Document ID: SEC-2020-1051-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2020-07-06T04:00Z

[Federal Register Volume 85, Number 129 (Monday, July 6, 2020)]
[Notices]
[Pages 40358-40369]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-14489]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89191; File No. SR-NYSEArca-2019-92]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 3 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 3, to List and Trade 
Four Series of Active Proxy Portfolio Shares Issued by T. Rowe Price 
Exchange-Traded Funds, Inc. Under NYSE Arca Rule 8.601-E

June 30, 2020

I. Introduction

    On December 23, 2019, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares (``Shares'') of the 
following under NYSE Arca Rule 8.601-E (Active Proxy Portfolio Shares): 
T. Rowe Price Blue Chip Growth ETF, T. Rowe Price Dividend Growth ETF, 
T. Rowe Price Growth Stock ETF, and T. Rowe Price Equity Income ETF 
(``Funds'').\3\ The proposed rule change was published for comment in 
the Federal Register on January 3, 2020.\4\
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange originally proposed to adopt NYSE Arca Rule 
8.601-E to permit the Exchange to list and trade Managed Portfolio 
Securities, and to list and trade Shares of the Funds under proposed 
Exchange Rule 8.601-E (Managed Portfolio Securities). In Amendment 
No. 1, the Exchange removed the proposal to adopt proposed NYSE Arca 
Rule 8.601-E (Managed Portfolio Securities) and revised the proposal 
to seek to list and trade Shares of the Funds under proposed NYSE 
Arca Rule 8.601-E (Active Proxy Portfolio Shares). See Amendment No. 
1, infra note 7. See also Amendment No. 6 to SR-NYSEArca-2019-95 
(proposing to adopt NYSE Arca Rule 8.601-E to list and trade Active 
Proxy Portfolio Shares, available on the Commission's website at 
https://www.sec.gov/comments/sr-nysearca-2019-95/srnysearca201995-7329866-218548.pdf. The Commission recently approved the Exchange's 
proposed rule change to adopt NYSE Arca Rule 8.601-E to permit the 
listing and trading of Active Proxy Portfolio Shares. See Securities 
Exchange Act Release No. 89185 (June 29, 2020) (SR-NYSEArca-2019-95) 
(``Active Proxy Portfolio Shares Order'').
    \4\ See Securities Exchange Act Release No. 87865 (Dec. 30, 
2019), 85 FR 380.
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    On February 13, 2020, pursuant to Section 19(b)(2) of the Act,\5\ 
the Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\6\ On March 31, 2020, the Exchange filed Amendment No. 1 to the 
proposed rule change, which replaced and superseded the proposed rule 
change as originally filed.\7\ On April 1, 2020, the Commission 
published Amendment No. 1 for notice and comment and instituted 
proceedings under Section 19(b)(2)(B) of the Act \8\ to determine 
whether to approve or disapprove the proposed rule change.\9\ On May 
2020, 2020, the Exchange filed Amendment No. 2 to the

[[Page 40359]]

proposed rule change, which replaced and superseded the proposed rule 
change, as amended by Amendment No. 1.\10\ On June 19, 2020, the 
Exchange filed Amendment No. 3 to the proposed rule change, which 
replaced and superseded the proposed rule change, as amended by 
Amendment No. 2.\11\ The Commission has received no comments on the 
proposed rule change. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as modified by Amendment 
No. 3, from interested persons and is approving the proposed rule 
change, as modified by Amendment No. 3, on an accelerated basis.
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    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 88197, 85 FR 9887 
(Feb. 20, 2020). The Commission designated April 2, 2020, as the 
date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \7\ Amendment No. 1 is available on the Commission's website at 
https://www.sec.gov/comments/sr-nysearca-2019-92/srnysearca201992-7015540-214975.pdf.
    \8\ 15 U.S.C. 78s(b)(2)(B).
    \9\ See Securities Exchange Act Release No. 88535, 85 FR 19554 
(April 7, 2020).
    \10\ Amendment No. 2 is available on the Commission's website at 
https://www.sec.gov/comments/sr-nysearca-2019-92/srnysearca201992-7220751-216933.pdf.
    \11\ Amendment No. 3 is available on the Commission's website at 
https://www.sec.gov/comments/sr-nysearca-2019-92/srnysearca201992-7329868-218550.pdf.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change, as Modified by Amendment 
No. 3

    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange has proposed to add new 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.\12\ Proposed Commentary .01 to Rule 
8.601-E would require 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 the T. Rowe Price Blue Chip Growth ETF; T. Rowe Price 
Dividend Growth ETF; T. Rowe Price Growth Stock ETF; and T. Rowe Price 
Equity Income ETF (each a ``Fund'' and, collectively, the ``Funds'') 
under proposed Rule 8.601-E.
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    \12\ See Amendment 6 to SR-NYSEArca-2019-95, filed on June 19, 
2020. See also, Securities Exchange Act Release No. 87866 (December 
30, 2019), 85 FR 357 (January 3, 2020) (SR-NYSEArca-2019-95). 
Proposed Rule 8.601-E(c)(1) provides that ``[t]he term ``Active 
Proxy Portfolio Share'' means a security that (a) is issued by 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 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.'' Proposed 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.'' Proposed 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 \13\ and for which a ``Disclosed Portfolio'' is 
required to be disseminated at least once daily,\14\ 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 1940 
Act.\15\ The composition of 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 and/or cash with a 
value equal to the next-determined net asset value (``NAV'').
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    \13\ 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. See 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).
    \14\ 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.
    \15\ 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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    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.
    The Exchange, after consulting with various Lead Market Makers 
(``LMMs'') that trade exchange-traded funds (``ETFs'') on the 
Exchange,\16\ believes that market makers will be able to make 
efficient and liquid markets priced near

[[Page 40360]]

the ETF's intraday value, and market makers employ market making 
techniques such as ``statistical arbitrage,'' including correlation 
hedging, beta hedging, and dispersion trading, which is currently used 
throughout the financial services industry, to make efficient markets 
in exchange-traded products.\17\ For Active Proxy Portfolio Shares, 
market makers may use the knowledge of a fund's means of achieving its 
investment objective, as described in the applicable fund registration 
statement, as well as a fund's disclosed Proxy Portfolio, to construct 
a hedging proxy for a fund to manage a market maker's quoting risk in 
connection with trading fund shares. Market makers can then conduct 
statistical arbitrage between their hedging proxy and shares of a fund, 
buying and selling one against the other over the course of the trading 
day. This ability should permit market makers to make efficient markets 
in an issue of Active Proxy Portfolio Shares without precise knowledge 
of a fund's underlying portfolio. This is similar to certain other 
existing exchange-traded products (for example, ETFs that invest in 
foreign securities that do not trade during U.S. trading hours), in 
which spreads may be generally wider in the early days of trading and 
then narrow as market makers gain more confidence in their real-time 
hedges.
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    \16\ The term ``Lead Market Maker'' is defined in Rule 1.1(w) to 
mean a registered Market Maker that is the exclusive Designated 
Market Maker in listings for which the Exchange is the primary 
market.
    \17\ Statistical arbitrage enables a trader to construct an 
accurate proxy for another instrument, allowing it to hedge the 
other instrument or buy or sell the instrument when it is cheap or 
expensive in relation to the proxy. Statistical analysis permits 
traders to discover correlations based purely on trading data 
without regard to other fundamental drivers. These correlations are 
a function of differentials, over time, between one instrument or 
group of instruments and one or more other instruments. Once the 
nature of these price deviations have been quantified, a universe of 
securities is searched in an effort to, in the case of a hedging 
strategy, minimize the differential. Once a suitable hedging proxy 
has been identified, a trader can minimize portfolio risk by 
executing the hedging basket. The trader then can monitor the 
performance of this hedge throughout the trade period making 
corrections where warranted. In the case of correlation hedging, the 
analysis seeks to find a proxy that matches the pricing behavior of 
a fund. In the case of beta hedging, the analysis seeks to determine 
the relationship between the price movement over time of a fund and 
that of another stock. Dispersion trading is a hedged strategy 
designed to take advantage of relative value differences in implied 
volatilities between an index and the component stocks of that 
index. Such trading strategies will allow market participants to 
engage in arbitrage between series of Active Proxy Portfolio Shares 
and other instruments, both through the creation and redemption 
process and strictly through arbitrage without such processes.
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    The Shares of each Fund will be issued by T. Rowe Price Exchange-
Traded Funds, Inc. (``Issuer''), a corporation organized under the laws 
of the State of Maryland, which may be comprised of multiple separate 
series, and registered with the Commission as an open-end management 
investment company.\18\ The investment adviser for the Funds will be T. 
Rowe Price Associates, Inc. (``Adviser''). State Street Bank and Trust 
Co. will serve as the Funds' transfer agent, custodian, and will 
conduct certain administrative functions (the ``Transfer Agent'' or 
``Custodian''). T. Rowe Price Investment Services, Inc., a registered 
broker dealer and an affiliate of the Adviser, will serve as the 
distributor (``Distributor'') of the Shares.
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    \18\ The Issuer is registered under the 1940 Act. On December 
11, 2019, the Issuer filed an initial registration statement on Form 
N-1A under the Securities Act of 1933 Act (``1933 Act'') (15 U.S.C. 
77a) and under the 1940 Act relating to the Funds (File Nos. 333-
235450 and 811-23494) (the ``Registration Statement''). The Issuer 
filed a seventh amended 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. 812-14214), dated October 16, 
2019 (``Application''). On December 10, 2019, the Commission issued 
an order (``Exemptive Order'') under the 1940 Act granting the 
exemptions requested in the Application (Investment Company Act 
Release No. 33713, December 10, 2019). Investments made by the Funds 
will comply with the conditions set forth in the Application and the 
Exemptive Order. The description of the operation of the Funds 
herein is based, in part, on the Registration Statement and the 
Application.
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    Proposed Commentary.04 to 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.\19\ 
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. Proposed Commentary .04 is similar to Commentary 
.03(a)(i) and (iii) to NYSE Arca Rule 5.2-E(j)(3); however, proposed 
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.\20\ Proposed Commentary 
.04 is also similar to Commentary .06 to Rule 8.600-E related to 
Managed Fund Shares, except that proposed 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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    \19\ The text of proposed Commentary .04 to Rule 8.601-E is 
contained in Amendment 6 to SR-NYSEArca-2019-95. See note 4, supra.
    \20\ 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.
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    In addition, proposed 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.\21\ 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

[[Page 40361]]

changes to such Investment Company Actual Portfolio or Proxy Portfolio.
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    \21\ The text of proposed Commentary .05 to NYSE Arca Rule 
8.601-E is included in Amendment 6 to SR-NYSEArca-2019-95. See note 
4, supra.
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    The Adviser is not registered as a broker-dealer but is affiliated 
with a broker-dealer and has implemented and will maintain a ``fire 
wall'' with respect to such broker-dealer affiliate regarding access to 
information concerning the composition and/or changes to a Fund's 
Actual Portfolio and/or Proxy Portfolio.
    In the event (a) the Adviser becomes registered as a broker-dealer 
or newly affiliated with a broker-dealer, or (b) any new adviser or any 
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 a 
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 a Fund's Actual Portfolio and/or Proxy 
Portfolio or changes thereto. Any person related to the Adviser or a 
Fund who makes decisions pertaining to a Fund's Actual Portfolio or 
Proxy Portfolio or has access to non-public information regarding a 
Fund's Actual Portfolio and/or the Proxy Portfolio or changes thereto 
is subject to procedures reasonably designed to prevent the use and 
dissemination of material non-public information regarding a Fund's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto.
    In addition, any person or entity, including any service provider 
for a Fund, who has access to non-public information regarding a 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 a 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 a Fund's Actual Portfolio and/or Proxy 
Portfolio.
Description of the Funds
    According to the Application, for each Fund, the Adviser will 
identify its Proxy Portfolio, which could be a broad-based securities 
index (e.g., the S&P 500) or a Fund's recently disclosed portfolio 
holdings. The Proxy Portfolio will be determined such that at least 80% 
of its total assets will overlap with the portfolio weightings of a 
Fund. Although the Adviser may change a Fund's Proxy Portfolio at any 
time, the Adviser currently does not expect to make such changes more 
frequently than quarterly (for example, in connection with the release 
of a Fund's portfolio holdings). The Adviser will publish a new Proxy 
Portfolio for a Fund only before the commencement of trading of such 
Fund's Shares on that ``Business Day,'' \22\ and the Adviser will not 
make intra-day changes to the Proxy Portfolio except to correct errors 
in the published Proxy Portfolio. For the reasons described herein, the 
Adviser believes that each Fund's Proxy Portfolio will be a high-
quality hedging vehicle, the value of which will provide arbitrageurs 
with a high quality pricing signal.
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    \22\ ``Business Day'' is defined to mean any day that the 
Exchange is open, including any day when a 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 ``Portfolio Overlap'' will be published on the Funds' 
website. The Portfolio Overlap will be the percentage weight overlap 
between the prior Business Day's Proxy Portfolio's holdings compared to 
the holdings of a Fund that formed the basis for that Fund's 
calculation of NAV at the end of the prior Business Day.\23\ In 
addition, each Fund will disclose the ``Daily Deviation'' \24\ between 
the Proxy Portfolio and a Fund daily, as well as ``Empirical 
Percentiles,'' \25\ which are quantitative summaries of the Daily 
Deviation data for the last year. Each Fund will also disclose its 
``Tracking Error.'' \26\
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    \23\ According to the Registration Statement, ``Portfolio 
Overlap'' indicates how much of a Fund's portfolio securities 
overlap with a Fund's Proxy Portfolio as of the end of the prior 
business day.
    \24\ According to the Registration Statement, the Daily 
Deviation shows the difference in performance between the NAV of a 
Fund and the NAV of the Proxy Portfolio.
    \25\ According to the Registration Statement, the Empirical 
Percentiles shows frequency and magnitude of performance differences 
between a Fund and the Proxy Portfolio over time.
    \26\ According to the Registration Statement, ``Tracking Error'' 
is the deviation over the past three months of the daily proxy 
spread (i.e., the difference, in percentage terms, between the Proxy 
Portfolio's per share NAV and that of the fund at the end of the 
trading day).
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    According to the Application and Exemptive Order, the Adviser 
expects that the Proxy Portfolio, the Portfolio Overlap, the Daily 
Deviations and related information will provide a set of high-quality 
proxy information that arbitrageurs will use to construct a hedging 
basket. The Portfolio Overlap, Daily Deviation, and Empirical 
Percentile data, which will be disclosed daily on the Funds' website, 
will help arbitrageurs by describing the market behavior of the Proxy 
Portfolio and how it relates to a Fund's portfolio holdings, and by 
providing historical valuation data and analysis.
    The Proxy Portfolio will not include any asset that is ineligible 
to be in the Actual Portfolio of the applicable Fund.
T. Rowe Price Blue Chip Growth ETF
    The Fund's holdings will conform to the permissible investments as 
set forth in the Application and Exemptive Order and the holdings will 
be consistent with all requirements in the Application and Exemptive 
Order.\27\ 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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    \27\ According to the Application and Exemptive Order, each Fund 
will only invest in exchange-traded common stocks, common stocks 
listed on a foreign exchange that trade on such exchange 
synchronously with the Shares (``foreign common stocks'') in the 
Exchange's Core Trading Session (normally 9:30 a.m. to 4:00 p.m. 
Eastern time (``E.T.'')), ETFs traded on a U.S. exchange, exchange-
traded notes (``ETNs'') traded on a U.S. exchange, 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 contracts (collectively, ``exchange-traded 
instruments'') that trade synchronously with a Fund's Shares, as 
well as cash and cash equivalents. For purposes of this filing, cash 
equivalents are short-term U.S. Treasury securities, government 
money market funds, and repurchase agreements. The Funds will not 
hold short positions or invest in derivatives other than U.S. 
exchange-traded futures, will not borrow for investment purposes, 
and will not purchase any securities that are illiquid investments 
at the time of purchase.
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    The investment objective of the T. Rowe Price Blue Chip Growth ETF 
will be to seek to provide long-term capital growth. Income will be a 
secondary objective.
    The Fund will normally invest at least 80% of its net assets in the 
common stocks of large and medium-sized blue-chip growth companies that 
are listed in the United States. These are companies that, in the 
Adviser's view, are well established in their industries and have the 
potential for above-average earnings growth. The Fund will primarily 
invest in U.S. exchange-traded securities, cash, and cash equivalents.
T. Rowe Price Dividend Growth ETF
    The Fund's holdings will conform to the permissible investments as 
set forth

[[Page 40362]]

in the Application and Exemptive Order and the holdings will be 
consistent with all requirements in the Application and Exemptive 
Order.\28\ 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.
---------------------------------------------------------------------------

    \28\ See note 27, supra.
---------------------------------------------------------------------------

    The investment objective of the T. Rowe Price Dividend Growth ETF 
will be to seek dividend income and long-term capital growth.
    The Fund normally will invest at least 65% of the Fund's total 
assets in stocks listed in the United States, with an emphasis on 
stocks that have a strong track record of paying dividends or that are 
expected to increase their dividends over time. The Fund will primarily 
invest in U.S. exchange-traded securities, cash, and cash equivalents.
T. Rowe Price Growth Stock ETF
    The Fund's holdings will conform to the permissible investments as 
set forth in the Application and Exemptive Order and the holdings will 
be consistent with all requirements in the Application and Exemptive 
Order.\29\ 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.
---------------------------------------------------------------------------

    \29\ See note 27, supra.
---------------------------------------------------------------------------

    The investment objective of the T. Rowe Price Growth Stock ETF will 
be to seek long-term capital growth.
    The Fund will normally invest at least 80% of its net assets in the 
common stocks of a diversified group of growth companies. While it may 
invest in companies of any market capitalization, the Fund generally 
seeks investments in stocks of large-capitalization companies with one 
or more of the following characteristics: strong cash flow and an 
above-average rate of earnings growth; the ability to sustain earnings 
momentum during economic downturns; and occupation of a lucrative niche 
in the economy and the ability to expand even during times of slow 
economic growth. The Fund will primarily invest in U.S. exchange-traded 
securities, cash, and cash equivalents.
T. Rowe Price Equity Income ETF
    The Fund's holdings will conform to the permissible investments as 
set forth in the Application and Exemptive Order and the holdings will 
be consistent with all requirements in the Application and Exemptive 
Order. \30\ 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.
---------------------------------------------------------------------------

    \30\ See note 27, supra.
---------------------------------------------------------------------------

    The investment objective of the T. Rowe Price Equity Income ETF 
will be to seek a high level of dividend income and long-term capital 
growth.
    The Fund will normally invest at least 80% of its net assets in 
common stocks listed in the United States, with an emphasis on large-
capitalization stocks that have a strong track record of paying 
dividends or that are believed to be undervalued. The Fund typically 
will employ a ``value'' approach in selecting investments. The Fund 
generally will invest in U.S. exchange-traded securities, cash, and 
cash equivalents.
Investment Restrictions
    The Shares of each Fund will conform to the initial and continued 
listing criteria under proposed Rule 8.601-E. Each Fund's holdings will 
be limited to and consistent with permissible holdings as described in 
the Application and all requirements in the Application and Exemptive 
Order.\31\
---------------------------------------------------------------------------

    \31\ See note 27, supra.
---------------------------------------------------------------------------

    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, a Fund's investments will not be used to seek 
performance that is the multiple or inverse multiple (e.g., 2X or -3X) 
of a Fund's primary broad-based securities benchmark index (as defined 
in Form N-1A).
Purchases and Redemptions
    The Issuer will offer, issue and sell Shares of each Fund to 
investors only in specified minimum size ``Creation Units'' through the 
Distributor on a continuous basis at the NAV per Share next determined 
after an order in proper form is received. The NAV of each Fund is 
expected to be determined as of 4:00 p.m. E.T. on each Business Day. 
The Issuer will sell and redeem Creation Units of each Fund only on a 
Business Day. A Creation Unit will consist of at least 5,000 Shares.
    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 under the circumstances specified 
below, purchasers will be required to purchase Creation Units by making 
an in-kind deposit of specified instruments (``Deposit Instruments''), 
and shareholders redeeming their Shares will receive an in-kind 
transfer of specified instruments (``Redemption Instruments''). The 
names and quantities of the instruments that constitute the Deposit 
Instruments and the Redemption Instruments for a Fund (collectively, 
the ``Creation Basket'') will be the same as a Fund's designated Proxy 
Portfolio, except to the extent that a Fund requires purchases and 
redemptions to be made entirely or in part on a cash basis, as 
described below.
    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'').
    Each Fund will adopt and implement policies and procedures 
regarding the composition of its Creation Baskets. The policies and 
procedures will set forth detailed parameters for the construction and 
acceptance of baskets that are in the best interests of a Fund, 
including the process for any revisions to or deviations from, those 
parameters.
    A Fund that normally issues and redeems Creation Units in-kind may 
require purchases and redemptions to be made entirely or in part on a 
cash basis. In such an instance, a Fund will announce, before the open 
of trading in the Core Trading Session on a given Business Day, that 
all purchases, all redemptions or all purchases and redemptions on that 
day will be made wholly or partly in cash. A Fund may also determine, 
upon receiving a purchase or redemption order from an Authorized 
Participant (as defined below), to have the purchase or redemption, as 
applicable, be made entirely or in part in cash.\32\
---------------------------------------------------------------------------

    \32\ The Adviser represents that, to the extent that a Fund 
allows creations and redemptions to be conducted in cash, such 
transactions will be effected in the same manner for all Authorized 
Participants transacting in cash.
---------------------------------------------------------------------------

    Each Business Day, before the open of trading on the Exchange, a 
Fund will cause to be published through the National Securities 
Clearing Corporation (``NSCC'') 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 
Proxy Portfolio will be published each Business Day regardless of 
whether a Fund decides to issue or

[[Page 40363]]

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 a member 
or participant of a clearing agency registered with the Commission, 
which has a written agreement with a Fund or one of its service 
providers that allows the Authorized Participant to place orders for 
the purchase and redemption of Creation Units. Except as otherwise 
permitted, no promoter, principal underwriter (e.g., the Distributor) 
or affiliated person of a Fund, or any affiliated person of such 
person, will be an Authorized Participant in Shares.
    Validly submitted orders to purchase or redeem Creation Units on 
each Business Day will be accepted until the end of the Core Trading 
Session (the ``Order Cut-Off Time''), generally 4:00 p.m. E.T., on the 
Business Day that the order is placed (the ``Transmittal Date''). All 
Creation Unit orders must be received by the Distributor no later than 
the Order Cut-Off Time in order to receive the NAV determined on the 
Transmittal Date. When the Exchange closes earlier than normal, a Fund 
may require orders for Creation Units to be placed earlier in the 
Business Day.
Availability of Information
    The Funds' website (www.troweprice.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for each Fund that may be downloaded. The Funds' 
website will include on a daily basis, per Share for each Fund, the 
prior Business Day's NAV and the ``Closing Price'' or ``Bid/Ask 
Price,'' \33\ and a calculation of the premium/discount of the Closing 
Price or Bid/Ask Price against such NAV \34\. The Adviser has 
represented that the Funds' 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 a Fund as may be required 
for other ETFs under Rule 6c-11 under the 1940 Act, as amended. The 
website and information will be publicly available at no charge. The 
Funds' website also will disclose the information required under 
proposed Rule 8.601-E(c)(3).\35\
---------------------------------------------------------------------------

    \33\ The records relating to Bid/Ask Prices will be retained by 
the Funds or their 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.
    \34\ The ``premium/discount'' refers to the premium or discount 
to 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.
    \35\ See note 12, supra. Proposed 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 Investment Company 
Act of 1940 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.
---------------------------------------------------------------------------

    The Proxy Portfolio holdings (including the identity and quantity 
of investments in the Proxy Portfolio) will be publicly available on 
the Funds' website before the commencement of trading in Shares on each 
Business Day.
    The website also will include information relating to Portfolio 
Overlap, Daily Deviation, Empirical Percentile and Tracking Error for 
each Fund, as discussed above.
    The Exchange notes that the Application provides that the Issuer 
will comply with Regulation Fair Disclosure, which prohibits selective 
disclosure of any material non-public information.
    Typical mutual fund-style annual, semi-annual and quarterly 
disclosures contained in the Funds' Commission filings will be provided 
on the Funds' website on a current basis. \36\ Thus, each Fund will 
publish the portfolio contents of its Actual Portfolio on a periodic 
basis within at least 60 days following the end of every fiscal 
quarter.
---------------------------------------------------------------------------

    \36\ See note 15, supra.
---------------------------------------------------------------------------

    Investors interested in a particular Fund can also obtain its 
prospectus, statement of additional information (``SAI''), shareholder 
reports, Form N-CSR, Form N-PORT and Form N-CEN. Investors may access 
complete portfolio schedules for the Funds on Form N-CSR and Form N-
PORT. The prospectus, SAI and shareholder reports will be available 
free upon request from the Funds, 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 at http://www.sec.gov.
    Information regarding the market price of Shares and trading volume 
in Shares, will be continually available on a real-time basis 
throughout the day on brokers' computer screens and other electronic 
services. The previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers.
    Updated price information for U.S. exchange-listed equity 
securities is available through major market data vendors or securities 
exchanges trading such securities. 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 Proxy 
Portfolio 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 a Fund.\37\ Trading in Shares of a 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 a Fund will be halted.
---------------------------------------------------------------------------

    \37\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

    Specifically, proposed 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.
    In addition, if the Exchange becomes aware that the NAV, Proxy 
Portfolio or Actual Portfolio with respect to a series

[[Page 40364]]

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 proposed 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 each Fund will be outstanding at 
the commencement of trading on the Exchange. In addition, pursuant to 
proposed Rule 8.601-E(d)(1)(B), the Exchange, prior to commencement of 
trading in the Shares, will obtain a representation from the issuer of 
the Shares that the NAV per Share will be calculated daily and that the 
NAV, Proxy Portfolio and the Actual Portfolio for each Fund will be 
made available to all market participants at the same time.
    With respect to the Funds, 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.\38\ 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.
---------------------------------------------------------------------------

    \38\ 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.
    FINRA, on behalf of the Exchange, or 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 Intermarket Surveillance Group (``ISG''), and FINRA, 
on behalf of the Exchange, or the Exchange or both may obtain trading 
information regarding trading such securities and exchange-traded 
instruments from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in such securities 
and 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.\39\
---------------------------------------------------------------------------

    \39\ For a list of the current members of ISG, see 
www.isgportal.org.
---------------------------------------------------------------------------

    The Adviser will make available daily to FINRA and the Exchange the 
Actual Portfolio of the Funds, 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.
    Proposed 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 a 
Fund's compliance with the requirements of proposed 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 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 proposed Commentary .01 to Rule 8.601-E would require 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 proposed Rule 8.601-E.
    With respect to the Funds, 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 a Fund, 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 Act, the 
Exchange will monitor 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 NYSE Arca Rule 5.5-E(m).

[[Page 40365]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\40\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\41\ 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.\42\
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78f(b).
    \41\ 15 U.S.C. 78f(b)(5).
    \42\ The Exchange represents that, for initial and continued 
listing, the Funds 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 
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 proposed NYSE Arca Rule 
8.601-E. One-hundred percent of the value of a Fund's Actual Portfolio 
(except for cash, cash equivalents and Treasury securities) at the time 
of purchase will be listed on U.S. or foreign securities exchanges (or, 
in the limited case of futures contracts, U.S. futures exchanges). The 
listing and trading of such securities is subject to rules of the 
exchanges on which they are listed and traded, as approved by the 
Commission.
    With respect to the proposed listing and trading of Shares of a 
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. Each 
Fund's holdings will conform to the permissible investments as set 
forth in the Application and Exemptive Order and the holdings will be 
consistent with all requirements in the Application and Exemptive 
Order.\43\ 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 exchange-traded instruments from 
such markets and other entities. In addition, the Exchange may obtain 
information regarding trading in such securities and 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 a 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.
---------------------------------------------------------------------------

    \43\ See note 27, supra
---------------------------------------------------------------------------

    The Exchange, after consulting with various LMMs that trade ETFs on 
the Exchange, believes that market makers will be able to make 
efficient and liquid markets priced near the ETF's intraday value, and 
market makers employ market making techniques such as ``statistical 
arbitrage,'' including correlation hedging, beta hedging, and 
dispersion trading, which is currently used throughout the financial 
services industry, to make efficient markets in exchange-traded 
products.\44\ For Active Proxy Portfolio Shares, market makers may use 
the knowledge of a fund's means of achieving its investment objective, 
as described in the applicable fund registration statement, as well as 
a fund's disclosed Proxy Portfolio, to construct a hedging proxy for a 
fund to manage a market maker's quoting risk in connection with trading 
fund shares. Market makers can then conduct statistical arbitrage 
between their hedging proxy and shares of a fund, buying and selling 
one against the other over the course of the trading day. This ability 
should permit market makers to make efficient markets in an issue of 
Active Proxy Portfolio Shares without precise knowledge of a fund's 
underlying portfolio. This is similar to certain other existing 
exchange-traded products (for example, ETFs that invest in foreign 
securities that do not trade during U.S. trading hours), in which 
spreads may be generally wider in the early days of trading and then 
narrow as market makers gain more confidence in their real-time hedges.
---------------------------------------------------------------------------

    \44\ See note 17, supra.
---------------------------------------------------------------------------

    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 Bid/Ask 
Price and NAV of shares of a series of Active Proxy Portfolio Shares.
    The pricing efficiency with respect to trading a series of Active 
Proxy Portfolio Shares will generally rest on the ability of market 
participants to arbitrage between the shares and a fund's portfolio, in 
addition to the ability of market participants to assess a fund's 
underlying value accurately enough throughout the trading day in order 
to hedge positions in shares effectively. Professional traders can buy 
shares that they perceive to be trading at a price less than that which 
will be available at a subsequent time and sell shares they perceive to 
be trading at a price higher than that which will be available at a 
subsequent time. It is expected that, as part of their normal day-to-
day trading activity, market makers assigned to shares by the Exchange, 
off-exchange market makers, firms that specialize in electronic 
trading, hedge funds and other professionals specializing in short-
term, non-fundamental trading strategies will assume the risk of being 
``long'' or ``short'' shares through such trading and will hedge such 
risk wholly or partly by simultaneously taking positions in correlated 
assets \45\ or by netting the exposure against other, offsetting 
trading positions--much as such firms do with existing ETFs and other 
equities. Disclosure of a fund's investment objective and principal 
investment strategies in its prospectus and SAI should permit 
professional investors to engage easily in this type of hedging 
activity.
---------------------------------------------------------------------------

    \45\ Price correlation trading is used throughout the financial 
industry. It is used to discover both trading opportunities to be 
exploited, such as currency pairs and statistical arbitrage, as well 
as for risk mitigation such as dispersion trading and beta hedging. 
These correlations are a function of differentials, over time, 
between one or multiple securities pricing. Once the nature of these 
price deviations have been quantified, a universe of securities is 
searched in an effort to, in the case of a hedging strategy, 
minimize the differential. Once a suitable hedging basket has been 
identified, a trader can minimize portfolio risk by executing the 
hedging basket. The trader then can monitor the performance of this 
hedge throughout the trade period, making corrections where 
warranted.
---------------------------------------------------------------------------

    The Exchange believes that the Funds 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.

[[Page 40366]]

    The Adviser represents that, unlike ETFs that publish their 
portfolios on a daily basis, the Funds, 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 a Fund from the potential for front-
running of portfolio transactions and the potential for free-riding on 
a Fund's portfolio strategies, each of which could adversely impact the 
performance of a 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.
    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, a Fund's investments will not be used to seek 
performance that is the multiple or inverse multiple (e.g., 2X or -3X) 
of a Fund's primary broad-based securities benchmark index (as defined 
in Form N-1A).
    With respect to the Funds, the proposed rule change is designed to 
promote just and equitable principles of trade and to protect investors 
and the public interest in that the Exchange will obtain a 
representation from the Issuer, prior to commencement of trading in the 
Shares, that the NAV per Share of a Fund will be calculated daily and 
that the NAV, Proxy Portfolio and Actual Portfolio will be made 
available to all market participants at the same time. Investors can 
also obtain a Fund's SAI, shareholder reports, and its Form N-CSR, Form 
N-PORT and Form N-CEN. A Fund's SAI and shareholder reports will be 
available free upon request from the applicable Fund, and those 
documents and the Form N-CSR, Form N-PORT and Form N-CEN may be viewed 
on-screen or downloaded from the Commission's website.
    Proposed 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 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. With respect to the Funds, the Adviser will make available 
daily to FINRA and the Exchange the portfolio holdings of a Fund upon 
request in order to facilitate the performance of the surveillances 
referred to above.
    The Exchange will utilize its existing procedures to monitor issuer 
compliance with the requirements of proposed 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 proposed Rule 8.601-E. The 
Exchange notes that proposed Commentary .01 to Rule 8.601-E would 
require an issuer of Active Proxy Portfolio Shares to notify the 
Exchange of any failure to comply with the continued listing 
requirements of proposed 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. The Exchange will rely on the foregoing procedures to become 
aware of any non-compliance with the requirements of proposed Rule 
8.601-E.
    In addition, with respect to the Funds, a large amount of 
information will be publicly available regarding the Funds and the 
Shares, thereby promoting market transparency. Quotation and last sale 
information for the Shares, 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 Funds 
will include a form of the prospectus for the Funds that may be 
downloaded, and additional data relating to NAV and other applicable 
quantitative information, updated on a daily basis. Trading in Shares 
of a 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 proposed NYSE 
Arca Rule 8.601-E(d)(2)(D), which sets forth circumstances under which 
Shares of the Funds may be halted. In addition, as noted above, 
investors will have ready access to the Proxy Portfolio, and quotation 
and last sale information for the Shares. The Proxy Portfolio holdings 
(including the identity and quantity of investments in the Proxy 
Portfolio) will be publicly available on the Funds' website before the 
commencement of trading in Shares on each Business Day. The Shares will 
conform to the initial and continued listing criteria under proposed 
Rule 8.601-E.
    Each Fund's holdings will conform to the permissible investments as 
set forth in the Application and Exemptive Order and the holdings will 
be consistent with all requirements in the Application and Exemptive 
Order.\46\ Any foreign common stocks held by a 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.
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    \46\ See note 26, supra.
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    The components of a 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 a Fund, that it will advise the Exchange of any failure

[[Page 40367]]

by a 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 a 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, with respect to the Funds, the Exchange has in 
place surveillance procedures relating to trading in the Funds' 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, with respect to the Funds, investors will have ready access to 
information regarding the Proxy Portfolio and quotation and last sale 
information for the Shares.

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

    In accordance with Section 6(b)(8) of the Act,\47\ 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, including that the portfolio is disclosed at least once 
quarterly as opposed to daily, and would introduce additional 
competition among various ETF products to the benefit of investors.
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

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. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 3, is consistent with the Act and 
rules and regulations thereunder applicable to a national securities 
exchange.\48\ In particular, the Commission finds that the proposed 
rule change, as modified by Amendment No. 3 is consistent with Section 
6(b)(5) of the Act,\49\ which requires, among other things, that the 
Exchange's rules be designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest. The Commission notes that in a 
separate order, it approved the Exchange's proposed rule change to 
adopt NYSE Arca Rule 8.601-E to permit the listing and trading of 
Active Proxy Portfolio Shares.\50\
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    \48\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \49\ 15 U.S.C. 78f(b)(5).
    \50\ See note 3 supra.
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    The Commission believes that the proposal is reasonably designed to 
promote fair disclosure of information that may be necessary to price 
the Shares appropriately and to prevent trading in the Shares when a 
reasonable degree of certain pricing transparency cannot be assured. As 
such, the Commission believes the proposal is reasonably designed to 
maintain a fair and orderly market for trading the Shares. The 
Commission also finds that the proposal is consistent with Section 
11A(a)(1)(C)(iii) of the Act, which sets forth Congress's finding that 
it is in the public interest and appropriate for the protection of 
investors and the maintenance of fair and orderly markets to assure the 
availability to brokers, dealers, and investors of information with 
respect to quotations for, and transactions in, securities.
    Specifically, the Commission notes that the Exchange, prior to 
commencement of trading in the Shares, will obtain a representation 
from the issuer of the Shares of each Fund that the NAV per Share will 
be calculated daily and that the NAV, Proxy Portfolio, and Actual 
Portfolio for each Fund will be made available to all market 
participants at the same time.\51\ Information regarding the market 
price of Shares and trading volume in Shares will be continually 
available on a real-time basis throughout the day on brokers' computer 
screens and other electronic services. Quotation and last-sale 
information for the Shares, ETFs, ETNs, U.S. exchange-traded common 
stocks, preferred stocks, and ADRs will be available via the 
Consolidated Tape Association 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 Funds' website will include additional information updated 
on a daily basis, including, on a per Share basis for each Fund, the 
prior business day's NAV, the closing price or bid/ask price at the 
time of calculation of such NAV, and a calculation of the premium or 
discount of the closing price or bid/ask price against such NAV. The 
website will also disclose the percentage weight overlap between the 
prior business day's Proxy Portfolio's holdings compared to the 
holdings of a Fund that formed the basis for that Fund's calculation of 
NAV at the end of the prior business day, and any other information 
regarding premiums and discounts and the bid/ask spread for a Fund as 
may be required for other ETFs under Rule 6c-11 under the 1940 Act. The 
Proxy Portfolio holdings (including the identity and quantity of 
investments in the Proxy Portfolio) will be publicly available on the 
Funds' website before the commencement of trading in Shares on each 
Business Day and the Funds' website will disclose the information 
required under Rule 8.601-E(c)(3).\52\ The website and information will 
be publicly available at no charge.
---------------------------------------------------------------------------

    \51\ See NYSE Arca Rule 8.601-E(d)(1)(B).
    \52\ See Rule 8.601-E(c)(3), which requires 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 Investment Company Act of 1940 
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.
---------------------------------------------------------------------------

    In addition, the Exchange states that intraday pricing information 
for all constituents of the Proxy Portfolio 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, and that intraday pricing 
information for cash equivalents will be available through subscription 
services and/or pricing services.
    The Commission also notes that the Exchange's rules regarding 
trading halts help to ensure the maintenance of fair and orderly 
markets for the Shares. Specifically, pursuant to its rules, the 
Exchange may consider all relevant factors in exercising its discretion 
to halt trading in the Shares and will halt trading in the Shares under 
the conditions specified in NYSE Arca Rule 7.12-E. Trading may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable, including (1) the 
extent to which trading is not occurring in the securities and/or the 
financial instruments composing the Proxy Portfolio and/or Actual 
Portfolio; or (2) whether other unusual conditions

[[Page 40368]]

or circumstances detrimental to the maintenance of a fair and orderly 
market are present.\53\ Trading in the Shares also will be subject to 
NYSE Arca Rule 8.601-E(d)(2)(D), which sets forth additional 
circumstances under which trading in the Shares will be halted.
---------------------------------------------------------------------------

    \53\ See NYSE Arca Rule 8.601-E(d)(2)(D)(i).
---------------------------------------------------------------------------

    The Commission also believes that the proposal is reasonably 
designed to help prevent fraudulent and manipulative acts and 
practices. Specifically, the Exchange provides that:
     The Adviser is not registered as a broker-dealer but is 
affiliated with a broker-dealer and has implemented and will maintain a 
``fire wall'' with respect to such broker-dealer affiliate regarding 
access to information concerning the composition of and/or changes to a 
Fund's Actual Portfolio and/or Proxy Portfolio;
     Any person related to the Adviser or a Fund who makes 
decisions pertaining to the Fund's Actual Portfolio or Proxy Portfolio 
or who has access to non-public information regarding a 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 
material non-public information regarding a Fund's Actual Portfolio 
and/or the Proxy Portfolio or changes thereto;
     In the event (a) the Adviser becomes registered as a 
broker-dealer or 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 of 
and/or changes to a 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 a Fund's 
Actual Portfolio and/or Proxy Portfolio or changes thereto; and
     Any person or entity, including any service provider for a 
Fund, who has access to non-public information regarding a 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 a Fund's 
Actual Portfolio and/or the Proxy Portfolio or changes thereto, and 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 of and/or changes to a Fund's Actual Portfolio and/or Proxy 
Portfolio.
    Finally, 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,\54\ and that these surveillance 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.
---------------------------------------------------------------------------

    \54\ See NYSE Arca Rule 8.601-E, Commentary .03, which requires, 
as part of the surveillance procedures for Active Proxy Portfolio 
Shares, a Fund's investment adviser to, 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 the Fund.
---------------------------------------------------------------------------

    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.
    In support of this proposal, the Exchange represents that:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Rule 8.601-E.
    (2) A minimum of 100,000 Shares for each Fund will be outstanding 
at the commencement of trading on the Exchange.
    (3) FINRA, on behalf of the Exchange, or the Exchange, or both, 
will communicate as needed, and may obtain information, regarding 
trading in the Shares and underlying exchange-traded instruments with 
other markets and other entities that are members of the ISG. In 
addition, the Exchange may obtain information regarding trading in such 
securities and exchange-traded instruments from markets and other 
entities with which the Exchange has in place a comprehensive 
surveillance sharing agreement. Any foreign common stocks held by a 
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.
    (4) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (5) For initial and continued listing, the Funds will be in 
compliance with Rule 10A-3 under the Act.\55\
---------------------------------------------------------------------------

    \55\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (6) Each Fund's holdings will conform to the permissible 
investments as set forth in the Application and Exemptive Order and the 
holdings will be consistent with all requirements set forth in the 
Application and Exemptive Order. 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).
    (7) With respect to the Funds, 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 FINRA will continue 
to monitor Exchange members for compliance with such requirements.
    The Exchange also represents that all statements and 
representations made in the filing regarding: (1) the description of 
the portfolio or reference assets; (2) limitations on portfolio 
holdings or reference assets; or (3) the applicability of Exchange 
listing rules specified in the filing constitute continued listing 
requirements for listing the Shares on the Exchange. In addition, the 
Exchange represents that the Exchange will obtain a representation from 
the Adviser, prior to commencement of trading in the Shares of a Fund, 
that the Adviser 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 Act, the Exchange will 
monitor \56\ 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 NYSE Arca Rule 
5.5-E(m).
---------------------------------------------------------------------------

    \56\ The Commission notes that certain proposals for the listing 
and trading of exchange-traded products include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Securities Exchange Act Release No. 
77499 (April 1, 2016), 81 FR 20428, 20432 (April 7, 2016) (SR-BATS-
2016-04). In the context of this representation, it is the 
Commission's view that ``monitor'' and ``surveil'' both mean ongoing 
oversight of compliance with the continued listing requirements. 
Therefore, the Commission does not view ``monitor'' as a more or 
less stringent obligation than ``surveil'' with respect to the 
continued listing requirements.
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 3 to the Proposed Rule 
Change

    Interested persons are invited to submit written data, views, and 
arguments concerning whether the proposed rule change, as modified by 
Amendment No. 3, is consistent with the Exchange Act. Comments may be 
submitted by any of the following methods:

[[Page 40369]]

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-2019-92 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-2019-92. 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-2019-92, and should be 
submitted on or before July 27, 2020.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 3

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 3, prior to the thirtieth day 
after the date of publication of notice of the filing of Amendment No. 
3 in the Federal Register. In Amendment No. 3, the Exchange modified 
the description of each Fund and conformed the description of NYSE Arca 
Rule 8.601-E to the final rule approved in the Active Proxy Portfolio 
Shares Order.\57\ Amendment No. 3 also provides other clarifications 
and additional information related to the Funds.\58\ The changes and 
additional information in Amendment No. 3 assist the Commission in 
finding that the proposal is consistent with the Exchange Act. 
Accordingly, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Exchange Act,\59\ to approve the proposed rule change, 
as modified by Amendment No. 3, on an accelerated basis.
---------------------------------------------------------------------------

    \57\ See supra note 3.
    \58\ See Amendment No. 3, supra note 11.
    \59\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\60\ that the proposed rule change (SR-NYSEArca-2019-92), as modified 
by Amendment No. 3, be, and it hereby is, approved on an accelerated 
basis.\61\
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    \60\ Id.
    \61\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-14489 Filed 7-2-20; 8:45 am]
BILLING CODE 8011-01-P