---------------------------------------------------------------------------

    As proposed, we are amending Form N-CEN to require identification
of ETFs that are relying on rule 6c-11.\624\ We believe that this
requirement will allow the Commission to better monitor reliance on
rule 6c-11 and assist us with our accounting, auditing, and oversight
functions, including compliance with the Paperwork Reduction Act. We
believe that the incremental cost of this requirement to ETFs is
minimal.
---------------------------------------------------------------------------

    \624\ We also are changing the definition of ``authorized
participant'' in Form N-CEN to conform the definition with rule 6c-
11 by excluding specific reference to an authorized participant's
participation in DTC (Item E.2 of Form N-CEN).
---------------------------------------------------------------------------

D. Effects on Efficiency, Competition, and Capital Formation

    This section evaluates the impact of rule 6c-11 and the amendments
to Forms N-1A, N-8B-2, and N-CEN on efficiency, competition, and
capital formation. However, as discussed in further detail below, the
Commission is unable to quantify the effects on efficiency, competition
and capital formation either because they are inherently difficult to
quantify or because it lacks the information necessary to provide a
reasonable estimate.
1. Efficiency
    The rule will likely increase total assets of ETFs, as a result of
reducing the expense and delay of forming and operating new ETFs
organized as open-end funds, reducing the cost for certain ETFs to
monitor their own compliance with regulations, and increasing
competition among ETFs as discussed below. At the same time, the rule
could

lead to a decrease in total assets of other fund types that investors
may regard as substitutes, such as certain mutual funds.\625\ As a
result, ETF ownership (as a percentage of market capitalization) for
some securities, such as stocks and bonds, will likely increase, and
ownership by other funds, such as mutual funds, will likely decrease.
We are aware of only a limited amount of academic literature regarding
ETFs. This literature suggests that such a shift in ownership could
have a limited effect on the price efficiency (i.e., the extent to
which an asset price reflects all public information at any point in
time) and liquidity of these portfolio securities.\626\
---------------------------------------------------------------------------

    \625\ The disclosure requirements will also serve to increase
investors' awareness of ETF trading costs, which can be substantial
in some cases. As a result, investors who may previously not have
been fully aware of these costs may shift their demand away from
ETFs and towards other types of funds, such as mutual funds. We
believe, however, that the rulemaking as a whole is likely to
increase demand for ETFs rather than decrease it.
    \626\ In documenting the impact of ETF arbitrage on price
efficiency and liquidity, the academic literature does not generally
distinguish ETFs that could rely on the rule from those that could
not. However, these studies investigate a broad range of ETFs with
varying degrees of relief including basket flexibility. Therefore,
we believe that the subsample of ETFs that could rely on the rule is
representative of those used in the academic literature. As a
result, we believe that inferences from the academic research
generally apply to ETFs that can rely on the rule.
---------------------------------------------------------------------------

    The literature also suggests that a shift in stock ownership
towards ETFs may somewhat improve certain dimensions of price
efficiency while possibly attenuating price efficiency along other
dimensions. Specifically, the results in one paper suggest that stock
prices incorporate systematic information more quickly when they are
held in ETF portfolios.\627\ The evidence in this paper thus indicates
that ETF activity increases stock market efficiency with regard to
systematic information, i.e., information relating to market-wide
risks. On the other hand, some studies find that an increase in ETF
ownership may introduce non-fundamental volatility into stock prices,
i.e., cause temporary deviations of stock prices from their fundamental
values. For example, one paper finds that ownership by U.S. equity
index ETFs is associated with moderately higher volatility among
component stocks and asserts that the increased volatility is non-
fundamental.\628\ Another paper finds that higher authorized
participant arbitrage activity in U.S. equity ETFs is associated with a
moderately higher correlation of returns among stocks in the ETF's
portfolio.\629\ The authors observed that changes in the prices of
these stocks tend to partially revert over the next trading day and
state that the increased co-movement in returns is thus a sign of
excessive price movement due to non-fundamental shocks that ETF trading
helps propagate.
---------------------------------------------------------------------------

    \627\ Lawrence Glosten, Suresh Nallareddy, & Yuan Zou, ETF
Trading and Informational Efficiency of Underlying Securities
(Columbia Business School, Research Paper No. 16-71, 2016).
    \628\ See Itzhak Ben-David, Francesco Franzoni & Rabih Moussawi,
Do ETFs Increase Volatility? (Swiss Finance Institute, Research
Paper No. 11-66, 2017). This paper also finds that mutual fund
ownership is associated with higher volatility in the underlying
indexes. Thus, to the extent that part of the increase in ETF assets
would be accompanied by a decrease in mutual fund assets, the net
effect on price efficiency would be unclear.
    \629\ Zhi Da & Sophie Shive, Exchange Traded Funds and Asset
Return Correlations (Working Paper, 2016).
---------------------------------------------------------------------------

    To a limited extent, the rule could decrease the liquidity of
stocks held by ETFs, as one study finds that higher ownership of a
stock by U.S. equity ETFs is associated with somewhat lower liquidity
as measured by market impact.\630\ Conversely, the academic literature
offers mixed evidence regarding the impact of ETFs on bond liquidity.
While one paper finds that increased ETF ownership is associated with
lower bond liquidity for investment grade bonds,\631\ another study
finds that bonds included in ETFs experience improvements in their
liquidity.\632\
---------------------------------------------------------------------------

    \630\ See Sophia J.W. Hamm, The Effect of ETFs on Stock
Liquidity (Working Paper, 2014). However, the study also finds the
same relationship for ownership by index mutual funds. Thus, to the
extent that part of the increase in ETF assets would be accompanied
by a decrease in mutual fund assets, the net effect on price
efficiency would be unclear.
    \631\ Caitlin Dillon Dannhauser, The Impact of Innovation:
Evidence from Corporate Bond ETFs, Journal of Financial Economics
(forthcoming 2016) (``Dannhauser Article'').
    \632\ Jayoung Nam, Market Accessibility, Corporate Bond ETFs,
and Liquidity (Working Paper, 2017).
---------------------------------------------------------------------------

    A shift in stock ownership towards ETFs could also have an effect
on the co-movement of liquidity for stocks held by ETFs. Specifically,
one paper observes that the liquidity of a stock with high ETF
ownership co-moves with the liquidity of other stocks that also have
high ETF ownership.\633\ The authors assert that this co-movement in
liquidity exposes investors to the possibility that multiple assets in
their portfolio will be illiquid at the same time.
---------------------------------------------------------------------------

    \633\ Vikas Agarwal et al., Do ETFs Increase the Commonality in
Liquidity of Underlying Stocks (Working Paper, 2017).
---------------------------------------------------------------------------

    Since we do not know the degree to which the rule will increase ETF
ownership of stocks and bonds, we are unable to quantify the rule's
effects on price efficiency and liquidity. However, the effects
documented in the literature surveyed above are generally small, so
that we do not anticipate that the rule would have a significant effect
on the price efficiency or liquidity of assets held by ETFs.
    As a result of the rule's allowance of increased basket
flexibility, some ETFs that did not already have this flexibility in
their baskets may choose to increase the weight of more liquid
securities and decrease the weight of less liquid securities in their
baskets compared to their portfolios.\634\ During normal market
conditions, this may lead those ETFs' shares to trade at smaller bid-
ask spreads, thus benefiting investors. Such a reduction in bid-ask
spreads by over-weighting more liquid securities may not continue to be
possible during stressed market conditions, however, if a large
proportion of such an ETF's portfolio securities become less
liquid.\635\ As a result, the gap between bid-ask spreads of some ETFs'
shares during normal and stressed market periods may grow as a result
of the rule, which some investors may not anticipate and fail to fully
take into account when making their investment decisions.\636\
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    \634\ This would be the case for those ETFs that hold less
liquid securities in their portfolios.
    \635\ Under rule 22e-4 under the Act, an ETF is required to
consider: (i) The relationship between portfolio liquidity and the
way in which, and the prices and spreads at which, ETF shares trade,
including, the efficiency of the arbitrage mechanism and the level
of active participation by market participants (including authorized
participants); and (ii) the effect of the composition of baskets on
the overall liquidity of the ETF's portfolio as part of its
assessment, management and review of liquidity risk. See LRM
Adopting Release, supra footnote 123.
    \636\ Conversely, some ETFs may choose to decrease, rather than
increase, the weight of more liquid securities and increase the
weight of less liquid securities in their basket compared to their
portfolio in order to reduce transaction costs borne by an ETF's
existing/remaining shareholders when the ETF must buy and sell
portfolio holdings. This would lead to a reduction in transaction
costs for existing/remaining shareholders and to an increase in
transactions costs for authorized participants and, ultimately,
investors buying and selling ETF shares. We believe that most funds
would choose to limit such behavior as they would likely find it to
be in their best interest to balance costs imposed on transacting
and existing/remaining shareholders.
---------------------------------------------------------------------------

    Finally, the amendments to Forms N-1A and N-8B-2 as well as the
additional website disclosures required by rule 6c-11 we are adopting
will allow investors and other market participants to better understand
and compare ETFs using more relevant and standardized disclosure. For
example, the amendments to Item 6 of Form N-1A will add a requirement
for ETFs to include a statement that ETF investors may be subject to
other expenses that are specific to ETF trading, including

bid-ask spreads.\637\ These costs are not currently required to be
disclosed as part of the prospectus. Since these costs are incurred by
ETF investors and not mutual fund investors, we believe that adding
this disclosure requirement will help investors and other market
participants better assess and compare fees and expenses between
certain funds and fund types, such as ETFs and mutual funds. Thus, the
final rule could help investors make more informed investment decisions
that are more suited to their investment objectives. The degree to
which investors will benefit from the ability to make more informed
investment decisions is inherently difficult to quantify, so we are
unable to estimate the size of this benefit.
---------------------------------------------------------------------------

    \637\ James J. Angel, Todd J. Broms, & Gary L. Gastineau, ETF
Transaction Costs Are Often Higher Than Investors Realize, Journal
of Portfolio Management, Spring 2016, at 65, find that the cost of
trading ETF shares depends both on bid-ask spreads as well as
premiums and discounts to NAV per share.
---------------------------------------------------------------------------

2. Competition
    The rule will likely increase competition among ETFs that can rely
on the rule. The first channel through which the rule will likely
foster competition is by reducing the costs for ETF sponsors to form
new ETFs that comply with the conditions set by the rule. This cost
reduction will lower the barriers to entering the ETF market, which
will likely lead to increased competition among ETFs that can rely on
the rule.
    In addition, new ETFs that enter the market in reliance on the
rule, as well as those existing ETFs that will have their exemptive
relief rescinded and replaced by the rule, will no longer be subject to
requirements that vary among exemptive orders.\638\ Instead, these ETFs
will operate under uniform requirements, which will help promote
competition among ETFs that can rely on the rule. An increase in
competition among ETFs that can rely on the rule will likely also lead
to an increase in competition among those ETFs, ETFs that cannot rely
on the rule, and other types of funds and products that investors may
perceive to be substitutes for ETFs.\639\
---------------------------------------------------------------------------

    \638\ Some fund sponsors that operate ETFs outside the scope of
rule 6c-11 may voluntarily decide to comply with certain provisions
of the rule. For example, one sponsor that operates share class ETFs
stated that it intends to modify its current practices, as
necessary, to be consistent with the custom basket requirements
contemplated by the proposed rule for all its U.S. ETFs. See
Vanguard Comment Letter.
    \639\ The types of funds and products that investors may
consider substitutes for ETFs would depend on an individual
investor's preferences and investment objectives. Other types of
products that some investors may consider to be substitutes for ETFs
include mutual funds, closed-end funds, and other ETPs, such as
exchange-traded notes and commodity pools.
---------------------------------------------------------------------------

    Furthermore, the new website disclosures and amendments to Forms N-
1A and N-8B-2 will allow investors to better compare ETFs and mutual
funds, which can further foster competition among these types of funds
as well as between these types of funds and other types of funds that
investors may perceive to be substitutes for ETFs and mutual funds,
such as closed-end funds and certain ETPs.
    Increased competition will likely lead to lower fees for investors,
encourage financial innovation, and increase consumer choice in the
markets for ETFs, mutual funds, and other types of funds that investors
may perceive to be substitutes.\640\ Due to the limited availability of
data, however, we are unable to quantify these effects.
---------------------------------------------------------------------------

    \640\ The rule will likely lead to increased competition both
among ETFs that can rely on the rule. as well as between ETFs that
can rely on the rule and those that cannot, to the extent that
investors perceive these ETFs as substitutes. While we believe that
increased competition generally is conducive to innovation, any
increased competition in the ETF market resulting from the rule will
be more likely to involve novel ETFs that will continue to need to
obtain exemptive relief from the Commission.
---------------------------------------------------------------------------

    To the extent the rule will increase the number and total assets of
ETFs, more authorized participants or other market participants that
engage in ETF arbitrage, such as hedge funds and principal trading
firms, may enter the market. This may lead to increased competition
among authorized participants or other market participants and result
in authorized participants or other market participants exploiting
arbitrage opportunities sooner (i.e., when premiums/discounts to NAV
per share are smaller). As a result, bid-ask spreads may tighten and
premiums/discounts to NAV per share for ETF shares may decrease. We
would expect new entries of authorized participants or other
arbitrageurs as a result of the rule to be limited, however, and any
effects on bid-ask spreads and premiums/discounts to NAV per share to
be small.
3. Capital Formation
    The rule may lead to increased capital formation. Specifically, an
increase in the demand for ETFs, to the extent that it increases demand
for intermediated assets as a whole, will likely spill over into
primary markets for equity and debt securities. As a consequence,
companies may be able to issue new debt and equity at higher prices in
light of the increased demand for these assets in secondary markets
created by ETFs and the cost of capital for firms could fall,
facilitating capital formation.
    The conclusion that an increase in the demand for ETFs may lower
the firm's cost of capital is further supported by a paper \641\ that
finds that bonds with a higher share of ETF ownership have lower
expected returns.\642\ Due to the limited availability of data,
however, we are unable to quantify these effects of the rule on capital
formation.
---------------------------------------------------------------------------

    \641\ Dannhauser Article, supra footnote 632.
    \642\ We acknowledge that there is research (see Yakov Amihud &
Haim Mendelson, Asset Pricing and the Bid-Ask Spread, 17 Journal of
Financial Economics 223 (1986)) that provides evidence that expected
returns of an asset are positively associated with its liquidity. As
discussed above, the academic literature suggests that stocks with a
higher share of ETF ownership have lower liquidity (whereas the
evidence on the effect of underlying bonds is mixed). Thus, there
may be an offsetting effect that could weaken the potential benefits
of the rule for capital formation through new equity issuances by
firms.
---------------------------------------------------------------------------

E. Reasonable Alternatives

1. Website Disclosure of Basket Information
    Rule 6c-11 does not include a basket publication requirement. As an
alternative, we considered requiring an ETF to post on its website one
``published'' basket each business day before the opening of trading of
the ETF's shares, as we proposed. This disclosure would allow smaller
institutional investors and retail investors that are not NSCC members
and do not currently have access to basket information to compare the
ETF's ``published basket'' with its portfolio holdings.\643\ However,
we agree with commenters that the benefit of this information to these
investors is likely to be limited, as secondary market arbitrage
typically does not require information regarding an ETF's basket
composition.\644\ In addition, ETFs would incur additional costs
associated with this disclosure.\645\
---------------------------------------------------------------------------

    \643\ Commenters stated that authorized participants already
have access to basket information through the daily portfolio
composition file provided to NSCC. In addition, other institutional
investors that use basket information for hedging purposes, such as
an investor using an authorized participant as an agent, have access
to this information through the NSCC, an intermediary (such as an
authorized participant), or the ETF itself. See supra section
II.C.5.c.
    \644\ See, e.g., CSIM Comment Letter; ICI Comment Letter.
    \645\ Our exemptive orders have not included requirements for
daily website disclosures of ETF baskets, though some exemptive
orders contemplate disclosure of daily basket assets through NSCC.
Since specifying basket assets is part of the regular operation of
an ETF, we believe that all ETFs already have the required data
available to them. In addition, we believe that most ETFs already
have systems (such as computer equipment, an internet connection,
and a website) in place that can be used for processing this data
and uploading it to their websites. However, these ETFs would still
incur the costs associated with establishing and following
(potentially automated) processes for processing and uploading this
data to their websites.

---------------------------------------------------------------------------

    We also considered requiring an ETF to publish information
regarding every custom basket used by the ETF after the close of
trading on each business day. This information could reveal whether an
authorized participant has pressured an ETF into accepting illiquid
securities in exchange for liquid ETF shares (i.e., dumping) or into
giving the authorized participant desirable securities in exchange for
ETF shares tendered for redemption (i.e., cherry-picking) by comparing
an ETF's portfolio assets and published basket to the baskets used by
various authorized participants throughout the day.
    However, the rule contains conditions for basket policies and
procedures, which seek to prevent overreaching. Moreover, the rule will
require an ETF to maintain records regarding the baskets used, which
will allow Commission staff to examine an ETF's use of basket
flexibility. We also agree with commenters that requiring publication
of all baskets could disadvantage an ETF and its shareholders by
allowing market participants to front-run trades by authorized
participants (or other arbitrageurs that use an authorized participant
as an agent) in basket securities, particularly for those ETFs that
have more frequent primary market transactions.\646\
---------------------------------------------------------------------------

    \646\ See, e.g., ICI Comment Letter; SSGA Comment Letter I;
Vanguard Comment Letter.
---------------------------------------------------------------------------

    Consequently, we believe that the risk for abusive practices under
the rule will be low while, at the same time, the rule will avoid
additional operational and compliance costs for ETFs to post and review
the information as well as potential costs associated with front-
running trades in basket securities under the alternative.
2. Disclosure of ETF Premiums or Discounts Greater Than 2%
    As proposed, the rule will require any ETF whose premium or
discount was greater than 2% for more than seven consecutive trading
days to post that information on its website, along with a discussion
of the factors that are reasonably believed to have materially
contributed to the premium or discount. One commenter suggested that we
raise the threshold for the size of the premiums or discounts to five
or ten percent while shortening the period over which the premium or
discount has to be sustained for the requirement to trigger.\647\ Based
on this suggestion, we considered an alternative that would require any
ETF whose premium or discount was greater than five percent for more
than three consecutive trading days to post that information on its
website, along with a discussion as required under the rule.
---------------------------------------------------------------------------

    \647\ Nasdaq Comment Letter.
---------------------------------------------------------------------------

    Under both the rule and the alternative, ETFs with premiums or
discounts greater than five percent for more than seven consecutive
trading days would provide the disclosure. The disclosure threshold
under the rule will also capture ETFs with premiums or discounts
greater than two and up to five percent for more than seven consecutive
trading days, which would not be captured under the alternative.
Conversely, the disclosure threshold under the alternative would also
capture ETFs with premiums or discounts greater than five percent for
between three and six consecutive trading days, which will not be
captured under the rule.
    We estimate that 1.7 percent of those ETFs that can rely on the
rule would trigger the alternative disclosure threshold per year,
compared to 4.5 percent under the rule. From 2008 and 2018, the
percentage of ETFs that would have triggered the requirement would have
been largest in 2008. In that year, 4.6 percent of ETFs that could have
relied on the rule would have triggered the alternative threshold,
compared to 10 percent under the rule.\648\ In addition, an ETF that
triggers the reporting requirement under the alternative would make its
disclosure sooner after the premium or discount first exceeds the
threshold, as the measurement period is shorter compared to the rule.
---------------------------------------------------------------------------

    \648\ See supra footnote 598 and accompanying text. Our estimate
of the percentage of ETFs that would have to satisfy the requirement
under the alternative is based on the same methodology and data as
our estimate for the rule's reporting threshold.
---------------------------------------------------------------------------

    The lower incidence of reporting under the alternative would
decrease the costs incurred by ETFs associated with making the
disclosure,\649\ but also reduce the reporting of persistent premiums
and discounts available to investors in that it would eliminate
reporting of discounts below the 5% threshold. While the shorter
observation period under the alternative would make the information
about premiums and discounts available to investors sooner, rule 6c-11
will require ETFs to disclose the prior day's premium/discount to NAV
per share on its website every day, so that timely information about
the size of ETF's premiums/discounts will still be available to
investors under the rule.
---------------------------------------------------------------------------

    \649\ We estimate a total annual industry cost of $47,457,745 (=
1.7% x 1,735 ETFs x $1,609). This estimate uses the same assumptions
as our estimate of the cost of this requirement under the rule. See
supra footnote 600 and accompanying text.
---------------------------------------------------------------------------

    Another commenter suggested that we adopt a materiality standard
rather than a fixed numerical threshold to trigger the reporting
requirement.\650\ We considered an alternative under which each ETF
would make its own determination as to when a premium/discount to NAV
per share is material and thus would be reported. As a result, ETFs
would almost certainly differ in the size and duration of a premium/
discount that they would consider to be material. In addition, ETFs
might adopt varying criteria to determine whether a premium/discount is
deemed material based on the asset class of the ETF or general market
conditions. While we are unable to predict how the alternative would
impact the frequency of reporting compared to the rule, we believe that
the alternative might lead to inconsistent reporting practices among
ETFs, which would likely reduce the usefulness of the requirement to
investors, compared to the rule.
---------------------------------------------------------------------------

    \650\ John Hancock Comment Letter (recommending a materiality
standard instead of a 2% threshold).
---------------------------------------------------------------------------

3. Website and Prospectus Disclosure of the Median Bid-Ask Spread
Calculated Over the Most Recent 1-Year Period
    Rule 6c-11 will require an ETF to disclose the median bid-ask
spread calculated over the most recent 30-day period on its
website.\651\ As an alternative, we considered requiring an ETF to
disclose the median bid-ask spread for the ETF's most recent fiscal
year on its website and in its prospectus, as proposed.
---------------------------------------------------------------------------

    \651\ Our amendments to Form N-1A will provide ETFs that do not
rely on rule 6c-11 with the option to provide the same information
on its website or the median bid-ask spread over the ETF's most
recent fiscal year in its prospectus. See supra section II.H.2.b.
---------------------------------------------------------------------------

    We agree with commenters that computing the median bid-ask spread
over a 30-day rolling period, rather than over the proposed 1-year
lookback period, may provide a more accurate predictor of trading costs
for newly launched ETFs whose bid-ask spreads may tighten as the ETFs
mature.\652\ In addition, as an ETF's prospectus cannot be updated
every day, we believe it is appropriate to require ETFs to make this

disclosure on their websites. As a result, we believe that requiring
ETFs to disclose the median bid-ask spread over the most recent 30-day
period on their websites will increase the benefits of the bid-ask
spread disclosure to investors compared to the alternative,
particularly for newly-launched ETFs.
---------------------------------------------------------------------------

    \652\ See supra footnote 381 and accompanying text. Conversely,
there may also be instances where future bid-ask spreads may be
better predicted by the median bid-ask spread computed over a 1-year
lookback period, as compared to a 30-day rolling period (e.g., when
recent bid-ask spreads are not representative of how an ETF
typically has traded.
---------------------------------------------------------------------------

4. Additional Disclosures Showing the Impact of Bid-Ask Spreads
    We considered amending Forms N-1A and N-8B-2 to require an ETF to
provide: (1) Examples in the ETF's prospectus showing how bid-ask
spreads impact the return on a hypothetical investment for both buy-
and-hold and frequent traders; and (2) an interactive calculator on the
ETF's website that would allow an investor to customize the
hypothetical bid-ask spread calculations to its specific investing
situation, as proposed. Some investors may find the additional
disclosures under this alternative useful to understand the effect of
transaction costs resulting from bid-ask spreads on their investments;
however, we agree with commenters that this benefit could be diminished
by over-concentrating investor focus on bid-ask spreads, thereby
potentially obscuring the importance of other components of ETF
transaction costs (e.g., order size, market conditions, and the extent
to which a broker-dealer improves upon quoted bid-ask spreads).\653\ In
addition, the omission of these requirements will save ETFs the costs
associated with providing examples showing how bid-ask spreads impact
the return on a hypothetical investment and implementing the
interactive calculator on its website.
---------------------------------------------------------------------------

    \653\ See, e.g., Vanguard Comment. See also Eaton Vance Comment
Letter.
---------------------------------------------------------------------------

5. Website Disclosure of a Modified IIV
    As proposed, rule 6c-11 will not require ETFs to disseminate IIV as
a condition for reliance on the rule. As an alternative, we considered
requiring an ETF to publicly disseminate a modified IIV on its website
on a real time basis as a condition to rule 6c-11, requiring ETFs to
calculate IIVs more frequently and in a more accessible manner. We also
considered creating a methodology that takes into account circumstances
when market prices for underlying assets are not available or should
not be used to reflect the ETF's intraday value. As we discussed above
in section II.C.3, such a modified IIV would benefit retail and less
sophisticated institutional investors by allowing them to better
evaluate the value of an ETF intra-day. However, we are concerned that
these modifications would not cure the shortcomings of IIV for ETFs in
a uniform manner. We encourage the ETF industry to undertake efforts to
develop intraday value metrics targeted at these investors as we
believe that ETFs are in a position to consider and develop tailored
metrics for ETFs holding different asset classes in a format that is
useful for retail investors.
6. The Use of a Structured Format for Additional Website Disclosures
and the Filing of Additional Website Disclosures in a Structured Format
on EDGAR
    The rule will require ETFs to post on their websites certain
disclosures to enable investors to more readily obtain certain key
metrics for individual ETFs. As an alternative, we considered requiring
ETFs to post the disclosures in a structured format on their websites.
Structured disclosures are made machine-readable by having reported
disclosure items labeled (tagged) using a markup language that can be
processed by software for analysis.\654\ The resulting standardization
under this alternative would allow for extraction, aggregation,
comparison, and analysis of reported information through significantly
more automated means than is possible with unstructured formats such as
HTML.\655\ This alternative would facilitate the extraction and
analysis through automated means of an individual fund's disclosures
over time which would offer the greatest benefit for higher-frequency
ETF disclosures and potentially the comparison of disclosures across a
small number of ETFs. However, requiring a structured disclosure format
would not lower the burden on investors and other data users of
separately visiting each website to obtain each ETF's disclosure.
---------------------------------------------------------------------------

    \654\ Structured information can be stored, shared, and
presented in different systems or platforms. Standardized markup
languages, such as XML or XBRL, use sets of data element tags for
each required reporting element, referred to as taxonomies.
    \655\ Several commenters agreed with our assessment of the
benefits of a structured disclosure format. One commenter stated
that ``having such information submitted in a standardized,
structured format to the Commission and available publicly would aid
comparison and analysis.'' The commenter further indicated that such
information should be provided in the XBRL format on a daily basis.
See Morningstar Comment Letter. Another commenter expressed general
support for having ``standardized basket reporting in XBRL.'' See
Angel Comment Letter. Another commenter recommended that ETFs ``be
required to disclose their daily portfolio holdings using a common
downloadable or machine[hyphen]readable format specified by the
Commission.'' See Eaton Vance Comment Letter. A different commenter
recommended that ``portfolio holdings information be supplied in a
standard file format with comma-separated value.'' See SSGA Comment
Letter I.
---------------------------------------------------------------------------

    The structured data requirement could impose a cost on ETFs of
tagging the information in a structured format, particularly to the
extent that ETFs do not otherwise structure this data in this manner
for their own purposes.\656\ However, we believe that if the XML
format, for example, were used for structuring the additional
disclosure, the incremental cost of tagging information in each such
disclosure would likely be relatively modest.\657\
---------------------------------------------------------------------------

    \656\ See, e.g., CSIM Comment Letter (stating that ``[t]he
alternatives described in the proposal, including the use of
structured disclosures, will not be user-friendly for individual
investors and will incur unnecessary costs to the ETF.'').
    \657\ For example, based on staff experience with XML filings,
the costs of tagging the information in XML are minimal given the
technology that would be used to structure the data. XML is a widely
used data format, and based on the Commission's understanding of
current practices, most reporting persons and third party service
providers have production systems already in place to report
schedules of investments and other information. Therefore, we
believe systems would be able to accommodate XML data without
significant costs, and large-scale changes would likely not be
necessary to output structured data files.
---------------------------------------------------------------------------

    As another alternative, we considered requiring ETFs to make the
additional website disclosures available in a centralized repository in
a structured format, such as by filing them on EDGAR.\658\ Making the
information available in a structured format on EDGAR would likely
improve its accessibility and the ability of investors, the Commission,
and other data users, such as third-party data aggregators, to
efficiently extract information for purposes of aggregation,
comparison, and analysis of information across multiple funds and time
periods.\659\ Requiring the information to be filed on EDGAR also would
enable data users to retain access to such historical information in
the event that such information is subsequently removed from the fund's
website.\660\ We recognize that filers might incur

additional costs under this alternative, compared to the requirement in
the rule to post the additional disclosures in an unstructured format
on fund websites.\661\ Such costs would likely vary across filers,
depending on the systems and processes they currently have in place,
such as for internal reporting, posting of website updates, and
submission of regulatory filings, and the manner in which filers
currently maintain data required for the additional disclosures under
the final rule.\662\
---------------------------------------------------------------------------

    \658\ The Commission has previously adopted rules requiring the
structuring of certain information disclosed by funds. See, e.g.,
Reporting Modernization Adopting Release, supra footnote 263; Money
Market Fund Reform, Investment Company Act Release No. 29132 (Feb.
23, 2010) [75 FR 10059 (Mar. 4, 2010)]; Interactive Data for Mutual
Fund Risk/Return Summary, Investment Company Act Release No. 28617
(Feb. 11, 2009) [74 FR 7747 (Feb. 19, 2009)].
    \659\ One commenter agreed with the assessment in the 2018 ETF
Proposing Release of the benefits of making the additional website
disclosures available in a centralized repository in a structured
format, stating that ``[a]ll holdings and basket information should
be filed in a central location (such as EDGAR) in a common format.
It is too difficult to search many funds groups for this information
and then putting it in a common format for analysis.'' See Reagan
Comment Letter.
    \660\ See Reagan Comment Letter.
    \661\ See Invesco Comment Letter (supporting dissemination via
the ETF sponsor's website and opposing any additional dissemination
requirements, such as filing on EDGAR, stating that building a
separate data feed would involve additional costs and internal
resources).
    \662\ Such costs would also depend on the specific nature of the
EDGAR filing requirement under this alternative.
---------------------------------------------------------------------------

7. Pro Rata Baskets
    Rule 6c-11 will require ETFs relying on the rule to adopt and
implement written policies and procedures that govern the construction
of basket assets and the process that will be used for the acceptance
of basket assets. As an alternative, we considered requiring that an
ETF's basket generally correspond pro rata to its portfolio holdings,
while identifying certain limited circumstances under which an ETF may
use a non-pro rata basket, as we have done in our exemptive orders
since approximately 2006.\663\
---------------------------------------------------------------------------

    \663\ ETFs whose orders we are rescinding and that are operating
under exemptive orders issued before approximately 2006, which
included few explicit restrictions, would have reduced basket
flexibility under the alternative compared to the baseline in that
they are required to adopt custom basket policies and procedures
under rule 6c-11.
---------------------------------------------------------------------------

    The requirement included in these orders was designed to address
the risk that an authorized participant or other market participant
could take advantage of its relationship with the ETF (i.e., engage in
cherry picking or dumping). However, we believe that the rule's
additional policies and procedures requirements for custom baskets will
provide a principles-based approach that is designed to limit potential
abuses so that they would be unlikely to cause significant harm to
investors. In addition, we believe that the increased basket
flexibility under the rule will benefit the effective functioning of
the arbitrage mechanism, particularly benefiting fixed-income,
international, and actively managed ETFs.\664\
---------------------------------------------------------------------------

    \664\ Section IV.C.1.b.i supra discusses the possibility that
some ETFs may use the increased basket flexibility of the rule to
over- or under-weight securities in their baskets compared to their
portfolios based on the liquidity of these securities. Such a
practice would not be possible under the alternative that would
require an ETF's basket to generally correspond pro rata to its
portfolio holdings.
---------------------------------------------------------------------------

8. Treatment of Existing Exemptive Relief
    As proposed, we will rescind the exemptive relief we have issued to
ETFs that will be permitted to rely on the rule. As an alternative, we
considered allowing ETFs with existing exemptive relief in orders that
do not contain a self-termination clause to continue operating under
their relief rather than requiring them to operate in reliance on the
rule.
    The Commission believes that allowing ETFs to continue operating
under their existing relief would create differences in the conditions
under which funds that would otherwise be subject to rule 6c-11
operate. Specifically, some ETFs that determine they do not need the
additional flexibility (e.g., basket flexibility) the rule will provide
could choose to continue operating under their existing relief rather
than in reliance on conditions of the rule, such as standardized
presentation of portfolio holdings. This self-selection would
perpetuate existing disparity in the conditions under which these ETFs
are allowed to operate.
    Measured against the baseline, the alternative would thus have
smaller benefits arising from improved disclosure. For example, an ETF
that chose to continue to operate under its existing exemptive relief
would not be required to present its portfolio holdings in the
standardized format prescribed by rule 6c-11. As discussed in section
IV.C.1.b.i above, we believe that this requirement will benefit
investors of ETFs that are subject to rule 6c-11 by allowing them to
more easily identify arbitrage opportunities and compare ETFs that have
similar investment objectives. In addition, the alternative would not
level the playing field among ETFs subject to rule 6c-11 with regard to
these conditions and thus not be as effective at promoting product
competition as the rule. One commenter agreed, stating that the
rescission of the orders will further the Commission's regulatory goal
of creating a consistent regulatory framework for ETFs.\665\ In
addition, it would be more difficult for the Commission to evaluate
compliance with applicable law under the alternative compared to the
rule, as some of the ETFs whose exemptive relief we will rescind could
choose to continue to operate under their exemptive relief. The
Commission also believes that the costs to funds associated with
rescinding the existing exemptive relief would be minimal, as we
anticipate that substantially all ETFs whose relief will be rescinded
will be able to continue operating with only minor adjustments, other
than being required to develop basket asset policies and
procedures.\666\
---------------------------------------------------------------------------

    \665\ See supra footnote 455 and accompanying text.
    \666\ Under the alternative, some ETFs may volunarily change
operational or compliance functions in order to be able to operate
under the rule, if this provides the ETFs increased basket
flexibility compared to operating under their existing exemptive
orders.
---------------------------------------------------------------------------

9. ETFs Organized as UITs
    Rule 6c-11 will be available only to ETFs that are organized as
open-end funds.\667\ As an alternative, we considered including ETFs
organized as UITs in the scope of the rule. However, as discussed above
in section II.A.1, we believe that the terms and conditions of the
existing exemptive orders for UITs are appropriately tailored to
address the unique features of the UIT structure.
---------------------------------------------------------------------------

    \667\ While the vast majority of ETFs currently in operation are
organized as open-end funds, some early ETFs, which currently have a
significant amount of assets, are organized as UITs. Examples
include SPDR S&P 500 ETF Trust (SPY) and PowerShares QQQ Trust,
Series 1 (QQQ).
---------------------------------------------------------------------------

    In addition, as ETFs have greater investment flexibility under the
open-end fund structure than the UIT structure, we believe that most
new ETFs entering into the market will prefer to operate under the
open-end fund structure rather than the UIT structure. No new UIT ETFs
have come to market in recent years, and we do not think that there
would be significant economic benefits to including UITs in the scope
of the rule.\668\
---------------------------------------------------------------------------

    \668\ ETFs sponsors that plan to launch a new ETF organized as a
UIT will continue to be able to rely on the exemptive order process.
---------------------------------------------------------------------------

10. Treatment of Leveraged/Inverse ETFs
    As discussed in section II.A.3 above, leveraged/inverse ETFs will
not be able to rely on final rule 6c-11. As an alternative, we
considered permitting leveraged/inverse ETFs to rely on the rule, while
maintaining the status quo of existing exemptive orders with respect to
the amount of leveraged market exposure that leveraged/inverse ETFs may
obtain (i.e., 300% of the return or inverse return).\669\
---------------------------------------------------------------------------

    \669\ See supra footnote 72.
---------------------------------------------------------------------------

    This alternative could benefit competition among leveraged/inverse
ETFs as compared to the baseline, as fund sponsors that currently do
not have an exemptive order permitting them to operate this type of ETF
could enter the market. As a result, fees for leveraged/inverse ETFs
would likely decrease and their assets could increase.

However, as discussed in detail in section II.A.3 above, while
leveraged/inverse ETFs are structurally and operationally similar to
other types of ETFs within the scope of rule 6c-11, we believe it is
premature to permit sponsors to form and operate leveraged/inverse ETFs
in reliance on the rule without first addressing the investor
protection purposes and concerns underlying section 18 of the Act. We
therefore believe that the Commission should first complete its broader
consideration of the use of derivatives by registered funds before
considering allowing leveraged/inverse ETFs to rely on the rule.

V. Paperwork Reduction Act

A. Introduction

    Rule 6c-11 will result in new ``collection of information''
requirements within the meaning of the Paperwork Reduction Act of 1995
(``PRA'').\670\ In addition, the amendments to Form N-1A, Form N-8B-2,
and Form N-CEN will impact the collection of information burden under
those forms and Form S-6.\671\ Rule 6c-11 also will impact the current
collection of information burden of rule 0-2 under the Act.\672\
---------------------------------------------------------------------------

    \670\ 44 U.S.C. 3501-3520.
    \671\ 17 CFR 274.11A; 17 CFR 274.12; 17 CFR part 101; 17 CFR
239.16.
    \672\ 17 CFR 270.0-2.
---------------------------------------------------------------------------

    The titles for the existing collections of information are: ``Form
N-1A under the Securities Act of 1933 and under the Investment Company
Act of 1940, Registration Statement for Open-End Management Companies''
(OMB No. 3235-0307); ``Form N-8B-2 under the Investment Company Act of
1940, Registration Statement of Unit Investment Trusts Which are
Currently Issuing Securities'' (OMB No. 3235-0186); ``Form S-6 [17 CFR
239.19], for registration under the Securities Act of 1933 of Unit
Investment Trusts registered on Form N-8B-2'' (OMB Control No. 3235-
0184); ``Form N-CEN'' (OMB Control No. 3235-0730); and ``Rule 0-2 under
the Investment Company Act of 1940, General Requirements of Papers and
Applications'' (OMB Control No. 3235-0636). The title for the new
collection of information would be: ``Rule 6c-11 under the Investment
Company Act of 1940, `Exchange-traded funds.' '' The Commission is
submitting these collections of information to the Office of Management
and Budget (``OMB'') for review in accordance with 44 U.S.C. 3507(d)
and 5 CFR 1320.11. An agency may not conduct or sponsor, and a person
is not required to respond to, a collection of information unless it
displays a currently valid control number.
    We published notice soliciting comments on the collection of
information requirements in the 2018 ETF Proposing Release and
submitted the proposed collections of information to OMB for review and
approval in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. We
received no comments on the collection of information requirements. We
discuss below the collection of information burdens associated with
rule 6c-11 and its impact on rule 0-2 as well as the amendments to
Forms N-1A, N-8B-2, S-6 and N-CEN.

B. Rule 6c-11

    Rule 6c-11 will permit ETFs that satisfy certain conditions to
operate without first obtaining an exemptive order from the Commission.
The rule is designed to create a consistent, transparent, and efficient
regulatory framework for such ETFs and facilitate greater competition
and innovation among ETFs. The rule attempts to eliminate historical
distinctions and conditions that we no longer believe are necessary and
thus appropriately level the playing field for open-end ETFs that
pursue the same or similar investment strategies.
    Rule 6c-11 will require an ETF to disclose certain information on
its website, to maintain certain records, and to adopt and implement
written policies and procedures governing its constructions of baskets,
as well as written policies and procedures that set forth detailed
parameters for the construction and acceptance of custom baskets that
are in the best interests of the ETF and its shareholders. These
requirements are collections of information under the PRA.
    The respondents to rule 6c-11 will be ETFs registered as open-end
management investment companies other than share class ETFs, leveraged/
inverse ETFs, or non-transparent ETFs. This collection will not be
mandatory, but will be necessary for those ETFs seeking to operate
without individual exemptive orders, including all ETFs whose existing
exemptive orders will be rescinded. In the 2018 ETF Proposing Release,
we estimated that 1,635 ETFs would likely rely on rule 6c-11.\673\ We
did not receive public comment on this estimate, but are updating the
estimate to 1,735 ETFs to reflect industry data as of December 31,
2018.\674\ Information provided to the Commission in connection with
staff examinations or investigations will be kept confidential subject
to the provisions of applicable law.
---------------------------------------------------------------------------

    \673\ 2018 ETF Proposing Release, supra footnote 7, at section
IV.B. This estimate did not include UIT ETFs, share class ETFs,
leveraged/inverse ETFs, or non-transparent ETFs. Id.
    \674\ This figure is based on a staff analysis of Bloomberg
data.
---------------------------------------------------------------------------

1. Website Disclosures
    Rule 6c-11 will require an ETF to disclose on its website, each
business day, the portfolio holdings that will form the basis for each
calculation of NAV per share.\675\ The rule will require that the
portfolio holdings information contain specified information, including
description and amount of each position.\676\ Additionally, the rule
will require an ETF to disclose on its website: (i) The ETF's NAV per
share, market price, and premium or discount, each as of the end of the
prior business day; (ii) a tabular chart and line graph showing the
ETF's premiums and discounts for the most recently completed calendar
year and the most recently completed calendar quarters of the current
year (or for the life of the fund if shorter); and (iii) the ETF's
median bid-ask spread over the last thirty calendar days.\677\
---------------------------------------------------------------------------

    \675\ Rule 6c-11(c)(1)(i).
    \676\ Rule 6c-11(c)(1)(i).
    \677\ Rule 6c-11(c)(1)(ii)-(v).
---------------------------------------------------------------------------

    Rule 6c-11(c)(1)(vi) also will require any ETF whose premium or
discount was greater than 2% for more than seven consecutive trading
days to post that information on its website, along with a discussion
of the factors that are reasonably believed to have materially
contributed to the premium or discount.\678\ Given the threshold for
this requirement, we do not believe that many ETFs will be required to
disclose this information on a routine basis. In the 2018 ETF Proposing
Release, we estimated that all ETFs will be required to make this
disclosure only once in their lifetime.\679\ Therefore, we believed
that this requirement will impose only initial costs and that there
will be no ongoing costs associated with it.\680\
---------------------------------------------------------------------------

    \678\ Rule 6c-11(c)(1)(vi). This information would be posted on
the trading day immediately following the eighth consecutive trading
day on which the ETF had a premium or discount greater than 2% and
be maintained on the ETF's website for at least one year following
the first day it was posted. See supra section II.C.6.c.
    \679\ 2018 ETF Proposing Release, supra footnote 7, at section
IV.B.1.
    \680\ For purposes of this analysis, we estimate that 1,735 ETFs
would be required to make this disclosure at least once in their
lifetime.

                                                       Table 11--Website Disclosure PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Internal time      Initial  external     Annual external
                                 Initial hours    Annual hours \1\         Wage rate \2\          costs             cost burden          cost burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Proposed Estimates \3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Website development...........             7.5  2.5 hours...........  x  $274 (senior      $685...............  $2,000.............  $666.65
                                                                          systems
                                                                          analyst).
                                           7.5  2.5 hours...........  x  $319 (senior      $797.50............
                                                                          programmer).
Review of website disclosures.               5  1.7 hours...........  x  $298 (compliance  $506.60............
                                                                          manager).
                                             5  1.7 hours...........  x  $352 (compliance  $598.40............
                                                                          attorney).
Website updates...............  ..............  1 hour..............  x  $274 (senior      $274...............
                                                                          systems
                                                                          analyst).
                                                1 hour..............  x  $319 (senior      $319...............
                                                                          programmer).
Review of updated website       ..............  1.25 hours..........  x  $298 (compliance  $372.50............
 disclosure.                                                              manager).
                                                1.25 hours..........  x  $352 (compliance  $440...............
                                                                          attorney).
                               -------------------------------------------------------------------------------------------------------------------------
    Total annual burden per                 25  13.3 hours                                 $3,971.30..........  $2,000.............  $666.65
     ETF.
    Number of ETFs............  ..............  x 1,635                                    x 1,635............  x 1,635............  x 1,635
                               -------------------------------------------------------------------------------------------------------------------------
        Total annual burden...  ..............  21,745.5 hours                             $6,493,075.50......  $3,270,000.........  $1,089,972.75
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Final Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Website development...........       \4\ 11.25  3.75 hours..........  x  $284 (senior      $1,065.............  $3,000 \4\.........  $1,000
                                                                          systems
                                                                          analyst) \5\.
                                     \4\ 11.25  3.75 hours..........  x  $331 (senior      $1,241.25..........
                                                                          programmer) \5\.
Review of website disclosures.         \4\ 7.5  2.5 hours...........  x  $309 (compliance  $772.50............
                                                                          manager) \5\.
                                       \4\ 7.5  2.5 hours...........  x  $365 (compliance  $912.50............
                                                                          attorney) \5\.
Website updates...............  ..............  1.5 hours \4\.......  x  $284 (senior      $426...............
                                                                          systems
                                                                          analyst) \5\.
                                                1.5 hours \4\.......  x  $331 (senior      $496.50............
                                                                          programmer) \5\.
Review of updated website       ..............  1.875 hours \4\.....  x  $309 (compliance  $579.38............
 disclosure.                                                              manager) \5\.
                                                1.875 hours \4\.....  x  $365 (compliance  $684.36............
                                                                          attorney) \5\.
                               -------------------------------------------------------------------------------------------------------------------------
    Total annual burden per               37.5  19.25 hours                                $6,177.49..........  $3,000.............  $1,000
     ETF.
    Number of ETFs............  ..............  x 1,735 \5\                                x 1,735 \5\........  x 1,735 \5\........  x 1,735 \5\
                               -------------------------------------------------------------------------------------------------------------------------
        Total annual burden...  ..............  33,398.75 hours.....                       $10,717,945.15.....  $5,205,000.........  $1,735,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a three-year period.
\2\ See supra footnote 568.
\3\ 2018 Proposing Release, supra footnote 7, at section IV.B.1.
\4\ Estimate revised to reflect modifications from the proposal.
\5\ Estimate revised to reflect updated industry data.

    Table 11 above summarizes the proposed PRA estimates included in
the 2018 ETF Proposing Release and the final PRA estimates associated
with the website disclosures in rule 6c-11.\681\ We did not receive
public comment on our proposed estimates, but we have revised them as a
result of updated industry data and modifications from the proposal.
Specifically, we are increasing the initial and ongoing internal and
external burden estimates by 50 percent each to account for our
modification to the proposal that will require ETFs to disclose median
bid-ask spread information on their websites as part of rule 6c-11,
partially offset by the elimination of the proposed published basket
requirement and the modification to the proposed requirement to
disclose portfolio holdings related to timing and presentation of those
holdings.\682\ In addition, we are revising the estimated wage rates
and estimated number of ETFs that will be subject to the rule to
reflect updated industry data.
---------------------------------------------------------------------------

    \681\ 2018 ETF Proposing Release, supra footnote 7, at section
IV.B.1.
    \682\ See supra section II.C.6.d, section II.C.5.c.
---------------------------------------------------------------------------

2. Recordkeeping
    Rule 6c-11 will require an ETF to preserve and maintain copies of
all written authorized participant agreements.\683\ Additionally, the
rule will require ETFs to maintain records setting forth the following
information for each basket exchanged with an authorized participant:
(i) Ticker symbol, CUSIP or other identifier, description of holding,
quantity of each holding, and percentage weight of each holding
composing the basket; (ii) if applicable, identification of the basket
as a ``custom basket'' and a record stating that the custom basket
complies with the ETF's custom basket policies and procedures (if
applicable); (iii) cash balancing amounts (if any); and (iv) the
identity of the authorized participant conducting the transaction.\684\
ETFs would have to maintain these records for at least five years, the
first two years in an easily accessible place.\685\
---------------------------------------------------------------------------

    \683\See rule 6c-11(d).
    \684\ See supra footnote 411 and accompanying text. Although we
have modified the recordkeeping requirement from the proposal, we do
not believe the modified requirements would increase the time or
cost burdens set forth in the 2018 ETF Proposing Release. See 2018
ETF Proposing Release, supra footnote 7, at section IV.B.2.
    \685\ Id.

                                                          Table 12--Recordkeeping PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Internal time      Initial  external     Annual external
                                 Initial hours      Annual hours           Wage rate \1\          costs             cost burden          cost burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Proposed Estimates \2\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Recordkeeping.................               0  2.5 hours...........  x  $60 (general      $150...............
                                                                          clerk).
                                             0  2.5 hours...........  x  $92 (senior       $230...............
                                                                          computer
                                                                          operator).
                               -------------------------------------------------------------------------------------------------------------------------
    Total annual burden per                  0  5 hours.............                       $380...............
     ETF.
    Number of ETFs............  ..............  x 1,635.............                       x 1,635............
                               -------------------------------------------------------------------------------------------------------------------------
        Total annual burden...               0  8,175 hours.........                       $621,300.00........  $0.................  $0
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Final Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Recordkeeping.................               0  2.5 hours...........  x  $62 (general      $155...............
                                                                          clerk) \3\.
                                             0  2.5 hours...........  x  $95 (senior       $237.50............
                                                                          computer
                                                                          operator) \3\.
                               -------------------------------------------------------------------------------------------------------------------------
    Total annual burden per                  0  5 hours.............                       $392.50............
     ETF.
    Number of ETFs............  ..............  x 1,735 \3\.........                       x 1,735............
                               -------------------------------------------------------------------------------------------------------------------------
        Total annual burden...  ..............  8,675 hours                                $680,987.50........  $0.................  $0
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Based on SIFMA Report, supra footnote 568, as modified by Commission staff.
\2\ See 2018 ETF Proposing Release at section IV.B.2.
\3\ Estimate revised to reflect updated industry data.

    Table 12 above summarizes the proposed PRA estimates included in
the 2018 ETF Proposing Release and the final PRA estimates associated
with the recordkeeping requirements in rule 6c-11.\686\ We did not
receive public comment on our proposed estimates, but we have revised
the estimates as a result of updated industry data. Specifically, we
have updated the estimated wage rates and the estimated number of ETFs
that will be subject to the rule and thus the recordkeeping
requirement. We do not estimate that there will be any initial or
ongoing external costs associated with the recordkeeping requirement.
---------------------------------------------------------------------------

    \686\ See 2018 ETF Proposing Release, supra footnote 7, at
section IV.B.2.
---------------------------------------------------------------------------

3. Policies and Procedures
    As proposed, rule 6c-11 will require ETFs relying on the rule to
adopt and implement written policies and procedures that govern the
construction of baskets and the process that will be used for the
acceptance of basket assets.\687\ Additionally, to use custom baskets,
an ETF would be required to adopt and implement written policies and
procedures setting forth detailed parameters for the construction and
acceptance of custom baskets that are in the best interests of the ETF
and its shareholders.\688\ These policies and procedures also may
include a periodic review requirement in order to ensure that the ETF's
custom basket procedures are being consistently followed.\689\ Finally,
as discussed above, an ETF using custom baskets would be required to
maintain records detailing the composition of each custom basket.
---------------------------------------------------------------------------

    \687\ See rule 6c-11(c)(3).
    \688\ See rule 6c-11(c)(3).
    \689\ See supra text following footnote 294.

                                                     Table 13--Policies and Procedures PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Initial external     Annual external
                                 Initial hours    Annual hours \1\         Wage rate \2\   Internal time costs      cost burden          cost burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Proposed Estimates \3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Establishing and implementing                3  1 hour..............  x  $317 (senior      $317...............
 standard baskets policies and                                            manager).
 procedures.
                                             2  .67 hours...........  x  $511 (chief       $340.67............
                                                                          compliance
                                                                          officer).
                                             1  .33 hours...........  x  $352 (compliance  $117.33............
                                                                          attorney).
Establishing and implementing                9  3 hours.............  x  $317 (senior      $951...............
 custom baskets policies and                                              manager).
 procedures.
                                             5  1.67 hours..........  x  $449 (ass't       $748.33............
                                                                          general
                                                                          counsel).
                                             5  1.67 hours..........  x  $511 (chief       $851.67............
                                                                          compliance
                                                                          officer).
                                             1  .33 hours...........  x  $352 (compliance  $117.33............
                                                                          attorney).
Reviewing and updating baskets  ..............  5 hours.............  x  $317 (senior      $1,585.............
 policies and procedures.                                                 manager).
                                                2.5 hours...........  x  $449 (ass't       $1,122.50..........
                                                                          general
                                                                          counsel).
                                                2.5 hours...........  x  $511 (chief       $1,277.50..........
                                                                          compliance
                                                                          officer).

    Total annual burden per     ..............  18.67 hours.........                       $7,428.33..........
     ETF.
                               -------------------------------------------------------------------------------------------------------------------------
    Number of ETFs............  ..............  x 1,635.............                       x 1,635............
        Total annual burden...  ..............  30,525 hours \4\....                       $12,145,320 \4\....  $0.................  $0
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Final Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Establishing and implementing                3  1 hour..............  x  $329 (senior      $329...............
 standard baskets policies and                                            manager) \5\.
 procedures.
                                             2  .67 hours...........  x  $530 (chief       $353.33............
                                                                          compliance
                                                                          officer) \5\.
                                             1  .33 hours...........  x  $365 (compliance  $121.67............
                                                                          attorney) \5\.
Establishing and implementing                9  3 hours.............  x  $329 (senior      $987...............
 custom baskets policies and                                              manager) \5\.
 procedures.
                                             5  1.67 hours..........  x  $466 (ass't       $776.67............
                                                                          general
                                                                          counsel) \5\.
                                             5  1.67 hours..........  x  $530 (chief       $883.33............
                                                                          compliance
                                                                          officer) \5\.
                                             1  .33 hours...........  x  $365 (compliance  $121.67............
                                                                          attorney) \5\.
Reviewing and updating baskets                  5 hours.............  x  $329 (senior      $1,645.............
 policies and procedures.                                                 manager) \5\.
                                                2.5 hours...........  x  $466 (ass't       $1,165.............
                                                                          general
                                                                          counsel) \5\.
                                                2.5 hours...........  x  $530 (chief       $1,325.............
                                                                          compliance
                                                                          officer) \5\.
                               -------------------------------------------------------------------------------------------------------------------------
    Total annual burden per                     18.67 hours.........                       $7,707.67..........  $0.................  $0
     ETF.
                               -------------------------------------------------------------------------------------------------------------------------
    Number of ETFs............                  x 1,735 \5\.........                       x 1,735............
        Total annual burden...                  32,392.45 hours.....                       $13,372,807.45.....                       ...................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a three-year period.
\2\ Based on SIFMA Report, supra footnote 568, as modified by Commission staff.
\3\ See 2018 ETF Proposing Release at section IV.B.3.
\4\ The proposed estimates shown here for the total annual hour and cost burdens (30,525 hours and $12,145,320) are not identical to the totals provided
  in the 2018 ETFs Proposing Release. See supra footnote 7, at section IV.B.2 (estimating total hour and cost burdens of 30,520 hours and $12,111,525).
  This discrepancy is due to our calculation of the annual hours in the 2018 ETF Proposing Release, in which the total initial burden hours were
  calculated before being amortized over 3 years (i.e., divided by 3). Here, the initial burden hours were amortized over 3 years before we calculated
  the total annual hour and cost burdens, resulting in slightly higher totals. This does not affect the final estimates set forth above.
\5\ Estimate revised to reflect updated industry data.

    Table 13 above summarizes the proposed PRA estimates included in
the 2018 ETF Proposing Release and the final PRA estimates associated
with the policies and procedures requirements in rule 6c-11.\690\ We
did not receive public comment on our proposed estimates, but we are
revising the estimates as a result of updated industry data.
Specifically, we have updated the estimated wage rates and the
estimated number of ETFs that will be subject to the rule and thus the
policies and procedures requirement. We do not estimate that there will
be any initial or ongoing external costs associated with this
requirement.
---------------------------------------------------------------------------

    \690\ See 2018 ETF Proposing Release, supra footnote 7, at
section IV.B.2.
---------------------------------------------------------------------------

4. Estimated Total Burden

                                                        Table 14--Rule 6c-11 Total PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             Internal  hour burden                Internal  burden time cost               External  cost burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
Website disclosure.................  33,398.75 hours......................  $10,717,945.15.......................  $1,735,000
Recordkeeping......................  8,675 hours..........................  $680,987.50..........................  $0
Developing policies and procedures.  32,392.45 hours......................  $13,372,807.45.......................  $0
                                    --------------------------------------------------------------------------------------------------------------------
    Total annual burden............  74,466.2 hours.......................  $24,771,740.10.......................  $1,735,000
    Number of ETFs.................  / 1,735..............................  / 1,735..............................  / 1,735
                                    --------------------------------------------------------------------------------------------------------------------
        Average annual burden per    42.92 hours..........................  $14,277.66...........................  $1,000
         ETF.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    As summarized in Table 14 above, we estimate that the total hour
burdens and time costs associated with rule 6c-11, including the burden
associated with website disclosure, recordkeeping, and developing
policies and procedures will result in an average aggregate annual
burden of 74,466.2 hours and an average aggregate time cost of
$24,771,740.10. We also estimate that there are external costs of
$1,735,000 associated with this collection of information. Therefore,

each ETF will incur an annual burden of approximately 42.92 hours, at
an average time cost of approximately $14,277.66, and an external cost
of $1,000 to comply with rule 6c-11.

C. Rule 0-2

    Section 6(c) of the Act provides the Commission with authority to
conditionally or unconditionally exempt persons, securities or
transactions from any provision of the Act if and to the extent that
such exemption is necessary or appropriate in the public interest and
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Act. Rule 0-2 under the
Act, entitled ``General Requirements of Papers and Applications,''
prescribes general instructions for filing an application seeking
exemptive relief with the Commission.\691\
---------------------------------------------------------------------------

    \691\ See Supporting Statement of Rule 0-2 under the Investment
Company Act of 1940, General Requirements of Paper Applications
(Nov. 23, 2016), available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201602-3235-008 (summarizing how applications are
filed with the Commission in accordance with the requirements of
rule 0-2).
---------------------------------------------------------------------------

    As discussed above, rule 6c-11 will permit ETFs that satisfy the
conditions of the rule to operate without the need to obtain an
exemptive order from the Commission under the Act. Therefore, rule 6c-
11 will alleviate some of the burdens associated with rule 0-2 because
it will reduce the number of entities that require exemptive relief in
order to operate.\692\ Based on staff experience, we estimate that
approximately one-third (rounded in the 2018 ETF Proposing Release and
here to 30%) of the annual burdens associated with rule 0-2 are
attributable to ETF applications.
---------------------------------------------------------------------------

    \692\ We expect to continue to receive applications for complex
or novel ETF exemptive relief that are beyond the scope of the rule.
See supra at text following footnote 570.

                                                            Table 15--Rule 0-2 PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Annual hours                    Annual internal time cost             Annual external cost burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rule 0-2 burdens currently approved  x = 5,340............................  y = $2,029,200.60....................  z = $14,090,000
Estimated effect of rule 6c-11 on    -0.3(x)..............................  -0.3(y)..............................  -0.3(z)
 rule 0-2 burdens.
                                    --------------------------------------------------------------------------------------------------------------------
    Revised estimated burden.......  3,738 hours..........................  $1,420,440.42........................  $9,863,000
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Table 15 above summarizes the proposed estimates included in the
2018 ETF Proposing Release.\693\ We did not receive public comment on
these estimates, and we have not revised them.
---------------------------------------------------------------------------

    \693\ See 2018 ETF Proposing Release, supra footnote 7, at
section IV.B.2.
---------------------------------------------------------------------------

D. Form N-1A

    Form N-1A is the registration form used by open-end management
investment companies. The respondents to the amendments to Form N-1A
are open-end management investment companies registered or registering
with the Commission. Compliance with the disclosure requirements of
Form N-1A is mandatory for open-end funds (to the extent applicable)
including all ETFs organized as open-end funds. Responses to the
disclosure requirements are not confidential. We currently estimate for
Form N-1A a total hour burden of 1,642,490 burden hours and external
cost of $131,139,208.\694\
---------------------------------------------------------------------------

    \694\ This estimate is based on the last time the form's
information collection was submitted for PRA approval in 2019. When
we issued the 2018 ETF Proposing Release, the current estimate for
Form N-1A was a total burden hour of 1,579,974 burden hours, with an
estimated internal cost of $129,338,408, and external cost of
$124,820,197.
---------------------------------------------------------------------------

    We are adopting amendments to Form N-1A designed to provide
investors who purchase open-end ETF shares in secondary market
transactions with tailored information regarding ETFs, including
information regarding purchasing and selling shares of ETFs.\695\
Specifically, the amendments to Form N-1A will require new narrative
disclosures regarding ETF trading and associated costs.\696\ In
addition, we are requiring an ETF that does not rely on rule 6c-11 to
disclose median bid-ask spread information on their websites or in
their prospectuses.\697\ The amendments also exclude ETFs that provide
premium/discount disclosures on their websites in accordance with rule
6c-11 from the premium discount disclosure requirements in Form N-
1A.\698\ We also are adopting amendments to Form N-1A designed to
eliminate certain disclosures for ETFs that are no longer
necessary.\699\
---------------------------------------------------------------------------

    \695\ See supra section II.H.
    \696\ See supra section II.H.2.a.
    \697\ See supra section II.H.2.b.
    \698\ See supra section 0.
    \699\ See supra section II.H.3.
---------------------------------------------------------------------------

    Form N-1A generally imposes two types of reporting burdens on
investment companies: (i) The burden of preparing and filing the
initial registration statement; and (ii) the burden of preparing and
filing post-effective amendments to a previously effective registration
statement (including post-effective amendments filed pursuant to rule
485(a) or 485(b) under the Securities Act, as applicable).

                                                            Table 16--Form N-1A PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annual external cost
                                     Initial hours      Annual hours \1\             Wage rate \2\        Internal time costs             burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Proposed Estimates \3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Draft and finalize disclosure and   ..............  1.67 hours..............  x  $352 (compliance       $587.84................
 amend registration statement.                                                    attorney).
                                                 5  1.67 hours..............  x  $319 (senior           532.73.................
                                                                                programmer).
Bid-ask spread and interactive                   5  1.67 hours..............  x  $352 (compliance       587.84.................
 calculator requirements.                                                         attorney).
                                                 5  1.67 hours..............  x  $319 (senior           532.73.................
                                                                                programmer).
Review and update disclosures.....  ..............  2.5 hours...............  x  $352 (compliance       880....................
                                                                                attorney).
                                    ..............  2.5 hours...............  x  $319 (senior           797.50.................
                                                                                programmer).
Maintain bid-ask spread and         ..............  2.5 hours...............  x  $352 (compliance       880....................
 interactive calculator.                                                          attorney).
                                    ..............  2.5 hours...............  x  $319 (senior           797.50.................
                                                                                programmer).
                                   ---------------------------------------------------------------------------------------------------------------------
    Total new annual burden per                 20  16.67 hours.............  .  .....................  5,591.67...............
     ETF.                                           x 1,892.................                            x 1,892................
    Number of ETFs................
                                   ---------------------------------------------------------------------------------------------------------------------
        Total new annual burden...  ..............  31,596.4 hours..........  .  .....................  10,579,307.20..........
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Final Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Draft and finalize disclosure and                5  1.67 hours..............  x  $365 (compliance       609.55.................
 amend registration statement.                                                    attorney) \4\.
                                                 5  1.67 hours..............  x  $331 (senior           552.77.................
                                                                                programmer) \4\.
Bid-ask spread and premium or                \5\ 1  0.33 hours..............  x  $365 (compliance       121.67.................
 discount requirements.                                                           attorney) \4\.
                                             \5\ 1  0.33 hours..............  x  $331 (senior           110.33.................
                                                                                programmer) \4\.
Review and update disclosures.....  ..............  2.5 hours...............  x  $365 (compliance       912.50.................
                                                                                attorney) \4\.
                                    ..............  2.5 hours...............  x  $331 (senior           827.50.................
                                                                                programmer) \4\.
Maintain bid-ask spread             ..............  0.5 hours \5\...........  x  $365 (compliance       182.50.................
 requirements.                                                                    attorney) \4\.
                                    ..............  0.5 hours \5\...........  x  $331 (senior           165.50.................
                                                                                programmer) \4\.
                                   ---------------------------------------------------------------------------------------------------------------------
    Total new annual burden per                  7  10 hours................  .  .....................  3,482.32...............
     ETF.                                           x 1,970 \4\.............                            x 1,970 \4\............
    Number of ETFs................
                                   ---------------------------------------------------------------------------------------------------------------------
        Total new annual burden...  ..............  19,700 hours............  .  .....................  6,860,170.40...........  $ 0
        Current burden estimates..  ..............  + 1,642,490 hours.......  .  .....................  .......................  + $131,139,208
                                   ---------------------------------------------------------------------------------------------------------------------
            Revised burden          ..............  1,662,190 hours.........  .  .....................  .......................  $131,139,208
             estimates.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a three-year period.
\2\ See supra footnote 568.
\3\ 2018 Proposing Release, supra footnote 7, at section IV.D.
\4\ Estimate revised to reflect updated industry data.
\5\ Estimate revised to reflect modifications from the proposal.

    Table 16 above summarizes the proposed PRA estimates included in
the 2018 ETF Proposing Release and the final PRA estimates associated
Form N-1A as amended.\700\ We did not receive public comment on our
proposed PRA estimates, but we are revising our estimates as a result
of updated industry data and modifications from the proposal.
Specifically, we are decreasing the initial and ongoing internal and
external burden estimates associated with the bid-ask spread and
interactive calculator requirements by 80 percent each to account for
our elimination of the hypothetical example and interactive calculator
requirements and our decision to apply the prospectus bid-ask spread
requirements only to those ETFs that do not comply with the website
disclosure requirements in rule 6c-11, partially offset by the
additional premium or discount requirements.\701\ In addition, we are
revising the estimated wage rates and estimated number of ETFs that
will be subject to the rule to reflect updated industry data.
---------------------------------------------------------------------------

    \700\ 2018 Proposing Release, supra footnote 7, at section
IV.B.1.
    \701\ See supra sections II.H.
---------------------------------------------------------------------------

    As summarized in Table 16 above, we estimate that the total hour
burdens and time costs associated with the amendments to Form N-1A will
result in an average aggregate annual burden of 19,700 hours at an
average aggregate time cost of $6,860,170.40. We do not estimate any
change in external cost. Therefore the revised aggregate estimates for
Form N-1A, including the new amendments, are 1,662,190 hours and
$131,338,208 in external costs.

E. Forms N-8B-2 and S-6

    Form N-8B-2 is used by UITs to initially register under the
Investment Company Act pursuant to section 8 thereof.\702\ UITs are
required to file Form S-6 in order to register offerings of securities
with the Commission under the Securities Act.\703\ As a result, UITs
file Form N-8B-2 only once when the UIT is initially created and then
use Form S-6 to file all post-effective amendments to their
registration statements in order to update their prospectuses.\704\ We
currently estimate for Form S-6 a total burden of 107,245

hours, with an internal cost burden of approximately $34,163,955, and
an external cost burden estimate of $68,108,956.\705\ Additionally, we
currently estimate for Form N-8B-2 a total burden of 10 hours, with an
internal cost burden of approximately $3,360, and an external burden
estimate of $10,000.\706\
---------------------------------------------------------------------------

    \702\ See Form N-8B-2 [17 CFR 274.12].
    \703\ See Form S-6 [17 CFR 239.16]. Form S-6 is used for
registration under the Securities Act of securities of any UIT
registered under the Act on Form N-8B-2.
    \704\ Form S-6 incorporates by reference the disclosure
requirements of Form N-8B-2 and allows UITs to meet the filing and
disclosure requirements of the Securities Act.
    \705\ This estimate is based on the last time the form's
information collection was submitted for PRA revision in 2019.
    \706\ This estimate is based on the last time the form's
information collection was submitted for PRA renewal in 2018.
---------------------------------------------------------------------------

    To assist investors with better understanding the total costs of
investing in a UIT ETF, we are adopting disclosure requirements in Form
N-8B-2 that mirror those disclosures we are adopting for Form N-
1A.\707\ All UIT ETFs will be subject to these disclosure requirements.
For existing UIT ETFs, the one-time and ongoing costs of complying with
the amendments to Form N-8B-2 will accrue on Form S-6.
---------------------------------------------------------------------------

    \707\ See supra section II.I.

                                                            Table 17--Form S-6 PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annual external  cost
                                     Initial hours      Annual hours \1\             Wage rate \2\        Internal time  costs            burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Proposed Estimates \3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Draft and finalize disclosure and               10  3.33 hours..............  x  $352 (compliance       $1,173.32..............  .......................
 amend Form S-6.                                                                  attorney).
                                                10  3.33 hours..............  x  $319 (senior           1,063.33...............  .......................
                                                                                programmer).
Review and update disclosures on    ..............  5 hours.................  x  $352 (compliance       1,760..................  .......................
 Form S[dash]6.                                                                   attorney).
                                    ..............  5.......................  x  $319 (senior           1,595..................  .......................
                                                                                programmer).
                                   ---------------------------------------------------------------------------------------------------------------------
    Total new annual burden per                 20  16.67 hours.............  .  .....................  5,591.65...............  .......................
     UIT ETF.
                                   ---------------------------------------------------------------------------------------------------------------------
    Number of UIT ETFs............  ..............  x 8.....................  .  .....................  x 8....................  .......................
                                   ---------------------------------------------------------------------------------------------------------------------
        Total new annual burden...  ..............  133.36 hours............  .  .....................  44,733.20..............  .......................
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Final Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Draft and finalize disclosure and           \4\ 12  4 hours.................  x  $365 (compliance       1,460..................  .......................
 amend Form S[dash]6.                                                             attorney) \5\.
                                            \4\ 12  4 hours.................  x  $331 (senior           1,324..................  .......................
                                                                                programmer) \5\.
Review and update disclosures on    ..............  5 hours.................  x  $365 (compliance       1,825..................  .......................
 Form S[dash]6.                                                                   attorney) \5\.
                                    ..............  5 hours.................  x  $331(senior            $1,655.................  .......................
                                                                                programmer) \5\.
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
    Total new annual burden per                 24  18 hours................                            $6,264.................  .......................
     ETF.
    Number of UIT ETFs............  ..............  x 8.....................                            x 8....................  .......................
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
        Total new annual burden...  ..............  114 hours...............                            $50,112................  $ 0
        Current burden estimates..                  + 107,245 hours.........                                                     + $68,108,956
            Revised burden          ..............  107,359 hours...........                            .......................  $68,108,956
             estimates.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a three-year period.
\2\ See supra footnote 568.
\3\ 2018 Proposing Release, supra footnote 7, at Section IV.E.
\4\ Estimate revised to reflect modifications from the proposal.
\5\ Estimate revised to reflect updated industry data.

                                                           Table 18--Form N-8B-2 PRA Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Annual external  cost
                                     Initial hours      Annual hours \1\             Wage rate \2\        Internal time  costs            burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Proposed Estimates \3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Draft and finalize disclosure and               10  3.33 hours..............  x  $352 (compliance       $1,173.32..............  .......................
 file Form N-8B-2.                                                                attorney).
                                                10  3.33 hours..............  x  $319 (senior           $1,063.33..............  .......................
                                                                                programmer).
Complete Form N-8B-2..............  ..............  5 hours.................  x  $352 (compliance       $1,760.................  .......................
                                                                                attorney).
                                    ..............  5 hours.................  x  $319 (senior           $1,595.................  .......................
                                                                                programmer).
                                   ---------------------------------------------------------------------------------------------------------------------
    Total new annual burden per                 20  16.67 hours.............  .  .....................  $5,591.65..............  .......................
     UIT ETF.
    Number of new UIT ETFs........  ..............  x 1.....................  .  .....................  x 1....................  .......................
                                   ---------------------------------------------------------------------------------------------------------------------
        Total new annual burden...  ..............  16.67 hours.............  .  .....................  $5,591.65..............  .......................
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Final Estimates
--------------------------------------------------------------------------------------------------------------------------------------------------------
Draft and finalize disclosure and           \4\ 12  4 hours.................  x  $365 (compliance       $1,460.................  .......................
 file Form N-8B-2.                                                                attorney) \5\.
                                            \4\ 12  4 hours.................  x  $331 (senior           $1,324.................  .......................
                                                                                programmer) \5\.
Complete Form N-8B-2..............  ..............  5 hours.................  x  $365 (compliance       $1,825.................  .......................
                                                                                attorney) \5\.
                                    ..............  5 hours.................  x  $331 (senior           $1,655.................  .......................
                                                                                programmer) \5\.
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr
    Total new annual burden per                 24  18 hours................                            $6,264.................
     UIT ETF.
    Number of new UIT ETFs........  ..............  x 1.....................                            x 1....................
rrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr

        Total new annual burden...  ..............  18 hours................                            $6,264.................  $0
        Current burden estimates..  ..............  +10 hours...............                                                     + $10,000
            Revised burden          ..............  28 hours................                                                     $10,000
             estimates.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ Includes initial burden estimates annualized over a three-year period.
\2\ See supra footnote 568.
\3\ 2018 Proposing Release, supra footnote 7, at section IV.E.
\4\ Estimate revised to reflect modifications from the proposal.
\5\ Estimate revised to reflect updated industry data.

    Table 17 and Table 18 above summarize the proposed PRA estimates
included in the 2018 ETF Proposing Release and the final PRA estimates
associated with Forms S-6 and N-8B-2, respectively.\708\ We did not
receive public comment on our proposed estimates, but we are revising
our estimates as a result of updated industry data and modifications
from the proposal. Specifically, we are increasing the initial internal
burden estimate for both Form S-6 and Form N-8B-2 by 20 percent to
account for the additional premium and discount requirement, partially
offset by the modifications to the proposed fee and expense
requirements, including those relating to bid-ask spreads.\709\ In
addition, we are revising the estimated wage rates to reflect updated
industry data.\710\
---------------------------------------------------------------------------

    \708\ 2018 ETF Proposing Release, supra footnote 7, at section
IV.E.
    \709\ See supra section II.I.
    \710\ After reviewing updated industry data, no revisions to the
estimated number of UIT ETFs that will be subject to the form are
necessary.
---------------------------------------------------------------------------

    As summarized in Table 17 above, we estimate that the total hour
burdens and time costs associated with the amendments to Form S-6 will
result in an average aggregate annual burden of 114 hours at an average
aggregate time cost of $50,112. We do not estimate any change in
external cost. Therefore, the revised aggregate estimates for Form S-6,
including the new amendments, are 107,359 hours and $68,108,956 in
external costs.
    As summarized in Table 18 above, we estimate that the total hour
burdens and time costs associated with the amendments affecting Form N-
8B-2 will result in an average aggregate annual burden of 18 hours at
an average aggregate time cost of $6,264. We do not estimate any change
in external cost. Therefore, the revised aggregate estimates for Form
N-8B-2, including the new amendments, are 28 hours and $10,000 in
external costs.

F. Form N-CEN

    As discussed above, Form N-CEN is a structured form that requires
registered funds to provide census-type information to the Commission
on an annual basis.\711\ Today, the Commission is adopting amendments
to Form N-CEN to require ETFs to report if they are relying on rule 6c-
11.\712\ We currently estimate for Form N-CEN total burden hours of
74,425 and external costs of $2,088,176.\713\
---------------------------------------------------------------------------

    \711\ See Reporting Modernization Adopting Release, supra
footnote 263.
    \712\ See supra section II.J.
    \713\ This estimate is based on the last time the form's
information collection was submitted for PRA approval in 2017.

                   Table 19--Form N-CEN PRA Estimates
------------------------------------------------------------------------
                                                        Annual external
                                       Annual hours       cost burden
------------------------------------------------------------------------
                         Proposed Estimates \1\
------------------------------------------------------------------------
Report reliance on rule 6c-11.....          0.1 hours  .................
Number of ETFs....................            x 1,635  .................
                                   -------------------------------------
    Total new annual burden.......        163.5 hours  .................
------------------------------------------------------------------------
                             Final Estimates
------------------------------------------------------------------------
Report reliance on rule 6c-11.....          0.1 hours  .................
Number of ETFs....................        x 1,735 \2\  .................
    Total new annual burden.......        173.5 hours                $ 0
    Current burden estimates......     + 74,425 hours       + $2,088,176
        Revised burden estimates..       74,598 hours         $2,088,176
------------------------------------------------------------------------
Notes:
\1\ 2018 Proposing Release, supra footnote 7, at section IV.F.
\2\ Estimate revised to reflect updated industry data.

    Table 19 above summarizes the proposed estimates included in the
2018 ETF Proposing Release and the final PRA estimates associated with
Form N-CEN as amended.\714\ We did not receive public comment on these
estimates, but we are revising our proposed estimates as a result of
updated industry data. Specifically, we are revising the estimated
number of ETFs that will be subject to the rule to reflect updated
industry data. As summarized in Table 19, we estimate that the total
hour burdens and time costs associated with the amendments to Form N-
CEN will result in an average aggregate annual burden of 173.5 hours.
We do not estimate any change in external cost.

Therefore the revised aggregate estimates for Form N-CEN, including the
new amendments, are 74,598 hours and $2,088,176 in external costs.
---------------------------------------------------------------------------

    \714\ 2018 ETF Proposing Release, supra footnote 7, at section
IV.F.
---------------------------------------------------------------------------

VI. Final Regulatory Flexibility Analysis

    The Commission has prepared the following Final Regulatory
Flexibility Analysis (``FRFA'') in accordance with section 4(a) of the
Regulatory Flexibility Act (``RFA''),\715\ regarding new rule 6c-11 and
amendments to Form N-1A, Form N-8B-2, and Form N-CEN. An Initial
Regulatory Flexibility Analysis (``IRFA'') was prepared in accordance
with the RFA and included in the 2018 ETF Proposing Release.\716\
---------------------------------------------------------------------------

    \715\ See 5 U.S.C. 603.
    \716\ See 2018 ETF Proposing Release, supra footnote 7, at
section V.
---------------------------------------------------------------------------

A. Need for and Objectives of the Rule and Form Amendments

    As described more fully above, rule 6c-11 will allow ETFs that meet
the conditions of the rule to form and operate without the expense and
delay of obtaining an exemptive order from the Commission. The
Commission's objective is to create a consistent, transparent and
efficient regulatory framework for ETFs and to facilitate greater
competition and innovation among ETFs. The Commission also believes the
amendments to Forms N-1A and N-8B-2 will provide useful information to
investors who purchase and sell ETF shares in secondary markets.
Finally, the Commission believes the amendments to Form N-CEN will
allow the Commission to better monitor reliance on rule 6c-11 and will
assist the Commission with its accounting, auditing and oversight
functions.
    All of these requirements are discussed in detail in section II
above. The costs and burdens of these requirements on small ETFs are
discussed below as well as above in our Economic Analysis and Paperwork
Reduction Act Analysis, which discuss the costs and burdens on all
ETFs.

B. Significant Issues Raised by Public Comments

    In the 2018 ETF Proposing Release, we requested comment on every
aspect of the IRFA, including the number of small entities that would
be affected by the proposed rule and amendments, the existence or
nature of the potential impact of the proposals on small entities
discussed in the analysis and how to quantify the impact of the
proposed rule and amendments. We also requested comment on the broader
impact of the proposed rule and amendments on all relevant entities,
regardless of size. After consideration of the comments we received on
the proposed rule and amendments, we are adopting the rule and
amendments with several modifications that are designed to reduce
certain operational challenges that commenters identified, while
maintaining protections for investors and providing investors with
useful information regarding ETFs. However, none of the modifications
were significant to the small-entity cost burden estimates discussed
below. Revisions to the estimates are instead based on updated figures
regarding the number of small entities impacted by the new rule and
amendments and updated estimated wage rates.

C. Small Entities Subject to the Rule

    An investment company is a small entity if, together with other
investment companies in the same group of related investment companies,
it has net assets of $50 million or less as of the end of its most
recent fiscal year.\717\ Commission staff estimates that, as of
December 2018, there are approximately 9 open-end ETFs that may be
considered small entities.\718\ Commission staff estimates there are no
UIT ETFs that would be considered small entities subject to the
proposed disclosures for Form N-8B-2.\719\
---------------------------------------------------------------------------

    \717\ 17 CFR 270.0-10(a).
    \718\ This estimate is derived from an analysis of data reported
on Form N-1A with the Commission for the period ending December,
2018.
    \719\ This estimate is derived from an analysis of data reported
on Forms S-6 and N-8B-2 with the Commission for the period ending
December 2018.
---------------------------------------------------------------------------

D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements

    The new rule and amendments will impact current reporting,
recordkeeping and other compliance requirements for ETFs considered
small entities.
1. Rule 6c-11
    Rule 6c-11 will require an ETF to disclose on its website: (i)
Portfolio holding information each business day; (ii) the ETF's current
NAV per share, market price, and premium or discount, each as of the
end of the prior business day; (iii) if an ETF's premium or discount is
greater than 2% for more than seven consecutive trading days, to post
that information and a discussion of the factors that are reasonably
believed to have materially contributed to the premium or discount;
(iv) a table and line graph showing the ETF's premiums and discounts;
and (v) the ETF's median bid-ask spread over the last thirty calendar
days.\720\ The new rule also will require that ETFs preserve and
maintain copies of all written authorized participant agreements, as
well as records setting forth the following information for each basket
exchanged with an authorized participant: (i) Ticker symbol, CUSIP or
other identifier, description of holding, quantity of each holding, and
percentage weight of each holding composing the basket; (ii)
identification of the basket as a ``custom basket'' and a record
stating that the custom basket complies with the ETF's policies and
procedures (if applicable); (iii) cash balancing amounts (if any); and
(iv) the identity of the authorized participant conducting the
transaction.\721\ Additionally, rule 6c-11 will require ETFs relying on
the rule to adopt and implement written policies and procedures that
govern the construction of baskets and the process that will be used
for the acceptance of basket assets.\722\ ETFs using custom baskets
under the rule must adopt custom basket policies and procedures that
include certain enumerated requirements.\723\
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    \720\ See rule 6c-11(c)(1).
    \721\ See rule 6c-11(d).
    \722\ Rule 6c-11(c)(3).
    \723\ Rule 6c-11(c)(3).
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    We estimate that approximately 9 ETFs are small entities that will
comply with rule 6c-11, and we do not believe that their costs would
differ from other ETFs. As discussed above, we estimate that an ETF
will incur an annual burden of approximately 36.97 hours, at an average
time cost of approximately $11,758.97, and an external cost of
$1,000.00.\724\
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    \724\ See supra Table 13.
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    As we discuss in greater detail in section IV.C.1 above, we expect
rule 6c-11 to have other, generally unquantifiable economic effects.
For example, by eliminating the need for ETFs that can rely on the rule
to seek an exemptive order from the Commission, the rule will also
eliminate certain indirect costs associated with the exemptive
application process.\725\ Specifically, ETFs that apply for an order
forgo potential market opportunities until they receive the order,
while others forgo the market opportunity entirely rather than seek an
exemptive order because they have concluded that the cost of seeking an
exemptive order would exceed the anticipated benefit of the market
opportunity.\726\ We also believe that the rule could increase
competition in the

ETF market as a whole, which could also lead to lower fees.\727\
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    \725\ See supra section IV.C.1.
    \726\ See id.
    \727\ See id.
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2. Other Disclosure and Reporting Requirements
    The amendments to Form N-1A and Form N-8B-2 are designed to provide
investors who purchase ETF shares in secondary market transactions with
tailored information regarding ETFs, including information regarding
costs associated with an investment in ETFs. Specifically, the
amendments to Form N-1A will: (i) Require new disclosure regarding ETF
trading and associated costs; (ii) require ETFs that are not subject to
rule 6c-11 to disclose median bid-ask spread information on their
websites or in their prospectuses; and (iii) exclude ETFs that provide
premium/discount disclosures in accordance with rule 6c-11 from the
premium and discount disclosure requirements in the form.\728\
Amendments to Form N-8B-2 mirror proposed disclosures for Form N-1A. In
addition, amendments to Form N-CEN will require ETFs to report on Form
N-CEN whether they are relying on rule 6c-11 to assist us with
monitoring reliance on rule 6c-11 as well with our accounting, auditing
and oversight functions, including compliance with the PRA.
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    \728\ See supra section II.H.2.
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    All ETFs (including ETFs that do not rely on rule 6c-11) will be
subject to the amended Form N-1A or Form N-8B-2 (depending on the ETF's
structure as an open-end fund or UIT), and Form N-CEN disclosure and
reporting requirements, including ETFs that are small entities. We
estimate that 9 ETFs are small entities that will be required to comply
with the requirements on Form N-1A and Form N-CEN.\729\ We estimate
that each ETF, including ETFs that are small entities, will incur a
one-time burden of 7 hours, at a time cost of $4,176 to draft and
finalize the required disclosure and amend its registration
statement.\730\ We also estimate that each ETF, including ETFs that are
small entities, will incur an ongoing burden of an additional 3 hours,
at a time cost of an additional $2,088, to comply with the Form N-1A
disclosure requirements.\731\ We do not estimate any change to the
external costs associated with the amendments to Form N-1A.\732\ The
total administrative cost for of the Form N-CEN disclosure requirement
to ETFs is .1 hours.\733\
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    \729\ See supra footnotes 720 and 721. As discussed above, the
amendments to Form N-8B-2 mirror those made to Form N-1A. We
therefore believe that UIT ETFs will incur the same costs as all
ETFs associated with updating their registration statements.
However, none of the UIT ETFs are small entities.
    \730\ See supra Table 16.
    \731\ See id.
    \732\ See id.
    \733\ See supra Table 19.
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    As we discuss in greater detail in section IV.C.2 above, we expect
the new disclosure amendments to have other, generally unquantifiable
economic effects. For example, we believe that the new disclosures will