Document ID: SEC-2020-0171-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2020-02-06T05:00Z

[Federal Register Volume 85, Number 25 (Thursday, February 6, 2020)]
[Notices]
[Pages 6988-6993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02278]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88107; File No. SR-CboeBZX-2020-008]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To List 
and Trade Shares of the Hartford Core Bond ETF of the Hartford Funds 
Exchange-Traded Trust Under Rule 14.11(i), Managed Fund Shares

January 31, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 21, 2020, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Exchange filed the proposal as 
a ``non-controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') is filing 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change to list and trade shares of the Hartford Core Bond ETF (the 
``Fund'') of the Hartford Funds Exchange-Traded Trust (the ``Trust'') 
under Rule 14.11(i) (``Managed Fund Shares'').
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade the Shares under Rule 
14.11(i), which governs the listing and trading of Managed Fund Shares 
on the Exchange.\5\ The Fund will be an actively managed fund. The 
shares will be offered by the Trust, which was established as a 
Delaware statutory trust on September 20, 2010. The Trust is registered 
with the Commission as an open-end investment company and has filed a 
registration statement on behalf of the Fund on Form N-1A 
(``Registration Statement'') with the Commission.\6\
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    \5\ The Commission approved Rule 14.11(i) in Securities Exchange 
Act Release No. 65225 (August 30, 2011), 76 FR 55148 (September 6, 
2011) (SR-BATS-2011-018) and subsequently approved generic listing 
standards for Managed Fund Shares under Rule 14.11(i) in Securities 
Exchange Act Release No. 78396 (July 22, 2016), 81 FR 49698 (July 
28, 2016) (SR-BATS-2015-100).
    \6\ The Trust filed a post-effective amendment to the 
Registration Statement on March 1, 2019 (the ``Registration 
Statement''). See Registration Statement on Form N-1A for the Trust 
(File Nos. 333-215165 and 811-23222). The descriptions of the Fund 
and the Shares contained herein are based, in part, on information 
included in the Registration Statement. The Commission has issued an 
order granting certain exemptive relief to the Trust and affiliated 
persons under the Investment Company Act of 1940 (the ``1940 Act'') 
(15 U.S.C. 80a-1). See Investment Company Act Release No. 30695 
(September 24, 2013) (File No. 812- 14178).
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    Rule 14.11(i)(4)(C)(ii)(d) requires that component securities that 
in aggregate account for at least 90% of the fixed income weight of the 
portfolio must satisfy at least one of five conditions. The Exchange 
submits this proposal because the Fund will not meet this requirement; 
\7\ however, it will meet all of the other requirements of Rule 
14.11(i). The Exchange notes that this proposed exception to Rule 
14.11(i)(4)(C)(ii)(d) is substantively identical to an exception 
included in several other rule filings that were either immediately 
effective or approved by the Commission.\8\
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    \7\ Rule 14.11(i)(4)(C)(ii)(d) provides that ``component 
securities that in aggregate account for at least 90% of the fixed 
income weight of the portfolio must be either: (a) From issuers that 
are required to file reports pursuant to Sections 13 and 15(d) of 
the Act; (b) from issuers that have a worldwide market value of its 
outstanding common equity held by non-affiliates of $700 million or 
more; (c) from issuers that have outstanding securities that are 
notes, bonds, debentures, or evidence of indebtedness having a total 
remaining principal amount of at least $1 billion; (d) exempted 
securities as defined in Section 3(a)(12) of the Act; or (e) from 
issuers that are a government of a foreign country or a political 
subdivision of a foreign country.'' The Exchange instead is 
proposing that the fixed income portion of the portfolio excluding 
Non-Agency ABS and MBS, as defined below, will satisfy this 90% 
requirement.
    \8\ See Securities Exchange Act Release Nos. 84047 (September 6, 
2018), 83 FR 46200 (September 12, 2018) (SR-NASDAQ-2017-128) (the 
``Nasdaq Approval Order''); and 85701 (April 22, 2019), 84 FR 17902 
(April 26, 2019) (SR-CboeBZX-2019-016) (the ``Exchange Approval 
Order''). The Exchange notes that it filed a non-controversial rule 
change related to another fund issued by the Trust that allows for 
an identical exception to Rule 14.11(i)(4)(C)(ii)(d). See also 
Securities Exchange Act Release No. 87651 (December 3, 2019), 84 FR 
67327 (December 9, 2019) (SR-CboeBZX-2019-099).
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    Hartford Funds Management Company LLC acts as adviser to the Fund 
(the ``Adviser''). Wellington Management is the sub-adviser (``Sub-
Adviser'') to the Fund. State Street Bank and Trust Company is the 
administrator, custodian, and transfer agent for the Trust. ALPS 
Distributors, Inc. serves as the distributor for the Trust.
    Rule 14.11(i)(7) provides that, if the investment adviser or sub-
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-

[[Page 6989]]

dealer, such investment adviser or sub-adviser shall erect and maintain 
a ``fire wall'' between the investment adviser or sub-adviser and the 
broker-dealer with respect to access to information concerning the 
composition and/or changes to such investment company portfolio.\9\ In 
addition, Rule 14.11(i)(7) further requires that personnel who make 
decisions on the investment company's portfolio composition must be 
subject to procedures designed to prevent the use and dissemination of 
material nonpublic information regarding the applicable investment 
company portfolio. Rule 14.11(i)(7) is similar to Rule 
14.11(b)(5)(A)(i), however, Rule 14.11(i)(7) in connection with the 
establishment of a ``fire wall'' between the investment adviser or sub-
adviser and the broker-dealer reflects the applicable open-end fund's 
portfolio, not an underlying benchmark index, as is the case with 
index-based funds. The Adviser and Sub-Adviser are not a registered 
broker-dealer, but the Adviser and Sub-Adviser are affiliated with a 
broker-dealer and have implemented and will maintain ``fire walls'' 
with respect to such broker-dealer regarding access to information 
concerning the composition and/or changes to the Fund's portfolio. In 
addition, Adviser and Sub-Adviser personnel who make decisions 
regarding the Fund's portfolio are subject to procedures designed to 
prevent the use and dissemination of material nonpublic information 
regarding the Fund's portfolio. In the event that (a) the Adviser or 
Sub-Adviser becomes registered as a broker-dealer or newly affiliated 
with another broker-dealer, or (b) any new adviser or sub-adviser is a 
registered broker-dealer or becomes affiliated with a broker-dealer, it 
will implement and maintain a fire wall with respect to its relevant 
personnel or such broker-dealer affiliate, as applicable, regarding 
access to information concerning the composition and/or changes to the 
portfolio, and will be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding such 
portfolio.
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    \9\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and their Sub-Adviser and their 
related personnel are subject to the provisions of Rule 204A-1 under 
the Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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Hartford Core Bond ETF
    According to the Registration Statement, the Fund seeks to provide 
long-term total return. In order to achieve its investment objective, 
under Normal Market Conditions,\10\ the Fund will invest primarily in 
investment grade fixed-income securities. Under Normal Market 
Conditions, the Fund will invest at least 80% of its assets (including 
any borrowings for investment purposes) in fixed income securities, as 
described in Rule 14.11(i)(4)(C)(ii), including: (1) Securities issued 
or guaranteed as to principal or interest by the U.S. Government, its 
agencies or instrumentalities; (2) non-convertible and convertible debt 
securities issued or guaranteed by U.S. corporations or other issuers 
(including foreign issuers); (3) asset-backed and mortgage-related 
securities, including collateralized mortgage and loan obligations; and 
(4) securities and loans issued or guaranteed as to principal or 
interest by a sovereign government or one of its agencies or political 
subdivisions (including quasi-sovereigns), supranational entities such 
as development banks, non-U.S. corporations, banks or bank holding 
companies, or other foreign issuers. Such holdings in fixed income 
securities will meet the requirements for fixed income instruments in 
Rule 14.11(i)(4)(C)(ii) except for Rule 14.11(i)(4)(C)(ii)(d), as 
discussed in more detail below.
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    \10\ As provided in Rule 14.11(i)(3)(E), the term ``Normal 
Market Conditions'' includes, but is not limited to, the absence of 
trading halts in the applicable financial markets generally; 
operational issues causing dissemination of inaccurate market 
information or system failures; or force majeure type events such as 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption, or any similar intervening 
circumstance.
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    Among others, such fixed income securities that may be held by the 
Fund include non-agency, non-GSE,\11\ and privately-issued mortgage-
related and other asset-backed securities (collectively, ``Non-Agency 
ABS and MBS''), which it generally expects to include (but not be 
limited to) the following sectors: Private mortgage backed securities, 
commercial mortgage backed securities, asset-backed securities 
(including autos, credit cards, equipment, consumer loans), and 
collateralized loan obligations. In accordance with Rule 
14.11(i)(4)(C)(ii)(e), the Fund's holdings in Non-Agency ABS and MBS 
will not account for more than 20% of the weight of the total 
portfolio, in the aggregate.
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    \11\ A ``GSE'' is a type of financial services corporation 
created by the United States Congress. GSEs include Fannie Mae and 
Freddie Mac, but not Sallie Mae, which is no longer a government 
entity.
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    The Fund will also generally invest up to 20% of its assets in cash 
and Cash Equivalents,\12\ listed derivatives,\13\ and OTC 
derivatives,\14\ although such holdings may exceed 20%. The Fund's 
holdings in cash and Cash Equivalents, listed derivatives, and OTC 
derivatives will be in compliance with all generic listing standards, 
including those in Rules 14.11(i)(4)(C)(iii), 14.11(i)(4)(C)(iv), 
14.11(i)(4)(C)(v), and 14.11(i)(4)(C)(vi).
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    \12\ As defined in Exchange Rule 14.11(i)(4)(C)(iii)(b), Cash 
Equivalents are short-term instruments with maturities of less than 
three months, which includes only the following: (i) U.S. Government 
securities, including bills, notes, and bonds differing as to 
maturity and rates of interest, which are either issued or 
guaranteed by the U.S. Treasury or by U.S. Government agencies or 
instrumentalities; (ii) certificates of deposit issued against funds 
deposited in a bank or savings and loan association; (iii) bankers 
acceptances, which are short-term credit instruments used to finance 
commercial transactions; (iv) repurchase agreements and reverse 
repurchase agreements; (v) bank time deposits, which are monies kept 
on deposit with banks or savings and loan associations for a stated 
period of time at a fixed rate of interest; (vi) commercial paper, 
which are short-term unsecured promissory notes; and (vii) money 
market funds.
    \13\ For purposes of this filing, listed derivatives include 
only the following instruments: Treasury futures, U.S. interest rate 
futures, and Eurodollar futures.
    \14\ For purposes of this filing, OTC derivatives include only 
the following instruments: interest rate swaps, currency forwards, 
and credit default swap indices.
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    The Fund's investments, including derivatives, will be consistent 
with the 1940 Act and the Fund's investment objective and policies and 
will not be used to enhance leverage (although certain derivatives and 
other investments may result in leverage).\15\

[[Page 6990]]

That is, while the Fund will be permitted to borrow as permitted under 
the 1940 Act, the Fund's investments will not be used to seek 
performance that is the multiple or inverse multiple (i.e., 2Xs and 
3Xs) of the Fund's primary broad-based securities benchmark index (as 
defined in Form N-1A). The Fund will only use those derivatives 
described above. The Fund's use of derivative instruments will be 
collateralized.
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    \15\ The Fund will include appropriate risk disclosure in its 
offering documents, including leveraging risk. Leveraging risk is 
the risk that certain transactions of a fund, including a fund's use 
of derivatives, may give rise to leverage, causing a fund to be more 
volatile than if it had not been leveraged. To mitigate leveraging 
risk, the Fund will segregate or earmark liquid assets determined to 
be liquid by the Adviser in accordance with procedures established 
by the Trust's Board of Trustees and in accordance with the 1940 Act 
(or, as permitted by applicable regulations, enter into certain 
offsetting positions) to cover its obligations under derivative 
instruments. These procedures have been adopted consistent with 
Section 18 of the 1940 Act and related Commission guidance. See 15 
U.S.C. 80a-18; Investment Company Act Release No. 10666 (April 18, 
1979), 44 FR 25128 (April 27, 1979); Dreyfus Strategic Investing, 
Commission No-Action Letter (June 22, 1987); Merrill Lynch Asset 
Management, L.P., Commission No-Action Letter (July 2, 1996).
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Discussion
    If the Fund had full flexibility to invest in a manner consistent 
with its investment strategy, it might not meet the requirements of 
Rule 14.11(i)(4)(C)(ii)(d) because certain Non-Agency ABS and MBS by 
their nature cannot satisfy these requirements. As described above, the 
Exchange is instead proposing that the fixed income portion of the 
portfolio excluding Non-Agency ABS and MBS will satisfy this 90% 
requirement. The Exchange believes that this alternative limitation is 
appropriate because Rule 14.11(i)(4)(C)(ii)(d) is not designed for 
structured finance vehicles such as Non-Agency ABS and MBS and the 
overall weight of the Non-Agency ABS and MBS held by the Fund will be 
limited to 20% of the total portfolio as required under Rule 
14.11(i)(4)(C)(ii)(e). The Exchange also notes that the Fund's 
portfolio is consistent with the policy issues underlying the rule as a 
result of the diversification provided by the investments and the 
Adviser's and Sub-Adviser's selection process, which closely monitors 
investments to ensure maintenance of credit and liquidity standards. As 
noted above, the remainder of the fixed income securities held by the 
Fund will satisfy the requirements of Rule 14.11(i)(4)(C)(ii)(d) and 
the remainder of the Fund's portfolio, including fixed income 
securities, will meet all other applicable generic listing standards 
under Rule 14.11(i)(4)(C). Further, the exception to Rule 
14.11(i)(4)(C)(ii)(d) proposed herein is identical to the exception to 
Rule 14.11(i)(4)(C)(ii)(d) laid out in an immediately effective rule 
change related to another fund issued by the Trust.\16\ Allowing the 
Fund full flexibility to implement its fixed income strategy and 
further diversify its holdings to provide exposure to a broader array 
of fixed income securities would allow the Fund to better achieve its 
investment objective and, as such, benefit both investors [sic] in the 
Fund.
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    \16\ See Securities Exchange Act Release No. 87651 (December 3, 
2019) 84 FR 67327 (December 9, 2019) (SR-CboeBZX-2019-099).
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    The Exchange represents that the Shares of the Fund will comply 
with all other requirements applicable to Managed Fund Shares, which 
include the dissemination of key information such as the Disclosed 
Portfolio,\17\ Net Asset Value,\18\ and the Intraday Indicative 
Value,\19\ suspension of trading or removal,\20\ trading halts,\21\ 
surveillance,\22\ minimum price variation for quoting and order 
entry,\23\ the information circular,\24\ and firewalls \25\ as set 
forth in Exchange rules applicable to Managed Fund Shares and the 
orders approving such rules. The Exchange or FINRA, on behalf of the 
Exchange, or both will communicate as needed regarding trading in the 
Shares and the underlying futures contracts with other markets and 
other entities that are members of the Intermarket Surveillance Group 
(``ISG''), and the Exchange or FINRA, on behalf of the Exchange, or 
both, may obtain trading information regarding trading in the Shares 
from such markets and other entities. In addition, the Exchange may 
obtain information regarding trading in the Shares from market and 
other entities that are members of ISG or with which the Exchange has 
in place a comprehensive surveillance sharing agreement \26\ All 
statements and representations made in this filing regarding the 
description of the portfolio or reference assets, limitations on 
portfolio holdings or reference assets, dissemination and availability 
of reference asset and Intraday Indicative Values (as applicable), or 
the applicability of Exchange listing rules specified in this filing 
shall constitute continued listing requirements for the Shares. The 
Fund has represented to the Exchange that it will advise the Exchange 
of any failure by the Fund or Shares to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will surveil for compliance with the 
continued listing requirements. FINRA conducts certain cross-market 
surveillances on behalf of the Exchange pursuant to a regulatory 
services agreement. The Exchange is responsible for FINRA's performance 
under this regulatory services agreement. If the Fund is not in 
compliance with the applicable listing requirements, the Exchange will 
commence delisting procedures with respect to such Fund under Exchange 
Rule 14.12.
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    \17\ See Rule 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii).
    \18\ See Rule 14.11(i)(4)(A)(ii).
    \19\ See Rule 14.11(i)(4)(B)(i).
    \20\ See Rule 14.11(i)(4)(B)(iii).
    \21\ See Rule 14.11(i)(4)(B)(iv).
    \22\ See Rule 14.11(i)(2)(C).
    \23\ See Rule 14.11(i)(2)(B).
    \24\ See Rule 14.11(i)(6).
    \25\ See Rule 14.11(i)(7).
    \26\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com. The Exchange notes that not all 
components of the Disclosed Portfolio for the Fund may trade on 
markets that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.
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Availability of Information
    As noted above, the Fund will comply with the requirements under 
Rule 14.11(i) related to Disclosed Portfolio, NAV, and the Intraday 
Indicative Value. Intraday price quotations on fixed income securities 
and OTC derivative instruments are available from major broker-dealer 
firms and from third-parties, which may provide prices free with a time 
delay or in real-time for a paid fee. Additionally, the intraday, 
closing and settlement prices of futures contracts held by the Fund 
will be readily available from the exchanges on which such products are 
listed, automated quotation systems, published or other public sources, 
or online information services such as Bloomberg or Reuters. Price 
information for Cash Equivalents will be available from major market 
data vendors. The Disclosed Portfolio will be available on the Fund's 
website (www.hartfordfunds.com) free of charge. The Fund's website will 
include the prospectus for the Fund and additional information related 
to NAV and other applicable quantitative information. Information 
regarding market price and trading volume of the Shares will be 
continuously available throughout the day on brokers' computer screens 
and other electronic services. Information regarding the previous day's 
closing price and trading volume for the Shares will be published daily 
in the financial section of newspapers. Trading in the Shares may be 
halted for market conditions or for reasons that, in the view of the 
Exchange, make trading inadvisable. The Exchange deems the Shares to be 
equity securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities. 
The Exchange has appropriate rules to facilitate trading in the Shares 
during all trading sessions.

[[Page 6991]]

The Exchange prohibits the distribution of material non-public 
information by its employees. Quotation and last sale information for 
the Shares will be available via the CTA high-speed line.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \27\ in general and Section 6(b)(5) of the Act \28\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest in that the Shares will meet each of the continued 
listing criteria in BZX Rule 14.11(i) with the exception of Rule 
14.11(i)(4)(C)(ii)(d) as specifically discussed herein.
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    \27\ 15 U.S.C. 78f(b).
    \28\ 15 U.S.C. 78f(b)(5).
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    If the Fund were permitted full flexibility to invest consistent 
with its investment strategy, it might not meet the requirements of 
Rule 14.11(i)(4)(C)(ii)(d) because certain Non-Agency ABS and MBS by 
their nature cannot satisfy these requirements. The Exchange believes 
that excluding Non-Agency ABS and MBS from this calculation is 
consistent with the Act because the Fund's portfolio will minimize the 
risk associated with any particular holding of the Fund as a result of 
the diversification provided by the investments and the Adviser's 
selection process, which closely monitors investments to ensure 
maintenance of credit and liquidity standards. Further, the Exchange 
believes that this alternative limitation is appropriate because Rule 
14.11(i)(4)(C)(ii)(d) is not designed for structured finance vehicles 
such as Non-Agency ABS and MBS and the overall weight of the Non-Agency 
ABS and MBS held by the Fund will be limited to 20% of the total 
portfolio as required under Rule 14.11(i)(4)(C)(ii)(e). The Exchange 
also notes that the Fund's portfolio will meet all of the other generic 
listing standards applicable under Rule 14.11(i), which will further 
act to mitigate the manipulation concerns which the rules are intended 
to address. Further, the other fixed income instruments, excluding Non-
Agency ABS and MBS, held by the Fund will satisfy the 90% requirement 
under Rule 14.11(i)(4)(C)(ii)(d). Consistent with Rule 
14.11(i)(4)(C)(ii)(e), the Non-Agency ABS and MBS held by the Fund will 
not account, in the aggregate, for more than 20% of the weight of the 
total portfolio.
    As noted above, the remainder of the Fund's portfolio, including 
fixed income securities, will meet all other applicable generic listing 
standards under Rule 14.11(i)(4)(C). Allowing the Fund full flexibility 
to implement its fixed income strategy and further diversify its 
holdings to provide exposure to a broader array of fixed income 
securities would allow the Fund to better achieve its investment 
objective and, as such, benefit investors in the Fund.
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the Shares on the Exchange during 
all trading sessions and to deter and detect violations of Exchange 
rules and the applicable federal securities laws. Rule 14.11(i)(7) 
provides that, if the investment adviser or sub-adviser to the 
investment company issuing Managed Fund Shares is affiliated with a 
broker-dealer, such investment adviser or sub-adviser shall erect a 
``fire wall'' between the investment adviser or sub-adviser and the 
broker-dealer with respect to access to information concerning the 
composition and/or changes to such investment company portfolio. The 
Adviser and Sub-Adviser are not a registered broker-dealer, but the 
Adviser and Sub-Adviser are affiliated with a broker-dealer and have 
implemented and will maintain ``fire walls'' with respect to such 
broker-dealer regarding access to information concerning the 
composition and/or changes to the Fund's portfolio. In addition, 
Adviser and Sub-Adviser personnel who make decisions regarding the 
Fund's portfolio are subject to procedures designed to prevent the use 
and dissemination of material nonpublic information regarding the 
Fund's portfolio. Additionally, the Exchange or FINRA, on behalf of the 
Exchange, are able to access, as needed, trade information for certain 
fixed income instruments reported to TRACE. The Exchange may obtain 
information regarding trading in the Shares via the ISG from other 
exchanges who are a member of ISG or affiliated with a member of ISG or 
with which the Exchange has entered into a comprehensive surveillance 
sharing agreement. The Exchange further notes that, except as sort 
[sic] forth above, the Fund will meet and be subject to all 
requirements of the generic listing rules and applicable continued 
listing requirements for Managed Fund Shares under Rule 14.11(i), 
including those requirements regarding the dissemination of key 
information such as the Disclosed Portfolio, Net Asset Value, and the 
Intraday Indicative Value, suspension of trading or removal, trading 
halts, surveillance, minimum price variation for quoting and order 
entry, the information circular, and firewalls as set forth in Exchange 
rules applicable to Managed Fund Shares.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information is publicly available regarding the Fund and the Shares, 
thereby promoting market transparency. Moreover, the Intraday 
Indicative Value will be disseminated by one or more major market data 
vendors at least every 15 seconds during Regular Trading Hours. On each 
business day, before commencement of trading in Shares during Regular 
Trading Hours, the Fund will disclose on its website the Disclosed 
Portfolio that will form the basis for the Fund's calculation of NAV at 
the end of the business day. The Fund's website will include additional 
quantitative information updated on a daily basis, including, for the 
Fund: (1) The prior business day's NAV and the market closing price or 
mid-point of the Bid/Ask Price,\29\ and a calculation of the premium or 
discount of the market closing price or Bid/Ask Price against the NAV; 
and (2) data in chart format displaying the frequency distribution of 
discounts and premiums of the daily market closing price or Bid/Ask 
Price against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. Additionally, information regarding market 
price and trading of the Shares will be continually available on a 
real-time basis throughout the day on brokers' computer screens and 
other electronic services, and quotation and last sale information for 
the Shares will be available on the facilities of the Consolidated Tape 
Association. The website for the Fund will include a form of the 
prospectus for the Fund and additional data relating to NAV and other 
applicable quantitative information. Trading in Shares of the Fund will 
be halted under the

[[Page 6992]]

conditions specified in Rule 11.18. Trading may also be halted because 
of market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. Finally, trading in the Shares 
will be subject to Rule 14.11(i)(4)(B)(iv), which sets forth 
circumstances under which Shares may be halted. In addition, as noted 
above, investors will have ready access to information regarding the 
Fund's holdings, the Intraday Indicative Value, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.
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    \29\ The Bid/Ask Price of the Fund will be determined using the 
highest bid and the lowest offer on the Exchange as of the time of 
calculation of the Fund's NAV. The records relating to Bid/Ask 
Prices will be retained by the Fund or its service providers.
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    Intraday price quotations on fixed income securities and OTC 
derivative instruments are available from major broker-dealer firms and 
from third-parties, which may provide prices free with a time delay or 
in real-time for a paid fee. Additionally, the intraday, closing and 
settlement prices of futures contracts held by the Fund will be readily 
available from the exchanges on which such products are listed, 
automated quotation systems, published or other public sources, or 
online information services such as Bloomberg or Reuters. Price 
information for Cash Equivalents will be available from major market 
data vendors. The Exchange prohibits the distribution of material non-
public information by its employees.
    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 actively-managed 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, the Exchange, or FINRA, on behalf of the 
Exchange, is able to access, as needed, trade information for certain 
fixed income instruments reported to TRACE. As noted above, investors 
will also have ready access to information regarding the Fund's 
holdings, the Intraday Indicative Value, the Disclosed Portfolio, and 
quotation and last sale information for the Shares.
    For the above reasons, the Exchange believes that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of an 
additional actively-managed exchange-traded product that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \30\ and Rule 19b-
4(f)(6) thereunder.\31\
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    \30\ 15 U.S.C. 78s(b)(3)(A).
    \31\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \32\ normally 
does not become operative for 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\33\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay to allow the Fund to 
list and trade on the Exchange as soon as practicable. The Exchange 
stated that the proposal would allow the Fund to hold Non-Agency ABS 
and MBS in a manner that is generally consistent with other series of 
Managed Fund Shares that the Commission has approved for listing and 
trading.\34\ The Commission agrees that the proposal raises no novel or 
substantive issues. Therefore, the Commission believes that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest and hereby waives the 30-day 
operative delay and designates the proposed rule change operative upon 
filing.\35\
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    \32\ 17 CFR 240.19b-4(f)(6).
    \33\ 17 CFR 240.19b-4(f)(6)(iii).
    \34\ See supra note 8. Nasdaq Rule 5735(b)(1)(B)(iv) is 
substantially the same as Exchange Rule 14.11(i)(4)(C)(ii)(d).
    \35\ For purposes only of waiving the operative delay, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CboeBZX-2020-008 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CboeBZX-2020-008. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the

[[Page 6993]]

provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CboeBZX-2020-008 and should 
be submitted on or before February 27, 2020.
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    \36\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-02278 Filed 2-5-20; 8:45 am]
 BILLING CODE 8011-01-P