[Federal Register Volume 83, Number 117 (Monday, June 18, 2018)]
[Notices]
[Pages 28296-28298]
[FR Doc No: 2018-12930]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83414; File No. SR-BOX-2018-22]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend IM-3120-2 of BOX Rule 3120 (Position Limits) To Amend the
Position and Exercise Limits for Options on the Standard and Poor's
Depositary Receipts Trust (``SPY'')

June 12, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 6, 2018, BOX Options Exchange LLC (the ``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I and II below, which Items have been
prepared by the self-regulatory organization. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend IM-3120-2 of BOX Rule 3120 (Position
Limits) to amend the position and exercise limits for options on the
Standard and Poor's Depositary Receipts Trust (``SPY''). The text of
the proposed rule change is available from the principal office of the
Exchange, at the Commission's Public Reference Room and also on the
Exchange's internet website at http://boxoptions.com.

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

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

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

1. Purpose
    BOX Rule 3120 (Position Limits) establishes position limits for
aggregate positions in option contracts traded on the Exchange. IM-
3120-2 to BOX Rule 3120 lists specific position limits for certain
select underlying securities.\3\ SPY is among the certain select
underlying securities listed in such Rule. Currently, this Rule
provides that there are no position limits and there are no exercise
limits on options overlying SPY pursuant to a pilot program, which is
scheduled to expire on July 12, 2018 (``SPY Pilot Program'').\4\
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    \3\ The Exchange notes that IM-3140-1 to BOX Rule 3140 (Exercise
Limits) states that exercise limits established under Rule 3140
shall be equivalent to the position limits prescribed for such
options in IM-3120-2.
    \4\ See Securities Exchange Act Release Nos. 67936 (September
27, 2012), 77 FR 60491 (October 3, 2012) (SR-BOX-2012-013) (adoption
of the SPY Pilot Program), 81092 (July 7, 2017), 82 FR 32402 (July
13, 2017) (SR-BOX-2017-22) (extending the SPY Pilot Program to July
12, 2018).
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    The Exchange proposes to amend IM-3120-2 to allow the SPY Pilot
Program to terminate on July 12, 2018, the current expiration date of
the SPY Pilot Program. In lieu of extending the SPY Pilot Program for
another year, the Exchange proposes to allow the SPY Pilot Program to
terminate and to establish position and exercise limits of 1,800,000
contracts, for options on SPY, with such change becoming operative on
July 12, 2018, so that there is no lapse in time between termination of
the SPY Pilot Program and the establishment of the new limits.
Furthermore, as a result of the termination of the SPY Pilot Program,
the Exchange does not believe it is necessary to submit a SPY Pilot
Program Report at the end of the SPY Pilot Program. Based on the prior
SPY Pilot Program Reports provided to the Commission,\5\ the Exchange
believes it is appropriate to terminate the SPY Pilot Program and that
permanent position and exercise limits should be established for SPY.
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    \5\ Id.
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    Position limits are designed to address potential manipulative
schemes and adverse market impact surrounding the use of options, such
as disrupting the market in the security underlying the options. The
potential manipulative schemes and adverse market impact are balanced
against the potential of setting the limits so low as to discourage
participation in the options market. The level of those position limits
must be balanced between curtailing potential manipulation and the cost
of preventing potential hedging activity that could be used for
legitimate economic purposes.
    The SPY Pilot Program was established in 2012 in order to eliminate
position and exercise limits for physically-settled SPY options.\6\ In
2005, the position limits for SPY options were increased from 75,000
contracts to 300,000 contracts on the same side of the market.\7\ In
July 2011, the position limit for these options was again increased
from 300,000 contracts to 900,000 contracts on the same side of the
market.\8\ Then, in 2012, the position limits for SPY options were
eliminated as part of the SPY Pilot Program.\9\
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    \6\ See Securities Exchange Act Release Nos. 67672 (August 15,
2012), 77 FR 50750 (August 22, 2012) (SR-NYSEAmex-2012-29); 67937
(September 27, 2012), 77 FR 60489 (October 3, 2012) (SR-CBOE-2012-
091).
    \7\ See Securities Exchange Act Release No. 51041 (January 14,
2005), 70 FR 3408 (January 24, 2005) (SR-CBOE-2005-06).
    \8\ See Securities Exchange Act Release No. 64928 (July 20,
2011), 76 FR 44633 (July 26, 2011) (SR-CBOE-2011-065).
    \9\ See supra note 6.
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    The underlying SPY tracks the performance of the S&P 500 Index and
the Exchange notes that the SPY and SPY options have deep, liquid
markets that reduce concerns regarding manipulation and disruption in
the underlying markets. In support of its proposed rule change, Miami
International Securities Exchange LLC (``MIAX'') has collected the
following trading statistics for SPY and SPY Options: (1) The average
daily volume (``ADV'') to date (as of May 15, 2018) for SPY is 108.32
million shares; (2) the ADV to date in 2018 for SPY options is 3.9
million contracts per day; (3) the total shares outstanding for SPY are
965.43 million; and (4) the fund market cap for SPY is 261.65
billion.\10\ The Exchange, based on MIAX's compiled trading statistics,
represents further that there is tremendous liquidity in the securities
that make up the S&P 500 Index.
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    \10\ See Securities Exchange Act Release No. 83349 (May 30,
2018), 83 FR 26123 (June 5, 2018) (SR-MIAX-2018-11).
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    Accordingly, the Exchange proposes to amend IM-3120-2 to Rule 3120
to set forth that the position and exercise limits for options on SPY
would be 1,800,000 contracts on the same side of the market. These
position and exercise limits equal the current position and exercise
limits for options on QQQQ, which the Commission previously approved to
be increased from 900,000 contracts on the same side of the market, to
1,800,000 contracts on the

same side of the market.\11\ The Exchange also notes that SPY is more
liquid than QQQQ.\12\ The Exchange believes that establishing position
and exercise limits for the SPY options in the amount of 1,800,000
contracts on the same side of the market subject to this proposal would
allow for the maintenance of the liquid and competitive market
environment for these options, which will benefit customers interested
in these products. Under the proposal, the reporting requirement for
the options would be unchanged.
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    \11\ See Securities Exchange Act Release No. 82930 (March 22,
2018), 83 FR 13330 (March 28, 2018) (SR-BOX-2018-10); see also
Securities Exchange Act Release No. 82770 (February 23, 2018), 83 FR
8907 (March 1, 2018) (SR-CBOE-2017-057).
    \12\ From the beginning of the year, through May 15, 2018, the
ADV for SPY was 108.32 million shares while the ADV for QQQQ was
46.64 million shares (calculated using data from Yahoo Finance as of
May 15, 2018).
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act.\13\ Specifically, the proposal
is consistent with Section 6(b)(5) of the Act \14\ because it is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, to remove impediments to, and perfect the mechanism of, a
free and open market and a national market system and, in general, to
protect investors and the public interest. The Exchange believes that
establishing permanent position and exercise limits for SPY options
subject to this proposal will encourage Market Makers to continue to
provide sufficient liquidity in SPY options on the Exchange, which will
enhance the process of price discovery conducted on the Exchange. The
proposal will also benefit institutional investors as well as retail
traders, and public customers, by continuing to provide them with an
effective trading and hedging vehicle. In addition, the Exchange
believes that the structure of the SPY options subject to this proposal
and the considerable liquidity of the market for those options
diminishes the opportunity to manipulate this product and disrupt the
underlying market that a lower position limit may protect against.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    Increased position limits for select actively traded options, such
as that proposed herein (increased as compared to the 900,000 limit in
place prior to the SPY Pilot Program),\15\ is not novel and has been
previously approved by the Commission. For example, the Commission has
previously approved a rule change permitting the Exchange to double the
position and exercise limits for FXI, EEM, IWM, EFA, EWZ, TLT, QQQQ,
and EWJ.\16\ Furthermore, as previously mentioned, the Commission
specifically approved a proposal by the Exchange to increase the
position and exercise limits for options on QQQQ from 900,000 contracts
on the same side of the market to 1,800,000 contracts on the same side
of the market; similar to the current proposal for options on SPY.\17\
The Exchange also notes that SPY is more liquid than QQQQ.\18\
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    \15\ See supra note 8.
    \16\ See supra note 10.
    \17\ Id.
    \18\ See supra note 11.
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    Lastly, the Commission expressed the belief that implementing
higher position and exercise limits may bring additional depth and
liquidity without increasing concerns regarding intermarket
manipulation or disruption of the options or the underlying
securities.\19\ The Exchange's existing surveillance and reporting
safeguards are designed to deter and detect possible manipulative
behavior which might arise from increasing position and exercise limits
(increased as compared to the 900,000 limit in place prior to the SPY
Pilot Program).\20\
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    \19\ See supra note 10.
    \20\ See supra note 8.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes the
entire proposal is consistent with Section (6)(b)(8) of the Act \21\ in
that it does not impose any burden on competition that is not necessary
or appropriate in furtherance of the purposes of the Act. On the
contrary, the Exchange believes the proposal promotes competition
because it will enable the option exchanges to attract additional order
flow from the over-the-counter market, who in turn compete for those
orders. The Exchange believes that the proposed rule change will result
in continued opportunities to achieve the investment and trading
objectives of market participants seeking efficient trading and hedging
vehicles, to the benefit of investors, market participants, and the
marketplace in general. BOX believes this proposed rule change is
necessary to permit fair competition among the options exchanges and to
establish uniform position limits for additional multiply listed option
classes.
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    \21\ 15 U.S.C. 78f(b)(8).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

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

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

    Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate, it has become effective
pursuant to Section 19(b)(3)(A) of the Act \22\ and Rule 19b-4(f)(6)
\23\ thereunder.
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    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-BOX-2018-22 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BOX-2018-22. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BOX-2018-22 and should be submitted on
or before July 9, 2018.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12930 Filed 6-15-18; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 82, Number 190 (Tuesday, October 3, 2017)]
[Notices]
[Pages 46103-46106]
[FR Doc No: 2017-21156]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32837; 812-14770]

PREDEX and PREDEX Capital Management, LLC

September 27, 2017.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of an application under section 6(c) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from sections
18(a)(2), 18(c) and 18(i) of the Act, under sections 6(c) and 23(c)(3)
of the Act for an exemption from rule 23c-3 under the Act, and for an
order pursuant to section 17(d) of the Act and rule 17d-1 under the
Act.

Summary of Application: Applicants request an order to permit certain
registered closed-end management investment companies to issue multiple
classes of shares and to impose asset-based distribution and/or service
fees and early withdrawal charges.

Applicants: PREDEX (the ``Initial Fund''), and PREDEX Capital
Management, LLC (the ``Adviser'').

Filing Dates: The application was filed on May 5, 2017, and amended on
August 14, 2017.

Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail.
    Hearing requests should be received by the Commission by 5:30 p.m.
on October 23, 2017, and should be accompanied by proof of service on
the applicants, in the form of an affidavit, or, for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing upon the desirability of a hearing on the matter, the reason
for the request, and the issues contested. Persons who wish to be
notified of a hearing may request notification by writing to the
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants: PREDEX, 17605 Wright
Street, Suite 2, Omaha, NE 68130; Adviser, 18500 Von Karman Ave., Suite
350, Irvine, CA 92612.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at
(202) 551-6817, or David J. Marcinkus, Branch Chief, at<PHONE_NUMBER>
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling<PHONE_NUMBER>.

Applicants' Representations

    1. The Initial Fund is a Delaware statutory trust that is
registered under the Act as a non-diversified, closed-end management
investment company. The Initial Fund's primary investment objective is
to seek consistent current income while secondarily seeking long-term
capital appreciation with moderate volatility. The Initial Fund pursues
its investment objectives by investing up to 95% of its total assets in
real estate investment funds managed by institutional asset managers
with expertise in managing portfolios of real estate and real estate
related industry securities.
    2. The Adviser, a Delaware limited liability company, is registered
as an investment adviser under the Investment Advisers Act of 1940. The

Adviser serves as investment adviser to the Initial Fund.
    3. The applicants seek an order to permit the Funds (as defined
below) to issue multiple classes of shares, each having its own fee and
expense structure and to impose early withdrawal charges and asset-
based distribution and/or service fees with respect to certain classes.
    4. Applicants request that the order also apply to any
continuously-offered registered closed-end management investment
company that has been previously organized or that may be organized in
the future for which the Adviser, or any entity controlling, controlled
by, or under common control with the Adviser, or any successor in
interest to any such entity,\1\ acts as investment adviser and which
operates as an interval fund pursuant to rule 23c-3 under the Act or
provides periodic liquidity with respect to its shares pursuant to rule
13e-4 under the Securities Exchange Act of 1934 (``Exchange Act'')
(each, a ``Future Fund'' and together with the Initial Fund, the
``Funds'').\2\
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    \1\ A successor in interest is limited to an entity that results
from a reorganization into another jurisdiction or a change in the
type of business organization.
    \2\ Any Fund relying on this relief in the future will do so in
a manner consistent with the terms and conditions of the
application. Applicants represent that each entity presently
intending to rely on the requested relief is listed as an applicant.
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    5. The Initial Fund is currently making a continuous public
offering of its common shares. Applicants state that additional
offerings by any Fund relying on the order may be on a private
placement or public offering basis. Shares of the Funds are not
expected to be listed on any securities exchange nor quoted on any
quotation medium and the Funds do not expect there to be a secondary
trading market for their shares.
    6. If the requested relief is granted, the Initial Fund intends to
redesignate its common shares as ``Class I Shares'' and to commence a
continuous offering of two additional classes of shares (``Class A
Shares'' and ``Class C Shares''), with each class having its own fee
and expense structure and may also offer additional classes of shares
in the future. Because of the different distribution fees, services,
and any other class expenses that may be attributable to the Class A
Shares, Class I Shares, and Class C Shares, the net income attributable
to, and the dividends payable on, each class of shares may differ from
each other.
    7. Applicants state that, from time to time, the Initial Fund may
create additional classes of shares, the terms of which may differ from
Class A Shares, Class I Shares and Class C Shares in the following
respects: (i) The amount of fees permitted by different distribution
plans or different service fee arrangements; (ii) voting rights with
respect to a distribution plan of a class; (iii) different class
designations; (iv) the impact of any class expenses directly
attributable to a particular class of shares allocated on a class basis
as described in the application; (v) any differences in dividends and
net asset value resulting from differences in fees under a distribution
plan or in class expenses; (vi) any early withdrawal charge or other
sales load structure; and (vii) exchange or conversion privileges of
the classes as permitted under the Act.
    8. Applicants state that the Initial Fund has adopted a fundamental
policy to repurchase a specified percentage of its shares (no less than
5%) at net asset value on a quarterly basis. Such repurchase offers
will be conducted pursuant to rule 23c-3 under the Act. Each of the
other Funds will likewise adopt fundamental investment policies in
compliance with rule 23c-3 and make quarterly repurchase offers to its
shareholders, or provide periodic liquidity with respect to its shares
pursuant to rule 13e-4 under the Exchange Act.\3\ Any repurchase offers
made by the Funds will be made to all holders of shares of each such
Fund.
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    \3\ Applicants submit that rule 23c-3 and Regulation M under the
Exchange Act permit an interval fund to make repurchase offers to
repurchase its shares while engaging in a continuous offering of its
shares pursuant to Rule 415 under the Securities Act of 1933, as
amended.
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    9. Applicants represent that any asset-based service and/or
distribution fees for each class of shares of the Funds will comply
with the provisions of FINRA Rule 2341 (``FINRA Sales Charge
Rule'').\4\ Applicants also represent that each Fund will disclose in
its prospectus the fees, expenses and other characteristics of each
class of shares offered for sale by the prospectus, as is required for
open-end multiple class funds under Form N-1A.\5\ As is required for
open-end funds, each Fund will disclose its expenses in shareholder
reports, and describe any arrangements that result in breakpoints in or
elimination of sales loads in its prospectus.\6\ In addition,
applicants will comply with applicable enhanced fee disclosure
requirements for fund of funds, including registered funds of hedge
funds.\7\
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    \4\ Any reference in the application to the FINRA Sales Charge
Rule includes any successor or replacement to the FINRA Sales Charge
Rule.
    \5\ In all respects other than class by class disclosure, each
Fund will comply with the requirements of Form N-2.
    \6\ See Shareholder Reports and Quarterly Portfolio Disclosure
of Registered Management Investment Companies, Investment Company
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring
open-end investment companies to disclose fund expenses in
shareholder reports); and Disclosure of Breakpoint Discounts by
Mutual Funds, Investment Company Act Release No. 26464 (June 7,
2004) (adopting release) (requiring open-end investment companies to
provide prospectus disclosure of certain sales load information).
    \7\ Fund of Funds Investments, Investment Company Act Rel. Nos.
26198 (Oct. 1, 2003) (proposing release) and 27399 (Jun. 20, 2006)
(adopting release). See also Rules 12d1-1, et seq. of the Act.
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    10. Each of the Funds will comply with any requirements that the
Commission or FINRA may adopt regarding disclosure at the point of sale
and in transaction confirmations about the costs and conflicts of
interest arising out of the distribution of open-end investment company
shares, and regarding prospectus disclosure of sales loads and revenue
sharing arrangements, as if those requirements applied to the Fund. In
addition, each Fund will contractually require that any distributor of
the Fund's shares comply with such requirements in connection with the
distribution of such Fund's shares.
    11. Each Fund will allocate all expenses incurred by it among the
various classes of shares based on the net assets of the Fund
attributable to each class, except that the net asset value and
expenses of each class will reflect the expenses associated with the
distribution plan of that class, service fees, and any other
incremental expenses of that class. Expenses of a Fund allocated to a
particular class of shares will be borne on a pro rata basis by each
outstanding share of that class. Applicants state that each Fund will
comply with the provisions of rule 18f-3 under the Act as if it were an
open-end investment company.
    12. Applicants state that each Fund may impose an early withdrawal
charge on shares submitted for repurchase that have been held less than
a specified period and may waive the early withdrawal charge for
certain categories of shareholders or transactions to be established
from time to time. Applicants state that each Fund will apply the early
withdrawal charge (and any waivers or scheduled variations of the early
withdrawal charge) uniformly to all shareholders in a given class and
consistently with the requirements of rule 22d-1 under the Act as if
the Funds were open-end investment companies.
    13. Each Fund operating as an interval fund pursuant to rule 23c-3
under the

Act may offer its shareholders an exchange feature under which the
shareholders of the Fund may, in connection with the Fund's periodic
repurchase offers, exchange their shares of the Fund for shares of the
same class of (i) registered open-end investment companies or (ii)
other registered closed-end investment companies that comply with rule
23c-3 under the Act and continuously offer their shares at net asset
value, that are in the Fund's group of investment companies
(collectively, ``Other Funds''). Shares of a Fund operating pursuant to
rule 23c-3 that are exchanged for shares of Other Funds will be
included as part of the amount of the repurchase offer amount for such
Fund as specified in rule 23c-3 under the Act. Any exchange option will
comply with rule 11a-3 under the Act, as if the Fund were an open-end
investment company subject to rule 11a-3. In complying with rule 11a-3,
each Fund will treat an early withdrawal charge as if it were a
contingent deferred sales load.

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(a)(2) of the Act provides that a closed-end
investment company may not issue or sell a senior security that is a
stock unless certain requirements are met. Applicants state that the
creation of multiple classes of shares of the Funds may violate section
18(a)(2) because the Funds may not meet such requirements with respect
to a class of shares that may be a senior security.
    2. Section 18(c) of the Act provides, in relevant part, that a
closed-end investment company may not issue or sell any senior security
if, immediately thereafter, the company has outstanding more than one
class of senior security. Applicants state that the creation of
multiple classes of shares of the Funds may be prohibited by section
18(c), as a class may have priority over another class as to payment of
dividends because shareholders of different classes would pay different
fees and expenses.
    3. Section 18(i) of the Act provides that each share of stock
issued by a registered management investment company will be a voting
stock and have equal voting rights with every other outstanding voting
stock. Applicants state that multiple classes of shares of the Funds
may violate section 18(i) of the Act because each class would be
entitled to exclusive voting rights with respect to matters solely
related to that class.
    4. Section 6(c) of the Act provides that the Commission may exempt
any person, security or transaction or any class or classes of persons,
securities or transactions from any provision of the Act, or from any
rule or regulation under the Act, if and to the extent 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. Applicants request an exemption under
section 6(c) from sections 18(a)(2), 18(c) and 18(i) to permit the
Funds to issue multiple classes of shares.
    5. Applicants submit that the proposed allocation of expenses
relating to distribution and/or services and voting rights among
multiple classes is equitable and will not discriminate against any
group or class of shareholders. Applicants submit that the proposed
arrangements would permit a Fund to facilitate the distribution of its
shares and provide investors with a broader choice of shareholder
services. Applicants assert that the proposed closed-end investment
company multiple class structure does not raise the concerns underlying
section 18 of the Act to any greater degree than open-end investment
companies' multiple class structures that are permitted by rule 18f-3
under the Act. Applicants state that each Fund will comply with the
provisions of rule 18f-3 as if it were an open-end investment company.

Early Withdrawal Charges

    1. Section 23(c) of the Act provides, in relevant part, that no
registered closed-end investment company shall purchase securities of
which it is the issuer, except: (a) On a securities exchange or other
open market; (b) pursuant to tenders, after reasonable opportunity to
submit tenders given to all holders of securities of the class to be
purchased; or (c) under other circumstances as the Commission may
permit by rules and regulations or orders for the protection of
investors.
    2. Rule 23c-3 under the Act permits a registered closed-end
investment company (an ``interval fund'') to make repurchase offers of
between five and twenty-five percent of its outstanding shares at net
asset value at periodic intervals pursuant to a fundamental policy of
the interval fund. Rule 23c-3(b)(1) under the Act permits an interval
fund to deduct from repurchase proceeds only a repurchase fee, not to
exceed two percent of the proceeds, that is paid to the interval fund
and is reasonably intended to compensate the fund for expenses directly
related to the repurchase. A Fund will not impose a repurchase fee on
investors who purchase and tender their shares.
    3. Section 23(c)(3) provides that the Commission may issue an order
that would permit a closed-end investment company to repurchase its
shares in circumstances in which the repurchase is made in a manner or
on a basis that does not unfairly discriminate against any holders of
the class or classes of securities to be purchased.
    4. Applicants request relief under section 6(c), discussed above,
and section 23(c)(3) from rule 23c-3 to the extent necessary for the
Funds to impose early withdrawal charges on shares of the Funds
submitted for repurchase that have been held for less than a specified
period.
    5. Applicants state that the early withdrawal charges they intend
to impose are functionally similar to contingent deferred sales loads
imposed by open-end investment companies under rule 6c-10 under the
Act. Rule 6c-10 permits open-end investment companies to impose
contingent deferred sales loads, subject to certain conditions.
Applicants note that rule 6c-10 is grounded in policy considerations
supporting the employment of contingent deferred sales loads where
there are adequate safeguards for the investor and state that the same
policy considerations support imposition of early withdrawal charges in
the interval fund context. In addition, applicants state that early
withdrawal charges may be necessary for the distributor to recover
distribution costs. Applicants represent that any early withdrawal
charge imposed by the Funds will comply with rule 6c-10 under the Act
as if the rule were applicable to closed-end investment companies. The
Funds will disclose early withdrawal charges in accordance with the
requirements of Form N-1A concerning contingent deferred sales loads.

Asset-Based Distribution and/or Service Fees

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of a registered investment company, or an
affiliated person of such person, acting as principal, from
participating in or effecting any transaction in connection with any
joint enterprise or joint arrangement in which the investment company
participates unless the Commission issues an order permitting the
transaction. In reviewing applications submitted under section 17(d)
and rule 17d-1, the Commission considers whether the participation of
the investment company in a joint

enterprise or joint arrangement is consistent with the provisions,
policies and purposes of the Act, and the extent to which the
participation is on a basis different from or less advantageous than
that of other participants.
    2. Rule 17d-3 under the Act provides an exemption from section
17(d) and rule 17d-1 to permit open-end investment companies to enter
into distribution arrangements pursuant to rule 12b-1 under the Act.
Applicants request an order under section 17(d) and rule 17d-1 under
the Act to the extent necessary to permit the Fund to impose asset-
based distribution and/or service fees. Applicants have agreed to
comply with rules 12b-1 and 17d-3 as if those rules applied to closed-
end investment companies, which they believe will resolve any concerns
that might arise in connection with a Fund financing the distribution
of its shares through asset-based distribution and/or service fees.
    3. For the reasons stated above, applicants submit that the
exemptions requested under section 6(c) are necessary and appropriate
in the public interest and are consistent with the protection of
investors and the purposes fairly intended by the policy and provisions
of the Act. Applicants further submit that the relief requested
pursuant to section 23(c)(3) will be consistent with the protection of
investors and will insure that applicants do not unfairly discriminate
against any holders of the class of securities to be purchased.
Finally, applicants state that the Funds' imposition of asset-based
distribution and/or service fees is consistent with the provisions,
policies and purposes of the Act and does not involve participation on
a basis different from or less advantageous than that of other
participants.
    Applicants' Condition:
    Applicants agree that any order granting the requested relief will
be subject to the following condition:
    Each Fund relying on the order will comply with the provisions of
rules 6c-10, 12b-1, 17d-3, 18f-3, 22d-1, and, where applicable, 11a-3
under the Act, as amended from time to time, as if those rules applied
to closed-end management investment companies, and will comply with the
FINRA Sales Charge Rule, as amended from time to time, as if that rule
applied to all closed-end management investment companies.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-21156 Filed 10-2-17; 8:45 am]
 BILLING CODE 8011-01-P