broker-dealers. SubAdviser personnel who make decisions 

regarding a Fund’s Fund Portfolio and/ 

or Tracking Basket or who have access 

to information regarding the Fund 

Portfolio and/or the Tracking Basket or 

changes thereto are subject to 

procedures designed to prevent the use 

and dissemination of material 

nonpublic information regarding the 

Fund’s portfolio and/or Tracking Basket. 

In the event that (a) the Adviser or a 

Sub-Adviser becomes registered as a 

broker-dealer or newly affiliated with a 

broker-dealer; or (b) any new adviser or 

sub-adviser is a registered broker-dealer 

or becomes newly affiliated with a 

broker-dealer; it will implement and 

maintain a fire wall with respect to its 

relevant personnel or such broker-dealer 

affiliate, as applicable, regarding access 

to information concerning the 

composition and/or changes to the Fund 

Portfolio and/or Tracking Basket, and 

will be subject to procedures designed 

to prevent the use and dissemination of 

material non-public information 

regarding such portfolio and/or 

Tracking Basket. Any person or entity, 

including any service provider for the 

Funds, who has access to nonpublic 

information regarding a Fund Portfolio 

or Tracking Basket or changes thereto 

for a Fund or Funds will be subject to 

procedures designed to prevent the use 

and dissemination of material 

nonpublic information regarding the 

applicable Fund Portfolio or Tracking 

Basket or changes thereto. Further, any 

such person or entity that is registered 

as a broker-dealer or affiliated with a 

broker-dealer, has erected and will 

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 Fund Portfolio or 

Tracking Basket. Each Fund intends to 

qualify each year as a regulated 

investment company under Subchapter 

M of the Internal Revenue Code of 1986, 

as amended. 

The Shares will conform to the initial 

and continued listing criteria under 

Rule 14.11(m) as well as all terms in the 

Exemptive Relief. The Exchange 

represents that, for initial and/or 

continued listing, each Fund will be in 

compliance with Rule 10A–3 under the 

Act.10 A minimum of 100,000 Shares of 

each Fund will be outstanding at the 

commencement of trading on the 

Exchange. The Exchange will obtain a 

representation from the issuer of the 

Shares of each Fund that the NAV per 

share of each Fund will be calculated 

daily 11 and will be made available to all 

market participants at the same time. 

Each Fund’s investments will be 

consistent with its investment objective 

and will not be used to enhance 

leverage. 

Invesco Focused Discovery Growth ETF 

The Fund’s holdings will conform to 

the permissible investments as set forth 

in the Exemptive Relief and the 

holdings will be consistent with all 

requirements in the Exemptive Relief.12

Any foreign common stocks held by the 

Fund will be traded on an exchange that 

is a member of the Intermarket 

Surveillance Group (‘‘ISG’’) 13 or with 

which the Exchange has in place a 

comprehensive surveillance sharing 

agreement. 

The Fund seeks capital appreciation 

as its investment objective. The Fund 

seeks to achieve its investment objective 

by investing primarily in exchangetraded common stocks of U.S. 

companies that the Sub-Adviser expects 

to have above average growth rates. The 

Fund seeks to invest in newer 

companies or in more established 

companies that are in the early growth 

phase of their business cycle, which is 

typically marked by above average 

growth rates. The Fund may invest in 

securities of issuers of all capitalization 

sizes; however, it will primarily hold 

securities of mid-capitalization issuers. 

In selecting investments for the Fund, 


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Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Notices 83639 

14Pursuant to the Exemptive Relief, the Fund’s 

permissible investments include only the following 

instruments: ETFs, exchange-traded notes, 

exchange-traded common stocks, foreign common 

stocks, exchange-traded preferred stocks, ADRs, 

exchange-traded real estate investment trusts, 

exchange-traded commodity pools, exchange-traded 

metals trusts, exchange-traded currency trusts, and 

exchange-traded futures that trade 

contemporaneously with the Shares, as well as cash 

and cash equivalents. With the exception of foreign 

common stocks and cash and cash equivalents, all 

holdings of the Fund will be listed on a U.S. 

national securities exchange. 

15For a list of the current members of ISG, see 

www.isgportal.com. The Exchange notes that all 

components, except the cash and cash equivalent 

components, of the Funds may trade on markets 

that are members of ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement. 

16With respect to trading in Tracking Fund 

Shares, all of the BZX Member obligations relating 

to product description and prospectus delivery 

requirements will continue to apply in accordance 

with Exchange rules and federal securities laws, 

and the Exchange will continue to monitor its 

Members for compliance with such requirements. 

17See Tracking Fund Shares Approval Order. 

18Tracking error measures the deviations 

between the Tracking Basket and Fund. 

the Sub-Adviser looks for companies 

with high growth potential using a 

‘‘bottom-up’’ stock selection process. 

The ‘‘bottom-up’’ approach focuses on 

fundamental analysis of individual 

issuers before considering the impact of 

overall economic, market or industry 

trends. This approach includes analysis 

of a company’s financial statements and 

management structure and 

consideration of the company’s 

operations, product development, and 

its industry position. 

Invesco Select Growth ETF 

The Fund’s holdings will conform to 

the permissible investments as set forth 

in the Exemptive Relief and the 

holdings will be consistent with all 

requirements in the Exemptive Relief.14

Any foreign common stocks held by the 

Fund will be traded on an exchange that 

is a member of ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement.15

The Fund seeks capital appreciation 

as its investment objective. The Fund 

seeks to achieve its investment objective 

by investing primarily in exchangetraded common stocks of U.S. 

companies that the Sub-Adviser 

believes have potential for earnings or 

revenue growth driven by long-term 

secular trends and themes. The Fund 

may invest in securities of issuers of all 

capitalization sizes; however, it will 

primarily hold securities of large and 

mid-capitalization issuers. The Fund 

usually will hold a relatively small 

number of stocks (approximately 20–30) 

and may invest more than 25% of its 

assets in a given sector. 

Trading Halts 

Rule 14.11(m)(4)(B)(iv) provides that 

(a) the Exchange may consider all 

relevant factors in exercising its 

discretion to halt trading in a series of 

Tracking Fund Shares. Trading may be 

halted because of market conditions or 

for reasons that, in the view of the 

Exchange, make trading in the Shares 

inadvisable. These may include: (i) The 

extent to which trading is not occurring 

in the securities and/or the financial 

instruments composing the Tracking 

Basket or Fund Portfolio; or (ii) whether 

other unusual conditions or 

circumstances detrimental to the 

maintenance of a fair and orderly 

market are present; and (b) if the 

Exchange becomes aware that one of the 

following is not being made available to 

all market participants at the same time: 

the net asset value, the Tracking Basket, 

or the Fund Portfolio with respect to a 

series of Tracking Fund Shares, then the 

Exchange will halt trading in such series 

until such time as the net asset value, 

the Tracking Basket, or the Fund 

Portfolio is available to all market 

participants, as applicable. 

Trading Rules 

The Exchange deems Tracking Fund 

Shares to be equity securities, thus 

rendering trading in the Shares subject 

to the Exchange’s existing rules 

governing the trading of equity 

securities.16 As provided in Rule 

14.11(m)(2)(C), the minimum price 

variation for quoting and entry of orders 

in securities traded on the Exchange is 

$0.01. The Exchange has appropriate 

rules to facilitate trading in Tracking 

Fund Shares during all trading sessions. 

Tracking Basket for the Proposed Funds 

For the Funds, the Tracking Basket 

will include a significant percentage of 

the securities held in the Fund Portfolio, 

but will exclude certain securities held 

in the Fund Portfolio (or modify their 

weightings), such as those the Fund’s 

portfolio managers are actively looking 

to purchase or sell, or securities which, 

if disclosed, could increase the risk of 

front-running or free-riding. By design, 

the behavior of the Tracking Basket will 

be highly correlated with the behavior 

of a Fund Portfolio. A process 

developed by the Adviser will be used 

to optimize the Tracking Basket, which 

the Adviser expects will cause the 

performance of the Tracking Basket to 

closely track the performance of the 

Fund Portfolio. The Exchange notes that 

although the Tracking Basket 

methodology used by the Fund is not 

identical to the Tracking Basket 

methodology in a proposal to list and 

trade shares of Tracking Fund Shares 

that was previously approved by the 

Commission,17 the substantive function 

of the Tracking Basket is the same. The 

Tracking Basket will only include 

securities in which the applicable Fund 

may itself invest. Intraday pricing 

information for all constituents of the 

Tracking Basket that are exchangetraded, which includes all eligible 

instruments except cash and cash 

equivalents, will be available on the 

exchanges on which they are traded and 

through subscription services. Intraday 

pricing information for cash equivalents 

will be available through subscription 

services and/or pricing services. The 

Exchange notes that each Fund’s NAV 

will form the basis for creations and 

redemptions for the Funds and creations 

and redemptions will work in a manner 

substantively identical to that of series 

of Managed Fund Shares. The Adviser 

expects that the Shares of the Funds 

will generally be created and redeemed 

in-kind, with limited exceptions. The 

names and quantities of the instruments 

that constitute the basket of securities 

for creations and redemptions will be 

the same as a Fund’s Tracking Basket, 

except to the extent purchases and 

redemptions are made entirely or in part 

on a cash basis. In the event that the 

value of the Tracking Basket is not the 

same as a Fund’s NAV, the creation and 

redemption baskets will consist of the 

securities included in the Tracking 

Basket plus or minus an amount of cash 

equal to the difference between the NAV 

and the value of the Tracking Basket, as 

further described below. 

The Tracking Basket will be 

constructed utilizing a risk model, 

which includes a covariance matrix, 

based on an optimization process to 

minimize deviations in the return of the 

Tracking Basket relative to the Fund. 

The proprietary optimization process 

mathematically seeks to minimize key 

parameters that the Adviser believes are 

important to the effectiveness of the 

Tracking Basket as a hedge, including 

tracking error (standard deviation of 

return differentials between the 

Tracking Basket and the Fund) and 

creation/redemption transaction costs.18

In general, the optimization process 

attempts to keep the characteristics of 

the Tracking Basket in line with those 

of the Fund. Typically, the Tracking 

Basket is expected to be rebalanced on 

schedule with the public disclosure of 

the Fund’s holdings; however, a new 

optimized Tracking Basket may be 

generated as frequently as daily, and 

therefore, rebalancing may occur more 

frequently at the Adviser’s discretion. In 


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83640 Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Notices 

19The Adviser uses a trading cost model to 

develop estimates of costs to trade a new Tracking 

Basket. There are essentially two elements to this 

cost: (1) The cost to purchase securities constituting 

the Tracking Basket, i.e., the cost to put on the 

hedge for the Authorized Participant, and (2) the 

cost of any adjustments that need to be made to the 

composition of the Tracking Basket, i.e., the cost to 

the Authorized Participant to change or maintain 

the hedge position. The inclusion of the trading cost 

model in the optimization process is intended to 

result in a Tracking Basket that is cost effective and 

liquid without compromising its tracking ability. 

20The Exchange notes that to the extent that the 

Fund Portfolio or Tracking Basket include any 

foreign common stocks, such securities will be 

traded on an exchange that is a member of ISG or 

with which the Exchange has in place a 

comprehensive surveillance sharing agreement. 

21 15 U.S.C. 78f. 

22 15 U.S.C. 78f(b)(5). 

determining whether to rebalance a new 

optimized Tracking Basket, the Adviser 

will consider various factors, including 

liquidity of the securities in the 

Tracking Basket, tracking error, and the 

cost to create and trade the Tracking 

Basket.19 For example, if the Adviser 

determines that a new Tracking Basket 

would reduce the variability of return 

differentials between the Tracking 

Basket and the Fund when balanced 

against the cost to trade the new 

Tracking Basket, rebalancing may be 

appropriate. The Adviser will 

periodically review the Tracking Basket 

parameters and Tracking Basket 

performance and process. 

As noted above, each Fund will also 

disclose the entirety of its portfolio 

holdings, including the name, identifier, 

market value and weight of each 

security and instrument in the portfolio, 

at a minimum within at least 60 days 

following the end of every fiscal quarter. 

The Exchange notes that the concept of 

the Tracking Basket employed under 

this structure is designed to provide 

investors with the traditional benefits of 

ETFs while protecting the Funds from 

the potential for front running or free 

riding of portfolio transactions, which 

could adversely impact the performance 

of a Fund. 

The Exchange believes that the 

particular instruments that may be 

included in each of the Fund’s 

respective Fund Portfolio and Tracking 

Basket do not raise any concerns related 

to the Tracking Baskets being able to 

closely track the NAV of the Funds 

because such instruments include only 

instruments that trade on an exchange 

contemporaneously with the Shares.20

In addition, each Fund’s Tracking 

Basket will be optimized so that it 

reliably and consistently correlates to 

the performance of the Fund. 

The Adviser anticipates that the 

returns between a Fund and its 

respective Tracking Basket will have a 

consistent relationship and that the 

deviation in the returns between a Fund 

and its Tracking Basket will be 

sufficiently small such that the Tracking 

Basket will provide Authorized 

Participants, arbitrageurs, and certain 

other market participants (collectively, 

‘‘Market Makers’’) with a reliable 

hedging vehicle that they can use to 

effectuate low-risk arbitrage trades in 

Fund Shares. The Exchange believes 

that the disclosures provided by the 

Funds will allow Market Makers to 

understand the relationship between the 

performance of a Fund and its Tracking 

Basket. Market Makers will be able to 

estimate the value of and hedge 

positions in a Fund’s Shares, which the 

Exchange believes will facilitate the 

arbitrage process and help ensure that 

the Fund’s Shares normally will trade at 

market prices close to their NAV. The 

Exchange also believes that competitive 

market making, where traders are 

looking to take advantage of differences 

in bid-ask spread, will aid in keeping 

spreads tight. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with Section 6(b) 

of the Act 21 in general and Section 

6(b)(5) of the Act 22 in particular in that 

it is designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities, 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 notes that a significant 

amount of information about each Fund 

and its Fund Portfolio will be publicly 

available at all times. Each Fund will 

disclose the Tracking Basket, which is 

designed to closely track the daily 

performance of the Fund Portfolio, on a 

daily basis. Each Fund will at a 

minimum publicly disclose the entirety 

of its portfolio holdings, including the 

name, identifier, market value and 

weight of each security and instrument 

in the portfolio within at least 60 days 

following the end of every fiscal quarter 

in a manner consistent with normal 

disclosure requirements otherwise 

applicable to open-end investment 

companies registered under the 1940 

Act. The website will include additional 

quantitative information updated on a 

daily basis, including, on a per Share 

basis for each Fund, the prior business 

day’s NAV and the closing price or bid/ 

ask price at the time of calculation of 

such NAV, and a calculation of the 

premium or discount of the closing 

price or bid/ask price against such NAV. 

The website will also disclose the 

percentage weight overlap between the 

holdings of the Tracking Basket 

compared to the Fund holdings for the 

prior business day and any information 

regarding the bid/ask spread for each 

Fund as may be required for other ETFs 

under Rule 6c–11 under the 1940 Act, 

as amended. Price information for the 

exchange-listed instruments held by the 

Funds, including both U.S. and nonU.S. listed equity securities and U.S. 

exchange-listed futures will be available 

through major market data vendors or 

securities exchanges listing and trading 

such securities. 

The Exchange represents that the 

Shares of the Funds will continue to 

comply with all other requirements 

applicable to Tracking Fund Shares, 

including the dissemination of key 

information such as the Tracking 

Basket, the Fund Portfolio, and NAV, 

suspension of trading or removal, 

trading halts, surveillance, minimum 

price variation for quoting and order 

entry, an information circular informing 

members of the special characteristics 

and risks associated with trading in the 

Shares, and firewalls as set forth in the 

Rules applicable to Tracking Fund 

Shares and the order approving such 

rules. Moreover, U.S.-listed equity 

securities held by the Funds will trade 

on markets that are a member of ISG or 

with which the Exchange has in place 

a comprehensive surveillance sharing 

agreement. All statements and 

representations made in this filing 

regarding the description of the 

portfolio or reference assets, limitations 

on portfolio holdings or reference assets, 

dissemination and availability of 

reference asset (as applicable), or the 

applicability of Exchange listing rules 

specified in this filing shall constitute 

continued listing requirements for the 

Shares. The issuer has represented to 

the Exchange that it will advise the 

Exchange of any failure by a Fund or 

Shares 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. FINRA conducts certain 

cross-market surveillances on behalf of 

the Exchange pursuant to a regulatory 

services agreement. The Exchange is 

responsible for FINRA’s performance 

under this regulatory services 

agreement. If a Fund is not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures with 


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Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Notices 83641 

23 15 U.S.C. 78s(b)(3)(A). 

24 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 

Continued 

respect to such Fund under Exchange 

Rule 14.12. 

The Exchange believes that the 

proposal is designed to prevent 

fraudulent and manipulative acts and 

practices in that the Rules relating to 

listing and trading of Tracking Fund 

Shares provide specific initial and 

continued listing criteria required to be 

met by such securities. 

Rules 14.11(m)(4)(B)(iii) and (iv) 

provide that the Exchange will consider 

the suspension of trading in and will 

commence delisting proceedings for a 

Fund pursuant to Rule 14.12 under any 

of the circumstances described above 

and that the Exchange may consider all 

relevant factors in exercising its 

discretion to halt trading in a series of 

Tracking Fund Shares. Trading may be 

halted because of market conditions or 

for reasons that, in the view of the 

Exchange, make trading in the Shares 

inadvisable. 

Additionally, the Exchange believes 

that the requirements related to 

information protection enumerated 

under Rule 14.11(m)(2)(F) will act as a 

strong safeguard against any misuse and 

improper dissemination of information 

related to a Fund Portfolio, the Tracking 

Basket, or changes thereto. The 

requirement that any person or entity, 

including a custodian, Reporting 

Authority, distributor, or administrator, 

who has access to nonpublic 

information regarding the Fund 

Portfolio or the Tracking Basket or 

changes thereto, must be subject to 

procedures designed to prevent the use 

and dissemination of material 

nonpublic information regarding the 

applicable Fund Portfolio or the 

Tracking Basket or changes thereto will 

act to prevent any individual or entity 

from sharing such information 

externally. 

The Exchange believes that its 

surveillance procedures are adequate to 

properly monitor the trading of the 

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 the Shares through the 

Exchange will be subject to the 

Exchange’s surveillance procedures for 

derivative products, including Tracking 

Fund Shares. If a Fund is not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures under 

Exchange Rule 14.12. In addition, the 

Exchange also has a general policy 

prohibiting the distribution of material, 

non-public information by its 

employees. Any foreign common stocks 

held by the Fund will be traded on an 

exchange that is a member of ISG or 

with which the Exchange has in place 

a comprehensive surveillance sharing 

agreement. All futures contracts that the 

Funds may invest in will be traded on 

a U.S. futures exchange. The Exchange 

or FINRA, on behalf of the Exchange, or 

both, will communicate as needed 

regarding trading in the Shares, 

underlying U.S. exchange-listed equity 

securities, and U.S. exchange-listed 

futures with other markets and other 

entities that are members of ISG, and the 

Exchange or FINRA, on behalf 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, underlying equity 

securities, and U.S. exchange-listed 

futures from markets and other entities 

that are members of ISG or with which 

the Exchange has in place a 

comprehensive surveillance sharing 

agreement. 

As provided in Rule 14.11(m)(2)(D), 

the Adviser will upon request make 

available to the Exchange and/or 

FINRA, on behalf of the Exchange, the 

daily Fund Portfolio of each Fund. The 

Exchange believes that the ability to 

access the information on an as needed 

basis will provide it with sufficient 

information to perform the necessary 

regulatory functions associated with 

listing and trading the Shares on the 

Exchange, including the ability to 

monitor compliance with the initial and 

continued listing requirements as well 

as the ability to surveil for manipulation 

of the Shares. 

In addition, Form N–PORT requires 

reporting of a fund’s complete portfolio 

holdings on a position-by-position basis 

on a quarterly basis within 60 days after 

fiscal quarter end. Investors can obtain 

a fund’s Statement of Additional 

Information, its Shareholder Reports, its 

Form N–CSR, filed twice a year, and its 

Form N–CEN, filed annually. A fund’s 

SAI and Shareholder Reports are 

available free upon request from the 

Investment Company, and those 

documents and the Form N–PORT, 

Form N–CSR, and Form N–CEN may be 

viewed on-screen or downloaded from 

the Commission’s website at 

www.sec.gov. The Exchange also notes 

that the Exemptive Relief provides that 

the Funds will comply with Regulation 

Fair Disclosure, which prohibits 

selective disclosure of any material nonpublic information, which otherwise do 

not apply to issuers of Tracking Fund 

Shares. 

Information regarding market price 

and trading volume of the Shares will be 

continually available 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 CTA high-speed 

line. The Exchange deems Tracking 

Fund Shares to be equity securities, thus 

rendering trading in the Shares subject 

to the Exchange’s existing rules 

governing the trading of equity 

securities. As provided in Rule 

14.11(m)(2)(C), the minimum price 

variation for quoting and entry of orders 

in securities traded on the Exchange is 

$0.01. 

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 purpose of the Act. Rather, the 

Exchange notes that the proposed rule 

change will facilitate the listing of 

several new series of actively-managed 

exchange-traded product, thus 

enhancing competition among both 

market participants and listing venues, 

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 

The Exchange has neither solicited 

nor received written comments on 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 23 and Rule 19b– 

4(f)(6) thereunder.24


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83642 Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Notices 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

25 17 CFR 240.19b–4(f)(6). 

26 17 CFR 240.19b–4(f)(6)(iii). 

27See Securities Exchange Act Release No. 88887 

(May 15, 2020), 85 FR 30990 (May 21, 2020) (SR– 

CboeBZX–2019–107) (Notice of Filing of 

Amendment No. 5 and Order Granting Accelerated 

Approval of a Proposed Rule Change, as Modified 

by Amendment No. 5, to Adopt Rule 14.11(m), 

Tracking Fund Shares, and to List and Trade Shares 

of the Fidelity Blue Chip Value ETF, Fidelity Blue 

Chip Growth ETF, and Fidelity New Millennium 

ETF). See also Securities Exchange Act Release No. 

90530 (November 30, 2020), 85 FR 78366 

(December 4, 2020) (SR–CboeBZX–2020–085) 

(Notice of Filing and Immediate Effectiveness of a 

Proposed Rule Change Relating to List and Trade 

Shares of the Fidelity Growth Opportunities ETF, 

Fidelity Magellan ETF, Fidelity Real Estate 

Investment ETF, and Fidelity Small-Mid Cap 

Opportunities ETF). 

28For 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). 29 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 7201 et seq. 

2Public Law 111–203, 124 Stat. 1376 (2010). 

3 17 CFR 202.190. 

A proposed rule change filed under 

Rule 19b–4(f)(6) 25 normally does not 

become operative for 30 days after the 

date of the filing. However, pursuant to 

Rule 19b–4(f)(6)(iii),26 the Commission 

may designate a shorter time if such 

action is consistent with the protection 

of investors and the public interest. The 

Exchange has asked the Commission to 

waive the 30-day operative delay. The 

proposed rule change is substantially 

similar to other Tracking Fund Shares 

the Commission previously approved 27

and does not raise any novel regulatory 

issues. Accordingly, the Commission 

waives the 30-day operative delay and 

designates the proposal operative upon 

filing.28

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission will institute proceedings 

to determine whether the proposed rule 

change 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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

CboeBZX–2020–091 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–CboeBZX–2020–091. 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 (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–CboeBZX–2020–091 and 

should be submitted on or before 

January 12, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–28148 Filed 12–21–20; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 10905; Release No. 90693] 

Order Approving Public Company 

Accounting Oversight Board Budget 

and Annual Accounting Support Fee 

for Calendar Year 2021 

December 16, 2020. 

The Sarbanes-Oxley Act of 2002, as 

amended (the ‘‘Sarbanes-Oxley Act’’),1

established the Public Company 

Accounting Oversight Board (‘‘PCAOB’’) 

to oversee the audits of companies that 

are subject to the securities laws, and 

related matters, in order to protect the 

interests of investors and further the 

public interest in the preparation of 

informative, accurate, and independent 

audit reports. Section 982 of the DoddFrank Wall Street Reform and Consumer 

Protection Act (the ‘‘Dodd-Frank Act’’) 2

amended the Sarbanes-Oxley Act to 

provide the PCAOB with explicit 

authority to oversee auditors of brokerdealers registered with the Securities 

and Exchange Commission (the 

‘‘Commission’’). The PCAOB is to 

accomplish these goals through the 

registration of public accounting firms, 

standard setting, inspections, and 

investigation and disciplinary programs. 

The PCAOB is subject to the 

comprehensive oversight of the 

Commission. 

Section 109 of the Sarbanes-Oxley Act 

provides that the PCAOB shall establish 

a reasonable annual accounting support 

fee, as may be necessary or appropriate 

to establish and maintain the PCAOB. 

Under Section 109(f) of the SarbanesOxley Act, the aggregate annual 

accounting support fee shall not exceed 

the PCAOB’s aggregate ‘‘recoverable 

budget expenses,’’ which may include 

operating, capital, and accrued items. 

The PCAOB’s annual budget and 

accounting support fee are subject to 

approval by the Commission. In 

addition, the PCAOB must allocate the 

annual accounting support fee among 

issuers and among brokers and dealers. 

Section 109(b) of the Sarbanes-Oxley 

Act directs the PCAOB to establish a 

budget for each fiscal year in accordance 

with the PCAOB’s internal procedures, 

subject to approval by the Commission. 

Rule 190 of Regulation P (the ‘‘budget 

rule’’) governs the Commission’s review 

and approval of PCAOB budgets and 

annual accounting support fees.3 The 

budget rule provides, among other 

things, a timetable for the preparation 

and submission of the PCAOB budget 


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