Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Granting Approval of a Proposed Rule Change Relating to the Listing and Trading of the Shares of the Calamos Focus Growth ETF of the Calamos ETF Trust, 35598-35602 [2014-14541]
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emcdonald on DSK67QTVN1PROD with NOTICES
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Federal Register / Vol. 79, No. 120 / Monday, June 23, 2014 / Notices
Fund in the securities of the Fund
exceeds the limit of section
12(d)(1)(A)(i) of the Act, setting forth
from whom the securities were
acquired, the identity of the
underwriting syndicate’s members, the
terms of the purchase, and the
information or materials upon which
the Board’s determinations were made.
9. Before investing in a Fund in
excess of the limits in section
12(d)(1)(A), an Investing Fund will
execute a FOF Participation Agreement
with the Fund stating that their
respective boards of directors or trustees
and their investment advisers, or
Trustee and Sponsor, as applicable,
understand the terms and conditions of
the order, and agree to fulfill their
responsibilities under the order. At the
time of its investment in Shares of a
Fund in excess of the limit in section
12(d)(1)(A)(i), an Investing Fund will
notify the Fund of the investment. At
such time, the Investing Fund will also
transmit to the Fund a list of the names
of each Investing Fund Affiliate and
Underwriting Affiliate. The Investing
Fund will notify the Fund of any
changes to the list as soon as reasonably
practicable after a change occurs. The
Fund and the Investing Fund will
maintain and preserve a copy of the
order, the FOF Participation Agreement,
and the list with any updated
information for the duration of the
investment and for a period of not less
than six years thereafter, the first two
years in an easily accessible place.
10. Before approving any advisory
contract under section 15 of the Act, the
board of directors or trustees of each
Investing Management Company,
including a majority of the independent
directors or trustees, will find that the
advisory fees charged under such
contract are based on services provided
that will be in addition to, rather than
duplicative of, the services provided
under the advisory contract(s) of any
Fund in which the Investing
Management Company may invest.
These findings and their basis will be
recorded fully in the minute books of
the appropriate Investing Management
Company.
11. Any sales charges and/or service
fees charged with respect to shares of an
Investing Fund will not exceed the
limits applicable to a fund of funds as
set forth in NASD Conduct Rule 2830.
12. No Fund relying on the section
12(d)(1) relief will acquire securities of
any investment company or company
relying on section 3(c)(1) or 3(c)(7) of
the Act in excess of the limits contained
in section 12(d)(1)(A) of the Act, except
to the extent permitted by exemptive
relief from the Commission permitting
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the Fund to purchase shares of other
investment companies for short-term
cash management purposes.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–14533 Filed 6–20–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold an Open Meeting
on Wednesday, June 25, 2014 at 10:00
a.m., in the Auditorium, Room L–002.
The subject matter of the Open
Meeting will be:
The Commission will consider
whether to adopt rules regarding the
Application of ‘‘Security-based Swap
Dealer’’ and ‘‘Major Security-based
Swap Participant’’ Definitions to CrossBorder Security-Based Swap Activities
under the Securities Exchange Act of
1934 and Title VII of the Dodd-Frank
Wall Street Reform and Consumer
Protection Act.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact:
The Office of the Secretary at (202)
551–5400.
Dated: June 18, 2014.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–14695 Filed 6–19–14; 4:15 pm]
BILLING CODE 8011–01–P
PO 00000
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72411; File No. SR–
NASDAQ–2014–040]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order
Granting Approval of a Proposed Rule
Change Relating to the Listing and
Trading of the Shares of the Calamos
Focus Growth ETF of the Calamos ETF
Trust
June 17, 2014.
I. Introduction
On April 21, 2014, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and
Rule 19b–4 thereunder,2 a proposed rule
change to list and trade the shares
(‘‘Shares’’) of the Calamos Focus Growth
ETF (‘‘Fund’’) under Nasdaq Rule 5735.
The proposed rule change was
published for comment in the Federal
Register on May 9, 2014.3 The
Commission received no comments on
the proposal. This order grants approval
of the proposed rule change.
II. Description of the Proposed Rule
Change
A. The Exchange’s Proposal
The Exchange proposes to list and
trade Shares of the Fund under Nasdaq
Rule 5735, which governs the listing
and trading of Managed Fund Shares on
the Exchange. The Shares will be
offered by Calamos ETF Trust (‘‘Trust’’),
which is registered with the
Commission as an investment
company.4 The Fund is a series of the
Trust.
Calamos Advisors LLC will be the
investment adviser (‘‘Adviser’’) to the
Fund. Foreside Fund Services, LLC will
be the principal underwriter and
distributor of the Fund’s Shares, and
State Street Bank and Trust will act as
the administrator, accounting agent,
custodian, and transfer agent to the
Fund.
1 15
U.S.C.78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 72096
(May 5, 2014), 79 FR 26789 (‘‘Notice’’).
4 The Trust has filed a registration statement on
Form N–1A (‘‘Registration Statement’’) with the
Commission. See Initial Registration Statement on
Form N–1A for the Trust, dated September 13, 2013
(File Nos. 333–191151 and 811–22887). In addition,
the Exchange states that the Trust has obtained
certain exemptive relief under the 1940. Act See
Investment Company Act Release No. 30653
(August 20, 2013) (File No. 812–14169)
(‘‘Exemptive Order’’).
2 17
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The Exchange represents that the
Adviser is not a broker-dealer, but is
affiliated with Calamos Financial
Services LLC, which is a broker-dealer.
The Exchange states that the Adviser
has implemented a fire wall with
respect to its broker dealer affiliate
regarding access to information
concerning the composition of or
changes to the portfolio.5 The Exchange
also represents that the Shares will be
subject to Nasdaq Rule 5735, which sets
forth the initial and continued listing
criteria applicable to Managed Fund
Shares, and that for initial and
continued listing, the Fund must be in
compliance with Rule 10A–3 under the
Act.6
B. The Exchange’s Description of the
Fund
The Exchange has made the following
additional representations and
statements in describing the Fund and
its investment strategy, including
portfolio holdings and investment
restrictions.
Principal Investments
emcdonald on DSK67QTVN1PROD with NOTICES
According to the Exchange, the
Fund’s primary investment objective is
to achieve long-term capital growth. The
Fund will pursue its objective by
investing primarily, i.e., at least 80% of
its assets under normal market
conditions,7 in U.S. exchange-listed
equity securities. Under normal market
conditions, the Fund will invest
primarily in companies with market
capitalization of greater than $1 billion
5 See Nasdaq Rule 5735(g). The Exchange states
that, in the event (a) the Adviser becomes newly
affiliated with a broker-dealer or registers as a
broker-dealer, or (b) any new adviser or sub-adviser
is a registered broker-dealer or becomes affiliated
with a broker-dealer, [the Adviser, or the relevant
adviser or sub-adviser,] will implement a fire wall
with respect to its relevant personnel and its brokerdealer affiliate, if applicable, regarding access to
information concerning the composition of or
changes to the portfolio and will be subject to
procedures designed to prevent the use and
dissemination of material non-public information
regarding the portfolio.
6 See 17 CFR 240.10A–3.
7 The term ‘‘under normal market conditions’’ as
used herein includes, but is not limited to, the
absence of adverse market, economic, political, or
other conditions, including extreme volatility or
trading halts in the securities markets or the
financial markets generally; operational issues
causing dissemination of inaccurate market
information; or force majeure type events such as
systems failure, natural or man-made disaster, act
of God, armed conflict, act of terrorism, riot or labor
disruption, or any similar intervening circumstance.
In periods of extreme market disturbance, the Fund
may take temporary defensive positions, by
overweighting its portfolio in cash or cash-like
instruments; however, to the extent possible, the
Adviser would continue to seek to achieve the
Fund’s investment objectives.
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that the Adviser believes offer the best
opportunities for growth.
When buying and selling growthoriented securities, the Adviser will
focus on the company’s growth
potential coupled with financial
strength and stability. When selecting
specific growth-oriented securities, the
Adviser will combine its top-down
macroeconomic views with individual
security selection based on qualitative
and quantitative research. The equity
securities held by the Fund may include
small- and mid-cap sized companies.
The Fund may invest in equity
securities issued by other registered
investment companies (including
money market funds).
The Fund may invest up to 25% of its
assets in foreign securities. The Fund’s
investment in such stocks may be in the
form of direct investments in non-U.S.
securities that are listed on non-U.S.
exchanges or in the form of American
Depositary Receipts (‘‘ADRs’’), Global
Depositary Receipts (‘‘GDRs’’), and
European Depositary Receipts (‘‘EDRs’’)
(collectively, ‘‘Depositary Receipts’’).8
With respect to its investments in
exchange-listed common stocks and
Depositary Receipts of non-U.S. issuers,
the Fund will generally invest in
securities that trade in markets that are
members of the Intermarket
Surveillance Group (‘‘ISG’’) or are
parties to a comprehensive surveillance
sharing agreement with the Exchange.
The Fund will generally invest in
sponsored Depositary Receipts that are
listed on ISG member exchanges and
that the Adviser deems as liquid at time
of purchase. In certain limited
circumstances, the Fund may invest in
unlisted or unsponsored Depositary
Receipts, Depositary Receipts listed on
non-ISG member exchanges, or
Depositary Receipts that the Adviser
deems illiquid at the time of purchase
or for which pricing information is not
readily available.9 The issuers of
8 Depositary Receipts are receipts, typically
issued by a bank or trust issuer, that evidence
ownership of underlying securities issued by a nonU.S. issuer. For ADRs, the depository is typically
a U.S. financial institution and the underlying
securities are issued by a non-U.S. issuer. For other
forms of Depositary Receipts, the depository may be
a non-U.S. or a U.S. entity, and the underlying
securities may be issued by a non-U.S. or a U.S.
issuer. Depositary Receipts are not necessarily
denominated in the same currency as their
underlying securities. Generally, ADRs, issued in
registered form, are designed for use in the U.S.
securities markets, and EDRs, issued in bearer form,
are designed for use in European securities markets.
GDRs are tradable both in the United States and in
Europe and are designed for use throughout the
world.
9 Not more than 10% of the net assets of the Fund,
in the aggregate, will be invested in (1) unlisted or
unsponsored Depositary Receipts; (2) Depositary
Receipts not listed on an exchange that is a member
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35599
unlisted or unsponsored Depositary
Receipts are not obligated to disclose
material information in the United
States. Therefore, there may be less
information available regarding such
issuers, and there may be no correlation
between available information and the
market value of the Depositary Receipts.
Other Investments
While the Fund under normal
circumstances will invest at least 80%
of its assets in exchange-listed equity
securities issued by U.S. companies, the
Fund may invest the remaining assets in
a variety of other securities and
investments in support of its primary
investment strategy, including, but not
limited to: Equity securities traded overthe-counter; 10 convertible securities;
synthetic convertible instruments; debt
securities (including high-yield fixedincome securities, loan participations
and assignments, inflation-indexed
bonds, municipal bonds, U.S.
Government obligations (including
stripped securities),11 and agency
mortgage-backed securities); repurchase
agreements; reverse repurchase
agreements; exchange-traded options on
exchange-traded securities, indexes, and
currencies; money market
instruments; 12 foreign currency forward
contracts; futures contracts on securities
indices and options on futures contracts
on securities indices; warrants; and
total-return swaps related to individual
exchange-traded securities or securities
indices. The Fund does not intend to
of the ISG or a party to a comprehensive
surveillance sharing agreement with the Exchange;
or (3) unlisted common stocks or common stocks
not listed on an exchange that is a member of the
ISG or a party to a comprehensive surveillance
sharing agreement with the Exchange.
10 See Notice, supra note 3, 79 FR at 26791
(noting that not more than 10% of the net assets of
the Fund, in the aggregate, will be invested in
certain Depositary Receipts or in unlisted common
stocks or common stocks not listed on an exchange
that is a member of the ISG or a party to a
comprehensive surveillance sharing agreement with
the Exchange).
11 The term ‘‘stripped security,’’ as used herein,
means a security that evidences ownership in either
the future interest payments or the future principal
payments on underlying U.S. Government,
mortgage, or other debt obligations. These securities
generally are structured to make a lump-sum
payment at maturity and do not make periodic
payments of principal or interest.
12 The term ‘‘money market instruments,’’ as used
herein, means: (i) Short-term obligations issued by
the U.S. Government; (ii) short-term negotiable
obligations of commercial banks, fixed time
deposits and bankers’ acceptances of U.S. and
foreign banks, and similar institutions; (iii)
commercial paper rated at the date of purchase
‘‘Prime-1’’ by Moody’s Investors Service, Inc., or
‘‘A–1+’’ or ‘‘A–1’’ by Standard & Poor’s, or, if
unrated, of comparable quality, as the Adviser of
the Fund determines; and (iv) money market
mutual funds.
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Federal Register / Vol. 79, No. 120 / Monday, June 23, 2014 / Notices
use these other investments to create a
leveraged return on the Fund’s portfolio.
emcdonald on DSK67QTVN1PROD with NOTICES
Investment Restrictions
The Fund may hold up to an aggregate
amount of 15% of its net assets in
illiquid securities or other illiquid assets
(calculated at the time of investment).
The Fund will monitor its portfolio
liquidity on an ongoing basis to
determine whether, in light of current
circumstances, an adequate level of
liquidity is being maintained and will
consider taking appropriate steps in
order to maintain adequate liquidity if,
through a change in values, net assets,
or other circumstances, more than 15%
of the Fund’s net assets are held in
illiquid assets. Illiquid assets include
securities subject to contractual or other
restrictions on resale and other
instruments that lack readily available
markets as determined in accordance
with Commission staff guidance.
The Fund may not invest more than
25% of the value of its total assets in
securities of issuers in any one industry
or group of industries. This restriction
does not apply to obligations issued or
guaranteed by the U.S. government, its
agencies or instrumentalities, or
securities of other registered investment
companies.
Additional information regarding the
Trust, Fund, and Shares, including
investment strategies and restrictions,
risks, creation and redemption
procedures, fees, portfolio holdings,
disclosure policies, distributions and
taxes, calculation of net asset value per
share (‘‘NAV’’), availability of
information, trading rules and halts, and
surveillance procedures, among other
things, can be found in the Notice,
Registration Statement, and Exemptive
Order, as applicable.13
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of
Section 6 of the Act; 14 and the rules and
regulations thereunder applicable to a
national securities exchange.15 In
particular, the Commission finds that
the proposed rule change is consistent
with the requirements of Section 6(b)(5)
of the Act,16 which requires, among
other things, that the Exchange’s rules
be designed to prevent fraudulent and
13 See Notice, supra note 3; see also Registration
Statement and Exemptive Order, supra note 4.
14 15 U.S.C. 78(f).
15 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
16 15 U.S.C. 78f(b)(5).
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manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The Commission notes
that the Fund and the Shares must
comply with the requirements of
Nasdaq Rule 5735 to be listed and
traded on the Exchange.
The Commission finds that the
proposal to list and trade the Shares on
the Exchange is consistent with Section
11A(a)(1)(C)(iii) of the Act,17 which sets
forth Congress’ finding that it is in the
public interest and appropriate for the
protection of investors and the
maintenance of fair and orderly markets
to assure the availability to brokers,
dealers, and investors of information
with respect to quotations for, and
transactions in, securities. Quotation
and last-sale information for the Shares
will be available via Nasdaq proprietary
quote and trade services and via the
Consolidated Tape Association plans for
the Shares. Similarly, quotation and
last-sale information for any underlying
exchange-traded products will also be
available via the quote and trade
services of their respective primary
exchanges, as well as in accordance
with the Unlisted Trading Privileges
and the Consolidated Tape Association
plans or through the Options Price
Reporting Authority, or equivalent
services related to futures, as
applicable.18 In addition, the Intraday
Indicative Value (as defined in Nasdaq
Rule 5735(c)(3))—which will be based
upon the current value of the
components of the Disclosed Portfolio
(as defined in Nasdaq Rule 5735(c)(2))—
will be available on the NASDAQ OMX
Information LLC proprietary index data
service 19 and will be updated and
widely disseminated and broadly
displayed at least every 15 seconds
during the Regular Market Session.20 On
each business day, before
commencement of trading in Shares in
the Regular Market Session on the
Exchange, the Fund will disclose on its
Web site the Disclosed Portfolio, which
will form the basis for the Fund’s
calculation of NAV at the end of the
17 15
U.S.C. 78k–1(a)(1)(C)(iii).
Notice, supra note 3, 79 FR at 26794.
19 According to the Exchange, the NASDAQ OMX
Global Index Data Service offers real-time updates,
daily summary messages, and access to widely
followed indexes and Intraday Indicative Values for
exchange-traded funds. See id. at 26793.
20 See id.
18 See
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business day.21 The NAV of the Fund
will be determined once each business
day, normally as of the close of trading
on the New York Stock Exchange
(normally 4:00 p.m. Eastern time).22
Information regarding market price and
volume of the Shares will be continually
available on a real-time basis throughout
the day on brokers’ computer screens
and other electronic services.23
Information regarding the previous
day’s closing price and trading volume
information for the Shares will be
published daily in the financial section
of newspapers.24 Intra-day, executable
price quotations for the securities and
other assets held by the Fund will be
available from major broker-dealer firms
21 On a daily basis, the Disclosed Portfolio will
include each portfolio security and other financial
instruments of the Fund with the following
information on the Fund’s Web site: (1) Ticker
symbol (if applicable); (2) name of security and
financial instrument; (3) number of shares (if
applicable); (4) dollar value of securities and
financial instruments held in the Fund; and (5)
percentage weighting of the security and financial
instrument in the Fund. The Web site information
will be publicly available at no charge. See id.
22 See id. at 26791. The Exchange notes that, for
purposes of calculating NAV, exchange-traded
equities; futures contracts on securities indices and
options on futures contracts on securities indices;
warrants; exchange-traded options on exchangetraded securities, indexes, or currencies; sponsored
or unsponsored Depositary Receipts; or other
exchange-traded securities will be valued at the
official closing price on their principal exchange or
board of trade, or, lacking any current reported sale
at the time of valuation, at the mean between the
most recent bid and asked quotations on its
principal exchange or board of trade. Portfolio
securities traded on more than one securities
exchange will be valued at the last sale price or
official closing price, as applicable, on the exchange
representing the principal market for the securities.
Equity securities traded over-the-counter,
convertible securities, synthetic convertible
instruments, debt securities (including high-yield
fixed-income securities, loan participations and
assignments, inflation-indexed bonds, municipal
bonds, U.S. Government obligations (including
stripped securities), and agency mortgage-backed
securities) will be valued at the mean between the
most recent bid and asked quotations received from
pricing services, but, if the most recent bid and
asked quotations are not available, these securities
will be valued in accordance with the Fund’s fair
valuation procedures. Repurchase agreements and
reverse repurchase agreements are valued at cost.
Money market instruments with maturities of less
than 60 days will be valued at amortized cost;
money market instruments with longer maturities
will be valued at the mid-point of the bid-ask
prices. Foreign currency forward contracts will be
valued in U.S. dollars using an exchange price
provided by a third party. Total-return swaps
related to individual exchange-traded securities or
securities indices will be valued at the mean
between bid and asked prices provided by a dealer
(which may be the counterparty). Investment
company shares will be valued at NAV, unless the
shares are exchange-traded, in which case they will
be valued at the last sale or official closing price
on the market on which they primarily trade. In
addition, expenses and fees, including the
management fees, will be accrued daily and taken
into account for purposes of determining NAV.
23 See id. at 26794.
24 See id.
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Federal Register / Vol. 79, No. 120 / Monday, June 23, 2014 / Notices
or on the exchange on which they are
traded, as applicable.25 Specifically,
intra-day price information on the
securities and other assets held by the
Fund will be available through
subscription or free services that can be
accessed by Authorized Participants and
other investors: (a) Pricing information
for exchange-traded equity securities;
investment company securities; futures
contracts on securities indices and
options on futures contracts on
securities indices; warrants; exchangetraded options on exchange-traded
securities, indexes, or currencies;
sponsored or unsponsored Depositary
Receipts; or other exchange-traded
securities will be publicly available
from the Web sites of the exchanges on
which they trade, on public financial
Web sites, and through subscription
services such as Bloomberg and
Thompson Reuters; (b) pricing
information regarding over-the-counter
equities (including Depositary Receipts
and certain investment company
securities); convertible securities;
synthetic convertible instruments; debt
securities (including high-yield fixedincome securities, loan participations
and assignments, inflation-indexed
bonds, municipal bonds, U.S.
Government obligations (including
stripped securities), and agency
mortgage-backed securities); repurchase
agreements; reverse repurchase
agreements; money market instruments;
and foreign currency forward contracts
will be available through subscription
services such as Markit, Bloomberg, and
Thompson Reuters; and (c) pricing
information on the reference index or
security underlying total-return swaps
will be available on Bloomberg.26 In
addition, a basket composition file,
which includes the security names,
amounts, and share quantities, as
applicable, required to be delivered in
exchange for the Fund’s Shares, together
with estimates and actual cash
components, will be publicly
disseminated daily prior to the opening
of Nasdaq via the National Securities
Clearing Corporation. The basket will
represent one ‘‘Creation Unit’’ of the
Fund. The Fund’s Web site will include
a form of the prospectus for the Fund
and additional data relating to NAV and
other applicable quantitative
information.27
The Commission further believes that
the proposal to list and trade the Shares
is reasonably designed to promote fair
disclosure of information that may be
necessary to price the Shares
25 See
id. at 26793.
id. at 26794.
27 See id. at 26793.
26 See
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appropriately and to prevent trading
when a reasonable degree of
transparency cannot be assured. The
Commission notes that the Exchange
will obtain a representation from the
issuer of the Shares that the NAV will
be calculated daily and that the NAV
and the Disclosed Portfolio will be made
available to all market participants at
the same time.28 Further, trading in the
Shares will be subject to Nasdaq
5735(d)(2)(D), which sets forth
circumstances under which trading in
the Shares may be halted.29 The
Exchange also may halt trading in the
Shares if trading is not occurring in the
securities or the financial instruments
constituting the Disclosed Portfolio or if
other unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market are present.30 Further, the
Commission notes that the Reporting
Authority that provides the Disclosed
Portfolio must implement and maintain,
or be subject to, procedures designed to
prevent the use and dissemination of
material, non-public information
regarding the actual components of the
portfolio.31 The Exchange states that it
has a general policy prohibiting the
distribution of material, non-public
information by its employees.32 The
Exchange also states that the Adviser is
not a broker-dealer but is affiliated with
a broker-dealer and that the Adviser has
implemented a fire wall with respect to
its broker-dealer affiliate regarding
access to information concerning the
composition or changes to the
portfolio.33 The Financial Industry
28 See
id. at 26794.
id.
30 See id. See also Nasdaq Rule 5735(d)(2)(C)
(providing additional considerations for the
suspension of trading in or removal from listing of
Managed Fund Shares on the Exchange). With
respect to trading halts, the Exchange may consider
all relevant factors in exercising its discretion to
halt or suspend trading in the Shares of the Fund.
Nasdaq will halt or pause trading in the Shares
under the conditions specified in Nasdaq Rules
4120 and 4121, including the trading pauses under
Nasdaq Rules 4120(a)(11) and (12). Trading also
may be halted because of market conditions or for
reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. See Notice, supra
note 3, 79 FR at 26794.
31 See Nasdaq Rule 5735(d)(2)(B)(ii).
32 See Notice, supra note 3, 79 FR at 26795.
33 See supra note 5 and accompanying text. The
Exchange further represents that an investment
adviser to an open-end fund is required to be
registered under the Investment Advisers Act of
1940 (‘‘Advisers Act’’). As a result, the Adviser and
its related personnel are subject to the provisions
of Rule 204A–1 under the Advisers Act relating to
codes of ethics. This Rule requires investment
advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as
well as compliance with applicable federal
securities laws as defined in Rule 204A–1(e)(4).
Accordingly, procedures designed to prevent the
29 See
PO 00000
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Fmt 4703
Sfmt 4703
35601
Regulatory Authority (‘‘FINRA’’), on
behalf of the Exchange, will
communicate as needed regarding
trading in the Shares; exchange-traded
equities; futures contracts on securities
indices and options on futures contracts
on securities indices; warrants;
exchange-traded options on exchangetraded securities, indexes, or currencies;
exchange-listed investment companies;
or other exchange-traded securities with
other markets and other entities that are
ISG members, and FINRA, on behalf of
the Exchange, may obtain trading
information regarding trading in the
Shares; exchange-traded equities;
futures contracts on securities indices
and options on futures contracts on
securities indices; warrants; exchangetraded options on exchange-traded
securities, indexes, or currencies;
exchange-listed investment companies;
or other exchange-traded securities from
such markets and other entities. In
addition, the Exchange may obtain
information regarding trading in the
Shares; exchange-traded equities;
futures contracts on securities indices
and options on futures contracts on
securities indices; warrants; exchangetraded options on exchange-traded
securities, indexes, or currencies;
exchange-listed investment companies;
or other exchange-traded securities from
markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.34
FINRA, on behalf of the Exchange, also
is able to access, as needed, trade
information for certain fixed income
securities held by the Fund reported to
FINRA’s Trade Reporting and
Compliance Engine.
In support of this proposal, the
Exchange has made representations,
including:
(1) The Exchange deems the Shares to
be equity securities, thus rendering
trading in the Shares subject to the
communication and misuse of nonpublic
information by an investment adviser must be
consistent with Rule 204A–1 under the Advisers
Act. In addition, Rule 206(4)-7 under the Advisers
Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such
investment adviser has (i) adopted and
implemented written policies and procedures
reasonably designed to prevent violation, by the
investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted
thereunder; (ii) implemented, at a minimum, an
annual review regarding the adequacy of the
policies and procedures established pursuant to
subparagraph (i) above and the effectiveness of their
implementation; and (iii) designated an individual
(who is a supervised person) responsible for
administering the policies and procedures adopted
under subparagraph (i) above.
34 For a list of the current members of ISG, see
www.isgportal.org.
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emcdonald on DSK67QTVN1PROD with NOTICES
35602
Federal Register / Vol. 79, No. 120 / Monday, June 23, 2014 / Notices
Exchange’s existing rules governing the
trading of equity securities.
(2) The Shares will be subject to Rule
5735, which sets forth the initial and
continued listing criteria applicable to
Managed Fund Shares.
(3) The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions.
(4) Prior to the commencement of
trading, the Exchange will inform its
members in an Information Circular of
the special characteristics and risks
associated with trading the Shares.
Specifically, the Information Circular
will discuss the following: (a) The
procedures for purchases and
redemptions of Shares in Creation Units
(and that Shares are not individually
redeemable); (b) Nasdaq Rule 2111A,
which imposes suitability obligations on
Nasdaq members with respect to
recommending transactions in the
Shares to customers; (c) how
information regarding the Intraday
Indicative Value is disseminated; (d) the
risks involved in trading the Shares
during the Pre-Market and Post-Market
Sessions when an updated Intraday
Indicative Value will not be calculated
or publicly disseminated; (e) the
requirement that members deliver a
prospectus to investors purchasing
newly issued Shares prior to or
concurrently with the confirmation of a
transaction; and (f) trading information.
(5) Trading in the Shares will be
subject to the existing trading
surveillances, administered by both
Nasdaq and FINRA,35 on behalf of the
Exchange, which are designed to detect
violations of Exchange rules and
applicable federal securities laws, and
these procedures are adequate to
properly monitor Exchange trading of
the Shares in all trading sessions and to
deter and detect violations of Exchange
rules and applicable federal securities
laws.
(6) Not more than 10% of the net
assets of the Fund, in the aggregate, will
be invested in: (a) Unlisted or
unsponsored Depositary Receipts; (b)
Depositary Receipts not listed on an
exchange that is not a member of ISG or
a party to a comprehensive surveillance
sharing agreement with the Exchange; or
(c) unlisted common stocks or common
stocks not listed on an exchange that is
a member of the ISG or a party to a
comprehensive surveillance sharing
agreement with the Exchange. In
addition, all futures and options held by
the Fund will be listed on an exchange
35 According to the Exchange, FINRA surveils
trading on the Exchange pursuant to a regulatory
services agreement. The Exchange is responsible for
FINRA’s performance under this regulatory services
agreement. See Notice, supra note 3 at 26794.
VerDate Mar<15>2010
17:33 Jun 20, 2014
Jkt 232001
that is a member of the ISG or a party
to a comprehensive surveillance sharing
agreement with the Exchange.
(7) For initial and continued listing,
the Fund must be in compliance with
Rule 10A–3 under the Exchange Act.36
(8) A minimum of 100,000 Shares will
be outstanding at the commencement of
trading on the Exchange.
(9) The Fund will invest at least 80%
of its assets under normal market
conditions in U.S. exchange-listed
equity securities. The Fund will invest
primarily in companies with market
capitalization of greater than $1 billion
that the Adviser believes offer the best
opportunities for growth. The Fund may
invest up to 25% of its assets in foreign
securities.
(10) The Fund may hold up to an
aggregate amount of 15% of its net
assets in illiquid assets (calculated at
the time of investment); will monitor its
portfolio liquidity on an ongoing basis
to determine whether, in light of current
circumstances, an adequate level of
liquidity is being maintained; and will
consider taking appropriate steps in
order to maintain adequate liquidity if,
through a change in values, net assets,
or other circumstances, more than 15%
of the Fund’s net assets are held in
illiquid assets.
(11) The Fund does not intend to use
its other investments to create a
leveraged return on the Fund’s portfolio.
(12) The Fund’s investments will be
consistent with the Fund’s investment
objective.
This approval order is based on all of
the Exchange’s representations and
description of the Fund, including those
set forth above and in the Notice.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,37 that the
proposed rule change (SR–NASDAQ–
2014–040), be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.38
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–14541 Filed 6–20–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72407; File No. SR–
NASDAQ–2014–064]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Relating to
Exercise Limits
June 17, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 11,
2014, The NASDAQ Stock Market LLC
(‘‘NASDAQ’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II, below, which Items
have been prepared by NASDAQ. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASDAQ proposes to correct rule text
related to a NASDAQ Options Market
(‘‘NOM’’) Rule at Chapter III, Section 9,
pertaining to Exercise Limits.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
www.nasdaq.cchwallstreet.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend an error in rule text
36 17
CFR 240.10A–3.
U.S.C. 78s(b)(2).
38 17 CFR 200.30–3(a)(12).
37 15
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1 15
2 17
E:\FR\FM\23JNN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
23JNN1
]]>Agencies
[Federal Register Volume 79, Number 120 (Monday, June 23, 2014)]
[Notices]
[Pages 35598-35602]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-14541]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72411; File No. SR-NASDAQ-2014-040]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Granting Approval of a Proposed Rule Change Relating to the Listing and
Trading of the Shares of the Calamos Focus Growth ETF of the Calamos
ETF Trust
June 17, 2014.
I. Introduction
On April 21, 2014, The NASDAQ Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to list and trade the shares
(``Shares'') of the Calamos Focus Growth ETF (``Fund'') under Nasdaq
Rule 5735. The proposed rule change was published for comment in the
Federal Register on May 9, 2014.\3\ The Commission received no comments
on the proposal. This order grants approval of the proposed rule
change.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 72096 (May 5, 2014),
79 FR 26789 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
A. The Exchange's Proposal
The Exchange proposes to list and trade Shares of the Fund under
Nasdaq Rule 5735, which governs the listing and trading of Managed Fund
Shares on the Exchange. The Shares will be offered by Calamos ETF Trust
(``Trust''), which is registered with the Commission as an investment
company.\4\ The Fund is a series of the Trust.
---------------------------------------------------------------------------
\4\ The Trust has filed a registration statement on Form N-1A
(``Registration Statement'') with the Commission. See Initial
Registration Statement on Form N-1A for the Trust, dated September
13, 2013 (File Nos. 333-191151 and 811-22887). In addition, the
Exchange states that the Trust has obtained certain exemptive relief
under the 1940. Act See Investment Company Act Release No. 30653
(August 20, 2013) (File No. 812-14169) (``Exemptive Order'').
---------------------------------------------------------------------------
Calamos Advisors LLC will be the investment adviser (``Adviser'')
to the Fund. Foreside Fund Services, LLC will be the principal
underwriter and distributor of the Fund's Shares, and State Street Bank
and Trust will act as the administrator, accounting agent, custodian,
and transfer agent to the Fund.
[[Page 35599]]
The Exchange represents that the Adviser is not a broker-dealer,
but is affiliated with Calamos Financial Services LLC, which is a
broker-dealer. The Exchange states that the Adviser has implemented a
fire wall with respect to its broker dealer affiliate regarding access
to information concerning the composition of or changes to the
portfolio.\5\ The Exchange also represents that the Shares will be
subject to Nasdaq Rule 5735, which sets forth the initial and continued
listing criteria applicable to Managed Fund Shares, and that for
initial and continued listing, the Fund must be in compliance with Rule
10A-3 under the Act.\6\
---------------------------------------------------------------------------
\5\ See Nasdaq Rule 5735(g). The Exchange states that, in the
event (a) the Adviser becomes newly affiliated with a broker-dealer
or registers as a broker-dealer, or (b) any new adviser or sub-
adviser is a registered broker-dealer or becomes affiliated with a
broker-dealer, [the Adviser, or the relevant adviser or sub-
adviser,] will implement a fire wall with respect to its relevant
personnel and its broker-dealer affiliate, if applicable, regarding
access to information concerning the composition of or changes to
the portfolio and will be subject to procedures designed to prevent
the use and dissemination of material non-public information
regarding the portfolio.
\6\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------
B. The Exchange's Description of the Fund
The Exchange has made the following additional representations and
statements in describing the Fund and its investment strategy,
including portfolio holdings and investment restrictions.
Principal Investments
According to the Exchange, the Fund's primary investment objective
is to achieve long-term capital growth. The Fund will pursue its
objective by investing primarily, i.e., at least 80% of its assets
under normal market conditions,\7\ in U.S. exchange-listed equity
securities. Under normal market conditions, the Fund will invest
primarily in companies with market capitalization of greater than $1
billion that the Adviser believes offer the best opportunities for
growth.
---------------------------------------------------------------------------
\7\ The term ``under normal market conditions'' as used herein
includes, but is not limited to, the absence of adverse market,
economic, political, or other conditions, including extreme
volatility or trading halts in the securities markets or the
financial markets generally; operational issues causing
dissemination of inaccurate market information; or force majeure
type events such as systems failure, natural or man-made disaster,
act of God, armed conflict, act of terrorism, riot or labor
disruption, or any similar intervening circumstance. In periods of
extreme market disturbance, the Fund may take temporary defensive
positions, by overweighting its portfolio in cash or cash-like
instruments; however, to the extent possible, the Adviser would
continue to seek to achieve the Fund's investment objectives.
---------------------------------------------------------------------------
When buying and selling growth-oriented securities, the Adviser
will focus on the company's growth potential coupled with financial
strength and stability. When selecting specific growth-oriented
securities, the Adviser will combine its top-down macroeconomic views
with individual security selection based on qualitative and
quantitative research. The equity securities held by the Fund may
include small- and mid-cap sized companies. The Fund may invest in
equity securities issued by other registered investment companies
(including money market funds).
The Fund may invest up to 25% of its assets in foreign securities.
The Fund's investment in such stocks may be in the form of direct
investments in non-U.S. securities that are listed on non-U.S.
exchanges or in the form of American Depositary Receipts (``ADRs''),
Global Depositary Receipts (``GDRs''), and European Depositary Receipts
(``EDRs'') (collectively, ``Depositary Receipts'').\8\ With respect to
its investments in exchange-listed common stocks and Depositary
Receipts of non-U.S. issuers, the Fund will generally invest in
securities that trade in markets that are members of the Intermarket
Surveillance Group (``ISG'') or are parties to a comprehensive
surveillance sharing agreement with the Exchange.
---------------------------------------------------------------------------
\8\ Depositary Receipts are receipts, typically issued by a bank
or trust issuer, that evidence ownership of underlying securities
issued by a non-U.S. issuer. For ADRs, the depository is typically a
U.S. financial institution and the underlying securities are issued
by a non-U.S. issuer. For other forms of Depositary Receipts, the
depository may be a non-U.S. or a U.S. entity, and the underlying
securities may be issued by a non-U.S. or a U.S. issuer. Depositary
Receipts are not necessarily denominated in the same currency as
their underlying securities. Generally, ADRs, issued in registered
form, are designed for use in the U.S. securities markets, and EDRs,
issued in bearer form, are designed for use in European securities
markets. GDRs are tradable both in the United States and in Europe
and are designed for use throughout the world.
---------------------------------------------------------------------------
The Fund will generally invest in sponsored Depositary Receipts
that are listed on ISG member exchanges and that the Adviser deems as
liquid at time of purchase. In certain limited circumstances, the Fund
may invest in unlisted or unsponsored Depositary Receipts, Depositary
Receipts listed on non-ISG member exchanges, or Depositary Receipts
that the Adviser deems illiquid at the time of purchase or for which
pricing information is not readily available.\9\ The issuers of
unlisted or unsponsored Depositary Receipts are not obligated to
disclose material information in the United States. Therefore, there
may be less information available regarding such issuers, and there may
be no correlation between available information and the market value of
the Depositary Receipts.
---------------------------------------------------------------------------
\9\ Not more than 10% of the net assets of the Fund, in the
aggregate, will be invested in (1) unlisted or unsponsored
Depositary Receipts; (2) Depositary Receipts not listed on an
exchange that is a member of the ISG or a party to a comprehensive
surveillance sharing agreement with the Exchange; or (3) unlisted
common stocks or common stocks not listed on an exchange that is a
member of the ISG or a party to a comprehensive surveillance sharing
agreement with the Exchange.
---------------------------------------------------------------------------
Other Investments
While the Fund under normal circumstances will invest at least 80%
of its assets in exchange-listed equity securities issued by U.S.
companies, the Fund may invest the remaining assets in a variety of
other securities and investments in support of its primary investment
strategy, including, but not limited to: Equity securities traded over-
the-counter; \10\ convertible securities; synthetic convertible
instruments; debt securities (including high-yield fixed-income
securities, loan participations and assignments, inflation-indexed
bonds, municipal bonds, U.S. Government obligations (including stripped
securities),\11\ and agency mortgage-backed securities); repurchase
agreements; reverse repurchase agreements; exchange-traded options on
exchange-traded securities, indexes, and currencies; money market
instruments; \12\ foreign currency forward contracts; futures contracts
on securities indices and options on futures contracts on securities
indices; warrants; and total-return swaps related to individual
exchange-traded securities or securities indices. The Fund does not
intend to
[[Page 35600]]
use these other investments to create a leveraged return on the Fund's
portfolio.
---------------------------------------------------------------------------
\10\ See Notice, supra note 3, 79 FR at 26791 (noting that not
more than 10% of the net assets of the Fund, in the aggregate, will
be invested in certain Depositary Receipts or in unlisted common
stocks or common stocks not listed on an exchange that is a member
of the ISG or a party to a comprehensive surveillance sharing
agreement with the Exchange).
\11\ The term ``stripped security,'' as used herein, means a
security that evidences ownership in either the future interest
payments or the future principal payments on underlying U.S.
Government, mortgage, or other debt obligations. These securities
generally are structured to make a lump-sum payment at maturity and
do not make periodic payments of principal or interest.
\12\ The term ``money market instruments,'' as used herein,
means: (i) Short-term obligations issued by the U.S. Government;
(ii) short-term negotiable obligations of commercial banks, fixed
time deposits and bankers' acceptances of U.S. and foreign banks,
and similar institutions; (iii) commercial paper rated at the date
of purchase ``Prime-1'' by Moody's Investors Service, Inc., or ``A-
1+'' or ``A-1'' by Standard & Poor's, or, if unrated, of comparable
quality, as the Adviser of the Fund determines; and (iv) money
market mutual funds.
---------------------------------------------------------------------------
Investment Restrictions
The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities or other illiquid assets (calculated at
the time of investment). The Fund will monitor its portfolio liquidity
on an ongoing basis to determine whether, in light of current
circumstances, an adequate level of liquidity is being maintained and
will consider taking appropriate steps in order to maintain adequate
liquidity if, through a change in values, net assets, or other
circumstances, more than 15% of the Fund's net assets are held in
illiquid assets. Illiquid assets include securities subject to
contractual or other restrictions on resale and other instruments that
lack readily available markets as determined in accordance with
Commission staff guidance.
The Fund may not invest more than 25% of the value of its total
assets in securities of issuers in any one industry or group of
industries. This restriction does not apply to obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities,
or securities of other registered investment companies.
Additional information regarding the Trust, Fund, and Shares,
including investment strategies and restrictions, risks, creation and
redemption procedures, fees, portfolio holdings, disclosure policies,
distributions and taxes, calculation of net asset value per share
(``NAV''), availability of information, trading rules and halts, and
surveillance procedures, among other things, can be found in the
Notice, Registration Statement, and Exemptive Order, as applicable.\13\
---------------------------------------------------------------------------
\13\ See Notice, supra note 3; see also Registration Statement
and Exemptive Order, supra note 4.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of Section 6 of the Act;
\14\ and the rules and regulations thereunder applicable to a national
securities exchange.\15\ In particular, the Commission finds that the
proposed rule change is consistent with the requirements of Section
6(b)(5) of the Act,\16\ which requires, among other things, that the
Exchange's rules be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to foster cooperation and coordination with persons engaged in
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
The Commission notes that the Fund and the Shares must comply with the
requirements of Nasdaq Rule 5735 to be listed and traded on the
Exchange.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78(f).
\15\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Act,\17\ which sets forth Congress' finding that it is in the public
interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for, and transactions in, securities. Quotation and last-
sale information for the Shares will be available via Nasdaq
proprietary quote and trade services and via the Consolidated Tape
Association plans for the Shares. Similarly, quotation and last-sale
information for any underlying exchange-traded products will also be
available via the quote and trade services of their respective primary
exchanges, as well as in accordance with the Unlisted Trading
Privileges and the Consolidated Tape Association plans or through the
Options Price Reporting Authority, or equivalent services related to
futures, as applicable.\18\ In addition, the Intraday Indicative Value
(as defined in Nasdaq Rule 5735(c)(3))--which will be based upon the
current value of the components of the Disclosed Portfolio (as defined
in Nasdaq Rule 5735(c)(2))--will be available on the NASDAQ OMX
Information LLC proprietary index data service \19\ and will be updated
and widely disseminated and broadly displayed at least every 15 seconds
during the Regular Market Session.\20\ On each business day, before
commencement of trading in Shares in the Regular Market Session on the
Exchange, the Fund will disclose on its Web site the Disclosed
Portfolio, which will form the basis for the Fund's calculation of NAV
at the end of the business day.\21\ The NAV of the Fund will be
determined once each business day, normally as of the close of trading
on the New York Stock Exchange (normally 4:00 p.m. Eastern time).\22\
Information regarding market price and volume of the Shares will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services.\23\
Information regarding the previous day's closing price and trading
volume information for the Shares will be published daily in the
financial section of newspapers.\24\ Intra-day, executable price
quotations for the securities and other assets held by the Fund will be
available from major broker-dealer firms
[[Page 35601]]
or on the exchange on which they are traded, as applicable.\25\
Specifically, intra-day price information on the securities and other
assets held by the Fund will be available through subscription or free
services that can be accessed by Authorized Participants and other
investors: (a) Pricing information for exchange-traded equity
securities; investment company securities; futures contracts on
securities indices and options on futures contracts on securities
indices; warrants; exchange-traded options on exchange-traded
securities, indexes, or currencies; sponsored or unsponsored Depositary
Receipts; or other exchange-traded securities will be publicly
available from the Web sites of the exchanges on which they trade, on
public financial Web sites, and through subscription services such as
Bloomberg and Thompson Reuters; (b) pricing information regarding over-
the-counter equities (including Depositary Receipts and certain
investment company securities); convertible securities; synthetic
convertible instruments; debt securities (including high-yield fixed-
income securities, loan participations and assignments, inflation-
indexed bonds, municipal bonds, U.S. Government obligations (including
stripped securities), and agency mortgage-backed securities);
repurchase agreements; reverse repurchase agreements; money market
instruments; and foreign currency forward contracts will be available
through subscription services such as Markit, Bloomberg, and Thompson
Reuters; and (c) pricing information on the reference index or security
underlying total-return swaps will be available on Bloomberg.\26\ In
addition, a basket composition file, which includes the security names,
amounts, and share quantities, as applicable, required to be delivered
in exchange for the Fund's Shares, together with estimates and actual
cash components, will be publicly disseminated daily prior to the
opening of Nasdaq via the National Securities Clearing Corporation. The
basket will represent one ``Creation Unit'' of the Fund. The Fund's Web
site will include a form of the prospectus for the Fund and additional
data relating to NAV and other applicable quantitative information.\27\
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\18\ See Notice, supra note 3, 79 FR at 26794.
\19\ According to the Exchange, the NASDAQ OMX Global Index Data
Service offers real-time updates, daily summary messages, and access
to widely followed indexes and Intraday Indicative Values for
exchange-traded funds. See id. at 26793.
\20\ See id.
\21\ On a daily basis, the Disclosed Portfolio will include each
portfolio security and other financial instruments of the Fund with
the following information on the Fund's Web site: (1) Ticker symbol
(if applicable); (2) name of security and financial instrument; (3)
number of shares (if applicable); (4) dollar value of securities and
financial instruments held in the Fund; and (5) percentage weighting
of the security and financial instrument in the Fund. The Web site
information will be publicly available at no charge. See id.
\22\ See id. at 26791. The Exchange notes that, for purposes of
calculating NAV, exchange-traded equities; futures contracts on
securities indices and options on futures contracts on securities
indices; warrants; exchange-traded options on exchange-traded
securities, indexes, or currencies; sponsored or unsponsored
Depositary Receipts; or other exchange-traded securities will be
valued at the official closing price on their principal exchange or
board of trade, or, lacking any current reported sale at the time of
valuation, at the mean between the most recent bid and asked
quotations on its principal exchange or board of trade. Portfolio
securities traded on more than one securities exchange will be
valued at the last sale price or official closing price, as
applicable, on the exchange representing the principal market for
the securities. Equity securities traded over-the-counter,
convertible securities, synthetic convertible instruments, debt
securities (including high-yield fixed-income securities, loan
participations and assignments, inflation-indexed bonds, municipal
bonds, U.S. Government obligations (including stripped securities),
and agency mortgage-backed securities) will be valued at the mean
between the most recent bid and asked quotations received from
pricing services, but, if the most recent bid and asked quotations
are not available, these securities will be valued in accordance
with the Fund's fair valuation procedures. Repurchase agreements and
reverse repurchase agreements are valued at cost. Money market
instruments with maturities of less than 60 days will be valued at
amortized cost; money market instruments with longer maturities will
be valued at the mid-point of the bid-ask prices. Foreign currency
forward contracts will be valued in U.S. dollars using an exchange
price provided by a third party. Total-return swaps related to
individual exchange-traded securities or securities indices will be
valued at the mean between bid and asked prices provided by a dealer
(which may be the counterparty). Investment company shares will be
valued at NAV, unless the shares are exchange-traded, in which case
they will be valued at the last sale or official closing price on
the market on which they primarily trade. In addition, expenses and
fees, including the management fees, will be accrued daily and taken
into account for purposes of determining NAV.
\23\ See id. at 26794.
\24\ See id.
\25\ See id. at 26793.
\26\ See id. at 26794.
\27\ See id. at 26793.
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The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Commission notes that the Exchange will obtain a
representation from the issuer of the Shares that the NAV will be
calculated daily and that the NAV and the Disclosed Portfolio will be
made available to all market participants at the same time.\28\
Further, trading in the Shares will be subject to Nasdaq 5735(d)(2)(D),
which sets forth circumstances under which trading in the Shares may be
halted.\29\ The Exchange also may halt trading in the Shares if trading
is not occurring in the securities or the financial instruments
constituting the Disclosed Portfolio or if other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present.\30\ Further, the Commission notes that the
Reporting Authority that provides the Disclosed Portfolio must
implement and maintain, or be subject to, procedures designed to
prevent the use and dissemination of material, non-public information
regarding the actual components of the portfolio.\31\ The Exchange
states that it has a general policy prohibiting the distribution of
material, non-public information by its employees.\32\ The Exchange
also states that the Adviser is not a broker-dealer but is affiliated
with a broker-dealer and that the Adviser has implemented a fire wall
with respect to its broker-dealer affiliate regarding access to
information concerning the composition or changes to the portfolio.\33\
The Financial Industry Regulatory Authority (``FINRA''), on behalf of
the Exchange, will communicate as needed regarding trading in the
Shares; exchange-traded equities; futures contracts on securities
indices and options on futures contracts on securities indices;
warrants; exchange-traded options on exchange-traded securities,
indexes, or currencies; exchange-listed investment companies; or other
exchange-traded securities with other markets and other entities that
are ISG members, and FINRA, on behalf of the Exchange, may obtain
trading information regarding trading in the Shares; exchange-traded
equities; futures contracts on securities indices and options on
futures contracts on securities indices; warrants; exchange-traded
options on exchange-traded securities, indexes, or currencies;
exchange-listed investment companies; or other exchange-traded
securities from such markets and other entities. In addition, the
Exchange may obtain information regarding trading in the Shares;
exchange-traded equities; futures contracts on securities indices and
options on futures contracts on securities indices; warrants; exchange-
traded options on exchange-traded securities, indexes, or currencies;
exchange-listed investment companies; or other exchange-traded
securities from markets and other entities that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement.\34\ FINRA, on behalf of the Exchange, also is able
to access, as needed, trade information for certain fixed income
securities held by the Fund reported to FINRA's Trade Reporting and
Compliance Engine.
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\28\ See id. at 26794.
\29\ See id.
\30\ See id. See also Nasdaq Rule 5735(d)(2)(C) (providing
additional considerations for the suspension of trading in or
removal from listing of Managed Fund Shares on the Exchange). With
respect to trading halts, the Exchange may consider all relevant
factors in exercising its discretion to halt or suspend trading in
the Shares of the Fund. Nasdaq will halt or pause trading in the
Shares under the conditions specified in Nasdaq Rules 4120 and 4121,
including the trading pauses under Nasdaq Rules 4120(a)(11) and
(12). Trading also may be halted because of market conditions or for
reasons that, in the view of the Exchange, make trading in the
Shares inadvisable. See Notice, supra note 3, 79 FR at 26794.
\31\ See Nasdaq Rule 5735(d)(2)(B)(ii).
\32\ See Notice, supra note 3, 79 FR at 26795.
\33\ See supra note 5 and accompanying text. The Exchange
further represents that an investment adviser to an open-end fund is
required to be registered under the Investment Advisers Act of 1940
(``Advisers Act''). As a result, the Adviser and its related
personnel are subject to the provisions of Rule 204A-1 under the
Advisers Act relating to codes of ethics. This Rule requires
investment advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as well as
compliance with applicable federal securities laws as defined in
Rule 204A-1(e)(4). Accordingly, procedures designed to prevent the
communication and misuse of nonpublic information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless such investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violation, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
\34\ For a list of the current members of ISG, see
www.isgportal.org.
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In support of this proposal, the Exchange has made representations,
including:
(1) The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the
[[Page 35602]]
Exchange's existing rules governing the trading of equity securities.
(2) The Shares will be subject to Rule 5735, which sets forth the
initial and continued listing criteria applicable to Managed Fund
Shares.
(3) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(4) Prior to the commencement of trading, the Exchange will inform
its members in an Information Circular of the special characteristics
and risks associated with trading the Shares. Specifically, the
Information Circular will discuss the following: (a) The procedures for
purchases and redemptions of Shares in Creation Units (and that Shares
are not individually redeemable); (b) Nasdaq Rule 2111A, which imposes
suitability obligations on Nasdaq members with respect to recommending
transactions in the Shares to customers; (c) how information regarding
the Intraday Indicative Value is disseminated; (d) the risks involved
in trading the Shares during the Pre-Market and Post-Market Sessions
when an updated Intraday Indicative Value will not be calculated or
publicly disseminated; (e) the requirement that members deliver a
prospectus to investors purchasing newly issued Shares prior to or
concurrently with the confirmation of a transaction; and (f) trading
information.
(5) Trading in the Shares will be subject to the existing trading
surveillances, administered by both Nasdaq and FINRA,\35\ on behalf of
the Exchange, which are designed to detect violations of Exchange rules
and applicable federal securities laws, and these procedures are
adequate to properly monitor Exchange trading of the Shares in all
trading sessions and to deter and detect violations of Exchange rules
and applicable federal securities laws.
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\35\ According to the Exchange, FINRA surveils trading on the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement. See Notice, supra note 3 at 26794.
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(6) Not more than 10% of the net assets of the Fund, in the
aggregate, will be invested in: (a) Unlisted or unsponsored Depositary
Receipts; (b) Depositary Receipts not listed on an exchange that is not
a member of ISG or a party to a comprehensive surveillance sharing
agreement with the Exchange; or (c) unlisted common stocks or common
stocks not listed on an exchange that is a member of the ISG or a party
to a comprehensive surveillance sharing agreement with the Exchange. In
addition, all futures and options held by the Fund will be listed on an
exchange that is a member of the ISG or a party to a comprehensive
surveillance sharing agreement with the Exchange.
(7) For initial and continued listing, the Fund must be in
compliance with Rule 10A-3 under the Exchange Act.\36\
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\36\ 17 CFR 240.10A-3.
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(8) A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange.
(9) The Fund will invest at least 80% of its assets under normal
market conditions in U.S. exchange-listed equity securities. The Fund
will invest primarily in companies with market capitalization of
greater than $1 billion that the Adviser believes offer the best
opportunities for growth. The Fund may invest up to 25% of its assets
in foreign securities.
(10) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment); will
monitor its portfolio liquidity on an ongoing basis to determine
whether, in light of current circumstances, an adequate level of
liquidity is being maintained; and will consider taking appropriate
steps in order to maintain adequate liquidity if, through a change in
values, net assets, or other circumstances, more than 15% of the Fund's
net assets are held in illiquid assets.
(11) The Fund does not intend to use its other investments to
create a leveraged return on the Fund's portfolio.
(12) The Fund's investments will be consistent with the Fund's
investment objective.
This approval order is based on all of the Exchange's
representations and description of the Fund, including those set forth
above and in the Notice.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\37\ that the proposed rule change (SR-NASDAQ-2014-040), be, and it
hereby is, approved.
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\37\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
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\38\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14541 Filed 6-20-14; 8:45 am]
BILLING CODE 8011-01-P
