8282 Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Notices 

46 17 CFR 200.30–3(a)(12). 

the Funds, a large amount of 

information will be publicly available 

regarding the Funds and the Shares, 

thereby promoting market transparency. 

Quotation and last sale information for 

the Shares will be available via the CTA 

high-speed line. Information regarding 

the intra-day value of the Shares of a 

Fund, which is the VIIV as defined in 

proposed NYSE Arca Equities Rule 

8.900(c)(3), will be widely disseminated 

every second throughout the Exchange’s 

Core Trading Session by one or more 

major market data vendors. The Web 

site for the Funds will include a form of 

the prospectus for the Funds that may 

be downloaded, and additional data 

relating to NAV and other applicable 

quantitative information, updated on a 

daily basis. Moreover, prior to the 

commencement of trading, the Exchange 

will inform its ETP Holders in an 

Information Bulletin of the special 

characteristics and risks associated with 

trading the Shares. Trading in Shares of 

a Fund will be halted if the circuit 

breaker parameters in NYSE Arca 

Equities Rule 7.12 have been reached or 

because of market conditions or for 

reasons that, in the view of the 

Exchange, make trading in the Shares 

inadvisable. Trading in the Shares will 

be subject to NYSE Arca Equities Rule 

8.900(d)(2)(C), which sets forth 

circumstances under which Shares of 

the Funds will be halted. In addition, as 

noted above, investors will have ready 

access to the VIIV, and quotation and 

last sale information for the Shares. The 

Shares will conform to the initial and 

continued listing criteria under 

proposed Rule 8.900. The Funds will 

not invest in options, futures, forwards 

or swaps. Each Fund’s investments will 

be consistent with its investment 

objective and will not be used to 

enhance leverage. While a Fund may 

invest in inverse ETFs, a Fund will not 

invest in leveraged (e.g., 2X, ¥2X, 3X or 

¥3X) ETFs. The Funds will not invest 

in non-U.S. listed securities. 

The proposed rule change is designed 

to perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest in that 

it will facilitate the listing and trading 

of an additional type of activelymanaged exchange-traded product that 

will enhance competition among market 

participants, to the benefit of investors 

and the marketplace. As noted above, 

the Exchange has in place surveillance 

procedures relating to trading in the 

Shares and may obtain information via 

ISG from other exchanges that are 

members of ISG or with which the 

Exchange has entered into a 

comprehensive surveillance sharing 

agreement. In addition, as noted above, 

investors will have ready access to 

information regarding the VIIV and 

quotation and last sale information for 

the Shares. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange believes the proposed rule 

change would permit listing and trading 

of another type of actively-managed ETF 

that has characteristics different from 

existing actively-managed and index 

ETFs, and would introduce additional 

competition among various ETF 

products to the benefit of investors. 

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 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or up to 90 days (i) as the 

Commission may designate if it finds 

such longer period to be appropriate 

and publishes its reasons for so finding 

or (ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be 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– 

NYSEArca–2016–08 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–2016–08. 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 Section, 100 F Street NE., 

Washington, DC 20549 on official 

business days between 10:00 a.m. and 

3:00 p.m. Copies of the filing will also 

be available for inspection and copying 

at the Exchange’s principal office. 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–2016–08 and 

should be submitted on or before March 

10, 2016. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.46

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2016–03269 Filed 2–17–16; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

31995; File No. 812–14574] 

PowerShares Exchange-Traded SelfIndexed Fund Trust, et al.; Notice of 

Application 

February 11, 2016. 

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 (the 

‘‘Act’’) for an exemption from sections 

2(a)(32), 5(a)(1), 22(d), and 22(e) of the 

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

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Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Notices 8283 

1All existing entities that intend to rely on the 

requested order have been named as applicants. 

Any other existing or future entity that 

subsequently relies on the order will comply with 

the terms and conditions of the order. A Fund of 

Funds (as defined below) may rely on the order 

only to invest in Self-Indexing Funds and not in 

any other registered investment company. 

2A ‘‘to-be-announced transaction’’ or ‘‘TBA 

Transaction’’ is a method of trading mortgagebacked securities. In a TBA Transaction, the buyer 

and seller agree upon general trade parameters such 

as agency, settlement date, par amount and price. 

The actual pools delivered generally are determined 

two days prior to settlement date. 

3 Depositary receipts representing foreign 

securities (‘‘Depositary Receipts’’) include 

American Depositary Receipts and Global 

Depositary Receipts. The Self-Indexing Funds may 

invest in Depositary Receipts representing foreign 

securities in which they seek to invest. Depositary 

Receipts are typically issued by a financial 

institution (a ‘‘depositary bank’’) and evidence 

ownership interests in a security or a pool of 

securities that have been deposited with the 

depositary bank. A Self-Indexing Fund will not 

invest in any Depositary Receipts that the Adviser 

or any Sub-Adviser deems to be illiquid or for 

which pricing information is not readily available. 

No affiliated person of a Self-Indexing Fund, the 

Adviser or any Sub-Adviser will serve as the 

Continued 

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

exemption from sections 17(a)(1) and 

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

12(d)(1)(J) of the Act for an exemption 

from sections 12(d)(1)(A) and 

12(d)(1)(B) of the Act. 

Summary of Application: Applicants 

request an order that would permit (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 

rather than at net asset value (‘‘NAV’’); 

(c) certain series to pay redemption 

proceeds, under certain circumstances, 

more than seven days after the tender of 

Creation Units for redemption; (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; and (e) certain registered 

management investment companies and 

unit investment trusts outside of the 

same group of investment companies as 

the series to acquire Shares. 

Applicants: PowerShares ExchangeTraded Self-Indexed Fund Trust (the 

‘‘Trust’’), Invesco PowerShares Capital 

Management LLC (‘‘IPCM’’), and 

Invesco Distributors, Inc. (‘‘IDI’’). 

Filing Dates: The application was 

filed on October 30, 2015, and amended 

on November 24, 2015, and January 6, 

2016. Applicants have agreed to file an 

amendment during the notice period, 

the substance of which is reflected in 

this notice. 

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 March 7, 2016, 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: The Commission: Secretary, 

U.S. Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090; 

Applicants: the Trust and IPCM, 3500 

Lacey Road, Downers Grove, IL 60515; 

IDI, 11 Greenway Plaza, Suite 1000, 

Houston, TX 77046. 

FOR FURTHER INFORMATION CONTACT: 

Christine Y. Greenlees, Senior Counsel 

at (202) 551–6879, or Dalia Osman 

Blass, Assistant Director, 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. 

Applicants’ Representations 

1. The Trust is a statutory trust 

organized under the laws of the State of 

Delaware and will be registered with the 

Commission as an open-end 

management investment company that 

offers multiple series. 

2. IPCM will be the investment 

adviser to the Initial Self-Indexing Fund 

(defined below). IPCM is, and any other 

Adviser (defined below) will be, 

registered as an investment adviser 

under the Investment Advisers Act of 

1940 (the ‘‘Advisers Act’’). The Adviser 

may enter into sub-advisory agreements 

with one or more investment advisers to 

act as sub-advisers to particular SelfIndexing Funds (each, a ‘‘SubAdviser’’). Any Sub-Adviser will either 

be registered under the Advisers Act or 

will not be required to register 

thereunder. 

3. The Trust will enter into a 

distribution agreement with one or more 

distributors. Each distributor for a SelfIndexing Fund (defined below) will be 

a broker-dealer (‘‘Broker’’) registered 

under the Securities Exchange Act of 

1934 (‘Exchange Act’’) and will act as 

distributor and principal underwriter 

(‘‘Distributor’’) of one or more of the 

Self-Indexing Funds. IDI, a brokerdealer registered under the Exchange 

Act, is a wholly-owned subsidiary of 

Invesco Ltd. and will act as the initial 

Distributor and principal underwriter of 

the Self-Indexing Funds. No Distributor 

is or will be affiliated with any 

Exchange (defined below). 

4. Applicants request that the order 

apply to a new series, the PowerShares 

Quantitative U.S. Equity Portfolio 

(‘‘Initial Self-Indexing Fund’’), and any 

additional series of the Trust, that may 

be created in the future (‘‘Future SelfIndexing Funds’’), each of which will 

operate as an exchange traded fund 

(‘‘ETF’’) and will track a specified 

Affiliated Index (as defined below) 

comprised of domestic and/or foreign 

equity and/or fixed income securities 

(each, an ‘‘Underlying Index’’). Any 

Future Self-Indexing Fund will (a) be 

advised by IPCM or an entity 

controlling, controlled by, or under 

common control with IPCM (each, an 

‘‘Adviser’’) and (b) comply with the 

terms and conditions of the application. 

The Initial Self-Indexing Fund and 

Future Self-Indexing Funds, together, 

are the ‘‘Self-Indexing Funds.’’ 1

5. Each Self-Indexing Fund will hold 

certain securities, currencies, other 

assets and other investment positions 

(‘‘Portfolio Holdings’’) selected to 

correspond generally to the performance 

of its Underlying Index. Certain of the 

Self-Indexing Funds will be based on 

Underlying Indexes that will be 

comprised of equity and/or fixed 

income securities issued by one or more 

of the following categories of issuers: (i) 

Domestic issuers and (ii) non-domestic 

issuers meeting the requirements for 

trading in U.S. markets. Other SelfIndexing Funds will be based on 

Underlying Indexes that will be 

comprised of foreign and domestic, or 

solely foreign, equity and/or fixed 

income securities (‘‘Foreign SelfIndexing Funds’’). 

6. Applicants represent that each SelfIndexing Fund will invest at least 80% 

of its assets (excluding securities 

lending collateral) in the component 

securities of its respective Underlying 

Index (‘‘Component Securities’’) and 

TBA Transactions 2, and in the case of 

Foreign Self-Indexing Funds, 

Component Securities and Depositary 

Receipts 3 representing Component 

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8284 Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Notices 

depositary bank for any Depositary Receipts held by 

a Self-Indexing Fund. 

4The licenses for the Self-Indexing Funds will 

specifically state that the Affiliated Index Provider 

(or in case of a sub-licensing agreement, the 

Adviser) must provide the use of the Underlying 

Indexes and related intellectual property at no cost 

to the Trust and the Self-Indexing Funds. 

5 In the event that an Adviser or Sub-Adviser 

serves as the Affiliated Index Provider for a SelfIndexing Fund, the terms ‘‘Affiliated Index 

Provider’’ or ‘‘Index Provider,’’ with respect to that 

Self-Indexing Fund, will be limited to the 

employees of the applicable Adviser or Sub-Adviser 

that are responsible for creating, compiling and 

maintaining the relevant Underlying Index. 

6The Affiliated Indexes may be made available to 

registered investment companies, as well as 

separately managed accounts of institutional 

investors and privately offered funds that are not 

deemed to be ‘‘investment companies’’ in reliance 

on section 3(c)(1) or 3(c)(7) of the Act for which the 

Adviser acts as adviser or subadviser (‘‘Affiliated 

Accounts’’) as well as other such registered 

investment companies, separately managed 

accounts and privately offered funds for which it 

does not act either as adviser or subadviser 

(‘‘Unaffiliated Accounts’’). The Affiliated Accounts 

and the Unaffiliated Accounts, like the SelfIndexing Funds, would seek to track the 

performance of one or more Underlying Index(es) 

by investing in the constituents of such Underlying 

Indexes or a representative sample of such 

constituents of the Underlying Index. Consistent 

with the relief requested from section 17(a), the 

Affiliated Accounts will not engage in Creation Unit 

transactions with a Self-Indexing Fund. 

7Under accounting procedures followed by each 

Self-Indexing Fund, trades made on the prior 

Business Day (‘‘T’’) will be booked and reflected in 

NAV on the current Business Day (T+1). 

Accordingly, the Self-Indexing 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. 

8 IPCM has also adopted (and any other Adviser 

has adopted or will adopt) a code of ethics pursuant 

to rule 17j–1 under the Act and rule 204A–1 under 

the Advisers Act, which contains provisions 

reasonably necessary to prevent Access Persons (as 

defined in rule 17j–1) from engaging in any conduct 

prohibited in rule 17j–1 (‘‘Code of Ethics’’). 

9The instruments and cash that the purchaser is 

required to deliver in exchange for the Creation 

Units it is purchasing is referred to as the ‘‘Portfolio 

Deposit.’’ 

Securities. Each Self-Indexing Fund 

may also invest up to 20% of its assets 

in certain index futures, options, 

options on index futures, swap contracts 

or other derivatives, as related to its 

respective Underlying Index and its 

Component Securities, cash and cash 

equivalents, other investment 

companies, as well as in securities and 

other instruments not included in its 

Underlying Index but which the Adviser 

believes will help the Self-Indexing 

Fund track its Underlying Index. A SelfIndexing Fund may also engage in short 

sales in accordance with its investment 

objective. 

7. A Self-Indexing Fund will utilize 

either a replication or representative 

sampling strategy to track its Underlying 

Index. A Self-Indexing Fund using a 

replication strategy will invest in the 

Component Securities of its Underlying 

Index in the same approximate 

proportions as in such Underlying 

Index. A Self-Indexing Fund using a 

representative sampling strategy will 

hold some, but not necessarily all, of the 

Component Securities of its Underlying 

Index. Applicants state that a SelfIndexing Fund using a representative 

sampling strategy will not be expected 

to track the performance of its 

Underlying Index with the same degree 

of accuracy as would an investment 

vehicle that invested in every 

Component Security of the Underlying 

Index with the same weighting as the 

Underlying Index. Applicants expect 

that each Self-Indexing Fund will have 

an annual tracking error relative to the 

performance of its Underlying Index of 

less than 5%. 

8. The Self-Indexing Funds will be 

entitled to use their Underlying Indexes 

pursuant to either a licensing agreement 

with the Affiliated Index Provider 

(defined below) or a sub-licensing 

arrangement with the Adviser, which 

has or will have a licensing agreement 

with such Affiliated Index Provider.4

An affiliated person, as defined in 

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

Person’’), or an affiliated person of an 

Affiliated Person (a ‘‘Second-Tier 

Affiliate’’), of the Trust or a SelfIndexing Fund, of an Adviser, of any 

Sub-Adviser to or promoter of a SelfIndexing Fund, or of the Distributor 

(each, an ‘‘Affiliated Index Provider’’) 5

will serve as the Index Provider to each 

Self-Indexing Fund. An Affiliated Index 

Provider will create a proprietary, rulesbased methodology to create Underlying 

Indexes (each an ‘‘Affiliated Index’’).6

9. Applicants recognize that the SelfIndexing Funds could raise concerns 

regarding the ability of the Affiliated 

Index Provider to manipulate the 

Underlying Index to the benefit or 

detriment of a Self-Indexing Fund. 

Applicants further recognize the 

potential for conflicts that may arise 

with respect to the personal trading 

activity of personnel of the Affiliated 

Index Provider who have knowledge of 

changes to an Underlying Index prior to 

the time that information is publicly 

disseminated. 

10. Applicants propose that each day 

that the Trust, the NYSE and the 

national securities exchange (as defined 

in section 2(a)(26) of the Act) (an 

‘‘Exchange’’) on which the Self-Indexing 

Fund’s Shares are primarily listed 

(‘‘Listing Exchange’’) are open for 

business, including any day that a SelfIndexing Fund is required to be open 

under section 22(e) of the Act (a 

‘‘Business Day’’), each Self-Indexing 

Fund will post on its Web site, before 

commencement of trading of Shares on 

the Exchange, the identities and 

quantities of the Portfolio Holdings that 

will form the basis for the Self-Indexing 

Fund’s calculation of its NAV at the end 

of the Business Day.7 Applicants believe 

that requiring the Self-Indexing Funds 

to maintain full portfolio transparency 

will provide an additional effective 

mechanism for addressing any such 

potential conflicts of interest. 

11. In addition, applicants do not 

believe the potential for conflicts of 

interest raised by the Adviser’s use of 

the Underlying Indexes in connection 

with the management of Self-Indexing 

Funds and the Affiliated Accounts will 

be substantially different from the 

potential conflicts presented by an 

adviser managing two or more registered 

funds. Both the Act and the Advisers 

Act contain various protections to 

address conflicts of interest where an 

adviser is managing two or more 

registered funds and these protections 

will also help address these conflicts 

with respect to the Self-Indexing Funds. 

12. Each Adviser and any SubAdviser has adopted or will adopt, 

pursuant to rule 206(4)–7 under the 

Advisers Act, written policies and 

procedures designed to prevent 

violations of the Advisers Act and the 

rules thereunder. These include policies 

and procedures designed to minimize 

potential conflicts of interest among the 

Self-Indexing Funds and the Affiliated 

Accounts, such as cross trading policies, 

as well as those designed to ensure the 

equitable allocation of portfolio 

transactions and brokerage 

commissions. In addition, IPCM has 

adopted policies and procedures as 

required under section 204A of the 

Advisers Act, which are reasonably 

designed in light of the nature of its 

business to prevent the misuse, in 

violation of the Advisers Act or the 

Exchange Act or the rules thereunder, of 

material non-public information by the 

IPCM or associated persons (‘‘Inside 

Information Policy’’). Any other Adviser 

and/or Sub-Adviser will be required to 

adopt and maintain a similar Inside 

Information Policy. In accordance with 

the Code of Ethics 8 and Inside 

Information Policy of each Adviser and 

Sub-Adviser, personnel of those entities 

with knowledge about the composition 

of a Portfolio Deposit 9 will be 

prohibited from disclosing such 

information to any other person, except 

as authorized in the course of their 

employment, until such information is 

made public. In addition, an Index 

Provider will not provide any 

information relating to changes to an 

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10The Self-Indexing 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 of 1933 

(‘‘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 Self-Indexing Funds will comply with the 

conditions of rule 144A. 

11The portfolio used for this purpose will be the 

same portfolio used to calculate the Self-Indexing 

Fund’s NAV for the Business Day. 

12A tradeable round lot for a security will be the 

standard unit of trading in that particular type of 

security in its primary market. 

13This includes instruments that can be 

transferred in kind only with the consent of the 

original counterparty to the extent the Self-Indexing 

Fund does not intend to seek such consents. 

14Because these instruments will be excluded 

from the Deposit Instruments and the Redemption 

Instruments, their value will be reflected in the 

determination of the Cash Amount (as defined 

below). 

15A Self-Indexing Fund may only use sampling 

for this purpose if the sample: (i) Is designed to 

generate performance that is highly correlated to the 

performance of the Self-Indexing Fund’s portfolio; 

(ii) consists entirely of instruments that are already 

included in the Self-Indexing Fund’s portfolio; and 

(iii) is the same for all Authorized Participants (as 

defined below) on a given Business Day. 

16 In determining whether a particular SelfIndexing 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 SelfIndexing 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 Self-Indexing Funds from a tax 

perspective. In contrast, cash redemptions typically 

require selling portfolio holdings, which may result 

in adverse tax consequences for the remaining SelfIndexing Fund shareholders that would not occur 

with an in-kind redemption. As a result, tax 

consideration may warrant in-kind redemptions. 

17A ‘‘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). 

Underlying Index’s methodology for the 

inclusion of component securities, the 

inclusion or exclusion of specific 

component securities, or methodology 

for the calculation or the return of 

component securities, in advance of a 

public announcement of such changes 

by the Index Provider. The Adviser will 

also include under Item 10.C. of Part 2 

of its Form ADV a discussion of its 

relationship to any Affiliated Index 

Provider and any material conflicts of 

interest resulting therefrom, regardless 

of whether the Affiliated Index Provider 

is a type of affiliate specified in Item 10. 

13. To the extent the Self-Indexing 

Funds transact with an Affiliated Person 

of an Adviser or Sub-Adviser, such 

transactions will comply with the Act, 

the rules thereunder and the terms and 

conditions of the requested order. In 

this regard, each Self-Indexing Fund’s 

board of directors or trustees (‘‘Board’’) 

will periodically review the SelfIndexing Fund’s use of an Affiliated 

Index Provider. Subject to the approval 

of the Self-Indexing Fund’s Board, the 

Adviser, Affiliated Persons of the 

Adviser (‘‘Adviser Affiliates’’) and 

Affiliated Persons of any Sub-Adviser 

(‘‘Sub-Adviser Affiliates’’) may be 

authorized to provide custody, fund 

accounting and administration and 

transfer agency services to the SelfIndexing Funds. Any services provided 

by the Adviser, Adviser Affiliates, SubAdviser and Sub-Adviser Affiliates will 

be performed in accordance with the 

provisions of the Act, the rules under 

the Act and any relevant guidelines 

from the staff of the Commission. 

14. The Shares of each Self-Indexing 

Fund will be purchased and redeemed 

in Creation Units and generally on an 

in-kind basis. 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’’).10 On any given Business 

Day, 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, unless the SelfIndexing Fund is Rebalancing (as 

defined below). In addition, the Deposit 

Instruments and the Redemption 

Instruments will each correspond pro 

rata to the positions in the Self-Indexing 

Fund’s portfolio (including cash 

positions) 11 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; 12 (c) TBA 

Transactions, short positions, 

derivatives and other positions that 

cannot be transferred in kind 13 will be 

excluded from the Deposit Instruments 

and the Redemption Instruments; 14 (d) 

to the extent the Self-Indexing Fund 

determines, on a given Business Day, to 

use a representative sampling of the 

Self-Indexing Fund’s portfolio; 15 or (e) 

for temporary periods, to effect changes 

in the Self-Indexing Fund’s portfolio as 

a result of the rebalancing of its 

Underlying Index (any such change, a 

‘‘Rebalancing’’). If there is a difference 

between the NAV attributable to a 

Creation Unit and the aggregate market 

value of the Deposit Instruments or 

Redemption Instruments 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 ‘‘Cash 

Amount’’). 

15. 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 Cash Amount; (b) if, on a given 

Business Day, the Self-Indexing 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, the Self-Indexing Fund 

determines to require the purchase or 

redemption, as applicable, to be made 

entirely in cash; 16 (d) if, on a given 

Business Day, the Self-Indexing 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 or DTC 

(defined below); or (ii) in the case of 

Foreign Self-Indexing Funds holding 

non-U.S. investments, such instruments 

are not eligible for trading due to local 

trading restrictions, local restrictions on 

securities transfers or other similar 

circumstances; or (e) if the Self-Indexing 

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 Foreign SelfIndexing Fund holding non-U.S. 

investments would be subject to 

unfavorable income tax treatment if the 

holder receives redemption proceeds in 

kind.17

16. Creation Units will consist of 

specified large aggregations of Shares, 

e.g., at least 25,000 Shares, and it is 

expected that the initial price of a 

Creation Unit will range from $1 million 

to $10 million. All orders to purchase 

Creation Units must be placed with the 

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18Where a Self-Indexing Fund permits an in-kind 

purchaser to substitute cash-in-lieu of depositing 

one or more of the requisite Deposit Instruments, 

the purchaser may be assessed a higher Transaction 

Fee to cover the cost of purchasing such Deposit 

Instruments. 

19Shares will be registered in book-entry form 

only. DTC or its nominee will be the record or 

registered owner of all outstanding Shares. 

Beneficial ownership of Shares will be shown on 

the records of DTC or the DTC Participants. 

Distributor by or through an 

‘‘Authorized Participant’’ which is 

either (1) a ‘‘Participating Party,’’ i.e., a 

broker-dealer or other participant in the 

Continuous Net Settlement System of 

the NSCC, a clearing agency registered 

with the Commission, or (2) a 

participant in The Depository Trust 

Company (‘‘DTC’’) (‘‘DTC Participant’’), 

which, in either case, has signed a 

participant agreement with the 

Distributor. The Distributor will be 

responsible for transmitting the orders 

to the Self-Indexing Funds and will 

furnish to those placing such orders 

confirmation that the orders have been 

accepted, but applicants state that the 

Distributor may reject any order which 

is not submitted in proper form. 

17. Each Business Day, before the 

open of trading on the Listing Exchange, 

each Self-Indexing Fund will cause to 

be published through the NSCC the 

names and quantities of the instruments 

comprising the Deposit Instruments and 

the Redemption Instruments, as well as 

the estimated Cash Amount (if any), for 

that day. The list of Deposit Instruments 

and Redemption Instruments will apply 

until a new list is announced on the 

following Business Day, and there will 

be no intra-day changes to the list 

except to correct errors in the published 

list. Each Listing Exchange or other 

major market data provider will 

disseminate, every 15 seconds during 

regular Exchange trading hours, through 

the facilities of the Consolidated Tape 

Association or other widely 

disseminated means, an amount for 

each Self-Indexing Fund stated on a per 

individual Share basis representing the 

sum of (i) the estimated Cash Amount 

and (ii) the current value of the Deposit 

Instruments. 

18. Transaction expenses, including 

operational processing and brokerage 

costs, will be incurred by a SelfIndexing Fund when investors purchase 

or redeem Creation Units in-kind and 

such costs have the potential to dilute 

the interests of the Self-Indexing Fund’s 

existing shareholders. Each SelfIndexing Fund will impose purchase or 

redemption transaction fees 

(‘‘Transaction Fees’’) in connection with 

effecting such purchases or redemptions 

of Creation Units. In all cases, such 

Transaction Fees will be limited in 

accordance with requirements of the 

Commission applicable to management 

investment companies offering 

redeemable securities. Since the 

Transaction Fees are intended to defray 

the transaction expenses as well as to 

prevent possible shareholder dilution 

resulting from the purchase or 

redemption of Creation Units, the 

Transaction Fees will be borne only by 

such purchasers or redeemers.18 The 

Distributor will be responsible for 

delivering the Self-Indexing Fund’s 

prospectus to those persons acquiring 

Shares in Creation Units and for 

maintaining records of both the orders 

placed with it and the confirmations of 

acceptance furnished by it. In addition, 

the Distributor will maintain a record of 

the instructions given to the applicable 

Self-Indexing Fund to implement the 

delivery of its Shares. 

19. Shares of each Self-Indexing Fund 

will be listed and traded individually on 

an Exchange. It is expected that one or 

more member firms of an Exchange will 

be designated to act as a market maker 

(each, a ‘‘Market Maker’’) and maintain 

a market for Shares trading on the 

Exchange. Prices of Shares trading on an 

Exchange will be based on the current 

bid/offer market. Transactions involving 

the sale of Shares on an Exchange will 

be subject to customary brokerage 

commissions and charges. 

20. Applicants expect that purchasers 

of Creation Units will include 

institutional investors and arbitrageurs. 

Market Makers, acting in their roles to 

provide a fair and orderly secondary 

market for the Shares, may from time to 

time find it appropriate to purchase or 

redeem Creation Units. Applicants 

expect that secondary market 

purchasers of Shares will include both 

institutional and retail investors.19 The 

price at which Shares trade will be 

disciplined by arbitrage opportunities 

created by the option continually to 

purchase or redeem Shares in Creation 

Units, which should help prevent 

Shares from trading at a material 

discount or premium in relation to their 

NAV. 

21. Shares will not be individually 

redeemable, and owners of Shares may 

acquire those Shares from the SelfIndexing Fund, or tender such Shares 

for redemption to the Self-Indexing 

Fund, in Creation Units only. To 

redeem, an investor must accumulate 

enough Shares to constitute a Creation 

Unit. Redemption requests must be 

placed through an Authorized 

Participant. A redeeming investor may 

pay a Transaction Fee, calculated in the 

same manner as a Transaction Fee 

payable in connection with purchases of 

Creation Units. 

22. Neither the Trust nor any SelfIndexing Fund will be advertised or 

marketed or otherwise held out as a 

traditional open-end investment 

company or a ‘‘mutual fund.’’ Instead, 

each Self-Indexing Fund will be 

marketed as an ‘‘ETF.’’ All marketing 

materials that describe the features or 

method of obtaining, buying or selling 

Creation Units, or Shares traded on an 

Exchange, or refer to redeemability, will 

prominently disclose that Shares are not 

individually redeemable and will 

disclose that the owners of Shares may 

acquire those Shares from the SelfIndexing Fund or tender such Shares for 

redemption to the Self-Indexing Fund in 

Creation Units only. The Self-Indexing 

Funds will provide copies of their 

annual and semi-annual shareholder 

reports to DTC Participants for 

distribution to beneficial owners of 

Shares. 

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, under section 12(d)(1)(J) of the 

Act for an exemption from sections 

12(d)(1)(A) and (B) of the Act, and 

under sections 6(c) and 17(b) of the Act 

for an exemption from sections 17(a)(1) 

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

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 

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

provides that the Commission may 

exempt any person, security, or 

transaction, or any class or classes of 

persons, securities or transactions, from 

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

exemption is consistent with the public 

interest and the protection of investors. 

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20Applicants acknowledge that no relief obtained 

from the requirements of section 22(e) will affect 

any obligations applicants may otherwise have 

under rule 15c6–1 under the Exchange Act 

requiring that most securities transactions be settled 

within three business days of the trade date. 

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 owner, 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. Because Shares 

will not be individually redeemable, 

applicants request an order that would 

permit the Self-Indexing Funds to 

register as open-end management 

investment companies and issue Shares 

that are redeemable in Creation Units 

only. Applicants state that investors 

may purchase Shares in Creation Units 

and redeem Creation Units from each 

Self-Indexing Fund. Applicants further 

state that because Creation Units may 

always be purchased and redeemed at 

NAV, the price of Shares on the 

secondary market should not vary 

materially from 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 that is 

currently being offered to the public by 

or through an 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, not 

at a current offering price described in 

a Self-Indexing Fund’s prospectus, and 

not at a price based on NAV. 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 designed to (a) prevent 

dilution caused by certain risklesstrading schemes by principal 

underwriters and contract dealers, (b) 

prevent unjust discrimination or 

preferential treatment among buyers, 

and (c) ensure an orderly distribution of 

investment company shares by 

eliminating price competition from 

dealers offering shares at less than the 

published sales price and repurchasing 

shares at more than the published 

redemption price. 

6. Applicants believe that none of 

these purposes will be thwarted by 

permitting Shares to trade in the 

secondary market at negotiated prices. 

Applicants state that (a) secondary 

market trading in Shares does not 

involve a Self-Indexing Fund as a party 

and will not result in dilution of an 

investment in Shares, and (b) to the 

extent different prices exist during a 

given trading day, or from day to day, 

such variances occur as a result of thirdparty 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 price at which Shares trade will 

be disciplined by arbitrage 

opportunities created by the option 

continually to purchase or redeem 

Shares in Creation Units, which should 

help prevent Shares from trading at a 

material discount or premium in 

relation to their NAV. 

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 

state that settlement of redemptions for 

Foreign Self-Indexing Funds will be 

contingent not only on the settlement 

cycle of the United States market, but 

also on current delivery cycles in local 

markets for the underlying foreign 

securities held by a Foreign SelfIndexing Fund. Applicants state that the 

delivery cycles currently practicable for 

transferring Redemption Instruments to 

redeeming investors, coupled with local 

market holiday schedules, may require 

a delivery process of up to fourteen (14) 

calendar days. Accordingly, with 

respect to Foreign Self-Indexing Funds 

only, applicants hereby request relief 

under section 6(c) from the requirement 

imposed by section 22(e) to allow 

Foreign Self-Indexing Funds to pay 

redemption proceeds within fourteen 

(14) calendar days following the tender 

of Creation Units for redemption.20

8. Applicants believe that Congress 

adopted section 22(e) to prevent 

unreasonable, undisclosed or 

unforeseen delays in the actual payment 

of redemption proceeds. Applicants 

propose that allowing redemption 

payments for Creation Units of a Foreign 

Self-Indexing Fund to be made within 

fourteen calendar days would not be 

inconsistent with the spirit and intent of 

section 22(e). Applicants suggest that a 

redemption payment occurring within 

fourteen calendar days following a 

redemption request would adequately 

afford investor protection. 

9. Applicants are not seeking relief 

from section 22(e) with respect to 

Foreign Self-Indexing Funds that do not 

effect creations and redemptions of 

Creation Units in-kind. 

Section 12(d)(1) 

10. Section 12(d)(1)(A) of the Act 

prohibits a registered investment 

company from acquiring securities of an 

investment company if such securities 

represent more than 3% of the total 

outstanding voting stock of the acquired 

company, more than 5% of the total 

assets of the acquiring company, or, 

together with the securities of any other 

investment companies, more than 10% 

of the total assets of the acquiring 

company. Section 12(d)(1)(B) of the Act 

prohibits a registered open-end 

investment company, its principal 

underwriter and any other broker-dealer 

from knowingly selling the investment 

company’s shares to another investment 

company if the sale will cause the 

acquiring company to own more than 

3% of the acquired company’s voting 

stock, or if the sale will cause more than 

10% of the acquired company’s voting 

stock to be owned by investment 

companies generally. 

11. Applicants request an exemption 

to permit registered management 

investment companies and unit 

investment trusts (‘‘UITs’’) that are not 

advised or sponsored by the Adviser 

and are not part of the same ‘‘group of 

investment companies,’’ as defined in 

section 12(d)(1)(G)(ii) of the Act as the 

Self-Indexing Funds (such management 

investment companies are referred to as 

‘‘Investing Management Companies,’’ 

such UITs are referred to as ‘‘Investing 

Trusts,’’ and Investing Management 

Companies and Investing Trusts are 

collectively referred to as ‘‘Funds of 

Funds’’), to acquire Shares beyond the 

limits of section 12(d)(1)(A) of the Act; 

and the Self-Indexing Funds, and any 

principal underwriter for the Selfmstockstill on DSK4VPTVN1PROD with NOTICES

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21A ‘‘Fund of Funds Affiliate’’ is a Fund of Funds 

Adviser, Fund of Funds Sub-Adviser, Sponsor, 

promoter, and principal underwriter of a Fund of 

Funds, and any person controlling, controlled by, 

or under common control with any of those entities. 

A ‘‘Self-Indexing Fund Affiliate’’ is an investment 

adviser, promoter, or principal underwriter of a 

Self-Indexing Fund and any person controlling, 

controlled by or under common control with any 

of these entities. 

22Any references to NASD Conduct Rule 2830 

include any successor or replacement FINRA rule 

to NASD Conduct Rule 2830. 

Indexing Funds, and/or any Broker 

registered under the Exchange Act, to 

sell Shares to Funds of Funds beyond 

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

Act. 

12. Each Investing Management 

Company will be advised by an 

investment adviser within the meaning 

of section 2(a)(20)(A) of the Act (the 

‘‘Fund of Funds Adviser’’) and may be 

sub-advised by investment advisers 

within the meaning of section 

2(a)(20)(B) of the Act (each a ‘‘Fund of 

Funds Sub-Adviser’’). Any investment 

adviser to an Investing Management 

Company will be registered under the 

Advisers Act. Each Investing Trust will 

be sponsored by a sponsor (‘‘Sponsor’’). 

13. Applicants submit that the 

proposed conditions to the requested 

relief adequately address the concerns 

underlying the limits in sections 

12(d)(1)(A) and (B), which include 

concerns about undue influence by a 

fund of funds over underlying funds, 

excessive layering of fees and overly 

complex fund structures. Applicants 

believe that the requested exemption is 

consistent with the public interest and 

the protection of investors. 

14. Applicants believe that neither a 

Fund of Funds nor a Fund of Funds 

Affiliate would be able to exert undue 

influence over a Self-Indexing Fund.21

To limit the control that a Fund of 

Funds may have over a Self-Indexing 

Fund, applicants propose a condition 

prohibiting a Fund of Funds Adviser or 

Sponsor, any person controlling, 

controlled by, or under common control 

with a Fund of Funds Adviser or 

Sponsor, and any investment company 

and any issuer that would be an 

investment company but for sections 

3(c)(1) or 3(c)(7) of the Act that is 

advised or sponsored by a Fund of 

Funds Adviser or Sponsor, or any 

person controlling, controlled by, or 

under common control with a Fund of 

Funds Adviser or Sponsor (‘‘Fund of 

Funds Advisory Group’’) from 

controlling (individually or in the 

aggregate) a Self-Indexing Fund within 

the meaning of section 2(a)(9) of the Act. 

The same prohibition would apply to 

any Fund of Funds Sub-Adviser, any 

person controlling, controlled by or 

under common control with the Fund of 

Funds Sub-Adviser, and any investment 

company or issuer that would be an 

investment company but for sections 

3(c)(1) or 3(c)(7) of the Act (or portion 

of such investment company or issuer) 

advised or sponsored by the Fund of 

Funds Sub-Adviser or any person 

controlling, controlled by or under 

common control with the Fund of 

Funds Sub-Adviser (‘‘Fund of Funds 

Sub-Advisory Group’’). 

15. Applicants propose other 

conditions to limit the potential for 

undue influence over the Self-Indexing 

Funds, including that no Fund of Funds 

or Fund of Funds Affiliate (except to the 

extent it is acting in its capacity as an 

investment adviser to a Self-Indexing 

Fund) will cause a Self-Indexing Fund 

to purchase a security in an offering of 

securities during the existence of an 

underwriting or selling syndicate of 

which a principal underwriter is an 

Underwriting Affiliate (‘‘Affiliated 

Underwriting’’). An ‘‘Underwriting 

Affiliate’’ is a principal underwriter in 

any underwriting or selling syndicate 

that is an officer, director, member of an 

advisory board, Fund of Funds Adviser, 

Fund of Funds Sub-Adviser, employee 

or Sponsor of the Fund of Funds, or a 

person of which any such officer, 

director, member of an advisory board, 

Fund of Funds Adviser or Fund of 

Funds Sub-Adviser, employee or 

Sponsor is an affiliated person (except 

that any person whose relationship to 

the Self-Indexing Fund is covered by 

section 10(f) of the Act is not an 

Underwriting Affiliate). 

16. Applicants do not believe that the 

proposed arrangement will involve 

excessive layering of fees. The board of 

directors or trustees of any Investing 

Management Company, including a 

majority of the directors or trustees who 

are not ‘‘interested persons’’ within the 

meaning of section 2(a)(19) of the Act 

(‘‘disinterested directors or trustees’’), 

will find that the advisory fees charged 

under the contract are based on services 

provided that will be in addition to, 

rather than duplicative of, services 

provided under the advisory contract of 

any Self-Indexing Fund in which the 

Investing Management Company may 

invest. In addition, under condition 

B.5., a Fund of Funds Adviser, or a 

Fund of Funds’ trustee or Sponsor, as 

applicable, will waive fees otherwise 

payable to it by the Fund of Funds in 

an amount at least equal to any 

compensation (including fees received 

pursuant to any plan adopted by a SelfIndexing Fund under rule 12b–1 under 

the Act) received from a Self-Indexing 

Fund by the Fund of Funds Adviser, 

trustee or Sponsor or an affiliated 

person of the Fund of Funds Adviser, 

trustee or Sponsor, other than any 

advisory fees paid to the Fund of Funds 

Adviser, trustee or Sponsor or its 

affiliated person by a Self-Indexing 

Fund, in connection with the 

investment by the Fund of Funds in the 

Self-Indexing Fund. Applicants state 

that any sales charges and/or service 

fees charged with respect to shares of a 

Fund of Funds will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830.22

17. Applicants submit that the 

proposed arrangement will not create an 

overly complex fund structure. 

Applicants note that no Self-Indexing 

Fund will acquire securities of any 

investment company or company 

relying on section 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A) of the Act, except 

to the extent permitted by exemptive 

relief from the Commission permitting 

the Self-Indexing Fund to purchase 

shares of other investment companies 

for short-term cash management 

purposes. To ensure a Fund of Funds is 

aware of the terms and conditions of the 

requested order, the Fund of Funds will 

enter into an agreement with the SelfIndexing Fund (‘‘FOF Participation 

Agreement’’). The FOF Participation 

Agreement will include an 

acknowledgement from the Fund of 

Funds that it may rely on the order only 

to invest in the Self-Indexing Funds and 

not in any other investment company. 

18. Applicants also note that a SelfIndexing Fund may choose to reject a 

direct purchase of Shares in Creation 

Units by a Fund of Funds. To the extent 

that a Fund of Funds purchases Shares 

in the secondary market, a Self-Indexing 

Fund would still retain its ability to 

reject any initial investment by a Fund 

of Funds in excess of the limits of 

section 12(d)(1)(A) by declining to enter 

into a FOF Participation Agreement 

with the Fund of Funds. 

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

19. Sections 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, from 

selling any security to or purchasing any 

security from the company. Section 

2(a)(3) of the Act defines ‘‘affiliated 

person’’ of another person to include (a) 

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, (b) any person 5% or more 

of whose outstanding voting securities 

are directly or indirectly owned, 

controlled or held with the power to 

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23Although applicants believe that most Funds of 

Funds will purchase Shares in the secondary 

market and will not purchase Creation Units 

directly from a Self-Indexing Fund, a Fund of 

Funds might seek to transact in Creation Units 

directly with a Self-Indexing Fund that is an 

affiliated person of a Fund of Funds. To the extent 

that purchases and sales of Shares occur in the 

secondary market and not through principal 

transactions directly between a Fund of Funds and 

a Self-Indexing Fund, relief from section 17(a) 

would not be necessary. However, the requested 

relief would apply to direct sales of Shares in 

Creation Units by a Self-Indexing Fund to a Fund 

of Funds and redemptions of those Shares. 

Applicants are not seeking relief from section 17(a) 

for, and the requested relief will not apply to, 

transactions where a Self-Indexing Fund could be 

deemed an affiliated person, or an affiliated person 

of an affiliated person of a Fund of Funds because 

an Adviser or an entity controlling, controlled by 

or under common control with an Adviser provides 

investment advisory services to that Fund of Funds. 

24Applicants acknowledge that the receipt of 

compensation by (a) an affiliated person of a Fund 

of Funds, or an affiliated person of such person, for 

the purchase by the Fund of Funds of Shares of a 

Self-Indexing Fund or (b) an affiliated person of a 

Self-Indexing Fund, or an affiliated person of such 

person, for the sale by the Self-Indexing Fund of its 

Shares to a Fund of Funds, may be prohibited by 

section 17(e)(1) of the Act. The FOF Participation 

Agreement also will include this acknowledgment. 

vote by the other person, and (c) 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’’ as the power 

to exercise a controlling influence over 

the management or policies of a 

company, and provides that a control 

relationship will be presumed where 

one person owns more than 25% of a 

company’s voting securities. The SelfIndexing Funds may be deemed to be 

controlled by the Adviser or an entity 

controlling, controlled by or under 

common control with the Adviser and 

hence affiliated persons of each other. In 

addition, the Self-Indexing Funds may 

be deemed to be under common control 

with any other registered investment 

company (or series thereof) advised by 

an Adviser or an entity controlling, 

controlled by or under common control 

with an Adviser (an ‘‘Affiliated Fund’’). 

Any investor, including Market Makers, 

owning 5% or holding in excess of 25% 

of the Trust or such Self-Indexing 

Funds, may be deemed affiliated 

persons of the Trust or such SelfIndexing Funds. In addition, an investor 

could own 5% or more, or in excess of 

25% of the outstanding shares of one or 

more Affiliated Funds making that 

investor a Second-Tier Affiliate of the 

Self-Indexing Funds. 

20. Applicants request an exemption 

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

Act pursuant to sections 6(c) and 17(b) 

of the Act to permit persons that are 

Affiliated Persons of the Self-Indexing 

Funds, or Second-Tier Affiliates of the 

Self-Indexing Funds, solely by virtue of 

one or more of the following: (a) 

Holding 5% or more, or in excess of 

25%, of the outstanding Shares of one 

or more Self-Indexing 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, to effectuate purchases 

and redemptions ‘‘in-kind.’’ 

21. Applicants assert that no useful 

purpose would be served by prohibiting 

such affiliated persons from making ‘‘inkind’’ purchases or ‘‘in-kind’’ 

redemptions of Shares of a Self-Indexing 

Fund in Creation Units. Both the 

deposit procedures for ‘‘in-kind’’ 

purchases of Creation Units and the 

redemption procedures for ‘‘in-kind’’ 

redemptions of Creation Units will be 

effected in exactly the same manner for 

all purchases and redemptions, 

regardless of size or number. There will 

be no discrimination between 

purchasers or redeemers. Deposit 

Instruments and Redemption 

Instruments for each Self-Indexing Fund 

will be valued in the identical manner 

as those Portfolio Holdings currently 

held by such Self-Indexing Fund and 

the valuation of the Deposit Instruments 

and Redemption Instruments will be 

made in an identical manner regardless 

of the identity of the purchaser or 

redeemer. Applicants do not believe 

that ‘‘in-kind’’ purchases and 

redemptions will result in abusive selfdealing or overreaching, but rather 

assert that such procedures will be 

implemented consistently with each 

Self-Indexing Fund’s objectives and 

with the general purposes of the Act. 

Applicants believe that ‘‘in-kind’’ 

purchases and redemptions will be 

made on terms reasonable to applicants 

and any affiliated persons because they 

will be valued pursuant to verifiable 

objective standards. The method of 

valuing Portfolio Holdings held by a 

Self-Indexing Fund is identical to that 

used for calculating ‘‘in-kind’’ purchase 

or redemption values and therefore 

creates no opportunity for affiliated 

persons or Second-Tier Affiliates of 

applicants to effect a transaction 

detrimental to the other holders of 

Shares of that Self-Indexing Fund. 

Similarly, applicants submit that, by 

using the same standards for valuing 

Portfolio Holdings held by a SelfIndexing Fund as are used for 

calculating ‘‘in-kind’’ redemptions or 

purchases, the Self-Indexing Fund will 

ensure that its NAV will not be 

adversely affected by such securities 

transactions. Applicants also note that 

the ability to take deposits and make 

redemptions ‘‘in-kind’’ will help each 

Self-Indexing Fund to track closely its 

Underlying Index and therefore aid in 

achieving the Self-Indexing Fund’s 

objectives. 

22. Applicants also seek relief under 

sections 6(c) and 17(b) from section 

17(a) to permit a Self-Indexing Fund 

that is an affiliated person, or an 

affiliated person of an affiliated person, 

of a Fund of Funds to sell its Shares to 

and redeem its Shares from a Fund of 

Funds, and to engage in the 

accompanying in-kind transactions with 

the Fund of Funds.23 Applicants state 

that the terms of the transactions are fair 

and reasonable and do not involve 

overreaching. Applicants note that any 

consideration paid by a Fund of Funds 

for the purchase or redemption of 

Shares directly from a Self-Indexing 

Fund will be based on the NAV of the 

Self-Indexing Fund.24 Applicants 

believe that any proposed transactions 

directly between the Self-Indexing 

Funds and Funds of Funds will be 

consistent with the policies of each 

Fund of Funds. The purchase of 

Creation Units by a Fund of Funds 

directly from a Self-Indexing Fund will 

be accomplished in accordance with the 

investment restrictions of any such 

Fund of Funds and will be consistent 

with the investment policies set forth in 

the Fund of Funds’ registration 

statement. Applicants also state that the 

proposed transactions are consistent 

with the general purposes of the Act and 

are appropriate in the public interest. 

Applicants’ Conditions 

Applicants agree that any order of the 

Commission granting the requested 

relief will be subject to the following 

conditions: 

A. ETF Relief 

1. The requested relief to permit ETF 

operations will expire on the effective 

date of any Commission rule under the 

Act that provides relief permitting the 

operation of affiliated index-based ETFs. 

2. As long as a Self-Indexing Fund 

operates in reliance on the requested 

order, the Shares of such Self-Indexing 

Fund will be listed on an Exchange. 

3. Neither the Trust nor any SelfIndexing Fund will be advertised or 

marketed as an open-end 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 Shares are not individually 

redeemable and that owners of Shares 

may acquire those Shares from the SelfIndexing Fund and tender those Shares 

for redemption to a Self-Indexing Fund 

in Creation Units only. 

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8290 Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Notices 

4. The Web site, which is and will be 

publicly accessible at no charge, will 

contain, on a per Share basis for each 

Self-Indexing Fund, the prior Business 

Day’s NAV and the market closing price 

or the midpoint of the bid/ask spread at 

the time of the calculation of such NAV 

(‘‘Bid/Ask Price’’), and a calculation of 

the premium or discount of the market 

closing price or Bid/Ask Price against 

such NAV. 

5. Each Self-Indexing Fund will post 

on the Web site on each Business Day, 

before commencement of trading of 

Shares on the Exchange, the SelfIndexing Fund’s Portfolio Holdings. 

6. No Adviser or any Sub-Adviser to 

a Self-Indexing Fund, directly or 

indirectly, will cause any Authorized 

Participant (or any investor on whose 

behalf an Authorized Participant may 

transact with the Self-Indexing Fund) to 

acquire any Deposit Instrument for the 

Self-Indexing Fund through a 

transaction in which the Self-Indexing 

Fund could not engage directly. 

B. Section 12(d)(1) Relief 

1. The members of a Fund of Funds’ 

Advisory Group will not control 

(individually or in the aggregate) a SelfIndexing Fund within the meaning of 

section 2(a)(9) of the Act. The members 

of a Fund of Funds’ Sub-Advisory 

Group will not control (individually or 

in the aggregate) a Self-Indexing Fund 

within the meaning of section 2(a)(9) of 

the Act. If, as a result of a decrease in 

the outstanding voting securities of a 

Self-Indexing Fund, the Fund of Funds’ 

Advisory Group or the Fund of Funds’ 

Sub-Advisory Group, each in the 

aggregate, becomes a holder of more 

than 25 percent of the outstanding 

voting securities of a Self-Indexing 

Fund, it will vote its Shares of the SelfIndexing Fund in the same proportion 

as the vote of all other holders of the 

Self-Indexing Fund’s Shares. This 

condition does not apply to the Fund of 

Funds’ Sub-Advisory Group with 

respect to a Self-Indexing Fund for 

which the Fund of Funds’ Sub-Adviser 

or a person controlling, controlled by or 

under common control with the Fund of 

Funds’ Sub-Adviser acts as the 

investment adviser within the meaning 

of section 2(a)(20)(A) of the Act. 

2. No Fund of Funds or Fund of 

Funds Affiliate will cause any existing 

or potential investment by the Fund of 

Funds in a Self-Indexing Fund to 

influence the terms of any services or 

transactions between the Fund of Funds 

or Fund of Funds Affiliate and the SelfIndexing Fund or a Self-Indexing Fund 

Affiliate. 

3. The board of directors or trustees of 

an Investing Management Company, 

including a majority of the disinterested 

directors or trustees, will adopt 

procedures reasonably designed to 

ensure that the Fund of Funds Adviser 

and Fund of Funds Sub-Adviser are 

conducting the investment program of 

the Investing Management Company 

without taking into account any 

consideration received by the Investing 

Management Company or a Fund of 

Funds Affiliate from a Self-Indexing 

Fund or Self-Indexing Fund Affiliate in 

connection with any services or 

transactions. 

4. Once an investment by a Fund of 

Funds in the securities of a SelfIndexing Fund exceeds the limits in 

section 12(d)(1)(A)(i) of the Act, the 

Board of the Self-Indexing Fund, 

including a majority of the directors or 

trustees who are not ‘‘interested 

persons’’ within the meaning of section 

2(a)(19) of the Act (‘‘non-interested 

Board members’’), will determine that 

any consideration paid by the SelfIndexing Fund to the Fund of Funds or 

a Fund of Funds Affiliate in connection 

with any services or transactions: (i) Is 

fair and reasonable in relation to the 

nature and quality of the services and 

benefits received by the Self-Indexing 

Fund; (ii) is within the range of 

consideration that the Self-Indexing 

Fund would be required to pay to 

another unaffiliated entity in connection 

with the same services or transactions; 

and (iii) does not involve overreaching 

on the part of any person concerned. 

This condition does not apply with 

respect to any services or transactions 

between a Self-Indexing Fund and its 

investment adviser(s), or any person 

controlling, controlled by or under 

common control with such investment 

adviser(s). 

5. The Fund of Funds Adviser, or 

trustee or Sponsor of an Investing Trust, 

as applicable, will waive fees otherwise 

payable to it by the Fund of Funds in 

an amount at least equal to any 

compensation (including fees received 

pursuant to any plan adopted by a SelfIndexing Fund under rule 12b–1 under 

the Act) received from a Self-Indexing 

Fund by the Fund of Funds Adviser, or 

trustee or Sponsor of the Investing 

Trust, or an affiliated person of the 

Fund of Funds Adviser, or trustee or 

Sponsor of the Investing Trust, other 

than any advisory fees paid to the Fund 

of Funds Adviser, trustee or Sponsor of 

an Investing Trust, or its affiliated 

person by the Self-Indexing Fund in 

connection with the investment by the 

Fund of Funds in the Self-Indexing 

Fund. Any Fund of Funds Sub-Adviser 

will waive fees otherwise payable to the 

Fund of Funds Sub-Adviser, directly or 

indirectly, by the Investing Management 

Company in an amount at least equal to 

any compensation received from a SelfIndexing Fund by the Fund of Funds 

Sub-Adviser, or an affiliated person of 

the Fund of Funds Sub-Adviser, other 

than any advisory fees paid to the Fund 

of Funds Sub-Adviser or its affiliated 

person by the Self-Indexing Fund in 

connection with the investment by the 

Investing Management Company in the 

Self-Indexing Fund made at the 

direction of the Fund of Funds SubAdviser. In the event that the Fund of 

Funds Sub-Adviser waives fees, the 

benefit of the waiver will be passed 

through to the Investing Management 

Company. 

6. No Fund of Funds or Fund of 

Funds Affiliate (except to the extent it 

is acting in its capacity as an investment 

adviser to a Self-Indexing Fund) will 

cause a Self-Indexing Fund to purchase 

a security in any Affiliated 

Underwriting. 

7. The Board of a Self-Indexing Fund, 

including a majority of the noninterested Board members, will adopt 

procedures reasonably designed to 

monitor any purchases of securities by 

the Self-Indexing Fund in an Affiliated 

Underwriting, once an investment by a 

Fund of Funds in the securities of the 

Self-Indexing Fund exceeds the limit of 

section 12(d)(1)(A)(i) of the Act, 

including any purchases made directly 

from an Underwriting Affiliate. The 

Board will review these purchases 

periodically, but no less frequently than 

annually, to determine whether the 

purchases were influenced by the 

investment by the Fund of Funds in the 

Self-Indexing Fund. The Board will 

consider, among other things: (i) 

Whether the purchases were consistent 

with the investment objectives and 

policies of the Self-Indexing Fund; (ii) 

how the performance of securities 

purchased in an Affiliated Underwriting 

compares to the performance of 

comparable securities purchased during 

a comparable period of time in 

underwritings other than Affiliated 

Underwritings or to a benchmark such 

as a comparable market index; and (iii) 

whether the amount of securities 

purchased by the Self-Indexing Fund in 

Affiliated Underwritings and the 

amount purchased directly from an 

Underwriting Affiliate have changed 

significantly from prior years. The 

Board will take any appropriate actions 

based on its review, including, if 

appropriate, the institution of 

procedures designed to ensure that 

purchases of securities in Affiliated 

Underwritings are in the best interest of 

shareholders of the Self-Indexing Fund. 

8. Each Self-Indexing Fund will 

maintain and preserve permanently in 

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Federal Register / Vol. 81, No. 32 / Thursday, February 18, 2016 / Notices 8291 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See Rule 6.62(e), which defines complex orders. 

5See Securities Exchange Act Release No. 68005 

(Oct. 9, 2012), 77 FR 63362 (Oct. 16, 2012) (SR– 

NYSEArca–2012–106) (establishing fees for certain 

proprietary options market data products). See also 

Securities Exchange Act Release Nos. 69523 (May 

6, 2013), 78 FR 27452 (May 10, 2013) (SR– 

NYSEArca–2013–41) (establishing a schedule of 

Continued 

an easily accessible place a written copy 

of the procedures described in the 

preceding condition, and any 

modifications to such procedures, and 

will maintain and preserve for a period 

of not less than six years from the end 

of the fiscal year in which any purchase 

in an Affiliated Underwriting occurred, 

the first two years in an easily accessible 

place, a written record of each purchase 

of securities in Affiliated Underwritings 

once an investment by a Fund of Funds 

in the securities of the Self-Indexing 

Fund exceeds the limit of section 

12(d)(1)(A)(i) of the Act, setting forth 

from whom the securities were 

acquired, the identity of the 

underwriting syndicate’s members, the 

terms of the purchase, and the 

information or materials upon which 

the Board’s determinations were made. 

9. Before investing in a Self-Indexing 

Fund in excess of the limit in section 

12(d)(1)(A), a Fund of Funds and the 

Trust will execute a FOF Participation 

Agreement stating without limitation 

that their respective boards of directors 

or trustees and their investment 

advisers, or trustee and Sponsor, as 

applicable, understand the terms and 

conditions of the order, and agree to 

fulfill their responsibilities under the 

order. At the time of its investment in 

Shares of a Self-Indexing Fund in excess 

of the limit in section 12(d)(1)(A)(i), a 

Fund of Funds will notify the SelfIndexing Fund of the investment. At 

such time, the Fund of Funds will also 

transmit to the Self-Indexing Fund a list 

of the names of each Fund of Funds 

Affiliate and Underwriting Affiliate. The 

Fund of Funds will notify the SelfIndexing Fund of any changes to the list 

of the names as soon as reasonably 

practicable after a change occurs. The 

Self-Indexing Fund and the Fund of 

Funds will maintain and preserve a 

copy of the order, the FOF Participation 

Agreement, and the list with any 

updated information for the duration of 

the investment and for a period of not 

less than six years thereafter, the first 

two years in an easily accessible place. 

10. Before approving any advisory 

contract under section 15 of the Act, the 

board of directors or trustees of each 

Investing Management Company, 

including a majority of the disinterested 

directors or trustees, will find that the 

advisory fees charged under such 

contract are based on services provided 

that will be in addition to, rather than 

duplicative of, the services provided 

under the advisory contract(s) of any 

Self-Indexing Fund in which the 

Investing Management Company may 

invest. These findings and their basis 

will be fully recorded in the minute 

books of the appropriate Investing 

Management Company. 

11. Any sales charges and/or service 

fees charged with respect to shares of a 

Fund of Funds will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830. 

12. No Self-Indexing Fund will 

acquire securities of an investment 

company or company relying on section 

3(c)(1) or 3(c)(7) of the Act in excess of 

the limits contained in section 

12(d)(1)(A) of the Act, except to the 

extent the Self-Indexing Fund acquires 

securities of another investment 

company pursuant to exemptive relief 

from the Commission permitting the 

Self-Indexing Fund to acquire securities 

of one or more investment companies 

for short-term cash management 

purposes. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2016–03301 Filed 2–17–16; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–77111; File No. SR– 

NYSEARCA–2016–29] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Modifying the Arca 

Options Deep Market Data Product 

February 11, 2016. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that on February 

4, 2016, NYSE Arca, Inc. (the 

‘‘Exchange’’ or ‘‘NYSE Arca’’) 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 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 modify the 

Arca Options Deep market data product. 

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 modify the 

Arca Options Deep market data product. 

The Exchange currently offers the 

following real-time options market data 

feeds: ‘‘Arca Options Top,’’ ‘‘Arca 

Options Deep,’’ and ‘‘Arca Options 

Complex’’ (the ‘‘Arca Options 

Products’’). ‘‘Arca Options Top’’ is a 

single market data product that 

combines last sale data, best bids and 

offers (‘‘BBO’’), order imbalance 

information and series status and 

underlying status messages (collectively 

called security status messages). ‘‘Arca 

Options Deep’’ is also a single market 

data product that provides subscribers 

NYSE Arca Options quotes and orders at 

the first three price levels in each series 

on a real-time basis. ‘‘Arca Options 

Complex,’’ also a single market data 

product, provides subscribers NYSE 

Arca Options quote and trade 

information (including orders/quotes, 

requests for responses, and trades) for 

the complex order book on a real-time 

basis.4

The Exchange charges a single fee for 

Arca Options Top and subscribers of 

Arca Options Top receive all three data 

feeds described above. The Exchange 

charges a separate fee for Arca Options 

Complex for subscribers that seek to 

obtain this data feed on a standalone 

basis.5

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