Federal Register, Volume 75, Number 226, November 24, 2010, Pages 71519-72652 Page: 71,755
This periodical is part of the collection entitled: Federal Register and was provided to UNT Digital Library by the UNT Libraries Government Documents Department.
Extracted Text
The following text was automatically extracted from the image on this page using optical character recognition software:
Federal Register/Vol. 75, No. 226/Wednesday, November 24, 2010/Notices
redemptions of Creation Units
("Participant Agreement"). Shares of
each New Fund will be purchased in
Creation Units in exchange for an in-
kind deposit by the purchaser of a
particular portfolio of securities
("Deposit Securities") designated by the
Adviser, together with the deposit of a
specified cash payment ("Cash
Component," collectively with the
Deposit Securities, "Fund Deposit"). The
Cash Component is an amount equal to
the difference between the NAV of a
Creation Unit and the total aggregate
market value per Creation Unit of the
Deposit Securities.6 A Fund may also
permit, under certain circumstances, an
in-kind purchaser to substitute cash in
lieu of depositing some or all of the
Deposit Securities.
11. Each Fund may impose a purchase
or redemption transaction fee
("Transaction Fee") to protect existing
shareholders from the dilutive costs
associated with the purchase or
redemption of Creation Units.7 The
Distributor will deliver a confirmation
and prospectus ("Prospectus") to the
purchaser.
12. Purchasers of Shares in Creation
Units may hold such Shares or may sell
such Shares into the secondary market.
Shares will be listed on the Stock
Exchange and traded in the secondary
market in the same manner as other
equity securities. One or more Market
Makers (as defined below) will be
assigned to make continuous markets in
Shares. The price of Shares trading on
a Stock Exchange will be based on a
current bid/offer market. Transactions
involving the sale of Shares on a Stock
Exchange will be subject to customary
brokerage commissions and charges.
13. Applicants expect that purchasers
of Creation Units will include
arbitrageurs and the lead market makers
("LMMs") and/or designated liquidity
providers (together with LMMs, "Market
Makers"). Applicants expect that
secondary market purchasers of Shares
6 On each day that a Fund is open, including as
required by section 22(e) of the Act ("Business
Day"), the Adviser will make available prior to the
opening of trading on the Stock Exchange a list of
the names and the required number of shares of
each Deposit Security to be included in the Fund
Deposit for each Fund, along with the prior day's
Cash Component. The Stock Exchange will
disseminate, every 15 seconds during its regular
trading hours, through the facilities of the
Consolidated Tape Association, the estimated NAV
of the Funds, which is an amount per Share
representing the sum of the estimated Cash
Component effective through and including the
previous Business Day, plus the current value of the
Deposit Securities, on a per Share basis.
7 Where a Fund permits a purchaser to substitute
cash in lieu of depositing a portion of the requisite
Deposit Securities, the purchaser may be assesseda higher Transaction Fee to offset the cost to the
Fund of purchasing such Deposit Securities.will include both institutional and retail
investors.8 Applicants state that
arbitrage opportunities created by the
ability to continually purchase or
redeem Creation Units at their NAV
should ensure that the Shares will not
trade at a material discount or premium
in relation to their NAV.
14. Beneficial owners of Shares may
sell their Shares in the secondary
market, but must accumulate enough
Shares to constitute a Creation Unit in
order to redeem through a Fund.
Creation Units will be redeemed in
exchange for a portfolio of securities
("Redemption Securities") and specified
cash amount9 as published in the
redemption basket. While Shares
generally will be redeemed in Creation
Units in exchange for Redemption
Securities, each Fund will have the right
to make redemption payments in cash,
in kind or a combination of each,
provided the value of its redemption
payments equals the NAV.10 To the
extent that the Redemption Securities
have a value greater than the NAV of the
Shares being redeemed, a cash payment
equal to the differential will be paid by
the redeeming shareholder to the Trust.
Redemption of Shares in Creation Units
will be subject to a Transaction Fee.
15. Applicants state that each Fund
must comply with the federal securities
laws in accepting Deposit Securities and
satisfying redemptions with
Redemption Securities, including that
the Redemption Securities are sold in
transactions that would be exempt from
registration under the Securities Act.11
The Deposit Securities and Redemption
Securities will consist of a pro rata
8 Shares will be registered in book-entry form
only. DTC or its nominee will be the registered
owner of all outstanding Shares. Beneficial
ownership of Shares will be shown on the records
of DTC or DTC participants ("DTC Participants").
9In the case of a Fund that is part of a master-
feeder structure, the Fund will redeem shares from
the appropriate master portfolio and then deliver to
the redeeming shareholder a portfolio of
Redemption Securities and specified cash amount
as published in the redemption basket.
o10 The Funds may substitute a cash-in-lieu
amount to replace any Deposit Security or
Redemption Security that is a to-be-announced
transaction ("TBA Transaction"). A TBA
Transaction is a method of trading mortgage-backed
securities. In a TBA Transaction, the buyer and
seller agree upon general trade parameters such as
agency, settlement date, par amount and price. The
actual pools delivered generally are determined two
days prior to the settlement date. The amount of
substituted cash in the case of TBA Transactions
will be equivalent to the value of the TBA
Transaction listed as a Deposit Security or
Redemption Security.
11 In accepting Deposit Securities and satisfying
redemptions with Redemption Securities that are
restricted securities eligible for resale pursuant to
rule 144A under the Securities Act, each Fund will
comply with the conditions of rule 144A, includingin satisfying redemptions with such rule 144A
eligible restricted Redemption Securities.basket of the portfolio securities held by
a Fund ("Fund Securities"), except for
certain minor differences that may exist
for certain Fixed Income Funds because
it is impossible to break up bonds
beyond certain minimum sizes needed
for transfer and settlement.
16. Neither the Trust nor any Fund
will be advertised or marketed or
otherwise held out as a traditional open-
end investment company or a mutual
fund. Instead, each Fund will be
marketed as an "actively-managed
exchange-traded fund."12 All marketing
materials that describe the features or
method of obtaining, buying or selling
Creation Units, or Shares traded on the
Stock Exchange, or refer to
redeemability, will prominently
disclose that Shares are not individually
redeemable shares and will disclose that
the owners of Shares may acquire those
Shares from the Fund, or tender those
Shares for redemption to the Fund in
Creation Units only. The same approach
will be followed in connection with
shareholder reports and investor
educational materials issued or
circulated in connection with the
Shares. The Funds will provide copies
of its semi-annual and annual
shareholder reports to DTC Participants
for distribution to beneficial owners of
Shares.
17. The Trust will maintain a Web site
that will include each Fund's
Prospectus and other information about
each Fund that is updated on a daily
basis, including the prior Business Day's
NAV, closing market price, reported
midpoint of "bid and ask" at the time of
calculation of such NAV ("Bid/Ask
Price"), and a calculation of the
premium or discount of such price
against such NAV. Prior to the opening
of the Stock Exchange on each Business
Day, a Trust will disclose on its Web
site the identities and quantities of the
securities and other assets held by each
Fund, or its respective Master Fund,13
12 As noted above, the Funds may operate in a
master-feeder structure. Under such circumstances,
the Funds would operate, and would be marketed,
as ETFs. The respective Master Funds would
operate as mutual funds, but would not be publicly
offered or marketed. Applicants do not believe the
master-feeder structure would be confusing to
investors because any additional feeder fund that is
a traditional mutual fund or other pooled
investment vehicle would be marketed separately.
Applicants state that they will take steps to ensure
that investors will understand the differences
between the Funds and any feeder funds.
13 For Funds that are part of a master-feeder
structure, the Fund will disclose information aboutthe securities and other assets held by the Master
Fund.71755
Upcoming Pages
Here’s what’s next.
Search Inside
This issue can be searched. Note: Results may vary based on the legibility of text within the document.
Tools / Downloads
Get a copy of this page or view the extracted text.
Citing and Sharing
Basic information for referencing this web page. We also provide extended guidance on usage rights, references, copying or embedding.
Reference the current page of this Periodical.
United States. Office of the Federal Register. Federal Register, Volume 75, Number 226, November 24, 2010, Pages 71519-72652, periodical, November 24, 2010; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc52807/m1/245/: accessed April 24, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.