Document ID: SEC-2020-0215-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2020-02-19T05:00Z

[Federal Register Volume 85, Number 33 (Wednesday, February 19, 2020)]
[Notices]
[Pages 9494-9503]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03176]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88175; File No. SR-CboeBZX-2019-057]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing of Amendment No. 2 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 2 thereto, To List 
and Trade Shares of the American Century Focused Dynamic Growth ETF and 
American Century Focused Large Cap Value ETF Under BZX Rule 14.11(k)

February 12, 2020.

I. Introduction

    On June 6, 2019, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares (``Shares'') of the 
American Century Focused Dynamic Growth ETF and American Century 
Focused Large Cap Value ETF (each a ``Fund'' and, collectively, the 
``Funds'') under BZX Rule 14.11(k) (Managed Portfolio Shares).\3\ The 
proposed rule change was published for comment in the Federal Register 
on June 25, 2019.\4\ On August 2, 2019, pursuant to Section 19(b)(2) of 
the Act,\5\ the Commission designated a longer period within which to 
approve the proposed rule change, disapprove the proposed rule change, 
or institute proceedings to determine whether to disapprove the 
proposed rule change.\6\ On September 23, 2019, the Commission 
instituted proceedings under Section 19(b)(2)(B) of the Act \7\ to 
determine whether to approve or disapprove the proposed rule change.\8\ 
On December 17, 2019, the Exchange filed Amendment No. 1 to the 
proposed rule change, which replaced and superseded the proposed rule 
change as originally filed.\9\ On December 17, 2019, the Commission 
designated a longer period for action on the proposed rule change.\10\ 
On February 11, 2020, the Exchange filed Amendment No. 2 to the 
proposed rule change, which replaced and superseded the proposed rule 
change as modified by Amendment No. 1.\11\ The Commission has received 
no comments on the proposed rule change. The Commission is publishing 
this notice to solicit comments on Amendment No. 2 from interested 
persons, and is approving the proposed rule change, as modified by 
Amendment No. 2, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Commission recently approved the Exchange's proposed 
rule change to adopt BZX Rule 14.11(k) to permit the listing and 
trading of Managed Portfolio Shares. See Securities Exchange Act 
Release No. 87759 (December 16, 2019), 84 FR 70223 (December 20, 
2019) (SR-CboeBZX-2019-047) (``Managed Portfolio Shares Order'').
    \4\ See Securities Exchange Act Release No. 86155 (June 19, 
2019), 84 FR 29912 (``Notice'').
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 86557, 84 FR 39024 
(August 8, 2019). The Commission designated September 23, 2019, as 
the date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \7\ 15 U.S.C. 78s(b)(2)(B).
    \8\ See Securities Exchange Act Release No. 87059, 84 FR 51215 
(September 27, 2019).
    \9\ Amendment No. 1 is available on the Commission's website at 
https://www.sec.gov/comments/sr-cboebzx-2019-057/srcboebzx2019057-6555831-200931.pdf.
    \10\ See Securities Exchange Act Release No. 87769, 84 FR 70589 
(December 23, 2019). The Commission designated February 20, 2020, as 
the date by which the Commission must either approve or disapprove 
the proposed rule change.
    \11\ Amendment No. 2 is available on the Commission's website at 
https://www.sec.gov/comments/sr-cboebzx-2019-057/srcboebzx2019057.htm.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change, as Modified by Amendment 
No. 2

    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
    This Amendment No. 2 to SR-CboeBZX-2019-057 amends and replaces in 
its entirety Amendment No. 1 to the proposal, originally submitted on 
December 17, 2019, which amended and replaced in its entirety the 
proposal as originally submitted on June 5, 2019. The Exchange submits 
this Amendment No. 2 in order to clarify certain points and add 
additional details to the proposal.
    The Exchange received approval to add new Rule 14.11(k) for the 
purpose of permitting the listing and trading of Managed Portfolio 
Shares, which are securities issued by an actively managed open-end 
management investment company,\12\ on December 16, 2019.\13\ Rule 
14.11(k)(2)(A) requires the Exchange to file separate proposals

[[Page 9495]]

under Section 19(b) of the Act before listing and trading any series of 
Managed Portfolio Shares on the Exchange. As such, the Exchange is 
submitting this proposal in order to list and trade shares of the 
American Century Focused Dynamic Growth ETF and the American Century 
Focused Large Cap Value ETF under Rule 14.11(k).
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    \12\ As defined in Rule 14.11(k)(3)(A), the term ``Managed 
Portfolio Share'' means a security that (a) represents an interest 
in an investment company registered under the Investment Company Act 
of 1940 (``Investment Company'') organized as an open-end management 
investment company, that invests in a portfolio of securities 
selected by the Investment Company's investment adviser consistent 
with the Investment Company's investment objectives and policies; 
(b) is issued in a Creation Unit (as defined below), or multiples 
thereof, in return for a designated portfolio of instruments (and/or 
an amount of cash) with a value equal to the next determined net 
asset value and delivered to the Authorized Participant (as defined 
in the Investment Company's Form N-1A filed with the Commission) 
through a Confidential Account; (c) when aggregated into a 
Redemption Unit (as defined below), or multiples thereof, may be 
redeemed for a designated portfolio of instruments (and/or an amount 
of cash) with a value equal to the next determined net asset value 
delivered to the Confidential Account (as defined below) for the 
benefit of the Authorized Participant; and (d) the portfolio 
holdings for which are disclosed within at least 60 days following 
the end of every fiscal quarter.
    \13\ See Securities Exchange Act Release No. 87759 (December 16, 
2019), 84 FR 70223 (December 20, 2019) (SR-CboeBZX-2019-047).
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Description of the Funds and the Trust
    The shares of each Fund (the ``Shares'') will be issued by American 
Century ETF Trust (the ``Trust''), a statutory trust organized under 
the laws of the State of Delaware and registered with the Commission as 
an open-end management investment company.\14\ The investment adviser 
to each Fund will be American Century Investment Management, Inc. (the 
``Adviser''). Foreside Fund Services, LLC (the ``Distributor'') will 
serve as the distributor of each of the Fund's Shares. 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 the Verified 
Intraday Indicative Value (``VIIV''),\15\ reference assets, and 
intraday indicative values, and the applicability of Exchange rules 
shall constitute continued listing requirements for listing the Shares 
on the Exchange, as provided under Rule 14.11(a).
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    \14\ The Trust is registered under the 1940 Act. On June 18, 
2018, the Trust filed a registration statement on Form N-1A relating 
to the Funds (File No. 811-23305) (the ``Registration Statement''). 
The Exchange notes that the names of the Funds have been changed 
since the Registration Statement was filed and that such names will 
be updated in a subsequent filing. The Commission issued an order 
granting exemptive relief to the Trust (``Exemptive Order'') under 
the 1940 Act on September 10, 2019 (Investment Company Act Release 
No. 33620). The Exemptive Order was granted with respect to the 
Trust's application for exemptive relief (the ``Exemptive 
Application'') (File No. 812-15035). Investments made by the Funds 
will comply with the conditions set forth in the Exemptive Order. 
The description of the operation of the Trust and the Funds herein 
is based, in part, on the Registration Statement. The Exemptive 
Order specifically notes that ``granting the requested exemptions is 
appropriate in and consistent with the public interest and 
consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Act. It is further 
found that the terms of the proposed transactions, 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 
that the proposed transactions are consistent with the policy of 
each registered investment company concerned and with the general 
purposes of the Act.'' The Exchange notes that the Exemptive 
Application incorporates by reference the terms and conditions of 
the exemptive order granted to Precidian ETFs Trust, et al. See 
Investment Company Act Release Nos. 33440, April 8, 2019 (notice) 
and 33477, May 20, 2019 (order).
    \15\ Rule 14.11(k)(3)(B) defines the term VIIV as the indicative 
value of a Managed Portfolio Share based on all of the holdings of a 
series of Managed Portfolio Shares as of the close of business on 
the prior business day and, for corporate actions, based on the 
applicable holdings as of the opening of business on the current 
business day, priced and disseminated in one second intervals during 
Regular Trading Hours (as defined in Rule 1.5(w)) by the Reporting 
Authority, as defined below.
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    Rule 14.11(k)(2)(D) provides that if the investment adviser to the 
Investment Company issuing Managed Portfolio Shares is registered as a 
broker-dealer or is affiliated with a broker-dealer, such investment 
adviser will erect and maintain a ``fire wall'' between the investment 
adviser and personnel of the broker-dealer or broker-dealer affiliate, 
as applicable, with respect to access to information concerning the 
composition of and/or changes to such Investment Company portfolio and/
or the Creation Basket.\16\ Any person related to the investment 
adviser or Investment Company who makes decisions pertaining to the 
Investment Company's portfolio composition or has access to information 
regarding the Investment Company's portfolio composition or changes 
thereto or the Creation Basket must be subject to procedures designed 
to prevent the use and dissemination of material nonpublic information 
regarding the applicable Investment Company portfolio or changes 
thereto or the Creation Basket.\17\ Rule 14.11(k)(2)(D) is similar to 
Rule 14.11(c)(5)(A)(i), related to Index Fund Shares, except that Rule 
14.11(k)(2)(D) relates to the establishment of a ``fire wall'' between 
the investment adviser and the broker-dealer as applicable to an 
Investment Company's portfolio and/or Creation Basket, not an 
underlying benchmark index, as is the case with index-based funds. Rule 
14.11(k)(2)(D) is also similar to Rule 14.11(i)(7), related to Managed 
Fund Shares, except that Rule 14.11(k)(2)(D) relates to the 
establishment of a ``fire wall'' between the investment adviser and the 
broker-dealer as applicable to an Investment Company's portfolio and 
Creation Basket, and not just the underlying portfolio, as is the case 
with Managed Fund Shares. The Adviser is not registered as a broker-
dealer, but is affiliated with a broker-dealer and has implemented and 
will maintain a ``fire wall'' with respect to such broker-dealer 
regarding access to information concerning the composition of and 
changes to a Fund's portfolio and/or Creation Basket.
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    \16\ Rule 14.11(k)(3)(E) defines the term ``Creation Basket'' as 
on any given business day the names and quantities of the specified 
instruments (and/or an amount of cash) that are required for an AP 
Representative (as defined below) to deposit in-kind on behalf of an 
Authorized Participant in exchange for a Creation Unit and the names 
and quantities of the specified instruments (and/or an amount of 
cash) that will be transferred in-kind to an AP Representative on 
behalf of an Authorized Participant in exchange for a Redemption 
Unit, which will be identical and will be transmitted to each AP 
Representative before the commencement of trading.
    \17\ 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 its related personnel will be 
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 its fiduciary obligations 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 (i) adopts and implements written policies 
and procedures reasonably designed to prevent violations, by the 
investment adviser and its supervised persons, of the Advisers Act 
and the Commission rules adopted thereunder; (ii) reviews, at least 
annually, the adequacy of the policies and procedures established 
pursuant to subparagraph (i) above and the effectiveness of their 
implementation; and (iii) designates an individual (who is a 
supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above. The Funds will also 
comply with the requirements of Regulation Fair Disclosure, as 
provided in the Exemptive Application.
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    In the event (a) the Adviser becomes registered as a broker-dealer 
or becomes newly affiliated with a 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 its broker-dealer 
affiliate regarding access to information concerning the composition 
and/or changes to the portfolio and/or Creation Basket. Any person 
related to the Adviser or the Trust who makes decisions pertaining to a 
Fund's portfolio composition or that has access to information 
regarding a Fund's portfolio or changes thereto or the Creation Basket 
will be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio or changes thereto and the Creation Basket.
    Further, Rule 14.11(k)(2)(E) requires that any person or entity, 
including an AP Representative, custodian, Reporting Authority, 
distributor, or administrator, who has access to information regarding 
the Investment Company's portfolio composition or changes thereto or 
the Creation Basket, must be subject to procedures designed to prevent 
the use and dissemination of material nonpublic information regarding 
the applicable Investment Company

[[Page 9496]]

portfolio or changes thereto or the Creation Basket. Moreover, if any 
such person or entity is registered as a broker-dealer or affiliated 
with a broker-dealer, such person or entity will erect and maintain a 
``fire wall'' between the person or entity and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such Investment Company portfolio or Creation Basket. Any 
person or entity who has access to information regarding a Fund's 
portfolio composition or changes thereto or the Creation Basket will be 
subject to procedures designed to prevent the use and dissemination of 
material nonpublic information regarding the portfolio composition or 
changes thereto or the Creation Basket.
Description of the Funds
American Century Focused Dynamic Growth ETF
    The Fund's holdings will conform to the permissible investments as 
set forth in the Exemptive Application and Exemptive Order and the 
holdings will be consistent with all requirements in the Exemptive 
Application and Exemptive Order.\18\
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    \18\ Pursuant to the Exemptive Order, the permissible 
investments include only the following instruments that trade on a 
U.S. exchange contemporaneously with the Shares: ETFs and exchange-
traded notes, common stocks, preferred stocks, American depositary 
receipts, real estate investment trusts, commodity pools, metals 
trusts, currency trusts, and futures for which the reference asset 
the Fund may invest in directly or, in the case of an index future, 
based on an index of a type of asset that the Fund could invest in 
directly; as well as cash and cash equivalents (short-term U.S. 
Treasury securities, government money market funds and repurchase 
agreements).
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    The Fund seeks long-term capital growth. The portfolio managers 
look for stocks of companies they believe will increase in value over 
time.
American Century Focused Large Cap Value ETF
    The Fund's holdings will conform to the permissible investments as 
set forth in the Exemptive Application and Exemptive Order and the 
holdings will be consistent with all requirements in the Exemptive 
Application and Exemptive Order.\19\
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    \19\ Pursuant to the Exemptive Order, the permissible 
investments include only the following instruments that trade on a 
U.S. exchange contemporaneously with the Shares: ETFs and exchange-
traded notes, common stocks, preferred stocks, American depositary 
receipts, real estate investment trusts, commodity pools, metals 
trusts, currency trusts, and futures for which the reference asset 
the Fund may invest in directly or, in the case of an index future, 
based on an index of a type of asset that the Fund could invest in 
directly; as well as cash and cash equivalents (short-term U.S. 
Treasury securities, government money market funds and repurchase 
agreements).
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    The Fund seeks long-term capital growth. In selecting stocks for 
the Fund, the portfolio managers look for companies whose stock price 
may not reflect the company's value, by looking for companies that are 
temporarily out of favor in, or whose value is not yet recognized by, 
the market.
Investment Restrictions
    The Funds will not purchase any securities that are illiquid 
investments at the time of purchase and each Fund's holdings will be 
consistent with all requirements described in the Exemptive Application 
and Exemptive Order.
    The Shares of each Fund will conform to the initial and continued 
listing criteria under Rule 14.11(k). The Funds' holdings will be 
limited to and consistent with what is permissible under the Exemptive 
Order and described herein.
    Each Fund's investments will be consistent with its investment 
objective and will not be used to enhance leverage.
Creations and Redemptions of Shares
    Creations and redemptions of the Shares will occur as described in 
Rule 14.11(k). More specifically, in connection with the creation and 
redemption of Creation Units \20\ and Redemption Units,\21\ the 
delivery or receipt of any portfolio securities in-kind will be 
required to be effected through a separate confidential brokerage 
account (a ``Confidential Account'').\22\ Authorized Participants (as 
defined in the applicable Form N-1A filed with the Commission, ``AP'') 
will sign an agreement with an AP Representative \23\ establishing the 
Confidential Account for the benefit of the AP. AP Representatives will 
be broker-dealers. An AP must be a Depository Trust Company (``DTC'') 
Participant that has executed a ``Participant Agreement'' with the 
Distributor with respect to the creation and redemption of Creation 
Units and Redemption Units and formed a Confidential Account for its 
benefit in accordance with the terms of the Participant Agreement. For 
purposes of creations or redemptions, all transactions will be effected 
through the respective AP's Confidential Account, for the benefit of 
the AP, without disclosing the identity of such securities to the AP.
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    \20\ Rule 14.11(k)(3)(F) defines the term ``Creation Unit'' as a 
specified minimum number of Managed Portfolio Shares issued by an 
Investment Company at the request of an Authorized Participant in 
return for a designated portfolio of instruments and/or cash.
    \21\ Rule 14.11(k)(3)(G) defines the term ``Redemption Unit'' as 
a specified minimum number of Managed Portfolio Shares that may be 
redeemed to an Investment Company at the request of an Authorized 
Participant in return for a portfolio of instruments and/or cash.
    \22\ Rule 14.11(k)(3)(D) defines the term ``Confidential 
Account'' as an account owned by an Authorized Participant and held 
with an AP Representative on behalf of the Authorized Participant. 
The account will be established and governed by contractual 
agreement between the AP Representative and the Authorized 
Participant solely for the purposes of creation and redemption, 
while keeping confidential the Creation Basket constituents of each 
series of Managed Portfolio Shares, including from the Authorized 
Participant. The books and records of the Confidential Account will 
be maintained by the AP Representative on behalf of the Authorized 
Participant.
    \23\ Rule 14.11(k)(3)(C) defines the term ``AP Representative'' 
as an unaffiliated broker-dealer, with which an Authorized 
Participant has signed an agreement to establish a Confidential 
Account for the benefit of such Authorized Participant, that will 
deliver or receive, on behalf of the Authorized Participant, all 
consideration to or from the Investment Company in a creation or 
redemption. An AP Representative will not be permitted to disclose 
the Creation Basket to any person, including the Authorized 
Participants.
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    Each AP Representative will be given, before the commencement of 
trading each Business Day (defined below), the Creation Basket (as 
described below) for that day. This information will permit an AP that 
has established a Confidential Account with an AP Representative, to 
instruct the AP Representative to buy and sell positions in the 
portfolio securities to permit creation and redemption of Creation 
Units and Redemption Units. Shares of each Fund will be issued and 
redeemed in Creation Units and Redemption Units of 5,000 or more 
Shares. The Funds will offer and redeem Creation Units and Redemption 
Units on a continuous basis at the net asset value (``NAV'') per share 
next determined after receipt of an order in proper form. The NAV per 
share of each Fund will be determined as of the close of regular 
trading on the Exchange on each day that the Exchange is open (a 
``Business Day''). The Funds will sell and redeem Creation Units and 
Redemption Units only on Business Days.
    To keep costs low and permit each Fund to be as fully invested as 
possible, Shares will be purchased and redeemed in Creation Units and 
Redemption Units and generally on an in-kind basis. Accordingly, except 
where the purchase or redemption will include cash under the 
circumstances described in the Exemptive Application, APs will be 
required to purchase Creation Units by making an in-kind deposit of 
specified instruments (``Deposit Instruments''), and APs redeeming 
their Shares will receive an in-kind transfer of specified instruments 
(``Redemption

[[Page 9497]]

Instruments'') through the AP Representative in their Confidential 
Account.\24\ 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, and these instruments may be referred 
to, in the case of either a purchase or a redemption, as the ``Creation 
Basket.''
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    \24\ The 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 1933 Act.
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Placement of Purchase Orders
    Each Fund will issue Shares through the Distributor on a continuous 
basis at NAV. The Exchange represents that the issuance of Shares will 
operate in a manner similar to that of other ETFs. Each Fund will issue 
Shares only at the NAV per share next determined after an order in 
proper form is received.
    In the case of a creation, the AP would enter an irrevocable 
creation order with the applicable Fund and direct the AP 
Representative to purchase the Deposit Instruments. The AP 
Representative would then purchase the necessary securities in the 
Confidential Account. In purchasing the necessary securities, the AP 
Representative will use methods, such as breaking the transaction into 
multiple transactions and transacting in multiple marketplaces, to 
avoid revealing the composition of the Creation Basket. Once the 
Deposit Instruments have been acquired in the Confidential Account, the 
AP Representative would contribute the Deposit Instruments in-kind to 
the Fund.
    The Distributor will furnish acknowledgements to those placing such 
orders that the orders have been accepted, but the Distributor may 
reject any order which is not submitted in proper form, as described in 
a Fund's prospectus or Statement of Additional Information (``SAI''). 
The NAV of each Fund is expected to be determined once each Business 
Day at a time determined by the Trust's Board of Trustees (``Board''), 
currently anticipated to be as of the close of the regular trading 
session on the Exchange (ordinarily 4:00 p.m. E.T.) (the ``Valuation 
Time''). Each Fund will establish a cut-off time (``Order Cut-Off 
Time'') for purchase orders in proper form. Such Order Cut-Off Time 
will be provided in the Registration Statement. To initiate a purchase 
of Shares, an AP must submit to the Distributor an irrevocable order to 
purchase such Shares after the most recent prior Valuation Time. All 
orders to purchase Creation Units must be received by the Distributor 
no later than the Order Cut-Off Time in each case on the date such 
order is placed (``Transmittal Date'') for the AP to receive the NAV 
per share determined on the Transmittal Date. As with all existing 
ETFs, if there is a difference between the NAV attributable to a 
Creation Unit and the aggregate market value of the Creation Basket 
exchanged for the Creation Unit, the party conveying instruments with 
the lower value will also pay to the other an amount in cash equal to 
that difference (the ``Balancing Amount'').
    Purchases of Shares will be settled in-kind and/or cash for an 
amount equal to the applicable NAV per share purchased plus applicable 
transaction fees.\25\ Other than the Balancing Amount, a Fund will 
substitute cash only under exceptional circumstances and as set forth 
under that Fund's policies and procedures governing the composition of 
Creation Baskets.
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    \25\ To the extent that a Fund allows creations or redemptions 
to be conducted in cash, such transactions will be effected in the 
same manner for all APs transacting in cash.
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Authorized Participant Redemption
    The Shares may be redeemed to a Fund in Redemption Unit size or 
multiples thereof as described below. Redemption orders of Redemption 
Units must be placed by an AP (``AP Redemption Order''). Each Fund will 
establish in its Registration Statement an Order Cut-Off Time for 
redemption orders of Redemption Units in proper form. Redemption Units 
of the applicable Fund will be redeemable at their NAV per share next 
determined after receipt of a request for redemption by the Trust in 
the manner specified below before the Order Cut-Off Time. A transaction 
fee may also be imposed on redemption orders. To initiate an AP 
Redemption Order, an AP must submit to the Distributor an irrevocable 
order to redeem such Redemption Unit after the most recent prior 
Valuation Time, but not later than the Order Cut-Off Time.
    In the case of a redemption, the AP would enter into an irrevocable 
redemption order, and then the applicable Fund would instruct its 
custodian to deliver the Redemption Instruments to the appropriate 
Confidential Account. The Authorized Participant would direct the AP 
Representative on when that day to liquidate those securities. As with 
the purchase of securities, the AP Representative will use methods, 
such as breaking the transaction into multiple transactions and 
transacting in multiple marketplaces, to avoid revealing the 
composition of the Creation Basket.
    Consistent with the provisions of Section 22(e) of the 1940 Act and 
Rule 22e-2 thereunder, the right to redeem will not be suspended, nor 
payment upon redemption delayed, except for: (1) Any period during 
which the Exchange is closed other than customary weekend and holiday 
closings, (2) any period during which trading on the Exchange is 
restricted, (3) any period during which an emergency exists as a result 
of which disposal by a Fund of securities owned by it is not reasonably 
practicable or it is not reasonably practicable for a Fund to determine 
its NAV, and (4) for such other periods as the Commission may by order 
permit for the protection of shareholders.
    Redemptions will occur primarily in-kind, although redemption 
payments may also be made partly or wholly in cash.\26\ The Participant 
Agreement signed by each AP will require establishment of a 
Confidential Account to receive distributions of securities in-kind 
upon redemption. Each AP will be required to open a Confidential 
Account with an AP Representative in order to facilitate orderly 
processing of redemptions. Other than the Balancing Amount, a Fund will 
substitute cash only under exceptional circumstances and as set forth 
under that Fund's policies and procedures governing the composition of 
Creation Baskets.\27\
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    \26\ The value of any positions not susceptible to in-kind 
settlement may be paid in cash.
    \27\ To the extent that a Fund allows creations or redemptions 
to be conducted in cash, such transactions will be effected in the 
same manner for all APs transacting in cash.
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Net Asset Value
    The NAV per share of a Fund will be computed by dividing the value 
of the net assets of a Fund (i.e., the value of its total assets less 
total liabilities) by the total number of Shares of a Fund outstanding, 
rounded to the nearest cent. Expenses and fees, including, without 
limitation, the management, administration and distribution fees, will 
be accrued daily and taken into account for purposes of determining 
NAV. Interest and investment income on a Fund's assets accrue daily and 
will be included in the Fund's total assets. The NAV per share for a 
Fund will be calculated by a Fund's administrator and determined as of 
the close of the regular trading session on the Exchange (ordinarily 4 
p.m., E.T.) on each day that the Exchange is open.

[[Page 9498]]

    Exchange-traded instruments will be valued at market value, which 
will generally be determined using the last reported official closing 
or last trading price on the exchange or market on which the securities 
are primarily traded at the time of valuation. Other holdings of the 
Funds will generally be valued on the basis of independent pricing 
services, quotes obtained from brokers and dealers or price quotations 
or other equivalent indications of value provided by a third-party 
pricing service, reported net asset value, or at cost.
Availability of Information
    The Funds' website (www.americancenturyetfs.com), which will be 
publicly available prior to the listing and trading of Shares, will 
include a form of the prospectus for each Fund that may be downloaded. 
The Funds' website will include additional quantitative information 
updated on a daily basis, including, for each Fund, the prior Business 
Day's NAV, market closing price or mid-point of the bid/ask spread at 
the time of calculation of such NAV (the ``Bid/Ask Price''),\28\ and a 
calculation of the premium and discount of the market closing price or 
Bid/Ask Price against the NAV. In addition, the Funds will provide any 
other information on their website regarding premiums/discounts that 
ETFs registered under the 1940 Act are required to provide or that are 
otherwise required under the Exemptive Order. The website and 
information will be publicly available at no charge.
---------------------------------------------------------------------------

    \28\ The Bid/Ask Price of a Fund will be determined using the 
mid-point between the current NBB and NBO as of the time of 
calculation of a Fund's NAV. The records relating to Bid/Ask Prices 
will be retained by each Fund and/or its service providers.
---------------------------------------------------------------------------

    Each Fund's SAI and shareholder reports will be available free upon 
request from the Trust. These documents and forms may be viewed on-
screen or downloaded from the Commission's website at www.sec.gov.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Quotation 
and last sale information for the Shares will be available via the 
Consolidated Tape Association (``CTA'') high-speed line. In addition, 
the VIIV, as defined in Rule 14.11(k)(3)(B) and as described further 
below, will be widely disseminated by the Reporting Authority \29\ and/
or one or more major market data vendors in one-second intervals during 
Regular Trading Hours.
---------------------------------------------------------------------------

    \29\ Rule 14.11(k)(3)(H) defines the term ``Reporting 
Authority'' in respect of a particular series of Managed Portfolio 
Shares as the Exchange, the exchange that lists a particular series 
of Managed Portfolio Shares (if the Exchange is trading such series 
pursuant to unlisted trading privileges), an institution, or a 
reporting service designated by the Investment Company as the 
official source for calculating and reporting information relating 
to such series, including, the net asset value, the Verified 
Intraday Indicative Value, or other information relating to the 
issuance, redemption or trading of Managed Portfolio Shares. A 
series of Managed Portfolio Shares may have more than one Reporting 
Authority, each having different functions.
---------------------------------------------------------------------------

Dissemination of the VIIV
    With respect to trading of the Shares, the ability of market 
participants to buy and sell Shares at prices near the VIIV is 
dependent upon their assessment that the VIIV is a reliable, indicative 
real-time value for a Fund's underlying holdings. Market participants 
are expected to accept the VIIV as a reliable, indicative real-time 
value because (1) the VIIV will be calculated and disseminated based on 
a Fund's actual portfolio holdings, (2) the securities in which a Fund 
plans to invest are generally highly liquid and actively traded and 
trade at the same time as the Funds and therefore generally have 
accurate real time pricing available, and (3) market participants will 
have a daily opportunity to evaluate whether the VIIV at or near the 
close of trading is indeed predictive of the actual NAV. The VIIV for 
each Fund will be disseminated by the Reporting Authority and/or one or 
more major market data vendors in one-second intervals during Regular 
Trading Hours. For purposes of the VIIV, securities held by a Fund will 
be valued throughout the day based on the mid-point between the 
disseminated current NBB and NBO. If the Adviser determines that a 
portfolio security does not have a readily available market quotation, 
that fact along with the identity and weighting of that security in a 
Fund's VIIV calculation will be publicly disclosed on the Fund's 
website.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of a Fund. The Exchange will halt trading in the 
Shares under the conditions specified in BZX Rule 11.18. Trading may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable, including whether 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present. Trading in the Shares also will be 
subject to Rule 14.11(k)(4)(B)(iii)(a) and (b), which set forth 
circumstances under which trading in the Shares of the Funds will be 
halted.
    Specifically, Rule 14.11(k)(4)(B)(iii)(a) provides that the 
Exchange may consider all relevant factors in exercising its discretion 
to halt trading in a series of Managed Portfolio Shares. Trading may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the series of Managed Portfolio Shares 
inadvisable. These may include: (i) The extent to which trading is not 
occurring in the securities and/or the financial instruments composing 
the portfolio; or (ii) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present.\30\ The Adviser has represented to the Exchange 
that it will provide the Exchange with prompt notification upon the 
existence of any such condition or set of conditions.
---------------------------------------------------------------------------

    \30\ The Exemptive Application provides that the Investment 
Company or their agent will request that the Exchange halt trading 
in the applicable series of Managed Portfolio Shares where: (i) The 
intraday indicative values calculated by the calculation engines 
differ by more than 25 basis points for 60 seconds in connection 
with pricing of the Verified Intraday Indicative Value; or (ii) 
holdings representing 10% or more of a series of Managed Portfolio 
Shares' portfolio have become subject to a trading halt or otherwise 
do not have readily available market quotations. Any such requests 
will be one of many factors considered in order to determine whether 
to halt trading in a series of Managed Portfolio Shares and the 
Exchange retains sole discretion in determining whether trading 
should be halted. As provided in the Exemptive Application, each 
series of Managed Portfolio Shares would employ a pricing 
verification agent to continuously compare two intraday indicative 
values during Regular Trading Hours in order to ensure the accuracy 
of the Verified Intraday Indicative Value.
---------------------------------------------------------------------------

    Rule 14.11(k)(4)(B)(iii)(b) provides that, if the Exchange becomes 
aware that: (i) The Verified Intraday Indicative Value of a series of 
Managed Portfolio Shares is not being calculated or disseminated in one 
second intervals, as required; (ii) the net asset value with respect to 
a series of Managed Portfolio Shares is not disseminated to all market 
participants at the same time; (iii) the holdings of a series of 
Managed Portfolio Shares are not made available on at least a quarterly 
basis as required under the 1940 Act; or (iv) such holdings are not 
made available to all market participants at the same time, (except as 
otherwise permitted under the currently applicable exemptive order or 
no-action relief granted by the Commission or Commission staff to the 
Investment Company with respect to the

[[Page 9499]]

series of Managed Portfolio Shares), it will halt trading in such 
series until such time as the Verified Intraday Indicative Value, the 
net asset value, or the holdings are available, as required.
Trading Rules
    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. Shares will trade on 
the Exchange only during Regular Trading Hours as provided in Rule 
14.11(k)(2)(B). The Exchange has appropriate rules in place to 
facilitate trading during all trading sessions in which the Shares will 
trade. As provided in BZX Rule 11.11(a), the minimum price variation 
for quoting and entry of orders in securities traded on the Exchange is 
$0.01, with the exception of securities that are priced less than 
$1.00, for which the minimum price variation for order entry is 
$0.0001.
    The Shares will conform to the initial and continued listing 
criteria under Rule 14.11(k) as well as all terms in the Exemptive 
Order. The Exchange represents that, for initial and/or continued 
listing, each Fund will be in compliance with Rule 10A-3 under the 
Act.\31\ A minimum of 100,000 Shares of each Fund will be outstanding 
at the commencement of trading on the Exchange. The Exchange has 
obtained a representation from the issuer of the Shares of each Fund 
that the NAV per share of each Fund will be calculated daily and will 
be made available to all market participants at the same time.
---------------------------------------------------------------------------

    \31\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the Shares on the Exchange during 
all trading sessions and to deter and detect violations of Exchange 
rules and the applicable federal securities laws. Trading of the Shares 
through the Exchange will be subject to the Exchange's surveillance 
procedures for derivative products, including Managed Portfolio Shares. 
As part of these surveillance procedures and consistent with Rule 
14.11(k)(2)(C), the Adviser will upon request make available to the 
Exchange and/or FINRA, on behalf of the Exchange, the daily portfolio 
holdings of a Fund. The issuer has represented to the Exchange that it 
will advise the Exchange of any failure by a Fund to comply with the 
continued listing requirements, and, pursuant to its obligations under 
Section 19(g)(1) of the Exchange Act, the Exchange will surveil for 
compliance with the continued listing requirements. If a Fund is not in 
compliance with the applicable listing requirements, the Exchange will 
commence delisting procedures under Exchange Rule 14.12.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and the 
underlying exchange-traded instruments 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 such securities 
from such markets and other entities. In addition, the Exchange may 
obtain information regarding trading in the Shares and the underlying 
exchange-traded instruments from markets and other entities that are 
members of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.\32\
---------------------------------------------------------------------------

    \32\ For a list of the current members of ISG, see 
www.isgportal.org.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular (``Circular'') of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Circular will discuss the following: (1) The 
procedures for purchases and redemptions of Shares; (2) BZX Rule 3.7, 
which imposes suitability obligations on Exchange members with respect 
to recommending transactions in the Shares to customers; (3) how 
information regarding the VIIV is disseminated; (4) the requirement 
that members deliver a prospectus to investors purchasing newly issued 
Shares prior to or concurrently with the confirmation of a transaction; 
(5) trading information; and (6) that the portfolio holdings will be 
disclosed within at least 60 days following the end of every fiscal 
quarter.
    In addition, the Circular will reference that the Funds are subject 
to various fees and expenses described in the Registration Statement. 
The Circular will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Circular will also disclose that the NAV for the Shares will be 
calculated after 4 p.m., E.T. each trading day.
2. Statutory Basis
    The Exchange believes that this proposal is consistent with Section 
6(b) of the Act \33\ in general and Section 6(b)(5) of the Act \34\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, 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.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f.
    \34\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that this proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Funds would meet each of the rules relating to listing and trading of 
Managed Portfolio Shares and, to the extent that a Fund is not in 
compliance with such rules, the Exchange would either prevent that Fund 
from listing and trading if it hadn't started trading on the Exchange 
or would commence delisting procedures under Exchange Rule 14.12. More 
specifically, the Exchange will consider the suspension of trading in, 
and will commence delisting proceedings under Rule 14.12 for, a Fund 
under any of the following circumstances: (a) If, following the initial 
twelve-month period after commencement of trading on the Exchange, 
there are fewer than 50 beneficial holders of the Fund for 30 or more 
consecutive trading days; (b) if the Exchange has halted trading in a 
Fund because the VIIV is interrupted pursuant to Rule 
14.11(k)(4)(B)(iii)(b) and such interruption persists past the trading 
day in which it occurred or is no longer available; (c) if the Exchange 
has halted trading in a Fund because the net asset value with respect 
to such Fund is not disseminated to all market participants at the same 
time, the holdings of such Fund are not made available on at least a 
quarterly basis as required under the 1940 Act, or such holdings are 
not made available to all market participants at the same time pursuant 
to Rule 14.11(k)(4)(B)(iii)(b) and such issue persists past the trading 
day in which it occurred; (d) if the Exchange has halted trading in the 
Fund pursuant to Rule 14.11(k)(4)(B)(iii)(a) and such issue persists 
past the trading day in which it occurred; (e) if the Fund has failed 
to file any filings required by the Commission or if the Exchange is 
aware that the Fund is not in compliance with the conditions of any 
currently

[[Page 9500]]

applicable exemptive order or no-action relief granted by the 
Commission or Commission staff with respect to the Fund; (f) if any of 
the continued listing requirements set forth in Rule 14.11(k) are not 
continuously maintained; (g) if any of the applicable Continued Listing 
Representations, as defined in Rule 14.11(a), for the Fund are not 
continuously met; or (h) if such other event shall occur or condition 
exists which, in the opinion of the Exchange, makes further dealings on 
the Exchange inadvisable.
    The Adviser is not registered as a broker-dealer, but is affiliated 
with a broker-dealer and has implemented and will maintain a ``fire 
wall'' with respect to such affiliate broker-dealer regarding access to 
information concerning the composition and/or changes to a Fund's 
portfolio and Creation Basket.
    In the event (a) the Adviser becomes registered as a broker-dealer 
or becomes newly affiliated with a 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 its broker-dealer 
affiliate regarding access to information concerning the composition 
and/or changes to the portfolio and/or Creation Basket. Any person 
related to the Adviser or the Trust who makes decisions pertaining to a 
Fund's portfolio composition or that has access to information 
regarding a Fund's portfolio or changes thereto or the Creation Basket 
will be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio or changes thereto and the Creation Basket.
    Further, Rule 14.11(k)(2)(E) requires that any person or entity, 
including an AP Representative, custodian, Reporting Authority, 
distributor, or administrator, who has access to information regarding 
the Investment Company's portfolio composition or changes thereto or 
the Creation Basket, must be subject to procedures designed to prevent 
the use and dissemination of material nonpublic information regarding 
the applicable Investment Company portfolio or changes thereto or the 
Creation Basket. Moreover, if any such person or entity is registered 
as a broker-dealer or affiliated with a broker-dealer, such person or 
entity will erect and maintain a ``fire wall'' between the person or 
entity and the broker-dealer with respect to access to information 
concerning the composition and/or changes to such Investment Company 
portfolio or Creation Basket. Any person or entity who has access to 
information regarding a Fund's portfolio composition or changes thereto 
or the Creation Basket will be subject to procedures designed to 
prevent the use and dissemination of material nonpublic information 
regarding the portfolio or changes thereto or the Creation Basket.
    The Exchange further believes that Rule 14.11(k) is designed to 
prevent fraudulent and manipulative acts and practices related to the 
listing and trading of Managed Portfolio Shares because it provides 
meaningful requirements about both the data that will be made publicly 
available about the Shares as well as the information that will only be 
available to certain parties and the controls on such information. 
Specifically, the Exchange believes that the requirements related to 
information protection enumerated under Rule 14.11(k)(2)(E) will act as 
a strong safeguard against misuse and improper dissemination of 
information related to a Fund's portfolio composition or changes 
thereto or the Creation Basket. The requirement that any person or 
entity implement procedures to prevent the use and dissemination of 
material nonpublic information regarding the portfolio or Creation 
Basket will act to prevent any individual or entity from sharing such 
information externally and the internal ``fire wall'' requirements 
applicable where an entity is a registered broker-dealer or affiliated 
with a broker-dealer will act to make sure that no entity will be able 
to misuse the data for their own purposes. As such, the Exchange 
believes that this proposal is designed to prevent fraudulent and 
manipulative acts and practices.
    The Exchange further believes that the proposal is designed to 
prevent fraudulent and manipulative acts and practices related to the 
listing and trading of Managed Portfolio Shares and to promote just and 
equitable principles of trade and to protect investors and the public 
interest in that the Exchange would halt trading under certain 
circumstances under which trading in the Shares of a Fund may be 
inadvisable. Specifically, trading in the Shares will be subject to 
Rule 14.11(k)(4)(B)(iii)(a), which provides that the Exchange may 
consider all relevant factors in exercising its discretion to halt 
trading in a series of Managed Portfolio Shares. Trading may be halted 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the series of Managed Portfolio Shares 
inadvisable. These may include: (i) the extent to which trading is not 
occurring in the securities and/or the financial instruments composing 
the portfolio; or (ii) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present.\35\ The Adviser has represented to the Exchange 
that it will provide the Exchange with prompt notification upon the 
existence of any such condition or set of conditions. Trading in the 
Shares will also be subject to Rule 14.11(k)(4)(B)(iii)(b), which 
provides that if the Exchange becomes aware that: (i) The Verified 
Intraday Indicative Value of a series of Managed Portfolio Shares is 
not being calculated or disseminated in one second intervals, as 
required; (ii) the net asset value with respect to a series of Managed 
Portfolio Shares is not disseminated to all market participants at the 
same time; (iii) the holdings of a series of Managed Portfolio Shares 
are not made available on at least a quarterly basis as required under 
the 1940 Act; or (iv) such holdings are not made available to all 
market participants at the same time, (except as otherwise permitted 
under the currently applicable exemptive order or no-action relief 
granted by the Commission or Commission staff to the Investment Company 
with respect to the series of Managed Portfolio Shares), it will halt 
trading in such series until such time as the Verified Intraday 
Indicative Value, the net asset value, or the holdings are available, 
as required.
---------------------------------------------------------------------------

    \35\ See supra note 30.
---------------------------------------------------------------------------

    With respect to the proposed listing and trading of Shares of the 
Funds, the Exchange believes that the proposed rule change is designed 
to prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Rule 14.11(k). Each Fund's 
holdings will conform to the permissible investments as set forth in 
the Exemptive Application and Exemptive Order. The Exchange or FINRA, 
on behalf of the Exchange, or both, will communicate as needed 
regarding trading in the Shares and the underlying exchange-traded 
instruments with other markets and other entities that are members of 
the ISG, and the Exchange or FINRA, on behalf of the Exchange, or both, 
may obtain trading information regarding trading such instruments from 
such markets and other entities. In addition, the Exchange may obtain 
information regarding trading in the Shares and the underlying 
exchange-traded instruments from markets and other entities that are 
members of ISG or with which the

[[Page 9501]]

Exchange has in place a comprehensive surveillance sharing agreement.
    With respect to trading of Shares of the Funds, the ability of 
market participants to buy and sell Shares at prices near the VIIV is 
dependent upon their assessment that the VIIV is a reliable, indicative 
real-time value for a Fund's underlying holdings. Market participants 
are expected to accept the VIIV as a reliable, indicative real-time 
value because (1) the VIIV will be calculated and disseminated based on 
a Fund's actual portfolio holdings, (2) the securities in which the 
Funds plan to invest are generally highly liquid and actively traded 
and trade at the same time as the Funds and therefore generally have 
accurate real time pricing available, and (3) market participants will 
have a daily opportunity to evaluate whether the VIIV at or near the 
close of trading is indeed predictive of the actual NAV.
    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 that the NAV per share 
of the Funds will be calculated daily and that the NAV will be made 
available to all market participants at the same time. Investors can 
also obtain a Fund's SAI, shareholder reports, Form N-CSR, and Form N-
PORT. A Fund's SAI and shareholder reports will be available free upon 
request from the applicable fund, and those documents and the Form N-
CSR and Form N-PORT may be viewed on-screen or downloaded from the 
Commission's website. In addition, with respect to 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 VIIV will be widely 
disseminated every second throughout Regular Trading Hours by the 
Reporting Authority and/or one or more major market data vendors. The 
website for the Funds will include a 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 members in a Circular of the special characteristics and 
risks associated with trading the Shares. The Exchange will halt 
trading in the Shares under the conditions specified in BZX Rule 11.18 
or for reasons that, in the view of the Exchange, make trading in the 
Shares inadvisable. Trading in the Shares will be subject to Rule 
14.11(k)(4)(B)(iii)(a) and (b), which set forth circumstances under 
which Shares of a Fund 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 
Rule 14.11(k). Each Fund's holdings will be limited to and consistent 
with what is permissible under the Exemptive Order. Each Fund's 
investments will be consistent with its investment objective and will 
not be used to enhance leverage.
    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 
actively-managed exchange-traded products 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.
    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, rather will facilitate the listing and trading of 
actively-managed exchange-traded products that will enhance competition 
among both market participants and listing venues, to the benefit of 
investors and the marketplace.

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

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

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 2, is consistent with the Act and 
rules and regulations thereunder applicable to a national securities 
exchange.\36\ In particular, the Commission finds that the proposed 
rule change, as modified by Amendment No. 2, is consistent with Section 
6(b)(5) of the Act,\37\ which requires, among other things, that the 
Exchange's rules be designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
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.
---------------------------------------------------------------------------

    \36\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \37\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission believes that the proposal is reasonably designed to 
promote fair disclosure of information that may be necessary to price 
the Shares appropriately and to prevent trading in the Shares when a 
reasonable degree of certain pricing transparency cannot be assured. As 
such, the Commission believes the proposal is reasonably designed to 
maintain a fair and orderly market for trading the Shares. The 
Commission also finds that the proposal is consistent with Section 
11A(a)(1)(C)(iii) of the Act, which sets forth Congress's finding that 
it is in the public interest and appropriate for the protection of 
investors and the maintenance of fair and orderly markets to assure the 
availability to brokers, dealers, and investors of information with 
respect to quotations for, and transactions in, securities.
    Specifically, the Commission notes that the Exchange has obtained a 
representation from the issuer that the NAV per Share of each Fund will 
be calculated daily and will be made available to all market 
participants at the same time.\38\ Information regarding market price 
and trading volume of the Shares will be continually available on a 
real-time basis throughout the day on brokers' computer screens and 
other electronic services. Quotation and last sale information for the 
Shares will be available via the Consolidated Tape Association high-
speed line. In addition, the VIIV will be widely disseminated by the 
Reporting Authority and/or one or more major market data vendors in 
one-second intervals during Regular Trading Hours, and must be 
disseminated to all market

[[Page 9502]]

participants at the same time.\39\ Moreover, the Funds' website will 
include a form of the prospectus and additional data relating to NAV 
and other applicable quantitative information for each Fund, including 
any information regarding premiums/discounts that ETFs registered under 
the 1940 Act are required to provide or that are otherwise required 
under the Exemptive Order. Such website and information will be 
publicly available at no charge.
---------------------------------------------------------------------------

    \38\ See BZX Rule 14.11(k)(4)(A)(ii).
    \39\ See BZX Rule 14.11(k)(4)(B)(i).
---------------------------------------------------------------------------

    The Commission also notes that the Exchange's rules regarding 
trading halts help to ensure the maintenance of fair and orderly 
markets for the Shares. Specifically, pursuant to its rules, the 
Exchange may consider all relevant factors in exercising its discretion 
to halt trading in the Shares and will halt trading in the Shares under 
the conditions specified in BZX Rule 11.18. Trading may be halted 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Shares inadvisable, including (1) the 
extent to which trading is not occurring in the securities and/or the 
financial instruments composing the portfolio; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present.\40\ Trading in the Shares also 
will be subject to BZX Rule 14.11(k)(4)(B)(iii)(b), which sets forth 
additional circumstances under which trading in the Shares will be 
halted.
---------------------------------------------------------------------------

    \40\ See BZX Rule 14.11(k)(4)(B)(iii)(a).
---------------------------------------------------------------------------

    The Commission also believes that the proposal is reasonably 
designed to help prevent fraudulent and manipulative acts and 
practices. The Exchange represents that it has a general policy 
prohibiting the distribution of material, non-public information by its 
employees. The Exchange states that the Adviser is not registered as a 
broker-dealer, but is affiliated with a broker-dealer and has 
implemented and will maintain a ``fire wall'' with respect to its 
broker-dealer affiliate regarding access to information concerning the 
composition of and/or changes to the Funds' portfolios and Creation 
Baskets. Further, the Commission notes that any person related to the 
Funds' investment adviser or to the Trust who makes decisions 
pertaining to a Fund's portfolio composition or has access to 
information regarding the Fund's portfolio composition or changes 
thereto or the Creation Basket must be subject to procedures designed 
to prevent the use and dissemination of material nonpublic information 
regarding the applicable Fund portfolio or changes thereto or the 
Creation Basket.\41\ In addition, any person or entity, including an AP 
Representative, custodian, Reporting Authority, distributor, or 
administrator, who has access to information regarding a Fund's 
portfolio composition or changes thereto or its Creation Basket, must 
be subject to procedures designed to prevent the use and dissemination 
of material nonpublic information regarding the applicable Fund 
portfolio or changes thereto or the Creation Basket.\42\ Moreover, if 
any such person or entity is registered as a broker-dealer or 
affiliated with a broker-dealer, such person or entity must erect and 
maintain a ``fire wall'' between the person or entity and the broker-
dealer with respect to access to information concerning the composition 
of and/or changes to such Fund's portfolio and/or Creation Basket.\43\ 
Finally, the Exchange represents that trading of the Shares through the 
Exchange will be subject to the Exchange's surveillance procedures for 
derivative products, including Managed Portfolio Shares,\44\ and 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.
---------------------------------------------------------------------------

    \41\ See BZX Rule 14.11(k)(2)(D). The Exchange represents that 
any person related to the Adviser or the Trust who makes decisions 
pertaining to a Fund's portfolio composition or that has access to 
information regarding a Fund's portfolio or changes thereto or the 
Creation Basket will be subject to procedures designed to prevent 
the use and dissemination of material non-public information 
regarding such portfolio or changes thereto and the Creation Basket.
    \42\ See BZX Rule 14.11(k)(2)(E).
    \43\ See id. The Exchange represents that any person or entity 
who has access to information regarding a Fund's portfolio 
composition or changes thereto or the Creation Basket will be 
subject to procedures designed to prevent the use and dissemination 
of material nonpublic information regarding the portfolio 
composition or changes thereto or the Creation Basket.
    \44\ See BZX Rule 14.11(k)(2)(C), which requires, as part of the 
surveillance procedures for Managed Portfolio Shares, the Funds' 
investment adviser to, upon request by the Exchange or the Financial 
Industry Regulatory Authority (``FINRA''), on behalf of the 
Exchange, make available to the Exchange or FINRA the daily 
portfolio holdings of each series of Managed Portfolio Shares.
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    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. Moreover, prior to 
the commencement of trading, the Exchange will inform its members in a 
Circular of the special characteristics and risks associated with 
trading the Shares.\45\
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    \45\ The Exchange represents that the Circular will discuss the 
following: (1) Procedures for purchases and redemptions of Shares; 
(2) BZX Rule 3.7, which imposes suitability obligations on Exchange 
members with respect to recommending transactions in the Shares to 
customers; (3) how information regarding the VIIV is disseminated; 
(4) the requirement that members deliver a prospectus to investors 
purchasing newly issued shares prior to or concurrently with the 
confirmation of a transaction; (5) trading information; and (6) that 
the portfolio holdings will be disclosed within at least 60 days 
following the end of every fiscal quarter.
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    In support of this proposal, the Exchange represents that:
    (1) The Shares will conform to the initial and continued listing 
criteria under BZX Rule 14.11(k).
    (2) A minimum of 100,000 Shares of each Fund will be outstanding at 
the commencement of trading on the Exchange.
    (3) The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed, and may obtain trading information, regarding 
trading in the Shares and the underlying exchange-traded instruments 
with other markets and other entities that are members of the ISG. In 
addition, the Exchange may obtain information regarding trading in the 
Shares and the underlying exchange-traded instruments from markets and 
other entities with which the Exchange has in place a comprehensive 
surveillance sharing agreement.
    (4) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions in which the Shares trade.
    (5) For initial and continued listing, each Fund will be in 
compliance with Rule 10A-3 under the Act.\46\
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    \46\ See 17 CFR 240.10A-3.
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    (6) Each Fund's holdings will conform to the permissible 
investments as set forth in the Exemptive Application and Exemptive 
Order, and investments made by the Funds will be consistent with all 
requirements set forth in the Exemptive Application and Exemptive 
Order. Each Fund's investments will be consistent with its investment 
objective and will not be used to enhance leverage.
    The Exchange represents that all statements and representations 
made in the filing regarding: (1) The description of the portfolio or 
reference assets; (2) limitations on portfolio holdings or reference 
assets; (3) dissemination and availability of the VIIV, reference 
assets, and intraday indicative values; and (4) the applicability of 
Exchange rules constitute continued listing requirements for listing 
the Shares on the Exchange. In addition, the Exchange represents that 
the issuer will advise the Exchange of any failure by a Fund to comply 
with the continued listing requirements and, pursuant to its 
obligations under Section 19(g)(1) of the

[[Page 9503]]

Act, the Exchange will surveil for compliance with the continued 
listing requirements. If a Fund is not in compliance with the 
applicable listing requirements, the Exchange will commence delisting 
procedures under BZX Rule 14.12.

IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule 
Change

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 2 is consistent with the 
Exchange 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-2019-057 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-2019-057. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10 a.m. and 3 
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-2019-057, and should be 
submitted on or before March 11, 2020.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 2

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 2, prior to the thirtieth day 
after the date of publication of notice of the filing of Amendment No. 
2 in the Federal Register. In Amendment No. 2, the Exchange modified 
the description of each Fund's investments and conformed the 
description of BZX Rule 14.11(k) to the final rule approved in the 
Managed Portfolio Shares Order. Amendment No. 2 also provides other 
clarifications and additional information to the proposed rule 
change.\47\ The changes and additional information in Amendment No. 2 
assist the Commission in finding that the proposal is consistent with 
the Exchange Act. Accordingly, the Commission finds good cause, 
pursuant to Section 19(b)(2) of the Exchange Act,\48\ to approve the 
proposed rule change, as modified by Amendment No. 2, on an accelerated 
basis.
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    \47\ See Amendment No. 2, supra note 11.
    \48\ 15 U.S.C. 78s(b)(2).
    \49\ 15 U.S.C. 78s(b)(2).
    \50\ 17 CFR 200.30-3(a)(12).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\49\ that the proposed rule change (SR-CboeBZX-2019-057), as modified 
by Amendment No. 2, be, and hereby is, approved on an accelerated 
basis.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\50\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-03176 Filed 2-18-20; 8:45 am]
 BILLING CODE 8011-01-P