Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of the Shares of the AltShares Long/Short High Yield Fund of ETFis Series Trust I, 51632-51638 [2015-20937]

Download as PDF 51632 Federal Register / Vol. 80, No. 164 / Tuesday, August 25, 2015 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION [Release No. 34–75738 ; File No. SR– NASDAQ–2015–095] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of the Shares of the AltShares Long/Short High Yield Fund of ETFis Series Trust I August 19, 2015. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on August 7, 2015, The NASDAQ Stock Market LLC (‘‘Nasdaq’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by Nasdaq. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to list and trade the shares of the AltShares Long/Short High Yield Fund (the ‘‘Fund’’) of ETFis Series Trust I (the ‘‘Trust’’) under Nasdaq Rule 5735 (‘‘Managed Fund Shares’’).3 The shares of the Funds are collectively referred to herein as the ‘‘Shares.’’ The text of the proposed rule change is available at http:// nasdaq.cchwallstreet.com/, at Nasdaq’s principal office, and at the Commission’s Public Reference Room. asabaliauskas on DSK5VPTVN1PROD with 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. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 The Commission approved Nasdaq Rule 5735 in Securities Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June 20, 2008) (SR– NASDAQ–2008–039). The Exchange believes the proposed rule change raises no significant issues not previously addressed in prior Commission orders. 2 17 VerDate Sep<11>2014 17:10 Aug 24, 2015 Jkt 235001 1. Purpose The Exchange proposes to list and trade the Shares of the Fund under Nasdaq Rule 5735, which governs the listing and trading of Managed Fund Shares 4 on the Exchange. The Fund will be an actively-managed exchange-traded fund (‘‘ETF’’). The Shares will be offered by the Trust, which was established as a Delaware series trust on September 20, 2012.5 The Trust is registered with the Commission as an investment company and has filed a registration statement on Form N–1A (‘‘Registration Statement’’) with the Commission.6 The Fund is a series of the Trust. Description of the Shares and the Fund Etfis Capital LLC is the investment adviser (‘‘Adviser’’) to the Fund. Bramshill Investments, LLC is the investment sub-adviser to the Fund (the ‘‘Sub-Adviser’’). The Sub-Adviser is responsible for daily portfolio management and all investment decisions for the Fund. ETF Distributors LLC (the ‘‘Distributor’’) will be the principal underwriter and distributor of the Fund’s Shares. The Bank of New York Mellon Corporation (‘‘BNY’’) will act as the administrator, accounting agent, custodian and transfer agent to the Fund. Paragraph (g) of Rule 5735 provides that if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a brokerdealer, such investment adviser shall erect a ‘‘fire wall’’ between the 4 A Managed Fund Share is a security that represents an interest in an investment company registered under the Investment Company Act of 1940, as amended (15 U.S.C. 80a–1) (the ‘‘1940 Act’’) organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment adviser consistent with its investment objectives and policies. In contrast, an open-end investment company that issues Index Fund Shares, listed and traded on the Exchange under Nasdaq Rule 5705, seeks to provide investment results that correspond generally to the price and yield performance of a specific foreign or domestic stock index, fixed income securities index or combination thereof. 5 The Commission has issued an order, upon which the Trust may rely (the ‘‘Exemptive Order’’), granting certain exemptive relief to the investment adviser to the Fund under the 1940 Act. See Investment Company Act Release No. 30607 (July 23, 2013) (File No. 812–14080). 6 See Post-Effective Amendment No. 40/41 to Form N–1A Registration Statement for the Trust, dated May 4, 2015 (File Nos. 333–187668 and 811– 22819) (the ‘‘Registration Statement’’). The description of the Fund and the Shares contained herein is based, in part, on information in the Registration Statement. PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 investment adviser and the brokerdealer with respect to access to information concerning the composition and/or changes to such investment company portfolio.7 In addition, paragraph (g) further requires that personnel who make decisions on the open-end fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material, nonpublic information regarding the open-end fund’s portfolio. Rule 5735(g) is similar to Nasdaq Rule 5705(b)(5)(A)(i); however, paragraph (g) in connection with the establishment of a ‘‘fire wall’’ between the investment adviser and the broker-dealer reflects the applicable open-end fund’s portfolio, not an underlying benchmark index, as is the case with index-based funds. The Adviser is not a brokerdealer, although it is affiliated with the Distributor, 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 the portfolio. The SubAdviser is not a broker-dealer and is not affiliated with a broker-dealer. In the event (a) the Adviser or the Sub-Adviser becomes newly affiliated with a brokerdealer 8 or registers as a broker-dealer, or (b) any new adviser or new sub-adviser is a registered broker-dealer or is or becomes affiliated with a broker-dealer, it will implement a fire wall with respect to its relevant personnel and/or such broker-dealer affiliate, as 7 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’). As a result, the Adviser, the Sub-Adviser and each such party’s related personnel are subject to the provisions of Rule 204A–1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with applicable federal securities laws as defined in Rule 204A– 1(e)(4). Accordingly, procedures designed to prevent the communication and misuse of nonpublic information by an investment adviser must be consistent with Rule 204A–1 under the Advisers Act. In addition, Rule 206(4)–7 under the Advisers Act makes it unlawful for an investment adviser to provide investment advice to clients unless such investment adviser has (i) adopted and implemented written policies and procedures reasonably designed to prevent violation, by the investment adviser and its supervised persons, of the Advisers Act and the Commission rules adopted thereunder; (ii) implemented, at a minimum, an annual review regarding the adequacy of the policies and procedures established pursuant to subparagraph (i) above and the effectiveness of their implementation; and (iii) designated an individual (who is a supervised person) responsible for administering the policies and procedures adopted under subparagraph (i) above. 8 In the case of the Adviser, which is already affiliated with a broker-dealer and has implemented a fire wall with respect to such affiliated brokerdealer, this refers to a new affiliation with an additional broker-dealer. E:\FR\FM\25AUN1.SGM 25AUN1 Federal Register / Vol. 80, No. 164 / Tuesday, August 25, 2015 / Notices applicable, regarding access to information concerning the composition and/or changes to the Fund portfolio and will be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding such portfolio. Investment Objective The Fund’s investment objective is to seek current income and capital appreciation with reduced volatility over time. asabaliauskas on DSK5VPTVN1PROD with NOTICES Principal Investments The Fund will seek to achieve its investment objective primarily by investing in a portfolio of ‘‘high yield’’ debt securities of U.S. companies. Under normal market conditions,9 the Fund will hold long positions in high yield debt securities selected because the Sub-Adviser believes they are likely to outperform the market over time or increase in value in the near term (the ‘‘Long Position’’), and will hold short positions in high yield debt securities selected because the Sub-Adviser believes they are likely to lose value in the near or longer term (the ‘‘Short Position’’). The Fund will not have any portfolio maturity limitation and may invest its assets in instruments with short-term, medium-term or long-term maturities. Issuers of securities in which the Fund expects to invest will include large and medium capitalization companies, and may include small capitalization companies. The Sub-Adviser expects the Fund’s investment portfolio to include up to 200 different securities positions with a target portfolio net exposure (the market value of the Long Position minus the market value of the Short Position) of between ¥20% and 100%. In selecting securities for the Fund’s portfolio, the Sub-Adviser generally will analyze debt securities included in the Bloomberg USD Corporate High Yield Bond Index (the ‘‘Bloomberg High Yield Index’’). While the Fund may invest directly in high yield debt securities, the 9 The term ‘‘under normal market conditions’’ as used herein includes, but is not limited to, the absence of adverse market, economic, political or other conditions, including extreme volatility or trading halts in the fixed income or other securities markets or the financial markets generally; operational issues causing dissemination of inaccurate market information; or force majeure type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. In periods of extreme market disturbance, the Fund may take temporary defensive positions, by overweighting its portfolio in cash/cash-like instruments; however, to the extent possible, the Adviser would continue to seek to achieve the Fund’s investment objectives. VerDate Sep<11>2014 17:10 Aug 24, 2015 Jkt 235001 Sub-Adviser may also implement the Fund’s strategy by investing in exchange-traded pools (which will consist of exchange-traded funds,10 exchange-traded notes,11 or closed-end funds, and each of which will be listed for trading on a U.S. exchange) (‘‘ETPs’’) that invest a significant portion of their portfolios in high yield debt instruments (‘‘High Yield ETPs’’). Positions in high-yield debt securities also may include foreign debt securities traded on U.S. or foreign exchanges or in U.S. or foreign over-the-counter markets, which may be denominated in foreign currencies. (Any currency hedging will be accomplished by taking long or short positions in ETPs.) ‘‘High yield debt securities’’ generally include debt securities that are rated lower than ‘‘BBB¥’’ by Standard & Poor’s Ratings Group or ‘‘Baa3’’ by Moody’s Investors Service, Inc. or at a similar level by another nationally recognized statistical rating organization, or are unrated but are deemed to be of comparable quality by the Sub-Adviser. These securities consist of senior and subordinated corporate debt obligations (bonds, debentures, notes and commercial paper). The Fund may invest in the foregoing corporate debt obligations, senior bank loans (including through loan assignments and loan participations), preferred stocks, municipal bonds, convertible bonds and convertible preferred stocks.12 The Fund will not invest in other types of high-yield debt securities, such as assetbacked securities. The Fund will not be limited to investing in high-yield securities, so any of the securities listed may also be investment grade. The Fund may invest in U.S. treasuries. The Fund As a result of its trading strategy, the Fund expects to engage in frequent portfolio transactions that will likely result in higher portfolio turnover than other similar investment companies. Portfolio turnover is a ratio that indicates how often the securities in an investment company’s portfolio change during a year. A higher portfolio turnover rate indicates a greater number Nasdaq Rules 5705. Nasdaq Rules 5710. 12 Convertible bonds and convertible preferred stocks in which the Fund invests, and the equity securities into which these securities may be converted, and also preferred stocks (nonconvertible) in which the Fund invests, generally will be exchange-traded. The Sub-Adviser’s current expectation is that at least 80% of these securities will be exchange-traded. At least 90% of these exchange-traded securities will be traded on exchanges that are Intermarket Surveillance Group (‘‘ISG’’) members. 51633 of changes, and a lower portfolio turnover rate indicates a smaller number of changes. Under normal circumstances, the anticipated annual portfolio turnover rate for the Fund is expected to be greater than 100%. Other Investments The Fund may invest in other types of investments, as set forth in this section. In addition to investing in High Yield ETPs as discussed under Principal Investments, the Fund could invest in other fixed-income ETPs—but will not invest in leveraged ETPs. Due to legal limitations, the Fund will be prevented from purchasing more than 3% of an ETF’s outstanding shares unless: (i) The ETF or the Fund has received an order for exemptive relief from the 3% limitation from the Commission that is applicable to the Fund; and (ii) the ETF and the Fund take appropriate steps to comply with any conditions in such order. The Fund may invest in warrants.13 In certain adverse market, economic, political, or other conditions, the Fund may temporarily depart from its normal investment policies and strategy, provided that the alternative is consistent with the Fund’s investment objective and is in the best interest of the Fund. At such times, the Fund may invest in cash or cash equivalents, such as money market instruments,14 and to the extent permitted by applicable law and the Fund’s investment restrictions, the Fund may invest in shares of money market mutual funds. Under such circumstances, the Fund may invest up to 100% of its assets in these investments and may do so for extended periods of time. Under normal circumstances, however, the Fund may also hold money market instruments and/or shares of money market mutual funds for various reasons including to provide for funds awaiting investment, to accumulate cash for anticipated purchases of portfolio securities, to allow for shareholder redemptions and to provide for the Fund’s operating expenses. The Fund anticipates investing entirely in fully liquid assets, but it has the flexibility to invest up to 15% of its net assets in illiquid securities and other 10 See 11 See PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 13 Warrants in which the Fund invests, and the equity securities into which these warrants may be converted, generally will be exchange-traded. The Sub-Adviser’s current expectation is that at least 80% of these securities will be exchange-traded. At least 90% of these exchange-traded securities will be traded on exchanges that are ISG members. 14 The money market instruments in which the Fund may invest are short-term (less than one-year) notes issued by (i) the U.S. government, (ii) an agency of the U.S. government, or (iii) a U.S. corporation. E:\FR\FM\25AUN1.SGM 25AUN1 51634 Federal Register / Vol. 80, No. 164 / Tuesday, August 25, 2015 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES illiquid assets.15 Under the supervision of the Board of Trustees of the Trust (the ‘‘Trust Board’’), the Sub-Adviser will determine the liquidity of the Fund’s investments, and through reports from the Sub-Adviser, the Trust Board monitors investments in illiquid instruments. In determining the liquidity of the Fund’s investments, the Sub-Adviser may consider various factors including: (i) The frequency of trades and quotations; (ii) the number of dealers and prospective purchasers in the marketplace; (iii) dealer undertakings to make a market; (iv) the nature of the security (including any demand or tender features); and (v) the nature of the marketplace for trades (including the ability to assign or offset the Fund’s rights and obligations relating to the investment). If through a change in values, net assets, or other circumstances, the Fund were in a position where more than 15% of its net assets were invested in illiquid securities or other illiquid assets, it would seek to take appropriate steps to protect liquidity. In keeping with the foregoing focus on liquidity, the Fund will generally seek to invest in highyield debt securities, bank loans, and other debt issuances that the SubAdviser deems to be liquid, with readily available prices. The Fund will only invest in bank loans that have a par amount outstanding of U.S. $100 million or greater at the time the loan is originally issued. The Fund will not enter into a long or short position in high yield debt securities with a par amount outstanding of less than U.S. $100 million at the time of issuance of such high yield debt securities, if upon establishing such position, the total value of such positions would represent fifty percent or greater of the Fund’s net assets. The Fund may not invest more than 25% of the value of its total assets in 15 The Commission has stated that long-standing Commission guidelines have required open-end funds to hold no more than 15% of their net assets in illiquid securities and other illiquid assets. See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 14618 (March 18, 2008), FN 34. See also Investment Company Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) (Statement Regarding ‘‘Restricted Securities’’); Investment Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) (Revisions of Guidelines to Form N–1A). A fund’s portfolio security is illiquid if it cannot be disposed of in the ordinary course of business within seven days at approximately the value ascribed to it by the fund. See Investment Company Act Release No. 14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a–7 under the 1940 Act); Investment Company Act Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under the Securities Act of 1933). VerDate Sep<11>2014 17:10 Aug 24, 2015 Jkt 235001 securities of issuers in any particular industry.16 The Fund’s investments (including investments in ETPs) will not be utilized to seek to achieve a leveraged return on the Fund’s net assets. The Fund will not invest in futures contracts, will not invest in options, will not invest in swaps, and will not invest in other derivative instruments. The Shares The Fund will issue and redeem Shares only in Creation Units, through the Distributor, without a sales load (but subject to transaction fees), at the net asset value (‘‘NAV’’) next determined after receipt of an order in proper form, on a continuous basis every day except weekends and specified holidays, pursuant to the terms of the agreement executed with each Authorized Participant (as defined below). The NAV of the Fund will be determined once each business day, normally as of the close of regular trading on the NYSE, generally, 4:00 p.m. Eastern time.17 Creation Unit sizes will be 25,000 Shares per Creation Unit. The consideration for purchase of a Creation Unit will consist of either (i) an in-kind deposit of a designated portfolio of securities (the ‘‘Deposit Securities’’) for each Creation Unit constituting a substantial replication, or a representation, of the securities included in the Fund’s portfolio and an amount of cash (the ‘‘Cash Component’’) computed as described below or (ii) cash totaling the NAV of the Creation Unit (‘‘Deposit Cash’’). The ‘‘Cash Component’’ will be an amount equal to the difference between the NAV of the shares (per Creation Unit) and the market value of the Deposit Securities. The Fund may also effect a portion of an otherwise in-kind creation or redemption for cash, in accordance with the Exemptive Order. As applicable, (i) the Deposit Securities and the Cash Component, together, or (ii) the Deposit Cash, will constitute the ‘‘Fund Deposit,’’ which will represent the minimum initial and subsequent investment amount for a Creation Unit of the Fund. If the Cash Component is a positive number (i.e., 16 See Form N–1A, Item 9. The Commission has taken the position that a fund is concentrated if it invests more than 25% of the value of its total assets in any one industry. See, e.g., Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 54241 (November 21, 1975). 17 NAV per Share will be calculated by dividing the Fund’s net assets by the number of Fund Shares outstanding. For more information regarding the valuation of Fund investments in calculating the Fund’s NAV, see ‘‘Net Asset Value’’ below and see ‘‘Determination of Net Asset Value’’ in the Registration Statement. PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 the NAV per Creation Unit exceeds the market value of the Deposit Securities), the Cash Component will be such positive amount. If the Cash Component is a negative number (i.e., the NAV per Creation Unit is less than the market value of the Deposit Securities), the Cash Component will be such negative amount and the creator will be entitled to receive cash from the Fund in an amount equal to the Cash Component. The Cash Component will serve the function of compensating for any difference between the NAV per Creation Unit and the market value of the Deposit Securities. To be eligible to place orders with respect to creations and redemptions of Creation Units, an entity must be (i) a ‘‘Participating Party,’’ i.e., a brokerdealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation (‘‘NSCC’’) or (ii) a Depository Trust Company (‘‘DTC’’) Participant (a ‘‘DTC Participant’’). In addition, each Participating Party or DTC Participant (each, an ‘‘Authorized Participant’’) must execute an agreement that has been agreed to by the Distributor and the Fund Administrator, BNY, with respect to purchases and redemptions of Creation Units. BNY, through the NSCC, will make available on each business day, immediately prior to the opening of business on the Exchange’s Regular Market Session (currently 9:30 a.m. Eastern time), the list of the names and the required number of shares of each Deposit Security to be included in the current Fund Deposit (based on information at the end of the previous business day) for the Fund. Such Fund Deposit, subject to any relevant adjustments, will be applicable in order to effect purchases of Creation Units of the Fund until such time as the next announced composition of the Deposit Securities is made available. Shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by the Fund through BNY and only on a business day. With respect to the Fund, BNY, through the NSCC, will make available immediately prior to the opening of business on the Exchange (9:30 a.m. Eastern time) on each business day, the list of the names and share quantities of the Fund’s portfolio securities (‘‘Fund Securities’’) that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form on that day. Fund Securities received on redemption E:\FR\FM\25AUN1.SGM 25AUN1 Federal Register / Vol. 80, No. 164 / Tuesday, August 25, 2015 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES may not be identical to Deposit Securities. Unless cash redemptions are available or specified for the Fund, the redemption proceeds for a Creation Unit will consist of Fund Securities as announced by BNY on the business day of the request for redemption received in proper form plus cash in an amount equal to the difference between the NAV of the Shares being redeemed, as next determined after a receipt of a request in proper form, and the value of the Fund Securities (the ‘‘Cash Redemption Amount’’), less a fixed redemption transaction fee and any applicable additional variable charge as set forth in the Registration Statement. In the event that the Fund Securities have a value greater than the NAV of the Shares, a compensating cash payment equal to the differential will be required to be made by or through an Authorized Participant by the redeeming shareholder. Notwithstanding the foregoing, at the Trust’s discretion, an Authorized Participant may receive the corresponding cash value of the securities in lieu of one or more Fund Securities. The creation order and redemption order cut off time for the Fund is expected to be 3:00 p.m. Eastern time. On days when the Exchange closes earlier than normal and in the case of custom orders, the Fund may require orders for Creation Units to be placed earlier in the day. Net Asset Value The NAV per Share for the Fund will be computed by dividing the value of the net assets of the Fund (i.e., the value of its total assets less total liabilities) by the total number of Shares outstanding, rounded to the nearest cent. Expenses and fees, including the management fees, will be accrued daily and taken into account for purposes of determining NAV. The NAV of the Fund will be calculated by BNY and determined at the close of regular trading on the NYSE (ordinarily 4:00 p.m. Eastern time) on each day that such exchange is open. In calculating the Fund’s NAV per Share, investments will generally be valued by using market valuations. A market valuation generally means a valuation (i) obtained from an exchange, a pricing service, or a major market maker (or dealer) or (ii) based on a price quotation or other equivalent indication of value supplied by an exchange, a pricing service, or a major market maker (or dealer).18 18 Under normal market conditions, the Fund will obtain pricing information on all of its assets from these sources. VerDate Sep<11>2014 17:10 Aug 24, 2015 Jkt 235001 ETPs, exchange-traded fixed income securities, exchange-traded convertible securities, exchange-traded warrants and any other exchange traded securities will be valued at the official closing price on their principal exchange or board of trade, or lacking any current reported sale at the time of valuation, at the mean between the most recent bid and asked quotations on the principal exchange or board of trade. Portfolio securities traded on more than one securities exchange will be valued at the last sale price or official closing price, as applicable, on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Fixed-income securities traded over-the-counter (including high yield fixed-income securities and money market instruments); warrants traded over-the-counter; and convertible securities traded over-the-counter will be valued at the mean between the most recent available bid and asked quotations provided by parties that make a market in the instrument. If recent bid and asked quotations are not available, these securities will be valued in accordance with the Fund’s fair valuation procedures. Money market instruments with maturities of less than 60 days will be valued at amortized cost. Shares of mutual funds that are not exchange-listed will be valued at their net asset value. Notwithstanding the foregoing, in determining the value of any security or asset, the Fund may use a valuation provided by a pricing vendor employed by the Trust and approved by the Trust Board. The pricing vendor may base such valuations upon dealer quotes, by analyzing the listed market, by utilizing matrix pricing, by analyzing market correlations and pricing and/or employing sensitivity analysis. The Adviser may use various pricing services, or discontinue the use of any pricing service, as approved by the Trust Board from time to time. A price obtained from a pricing service based on such pricing service’s valuation matrix may be considered a market valuation. Any assets or liabilities denominated in currencies other than the U.S. dollar will be converted into U.S. dollars at the current market rates on the date of valuation as quoted by one or more sources. In the event that current market valuations are not readily available or such valuations do not reflect current market value, the Trust’s procedures require the Adviser’s Pricing Committee to determine a security’s fair value in accordance with the Fund’s fair value pricing procedures, which are approved PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 51635 by the Trust Board and consistent with the 1940 Act.19 In determining such value the Adviser’s Pricing Committee may consider, among other things, (i) price comparisons among multiple sources, (ii) a review of corporate actions and news events, and (iii) a review of relevant financial indicators. In these cases, the Fund’s NAV may reflect certain portfolio securities’ fair values rather than their market prices. Fair value pricing involves subjective judgments and it is possible that the fair value determination for a security is materially different than the value that could be realized upon the sale of the security. Availability of Information The Fund’s Web site, which will be publicly available prior to the public offering of Shares, will include a form of the prospectus for the Fund that may be downloaded. The Web site will include additional quantitative information updated on a daily basis, including, for the Fund: (1) The prior business day’s reported NAV, mid-point of the bid/ask spread at the time of calculation of such NAV (the ‘‘Bid/Ask Price’’),20 and a calculation of the premium and discount of the Bid/Ask Price against the NAV; (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters; and (3) daily trading volume. On each business day, before commencement of trading in Shares in the Regular Market Session 21 on the Exchange, the Trust will disclose on its Web site the identities and quantities of the portfolio of securities and other 19 The Valuation Committee of the Trust Board will be responsible for the oversight of the pricing procedures of the Fund and the valuation of the Fund’s portfolio. The Valuation Committee has delegated day-to-day pricing responsibilities to the Adviser’s Pricing Committee, which will be composed of officers of the Adviser. The Pricing Committee will be responsible for the valuation and revaluation of any portfolio investments for which market quotations or prices are not readily available. The Trust and the Adviser have implemented procedures designed to prevent the use and dissemination of material, nonpublic information regarding valuation and revaluation of any portfolio investments. 20 The Bid/Ask Price of the Fund will be determined using the midpoint of the highest bid and the lowest offer on the Exchange as of the time of calculation of such Fund’s NAV. The records relating to Bid/Ask Prices will be retained by the Fund and its service providers. 21 See Nasdaq Rule 4120(b)(4) (describing the three trading sessions on the Exchange: (1) PreMarket Session from 7 a.m. to 9:30 a.m. Eastern time; (2) Regular Market Session from 9:30 a.m. to 4 p.m. or 4:15 p.m. Eastern time; and (3) PostMarket Session from 4 p.m. or 4:15 p.m. to 8 p.m. Eastern time). E:\FR\FM\25AUN1.SGM 25AUN1 51636 Federal Register / Vol. 80, No. 164 / Tuesday, August 25, 2015 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES assets (the ‘‘Disclosed Portfolio’’) held by the Fund that will form the basis for the Fund’s calculation of NAV at the end of the business day.22 On a daily basis, the Fund will disclose for each portfolio security and other asset of the Fund the following information on the Fund’s Web site (if applicable): Name, ticker symbol, CUSIP number or other identifier, if any; type of holding (such as ‘‘bond’’, ‘‘note’’, ‘‘preferred stock’’, ‘‘ETP’’, ‘‘mutual fund’’); quantity held (as measured by, for example, number of shares, contracts or units); maturity date, if any; coupon rate, if any; effective date, if any; market value of the holding; and the percentage weighting of the holdings in the Fund’s portfolio. The Web site information will be publicly available at no charge. In addition, for the Fund, an estimated value, defined in Rule 5735 as the ‘‘Intraday Indicative Value,’’ that reflects an estimated intraday value of the Fund’s portfolio, will be disseminated. Moreover, the Intraday Indicative Value, available on the NASDAQ OMX Information LLC proprietary index data service,23 will be based upon the current value for the components of the Disclosed Portfolio and will be updated and widely disseminated and broadly displayed at least every 15 seconds during the Regular Market Session. In addition, during hours when the local markets for foreign securities in the Fund’s portfolio are closed, the Intraday Indicative Value will be updated at least every 15 seconds during the Regular Market Session to reflect currency exchange fluctuations. The dissemination of the Intraday Indicative Value, together with the Disclosed Portfolio, will allow investors to determine the value of the underlying portfolio of the Fund on a daily basis and to provide a close estimate of that value throughout the trading day. Investors will also be able to obtain the Fund’s Statement of Additional 22 Under accounting procedures to be followed by the Fund, trades made on the prior business day (‘‘T’’) will be booked and reflected in NAV on the current business day (‘‘T+1’’). Notwithstanding the foregoing, portfolio trades that are executed prior to the opening of the Exchange on any business day may be booked and reflected in NAV on such business day. Accordingly, the Fund will be able to disclose at the beginning of the business day the portfolio that will form the basis for the NAV calculation at the end of the business day. 23 Currently, the NASDAQ OMX Global Index Data Service (‘‘GIDS’’) is the NASDAQ OMX global index data feed service, offering real-time updates, daily summary messages, and access to widely followed indexes and Intraday Indicative Values for ETFs. GIDS provides investment professionals with the daily information needed to track or trade NASDAQ OMX indexes, listed ETFs, or third-party partner indexes and ETFs. VerDate Sep<11>2014 17:10 Aug 24, 2015 Jkt 235001 Information (‘‘SAI’’), the Fund’s Shareholder Reports, and its Form N–CSR and Form N–SAR, filed twice a year. The Fund’s SAI and Shareholder Reports will be available from the Fund free upon request, and those documents and the Form N–CSR and Form N–SAR may be viewed on-screen or downloaded from the Commission’s Web site at www.sec.gov. Intra-day, executable price quotations on the high yield debt securities, bank loans, warrants, other fixed-income and convertible securities, including cash and cash equivalents, ETPs and other assets held by the Fund are available from major broker-dealer firms or on the exchange on which they are traded, if applicable. The foregoing, intra-day price information is available through subscription services, such as Bloomberg and Thomson Reuters, which can be accessed by Authorized Participants and other investors. The previous day’s closing price and trading volume information for the exchangetraded securities held by the Fund will be published daily in the financial section of newspapers. Quotation and last sale information for the exchangetraded securities held by the Fund will be available via UTP Level 1, as well as Nasdaq proprietary quote and trade services. Information regarding market price and volume of the Shares is and will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. The previous day’s closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Quotation and last sale information for the Shares will be available via UTP Level 1, as well as Nasdaq proprietary quote and trade services. Initial and Continued Listing The Shares will be subject to Rule 5735, which sets forth the initial and continued listing criteria applicable to Managed Fund Shares. The Exchange represents that, for initial and/or continued listing, the Fund must be in compliance with Rule 10A–3 24 under the Act. A minimum of 100,000 Shares 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 that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time. 24 See PO 00000 17 CFR 240.10A–3. Frm 00106 Fmt 4703 Sfmt 4703 Trading Halts and Trading Pauses With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund. Nasdaq will halt or pause trading in the Shares under the conditions specified in Nasdaq Rules 4120 and 4121, including the trading pauses under Nasdaq Rules 4120(a)(11) and (12). Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities and/or the financial instruments constituting the Disclosed Portfolio of the Fund; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. Trading in the Shares also will be subject to Rule 5735(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. Trading Rules Nasdaq deems the Shares to be equity securities, thus rendering trading in the Shares subject to Nasdaq’s existing rules governing the trading of equity securities. Nasdaq will allow trading in the Shares from 7:00 a.m. until 8:00 p.m. Eastern time. The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in Nasdaq Rule 5735(b)(3), the minimum price variation for quoting and entry of orders in Managed Fund Shares traded on the Exchange is $0.01. Surveillance The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by both Nasdaq and also the Financial Industry Regulatory Authority (‘‘FINRA’’) on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws.25 The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. 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. 25 FINRA surveils trading on the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. E:\FR\FM\25AUN1.SGM 25AUN1 Federal Register / Vol. 80, No. 164 / Tuesday, August 25, 2015 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES 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. In addition, the Exchange may obtain information from the Trade Reporting and Compliance Engine (‘‘TRACE’’), which is the FINRAdeveloped vehicle that facilitates mandatory reporting of over-the-counter secondary market transactions in eligible fixed income securities.26 FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares or other exchangetraded securities with other markets and other entities that are ISG members, and FINRA, on behalf of the Exchange, may obtain trading information regarding trading in the Shares; exchange-traded fixed income securities; exchangetraded warrants; exchange-traded convertible securities; ETPs; or other exchange-traded securities from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares; exchange-traded warrants; exchangetraded fixed-income securities; exchange-traded convertible securities; ETPs; or other exchange-traded securities from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.27 FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities, including corporate debt securities and money market instruments, held by the Fund reported to FINRA’s TRACE. In addition, the Exchange also has a general policy prohibiting the distribution of material, nonpublic information by its employees. Information Circular Prior to the commencement of trading, the Exchange will inform its members in an Information Circular of the special characteristics and risks associated with trading the Shares. Specifically, the Information Circular will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (2) Nasdaq Rule 2111A, which imposes suitability obligations on Nasdaq members with respect to recommending transactions in the Shares to customers; (3) how and by 26 All broker/dealers who are FINRA member firms have an obligation to report transactions in corporate bonds to TRACE. 27 For a list of the current members of ISG, see www.isgportal.org. VerDate Sep<11>2014 17:10 Aug 24, 2015 Jkt 235001 whom information regarding the Intraday Indicative Value and the Disclosed Portfolio is disseminated; (4) the risks involved in trading the Shares during the Pre-Market and Post-Market Sessions when an updated Intraday Indicative Value will not be calculated or publicly disseminated; (5) the requirement that members deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information. In addition, the Information Circular will advise members, prior to the commencement of trading, of the prospectus delivery requirements applicable to the Fund. Members purchasing Shares from the Fund for resale to investors will deliver a 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. Additionally, the Information Circular will reference that the Fund is subject to various fees and expenses described in the Registration Statement. The Information Circular will also disclose the trading hours of the Shares of the Fund and the applicable NAV Calculation Time for the Shares. The Information Circular will disclose that information about the Shares of the Fund will be publicly available on the Fund’ Web site. 2. Statutory Basis Nasdaq believes that the proposal is consistent with Section 6(b) of the Act 28 in general and Section 6(b)(5) of the Act 29 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 will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in Nasdaq Rule 5735. The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of the Shares on Nasdaq during all trading sessions and to deter and detect violations of Exchange rules and the applicable 28 15 29 15 PO 00000 U.S.C. 78f. U.S.C. 78f(b)(5). Frm 00107 Fmt 4703 Sfmt 4703 51637 federal securities laws. The Adviser is affiliated with a broker-dealer and has implemented a ‘‘fire wall’’ with respect to such broker-dealer regarding access to information concerning the composition and/or changes to the Fund’s portfolio. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the Intraday Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares. 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. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange will obtain a representation from the issuer of the Shares that the NAV per share will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time. In addition, a large amount of information is publicly available regarding the Fund and the Shares, thereby promoting market transparency. The Fund’s portfolio holdings will be disclosed on its Web site daily after the close of trading on the Exchange and prior to the opening of trading on the Exchange the following day. Moreover, the Intraday Indicative Value, available on the NASDAQ OMX Information LLC proprietary index data service will be widely disseminated and broadly displayed at least every 15 seconds during the Regular Market Session. On each business day, before commencement of trading in Shares in the Regular Market Session on the Exchange, the Fund will disclose on its Web site the Disclosed Portfolio that will form the basis for the Fund’s calculation of NAV at the end of the business day. Information regarding market price and trading volume of the Shares is and will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services, and quotation and last sale information for the Shares will be available via UTP Level 1, as well as Nasdaq proprietary quote and trade services. Intra-day, executable price quotations on the high yield debt securities, bank loans, other fixed-income and convertible securities, including cash and cash equivalents, ETPs and other assets held by the Fund are available from major broker-dealer firms or on the exchange on which they are traded, if applicable. The foregoing E:\FR\FM\25AUN1.SGM 25AUN1 51638 Federal Register / Vol. 80, No. 164 / Tuesday, August 25, 2015 / Notices intra-day price information is available through subscription services, such as Bloomberg and Thomson Reuters, which can be accessed by Authorized Participants and other investors. The Web site for the Fund will include a form of the prospectus for the Fund and additional data relating to NAV and other applicable quantitative information. Trading in Shares of the Fund will be halted if the circuit breaker parameters in Nasdaq Rule 4120(a)(11) have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable, and trading in the Shares will be subject to Nasdaq Rule 5735(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the Intraday Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares. 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 an additional type of activelymanaged exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and 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. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the Intraday Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares. For the above reasons, Nasdaq believes the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act. asabaliauskas on DSK5VPTVN1PROD with NOTICES B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed rule change will facilitate the listing and trading of an additional type of activelymanaged exchange-traded fund that will enhance competition among market participants, to the benefit of investors and the marketplace. VerDate Sep<11>2014 17:10 Aug 24, 2015 Jkt 235001 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. 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2015–095 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–2015–095. 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 (http://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 Frm 00108 Fmt 4703 Sfmt 4703 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.30 Jill M. Peterson, Assistant Secretary. [FR Doc. 2015–20937 Filed 8–24–15; 8:45 am] IV. Solicitation of Comments PO 00000 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 such filing will also 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– NASDAQ–2015–095 and should be submitted on or before September 15, 2015. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–75730; File No. SR–NSCC– 2015–802] Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing of Amendment No. 1 and No Objection to Advance Notice Filing, as Modified by Amendment No. 1, to Establish a Prefunded Liquidity Program As Part of NSCC’s Liquidity Risk Management August 19, 2015. On June 26, 2015, National Securities Clearing Corporation (‘‘NSCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) advance notice SR–NSCC–2015–802 (‘‘Advance Notice’’) pursuant to Section 806(e)(1) of the Payment, Clearing, and Settlement Supervision Act of 2010 (‘‘Payment, Clearing and Settlement Supervision Act’’) 1 and Rule 19b–4(n)(1)(i) 2 under the Securities Exchange Act of 1934 (‘‘Exchange Act’’) to establish a ‘‘Prefunded Liquidity Program’’ through the private placement of unsecured 30 17 CFR 200.30–3(a)(12). U.S.C. 5465(e)(1). The Financial Stability Oversight Council designated NSCC a systemically important financial market utility on July 18, 2012. See Financial Stability Oversight Council 2012 Annual Report, Appendix A, http:// www.treasury.gov/initiatives/fsoc/Documents/ 2012%20Annual%20Report.pdf. Therefore, NSCC is required to comply with the Clearing Supervision Act and file advance notices with the Commission. See 12 U.S.C. 5465(e). 2 17 CFR 240.19b–4(n)(1)(i). 1 12 E:\FR\FM\25AUN1.SGM 25AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 80, Number 164 (Tuesday, August 25, 2015)]
[Notices]
[Pages 51632-51638]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-20937]

[[Page 51632]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75738 ; File No. SR-NASDAQ-2015-095]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change Relating to the Listing and
Trading of the Shares of the AltShares Long/Short High Yield Fund of
ETFis Series Trust I

August 19, 2015.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 7, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by Nasdaq. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

Nasdaq proposes to list and trade the shares of the AltShares Long/
Short High Yield Fund (the ``Fund'') of ETFis Series Trust I (the
``Trust'') under Nasdaq Rule 5735 (``Managed Fund Shares'').\3\ The
shares of the Funds are collectively referred to herein as the
``Shares.'' The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, and at the
Commission's Public Reference Room.
---------------------------------------------------------------------------

\3\ The Commission approved Nasdaq Rule 5735 in Securities
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June
20, 2008) (SR-NASDAQ-2008-039). The Exchange believes the proposed
rule change raises no significant issues not previously addressed in
prior Commission orders.
---------------------------------------------------------------------------

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 the
Statutory Basis for, the Proposed Rule Change

1. Purpose
The Exchange proposes to list and trade the Shares of the Fund
under Nasdaq Rule 5735, which governs the listing and trading of
Managed Fund Shares \4\ on the Exchange. The Fund will be an actively-
managed exchange-traded fund (``ETF''). The Shares will be offered by
the Trust, which was established as a Delaware series trust on
September 20, 2012.\5\ The Trust is registered with the Commission as
an investment company and has filed a registration statement on Form N-
1A (``Registration Statement'') with the Commission.\6\ The Fund is a
series of the Trust.
---------------------------------------------------------------------------

\4\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940, as amended (15 U.S.C. 80a-1) (the ``1940 Act'')
organized as an open-end investment company or similar entity that
invests in a portfolio of securities selected by its investment
adviser consistent with its investment objectives and policies. In
contrast, an open-end investment company that issues Index Fund
Shares, listed and traded on the Exchange under Nasdaq Rule 5705,
seeks to provide investment results that correspond generally to the
price and yield performance of a specific foreign or domestic stock
index, fixed income securities index or combination thereof.
\5\ The Commission has issued an order, upon which the Trust may
rely (the ``Exemptive Order''), granting certain exemptive relief to
the investment adviser to the Fund under the 1940 Act. See
Investment Company Act Release No. 30607 (July 23, 2013) (File No.
812-14080).
\6\ See Post-Effective Amendment No. 40/41 to Form N-1A
Registration Statement for the Trust, dated May 4, 2015 (File Nos.
333-187668 and 811-22819) (the ``Registration Statement''). The
description of the Fund and the Shares contained herein is based, in
part, on information in the Registration Statement.
---------------------------------------------------------------------------

Description of the Shares and the Fund
Etfis Capital LLC is the investment adviser (``Adviser'') to the
Fund. Bramshill Investments, LLC is the investment sub-adviser to the
Fund (the ``Sub-Adviser''). The Sub-Adviser is responsible for daily
portfolio management and all investment decisions for the Fund. ETF
Distributors LLC (the ``Distributor'') will be the principal
underwriter and distributor of the Fund's Shares. The Bank of New York
Mellon Corporation (``BNY'') will act as the administrator, accounting
agent, custodian and transfer agent to the Fund.
Paragraph (g) of Rule 5735 provides that if the investment adviser
to the investment company issuing Managed Fund Shares is affiliated
with a broker-dealer, such investment adviser shall erect a ``fire
wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such investment company portfolio.\7\ In addition, paragraph
(g) further requires that personnel who make decisions on the open-end
fund's portfolio composition must be subject to procedures designed to
prevent the use and dissemination of material, nonpublic information
regarding the open-end fund's portfolio. Rule 5735(g) is similar to
Nasdaq Rule 5705(b)(5)(A)(i); however, paragraph (g) in connection with
the establishment of a ``fire wall'' between the investment adviser and
the broker-dealer reflects the applicable open-end fund's portfolio,
not an underlying benchmark index, as is the case with index-based
funds. The Adviser is not a broker-dealer, although it is affiliated
with the Distributor, 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 the
portfolio. The Sub-Adviser is not a broker-dealer and is not affiliated
with a broker-dealer. In the event (a) the Adviser or the Sub-Adviser
becomes newly affiliated with a broker-dealer \8\ or registers as a
broker-dealer, or (b) any new adviser or new sub-adviser is a
registered broker-dealer or is or becomes affiliated with a broker-
dealer, it will implement a fire wall with respect to its relevant
personnel and/or such broker-dealer affiliate, as

[[Page 51633]]

applicable, regarding access to information concerning the composition
and/or changes to the Fund portfolio and will be subject to procedures
designed to prevent the use and dissemination of material nonpublic
information regarding such portfolio.
---------------------------------------------------------------------------

\7\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser, the Sub-Adviser and each such
party's related personnel are subject to the provisions of Rule
204A-1 under the Advisers Act relating to codes of ethics. This Rule
requires investment advisers to adopt a code of ethics that reflects
the fiduciary nature of the relationship to clients as well as
compliance with applicable federal securities laws as defined in
Rule 204A-1(e)(4). Accordingly, procedures designed to prevent the
communication and misuse of nonpublic information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless such investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violation, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
\8\ In the case of the Adviser, which is already affiliated with
a broker-dealer and has implemented a fire wall with respect to such
affiliated broker-dealer, this refers to a new affiliation with an
additional broker-dealer.
---------------------------------------------------------------------------

Investment Objective
The Fund's investment objective is to seek current income and
capital appreciation with reduced volatility over time.
Principal Investments
The Fund will seek to achieve its investment objective primarily by
investing in a portfolio of ``high yield'' debt securities of U.S.
companies.
Under normal market conditions,\9\ the Fund will hold long
positions in high yield debt securities selected because the Sub-
Adviser believes they are likely to outperform the market over time or
increase in value in the near term (the ``Long Position''), and will
hold short positions in high yield debt securities selected because the
Sub-Adviser believes they are likely to lose value in the near or
longer term (the ``Short Position'').
---------------------------------------------------------------------------

\9\ The term ``under normal market conditions'' as used herein
includes, but is not limited to, the absence of adverse market,
economic, political or other conditions, including extreme
volatility or trading halts in the fixed income or other securities
markets or the financial markets generally; operational issues
causing dissemination of inaccurate market information; or force
majeure type events such as systems failure, natural or man-made
disaster, act of God, armed conflict, act of terrorism, riot or
labor disruption or any similar intervening circumstance. In periods
of extreme market disturbance, the Fund may take temporary defensive
positions, by overweighting its portfolio in cash/cash-like
instruments; however, to the extent possible, the Adviser would
continue to seek to achieve the Fund's investment objectives.
---------------------------------------------------------------------------

The Fund will not have any portfolio maturity limitation and may
invest its assets in instruments with short-term, medium-term or long-
term maturities. Issuers of securities in which the Fund expects to
invest will include large and medium capitalization companies, and may
include small capitalization companies. The Sub-Adviser expects the
Fund's investment portfolio to include up to 200 different securities
positions with a target portfolio net exposure (the market value of the
Long Position minus the market value of the Short Position) of between
-20% and 100%.
In selecting securities for the Fund's portfolio, the Sub-Adviser
generally will analyze debt securities included in the Bloomberg USD
Corporate High Yield Bond Index (the ``Bloomberg High Yield Index'').
While the Fund may invest directly in high yield debt securities, the
Sub-Adviser may also implement the Fund's strategy by investing in
exchange-traded pools (which will consist of exchange-traded funds,\10\
exchange-traded notes,\11\ or closed-end funds, and each of which will
be listed for trading on a U.S. exchange) (``ETPs'') that invest a
significant portion of their portfolios in high yield debt instruments
(``High Yield ETPs'').
---------------------------------------------------------------------------

\10\ See Nasdaq Rules 5705.
\11\ See Nasdaq Rules 5710.
---------------------------------------------------------------------------

Positions in high-yield debt securities also may include foreign
debt securities traded on U.S. or foreign exchanges or in U.S. or
foreign over-the-counter markets, which may be denominated in foreign
currencies. (Any currency hedging will be accomplished by taking long
or short positions in ETPs.)
``High yield debt securities'' generally include debt securities
that are rated lower than ``BBB-'' by Standard & Poor's Ratings Group
or ``Baa3'' by Moody's Investors Service, Inc. or at a similar level by
another nationally recognized statistical rating organization, or are
unrated but are deemed to be of comparable quality by the Sub-Adviser.
These securities consist of senior and subordinated corporate debt
obligations (bonds, debentures, notes and commercial paper). The Fund
may invest in the foregoing corporate debt obligations, senior bank
loans (including through loan assignments and loan participations),
preferred stocks, municipal bonds, convertible bonds and convertible
preferred stocks.\12\ The Fund will not invest in other types of high-
yield debt securities, such as asset-backed securities. The Fund will
not be limited to investing in high-yield securities, so any of the
securities listed may also be investment grade. The Fund may invest in
U.S. treasuries.
---------------------------------------------------------------------------

\12\ Convertible bonds and convertible preferred stocks in which
the Fund invests, and the equity securities into which these
securities may be converted, and also preferred stocks (non-
convertible) in which the Fund invests, generally will be exchange-
traded. The Sub-Adviser's current expectation is that at least 80%
of these securities will be exchange-traded. At least 90% of these
exchange-traded securities will be traded on exchanges that are
Intermarket Surveillance Group (``ISG'') members.
---------------------------------------------------------------------------

The Fund
As a result of its trading strategy, the Fund expects to engage in
frequent portfolio transactions that will likely result in higher
portfolio turnover than other similar investment companies. Portfolio
turnover is a ratio that indicates how often the securities in an
investment company's portfolio change during a year. A higher portfolio
turnover rate indicates a greater number of changes, and a lower
portfolio turnover rate indicates a smaller number of changes. Under
normal circumstances, the anticipated annual portfolio turnover rate
for the Fund is expected to be greater than 100%.
Other Investments
The Fund may invest in other types of investments, as set forth in
this section. In addition to investing in High Yield ETPs as discussed
under Principal Investments, the Fund could invest in other fixed-
income ETPs--but will not invest in leveraged ETPs. Due to legal
limitations, the Fund will be prevented from purchasing more than 3% of
an ETF's outstanding shares unless: (i) The ETF or the Fund has
received an order for exemptive relief from the 3% limitation from the
Commission that is applicable to the Fund; and (ii) the ETF and the
Fund take appropriate steps to comply with any conditions in such
order. The Fund may invest in warrants.\13\
---------------------------------------------------------------------------

\13\ Warrants in which the Fund invests, and the equity
securities into which these warrants may be converted, generally
will be exchange-traded. The Sub-Adviser's current expectation is
that at least 80% of these securities will be exchange-traded. At
least 90% of these exchange-traded securities will be traded on
exchanges that are ISG members.
---------------------------------------------------------------------------

In certain adverse market, economic, political, or other
conditions, the Fund may temporarily depart from its normal investment
policies and strategy, provided that the alternative is consistent with
the Fund's investment objective and is in the best interest of the
Fund. At such times, the Fund may invest in cash or cash equivalents,
such as money market instruments,\14\ and to the extent permitted by
applicable law and the Fund's investment restrictions, the Fund may
invest in shares of money market mutual funds. Under such
circumstances, the Fund may invest up to 100% of its assets in these
investments and may do so for extended periods of time. Under normal
circumstances, however, the Fund may also hold money market instruments
and/or shares of money market mutual funds for various reasons
including to provide for funds awaiting investment, to accumulate cash
for anticipated purchases of portfolio securities, to allow for
shareholder redemptions and to provide for the Fund's operating
expenses.
---------------------------------------------------------------------------

\14\ The money market instruments in which the Fund may invest
are short-term (less than one-year) notes issued by (i) the U.S.
government, (ii) an agency of the U.S. government, or (iii) a U.S.
corporation.
---------------------------------------------------------------------------

The Fund anticipates investing entirely in fully liquid assets, but
it has the flexibility to invest up to 15% of its net assets in
illiquid securities and other

[[Page 51634]]

illiquid assets.\15\ Under the supervision of the Board of Trustees of
the Trust (the ``Trust Board''), the Sub-Adviser will determine the
liquidity of the Fund's investments, and through reports from the Sub-
Adviser, the Trust Board monitors investments in illiquid instruments.
In determining the liquidity of the Fund's investments, the Sub-Adviser
may consider various factors including: (i) The frequency of trades and
quotations; (ii) the number of dealers and prospective purchasers in
the marketplace; (iii) dealer undertakings to make a market; (iv) the
nature of the security (including any demand or tender features); and
(v) the nature of the marketplace for trades (including the ability to
assign or offset the Fund's rights and obligations relating to the
investment). If through a change in values, net assets, or other
circumstances, the Fund were in a position where more than 15% of its
net assets were invested in illiquid securities or other illiquid
assets, it would seek to take appropriate steps to protect liquidity.
In keeping with the foregoing focus on liquidity, the Fund will
generally seek to invest in high-yield debt securities, bank loans, and
other debt issuances that the Sub-Adviser deems to be liquid, with
readily available prices. The Fund will only invest in bank loans that
have a par amount outstanding of U.S. $100 million or greater at the
time the loan is originally issued. The Fund will not enter into a long
or short position in high yield debt securities with a par amount
outstanding of less than U.S. $100 million at the time of issuance of
such high yield debt securities, if upon establishing such position,
the total value of such positions would represent fifty percent or
greater of the Fund's net assets.
---------------------------------------------------------------------------

\15\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR
14618 (March 18, 2008), FN 34. See also Investment Company Act
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970)
(Statement Regarding ``Restricted Securities''); Investment Company
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992)
(Revisions of Guidelines to Form N-1A). A fund's portfolio security
is illiquid if it cannot be disposed of in the ordinary course of
business within seven days at approximately the value ascribed to it
by the fund. See Investment Company Act Release No. 14983 (March 12,
1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7
under the 1940 Act); Investment Company Act Release No. 17452 (April
23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under
the Securities Act of 1933).
---------------------------------------------------------------------------

The Fund may not invest more than 25% of the value of its total
assets in securities of issuers in any particular industry.\16\
---------------------------------------------------------------------------

\16\ See Form N-1A, Item 9. The Commission has taken the
position that a fund is concentrated if it invests more than 25% of
the value of its total assets in any one industry. See, e.g.,
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR
54241 (November 21, 1975).
---------------------------------------------------------------------------

The Fund's investments (including investments in ETPs) will not be
utilized to seek to achieve a leveraged return on the Fund's net
assets. The Fund will not invest in futures contracts, will not invest
in options, will not invest in swaps, and will not invest in other
derivative instruments.
The Shares
The Fund will issue and redeem Shares only in Creation Units,
through the Distributor, without a sales load (but subject to
transaction fees), at the net asset value (``NAV'') next determined
after receipt of an order in proper form, on a continuous basis every
day except weekends and specified holidays, pursuant to the terms of
the agreement executed with each Authorized Participant (as defined
below). The NAV of the Fund will be determined once each business day,
normally as of the close of regular trading on the NYSE, generally,
4:00 p.m. Eastern time.\17\ Creation Unit sizes will be 25,000 Shares
per Creation Unit.
---------------------------------------------------------------------------

\17\ NAV per Share will be calculated by dividing the Fund's net
assets by the number of Fund Shares outstanding. For more
information regarding the valuation of Fund investments in
calculating the Fund's NAV, see ``Net Asset Value'' below and see
``Determination of Net Asset Value'' in the Registration Statement.
---------------------------------------------------------------------------

The consideration for purchase of a Creation Unit will consist of
either (i) an in-kind deposit of a designated portfolio of securities
(the ``Deposit Securities'') for each Creation Unit constituting a
substantial replication, or a representation, of the securities
included in the Fund's portfolio and an amount of cash (the ``Cash
Component'') computed as described below or (ii) cash totaling the NAV
of the Creation Unit (``Deposit Cash''). The ``Cash Component'' will be
an amount equal to the difference between the NAV of the shares (per
Creation Unit) and the market value of the Deposit Securities. The Fund
may also effect a portion of an otherwise in-kind creation or
redemption for cash, in accordance with the Exemptive Order.
As applicable, (i) the Deposit Securities and the Cash Component,
together, or (ii) the Deposit Cash, will constitute the ``Fund
Deposit,'' which will represent the minimum initial and subsequent
investment amount for a Creation Unit of the Fund. If the Cash
Component is a positive number (i.e., the NAV per Creation Unit exceeds
the market value of the Deposit Securities), the Cash Component will be
such positive amount. If the Cash Component is a negative number (i.e.,
the NAV per Creation Unit is less than the market value of the Deposit
Securities), the Cash Component will be such negative amount and the
creator will be entitled to receive cash from the Fund in an amount
equal to the Cash Component. The Cash Component will serve the function
of compensating for any difference between the NAV per Creation Unit
and the market value of the Deposit Securities.
To be eligible to place orders with respect to creations and
redemptions of Creation Units, an entity must be (i) a ``Participating
Party,'' i.e., a broker-dealer or other participant in the clearing
process through the Continuous Net Settlement System of the National
Securities Clearing Corporation (``NSCC'') or (ii) a Depository Trust
Company (``DTC'') Participant (a ``DTC Participant''). In addition,
each Participating Party or DTC Participant (each, an ``Authorized
Participant'') must execute an agreement that has been agreed to by the
Distributor and the Fund Administrator, BNY, with respect to purchases
and redemptions of Creation Units.
BNY, through the NSCC, will make available on each business day,
immediately prior to the opening of business on the Exchange's Regular
Market Session (currently 9:30 a.m. Eastern time), the list of the
names and the required number of shares of each Deposit Security to be
included in the current Fund Deposit (based on information at the end
of the previous business day) for the Fund. Such Fund Deposit, subject
to any relevant adjustments, will be applicable in order to effect
purchases of Creation Units of the Fund until such time as the next
announced composition of the Deposit Securities is made available.
Shares may be redeemed only in Creation Units at their NAV next
determined after receipt of a redemption request in proper form by the
Fund through BNY and only on a business day.
With respect to the Fund, BNY, through the NSCC, will make
available immediately prior to the opening of business on the Exchange
(9:30 a.m. Eastern time) on each business day, the list of the names
and share quantities of the Fund's portfolio securities (``Fund
Securities'') that will be applicable (subject to possible amendment or
correction) to redemption requests received in proper form on that day.
Fund Securities received on redemption

[[Page 51635]]

may not be identical to Deposit Securities.
Unless cash redemptions are available or specified for the Fund,
the redemption proceeds for a Creation Unit will consist of Fund
Securities as announced by BNY on the business day of the request for
redemption received in proper form plus cash in an amount equal to the
difference between the NAV of the Shares being redeemed, as next
determined after a receipt of a request in proper form, and the value
of the Fund Securities (the ``Cash Redemption Amount''), less a fixed
redemption transaction fee and any applicable additional variable
charge as set forth in the Registration Statement. In the event that
the Fund Securities have a value greater than the NAV of the Shares, a
compensating cash payment equal to the differential will be required to
be made by or through an Authorized Participant by the redeeming
shareholder. Notwithstanding the foregoing, at the Trust's discretion,
an Authorized Participant may receive the corresponding cash value of
the securities in lieu of one or more Fund Securities.
The creation order and redemption order cut off time for the Fund
is expected to be 3:00 p.m. Eastern time. On days when the Exchange
closes earlier than normal and in the case of custom orders, the Fund
may require orders for Creation Units to be placed earlier in the day.
Net Asset Value
The NAV per Share for the Fund will be computed by dividing the
value of the net assets of the Fund (i.e., the value of its total
assets less total liabilities) by the total number of Shares
outstanding, rounded to the nearest cent. Expenses and fees, including
the management fees, will be accrued daily and taken into account for
purposes of determining NAV. The NAV of the Fund will be calculated by
BNY and determined at the close of regular trading on the NYSE
(ordinarily 4:00 p.m. Eastern time) on each day that such exchange is
open. In calculating the Fund's NAV per Share, investments will
generally be valued by using market valuations. A market valuation
generally means a valuation (i) obtained from an exchange, a pricing
service, or a major market maker (or dealer) or (ii) based on a price
quotation or other equivalent indication of value supplied by an
exchange, a pricing service, or a major market maker (or dealer).\18\
---------------------------------------------------------------------------

\18\ Under normal market conditions, the Fund will obtain
pricing information on all of its assets from these sources.
---------------------------------------------------------------------------

ETPs, exchange-traded fixed income securities, exchange-traded
convertible securities, exchange-traded warrants and any other exchange
traded securities will be valued at the official closing price on their
principal exchange or board of trade, or lacking any current reported
sale at the time of valuation, at the mean between the most recent bid
and asked quotations on the principal exchange or board of trade.
Portfolio securities traded on more than one securities exchange will
be valued at the last sale price or official closing price, as
applicable, on the business day as of which such value is being
determined at the close of the exchange representing the principal
market for such securities. Fixed-income securities traded over-the-
counter (including high yield fixed-income securities and money market
instruments); warrants traded over-the-counter; and convertible
securities traded over-the-counter will be valued at the mean between
the most recent available bid and asked quotations provided by parties
that make a market in the instrument. If recent bid and asked
quotations are not available, these securities will be valued in
accordance with the Fund's fair valuation procedures. Money market
instruments with maturities of less than 60 days will be valued at
amortized cost. Shares of mutual funds that are not exchange-listed
will be valued at their net asset value.
Notwithstanding the foregoing, in determining the value of any
security or asset, the Fund may use a valuation provided by a pricing
vendor employed by the Trust and approved by the Trust Board. The
pricing vendor may base such valuations upon dealer quotes, by
analyzing the listed market, by utilizing matrix pricing, by analyzing
market correlations and pricing and/or employing sensitivity analysis.
The Adviser may use various pricing services, or discontinue the
use of any pricing service, as approved by the Trust Board from time to
time. A price obtained from a pricing service based on such pricing
service's valuation matrix may be considered a market valuation. Any
assets or liabilities denominated in currencies other than the U.S.
dollar will be converted into U.S. dollars at the current market rates
on the date of valuation as quoted by one or more sources.
In the event that current market valuations are not readily
available or such valuations do not reflect current market value, the
Trust's procedures require the Adviser's Pricing Committee to determine
a security's fair value in accordance with the Fund's fair value
pricing procedures, which are approved by the Trust Board and
consistent with the 1940 Act.\19\ In determining such value the
Adviser's Pricing Committee may consider, among other things, (i) price
comparisons among multiple sources, (ii) a review of corporate actions
and news events, and (iii) a review of relevant financial indicators.
In these cases, the Fund's NAV may reflect certain portfolio
securities' fair values rather than their market prices. Fair value
pricing involves subjective judgments and it is possible that the fair
value determination for a security is materially different than the
value that could be realized upon the sale of the security.
---------------------------------------------------------------------------

\19\ The Valuation Committee of the Trust Board will be
responsible for the oversight of the pricing procedures of the Fund
and the valuation of the Fund's portfolio. The Valuation Committee
has delegated day-to-day pricing responsibilities to the Adviser's
Pricing Committee, which will be composed of officers of the
Adviser. The Pricing Committee will be responsible for the valuation
and revaluation of any portfolio investments for which market
quotations or prices are not readily available. The Trust and the
Adviser have implemented procedures designed to prevent the use and
dissemination of material, nonpublic information regarding valuation
and revaluation of any portfolio investments.
---------------------------------------------------------------------------

Availability of Information
The Fund's Web site, which will be publicly available prior to the
public offering of Shares, will include a form of the prospectus for
the Fund that may be downloaded. The Web site will include additional
quantitative information updated on a daily basis, including, for the
Fund: (1) The prior business day's reported NAV, mid-point of the bid/
ask spread at the time of calculation of such NAV (the ``Bid/Ask
Price''),\20\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV; (2) data in chart format displaying the
frequency distribution of discounts and premiums of the daily Bid/Ask
Price against the NAV, within appropriate ranges, for each of the four
previous calendar quarters; and (3) daily trading volume. On each
business day, before commencement of trading in Shares in the Regular
Market Session \21\ on the Exchange, the Trust will disclose on its Web
site the identities and quantities of the portfolio of securities and
other

[[Page 51636]]

assets (the ``Disclosed Portfolio'') held by the Fund that will form
the basis for the Fund's calculation of NAV at the end of the business
day.\22\
---------------------------------------------------------------------------

\20\ The Bid/Ask Price of the Fund will be determined using the
midpoint of the highest bid and the lowest offer on the Exchange as
of the time of calculation of such Fund's NAV. The records relating
to Bid/Ask Prices will be retained by the Fund and its service
providers.
\21\ See Nasdaq Rule 4120(b)(4) (describing the three trading
sessions on the Exchange: (1) Pre-Market Session from 7 a.m. to 9:30
a.m. Eastern time; (2) Regular Market Session from 9:30 a.m. to 4
p.m. or 4:15 p.m. Eastern time; and (3) Post-Market Session from 4
p.m. or 4:15 p.m. to 8 p.m. Eastern time).
\22\ Under accounting procedures to be followed by the Fund,
trades made on the prior business day (``T'') will be booked and
reflected in NAV on the current business day (``T+1'').
Notwithstanding the foregoing, portfolio trades that are executed
prior to the opening of the Exchange on any business day may be
booked and reflected in NAV on such business day. Accordingly, the
Fund will be able to disclose at the beginning of the business day
the portfolio that will form the basis for the NAV calculation at
the end of the business day.
---------------------------------------------------------------------------

On a daily basis, the Fund will disclose for each portfolio
security and other asset of the Fund the following information on the
Fund's Web site (if applicable): Name, ticker symbol, CUSIP number or
other identifier, if any; type of holding (such as ``bond'', ``note'',
``preferred stock'', ``ETP'', ``mutual fund''); quantity held (as
measured by, for example, number of shares, contracts or units);
maturity date, if any; coupon rate, if any; effective date, if any;
market value of the holding; and the percentage weighting of the
holdings in the Fund's portfolio. The Web site information will be
publicly available at no charge.
In addition, for the Fund, an estimated value, defined in Rule 5735
as the ``Intraday Indicative Value,'' that reflects an estimated
intraday value of the Fund's portfolio, will be disseminated. Moreover,
the Intraday Indicative Value, available on the NASDAQ OMX Information
LLC proprietary index data service,\23\ will be based upon the current
value for the components of the Disclosed Portfolio and will be updated
and widely disseminated and broadly displayed at least every 15 seconds
during the Regular Market Session. In addition, during hours when the
local markets for foreign securities in the Fund's portfolio are
closed, the Intraday Indicative Value will be updated at least every 15
seconds during the Regular Market Session to reflect currency exchange
fluctuations.
---------------------------------------------------------------------------

\23\ Currently, the NASDAQ OMX Global Index Data Service
(``GIDS'') is the NASDAQ OMX global index data feed service,
offering real-time updates, daily summary messages, and access to
widely followed indexes and Intraday Indicative Values for ETFs.
GIDS provides investment professionals with the daily information
needed to track or trade NASDAQ OMX indexes, listed ETFs, or third-
party partner indexes and ETFs.
---------------------------------------------------------------------------

The dissemination of the Intraday Indicative Value, together with
the Disclosed Portfolio, will allow investors to determine the value of
the underlying portfolio of the Fund on a daily basis and to provide a
close estimate of that value throughout the trading day.
Investors will also be able to obtain the Fund's Statement of
Additional Information (``SAI''), the Fund's Shareholder Reports, and
its Form N-CSR and Form N-SAR, filed twice a year. The Fund's SAI and
Shareholder Reports will be available from the Fund free upon request,
and those documents and the Form N-CSR and Form N-SAR may be viewed on-
screen or downloaded from the Commission's Web site at www.sec.gov.
Intra-day, executable price quotations on the high yield debt
securities, bank loans, warrants, other fixed-income and convertible
securities, including cash and cash equivalents, ETPs and other assets
held by the Fund are available from major broker-dealer firms or on the
exchange on which they are traded, if applicable. The foregoing, intra-
day price information is available through subscription services, such
as Bloomberg and Thomson Reuters, which can be accessed by Authorized
Participants and other investors. The previous day's closing price and
trading volume information for the exchange-traded securities held by
the Fund will be published daily in the financial section of
newspapers. Quotation and last sale information for the exchange-traded
securities held by the Fund will be available via UTP Level 1, as well
as Nasdaq proprietary quote and trade services.
Information regarding market price and volume of the Shares is and
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. The
previous day's closing price and trading volume information for the
Shares will be published daily in the financial section of newspapers.
Quotation and last sale information for the Shares will be available
via UTP Level 1, as well as Nasdaq proprietary quote and trade
services.
Initial and Continued Listing
The Shares will be subject to Rule 5735, which sets forth the
initial and continued listing criteria applicable to Managed Fund
Shares. The Exchange represents that, for initial and/or continued
listing, the Fund must be in compliance with Rule 10A-3 \24\ under the
Act. A minimum of 100,000 Shares 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 that the NAV and the Disclosed Portfolio
will be made available to all market participants at the same time.
---------------------------------------------------------------------------

\24\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Trading Halts and Trading Pauses
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund. Nasdaq will halt or pause trading in
the Shares under the conditions specified in Nasdaq Rules 4120 and
4121, including the trading pauses under Nasdaq Rules 4120(a)(11) and
(12). Trading may be halted because of market conditions or for reasons
that, in the view of the Exchange, make trading in the Shares
inadvisable. These may include: (1) The extent to which trading is not
occurring in the securities and/or the financial instruments
constituting the Disclosed Portfolio of the Fund; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present. Trading in the Shares also will be
subject to Rule 5735(d)(2)(D), which sets forth circumstances under
which Shares of the Fund may be halted.
Trading Rules
Nasdaq deems the Shares to be equity securities, thus rendering
trading in the Shares subject to Nasdaq's existing rules governing the
trading of equity securities. Nasdaq will allow trading in the Shares
from 7:00 a.m. until 8:00 p.m. Eastern time. The Exchange has
appropriate rules to facilitate transactions in the Shares during all
trading sessions. As provided in Nasdaq Rule 5735(b)(3), the minimum
price variation for quoting and entry of orders in Managed Fund Shares
traded on the Exchange is $0.01.
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by both Nasdaq and
also the Financial Industry Regulatory Authority (``FINRA'') on behalf
of the Exchange, which are designed to detect violations of Exchange
rules and applicable federal securities laws.\25\ The Exchange
represents that these procedures are adequate to properly monitor
Exchange trading of the Shares in all trading sessions and to deter and
detect violations of Exchange rules and applicable federal securities
laws.
---------------------------------------------------------------------------

\25\ FINRA surveils trading on the Exchange pursuant to a
regulatory services agreement. The Exchange is responsible for
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------

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.

[[Page 51637]]

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. In addition,
the Exchange may obtain information from the Trade Reporting and
Compliance Engine (``TRACE''), which is the FINRA-developed vehicle
that facilitates mandatory reporting of over-the-counter secondary
market transactions in eligible fixed income securities.\26\
---------------------------------------------------------------------------

\26\ All broker/dealers who are FINRA member firms have an
obligation to report transactions in corporate bonds to TRACE.
---------------------------------------------------------------------------

FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares or other exchange-traded securities
with other markets and other entities that are ISG members, and FINRA,
on behalf of the Exchange, may obtain trading information regarding
trading in the Shares; exchange-traded fixed income securities;
exchange-traded warrants; exchange-traded convertible securities; ETPs;
or other exchange-traded securities from such markets and other
entities. In addition, the Exchange may obtain information regarding
trading in the Shares; exchange-traded warrants; exchange-traded fixed-
income securities; exchange-traded convertible securities; ETPs; or
other exchange-traded securities from markets and other entities that
are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.\27\ FINRA, on behalf of
the Exchange, is able to access, as needed, trade information for
certain fixed income securities, including corporate debt securities
and money market instruments, held by the Fund reported to FINRA's
TRACE.
---------------------------------------------------------------------------

\27\ For a list of the current members of ISG, see
www.isgportal.org.
---------------------------------------------------------------------------

In addition, the Exchange also has a general policy prohibiting the
distribution of material, nonpublic information by its employees.
Information Circular
Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares. Specifically, the Information
Circular will discuss the following: (1) The procedures for purchases
and redemptions of Shares in Creation Units (and that Shares are not
individually redeemable); (2) Nasdaq Rule 2111A, which imposes
suitability obligations on Nasdaq members with respect to recommending
transactions in the Shares to customers; (3) how and by whom
information regarding the Intraday Indicative Value and the Disclosed
Portfolio is disseminated; (4) the risks involved in trading the Shares
during the Pre-Market and Post-Market Sessions when an updated Intraday
Indicative Value will not be calculated or publicly disseminated; (5)
the requirement that members deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; and (6) trading information.
In addition, the Information Circular will advise members, prior to
the commencement of trading, of the prospectus delivery requirements
applicable to the Fund. Members purchasing Shares from the Fund for
resale to investors will deliver a 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.
Additionally, the Information Circular will reference that the Fund
is subject to various fees and expenses described in the Registration
Statement. The Information Circular will also disclose the trading
hours of the Shares of the Fund and the applicable NAV Calculation Time
for the Shares. The Information Circular will disclose that information
about the Shares of the Fund will be publicly available on the Fund'
Web site.
2. Statutory Basis
Nasdaq believes that the proposal is consistent with Section 6(b)
of the Act \28\ in general and Section 6(b)(5) of the Act \29\ 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.
---------------------------------------------------------------------------

\28\ 15 U.S.C. 78f.
\29\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in Nasdaq Rule 5735. The
Exchange believes that its surveillance procedures are adequate to
properly monitor the trading of the Shares on Nasdaq during all trading
sessions 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'' with respect to such
broker-dealer regarding access to information concerning the
composition and/or changes to the Fund's portfolio. In addition, as
noted above, investors will have ready access to information regarding
the Fund's holdings, the Intraday Indicative Value, the Disclosed
Portfolio, and quotation and last sale information for the Shares. 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.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Exchange will obtain a representation from the issuer of the
Shares that the NAV per share will be calculated daily and that the NAV
and the Disclosed Portfolio will be made available to all market
participants at the same time. In addition, a large amount of
information is publicly available regarding the Fund and the Shares,
thereby promoting market transparency. The Fund's portfolio holdings
will be disclosed on its Web site daily after the close of trading on
the Exchange and prior to the opening of trading on the Exchange the
following day. Moreover, the Intraday Indicative Value, available on
the NASDAQ OMX Information LLC proprietary index data service will be
widely disseminated and broadly displayed at least every 15 seconds
during the Regular Market Session. On each business day, before
commencement of trading in Shares in the Regular Market Session on the
Exchange, the Fund will disclose on its Web site the Disclosed
Portfolio that will form the basis for the Fund's calculation of NAV at
the end of the business day. Information regarding market price and
trading volume of the Shares is and will be continually available on a
real-time basis throughout the day on brokers' computer screens and
other electronic services, and quotation and last sale information for
the Shares will be available via UTP Level 1, as well as Nasdaq
proprietary quote and trade services. Intra-day, executable price
quotations on the high yield debt securities, bank loans, other fixed-
income and convertible securities, including cash and cash equivalents,
ETPs and other assets held by the Fund are available from major broker-
dealer firms or on the exchange on which they are traded, if
applicable. The foregoing

[[Page 51638]]

intra-day price information is available through subscription services,
such as Bloomberg and Thomson Reuters, which can be accessed by
Authorized Participants and other investors.
The Web site for the Fund will include a form of the prospectus for
the Fund and additional data relating to NAV and other applicable
quantitative information. Trading in Shares of the Fund will be halted
if the circuit breaker parameters in Nasdaq Rule 4120(a)(11) have been
reached or because of market conditions or for reasons that, in the
view of the Exchange, make trading in the Shares inadvisable, and
trading in the Shares will be subject to Nasdaq Rule 5735(d)(2)(D),
which sets forth circumstances under which Shares of the Fund may be
halted. In addition, as noted above, investors will have ready access
to information regarding the Fund's holdings, the Intraday Indicative
Value, the Disclosed Portfolio, and quotation and last sale information
for the Shares.
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
an additional type of actively-managed exchange-traded product that
will enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, the Exchange has in
place surveillance procedures relating to trading in the Shares and 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. In addition, as noted above, investors
will have ready access to information regarding the Fund's holdings,
the Intraday Indicative Value, the Disclosed Portfolio, and quotation
and last sale information for the Shares.
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
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed rule change will facilitate the listing and trading of an
additional type of actively-managed exchange-traded fund that will
enhance competition among market participants, to the benefit of
investors and the marketplace.

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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2015-095 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-2015-095. 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 (http://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 such filing will also 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-NASDAQ-2015-095 and should
be submitted on or before September 15, 2015.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
---------------------------------------------------------------------------

\30\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-20937 Filed 8-24-15; 8:45 am]
BILLING CODE 8011-01-P