Federal Register / Vol. 80, No. 67 / Wednesday, April 8, 2015 / Notices 18877 

6 15 U.S.C. 78s(b)(3)(a)(ii). [sic] 

7 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

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. 8 17 CFR 200.30–3(a)(12). 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

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)(ii) [sic] of the Act 6 and 

subparagraph (f)(6) of Rule 19b–4 

thereunder.7

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is: (i) Necessary or appropriate in 

the public interest; (ii) for the protection 

of investors; or (iii) otherwise in 

furtherance of the purposes of the Act. 

If the Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

PHLX–2015–31 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–PHLX–2015–31. 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–PHLX– 

2015–31, and should be submitted on or 

before April 29, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–07959 Filed 4–7–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

31545; 812–14423] 

Amplify Investments LLC and Amplify 

ETF Trust; Notice of Application 

April 1, 2015. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of an application for an 

order under section 6(c) of the 

Investment Company Act of 1940 

(‘‘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 

(a)(2) of the Act. 

Applicants: Amplify Investments LLC 

(‘‘Amplify Investments’’) and Amplify 

ETF Trust (the ‘‘Trust’’). 

SUMMARY: Summary of Application: 

Applicants request an order that 

permits: (a) Series of certain open-end 

management investment companies to 

issue shares (‘‘Shares’’) redeemable in 

large aggregations only (‘‘Creation 

Units’’); (b) secondary market 

transactions in Shares to occur at 

negotiated market prices; (c) certain 

series to pay redemption proceeds, 

under certain circumstances, more than 

seven days from the tender of Shares for 

redemption; and (d) certain affiliated 

persons of the series to deposit 

securities into, and receive securities 

from, the series in connection with the 

purchase and redemption of Creation 

Units. 

DATES: Filing Dates: The application was 

filed on February 20, 2015. 

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 April 27, 2015, 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: Brent J. Fields, Secretary, 

U.S. Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090. 

Applicants, 3250 Lacey Road, Suite 130, 

Downers Grove, IL 60515. 

FOR FURTHER INFORMATION CONTACT: 

Kaitlin C. Bottock, Attorney Adviser, at 

(202) 551–8658, or Daniele Marchesani, 

Branch Chief, at (202) 551–6821 

(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 

Web site 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. 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
18878 Federal Register / Vol. 80, No. 67 / Wednesday, April 8, 2015 / Notices 

1All entities that currently intend to rely on the 

requested order are named as applicants and any 

Fund that currently intends to rely on the requested 

order is identified in the application. Any other 

entity that relies on the requested order in the 

future will comply with the terms and conditions 

of the application. 

2A TBA Transaction is a method of trading 

mortgage-backed securities. In a TBA Transaction, 

the buyer and seller agree on general trade 

parameters such as agency, settlement date, par 

amount and price. The actual pools delivered 

generally are determined two days prior to the 

settlement date. 

3 Depositary Receipts include American 

Depositary Receipts (‘‘ADRs’’) and Global 

Depositary Receipts (‘‘GDRs’’). With respect to 

ADRs, the depositary is typically a U.S. financial 

institution and the underlying securities are issued 

by a foreign issuer. The ADR is registered under the 

Securities Act of 1933 (‘‘Securities Act’’) on Form 

F–6. ADR trades occur either on a national 

securities exchange as defined in Section 2(a)(26) of 

the Act (‘‘Listing Exchange’’) or off-exchange. 

Financial Industry Regulatory Authority Rule 6620 

requires all off-exchange transactions in ADRs to be 

reported within 90 seconds and ADR trade reports 

to be disseminated on a real-time basis. With 

respect to GDRs, the depositary may be a foreign or 

a U.S. entity, and the underlying securities may 

have a foreign or a U.S. issuer. All GDRs are 

sponsored and trade on a foreign exchange. No 

affiliated persons of applicants, any Adviser (as 

defined below), Fund Sub-Adviser (as defined 

below), or Fund will serve as the depositary for any 

Depositary Receipts held by a Fund. A Fund will 

not invest in any Depositary Receipts that the 

Adviser (or, if applicable, the Fund Sub-Adviser) 

deems to be illiquid or for which pricing 

information is not readily available. 

4 If a Fund invests in derivatives: (a) The Fund’s 

board of trustees periodically will review and 

approve (i) the Fund’s use of derivatives and (ii) 

how the Fund’s investment adviser assesses and 

manages risk with respect to the Fund’s use of 

derivatives; and (b) the Fund’s disclosure of its use 

of derivatives in its offering documents and 

periodic reports will be consistent with relevant 

Commission and staff guidance. 

5For the 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. 

6The Funds must comply with the federal 

securities laws in accepting Deposit Instruments 

and satisfying redemptions with Redemption 

Instruments, including that the Deposit Instruments 

and Redemption Instruments are sold in 

transactions that would be exempt from registration 

under the Securities Act. In accepting Deposit 

Instruments and satisfying redemptions with 

Redemption Instruments that are restricted 

securities eligible for resale pursuant to Rule 144A 

under the Securities Act, the Funds will comply 

with the conditions of Rule 144A. 

7Each Fund will sell and redeem Creation Units 

on any day the Fund is open, including as required 

by section 22(e) of the Act (each, a ‘‘Business Day’’). 

8The portfolio used for this purpose will be the 

same portfolio used to calculate the Fund’s NAV for 

that Business Day. 

9A tradeable round lot for a security will be the 

standard unit of trading in that particular type of 

security in its primary market. 

10This includes instruments that can be 

transferred in kind only with the consent of the 

original counterparty to the extent the Fund does 

not intend to seek such consents. 

11Because these instruments will be excluded 

from the Creation Basket, their value will be 

Applicants’ Representations 

1. The Trust, a business trust 

organized under the laws of 

Massachusetts, intends to register with 

the Commission as an open-end 

management investment company. The 

applicants are requesting relief not only 

for the Trust and its initial series, 

Amplify Tactical Equity Fund (‘‘Initial 

Fund’’), but also with respect to future 

series of the Trust, and to any registered 

open-end management investment 

companies or series thereof that may be 

created in the future and that utilizes 

active management investment 

strategies (‘‘Future Funds’’ and 

collectively with the Initial Fund, the 

‘‘Funds’’).1 Funds may invest in equity 

securities or fixed income securities 

traded in the U.S. or non-U.S. markets 

or a combination of equity and fixed 

income securities, including ‘‘to-beannounced transactions’’ (‘‘TBA 

Transactions’’) 2 and depositary receipts 

(‘‘Depositary Receipts’’).3 The securities, 

other assets, and other positions in 

which a Fund invests are its ‘‘Portfolio 

Positions.’’ 4 The Trust currently expects 

that the Initial Fund’s investment 

objective will be to seek total return by 

investing, under normal market 

conditions, at least 80% of its net assets 

in a portfolio of affiliated and 

unaffiliated exchange-traded funds. 

2. Each Fund will (a) be advised by 

Amplify Investments or an entity 

controlling, controlled by or under 

common control with Amplify 

Investments (each such entity and any 

successor thereto, an ‘‘Adviser’’) 5 and 

(b) comply with the terms and 

conditions stated in the application. 

Amplify Investments is a Delaware 

limited liability company and is 

registered as an investment adviser 

under section 203 of the Investment 

Advisers Act of 1940 (the ‘‘Advisers 

Act’’). Any other Adviser to a Fund will 

be registered under the Advisers Act. 

The Adviser may retain sub-advisers 

(each, a ‘‘Fund Sub-Adviser’’) in 

connection with the Funds; each Fund 

Sub-Adviser will be registered under the 

Advisers Act or not subject to such 

registration. 

3. The Trust will enter into a 

distribution agreement with one or more 

distributors (‘‘Distributor’’). Each 

Distributor will be registered under the 

Securities Exchange Act of 1934, as 

amended (the ‘‘Exchange Act’’), and will 

act as Distributor and principal 

underwriter of the Funds. No 

Distributor will be affiliated with the 

Listing Exchange. The Distributor of any 

Fund may be an ‘‘affiliated person’’ or 

an affiliated person of an affiliated 

person of the Fund’s Adviser or Fund 

Sub-Adviser. 

4. Shares of each Fund will be 

purchased from the Trust only in large 

aggregations of a specified number 

referred to as ‘‘Creation Units.’’ Creation 

Units may be purchased through orders 

placed with the Distributor by or 

through an ‘‘Authorized Participant’’ 

which is either (a) a broker-dealer or 

other participant in the Continuous Net 

Settlement (‘‘CNS’’) System of the 

National Securities Clearing Corporation 

(‘‘NSCC’’), a clearing agency that is 

registered with the Commission, or (b) 

a participant (‘‘DTC Participant’’) in the 

Depository Trust Company (‘‘DTC’’), 

and which in either case has executed 

a participant agreement with the 

Distributor with respect to the creation 

and redemption of Creation Units. 

Purchases and redemptions of the 

Funds’ Creation Units will be processed 

either through an enhanced clearing 

process available to DTC Participants 

that are also participants in the CNS 

system of the NSCC (the ‘‘NSCC 

Process’’) or through a manual clearing 

process that is available to all DTC 

Participants (the ‘‘DTC Process’’). 

5. In order to keep costs low and 

permit each Fund to be as fully invested 

as possible, Shares will be purchased 

and redeemed in Creation Units and 

generally on an in-kind basis. 

Accordingly, except where the purchase 

or redemption will include cash under 

the limited circumstances specified 

below, purchasers will be required to 

purchase Creation Units by making an 

in-kind deposit of specified instruments 

(‘‘Deposit Instruments’’), and 

shareholders redeeming their Shares 

will receive an in-kind transfer of 

specified instruments (‘‘Redemption 

Instruments’’).6 On any given Business 

Day,7 the names and quantities of the 

instruments that constitute the Deposit 

Instruments and the names and 

quantities of the instruments that 

constitute the Redemption Instruments 

will be identical, and these instruments 

may be referred to, in the case of either 

a purchase or redemption, as the 

‘‘Creation Basket.’’ In addition, the 

Creation Basket will correspond pro rata 

to the positions in a Fund’s portfolio 

(including cash positions),8 except: (a) 

In the case of bonds, for minor 

differences when it is impossible to 

break up bonds beyond certain 

minimum sizes needed for transfer and 

settlement; (b) for minor differences 

when rounding is necessary to eliminate 

fractional shares or lots that are not 

tradeable round lots; 9 or (c) TBA 

Transactions, short positions, and other 

positions that cannot be transferred in 

kind 10 will be excluded from the 

Creation Basket.11 If there is a difference 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 67 / Wednesday, April 8, 2015 / Notices 18879 

reflected in the determination of the Balancing 

Amount (defined below). 

12 In determining whether a particular Fund will 

sell or redeem Creation Units entirely on a cash or 

in-kind basis (whether for a given day or a given 

order), the key consideration will be the benefit that 

would accrue to the Fund and its investors. For 

instance, in bond transactions, the Adviser may be 

able to obtain better execution than Share 

purchasers because of the Adviser’s size, experience 

and potentially stronger relationships in the fixed 

income markets. Purchases of Creation Units either 

on an all cash basis or in kind are expected to be 

neutral to the Funds from a tax perspective. In 

contrast, cash redemptions typically require selling 

portfolio holdings, which may result in adverse tax 

consequences for the remaining Fund shareholders 

that would not occur with an in-kind redemption. 

As a result, tax considerations may warrant in-kind 

redemptions. 

13A ‘‘custom order’’ is any purchase or 

redemption of Shares made in whole or in part on 

a cash basis in reliance on clause (e)(i) or (e)(ii). 

14Where a Fund permits an in-kind purchaser to 

deposit cash in lieu of depositing one or more 

Deposit Instruments, the purchaser may be assessed 

a higher Transaction Fee to offset the cost to the 

Fund of buying those particular Deposit 

Instruments. In all cases, such Transaction Fees will 

be limited in accordance with requirements of the 

Commission applicable to open-end management 

investment companies offering redeemable 

securities. 

15 If Shares are listed on The NASDAQ Stock 

Market LLC (‘‘Nasdaq’’) or a similar electronic Stock 

Exchange (including NYSE Arca), one or more 

member firms of that Stock Exchange will act as 

Market Maker and maintain a market for Shares 

trading on that Stock Exchange. On Nasdaq, no 

particular Market Maker would be contractually 

obligated to make a market in Shares. However, the 

listing requirements on Nasdaq, for example, 

stipulate that at least two Market Makers must be 

registered in Shares to maintain a listing. In 

addition, on Nasdaq and NYSE Arca, registered 

Market Makers are required to make a continuous 

two-sided market or subject themselves to 

regulatory sanctions. No Market Maker will be an 

affiliated person, or an affiliated person of an 

affiliated person, of the Funds, except within the 

meaning of section 2(a)(3)(A) or (C) of the Act due 

solely to ownership of Shares as discussed below. 

16Shares will be registered in book-entry form 

only. DTC or its nominee will be the record or 

registered owner of all outstanding Shares. DTC or 

DTC Participants will maintain records of beneficial 

ownership of Shares. 

between the net asset value (‘‘NAV’’) 

attributable to a Creation Unit and the 

aggregate market value of the Creation 

Basket exchanged for the Creation Unit, 

the party conveying instruments with 

the lower value will also pay to the 

other an amount in cash equal to that 

difference (the ‘‘Balancing Amount’’). 

6. Purchases and redemptions of 

Creation Units may be made in whole or 

in part on a cash basis, rather than in 

kind, solely under the following 

circumstances: (a) To the extent there is 

a Balancing Amount, as described 

above; (b) if, on a given Business Day, 

a Fund announces before the open of 

trading that all purchases, all 

redemptions or all purchases and 

redemptions on that day will be made 

entirely in cash; (c) if, upon receiving a 

purchase or redemption order from an 

Authorized Participant, a Fund 

determines to require the purchase or 

redemption, as applicable, to be made 

entirely in cash; 12 (d) if, on a given 

Business Day, a Fund requires all 

Authorized Participants purchasing or 

redeeming Shares on that day to deposit 

or receive (as applicable) cash in lieu of 

some or all of the Deposit Instruments 

or Redemption Instruments, 

respectively, solely because: (i) Such 

instruments are not eligible for transfer 

through either the NSCC Process or DTC 

Process; or (ii) in the case of Funds 

holding non-U.S. investments (‘‘Global 

Funds’’), such instruments are not 

eligible for trading due to local trading 

restrictions, local restrictions on 

securities transfers or other similar 

circumstances; or (e) if a Fund permits 

an Authorized Participant to deposit or 

receive (as applicable) cash in lieu of 

some or all of the Deposit Instruments 

or Redemption Instruments, 

respectively, solely because: (i) Such 

instruments are, in the case of the 

purchase of a Creation Unit, not 

available in sufficient quantity; (ii) such 

instruments are not eligible for trading 

by an Authorized Participant or the 

investor on whose behalf the 

Authorized Participant is acting; or (iii) 

a holder of Shares of a Fund holding 

non-U.S. investments would be subject 

to unfavorable income tax treatment if 

the holder receives redemption 

proceeds in kind.13

7. Each Business Day, before the open 

of trading on the Listing Exchange, each 

Fund will cause to be published through 

the NSCC the names and quantities of 

the instruments comprising the Creation 

Basket, as well as the estimated 

Balancing Amount (if any), for that day. 

The published Creation Basket will 

apply until a new Creation Basket is 

announced on the following Business 

Day, and there will be no intra-day 

changes to the Creation Basket except to 

correct errors in the published Creation 

Basket. The Listing Exchange or a major 

market data vendor will disseminate 

every 15 seconds throughout the trading 

day an amount representing the Fund’s 

estimated NAV, which will be the value 

of the Fund’s Portfolio Positions, on a 

per Share basis. 

8. An investor purchasing or 

redeeming a Creation Unit will be 

charged a fee (‘‘Transaction Fee’’) to 

protect continuing shareholders of the 

Funds from the dilutive costs associated 

with the purchase and redemption of 

Creation Units.14 The Distributor will 

deliver a confirmation and Fund 

prospectus (‘‘Prospectus’’) to the 

purchaser. In addition, the Distributor 

will maintain records of both the orders 

placed with it and the confirmations of 

acceptance furnished by it. 

9. Beneficial owners of Shares may 

sell their Shares in the secondary 

market. Shares will be listed on a 

Listing Exchange and traded in the 

secondary market in the same manner as 

other equity securities. Applicants state 

that one or more specialists or market 

makers will be assigned to the Shares. 

The price of Shares trading on the 

Listing Exchange will be based on a 

current bid/offer market. Transactions 

involving the sale of Shares on the 

Listing Exchange will be subject to 

customary brokerage commissions and 

charges. 

10. Applicants expect that purchasers 

of Creation Units will include 

arbitrageurs and that Listing Exchange 

specialists or market makers, acting in 

their unique role to provide a fair and 

orderly secondary market for Shares, 

also may purchase Creation Units for 

use in their own market making 

activities.15 Applicants expect that 

secondary market purchasers of Shares 

will include both institutional investors 

and retail investors.16 Applicants state 

that because the market price of 

Creation Units will be disciplined by 

arbitrage opportunities, investors should 

be able to sell Shares in the secondary 

market at prices that do not vary 

materially from their NAV. 

11. Neither the Trust nor any Fund 

will be advertised or marketed as a 

conventional open-end investment 

company or mutual fund. Instead, each 

Fund will be marketed as an ‘‘activelymanaged exchange-traded fund.’’ Any 

advertising material that describes the 

features of obtaining, buying or selling 

Creation Units, or buying or selling 

Shares on the Listing Exchange, or 

where there is reference to 

redeemability, will prominently 

disclose that Shares are not individually 

redeemable and that owners of Shares 

may acquire Shares from a Fund and 

tender those Shares for redemption to a 

Fund in Creation Units only. 

12. The Funds’ Web site, which will 

be publicly available prior to the public 

offering of Shares, will include, or will 

include links to, each Fund’s current 

Prospectus and Summary Prospectus (if 

any), which may be downloaded. That 

Web site, which will be publicly 

available at no charge, will also contain, 

on a per Share basis for each Fund, the 

prior Business Day’s NAV and the 

market closing price or the mid-point of 

the bid/ask spread at the time of 

calculation of such NAV (the ‘‘Bid/Ask 

Price’’), and a calculation of the 

premium or discount of the market 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
18880 Federal Register / Vol. 80, No. 67 / Wednesday, April 8, 2015 / Notices 

17Under accounting procedures followed by the 

Funds, trades made on the prior Business Day (‘‘T’’) 

will be booked and reflected in NAV on the current 

Business Day (‘‘T+1’’). Accordingly, the Funds will 

be able to disclose at the beginning of the Business 

Day the portfolio that will form the basis for the 

NAV calculation at the end of the Business Day. 

18Applicants acknowledge that no relief obtained 

from the requirements of section 22(e) will affect 

any obligations that they may otherwise have under 

rule 15c6–1 under the Exchange Act, which 

requires that most securities transactions be settled 

within three business days of the trade date. 

19Certain countries in which a Global Fund may 

invest have historically had settlement periods of 

up to 15 calendar days. 

closing price or Bid/Ask Price against 

such NAV. On each Business Day, 

before commencement of trading in 

Shares on the Listing Exchange, each 

Fund will also disclose on its Web site 

the identities and quantities of its 

Portfolio Positions held by the Fund 

that will form the basis for the Fund’s 

calculation of NAV at the end of the 

Business Day.17

Applicants’ Legal Analysis 

1. Applicants request an order under 

section 6(c) of 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, and under sections 6(c) and 

17(b) of the Act for an exemption from 

sections 17(a)(1) and (a)(2) of the Act. 

2. Section 6(c) of the Act provides that 

the Commission may exempt any 

person, security or transaction, or any 

class of persons, securities or 

transactions, from any provision of the 

Act, if and to the extent that 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 17(b) 

of the Act authorizes the Commission to 

exempt a proposed transaction from 

section 17(a) of the Act if evidence 

establishes that the terms of the 

proposed transaction, including the 

consideration to be paid or received, are 

reasonable and fair and do not involve 

overreaching on the part of any person 

concerned, and the proposed 

transaction is consistent with the 

policies of the registered investment 

company and the general provisions of 

the Act. 

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

3. Section 5(a)(1) of the Act defines an 

‘‘open-end company’’ as a management 

investment company that is offering for 

sale or has outstanding any redeemable 

security of which it is the issuer. 

Section 2(a)(32) of the Act defines a 

redeemable security as any security, 

other than short-term paper, under the 

terms of which the holder, upon its 

presentation to the issuer, is entitled to 

receive approximately a proportionate 

share of the issuer’s current net assets, 

or the cash equivalent. Applicants 

request an order to permit the Trust to 

register as an open-end management 

investment company and redeem Shares 

in Creation Units only. Applicants state 

that each investor is entitled to purchase 

or redeem Creation Units rather than 

trade the individual Shares in the 

secondary market. Applicants further 

state that because of the arbitrage 

possibilities created by the 

redeemability of Creation Units, it is 

expected that the market price of an 

individual Share will not vary 

materially from its NAV. 

Section 22(d) of the Act and Rule 22c– 

1 Under the Act 

4. Section 22(d) of the Act, among 

other things, prohibits a dealer from 

selling a redeemable security, which is 

currently being offered to the public by 

or through a principal underwriter, 

except at a current public offering price 

described in the prospectus. Rule 22c– 

1 under the Act generally requires that 

a dealer selling, redeeming, or 

repurchasing a redeemable security do 

so only at a price based on its NAV. 

Applicants state that secondary market 

trading in Shares will take place at 

negotiated prices, rather than at the 

current offering price described in the 

Fund’s Prospectus. Thus, purchases and 

sales of Shares in the secondary market 

will not comply with section 22(d) of 

the Act and rule 22c–1 under the Act. 

Applicants request an exemption under 

section 6(c) from these provisions. 

5. Applicants assert that the concerns 

sought to be addressed by section 22(d) 

of the Act and rule 22c–1 under the Act 

with respect to pricing are equally 

satisfied by the proposed method of 

pricing Shares. Applicants maintain that 

while there is little legislative history 

regarding section 22(d), its provisions, 

as well as those of rule 22c–1, appear to 

have been intended (a) to prevent 

dilution caused by certain risklesstrading schemes by principal 

underwriters and contract dealers, (b) to 

prevent unjust discrimination or 

preferential treatment among buyers, 

and (c) to ensure an orderly distribution 

of shares by eliminating price 

competition from brokers offering shares 

at less than the published sales price 

and repurchasing shares at more than 

the published redemption price. 

6. Applicants state that (a) secondary 

market transactions in Shares would not 

cause dilution for owners of such Shares 

because such transactions do not 

involve the Trust or Funds as parties, 

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 

contend that the proposed distribution 

system will be orderly because arbitrage 

activity will ensure that the difference 

between the market price of Shares and 

their NAV remains immaterial. 

Section 22(e) 

7. Section 22(e) of the Act generally 

prohibits a registered investment 

company from suspending the right of 

redemption or postponing the date of 

payment of redemption proceeds for 

more than seven days after the tender of 

a security for redemption. Applicants 

observe that the settlement of 

redemptions of Creation Units of Global 

Funds will be contingent not only on 

the settlement cycle of the U.S. 

securities markets but also on the 

delivery cycles in foreign markets in 

which those Funds invest. Applicants 

assert that, under certain circumstances, 

the delivery cycles for transferring 

Portfolio Positions to redeeming 

investors, coupled with local market 

holiday schedules, may require a 

delivery process of up to 15 calendar 

days. Applicants therefore request relief 

from section 22(e) in order for each 

Global Fund to provide payment or 

satisfaction of redemptions within the 

maximum number of calendar days 

required for such payment or 

satisfaction in the principal local 

market(s) where transactions in its 

Portfolio Positions customarily clear 

and settle, but in any event, within a 

period not to exceed fifteen calendar 

days.18

8. Applicants submit that Congress 

adopted section 22(e) to prevent 

unreasonable, undisclosed or 

unforeseen delays in the actual payment 

of redemption proceeds. Applicants 

state that allowing redemption 

payments for Creation Units of a Global 

Fund to be made within 15 calendar 

days would not be inconsistent with the 

spirit and intent of section 22(e).19

Applicants state that each Global Fund’s 

statement of additional information 

(‘‘SAI’’) will disclose those local 

holidays (over the period of at least one 

year following the date of the SAI), if 

any, that are expected to prevent the 

delivery of redemption proceeds in 

seven calendar days and the maximum 

number of days, up to 15 calendar days, 

needed to deliver the proceeds for that 

Global Fund. Applicants are not seeking 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 67 / Wednesday, April 8, 2015 / Notices 18881 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(4)(ii). 

relief from section 22(e) with respect to 

Global Funds that do not effect 

redemptions of Creation Units in kind. 

Sections 17(a)(1) and (2) of the Act 

9. Section 17(a)(1) and (2) of the Act 

generally prohibit an affiliated person of 

a registered investment company, or an 

affiliated person of such a person 

(‘‘second tier affiliate’’), from selling any 

security to or purchasing any security 

from the company. Section 2(a)(3) of the 

Act defines ‘‘affiliated person’’ to 

include any person directly or indirectly 

owning, controlling, or holding with 

power to vote 5% or more of the 

outstanding voting securities of the 

other person and any person directly or 

indirectly controlling, controlled by, or 

under common control with, the other 

person. Section 2(a)(9) of the Act 

defines ‘‘control’’ of a fund as ‘‘the 

power to exercise a controlling 

influence over the management or 

policies’’ of the fund and provides that 

a control relationship will be presumed 

where one person owns more than 25% 

of another person’s voting securities. 

The Funds may be deemed to be 

controlled by an Adviser and hence 

affiliated persons of each other. In 

addition, the Funds may be deemed to 

be under common control with any 

other registered investment company (or 

series thereof) advised by an Adviser (an 

‘‘Affiliated Fund’’). 

10. Applicants request an exemption 

from section 17(a) under sections 6(c) 

and 17(b) to permit in-kind purchases 

and redemptions of Creation Units from 

the Funds by persons that are affiliated 

persons or second tier affiliates of the 

Funds solely by virtue of one or more 

of the following: (a) Holding 5% or 

more, or more than 25%, of the 

outstanding Shares of one or more 

Funds; (b) an affiliation with a person 

with an ownership interest described in 

(a); or (c) holding 5% or more, or more 

than 25%, of the shares of one or more 

Affiliated Funds. 

11. Applicants assert that no useful 

purpose would be served by prohibiting 

the affiliated persons described above 

from making in-kind purchases or inkind redemptions of Shares of a Fund in 

Creation Units. Both the deposit 

procedures for in-kind purchases of 

Creation Units and the redemption 

procedures for in-kind redemptions will 

be effected in exactly the same manner 

for all purchases and redemptions. The 

valuation of the Deposit Instruments 

and Redemption Instruments will be 

made in the same manner, and in the 

same manner as the Fund’s Portfolio 

Positions, regardless of the identity of 

the purchaser or redeemer. Except with 

respect to cash determined in 

accordance with the procedures 

described in section I.G.1. of the 

application, Deposit Instruments and 

Redemption Instruments will be the 

same for all purchasers and redeemers. 

Therefore, applicants state that the inkind purchases and redemptions will 

afford no opportunity for the specified 

affiliated persons of a Fund to effect a 

transaction detrimental to other holders 

of Shares of that Fund. Applicants do 

not believe that in-kind purchases and 

redemptions will result in abusive selfdealing or overreaching of the Fund. 

Applicant’s Conditions 

Applicants agree that any order of the 

Commission granting the requested 

relief will be subject to the following 

conditions: 

1. As long as the Funds operate in 

reliance on the requested order, the 

Shares of the Funds will be listed on a 

Listing Exchange. 

2. Neither the Trust nor any Fund will 

be advertised or marketed as an openend investment company or a mutual 

fund. Any advertising material that 

describes the purchase or sale of 

Creation Units or refers to redeemability 

will prominently disclose that the 

Shares are not individually redeemable 

and that owners of the Shares may 

acquire those Shares from the Fund and 

tender those Shares for redemption to 

the Fund in Creation Units only. 

3. The Web site for the Funds, which 

is and will be publicly accessible at no 

charge, will contain on a per Share 

basis, for each Fund, the prior Business 

Day’s NAV and the market closing price 

or Bid/Ask Price, and a calculation of 

the premium or discount of the market 

closing price or Bid/Ask Price against 

such NAV. 

4. On each Business Day, before 

commencement of trading in Shares on 

the Listing Exchange, the Fund will 

disclose on its Web site the identities 

and quantities of the Portfolio Positions 

held by the Fund that will form the 

basis for the Fund’s calculation of NAV 

at the end of the Business Day. 

5. The Adviser or any Fund SubAdviser, directly or indirectly, will not 

cause any Authorized Participant (or 

any investor on whose behalf an 

Authorized Participant may transact 

with the Fund) to acquire any Deposit 

Instrument for the Fund through a 

transaction in which the Fund could not 

engage directly. 

6. The requested relief to permit ETF 

operations will expire on the effective 

date of any Commission rule under the 

1940 Act that provides relief permitting 

the operation of actively managed 

exchange-traded funds. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–08022 Filed 4–7–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74634; File No. SR–CME– 

2015–004] 

Self-Regulatory Organizations; 

Chicago Mercantile Exchange Inc.; 

Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change To Amend Rulebook 

Provisions Establishing DecisionMaking and Emergency Authority Over 

Clearing House Matters 

April 2, 2015. 

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

Securities Exchange Act of 1934 (‘‘Act’’ 

or ‘‘Exchange Act’’),1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on March 30, 2015, Chicago Mercantile 

Exchange Inc. (‘‘CME’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III, 

below, which Items have been prepared 

primarily by CME. CME filed the 

proposal pursuant to Section 

19(b)(3)(A)(ii) 3 of the Act, and Rule 

19b–4(f)(4)(ii) 4 thereunder, so that the 

proposal was effective upon filing with 

the Commission. 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 

CME is filing a proposed rule change 

that is limited to its business as a 

derivatives clearing organization. More 

specifically, the proposed rule change 

would make amendments to rulebook 

provisions establishing decision-making 

and emergency authority over clearing 

house matters. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

CME included statements concerning 

the purpose and basis for the proposed 

rule change and discussed any 


asabaliauskas on DSK5VPTVN1PROD with NOTICES