Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Approving a Proposed Rule Change To List and Trade Shares of the AlphaMark Actively Managed Small Cap ETF of ETF Series Solutions, 22249-22251 [2015-09064]
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Federal Register / Vol. 80, No. 76 / Tuesday, April 21, 2015 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
prospectus, the Company will not
exercise any right it may have under the
Contract to impose restrictions on
transfers between the subaccounts
under the Contracts, including
limitations on the future number of
transfers, for a period beginning at least
30 days before the Effective Date
through at least 30 days following the
Effective Date.
7. All Affected Contract Owners will
be notified, at least 30 days before the
Effective Date about: (a) The intended
substitution of Existing Funds with the
Replacement Funds; (b) the intended
Effective Date; and (c) information with
respect to transfers as set forth in
Condition 6 above. In addition, the
Companies will also deliver, at least 30
days before the Effective Date a
prospectus for each applicable
Replacement Fund.
8. Companies will deliver to each
Affected Contract Owner within five (5)
business days of the Effective Date a
written confirmation which will
include: (a) A confirmation that the
Substitutions were carried out as
previously notified; (b) a restatement of
the information set forth in the PreSubstitution Notice; and (c) before and
after account values.
9. After the Effective Date Applicants
agree not to change a Replacement
Fund’s sub-adviser without first (a)
obtaining shareholder approval of the
sub-adviser change or (b) Voya Variable
Portfolios Inc. determining that it can
continue to rely on its manager-ofmanagers exemptive order.
10. For two years following the
Effective Date the net annual expenses
of each Replacement Fund will not
exceed the net annual expenses of the
corresponding Existing Fund as of the
Fund’s most recent fiscal year. To
achieve this limitation, the Replacement
Fund’s investment adviser will waive
fees or reimburse the Replacement Fund
in certain amounts to maintain expenses
at or below the limit. Any adjustments
will be made at least on a quarterly
basis. In addition, the Companies will
not increase the Contract fees and
charges including asset based charges
such as mortality expense risk charges
deducted from the subaccounts that
would otherwise be assessed under the
terms of the Contracts for a period of at
least two years following the Effective
Date.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015–09067 Filed 4–20–15; 8:45 am]
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74728; File No. SR–
NASDAQ–2015–013]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order
Approving a Proposed Rule Change To
List and Trade Shares of the
AlphaMark Actively Managed Small
Cap ETF of ETF Series Solutions
April 15, 2015.
I. Introduction
On February 17, 2015, The NASDAQ
Stock Market LLC (the ‘‘Exchange’’ or
‘‘Nasdaq’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’) 2 and Rule 19b–4
thereunder,3 a proposed rule change to
list and trade the shares (‘‘Shares’’) of
the AlphaMark Actively Managed Small
Cap ETF (the ‘‘Fund’’) of ETF Series
Solutions (the ‘‘Trust’’) under Nasdaq
Rule 5735. The proposed rule change
was published for comment in the
Federal Register on March 3, 2015.4 The
Commission received no comments on
the proposed rule change. This order
approves the proposed rule change.
II. Description of the Proposal
The Exchange proposes to list and
trade the Shares under Nasdaq Rule
5735, which governs the listing and
trading of Managed Fund Shares on the
Exchange. The Fund will be an activelymanaged exchange-traded fund (‘‘ETF’’).
The Shares will be offered by the Trust.5
The Trust is registered with the
Commission as an investment company
and has filed a registration statement on
Form N–1A (‘‘Registration Statement’’)
with the Commission.6 The Fund is a
series of the Trust.
AlphaMark Advisors, LLC will be the
investment adviser (‘‘Adviser’’) to the
Fund. Quasar Distributors, LLC (the
‘‘Distributor’’) will be the principal
underwriter and distributor of the
Fund’s Shares. U.S. Bancorp Fund
Services, LLC will act as the
administrator, accounting agent, and
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 See Securities Exchange Act Release No. 74377
(February 25, 2015), 80 FR 11502 (‘‘Notice’’).
5 The Trust has obtained an order from the
Commission granting certain exemptive relief to the
Trust under the 1940 Act. See Investment Company
Act Release No. 31469 (February 24, 2015) (File No.
812–14402).
6 See Post- Effective Amendment No. 43 to the
Registration Statement on Form N–1A for the Trust,
dated February 4, 2015 (File Nos. 333–179562 and
811–22668).
2 15
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22249
transfer agent to the Fund. U.S. Bank
National Association will act as the
custodian to the Fund. The Exchange
states that the Adviser is not a brokerdealer, and is not affiliated with any
broker-dealer.7 The Exchange has made
the following representations and
statements regarding the Fund.8
Principal Investments
The Fund’s primary investment
objective is to seek long-term growth of
capital. The Fund will pursue its
objectives by investing primarily—i.e.,
at least 80% of its assets under normal
market conditions 9—in a portfolio of
equity securities of small cap companies
listed on a U.S. exchange.
The Fund defines ‘‘equity securities’’
to include common and preferred stock,
American Depositary Receipts
(‘‘ADRs’’), real estate investment trusts,
and ETFs that under normal
circumstances invest at least 80% of
their net assets in equity securities of
small cap companies (‘‘Small Cap
ETFs’’). The Fund may invest up to 30%
of its net assets in foreign equity
securities of small cap companies traded
on a U.S. exchange as ADRs, which may
include companies in emerging markets.
The Adviser expects that there will
generally be between 25 and 40 stocks
in the Fund’s portfolio.
The Fund is non-diversified, and
therefore may invest a larger percentage
of its assets in the securities of a single
7 See Notice, supra note 4, 80 FR at 11503. In
addition, the Exchange states that, in the event (a)
the Adviser becomes 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, it will
implement a fire wall with respect to its relevant
personnel and/or such broker-dealer affiliate, as
applicable, regarding access to information
concerning the composition and/or changes to the
portfolio and will be subject to procedures designed
to prevent the use and dissemination of material
nonpublic information regarding such portfolio.
According to the Exchange, the Adviser has no
present intent or arrangement to become affiliated
with any broker-dealer, and the Fund does not
currently intend to use a sub-adviser. Id.
8 Additional information regarding, among other
things, the Fund, the Shares, the Fund’s investment
objectives, the Fund’s strategies, the Fund’s
holdings, risks, fees and expenses associated with
the Shares, creations and redemptions of Shares,
availability of information, trading rules and halts,
and surveillance procedures can be found in the
Notice and the Registration Statement. See Notice,
supra note 4, and Registration Statement, supra
note 6, respectively.
9 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.
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Federal Register / Vol. 80, No. 76 / Tuesday, April 21, 2015 / Notices
company than diversified funds. The
Fund’s investment in various sectors
may change significantly over time. The
Fund’s investment in foreign equity
securities will be in the form of ADRs
and may include ADRs representing
companies in emerging markets. With
respect to its investments as part of its
principal investment strategies in
exchange-listed securities, the Fund will
invest in such securities that trade in
markets that are members of the
Intermarket Surveillance Group
(‘‘ISG’’).10
Other Investments
Although the Fund under normal
circumstances will invest at least 80%
of its assets in U.S. exchange-listed
equity securities, the Fund may invest
the remaining assets in: Equity
securities traded over-the-counter; 11
money market instruments; securities of
open-end mutual funds, money market
mutual funds, and ETFs other than
Small Cap ETFs; and non-exchangelisted ADRs.
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the Exchange’s proposal to list
and trade the Shares is consistent with
the Exchange Act and the rules and
regulations thereunder applicable to a
national securities exchange.12 In
particular, the Commission finds that
the proposed rule change is consistent
with section 6(b)(5) of the Exchange
Act,13 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 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 finds that the
proposal to list and trade the Shares on
the Exchange is consistent with section
11A(a)(1)(C)(iii) of the Exchange Act,14
which sets forth Congress’ finding that
it is in the public interest and
appropriate for the protection of
10 See
Notice, supra note 4, 80 FR at 11504.
Exchange states that not more than 10% of
the net assets of the Fund, in the aggregate, will be
invested in unlisted equity securities or equity
securities not listed on an exchange that is a
member of the ISG or a party to a comprehensive
surveillance sharing agreement with the Exchange.
See id. at 11504, n.12.
12 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
13 15 U.S.C. 78f(b)(5).
14 15 U.S.C. 78k–1(a)(1)(C)(iii).
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11 The
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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 (‘‘CTA’’)
plans for the Shares. 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. 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.
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 CTA plans, as
applicable.
Intraday, executable price quotations
on the securities and other assets held
by the Fund (other than investment
company securities that are not
exchange-listed) will be available from
major broker-dealer firms and through
subscription or free services that can be
accessed by authorized participants and
other investors. Intraday price
information for 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. Intraday price information
regarding over-the-counter equities
(including certain investment company
securities) and money market
instruments, will be available through
subscription services.
The Commission also 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. On
each business day, before
commencement of trading in Shares in
the Regular Market Session 15 on the
Exchange, the Fund will disclose on its
Web site the identities and quantities of
the portfolio of securities and other
15 See Nasdaq Rule 4120(b)(4) (describing the
three trading sessions on the Exchange: (1) PreMarket Session from 4 a.m. to 9:30 a.m. Eastern
time; (2) Regular Market Session from 9:30 a.m. to
4 p.m. or 4:15 p.m. Eastern time; and (3) PostMarket Session from 4 p.m. or 4:15 p.m. to 8 p.m.
Eastern time).
PO 00000
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assets (the ‘‘Disclosed Portfolio’’) held
by the Fund that will form the basis for
the Fund’s calculation of NAV at the
end of the business day. The Web site
information will be publicly available at
no charge. The NAV of the Fund’s
Shares generally will be calculated once
daily Monday through Friday as of the
close of regular trading on the New York
Stock Exchange, generally 4:00 p.m.,
Eastern Time. The Exchange will obtain
a representation from the issuer of the
Shares that the NAV per Share will be
calculated daily and that the NAV and
the Disclosed Portfolio will be made
available to all market participants at
the same time.16 The intraday indicative
value, available on the NASDAQ OMX
Information LLC proprietary index data
service,17 will be based upon the current
value for the components of the
Disclosed Portfolio and will be updated
and widely disseminated and broadly
displayed at least every 15 seconds
during the Regular Market Session.18
The Web site for the Fund will include
the prospectus for the Fund and
additional data relating to NAV and
other applicable quantitative
information.19
The Exchange represents that it 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.20
Trading in the Shares also will be
subject to Rule 5735(d)(2)(D), which sets
forth circumstances under which Shares
of the Fund may be halted.
The Exchange states that it has a
general policy prohibiting the
distribution of material, non-public
16 See
Notice, supra note 4, 80 FR at 11507.
the NASDAQ OMX Global Index
Data Service (‘‘GIDS’’) is the NASDAQ OMX global
index data feed service. The Exchange represents
that GIDS offers real-time updates, daily summary
messages, and access to widely followed indexes
and Intraday Indicative Values for ETFs, and that
GIDS provides investment professionals with the
daily information needed to track or trade NASDAQ
OMX indexes, listed ETFs, or third-party partner
indexes and ETFs.
18 See id. at 11506.
19 See id. at 11509.
20 These may include: (1) The extent to which
trading is not occurring in the securities and/or the
financial instruments constituting the Disclosed
Portfolio of the Fund; or (2) whether other unusual
conditions or circumstances detrimental to the
maintenance of a fair and orderly market are
present. See id. at 11507.
17 Currently,
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Federal Register / Vol. 80, No. 76 / Tuesday, April 21, 2015 / Notices
information by its employees.21 The
Exchange states that the Adviser is not
a broker-dealer, and is not affiliated
with any broker-dealer. In addition, the
Exchange states that in the event (a) the
Adviser becomes affiliated with a
broker-dealer or registers as a brokerdealer, or (b) any new adviser or subadviser is a registered broker-dealer or
becomes affiliated with a broker-dealer,
it will implement a fire wall with
respect to its relevant personnel and/or
such broker-dealer affiliate, as
applicable, regarding access to
information concerning the composition
and/or changes to the portfolio and will
be subject to procedures designed to
prevent the use and dissemination of
material nonpublic information
regarding such portfolio.22
FINRA, on behalf of the Exchange,
will communicate as needed regarding
trading in the Shares and 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 and other exchange-traded
securities from such markets and other
entities. In addition, the Exchange may
obtain information regarding trading in
the Shares and 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.23
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.
Nasdaq deems the Shares to be equity
securities, thus rendering trading in the
Shares subject to Nasdaq’s existing rules
governing the trading of equity
securities. In support of this proposal,
the Exchange represented that:
(1) The Shares will be subject to
Nasdaq Rule 5735, which sets forth the
initial and continued listing criteria
applicable to Managed Fund Shares.
(2) Trading in the Shares will be
subject to the existing trading
surveillances administered by both
Nasdaq and FINRA 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
21 See
id. at 11508.
22 See supra note 7.
23 For a list of the current members of ISG, see
www.isgportal.org.
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rules and applicable federal securities
laws.
(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) the
dissemination of information regarding
the Intraday Indicative Value through
major index service providers such as
NASDAQ OMX proprietary index data
services or other major market
proprietary index services; (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; (f) trading information; and
(g) the dissemination of the Disclosed
Portfolio through the Fund’s Web site.
(5) For initial and/or continued
listing, the Fund must be in compliance
with Rule 10A–3 24 under the Act.
(6) The Fund may invest up to 30%
of its net assets in foreign equity
securities of small cap companies traded
on a U.S. exchange as ADRs, which may
include companies in emerging markets.
(7) 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).
(8) 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.
(9) Not more than 10% of the net
assets of the Fund, in the aggregate, will
be invested in unlisted equity securities
or equity securities not listed on an
exchange that is a member of the ISG or
a party to a comprehensive surveillance
sharing agreement with the Exchange.
24 See
PO 00000
17 CFR 240.10A–3.
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22251
(10) A minimum of 100,000 Shares
will be outstanding at the
commencement of trading on the
Exchange.
This approval order is based on all of
the Exchange’s representations,
including those set forth above and in
the Notice. For the foregoing reasons,
the Commission finds that the proposed
rule change is consistent with section
6(b)(5) of the Act 25 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
section 19(b)(2) of the Exchange Act,26
that the proposed rule change (SR–
NASDAQ–2015–013) be, and it hereby
is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Brent J. Fields,
Secretary.
[FR Doc. 2015–09064 Filed 4–20–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74733; File No. SR–C2–
2015–007]
Self-Regulatory Organizations; C2
Options Exchange, Incorporated;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Fees Schedule
April 15, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 10,
2015, C2 Options Exchange,
Incorporated (the ‘‘Exchange’’ or ‘‘C2’’)
filed with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
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
The Exchange proposes to amend its
Fees Schedule. The text of the proposed
rule change is available on the
25 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(2).
27 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
26 15
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[Federal Register Volume 80, Number 76 (Tuesday, April 21, 2015)]
[Notices]
[Pages 22249-22251]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-09064]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74728; File No. SR-NASDAQ-2015-013]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Approving a Proposed Rule Change To List and Trade Shares of the
AlphaMark Actively Managed Small Cap ETF of ETF Series Solutions
April 15, 2015.
I. Introduction
On February 17, 2015, The NASDAQ Stock Market LLC (the ``Exchange''
or ``Nasdaq'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \2\ and Rule 19b-4
thereunder,\3\ a proposed rule change to list and trade the shares
(``Shares'') of the AlphaMark Actively Managed Small Cap ETF (the
``Fund'') of ETF Series Solutions (the ``Trust'') under Nasdaq Rule
5735. The proposed rule change was published for comment in the Federal
Register on March 3, 2015.\4\ The Commission received no comments on
the proposed rule change. This order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release No. 74377 (February 25,
2015), 80 FR 11502 (``Notice'').
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II. Description of the Proposal
The Exchange proposes to list and trade the Shares under Nasdaq
Rule 5735, which governs the listing and trading of Managed Fund Shares
on the Exchange. The Fund will be an actively-managed exchange-traded
fund (``ETF''). The Shares will be offered by the Trust.\5\ The Trust
is registered with the Commission as an investment company and has
filed a registration statement on Form N-1A (``Registration
Statement'') with the Commission.\6\ The Fund is a series of the Trust.
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\5\ The Trust has obtained an order from the Commission granting
certain exemptive relief to the Trust under the 1940 Act. See
Investment Company Act Release No. 31469 (February 24, 2015) (File
No. 812-14402).
\6\ See Post- Effective Amendment No. 43 to the Registration
Statement on Form N-1A for the Trust, dated February 4, 2015 (File
Nos. 333-179562 and 811-22668).
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AlphaMark Advisors, LLC will be the investment adviser
(``Adviser'') to the Fund. Quasar Distributors, LLC (the
``Distributor'') will be the principal underwriter and distributor of
the Fund's Shares. U.S. Bancorp Fund Services, LLC will act as the
administrator, accounting agent, and transfer agent to the Fund. U.S.
Bank National Association will act as the custodian to the Fund. The
Exchange states that the Adviser is not a broker-dealer, and is not
affiliated with any broker-dealer.\7\ The Exchange has made the
following representations and statements regarding the Fund.\8\
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\7\ See Notice, supra note 4, 80 FR at 11503. In addition, the
Exchange states that, in the event (a) the Adviser becomes
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, it will implement a fire
wall with respect to its relevant personnel and/or such broker-
dealer affiliate, as applicable, regarding access to information
concerning the composition and/or changes to the portfolio and will
be subject to procedures designed to prevent the use and
dissemination of material nonpublic information regarding such
portfolio. According to the Exchange, the Adviser has no present
intent or arrangement to become affiliated with any broker-dealer,
and the Fund does not currently intend to use a sub-adviser. Id.
\8\ Additional information regarding, among other things, the
Fund, the Shares, the Fund's investment objectives, the Fund's
strategies, the Fund's holdings, risks, fees and expenses associated
with the Shares, creations and redemptions of Shares, availability
of information, trading rules and halts, and surveillance procedures
can be found in the Notice and the Registration Statement. See
Notice, supra note 4, and Registration Statement, supra note 6,
respectively.
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Principal Investments
The Fund's primary investment objective is to seek long-term growth
of capital. The Fund will pursue its objectives by investing
primarily--i.e., at least 80% of its assets under normal market
conditions \9\--in a portfolio of equity securities of small cap
companies listed on a U.S. exchange.
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\9\ 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.
---------------------------------------------------------------------------
The Fund defines ``equity securities'' to include common and
preferred stock, American Depositary Receipts (``ADRs''), real estate
investment trusts, and ETFs that under normal circumstances invest at
least 80% of their net assets in equity securities of small cap
companies (``Small Cap ETFs''). The Fund may invest up to 30% of its
net assets in foreign equity securities of small cap companies traded
on a U.S. exchange as ADRs, which may include companies in emerging
markets. The Adviser expects that there will generally be between 25
and 40 stocks in the Fund's portfolio.
The Fund is non-diversified, and therefore may invest a larger
percentage of its assets in the securities of a single
[[Page 22250]]
company than diversified funds. The Fund's investment in various
sectors may change significantly over time. The Fund's investment in
foreign equity securities will be in the form of ADRs and may include
ADRs representing companies in emerging markets. With respect to its
investments as part of its principal investment strategies in exchange-
listed securities, the Fund will invest in such securities that trade
in markets that are members of the Intermarket Surveillance Group
(``ISG'').\10\
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\10\ See Notice, supra note 4, 80 FR at 11504.
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Other Investments
Although the Fund under normal circumstances will invest at least
80% of its assets in U.S. exchange-listed equity securities, the Fund
may invest the remaining assets in: Equity securities traded over-the-
counter; \11\ money market instruments; securities of open-end mutual
funds, money market mutual funds, and ETFs other than Small Cap ETFs;
and non-exchange-listed ADRs.
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\11\ The Exchange states that not more than 10% of the net
assets of the Fund, in the aggregate, will be invested in unlisted
equity securities or equity securities not listed on an exchange
that is a member of the ISG or a party to a comprehensive
surveillance sharing agreement with the Exchange. See id. at 11504,
n.12.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act and the rules and regulations thereunder applicable to a national
securities exchange.\12\ In particular, the Commission finds that the
proposed rule change is consistent with section 6(b)(5) of the Exchange
Act,\13\ 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 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.
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\12\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\13\ 15 U.S.C. 78f(b)(5).
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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
Exchange Act,\14\ 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
(``CTA'') plans for the Shares. 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. 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. 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 CTA plans, as applicable.
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\14\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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Intraday, executable price quotations on the securities and other
assets held by the Fund (other than investment company securities that
are not exchange-listed) will be available from major broker-dealer
firms and through subscription or free services that can be accessed by
authorized participants and other investors. Intraday price information
for 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. Intraday price information
regarding over-the-counter equities (including certain investment
company securities) and money market instruments, will be available
through subscription services.
The Commission also 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. On each business day, before commencement of trading in Shares
in the Regular Market Session \15\ on the Exchange, the Fund will
disclose on its Web site the identities and quantities of the portfolio
of securities and other assets (the ``Disclosed Portfolio'') held by
the Fund that will form the basis for the Fund's calculation of NAV at
the end of the business day. The Web site information will be publicly
available at no charge. The NAV of the Fund's Shares generally will be
calculated once daily Monday through Friday as of the close of regular
trading on the New York Stock Exchange, generally 4:00 p.m., Eastern
Time. The Exchange will obtain a representation from the issuer of the
Shares that the NAV per Share will be calculated daily and that the NAV
and the Disclosed Portfolio will be made available to all market
participants at the same time.\16\ The intraday indicative value,
available on the NASDAQ OMX Information LLC proprietary index data
service,\17\ will be based upon the current value for the components of
the Disclosed Portfolio and will be updated and widely disseminated and
broadly displayed at least every 15 seconds during the Regular Market
Session.\18\ The Web site for the Fund will include the prospectus for
the Fund and additional data relating to NAV and other applicable
quantitative information.\19\
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\15\ See Nasdaq Rule 4120(b)(4) (describing the three trading
sessions on the Exchange: (1) Pre-Market Session from 4 a.m. to 9:30
a.m. Eastern time; (2) Regular Market Session from 9:30 a.m. to 4
p.m. or 4:15 p.m. Eastern time; and (3) Post-Market Session from 4
p.m. or 4:15 p.m. to 8 p.m. Eastern time).
\16\ See Notice, supra note 4, 80 FR at 11507.
\17\ Currently, the NASDAQ OMX Global Index Data Service
(``GIDS'') is the NASDAQ OMX global index data feed service. The
Exchange represents that GIDS offers real-time updates, daily
summary messages, and access to widely followed indexes and Intraday
Indicative Values for ETFs, and that GIDS provides investment
professionals with the daily information needed to track or trade
NASDAQ OMX indexes, listed ETFs, or third-party partner indexes and
ETFs.
\18\ See id. at 11506.
\19\ See id. at 11509.
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The Exchange represents that it 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.\20\
Trading in the Shares also will be subject to Rule 5735(d)(2)(D), which
sets forth circumstances under which Shares of the Fund may be halted.
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\20\ These may include: (1) The extent to which trading is not
occurring in the securities and/or the financial instruments
constituting the Disclosed Portfolio of the Fund; or (2) whether
other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present. See id. at
11507.
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The Exchange states that it has a general policy prohibiting the
distribution of material, non-public
[[Page 22251]]
information by its employees.\21\ The Exchange states that the Adviser
is not a broker-dealer, and is not affiliated with any broker-dealer.
In addition, the Exchange states that in the event (a) the Adviser
becomes 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, it will implement a
fire wall with respect to its relevant personnel and/or such broker-
dealer affiliate, as applicable, regarding access to information
concerning the composition and/or changes to the portfolio and will be
subject to procedures designed to prevent the use and dissemination of
material nonpublic information regarding such portfolio.\22\
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\21\ See id. at 11508.
\22\ See supra note 7.
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FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares and 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 and other exchange-traded securities from such
markets and other entities. In addition, the Exchange may obtain
information regarding trading in the Shares and 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.\23\
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\23\ For a list of the current members of ISG, see
www.isgportal.org.
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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. Nasdaq deems the Shares to be equity securities, thus
rendering trading in the Shares subject to Nasdaq's existing rules
governing the trading of equity securities. In support of this
proposal, the Exchange represented that:
(1) The Shares will be subject to Nasdaq Rule 5735, which sets
forth the initial and continued listing criteria applicable to Managed
Fund Shares.
(2) Trading in the Shares will be subject to the existing trading
surveillances administered by both Nasdaq and FINRA 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.
(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) the dissemination of
information regarding the Intraday Indicative Value through major index
service providers such as NASDAQ OMX proprietary index data services or
other major market proprietary index services; (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; (f) trading
information; and (g) the dissemination of the Disclosed Portfolio
through the Fund's Web site.
(5) For initial and/or continued listing, the Fund must be in
compliance with Rule 10A-3 \24\ under the Act.
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\24\ See 17 CFR 240.10A-3.
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(6) The Fund may invest up to 30% of its net assets in foreign
equity securities of small cap companies traded on a U.S. exchange as
ADRs, which may include companies in emerging markets.
(7) 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).
(8) 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.
(9) Not more than 10% of the net assets of the Fund, in the
aggregate, will be invested in unlisted equity securities or equity
securities 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) A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange.
This approval order is based on all of the Exchange's
representations, including those set forth above and in the Notice. For
the foregoing reasons, the Commission finds that the proposed rule
change is consistent with section 6(b)(5) of the Act \25\ and the rules
and regulations thereunder applicable to a national securities
exchange.
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\25\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Exchange Act,\26\ that the proposed rule change (SR-NASDAQ-2015-013)
be, and it hereby is, approved.
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\26\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-09064 Filed 4-20-15; 8:45 am]
BILLING CODE 8011-01-P
