Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendments Nos. 1 and 2 Thereto, Relating to the Listing and Trading of the Shares of 18 Eaton Vance NextShares ETMFs of Either the Eaton Vance ETMF Trust or the Eaton Vance ETMF Trust II, 23831-23838 [2015-09919]
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Federal Register / Vol. 80, No. 82 / Wednesday, April 29, 2015 / Notices
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an exemption from sections 2(a)(32),
5(a)(1), 22(d) and 22(e) of the Act and
rule 22c–1 under the Act, under
sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and
17(a)(2) of the Act, and under section
12(d)(1)(J) of the Act for an exemption
from sections 12(d)(1)(A) and (B) of the
Act. The requested Order would permit
applicants to offer exchange-traded
managed funds. Because the relief
requested is the same as the relief
granted by the Commission under the
Reference Order and because the
Adviser has entered into, or anticipates
entering into, a licensing agreement
with Eaton Vance Management, or an
affiliate thereof in order to offer
exchange-traded managed funds,2 the
Order would incorporate by reference
the terms and conditions of the
Reference Order.
5. Applicants request that the Order
apply to the Initial Funds and to any
other existing or future open-end
management investment company or
series thereof that: (a) is advised by the
Adviser or any entity controlling,
controlled by, or under common control
with the Adviser (any such entity
included in the term ‘‘Adviser’’); and (b)
operates as an exchange-traded managed
fund as described in the Reference
Order; and (c) complies with the terms
and conditions of the Order and of the
Reference Order, which is incorporated
by reference herein (each such company
or series and Initial Fund, a ‘‘Fund’’).3
6. Section 6(c) of the Act provides that
the Commission may exempt any
person, security or transaction, or any
class of persons, securities or
transactions, from any provisions of the
Act, if and to the extent that such
exemption is necessary or appropriate
in the public interest and consistent
with the protection of investors and the
purposes fairly intended by the policy
and provisions of the Act. Section 17(b)
of the Act authorizes the Commission to
exempt a proposed transaction from
section 17(a) of the Act if evidence
establishes that the terms of the
transaction, including the consideration
to be paid or received, are reasonable
and fair and do not involve
overreaching on the part of any person
concerned, and the proposed
transaction is consistent with the
policies of the registered investment
2 Eaton Vance Management has obtained patents
with respect to certain aspects of the Funds’ method
of operation as exchange-traded managed funds.
3 All entities that currently intend to rely on the
Order are named as applicants. Any other entity
that relies on the Order in the future will comply
with the terms and conditions of the Order and of
the Reference Order, which is incorporated by
reference herein.
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company and the general purposes of
the Act. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
7. Applicants submit that for the
reasons stated in the Reference Order:
(1) With respect to the relief requested
pursuant to section 6(c) of the Act, the
relief is appropriate, in the public
interest and consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the Act; (2) with respect to
the relief request pursuant to section
17(b) of the Act, the proposed
transactions are reasonable and fair and
do not involve overreaching on the part
of any person concerned, are consistent
with the policies of each registered
investment company concerned and
consistent with the general purposes of
the Act; and (3) with respect to the relief
requested pursuant to section 12(d)(1)(J)
of the Act, the relief is consistent with
the public interest and the protection of
investors.
By the Division of Investment
Management, pursuant to delegated
authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015–09963 Filed 4–28–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74797; File No. SR–
NASDAQ–2015–036]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change, as
Modified by Amendments Nos. 1 and 2
Thereto, Relating to the Listing and
Trading of the Shares of 18 Eaton
Vance NextShares ETMFs of Either the
Eaton Vance ETMF Trust or the Eaton
Vance ETMF Trust II
April 23, 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, The NASDAQ Stock Market LLC
(‘‘Nasdaq’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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23831
been prepared by the Exchange. On
April 21, 2015, the Exchange filed
Amendments Nos. 1 and 2 to the
proposal.3 The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as modified by Amendments Nos. 1 and
2 thereto, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
Nasdaq proposes to list and trade
under Nasdaq Rule 5745 (ExchangeTraded Managed Fund Shares) the
common shares (‘‘Shares’’) of the belowlisted exchange-traded managed funds
(each, a ‘‘Fund,’’ and collectively, the
‘‘Funds’’):
Eaton Vance Balanced NextShares TM
Eaton Vance Global Dividend Income
NextShares TM
Eaton Vance Growth NextShares TM
Eaton Vance Large-Cap Value
NextShares TM
Eaton Vance Richard Bernstein All
Asset Strategy NextShares TM
Eaton Vance Richard Bernstein Equity
Strategy NextShares TM
Eaton Vance Small-Cap NextShares TM
Eaton Vance Stock NextShares TM
Parametric Emerging Markets
NextShares TM
Parametric International Equity
NextShares TM
Eaton Vance Bond NextShares TM
Eaton Vance TABS 5-to-15 Year
Laddered Municipal Bond
NextShares TM
Eaton Vance Floating-Rate & High
Income NextShares TM
Eaton Vance Global Macro Absolute
Return NextShares TM
Eaton Vance Government Obligations
NextShares TM
Eaton Vance High Income Opportunities
NextShares TM
Eaton Vance High Yield Municipal
Income NextShares TM
Eaton Vance National Municipal Income
NextShares TM
Each Fund is a series of either Eaton
Vance ETMF Trust or Eaton Vance
ETMF Trust II (each, a ‘‘Trust,’’ and
together, the ‘‘Trusts’’). The text of the
proposed rule change is available at
https://nasdaq.cchwallstreet.com/, at
Nasdaq’s principal office, and at the
Commission’s Public Reference Room.
3 Amendment No. 1 amended and replaced the
proposed rule change in its entirety. Amendment
No. 2 subsequently amended the proposal to
include a new footnote to reflect a Web site
reference.
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Federal Register / Vol. 80, No. 82 / Wednesday, April 29, 2015 / Notices
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Nasdaq included statements concerning
the purpose of, and basis for, the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below.
Nasdaq 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
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The Exchange proposes to list and
trade the Shares of each Fund under
Nasdaq Rule 5745, which governs the
listing and trading of exchange-traded
managed fund shares, as defined in
Nasdaq Rule 5745(c)(1), on the
Exchange.4 Each Trust is registered with
the Commission as an open-end
investment company and has filed a
registration statement on Form N–1A
(‘‘Registration Statement’’) with the
Commission.5 Each Fund is a series of
a Trust.6
Eaton Vance Management will be the
investment adviser (‘‘Adviser’’) to the
Funds. Foreside Fund Services, LLC
will be the principal underwriter and
distributor of each Fund’s Shares. State
Street Bank and Trust Company will act
as the administrator, accounting agent,
custodian and transfer agent to the
Funds. Interactive Data Corporation will
4 The Commission approved Nasdaq Rule 5745 in
Securities Exchange Act Release No. 34–73562
(Nov. 7, 2014), 79 FR 68309 (Nov. 14, 2014) (SR–
NASDAQ–2014–020). The Funds would be the first
exchange-traded managed funds listed on the
Exchange.
5 See Registration Statements on Form N–1A for
the Eaton Vance NextShares Trust dated April 9,
2015 (File Nos. 333–197733 and 811–22982) and for
the Eaton Vance NextShares Trust II dated April 9,
2015 (File Nos. 333–197734 and 811–22983). The
descriptions of the Funds and the Shares contained
herein conform to the Registration Statements.
6 The Commission has issued an order granting
the Trusts and certain affiliates exemptive relief
under the Investment Company Act (the
‘‘Exemptive Order’’). See Investment Company Act
Release No. 31361 (Dec. 2, 2014) (File No. 812–
14139). In compliance with Nasdaq Rule 5745(b)(5),
which applies to Shares based on an international
or global portfolio, the application for exemptive
relief under the Investment Company Act states that
the Funds will comply with the federal securities
laws in accepting securities for deposits and
satisfying redemptions with securities, including
that the securities accepted for deposits and the
securities used to satisfy redemption requests are
sold in transactions that would be exempt from
registration under the Securities Act of 1933, as
amended (15 U.S.C. 77a) (‘‘Securities Act’’).
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be the intraday indicative value (‘‘IIV’’)
calculator to the Funds.
Principal Investment Strategies
Applicable to Each Fund
Each Fund will be actively managed
and will pursue the various principal
investment strategies described below.7
Eaton Vance Balanced NextShares TM
The investment objective of this Fund
is to provide current income and longterm growth of capital. The Fund
normally will invest between 50% and
75% of its net assets in equity securities
and between 25% and 50% of its net
assets in fixed-income securities.
Eaton Vance Global Dividend Income
NextShares TM
The investment objective of this Fund
is to provide current income and longterm growth of capital. The Fund
normally will invest primarily in
common stocks and, in the adviser’s
discretion, preferred stocks of U.S. and
foreign companies that pay dividends.
Eaton Vance Growth NextShares TM
The investment objective of this Fund
is total return. The Fund will invest in
a broadly diversified selection of equity
securities, seeking companies with
above-average growth and financial
strength. Under normal market
conditions, the Fund will invest
primarily in large-cap companies.
Eaton Vance Large-Cap Value
NextShares TM
The investment objective of this Fund
is total return. Under normal market
conditions, the Fund will invest
primarily in value stocks of large-cap
companies.
Eaton Vance Richard Bernstein All
Asset Strategy NextShares TM
The investment objective of this Fund
is total return. In seeking its investment
objective, the Fund will have flexibility
to allocate its assets in markets around
the world and among various asset
classes, including equity, fixed-income,
commodity, currency and cash
investments.
Eaton Vance Richard Bernstein Equity
Strategy NextShares TM
The investment objective of this Fund
is total return. Under normal market
conditions, the Fund will invest
primarily in equity securities and
derivative instruments that provide
exposure to equity securities.
7 Additional information regarding the Funds will
be available on the public Web site for the Funds
and in the Registration Statements for the Funds.
See supra note 5.
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Eaton Vance Small-Cap NextShares TM
The investment objective of this Fund
is long-term capital appreciation. The
Fund normally will invest primarily in
equity securities of small-cap
companies.
Eaton Vance Stock NextShares TM
The investment objective of this Fund
is to achieve long-term capital
appreciation by investing in a
diversified portfolio of equity securities.
The Fund normally will invest
primarily in a diversified portfolio of
common stocks.
Parametric Emerging Markets
NextShares TM
The investment objective of this Fund
is long-term capital appreciation. The
Fund normally will invest primarily in
equity securities of companies located
in emerging market countries.
Parametric International Equity
NextSharesTM
The investment objective of this Fund
is long-term capital appreciation. The
Fund normally will invest primarily in
companies domiciled in developed
markets outside of the United States,
including securities trading in the form
of depositary receipts.
Eaton Vance Bond NextSharesTM
The investment objective of this Fund
is total return. The Fund normally will
invest primarily in bonds and other
fixed and floating-rate income
instruments.
Eaton Vance TABS 5-to-15 Year
Laddered Municipal Bond
NextSharesTM
The investment objective of this Fund
is to provide current income exempt
from regular federal income tax. The
Fund normally will invest primarily in
municipal obligations with remaining
maturities of between 5 and 15 years,
the interest on which is exempt from
regular federal income tax.
Eaton Vance Floating-Rate & High
Income NextSharesTM
The investment objective of this Fund
is to provide a high level of current
income. The Fund normally will invest
primarily in a combination of incomeproducing floating rate loans and other
floating rate debt securities and highyield corporate bonds.
Eaton Vance Global Macro Absolute
Return NextSharesTM
The investment objective of this Fund
is total return. The Fund will seek its
investment objective by investing in
securities, derivatives and other
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instruments to establish long and short
investment exposures around the world.
Eaton Vance Government Obligations
NextSharesTM
The investment objective of this Fund
is to provide a high current return. The
Fund normally will invest primarily in
securities issued, backed or otherwise
guaranteed by the U.S. Government, its
agencies or instrumentalities.
Eaton Vance High Income Opportunities
NextSharesTM
The primary investment objective of
this Fund is to provide a high level of
current income. The Fund will seek
growth of capital as a secondary
investment objective. The Fund
normally will invest primarily in fixedincome securities, including preferred
stocks, senior and subordinated floating
rate loans, and convertible securities.
Eaton Vance High Yield Municipal
Income NextSharesTM
The investment objective of this Fund
is to provide high current income
exempt from regular federal income tax.
The Fund normally will invest
primarily in municipal obligations, the
interest on which is exempt from
regular federal income tax.
Eaton Vance National Municipal Income
NextSharesTM
The investment objective of this Fund
is to provide current income exempt
from regular federal income tax. The
Fund normally will invest primarily in
municipal obligations, the interest on
which is exempt from regular federal
income tax.
Creations and Redemptions of Shares
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Shares will be issued and redeemed
on a daily basis at the Fund’s nextdetermined net asset value (‘‘NAV’’) 8 in
specified blocks of Shares called
‘‘Creation Units.’’ A Creation Unit will
consist of at least 25,000 Shares.
Creation Units may be purchased and
redeemed by or through ‘‘Authorized
Participants.’’ 9 Purchases and sales of
8 As with other registered open-end investment
companies, NAV generally will be calculated daily
Monday through Friday as of the close of regular
trading on the New York Stock Exchange, normally
4:00 p.m. Eastern Time. NAV will be calculated by
dividing a Fund’s net asset value by the number of
Shares outstanding. Information regarding the
valuation of investments in calculating a Fund’s
NAV will be contained in the Registration
Statement for its Shares.
9 ‘‘Authorized Participants’’ will be either: (1)
‘‘participating parties,’’ i.e., brokers or other
participants in the Continuous Net Settlement
System (‘‘CNS System’’) of the National Securities
Clearing Corporation (‘‘NSCC’’), a clearing agency
registered with the Commission and affiliated with
the Depository Trust Company (‘‘DTC’’), or (2) DTC
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Shares in amounts less than a Creation
Unit may be effected only in the
secondary market, as described below,
and not directly with the Fund.
The creation and redemption process
for Funds may be effected ‘‘in kind,’’ in
cash, or in a combination of securities
and cash. Creation ‘‘in kind’’ means that
an Authorized Participant—usually a
brokerage house or large institutional
investor—purchases the Creation Unit
with a basket of securities equal in value
to the aggregate NAV of the Shares in
the Creation Unit. When an Authorized
Participant redeems a Creation Unit in
kind, it receives a basket of securities
equal in value to the aggregate NAV of
the Shares in the Creation Unit.
Composition File
As defined in Nasdaq Rule 5745(c)(3),
the Composition File is the specified
portfolio of securities and/or cash that a
Fund will accept as a deposit in issuing
a Creation Unit of Shares, and the
specified portfolio of securities and/or
cash that a Fund will deliver in a
redemption of a Creation Unit of Shares.
The Composition File will be
disseminated through the NSCC once
each business day before the open of
trading in Shares on such day and also
will be made available to the public
each day on a free Web site.10 Because
the Funds seek to preserve the
confidentiality of their current portfolio
trading program, a Fund’s Composition
File generally will not be a pro rata
reflection of the Fund’s investment
positions. Each security included in the
Composition File will be a current
holding of the Fund, but the
Composition File generally will not
include all of the securities in the
Fund’s portfolio or match the
weightings of the included securities in
the portfolio. Securities that the Adviser
is in the process of acquiring for a Fund
generally will not be represented in the
Fund’s Composition File until their
purchase has been completed. Similarly,
securities that are held in a Fund’s
portfolio but in the process of being sold
may not be removed from its
Composition File until the sale program
is substantially completed. Funds
creating and redeeming Shares in kind
will use cash amounts to supplement
the in-kind transactions to the extent
necessary to ensure that Creation Units
participants, which in either case have executed
participant agreements with the Fund’s distributor
and transfer agent regarding the creation and
redemption of Creation Units. Investors will not
have to be Authorized Participants in order to
transact in Creation Units, but must place an order
through and make appropriate arrangements with
an Authorized Participant for such transactions.
10 The free Web site will be www.eatonvance.com
or www.nextshares.com.
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23833
are purchased and redeemed at NAV.
The Composition File also may consist
entirely of cash, in which case it will
not include any of the securities in the
Fund’s portfolio.11
Transaction Fees
All persons purchasing or redeeming
Creation Units are expected to incur a
transaction fee to cover the estimated
cost to the Fund of processing the
transaction, including the costs of
clearance and settlement charged to it
by NSCC or DTC, and the estimated
trading costs (i.e., brokerage
commissions, bid-ask spread and market
impact) to be incurred in converting the
Composition File to or from the desired
portfolio holdings. The transaction fee is
determined daily and will be limited to
amounts approved by the board of
trustees of a Fund and determined by
the Adviser to be appropriate to defray
the expenses that a Fund incurs in
connection with the purchase or
redemption of Creation Units. The
purpose of transaction fees is to protect
a Fund’s existing shareholders from the
dilutive costs associated with the
purchase and redemption of Creation
Units. Transaction fees will differ
among Funds and may vary over time
for a given Fund depending on the
estimated trading costs for its portfolio
positions and Composition File,
processing costs and other
considerations. Funds that specify
greater amounts of cash in their
Composition File may impose higher
transaction fees. In addition, Funds that
include in their Composition File
instruments that clear through DTC may
impose higher transaction fees than
Funds whose Composition File consists
solely of instruments that clear through
NSCC, because DTC may charge more
than NSCC in connection with Creation
Unit transactions.12 The transaction fees
applicable to each Fund’s purchases and
redemptions on a given business day
11 In determining whether a Fund will issue or
redeem Creation Units entirely on a cash basis, the
key consideration will be the benefit that would
accrue to the Fund and its investors. For instance,
in bond transactions, the Adviser may be able to
obtain better execution for a Fund than Authorized
Participants because of the Adviser’s size,
experience and potentially stronger relationships in
the fixed-income markets.
12 Authorized Participants that participate in the
CNS System of the NSCC are expected to be able
to use the enhanced NSCC/CNS process for
effecting in-kind purchases and redemptions of
ETFs (the ‘‘NSCC Process’’) to purchase and redeem
Creation Units of Funds that limit the composition
of their baskets to include only NSCC Processeligible instruments (generally domestic equity
securities and cash). Because the NSCC Process is
generally more efficient than the DTC clearing
process, NSCC is likely to charge a Fund less than
DTC to settle purchases and redemptions of
Creation Units.
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will be disseminated through the NSCC
prior to the open of market trading on
that day and also will be made available
to the public each day on a free Web
site.13 In all cases, the transaction fees
will be limited in accordance with the
requirements of the Commission
applicable to open-end management
investment companies offering
redeemable securities.
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NAV-Based Trading
Because Shares will be listed and
traded on the Exchange, Shares will be
available for purchase and sale on an
intraday basis. Shares will be purchased
and sold in the secondary market at
prices directly linked to the Fund’s
next-determined NAV using a new
trading protocol called ‘‘NAV-Based
Trading.’’ 14 All bids, offers and
execution prices of Shares will be
expressed as a premium/discount
(which may be zero) to the Fund’s nextdetermined NAV (e.g., NAV¥$0.01,
NAV+$0.01). A Fund’s NAV will be
determined each business day, normally
as of 4:00 p.m. Eastern Time. Trade
executions will be binding at the time
orders are matched on Nasdaq’s
facilities, with the transaction prices
contingent upon the determination of
NAV.
• Trading Premiums and Discounts.
Bid and offer prices for Shares will be
quoted throughout the day relative to
NAV. The premium or discount to NAV
at which Share prices are quoted and
transactions are executed will vary
depending on market factors, including
the balance of supply and demand for
Shares among investors, transaction fees
and other costs in connection with
creating and redeeming Creation Units
of Shares, the cost and availability of
borrowing Shares, competition among
market makers, the Share inventory
positions and inventory strategies of
market makers, the profitability
requirements and business objectives of
market makers, and the volume of Share
trading. Reflecting such market factors,
prices for Shares in the secondary
market may be above, at or below NAV.
Funds with higher transaction fees may
trade at wider premiums or discounts to
NAV than other Funds with lower
transaction fees, reflecting the added
costs to market makers of managing
13 The free Web site will be www.eatonvance.com
or www.nextshares.com.
14 Aspects of NAV-Based Trading are protected
intellectual property subject to issued and pending
U.S. patents held by Navigate Fund Solutions LLC
(‘‘Navigate’’), a wholly owned subsidiary of Eaton
Vance Corp. Nasdaq will enter into a license
agreement with Navigate to allow for NAV-Based
Trading on the Exchange of exchange-traded
managed funds that have themselves entered into
license agreements with Navigate.
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their Share inventory positions through
purchases and redemptions of Creation
Units.
Because making markets in Shares
will be simple to manage and low risk,
competition among market makers
seeking to earn reliable, low-risk profits
should enable the Shares to routinely
trade at tight bid-ask spreads and
narrow premiums/discounts to NAV. As
noted below, each Fund will maintain a
public Web site that will be updated on
a daily basis to show current and
historical trading spreads and
premiums/discounts of Shares trading
in the secondary market.
• Transmitting and Processing
Orders. Member firms will utilize
certain existing order types and
interfaces to transmit Share bids and
offers to Nasdaq, which will process
Share trades like trades in shares of
other listed securities.15 In the systems
used to transmit and process
transactions in Shares, a Fund’s nextdetermined NAV will be represented by
a proxy price (e.g., 100.00) and a
premium/discount of a stated amount to
the next-determined NAV to be
represented by the same increment/
decrement from the proxy price used to
denote NAV (e.g., NAV¥$0.01 would
be represented as 99.99; NAV+$0.01 as
100.01).
To avoid potential investor confusion,
Nasdaq will work with member firms
and providers of market data services to
seek to ensure that representations of
intraday bids, offers and execution
prices of Shares that are made available
to the investing public follow the
‘‘NAV¥$0.01/NAV+$0.01’’ (or similar)
display format. All Shares listed on the
Exchange will have a unique identifier
associated with their ticker symbols,
which would indicate that the Shares
are traded using NAV-Based Trading.
Nasdaq makes available to member
firms and market data services certain
proprietary data feeds that are designed
to supplement the market information
disseminated through the consolidated
tape (‘‘Consolidated Tape’’).
Specifically, the Exchange will use the
NASDAQ Basic and NASDAQ Last Sale
data feeds to disseminate intraday price
and quote data for Shares in real time
in the ‘‘NAV¥$0.01/NAV+$0.01’’ (or
similar) display format. Member firms
could use the NASDAQ Basic and
NASDAQ Last Sale data feeds to source
15 As noted below, all orders to buy or sell Shares
that are not executed on the day the order is
submitted will be automatically cancelled as of the
close of trading on such day. Prior to the
commencement of trading in a Fund, the Exchange
will inform its members in an Information Circular
of the effect of this characteristic on existing order
types.
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Fmt 4703
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intraday Share prices for presentation to
the investing public in the ‘‘NAV–$0.01/
NAV+$0.01’’ (or similar) display format.
Alternatively, member firms could
source intraday Share prices in proxy
price format from the Consolidated Tape
and other Nasdaq data feeds (e.g.,
Nasdaq TotalView and Nasdaq Level 2)
and use a simple algorithm to convert
prices into the ‘‘NAV¥$0.01/
NAV+$0.01’’ (or similar) display format.
As noted below, prior to the
commencement of trading in a Fund,
the Exchange will inform its members in
an Information Circular of the identities
of the specific Nasdaq data feeds from
which intraday Share prices in proxy
price format may be obtained.
• Intraday Reporting of Quotes and
Trades. All bids and offers for Shares
and all Share trade executions will be
reported intraday in real time by the
Exchange to the Consolidated Tape 16
and separately disseminated to member
firms and market data services through
the Exchange data feeds listed above.
The Exchange will also provide the
member firms participating in each
Share trade with a contemporaneous
notice of trade execution, indicating the
number of Shares bought or sold and the
executed premium/discount to NAV.17
• Final Trade Pricing, Reporting and
Settlement. All executed Share trades
will be recorded and stored intraday by
Nasdaq to await the calculation of the
Fund’s end-of-day NAV and the
determination of final trade pricing.
After a Fund’s NAV is calculated and
provided to the Exchange, Nasdaq will
price each Share trade entered into
during the day at the Fund’s NAV plus/
minus the trade’s executed premium/
discount. Using the final trade price,
each executed Share trade will then be
disseminated to member firms and
market data services via an FTP file to
be created for exchange-traded managed
funds and confirmed to the member
firms participating in the trade to
supplement the previously provided
information to include final pricing.18
16 Due to systems limitations, the Consolidated
Tape will report intraday execution prices and
quotes for Shares using a proxy price format. As
noted, Nasdaq will separately report real-time
execution prices and quotes to member firms and
providers of market data services in the
‘‘NAV¥$0.01/NAV+$0.01’’ (or similar) display
format, and otherwise seek to ensure that
representations of intraday bids, offers and
execution prices for Shares that are made available
to the investing public follow the same display
format.
17 All orders to buy or sell Shares that are not
executed on the day the order is submitted will be
automatically cancelled as of the close of trading on
such day.
18 File Transfer Protocol (‘‘FTP’’) is a standard
network protocol used to transfer computer files on
the Internet. Nasdaq will arrange for the daily
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After the pricing is finalized, Nasdaq
will deliver the Share trading data to
NSCC for clearance and settlement,
following the same processes used for
the clearance and settlement of trades in
other exchange-traded securities.
Availability of Information
Prior to the commencement of market
trading in Shares, each Fund will be
required to establish and maintain a
public Web site through which its
current prospectus may be downloaded.
The Web site will include additional
Fund information updated on a daily
basis, including the prior business day’s
NAV, and the following trading
information for such business day
expressed as premiums/discounts to
NAV: (a) Intraday high, low, average
and closing prices of Shares in
Exchange trading; (b) the midpoint of
the highest bid and lowest offer prices
as of the close of Exchange trading,
expressed as a premium/discount to
NAV (the ‘‘Closing Bid/Ask Midpoint’’);
and (c) the spread between highest bid
and lowest offer prices as of the close of
Exchange trading (the ‘‘Closing Bid/Ask
Spread.’’). The Web site will also
contain charts showing the frequency
distribution and range of values of
trading prices, Closing Bid/Ask
Midpoints and Closing Bid/Ask Spreads
over time.
The Composition File will be
disseminated through the NSCC before
the open of trading in Shares on each
business day and also will be made
available to the public each day on a
free Web site. Consistent with the
disclosure requirements that apply to
traditional open-end investment
companies, a complete list of current
Fund portfolio positions will be made
available at least once each calendar
quarter, with a reporting lag of not more
than 60 days. Funds may provide more
frequent disclosures of portfolio
positions at their discretion.
Reports of Share transactions will be
disseminated to the market and
delivered to the member firms
participating in the trade
contemporaneous with execution. Once
a Fund’s daily NAV has been calculated
and disseminated, Nasdaq will price
each Share trade entered into during the
day at the Fund’s NAV plus/minus the
trade’s executed premium/discount.
Using the final trade price, each
executed Share trade will then be
disseminated to member firms and
market data services via an FTP file to
be created for exchange-traded managed
funds and confirmed to the member
dissemination of an FTP file with executed Share
trades to member firms and market data services.
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firms participating in the trade to
supplement the previously provided
information to include final pricing.
Information regarding NAV-based
trading prices, best bids and offers for
Shares, and volume of Shares traded
will be continuously available on a realtime basis throughout each trading day
on brokers’ computer screens and other
electronic services.
Initial and Continued Listing
Shares will conform to the initial and
continued listing criteria as set forth
under Nasdaq Rule 5745. A minimum of
50,000 Shares and no less than two
Creation Units of each Fund will be
outstanding at the commencement of
trading on the Exchange. The Exchange
will obtain a representation from the
issuer of the Shares that the NAV per
Share will be calculated daily and
provided to Nasdaq via the Mutual
Fund Quotation Service (‘‘MFQS’’) by
the fund accounting agent. As soon as
the NAV is entered into MFQS, Nasdaq
will disseminate the value to market
participants and market data vendors
via the Mutual Fund Dissemination
Service (‘‘MFDS’’) so all firms will
receive the data element at the same
time.
For each series of Shares, an
estimated value of an individual Share,
defined in Nasdaq Rule 5745(c)(2) as the
‘‘Intraday Indicative Value,’’ will be
calculated and disseminated at intervals
of not more than 15 minutes throughout
the Regular Market Session 19 when
Shares trade on the Exchange. The
Exchange will obtain a representation
from the issuer of the Shares that the IIV
will be calculated on an intraday basis
and provided to Nasdaq for
dissemination via the Nasdaq Global
Index Service (‘‘GIDS’’). The IIV will be
based on current information regarding
the value of the securities and other
assets held by a Fund.20 The purpose of
the IIVs is to enable investors to
estimate the next-determined NAV so
they can determine the number of
Shares to buy or sell if they want to
transact in an approximate dollar
amount (e.g., if an investor wants to
acquire approximately $5,000 of a Fund,
19 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. E.T.; (2)
Regular Market Session from 9:30 a.m. to 4 p.m. or
4:15 p.m. E.T.; and (3) Post-Market Session from 4
p.m. or 4:15 p.m. to 8 p.m. E.T.).
20 IIVs disseminated throughout each trading day
would be based on the same portfolio as used to
calculate that day’s NAV. Funds will reflect
purchases and sales of portfolio positions in their
NAV the next business day after trades are
executed.
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23835
how many Shares should the investor
buy?).21
The Adviser is not a broker-dealer,
although it is affiliated with a brokerdealer. The Adviser has implemented a
fire wall with respect to its brokerdealer affiliate regarding access to
information concerning the composition
and/or changes to each Fund’s portfolio.
In the event (a) the Adviser registers as
a broker-dealer or becomes newly
affiliated with a broker-dealer, or (b) any
new adviser or a sub-adviser to a Fund
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 brokerdealer affiliate, if applicable, regarding
access to information concerning the
composition and/or changes to the
relevant Fund’s portfolio and will be
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding such portfolio.
Trading Halts
The Exchange may consider all
relevant factors in exercising its
discretion to halt or suspend trading in
Shares. Nasdaq will halt trading in
Shares under the conditions specified in
Nasdaq Rules 4120 and in Nasdaq Rule
5745(d)(2)(C). Additionally, Nasdaq may
cease trading Shares if other unusual
conditions or circumstances exist
which, in the opinion of Nasdaq, make
further dealings on Nasdaq detrimental
to the maintenance of a fair and orderly
market. To manage the risk of a nonregulatory Share trading halt, Nasdaq
has in place back-up processes and
procedures to ensure orderly trading.
Because, in NAV-Based Trading, all
trade execution prices are linked to endof-day NAV, buyers and sellers of
Shares should be less exposed to risk of
loss due to intraday trading halts than
buyers and sellers of conventional
exchange-traded funds (‘‘ETFs’’) and
other exchange-traded securities.
Trading Rules
Nasdaq deems Shares to be equity
securities, thus rendering trading in
Shares to be subject to Nasdaq’s existing
rules governing the trading of equity
securities. Nasdaq will allow trading in
21 Because, in NAV-Based Trading, prices of
executed trades are not determined until the
reference NAV is calculated, buyers and sellers of
Shares during the trading day will not know the
final value of their purchases and sales until the
end of the trading day. A Fund’s Registration
Statement, Web site and any advertising or
marketing materials will include prominent
disclosure of this fact. Although IIVs may provide
useful estimates of the value of intraday trades, they
cannot be used to calculate with precision the
dollar value of the Shares to be bought or sold.
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Shares from 9:30 a.m. until 4:00 p.m.
Eastern Time.
Surveillance
mstockstill on DSK4VPTVN1PROD with NOTICES
The Exchange represents that trading
in Shares will be subject to the existing
trading surveillances, administered by
both Nasdaq and the Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’) on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws.22 The Exchange
represents that these procedures are
adequate to properly monitor trading of
Shares on the Exchange and to deter and
detect violations of Exchange rules and
applicable federal securities laws.
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows and
investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
FINRA, on behalf of the Exchange,
will communicate as needed with other
markets and other entities that are
members of the Intermarket
Surveillance Group (‘‘ISG’’) 23 regarding
trading in Shares, and in exchangetraded securities and instruments held
by the Funds (to the extent such
exchange-traded securities and
instruments are known through the
publication of the Composition File and
periodic public disclosures of a Fund’s
portfolio holdings), and FINRA may
obtain trading information regarding
such trading from other markets and
other entities. In addition, the Exchange
may obtain information regarding
trading in Shares, and in exchangetraded securities and instruments held
by the Funds (to the extent such
exchange-traded securities and
instruments are known through the
publication of the Composition File and
periodic public disclosures of a Fund’s
portfolio holdings), from markets and
other entities that are members of ISG,
which includes securities and futures
exchanges, or with which the Exchange
22 FINRA provides surveillance of trading on the
Exchange pursuant to a regulatory services
agreement. The Exchange is responsible for
FINRA’s performance under this regulatory services
agreement.
23 For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all
components of a Fund’s portfolio may trade on
markets that are members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.
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has in place a comprehensive
surveillance sharing agreement.
In addition, the Exchange also has a
general policy prohibiting the
distribution of material non-public
information by its employees.
current processes for newly listed
products. Nasdaq intends to provide its
members with a detailed explanation of
NAV-Based Trading through a Trading
Alert issued prior to the commencement
of trading in Shares on the Exchange.
Information Circular
Prior to the commencement of trading
in a Fund, 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: (1) The
procedures for purchases and
redemptions of Shares in Creation Units
(and noting that Shares are not
individually redeemable); (2) Nasdaq
Rule 2111A, which imposes suitability
obligations on Nasdaq members with
respect to recommending transactions in
Shares to customers; (3) how
information regarding the IIV and
Composition File is disseminated; (4)
the requirement that members deliver a
prospectus to investors purchasing
Shares prior to or concurrently with the
confirmation of a transaction; and (5)
information regarding NAV-Based
Trading protocols.
As noted above, all orders to buy or
sell Shares that are not executed on the
day the order is submitted will be
automatically cancelled as of the close
of trading on such day. The Information
Circular will discuss the effect of this
characteristic on existing order types.
The Information Circular also will
identify the specific Nasdaq data feeds
from which intraday Share prices in
proxy price format may be obtained.
In addition, the Information Circular
will advise members, prior to the
commencement of trading, of the
prospectus delivery requirements
applicable to the Funds. Members
purchasing Shares from a Fund for
resale to investors will deliver a
summary prospectus to such investors.
The Information Circular will also
discuss any exemptive, no-action and
interpretive relief granted by the
Commission from any rules under the
Act.
The Information Circular also will
reference that the Funds are subject to
various fees and expenses described in
the Registration Statements. The
Information Circular will also disclose
the trading hours of the Shares and the
applicable NAV calculation time for the
Shares. The Information Circular will
disclose that information about the
Shares will be publicly available on the
Fund’s Web site.
Information regarding Fund trading
protocols will be disseminated to
Nasdaq members in accordance with
2. Statutory Basis
Nasdaq believes that the proposal is
consistent with Section 6(b) of the Act 24
in general, and Section 6(b)(5) of the
Act 25 in particular, in that it is 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, and to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares
would be listed and traded on the
Exchange pursuant to the initial and
continued listing criteria in Nasdaq Rule
5745. The Exchange believes that its
surveillance procedures are adequate to
properly monitor the trading of Shares
on Nasdaq and to deter and detect
violations of Exchange rules and the
applicable federal securities laws. The
Adviser is affiliated with a broker-dealer
and has implemented a ‘‘fire wall’’
between the investment adviser and the
broker-dealer affiliate with respect to
access to information concerning the
composition and/or changes to the
Funds’ portfolio holdings. The
Exchange may obtain information via
ISG from other exchanges that are
members of ISG or with which the
Exchange has entered into a
comprehensive surveillance sharing
agreement, to the extent necessary.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest. The Exchange will
obtain a representation from each issuer
of Shares that the NAV per Share will
be calculated on each business day that
the New York Stock Exchange is open
for trading and that the NAV will be
made available to all market
participants at the same time. In
addition, a large amount of information
would be publicly available regarding
the Funds and the Shares, thereby
promoting market transparency.
Prior to the commencement of market
trading in Shares, the Funds will be
required to establish and maintain a
public Web site through which its
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24 15
25 15
E:\FR\FM\29APN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
29APN1
mstockstill on DSK4VPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 82 / Wednesday, April 29, 2015 / Notices
current prospectus may be downloaded.
The Web site will display additional
Fund information updated on a daily
basis, including the prior business day’s
NAV, and the following trading
information for such business day
expressed as premiums/discounts to
NAV: (a) Intraday high, low, average
and closing prices of Shares in
Exchange trading; (b) the Closing Bid/
Ask Midpoint; and (c) the Closing Bid/
Ask Spread. The Web site will also
contain charts showing the frequency
distribution and range of values of
trading prices, Closing Bid/Ask
Midpoints and Closing Bid/Ask Spreads
over time. The Composition File will be
disseminated through the NSCC before
the open of trading in Shares on each
business day and also will be made
available to the public each day on a
free Web site. The Exchange will obtain
a representation from the issuer of the
Shares that the IIV will be calculated
and disseminated on an intraday basis
at intervals of not more than 15 minutes
during trading on the Exchange and
provided to Nasdaq for dissemination
via GIDS. A complete list of current
portfolio positions for the Funds will be
made available at least once each
calendar quarter, with a reporting lag of
not more than 60 days. Funds may
provide more frequent disclosures of
portfolio positions at their discretion.
Transactions in Shares will be
reported to the Consolidated Tape at the
time of execution in proxy price format
and will be disseminated to member
firms and market data services through
Nasdaq’s trading service and market
data interfaces, as defined above. Once
each Fund’s daily NAV has been
calculated and the final price of its
intraday Share trades has been
determined, Nasdaq will deliver a
confirmation with final pricing to the
transacting parties. At the end of the
day, Nasdaq will also post a newly
created FTP file with the final
transaction data for the trading and
market data services. The Exchange
expects that information regarding
NAV-based trading prices and volumes
of Shares traded will be continuously
available on a real-time basis throughout
each trading day on brokers’ computer
screens and other electronic services.
Because Shares will trade at prices
based on the next-determined NAV,
investors will be able to buy and sell
individual Shares at a known premium
or discount to NAV that they can limit
by transacting using limit orders at the
time of order entry. Trading in Shares
will be subject to Nasdaq Rules
5745(d)(2)(B) and (C), which provide for
the suspension of trading or trading
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17:18 Apr 28, 2015
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halts under certain circumstances,
including if, in the view of the
Exchange, trading in Shares becomes
inadvisable.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of the Funds, which seek to provide
investors with access to a broad range of
actively managed investment strategies
in a structure that offers the cost and tax
efficiencies and shareholder protections
of ETFs, while removing the
requirement for daily portfolio holdings
disclosure to ensure a tight relationship
between market trading prices and
NAV.
For the above reasons, Nasdaq
believes the proposed rule change is
consistent with the requirements of
Section 6(b)(5) of the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. In fact, the
Exchange believes that the introduction
of the Funds would promote
competition by making available to
investors a broad range of actively
managed investment strategies in a
structure that offers the cost and tax
efficiencies and shareholder protections
of ETFs, while removing the
requirement for daily portfolio holdings
disclosure to ensure a tight relationship
between market trading prices and
NAV. Moreover, the Exchange believes
that the proposed method of Share
trading would provide investors with
transparency of trading costs, and the
ability to control trading costs using
limit orders, that is not available for
conventionally traded ETFs.
These developments could
significantly enhance competition to the
benefit of the markets and investors.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
PO 00000
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23837
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will: (a) By
order approve or disapprove such
proposed rule change; or (b) institute
proceedings to determine whether the
proposed rule change should be
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an Email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2015–036 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2015–036. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
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Federal Register / Vol. 80, No. 82 / Wednesday, April 29, 2015 / Notices
NASDAQ–2015–036 and should be
submitted on or before May 20, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Brent J. Fields,
Secretary.
[FR Doc. 2015–09919 Filed 4–28–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–74796; File No. SR–
NYSEArca-2015–08]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change To Eliminate
Additional Order Type Combinations,
Delete Related Rule Text, Restructure
the Remaining Rule Text in NYSE Arca
Equities Rule 7.31, and Make Other
Clarifying Changes to Its Rules
April 23, 2015.
mstockstill on DSK4VPTVN1PROD with NOTICES
I. Introduction
On February 19, 2015, NYSE Arca,
Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to reorganize, revise and clarify
the order type and order modifier
definitions found in NYSE Arca Equities
Rule (‘‘Rule’’) 7.31; make certain
conforming and clarifying changes to
Rules 7.35, 7.36, 7.37 and 7.38; and
eliminate certain order type
functionality from the restructured rule.
The proposed rule change was
published for comment in the Federal
Register on March 9, 2015.3 The
Commission received no comment
letters regarding the proposed rule
change. This order approves the
proposed rule change.
II. Description of the Proposal
On June 5, 2014, in a speech entitled
‘‘Enhancing Our Market Equity
Structure,’’ Mary Jo White, Chair of the
Commission, requested that the equity
exchanges conduct a comprehensive
review of their order types and how
they operate in practice, and as part of
this review, consider appropriate rule
changes to help clarify the nature of
their order types.4 The Exchange has
26 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 74415
(March 3, 2015), 80 FR 12537 (‘‘Notice’’).
4 See Mary Jo White, Chair, Commission, Speech
at the Sandler, O’Neill & Partners, L.P. Global
1 15
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17:18 Apr 28, 2015
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filed this proposed rule change to
continue its efforts to review and clarify
its rules governing order types.5
The Exchange proposes to reorganize
and revise its existing order type and
modifier definitions in Rule 7.31.
Specifically, proposed Rule 7.31(a)
would contain the revised Exchange
definitions for Market Orders, Limit
Orders, and Inside Limit Orders
(collectively ‘‘primary order types’’).6
The revised Market Order definition
would specify that it cannot be
designated Immediate-or-Cancel (‘‘IOC’’)
and that it would be rejected in the
absence of a contra-side bid or offer.7
The revised Limit Order definition
would specify that a ‘‘marketable’’ Limit
Order is one to buy (sell) at or above
(below) the contra- contra-side Protected
Best Bid or Offer for the security.8 The
revised Inside Limit Order definition
would clarify how the order is routed,
the handling of any returning remainder
of such order after routing, and that
such orders may not be designated IOC.9
Proposed Rule 7.31(b) would contain
the definitions for the Exchange’s Timein-Force (‘‘TIF’’) Modifiers: Day, Good
Till Cancelled, Good Till Date, IOC, and
Fill-or-Kill.10 The definition for the
NOW Order designation would also be
relocated and re-designated as a TIF
Modifier in proposed Rule 7.31(b)(5).11
Proposed Rule 7.31(c) would contain
the Exchange’s revised definitions for
Limit-on-Open Orders, Market-on-Open
Orders, Limit-on-Close Orders, and
Market-on-Close Orders (collectively
‘‘Auction-Only Orders’’).12 The revised
definitions would clarify that the
Exchange would reject Auction-Only
Orders in securities that are not eligible
for an auction, or if an auction is
suspended pursuant to Rule 7.35(g).13
Proposed Rule 7.31(d) would contain
the Exchange’s revised and reformatted
definitions for Reserve Orders, Passive
Liquidity Orders, and Mid-Point Passive
Liquidity (‘‘MPL’’) Orders (collectively
‘‘Working Orders’’).14 The revised
Reserve Order definition would clarify
that such an order could not be
Exchange and Brokerage Conference (June 5, 2014)
(available at www.sec.gov/News/Speech/Detail/
Speech/1370542004312#.U5HI-fmwJiw).
5 See Notice, 80 FR at 12537.
6 See Notice, 80 FR at 12538.
7 Id.
8 Id. The Exchange also proposes to capitalize the
term ‘‘Limit Orders’’ where used in the rule. Id.
9 Id. The Exchange also proposes to state in
proposed Rule 7.31(a)(3) that Inside Limit Orders
may be designated with a NOW Modifier. Id.
10 See Notice, 80 FR at 12539.
11 Id.
12 Id.
13 Id.
14 Id.
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
designated IOC.15 Currently, the All-orNone (‘‘AON’’) Order is offered as a
Working Order, however the Exchange
proposes to eliminate the
functionality.16
Proposed Rule 7.31(e) would contain
the Exchange’s revised definitions for
Adding Liquidity Only (‘‘ALO’’) Orders,
Intermarket Sweep Orders, Post No
Preference (‘‘PNP’’) Orders, PNP Blind
Orders, Cross Orders, and Tracking
Orders (collectively ‘‘non-routable
orders’’).17 Proposed Rule 7.31(e)(4)
would clarify that PNP Blind Orders
combined with the ALO modifier may
not also be designated as a Reserve
Order.18
Proposed Rule 7.31(f) would contain
the Exchange’s revised definitions for
Primary Only Orders, Primary Until
9:45 Orders, and Primary After 3:55
Orders (collectively ‘‘specified routing
instructions’’).19 The Primary Sweep
Order is currently offered as a specified
routing instruction, however the
Exchange proposes to eliminate the
functionality.20
Proposed Rule 7.31(g) would contain
the Exchange’s definitions for other
existing order types and modifiers,
including the Pegged Order, Proactive if
Locked Modifier, Do Not Reduce
Modifier, Do Not Increase Modifier, and
Self-Trade Prevention (‘‘STP’’)
Modifier.21
Proposed Rule 7.31(h) would contain
the Exchange’s revised Q Order
definition clarifying that such orders do
not route.22
The Exchange also proposes to amend
and conform Rules 7.35, 7.36, 7.37 and
7.38 to proposed Rule 7.31 as it relates
cross references, term usage and
capitalization.23 In addition to certain
technical changes, proposed Rule 7.35
would be updated to reflect that the
Exchange no longer conducts a closing
auction for certain NYSE-listed
securities, does not run a Market Order
Auction in Nasdaq-listed securities, and
only runs a Trading Halt Auction in
securities that are listed on the
Exchange.24 In addition to certain
technical changes, proposed Rule 7.36
would be amended to clarify how, for
15 See
Notice, 80 FR at 12538.
Notice, 80 FR at 12537–38. The Exchange
also proposes conforming changes to other rules to
reflect the elimination of AON Orders. See Notice,
80 FR at 12358; see also proposed Rules 7.36 and
7.37.
17 See Notice, 80 FR at 12539–40.
18 See Notice, 80 FR at 12538.
19 See Notice, 80 FR at 12540.
20 See Notice, 80 FR at 12538.
21 See Notice, 80 FR at 12540.
22 Id.
23 See Notice, 80 FR at 12540–41.
24 See Notice, 80 FR at 12540.
16 See
E:\FR\FM\29APN1.SGM
29APN1
]]>Agencies
[Federal Register Volume 80, Number 82 (Wednesday, April 29, 2015)]
[Notices]
[Pages 23831-23838]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09919]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74797; File No. SR-NASDAQ-2015-036]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change, as Modified by Amendments
Nos. 1 and 2 Thereto, Relating to the Listing and Trading of the Shares
of 18 Eaton Vance NextShares ETMFs of Either the Eaton Vance ETMF Trust
or the Eaton Vance ETMF Trust II
April 23, 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, The NASDAQ Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. On April 21,
2015, the Exchange filed Amendments Nos. 1 and 2 to the proposal.\3\
The Commission is publishing this notice to solicit comments on the
proposed rule change, as modified by Amendments Nos. 1 and 2 thereto,
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 amended and replaced the proposed rule
change in its entirety. Amendment No. 2 subsequently amended the
proposal to include a new footnote to reflect a Web site reference.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
Nasdaq proposes to list and trade under Nasdaq Rule 5745 (Exchange-
Traded Managed Fund Shares) the common shares (``Shares'') of the
below-listed exchange-traded managed funds (each, a ``Fund,'' and
collectively, the ``Funds''):
Eaton Vance Balanced NextShares TM
Eaton Vance Global Dividend Income NextShares TM
Eaton Vance Growth NextShares TM
Eaton Vance Large-Cap Value NextShares TM
Eaton Vance Richard Bernstein All Asset Strategy NextShares
TM
Eaton Vance Richard Bernstein Equity Strategy NextShares TM
Eaton Vance Small-Cap NextShares TM
Eaton Vance Stock NextShares TM
Parametric Emerging Markets NextShares TM
Parametric International Equity NextShares TM
Eaton Vance Bond NextShares TM
Eaton Vance TABS 5-to-15 Year Laddered Municipal Bond NextShares
TM
Eaton Vance Floating-Rate & High Income NextShares TM
Eaton Vance Global Macro Absolute Return NextShares TM
Eaton Vance Government Obligations NextShares TM
Eaton Vance High Income Opportunities NextShares TM
Eaton Vance High Yield Municipal Income NextShares TM
Eaton Vance National Municipal Income NextShares TM
Each Fund is a series of either Eaton Vance ETMF Trust or Eaton
Vance ETMF Trust II (each, a ``Trust,'' and together, the ``Trusts'').
The text of the proposed rule change is available at https://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, and at the
Commission's Public Reference Room.
[[Page 23832]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, Nasdaq included statements
concerning the purpose of, and basis for, the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. Nasdaq 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 Exchange proposes to list and trade the Shares of each Fund
under Nasdaq Rule 5745, which governs the listing and trading of
exchange-traded managed fund shares, as defined in Nasdaq Rule
5745(c)(1), on the Exchange.\4\ Each Trust is registered with the
Commission as an open-end investment company and has filed a
registration statement on Form N-1A (``Registration Statement'') with
the Commission.\5\ Each Fund is a series of a Trust.\6\
---------------------------------------------------------------------------
\4\ The Commission approved Nasdaq Rule 5745 in Securities
Exchange Act Release No. 34-73562 (Nov. 7, 2014), 79 FR 68309 (Nov.
14, 2014) (SR-NASDAQ-2014-020). The Funds would be the first
exchange-traded managed funds listed on the Exchange.
\5\ See Registration Statements on Form N-1A for the Eaton Vance
NextShares Trust dated April 9, 2015 (File Nos. 333-197733 and 811-
22982) and for the Eaton Vance NextShares Trust II dated April 9,
2015 (File Nos. 333-197734 and 811-22983). The descriptions of the
Funds and the Shares contained herein conform to the Registration
Statements.
\6\ The Commission has issued an order granting the Trusts and
certain affiliates exemptive relief under the Investment Company Act
(the ``Exemptive Order''). See Investment Company Act Release No.
31361 (Dec. 2, 2014) (File No. 812-14139). In compliance with Nasdaq
Rule 5745(b)(5), which applies to Shares based on an international
or global portfolio, the application for exemptive relief under the
Investment Company Act states that the Funds will comply with the
federal securities laws in accepting securities for deposits and
satisfying redemptions with securities, including that the
securities accepted for deposits and the securities used to satisfy
redemption requests are sold in transactions that would be exempt
from registration under the Securities Act of 1933, as amended (15
U.S.C. 77a) (``Securities Act'').
---------------------------------------------------------------------------
Eaton Vance Management will be the investment adviser (``Adviser'')
to the Funds. Foreside Fund Services, LLC will be the principal
underwriter and distributor of each Fund's Shares. State Street Bank
and Trust Company will act as the administrator, accounting agent,
custodian and transfer agent to the Funds. Interactive Data Corporation
will be the intraday indicative value (``IIV'') calculator to the
Funds.
Principal Investment Strategies Applicable to Each Fund
Each Fund will be actively managed and will pursue the various
principal investment strategies described below.\7\
---------------------------------------------------------------------------
\7\ Additional information regarding the Funds will be available
on the public Web site for the Funds and in the Registration
Statements for the Funds. See supra note 5.
---------------------------------------------------------------------------
Eaton Vance Balanced NextShares TM
The investment objective of this Fund is to provide current income
and long-term growth of capital. The Fund normally will invest between
50% and 75% of its net assets in equity securities and between 25% and
50% of its net assets in fixed-income securities.
Eaton Vance Global Dividend Income NextShares TM
The investment objective of this Fund is to provide current income
and long-term growth of capital. The Fund normally will invest
primarily in common stocks and, in the adviser's discretion, preferred
stocks of U.S. and foreign companies that pay dividends.
Eaton Vance Growth NextShares TM
The investment objective of this Fund is total return. The Fund
will invest in a broadly diversified selection of equity securities,
seeking companies with above-average growth and financial strength.
Under normal market conditions, the Fund will invest primarily in
large-cap companies.
Eaton Vance Large-Cap Value NextShares TM
The investment objective of this Fund is total return. Under normal
market conditions, the Fund will invest primarily in value stocks of
large-cap companies.
Eaton Vance Richard Bernstein All Asset Strategy NextShares
TM
The investment objective of this Fund is total return. In seeking
its investment objective, the Fund will have flexibility to allocate
its assets in markets around the world and among various asset classes,
including equity, fixed-income, commodity, currency and cash
investments.
Eaton Vance Richard Bernstein Equity Strategy NextShares TM
The investment objective of this Fund is total return. Under normal
market conditions, the Fund will invest primarily in equity securities
and derivative instruments that provide exposure to equity securities.
Eaton Vance Small-Cap NextShares TM
The investment objective of this Fund is long-term capital
appreciation. The Fund normally will invest primarily in equity
securities of small-cap companies.
Eaton Vance Stock NextShares TM
The investment objective of this Fund is to achieve long-term
capital appreciation by investing in a diversified portfolio of equity
securities. The Fund normally will invest primarily in a diversified
portfolio of common stocks.
Parametric Emerging Markets NextShares TM
The investment objective of this Fund is long-term capital
appreciation. The Fund normally will invest primarily in equity
securities of companies located in emerging market countries.
Parametric International Equity NextSharesTM
The investment objective of this Fund is long-term capital
appreciation. The Fund normally will invest primarily in companies
domiciled in developed markets outside of the United States, including
securities trading in the form of depositary receipts.
Eaton Vance Bond NextSharesTM
The investment objective of this Fund is total return. The Fund
normally will invest primarily in bonds and other fixed and floating-
rate income instruments.
Eaton Vance TABS 5-to-15 Year Laddered Municipal Bond
NextSharesTM
The investment objective of this Fund is to provide current income
exempt from regular federal income tax. The Fund normally will invest
primarily in municipal obligations with remaining maturities of between
5 and 15 years, the interest on which is exempt from regular federal
income tax.
Eaton Vance Floating-Rate & High Income NextSharesTM
The investment objective of this Fund is to provide a high level of
current income. The Fund normally will invest primarily in a
combination of income-producing floating rate loans and other floating
rate debt securities and high-yield corporate bonds.
Eaton Vance Global Macro Absolute Return NextSharesTM
The investment objective of this Fund is total return. The Fund
will seek its investment objective by investing in securities,
derivatives and other
[[Page 23833]]
instruments to establish long and short investment exposures around the
world.
Eaton Vance Government Obligations NextSharesTM
The investment objective of this Fund is to provide a high current
return. The Fund normally will invest primarily in securities issued,
backed or otherwise guaranteed by the U.S. Government, its agencies or
instrumentalities.
Eaton Vance High Income Opportunities NextSharesTM
The primary investment objective of this Fund is to provide a high
level of current income. The Fund will seek growth of capital as a
secondary investment objective. The Fund normally will invest primarily
in fixed-income securities, including preferred stocks, senior and
subordinated floating rate loans, and convertible securities.
Eaton Vance High Yield Municipal Income NextSharesTM
The investment objective of this Fund is to provide high current
income exempt from regular federal income tax. The Fund normally will
invest primarily in municipal obligations, the interest on which is
exempt from regular federal income tax.
Eaton Vance National Municipal Income NextSharesTM
The investment objective of this Fund is to provide current income
exempt from regular federal income tax. The Fund normally will invest
primarily in municipal obligations, the interest on which is exempt
from regular federal income tax.
Creations and Redemptions of Shares
Shares will be issued and redeemed on a daily basis at the Fund's
next-determined net asset value (``NAV'') \8\ in specified blocks of
Shares called ``Creation Units.'' A Creation Unit will consist of at
least 25,000 Shares. Creation Units may be purchased and redeemed by or
through ``Authorized Participants.'' \9\ Purchases and sales of Shares
in amounts less than a Creation Unit may be effected only in the
secondary market, as described below, and not directly with the Fund.
---------------------------------------------------------------------------
\8\ As with other registered open-end investment companies, NAV
generally will be calculated daily Monday through Friday as of the
close of regular trading on the New York Stock Exchange, normally
4:00 p.m. Eastern Time. NAV will be calculated by dividing a Fund's
net asset value by the number of Shares outstanding. Information
regarding the valuation of investments in calculating a Fund's NAV
will be contained in the Registration Statement for its Shares.
\9\ ``Authorized Participants'' will be either: (1)
``participating parties,'' i.e., brokers or other participants in
the Continuous Net Settlement System (``CNS System'') of the
National Securities Clearing Corporation (``NSCC''), a clearing
agency registered with the Commission and affiliated with the
Depository Trust Company (``DTC''), or (2) DTC participants, which
in either case have executed participant agreements with the Fund's
distributor and transfer agent regarding the creation and redemption
of Creation Units. Investors will not have to be Authorized
Participants in order to transact in Creation Units, but must place
an order through and make appropriate arrangements with an
Authorized Participant for such transactions.
---------------------------------------------------------------------------
The creation and redemption process for Funds may be effected ``in
kind,'' in cash, or in a combination of securities and cash. Creation
``in kind'' means that an Authorized Participant--usually a brokerage
house or large institutional investor--purchases the Creation Unit with
a basket of securities equal in value to the aggregate NAV of the
Shares in the Creation Unit. When an Authorized Participant redeems a
Creation Unit in kind, it receives a basket of securities equal in
value to the aggregate NAV of the Shares in the Creation Unit.
Composition File
As defined in Nasdaq Rule 5745(c)(3), the Composition File is the
specified portfolio of securities and/or cash that a Fund will accept
as a deposit in issuing a Creation Unit of Shares, and the specified
portfolio of securities and/or cash that a Fund will deliver in a
redemption of a Creation Unit of Shares. The Composition File will be
disseminated through the NSCC once each business day before the open of
trading in Shares on such day and also will be made available to the
public each day on a free Web site.\10\ Because the Funds seek to
preserve the confidentiality of their current portfolio trading
program, a Fund's Composition File generally will not be a pro rata
reflection of the Fund's investment positions. Each security included
in the Composition File will be a current holding of the Fund, but the
Composition File generally will not include all of the securities in
the Fund's portfolio or match the weightings of the included securities
in the portfolio. Securities that the Adviser is in the process of
acquiring for a Fund generally will not be represented in the Fund's
Composition File until their purchase has been completed. Similarly,
securities that are held in a Fund's portfolio but in the process of
being sold may not be removed from its Composition File until the sale
program is substantially completed. Funds creating and redeeming Shares
in kind will use cash amounts to supplement the in-kind transactions to
the extent necessary to ensure that Creation Units are purchased and
redeemed at NAV. The Composition File also may consist entirely of
cash, in which case it will not include any of the securities in the
Fund's portfolio.\11\
---------------------------------------------------------------------------
\10\ The free Web site will be www.eatonvance.com or
www.nextshares.com.
\11\ In determining whether a Fund will issue or redeem Creation
Units entirely on a cash basis, the key consideration will be the
benefit that would accrue to the Fund and its investors. For
instance, in bond transactions, the Adviser may be able to obtain
better execution for a Fund than Authorized Participants because of
the Adviser's size, experience and potentially stronger
relationships in the fixed-income markets.
---------------------------------------------------------------------------
Transaction Fees
All persons purchasing or redeeming Creation Units are expected to
incur a transaction fee to cover the estimated cost to the Fund of
processing the transaction, including the costs of clearance and
settlement charged to it by NSCC or DTC, and the estimated trading
costs (i.e., brokerage commissions, bid-ask spread and market impact)
to be incurred in converting the Composition File to or from the
desired portfolio holdings. The transaction fee is determined daily and
will be limited to amounts approved by the board of trustees of a Fund
and determined by the Adviser to be appropriate to defray the expenses
that a Fund incurs in connection with the purchase or redemption of
Creation Units. The purpose of transaction fees is to protect a Fund's
existing shareholders from the dilutive costs associated with the
purchase and redemption of Creation Units. Transaction fees will differ
among Funds and may vary over time for a given Fund depending on the
estimated trading costs for its portfolio positions and Composition
File, processing costs and other considerations. Funds that specify
greater amounts of cash in their Composition File may impose higher
transaction fees. In addition, Funds that include in their Composition
File instruments that clear through DTC may impose higher transaction
fees than Funds whose Composition File consists solely of instruments
that clear through NSCC, because DTC may charge more than NSCC in
connection with Creation Unit transactions.\12\ The transaction fees
applicable to each Fund's purchases and redemptions on a given business
day
[[Page 23834]]
will be disseminated through the NSCC prior to the open of market
trading on that day and also will be made available to the public each
day on a free Web site.\13\ In all cases, the transaction fees will be
limited in accordance with the requirements of the Commission
applicable to open-end management investment companies offering
redeemable securities.
---------------------------------------------------------------------------
\12\ Authorized Participants that participate in the CNS System
of the NSCC are expected to be able to use the enhanced NSCC/CNS
process for effecting in-kind purchases and redemptions of ETFs (the
``NSCC Process'') to purchase and redeem Creation Units of Funds
that limit the composition of their baskets to include only NSCC
Process-eligible instruments (generally domestic equity securities
and cash). Because the NSCC Process is generally more efficient than
the DTC clearing process, NSCC is likely to charge a Fund less than
DTC to settle purchases and redemptions of Creation Units.
\13\ The free Web site will be www.eatonvance.com or
www.nextshares.com.
---------------------------------------------------------------------------
NAV-Based Trading
Because Shares will be listed and traded on the Exchange, Shares
will be available for purchase and sale on an intraday basis. Shares
will be purchased and sold in the secondary market at prices directly
linked to the Fund's next-determined NAV using a new trading protocol
called ``NAV-Based Trading.'' \14\ All bids, offers and execution
prices of Shares will be expressed as a premium/discount (which may be
zero) to the Fund's next-determined NAV (e.g., NAV-$0.01, NAV+$0.01). A
Fund's NAV will be determined each business day, normally as of 4:00
p.m. Eastern Time. Trade executions will be binding at the time orders
are matched on Nasdaq's facilities, with the transaction prices
contingent upon the determination of NAV.
---------------------------------------------------------------------------
\14\ Aspects of NAV-Based Trading are protected intellectual
property subject to issued and pending U.S. patents held by Navigate
Fund Solutions LLC (``Navigate''), a wholly owned subsidiary of
Eaton Vance Corp. Nasdaq will enter into a license agreement with
Navigate to allow for NAV-Based Trading on the Exchange of exchange-
traded managed funds that have themselves entered into license
agreements with Navigate.
---------------------------------------------------------------------------
Trading Premiums and Discounts. Bid and offer prices for
Shares will be quoted throughout the day relative to NAV. The premium
or discount to NAV at which Share prices are quoted and transactions
are executed will vary depending on market factors, including the
balance of supply and demand for Shares among investors, transaction
fees and other costs in connection with creating and redeeming Creation
Units of Shares, the cost and availability of borrowing Shares,
competition among market makers, the Share inventory positions and
inventory strategies of market makers, the profitability requirements
and business objectives of market makers, and the volume of Share
trading. Reflecting such market factors, prices for Shares in the
secondary market may be above, at or below NAV. Funds with higher
transaction fees may trade at wider premiums or discounts to NAV than
other Funds with lower transaction fees, reflecting the added costs to
market makers of managing their Share inventory positions through
purchases and redemptions of Creation Units.
Because making markets in Shares will be simple to manage and low
risk, competition among market makers seeking to earn reliable, low-
risk profits should enable the Shares to routinely trade at tight bid-
ask spreads and narrow premiums/discounts to NAV. As noted below, each
Fund will maintain a public Web site that will be updated on a daily
basis to show current and historical trading spreads and premiums/
discounts of Shares trading in the secondary market.
Transmitting and Processing Orders. Member firms will
utilize certain existing order types and interfaces to transmit Share
bids and offers to Nasdaq, which will process Share trades like trades
in shares of other listed securities.\15\ In the systems used to
transmit and process transactions in Shares, a Fund's next-determined
NAV will be represented by a proxy price (e.g., 100.00) and a premium/
discount of a stated amount to the next-determined NAV to be
represented by the same increment/decrement from the proxy price used
to denote NAV (e.g., NAV-$0.01 would be represented as 99.99; NAV+$0.01
as 100.01).
---------------------------------------------------------------------------
\15\ As noted below, all orders to buy or sell Shares that are
not executed on the day the order is submitted will be automatically
cancelled as of the close of trading on such day. Prior to the
commencement of trading in a Fund, the Exchange will inform its
members in an Information Circular of the effect of this
characteristic on existing order types.
---------------------------------------------------------------------------
To avoid potential investor confusion, Nasdaq will work with member
firms and providers of market data services to seek to ensure that
representations of intraday bids, offers and execution prices of Shares
that are made available to the investing public follow the ``NAV-$0.01/
NAV+$0.01'' (or similar) display format. All Shares listed on the
Exchange will have a unique identifier associated with their ticker
symbols, which would indicate that the Shares are traded using NAV-
Based Trading. Nasdaq makes available to member firms and market data
services certain proprietary data feeds that are designed to supplement
the market information disseminated through the consolidated tape
(``Consolidated Tape''). Specifically, the Exchange will use the NASDAQ
Basic and NASDAQ Last Sale data feeds to disseminate intraday price and
quote data for Shares in real time in the ``NAV-$0.01/NAV+$0.01'' (or
similar) display format. Member firms could use the NASDAQ Basic and
NASDAQ Last Sale data feeds to source intraday Share prices for
presentation to the investing public in the ``NAV-$0.01/NAV+$0.01'' (or
similar) display format. Alternatively, member firms could source
intraday Share prices in proxy price format from the Consolidated Tape
and other Nasdaq data feeds (e.g., Nasdaq TotalView and Nasdaq Level 2)
and use a simple algorithm to convert prices into the ``NAV-$0.01/
NAV+$0.01'' (or similar) display format. As noted below, prior to the
commencement of trading in a Fund, the Exchange will inform its members
in an Information Circular of the identities of the specific Nasdaq
data feeds from which intraday Share prices in proxy price format may
be obtained.
Intraday Reporting of Quotes and Trades. All bids and
offers for Shares and all Share trade executions will be reported
intraday in real time by the Exchange to the Consolidated Tape \16\ and
separately disseminated to member firms and market data services
through the Exchange data feeds listed above. The Exchange will also
provide the member firms participating in each Share trade with a
contemporaneous notice of trade execution, indicating the number of
Shares bought or sold and the executed premium/discount to NAV.\17\
---------------------------------------------------------------------------
\16\ Due to systems limitations, the Consolidated Tape will
report intraday execution prices and quotes for Shares using a proxy
price format. As noted, Nasdaq will separately report real-time
execution prices and quotes to member firms and providers of market
data services in the ``NAV-$0.01/NAV+$0.01'' (or similar) display
format, and otherwise seek to ensure that representations of
intraday bids, offers and execution prices for Shares that are made
available to the investing public follow the same display format.
\17\ All orders to buy or sell Shares that are not executed on
the day the order is submitted will be automatically cancelled as of
the close of trading on such day.
---------------------------------------------------------------------------
Final Trade Pricing, Reporting and Settlement. All
executed Share trades will be recorded and stored intraday by Nasdaq to
await the calculation of the Fund's end-of-day NAV and the
determination of final trade pricing. After a Fund's NAV is calculated
and provided to the Exchange, Nasdaq will price each Share trade
entered into during the day at the Fund's NAV plus/minus the trade's
executed premium/discount. Using the final trade price, each executed
Share trade will then be disseminated to member firms and market data
services via an FTP file to be created for exchange-traded managed
funds and confirmed to the member firms participating in the trade to
supplement the previously provided information to include final
pricing.\18\
[[Page 23835]]
After the pricing is finalized, Nasdaq will deliver the Share trading
data to NSCC for clearance and settlement, following the same processes
used for the clearance and settlement of trades in other exchange-
traded securities.
---------------------------------------------------------------------------
\18\ File Transfer Protocol (``FTP'') is a standard network
protocol used to transfer computer files on the Internet. Nasdaq
will arrange for the daily dissemination of an FTP file with
executed Share trades to member firms and market data services.
---------------------------------------------------------------------------
Availability of Information
Prior to the commencement of market trading in Shares, each Fund
will be required to establish and maintain a public Web site through
which its current prospectus may be downloaded. The Web site will
include additional Fund information updated on a daily basis, including
the prior business day's NAV, and the following trading information for
such business day expressed as premiums/discounts to NAV: (a) Intraday
high, low, average and closing prices of Shares in Exchange trading;
(b) the midpoint of the highest bid and lowest offer prices as of the
close of Exchange trading, expressed as a premium/discount to NAV (the
``Closing Bid/Ask Midpoint''); and (c) the spread between highest bid
and lowest offer prices as of the close of Exchange trading (the
``Closing Bid/Ask Spread.''). The Web site will also contain charts
showing the frequency distribution and range of values of trading
prices, Closing Bid/Ask Midpoints and Closing Bid/Ask Spreads over
time.
The Composition File will be disseminated through the NSCC before
the open of trading in Shares on each business day and also will be
made available to the public each day on a free Web site. Consistent
with the disclosure requirements that apply to traditional open-end
investment companies, a complete list of current Fund portfolio
positions will be made available at least once each calendar quarter,
with a reporting lag of not more than 60 days. Funds may provide more
frequent disclosures of portfolio positions at their discretion.
Reports of Share transactions will be disseminated to the market
and delivered to the member firms participating in the trade
contemporaneous with execution. Once a Fund's daily NAV has been
calculated and disseminated, Nasdaq will price each Share trade entered
into during the day at the Fund's NAV plus/minus the trade's executed
premium/discount. Using the final trade price, each executed Share
trade will then be disseminated to member firms and market data
services via an FTP file to be created for exchange-traded managed
funds and confirmed to the member firms participating in the trade to
supplement the previously provided information to include final
pricing.
Information regarding NAV-based trading prices, best bids and
offers for Shares, and volume of Shares traded will be continuously
available on a real-time basis throughout each trading day on brokers'
computer screens and other electronic services.
Initial and Continued Listing
Shares will conform to the initial and continued listing criteria
as set forth under Nasdaq Rule 5745. A minimum of 50,000 Shares and no
less than two Creation Units of each Fund will be outstanding at the
commencement of trading on the Exchange. The Exchange will obtain a
representation from the issuer of the Shares that the NAV per Share
will be calculated daily and provided to Nasdaq via the Mutual Fund
Quotation Service (``MFQS'') by the fund accounting agent. As soon as
the NAV is entered into MFQS, Nasdaq will disseminate the value to
market participants and market data vendors via the Mutual Fund
Dissemination Service (``MFDS'') so all firms will receive the data
element at the same time.
For each series of Shares, an estimated value of an individual
Share, defined in Nasdaq Rule 5745(c)(2) as the ``Intraday Indicative
Value,'' will be calculated and disseminated at intervals of not more
than 15 minutes throughout the Regular Market Session \19\ when Shares
trade on the Exchange. The Exchange will obtain a representation from
the issuer of the Shares that the IIV will be calculated on an intraday
basis and provided to Nasdaq for dissemination via the Nasdaq Global
Index Service (``GIDS''). The IIV will be based on current information
regarding the value of the securities and other assets held by a
Fund.\20\ The purpose of the IIVs is to enable investors to estimate
the next-determined NAV so they can determine the number of Shares to
buy or sell if they want to transact in an approximate dollar amount
(e.g., if an investor wants to acquire approximately $5,000 of a Fund,
how many Shares should the investor buy?).\21\
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\19\ 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. E.T.; (2) Regular Market Session from 9:30 a.m. to 4 p.m. or
4:15 p.m. E.T.; and (3) Post-Market Session from 4 p.m. or 4:15 p.m.
to 8 p.m. E.T.).
\20\ IIVs disseminated throughout each trading day would be
based on the same portfolio as used to calculate that day's NAV.
Funds will reflect purchases and sales of portfolio positions in
their NAV the next business day after trades are executed.
\21\ Because, in NAV-Based Trading, prices of executed trades
are not determined until the reference NAV is calculated, buyers and
sellers of Shares during the trading day will not know the final
value of their purchases and sales until the end of the trading day.
A Fund's Registration Statement, Web site and any advertising or
marketing materials will include prominent disclosure of this fact.
Although IIVs may provide useful estimates of the value of intraday
trades, they cannot be used to calculate with precision the dollar
value of the Shares to be bought or sold.
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The Adviser is not a broker-dealer, although it is affiliated with
a broker-dealer. The Adviser has implemented a fire wall with respect
to its broker-dealer affiliate regarding access to information
concerning the composition and/or changes to each Fund's portfolio. In
the event (a) the Adviser registers as a broker-dealer or becomes newly
affiliated with a broker-dealer, or (b) any new adviser or a sub-
adviser to a Fund 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, if applicable,
regarding access to information concerning the composition and/or
changes to the relevant Fund's portfolio and will be subject to
procedures designed to prevent the use and dissemination of material
non-public information regarding such portfolio.
Trading Halts
The Exchange may consider all relevant factors in exercising its
discretion to halt or suspend trading in Shares. Nasdaq will halt
trading in Shares under the conditions specified in Nasdaq Rules 4120
and in Nasdaq Rule 5745(d)(2)(C). Additionally, Nasdaq may cease
trading Shares if other unusual conditions or circumstances exist
which, in the opinion of Nasdaq, make further dealings on Nasdaq
detrimental to the maintenance of a fair and orderly market. To manage
the risk of a non-regulatory Share trading halt, Nasdaq has in place
back-up processes and procedures to ensure orderly trading. Because, in
NAV-Based Trading, all trade execution prices are linked to end-of-day
NAV, buyers and sellers of Shares should be less exposed to risk of
loss due to intraday trading halts than buyers and sellers of
conventional exchange-traded funds (``ETFs'') and other exchange-traded
securities.
Trading Rules
Nasdaq deems Shares to be equity securities, thus rendering trading
in Shares to be subject to Nasdaq's existing rules governing the
trading of equity securities. Nasdaq will allow trading in
[[Page 23836]]
Shares from 9:30 a.m. until 4:00 p.m. Eastern Time.
Surveillance
The Exchange represents that trading in Shares will be subject to
the existing trading surveillances, administered by both Nasdaq and the
Financial Industry Regulatory Authority, Inc. (``FINRA'') on behalf of
the Exchange, which are designed to detect violations of Exchange rules
and applicable federal securities laws.\22\ The Exchange represents
that these procedures are adequate to properly monitor trading of
Shares on the Exchange and to deter and detect violations of Exchange
rules and applicable federal securities laws.
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\22\ FINRA provides surveillance of trading on the Exchange
pursuant to a regulatory services agreement. The Exchange is
responsible for FINRA's performance under this regulatory services
agreement.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
FINRA, on behalf of the Exchange, will communicate as needed with
other markets and other entities that are members of the Intermarket
Surveillance Group (``ISG'') \23\ regarding trading in Shares, and in
exchange-traded securities and instruments held by the Funds (to the
extent such exchange-traded securities and instruments are known
through the publication of the Composition File and periodic public
disclosures of a Fund's portfolio holdings), and FINRA may obtain
trading information regarding such trading from other markets and other
entities. In addition, the Exchange may obtain information regarding
trading in Shares, and in exchange-traded securities and instruments
held by the Funds (to the extent such exchange-traded securities and
instruments are known through the publication of the Composition File
and periodic public disclosures of a Fund's portfolio holdings), from
markets and other entities that are members of ISG, which includes
securities and futures exchanges, or with which the Exchange has in
place a comprehensive surveillance sharing agreement.
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\23\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of a
Fund's portfolio may trade on markets that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement.
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In addition, the Exchange also has a general policy prohibiting the
distribution of material non-public information by its employees.
Information Circular
Prior to the commencement of trading in a Fund, 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: (1)
The procedures for purchases and redemptions of Shares in Creation
Units (and noting that Shares are not individually redeemable); (2)
Nasdaq Rule 2111A, which imposes suitability obligations on Nasdaq
members with respect to recommending transactions in Shares to
customers; (3) how information regarding the IIV and Composition File
is disseminated; (4) the requirement that members deliver a prospectus
to investors purchasing Shares prior to or concurrently with the
confirmation of a transaction; and (5) information regarding NAV-Based
Trading protocols.
As noted above, all orders to buy or sell Shares that are not
executed on the day the order is submitted will be automatically
cancelled as of the close of trading on such day. The Information
Circular will discuss the effect of this characteristic on existing
order types. The Information Circular also will identify the specific
Nasdaq data feeds from which intraday Share prices in proxy price
format may be obtained.
In addition, the Information Circular will advise members, prior to
the commencement of trading, of the prospectus delivery requirements
applicable to the Funds. Members purchasing Shares from a Fund for
resale to investors will deliver a summary prospectus to such
investors. The Information Circular will also discuss any exemptive,
no-action and interpretive relief granted by the Commission from any
rules under the Act.
The Information Circular also will reference that the Funds are
subject to various fees and expenses described in the Registration
Statements. The Information Circular will also disclose the trading
hours of the Shares and the applicable NAV calculation time for the
Shares. The Information Circular will disclose that information about
the Shares will be publicly available on the Fund's Web site.
Information regarding Fund trading protocols will be disseminated
to Nasdaq members in accordance with current processes for newly listed
products. Nasdaq intends to provide its members with a detailed
explanation of NAV-Based Trading through a Trading Alert issued prior
to the commencement of trading in Shares on the Exchange.
2. Statutory Basis
Nasdaq believes that the proposal is consistent with Section 6(b)
of the Act \24\ in general, and Section 6(b)(5) of the Act \25\ in
particular, in that it is 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, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
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\24\ 15 U.S.C. 78f(b).
\25\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares would be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in Nasdaq Rule 5745. The
Exchange believes that its surveillance procedures are adequate to
properly monitor the trading of Shares on Nasdaq and to deter and
detect violations of Exchange rules and the applicable federal
securities laws. The Adviser is affiliated with a broker-dealer and has
implemented a ``fire wall'' between the investment adviser and the
broker-dealer affiliate with respect to access to information
concerning the composition and/or changes to the Funds' portfolio
holdings. The Exchange may obtain information via ISG from other
exchanges that are members of ISG or with which the Exchange has
entered into a comprehensive surveillance sharing agreement, to the
extent necessary.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest.
The Exchange will obtain a representation from each issuer of Shares
that the NAV per Share will be calculated on each business day that the
New York Stock Exchange is open for trading and that the NAV will be
made available to all market participants at the same time. In
addition, a large amount of information would be publicly available
regarding the Funds and the Shares, thereby promoting market
transparency.
Prior to the commencement of market trading in Shares, the Funds
will be required to establish and maintain a public Web site through
which its
[[Page 23837]]
current prospectus may be downloaded. The Web site will display
additional Fund information updated on a daily basis, including the
prior business day's NAV, and the following trading information for
such business day expressed as premiums/discounts to NAV: (a) Intraday
high, low, average and closing prices of Shares in Exchange trading;
(b) the Closing Bid/Ask Midpoint; and (c) the Closing Bid/Ask Spread.
The Web site will also contain charts showing the frequency
distribution and range of values of trading prices, Closing Bid/Ask
Midpoints and Closing Bid/Ask Spreads over time. The Composition File
will be disseminated through the NSCC before the open of trading in
Shares on each business day and also will be made available to the
public each day on a free Web site. The Exchange will obtain a
representation from the issuer of the Shares that the IIV will be
calculated and disseminated on an intraday basis at intervals of not
more than 15 minutes during trading on the Exchange and provided to
Nasdaq for dissemination via GIDS. A complete list of current portfolio
positions for the Funds will be made available at least once each
calendar quarter, with a reporting lag of not more than 60 days. Funds
may provide more frequent disclosures of portfolio positions at their
discretion.
Transactions in Shares will be reported to the Consolidated Tape at
the time of execution in proxy price format and will be disseminated to
member firms and market data services through Nasdaq's trading service
and market data interfaces, as defined above. Once each Fund's daily
NAV has been calculated and the final price of its intraday Share
trades has been determined, Nasdaq will deliver a confirmation with
final pricing to the transacting parties. At the end of the day, Nasdaq
will also post a newly created FTP file with the final transaction data
for the trading and market data services. The Exchange expects that
information regarding NAV-based trading prices and volumes of Shares
traded will be continuously available on a real-time basis throughout
each trading day on brokers' computer screens and other electronic
services. Because Shares will trade at prices based on the next-
determined NAV, investors will be able to buy and sell individual
Shares at a known premium or discount to NAV that they can limit by
transacting using limit orders at the time of order entry. Trading in
Shares will be subject to Nasdaq Rules 5745(d)(2)(B) and (C), which
provide for the suspension of trading or trading halts under certain
circumstances, including if, in the view of the Exchange, trading in
Shares becomes inadvisable.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
the Funds, which seek to provide investors with access to a broad range
of actively managed investment strategies in a structure that offers
the cost and tax efficiencies and shareholder protections of ETFs,
while removing the requirement for daily portfolio holdings disclosure
to ensure a tight relationship between market trading prices and NAV.
For the above reasons, Nasdaq believes the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. In fact, the
Exchange believes that the introduction of the Funds would promote
competition by making available to investors a broad range of actively
managed investment strategies in a structure that offers the cost and
tax efficiencies and shareholder protections of ETFs, while removing
the requirement for daily portfolio holdings disclosure to ensure a
tight relationship between market trading prices and NAV. Moreover, the
Exchange believes that the proposed method of Share trading would
provide investors with transparency of trading costs, and the ability
to control trading costs using limit orders, that is not available for
conventionally traded ETFs.
These developments could significantly enhance competition to the
benefit of the markets and investors.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(a) By order approve or disapprove such proposed rule change; or (b)
institute proceedings to determine whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an Email to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2015-036 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2015-036. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-
[[Page 23838]]
NASDAQ-2015-036 and should be submitted on or before May 20, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-09919 Filed 4-28-15; 8:45 am]
BILLING CODE 8011-01-P
