[Federal Register Volume 85, Number 2 (Friday, January 3, 2020)]
[Notices]
[Pages 357-367]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28413]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87866; File No. SR-NYSEArca-2019-95]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To Adopt NYSE Arca Rule 8.602-E To Permit the 
Listing and Trading of Actively Managed Solution Shares and To List and 
Trade Shares of the Natixis ETF Under Proposed NYSE Arca Rule 8.602-E

December 30, 2019.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on December 23, 2019, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. 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\ 15 U.S.C. 78a.
    \3\ 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 adopt new NYSE Arca Rule 8.602-E to permit 
it to list and trade Actively Managed Solution Shares, which are shares 
of actively managed exchange-traded funds for which the portfolio is 
disclosed in accordance with standard mutual fund disclosure rules. In 
addition, the Exchange proposes to list and trade shares of the 
following under proposed NYSE Arca Rule 8.602-E: Natixis ETF. The 
proposed change is available on the Exchange's website at www.nyse.com, 
at the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to add new NYSE Arca Rule 8.602-E for the 
purpose of permitting the listing and trading, or trading pursuant to 
unlisted trading privileges (``UTP''), of Actively Managed Solution 
Shares, which are securities issued by an actively managed open-end 
investment management company. The Exchange also proposes to list and 
trade shares (``Shares'') of the following under proposed NYSE Arca 
Rule 8.602-E: Natixis ETF (the ``Fund'').
Proposed Listing Rules
    Proposed Rule 8.602-E(a) provides that the Exchange will consider 
for trading, whether by listing or pursuant to UTP, Actively Managed 
Solution Shares that meet the criteria of Rule 8.602-E.
    Proposed Rule 8.602-E(b) provides that Rule 8.602-E is applicable 
only to Actively Managed Solution Shares and that, except to the extent 
inconsistent with Rule 8.602-E, or unless the context otherwise 
requires, the rules and procedures of the Exchange's Board of Directors 
shall be applicable to the trading on the Exchange of such securities. 
Proposed Rule 8.602-E(b) provides further that Actively Managed 
Solution Shares are included within the definition of ``security'' or 
``securities'' as such terms are used in the Rules of the Exchange.
    Proposed Rule 8.602-E(c)(1) defines the term ``Actively Managed 
Solution Shares'' as a security that (a) represents an interest in a 
registered investment company (``Investment Company'') organized as an 
open-end management investment company that invests in a portfolio of 
securities selected by the Investment Company's investment adviser 
consistent with the Investment Company's investment objectives and 
policies; (b) is issued in a specified aggregate minimum number of 
shares equal to a Creation Unit, or multiples thereof, in return for a 
designated portfolio of securities (and/or an amount of cash) with a 
value equal to the next determined net asset value; and (c) when 
aggregated in the same specified aggregate number of shares, or 
multiples thereof, may be redeemed at the request of an Authorized 
Participant (as defined in the applicable Investment Company 
prospectus), which Authorized Participant will be paid a portfolio of 
securities and/or cash with a value equal to the next determined net 
asset value (``NAV'').
    Proposed Rule 8.602-E(c)(2) defines the term ``Actual Portfolio'' 
as the aggregation of securities held by a series of Actively Managed 
Solution Shares, which aggregation is periodically disclosed in 
accordance with requirements applicable to open-end management 
investment companies registered under the Investment Company Act of 
1940 (``1940 Act'').
    Proposed Rule 8.602-E(c)(3) defines the term ``Proxy Portfolio'' as 
a basket of cash and securities that differs from the Actual Portfolio 
of a series of Actively Managed Solution Shares and that is intended to 
closely track the daily performance of the Actual Portfolio on any 
trading day. The Proxy Portfolio will be disseminated each business day 
on the website for each series of Actively Managed Solution Shares.
    Proposed Rule 8.602-E(c)(4) defines the term ``Creation Unit'' as a 
specified minimum number of Actively Managed Solution Shares issued by 
an Investment Company at the request of an

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Authorized Participant in return for a designated portfolio of 
securities (and/or an amount of cash) specified each day and a 
specified minimum number of Actively Managed Solution Shares that may 
be redeemed to an Investment Company at the request of an Authorized 
Participant in return for a portfolio of securities and/or cash, 
consistent with the Investment Company's investment objectives and 
policies.
    Proposed Rule 8.602-E(c)(5) defines the term ``Reporting 
Authority'' in respect of a particular series of Actively Managed 
Solution Shares means the Exchange, the exchange that lists a 
particular series of Actively Managed Solution Shares (if the Exchange 
is trading such series pursuant to unlisted trading privileges), an 
institution, or a reporting service designated by the issuer of a 
series of Actively Managed Solution Shares as the official source for 
calculating and reporting information relating to such series, 
including the net asset value, or other information relating to the 
issuance, redemption or trading of Actively Managed Solution Shares. A 
series of Actively Managed Solution Shares may have more than one 
Reporting Authority, each having different functions.
    Proposed Rule 8.602-E(c)(6) defines the term ``normal market 
conditions'' as including, but not limited to, the absence of trading 
halts in the applicable financial markets generally; operational issues 
(e.g., systems failure) causing dissemination of inaccurate market 
information; or force majeure type events such as natural or manmade 
disaster, act of God, armed conflict, act of terrorism, riot or labor 
disruption or any similar intervening circumstance.
    Proposed Rule 8.602-E(d) sets forth initial and continued listing 
criteria applicable to Actively Managed Solution Shares. Proposed Rule 
8.602-E(d)(1)(A) provides that, for each series of Actively Managed 
Solution Shares, the Exchange will establish a minimum number of 
Actively Managed Solution Shares required to be outstanding at the time 
of commencement of trading on the Exchange. In addition, proposed Rule 
8.602-E(d)(1)(B) provides that the Exchange will obtain a 
representation from the issuer of each series of Actively Managed 
Solution Shares that the NAV per share for the series will be 
calculated daily and that the NAV will be made available to all market 
participants at the same time.\4\ Proposed Rule 8.602-E(d)(1)(C) 
provides that all Actively Managed Solution Shares shall have a stated 
investment objective, which shall be adhered to under normal market 
conditions.
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    \4\ NYSE Arca Rule 7.18-E(d)(2) (``Halts of Derivative 
Securities Products Listed on the NYSE Arca Marketplace'') provides 
that, with respect to Derivative Securities Products listed on the 
NYSE Arca Marketplace for which a net asset value is disseminated, 
if the Exchange becomes aware that the net asset value is not being 
disseminated to all market participants at the same time, it will 
halt trading in the affected Derivative Securities Product on the 
NYSE Arca Marketplace until such time as the net asset value is 
available to all market participants.
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    Proposed Rule 8.602-E(d)(2) provides that each series of Actively 
Managed Solution Shares will be listed and traded subject to 
application of the following continued listing criteria:
    Proposed Rule 8.602-E(d)(2)(A) provides that the Exchange will 
consider the suspension of trading in, and will commence delisting 
proceedings under Rule 5.5-E(m) of, a series of Actively Managed 
Solution Shares under any of the following circumstances:
    (i) If any of the continued listing requirements set forth in Rule 
8.602-E are not continuously maintained;
    (ii) if any of the statements or representations regarding (a) the 
description of the portfolio, (b) limitations on portfolio holdings, or 
(c) the applicability of Exchange listing rules, specified in the 
Exchange's rule filing pursuant to Section 19(b) of the Securities 
Exchange Act of 1934 to permit the listing and trading of a series of 
Actively Managed Solution Shares, is not continuously maintained; or
    (iii) if such other event shall occur or condition exists which, in 
the opinion of the Exchange, makes further dealings on the Exchange 
inadvisable.
    Proposed Rule 8.602-E(d)(2)(B) provides that, upon notification to 
the Exchange by the issuer of a series of Actively Managed Solution 
Shares that the NAV with respect to such series is not disseminated to 
all market participants at the same time, it will halt trading in such 
series until such time as the NAV is available to all market 
participants. The Exchange may also halt trading at the request of the 
investment adviser to a series of Actively Managed Solution Shares upon 
notification to the Exchange by the issuer of such series that the 
securities representing 10% or more of the Actual Portfolio for such 
series do not have readily available market quotations, and during 
times of unusual market volatility where a significant portion of such 
series' Actual Portfolio are subject to a trading halt or have a last 
trade price that the investment adviser deems unreliable, if the 
investment adviser determines that it is in the best interest of such 
series.
    Proposed Rule 8.602-E(d)(2)(C) provides that, upon termination of 
an Investment Company, the Exchange requires that Actively Managed 
Solution Shares issued in connection with such entity be removed from 
Exchange listing.
    Proposed Rule 8.602-E(d)(2)(D) provides that voting rights shall be 
as set forth in the applicable Investment Company prospectus.
    Proposed Rule 8.602-E(e), which relates to limitation of Exchange 
liability, provides that neither the Exchange, the Reporting Authority, 
nor any agent of the Exchange shall have any liability for damages, 
claims, losses or expenses caused by any errors, omissions, or delays 
in calculating or disseminating any current portfolio value; the 
current value of the portfolio of securities required to be deposited 
to the Investment Company in connection with issuance of Actively 
Managed Solution Shares; the amount of any dividend equivalent payment 
or cash distribution to holders of Actively Managed Solution Shares; 
net asset value; or other information relating to the purchase, 
redemption, or trading of Actively Managed Solution Shares, resulting 
from any negligent act or omission by the Exchange, the Reporting 
Authority or any agent of the Exchange, or any act, condition, or cause 
beyond the reasonable control of the Exchange, its agent, or the 
Reporting Authority, including, but not limited to, an act of God; 
fire; flood; extraordinary weather conditions; war; insurrection; riot; 
strike; accident; action of government; communications or power 
failure; equipment or software malfunction; or any error, omission, or 
delay in the reports of transactions in one or more underlying 
securities.
    Proposed Commentary .01 to NYSE Arca Rule 8.602-E provides that the 
Exchange will file separate proposals under Section 19(b) of the 
Securities Exchange Act of 1934 before the listing and trading of 
Actively Managed Solution Shares. All statements or representations 
contained in such rule filing regarding (a) the description of the 
portfolio, (b) limitations on portfolio holdings, or (c) the 
applicability of Exchange listing rules specified in such rule filing 
will constitute continued listing requirements. An issuer of such 
securities must notify the Exchange of any failure to comply with such 
continued listing requirements.
    Proposed Commentary .02 to NYSE Arca Rule 8.602-E provides that the 
Exchange will implement and maintain

[[Page 359]]

written surveillance procedures for Actively Managed Solution Shares.
    Proposed Commentary .03 to NYSE Arca Rule 8.602-E provides that, if 
the investment adviser to the Investment Company issuing Actively 
Managed Solution Shares is registered as a broker-dealer or is 
affiliated with a broker-dealer such investment adviser will erect and 
maintain a ``fire wall'' between the investment adviser and personnel 
of the broker-dealer or broker-dealer affiliate, as applicable, with 
respect to access to information concerning the composition of and/or 
changes to such Investment Company's Actual Portfolio or the applicable 
Proxy Portfolio. Personnel who make decisions on the Investment 
Company's Actual Portfolio or the applicable Proxy Portfolio 
composition must be subject to procedures designed to prevent the use 
and dissemination of material nonpublic information regarding the 
applicable Investment Company Actual Portfolio or Proxy Portfolio.\5\
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    \5\ The Exchange will propose applicable NYSE Arca listing fees 
for Actively Managed Solution Shares in the NYSE Arca Equities 
Schedule of Fees and Charges via a separate proposed rule change.
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Key Features of Actively Managed Solution Shares
    While funds issuing Actively Managed Solution Shares will be 
actively-managed and, to that extent, will be similar to Managed Fund 
Shares, Actively Managed Solution Shares differ from Managed Fund 
Shares in the following important respects. First, in contrast to 
Managed Fund Shares, which are actively-managed funds listed and traded 
under NYSE Arca Rule 8.600-E \6\ and for which a ``Disclosed 
Portfolio'' is required to be disseminated at least once daily,\7\ the 
portfolio for an issue of Actively Managed Solution Shares will be 
disclosed at least quarterly in accordance with normal disclosure 
requirements otherwise applicable to open-end management investment 
companies registered under the 1940 Act.\8\ The composition of the 
portfolio of an issue of Actively Managed Solution Shares would not be 
available at commencement of Exchange listing and trading. Second, 
Actively Managed Solution Shares would not publish their full portfolio 
contents daily. Instead, Actively Managed Solution Shares would utilize 
a proxy portfolio methodology, as described below (the ``NYSE Proxy 
Portfolio Methodology'') that would allow market participants to assess 
the intraday value and associated risk of a fund's then-current 
portfolio (the ``Actual Portfolio'') and thereby facilitate the 
purchase and sale of shares by investors in the secondary market at 
prices that do not vary materially from their NAV.\9\ The NYSE Proxy 
Portfolio Methodology would utilize creation of a proxy portfolio 
(``Proxy Portfolio'') for hedging and arbitrage purposes.\10\ Daily 
disclosure of Proxy Portfolio contents, Proxy Overlap and related 
metrics, as described below (the ``Proxy Portfolio Disclosures''), 
would permit effective hedging of risks associated with arbitrage and 
market making activities concerning a series of Actively Managed 
Solution Shares, permitting market making in Actively Managed Solution 
Shares with reasonable bid/ask spreads. In essence, the Proxy Portfolio 
Disclosures should permit market making in fund shares that keeps bid/
ask spreads narrow and the secondary market prices of fund shares at or 
close to NAV.
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    \6\ The Commission has previously approved listing and trading 
on the Exchange of a number of issues of Managed Fund Shares under 
NYSE Arca Rule 8.600-E. See, e.g., Securities Exchange Act Release 
Nos. 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-
2008-31) (order approving Exchange listing and trading of twelve 
actively-managed funds of the WisdomTree Trust); 60460 (August 7, 
2009), 74 FR 41468 (August 17, 2009) (SR-NYSEArca-2009-55) (order 
approving listing of Dent Tactical ETF); 63076 (October 12, 2010), 
75 FR 63874 (October 18, 2010) (SR-NYSEArca-2010-79) (order 
approving Exchange listing and trading of Cambria Global Tactical 
ETF); 63802 (January 31, 2011), 76 FR 6503 (February 4, 2011) (SR-
NYSEArca-2010-118) (order approving Exchange listing and trading of 
the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic 
Allocation Growth Income ETF). The Commission also has approved a 
proposed rule change relating to generic listing standards for 
Managed Fund Shares. Securities Exchange Act Release No. 78397 (July 
22, 2016), 81 FR 49320 (July 27, 2016 (SR-NYSEArca-2015-110) 
(amending NYSE Arca Equities Rule 8.600 to adopt generic listing 
standards for Managed Fund Shares).
    \7\ NYSE Arca Rule 8.600-E(c)(2) defines the term ``Disclosed 
Portfolio'' as the identities and quantities of the securities and 
other assets held by the Investment Company that will form the basis 
for the Investment Company's calculation of net asset value at the 
end of the business day. NYSE Arca Rule 8.600-E(d)(2)(B)(i) requires 
that the Disclosed Portfolio will be disseminated at least once 
daily and will be made available to all market participants at the 
same time.
    \8\ A mutual fund is required to file with the Commission its 
complete portfolio schedules for the second and fourth fiscal 
quarters on Form N-CSR under the 1940 Act, and is required to file 
its complete portfolio schedules each month on Form N-PORT under the 
1940 Act, within 60 days of the end of each month. Information 
reported on Form N-PORT for the third month of the Fund's fiscal 
quarter will be made publicly available 60 days after the end of the 
Fund's fiscal quarter. These forms are available to the public on 
the Commission's website at www.sec.gov.
    \9\ The NYSE Proxy Portfolio Methodology is owned by the NYSE 
Group, Inc. and licensed for use by the Fund. NYSE Group, Inc. is 
not affiliated with the Fund, Adviser or Distributor.
    \10\ With respect to the Fund, the Fund will have in place 
policies and procedures regarding the construction and composition 
of its Proxy Portfolio. Such policies and procedures will be covered 
by the Fund's compliance program and other requirements under Rule 
38a-1 under the 1940 Act.
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    The Exchange, after consulting with various Lead Market Makers that 
trade exchange-traded funds (``ETFs'') on the Exchange, believes that 
market makers will be able to make efficient and liquid markets priced 
near the NAV in light of the daily Proxy Portfolio Disclosures, and 
market makers employ market making techniques such as ``statistical 
arbitrage,'' including correlation hedging, beta hedging, and 
dispersion trading, which is currently used throughout the financial 
services industry, to make efficient markets in exchange-traded 
products.\11\ This ability should permit market makers to make 
efficient markets in an issue of Actively Managed Solution Shares 
without precise knowledge of a fund's underlying portfolio.
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    \11\ Statistical arbitrage enables a trader to construct an 
accurate proxy for another instrument, allowing it to hedge the 
other instrument or buy or sell the instrument when it is cheap or 
expensive in relation to the proxy. Statistical analysis permits 
traders to discover correlations based purely on trading data 
without regard to other fundamental drivers. These correlations are 
a function of differentials, over time, between one instrument or 
group of instruments and one or more other instruments. Once the 
nature of these price deviations have been quantified, a universe of 
securities is searched in an effort to, in the case of a hedging 
strategy, minimize the differential. Once a suitable hedging proxy 
has been identified, a trader can minimize portfolio risk by 
executing the hedging basket. The trader then can monitor the 
performance of this hedge throughout the trade period making 
correction where warranted. In the case of correlation hedging, the 
analysis seeks to find a proxy that matches the pricing behavior of 
a fund. In the case of beta hedging, the analysis seeks to determine 
the relationship between the price movement over time of a fund and 
that of another stock.
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    The Exchange understands that traders use statistical analysis to 
derive correlations between different sets of instruments to identify 
opportunities to buy or sell one set of instruments when it is 
mispriced relative to the others. For Actively Managed Solution Shares, 
market makers may use the knowledge of a fund's means of achieving its 
investment objective, as described in the applicable fund registration 
statement, together with the Proxy Portfolio Disclosures to manage a 
market maker's quoting risk in connection with trading Fund Shares. 
Market makers can then conduct statistical arbitrage between Proxy 
Portfolio and shares of a fund, buying and selling one against the 
other over the course of the trading day. They will evaluate how the 
Proxy Portfolio performed in comparison to the price of a fund's 
shares, and use that analysis as well as knowledge of risk metrics, 
such as volatility and turnover, to provide a more efficient hedge.

[[Page 360]]

    Market makers have indicated to the Exchange that there will be 
sufficient data to run a statistical analysis which will lead to 
spreads being tightened substantially around NAV of a fund's shares. 
This is similar to certain other existing exchange traded products (for 
example, ETFs that invest in foreign securities that do not trade 
during U.S. trading hours), in which spreads may be generally wider in 
the early days of trading and then narrow as market makers gain more 
confidence in their real-time hedges.
Description of the Fund and the Trust
    The Fund will be a series of Natixis ETF Trust II (``Trust''), 
which will be registered with the Commission as an open-end management 
investment company.\12\
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    \12\ The Trust is registered under the 1940 Act. On December 12, 
2019, the Trust filed a registration statement on Form N-1A under 
the Securities Act of 1933 (the ``1933 Act'') (15 U.S.C. 77a), and 
under the 1940 Act relating to the Fund (File Nos. 333-235466 and 
811-23500) (the ``Registration Statement''). The Trust and NYSE 
Group, Inc. filed a Seventh Amended and Restated Application for an 
Order under Section 6(c) of the 1940 Act for exemptions from various 
provisions of the 1940 Act and rules thereunder (File No. 812-
14870), dated October 21, 2019 (``Application''). On November 14, 
2019, the Commission issued a notice regarding the Application. 
Investment Company Release No. 33684 (File No. 812-14870). On 
December 10, 2019, the Commission issued an order (``Exemptive 
Order'') under the 1940 Act granting the exemptions requested in the 
Application (Investment Company Act Release No. 33711 (December 10, 
2019)). Investments made by the Fund will comply with the conditions 
set forth in the Application and the Exemptive Order. The 
description of the operation of the Trust and the Fund herein is 
based, in part, on the Registration Statement and the Application.
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    Natixis Advisors, L.P. (``Adviser'') will be the investment adviser 
to the Fund. ALPS Distributors, Inc. will act as the distributor and 
principal underwriter (``Distributor'') for the Fund.
    Proposed Commentary .03 to NYSE Arca Rule 8.602-E provides that, if 
the investment adviser to the Investment Company issuing Actively 
Managed Solution Shares is registered as a broker-dealer or is 
affiliated with a broker-dealer such investment adviser will erect and 
maintain a ``fire wall'' between the investment adviser and personnel 
of the broker-dealer or broker-dealer affiliate, as applicable, with 
respect to access to information concerning the composition and/or 
changes to such Investment Company's Actual Portfolio or the applicable 
Proxy Portfolio. Personnel who make decisions on the Investment 
Company's Actual Portfolio or the applicable Proxy Portfolio 
composition must be subject to procedures designed to prevent the use 
and dissemination of material nonpublic information regarding the 
applicable Investment Company Actual Portfolio or Proxy Portfolio. 
Proposed Commentary .03 is similar to Commentary .03(a)(i) and (iii) to 
NYSE Arca Rule 5.2-E(j)(3); however, Commentary .03, in connection with 
the establishment of a ``fire wall'' between the investment adviser and 
the broker-dealer, reflects the applicable open-end fund's portfolio, 
not an underlying benchmark index, as is the case with index-based 
funds.\13\ The Adviser is not registered as a broker-dealer but is 
affiliated with a broker-dealer. The Adviser has implemented and will 
maintain a ``fire wall'' with respect to such broker-dealer affiliate 
regarding access to information concerning the composition of and/or 
changes to the Fund's portfolio.
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    \13\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and its related personnel will be 
subject to the provisions of Rule 204A-1 under the Advisers Act 
relating to codes of ethics. This Rule requires investment advisers 
to adopt a code of ethics that reflects the fiduciary nature of the 
relationship to clients as well as compliance with other applicable 
securities laws. Accordingly, procedures designed to prevent the 
communication and misuse of non-public information by an investment 
adviser must be consistent with Rule 204A-1 under the Advisers Act. 
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful 
for an investment adviser to provide investment advice to clients 
unless such investment adviser has (i) adopted and implemented 
written policies and procedures reasonably designed to prevent 
violations, by the investment adviser and its supervised persons, of 
the Advisers Act and the Commission rules adopted thereunder; (ii) 
implemented, at a minimum, an annual review regarding the adequacy 
of the policies and procedures established pursuant to subparagraph 
(i) above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
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    In the event (a) the Adviser or any sub-adviser becomes registered 
as a broker-dealer or becomes newly affiliated with a broker-dealer, or 
(b) any new adviser or sub-adviser is a registered broker-dealer, or 
becomes affiliated with a broker-dealer, it will implement and maintain 
a fire wall with respect to its relevant personnel or its broker-dealer 
affiliate regarding access to information concerning the composition 
and/or changes to the portfolio, and will be subject to procedures 
designed to prevent the use and dissemination of material non-public 
information regarding such portfolio.
Actively Managed Solution Shares
    According to the Application, the Adviser believes Actively Managed 
Solution Shares would allow for efficient trading of Shares through an 
effective Fund portfolio transparency substitute and publication of 
related informative metrics, while still shielding the identity of the 
full Fund portfolio contents to protect the Fund's performance-seeking 
strategies. Even though the Fund would not publish its full portfolio 
contents daily, the Adviser believes that the NYSE Proxy Portfolio 
Methodology would allow market participants to assess the intraday 
value and associated risk of the Fund's then-current portfolio (the 
``Actual Portfolio''). As a result, the Adviser believes that investors 
would be able to purchase and sell Shares in the secondary market at 
prices that are close to their NAV. An important part of the NYSE Proxy 
Portfolio Methodology would be the creation of the Proxy Portfolio. As 
noted above, daily disclosure of the Proxy Portfolio Disclosures would 
also allow the Fund to permit effective arbitrage, including hedging of 
investors' positions in Shares.
    The Adviser believes Actively Managed Solution Shares would benefit 
investors by allowing them to access a greater choice of active 
portfolio managers in an ETF structure, which provides benefits over 
traditional mutual funds such as brokerage account transactional 
efficiencies, lower fund costs, tax efficiencies and intraday 
liquidity.
Natixis ETF
    According to the Registration Statement, the Fund will invest only 
in ETFs,\14\ exchange-traded notes (``ETNs''),\15\ U.S. exchange-traded 
common stocks, common stocks listed on a foreign exchange that trade on 
such exchange contemporaneously with the Shares (``foreign common 
stocks'') in the Exchange's Core Trading Session (normally 9:30 a.m. 
and 4:00 p.m., Eastern time (``E.T.'')), U.S. exchange-traded preferred 
stocks, U.S. exchange-traded American Depositary Receipts 
(``ADRs''),\16\ U.S. exchange-traded real estate investment trusts, 
U.S. exchange-traded commodity pools, U.S. exchange-traded metals 
trusts, U.S. exchange-

[[Page 361]]

traded currency trusts and U.S. exchange-traded futures \17\ that trade 
contemporaneously with Fund Shares, as well as cash and cash 
equivalents (together, the ``Permissible Investments'').\18\ The Fund 
will not hold short positions or invest in derivatives other than U.S. 
exchange-traded futures. The Fund will not borrow for investment 
purposes.
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    \14\ For purposes of this filing, ``ETFs'' are Investment 
Company Units (as described in NYSE Arca Rule 5.2-E(j)(3)); 
Portfolio Depositary Receipts (as described in NYSE Arca Rule 8.100-
E); and Managed Fund Shares (as described in NYSE Arca Rule 8.600-
E). All ETFs will be listed and traded in the U.S. on a national 
securities exchange.
    \15\ ETNs are Index-Linked Securities as described in NYSE Arca 
Rule 5.2-E(j)(6).
    \16\ ADRs are issued by a U.S. financial institution (a 
``depositary'') and evidence ownership in a security or pool of 
securities issued by a foreign issuer that have been deposited with 
the depositary. Each ADR will be registered under the Securities Act 
on Form F-6.
    \17\ Exchange-traded futures are U.S. listed futures contracts 
where the future contract's reference asset is an asset that the 
Fund could invest in directly, or in the case of an index future, is 
based on an index of a type of asset that the Fund could invest in 
directly, such as an S&P 500 index future. All futures contracts 
that the Fund may invest in will be traded on a U.S. futures 
exchange.
    \18\ For purposes of this filing, cash equivalents are short-
term U.S. Treasury securities, government money market funds, and 
repurchase agreements.
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    Under normal market conditions,\19\ the Fund will primarily invest 
in common stocks of U.S. companies. The Fund generally will invest in 
securities of larger capitalization companies in any industry.
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    \19\ The term ``normal market conditions'' is defined in 
proposed Rule 8.602-E(c)(6).
---------------------------------------------------------------------------

The NYSE Proxy Portfolio Methodology
    According to the Application, the goal of the NYSE Proxy Portfolio 
Methodology is to permit a fund's Proxy Portfolio, during all market 
conditions, to track closely the daily performance of a fund's Actual 
Portfolio and minimize intra-day misalignment between the performance 
of the Proxy Portfolio and the performance of the Actual Portfolio. The 
Proxy Portfolio is designed to reflect the economic exposures and the 
risk characteristics of the Actual Portfolio on any given trading day. 
The Adviser and the Exchange believe that the Proxy Portfolio 
Disclosures will enable arbitrageurs and market participants to use the 
component securities and their weightings in the Proxy Portfolio to 
calculate intraday values that approximate the value of the securities 
in the Actual Portfolio and, based thereon, assess whether the market 
price of the Shares is higher or lower than the approximate 
contemporaneous value of the Actual Portfolio and engage in arbitrage 
and hedging activities. These activities will help ensure that fund 
market prices remain close to a fund's NAV per Share. In addition, the 
Proxy Portfolio Disclosures generated by the NYSE Proxy Portfolio 
Methodology will allow for effective hedging activities by market 
makers, which will facilitate narrow bid/ask spreads for shares.
The Proxy Portfolio
    According to the Application, the Proxy Portfolio is designed to 
recreate the daily performance of the Actual Portfolio. This is 
achieved by performing a ``Factor Model'' analysis of the Actual 
Portfolio. The Factor Model is comprised of three sets of factors or 
analytical metrics: Market-based factors, fundamental factors, and 
industry/sector factors.
    The Fund, utilizing the NYSE Proxy Portfolio Methodology, will have 
a universe of securities (the ``Model Universe'') that will be used to 
generate the Fund's Proxy Portfolio. The Model Universe will be 
comprised of securities that the Fund can purchase and will be a 
financial index or stated portfolio of securities from which Fund 
investments will be selected. For example, the Model Universes could be 
the S&P 500 Index, the Russell 1000 Index or the 3,000 largest U.S.-
listed equity securities.
    The results of the Factor Model analysis of the Fund's Actual 
Portfolio are then applied to the Fund's Model Universe. The daily 
rebalanced Proxy Portfolio is then generated as a result of this Model 
Universe analysis with the Proxy Portfolio being a small sub-set of the 
Model Universe.\20\ Consequently, the Factor Model is applied to both 
the Actual Portfolio and the Model Universe to construct the Fund's 
Proxy Portfolio that performs in a manner substantially identical to 
the performance of its Actual Portfolio. The Proxy Portfolio will only 
include Permissible Investments.
---------------------------------------------------------------------------

    \20\ As a part of the Proxy Portfolio generation process, a 
restricted list is maintained to ensure that if one class of an 
issuer's securities is excluded from (or included in) the Proxy 
Portfolio, other classes of securities of the same issuer are 
excluded from the Proxy Portfolio.
---------------------------------------------------------------------------

    The Adviser believes that the mere inclusion of components in the 
Proxy Portfolio that are not part of the Actual Portfolio will not have 
a noticeable impact on the values of such components. As with the 
Actual Portfolio, the assets that may be included in the Proxy 
Portfolio are expected to be extremely liquid and it is highly unlikely 
that either their inclusion in the Proxy Portfolio or the Creation 
Basket (as defined below) \21\ would cause a change in the prices of 
those securities, even during times of market volatility. The NYSE 
Proxy Portfolio Methodology seeks to provide a mechanism whereby market 
participants can assess the intraday value of the Actual Portfolio and, 
therefore, by design seeks to exclude components from being included in 
the Proxy Portfolio whose values may change solely by virtue of being 
included in the Proxy Portfolio or Creation Basket.
---------------------------------------------------------------------------

    \21\ As discussed below, the Creation Basket will include the 
same names and quantities as the Fund's Proxy Portfolio, subject to 
cash substitutions.
---------------------------------------------------------------------------

    According to the Application, most traditional ETFs are required to 
provide full daily portfolio holding disclosure. As discussed below, 
the Adviser believes that the ``Proxy Portfolio'' (as described below) 
would be acceptable to market participants as a substitute for full 
daily portfolio transparency. In particular, the Adviser believes that 
the ``Proxy Portfolio Disclosures'' (as described below) resulting 
daily from the NYSE Proxy Portfolio Methodology will provide sufficient 
information to (1) allow for effective hedging by market participants 
that will have the effect of keeping Share bid/ask spreads within a 
narrow range that will foster liquid Share markets, and (2) support 
arbitrage activities by Authorized Participants and other arbitrageurs 
that will have the effect of keeping Fund Share trading prices at or 
close to NAV per Share. The Adviser expects this to be the case 
because, among other matters, the component securities included in the 
daily Proxy Portfolio and their weightings can be used by market 
participants to value and hedge the Actual Portfolio.
    The component securities included in the daily Proxy Portfolio and 
their weightings will be used by market participants to value and hedge 
the Actual Portfolio. If creation/redemption activity is necessary, 
market makers will trade their residual risk at the market close to be 
in line with the necessary positions provided in the creation/
redemption baskets. The Adviser represents that this well-known process 
is utilized by market makers and does not add additional market risk to 
the arbitrage and creation/redemption process. Thus, the Proxy 
Portfolio is designed to obtain the benefit of a known pricing process.
    As discussed below, the ``Tracking Error'' between the NAV per 
Share of the Actual Portfolio and value, on a per Share basis, of the 
Fund's Proxy Portfolio would be calculated at the end of the trading 
day and published before the opening of Fund Share trading on the 
Exchange's Core Trading Session the next Business Day to provide 
additional information to the market making community. Daily Tracking 
Error publication will allow market participants to provide more 
efficient markets and therefore narrower bid/ask spreads. The Adviser 
believes this information, alongside the periodic Fund disclosures and 
the other Proxy Portfolio Disclosures, will provide the level of detail 
necessary to foster

[[Page 362]]

efficient markets and support effective arbitrage functions.
    If the trading of a security held in the Fund's Actual Portfolio is 
halted or otherwise does not have readily available market quotations, 
the Adviser promptly will disclose on the Fund's website the identity 
and weighting of such security for so long as such security's trading 
is halted or otherwise does not have readily available market 
quotations and remains in the Actual Portfolio. The Adviser believes 
that this intraday corrective measure will allow sufficient market 
information so that market participants can continue to engage in Share 
arbitrage and hedging transactions effectively.
Hedging and Arbitrage Opportunities
    According to the Application, the Adviser believes that a reliable 
fund share hedging vehicle, where Proxy Portfolio performance is 
closely correlated to the Actual Portfolio performance, will reduce the 
risk of arbitrage trading and will encourage market making activity 
that drives Share market trading price closer to NAV per Share of the 
Fund. The Adviser believes that market makers for the Shares would 
determine bid/ask spreads for the Shares based primarily on the market 
makers' costs to hedge their exposure to the Shares, much in the same 
way that they determine bid/ask spreads for actively managed and 
passive ETFs that are already listed and traded in the secondary 
market. The prices and determination of effective hedging instruments 
will be influenced by the expected Tracking Error and price 
differentials between the Proxy Portfolio, which is fully disclosed, 
and the expected NAV per Share that will be calculated at the end of 
the trading day.
    According to the Application, historically, all active ETFs have 
sought to facilitate market making activity and arbitrage trading by 
providing full daily portfolio transparency. The Adviser believes that 
market making activity and arbitrage trading can be facilitated for the 
Fund by the information proposed to be provided to the market 
including: The identity and quantity of the components in the highly 
correlated Proxy Portfolio, Proxy Overlap, Tracking Error, and the last 
publicly-disclosed Fund portfolio as well as the identity of the Fund's 
benchmark index. The Adviser represents that, all other factors being 
equal, the statistical analysis and case studies of Proxy Portfolio and 
Actual Portfolio performance correlation indicate that market maker 
bid/ask spreads for Shares should, on average, be similar to those of 
active ETFs currently trading on exchanges.
    More specifically, because the Proxy Portfolio will be constructed 
to generate performance that is correlated to the performance of the 
Actual Portfolio, the Adviser believes that arbitrageurs and market 
participants will be able to use the component securities and their 
weightings in the Proxy Portfolio to calculate intraday values that 
approximate the value of the securities in the Actual Portfolio. As 
with existing fully transparent active ETFs, arbitrageurs and market 
makers then would be able to assess whether the market price of the 
Shares was higher or lower than the approximate contemporaneous value 
of the Actual Portfolio securities, and to make arbitrage and hedging 
decisions using the securities in the Proxy Portfolio.\22\
---------------------------------------------------------------------------

    \22\ According to the Application, the Adviser believes that it 
is statistically impractical to replicate the Actual Portfolio in a 
manner that would provide any trading advantage to a market 
participant over a fund. A fund's daily disclosures, (e.g., Proxy 
Portfolio Disclosures and other fund website information and 
periodic disclosures) are insufficient to permit a third-party to 
replicate the Fund's Actual Portfolio because the NYSE Proxy 
Portfolio Methodology only uses lagged information regarding 
purchases and sales occurring in the Actual Portfolio. Moreover, the 
daily publication of the Creation Basket information is insufficient 
to replicate the Actual Portfolio because it is based on the Proxy 
Portfolio, the construction of which is discussed above. In using 
the Proxy Portfolio, the intent is not to mask the entire Actual 
Portfolio but only the current activity in the Actual Portfolio. 
None of the Proxy Portfolio Disclosures provide up-to-date, granular 
or frequent enough information about the Actual Portfolio to permit 
replication of the Actual Portfolio or Fund investment strategies on 
a current basis.
---------------------------------------------------------------------------

Daily Disclosures
    With respect to the Fund, the following information will comprise 
the ``Proxy Portfolio Disclosures'' and will be publicly available on 
the Fund's website before the commencement of trading in Shares on each 
Business Day:
     The Proxy Portfolio holdings (including the identity and 
quantity of investments in the Proxy Portfolio) will be publicly 
available on the Fund's website before the commencement of trading in 
Shares on each Business Day. The Proxy Portfolio will include the 
following information for each portfolio holding in the Proxy 
Portfolio: (1) Ticker symbol; (2) CUSIP or other identifier; (3) 
description of holding; (4) quantity of each security or other asset 
held; and (5) percentage weight of the holding in the Proxy Portfolio.
     The historical ``Tracking Error'' between the Fund's last 
published NAV per share and the value, on a per Share basis, of the 
Fund's Proxy Portfolio calculated as of the close of trading on the 
prior Business Day will be publicly available on the Fund's website 
before the commencement of trading in Shares each Business Day.
     The ``Proxy Overlap'' will be publicly available on the 
Fund's website before the commencement of trading in Shares on each 
Business Day. The Proxy Overlap is the percentage weight overlap 
between the Proxy Portfolio's holdings compared to the Actual 
Portfolio's holdings that formed the basis for the Fund's calculation 
of NAV at the end of the prior Business Day. The Proxy Overlap will be 
calculated by taking the lesser weight of each asset held in common 
between the Actual Portfolio and the Proxy Portfolio and adding the 
totals.
    Typical mutual fund-style annual, semi-annual and quarterly 
disclosures contained in the Fund's Commission filings will also be 
provided on the Fund's website on a current basis.\23\ Thus, the Fund 
will publish the portfolio contents of its Actual Portfolio on a 
periodic basis. In addition, the Fund will post on its website its NAV 
per Share calculated after the close of trading on the prior Business 
Day.\24\
---------------------------------------------------------------------------

    \23\ See note 8, supra.
    \24\ The Fund will have in place policies and procedures 
regarding the construction and composition of its Proxy Portfolio. 
Such policies and procedures will be covered by the Fund's 
compliance program and other requirements under Rule 38a-1 under the 
1940 Act.
---------------------------------------------------------------------------

Creations and Redemptions of Shares
    According to the Application, the ``Creation Basket'' (as defined 
below) will be based on the Proxy Portfolio, which is designed to 
approximate the value and performance of the Actual Portfolio. All 
Creation Basket instruments will be valued in the same manner as they 
are valued for purposes of calculating the Fund's NAV, and such 
valuation will be made in the same manner regardless of the identity of 
the purchaser or redeemer. Further, the total consideration paid for 
the purchase or redemption of a Creation Unit of Shares will be based 
on the NAV of the Fund, as calculated in accordance with the policies 
and procedures set forth in its registration statement.
    As with the Proxy Portfolio, the Creation Basket will mask the 
Fund's Actual Portfolio from full disclosure while at the same time 
maximize benefits of the ETF structure to shareholders. In particular, 
the Adviser believes that the ability of the Fund to take deposits and 
make redemptions in-kind may aid in achieving the Fund's investment 
objectives by allowing it to be more fully invested, minimizing cash 
drag, and reducing flow-related trading

[[Page 363]]

costs. In-kind transactions may also increase the Fund's tax efficiency 
and promote efficient secondary market trading in Shares.
    According to the Application, the Trust will offer, issue and sell 
Shares of the Fund to investors only in Creation Units through the 
Distributor on a continuous basis at the NAV per Share next determined 
after an order in proper form is received. The NAV of the Fund is 
expected to be determined as of 4:00 p.m. E.T. on each Business Day. 
The Trust will sell and redeem Creation Units of the Fund only on a 
Business Day. Creation Units of the Fund may be purchased and/or 
redeemed entirely for cash, as permissible under the procedures 
described below. The Adviser anticipates that the trading price of a 
Share will range from $10 to $100.
    In order to keep costs low and permit the Fund to be as fully 
invested as possible, Shares will be purchased and redeemed in Creation 
Units and generally on an in-kind basis. Accordingly, except where the 
purchase or redemption will include cash under the circumstances 
specified below, purchasers will be required to purchase Creation Units 
by making an in-kind deposit of specified instruments (``Deposit 
Instruments''), and shareholders redeeming their Shares will receive an 
in-kind transfer of specified instruments (``Redemption Instruments''). 
The names and quantities of the instruments that constitute the Deposit 
Instruments and the Redemption Instruments for the Fund (collectively, 
the ``Creation Basket'') will be the same as the Fund's Proxy 
Portfolio, except to the extent purchases and redemptions are made 
entirely or in part on a cash basis.
    If there is a difference between the NAV attributable to a Creation 
Unit and the aggregate market value of the Creation Basket exchanged 
for the Creation Unit, the party conveying instruments with the lower 
value will also pay to the other an amount in cash equal to that 
difference (the ``Cash Amount'').
    The Fund will adopt and implement policies and procedures regarding 
the composition of its Creation Baskets. The policies and procedures 
will set forth detailed parameters for the construction and acceptance 
of baskets in compliance with the terms and conditions of the Exemptive 
Order and that are in the best interests of the Fund and its 
shareholders, including the process for any revisions to or deviations 
from those parameters. The Fund's basket policies and procedures would 
be covered by the Fund's compliance program and other requirements 
under Rule 38a-1 under the 1940 Act.
    While the Fund normally will issue and redeem Shares in kind, the 
Fund may require purchases and redemptions to be made entirely or in 
part on a cash basis. In such an instance, the Fund will announce, 
before the open of trading in the Core Trading Session (normally, 9:30 
a.m. to 4:00 p.m., E.T.) on a given Business Day, that all purchases, 
all redemptions, or all purchases and redemptions on that day will be 
made wholly or partly in cash. The Fund may also determine, upon 
receiving a purchase or redemption order from an Authorized 
Participant, to have the purchase or redemption, as applicable, be made 
entirely or in part in cash. Each Business Day, before the open of 
trading on the Exchange, the Fund will cause to be published through 
the National Securities Clearing Corporation (``NSCC'') the names and 
quantities of the instruments comprising the Creation Basket, as well 
as the estimated Cash Amount (if any), for that day. The published 
Creation Basket will apply until a new Creation Basket is announced on 
the following Business Day, and there will be no intra-day changes to 
the Creation Basket except to correct errors in the published Creation 
Basket.
    All orders to purchase Creation Units must be placed with the 
Distributor by or through an Authorized Participant, which is either: 
(1) A ``participating party'' (i.e., a broker or other participant), in 
the Continuous Net Settlement (``CNS'') System of the NSCC, a clearing 
agency registered with the Commission and affiliated with the 
Depository Tust Company (``DTC''), or (2) a DTC Participant, which in 
any case has executed a participant agreement with the Distributor and 
the transfer agent.
Timing and Transmission of Purchase Orders
    All orders to purchase (or redeem) Creation Units, whether using 
the NSCC Process or the DTC Process, must be received by the 
Distributor no later than the NAV calculation time (``NAV Calculation 
Time''), generally 4:00 p.m. E.T. on the date the order is placed 
(``Transmittal Date'') in order for the purchaser (or redeemer) to 
receive the NAV determined on the Transmittal Date. In the case of 
custom orders, the order must be received by the Distributor 
sufficiently in advance of the NAV Calculation Time in order to help 
ensure that the Fund has an opportunity to purchase the missing 
securities with the cash in lieu amounts or to sell securities to 
generate the cash in lieu amounts prior to the NAV Calculation Time. On 
days when the Exchange closes earlier than normal, the Fund may require 
custom orders to be placed earlier in the day.
Availability of Information
    The Fund's website (www.im.natixis.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Fund's 
website will include on a daily basis, per Share for the Fund, (1) 
daily trading volume, the prior Business Day's NAV and the ``Closing 
Price'' or ``Bid/Ask Price,'' \25\ and a calculation of the premium/
discount of the Closing Price or Bid/Ask Price against such NAV,\26\ 
and (2) data in chart format displaying the frequency distribution of 
discounts and premiums of the daily Bid/Ask Price against the NAV, 
within appropriate ranges, for each of the four previous calendar 
quarters. The website and information will be publicly available at no 
charge.
---------------------------------------------------------------------------

    \25\ The Bid/Ask Price of Shares of the Fund will be determined 
using the highest bid and the lowest offer on the Consolidated Tape 
as of the time of calculation of the Fund's NAV. The records 
relating to Bid/Ask Prices will be retained by the Fund or its 
service providers. The ``Bid/Ask Price'' is the midpoint of the 
highest bid and lowest offer based upon the National Best Bid and 
Offer as of the time of calculation of the Fund's NAV. The 
``National Best Bid and Offer'' is the current national best bid and 
national best offer as disseminated by the Consolidated Quotation 
System or UTP Plan Securities Information Processor. The ``Closing 
Price'' of Shares is the official closing price of the Shares on the 
Exchange.
    \26\ The ``premium/discount'' refers to the premium or discount 
to NAV at the end of a trading day and will be calculated based on 
the last Bid/Ask Price or the Closing Price on a given trading day.
---------------------------------------------------------------------------

    The Fund may also provide additional quantitative information on 
its website. In addition, the Fund will provide any other information 
on its website regarding premiums/discounts that ETFs registered under 
the 1940 Act may be required to provide.\27\ The website also will 
include the Proxy Portfolio for the Fund, the Proxy Overlap and 
Tracking Error for the Fund.
---------------------------------------------------------------------------

    \27\ According to the Application, the Fund's website will 
include any other information regarding premiums and discounts as 
may be required for other ETFs under Rule 6c-11 under the 1940 Act 
and will also disclose any information regarding the bid/ask spread 
for the Fund as may be required for other ETFs under Rule 6c-11 
under the 1940 Act.
---------------------------------------------------------------------------

    The Proxy Portfolio holdings (including the identity and quantity 
of investments in the Proxy Portfolio) will be publicly available on 
the Fund's website before the commencement of trading in Shares on each 
Business Day.
    Investors can also obtain the Fund's statement of additional 
information

[[Page 364]]

(``SAI''), Shareholder Reports, Form N-CSR, N-PORT and Form N-CEN. The 
prospectus, SAI and Shareholder Reports are available free upon request 
from the Trust, and those documents and the Form N-CSR, N-PORT, and 
Form N-CEN may be viewed on-screen or downloaded from the Commission's 
website.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers. Updated price information for U.S. exchange-
listed equity securities is available through major market data vendors 
or securities exchanges trading such securities. Quotation and last 
sale information for the Shares, equity securities and ETFs will be 
available via the Consolidated Tape Association (``CTA'') high-speed 
line. Price information for cash equivalents is available through major 
market data vendors.
Investment Restrictions
    The Shares of the Fund will conform to the initial and continued 
listing criteria under proposed Rule 8.602-E. The Fund's holdings will 
be limited to and consistent with permissible holdings as described in 
the Exemptive Application.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund.\28\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Rule 
7.12-E have been reached. Trading also may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. Trading in the Shares will be 
subject to NYSE Arca Rule 8.602-E(d)(2)(B), which sets forth 
circumstances under which Shares of the Fund will be halted.
---------------------------------------------------------------------------

    \28\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace in all trading sessions in accordance with 
NYSE Arca Rule 7.34-E(a). As provided in NYSE Arca Rule 7.6-E, the 
minimum price variation (``MPV'') for quoting and entry of orders in 
equity securities traded on the NYSE Arca Marketplace is $0.01, with 
the exception of securities that are priced less than $1.00 for which 
the MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Rule 8.602-E. The Exchange represents that, 
for initial and continued listing, the Fund will be in compliance with 
Rule 10A-3 under the Act,\29\ as provided by NYSE Arca Rule 5.3-E. The 
Exchange will obtain a representation from the issuer of the Shares of 
the Fund that the NAV per Share of the Fund will be calculated daily 
and will be made available to all market participants at the same time.
---------------------------------------------------------------------------

    \29\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Exchange, as 
well as cross-market surveillances administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\30\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and federal securities laws applicable to trading on 
the Exchange.
---------------------------------------------------------------------------

    \30\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, exchange-traded 
equity securities, and futures contracts with other markets and other 
entities that are members of the ISG, and the Exchange or FINRA, on 
behalf of the Exchange, or both, may obtain trading information 
regarding trading such securities and financial instruments from such 
markets and other entities. In addition, the Exchange may obtain 
information regarding trading in such securities and financial 
instruments from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.\31\
---------------------------------------------------------------------------

    \31\ For a list of the current members of ISG, see 
www.isgportal.org.
---------------------------------------------------------------------------

    The Adviser will make available daily to FINRA and the Exchange the 
portfolio holdings of the Fund in order to facilitate the performance 
of the surveillances referred to above.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit (``ETP'') Holders in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares. Specifically, the Bulletin will discuss the 
following: (1) The procedures for purchases and redemptions of Shares; 
(2) NYSE Arca Rule 9.2-E(a), which imposes a duty of due diligence on 
its ETP Holders to learn the essential facts relating to every customer 
prior to trading the Shares; (4) how information regarding the Proxy 
Portfolio will be disseminated; (5) the requirement that ETP Holders 
deliver a prospectus to investors purchasing newly issued Shares prior 
to or concurrently with the confirmation of a transaction; and (6) 
trading information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m., E.T. each trading day.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\32\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\33\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market

[[Page 365]]

system, and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b).
    \33\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that proposed Rule 8.602-E is designed to 
prevent fraudulent and manipulative acts and practices in that the 
proposed rules relating to listing and trading of Actively Managed 
Solution Shares provide specific initial and continued listing criteria 
required to be met by such securities.
    Proposed Rule 8.602-E (d) sets forth initial and continued listing 
criteria applicable to Actively Managed Solution Shares. Proposed Rule 
8.602-E(d)(1)(A) provides that, for each series of Actively Managed 
Solution Shares, the Exchange will establish a minimum number of 
Actively Managed Solution Shares required to be outstanding at the time 
of commencement of trading on the Exchange. In addition, proposed Rule 
8.602-E(d)(1)(B) provides that the Exchange will obtain a 
representation from the issuer of each series of Actively Managed 
Solution Shares that the NAV per share for the series will be 
calculated daily and that the NAV will be made available to all market 
participants at the same time. Proposed Rule 8.602-E(d)(2) provides 
that each series of Actively Managed Solution Shares will be listed and 
traded subject to application of specified continued listing criteria. 
Proposed Rule 8.602-E(d)(2)(A) provides that the Exchange will consider 
the suspension of trading in, and will commence delisting proceedings 
under Rule 5.5-E(m) of, a series of Actively Managed Solution Shares 
under any of the circumstances specified in such rule.
    Proposed Rule 8.602-E(d)(2)(B) provides that, upon notification to 
the Exchange by the issuer of a series of Actively Managed Solution 
Shares, that the net asset value with respect to a series of Actively 
Managed Solution Shares is not disseminated to all market participants 
at the same time, it will halt trading in such series until such time 
as the net asset value is available to all market participants.
    Proposed Commentary .01 to NYSE Arca Rule 8.602-E provides that the 
Exchange will file separate proposals under Section 19(b) of the Act 
before the listing and trading of Actively Managed Solution Shares. All 
statements or representations contained in such rule filing regarding 
(a) the description of the portfolio, (b) limitations on portfolio 
holdings, or (c) the applicability of Exchange listing rules specified 
in such rule filing will constitute continued listing requirements. An 
issuer of such securities must notify the Exchange of any failure to 
comply with such continued listing requirements.
    Proposed Commentary .02 to NYSE Arca Rule 8.602-E provides that the 
Exchange will implement and maintain written surveillance procedures 
for Actively Managed Solution Shares. Proposed Commentary .03 provides 
that, if the investment adviser to the Investment Company issuing 
Actively Managed Solution Shares is registered as a broker-dealer or is 
affiliated with a broker-dealer such investment adviser will erect and 
maintain a ``fire wall'' between the investment adviser and personnel 
of the broker-dealer or broker-dealer affiliate, as applicable, with 
respect to access to information concerning the composition and/or 
changes to such Investment Company's Actual Portfolio or the applicable 
Proxy Portfolio. Personnel who make decisions on the Investment 
Company's Actual Portfolio or the applicable Proxy Portfolio 
composition must be subject to procedures designed to prevent the use 
and dissemination of material nonpublic information regarding the 
applicable Investment Company Actual Portfolio or Proxy Portfolio.
    With respect to the proposed listing and trading of Shares of the 
Fund, the Exchange believes that the proposed rule change is designed 
to prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Rule 8.602-E. All 
exchange-listed equity securities held by the Fund will be listed on 
U.S. national securities exchanges. The listing and trading of such 
securities is subject to rules of the exchanges on which they are 
listed and traded, as approved by the Commission. The Fund will 
primarily hold U.S.-listed equity securities and shares issued by other 
U.S.-listed ETFs. The Exchange or FINRA, on behalf of the Exchange, or 
both, will communicate as needed regarding trading in the Shares, 
exchange-traded equity securities, and futures with other markets and 
other entities that are members of the ISG, and the Exchange or FINRA, 
on behalf of the Exchange, or both, may obtain trading information 
regarding trading such securities and financial instruments from such 
markets and other entities. In addition, the Exchange may obtain 
information regarding trading in such securities and financial 
instruments from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
    The Exchange, after consulting with various Lead Market Makers that 
trade ETFs on the Exchange, believes that market makers will be able to 
make efficient and liquid markets priced near the NAV, and that market 
makers have knowledge of a fund's means of achieving its investment 
objective even without daily disclosure of a fund's underlying 
portfolio. The Exchange believes that market makers will employ risk-
management techniques to make efficient markets in exchange traded 
products.\34\ This ability should permit market makers to make 
efficient markets in shares without knowledge of a fund's underlying 
portfolio.
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    \34\ See note 11, supra.
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    The Exchange understands that traders use statistical analysis to 
derive correlations between different sets of instruments to identify 
opportunities to buy or sell one set of instruments when it is 
mispriced relative to the others. For Actively Managed Solution Shares, 
market makers utilizing statistical arbitrage use the knowledge of a 
fund's means of achieving its investment objective, as described in the 
applicable fund registration statement, as well as Proxy Portfolio 
Disclosures to manage a market maker's quoting risk in connection with 
trading fund shares. Market makers will then conduct statistical 
arbitrage between the Proxy Portfolio and shares of a fund, buying and 
selling one against the other over the course of the trading day. 
Eventually, at the end of each day, they will evaluate how the Proxy 
Portfolio performed in comparison to the price of a fund's shares, and 
use that analysis as well as knowledge of risk metrics, such as 
volatility and turnover, to provide a more efficient hedge.
    The Lead Market Makers also indicated that, as with some other new 
exchange-traded products, spreads would tend to narrow as market makers 
gain more confidence in the accuracy of their hedges and their ability 
to adjust these hedges in real-time and gain an understanding of the 
applicable market risk metrics such as volatility and turnover, and as 
natural buyers and sellers enter the market. Other relevant factors 
cited by Lead Market Makers were that a fund's investment objectives 
are clearly disclosed in the applicable prospectus, the existence of 
quarterly portfolio disclosure and the ability to create shares in 
creation unit size.
    The real-time dissemination of the identity and quantity of Proxy 
Portfolio component investments, together with the right of Authorized 
Participants to create and redeem each day at the NAV, will be 
sufficient for market participants to value and trade shares in a 
manner that will not lead to significant deviations between the shares' 
Bid/Ask Price and NAV.

[[Page 366]]

    The pricing efficiency with respect to trading a series of Actively 
Managed Solution Shares will generally rest on the ability of market 
participants to arbitrage between the shares and a fund's portfolio, in 
addition to the ability of market participants to assess a fund's 
underlying value accurately enough throughout the trading day in order 
to hedge positions in shares effectively. Professional traders can buy 
shares that they perceive to be trading at a price less than that which 
will be available at a subsequent time and sell shares they perceive to 
be trading at a price higher than that which will be available at a 
subsequent time. It is expected that, as part of their normal day-to-
day trading activity, market makers assigned to shares by the Exchange, 
off-exchange market makers, firms that specialize in electronic 
trading, hedge funds and other professionals specializing in short-
term, non-fundamental trading strategies will assume the risk of being 
``long'' or ``short'' shares through such trading and will hedge such 
risk wholly or partly by simultaneously taking positions in correlated 
assets \35\ or by netting the exposure against other, offsetting 
trading positions--much as such firms do with existing ETFs and other 
equities. Disclosure of a fund's investment objective and principal 
investment strategies in its prospectus and SAI should permit 
professional investors to engage easily in this type of hedging 
activity.
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    \35\ Price correlation trading is used throughout the financial 
industry. It is used to discover both trading opportunities to be 
exploited, such as currency pairs and statistical arbitrage, as well 
as for risk mitigation such as dispersion trading and beta hedging. 
These correlations are a function of differentials, over time, 
between one or multiple securities pricing. Once the nature of these 
price deviations have been quantified, a universe of securities is 
searched in an effort to, in the case of a hedging strategy, 
minimize the differential. Once a suitable hedging basket has been 
identified, a trader can minimize portfolio risk by executing the 
hedging basket. The trader then can monitor the performance of this 
hedge throughout the trade period, making corrections where 
warranted.
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    The Exchange believes that the Fund, and Actively Managed Solution 
Shares generally, will provide investors with a greater choice of 
active portfolio managers and active strategies through which they can 
manage their assets in an ETF structure. This greater choice of active 
asset management is expected to be similar to the diversity of active 
managers and strategies available to mutual fund investors. Unlike 
mutual fund investors, investors in Actively Managed Solution Shares 
would also accrue the benefits derived from the ETF structure, such as 
lower fund costs, tax efficiencies, intraday liquidity, and pricing 
that reflects current market conditions rather than end-of-day pricing.
    The Adviser represents that, unlike ETFs that publish their 
portfolios on a daily basis, the Fund, as Actively Managed Solution 
Shares, propose to allow for efficient trading of Shares through an 
effective Fund portfolio transparency substitute--Proxy Portfolio 
transparency--and daily publication of Proxy Portfolio Disclosures. The 
Adviser believes that this approach will provide an important benefit 
to investors by protecting the Fund from the potential for front-
running of portfolio transactions and the potential for free-riding on 
Fund portfolio strategies, each of which could adversely impact the 
performance of the Fund.
    The Exchange believes that Actively Managed Solution Shares will 
provide the platform for many more asset managers to launch ETFs, 
increasing the investment choices for consumers of actively managed 
funds, which should lead to a greater competitive landscape that can 
help to reduce the overall costs of active investment management for 
retail investors. Unlike mutual funds, Actively Managed Solution Shares 
would be able to use the efficient share settlement system in place for 
ETFs today, translating into a lower cost of maintaining shareholder 
accounts and processing transactions.
    The Adviser represents that investors will also benefit because the 
Fund's operating costs, such as transfer agency costs, are generally 
lower in ETFs than in mutual funds. The Fund will have access to the 
identical clearing and settlement procedures now used by U.S. domiciled 
ETFs, and therefore, should experience many of the operational and cost 
efficiencies benefitting current ETF investors.
    The Adviser represents further that in-kind Share creation/
redemption orders will allow the Fund to enjoy overall transaction 
costs lower than those experienced by mutual funds. The Fund's in-kind 
Share creation and redemption process will facilitate and enhance 
active management strategies by generally limiting the portfolio 
manager's need to transact in a large volume of trades in order to 
maintain desired investment exposures. In addition, the Adviser 
represents that the Fund will receive tax efficiency benefits of the 
ETF structure because of in-kind Share creation and redemption 
activity.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of a 
series of Actively Managed Solution Shares that the NAV per Share of 
the Fund will be calculated daily and that the NAV will be made 
available to all market participants at the same time. Investors can 
also obtain the Fund's SAI, shareholder reports, and its Form N-CSR, 
Form N-PORT and Form N-CEN. The Fund's SAI and shareholder reports will 
be available free upon request from the Fund, and those documents and 
the Form N-CSR, Form N-PORT and Form N-CEN may be viewed on-screen or 
downloaded from the Commission's website. In addition, with respect to 
the Fund, a large amount of information will be publicly available 
regarding the Fund and the Shares, thereby promoting market 
transparency. Quotation and last sale information for the Shares will 
be available via the CTA high-speed line. The website for the Fund will 
include a form of the prospectus for the Fund that may be downloaded, 
and additional data relating to NAV and other applicable quantitative 
information, updated on a daily basis. Moreover, prior to the 
commencement of trading, the Exchange will inform its ETP Holders in an 
Information Bulletin of the special characteristics and risks 
associated with trading the Shares. Trading in Shares of the Fund will 
be halted if the circuit breaker parameters in NYSE Arca Rule 7.12-E 
have been reached or because of market conditions or for reasons that, 
in the view of the Exchange, make trading in the Shares inadvisable. 
Trading in the Shares will be subject to NYSE Arca Rule 8.602-E 
(d)(2)(B), which sets forth circumstances under which Shares of the 
Fund will be halted. In addition, as noted above, investors will have 
ready access to the Proxy Portfolio Disclosures and quotation and last 
sale information for the Shares. The Shares will conform to the initial 
and continued listing criteria under proposed Rule 8.602-E.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, as noted above, investors 
will have ready access to

[[Page 367]]

information regarding quotation and last sale information for the 
Shares.

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 
proposed rule change would permit listing and trading of another type 
of actively-managed ETF that has characteristics different from 
existing actively-managed and index ETFs and would introduce additional 
competition among various ETF products to the benefit of investors.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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 rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2019-95 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2019-95. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2019-95 and should be submitted 
on or before January 24, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
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    \36\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-28413 Filed 1-2-20; 8:45 am]
BILLING CODE 8011-01-P


