SUPPLEMENTARY INFORMATION:

For Applicants' representations, legal analysis, and conditions, please refer to Applicants' fourth amended and restated application, dated April 20, 2026, which may be obtained via the Commission's website by searching for the file number at the top of this document, or for an Applicant using the Company name search field on the SEC's EDGAR system. The SEC's EDGAR system may be searched at https://www.sec.gov/​search-filings. You may also call the SEC's Office of Investor Education and Advocacy at (202) 551-8090.

I. Introduction

1. On December 10, 2024, the Commission issued an order to the Applicants under section 6(c) of the Investment Company Act of 1940 granting an exemption from sections 2(a)(32), 5(a)(1), and 22(d) of the Act and rule 22c-1 thereunder, and under sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a)(1) and 17(a)(2) of the Act (the “2024 Order”),^[1] which amended a previous order issued by the Commission on May 20, 2019 ^[2] (the “Initial Order” and, as amended by the 2024 Order, the “Prior Order”). The Prior Order allows Applicants to operate actively-managed exchange-traded funds (“ETFs”) that are not required to disclose their full portfolio holdings on a daily basis (each, a “Fund”). Rather, each Fund disseminates a “verified intraday indicative value,” or “VIIV,” reflecting the value of its portfolio holdings, calculated every second throughout the trading day.

2. In addition to publishing a VIIV, the Prior Order requires a Fund to offer a Creation Basket ^[3] each Business Day comprised of names and quantities of instruments that correspond pro rata to the Fund's portfolio holdings used to calculate the Fund's NAV for that day except for certain specifically permitted cash substitutions (“Pro Rata Basket”).^[4]

3. The Prior Order allows a Fund to offer a Creation Basket that includes instruments that are not included in, or are included in different weightings than, the Fund's Pro Rata Basket (a “Custom Basket”) subject to the condition that, on any day the Fund offers a Custom Basket, the Fund must first publicly disclose an Optimized Basket and an Optimized Basket Overlap metric to provide market participants with additional information to evaluate arbitrage transactions involving a Custom Basket.^[5]

4. Applicants now seek to amend the Prior Order to permit a Fund to use Custom Baskets without disclosing an Optimized Basket and the Optimized Basket Overlap. The requested amendment would also permit a Fund to substitute cash in lieu of an instrument that would otherwise be part of the Fund's Pro Rata Basket in instances in which the Fund or its investment adviser is restricted from transacting in that instrument. As a condition to Applicants' requested amendment, the Funds would comply with additional disclosure and record retention requirements.^[6]

II. The Application

5. Upon amending the Prior Order, each Fund will be able to offer a Custom Basket without publishing an Optimized Basket and Optimized Basket Overlap metric.^[7] A Fund will continue to offer a Pro Rata Basket on any day the Fund offers a Custom Basket to provide Authorized Participants the option to transact in either basket. In addition, each Fund will continue to publish its VIIV every second throughout every trading day. Under the requested Amended Order, on each Business Day before trading opens on the Exchange where the Fund is listed, the Fund will continue to publish on its website the composition of any Custom Basket exchanged with an Authorized Participant on the previous Business Day.

6. Pursuant to the requested Amended Order, on any Business Day on which the Fund's Adviser determines the Fund should use a Custom Basket, the Adviser will cause the Fund to disclose to Authorized Participants the names and quantities of instruments that make up the Custom Basket. Applicants represent that this information will allow an Authorized Participant to compare the performance of the Custom Basket to the Fund's VIIV, and hedge potential risks of transacting in the Custom Basket that may result from differences between the value of the Custom Basket and the value of Fund's actual portfolio as reflected by the VIIV. Applicants represent that, though arbitrage may be slightly less efficient without an Optimized Basket, the VIIV combined with other publicly available information about a Fund will provide enough information to support efficient arbitrage on days that a Fund uses a Custom Basket. Applicants further note that Authorized Participants will continue to have the option to transact in a Fund's Pro Rata Basket and thereby eliminate intraday risk related to an arbitrage transaction, which makes arbitrage more efficient.

7. Applicants also seek expanded flexibility to substitute cash for one or more instruments in the Fund's Pro Rata Basket in the event a Fund or its Adviser is restricted from transacting in the instrument on that day. Applicants represent that a Fund or its Adviser may be restricted from transacting in an instrument for a number of reasons that include restrictions directly on the Fund (“Fund Level Restrictions”) and restrictions on the Adviser or one of its affiliates that impact the Fund (“Sponsor Level Restrictions”). As further discussed in the Application, Fund Level Restrictions can include regulatory requirements imposed by the Act or limits imposed by fundamental or non-fundamental investment policies that preclude a Fund from acquiring ( printed page 27474) additional interests in a particular instrument. Sponsor Level Restrictions instead arise, for example, when the Fund's Adviser or an affiliate of the Adviser has material non-public information about the issuer of an instrument that would restrict the Adviser and the Fund from transacting in that instrument, or if the Fund's Adviser or an affiliate of the Adviser (including a Fund) is restricted from acquiring more shares of an issuer due to legal restrictions on investments in certain industries.^[8]

8. Under the Prior Order, a Fund may substitute cash for one or more instruments that otherwise would be included in its Pro Rata Basket only if the Fund substitutes cash for all instruments in its Pro Rata Basket ( i.e., uses an all-cash Creation Basket), the instrument is not available in sufficient quantity, the Authorized Participant is unable to transact in the instrument, or the instrument is not eligible for transfer through clearing agencies' settlement processes. If a Fund's Pro Rata Basket contains an instrument that becomes subject to a Fund Level Restriction or Sponsor Level Restriction, the Fund currently must either transact in an all-cash Creation Basket or use a Custom Basket to substitute cash for the instruments that are subject to the restriction. The requested relief will modify the definition of a Pro Rata Basket to include cash substitutions for an instrument that becomes subject to a Fund Level Restriction or Sponsor Level Restriction.

9. As part of the requested amendment, Applicants will maintain additional records each time that a Fund substitutes cash for restricted instruments in its Pro Rata Basket. Specifically, pursuant to condition 6, for any Creation Basket that includes cash in lieu of an instrument subject to a Fund Level Restriction or a Sponsor Level Restriction, the Fund will include in its records the nature of the restriction.

II. Requested Exemptive Relief

Applicants believe that the Prior Order continues to meet the relevant standards for relief pursuant to section 6(c) of the Act for an exemption from sections 2(a)(32), 5(a)(1), and 22(d) of the Act and rule 22c-1 under the Act, and under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and 17(a)(2) of the Act.

III. Applicants' Conditions

Applicants agree that any Order of the Commission granting the requested relief will be subject to all of the conditions in the Prior Order, except condition 2 and condition 6 which are replaced with revised and restated conditions 2 and 6 below:

2. The website for the Trust, which will be publicly accessible at no charge, will contain, on a per Share basis for each Fund, the prior Business Day's NAV and market closing price or Bid/Ask Price of the Shares, a calculation of the premium or discount of the market closing price or Bid/Ask Price against such NAV, and any other information regarding premiums and discounts as may be required for other ETFs under Rule 6c-11 under the Act. The website will also disclose the median bid-ask spread for each Fund's most recent fiscal year based on the National Best Bid and Offer at the time of calculation of NAV (or such other spread measurement as may be required for other ETFs under Rule 6c-11 under the Act).

6. Each Fund will comply with the recordkeeping requirements of Rule 6c-11 under the Act, except that for purposes of this condition, only a Creation Basket different from the Fund's Pro Rata Basket will be treated as a “custom basket” under Rule 6c-11(d)(2)(ii). For any Creation Basket that includes cash in lieu of instruments subject to a Fund Level Restriction or a Sponsor Level Restriction, the Fund's records will note the nature of the restriction. In addition, each Fund will maintain and preserve, for a period of not less than five years, in an easily accessible place, (i) all written agreements (or copies thereof) between the Fund and each AP Representative related to the AP Representative's role as such; and (ii) a copy of each Creation Basket made available on a given day.

91 FR 27472