[Federal Register Volume 85, Number 220 (Friday, November 13, 2020)]
[Notices]
[Pages 72712-72715]
[FR Doc No: 2020-25050]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34087; 812-15070]

Invesco Capital Management LLC, et al.; Notice of Application

November 6, 2020.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for exemptive relief.

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    Summary of Application: Applicants request an order under section
6(c) of the Investment Company Act of 1940 (``Act'') for an exemption
from sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule
22c-1 under the Act, and under sections 6(c) and 17(b) of the Act for
an exemption from sections 17(a)(1) and 17(a)(2) of the Act. If
granted, the requested order would permit registered open-end
investment companies that are exchange-traded funds (``ETFs'') and are
actively managed to operate without being subject to a daily portfolio
transparency condition.
    Applicants: Invesco Capital Management LLC (``Invesco''), Invesco
Distributors, Inc. (the ``Distributor'') and Invesco Actively Managed
Exchange-Traded Fund Trust (the ``Trust'').
    Filing Dates: The application was filed on September 25, 2019, and
amended on February 28, 2020, May 29, 2020, July 20, 2020, August 26,
2020, and November 6, 2020.
    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 emailing to the
Commission's Secretary at<EMAIL_ADDRESS>and serving
Applicants with a copy of the request by email. Hearing requests should
be received by the Commission by 5:30 p.m. on December 1, 2020, and
should be accompanied by proof of service on 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 emailing to the Commission's Secretary at<EMAIL_ADDRESS>
ADDRESSES: Secretary, U.S. Securities and Exchange Commission,
<EMAIL_ADDRESS>Applicants: Anna Paglia, Esq., Invesco
Capital Management LLC<EMAIL_ADDRESS>
FOR FURTHER INFORMATION CONTACT: Kay M. Vobis, Senior Counsel, at (202)
551-6728 or Trace W. Rakestraw, 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 website 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>.

I. Introduction

    1. Applicants seek to operate actively-managed ETFs that would not
be required to disclose its portfolio holdings on a daily basis (each,
a ``Fund''). Since the Funds would not disclose their portfolio
holdings on a daily basis they would not be able to operate in reliance
on rule 6c-11 under the Act, which requires that ETFs disclose their
portfolio holdings on a daily basis.\1\ Accordingly, Applicants seek an
order: Under section 6(c) of the Act for an exemption from sections
2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act and rule 22c-1
thereunder; and under sections 6(c) and 17(b) of the Act granting an
exemption from sections 17(a)(1) and 17(a)(2) of the Act. The requested
order would permit: (a) The Funds to issue shares (``Shares'')
redeemable in large aggregations only (``creation units''); (b)
secondary market transactions in Shares to occur at negotiated market
prices rather than at net asset value (``NAV''); (c) certain Funds to
pay redemption proceeds, under certain circumstances, more than seven
days after the tender of Shares for redemption; and (d) certain
affiliated persons of a Fund to deposit securities into, and receive
securities from, the Fund in connection with the purchase and
redemption of creation units.
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    \1\ See rule 6c-11(c)(1)(i) (requiring an ETF to disclose
prominently on its website, publicly available and free of charge,
the portfolio holdings that will form the basis for each calculation
of NAV per share). See generally Exchange Traded Funds, Investment
Company Act Release No. 33646 (Sept. 25, 2019) (``ETF Rule Adopting
Release'').
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    2. In 2019 the Commission began issuing orders granting relief to
actively managed ETFs that, like the Funds, do not disclose their
complete portfolio holdings on a daily basis.\2\ In issuing this
relief, the Commission recognized that an arbitrage mechanism
alternative to full portfolio transparency can work in an efficient
manner to maintain secondary market prices at or close to the NAV of an
ETF.\3\
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    \2\ See, e.g., T. Rowe Price Associates, Inc. and T. Rowe Price
Equity Series, Investment Company Act Release Nos. 33685 (Nov. 14,
2019) (notice) (``T. Rowe Price Notice'') and 33713 (Dec. 10, 2019)
(order) (``T. Rowe Price Order''); Natixis ETF Trust II, et al.,
Investment Company Act Release Nos. 33684 (Nov. 14, 2019) (notice)
and 33711 (Dec. 10, 2019) (order); Fidelity Beach Street Trust, et
al., Investment Company Act Release Nos. 33683 (Nov. 14, 2019)
(notice) and 33712 (Dec. 10, 2019) (order); Blue Tractor ETF Trust
and Blue Tractor Group, LLC, Investment Company Act Release Nos.
33682 (Nov. 14, 2019) (notice) and 33710 (Dec. 10, 2019) (order).
See also Precidian ETFs Trust, et al., Investment Company Act
Release No. 33440 (Apr. 8, 2019) and 33477 (May 20, 2019) (order).
    \3\ See, e.g., T. Rowe Price Notice, supra note 2, at n.32 and
accompanying discussion.
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II. The Application 4
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    \4\ Capitalized terms not otherwise defined herein shall have
the same meaning as in the application.
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A. The Applicants

    3. The Trust is organized as a statutory trust under the laws of
the State of Delaware and is registered with the Commission as an open-
end management investment company. Invesco is a Delaware limited
liability corporation registered as an investment adviser under the
Investment Advisers Act of 1940 (``Advisers Act''), and would serve as
the investment adviser to the initial Fund. The Distributor, a Delaware
corporation, is a registered broker-dealer under the Securities
Exchange Act of 1934, as amended (``Exchange Act''), and will act as
distributor and principal underwriter of the Funds.

B. The Funds

    4. Applicants seek exemptive relief under section 6(c) to operate
actively-managed Funds that would not disclose their portfolio holdings
on a daily basis.\5\ Applicants maintain that operating the Funds as
fully-transparent actively-managed ETFs would make the Funds
susceptible to ``front running'' and ``free riding'' by other investors
and/or managers, which can harm the Funds and their shareholders.
Applicants believe that the Funds would allow investors to access
active

investment strategies while also taking advantage of the traditional
benefits of ETFs (e.g., lower fund costs, tax efficiencies and intraday
liquidity).
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    \5\ Applicants request that the order apply to the series of the
Trust identified and described in the application as well as to
additional series of the Trust and any other open-end management
investment company or series thereof that seek to rely on the relief
requested in the application, each of which will operate as an
actively-managed ETF. Any Fund will: (a) Be advised by Invesco or an
investment adviser controlling, controlled by, or under common
control with Invesco (each such entity and any successor thereto
collectively referred to as the ``Adviser'') and (b) comply with the
terms and conditions of the application. The Adviser may retain one
or more subadvisers (each a ``Subadviser'') for the Funds. Any
Subadviser will be registered under the Advisers Act. For purposes
of the requested order, the term ``successor'' is limited to an
entity that results from a reorganization into another jurisdiction
or a change in the type of business organization.
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    a. Substitute Basket. Each day a Fund would publish a basket of
securities and cash that, while different from the Fund's portfolio, is
designed to closely track its daily performance (the ``Substitute
Basket'').\6\ In addition, every day the Fund would disclose the
percentage weight overlap between the holdings of the prior Business
Day's Substitute Basket compared to the holdings of the Fund that
formed the basis for the Fund's calculation of NAV at the end of the
prior Business Day (the ``Basket Overlap'').\7\ Such number would help
market participants evaluate the risk that the performance of the
Substitute Basket may deviate from the performance of the portfolio
holdings of a Fund.
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    \6\ The Funds would, at a minimum, provide the quarterly
portfolio disclosures required for mutual funds. See rule 30b1-9
under the Act and Form N-PORT.
    \7\ Applicants state that each Fund may strike and publish its
NAV additional times during each Business Day at intervals
determined by the Adviser in order to further reduce market
participants' risk and to provide intraday price certainty. For
example, the Fund may strike a NAV once during normal trading at
12:00 p.m. Eastern Time (``Intra-Day NAV'') and again at the close
of trading at 4:00 p.m. Eastern Time (``End of Day NAV'').
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    Applicants state that the Substitute Basket would serve as a
pricing and hedging tool for market participants to identify and take
advantage of arbitrage opportunities. Because the Substitute Basket
would be designed to closely track the daily performance of the Fund's
holdings, the Substitute Basket would serve to estimate the value of
those holdings. For the same reason, trading the Substitute Basket
would allow market participants to get exposure to the performance of
the Fund's holdings, so that a Fund's Substitute Basket could serve to
hedge a position in the Fund's Shares. Further, the Substitute Basket
would generally serve as the creation/redemption basket when Authorized
Participants exchange creation units with the Fund.\8\ Also in order to
facilitate arbitrage, each Fund's portfolio and Substitute Basket will
only include certain securities that trade on an exchange
contemporaneously with the Fund's Shares.\9\ Because the securities
would be exchange traded, market participants would be able to
accurately price and readily trade the securities in the Substitute
Basket for purposes of assessing the intraday value of the Fund's
portfolio holdings and to hedge their positions in the Fund's shares.
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    \8\ Large broker-dealers that have contractual arrangements with
an ETF (each, an ``Authorized Participant'') purchase and redeem ETF
shares directly from the ETF, but only in blocks called ``creation
units.'' After purchasing a creation unit, the Authorized
Participant may sell the component ETF shares in secondary market
transactions. The redemption process is the reverse of the purchase
process.
    \9\Each fund may invest only in ETFs, Exchange-trade noted,
Exchange-traded common stocks, common stocks listed on a foreign
exchange that trade on such exchange synchronously with the Shares,
Exchange-traded preferred stocks, Exchange-traded American
depositary receipts, Exchange-traded real estate investments trusts,
Exchange-traded commodity pools, Exchange-traded metals trusts,
Exchange-traded currency trusts, and exchange-traded futures that
trade contemporaneously with the Shares, as well as cash and cash
equivalents. For purposes of the application, exchange-traded
futures are U.S. listed futures contracts where the futures
contract's reference asset is an asset that the Fund could invest in
directly. All futures contracts that a Fund may invest in will be
traded on a U.S. futures exchange. For these purposes, an
``Exchange'' is a national securities exchange as defined in section
2(a)(26) of the Act. No Fund will invest in a ``penny stock'' as
defined in Exchange Act Rule 3a51-1, borrow for investment purposes,
hold short positions, or purchase any security that is illiquid at
the time of purchase. The Substitute Basket will be subject to the
same limitations.
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    b. Arbitrage Transactions in the Funds. Applicants state that,
given the correlation between a Fund's Substitute Basket and its
portfolio holdings, the Substitute Basket would serve as a pricing
signal to identify arbitrage opportunities when its value and the
secondary market price of the Shares diverge. If Shares began trading
at a discount to the Substitute Basket, an Authorized Participant could
purchase the Shares in secondary market transactions and, after
accumulating enough Shares to comprise a creation unit, redeem them
from the Fund in exchange for a redemption basket reflecting the NAV
per share of the Fund's portfolio holdings.\10\ The purchases of Shares
would reduce the supply of Shares in the market, and thus tend to drive
up the Shares' market price closer to the Fund's NAV.\11\
Alternatively, if Shares are trading at a premium, the transactions in
the arbitrage process are reversed. Applicants further state that, like
with traditional ETFs, market participants also can engage in arbitrage
without using the creation or redemption processes. For example, if a
Fund is trading at a premium to the Substitute Basket, the market
participant may sell Shares short and take a long position in the
Substitute Basket securities, wait for the trading prices to move
toward parity, and then close out the positions in both the Shares and
the securities, to realize a profit from the relative movement of their
trading prices. Similarly, a market participant could buy Shares and
take a short position in the Substitute Basket securities in an attempt
to profit when Shares are trading at a discount to the Substitute
Basket.
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    \10\ In addition to purchasing Shares, Applicants assert an
Authorized Participant also would likely hedge its intraday risk by
shorting the securities in the Substitute Basket (the same as in the
redemption basket) in an amount corresponding to its long position
in Shares. After the Authorized Participant returns a creation unit
to the Fund in exchange for a redemption basket, the Authorized
Participant can use the basket securities to cover its short
positions.
    \11\ Applicants assert the purchase of the Shares in the
secondary market, combined with the sale of the redemption basket
securities, may also drive the market price of Shares and the value
of the Fund's portfolio holdings closer together.
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    c. Protective Conditions. First, the Funds will provide certain
public disclosures to explain to investors how they differ from
traditional ETFs and inform investors that the Funds' bid-ask spreads
and premiums/discounts may be larger than those for traditional ETFs
due to the lack of transparency, thus making trading in the Funds'
Shares more expensive. The Funds will also disclose that market
participants may attempt to reverse engineer a Fund's trading strategy,
which, if successful, could increase opportunities for trading
practices that may disadvantage the Fund and its shareholders. Each
Fund will include a legend (the ``Legend'') in a prominent location on
the outside cover page of its prospectus, as well as on its website and
any marketing materials, that will highlight for investors the
differences between the Funds and fully transparent actively managed
ETFs and the above costs and risk. Unless otherwise requested by the
staff of the Commission, the Legend will read as follows:
    This ETF is different from traditional ETFs.
    Traditional ETFs tell the public what assets they hold each day.
This ETF will not. This may create additional risks for your
investment. For example:
     You may have to pay more money to trade the ETF's shares.
This ETF will provide less information to traders, who tend to charge
more for trades when they have less information.
     The price you pay to buy ETF shares on an exchange may not
match the value of the ETF's portfolio. The same is true when you sell
shares. These price differences may be greater for this ETF compared to
other ETFs because it provides less information to traders.
     These additional risks may be even greater in bad or
uncertain market conditions.
     The ETF will publish on its website each day a
``Substitute Basket'' designed

to help trading in shares of the ETF. While the Substitute Basket
includes some of the ETF's holdings, it is not the ETF's actual
portfolio.
    The differences between this ETF and other ETFs may also have
advantages. By keeping certain information about the ETF secret, this
ETF may face less risk that other traders can predict or copy its
investment strategy. This may improve the ETF's performance. If other
traders are able to copy or predict the ETF's investment strategy,
however, this may hurt the ETF's performance.
    For additional information regarding the unique attributes and
risks of the ETF, see section [ ] below.
    5. Second, Applicants will comply with the requirements of
Regulation Fair Disclosure (``Reg. FD'') as if it applied to them, thus
prohibiting the Fund's selective disclosure of any material nonpublic
information.\12\ Applicants note that because the Funds will not
publicly disclose their portfolio holdings daily, the selective
disclosure of material nonpublic information, including information
other than portfolio information, would be more likely to provide an
unfair advantage to the recipient than in the context of other ETFs.
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    \12\ See 17 CFR 243. ETFs are not otherwise subject to Reg. FD.
Reg. FD's Rule 100(b)(2)(iii) exempts from Reg. FD certain
communications made in connection with a securities offering
registered under the Securities Act. Applicants would not rely on
this exemption; as the Funds will be continuously offered, this
exemption would likely make the condition requiring Applicants to
comply with Reg. FD meaningless.
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    6. Third, the Funds and their Adviser will take remedial actions as
necessary if the Funds do not function as anticipated. For at least the
first three years after launch, a Fund will establish certain
thresholds for its level of Tracking Error,\13\ premiums/discounts, and
spreads, so that, upon the Fund's crossing a threshold, the Adviser
will promptly call a meeting of the Fund's board of directors, and will
present the board with recommendations for appropriate remedial
measures.\14\ The board would then consider the continuing viability of
the Fund, whether shareholders are being harmed, and what, if any,
action would be appropriate.\15\ In addition, Applicants have agreed to
provide to Commission staff on a periodic basis certain metrics and
other such information as the staff may request in order to facilitate
the staff's ongoing monitoring of the Funds.\16\
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    \13\ ``Tracking Error'' is the standard deviation over the past
three months of the daily proxy spread (i.e., the difference, in
percentage terms, between the Substitute Basket's per share NAV and
that of the Fund at the end of the trading day).
    \14\ For at least the first three years after launch of a Fund,
its board would promptly meet (1) if the Tracking Error exceeds 1%;
or (2) if, for 30 or more days in any quarter or 15 days in a row
(a) the absolute difference between either the market closing price
or Bid/Ask Price, on one hand, and End of Day NAV, on the other,
exceeds no more than 2%, or (b) the bid/ask spread exceeds no more
than 2%. A Fund may adopt additional or lower (i.e., less than the
1% and 2% upper limits) thresholds to the extent deemed appropriate
and approved by the Fund's board. The Board will also consider
information provided by the Adviser reflecting how the Fund's Intra-
Day NAV compares to the Bid/Ask Price of Shares at the time as of
which the Intra-Day NAV is calculated, and will evaluate such
information in the context of its oversight of the Fund.
    \15\ For at least three years after launch of each Fund, the
board will also undertake these considerations on an annual basis,
regardless of whether the Fund's preset thresholds have been
crossed. Potential actions may include, but are not limited to,
changing lead market makers, listing the Fund on a different
Exchange, changing the size of creation units, changing the
construction of the Substitute Basket, changing the Fund's
investment objective or strategy, and liquidating the Fund.
    \16\ See condition 7.
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III. Requested Exemptive Relief

    7. Applicants request an order under section 6(c) of the Act for an
exemption from sections 2(a)(32), 5(a)(1), 22(d), and 22(e) of the Act
and rule 22c-1 under the Act, and under sections 6(c) and 17(b) of the
Act for an exemption from sections 17(a)(1) and 17(a)(2) of the
Act.\17\
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    \17\ Applicants request that the terms and conditions of the
requested order apply to other registered open-end management
investment companies or series thereof not advised by the Adviser
(``Authorized Funds''). Applicants anticipate that the Adviser or an
affiliate thereof may in the future enter into agreements concerning
Applicant's intellectual property rights in the Funds with the
registered investment advisers advising the Authorized Funds
(together with the Authorized Funds, ``Future Applicants'').
Applicants further expect that Future Applicants would apply for a
separate exemptive order that incorporates by reference all the
terms and conditions of the requested order and any amendments
thereto.
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    8. Section 6(c) of the Act provides that the Commission may exempt
any person, security or transaction, or any class of persons,
securities or transactions, from any provisions 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.
Section 17(b) of the Act authorizes the Commission to exempt a proposed
transaction from section 17(a) of the Act if evidence establishes that
the terms of the transaction, including the consideration to be paid or
received, are reasonable and fair and do not involve overreaching on
the part of any person concerned, and the proposed transaction is
consistent with the policies of the registered investment company and
the general purposes of the Act.

A. Overview of Requested Relief

    9. Sections 5(a)(1) and 2(a)(32) of the Act. Because the Shares
will not be individually redeemable, Applicants request an exemption
from section 5(a)(1) and section 2(a)(32) of the Act that would permit
the Funds to register as open-end management investment companies and
issue Shares that are redeemable in creation units only.
    10. Sections 17(a)(1) and (2) of the Act. Applicants request an
exemption from sections 17(a)(1) and 17(a)(2) of the Act to permit
persons that are affiliated persons, or second-tier affiliates, of the
Funds, solely by virtue of certain ownership interests, to effectuate
purchases and redemptions in-kind. The deposit procedures for in-kind
purchases of creation units and the redemption procedures for in-kind
redemptions of creation units will be the same for all purchases and
redemptions and basket securities will be valued in the same manner as
those portfolio securities currently held by the Funds.
    11. Section 22(d) of the Act and rule 22c-1 thereunder. Section
22(d) of the Act, among other things, prohibits a dealer from selling a
redeemable security that is currently being offered to the public by or
through a principal underwriter other than at a current public offering
price described in the fund's prospectus. Rule 22c-1 under the Act
requires open-end funds, their principal underwriters, and dealers in
fund shares (and certain others) to sell and redeem fund shares at a
price based on the current NAV next computed after receipt of an order
to buy or redeem.
    12. Together, section 22(d) and rule 22c-1 are designed to: (i)
Prevent dilution caused by certain riskless trading practices of
principal underwriters and dealers; (ii) prevent unjust discrimination
or preferential treatment among investors purchasing and redeeming fund
shares; and (iii) preserve an orderly distribution of investment
company shares.\18\
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    \18\ See ETF Rule Adopting Release, supra note 1, at text
accompanying note 116.
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    13. Applicants believe that none of these concerns will be raised
by permitting Shares to trade in the secondary market at negotiated
prices. Applicants state that secondary market trading in Shares does
not involve the Funds as parties and cannot result in dilution of an
investment in Shares, and to the extent different prices for Shares
exist during a given trading day, or from day to day, such variances
occur as a

result of third-party market forces, such as supply and demand.
Therefore, Applicants assert that secondary market transactions in
Shares will not lead to discrimination or preferential treatment among
purchasers. Finally, Applicants state that the proposed distribution
system will be orderly because anyone will be able to sell or acquire
Shares on an exchange and arbitrage activity should ensure that
secondary market transactions occur at prices at or close to the Fund's
NAV.
    14. Section 22(e) of the Act. Applicants seek relief from section
22(e) to permit Funds to satisfy redemption requests more than seven
days from the tender of Shares for redemption with respect to foreign
securities where the settlement cycle, coupled with local holiday
schedules, would not permit a Fund to satisfy redemption requests
within the seven days required under section 22(e) of the Act. A Fund
would deliver the foreign securities as soon as practicable, but in no
event later than 15 days after the tender of Shares.

B. Considerations Relating to the Requested Relief

    15. In support of the requested exemptive relief, the Applicants
also believe the proposed terms and conditions sufficiently address
possible concerns regarding the relief, as discussed below.
    16. Proposed Arbitrage Mechanism. Applicants believe that the
proposed arbitrage mechanism can work in an efficient manner to
maintain secondary market prices of Shares close to their NAV while
providing investors with the opportunity to invest in active strategies
through a vehicle that offers the traditional benefits of ETFs. In
addition, to the extent that the Funds do not function as anticipated,
Applicants have undertaken to take remedial actions as appropriate.
    17. Use of Substitute Baskets. Applicants believe they have
addressed possible concerns of using a Substitute Basket as an
arbitrage mechanism. First, Applicants note that a Fund's Substitute
Basket would not misrepresent the Fund's holdings and that they will
take steps to avoid investor confusion. To that effect, the Funds would
provide disclosures in their prospectus, marketing materials and
website clearly indicating the Substitute Basket's purpose and that it
is not the Fund's portfolio holdings.\19\ Second, Applicants state that
they have structured their arbitrage mechanism so that arbitrageurs'
trading will not have a significant market impact on the securities in
the Substitute Basket and other Creation Baskets, in particular those
that a Fund does not hold for investment purposes.\20\
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    \19\ In addition, every day the Funds would disseminate the
Basket Overlap, which would inform market participants as to the
degree to which the Substitute Basket and the Fund's portfolio
actually differ.
    \20\ Specifically, the Funds expect to include in the Substitute
Basket only assets that are liquid and have a high trading volume.
Further, Applicants note that their proposed arbitrage mechanism is
not novel in this respect. Currently, arbitrageurs for fully-
transparent ETFs may use securities that are not in the ETFs'
portfolio to hedge their positions in the ETFs' shares.
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    18. Reverse Engineering. Applicants indicate they have addressed
possible concerns that other market participants may be able to reverse
engineer current activity in a Fund's holdings and use such information
to the disadvantage of the Fund and its shareholders. Applicants have
represented that they will operate the Funds in a manner designed to
minimize the risk of reverse engineering and, for the reasons set forth
in the Application, believe successful front-running or free-riding is
highly unlikely.

IV. Applicants' Conditions

    Applicants agree that any order of the Commission granting the
requested relief will be subject to the following conditions:
    1. As long as a Fund operates in reliance on the requested order,
the Shares of the Fund will be listed on an Exchange.
    2. The website for the Funds, which will be publicly accessible at
no charge, will contain, on a per Share basis for each Fund, the prior
Business Day's Intra-Day NAV and End of Day NAV and Closing Price or
Bid/Ask Price of the Shares, a calculation of the premium or discount
of the Closing Price or Bid/Ask Price against such End of Day NAV, and
any other information regarding premiums and discounts as may be
required for other ETFs under rule 6c-11 under the Act, as amended. The
website will also disclose any information regarding the bid-ask spread
for each Fund as may be required for other ETFs under rule 6c-11 under
the Act, as amended.
    3. Each Fund will include the Legend in a prominent location on the
outside cover page of its prospectus, as well as on its website and any
marketing materials.
    4. On each Business Day, before the commencement of trading of
Shares, each Fund will publish on its website the Substitute Basket and
the Basket Overlap for that day.
    5. No Adviser or Subadviser, directly or indirectly, will cause any
Authorized Participant (or any investor on whose behalf an Authorized
Participant may transact with the Fund) to acquire any Deposit
Instrument for a Fund through a transaction in which the Fund could not
engage directly.
    6. The requested relief to permit ETF operations will expire on the
effective date of any Commission rule under the Act that provides
relief permitting the operation of actively managed ETFs that disclose
a proxy portfolio on each Business Day, without fully disclosing the
ETF's entire portfolio at the same time.
    7. Each Fund will provide the Commission staff with periodic
reports (for which confidential treatment may be requested) containing
such information as the Commission staff may request.
    8. Each Fund and each person acting on behalf of a Fund \21\ will
comply with and agree to be subject to the requirements of Regulation
Fair Disclosure as if it applied to them (except that the exemptions
provided in Rule 100(b)(2)(iii) therein shall not apply).
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    \21\ For purposes of this condition, ``person acting on behalf
of a Fund'' shall have the same meaning as ``person acting on behalf
of an issuer'' for a closed-end investment company under 17 CFR
243.101(c).
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    9. Each Fund will maintain and preserve, for a period of not less
than five years, in an easily accessible place, (i) all written
agreements (or copies thereof) between an Authorized Participant and
the Fund or one of its service providers that allows the Authorized
Participant to place orders for the purchase or redemption of Creation
Units; (ii) a copy of the Substitute Basket published on the Fund's
website for each Business Day; and (iii) a list of all creation or
redemption baskets exchanged with an Authorized Participant where cash
was included in the basket in lieu of some or all of the Substitute
Basket securities (except for cash included because the securities are
not eligible for trading by the Authorized Participant or the investor
on whose behalf the Authorized Participant is acting), the amount of
any such cash in lieu and the identity of the Authorized Participant
conducting the transaction.

    For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-25050 Filed 11-12-20; 8:45 am]
BILLING CODE 8011-01-P