81 FR 64534 - Global X Funds, et al.; Notice of Application

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 182 (September 20, 2016)

Page Range		64534-64535
FR Document		2016-22542

Federal Register, Volume 81 Issue 182 (Tuesday, September 20, 2016)

[Federal Register Volume 81, Number 182 (Tuesday, September 20, 2016)]
[Notices]
[Pages 64534-64535]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-22542]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32262; 812-14549]


Global X Funds, et al.; Notice of Application

September 14, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: 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) series of 
certain open-end management investment companies that track the 
performance of an index provided by an affiliated person to issue 
shares (``Shares'') redeemable in large aggregations only (``Creation 
Units''); (b) secondary market transactions in Shares to occur at 
negotiated market prices rather than at net asset value (``NAV''); (c) 
certain funds to pay redemption proceeds, under certain circumstances, 
more than seven days after the tender of Shares for redemption; (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; and (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.

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APPLICANTS: Global X Funds (the ``Trust''), a Delaware statutory trust 
registered under the Act as an open-end management investment company 
with multiple series, Global X Management Company LLC (the 
``Adviser''), a Delaware limited liability company registered as an 
investment adviser under the Investment Advisers Act of 1940, and SEI 
Investments Distribution Company (the ``Distributor''), a Pennsylvania 
corporation and broker-dealer registered under the Securities Exchange 
Act of 1934 (``Exchange Act'').

FILING DATES: The application was filed on September 18, 2015, and 
amended on June 3, 2016 and August 31, 2016.

HEARING OR NOTIFICATION OF HEARING: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on October 11, 2016, 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: Global X Funds and Global X 
Management Company LLC, 600 Lexington Avenue, 20th Floor, New York, NY 
10022; SEI Investments Distribution Company, 1 Freedom Valley Drive, 
Oaks, PA 19456.

FOR FURTHER INFORMATION CONTACT: Barbara T. Heussler, Senior Counsel at 
(202) 551-6990, or Mary Kay Frech, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or for an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.

Summary of the Application

    1. Applicants request an order that would allow funds to operate as 
index exchange traded funds (``ETFs'') and for which an Affiliated 
Person (as defined below) will serve as the index provider (each a 
``Self-Indexing Fund'') .\1\ The Self-Indexing Fund Shares will be 
purchased and redeemed at their NAV in Creation Units only. 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

[[Page 64535]]

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. Any order granting the 
requested relief would be subject to the terms and conditions stated in 
the application.
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    \1\ Applicants request that the order apply to any series of the 
Trust and any other open-end management investment companies or 
series thereof (each, included in the term ``Self-Indexing Funds''), 
each of which will operate as an ETF and will track a specified 
index comprised of domestic or foreign equity and/or fixed income 
securities (each, an ``Underlying Index''). Any Self-Indexing Fund 
will (a) be advised by the Adviser or an entity controlling, 
controlled by, or under common control with the Adviser (included in 
the term ``Adviser'') and (b) comply with the terms and conditions 
of the application.
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    2. Each Self-Indexing Fund will hold investment positions selected 
to correspond to the performance of an Underlying Index. 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 a Trust or a Self-Indexing Fund, of the Adviser, 
of any sub-adviser to or promoter of a Self-Indexing Fund, or of the 
Distributor will compile, create, sponsor or maintain the Underlying 
Index.\2\
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    \2\ Each Self-Indexing Fund will post on its Web site the 
identities and quantities of the investment positions that will form 
the basis for the Self-Indexing 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 Self-Indexing Funds.
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    3. Shares will be purchased and redeemed in Creation Units and 
generally on an in-kind basis. 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 Self-Indexing 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 Self-Indexing Funds to register as open-end 
management investment companies and issue Shares that are redeemable in 
Creation Units only.
    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 Self-Indexing 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, 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 Self-Indexing 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 Self-Indexing Funds to pay redemption proceeds within fourteen 
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 Shares of the Self-Indexing Funds beyond the limits of section 
12(d)(1)(A) of the Act; and the Self-Indexing Funds, and any principal 
underwriter for the Self-Indexing 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 Self-Indexing 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 Self-Indexing 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 Self-
Indexing Funds. Applicants also seek relief from the prohibitions on 
affiliated transactions in section 17(a) to permit a Self-Indexing 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.\3\ The purchase of Creation Units by a Fund of Funds directly 
from a Self-Indexing Fund will be accomplished in accordance with the 
policies of the Fund of Funds and will be based on the NAVs of the 
Self-Indexing Funds.
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    \3\ The requested relief would apply to direct sales of Shares 
in Creation Units by a Self-Indexing 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 Self-Indexing 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. 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.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-22542 Filed 9-19-16; 8:45 am]
 BILLING CODE 8011-01-P

Document Created: 2018-02-09 13:20:14
Document Modified: 2018-02-09 13:20:14

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
Action		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) series of certain open-end management investment companies that track the performance of an index provided by an affiliated person to issue shares (``Shares'') redeemable in large aggregations only (``Creation Units''); (b) secondary market transactions in Shares to occur at negotiated market prices rather than at net asset value (``NAV''); (c) certain funds to pay redemption proceeds, under certain circumstances, more than seven days after the tender of Shares for redemption; (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; and (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.
Dates		The application was filed on September 18, 2015, and amended on June 3, 2016 and August 31, 2016.
Contact		Barbara T. Heussler, Senior Counsel at (202) 551-6990, or Mary Kay Frech, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
FR Citation		81 FR 64534