Federal Register / Vol. 80, No. 60 / Monday, March 30, 2015 / Notices 16707 

15For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

16 17 CFR 200.30–3(a)(12), (59). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See paragraph (a)(3) to Rule 13 governing 

pegging interest. 

5See paragraph (a)(4) to Rule 13 governing 

pegging interest. 

from the pilot program without 

interruption after April 14, 2015. The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest because such waiver 

would allow the pilot to continue 

uninterrupted, thereby avoiding any 

potential investor confusion that could 

result from temporary interruption in 

the pilot program. For this reason, the 

Commission designates the proposal 

operative on April 14, 2015.15

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEARCA–2015–22 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEARCA–2015–22. 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 Web site (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 Web site 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 such 

filing also will be available for 

inspection and copying at the principal 

offices of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEARCA–2015–22, and should be 

submitted on or before April 20, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–07136 Filed 3–27–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74571; File No. SR– 

NYSEMKT–2015–19] 

Self-Regulatory Organizations; NYSE 

MKT LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending Rule 13— 

Equities Relating to Pegging Interest 

March 24, 2015. 

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 March 17, 

2015, NYSE MKT LLC (‘‘Exchange’’ or 

‘‘NYSE MKT’’) 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Rule 13—Equities (Orders and 

Modifiers) relating to pegging interest. 

The text of the proposed rule change is 

available on the Exchange’s Web site 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 

The Exchange proposes to amend 

Rule 13—Equities (‘‘Rule 13’’) relating 

to pegging interest to provide that if the 

protected best bid or offer (‘‘PBBO’’) is 

not within the range of the pegging 

interest, the pegging interest would peg 

to the ‘‘next best-priced available 

displayable interest,’’ rather than the 

‘‘next best-priced available interest.’’ 

This amendment would therefore 

exclude non-displayed interest from 

consideration as part of the ‘‘next bestpriced available interest’’ under the 

rule. 

Background 

Under current Rule 13, pegging 

interest pegs to prices based on (i) a 

PBBO, which may be available on the 

Exchange or an away market, or (ii) 

interest that establishes a price on the 

Exchange.4 In addition, pegging interest 

will peg only within a price range 

specified by the floor broker submitting 

the order. Thus, if the PBBO is not 

within the specified price range of the 

pegging interest, the pegging interest 

will instead peg to the next available 

best-priced interest that is within the 

specified price range.5 For example, if 

pegging interest to buy 100 shares has 

a specified price range up to $10.00, but 

the best protected bid (‘‘PBB’’) of 100 

shares is $10.01, then such pegging 

interest could not peg to the $10.01 PBB 

because it is not within the specified 

price range of the pegging interest. The 

pegging interest would instead peg to 

mstockstill on DSK4VPTVN1PROD with NOTICES

16708 Federal Register / Vol. 80, No. 60 / Monday, March 30, 2015 / Notices 

6See paragraph (a)(4)(A) to Rule 13 governing 

pegging interest. Similarly, if pegging interest 

would peg to a price that would lock or cross the 

Exchange best offer or bid, the pegging interest 

would instead peg to the next available best-priced 

interest that would not lock or cross the Exchange 

best bid or offer. See paragraph (c)(1) to Rule 13 

governing pegging interest. 

7On October 1, 2008, the Commission approved 

the Exchange’s rule proposal to establish new 

membership, member firm conduct, and equity 

trading rules that were based on the existing NYSE 

rules to reflect that equities trading on the Exchange 

would be supported by the NYSE’s trading system. 

See Securities Exchange Act Release No. 58705 

(Oct. 1, 2008), 73 FR 58995 (Oct. 8, 2008) (SR– 

Amex–2008–63) (approval order). Because the 

Exchange’s rules are based on the existing NYSE 

rules, the Exchange believes that pre-October 1, 

2008 NYSE rule filings provide guidance 

concerning Exchange equity rules. See Securities 

Exchange Act Release No. 54577 (Oct. 5, 2006), 71 

FR 60208, 60210–11 (Oct. 12, 2006) (SR–NYSE– 

2006–36) (‘‘Pegging Approval Order’’) (order 

approving, among other things, introduction of 

pegging functionality for Floor brokers, including 

‘‘if the Exchange best bid is higher than the ceiling 

price of a pegging buy-side e-Quote or d-Quote, the 

e-Quote or d-Quote would remain at its quote price 

or the highest price at which there is other interest 

within its pegging price range, whichever is higher 

(consistent with the limit price of the order 

underlying the e-Quote or d-Quote). Similarly, if the 

Exchange best offer is lower than the floor price of 

a pegging sell-side e-Quote or d-Quote, the e-Quote 

or d-Quote would remain at its quote price or the 

lowest price at which there is other interest within 

its pegging price range, whichever is lower 

(consistent with the limit price of the order 

underlying the e-Quote or d-Quote).’’ (emphasis 

added)). 

8See Securities Exchange Act Release No. 59022 

(Nov. 26, 2008), 73 FR 73683 (Dec. 3, 2008) (SR– 

NYSEALTR–2008–10) (introducing Non-Display 

Reserve Orders). 

9See Securities Exchange Act Release No. 66032 

(Dec. 22, 2011), 76 FR 82009 (Dec. 29, 2011) (SR– 

NYSEAmex–2011–99) (‘‘Because the next available 

best-priced non-pegging interest may be on an away 

market, the Exchange further proposes to amend 

paragraph (vii) to Supplementary Material .26 to 

specify that the non-pegging interest against which 

pegging interest pegs may either be available on the 

Exchange or may be a protected bid or offer on an 

away market.’’) (‘‘2011 Pegging Filing’’); see also 

Securities Exchange Act Release No. 68305 (Nov. 

28, 2012), 77 FR 71853, 71857 (Dec. 4, 2012) (SR– 

NYSEMKT–2012–67) (amending Exchange rule 

governing pegging to, among other things, 

consolidate rule text from separate parts of the thenexisting rule in a streamlined format, including use 

of the term ‘‘next available best-priced interest’’) 

(‘‘2012 Pegging Filing’’). 

10When the NYSE adopted this feature in 2006, 

it only considered the NYSE BBO for purposes of 

determining whether the size condition was met, 

and specifically excluded pegging interest that was 

pegging to the NYSE BBO. See Pegging Approval 

Order, supra, n. 7 at 60211. The Exchange now 

evaluates the minimum size requirement based on 

the PBBO instead of the Exchange BBO. See 2012 

Pegging Filing, supra, n. 9 at 71858. 

11The Exchange also proposes to delete the 

clause ‘‘which may not be the PBB or PBO’’ in 

current paragraph (c)(5), which is rule text that 

related to when primary pegging interest had an 

optional offset feature, in which case the minimum 

quantity would not have been evaluated against the 

PBBO because primary pegging interest with an 

offset would not have pegged to the PBBO. The 

Exchange did not implement the offset functionality 

and previously filed a rule change to delete the rule 

text relating to the optional offset. See Securities 

Exchange Act Release No. 71898 (April 8, 2014), 79 

FR 20957 (April 14, 2014) (SR–NYSEMKT–2014– 

27) (amending rules governing pegging interest to 

conform to functionality that is available at the 

Exchange). 

the next available best-priced interest 

within the specified price range of up to 

$10.00.6

The ‘‘next available best-priced 

interest’’ concept in the current rule was 

originally expressed in a different 

fashion (when pegging was based on the 

Exchange’s BBO, rather than the PBBO), 

but the basic functionality has always 

been the same. Specifically, when the 

pegging interest was introduced in 2006 

on the New York Stock Exchange LLC 

(‘‘NYSE’’), if the Exchange BBO was 

higher (lower) than the price limit on 

the pegging interest to buy (sell), the 

pegging interest would peg to the 

highest (lowest) price at which there 

was other interest within the pegging 

price range.7 In 2008, the NYSE 

introduced Non-Displayed Reserve 

Orders, without changing the 

underlying functionality of pegging 

interest to exclude the prices of such 

orders from the evaluation of what 

constitutes the highest (lowest) price at 

which there is other interest available 

within the range of the pegging 

interest.8 In 2011, the Exchange 

amended the rule governing pegging 

interest to make a non-substantive 

change to the rule text to use the term 

‘‘next available best-priced non-pegging 

interest’’ to describe the highest (lowest) 

priced interest in the Exchange Book or 

a protected bid or offer on an away 

market to which pegging interest to buy 

(sell) could peg.9 Accordingly, the next 

available best-priced interest for pegging 

interest to buy (sell) is the next highest 

(lowest)-priced buy (sell) interest within 

Exchange systems or an away market 

protected quote that is available for an 

execution at any given time. That 

interest could be same-side nonmarketable displayable interest or sameside non-marketable non-displayable 

interest. 

Taking the above example, assume 

that the next price points on the 

Exchange’s book priced below the 

$10.01 PBB are a Non-Display Reserve 

Order to buy 100 for $9.99 and a Limit 

Order to buy 100 for $9.98. Because the 

Non-Display Reserve Order is the next 

available best-priced interest within the 

specified price range, the pegging 

interest would peg to the $9.99 price of 

the Non-Display Reserve Order. 

Proposed Rule Change 

The Exchange proposes to revise its 

rule to limit the type of interest to 

which pegging interest would peg if the 

PBBO is not within the specified price 

range of the pegging interest. As 

proposed, if the PBBO is not within the 

specified price range, the pegging 

interest would only peg to the next 

available best-priced displayable 

interest. The term ‘‘displayable’’ is 

defined in Rule 72(a)(i) as that portion 

of interest that could be published as, or 

as part of, the Exchange BBO and 

includes non-marketable odd-lot and 

round-lot orders. 

Using the above example, under the 

proposed change, the pegging interest to 

buy would instead peg to the Limit 

Order to buy for $9.98, and not the 

higher-priced Non-Display Reserve 

Order to buy for $9.99. 

The Exchange also proposes to make 

a conforming change to paragraph (c)(1) 

of Rule 13 to provide that if pegging 

interest would peg to a price that is 

locking or crossing the Exchange best 

bid or offer, the pegging interest would 

instead peg to the next available bestpriced displayable interest that would 

not lock or cross the Exchange best bid 

or offer. 

Currently, under any circumstance 

when pegging interest cannot peg to the 

PBBO, whether because of a price 

restriction or if the PBBO does not meet 

a minimum size designation, pegging 

interest pegs instead to the next 

available best-priced interest. For 

example, pursuant to paragraph (c)(5) of 

Rule 13 governing pegging interest, the 

Exchange offers an optional feature 

whereby pegging interest may be 

designated with a minimum size of 

same-side volume to which such 

pegging interest would peg. If the PBBO 

does not meet the optional minimum 

size designation, the pegging interest 

pegs to the next available best-priced 

interest, without regard to size.10

Accordingly, the Exchange also 

proposes to make a related change to 

current paragraph (c)(5) (which is being 

renumbered as paragraph (b)(4)) to 

• specify that, if the PBBO does not 

meet a minimum size requirement 

specified by the pegging interest, the 

pegging interest pegs to the next 

available best-priced interest, without 

regard to size, and 

• modify current functionality so that 

only displayable interest may be pegged 

to in such circumstances.11

The Exchange also proposes nonsubstantive amendments to delete 

references to ‘‘reserved’’ paragraphs of 

the rule and renumber the rule 

accordingly. 

Because of the technology changes 

associated with this proposed rule 

change, the Exchange will announce by 

Trader Update when this change will be 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 60 / Monday, March 30, 2015 / Notices 16709 

12 15 U.S.C. 78f(b). 

13 15 U.S.C. 78f(b)(5). 

14See Securities Exchange Act Release No. 74298 

(Feb. 18, 2015), 80 FR 9770, 9772–73 (Feb. 24, 2015) 

(SR–NYSEMKT–2014–95) (Order instituting 

proceedings to determine whether to approve or 

disapprove a proposed rule change to Rule 13). 

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

16 17 CFR 240.19b–4(f)(6). 

17 17 CFR 240.19b–4(f)(6). In addition, Rule 

19b–4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s 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. 

18 17 CFR 240.19b–4(f)(6). 

19 17 CFR 240.19b–4(f)(6)(iii). 

20For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

21 15 U.S.C. 78s(b)(3)(C). 

implemented, which will be within 30 

days of the effective date of this filing. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the 

Act,12 in general, and furthers the 

objectives of Section 6(b)(5),13 in 

particular, because 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. Specifically, the 

proposed change is intended to respond 

to the concern raised by the 

Commission 14 that the current rule 

permitting pegging to prices of nondisplayable same-side non-marketable 

interest could potentially allow the user 

of the pegging interest to ascertain the 

presence of hidden liquidity at those 

price levels. Eliminating that 

functionality to respond to the 

Commission concern (along with 

conforming changes in the relevant rule) 

is, therefore, consistent with the Act. 

Similarly, the Exchange believes that 

specifying in its rules how the Exchange 

treats pegging interest that cannot peg to 

the PBBO, whether because of a price or 

size restriction, would remove 

impediments to and perfect the 

mechanism of a free and open market 

because it would provide transparency 

regarding the Exchange’s pegging 

functionality. 

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 

proposed change is not intended to 

address any competitive issues but 

rather to specify and amend the 

functionality associated with pegging 

interest to respond to concerns raised 

regarding current functionality. 

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 

The Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act 15 and Rule 

19b–4(f)(6) thereunder.16 Because the 

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 

prior to 30 days from the date on which 

it was filed, or such shorter time as the 

Commission may designate, if 

consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act and Rule 19b–4(f)(6)(iii) 

thereunder.17

A proposed rule change filed under 

Rule 19b–4(f)(6) 18 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b4(f)(6)(iii),19 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 so that 

the proposal may become operative 

immediately upon filing. The Exchange 

asserts that such a waiver is consistent 

with the protection of investors and the 

public interest because it would permit 

the Exchange to implement the 

proposed change as soon as the 

technology supporting the change is 

available, because it would respond to 

the Commission concerns that the 

current rule could potentially allow the 

user of pegging interest to ascertain the 

presence of hidden liquidity, and 

because it would provide transparency 

regarding the pegging functionality. The 

Commission believes that waiver of the 

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 proposal 

operative upon filing.20

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.21

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– 

NYSEMKT–2015–19 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEMKT–2015–19. 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 Web site (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 Web site 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 

mstockstill on DSK4VPTVN1PROD with NOTICES

16710 Federal Register / Vol. 80, No. 60 / Monday, March 30, 2015 / Notices 

22 17 CFR 200.30–3(a)(59). 

1See 15 U.S.C. 80a. 

2See 15 U.S.C. 80a–12(d)(1)(A). If an acquiring 

fund is not registered, these limitations apply only 

with respect to the acquiring fund’s acquisition of 

registered funds. 

3See 15 U.S.C. 80a–12(d)(1)(B). 

4See 17 CFR 270.12d1–1. 

5See rule 12d1–1(b)(1). 

6See 15 U.S.C. 80a–17(a), 15 U.S.C. 80a–17(d); 17 

CFR 270.17d–1. 

7An affiliated person of a fund includes any 

person directly or indirectly controlling, controlled 

by, or under common control with such other 

person. See 15 U.S.C. 80a–2(a)(3) (definition of 

‘‘affiliated person’’). Most funds today are organized 

by an investment adviser that advises or provides 

administrative services to other funds in the same 

complex. Funds in a fund complex are generally 

under common control of an investment adviser or 

other person exercising a controlling influence over 

the management or policies of the funds. See 15 

U.S.C. 80a–2(a)(9) (definition of ‘‘control’’). Not all 

advisers control funds they advise. The 

determination of whether a fund is under the 

control of its adviser, officers, or directors depends 

on all the relevant facts and circumstances. See 

Investment Company Mergers, Investment 

Company Act Release No. 25259 (Nov. 8, 2001) [66 

FR 57602 (Nov. 15, 2001)], at n.11. To the extent 

that an acquiring fund in a fund complex is under 

common control with a money market fund in the 

same complex, the funds would rely on the rule’s 

exemptions from section 17(a) and rule 17d–1. 

8See 15 U.S.C. 80a–2(a)(3)(A), (B). 

9See 17 CFR 270.2a–7. 

10See 15 U.S.C. 80a–17(a), 15 U.S.C. 80a–17(d), 

15 U.S.C. 80a–17(e), 15 U.S.C. 80a–18, 15 U.S.C. 

80a–22(e). 

11See 17 CFR 270.31a–1(b)(1), 17 CFR 270.31a– 

1(b)(2)(ii), 17 CFR 270.31a–1(b)(2)(iv), 17 CFR 

270.31a–1(b)(9). 

filing will also be available for 

inspection and copying at the NYSE’s 

principal office and on its Internet Web 

site at www.nyse.com. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEMKT–2015–19 and should be 

submitted on or before April 20, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–07135 Filed 3–27–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–526, OMB Control No. 

3235–0584] 

Submission for OMB Review; 

Comment Request 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE., Washington, DC 

20549–2736. 

Extension: 

Rule 12d1–1. 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501 et seq.), the Securities 

and Exchange Commission (the 

‘‘Commission’’) has submitted to the 

Office of Management and Budget a 

request for extension of the previously 

approved collection of information 

discussed below. 

An investment company (‘‘fund’’) is 

generally limited in the amount of 

securities the fund (‘‘acquiring fund’’) 

can acquire from another fund 

(‘‘acquired fund’’). Section 12(d) of the 

Investment Company Act of 1940 (the 

‘‘Investment Company Act’’ or ‘‘Act’’) 1

provides that a registered fund (and 

companies it controls) cannot: 

• Acquire more than three percent of 

another fund’s securities; 

• invest more than five percent of its 

own assets in another fund; or 

• invest more than ten percent of its 

own assets in other funds in the 

aggregate.2

In addition, a registered open-end 

fund, its principal underwriter, and any 

registered broker or dealer cannot sell 

that fund’s shares to another fund if, as 

a result: 

• The acquiring fund (and any 

companies it controls) owns more than 

three percent of the acquired fund’s 

stock; or 

• all acquiring funds (and companies 

they control) in the aggregate own more 

than ten percent of the acquired fund’s 

stock.3

Rule 12d1–1 under the Act provides 

an exemption from these limitations for 

‘‘cash sweep’’ arrangements in which a 

fund invests all or a portion of its 

available cash in a money market fund 

rather than directly in short-term 

instruments.4 An acquiring fund relying 

on the exemption may not pay a sales 

load, distribution fee, or service fee on 

acquired fund shares, or if it does, the 

acquiring fund’s investment adviser 

must waive a sufficient amount of its 

advisory fee to offset the cost of the 

loads or distribution fees.5 The acquired 

fund may be a fund in the same fund 

complex or in a different fund complex. 

In addition to providing an exemption 

from section 12(d)(1) of the Act, the rule 

provides exemptions from section 17(a) 

of the Act and rule 17d–1 thereunder, 

which restrict a fund’s ability to enter 

into transactions and joint arrangements 

with affiliated persons.6 These 

provisions would otherwise prohibit an 

acquiring fund from investing in a 

money market fund in the same fund 

complex,7 and prohibit a fund that 

acquires five percent or more of the 

securities of a money market fund in 

another fund complex from making any 

additional investments in the money 

market fund.8

The rule also permits a registered 

fund to rely on the exemption to invest 

in an unregistered money market fund 

that limits its investments to those in 

which a registered money market fund 

may invest under rule 2a–7 under the 

Act, and undertakes to comply with all 

the other provisions of rule 2a–7.9 In 

addition, the acquiring fund must 

reasonably believe that the unregistered 

money market fund (i) operates in 

compliance with rule 2a–7, (ii) complies 

with sections 17(a), (d), (e), 18, and 

22(e) of the Act 10 as if it were a 

registered open-end fund, (iii) has 

adopted procedures designed to ensure 

that it complies with these statutory 

provisions, (iv) maintains the records 

required by rules 31a–1(b)(1), 31a– 

1(b)(2)(ii), 31a–1(b)(2)(iv), and 31a– 

1(b)(9); 11 and (v) preserves 

permanently, the first two years in an 

easily accessible place, all books and 

records required to be made under these 

rules. 

Rule 2a–7 contains certain collection 

of information requirements. An 

unregistered money market fund that 

complies with rule 2a–7 would be 

subject to these collection of 

information requirements. In addition, 

the recordkeeping requirements under 

rule 31a–1 with which the acquiring 

fund reasonably believes the 

unregistered money market fund 

complies are collections of information 

for the unregistered money market fund. 

The adoption of procedures by 

unregistered money market funds to 

ensure that they comply with sections 

17(a), (d), (e), 18, and 22(e) of the Act 

also constitute collections of 

information. By allowing funds to invest 

in registered and unregistered money 

market funds, rule 12d1–1 is intended 

to provide funds greater options for cash 

management. In order for a registered 

fund to rely on the exemption to invest 

in an unregistered money market fund, 

the unregistered money market fund 

must comply with certain collection of 

information requirements for registered 

money market funds. These 

requirements are intended to ensure that 

the unregistered money market fund has 

established procedures for collecting the 

information necessary to make adequate 

credit reviews of securities in its 

portfolio, as well as other recordkeeping 

mstockstill on DSK4VPTVN1PROD with NOTICES