Correspondence 0001493580-25-000001 from BNY Mellon ETF Trust (CIK 0001493580)
BNY Mellon ETF Trust (CIK 0001493580)
Date: Feb. 21, 2025 · CIK: 0001493580 · Accession: 0001493580-25-000001
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File numbers found in text: 333-234030, 811-23477
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CORRESP
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Beau Yanoshik
Partner
+1.202.373.6133
beau.yanoshik@morganlewis.com
Via
EDGAR Correspondence
February
21, 2025
Ellie
Quarles
U.S.
Securities and Exchange Commission
Division
of Investment Management
100
F Street NE
Washington,
DC 20549
Re:
BNY Mellon ETF Trust (the “Registrant”)
File
No. 333-234030 and 811-23477
Dear
Ms. Quarles:
This
letter responds to comments you provided telephonically on February 10, 2025, with respect to Post-Effective Amendment No. 54 to the Registrant’s
Registration Statement on Form N-1A. Post-Effective Amendment No. 54 was filed on December 27, 2024, and included disclosure with respect
to the BNY Mellon High Yield ETF (the “Fund”), a separate series of the Registrant. Summaries of the comments provided and
responses thereto on behalf of the Registrant are provided below.
GENERAL
1. Comment: The Staff reminds the Registrant and management that they
are responsible for the accuracy and adequacy of their disclosures notwithstanding any review, comment, action, or absence of action by
the Staff.
Response: The Registrant acknowledges
the Staff’s comments.
2. Comment: Where a comment is provided in one part of the filing, please
apply the comment to all similar disclosure included in the filing.
Response: The Registrant has made
revisions in response to comments throughout the document, as applicable.
Morgan, Lewis & Bockius llp
1111 Pennsylvania Avenue, NW
Washington, DC 20004
United States
+1.202.739.3000
+1.202.739.3001
3. Comment: Please file responses to the Staff’s comments as correspondence
on EDGAR at least five (5) business days prior to the effective date of the registration statement in order to give the Staff enough time
to adequately review the responses. Once correspondence has filed, please also email a blackline of the prospectus and SAI reflecting
changes from the initial filing.
Response: The Registrant acknowledges
the Staff’s comment and will endeavor to file the response letter in advance of the effective date of the registration statement
to provide the Staff time to review the responses. Once correspondence has filed, the Registrant will provide the Staff with blacklines
of the prospectus and SAI.
PROSPECTUS
4. Comment: Please supplementally provide the completed fee table and
expense example for the Fund.
Response: The completed fee table
and expense examples will be provided under separate cover.
Comment: If the Fund’s acquired fees and expenses are greater
than one basis point, please include a separate line item in the fee table.
Response: The Registrant confirms
acquired fund fees and expenses did not exceed one basis point during the prior fiscal year.
6. Comment: If there was material portfolio repositioning resulting
from the changes to the Fund’s principal investment strategy, please disclose this in the Portfolio Turnover disclosure. Additionally,
please add disclosure, if true, that existing and new shareholders who purchase Fund shares may have adverse tax consequences due to such
repositioning. In the Statement of Additional Information, please add disclosure regarding variation in the Fund’s turnover rate,
if applicable. See Item 16(e) of Form N-1A.
Response:
The Registrant confirms the changes to the Fund’s principal investment strategy did not result in material portfolio repositioning.
The Registrant does not believe the variation in the Fund’s portfolio rate over the two most recently completed fiscal years was
significant and, therefore, has not added disclosure pursuant to Item 16(e) of Form N-1A.
7. Comment: The Staff notes that the Fund will invest in derivatives
as a part of its Principal Investment Strategy. The Principal Investment Strategy and Principal Risk sections should specifically address
the purposes for the use of derivatives to ensure the information provided is not too generic or standardized. Please update this disclosure
in response to Item 4 and Item 9. For additional guidance, please refer to the letter from Mr. Barry Miller, Associate Director of the
SEC’s Office of Legal Disclosure, to Ms. Karrie McMillan, General Counsel, Investment Company Institute, dated July 30, 2010.
Response: The Registrant has revised
the second sentence of the Principal Investment Strategy as follows:
The fund's derivatives investments may
include futures, total return swaps, structured notes and credit default swap indexes, and are typically used for hedging, risk
management, and liquidity purposes.
The Registrant notes the Principal Risks
include separate discussions for futures, total return swaps, structured notes and credit default swap indexes.
8. Comment: In the Form N-CSR, there is a discussion about focusing
on structural themes including capitalizing on fallen angels and harvesting income opportunities. If this is a part of the Fund’s
Principal Investment Strategy, please expand the discussion of the Fund’s strategies to include this focus on fallen angels and
discuss whether any other specific bond rating within speculative grade will be part of the Fund’s focus.
Response: The Registrant has revised
the third sentence of the third paragraph of the Principal Investment Strategy as noted below. The Registrant confirms the Fund does not
focus on a specific bond rating within speculative grade.
In an attempt to generate a modest
amount of outperformance over the Index, the sub-adviser also uses the proprietary credit model to identify opportunities
to harvest income and capitalize on fallen angels (bonds initially given investment-grade ratings, but subsequently reduced to high yield),
and to determine appropriate weightings, based on risk and relative value signals, of individual securities for the fund's portfolio
in an attempt to generate a modest amount of outperformance over the Index.
9. Comment: Please disclose whether the Fund may invest in fixed income
securities that are in default as part of its Principal Investment Strategy.
Response: The Fund does not currently
intend to invest in fixed income securities that are in default as part of its Principal Investment Strategy.
10. Comment: Please discuss the number of holdings the Fund intends to
have compared to the Index. For example, will the Fund have a similar number of holdings as compared to the index tracking fund but choose
to remove certain holdings and overweight others?
Response: In seeking its investment
objective, the Fund does not target a specific number of holdings compared to the Index and may at times have the same or different number
of holdings as the Index. Therefore, the Registrant has not added the requested disclosure. The Registrant notes the Principal Investment
Strategy currently provides examples of when the securities may be overweighted or underweighted against the Index.
11. Comment: Please disclose the duration range the sub-adviser intends
to focus on to construct the Fund’s portfolio.
Response: The Registrant notes the
sentence below, currently included in the Principal Investment Strategy, stating the Fund’s portfolio is expected to have a duration
similar to the Index. Because the Index does not have a specified duration range, the Registrant has not added the requested disclosure.
The sub-adviser uses a proprietary credit
model to construct a portfolio with general risk characteristics (e.g., credit rating distribution, duration and sector weightings) similar
to those of the Index.
12.
Comment: The Principal Investment Strategy section includes disclosure that the “sub-adviser
also uses the proprietary credit model to determine appropriate weightings, based on risk and relative value signals, of individual securities
for the fund's portfolio in an attempt to generate a modest amount of outperformance over the Index.” Please explain in plain English
which relative value signals may cause the sub-adviser to buy or sell an investment.
Response: The Registrant has revised
the sentence after the noted sentence as follows:
For example, the sub-adviser may overweight
against the Index individual securities identified by the credit model to have more favorable risk and relative value signals (i.e.,
securities identified as undervalued) and may underweight against the Index individual securities identified by the credit model
to have less favorable risk and relative value signals (i.e., securities identified as overvalued).
13. Comment: The Staff notes the inclusion of foreign investment risk
as a principal risk of the Fund. To the extent foreign investments are part of the Fund’s principal investment strategy, please
include disclosure in the Principal Investment Strategy section.
Response: The Registrant notes the
disclosure below, which is currently included in the second paragraph of the Principal Investment Strategy section.
The Index may include U.S. dollar-denominated
bonds issued by foreign issuers.
14. Comment: If the Fund expects to make principal investments in emerging
markets, please provide disclosure in the Principal Investment Strategy and disclose the related risks. See ADI 2020-11 Registered
Funds’ Risk Disclosure Regarding Investments in Emerging Markets.
Response: The Fund does not currently
intend to make principal investments in emerging markets.
Comment: Please address the risk of widening bid/ask spreads in the
“Fluctuation of net asset value, share premiums and discounts risk” discussion.
Response: The Registrant believes
the disclosure below, which is currently included in the “Costs of buying and selling shares risk” discussion, addresses the
risks of widening bid-ask spreads and, as a result, the Registrant has not revised “Fluctuation of net asset value, share premiums
and discounts risk” as requested.
In addition, secondary market investors
will also incur the cost of the difference between the price that an investor is willing to pay for fund shares (the “bid”
price) and the price at which an investor is willing to sell fund shares (the “ask” price). This
difference in bid and ask prices is often
referred to as the “spread” or “bid/ask spread.” The bid/ask spread varies over time for fund shares based on
trading volume and market liquidity, and is generally lower if fund shares have more trading volume and market liquidity and higher if
fund shares have little trading volume and market liquidity. Further, increased market volatility may cause increased bid/ask spreads.
Due to the costs of buying or selling fund shares, including bid/ask spreads, frequent trading of fund shares may significantly reduce
investment results and an investment in fund shares may not be advisable for investors who anticipate regularly making small investments.
16. Comment: Please revise the Item 9 disclosure so that it expands on
the Principal Investment Strategy disclosure provided in Item 4. There should be a layered disclosure approach taken with respect to Items
4 and 9. Otherwise, the Fund has not provided a summary as required by Form N-1A. See IM Guidance Update 2014-08 Guidance Regarding
Mutual Fund Enhanced Disclosure.
Response: The Registrant believes
the current disclosure is accurate and appropriate. In particular, the Registrant believes the Item 9 Principal Investment Strategy disclosure
describes the Fund’s principal investment strategies, including the particular types or types of securities in which the Fund principally
invests, and an explanation in general terms of how the sub-adviser decides which securities to buy and sell, consistent with Item 9(b)
of Form N-1A. With respect to the Item 4 Principal Investment Strategy disclosure, the Registrant believes an investor may consider the
current disclosure important to making an investment decision.
17. Comment: The lead in preceding the “Call risk” discussion
states that “In addition to the principal risks described above, the fund is subject to the following additional risks that are
not anticipated to be principal risks of investing in the fund” – if true, please refer to these risks as non-principal.
Response: The Registrant has made
the requested change.
18. Comment: The Fund indicates that investing in ETFs is part of its
principal investment strategy. Please consider whether the “ETF risk” discussion should be disclosed as a principal risk.
Response: The Registrant does not
currently expect the Fund to have material investments in ETFs. The references to ETFs in the Principal Investment Strategy are to reflect
that investments in ETFs that provide exposure to high yield securities, if any, will be included in the Fund’s Rule 35d-1 policy.
SAI
Comment: The first paragraph of the “Shareholder Actions”
discussion states that:
“If a majority of the Independent
Board Members determine that maintaining a suit would not be in the best interests of the Trust or the affected series, as applicable,
the demand shall be rejected and the shareholder shall not be permitted to maintain a derivative action unless the shareholder first sustains
the burden of proof to the court
that the decision of the Independent Board
Members not to pursue the requested action was not a good faith exercise of their business judgment on behalf of the Trust. With respect
to a direct action, no shareholder may bring a direct action claiming injury as a shareholder of the Trust, or an affected series, where
the matters alleged (if true) would give rise to a claim by the Trust or by the Trust on behalf of an affected series, unless the shareholder
has suffered an injury distinct from that suffered by the shareholders of the Trust, or the affected series, generally.”
Please add disclosure stating that these
provisions do not apply to claims arising under federal securities laws.
Response: The Registrant believes
the requested language is addressed by the sentence below, currently included in the “Shareholder Actions” discussion.
No provision of the Trust Agreement shall
restrict any shareholder rights granted by the Securities Act, the Exchange Act, or the 1940 Act, or of any valid rule, regulation, or
order of the SEC thereunder.
Comment: The Staff reiterates comment 26 (“Prior Comment 26”)
provided on September 15, 2022, with respect to Post-Effective Amendment No. 33 to the Registrant’s Registration Statement with
respect to the BNY Mellon Global Infrastructure Income ETF and our follow-up comment in response to that fund’s response to Prior
Comment 26.
Prior Comment 26: We understand that Massachusetts
law permits a fund to eliminate or alter the fiduciary duties of trustees, shareholders or other persons, and replace them with the standards
set forth in the declaration of trust. Provisions eliminating or altering the fiduciary duties of a fund’s trustees, officers, member
of any advisory board, investment adviser(s), depositor or principal underwriter (“fiduciary covered persons”) are inconsistent
with federal securities laws and the Commission’s express views on such persons’ fiduciary duties.
Please discuss Section 11.4(b)(vii) in the
Declaration of Trust in an appropriate location in the prospectus. Please immediately follow the disclosure with a statement that nothing
in the Declaration of Trust modifying, restricting or eliminating the duties or liabilities of trustees shall apply to, or in any way
limit, the duties (including state law fiduciary duties of loyalty and care) or liabilities of such persons with respect to matters arising
under the federal securities laws.
Follow-up comment to response to Prior Comment
26: Shareholders reading the Declaration of Trust may believe that trustees owe limited or no fiduciary duties to the fund or its shareholders.
This could discourage shareholders from exercising their legal rights. Also, shareholders wishing to pursue a claim should not have to
bear the expense or burden of proof, in litigation or otherwise, that fiduciary covered persons are subject to federal and state law fiduciary
duties with respect