Document ID: SEC-2020-2031-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2020-12-21T05:00Z

[Federal Register Volume 85, Number 245 (Monday, December 21, 2020)]
[Notices]
[Pages 83129-83135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28013]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90665; File No. SR-NYSEArca-2020-104]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade Shares of the Stance Equity 
ESG Large Cap Core ETF Under NYSE Arca Rule 8.601-E

December 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 November 30, 2020, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared 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 NYSE Arca Rule 8.601-E: Stance Equity ESG Large Cap Core 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.

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

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

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

1. Purpose
    The Exchange has adopted NYSE Arca Rule 8.601-E for the purpose of 
permitting the listing and trading, or trading pursuant to unlisted 
trading privileges (``UTP''), of Active Proxy Portfolio Shares, which 
are securities issued by an actively managed open-end investment 
management company.\4\ Commentary .01 to Rule 8.601-E requires the 
Exchange to file separate proposals under Section 19(b) of the Act 
before listing and trading any series of Active Proxy Portfolio Shares 
on the Exchange. Therefore, the Exchange is submitting this proposal in 
order to list and trade shares (``Shares'') of Active Proxy Portfolio 
Shares of the Stance Equity ESG Large Cap Core ETF (the ``Fund'') under 
Rule 8.601-E.
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    \4\ See Securities Exchange Act Release No. 89185 (June 29, 
2020), 85 FR 40328 (July 3, 2020) (SR-NYSEArca-2019-95). Rule 8.601-
E(c)(1) provides that ``[t]he term ``Active Proxy Portfolio Share'' 
means a security that (a) is issued by a 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 
specified minimum number of shares, or multiples thereof, in return 
for a deposit by the purchaser of the Proxy Portfolio and/or cash 
with a value equal to the next determined net asset value (``NAV''); 
(c) when aggregated in the same specified minimum number of Active 
Proxy Portfolio Shares, or multiples thereof, may be redeemed at a 
holder's request in return for the Proxy Portfolio and/or cash to 
the holder by the issuer with a value equal to the next determined 
NAV; and (d) the portfolio holdings for which are disclosed within 
at least 60 days following the end of every fiscal quarter.'' Rule 
8.601-E(c)(2) provides that ``[t]he term ``Actual Portfolio'' means 
the identities and quantities of the securities and other assets 
held by the Investment Company that shall form the basis for the 
Investment Company's calculation of NAV at the end of the business 
day.'' Rule 8.601-E(c)(3) provides that ``[t]he term ``Proxy 
Portfolio'' means a specified portfolio of securities, other 
financial instruments and/or cash designed to track closely the 
daily performance of the Actual Portfolio of a series of Active 
Proxy Portfolio Shares as provided in the exemptive relief pursuant 
to the Investment Company Act of 1940 applicable to such series.''
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Key Features of Active Proxy Portfolio Shares
    While funds issuing Active Proxy Portfolio Shares will be actively-
managed and, to that extent, will be similar to Managed Fund Shares, 
Active Proxy Portfolio Shares differ from Managed Fund Shares in the 
following important respects. First, in contrast to Managed Fund 
Shares, which are actively-managed funds listed and traded under NYSE 
Arca Rule 8.600-E \5\ and for which a ``Disclosed Portfolio'' is 
required to be disseminated at least once daily,\6\ the portfolio for 
an issue of Active Proxy Portfolio Shares will be publicly disclosed 
within at least 60 days following the end of every fiscal quarter in 
accordance with normal disclosure requirements otherwise applicable to 
open-end management investment companies registered under the 
Investment Company Act of 1940 (the ``1940 Act'').\7\ The composition 
of

[[Page 83130]]

the portfolio of an issue of Active Proxy Portfolio Shares would not be 
available at commencement of Exchange listing and trading. Second, in 
connection with the creation and redemption of Active Proxy Portfolio 
Shares, such creation or redemption may be exchanged for a Proxy 
Portfolio with a value equal to the next-determined NAV. A series of 
Active Proxy Portfolio Shares will disclose the Proxy Portfolio on a 
daily basis, which, as described above, is designed to track closely 
the daily performance of the Actual Portfolio of a series of Active 
Proxy Portfolio Shares, instead of the actual holdings of the 
Investment Company, as provided by a series of Managed Fund Shares.
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    \5\ The Commission has previously approved listing and trading 
on the Exchange of a number of issues of Managed Fund Shares under 
NYSE Arca Rule 8.600-E. See, e.g., Securities Exchange Act Release 
Nos. 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-
2008-31) (order approving Exchange listing and trading of twelve 
actively-managed funds of the WisdomTree Trust); 60460 (August 7, 
2009), 74 FR 41468 (August 17, 2009) (SR-NYSEArca-2009-55) (order 
approving listing of Dent Tactical ETF); 63076 (October 12, 2010), 
75 FR 63874 (October 18, 2010) (SR-NYSEArca-2010-79) (order 
approving Exchange listing and trading of Cambria Global Tactical 
ETF); 63802 (January 31, 2011), 76 FR 6503 (February 4, 2011) (SR-
NYSEArca-2010-118) (order approving Exchange listing and trading of 
the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic 
Allocation Growth Income ETF). The Commission also has approved a 
proposed rule change relating to generic listing standards for 
Managed Fund Shares. Securities Exchange Act Release No. 78397 (July 
22, 2016), 81 FR 49320 (July 27, 2016 (SR-NYSEArca-2015-110) 
(amending NYSE Arca Equities Rule 8.600 to adopt generic listing 
standards for Managed Fund Shares).
    \6\ NYSE Arca Rule 8.600-E(c)(2) defines the term ``Disclosed 
Portfolio'' as the identities and quantities of the securities and 
other assets held by the Investment Company that will form the basis 
for the Investment Company's calculation of net asset value at the 
end of the business day. NYSE Arca Rule 8.600-E(d)(2)(B)(i) requires 
that the Disclosed Portfolio will be disseminated at least once 
daily and will be made available to all market participants at the 
same time.
    \7\ A mutual fund is required to file with the Commission its 
complete portfolio schedules for the second and fourth fiscal 
quarters on Form N-CSR under the 1940 Act. Information reported on 
Form N-PORT for the third month of a fund's fiscal quarter will be 
made publicly available 60 days after the end of a fund's fiscal 
quarter. 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 series of Active Proxy Portfolio Shares' Statement of Additional 
Information (``SAI''), its Shareholder Reports, its Form N-CSR, 
filed twice a year, and its Form N-CEN, filed annually. A series of 
Active Proxy Portfolio Shares' SAI and Shareholder Reports will be 
available free upon request from the Investment Company, 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.
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    The Shares of the Fund will be issued by The RBB Fund, Inc. (the 
``Issuer''), a corporation organized under the laws of the State of 
Maryland and registered with the Commission as an open-end management 
investment company.\8\ Red Gate Advisers, LLC (the ``Adviser'') will be 
the investment adviser to the Fund. Stance Capital, LLC and Vident 
Investment Advisory, LLC will be the sub-advisers (the ``Sub-
Advisers'') for the Fund. U.S. Bank, N.A. will serve as the Fund's 
custodian (the ``Custodian''). U.S. Bancorp Fund Services, LLC will 
serve as the Fund's transfer agent (the ``Transfer Agent''). Herald 
Investment Marketing, LLC will act as the distributor and principal 
underwriter (the ``Distributor'') for the Fund.
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    \8\ The Issuer is registered under the 1940 Act. On November 23, 
2020, the Issuer filed a registration statement on Form N-1A under 
the Securities Act of 1933 (the ``1933 Act'') (15 U.S.C. 77a), and 
under the 1940 Act relating to the Fund (File Nos. 033-20827 and 
811-05518) (the ``Registration Statement''). The Issuer filed an 
Application for an Order under Section 6(c) of the 1940 Act for 
exemptions from various provisions of the 1940 Act and rules 
thereunder (File No. 812-15165), dated September 28, 2020 (the 
``Application''). The description of the operation of the Fund 
herein is based, in part, on the Registration Statement and the 
Application. The Exchange will not commence trading in Shares of the 
Fund until the Commission has issued an order granting the 
exemptions requested in the Application.
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    Commentary .04 to NYSE Arca Rule 8.601-E provides that, if the 
investment adviser to the Investment Company issuing Active Proxy 
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 and/or changes to 
such Investment Company's Actual Portfolio and/or Proxy Portfolio. Any 
person related to the investment adviser or Investment Company who 
makes decisions pertaining to the Investment Company's Actual Portfolio 
and/or Proxy Portfolio or has access to non-public information 
regarding the Investment Company's Actual Portfolio and/or Proxy 
Portfolio or changes thereto must be subject to procedures reasonably 
designed to prevent the use and dissemination of material non-public 
information regarding the Actual Portfolio and/or Proxy Portfolio or 
changes thereto. Commentary .04 is similar to Commentary .03(a)(i) and 
(iii) to NYSE Arca Rule 5.2-E(j)(3); however, Commentary .04, 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.\9\ Commentary .04 is also similar to Commentary 
.06 to Rule 8.600-E related to Managed Fund Shares, except that 
Commentary .04 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, applicable to an 
Investment Company's Actual Portfolio and/or Proxy Portfolio or changes 
thereto, and not just to the underlying portfolio, as is the case with 
Managed Fund Shares.
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    \9\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and Sub-Advisers and their 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.
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    In addition, Commentary .05 to Rule 8.601-E provides that any 
person or entity, including a custodian, Reporting Authority, 
distributor, or administrator, who has access to non-public information 
regarding the Investment Company's Actual Portfolio or the Proxy 
Portfolio or changes thereto, must be subject to procedures reasonably 
designed to prevent the use and dissemination of material non-public 
information regarding the applicable Investment Company Actual 
Portfolio or the Proxy Portfolio or changes thereto. 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 Actual Portfolio or Proxy Portfolio.
    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 
the Fund's Actual Portfolio and/or Proxy Portfolio. The Sub-Advisers 
are not registered as broker-dealers and are not affiliated with a 
broker-dealer.
    In the event (a) the Adviser or Sub-Adviser(s) 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 Fund's Actual Portfolio and/or Proxy 
Portfolio, and will be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding the 
Fund's Actual Portfolio and/or Proxy Portfolio or changes thereto. Any 
person related to the Adviser, Sub-Adviser(s), or the Fund who makes 
decisions pertaining to the Fund's Actual Portfolio or the Proxy 
Portfolio or has access to non-public information regarding the Fund's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto are 
subject to procedures reasonably designed to prevent the use and 
dissemination of

[[Page 83131]]

material non-public information regarding the Fund's Actual Portfolio 
and/or the Proxy Portfolio or changes thereto.
    In addition, any person or entity, including any service provider 
for the Fund, who has access to non-public information regarding the 
Fund's Actual Portfolio or the Proxy Portfolio or changes thereto, will 
be subject to procedures reasonably designed to prevent the use and 
dissemination of material non-public information regarding the Fund's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto. 
Moreover, if any such person or entity is registered as a broker-dealer 
or affiliated with a broker-dealer, such person or entity has erected 
and will 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 the Fund's Actual Portfolio and/or Proxy 
Portfolio.
Description of the Fund
    According to the Registration Statement, the Adviser will identify 
its ``Portfolio Reference Basket'' \10\ for the Fund, which is designed 
to closely track the daily performance of the Fund but is not the 
Fund's Actual Portfolio. The Portfolio Reference Basket is comprised of 
all of the names of the securities in the Actual Portfolio, and only 
the securities that are in the Actual Portfolio (unless cash or cash 
equivalents are included). The Portfolio Reference Basket will have a 
minimum weightings overlap of 90% with the Actual Portfolio at the 
beginning of each trading day. The Adviser will publish a new Portfolio 
Reference Basket for the Fund before the commencement of trading of the 
Fund's Shares on each ``Business Day,'' \11\ and the Adviser will not 
make intra-day changes to the Portfolio Reference Basket except to 
correct errors in the published Portfolio Reference Basket.
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    \10\ The ``Portfolio Reference Basket'' is the Proxy Portfolio 
for purposes of Rule 8.601-E(c)(3).
    \11\ ``Business Day'' is defined to mean any day that the 
Exchange is open, including any day when the Fund satisfies 
redemption requests as required by Section 22(e) of the 1940 Act.
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    In addition, on each Business Day, before commencement of trading 
of Shares, the Fund will publish the ``Guardrail Amount,'' which is the 
maximum deviation between the weightings of the specific securities in 
the Portfolio Reference Basket and the weightings of those specific 
securities in the Actual Portfolio, as well as between the weighting of 
the respective cash positions. The Guardrail Amount is designed to help 
evaluate the risk of tracking error, which is the difference in the 
performance of the Portfolio Reference Basket from the performance of 
the Actual Portfolio.
Stance Equity ESG Large Cap Core ETF
    The Fund's holdings will conform to the permissible investments as 
set forth in the Application, and the holdings will be consistent with 
all requirements in the Application.\12\ Any foreign common stocks held 
by the Fund will be traded on an exchange that is a member of the 
Intermarket Surveillance Group (``ISG'') or with which the Exchange has 
in place a comprehensive surveillance sharing agreement.
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    \12\ Pursuant to the Application, the permissible investments 
for the Fund include only the following instruments: ETFs traded on 
a U.S. exchange, exchange-traded notes (``ETNs'') traded on a U.S. 
exchange, U.S. exchange-traded common stocks, U.S. exchange-traded 
preferred stocks, U.S. exchange-traded American Depositary Receipts 
(``ADRs''), U.S. exchange-traded real estate investment trusts, U.S. 
exchange-traded commodity pools, U.S. exchange-traded metals trusts, 
U.S. exchange-traded currency trusts, and U.S. exchange-traded 
futures; common stocks listed on a foreign exchange that trade on 
such exchange contemporaneously with the Fund's Shares; exchange-
traded futures that are traded on a U.S. futures exchange 
contemporaneously with the Fund's Shares; and cash and cash 
equivalents (which are short-term U.S. Treasury securities, 
government money market funds, and repurchase agreements). The Fund 
will not borrow for investment purposes, hold short positions, or 
purchase any securities that are illiquid investments at the time of 
purchase.
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    According to the Registration Statement, the Fund's investment 
objective is to seek long-term capital appreciation. The Fund will 
invest primarily in exchange-traded equity securities of U.S. large 
capitalization issuers. The Fund will also seek to achieve its 
investment objectives by investing mainly in companies that meet 
environmental, social, and governance standards, as determined by 
Stance Capital, LLC.
Investment Restrictions
    The Shares of the Fund will conform to the initial and continued 
listing criteria under Rule 8.601-E. The Fund's holdings will be 
limited to and consistent with permissible holdings as described in the 
Application and all requirements in the Application.\13\
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    \13\ Id.
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    The 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).\14\
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    \14\ The Fund's broad-based securities benchmark index will be 
identified in a future amendment to its Registration Statement 
following the Fund's first full calendar year of performance.
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Creations and Redemptions of Shares
    According to the Registration Statement, the Issuer will issue and 
sell Shares of the Fund only in specified minimum size ``Creation 
Units'' on a continuous basis through the Distributor at their NAV next 
determined after receipt of an order, on any Business Day, in proper 
form. The NAV of the Fund's Shares will be calculated each Business Day 
as of the close of regular trading on the Exchange, ordinarily 4:00 
p.m. Eastern Time (``E.T.'').
    According to the Registration Statement, Shares will be purchased 
and redeemed in Creation Units and generally on an in-kind basis. 
Accordingly, except where the purchase or redemption will include cash, 
purchasers will be required to purchase Creation Units by making an in-
kind deposit of specified instruments (``Deposit Instruments''), and 
shareholders redeeming their Shares will receive an in-kind transfer of 
specified instruments (``Redemption Instruments''). The composition of 
the instruments that constitute the Deposit Instruments and the 
Redemption Instruments for the Fund (collectively, the ``Creation 
Basket'') will be the same as the Fund's Portfolio Reference Basket, 
except to the extent purchases and redemptions are made entirely or in 
part on a cash basis.
    Creation Units of the Fund may be purchased and/or redeemed 
entirely for cash. When full or partial cash purchases of Creation 
Units are available or specified for the Fund, they will be effected in 
essentially the same manner as in-kind purchases thereof. The Fund may 
determine, upon receiving a purchase or redemption order from an 
Authorized Participant, to have the purchase or redemption, as 
applicable, be made entirely or in part in cash.\15\
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    \15\ The Adviser represents that, to the extent the Issuer 
effects the creation or redemption of Shares in cash on any given 
day, such transactions will be effected in the same manner for all 
Authorized Participants placing trades with the Fund on that day.
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    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 ``Cash Amount'').

[[Page 83132]]

    The Fund, through the National Securities Clearing Corporation 
(``NSCC''), will make available on each Business Day, immediately prior 
to the opening of business on the Exchange (9:30 a.m. E.T.), the names 
and quantities of the instruments comprising the Creation Basket, as 
well as the estimated Cash Amount (if any), for that day. The published 
Creation Basket will apply until a new Creation Basket is announced on 
the following Business Day, and there will be no intra-day changes to 
the Creation Basket except to correct errors in the published Creation 
Basket. The Portfolio Reference Basket will be published each Business 
Day regardless of whether the Fund decides to issue or redeem Creation 
Units entirely or in part on a cash basis.
    All orders to purchase Creation Units must be placed with the 
Distributor by or through an Authorized Participant, which is either: 
(1) A ``participating party'' (i.e., a broker or other participant) in 
the Continuous Net Settlement (``CNS'') System of the NSCC, a clearing 
agency registered with the Commission and affiliated with the 
Depository Trust Company (``DTC''), or (2) a DTC participant, which in 
any case has executed a participant agreement with the Distributor and 
the Transfer Agent.
    Orders to purchase or redeem Creation Units will be accepted until 
the ``Cut-Off Time,'' generally 4:00 p.m. E.T. The date on which an 
order to purchase or redeem Creation Units is received and accepted is 
referred to as the ``Order Placement Date.'' All Creation Unit orders 
must be received by the Distributor no later than the Cut-Off Time in 
order to receive the NAV determined on the Order Placement Date. When 
the Exchange closes earlier than normal, the Fund may require orders 
for Creation Units to be placed earlier in the Business Day.
Availability of Information
    The Fund's website (https://www.stancecap.com/), which will be 
publicly available prior to the public offering of Shares, will include 
a form of the prospectus for the Fund that may be downloaded. The 
Fund's website will include on a daily basis, per Share for the Fund, 
the prior Business Day's NAV and the ``Closing Price'' or ``Bid/Ask 
Price,'' \16\ and a calculation of the premium/discount of the Closing 
Price or Bid/Ask Price against such NAV.\17\ The Adviser has 
represented that the Fund's website will also provide: (1) Any other 
information regarding premiums/discounts as may be required for other 
ETFs under Rule 6c-11 under the 1940 Act, as amended, and (2) any 
information regarding the bid/ask spread for the Fund as may be 
required for other ETFs under Rule 6c-1 under the 1940 Act, as amended. 
The Fund's website also will disclose the information required under 
Rule 8.601-E(c)(3).\18\ The website and information will be publicly 
available at no charge.
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    \16\ The records relating to Bid/Ask Prices will be retained by 
the Fund or its service providers. The ``Bid/Ask Price'' is the 
midpoint of the highest bid and lowest offer based upon the National 
Best Bid and Offer as of the time of calculation of the Fund's NAV. 
The ``National Best Bid and Offer'' is the current national best bid 
and national best offer as disseminated by the Consolidated 
Quotation System or UTP Plan Securities Information Processor. The 
``Closing Price'' of Shares is the official closing price of the 
Shares on the Exchange.
    \17\ The ``premium/discount'' refers to the premium or discount 
to the NAV at the end of a trading day and will be calculated based 
on the last Bid/Ask Price or the Closing Price on a given trading 
day.
    \18\ See note 4, supra. Rule 8.601-E (c)(3) provides that the 
website for each series of Active Proxy Portfolio Shares shall 
disclose the information regarding the Proxy Portfolio as provided 
in the exemptive relief pursuant to the 1940 Act applicable to such 
series, including the following, to the extent applicable: (i) 
Ticker symbol; (ii) CUSIP or other identifier; (iii) Description of 
holding; (iv) Quantity of each security or other asset held; and (v) 
Percentage weighting of the holding in the portfolio.
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    The Proxy Portfolio holdings for the Fund (including the identity 
and quantity of investments in the Portfolio Reference Basket) will be 
publicly available on the Fund's website before the commencement of 
trading in Shares on each Business Day. The website will also include 
information relating to the Guardrail Amount, as discussed above.
    Typical mutual fund-style annual, semi-annual and quarterly 
disclosures contained in the Fund's Commission filings will be provided 
on the Fund's website on a current basis.\19\ Thus, the Fund will 
publish the portfolio contents of its Actual Portfolio on a periodic 
basis, and no less than 60 days after the end of every fiscal quarter.
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    \19\ See note 7, supra.
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    Investors can also obtain the Fund's SAI, Shareholder Reports, Form 
N-CSR, N-PORT, and Form N-CEN. The prospectus, SAI, and Shareholder 
Reports are available free upon request from the Issuer, and those 
documents and the Form N-CSR, N-PORT, and Form N-CEN may be viewed on-
screen or downloaded from the Commission's website. The Exchange also 
notes that pursuant to the Application, the Fund must comply with 
Regulation Fair Disclosure, which prohibits selective disclosure of any 
material non-public information.
    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, ETFs, ETNs, U.S. exchange-traded common stocks, preferred 
stocks, and ADRs will be available via the Consolidated Tape 
Association (``CTA'') high-speed line or from the exchange on which 
such securities trade. Price information for futures, foreign stocks, 
and cash equivalents is available through major market data vendors. 
Intraday pricing information for all constituents of the Portfolio 
Reference Basket for the Fund that are exchange-traded, which includes 
all eligible instruments except cash and cash equivalents, will be 
available on the exchanges on which they are traded and through 
subscription services. Intraday pricing information for cash 
equivalents will be available through subscription services and/or 
pricing services.
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 the Fund.\20\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca 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 NYSE Arca Rule 8.601-E(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund will be halted.
---------------------------------------------------------------------------

    \20\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

    Specifically, Rule 8.601-E(d)(2)(D) provides that the Exchange may 
consider all relevant factors in exercising its discretion to halt 
trading in a series of Active Proxy 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 Active Proxy 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 Proxy Portfolio and/or Actual Portfolio; or (b) whether 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. If the Exchange 
becomes aware that the NAV, Proxy Portfolio, or Actual Portfolio with

[[Page 83133]]

respect to a series of Active Proxy Portfolio Shares is not 
disseminated to all market participants at the same time, the Exchange 
shall halt trading in such series until such time as the NAV, Proxy 
Portfolio, or Actual Portfolio is available to all market participants 
at the same time.
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 NYSE Arca Marketplace in all trading sessions in accordance with 
NYSE Arca Rule 7.34-E(a). As provided in NYSE Arca 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 NYSE Arca Rule 8.601-E. The Exchange has appropriate 
rules to facilitate trading in the Shares during all trading sessions.
    A minimum of 100,000 Shares for the Fund will be outstanding at the 
commencement of trading on the Exchange. In addition, pursuant to Rule 
8.601-E(d)(1)(B), the Exchange, prior to commencement of trading in the 
Shares, will obtain a representation from the Adviser that the NAV per 
Share of the Fund will be calculated daily and that the NAV, Proxy 
Portfolio, and the Actual Portfolio for the Fund will be made available 
to all market participants at the same time.
    With respect to Active Proxy Portfolio Shares, all of the Exchange 
member obligations relating to product description and prospectus 
delivery requirements will continue to apply in accordance with 
Exchange rules and federal securities laws, and the Exchange and the 
Financial Industry Regulatory Authority, Inc. (``FINRA'') will continue 
to monitor Exchange members for compliance with such requirements.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Exchange, as 
well as cross-market surveillances administered by FINRA on behalf of 
the Exchange, which are designed to detect violations of Exchange rules 
and applicable federal securities laws.\21\ The Exchange represents 
that these procedures are adequate to properly monitor Exchange trading 
of the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and federal securities laws applicable to 
trading on the Exchange.
---------------------------------------------------------------------------

    \21\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and 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 securities and underlying exchange-traded instruments from such 
markets and other entities. In addition, the Exchange may obtain 
information regarding trading in such securities and 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.\22\
---------------------------------------------------------------------------

    \22\ For a list of the current members of ISG, see 
www.isgportal.org.
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    The Adviser will make available daily to FINRA and the Exchange the 
Actual Portfolio of the Fund, upon request, in order to facilitate the 
performance of the surveillances referred to above.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    Commentary .03 to NYSE Arca Rule 8.601-E provides that the Exchange 
will implement and maintain written surveillance procedures for Active 
Proxy Portfolio Shares. As part of these surveillance procedures, the 
Investment Company's investment adviser will, upon request by the 
Exchange or FINRA, on behalf of the Exchange, make available to the 
Exchange or FINRA the daily Actual Portfolio holdings of each series of 
Active Proxy Portfolio Shares. The Exchange believes that the ability 
to access the information on an as needed basis will provide it with 
sufficient information to perform the necessary regulatory functions 
associated with listing and trading series of Active Proxy Portfolio 
Shares on the Exchange, including the ability to monitor compliance 
with the initial and continued listing requirements as well as the 
ability to surveil for manipulation of Active Proxy Portfolio Shares.
    The Exchange will utilize its existing procedures to monitor issuer 
compliance with the requirements of Rule 8.601-E. For example, the 
Exchange will continue to use intraday alerts that will notify Exchange 
personnel of trading activity throughout the day that may indicate that 
unusual conditions or circumstances are present that could be 
detrimental to the maintenance of a fair and orderly market. The 
Exchange will require from the issuer of a series of Active Proxy 
Portfolio Shares, upon initial listing and periodically thereafter, a 
representation that it is in compliance with Rule 8.601-E. The Exchange 
notes that Commentary .01 to Rule 8.601-E requires an issuer of Active 
Proxy Portfolio Shares to notify the Exchange of any failure to comply 
with the continued listing requirements of Rule 8.601-E. In addition, 
the Exchange will require issuers to represent that they will notify 
the Exchange of any failure to comply with the terms of applicable 
exemptive and no-action relief. As part of its surveillance procedures, 
the Exchange will rely on the foregoing procedures to become aware of 
any non-compliance with the requirements of Rule 8.601-E.
    With respect to the Fund, all statements and representations made 
in this filing regarding (a) the description of the portfolio or 
reference asset, (b) limitations on portfolio holdings or reference 
assets, or (c) the applicability of Exchange listing rules specified in 
this rule filing shall constitute continued listing requirements for 
listing the Shares on the Exchange. The Exchange will obtain a 
representation from the Adviser, prior to commencement of trading in 
the Shares of the Fund, that it will advise the Exchange of any failure 
by the Fund to comply with the continued listing requirements, and, 
pursuant to its obligations under Section 19(g)(1) of the Act, the 
Exchange will monitor for compliance with the continued listing 
requirements. If the Fund is not in compliance with the applicable 
listing requirements, the Exchange will commence delisting procedures 
under NYSE Arca Rule 5.5-E(m).

[[Page 83134]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\23\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\24\ 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.\25\
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(5).
    \25\ The Exchange represents that, for initial and continued 
listing, the Fund will be in compliance with Rule 10A-3 under the 
Act, as provided by NYSE Arca Rule 5.3-E.
---------------------------------------------------------------------------

    With respect to the proposed listing and trading of Shares of the 
Fund, 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 NYSE Arca Rule 8.601-E.
    The Fund's holdings will conform to the permissible investments as 
set forth in the Application, and the holdings will be consistent with 
all requirements in the Application.\26\
---------------------------------------------------------------------------

    \26\ See note 12, supra.
---------------------------------------------------------------------------

    The 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 or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and 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 in 
the Shares and underlying exchange-traded instruments from such markets 
and other entities. In addition, the Exchange may obtain information 
regarding trading in the Shares and 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. Any foreign common stocks held by the Fund will be 
traded on an exchange that is a member of the ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement.
    The daily dissemination of the identity and quantity of Proxy 
Portfolio component investments, together with the right of Authorized 
Participants to create and redeem each day at the NAV, will be 
sufficient for market participants to value and trade Shares in a 
manner that will not lead to significant deviations between the Shares' 
Bid/Ask Price and NAV.
    The Exchange believes that the Fund and Active Proxy Portfolio 
Shares generally, will provide investors with a greater choice of 
active portfolio managers and active strategies through which they can 
manage their assets in an ETF structure. This greater choice of active 
asset management is expected to be similar to the diversity of active 
managers and strategies available to mutual fund investors. Unlike 
mutual fund investors, investors in Active Proxy Portfolio Shares would 
also accrue the benefits derived from the ETF structure, such as lower 
fund costs, tax efficiencies, intraday liquidity, and pricing that 
reflects current market conditions rather than end-of-day pricing.
    The Adviser represents that, unlike ETFs that publish their 
portfolios on a daily basis, the Fund, as Active Proxy Portfolio 
Shares, will allow for efficient trading of Shares through an effective 
Fund portfolio transparency substitute, Proxy Portfolio transparency. 
The Adviser believes that this approach will provide an important 
benefit to investors by protecting the Fund from the potential for 
frontrunning of portfolio transactions and the potential for free-
riding on the Fund's portfolio strategies, each of which could 
adversely impact the performance of the Fund.
    The Exchange believes that Active Proxy Portfolio Shares will 
provide the platform for many more asset managers to launch ETFs, 
increasing the investment choices for consumers of actively managed 
funds, which should lead to a greater competitive landscape that can 
help to reduce the overall costs of active investment management for 
retail investors. Unlike mutual funds, Active Proxy Portfolio Shares 
would be able to use the efficient share settlement system in place for 
ETFs today, translating into a lower cost of maintaining shareholder 
accounts and processing transactions.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the Adviser that 
the NAV per Share of the Fund will be calculated daily and that the 
NAV, Portfolio Reference Basket, and the Actual Portfolio for the Fund 
will be made available to all market participants at the same time. 
Investors can obtain the Fund's SAI, shareholder reports, and its Form 
N-CSR, Form N-PORT, and Form N-CEN. The Fund's SAI and shareholder 
reports will be available free upon request from the Fund, and those 
documents and the Form N-CSR, Form N-PORT, and Form N-CEN may be viewed 
on-screen or downloaded from the Commission's website. In addition, 
with respect to the Fund, a large amount of information will be 
publicly available regarding the Fund and the Shares, thereby promoting 
market transparency. Quotation and last sale information for the 
Shares, ETFs, ETNs, U.S. exchange-traded common stocks, preferred 
stocks, and ADRs will be available via the CTA high-speed line or from 
the exchange on which such securities trade. Price information for 
futures, foreign stocks, and cash equivalents is available through 
major market data vendors. The website for the Fund will include a form 
of the prospectus that may be downloaded, and additional data relating 
to NAV and other applicable quantitative information, updated on a 
daily basis. Trading in Shares of the Fund will be halted if the 
circuit breaker parameters in NYSE Arca Rule 7.12-E have been reached 
or because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Shares inadvisable. Trading in the Shares 
will be subject to NYSE Arca Rule 8.601-E(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund will be halted. In 
addition, as noted above, investors will have ready access to the 
Portfolio Reference Basket and quotation and last sale information for 
the Shares. The Proxy Portfolio holdings for the Fund (including the 
identity and quantity of investments in the Portfolio Reference Basket) 
will be publicly available on the Fund's website before the 
commencement of trading in Shares on each Business Day. The Shares will 
conform to the initial and continued listing criteria under Rule 8.601-
E.\27\
---------------------------------------------------------------------------

    \27\ See note 4, supra.
---------------------------------------------------------------------------

    The Fund's holdings will conform to the permissible investments as 
set forth in the Application and the holdings will be consistent with 
all requirements in the Application.\28\ Any foreign common stocks held 
by the Fund will be traded

[[Page 83135]]

on an exchange that is a member of the ISG or with which the Exchange 
has in place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    \28\ See note 12, supra.
---------------------------------------------------------------------------

    The components of the Fund's Actual Portfolio will (a) be listed on 
an exchange and the primary trading session of such exchange will trade 
synchronously with the Exchange's Core Trading Session, as defined in 
Rule 7.34-E(a); (b) with respect to exchange-traded futures, be listed 
on a U.S. futures exchange; or (c) consist of cash and cash 
equivalents.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. The Exchange will obtain a 
representation from the Adviser, prior to commencement of trading in 
the Shares of the Fund, that it will advise the Exchange of any failure 
by the Fund to comply with the continued listing requirements, and, 
pursuant to its obligations under Section 19(g)(1) of the Act, the 
Exchange will monitor for compliance with the continued listing 
requirements. If the Fund is not in compliance with the applicable 
listing requirements, the Exchange will commence delisting procedures 
under NYSE Arca Rule 5.5-E(m).
    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 quotation and last sale information for the 
Shares.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes the 
proposed rule change would permit listing and trading of another type 
of actively-managed ETF that has characteristics different from 
existing actively-managed and index ETFs and would introduce additional 
competition among various ETF products to the benefit of investors.

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

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

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2020-104 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-2020-104. 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-2020-104 and should be 
submitted on or before January 11, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28013 Filed 12-18-20; 8:45 am]
BILLING CODE 8011-01-P