[Federal Register Volume 83, Number 143 (Wednesday, July 25, 2018)]
[Notices]
[Pages 35289-35291]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-15861]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33163; 812-14889]


IndexIQ ETF Trust, et al.

July 19, 2018.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of an application for an order under section 6(c) of the 
Investment Company Act of 1940 (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, 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, and under 
section 12(d)(1)(J) for an exemption from sections 12(d)(1)(A) and 
12(d)(1)(B) of the Act. The requested order would permit (a) index-
based series of certain open-end management investment

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companies (``Funds'') to issue shares redeemable in large aggregations 
(``Creation Units''); (b) secondary market transactions in Fund 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; (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; (e) certain 
registered management investment companies and unit investment trusts 
outside of the same group of investment companies as the Funds (``Funds 
of Funds'') to acquire shares of the Funds; (f) certain Funds (``Feeder 
Funds'') to create and redeem Creation Units in-kind in a master-feeder 
structure; and (g) certain Funds to issue Shares in less than Creation 
Unit size to investors participating in a distribution reinvestment 
program. The requested order would supersede the applicant's prior 
orders.\1\
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    \1\ IndexIQ ETF Trust, et. al., Investment Company Act Release 
Nos. 28638 (Feb. 27, 2009) (notice) and 28653 (Mar. 20, 2009) 
(order) and IndexIQ ETF Trust, et. al., Investment Company Release 
Nos. 30843 (Dec. 23, 2013) (notice) and 30888 (Jan. 22, 2014) 
(order).

Applicants: IndexIQ ETF Trust (the ``Trust''), a Delware statutory 
trust registered under the Act as an open-end management investment 
company with multiple series, IndexIQ Advisors LLC (the ``Adviser''), a 
Delaware limited liability company registered as an investment adviser 
under the Investment Advisers Act of 1940, and ALPS Distributors, Inc. 
(the ``Distributor''), a Colorado corporation and broker-dealer 
registered under the Securities Exchange Act of 1934 (``Exchange 
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Act'').

Filing Dates: The application was filed on March 16, 2018 and amended 
on May 25, 2018, July 2, 2018, and July 12, 2018.

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 August 13, 2018, 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 writing to the 
Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street 
NE, Washington, DC 20549-1090; Applicants: The Trust and the Adviser, 
51 Madison Avenue 4th Floor, New York, NY 10010, and the Distributor, 
1290 Broadway, Suite 1100, Denver, CO 80203.

FOR FURTHER INFORMATION CONTACT: Hae-Sung Lee, Attorney-Adviser, at 
(202) 551-7345, or Andrea Ottomanelli Magovern, Branch Chief, at (202) 
551-6825 (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 (202) 551-8090.

Summary of the Application

    1. Applicants request an order that would allow Funds to operate as 
index exchange traded funds (``ETFs'').\2\ Fund shares will be 
purchased and redeemed at their NAV in Creation Units (other than 
pursuant to a distribution reinvestment program, as described in the 
application). All orders to purchase Creation Units and all redemption 
requests will be placed by or through an ``Authorized Participant,'' 
which will have signed a participant agreement with the Distributor. 
Shares will be listed and traded individually on a national securities 
exchange, where share prices will be based on the current bid/offer 
market. Certain Funds may operate as Feeder Funds in a master-feeder 
structure. Any order granting the requested relief would be subject to 
the terms and conditions stated in the application.
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    \2\ Applicants request that the order apply to the current 
series of the Trust identified and described in Appendix A to the 
application (``Current Funds'') and any additional series of the 
Trust, and any other existing or future open-end management 
investment company or existing or future series thereof (together 
with the Current Funds, ``Funds''), each of which will operate as an 
ETF, and their respective existing or future Master Funds, and will 
track a specified index comprised of domestic and/or foreign equity 
securities and/or domestic and/or foreign fixed income securities 
(each, an ``Underlying Index''). Any Fund will (a) be advised by the 
Adviser or an entity controlling, controlled by, or under common 
control with the Adviser (each such entity and any successor 
thereto, an ``Adviser'') and (b) comply with the terms and 
conditions of the application. For purposes of the requested order, 
a ``successor'' is limited to an entity or entities that result from 
a reorganization into another jurisdiction or a change in the type 
of business organization.
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    2. Each Fund will hold investment positions selected to correspond 
closely to the performance of an Underlying Index. In the case of Self-
Indexing Funds, an affiliated person, as defined in section 2(a)(3) of 
the Act (``Affiliated Person''), or an affiliated person of an 
Affiliated Person (``Second-Tier Affiliate''), of the Trust or a Fund, 
of the Adviser, of any sub-adviser to or promoter of a Fund, or of the 
Distributor will compile, create, sponsor or maintain the Underlying 
Index.\3\
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    \3\ Each Self-Indexing Fund will post on its website the 
identities and quantities of the investment positions that will form 
the basis for the Fund's calculation of its NAV at the end of the 
day. Applicants believe that requiring Self-Indexing Funds to 
maintain full portfolio transparency will help address, together 
with other protections, conflicts of interest with respect to such 
Funds.
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    3. Shares will be purchased and redeemed in Creation Units and 
generally on an in-kind basis, or issued in less than Creation Unit 
size to investors participating in a distribution reinvestment program. 
Except where the purchase or redemption will include cash under the 
limited circumstances specified in the application, purchasers will be 
required to purchase Creation Units by depositing specified instruments 
(``Deposit Instruments''), and shareholders redeeming their shares will 
receive specified instruments (``Redemption Instruments''). The Deposit 
Instruments and the Redemption Instruments will each correspond pro 
rata to the positions in the Fund's portfolio (including cash 
positions) except as specified in the application.
    4. Because 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.
    5. Applicants also request an exemption from section 22(d) of the 
Act and rule 22c-1 under the Act as secondary market trading in shares 
will take place at negotiated prices, not at a current offering price 
described in a Fund's prospectus, and not at a price based on NAV. 
Applicants state that (a) secondary market trading in shares does not 
involve a Fund as a party and will not result in dilution of an 
investment in shares, and (b) to the extent different prices exist 
during a given trading day, or from day to day, such variances occur as 
a result of third-party market forces,

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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 represent 
that share market prices will be disciplined by arbitrage 
opportunities, which should prevent shares from trading at a material 
discount or premium from NAV.
    6. With respect to Funds that effect creations and redemptions of 
Creation Units in kind and that are based on certain Underlying Indexes 
that include foreign securities, applicants request relief from the 
requirement imposed by section 22(e) in order to allow such Funds to 
pay redemption proceeds within fifteen calendar days following the 
tender of Creation Units for redemption. Applicants assert that the 
requested relief would not be inconsistent with the spirit and intent 
of section 22(e) to prevent unreasonable, undisclosed or unforeseen 
delays in the actual payment of redemption proceeds.
    7. Applicants request an exemption to permit Funds of Funds to 
acquire Fund shares beyond the limits of section 12(d)(1)(A) of the 
Act; and the Funds, and any principal underwriter for the Funds, and/or 
any broker or dealer registered under the Exchange Act, to sell shares 
to Funds of Funds beyond the limits of section 12(d)(1)(B) of the Act. 
The application's terms and conditions are designed to, among other 
things, help prevent any potential (i) undue influence over a Fund 
through control or voting power, or in connection with certain 
services, transactions, and underwritings, (ii) excessive layering of 
fees, and (iii) overly complex fund structures, which are the concerns 
underlying the limits in sections 12(d)(1)(A) and (B) of the Act.
    8. 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 Deposit Instruments and 
Redemption Instruments will be valued in the same manner as those 
investment positions currently held by the Funds. Applicants also seek 
relief from the prohibitions on affiliated transactions in section 
17(a) to permit a Fund to sell its shares to and redeem its shares from 
a Fund of Funds, and to engage in the accompanying in-kind transactions 
with the Fund of Funds.\4\ The purchase of Creation Units by a Fund of 
Funds directly from a Fund will be accomplished in accordance with the 
policies of the Fund of Funds and will be based on the NAVs of the 
Funds.
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    \4\ The requested relief would apply to direct sales of shares 
in Creation Units by a Fund to a Fund of Funds and redemptions of 
those shares. Applicants, moreover, are not seeking relief from 
section 17(a) for, and the requested relief will not apply to, 
transactions where a Fund could be deemed an Affiliated Person, or a 
Second-Tier Affiliate, of a Fund of Funds because an Adviser or an 
entity controlling, controlled by or under common control with an 
Adviser provides investment advisory services to that Fund of Funds.
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    9. Applicants also request relief to permit a Feeder Fund to 
acquire shares of another registered investment company managed by the 
Adviser having substantially the same investment objectives as the 
Feeder Fund (``Master Fund'') beyond the limitations in section 
12(d)(1)(A) and permit the Master Fund, and any principal underwriter 
for the Master Fund, to sell shares of the Master Fund to the Feeder 
Fund beyond the limitations in section 12(d)(1)(B).
    10. Section 6(c) of the Act permits the Commission to exempt any 
persons or transactions from any provision of the Act if 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 12(d)(1)(J) 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 section 12(d)(1) if the exemption 
is consistent with the public interest and the protection of investors. 
Section 17(b) of the Act authorizes the Commission to grant an order 
permitting a transaction otherwise prohibited by section 17(a) if it 
finds that (a) the terms of the proposed transaction are fair and 
reasonable and do not involve overreaching on the part of any person 
concerned; (b) the proposed transaction is consistent with the policies 
of each registered investment company involved; and (c) the proposed 
transaction is consistent with the general purposes of the Act.


    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-15861 Filed 7-24-18; 8:45 am]
 BILLING CODE 8011-01-P


