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Federal Register / Vol. 86, No. 26 / Wednesday, February 10, 2021 / Notices
NAV per share due to a variety of factors, including the underlying prices of the ETPs assets and the demand for the ETP. Nonetheless, an ETPs market price is generally kept close to the ETPs end-of-day NAV because of the arbitrage function inherent to the structure of the ETP. An arbitrage opportunity is inherent in the ETP structure because the ETPs intra-day market price fluctuates during the trading day. Due to this fluctuation, the ETPs intra-day market price may not equal the ETPs end-of-day NAV. Authorized participants can arbitrage this difference and make a profit because they can trade directly with the ETP at NAV 4 as well as on the market at marketdetermined prices. The expected result of the arbitrage activity is that the market value of the ETP moves back in line with the ETPs NAV per share and investors are able to buy ETP shares on an exchange that is close to the ETPs NAV per share. The arbitrage mechanism is important because it provides a means to maintain a close tie between market price and NAV per share of the ETP, thereby helping to ensure that ETP investors are treated equitably when buying and selling fund shares.
In order for the arbitrage mechanism described above to operated efficiently, market participants need to be able to estimate, with high accuracy, the value of the ETPs holdings, such that it can then observe instances when the value of such holdings, on a per-share basis, is higher or lower than the current trading price of the shares on an exchange. In the case of Tracking Fund Shares, the applicable ETP disseminates various information to achieve that goal, while not publishing a full list of fund holdings daily.5 In general, the more information that is available to assist the market participants in estimating the value of the funds holdings, the better the arbitrage mechanism will operate with respect to the Tracking Fund Shares.
4 An open-end fund is required by law to redeem its securities on demand from shareholders at a price approximately the proportionate share of the funds NAV at the time of redemption. See 15
U.S.C. 80a22d.
5 As noted in the Initial Filing, each Fund will disclose the Tracking Basket, which is designed to closely track the daily performance of the Fund Portfolio, on a daily basis. Each Fund will at a minimum publicly disclose the entirety of its portfolio holdings, including the name, identifier, market value and weight of each security and instrument in the portfolio within at least 60 days following the end of every fiscal quarter in a manner consistent with normal disclosure requirements otherwise applicable to open-end investment companies registered under the 1940
Act.

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Generally, ETPs must calculate the NAV at least once every business day, which is typically done at market close i.e., 4 p.m. ET.6 Indeed, Exchange Rules reference the fact that NAV of a series of Tracking Fund Shares is calculated at the end of the business day.7 Now, the Exchange is proposing to allow the Funds to strike and publish the NAV per Share for each of the Funds more than once daily.8
As noted in the Initial Filing, Shares of each of the Funds are offered by the Trust, which is registered with the Commission as an open-end investment company and has filed a registration statement on behalf of the Funds on Form N1A with the Commission.9 The Exemptive Relief and Registration Statement provide that the Funds may calculate the NAV per Share more than once daily e.g., at 12 p.m. ET and 4:00
p.m. ET, however, the Initial Filing did not seek to allow the Funds to calculate more than one NAV per day. Now, the Exchange is seeking approval to explicitly allow the Funds to strike and publish the NAV per Share more than once daily.
As explained above, the calculation of NAV provides the basis for arbitrage, which is an instrumental mechanism in ensuring ETP investors are treated equitably when buying and selling fund shares. The Funds seek to further reduce market participants risk and to provide intra-day price certainty by striking and publishing its NAV more than once during each Business Day.10 Currently, and by way of example, the Fund anticipates it will strike a NAV once during normal trading at 12:00 p.m. ET
an Intra-Day NAV and again at the close of trading at 4:00 p.m. ET the End-of-Day NAV and collectively, the Published NAVs; however, the Fund may strike and publish multiple IntraDay NAVs. If a Fund strikes an IntraDay NAV, market participants will have 6 See
17 CFR 270.22c1.
Exchange Rule 14.11m3B.
8 The Exchanges proposal is similar to functionality offered for other ETPs. For example, the prospectus for the Invesco Treasury Collateral ETF provides that the Fund is calculated at 12 p.m.
and 4 p.m. ET every day the New York Stock Exchange NYSE is open. See http
hosted.rightprospectus.com/Invesco/Fund.aspx?cu=
46138G888&dt=P&ss=ETF.
9 The Trust is registered under the 1940 Act. On September 25, 2020, the Trust filed post-effective amendments to its registration statement on Form N1A relating to each Fund File No. 81122148
the Registration Statement. The descriptions of the Funds and the Shares contained herein are based, in part, on information included in the Registration Statement. The Commission has issued an order granting certain exemptive relief to the Trust the Exemptive Relief under the 1940 Act.
See Investment Company Act of 1940 Release No.
34127 December 2, 2020.
10 See the Exemptive Relief.
7 See
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the choice of purchasing or redeeming Shares at either of the Published NAVs pursuant to the applicable purchase and redemption order processes and requirements, understanding that the Fund will always process purchase and sales consistent with the next NAV
struck following the purchase or sale request. The Exchange believes that providing market participants with the ability to create and redeem during the trading day, coupled with the information available to market participants, will reduce the risk that market participants face intra-day related to the possible divergence between the Tracking Basket 11 and the value of the Funds underlying holdings, which should enable them to reduce spreads on Shares. Market participants will be able to lock in their creation and redemption transactions during the trading day at an Intra-Day NAV, and at the end of the trading day at the End-of-Day NAV. As proposed, the Funds will continue to meet all listings standards provided in Rule 14.11m. The only change to the Funds that the Exchange is proposing is to allow the Funds to strike multiple Intra-Day NAVs. All other material representations contained within the Initial Filing remain true and will continue to constitute continued listing requirements for the Funds.
2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6b of the Act 12 in general and Section 6b5 of the Act 13 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest in that the Shares of each Fund will meet each of the continued listing criteria in BZX Rule 14.11m, as provided in the Initial Filing.
The proposal to allow the Funds to strike and publish multiple intra-day NAVs will provide the marketplace with additional information related to each 11 As defined in Rule 14.11m3E, the term Tracking Basket means the identities and quantities of the securities and other assets included in a basket that is designed to closely track the daily performance of the Fund Portfolio, as provided in the exemptive relief under the Investment Company Act of 1940 applicable to a series of Tracking Fund Shares.
12 15 U.S.C. 78fb.
13 15 U.S.C. 78fb5.

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