SEC Division of Trading and Markets no-action letter: Murphy & McGonigle, P.C.

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DIVISION OF
TRADING AND MARKETS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Apri126, 2017
Murphy & McGonigle, P.C.
555 Thirteenth Street, N.W.
Washington, DC 20004
Re: Request for No-Action Relief under Rule 204 of Regulation SHO with respect to Creations of Covered ETF Shares for Close-Out Purposes and for Confirmation regarding the Treatment of Executed Creations and Executed Redemptions of Covered ETF Shares for Pre-Fail and Post-Fail Credit Purposes under the Multi-Day Close-Out Credit Letter TP File No 17-08 Dear Mr. Bergmann:
In your letter dated Apri126, 2017 ("Letter"), Murphy & McGonigle, P.C., on behalf of Latour Trading LLC ("Latour" or the "Firm"), abroker-dealer that is an exchange-registered market maker in exchange-traded products, requests assurances that the staff of the Division of Trading and Markets of the Securities and Exchange Commission (the "Commission") will not recommend to the Commission enforcement action under Rule 204 of Regulation SHO ("Rule 204") under the Securities Exchange Act of 1934 (the "Exchange Act"),1 if the Firm, consistent with the approach described in your Letter, closes out a fail to deliver position in the securities of certain exchange-traded products2 by submitting, no later than the beginning of regular trading hours on the applicable close-out date, irrevocable instructions to create shares in the covered ETF for which the Firm has a Rule 204(a) close-out obligation through an Authorized Participant 17 CFR 242.204; see Exchange Act Release No. 60388 (July 27, 2009), 74 FR 38266 (July 31, 2009) ("Rule 204 Adopting Release"). The request for relief is limited to the securities of exchange-traded products meeting the following conditions:
(1)(a) the securities are issued at net asset value by an open-end investment company or unit investment trust registered with the Commission under the Investment Company Act of 1940 (the "40 Act") that engages in a continuous offering of its securities, or (b) the securities are issued at net asset value by a pooled investment vehicle (e.g., a trust or a partnership) that engages in a continuous offering of its securities but that is not an investment company registered under the 40 Act; and (2) the securities are listed and traded on a national securities exchange. For purposes of this letter, exchange-traded products whose securities satisfy conditions (1) and (2) collectively shall be referred to as "covered ETFs."

("AP") of the covered ETF (hereinafter, "Creation Order").3 You also seek confirmation that shares of a covered ETF purchased through the execution of a Creation Order or shares of a covered ETF sold through the execution of a redemption request submitted through an AP of the covered ETF (hereinafter, "Redemption Order") should be treated in the same manner as purchases or sales of shares of the covered ETF in the secondary market, under the Multi-Day Close-Out Credit Letter (as defined below),4 when calculating daily net purchases for purposes of Credit (as that term is defined in the Multi-Day Close-Out Credit Letter). A copy of your Letter is attached to this response. By including a copy of your correspondence, we avoid having to repeat or summarize all of the facts you presented. The defined terms in this letter have the same meaning as in your Letter, unless otherwise noted. Rule 204 requires a participant of a registered clearing agencys("Participant") to deliver securities to a registered clearing agency for clearance and settlement on a long or short sale transaction in any equity security by settlement date, or to close-out a fail to deliver position at a registered clearing agency in any equity security for a long or short sale transaction in that equity security by borrowing or purchasing securities of like kind and quantity.6 The Participant must close-out a fail to deliver position for a short sale transaction "by no later than the beginning of regular trading hours on the settlement day following the settlement date."~ If a Participant'has a fail to deliver position that the Participant can demonstrate on its books and records resulted from a long sale, or is attributable to bona fide market making activities by a registered market maker, options market maker, or other market maker obligated to quote in the over-the-counter market, the Participant must close-out the fail to deliver position "by no later than the beginnin~ of regular trading hours on the third consecutive settlement day following the settlement date." In the Rule 204 Adopting Release, the Commission specified that to meet its close-out obligation, among other things, a Participant must be able to demonstrate on its books and records that on the applicable close-out date, it purchased or borrowed shares in the full quantity of its fail to deliver position by no later than the beginning of regular trading hours.9 Pursuant to Rule 204(d), a Participant with aclose-out obligation may reasonably allocate a portion of its fail to deliver position to another registered broker or dealer ("Allocated Broker￾3 When an ETF creates new shares, the ETF issues shares in blocks (blocks of 50,000 shares, for example) that are known as "creations." See infra note 12. 4 Letter from Josephine J. Tao, Assistant Director, Division of Trading and Markets, SEC, to Robert L.D. Colby, Executive Vice President and Chief Legal Officer, Financial Industry Regulatory Authority, Inc., and Timothy
H. Thompson, Senior Vice President and Chief Regulatory Officer, Chicago Board Options Exchange, Inc., C2 Options Exchange, Inc., dated September 6, 2013 ("Multi-Day Close-Out Credit Letter"). 5 For purposes of Regulation SHO, the term "participant" has the same meaning as in Section 3(a)(24) of the Exchange Act, 15 U.S.C. 78c(a)(24). See Rule 204 Adopting Release, 74 FR at 38268 n.34. 6 17 CFR 242.204(a). 17 CFR 242.204(a). For purposes of Rule 204, "regular trading hours" has the same meaning as in Rule 600(b)(64) of Regulation NMS. See Rule 204 Adopting Release, 74 FR at 38269 n.44; 17 CFR 242.600(b)(64). $ 17 CFR 242.204(a)(1) and (a)(3). 9 Rule 204 Adopting Release, 74 FR at 38272.

Dealer") for which it clears trades or from which it receives trades for settlement, based on such Allocated Broker-Dealer's short position.10 Rule 204(a) applies to such Allocated Broker-Dealer with respect to the allocated portion of the fail to deliver position.ll Your Letter indicates that Latour receives allocations of fail to deliver positions from Participants under Rule 204(d). When abroker-dealer submits an instruction to create ETF shares through an AP, the creation process involves steps that occur after the beginning of regular trading hours.12 As a result, ETF share creations are not completed until after the beginning of regular trading hours. You request assurances regarding the use of an approach, as described in your Letter, related to covered ETF share creations. Specifically, you propose an approach in which Latour would close-out a fail to deliver positon in the securities of a covered ETF by submitting an irrevocable Creation Order directly to an AP of the covered ETF no later than the beginning of regular trading hours on the applicable close-out date (the "ETF Creation Approach").13 You represent Latour's belief that the use of the ETF Creation Approach is consistent with the policy of enforcing the strict close-out requirements of Rule 204(a) as it requires the Firm to take affirmative action and irrevocably commit itself to purchase the covered ETF shares within the timeframes set forth in Rule 204(a). Based on the facts and representations in your Letter, the staff would not recommend to the Commission enforcement action under Rule 204 for failing to "immediately close out" a fail to deliver position in the shares of a covered ETF "no later than the beginning of regular trading hours on the [applicable close-out] settlement day" by "purchasing securities of like kind and quantity" if, consistent with the approach you describe in your Letter, the Firm submits an irrevocable Creation Order directly to an AP of the covered ETF no later than the beginning of regular trading hours on the applicable close-out date in accordance with the representations in your Letter, which are reproduced below.14 l0 17 CFR 242.204(d). " Id 12 The process of creating and redeeming ETF shares in "creation unit" aggregations is described generally in Securities Act Release No. 8901 (March 11, 2008), 73 FR 14618,14628 (March 18, 2008), and Securities Act Release No. 9922 (September 22, 2015), 80 FR 62274, 62276-77 (October 15, 2015). Typically, in an ETF creation the submitting party (e.g., Latour in this instance) sends a Creation Order to the AP, causing the AP to initiate the creation process. The AP will acknowledge receipt of the Creation Order to the Participant or Allocated Broker-Dealer, submit the Creation Order to the ETF or an authorized agent of the ETF and confirm the issuance of the ETF shares to the Participant or Allocated Broker-Dealer. The creation is a two-sided transaction: the ETF provides new ETF shares in exchange for
receipt of the underlying securities, cash, or a combination of the underlying securities and cash from the AP. Both legs are priced identically (at the net asset value of the ETF at the end of the day). 13 The request does not include Creations Orders that are not submitted directly to an AP of the covered ETF, for instance, through another broker-dealer that is not an AP of the covered ETF or abroker-dealer that is not accepting or receiving the Creation Order in its capacity as an AP of the covered ETF. Ia For the avoidance of doubt, this no-action relief solely addresses the issue of whether the submission of an irrevocable Creation Order directly to an AP of the covered ETF no later than the beginning of regular trading hours on the applicable close-out date, consistent with the approach described in your Letter, constitutes

1. The Creation Order, along with other actions the Firm may take to close-out its fail to
   deliver position,ls is for the full amount of the fail to deliver position subject to the close￾out obligation in Rule 204 in the shares of the covered ETF.

2. The Firm will submit the Creation Order directly to an AP that is authorized to create or
   redeem shares for the covered ETF.16

3. The Firm has a relationship with the AP of the covered ETF to which it directly submits
   the Creation Order to engage in creations and redemptions of shares of the covered ETF.17 The Firm reasonably believes that the AP will be able to facilitate and fulfill the execution of the Creation Order with the covered ETF based on the AP's past pattern and practice regarding creations and redemptions in covered ETF shares on behalf of the Firm. The Firm will not utilize an AP that has a pattern or practice of failed creations of covered ETF shares when it receives a Creation Order from the Firm, unless the Firm reasonably believes that the AP has implemented timely corrective measures that have remediated the issues that were resulting in Creation Orders not being filled.

4. The Firm's Creation Order will be irrevocable and will not be modified or canceled by
   the Firm ("Irrevocable Creation Order").

5. The Irrevocable Creation Order will he bona fide and the Firm will have nn reason t~
   believe that it will not be filled in its entirety by the covered ETF.18 "purchasing securities of like kind and quantity" by "no later than the beginning of regular trading hours on the [applicable close-out] settlement day" under Rule 204(a). This relief does not address any other issue under Rule 204(a), except as provided in note 15, infra, and except with respect to calculating daily net purchases for purposes of Credit under the Multi-Day Close-Out Credit Letter. See 17 CFR 242.204(a); Rule 204 Adopting Release. This relief also does not address any issue under any other provision of Regulation SHO relating to ETF creations and redemptions, including, without limitation, the calculation of net position for purposes of order marking under Rule 200. 's In some cases, Latour may satisfy its close-out obligation to "borrow[] or purchase] securities of like kind and quantity" by acquiring the requisite amount of covered ETF shares through a combination of Creation Orders, irrevocable volume-weighted-average-price ("VWAP") orders for covered ETF shares, and/or a borrow of covered ETF shares. The Commission has permitted the use of VWAP orders to satisfy the requirement to "borrow[] or purchase] securities" by "no later than the beginning of regular trading hours" provided: "(i) the order to purchase the equity security on a VWAP basis is irrevocable and received by no later than the beginning of regular trading hows on the applicable close-out date; and (ii) the final execution price of any such transaction is not determined until after the close of regular trading hours when the V WAP value is calculated and the execution is on an agency basis." See Rule 204 Adopting Release, 74 FR at 38271 n.66. In these circumstances, the Firm will note in its books and records the combination of Creation Orders, VWAP orders, and/or borrows that satisfies the specific obligation to "borrow[] or purchase] securities of like kind and quantity" under Rule 204(a). 16 See supra note 13. 17 Although not required to satisfy this representation, awritten agreement between Latour and the AP would be strong evidence of the relationship with the AP to create and redeem shares of the covered ETF. 18 For instance, the Firm's policies and procedures will provide that it will not engage in transactions with an AP or a covered ETF for the creation of shares of a covered ETF through an Irrevocable Creation Order for the purpose of closing-out a fail to deliver position if the Firm knows or has reason to know that the covered ETF or

6. The Firm will submit the Irrevocable Creation Order to the AP by no later than the
   beginning of regular trading hours on the applicable close-out date, and will note in its books and records that the Irrevocable Creation Order is in satisfaction, in whole or in
   part, of the Firm's obligation to "purchas[e] securities of like kind and quantity" under
   Rule 204(a).

7. The Firm has a reasonable expectation that the AP will confirm that the Irrevocable
   Creation Order has been filled in its entirety after the close of regular trading hours on the applicable close-out date.

8. If, despite the Firm having submitted an Irrevocable Creation Order directly to an AP of
   the covered ETF no later than the beginning of regular trading hours on the applicable close-out date:
   (i) the Firm is subsequently on notice before 3:30 p.m. Eastern Time on the close-out date that the Irrevocable Creation Order will not be filled (in whole or part in an amount sufficient to cover the close-out obligation) by the covered ETF, or will not be successfully submitted by the AP to the covered ETF on the close-out date by the deadline established by the covered ETF, the Firm will purchase or borrow19 covered ETF shares of like kind and quantity in the amount necessary to close-out the Firm's fail to deliver position, as calculated prior to beginning of regular trading hours on the close-out date ("original fail to deliver position") (less any shares in partial fulfillment of the Irrevocable Creation Order), prior to the end of regular trading hours on the close-out date; or (ii) the Irrevocable Creation Order was not filled (in whole or part in an amount sufficient to cover the original fail to deliver position) by the covered ETF after 3:30 p.m. Eastern Time on the close-out date, the Firm will, no later than the beginning of regular trading hours on the following trading day ("next trading day"), purchase or AP will not deliver the covered ETF shares in settlement of the Irrevocable Creation Order (i. e., a "sham close￾ouY'). See 17 CFR 242.204(fl; Rule 204 Adopting Release, 74 FR at 38278. 19 Ina 20141etter granting no-action relief to Goldman Sachs Execution &Clearing, L.P. ("GSEC"), the staff stated that "[t]o satisfy aclose-out obligation by borrowing shares, the Participant must enter into a legally binding agreement with the lender to borrow/loan shares (in accordance with the terms of a securities lending ageement) by no later than the beginning of regular trading hours on the Rule 204 close-out date." Letter from Josephine J. Tao, Assistant Director, Division of Trading and Markets, SEC, to Beth A. Stekler, Wilmer Cutler Pickering Hale and Dorr, LLP, dated October 27, 2014 at n.14. As with other no-action letters, the staff made clear in the letter that the staffs "position is based solely on the representations in [the] October 27, 20141etter and the representations and facts [the writer] presented to Division staff." Id. at 4. In that regard, the staff notes in particular that the October 27, 2014 letter requesting no-action relief stated the following in discussing GSEC's use of borrows to satisfy its Rule 204 close-out obligation in a security: "[b]ecause securities loans provide for same-day settlement, once shares that GSEC has borrowed to satisfy ali or a portion of its Rule 204 obligation are delivered to GSEC's account at Depository Trust Company, GSEC immediately delivers those shares to CNS (assuming no segregation deficit). Accordingly, the amount of the aggregate borrow will be applied to reduce GSEC's net delivery obligation to CN5 in that security and will be reflected, along with all other deliveries and receipts, in GSEC's net settlement obligation in the security for that settlement date." Letter from Beth
   A. Stekler, Wilmer Cutler Pickering Hale and Dorr, LLP, to Josephine J. Tao, Assistant Director, Division of Trading and Markets, SEC, dated October 27, 2014 ("GSEC Request Letter") at n. 22 (emphasis added). The GSEC Request Letter did not raise the possibility of so-called "dropped" borrows.

borrow covered ETF shares of like kind and quantity in the amount necessary to close-out the original fail to deliver position (less any shares in partial fulfillment of the Irrevocable Creation Order).20 In determining the number of shares necessary to close-out the original fail to deliver position pursuant to (i) or (ii) above, the Firm will not take credit for any trading or borrowing activity, or continuous net settlement activity, that occurs between the beginning of regular trading hours on the close-out date and the beginning of regular trading hours on the next trading day (except for any shares in partial fulfillment of the Irrevocable Creation Order). In addition, the Firm will note in its books and records the combination of partially filled Creation Orders, purchases, and/or borrows that satisfies the obligation to close-out the original fail to deliver position pursuant to (i) or (ii) above.
9. The Firm has a reasonable expectation that its creation of covered ETF shares will settle
at the applicable Participant's account at the National Securities Clearing Corporation (or other appropriate registered clearing agency) on the same time frame as would a secondary market purchase of covered ETF shares made no later than the beginning of regular trading hours on the applicable close-out date. 10..The Firm will not use an Irrevocable Creation Order to satisfy aclose-out obligation on an applicable close-out date for the shares of any covered ETF that has announced, prior to the beginning of regular trading hours on the applicable close-out date, a restriction or limitation on issuances or creations.
11. The Firm will establish, maintain, and enforce written policies and procedures reasonably
designed so that the Firm will have no reason to believe that a substantial proportion of the securities, cash, or collateral required for settlement of the Irrevocable Creation Order transaction will not be delivered to the covered ETF on the day that delivery is due.
12. The Firm will establish, maintain, and enforce written policies and procedures reasonably
designed to achieve and surveil for compliance with its Rule 204 close-out obligations using Irrevocable Creation Orders, including written policies and procedures to monitor the performance of the covered ETF, AP, and the Firm, as appropriate, for any pattern of actions that results in the Irrevocable Creation Order not being filled (in whole or in part), including failure to confirm or complete the creation of shares of the covered ETF; rejection, revocation, or cancellation of the Irrevocable Creation Order; or other actions that would result in the Irrevocable Creation Order not being filled. The policies and procedures will require the Firm to examine the cause of a failure to fill an Irrevocable Creation Order and consider whether any action should be taken in light of all the facts and circumstances.
13. The Firm will maintain accurate books and records that evidence the use of Irrevocable
Creation Orders to comply with its Rule 204 close-out requirement and that evidence compliance with the representations reproduced in this letter, and that will be provided to 20 Purchasing or borrowing activity to close-out the original fail to deliver position by no later than the beginning of regular trading hours on the next trading day is independent of any new close-out obligation on the next trading day and will have no effect on the Firm's close-out obligation under Rule 204 for the next trading day.

the staff of the Commission or appropriate self-regulatory organization ("SRO") upon request.21
14. The Firm recognizes that it is subject to all other requirements in Rule 204 related to its
close-out obligation.
ETF Creation and Redemption Multi-Da~~proach
You also seek confirmation that the Firm would be permitted to count the shares of a covered ETF purchased through executed Creation Orders or shares of a covered ETF sold through executed Redemption Orders in the same manner as purchases or sales of shares of the covered ETF in the secondary market when calculating daily net purchases for purposes of Credit under the Multi-Day Close-Out Credit Letter ("ETF Creation and Redemption Multi-Day Approach").22 You represent Latour's belief that the ETF Creation and Redemption Multi-Day Approach furthers the Commission's purpose in adopting Rule 204(e) of encouraging broker￾dealers to close-out fails to deliver prior to the applicable close-out date. The staff hereby confirms that the Firm would be permitted to count shares of a covered ETF purchased through executed Creation Orders or shares of a covered ETF sold through executed Redemption Orders submitted through an AP of the covered ETF in the same manner as purchases or sales of shares of the covered ETF in the secondary market when calculating Credit under the Multi-Day Close￾Out Credit Letter, consistent with the approach you describe in your Letter and subject to the terms of the Multi-Day Close-Out Credit Letter. ' Z The Fum's records will include communications with the AP or the covered ETF, if applicable, and any action taken to address a pattern of failure to complete Irrevocable Creation Orders by the AP or the covered ETF. 22 Unlike the ETF Creation Approach described above, the ETF Creation and Redemption Multi-Day Approach addresses executed Creation Orders and executed Redemption Orders. Issues concerning the timing of creations in the context of the ETF Creation Approach do not arise in the context of calculating Credit under the Multi-Day Close-Out Credit Letter because Credit is calculated as of the end of the day (i.e., after the Finn knows whether a Creation Order or Redemption Order has been executed).

Conclusion
These staff positions are with respect to enforcement only, and do not purport to express any legal conclusions regarding the application of the federal securities laws. These positions are subject to modification or revocation if at any time the staff determines that such action is necessary or appropriate in furtherance of the purpgses of the Exchange Act. These positions are based on the facts you have presented and the representations you have made in your Letter and are strictly limited to the application of the ETF Creation Approach and the ETF Creation and Redemption Multi-Day Approach as described above and in your Letter. Any different facts or circumstances may require a different response. The staff expresses no view with respect to any other questions that the proposed activities may raise, including, but not limited to, the applicability of any other federal or state laws or SRO rules to the proposed activities. Sincerely, -~~~~ -if J ; // -''Josephine J. Tao Assistant Director Attachment

uR~H~ ~ cG4NIGLE
A Prc~fcssi~nal C;c>rpc>raeion
Larry E. Bergmann
Direct: 202.661.7032
Facsimile: 202.661.7Q56
G m ai l: I bcr~man n@ n~ m I a~vu s. com
Apri126, Za1 ~
Josephine J. Tan, Esq.
Assistant Director
Division of Trading and Markets
U.S. Securities and Exchange Commission
1.00 F Street, N.E:
Washington, D.C. 20549
555 Thirteenth Street, N.W.
Suite 410 West
~Vashinbton, pC 20004
Rea ~gguest for No-Action Relief'ander Rule 204 of Regulation SHO with .respect to Creations ~f Covered ETF Shares fgr ~losg-Qut Purgose~ ~n~ for confirmation re~ardin~- the Treatment of Executed Creations and Executed m n d ETF h s fo P- it an t~-F Purposes under the Multi=Day Clase~0ut Credit Le~Eer Dear Ms. Tao:
Murphy & McGonigle, P.C., on behalf ~f LataurTradin~ LLG ("Latour" ar ".Firm"), a broker-dealer that is an exchange-registered market maker in exchange traded products, respectfully requests that the staff of the Division of Trading and Markets (the. "Division") of the Securities and Exchange Commission ("Commission" or "SEC") pzovide assurances that it will not recomnnend to the Commission enforcement action under Rule 204 of Regulation SHO "Rule 204") under the Securities Exchange Act of 1934 (the "Exchange Act"},~ if the Firm. closes-out a fail to deliver position in the securities of certain exchange-traded products2 by See 17 CFR 242.204; Exchange Act Kelease No. 60388 (July 27, 2009), 74 FR 38266 (July 31, 2U09) ("Rule 204 Adopting Release"). Our request for relief is limited tp the securiries of exchange~tradeci produc~c meeting the Following conditions: (1)(a) the securities are issued at net asset value by an open-end investment company or unit inveshnent host registered with the Commission under the Investment Company Act of 1940 (the "40 Act") that engages in a caxitinuous offering of its securities, or (b) the securitries are issued at net asset value by a pooled investment vehicle (e.~., a mast or a partnership) that engages in a contuauaus offering of its securities but that is not an investment cot~►pany registered under the 40 Act; and (2j the securities are .listed and traded on a national securities exchange. Far purposes of this letter, exct►an~e-traded products whose securities satisfy conditions (1) and (2) collectively shall be referred to as "covered F'I'Fs". New Ynrk ♦ Vi~•ginia ♦ Washington, D.C.

Josephine J. "I'ao
A~ri12b, 2Q17
Page 2 cif 10
submitting, no later than the beginning of regular trading houxs3 ou the applicable close-out date, irrevocable instructions to create shares in the covered ETF for which the Firm has a Rule 204(a) close-out nbligatian through an Authorized Participant ("AP") of the covered ETF (hereinafter, "Creation Order") in accordance with the approach described below.s We also seek confirmation that shares of a covered ETF purchased tl~•ougl~ the execution of a Creation Order ar shares ~f a covered ETF sold through the executi~za of a redeanption request submitted through. an AP of the covered ETP (he>reinafter, "Redemption Order") should be treated in the same manner as purchases or sales of shares of the covered ETF in the secondary market,. under the Multi-Day Close-Out Credit Letter (as defined helaw),6 when calculating daily net purchases fir purposes of Credit (as that term is rle~ined in the Multi-Day Close-Out Credit Letter), as described in mire detail below. Re~ulati~n SHO Close-Out Requirement under Rule 204 Under Rule 204, a participant of a.reg stered clearing-agency' ("Participant") must deliver securities to a registered clearing agc~acy fUar cleazanc~: and settlement on a long or short sale transaction in any equity security by settlement. date, or must close-out. ~ fail to deliver at a. registered clearing agency in any equity security fax a long or short sale transaction in that equity security by barrowin~ or purchasing securities of like kind and quantity.$ The Participant must close-out a fail to delivex position far a short sale transaction "hy no later than the beginning of regular- trading; hours on the settlement day f+~llowing the settlement date," referred to as T+4.4 If a Participant has a fail to deliver position that the. Fartic pant can demonstrate on its books and records resulted from a long sale, or is attributable to bona fide- market making activities by a rEb~ster~~ T~ai~Cet IT1~CZi? O~tiOI'iS itlaTi~c~ 1T1aiiE1', vi tiii2el' I112.[KEi ~i111C81 Otu'ti~e,ai~u tG ijuG1:G fil ~~"1E over-the-counter market, the Participant must close-out the fail. to deliver position "by no later 3 For purposes of Rule 204, "regular trading hours" has the same meaning as in Rule 600(b)(64) of Regulation NMS. 17 CFR 242.2Q4(g)(2), '4 The "instruction" will be a Uvna-fide Irrevocable Creation Order submitted directly to the AP, as described below. Sse infra pp. 4-5. When an ETF creates anew shares, the ETF issues shares in blocks (blpeks of SO,000 shares, for example) kh<~x are known as "creations" See infra noee t 6. ~ See Letter from Josephine J. Tao, Assistant Director, Division of Trading. and Markets, SEC, to Robert L.D. Colby, executive Vice President and Chief T,egal Officer, Financial Industry Regulatory Authority, Inc., and Timothy H. Thompson, Senior Vice .President and Chief.Regulatory Officer, Chicago Board Qptions F..xchange, Inc., C2 Options Exchange, Inc., dated September 6, 20] 3 ("Multi-Day Close-Out Credit Latter"),
available ak https://www.sec.gov/divisions/marketrepJ~nr-n~acti~n/2Q13/fins-oboe-c2-Q90613-2Q l .pdf. For purposes of Regulation SHO, the term "participant"has the same meanilig as in Section 3(a)(24) of the Exchange Act, 15 U.S.C, 28c(a)(24). See Rule 204 Adopting Kelease, 74 NR at 38268 n.34. ~ 17 CFR 242.204(a). `•' I~l. Gencralty, transactions in mast ~TFs settle. within three settlement days, knc~wci as T-+-3..See infi a the text accompanying note 22.

Josephine J. 'Tao
April 26, 2017 than the beginning of regular trading hours on the third consecutive settlement day follovvin~; the settlement date, referred to as T+6.10 In the Rule 2041~,doptin~ Release, the Commission specified that to meet its close-out obligation, ai~nong other things, a Participant must b~ able to demonstrate on its books and records that on the applicable close-out date, it purchased or borrowed shares in the full quantity of its fail to deliver position by no later than the beginning of regular trading hours.." Pursuant to Rule 204(d), a :Participant with aclose-out obligation may reasonably allocate a portion of its fail to deliver position to anothex registered broker or dealer ("allocated Broker￾Dealer"} for which it clears trades or from which it receives trades for settlement, based on such A17acated Broker-Dealer's short position.12 Rule 204(aj applies to such Allocated Broker-Dealer with respect to the allocated portion of the .fail to deliver pasiCion.13 Latour rcceiv~s allocations of fail to deliver posifiaons from .Participants under Rule 204(d). Proposed Approach to Utilise Newly-Created Cowered ETF Shares to Close-Out Open Fails to Deliver Latour takes its obligations to comply with Rule 204 seriously and respects the Cainmission's concern regarding fails tia deliver and the impt~rtant role that Rine 204 plays in efforts by the Comrnissioiy to address fails to deliver. Latour therefore requests. assurances that the Divisiarz would not recommend enforcement action under' Rute ~Q4 far failing Yo "immediately close out" a fail to deliver position in the shares of a cnverec~ ETF "no lafer th~ua the beginning; v£ regular trading hours on the [applicable close-.out] settlement day" by "purchasing securities of like kind aind quantity"14 if the Firma when it has aclose-out obligation 10 t? CFR ~42.204(aj(1) and (a)(3j. As discussed below, the oiose-out obligation can be allocated by a ParEicipant to another proker-dealer pursuant to Rule 204(d). Fails to deliver dye to sales resulting from options exercises or assignments must be-closed-out in aoccardnnce with Rule 204, Sea Letter from Josephine J. Tan, Assistant Director;. Division of Trading and Markets, SEC, to Beth E1. Stekler, Partner, Wilmer Cutler Pickerinb Hale and Dorr LLP, dated actober 2Z, 2014 ("Goldman Letter"} at 2-3 n.9, available at https;//wwvv.sec.goy/d visionslmarketregJ.nor-noaction/2014/goldman-090bi3-204.pdf. However, because application of the locate requirement in Rule 203(b}(1) to short sales resulting from.gptions exeroises or assignments presenrlyraises certain operations} difficulties, broker-dealers do -not need to obtain a IocaCe with respect to short sales that xesult from optiat~s exercises or assignments. The Commission and its staff have also noted Eliot short-sales pursuant to options. exercises and assignments are not subject. to Rule 201 of Regulation SHO. See Exchange Act Release iVo. 61595 (February ~6, 2010,), 75 FR 11232, 11,2'63 n.433 (March
10, 2010j; Multi-Day Close-Out Credit Letter at 3 n.9. ~ ~ Rn1e 204 Adopting Release, 74 FR at 3$272:. 12 ]7 CFR 242.244td). '3 Id. ~a For the. avoidance of doubt, this request for no-action relief solely addresses: the issue of whether the. submission o£an irrevocable Creation Order directly to an AP ofthe covered ETF nn later than the beginning Af regular txading hours nn the applicable close-out date, consistent with the upproaoh described betow, constitutes "purchasing securities of like kind and qufltttily" by "no later t#~an the beginning of regular trading hours on the [applicable close-out] settlement day" under Rule 204{a). 'This request for relief does not address any other issue under Rule 204(a), except as provided in note 17, infra, and except with. respect to calculating daily net

JosephinE J. "I'ao
April 2G, 201.7
Pale 4 of 10 pursuant to Rule 204(x) with respect to the shares oCthe covered ETF, closes-out its fail to deliver pasitian in these shares by subinittin~;~s an irrevocable Creation Order directly to an ~1.P ~f tl~c; covered ~TF no later thaty the be~;innin~ of regular trading hours on the applicable el~se￾out date in accordance with the representations below (the "ETF Creation Approach"):1~ R The Creatzon Order, along with. other actions the Firm nay take to cic~s~-aut .its .fail to deliver pasitian;'~ is for the full amount of the fail to deliver position subject to the clase- ~ut obli~ati~n in Rule 204 zn the shares ~f the covered ETF. The Firm w 13 submit fhe Croatian Orei~r directly to an AP that is author red to create or￾redeem shares for the covered.. ETA. i x ~ The Firm has a relationship with the AF ~f the covered ETF to which it directly submits the Creation-Under try engage in cr atio~is anti redemptions:of shares of the covered ETF. ~~ The Firm reasonably believes that the AP will be able to fiaclitate and ~ft~Ifzll the execution of -the Creation Order-with the-ravened E'I~ based Un the ~1.P's past pattenY anti purchases for purposes of Credit under the. Multi-Day Close;-Our CreaiC Letter, as described below: See 17 CFR 242.204(a); Rule 2d4.4riopting Ttetease. ~s \<Jur request does not include Creation Orders that are not submitted directly to an AP of the covered E'I'.F, for instance, through anarher broker-dealer that is not an AP of the covered ETF ar abroker-dealer that is not accepting or receivin~'the Creation C)rd~r in its capaeifiy as an A~' of=the covered E1'~~ - ~~ The process of creating and redeeming ETr Shares in "crealian unit" aggregatio~is is described generally in Securities Act Release No. 8901 (March 11,, 2008), '73 FR 14b l 8, 14628 (March I $, 2008);and Securities Act Release No. 9922 (September 22, 201 Sj, 80 FR 622'14, 622'76-62277 October ].5,,-201 S}. Typically; in an. ETF creation the submitting party (e:g:, Lato«r in this instaa~ce} sends a Creation Order to the AP, caul c7g tkie Al? to itYit ate the creation process. The AF' will acknowledge receipt cif the Creation Order to the Participant or Allocated Broker-llealer, submit the- Creation Order Co the E'I'F or an authorized went ofthe ETF and confirm tt3e issuance of the E'TF shares to the Participant ~r Allocated Broker-Dealer. The creation is a two-sided transaction: the ~TF provides new ETF shares in exchange for receipt of the underlying securities, cash, or z combirnation of the underlying securities and cash fsc~m the AP. Both legs are priced identically (at the net asset value of the E'TF at the end of the day). ~~ Zn some cases, Latour may satisfy its close-out obligation fo "borrow[] ar purchas[e) securities of like kind-and quantity" by acquiring the requisite ~mount:of covered ETF shares through a c~mbirzation of Creation Orders, irrevocable volume-weighted-average-price ("VWf~P") orders for cavere~l ~TF shares, andlor a b~rr~w:of covered ETF
shares. Tle Coznznssion has permitted the use of VVJAP orders to satisfy the requiremetat to "borrow[] or purchase] securities" by "na later tltatl the begituYing,ofregular trading kours" provided:. "(i) the order to purchase the equity security on a VWAP basis is irrevocable and received by no later chan the beginnzn~ of regular tradzn~ hours on the applicable close-out date; and (ii} tl~e :final execution price of any such transaction is not deter~mineci until after the close of regular trading hours when the VW.AP value. is calculated and fine execution is an an agency Uasis>" See Rule 204 Adapting Release, 74 FR at 3$271 n.6F. In these circumstances, the Finn will note iFi its. books and records the combination of Creation (Jrders, VWAP orders, aneUor borrows that satisfies the specific obligation to "borrow[] or purchase] securities- ofi ke land and quantity" tjntier Rule 204(a). See supra note 1 S. ~~ Altktough not required to satisfy this representation, tine Finn reco~nir_es that a written. agreement between Latour and the AP would be strong evidence ~t the relationship with the AY to create and redeem shares ofthe covered F,"1'F.

Josephine J. Tao
Aril 26, 2017 practice regarding creations and r~demptioi7s in covered ETF shares on behalf ~f the Fizm. The Firm will not utilize an t~P that has a pattern oz practice of failed creations of covered E1'F shares when it receives a Creation Order firom the Firm unless the rirm reasonably believes that the AP has implemented timely correefive measures that have remediated the issues that were resulting in Creation Orders not being. filled.

• The Firm's Creation Order will. be irrevocable and will not be modified or canceled by
  the Firm ("Irrevocable Great en Urcler").
• The Irrevocable Creation Order will be :bona fcde anti the firm will have i~.o reason to
  believe that. it will not be filled in its entirety by the covered ETF.2°
• 7"he Finn will submit the Irrevocable Creation. Order to the AP by no later tk~an tl~e
  beginning of regular trading- hours an the applicable close-gut date, and will note in its books and records that. the Irrevocable Creation Order is in satisfaction, in whale ox in
  part, of t`hc Finn°s obligation to "pur~has[~~ 'securities of like kind and. quantity" under
  Rule 204(x).
• The Firm has a reasonable expectation that the AP will confirm that the Irrevocable
  Creation (7rder has beez~t filled in its entirety after the- close of regular trading hours on the. applicable close-out date.
• ~f, despite the Firth having submitted an Iirrevocable Creation Order directly to an AP o~f
  fhe covered ETF no later than tike beginning of regular trading hours an the applicable :close-out date:
  () the: Firm is subsequently c~i~ notice before 3:3 d p.zrx. Eastern Time on the applicable close-out date that the Irrevocable Creation Order will not be filled (in whole or part in an amount sufficient to cover the close-out obligation.} by the covered ETF, ar will not lie successfully submitted by the AP to the covered. ETF on the close-out date by the deadline established. by thc; covered ETF, tihe Firm will purchase ax borr ow covered ETF shares of like kind and quantity in the annount necessary to close-aut the Firm's fail to deliver position, as calculated prior to beginning of regular trading hours on the applicable close-out date ("original fail. to deliver p~siti~n") (less any shares in partial fulfillment of tie Iiievocable Creation Order) prior to the end of regular trading hours on fihe close-out date; or (ii) the Irrevo~abie Creation Oder was hat filled (in whole or part in an annount sufficient to cover the original fail to deliver position) by the eavered ETF after 3:30 p.m. 20 For ianstance, the Pint's policies and procedures will ~rrovide that it will not engage in transactions with an AP or a covered ETF for the cz~ation of shares of a covered ETF throug~i an Irrevocable Creation Order for the purpose ofclosing-out a fail Co deliver position if the Firm kiYows or has reason to know that the covered ETI' or AP will not deliver tie covered E'TF shares in settlement of the Irrevocable Creation Order (i.e., a "sham close out"). See 17 CFR 242.204(#x; Rule 204 Adopting Release, 74 FR at 38278.

Josephine J. "I'ao
Aril 26, 2017
Eastern Tine on the applicable close-out date,. the Firm wi11, no later than tl~e beginning of regular trading lours on the following trading day ("next trading day"), purchase ~r barrow covered ETF shares of like kind and quantity in il~e aiount necessary to close-otrt the original fail t~ deliver position (less any shares in partial fulfillment of the Irrevocable Creation C1rd~r).21 In determining; the number of shares necessary to close-out the original fail to deliver position pursuant to (i) or (ii) above, the Fizm will not take credit for any trading or borrowing activity, or continuous net settlement acfivity, that nccurs between tihe beginning of regular trading hours on the close-out date and tlYe be~;innin~ of rexlar trading hours on the next trading day (except for any shares in partial fulfillment of the Irrevocable Creation Order). In addition, the Firin will note in its books aid records the combination of partially filled Creation Orders, purchases,. andlor borrows that satisfies the obligation to close:-out. the Qriginal fail to dc;li~rer posifron pursuant to (i) or (ii) above.

• The Fiz~~ has a reasonable expectation that its creatit~n of covered ETF shares vvi11 settle
  at the applicable Participant's account at the National Securities Clearing Corporation ("NSCC") (or other appropriate registered clearing agency) on the same time fi•arne as would a secondary market :purchase of covered ETF shares made no later than the beginziin~; of regular trading Hours on the applicable close-out datc:22
• The Firm will :not use an Irrevocable Creation C7rder to satin fy a close-out obligation on
  an applicable close-out date. for the shares of any covered ETF that has announced, prior to the b:;gn .ing of regular trading hours cry tie applicably ~1ose-au~ irate, ayes«-~cti~~ or limitation on issuances ~r creations.
• The Firm will establish, maintain, anc~ enforce written policies and procedures reasonably
  designed so that the Finn will have no reason to believe that a substantial proportion of the sec ties, cash, or collateral required for settlement ofth~ Irrevocable Creation Order transaction will not be delivered to the covered ETF on the-day that delivery is due.
• The Firm. will establish, maizztain, and enforce written ~aliczes and procedures reasonably
  designed to achieve and surveil for compliance with its Rule 2Q4 close-out obi ~;ations using Irrevocable Creation Orders, including written policies and procedures to monitor the performance of the covered ETF, AP,, and the Finn, as appropriate, for any pattern of actions that results. in the Irrevocable Creation Order not being. filled (in whole or in part), including failure to confirm or complete the creation. of shares of the covered ETF; rejection, re~ocatinn, or cancellation of the Irrevocable Creation Order; or other actions that would result in the Irrevocable Creation Order not being. filled. The policies and '1 Pw-eliasing or horrowin~ activity to close-out the oyi~inal fail to deliver position by no later than the beginning ofregular trading hours on die next trading day is independent of any new close-out obligation on the next trading day and will have no effect nn the Firm's close-out obligation under Rule 204 fox the next trading day. Zz We reca~nize ghat, when the securities industry transitions to a shortened settlement cycle, the Yimeframes for actions required by Rule 20~k waulci be adjusted accordingly.

Josephine J. 'Tao
April 26;2017 praeedures will require the Rirm to exami►~e the cause of a failure to fill an I~'evocable Creation Order ar~d consider whether any action should be taken in light of all the facts and circumstances. The Firm will maintain accurate books and records that evidence the use of Irrevocable Creation Orders to comply with its Rule 2U4 close-out requirement and that evidence. compliance with the repr~sentatians contained in this letter, ar~d that will be provided to the staff of the Gommissian ar appropriate self-regulatory organization ("SRO") upon request xs

• The Firm is subject to all other requirements in Rule 204 related to its close-out
  vbl~ation.
  Proposed Approach fur t11e Inclusion of Pre-Fail and Past-Fail Credits When Calculatin~Net Purchases Rule 204(e) provides that, even if a Participant has not closed-out a fail to deliver position in accordance with Rule 204~a) or hay not allocated a fail to deliver position to a broker￾dealer in accordance with Rule 2fl4(d), abroker-dealer may receive credit. £ar purchases or borrows executed.priar to the applicable close-out date if the broker-dealer earnpli~s with all four regwireme~ts set forth in "dare=fail erect t" provision i°n Rule ~04(ej ("Pre-Fail Credit"}. Specific~.11y, to obtain Pre-Fail Credit under Rule 2Q4(e} ~'1) the purchase or borrow must be "bona fide"; (2) the purchase pr borrow must be executed ..after the trade date bit by no later than. the end of regular trading. hours an the settlement date for the transaction (accordzngly, the purchase or borrow must be executed on T+1, T+z, or T+3); (3) the purchase or borrow must lie of a quantity of securities cuff dent to cover fhe entire amount of that broker-dealer's fail to deliver position at a registered clearing agency in that security;. and (4) the broker-dealer can demonstrate that it has a net. flat ox net long position in the security on its books and records o~n the day Qf the purchase or botx'ov~r. The Division staff explained that a brs~k~r-dealer rrray only claim Pre-Fail Credit in the limited circuimstazaeEs where a bona;fide purchase or barrow for the entire amount of the fail to deliver is effected by That broker-dealer on a single day that is either T+~, T+2 or T+3, and the broker-dealer can demonstrate on its books and records that it has. a net flat or net Lang position on such. day.~4 Further, footnote 81 of the Rule 204 l~doptixig Release provides. that, in determining fhe amount of its close-out obli`~ation, a Participant may rely on its z~et delivery obligation as reflected in its: notification firam the NSCC regarding its securities delivery and payment obligations, provided such notification is received prior to the beginning of regular trading hours on the applicably close-vut date (i.e., T+4 or'I'+6).~s ' 2 The Firm's records will include cottununicati~ns with the AP or the covered ETI', if applicable, and any acrion taken t6 address a pattern of failure to complete Irrevocable Creation Orders by the AF or the covered C'I'F. Z4 See Multi-Day Close-Out Credit Letter at 2. ZS See Rule 2q4 Adopting Release, 74 ~R at 38272 n.81.

Josephine J. Tao
Apri126, 2Q17
In the Multi-Day Close-Qut Credit Letter, the Division staff allowed a Participanf car an Allocated Broker-Dealer .to ctaim credit .for closing-out a fail to deliver position prior tt~ the applicable close-out date26 based on net purchases over multiple days (the °l'vlulti-Day Approach").27 Latour believes that shares of a covered ETF purchased through executed Creaf on Uxeiers ar shares of a covered ETF sold through executed Redemption Qrders should be treated in the same manner as purchases ax sa1~s of the ETF shams in ~}se secondary rrsarket when calculating Credit under tihe Multi-Day Approach. Accordingly, Latour is seeking eonfirmati~n, consistent with the Multi-Day Close-()ut Credit Letter, that the Firm would be permitted to Gaunt fhe shares of a covered ETF purchased tluou~l'i execu"ted Creation. Orders aver multiple days from T+1 to T+5 as Credit toward satisfying the Firm:'s close-out obligations under Rule 2Q4 on T+4 or T+6, as applicable, for any day the Firrn can demonstrate on its books and records that it had,net purchases, caleulat~d based on the entirety afi;ts bona-fide trading activity, including; its executed Creation Orders anc~ Red~~ption Orders, Credits aggregated over multiple days fx~a~x~. T+~ through T+S, as applicable, would- be included in determining tl~e quantity of securities thak must be purchased or borrowed to Blase-out the fail to deliver position an the applicable close zb The term "Credit" includes "Pre-Fail Credit" and "Post-I~ail ~redit~' with "I~osl-Fail CreBit" to mean full or partial credit for closing-.out a fail to deliver prior to i'+61~ased an net purchases aggregated over multiple days. from T+1 through T-+-S. 27 See Multi-Day Close-Out Credit Lefler at 3-5. The eanditions setforth iri the Multi-Day Close=Out Credit Letter include [note: capitalized terms in this footnote ax-e used as defined its 2~ie Mulfi-Day Close-0ue Credit Letter only and are.not otherwise- applicable in this letter]: (1)1:he Multi-Day Approach world not apply to the regniieinents to satisfy aBlase-out. obligation on the.applicabla close-out date (i.e., T+4 ox T-E>6), except to the extent that the amount of the close-out oblibation to be met on the applicable close-out date oauld be reduced Uy claiming Credit using tike Multi-Day Approach based on net purchases no later than the applicable close-out date; (2) Credit would only be claimed #br d"ays on which the Broker-Dealer can demonstrate on its books and records that it has net purchases far the day, calculateii based on the entirety of the Broker-Dealer's bona fide trading aetiviry, and in no case. would aBroker-Demler claim Credit for purchases on a.day on which its Trading. activity results in a x►et sa18 position, xegardles5 of whether sales executed on that dayhad a le~;itiniate economic putpose; (3} the Ivlulti=Day Approach would be applied in a manner that avoids double-counting net purchases; or purchases for compliance w Ctz.a close-out date (i.e., T+4 or
T-i-6)xequirerrient; (4) a Participant using. Attribution with the Multi-Day Approach vi+ould reasonably Atirabute fails, to deliver to each Correspondent:
using a con.5istently applied method designed to resolve fails to deliver, taking into account fhc trade date net trading activity and net short positiaxx ~f the Correspondent; (5) khe same reasonableness standard applic;able. to Attribution under tUe Multi-Day Approach. would apply to Allocation under the Multi-Day Approach; (6) whin calculating the net purchase amount, purchase-and sale transactions occurring as a resalt of options exercises would. be recognized. on the. day exercised,. and purchase and sale transactions occurcin~ as a result of options assignments would be recognized on the business day after exercise; (7) Broker-Dealers using the Ivlulti-Day Approach would. have supervisory systems. in place to ensure that thcirprocesses are consistent with the Muli~- Day Approach as described in the September b;20'131etter requesting. no-action relief and would establish, maintain and. enforce written policies and procedures rEasonalily deszgned to :achieve- and surveil for compliance with their Rule 204 close-out obligations using floe Multi-Day Approach; and (&) Bxoksr-Dealers using the I+ilulti-Day Approach would. also make and keep accurate books and records as required by the federal securities:
laws, ineludiri~ promptly providing suchxecords to the Commission or an SRO upon request in tie manner and fora agreed to between the staff of the Commission and the Broker-Dealer or between the staff oFthe SRO and the Broker-Dealer, as applicable. _

Josephine J. Tao
April 26, 20]'7
Pa~e9of10 aut date consistent with, and subject ta, the requirements set forth in the 1VTulti-Day Close-hut Credit Letter. Under this approach, the Firm. wQu~d include covered ETF shares purchased through a Creation Order and ETF shares sold through a Redemption Order as purchase and sale transactions, respectively, when calculating its Credits on T+1 through T+S, as applicable, subjecf to the representations of this letter and subject to tli~ terms of'the Multi-I?ay Close-out Credit Letter (the "ETF Creation Multi-.Day Approach").28 Folicv Discussion As discussed- above,. allowing tk~e Firm to use the ETF Creation Approach is consistent with the policy of enfcsreing the strict case-out requ ~r~ments ofMule 204 as it requires the: Finn to take affirmative action. and irrevocably commit itself to purchase the covered ETF shares within tt~e timefran~ies set forth iri Rule 204(a). The use of the ETF Creation Approach else has the benefit oil m ting market impart on the price of the covered ETF shares as an ETF creation has a lizx~.i'ted impact on trading~i~ the open markct.29 The Commission has :recognized commenters' concerns that market impact may be caused by purchase ardexs executed at the opening of regular trading hQurs,30 and has permitted the use of certain types of irrevoeabl~ VV~AP orders to satisfy a Rule 204 dose-out obligation subject to certain conditions 3'~ TJnder the ETF Creation ~1pproaeh, the use of an Irrevocable Creation Order to close-out a fail to deliver position under Rule 204 is akin to such. an irrevocable V~AP ~rtler in that both orders.

• Reduce market impact that may occur by executing purchases or borrowings of securities
  no-later than. the beginning of regular trading hours;
• Ensure. that the Finn has taken an affirmative action and is ii~evacably committed to
  purchasing the. securities no later than the beginning of regular tradinig hours:;. and
• Resolve the underlying fail to deliver positzon.
  2$ This would be limited to T-F 1 to T+3 if the fail io deliver resulted from a short sale that cannot be attributed to bona fide market making activities. 29 This would be of particular benefit if the covered ETF is experiencing unusual market volatility — particularly at the market open. ~0 See Rule 204 Adopting Release, 74 FR at 38269-3SZ70. 31 These V WAP orders must meet the requirements in t'ootr~ote 66 of Che Rule 204 Ado{~tin~ Release, 74 FR 38271 n.66.

Josephine J. Tao
Aril 26, 2Q1:7
I'~:zznitti~a~; Trrevoc:able Creation Qrders fo qualify as close-uut purchases is consistent with. tk~e C~inmssian's al of reducing, fails to deliver because purchases of caveced ETF shares in tihat manner will reduce the applicable Participant's fail to deliver position at the r~levayit :clearing agency, -- -_ F nalky, eonfir~n ng the use of tlae ETF Creation Multi-Day Approach for;puzposes of'the Multi-Day Close-Out Credit L~tt~r furthers the CamYn ssion's purpose in adopting Rule 204(e) of encouraging broker-dealers to cle-:out fails to deliver prior to the appl cabke close-out date.~~ Thus, confirming the use of t17ie ETF Creation. Mu1ti,Day Approach :is eans~st~nt with fhe Commission's policy goal of encouraging more timely resolution of fails to deliver.3~ Concun 'W'~ .respecffirlTy submit that, cansistea~t wzfh the process. outlined above, the propos~cl r~o￾acfiQn relief and confirmation of the use ~f the E S`F Cxeation Mu1tz-Uay Approach for purposes of the 1Vlulti-Dad Clc~sC>ut Credit L~;tter is consistent with the central goals of Rule 204 ~o reduce fails to deliver and address ~~tent ally abusive "naked'' short selling, Accordingly, based on the foregoing, we respectfully request that floe Division. staff pxovzdethe- rec~ne~ted assurances and confirmation. If you .have ariy questions, or wish to discuss this matter further, please feed free ~o call mc: at 2Q2-661-7032:
Sincerely yours,
~,/ ~ ~. ~i~ 6~,nurnrt ~A NS
Larry E. Ber~nann cc Leonard T. ~1.moxusa
Matthew B. Comstock
Andrea Qrr; Esq.
Valerie Uah ya, Esq, s2 .See Ru1e204 Ada~tin~ Release;74 rR at 38276.
~' :See i~ at 3.8287'.