Document ID: SEC-2020-1509-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2020-09-21T04:00Z

[Federal Register Volume 85, Number 183 (Monday, September 21, 2020)]
[Notices]
[Pages 59354-59361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20696]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89869; File No. SR-NYSEArca-2020-80]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade Shares of the Alger Mid Cap 
40 ETF and Alger 25 ETF Under Rule 8.900-E, Managed Portfolio Shares

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

    The Exchange proposes to list and trade shares of the following 
under Rule 8.900-E (Managed Portfolio Shares): Alger Mid Cap 40 ETF and 
Alger 25 ETF. The proposed change is available on the Exchange's 
website at www.nyse.com, at the principal office of the Exchange, and 
at the Commission's Public Reference Room.

[[Page 59355]]

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

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

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

1. Purpose
    NYSE Arca Rule 8.900-E permits the listing and trading, or trading 
pursuant to unlisted trading privileges, of Managed Portfolio Shares, 
which are securities issued by an actively managed open-end investment 
management company.\4\ Rule 8.900-E(b)(1) requires the Exchange to file 
separate proposals under Section 19(b) of the Act before listing and 
trading any series of Managed Portfolio Shares on the Exchange. 
Therefore, the Exchange is submitting this proposal in order to list 
and trade Managed Portfolio Shares of the Alger Mid Cap 40 ETF and the 
Alger 25 ETF (each a ``Fund'' and, collectively, the ``Funds'') under 
Rule 8.900-E.
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    \4\ Rule 8.900-E(c)(1) provides that 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, 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, 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 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.
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Description of the Funds and the Trust
    The shares of each Fund (the ``Shares'') will be issued by The 
Alger ETF Trust (the ``Trust''), a business trust organized under the 
laws of the state of Massachusetts and registered with the Commission 
as an open-end management investment company.\5\ The investment adviser 
to each Fund will be Fred Alger Management, LLC (the ``Adviser''). Fred 
Alger & Company, LLC (the ``Distributor'') will serve as the 
distributor of each of the Funds' Shares. All statements and 
representations made in this filing regarding (a) the description of 
the portfolio or reference assets, (b) limitations on portfolio 
holdings or reference assets, or (c) the applicability of Exchange 
rules shall constitute continued listing requirements for listing the 
Shares on the Exchange, as provided under Rule 8.900-E(b)(1).
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    \5\ The Trust is registered under the Investment Company Act of 
1940 (the ``1940 Act''). On August 17, 2020, the Trust filed a 
registration statement on Form N-1A under the Securities Act of 1933 
(the ``1933 Act'') and the 1940 Act for the Funds (File No. 811-
23603) (``Registration Statement''). The Commission issued an order 
granting exemptive relief to the Trust (``Exemptive Order'') under 
the 1940 Act on May 19, 2020 (Investment Company Act Release No. 
33869). The Exemptive Order was granted in response to the Trust's 
application for exemptive relief (the ``Exemptive Application'') 
(File No. 812-15117). The description of the operation of the Trust 
and the Funds herein is based, in part, on the Registration 
Statement.
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    Rule 8.900-E(b)(4) 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.\6\ 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 non-public information regarding 
the applicable Investment Company portfolio or changes thereto or the 
Creation Basket.
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    \6\ Rule 8.900-E(c)(5) provides that the term ``Creation 
Basket'' means, 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 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.
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    Rule 8.900-E(b)(4) is similar to Commentary .03(a)(i) and (iii) to 
Rule 5.2-E(j)(3); however, Commentary .03(a) in connection with the 
establishment of a ``fire wall'' between the investment 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.\7\ 
Rule 8.900-E(b)(4) is also similar to Commentary .06 to Rule 8.600-E 
related to Managed Fund Shares, except that Rule 8.900-E(b)(4) relates 
to establishment and maintenance of a ``fire wall'' between the 
investment adviser and personnel of the broker-dealer or broker-dealer 
affiliate, as applicable, with respect to an Investment Company's 
portfolio and Creation Basket, and not just to 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. 
The Adviser has implemented and will maintain a ``fire wall'' with 
respect to such broker-dealer affiliate regarding access to information 
concerning the composition of and/or changes to a Fund's portfolio and/
or Creation Basket.
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    \7\ 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 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 
violations, 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. The Funds will also be required to comply 
with Exchange rules relating to disclosure, including Rule 5.3-E(i).
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    In the event (a) the Adviser or any sub-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 personnel of the broker-dealer or broker-
dealer affiliate regarding

[[Page 59356]]

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 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 8.900-E(b)(5) requires that any person or entity, 
including an AP Representative, custodian, Reporting Authority, 
distributor, or administrator, who has access to non-public information 
regarding the Investment Company's portfolio composition or changes 
thereto or the Creation Basket, must be subject to procedures 
reasonably designed to prevent the use and dissemination of material 
non-public 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.
Description of the Funds \8\
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    \8\ The Exchange represents that, for initial and/or continued 
listing, each Fund will be in compliance with Rule 10A-3 under the 
Act. See 17 CFR 240.10A-3.
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    Each 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.\9\
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    \9\ Pursuant to the Exemptive Order, the only permissible 
investments for a Fund are the following: exchange-traded funds 
(``ETFs''), exchange-traded notes, exchange-listed common stocks, 
exchange-traded American Depositary Receipts, exchange-traded real 
estate investment trusts, exchange-traded commodity pools, exchange-
traded metals trusts, exchange-traded currency trusts and exchange-
traded futures that trade contemporaneously with Shares of a Fund, 
as well as cash and cash equivalents (short-term U.S. Treasury 
securities, government money market funds, and repurchase 
agreements).
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Alger Mid Cap 40 ETF
    The Fund's primary objective is to seek long-term capital 
appreciation. The Fund will primarily invest in equity securities, 
including common or preferred stocks listed on U.S. exchanges, of mid-
cap companies.
    Alger 25 ETF
    The Fund's primary objective is to seek long-term capital 
appreciation. The Fund will primarily invest in equity securities of 
companies listed on U.S. exchanges, including common or preferred 
stocks.
Investment Restrictions
    Each Fund's holdings will be consistent with all requirements 
described in the Exemptive Application and Exemptive Order.\10\
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    \10\ See id.
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    Each Fund's investments, including derivatives, will be consistent 
with its investment objective and will not be used to enhance leverage 
(although certain derivatives and other investments may result in 
leverage). That is, for each Fund, the Fund's investments will not be 
used to seek performance that is the multiple or inverse multiple 
(e.g., 2X or -3X) of the Fund's primary broad-based securities 
benchmark index (as defined in Form N-1A).\11\
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    \11\ Each Fund's broad-based securities benchmark index will be 
identified in a future amendment to the Registration Statement 
following that Fund's first full calendar year of performance.
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Creations and Redemptions of Shares
    Creations and redemptions of Shares will take place as described in 
Rule 8.900-E. Specifically, in connection with the creation and 
redemption of Creation Units \12\ and Redemption Units,\13\ 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'').\14\ Authorized Participants 
(``AP''), as defined in the applicable Form N-1A filed with the 
Commission, will sign an agreement with an AP Representative \15\ 
establishing the Confidential Account for the benefit of the AP. AP 
Representatives will be broker-dealers. An AP must be a Depository 
Trust Company Participant that has executed an authorized participant 
agreement (``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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    \12\ Rule 8.900-E(c)(6) provides that the term ``Creation Unit'' 
means 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.
    \13\ Rule 8.900-E(c)(7) provides that the term ``Redemption 
Unit'' means 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.
    \14\ Rule 8.900-E(c)(4) provides that the term ``Confidential 
Account'' means 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.
    \15\ Rule 8.900-E(c)(3) provides that the term ``AP 
Representative'' means 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 day, the Funds' custodian will transmit the Funds' Creation 
Basket (as described below) to each AP Representative. This information 
will permit an AP that has established a Confidential Account with an 
AP Representative to transact in the underlying securities of the 
Creation Basket through their AP Representatives, enabling them to 
engage in in-kind creation or redemption activity without knowing the 
identity or weighting of those securities. Fund Shares will be issued 
and redeemed in Creation Units and Redemption Units, the size of which 
will be specified in the Registration Statement. 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 Funds' NAVs will be determined as of 
the scheduled closing time of the regular trading session on the NYSE 
(ordinarily, 4:00 p.m. E.T.) on each business day.
    To keep costs low and permit the Funds to be as fully invested as 
possible, Shares are generally purchased and redeemed in Creation Units 
and Redemption Units on an in-kind basis. Except in limited 
circumstances where the purchase or redemption will include cash, 
purchasers, through the AP Representative, purchase Creation Units by 
making an in-kind deposit of specified instruments (``Deposit

[[Page 59357]]

Instruments''), and the AP Representative, acting on behalf of an 
Authorized Participant that is redeeming shares, receives an in-kind 
transfer of specified instruments (``Redemption Instruments''). 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 correspond pro rata to the 
positions in the Fund's portfolio (including cash positions) and thus 
will be identical. These instruments may be referred to, in the case of 
either a purchase or a redemption, as the ``Creation Basket.''
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 substantially 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.
    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 
each 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, 
currently anticipated to be as of the close of the regular trading 
session on the NYSE (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. The Order Cut-Off Time will 
be specified in a Fund's SAI and/or the Participant Agreement. 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. 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.
    Generally, all orders to purchase Creation Units must be received 
by the Distributor no later than the end of the Core Trading Session 
(ordinarily, 9:30 a.m. to 4:00 p.m. E.T.) on the date such order is 
placed (``Transmittal Date'') in order for the purchaser 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 in cash for an 
amount equal to the applicable NAV per Share purchased plus applicable 
transaction fees.\16\ Other than the Balancing Amount, the Fund will 
substitute cash only under exceptional circumstances and as set forth 
under the Fund's policies and procedures governing the composition of 
Creation Baskets.
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    \16\ 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 or through an AP (``AP Redemption Order''). 
Each Fund will establish an Order Cut-Off Time for redemption orders of 
Redemption Units in proper form. Redemption Units of a 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. 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 AP would direct the AP Representative on 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.
    Redemptions will occur primarily in-kind, although redemption 
payments may also be made partly or wholly in cash. 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.
Net Asset Value
    The NAV will be calculated separately for the Shares of each Fund 
on each Business Day. Each Fund's NAV is determined as of the close of 
regular trading on the NYSE, normally 4:00 p.m., Eastern Time. The NAV 
of each Fund is computed by adding the value of the Fund's investments 
plus cash and other assets allocable to the class, deducting 
liabilities, and then dividing the result by the number of Shares 
outstanding at the time the determination is made.
    The assets of the Funds are generally valued on the basis of market 
quotations. Securities for which such information is readily available 
are generally valued at the last reported sales price, the official 
closing price as reported by an independent pricing service on the 
primary market or exchange on which they are traded, or, in the absence 
of reported sales, at the bid price. Other investments and other 
assets, including restricted securities and securities for which market 
quotations are not readily available, are valued at fair value under 
procedures approved by the Board of Trustees.
    Information regarding each Fund's NAV and how often Shares of each 
Fund traded at a price above (i.e., at a premium) or below (i.e., at a 
discount) a Fund's NAV will be posted to the Funds' website when it 
becomes available.
Availability of Information
    The Funds' website, www.alger.com, will include 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''),\17\ and a calculation of the premium 
and discount of the market closing price or Bid/Ask Price against the 
NAV. The website and information will be publicly available at no 
charge.
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    \17\ The Bid/Ask Price of a Fund's Shares is determined using 
the mid-point between the current national best bid and offer at the 
time of calculation of such Fund's NAV. The records relating to Bid/
Ask Prices will be retained by the Funds or their service providers.
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    Form N-PORT requires reporting of a Fund's complete portfolio 
holdings on a position-by-position basis on a quarterly basis within 60 
days after fiscal quarter end. Investors can obtain a Fund's SAI, its 
shareholder reports, its Form N-CSR,

[[Page 59358]]

filed twice a year, and its Form N-CEN, filed annually. Each Fund's SAI 
and shareholder reports are available free upon request from the Fund, 
and those documents and the Form N-PORT, Form N-CSR, and Form N-CEN may 
be viewed onscreen 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. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers. Quotation and last sale information for the 
Shares will be available via the Consolidated Tape Association 
(``CTA'') high-speed line. In addition, the Verified Intraday 
Indicative Value (``VIIV''), as defined in Rule 8.900-E(c)(2),\18\ will 
be widely disseminated by the Reporting Authority \19\ and/or one or 
more major market data vendors in one second intervals during the 
Exchange's Core Trading Session.
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    \18\ Rule 8.900-E(c)(2) provides that the term ``Verified 
Intraday Indicative Value'' is 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 the Core Trading Session 
by the Reporting Authority.
    \19\ Rule 8.900-E(c)(8) provides that the term ``Reporting 
Authority'' in respect of a particular series of Managed Portfolio 
Shares means the Exchange, an institution, or a reporting service 
designated by the Exchange or by the exchange that lists a 
particular series of Managed Portfolio Shares (if the Exchange is 
trading such series pursuant to unlisted trading privileges), as the 
official source for calculating and reporting information relating 
to such series, including, but not limited to, the NAV, the VIIV, 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.
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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 Fund 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.
    Information regarding the VIIV will be calculated and disseminated 
by the Reporting Authority and/or by one or more major market data 
vendors in one second intervals during the Core Trading Session. The 
VIIV will also be available on the Funds' website and on websites that 
publish updated market quotations during the trading day. The VIIV is 
based on the current market value of the securities in a Fund's 
portfolio that day. The VIIV is intended to provide investors and other 
market participants with a highly correlated per Share value of the 
underlying portfolio that can be compared to the current market price. 
The methodology for calculating the fund's VIIV, which will be overseen 
by the Board, is available on the Funds' 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.\20\ Trading in Shares of a Fund will 
be halted if the circuit breaker parameters in Rule 7.12-E have been 
reached. Trading also may be halted because of market conditions or for 
reasons that, in the view of the Exchange, make trading in the Shares 
inadvisable. Trading in the Shares will be subject to Rule 8.900-
E(d)(2)(C), which sets forth circumstances under which Shares of a Fund 
will be halted.
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    \20\ See Rule 7.12-E.
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    Specifically, Rule 8.900-E(d)(2)(C)(i) 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: (a) The extent to which trading is not 
occurring in the securities and/or the financial instruments composing 
the portfolio; or (b) whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present.\21\
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    \21\ 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 VIIV.
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    Rule 8.900-E(d)(2)(C)(ii) provides that, if the Exchange becomes 
aware that: (i) The VIIV of a series of Managed Portfolio Shares is not 
being calculated or disseminated in one second intervals, as required; 
(ii) the NAV 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.
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 in all trading sessions in accordance with Rule 7.34-E(a). 
As provided in Rule 7.6-E, the minimum price variation (``MPV'') for 
quoting and entry of orders in equity securities traded on the NYSE 
Arca Marketplace is $0.01, with the exception of securities that are 
priced less than $1.00, for which the MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under Rule 8.900-E, as well as all terms in the Exemptive 
Order. The Exchange will obtain 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.
Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of Shares on the Exchange during all 
trading

[[Page 59359]]

sessions and to deter and detect violations of Exchange rules and the 
applicable federal securities laws. Trading of Shares through the 
Exchange will be subject to the Exchange's surveillance procedures for 
derivative products. As part of these surveillance procedures and 
consistent with Rule 8.900-E(b)(3) and 8.900-E(d)(2)(B), the Adviser 
will upon request make available to the Exchange and/or the Financial 
Industry Regulatory Authority (``FINRA''), on behalf of the Exchange, 
the daily portfolio holdings of a Fund. The issuer of the Shares of 
each Fund will be required to represent 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 5.5-E(m).
    FINRA, on behalf of the Exchange, or the regulatory staff of the 
Exchange, or both, will communicate as needed regarding trading in the 
Shares and certain exchange-traded instruments with other markets and 
other entities that are members of the Intermarket Surveillance Group 
(``ISG''), and FINRA, on behalf of the Exchange, or the regulatory 
staff 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 certain 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.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit (``ETP'') Holders in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares. Specifically, the Bulletin will discuss the 
following: (1) The procedures for purchases and redemptions of Shares; 
(2) Rule 9.2-E(a), which imposes a duty of due diligence on its ETP 
Holders to learn the essential facts relating to every customer prior 
to trading the Shares; (3) how information regarding the VIIV is 
disseminated; (4) the requirement that ETP Holders 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 of the Shares are not disclosed on a 
daily basis.
    In addition, the Bulletin will reference that the Funds are subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m., ET each trading day.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\22\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\23\ 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.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b).
    \23\ 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. To the extent that a Fund is not in 
compliance with such rules, the Exchange would either prevent the Fund 
from listing and trading on the Exchange or commence delisting 
procedures under Rule 8.900-E(d)(2)(B). Specifically, the Exchange 
would consider the suspension of trading, and commence delisting 
proceedings under Rule 8.900-E(d)(2)(B), of 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; (b) if the Exchange has halted 
trading in a Fund because the VIIV is interrupted pursuant to Rule 
8.900-E(d)(2)(C)(ii) 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 8.900-E(d)(2)(C)(ii) and such issue persists past the trading 
day in which it occurred; (d) if the Exchange has halted trading in 
Shares of a Fund pursuant to Rule 8.900-E(d)(2)(C)(i) and such issue 
persists past the trading day in which it occurred; (e) if a Fund has 
failed to file any filings required by the Commission or if the 
Exchange is aware that a Fund is not in compliance with the conditions 
of any currently 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 8.900-E are 
not continuously maintained; (g) if any of the statements of 
representations regarding (a) the description of the portfolio, (b) 
limitations on portfolio holdings, or (c) the applicability of Exchange 
listing rules as specified herein to permit the listing and trading of 
a Fund, are not continuously maintained; 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.
    As discussed above, 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 that 
(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, the Adviser will implement and maintain a fire wall with 
respect to personnel of the broker-dealer or 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.
    In addition, Rule 8.900-E(b)(5) requires that any person or entity, 
including an AP Representative, custodian, Reporting Authority, 
distributor, or administrator, who has

[[Page 59360]]

access to non-public 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 non-public 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 8.900-E is designed to 
prevent fraudulent and manipulative acts and practices related to the 
listing and trading of Shares of the Funds 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 set forth in Rule 8.900-E(b)(5) will act as a 
safeguard against misuse and improper dissemination of information 
related to a Fund's portfolio composition, the Creation Basket, or 
changes thereto. The requirement that any person or entity implement 
procedures to prevent the use and dissemination of material non-public 
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. Accordingly, 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 Shares of the Funds and to promote just and 
equitable principles of trade and to protect investors and the public 
interest because 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 8.900-E(d)(2)(C)(i), which provides that the Exchange may consider 
all relevant factors in exercising its discretion to halt trading in a 
Fund. 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: (a) The extent 
to which trading is not occurring in the securities and/or the 
financial instruments composing the portfolio; or (b) whether other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present.\24\ Additionally, trading in the 
Shares will be subject to Rule 8.900-E(d)(2)(C)(ii), which provides 
that the Exchange would halt trading where the Exchange becomes aware 
that: (a) The VIIV of a series of Managed Portfolio Shares is not being 
calculated or disseminated in one second intervals, as required; (b) 
the net asset value with respect to a series of Managed Portfolio 
Shares is not disseminated to all market participants at the same time; 
(c) 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 (d) 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). The Exchange would halt 
trading in such Shares until such time as the VIIV, the NAV, or the 
holdings are available, as required.
---------------------------------------------------------------------------

    \24\ See supra note 21.
---------------------------------------------------------------------------

    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 8.900-E.\25\ Each Fund's 
holdings will conform to the permissible investments as set forth in 
the Exemptive Application and Exemptive Order.\26\ As noted above, 
FINRA, on behalf of the Exchange, or the regulatory staff 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 FINRA, on 
behalf of the Exchange, or the regulatory staff 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 Exchange has in place a comprehensive 
surveillance sharing agreement.
---------------------------------------------------------------------------

    \25\ The Exchange represents that, for initial and/or continued 
listing, each Fund will be in compliance with Rule 10A-3 under the 
Act. See 17 CFR 240.10A-3.
    \26\ See supra note 9.
---------------------------------------------------------------------------

    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, its shareholder reports, its Form N-CSR 
(filed twice a year), and its Form N-CEN (filed annually). A Fund's SAI 
and shareholder reports will be available free upon request from the 
applicable Fund, and those documents and the Form N-PORT, Form N-CSR, 
and Form N-CEN may be viewed on-screen or downloaded from the 
Commission's website at www.sec.gov. In addition, 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

[[Page 59361]]

the Shares will be available via the CTA high-speed line. Information 
regarding the VIIV will be widely disseminated in one second intervals 
throughout the Core Trading Session 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 an 
Information Bulletin of the special characteristics and risks 
associated with trading the Shares.
    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 8.900-E. Each Fund's investments, including derivatives, will be 
consistent with its investment objective and will not be used to 
enhance leverage (although certain derivatives and other investments 
may result in leverage). That is, the Fund's investments will not be 
used to seek performance that is the multiple or inverse multiple 
(e.g., 2X or -3X) of the Fund's primary broad-based securities 
benchmark index (as defined in Form N-1A).
    The Exchange also believes that 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 purposes of the Act. The Exchange believes the 
proposed rule change would permit the listing and trading of additional 
actively-managed exchange-traded products, thereby promoting 
competition among exchange-traded products 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic comments:

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2020-80 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-NYSEArca-2020-80. 
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 10:00 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-NYSEArca-2020-80 and should 
be submitted on or before October 13, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-20696 Filed 9-18-20; 8:45 am]
BILLING CODE 8011-01-P