Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Granting Approval 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, 62580-62584 [2015-26323]
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62580
Federal Register / Vol. 80, No. 200 / Friday, October 16, 2015 / Notices
FINRA’s and NYSE’s trade reporting
requirements to avoid a duplicative
regulatory structure and the increased
costs that may be incurred as a result of
such duplicative requirements.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate, it has
become effective pursuant to 19(b)(3)(A)
of the Act 8 and Rule 19b–4(f)(6) 9
thereunder.
FINRA has asked the Commission to
waive the 30-day operative delay so that
the pilot may continue to operate
without interruption. The Commission
believes that waiving the 30-day
operative delay is consistent with the
protection of investors and the public
interest. This action will continue to
allow the benefits of the pilot—
preventing duplicative reporting of
transactions in TRACE-Eligible
Securities that occur on NYSE—to
continue without interruption.
Therefore, the Commission hereby
designates the proposed rule change as
operative upon filing.10
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), FINRA provided the Commission
with written notice of its intent to file the proposed
rule change, along with a brief description and the
text of the proposed rule change, at least five
business days prior to the date of filing of the
proposed rule change, or such shorter time as
designated by the Commission.
10 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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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
Written comments were neither
solicited nor received.
8 15
IV. Solicitation of Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FINRA–2015–037 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2015–037. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing will also be available for
inspection and copying at the principal
office of FINRA. 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–FINRA–
2015–037 andshould be submitted on or
before November 6, 2015.
11 17
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CFR 200.30–3(a)(12).
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–26326 Filed 10–15–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76126; File No. SR–
NASDAQ–2015–095]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order
Granting Approval 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
October 9, 2015.
I. Introduction
On August 7, 2015, The NASDAQ
Stock Market LLC (the ‘‘Exchange’’ or
‘‘Nasdaq’’) filed with the Securities and
Exchange Commission’’
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and
Rule 19b–4 thereunder,2 a proposed rule
change to list and trade shares
(‘‘Shares’’) of the AltShares Long/Short
High Yield Fund (‘‘Fund’’) of ETFis
Series Trust I (‘‘Trust’’) under NASDAQ
Rule 5735. The proposed rule change
was published for comment in the
Federal Register on August 25, 2015.3
The Commission received no comments
on the proposed rule change. This order
grants approval of the proposed rule
change.
II. Description of the Proposal
The Exchange proposes to list and
trade the Shares under Nasdaq Rule
5735, which governs the listing and
trading of Managed Fund Shares on the
Exchange. The Fund will be an activelymanaged exchange-traded fund (‘‘ETF’’).
The Shares will be offered by the Trust,4
which is registered with the
Commission as an investment company
and has filed a registration statement on
Form N–1A (‘‘Registration Statement’’)
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 75738
(August 19, 2015), 80 FR 51632 (‘‘Notice’’).
4 According to the Exchange, the Adviser (as
defined herein) has obtained certain exemptive
relief, upon which the Trust may rely, under the
Investment Company Act of 1940 (‘‘1940 Act’’). See
Investment Company Act Release No. 30607 (July
23, 2013) (File No. 812–14080).
2 17
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with the Commission.5 The Fund will
be a series of the Trust.
Etfis Capital LLC will be the
investment adviser (‘‘Adviser’’) to the
Fund, and Bramshill Investments, LLC
will be the investment sub-adviser to
the Fund (‘‘Sub-Adviser’’). ETF
Distributors LLC (‘‘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. The
Exchange states that the Adviser is not
a broker-dealer, although it is affiliated
with the Distributor, a broker-dealer.6
The Exchange represents that 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.7 According to
the Exchange, the Sub-Adviser is not a
broker-dealer and is not affiliated with
a broker-dealer.8
The Exchange has made the following
representations and statements in
describing the Fund and its investment
strategy, including the Fund’s portfolio
holdings and investment restrictions.9
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A. Exchange’s Description of the Fund’s
Principal Investments
The investment objective of the Fund
will be to seek current income and
capital appreciation with reduced
volatility over time. 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,10 the Fund will hold long
5 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).
6 See Notice, supra note 3, 80 FR at 51632.
7 See id.
8 In the event (a) the Adviser or the Sub-Adviser
becomes newly affiliated with a broker-dealer 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
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.
9 The Commission notes that additional
information regarding the Fund, the Trust, and the
Shares, including investment strategies, risks,
creation and redemption procedures, fees, portfolio
holdings disclosure policies, calculation of net asset
value (‘‘NAV’’), distributions, and taxes, among
other things, can be found in the Notice and the
Registration Statement, as applicable. See Notice
and Registration Statement, supra notes 3 and 5,
respectively.
10 The term ‘‘under normal market conditions’’ as
used herein includes, but is not limited to, the
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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 (‘‘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 (‘‘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. According to the Exchange,
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%.11
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. 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,
exchange-traded notes, or closed-end
funds, each of which will be listed for
trading on a U.S. exchange, collectively,
‘‘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.
The Exchange states that ‘‘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
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.
11 See Notice, supra note 3, 80 FR at 51633.
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62581
by the Sub-Adviser.12 These securities
will consist of: (a) Senior and
subordinated corporate debt obligations
(bonds, debentures, notes, and
commercial paper); (b) senior bank
loans (including through loan
assignments and loan participations); (c)
preferred stocks; (d) municipal bonds;
(e) convertible bonds; and (f) convertible
preferred stocks.13 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. In addition, the Fund
may invest in U.S. treasuries.
According to the Exchange, 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.14 Under
normal circumstances, the anticipated
annual portfolio turnover rate for the
Fund is expected to be greater than
100%.
B. Exchange’s Description of the Fund’s
Other Investments
In addition to investing in High Yield
ETPs, the Fund may invest in other
fixed-income ETPs, but the Fund will
not invest in leveraged ETPs. The
Exchange states that the Fund will not
purchase 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.15
The Fund also may invest in warrants.16
In certain adverse market, economic,
political, or other conditions, the Fund
12 See
id.
Exchange states that convertible bonds and
convertible preferred stocks in which the Fund may
invest, and the equity securities into which these
securities may be converted, and also preferred
stocks (non-convertible) in which the Fund may
invest, generally will be exchange-traded.
According to the Exchange, the Sub-Adviser’s
current expectation is that at least 80% of these
securities will be exchange-traded. The Exchange
represents that at least 90% of these exchangetraded securities will be traded on exchanges that
are Intermarket Surveillance Group (‘‘ISG’’)
members. See id. at 51633 n.12.
14 See id. at 51633.
15 See id.
16 The Exchange states that warrants in which the
Fund invests, and the equity securities into which
these warrants may be converted, generally will be
exchange-traded. According to the Exchange, the
Sub-Adviser’s current expectation is that at least
80% of these securities will be exchange-traded.
The Exchange represents that at least 90% of these
exchange-traded securities will be traded on
exchanges that are ISG members. See Notice, supra
note 3, 80 FR at 51633 n.13.
13 The
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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,17 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.
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C. Exchange’s Description of the Fund’s
Investment Restrictions
According to the Exchange, 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 illiquid
assets.18 Under the supervision of the
Board of Trustees of the Trust (‘‘Trust
Board’’), the Sub-Adviser will determine
the liquidity of the Fund’s investments,
and through reports from the SubAdviser, the Trust Board will monitor
investments in illiquid instruments.19
The Exchange represents that, 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.20
The Fund will generally seek to invest
in high-yield debt securities, bank loans,
17 The Exchange states that 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. See id. at
51633 n.14.
18 See id. at 51633–34.
19 According to the Exchange, in determining the
liquidity of the Fund’s investments, the SubAdviser 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). See Notice, supra note
3, 80 FR at 51634.
20 See id.
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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 will not invest more than
25% of the value of its total assets in
securities of issuers in any particular
industry.
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
Exchange represents that the Fund will
not invest in futures contracts, options,
swaps, or other derivative instruments.
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the Exchange’s proposal to list
and trade the Shares is consistent with
the Exchange Act and the rules and
regulations thereunder applicable to a
national securities exchange.21 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Exchange
Act,22 which requires, among other
things, that the Exchange’s rules be
designed to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
The Commission also finds that the
proposal to list and trade the Shares on
the Exchange is consistent with Section
11A(a)(1)(C)(iii) of the Exchange Act,23
which sets forth the finding of Congress
that it is in the public interest and
appropriate for the protection of
investors and the maintenance of fair
and orderly markets to assure the
availability to brokers, dealers, and
investors of information with respect to
quotations for, and transactions in,
securities. Quotation and last-sale
information for the Shares and the
exchange-traded securities held by the
21 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
22 15 U.S.C. 78f(b)(5).
23 15 U.S.C. 78k–1(a)(1)(C)(iii).
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Fund will be available via UTP Level 1,
as well as Nasdaq proprietary quote and
trade services.24 On each business day,
before commencement of trading in
Shares in the Regular Market Session 25
on the Exchange, the Trust will disclose
on its Web site the identities and
quantities of the portfolio of securities
and other assets (‘‘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.26 In
addition, the Intraday Indicative Value,
available on the NASDAQ OMX
Information LLC proprietary index data
service,27 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.28
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.29 The NAV of the Fund
will be calculated by BNY and
determined at the close of regular
trading on the New York Stock
24 See
Notice, supra note 3, 80 FR at 51636.
Nasdaq Rule 4120(b)(4) (describing the
three trading sessions on the Exchange: (1) PreMarket Session from 7:00 a.m. to 9:30 a.m. Eastern
time; (2) Regular Market Session from 9:30 a.m. to
4:00 p.m. or 4:15 p.m. Eastern time; and (3) PostMarket Session from 4:00 p.m. or 4:15 p.m. to 8:00
p.m. Eastern time).
26 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. The daily
disclosure will include 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.
27 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. The Exchange represents that GIDS provides
investment professionals with the daily information
needed to track or trade NASDAQ OMX indexes,
listed ETFs, or third-party partner indexes and
ETFs. See Notice, supra note 3, 80 FR at 51636,
n.23.
28 See id. at 51636.
29 See id.
25 See
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Exchange (ordinarily 4:00 p.m. Eastern
time) on each day that such exchange is
open.30 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.31
The Exchange further states that the
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 will be available
from major broker-dealer firms or on the
exchange on which they are traded, if
applicable.32 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.
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.
The Commission also believes that the
proposal to list and trade the Shares is
reasonably designed to promote fair
disclosure of information that may be
necessary to price the Shares
appropriately and to prevent trading
when a reasonable degree of
transparency cannot be assured. The
Exchange states that it will obtain a
representation from the issuer of the
Shares that the NAV per Share will be
30 According to the Exchange, ETPs, exchangetraded 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-thecounter (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 ask 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.
31 See id. at 51638.
32 See id.
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calculated daily and that the NAV and
the Disclosed Portfolio will be made
available to all market participants at
the same time.33 The Exchange also
represents that 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.34 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.35 The
Exchange states that it has a general
policy prohibiting the distribution of
material, non-public information by its
employees.36 In addition, the Exchange
states that the Adviser is not a brokerdealer, although it is affiliated with the
Distributor, a broker-dealer, and that the
Adviser has implemented a fire wall
with respect to its broker-dealer affiliate
regarding access to information
concerning the composition and/or
changes to the portfolio.37 The
Exchange states that the Sub-Adviser is
33 See
id.
may include: (1) the extent to which
trading is not occurring in the securities and/or the
financial instruments constituting the Disclosed
Portfolio of the Fund; or (2) whether other unusual
conditions or circumstances detrimental to the
maintenance of a fair and orderly market are
present. See id. at 51636.
35 See id.
36 See id. at 51637.
37 See id. at 51632. See also supra note 8. The
Exchange further represents that an investment
adviser to an open-end fund is required to be
registered under the Investment Advisers Act of
1940 (‘‘Advisers Act’’). As a result, the Adviser and
its related personnel are subject to the provisions
of Rule 204A–1 under the Advisers Act, which
requires investment advisers to adopt a code of
ethics that reflects the fiduciary nature of their
relationship with their clients as well as
compliance with other applicable securities laws.
Accordingly, investment advisers must have
procedures designed to prevent the communication
and misuse of non-public information, consistent
with Rule 204A–1 under the Advisers Act. In
addition, Rule 206(4)–7 under the Advisers Act
makes it unlawful for an investment adviser to
provide investment advice to clients unless such
investment adviser has (i) adopted and
implemented written policies and procedures
reasonably designed to prevent violation, by the
investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted
thereunder; (ii) implemented, at a minimum, an
annual review regarding the adequacy of the
policies and procedures established pursuant to
subparagraph (i) above and the effectiveness of their
implementation; and (iii) designated an individual
(who is a supervised person) responsible for
administering the policies and procedures adopted
under subparagraph (i) above.
34 These
PO 00000
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Sfmt 4703
62583
not a broker-dealer and is not affiliated
with a broker-dealer.38 Further, the
Commission notes that the Reporting
Authority 39 that provides the Disclosed
Portfolio must implement and maintain,
or be subject to, procedures designed to
prevent the use and dissemination of
material, non-public information
regarding the actual components of the
portfolio.40 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.41
Nasdaq deems the Shares to be equity
securities, thus rendering trading in the
Shares subject to Nasdaq’s existing rules
governing the trading of equity
securities. In support of this proposal,
the Exchange represented that:
(1) The Shares will be subject to
Nasdaq Rule 5735, which sets forth the
initial and continued listing criteria
applicable to Managed Fund Shares.
(2) Trading in the Shares will be
subject to the existing trading
surveillances administered by both
Nasdaq and FINRA on behalf of the
Exchange, which are designed to detect
violations of Exchange rules and
applicable federal securities laws, and
these procedures are adequate to
properly monitor Exchange trading of
the Shares in all trading sessions and to
detect and help deter violations of
Exchange rules and applicable federal
securities laws.
(3) 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 42 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
38 See
id. at 51632.
Rule 5730(c)(4) defines ‘‘Reporting
Authority.’’
40 See Nasdaq Rule 5735(d)(2)(B)(ii).
41 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.
42 For a list of the current members of ISG, see
www.isgportal.org.
39 Nasdaq
E:\FR\FM\16OCN1.SGM
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srobinson on DSK5SPTVN1PROD with NOTICES
62584
Federal Register / Vol. 80, No. 200 / Friday, October 16, 2015 / Notices
securities; ETPs; or other exchangetraded securities from markets and other
entities that are members of ISG or with
which the Exchange has in place a
comprehensive surveillance sharing
agreement. 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.
(4) The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions.
(5) Prior to the commencement of
trading, the Exchange will inform its
members in an Information Circular of
the special characteristics and risks
associated with trading the Shares.
Specifically, the Information Circular
will discuss the following: (a) The
procedures for purchases and
redemptions of Shares in Creation Units
(and that Shares are not individually
redeemable); (b) Nasdaq Rule 2111A,
which imposes suitability obligations on
Nasdaq members with respect to
recommending transactions in the
Shares to customers; (c) how and by
whom information regarding the
Intraday Indicative Value and the
Disclosed Portfolio is disseminated; (d)
the risks involved in trading the Shares
during the Pre-Market and Post-Market
Sessions when an updated Intraday
Indicative Value will not be calculated
or publicly disseminated; (e) the
requirement that members deliver a
prospectus to investors purchasing
newly issued Shares prior to or
concurrently with the confirmation of a
transaction; and (f) trading information.
(6) For initial and continued listing,
the Fund must be in compliance with
Rule 10A–3 under the Act.43
(7) At least 90% of the convertible
bonds, convertible preferred stocks, and
warrants 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, will be traded
on exchanges that are ISG members.
(8) The Fund may hold up to an
aggregate amount of 15% of its net
assets in illiquid assets.
(9) 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.
(10) 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. In addition, the Fund will not
invest in other types of high-yield debt
securities, such as asset-backed
securities.
(11) The Fund will not invest more
than 25% of the value of its total assets
in securities of issuers in any particular
industry.
(12) 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.
(13) The Fund will not invest in
futures contracts, options, swaps, or
other derivative instruments.
(14) A minimum of 100,000 Shares
will be outstanding at the
commencement of trading on the
Exchange.
This approval order is based on all of
the Exchange’s representations,
including those set forth above and in
the Notice. The Commission notes that
the Fund and the Shares must comply
with the requirements of Nasdaq Rule
5735 to be listed and traded on the
Exchange.
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act 44 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,45
that the proposed rule change (SR–
NASDAQ–2015–095) be, and it hereby
is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.46
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–26323 Filed 10–15–15; 8:45 am]
BILLING CODE 8011–01–P
17 CFR 240.10A–3.
VerDate Sep<11>2014
18:54 Oct 15, 2015
Jkt 238001
[Release No. 34–76127; File No. SR–NYSE–
2015–36]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Approving Proposed Rule Change,
Amending Section 907.00 of the Listed
Company Manual (the ‘‘Manual’’) To (i)
Amend the Suite of Complimentary
Products and Services That Are
Offered to Certain Current and Newly
Listed Companies, (ii) Update the
Value of Complimentary Products and
Services Offered to Listed Companies,
and (iii) Provide That Complimentary
Products and Services Would Also Be
Offered to Companies That Transfer
Their Listing to the Exchange From
Another National Securities Exchange
October 9, 2015.
I. Introduction
On August 11, 2015, New York Stock
Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend section 907.00 of the
listed company manual (‘‘Manual’’) to
amend the suite of complimentary
products and services that are offered to
certain current and newly listed
companies and update the value of
complimentary products and services
offered to listed companies. In addition,
the proposal would separate companies
that transfer their listing to the
Exchange from another national
securities exchange to a new category
and expand the complimentary
products and services offered to such
transfer companies. The proposed rule
change was published for comment in
the Federal Register on August 25,
2015.3 No comment letters were
received in response to the Notice. This
order approves the proposed rule
change.
II. Description of the Proposed Rule
Change
In December 2013, the Exchange
adopted a rule to expand the suite of
complimentary products and services
that it offers to certain current and
newly listed companies on the
Exchange.4 Under this rule, certain
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 75740
(August 19, 2015), 80 FR 51617 (‘‘Notice’’).
4 See Securities Exchange Act Release No. 70971
(Dec. 3, 2013), 78 FR 73905 (Dec. 9, 2013) (SR–
2 17
44 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(2).
46 17 CFR 200.30–3(a)(12).
45 15
43 See
SECURITIES AND EXCHANGE
COMMISSION
PO 00000
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]]>Agencies
[Federal Register Volume 80, Number 200 (Friday, October 16, 2015)]
[Notices]
[Pages 62580-62584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26323]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76126; File No. SR-NASDAQ-2015-095]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Granting Approval 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
October 9, 2015.
I. Introduction
On August 7, 2015, The NASDAQ Stock Market LLC (the ``Exchange'' or
``Nasdaq'') filed with the Securities and Exchange Commission''
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to list and trade shares
(``Shares'') of the AltShares Long/Short High Yield Fund (``Fund'') of
ETFis Series Trust I (``Trust'') under NASDAQ Rule 5735. The proposed
rule change was published for comment in the Federal Register on August
25, 2015.\3\ The Commission received no comments on the proposed rule
change. This order grants approval of the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 75738 (August 19,
2015), 80 FR 51632 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposes to list and trade the Shares under Nasdaq
Rule 5735, which governs the listing and trading of Managed Fund Shares
on the Exchange. The Fund will be an actively-managed exchange-traded
fund (``ETF''). The Shares will be offered by the Trust,\4\ which is
registered with the Commission as an investment company and has filed a
registration statement on Form N-1A (``Registration Statement'')
[[Page 62581]]
with the Commission.\5\ The Fund will be a series of the Trust.
---------------------------------------------------------------------------
\4\ According to the Exchange, the Adviser (as defined herein)
has obtained certain exemptive relief, upon which the Trust may
rely, under the Investment Company Act of 1940 (``1940 Act''). See
Investment Company Act Release No. 30607 (July 23, 2013) (File No.
812-14080).
\5\ 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).
---------------------------------------------------------------------------
Etfis Capital LLC will be the investment adviser (``Adviser'') to
the Fund, and Bramshill Investments, LLC will be the investment sub-
adviser to the Fund (``Sub-Adviser''). ETF Distributors LLC
(``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. The Exchange states that the Adviser is not
a broker-dealer, although it is affiliated with the Distributor, a
broker-dealer.\6\ The Exchange represents that 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.\7\ According to the Exchange, the Sub-Adviser
is not a broker-dealer and is not affiliated with a broker-dealer.\8\
---------------------------------------------------------------------------
\6\ See Notice, supra note 3, 80 FR at 51632.
\7\ See id.
\8\ In the event (a) the Adviser or the Sub-Adviser becomes
newly affiliated with a broker-dealer 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 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.
---------------------------------------------------------------------------
The Exchange has made the following representations and statements
in describing the Fund and its investment strategy, including the
Fund's portfolio holdings and investment restrictions.\9\
---------------------------------------------------------------------------
\9\ The Commission notes that additional information regarding
the Fund, the Trust, and the Shares, including investment
strategies, risks, creation and redemption procedures, fees,
portfolio holdings disclosure policies, calculation of net asset
value (``NAV''), distributions, and taxes, among other things, can
be found in the Notice and the Registration Statement, as
applicable. See Notice and Registration Statement, supra notes 3 and
5, respectively.
---------------------------------------------------------------------------
A. Exchange's Description of the Fund's Principal Investments
The investment objective of the Fund will be to seek current income
and capital appreciation with reduced volatility over time. 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,\10\ 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 (``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 (``Short
Position'').
---------------------------------------------------------------------------
\10\ 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.
---------------------------------------------------------------------------
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. According to the Exchange, 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%.\11\
---------------------------------------------------------------------------
\11\ See Notice, supra note 3, 80 FR at 51633.
---------------------------------------------------------------------------
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. 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, exchange-traded notes, or closed-end
funds, each of which will be listed for trading on a U.S. exchange,
collectively, ``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.
The Exchange states that ``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.\12\ These securities will consist of: (a)
Senior and subordinated corporate debt obligations (bonds, debentures,
notes, and commercial paper); (b) senior bank loans (including through
loan assignments and loan participations); (c) preferred stocks; (d)
municipal bonds; (e) convertible bonds; and (f) convertible preferred
stocks.\13\ 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. In addition, the Fund may invest
in U.S. treasuries.
---------------------------------------------------------------------------
\12\ See id.
\13\ The Exchange states that convertible bonds and convertible
preferred stocks in which the Fund may invest, and the equity
securities into which these securities may be converted, and also
preferred stocks (non-convertible) in which the Fund may invest,
generally will be exchange-traded. According to the Exchange, the
Sub-Adviser's current expectation is that at least 80% of these
securities will be exchange-traded. The Exchange represents that at
least 90% of these exchange-traded securities will be traded on
exchanges that are Intermarket Surveillance Group (``ISG'') members.
See id. at 51633 n.12.
---------------------------------------------------------------------------
According to the Exchange, 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.\14\ Under normal circumstances, the anticipated
annual portfolio turnover rate for the Fund is expected to be greater
than 100%.
---------------------------------------------------------------------------
\14\ See id. at 51633.
---------------------------------------------------------------------------
B. Exchange's Description of the Fund's Other Investments
In addition to investing in High Yield ETPs, the Fund may invest in
other fixed-income ETPs, but the Fund will not invest in leveraged
ETPs. The Exchange states that the Fund will not purchase 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.\15\ The Fund also may invest in warrants.\16\
---------------------------------------------------------------------------
\15\ See id.
\16\ The Exchange states that warrants in which the Fund
invests, and the equity securities into which these warrants may be
converted, generally will be exchange-traded. According to the
Exchange, the Sub-Adviser's current expectation is that at least 80%
of these securities will be exchange-traded. The Exchange represents
that at least 90% of these exchange-traded securities will be traded
on exchanges that are ISG members. See Notice, supra note 3, 80 FR
at 51633 n.13.
---------------------------------------------------------------------------
In certain adverse market, economic, political, or other
conditions, the Fund
[[Page 62582]]
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,\17\ 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.
---------------------------------------------------------------------------
\17\ The Exchange states that 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. See id. at 51633 n.14.
---------------------------------------------------------------------------
C. Exchange's Description of the Fund's Investment Restrictions
According to the Exchange, 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 illiquid assets.\18\
Under the supervision of the Board of Trustees of the Trust (``Trust
Board''), the Sub-Adviser will determine the liquidity of the Fund's
investments, and through reports from the Sub-Adviser, the Trust Board
will monitor investments in illiquid instruments.\19\ The Exchange
represents that, 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.\20\
---------------------------------------------------------------------------
\18\ See id. at 51633-34.
\19\ According to the Exchange, 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). See Notice, supra note 3, 80 FR at 51634.
\20\ See id.
---------------------------------------------------------------------------
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.
The Fund will not invest more than 25% of the value of its total
assets in securities of issuers in any particular industry.
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 Exchange represents that the Fund will not invest in
futures contracts, options, swaps, or other derivative instruments.
III. Discussion and Commission Findings
After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act and the rules and regulations thereunder applicable to a national
securities exchange.\21\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Exchange
Act,\22\ which requires, among other things, that the Exchange's rules
be designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest.
---------------------------------------------------------------------------
\21\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission also finds that the proposal to list and trade the
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of
the Exchange Act,\23\ which sets forth the finding of Congress that it
is in the public interest and appropriate for the protection of
investors and the maintenance of fair and orderly markets to assure the
availability to brokers, dealers, and investors of information with
respect to quotations for, and transactions in, securities. Quotation
and last-sale information for the Shares and the exchange-traded
securities held by the Fund will be available via UTP Level 1, as well
as Nasdaq proprietary quote and trade services.\24\ On each business
day, before commencement of trading in Shares in the Regular Market
Session \25\ on the Exchange, the Trust will disclose on its Web site
the identities and quantities of the portfolio of securities and other
assets (``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.\26\ In addition, the Intraday Indicative Value, available on the
NASDAQ OMX Information LLC proprietary index data service,\27\ 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.\28\ 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.\29\ The NAV of the Fund will
be calculated by BNY and determined at the close of regular trading on
the New York Stock
[[Page 62583]]
Exchange (ordinarily 4:00 p.m. Eastern time) on each day that such
exchange is open.\30\ 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.\31\
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\24\ See Notice, supra note 3, 80 FR at 51636.
\25\ See Nasdaq Rule 4120(b)(4) (describing the three trading
sessions on the Exchange: (1) Pre-Market Session from 7:00 a.m. to
9:30 a.m. Eastern time; (2) Regular Market Session from 9:30 a.m. to
4:00 p.m. or 4:15 p.m. Eastern time; and (3) Post-Market Session
from 4:00 p.m. or 4:15 p.m. to 8:00 p.m. Eastern time).
\26\ 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. The daily disclosure will include 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.
\27\ 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. The
Exchange represents that GIDS provides investment professionals with
the daily information needed to track or trade NASDAQ OMX indexes,
listed ETFs, or third-party partner indexes and ETFs. See Notice,
supra note 3, 80 FR at 51636, n.23.
\28\ See id. at 51636.
\29\ See id.
\30\ According to the Exchange, 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 ask 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.
\31\ See id. at 51638.
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The Exchange further states that the 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 will be available
from major broker-dealer firms or on the exchange on which they are
traded, if applicable.\32\ 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. 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.
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\32\ See id.
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The Commission also believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Exchange states that it 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.\33\ The Exchange
also represents that 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.\34\ 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.\35\ The
Exchange states that it has a general policy prohibiting the
distribution of material, non-public information by its employees.\36\
In addition, the Exchange states that the Adviser is not a broker-
dealer, although it is affiliated with the Distributor, a broker-
dealer, and that the Adviser has implemented a fire wall with respect
to its broker-dealer affiliate regarding access to information
concerning the composition and/or changes to the portfolio.\37\ The
Exchange states that the Sub-Adviser is not a broker-dealer and is not
affiliated with a broker-dealer.\38\ Further, the Commission notes that
the Reporting Authority \39\ that provides the Disclosed Portfolio must
implement and maintain, or be subject to, procedures designed to
prevent the use and dissemination of material, non-public information
regarding the actual components of the portfolio.\40\ 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.\41\
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\33\ See id.
\34\ These may include: (1) the extent to which trading is not
occurring in the securities and/or the financial instruments
constituting the Disclosed Portfolio of the Fund; or (2) whether
other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present. See id. at
51636.
\35\ See id.
\36\ See id. at 51637.
\37\ See id. at 51632. See also supra note 8. The Exchange
further represents that an investment adviser to an open-end fund is
required to be registered under the Investment Advisers Act of 1940
(``Advisers Act''). As a result, the Adviser and its related
personnel are subject to the provisions of Rule 204A-1 under the
Advisers Act, which requires investment advisers to adopt a code of
ethics that reflects the fiduciary nature of their relationship with
their clients as well as compliance with other applicable securities
laws. Accordingly, investment advisers must have procedures designed
to prevent the communication and misuse of non-public information,
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.
\38\ See id. at 51632.
\39\ Nasdaq Rule 5730(c)(4) defines ``Reporting Authority.''
\40\ See Nasdaq Rule 5735(d)(2)(B)(ii).
\41\ 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.
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Nasdaq deems the Shares to be equity securities, thus rendering
trading in the Shares subject to Nasdaq's existing rules governing the
trading of equity securities. In support of this proposal, the Exchange
represented that:
(1) The Shares will be subject to Nasdaq Rule 5735, which sets
forth the initial and continued listing criteria applicable to Managed
Fund Shares.
(2) Trading in the Shares will be subject to the existing trading
surveillances administered by both Nasdaq and FINRA on behalf of the
Exchange, which are designed to detect violations of Exchange rules and
applicable federal securities laws, and these procedures are adequate
to properly monitor Exchange trading of the Shares in all trading
sessions and to detect and help deter violations of Exchange rules and
applicable federal securities laws.
(3) 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 \42\ 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
[[Page 62584]]
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. 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.
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\42\ For a list of the current members of ISG, see
www.isgportal.org.
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(4) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(5) Prior to the commencement of trading, the Exchange will inform
its members in an Information Circular of the special characteristics
and risks associated with trading the Shares. Specifically, the
Information Circular will discuss the following: (a) The procedures for
purchases and redemptions of Shares in Creation Units (and that Shares
are not individually redeemable); (b) Nasdaq Rule 2111A, which imposes
suitability obligations on Nasdaq members with respect to recommending
transactions in the Shares to customers; (c) how and by whom
information regarding the Intraday Indicative Value and the Disclosed
Portfolio is disseminated; (d) the risks involved in trading the Shares
during the Pre-Market and Post-Market Sessions when an updated Intraday
Indicative Value will not be calculated or publicly disseminated; (e)
the requirement that members deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; and (f) trading information.
(6) For initial and continued listing, the Fund must be in
compliance with Rule 10A-3 under the Act.\43\
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\43\ See 17 CFR 240.10A-3.
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(7) At least 90% of the convertible bonds, convertible preferred
stocks, and warrants 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, will be
traded on exchanges that are ISG members.
(8) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets.
(9) 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.
(10) 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. In addition, the Fund will not invest in other types of high-
yield debt securities, such as asset-backed securities.
(11) The Fund will not invest more than 25% of the value of its
total assets in securities of issuers in any particular industry.
(12) 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.
(13) The Fund will not invest in futures contracts, options, swaps,
or other derivative instruments.
(14) A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange.
This approval order is based on all of the Exchange's
representations, including those set forth above and in the Notice. The
Commission notes that the Fund and the Shares must comply with the
requirements of Nasdaq Rule 5735 to be listed and traded on the
Exchange.
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act \44\ and the
rules and regulations thereunder applicable to a national securities
exchange.
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\44\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\45\ that the proposed rule change (SR-NASDAQ-2015-095)
be, and it hereby is, approved.
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\45\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
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\46\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26323 Filed 10-15-15; 8:45 am]
BILLING CODE 8011-01-P
