[Chapman and Cutler LLP Letterhead]
January 12, 2024
VIA EDGAR CORRESPONDENCE
Lisa Larkin
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: | Amplify ETF Trust | |
File Nos. 333-207937; 811-23108 |
Dear Ms. Larkin:
This letter responds to your comments provided by telephone regarding the registration statement filed on Form N-1A for Amplify ETF Trust (the “Trust”) with the Staff of the Securities and Exchange Commission (the “Staff”) on July 26, 2023 (the “Registration Statement”). The Registration Statement relates to the Amplify Mobile Payments ETF (the “Fund”), a series of the Trust. Capitalized terms used herein, but not otherwise defined, have the meanings ascribed to them in the Registration Statement.
Comment 1 – General
The Staff notes that this is an automatically effective filing pursuant to Rule 485(b) of Securities Act of 1933, and as such, a Staff accountant is not required to review the Registration Statement. If the Registrant intends to request acceleration of the filing, please ensure a Staff accountant reviews the Registration Statement.
Response to Comment 1
The Registrant acknowledges the Staff’s comment relating to the requirement of a Staff accountant’s review of a Registration Statement filed pursuant to an acceleration request.
Comment 2 – Investment Objective.
The Staff notes that the investment objective states, “The Amplify Mobile Payments ETF seeks investment results that generally correspond (before fees and expenses) to the total return performance of the Nasdaq CTA Global Digital Payments Index (the “Index”).” Please change “correspond” to “correlate” as the Staff believes “correlate” is a more accurate term.
Response to Comment 2
The disclosure has been revised in accordance with the Staff’s comment.
Comment 3 – Principal Investment Strategies
The Staff notes the following statement set forth in the section entitled “Principal Investment Strategies”:
“Under normal circumstances, the Fund invests at least 80% of its net assets (plus borrowings for investment purposes) in Mobile Payments Companies (as defined below).”
Please specify what securities are included in the 20% bucket. If the Fund intends to invest in derivatives as part of the 20% bucket, please ensure enough specificity in the risk disclosure with respect to derivatives.
Response to Comment 3
The Fund points the Staff to the first paragraph under “Additional Information About the Fund’s Strategies and Risks,” which includes the following disclosure: “The Fund may invest up to 20% of its total assets in equity securities that are not in the Fund’s Index to the extent that the Adviser believes such investments should help the Fund’s overall portfolio to provide returns substantially similar to the Index.” The Fund supplementally confirms that it does not intend use the 20% bucket to invest in derivatives.
Comment 4 – Principal Investment Strategies
The Staff notes the following statement set forth in the section entitled “Principal Investment Strategies”:
“Card Networks: companies that provide services for controlling where cards are accepted and to facilitate transactions between merchants and card issuers.”
Please clarify what type of cards (i.e., credit, debit, gift cards). .
Response to Comment 4
In accordance with the Staff’s comment, the disclosure has been revised as follows:
Card Networks: companies that provide services for controlling where cards (such as credit cards and debit cards) are accepted and to facilitate transactions between merchants and card issuers.
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Comment 5 – Principal Investment Strategies
The Staff notes the following statement set forth in the section entitled “Principal Investment Strategies”:
“Infrastructure & Software: companies that provide hardware or software services for transacting payments across various channels, such as point-of-sale, mobile, and online.”
Please explain what is meant by “point of sale”.
Response to Comment 5
In accordance with the Staff’s comment, the disclosure has been revised as follows:
“Infrastructure & Software: companies that provide hardware or software services for transacting payments across various channels, such as point-of-sale (a system where customers execute payment for products or services at a store), mobile, and online.”
Comment 6 – Principal Investment Strategies
The Staff notes the following statement set forth in the section entitled “Principal Investment Strategies”:
“Processors: companies that handle front end and back-end transactions and processing from various channels, such as credit cards, debit cards, or point-of-sale payments. ”
Please explain what is meant by “front end and back-end transactions.”
Response to Comment 6
In accordance with the Staff’s comment, the disclosure has been revised as follows:
“Processors: companies that handle front end and back-end transactions and processing from various channels, such as credit cards, debit cards, or point-of-sale payments. The front end platform handles the process of authorizing a transaction whereas the back-end platform settles the transaction, moving money from the customer’s account to the merchant bank.”
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Comment 7 – Principal Investment Strategies
The Staff notes the following statement set forth in the section entitled “Principal Investment Strategies”:
“Solutions: companies that provide products and services for accepting payments by a variety of payment methods. “
Please explain what is meant by “payments by a variety of payment methods.”
Response to Comment 7
In accordance with the Staff’s comment, the disclosure has been revised as follows:
“Solutions: companies that provide products and services for accepting payments by a variety of payment methods, such as credit and debit cards, mobile wallet, buy now, pay later, and autopay.”
Comment 8 – Principal Investment Strategies
The Staff notes the following statement set forth in the section entitled “Principal Investment Strategies”:
“The identification and classification of Mobile Payments Companies is determined by the Consumer Technology Association (“CTA”), a standard and trade association representing the U.S. consumer technology industry. “
Please consider explaining what is meant by “standard.”
Response to Comment 8
In accordance with the Staff’s comment, the disclosure has been revised as follows:
“The identification and classification of Mobile Payments Companies is determined by the Consumer Technology Association (“CTA”), a standard and trade association representing the U.S. consumer technology industry. The CTA works to set technical standards for product specifications, processes or services to ensure compatibility across companies within the consumer technology industry.”
Comment 9 – Principal Investment Strategies
The Staff notes the following statement set forth in the section entitled “Principal Investment Strategies”:
“Special Purpose Acquisition Companies are excluded from the Index. “
Please explain why an explicit exclusion to SPACs is referenced in the disclosure.
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Response to Comment 9
The above referenced disclosure has been removed from the prospectus.
Comment 10 – Principal Investment Strategies
The Staff notes the following statement set forth in the section entitled “Principal Investment Strategies”:
“Companies meeting the above criteria are screened for investbility…”
Please change “investbility” to “investability”.
Response to Comment 10
The disclosure has been revised in accordance with the Staff’s comment.
Comment 11 – Principal Investment Strategies
The Staff notes the following statement set forth in the section entitled “Principal Investment Strategies”:
Concentration Policy. The Fund will not concentrate its investments (i.e., invest more than 25% of the value of its total assets) in securities of issuers in any industry or group of industries, except to the extent the Index is concentrated in an industry or a group of industries.
Please disclose whether the Index is currently concentrated and if so, disclose the specific industry or group of industries in which the Index is concentrated.
Response to Comment 11
In accordance with the Staff’s comment, the Fund has revised the disclosure as follows:
“The Fund will not concentrate its investments (i.e., invest more than 25% of the value of its total assets) in securities of issuers in any one industry or group of industries, except to the extent that the Index concentrates in an industry or group of industries. As of the date of this prospectus, the Index is concentrated in the [______] industries.”
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Comment 12 – Principal Risks
The Staff notes that the principal risks appear in alphabetical order. The Staff requests the Fund list its principal risks in the order of importance rather than alphabetically. See ADI 2019-08 – Improving Principal Risk Disclosure.
Response to Comment 12
The Fund respectfully declines to revise the disclosure as requested by the Staff. Ultimately, the Fund has reached the same conclusion as many other industry participants and declines to make the requested revisions as it believes the disclosure is compliant with the requirements of Form N-1A. The Fund continues to evaluate its approach to the ordering of risk factors in light of recent Securities and Exchange Commission guidance.
Comment 13 – Principal Risks
The Staff notes “ETF Risks” set forth in the section entitled “Principal Risks.” Please supplementally confirm if the Fund invests in instruments traded outside of a collateralized settlement system.
Response to Comment 13
The Registrant confirms that none of the instruments in which the Fund intends to invest in are traded outside of a collateralized settlement system.
Comment 14 – Principal Risks
The Staff notes that the “Mobile Payment Companies Risk” is not listed in alphabetical order in the principal risks section.
Response to Comment 14
The Fund confirms that the Principal Risk section has been revised to list all risks in alphabetical order.
Comment 15 – Performance
The Staff notes the following disclosure appears in the “Performance Section:”
The Fund was reorganized on or about ___, 2023 from the ETFMG Prime Cyber Security ETF (the “Predecessor Fund”), a series of the ETF Managers Trust, a Delaware statutory trust, into Amplify ETF Trust, a Massachusetts business trust. The Fund is a continuation of the Predecessor Fund and, therefore adopts the performance information of the Predecessor Fund (as shown below), which was managed by ETF Managers Group LLC. The Predecessor Fund commenced operations on November 11, 2014.
Please revise the disclosure to reference the correct Fund.
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Response to Comment 15
In accordance with the Staff’s comment, the above referenced disclosure has been deleted in its entirety and replaced with the following:
The Fund was reorganized on or about ___, 2024 from the ETFMG Prime Mobile Payments ETF (the “Predecessor Fund”), a series of the ETF Managers Trust, a Delaware statutory trust, into Amplify ETF Trust, a Massachusetts business trust. The Fund is a continuation of the Predecessor Fund and, therefore adopts the performance information of the Predecessor Fund (as shown below), which was managed by ETF Managers Group LLC. The Predecessor Fund commenced operations on July 15, 2015.
Comment 16 – Purchase and Sale of Shares
Please supplementally inform the Staff whether “Creation Units” are purchased primarily with cash or are redeemed primarily with cash.
Response to Comment 16
The Fund confirms that Creation Units are expected to be purchased in-kind.
Comment 17 – Additional Information about the Fund’s Strategies and Risks
The Staff notes that the 80% policy in Item 4 does not align with the 80% policy in Item 9. Please confirm for consistency.
Response to Comment 17
The disclosure has been revised in accordance with the Staff’s comment. For the sake of clarity, the disclosure in the “Additional Information About the Fund’s Strategies and Risks” has been revised across all of the shell registration statements, including this Registration Statement, as follows:
“The Fund is a series of the Trust, an investment company and a passively managed ETF. The Fund uses an “indexing” investment approach to attempt to replicate, before fees and expenses, the performance of the Index. The investment objective of the Fund is to provide investment results that correlate generally to the price and yield (before the Fund’s fees and expenses) of the Index. In seeking to achieve this objective, the Fund invests at least 80% of its net assets (plus borrowings for investment purposes) in the securities of companies that comprise the Index. The Fund may invest up to 20% of its total assets in equity securities that are not in the Fund’s Index to the extent that the Adviser believes such investments should help the Fund’s overall portfolio to provide returns substantially similar to the Index.
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The Fund generally invests in all of the securities comprising the Index in proportion to the weightings of the securities in the Index. Under various circumstances, it may not be possible or practicable to purchase all of the securities comprising the Index. In those circumstances, the Fund may purchase a representative sample of securities in the Index.
A method to evaluate the relationship between the returns of the Fund and its Index is to assess the “tracking error” between the two. Tracking error means the variation between the Fund’s annual return and the return of the Index, expressed in terms of standard deviation. The Fund seeks to have a tracking error of less than 5%, measured on a monthly basis over a one-year period by taking the standard deviation of the difference in the Fund’s returns versus the Index’s returns. There is no guarantee that the tracking error will not exceed 5%.
The Fund’s investment objective, its investment strategy and each of the policies described herein are non-fundamental policies that may be changed by the Board of Trustees of the Trust (the “Board”) without shareholder approval. Certain fundamental policies of the Fund are set forth in the Fund’s Statement of Additional Information (“SAI”) under “Investment Objective and Policies.” The Fund may liquidate and terminate at any time without shareholder approval.
Comment 18– Non-Principal Investment Strategies
The Staff notes that “Securities Lending” appears as a Principal Risk and also appears under the “Non-Principal Investment Strategies” section. Please remove from the “Non-Principal Investment Strategies” section. Further, please revise the “Securities Lending Risk” to include any necessary disclosure from “Securities Lending” under the “Non-Principal Investment Strategies” section.
Response to Comment 18
The Staff notes that “Securities Lending” appears as a Principal Risk and also appears under the “Non-Principal Investment Strategies” section. Please remove from the “Non-Principal Investment Strategies” section. Further, please revise the “Securities Lending Risk” to include any necessary disclosure from “Securities Lending” under the “Non-Principal Investment Strategies” section.
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In addition, the following risk factor has been added to the “Additional Risks of Investing in the Fund” section:
Securities Lending Risk. The Fund may engage in securities lending. The Fund may lose money if the borrower of the loaned securities delays returning in a timely manner or fails to return the loaned securities. Securities lending involves the risk that the Fund could lose money in the event of a decline in the value of collateral provided for loaned securities. In addition, the Fund bears the risk of loss in connection with its investment of the cash collateral it receives from a borrower. To the extent that the value or return of the Fund’s investment of the cash collateral declines below the amount owed to the borrower, the Fund may incur losses that exceed the amount it earned on lending the security.
Comment 19 – Fund Investments
The Staff notes that “Cash Equivalents and Short-Term Investments” appears under “Fund Investments.” If these investments are principal, please add appropriate disclosure to the strategy section and risk section in Item 4 and Item 9.
Response to Comment 19
The Fund notes that it does not intend for cash equivalents and short-term investments to be principal investments of the Fund. The prospectus has been revised to differentiate between types of investments that are principal and those that are additional and non-principal.
Comment 20 – Additional Information Regarding Fund Risks
The Staff notes that the “Emerging Markets Securities Risk” appears under the section entitled “Additional Information Regarding Fund Risks.” If emerging markets is a principal risk to the Fund, please revise Item 4 to include appropriate disclosure in the Principal Investment Strategies section and Principal Risks section with respect to Emerging Markets.
Response to Comment 20
The disclosure has been revised. Please refer to the Fund’s response to Comment No. 21.
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Comment 21 – Additional Information Regarding Fund Risks
Please consider whether Emerging Markets Risk and/or risk regarding index issues should be added to the prospectus. The Staff notes that the Fund has an investment strategy to track an index with significant exposure to non-US companies in emerging and frontier markets. Please provide disclosure with respect to the following risks (and any related risks) associated with this investment strategy or explain to the Staff why such disclosure would not be appropriate: 1) the potential for errors in index data, index computation, and/or index construction if information on non-U.S. companies is unreliable or outdated, or if less information about the non-U.S. companies is publicly available due to differences in regulatory, accounting, auditing and financial record keeping standards, 2) the potential significance of such errors on the Fund’s performance, 3) limitations on the Fund Advisor’s ability to oversee the Index Provider’s due diligence process over index data prior to its use in index computation, construction and/or rebalancing, and/or 4) the rights and remedies associated with investments in the Fund that tracks an index comprised of foreign securities may be different than a fund that tracks an index of domestic securities
Response to Comment 21
In accordance with the Staff’s comment, the Fund has added the following “Index Provider Risk” and “Emerging Markets Risk” to the “Principal Risks” section:
Index Provider Risk. The Fund seeks to achieve returns that generally correlate, before fees and expenses, to the performance of the Index, as published by their Index Provider. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, composed or calculated accurately. The composition of the Index is heavily dependent on information and data supplied by third parties over which the Adviser has no or limited ability to oversee. While the Index Provider gives descriptions of what the Index is designed to achieve, the Index Provider does not provide any warranty or accept any liability in relation to the quality, accuracy or completeness of data in its indices, and it does not guarantee that its Index will be in line with its methodology. Because of this, if the composition of the Index reflects any errors, the Fund’s portfolio can be expected to also reflect the errors. In addition, data and information on non-U.S. countries may be unreliable or outdated or there may be less publicly available data or information about non-U.S. countries due to differences in registration, accounting, audit and financial record keeping standards which creates the potential for errors in Index data, Index computation and/or Index construction and could have an adverse effect on the Fund’s performance.
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Emerging Markets Risk. Emerging market countries include, but are not limited to, those considered to be developing by the International Monetary Fund, the World Bank, the International Finance Corporation or one of the leading global investment banks. The majority of these countries are likely to be located in Asia, Latin America, the Middle East, Central and Eastern Europe, and Africa. Investments in emerging market issuers are subject to a greater risk of loss than investments in issuers located or operating in more developed markets. This is due to, among other things, the potential for greater market volatility, lower trading volume, higher levels of inflation, political and economic instability, greater risk of a market shutdown and more governmental limitations on foreign investments in emerging market countries than are typically found in more developed markets. Moreover, emerging markets often have less uniformity in accounting and reporting requirements, less reliable securities valuations and greater risks associated with custody of securities than developed markets. In addition, emerging markets often have greater risk of capital controls through such measures as taxes or interest rate control than developed markets. Certain emerging market countries may also lack the infrastructure necessary to attract large amounts of foreign trade and investment. Emerging market economies’ exposure to specific industries, such as tourism, and lack of efficient or sufficient health care systems, could make these economies especially vulnerable to global crises, including but not limited to, pandemics such as the global COVID-19 pandemic. In addition, the rights and remedies associated with investments in a fund that tracks an index comprised of foreign securities may be different than a fund that tracks an index of domestic securities.
Comment 22 – Additional Risks of Investing in the Fund
The Staff notes that “Security Issuer Risk” appears under the section entitled “Additional Risks of Investing in the Fund.” Please supplementally explain to the Staff why “Security Issuer Risk” is not a principal risk to the Fund.
Response to Comment 22
The disclosure has been revised to include “Security Issuer Risk” under the Principal Risk section.
Comment 23 – Exhibits
The Registrant should include index license or sub-license agreements to which the Fund is a party as an exhibit to the Registration Statement, as applicable, as such contract would be considered an other material contract pursuant to Item 28(h) of Form N-1A.
Response to Comment 23
The Fund respectfully declines to file the Index licensing agreement as an exhibit to the Registration Statement as it is an agreement between the Adviser and the Index Provider to which the Fund is not a party. However, the Fund will file the Index sub-licensing agreement between the Fund and the Adviser.
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Comment 24 – Exhibits
Given that financials are included in the Registration Statement, please include Exhibit J (Auditor’s Consent) as an Exhibit to the Registration Statement.
Response to Comment 24
The Fund confirms that the Independent Auditor’s consent will be included as an Exhibit to the Registration Statement.
Comment 25 – Exhibits
The Staff notes that the referenced Powers of Attorney are almost 8 years old. The Staff requests the Registrant provide updated Powers of Attorney.
Response to Comment 25
Pursuant to the Staff’s request, updated Powers of Attorney will be filed with the Registration Statement.
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Please call me at (312) 845-3484 if you have any questions or issues you would like to discuss regarding these matters.
Sincerely yours, | ||
Chapman and Cutler llp | ||
By: | /s/ Morrison C. Warren | |
Morrison C. Warren |
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