Notice2026-09577
Precidian ETF Trust II, et al.
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 14, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 93 (Thursday, May 14, 2026)</title>
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[Federal Register Volume 91, Number 93 (Thursday, May 14, 2026)]
[Notices]
[Pages 27472-27474]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-09577]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 36145; 812-15766]
Precidian ETF Trust II, et al.
May 11, 2026.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application to amend a prior order for exemptive
relief.
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Summary of Application: Applicants request an order (``Amended Order'')
that would amend a prior order to (i) modify the conditions a Fund must
meet to use Creation Baskets that include instruments that are not
included, or are included with different weightings, in the Fund's Pro
Rata Basket (as defined below) and (ii) to expand the instances in
which a Fund is permitted to use cash in the Fund's Pro Rata Basket.
Applicants: Precidian ETF Trust II (``Trust'') and Precidian Funds LLC
(the ``Applicants'').
Filing Dates: The application was filed on April 25, 2025, and amended
on July 30, 2025, December 23, 2025, February 6, 2026, and April 20,
2026.
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 emailing the Commission's
Secretary at <a href="/cdn-cgi/l/email-protection#4310262031263722313a306e0c25252a2026033026206d242c35"><span class="__cf_email__" data-cfemail="1340767061766772616a603e5c75757a7076536076703d747c65">[email protected]</span></a> and serving Applicants with a
copy of the request by email, if an email address is listed for the
relevant Applicant below, or personally or by mail, if a physical
address is listed for the relevant Applicant below. Hearing requests
should be received by the Commission by 5:30 p.m. Eastern time on June
5, 2026 and should be accompanied by proof of service on the Applicants
in the form of an affidavit, or, for lawyers, a certificate of service.
Pursuant to rule 0-5 under the Investment Company Act of 1940
(``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
emailing the Commission's Secretary at <a href="/cdn-cgi/l/email-protection#e3b0868091869782919a90ceac85858a8086a3908680cd848c95"><span class="__cf_email__" data-cfemail="a7f4c2c4d5c2d3c6d5ded48ae8c1c1cec4c2e7d4c2c489c0c8d1">[email protected]</span></a>.
ADDRESSES:
The Commission: Commission's Secretary, <a href="/cdn-cgi/l/email-protection#f3a0969081968792818a80debc95959a9096b3809690dd949c85"><span class="__cf_email__" data-cfemail="e1b2848293849580939892ccae8787888284a1928482cf868e97">[email protected]</span></a>.
Applicants: W. John McGuire, Morgan, Lewis & Bockius LLP, 1111
Pennsylvania Avenue NW, Washington,
[[Page 27473]]
DC 20004, <a href="/cdn-cgi/l/email-protection#d8b2b7b0b6f6b5bbbfadb1aabd98b5b7aabfb9b6b4bdafb1abf6bbb7b5"><span class="__cf_email__" data-cfemail="7b111413155516181c0e12091e3b1614091c1a15171e0c120855181416">[email protected]</span></a>.
FOR FURTHER INFORMATION CONTACT: Kris Easter Guidroz, Senior Counsel;
Daniele Marchesani, Assistant Chief Counsel, at (202) 551-6825
(Division of Investment Management, Chief Counsel's Office).
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 <a href="https://www.sec.gov/search-filings">https://www.sec.gov/search-filings</a>. 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.
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\1\ See Precidian ETFs Trust II, et al., Investment Company Act
Release No. 35386 (Nov. 14, 2024) (the ``2024 Notice'') and
Investment Company Act Release No. 35411 (Dec. 10, 2024).
\2\ See Precidian ETFs Trust, et al., Investment Company Act
Release No. 33440 (April 8, 2019) (the ``Initial Notice'') and
Investment Company Act Release No. 33477 (May. 20, 2019). The
Initial Order also granted, under section 12(d)(1)(J) of the Act, an
exemption from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act (the
``Section 12(d)(1) Relief''). The Section 12(d)(1) Relief expired on
January 19, 2022. See Fund of Funds Arrangements, Investment Company
Act Rel. No. 10871 (Oct. 7, 2020), at III.
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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\
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\3\ All capitalized terms not otherwise defined in this notice
have the meanings ascribed to them in the Prior Order. Further,
except as specifically noted in the Application, all representations
and conditions under the Prior Order will remain applicable to the
operation of the Funds and will apply to any Funds relying on the
Amended Order requested in the Application
\4\ See the Initial Notice at note 19. The Funds are not able to
operate in reliance on rule 6c-11 because they do not disclose their
portfolio holdings on a daily basis as required by the rule. See
rule 6c-11(c)(1)(i) (requiring an ETF to disclose prominently on its
website, publicly available and free of charge, the portfolio
holdings that will form the basis for the Fund's calculation of per
share NAV).
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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\
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\5\ An ``Optimized Basket'' is a basket of securities and cash
that is designed to closely track the daily performance of the
Fund's actual portfolio. ``Optimized Basket Overlap'' is a metric
that measures the overlap between the Optimized Basket and the
Fund's actual portfolio.
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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\
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\6\ See the application to amend the Prior Order, as amended and
restated and filed by Precidian ETF Trust II, et al., filed April
20, 2026 (File Number 812-1576) (the ``Application'').
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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.
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\7\ As under the Prior Order, the Funds will continue to use
basket flexibility only in circumstances in which Applicants believe
there will be no harm to the Funds or their shareholders and in
order to benefit the Funds and their shareholders by reducing costs,
increasing efficiency, and improving trading.
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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
[[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\
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\8\ As an example, the Application notes that the purchase of
10% or more of the common equity of certain public utilities
requires prior FERC approval under Section 203 of the Federal Power
Act.
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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.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-09577 Filed 5-13-26; 8:45 am]
BILLING CODE 8011-01-P
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