Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To List and Trade the Shares of the Causeway International Value NextSharesTM, 59687-59694 [2017-27012]

Download as PDF Federal Register / Vol. 82, No. 240 / Friday, December 15, 2017 / Notices minimum requirements for operations and risk-management practices on an ongoing basis. As such, it is appropriate for the Commission to review advance notices for consistency with the objectives and principles for riskmanagement standards described in Section 805(b) of the Clearing Supervision Act and the Clearing Agency Rules. A. Consistency With Section 805(b) of the Clearing Supervision Act The Commission believes the Advance Notice proposal is consistent with the stated objectives and principles of Section 805(b) of the Clearing Supervision Act.14 Specifically, the Commission believes that the changes proposed in the Advance Notice are consistent with promoting robust risk management in the area of liquidity risk, as well as enhancing safety and soundness across the broader financial system. The Commission believes that the expanded authority proposed by OCC under the Advance Notice would enhance OCC’s ability to access liquid resources that, in turn, would allow OCC to continue to meet its settlement obligations to its Clearing Members in a timely fashion, thereby promoting robust liquidity risk management at OCC. The Commission notes that OCC’s By-Laws already grant OCC the authority to borrow against the Clearing Fund to manage the bankruptcy, insolvency, receivership, suspension of operations or similar event of a Settlement Entity.15 The proposed change would therefore constitute a limited expansion of that authority to relatively less extreme scenarios that nevertheless temporarily prevent a Settlement Entity from achieving daily settlement. While the Commission notes that this expansion of OCC’s authority to use the Clearing Fund potentially expands that range of scenarios where OCC might have to use Clearing Fund resources, the Commission believes that the ability of OCC management to exercise its discretion to either borrow against the Clearing Fund or utilize some other tool would permit OCC to 14 12 U.S.C. 5464(b). Commission previously issued a Notice of No Objection to OCC’s Advance Notice Proposal to Enter Into a New Credit Facility Agreement, which involved a replacement of a revolving credit facility. See Securities Exchange Act Release No. 81058 (June 30, 2017), 82 FR 31371 (July 6, 2017) (SR–OCC–2017–803). The Commission believes that the present Advance Notice is consistent with the new credit facility agreement, which provides OCC with the ability to borrow to address reasonably anticipated same-day settlement obligations, including but not limited to, the failure of any Settlement Entity to achieve daily settlement. sradovich on DSK3GMQ082PROD with NOTICES 15 The VerDate Sep<11>2014 23:42 Dec 14, 2017 Jkt 244001 consider and effectively manage such scenarios based on the facts and circumstances present.16 Further, the Commission believes that the Advance Notice is consistent with reducing systemic risks and promoting the stability of the broader financial system. The Commission believes that expanding OCC’s authority to use the Clearing Fund in the manner proposed by the Advance Notice increases the probability of OCC being able to meet its settlement obligations to its Clearing Members. The ability to use the Clearing Fund to obtain liquid resources to cover a liquidity gap that arises where a Settlement Entity is unable to perform enhances OCC’s ability to contain losses and liquidity pressures that otherwise might cause financial distress to OCC or its Clearing Members, thereby enhancing safety and soundness across the broader financial system. The Commission believes that the Advance Notice is designed to bolster OCC’s ability to meet its settlement obligations even if a Settlement Entity temporarily fails to achieve daily settlement with OCC, thereby reducing the risk of loss contagion and enhancing the ability of OCC and its Clearing Members to provide reliability, stability, and safety to the financial markets that they serve. Accordingly, the Commission believes that the proposal could help to reduce systemic risk and support the stability of the broader financial system, consistent with Section 805(b) of the Clearing Supervision Act. B. Consistency With Rule 17Ad– 22(e)(7)(viii) Under the Exchange Act The Commission further believes that the proposed change is consistent with Rule 17 Ad–22(e)(7)(viii), which requires that a covered clearing agency establish, implement, maintain and enforce written policies and procedures reasonably designed to, as applicable, effectively measure, monitor, and manage liquidity risk that arises in or is borne by the covered clearing agency, including measuring, monitoring, and managing its settlement and funding flows on an ongoing and timely basis, and its use of intraday liquidity by, at a minimum, addressing foreseeable liquidity shortfalls that would not be covered by its liquid resources and seek to avoid unwinding, revoking, or delaying the same-day settlement of payment obligations.17 The Commission believes that the Advance Notice is designed to improve OCC’s ability to address a temporary liquidity need resulting from the failure of a Settlement Entity to achieve timely settlement. The Commission believes that the proposed change is designed to provide OCC with additional tools to address a foreseeable, temporary liquidity shortfall to prevent the unwinding, revoking, or delaying of same-day settlement should that scenario materialize, and is therefore consistent with Rule 17Ad–22(e)(7)(viii) under the Exchange Act. IV. Conclusion It is therefore noticed, pursuant to Section 806(e)(1)(G) of the Payment, Clearing and Settlement Supervision Act,18 that the Commission does not object to Advance Notice (SR–OCC– 2017–806) and that OCC is authorized to implement the proposed change.19 By the Commission. Brent J. Fields, Secretary. [FR Doc. 2017–27112 Filed 12–14–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82290; File No. SR– NASDAQ–2017–123] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To List and Trade the Shares of the Causeway International Value NextSharesTM and the Causeway Global Value NextSharesTM December 11, 2017. 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 November 28, 2017, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘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 the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 18 12 U.S.C. 5465(e)(1)(G). is authorized to implement the proposed change as of the date of this Notice of No Objection or the date of an Order by the Commission approving the proposed rule change filed in connection with this Advance Notice, SR–OCC– 2017–017, whichever is later. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 19 OCC 16 For example, OCC could use existing authority to expand the settlement window under OCC Rule 505, rather than borrowing against the Clearing Fund, should it determine that this tool would be more appropriate in light of other demands on Clearing Fund resources. 17 17 CFR 240.17Ad–22(e)(7)(viii). PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 59687 E:\FR\FM\15DEN1.SGM 15DEN1 59688 Federal Register / Vol. 82, No. 240 / Friday, December 15, 2017 / Notices I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade under Nasdaq Rule 5745 (Exchange-Traded Managed Fund Shares (‘‘NextShares’’)) the common shares (‘‘Shares’’) of the exchangetraded managed funds described herein (each a ‘‘Fund’’ and together, the ‘‘Funds’’).3 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change sradovich on DSK3GMQ082PROD with NOTICES 1. Purpose The Exchange proposes to list and trade the Shares of the Funds under Nasdaq Rule 5745, which governs the listing and trading of exchange-traded managed fund shares, as defined in Nasdaq Rule 5745(c)(1), on the Exchange.4 Causeway ETMF Trust, which is discussed below, is registered with the Commission as an open-end investment company and has filed a registration statement on Form N–1A (‘‘Registration Statement’’) with the Commission. The Funds are each a series of Causeway ETMF Trust and will be advised by an investment adviser registered under the Investment Advisers Act of 1940 (‘‘Advisers Act’’), as described below. The Funds will be actively managed and will pursue the principal investment strategies noted below.5 3 Except for the specific Fund information set forth below, this rule filing conforms to the rule filing, as modified by amendments 1 and 2 thereto, relating to the listing and trading on Nasdaq of the shares of 18 series of the Eaton Vance ETMF Trust and the Eaton Vance ETMF Trust II, as approved by the Commission in Securities Exchange Act Release No. 75499 (July 21, 2015) (SR–NASDAQ– 2015–036). 4 The Commission approved Nasdaq Rule 5745 in Securities Exchange Act Release No. 34–73562 (Nov. 7, 2014), 79 FR 68309 (Nov. 14, 2014) (SR– NASDAQ–2014–020). 5 Additional information regarding the Funds will be available on the free public website for the VerDate Sep<11>2014 23:42 Dec 14, 2017 Jkt 244001 I. Causeway ETMF Trust Causeway ETMF Trust is registered with the Commission as an open-end investment company and has filed a Registration Statement with the Commission.6 The following Funds are each a series of Causeway ETMF Trust.7 Causeway Capital Management LLC (the ‘‘Adviser’’) will be the adviser to the Funds. The Adviser is not a registered broker-dealer, and is not affiliated with a broker-dealer. Personnel who make decisions on a Fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material, non-public information regarding the open-end fund’s portfolio.8 In the event that (a) the Adviser registers as a broker-dealer or becomes newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser to a Fund is a registered broker-dealer or is affiliated with a broker-dealer, such adviser or sub-adviser will implement and will maintain 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 a Fund’s portfolio and will be subject to procedures designed Funds at www.causewayfunds.com and in the Registration Statement for the Funds. 6 See initial Registration Statement on Form N– 1A for Causeway ETMF Trust dated September 20, 2017 (File Nos. 333–220536 and 811–23294). The descriptions of the Funds and the Shares contained herein conform to the initial Registration Statement. 7 The Commission has issued an order granting Causeway ETMF Trust and certain affiliates exemptive relief under the Investment Company Act of 1940, as amended (the ‘‘Investment Company Act’’). See Investment Company Act Release No. 32485 (February 22, 2017) (File No. 812–14729). 8 An investment adviser to an open-end fund is required to be registered under the Advisers Act. As a result, the Adviser and its related personnel are subject to the provisions of Rule 204A–1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with other applicable securities laws. Accordingly, procedures designed to prevent the communication and misuse of non-public 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. PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 to prevent the use and dissemination of material non-public information regarding such portfolio. SEI Investments Distribution Co. (‘‘SIDCO’’) will be the principal underwriter and distributor of each Fund’s Shares. SEI Investments Global Funds Services, Inc. will act as the administrator and accounting agent to each Fund; The Bank of New York Mellon will act as transfer agent and custodian to the Funds; ICE Data Indices, LLC will calculate intraday indicative values (‘‘IIVs’’) for each Fund. The Funds will be actively managed and will pursue the principal investment strategies described below.9 Causeway International Value NextShares (‘‘International Value NextShares’’) The investment objective of the International Value NextShares is to seek long-term growth of capital and income. Under normal market conditions, the International Value NextShares will invest primarily in equity securities of companies in developed countries outside the U.S. Normally, the International Value NextShares will invest at least 80% of its total assets in equity securities of companies in a number of foreign countries and normally will invest the majority of its total assets in equity securities of companies that pay dividends or repurchase their shares. The International Value NextShares may invest in emerging (less developed) markets. The International Value NextShares considers a country to be an emerging market if the country is included in the MSCI Emerging Markets Index. The International Value NextShares may invest in equity securities of companies of any market capitalization, and will not be required to invest a minimum amount and will not be limited to investing a maximum amount in any particular country. Causeway Global Value NextShares (‘‘Global Value NextShares’’) The investment objective of the Global Value NextShares is to seek longterm growth of capital and income. Under normal market conditions, the Global Value NextShares will invest primarily in equity securities of companies in developed and emerging countries outside the U.S. and of companies in the U.S. Normally, the Global Value NextShares will invest the 9 Additional information regarding the Funds will be available on a free public website for the Funds (www.causewayfunds.com, which may contain links for certain information to www.nextshares.com) and in the Registration Statement for the Funds. E:\FR\FM\15DEN1.SGM 15DEN1 Federal Register / Vol. 82, No. 240 / Friday, December 15, 2017 / Notices majority of its total assets in equity securities of companies that pay dividends or repurchase their shares. Under normal circumstances, the Global Value NextShares will invest at least 40% of its total assets in a number of countries outside the U.S. The Global Value NextShares may invest in emerging (less developed) markets. The Global Value NextShares considers a country to be an emerging market if the country is included in the MSCI Emerging Markets Index. The Global Value NextShares may also invest in frontier markets. The Global Value NextShares considers a country to be a frontier market if the country is classified by MSCI, based on a country’s economic development, size, liquidity and market accessibility, as a frontier market. The Global Value NextShares may invest in equity securities of companies of any market capitalization, and will not be required to invest a minimum amount and will not be limited to investing a maximum amount in any particular country. sradovich on DSK3GMQ082PROD with NOTICES Creations and Redemptions of Shares Shares will be issued and redeemed on a daily basis at a Fund’s nextdetermined net asset value (‘‘NAV’’) 10 in specified blocks of Shares called ‘‘Creation Units.’’ A Creation Unit will consist of at least 25,000 Shares. Creation Units may be purchased and redeemed by or through ‘‘Authorized Participants.’’ 11 Purchases and sales of Shares in amounts less than a Creation Unit may be effected only in the secondary market, as described below, and not directly with a Fund. The creation and redemption process for a Fund may be effected ‘‘in kind,’’ in cash, or in a combination of securities and cash. Creation ‘‘in kind’’ means that an Authorized Participant—usually a 10 As with other registered open-end investment companies, NAV generally will be calculated daily (on each day the New York Stock Exchange is open for trading), as of 4:00 p.m. Eastern Time. NAV will be calculated by dividing a Fund’s net asset value by the number of Shares outstanding. Information regarding the valuation of investments in calculating a Fund’s NAV will be contained in the Registration Statement for its Shares. 11 ‘‘Authorized Participants’’ will be either: (1) ‘‘participating parties,’’ i.e., brokers or other participants in the Continuous Net Settlement System (‘‘CNS System’’) of the National Securities Clearing Corporation (‘‘NSCC’’), a clearing agency registered with the Commission and affiliated with the Depository Trust Company (‘‘DTC’’), or (2) DTC participants, which in either case have executed participant agreements with a Fund’s distributor, and which have been acknowledged by the transfer agent, regarding the creation and redemption of Creation Units. Investors will not have to be Authorized Participants in order to transact in Creation Units, but must place an order through and make appropriate arrangements with an Authorized Participant for such transactions. VerDate Sep<11>2014 23:42 Dec 14, 2017 Jkt 244001 brokerage house or large institutional investor—purchases the Creation Unit with a basket of securities equal in value to the aggregate NAV of the Shares in the Creation Unit. When an Authorized Participant redeems a Creation Unit in kind, it receives a basket of securities equal in value to the aggregate NAV of the Shares in the Creation Unit.12 Composition File As defined in Nasdaq Rule 5745(c)(3), the Composition File is the specified portfolio of securities and/or cash that a Fund will accept as a deposit in issuing a Creation Unit of Shares, and the specified portfolio of securities and/or cash that a Fund will deliver in a redemption of a Creation Unit of Shares. The Composition File will be disseminated through the NSCC once each business day before the open of trading in Shares on such day and also will be made available to the public each day on a free public website.13 Because each Fund seeks to preserve the confidentiality of its current portfolio trading program, a Fund’s Composition File generally will not be a pro rata reflection of the Fund’s investment positions. Each security included in the Composition File will be a current holding of the relevant Fund, but the Composition File generally will not include all of the securities in that Fund’s portfolio or match the weightings of the included securities in the portfolio. Securities that the Adviser is in the process of acquiring for a Fund generally will not be represented in the Fund’s Composition File until their purchase has been completed. Similarly, securities that are held in a Fund’s portfolio but in the process of being sold may not be removed from its Composition File until the sale program is substantially completed. To the extent that a Fund creates or redeems Shares in kind, it will use cash amounts to supplement the in-kind transactions to the extent necessary to ensure that Creation Units are purchased and redeemed at NAV. The Composition File also may consist entirely of cash, in 12 In compliance with Nasdaq Rule 5745(b)(5), which applies to Shares based on an international or global portfolio, Causeway ETMF Trust’s application for exemptive relief under the Investment Company Act states that Causeway ETMF Trust will comply with the federal securities laws in accepting securities for deposits and satisfying redemptions with securities, including that the securities accepted for deposits and the securities used to satisfy redemption requests are sold in transactions that would be exempt from registration under the Securities Act of 1933, as amended (15 U.S.C. 77a). 13 The free public website containing the Composition File will be www.nextshares.com. PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 59689 which case it will not include any of the securities in a Fund’s portfolio.14 Transaction Fees All persons purchasing or redeeming Creation Units are expected to incur a transaction fee to cover the estimated cost to the relevant Fund of processing the transaction, including the costs of clearance and settlement charged to it by NSCC or DTC, and the estimated trading costs (i.e., brokerage commissions, bid-ask spread and market impact) to be incurred in converting the Composition File to or from the desired portfolio holdings. The transaction fee is determined daily and will be limited to amounts approved by the board of trustees of the Funds and determined by the Adviser to be appropriate to defray the expenses that a Fund incurs in connection with the purchase or redemption of Creation Units. The purpose of transaction fees is to protect a Fund’s existing shareholders from the dilutive costs associated with the purchase and redemption of Creation Units. Transaction fees may vary over time for a Fund depending on the estimated trading costs for its portfolio positions and Composition File, processing costs and other considerations. To the extent that a Fund specifies greater amounts of cash in its Composition File, it may impose higher transaction fees. In addition, to the extent that a Fund includes in its Composition File instruments that clear through DTC, the Fund may impose higher transaction fees than when the Composition File consists solely of instruments that clear through NSCC, because DTC may charge more than NSCC in connection with Creation Unit transactions.15 The transaction fees applicable to a Fund’s purchases and redemptions on a given business day will be disseminated through the NSCC prior to the open of market trading on that day and also will be made available 14 In determining whether a Fund will issue or redeem Creation Units entirely on a cash basis, the key consideration will be the benefit that would accrue to the Fund and its investors. For instance, in bond transactions, the Adviser may be able to obtain better execution for a Fund than Authorized Participants because of the Adviser’s size, experience and potentially stronger relationships in the fixed- income markets. 15 Authorized Participants that participate in the CNS System of the NSCC are expected to be able to use the enhanced NSCC/CNS process for effecting in-kind purchases and redemptions of Shares (the ‘‘NSCC Process’’) to purchase and redeem Creation Units of a Fund that limits the composition of its basket to include only NSCC Process-eligible instruments (generally domestic equity securities and cash). Because the NSCC Process is generally more efficient than the DTC clearing process, NSCC is likely to charge a Fund less than DTC to settle purchases and redemptions of Creation Units. E:\FR\FM\15DEN1.SGM 15DEN1 59690 Federal Register / Vol. 82, No. 240 / Friday, December 15, 2017 / Notices Trading Premiums and Discounts Bid and offer prices for Shares will be quoted throughout the day relative to NAV. The premium or discount to NAV at which Share prices are quoted and transactions are executed will vary depending on market factors, including the balance of supply and demand for Shares among investors, transaction fees and other costs in connection with creating and redeeming Creation Units of Shares, the cost and availability of borrowing Shares, competition among market makers, the Share inventory positions and inventory strategies of market makers, the profitability requirements and business objectives of market makers, and the volume of Share trading. Reflecting such market factors, prices for Shares in the secondary market may be above, at or below NAV. A Fund with higher transaction fees may trade at wider premiums or discounts to NAV than other funds with lower transaction fees, reflecting the added costs to market makers of managing their Share inventory positions through purchases and redemptions of Creation Units. Because making markets in Shares will be simple to manage and low risk, competition among market makers seeking to earn reliable, low-risk profits should enable the Shares to routinely trade at tight bid-ask spreads and narrow premiums/discounts to NAV. As noted below, each Fund will make available on a free public website that will be updated on a daily basis current and historical trading spreads and premiums/discounts of Shares trading in the secondary market.18 Transmitting and Processing Orders. Member firms will utilize certain existing order types and interfaces to transmit Share bids and offers to Nasdaq, which will process Share trades like trades in shares of other listed securities.19 In the systems used to transmit and process transactions in Shares, a Fund’s next-determined NAV will be represented by a proxy price (e.g., 100.00) and a premium/discount of a stated amount to the next-determined NAV to be represented by the same increment/decrement from the proxy price used to denote NAV (e.g., NAV¥$0.01 would be represented as 99.99; NAV+$0.01 as 100.01). To avoid potential investor confusion, Nasdaq will work with member firms and providers of market data services to seek to ensure that representations of intraday bids, offers and execution prices of Shares that are made available to the investing public follow the ‘‘NAV¥$0.01/NAV+$0.01’’ (or similar) display format. All Shares listed on the Exchange will have a unique identifier associated with their ticker symbols, which would indicate that the Shares are traded using NAV-Based Trading. Nasdaq makes available to member firms and market data services certain proprietary data feeds that are designed to supplement the market information disseminated through the consolidated tape (‘‘Consolidated Tape’’). Specifically, the Exchange will use the Nasdaq Basic and Nasdaq Last Sale data feeds to disseminate intraday price and quote data for Shares in real time in the ‘‘NAV¥$0.01/NAV+$0.01’’ (or similar) display format. Member firms could use 16 The free public website will be www.nextshares.com. 17 Aspects of NAV-Based Trading are protected intellectual property subject to issued and pending U.S. patents held by NextShares Solutions LLC (‘‘NextShares Solutions’’), a wholly owned subsidiary of Eaton Vance Corp. Nasdaq has entered into a license agreement with NextShares Solutions to allow for NAV- Based Trading on the Exchange of exchange-traded managed funds that have themselves entered into license agreements with NextShares Solutions. 18 The free public website containing this information will be www.nextshares.com, which will be available directly and through a link from www.causewayfunds.com. 19 As noted below, all orders to buy or sell Shares that are not executed on the day the order is submitted will be automatically cancelled as of the close of trading on such day. Prior to the commencement of trading in a Fund, the Exchange will inform its members in an Information Circular of the effect of this characteristic on existing order types. to the public each day on a free public website.16 In all cases, the transaction fees will be limited in accordance with the requirements of the Commission applicable to open-end management investment companies offering redeemable securities. sradovich on DSK3GMQ082PROD with NOTICES NAV-Based Trading Because Shares will be listed and traded on the Exchange, Shares will be available for purchase and sale on an intraday basis. Shares will be purchased and sold in the secondary market at prices directly linked to the relevant Fund’s next-determined NAV using a new trading protocol called ‘‘NAVBased Trading.’’ 17 All bids, offers and execution prices of Shares will be expressed as a premium/discount (which may be zero) to a Fund’s nextdetermined NAV (e.g., NAV-$0.01, NAV+$0.01). A Fund’s NAV will be determined daily (on each day the New York Stock Exchange is open for trading), as of 4:00 p.m. Eastern Time. Trade executions will be binding at the time orders are matched on Nasdaq’s facilities, with the transaction prices contingent upon the determination of NAV. VerDate Sep<11>2014 23:42 Dec 14, 2017 Jkt 244001 PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 the Nasdaq Basic and Nasdaq Last Sale data feeds to source intraday Share prices for presentation to the investing public in the ‘‘NAV¥$0.01/ NAV+$0.01’’ (or similar) display format. Alternatively, member firms could source intraday Share prices in proxy price format from the Consolidated Tape and other Nasdaq data feeds (e.g., Nasdaq TotalView and Nasdaq Level 2) and use a simple algorithm to convert prices into the ‘‘NAV¥$0.01/ NAV+$0.01’’ (or similar) display format. As noted below, prior to the commencement of trading in a Fund, the Exchange will inform its members in an Information Circular of the identities of the specific Nasdaq data feeds from which intraday Share prices in proxy price format may be obtained. Intraday Reporting of Quotes and Trades. All bids and offers for Shares and all Share trade executions will be reported intraday in real time by the Exchange to the Consolidated Tape 20 and separately disseminated to member firms and market data services through the Exchange data feeds listed above. The Exchange will also provide the member firms participating in each Share trade with a contemporaneous notice of trade execution, indicating the number of Shares bought or sold and the executed premium/discount to NAV.21 Final Trade Pricing, Reporting and Settlement. All executed Share trades will be recorded and stored intraday by Nasdaq to await the calculation of a Fund’s end-of- day NAV and the determination of final trade pricing. After a Fund’s NAV is calculated and provided to the Exchange, Nasdaq will price each Share trade entered into during the day at that Fund’s NAV plus/ minus the trade’s executed premium/ discount. Using the final trade price, each executed Share trade will then be disseminated to member firms and market data services via an FTP file to be created for exchange-traded managed funds and confirmed to the member firms participating in the trade to supplement the previously provided 20 Due to systems limitations, the Consolidated Tape will report intraday execution prices and quotes for Shares using a proxy price format. As noted, Nasdaq will separately report real-time execution prices and quotes to member firms and providers of market data services in the ‘‘NAV¥$0.01/NAV+$0.01’’ (or similar) display format, and otherwise seek to ensure that representations of intraday bids, offers and execution prices for Shares that are made available to the investing public follow the same display format. 21 All orders to buy or sell Shares that are not executed on the day the order is submitted will be automatically cancelled as of the close of trading on such day. E:\FR\FM\15DEN1.SGM 15DEN1 Federal Register / Vol. 82, No. 240 / Friday, December 15, 2017 / Notices information to include final pricing.22 After the pricing is finalized, Nasdaq will deliver the Share trading data to NSCC for clearance and settlement, following the same processes used for the clearance and settlement of trades in other exchange-traded securities. sradovich on DSK3GMQ082PROD with NOTICES Availability of Information Prior to the commencement of market trading in Shares, a Fund will be required to establish and maintain a free public website through which its current prospectus may be downloaded.23 The free public website will include directly or through a link additional Fund information updated on a daily basis, including the prior business day’s NAV, and the following trading information for such business day expressed as premiums/discounts to NAV: (a) Intraday high, low, average and closing prices of Shares in Exchange trading; (b) the midpoint of the highest bid and lowest offer prices as of the close of Exchange trading, expressed as a premium/discount to NAV (the ‘‘Closing Bid/Ask Midpoint’’); and (c) the spread between highest bid and lowest offer prices as of the close of Exchange trading (the ‘‘Closing Bid/Ask Spread.’’).24 The free public website will also contain charts showing the frequency distribution and range of values of trading prices, Closing Bid/ Ask Midpoints and Closing Bid/Ask Spreads over time. The Composition File will be disseminated through the NSCC before the open of trading in Shares on each business day and also will be made available to the public each day on a free public website as noted above.25 Consistent with the disclosure requirements that apply to traditional open-end investment companies, a complete list of current Fund portfolio positions will be made available at least once each calendar quarter, with a reporting lag of not more than 60 days. A Fund may provide more frequent disclosures of portfolio positions at its discretion. Reports of Share transactions will be disseminated to the market and delivered to the member firms 22 File Transfer Protocol (‘‘FTP’’) is a standard network protocol used to transfer computer files on the internet. Nasdaq will arrange for the daily dissemination of an FTP file with executed Share trades to member firms and market data services. 23 The free public website containing this information will be www.causewayfunds.com. 24 The free public website containing a Fund’s NAV will be www.causewayfunds.com. All other information listed will be made available on www.nextshares.com, which can be accessed directly and via a link on www.causewayfunds.com. 25 The free public website containing this information will be www.nextshares.com. VerDate Sep<11>2014 23:42 Dec 14, 2017 Jkt 244001 participating in the trade contemporaneous with execution. Once a Fund’s daily NAV has been calculated and disseminated, Nasdaq will price each Share trade entered into during the day at the relevant Fund’s NAV plus/ minus the trade’s executed premium/ discount. Using the final trade price, each executed Share trade will then be disseminated to member firms and market data services via an FTP file to be created for exchange-traded managed funds and confirmed to the member firms participating in the trade to supplement the previously provided information to include final pricing. Information regarding NAV-based trading prices, best bids and offers for Shares, and volume of Shares traded will be continuously available on a realtime basis throughout each trading day on brokers’ computer screens and other electronic services. Initial and Continued Listing Shares will conform to the initial and continued listing criteria as set forth under Nasdaq Rule 5745. A minimum of 50,000 Shares and no less than two Creation Units of each Fund will be outstanding at the commencement of trading on the Exchange. The Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily (on each day the New York Stock Exchange is open for trading) and provided to Nasdaq via the Mutual Fund Quotation Service (’’MFQS’’) by the fund accounting agent. As soon as the NAV is entered into MFQS, Nasdaq will disseminate the NAV to market participants and market data vendors via the Mutual Fund Dissemination Service (‘‘MFDS’’) so all firms will receive the NAV per Share at the same time. The Reporting Authority 26 also will implement and maintain, or will ensure that the Composition File will be subject to, procedures designed to prevent the use and dissemination of material non-public information regarding a Fund’s portfolio positions and changes in the positions. An estimated value of an individual Share, defined in Nasdaq Rule 5745(c)(2) as the ‘‘Intraday Indicative Value,’’ will be calculated and disseminated at intervals of not more than 15 minutes throughout the Regular Market Session 27 when Shares trade on 26 See Nasdaq Rule 5745(c)(4). Nasdaq Rule 4120(b)(4) (describing the three trading sessions on the Exchange: (1) PreMarket Session from 4 a.m. to 9:30 a.m. Eastern Time; (2) Regular Market Session from 9:30 a.m. to 4 p.m. or 4:15 p.m. Eastern Time; and (3) PostMarket Session from 4 p.m. or 4:15 p.m. to 8 p.m. Eastern Time). 27 See PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 59691 the Exchange. The Exchange will obtain a representation from the issuer of the Shares that the IIV for each Fund will be calculated on an intraday basis and provided to Nasdaq for dissemination via the Nasdaq Global Index Service (‘‘GIDS’’). The IIV for each Fund will be based on current information regarding the value of the securities and other assets held by a Fund.28 The purpose of the IIV for each Fund is to enable investors to estimate the next-determined NAV so they can determine the number of Shares to buy or sell if they want to transact in an approximate dollar amount (e.g., if an investor wants to acquire approximately $5,000 of a Fund, how many Shares should the investor buy?).29 The Adviser is not a registered brokerdealer, or affiliated with a broker-dealer. Personnel who make decisions on a Fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material, non-public information regarding the open-end fund’s portfolio. In the event that (a) the Adviser registers as a broker-dealer or becomes newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser to a Fund is a registered broker-dealer or becomes affiliated with a broker-dealer, such adviser or sub-adviser will implement and will maintain 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 a Fund’s portfolio and will be subject to procedures designed to prevent the use and dissemination of material non- public information regarding such portfolio. Trading Halts The Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in Shares. Nasdaq will halt trading in Shares under the conditions specified in 28 IIVs for each Fund disseminated throughout each trading day would be based on the same portfolio as used to calculate that day’s NAV. A Fund will reflect purchases and sales of portfolio positions in its NAV the next business day after trades are executed. 29 Because, in NAV-Based Trading, prices of executed trades are not determined until the reference NAV is calculated, buyers and sellers of Shares during the trading day will not know the final value of their purchases and sales until the end of the trading day. A Fund’s Registration Statement, free public website and any advertising or marketing materials will include prominent disclosure of this fact. Although the IIV for a Fund may provide useful estimates of the value of intraday trades, they cannot be used to calculate with precision the dollar value of the Shares to be bought or sold. E:\FR\FM\15DEN1.SGM 15DEN1 59692 Federal Register / Vol. 82, No. 240 / Friday, December 15, 2017 / Notices Nasdaq Rules 4120 and in Nasdaq Rule 5745(d)(2)(C). Additionally, Nasdaq may cease trading Shares if other unusual conditions or circumstances exist which, in the opinion of Nasdaq, make further dealings on Nasdaq detrimental to the maintenance of a fair and orderly market. To manage the risk of a nonregulatory Share trading halt, Nasdaq has in place back-up processes and procedures to ensure orderly trading. Because, in NAV-Based Trading, all trade execution prices are linked to endof-day NAV, buyers and sellers of Shares should be less exposed to risk of loss due to intraday trading halts than buyers and sellers of conventional exchange-traded funds (‘‘ETFs’’) and other exchange-traded securities. Every order to trade Shares of a Fund is subject to the proxy price protection threshold of plus/minus $1.00, which determines the lower and upper threshold for the life of the order and whereby the order will be cancelled at any point if it exceeds $101.00 or falls below $99.00, the established thresholds.30 With certain exceptions, each order also must contain the applicable order attributes, including routing instructions and time-in-force information, as described in Nasdaq Rule 4703.31 sradovich on DSK3GMQ082PROD with NOTICES Trading Rules Nasdaq deems Shares to be equity securities, thus rendering trading in Shares subject to Nasdaq’s existing rules governing the trading of equity securities. Nasdaq will allow trading in Shares from 9:30 a.m. until 4:00 p.m. Eastern Time. Surveillance The Exchange represents that trading in Shares will be subject to the existing trading surveillances, administered by both Nasdaq and the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws.32 The Exchange represents that these procedures are adequate to properly monitor trading of Shares on the Exchange and to deter and detect violations of Exchange rules and applicable federal securities laws. The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of Nasdaq Rule 5745(h). Nasdaq Rule 5745(b)(6). 32 FINRA provides surveillance of trading on the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations. FINRA, on behalf of the Exchange, will communicate as needed with other markets and other entities that are members of the Intermarket Surveillance Group (‘‘ISG’’) 33 regarding trading in Shares, and in exchangetraded securities and instruments held by a Fund (to the extent such exchangetraded securities and instruments are known through the publication of the Composition File and periodic public disclosures of a Fund’s portfolio holdings), and FINRA may obtain trading information regarding such trading from other markets and other entities. In addition, the Exchange may obtain information regarding trading in Shares, and in exchange-traded securities and instruments held by a Fund (to the extent such exchangetraded securities and instruments are known through the publication of the Composition File and periodic public disclosures of a Fund’s portfolio holdings), from markets and other entities that are members of ISG, which includes securities and futures exchanges, or with which the Exchange has in place a comprehensive surveillance sharing agreement. In addition, the Exchange also has a general policy prohibiting the distribution of material non-public information by its employees. Information Circular Prior to the commencement of trading in a Fund, the Exchange will inform its members in an Information Circular of the special characteristics and risks associated with trading the Shares of each Fund. Specifically, the Information Circular will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Units (and noting that Shares are not individually redeemable); (2) Nasdaq Rule 2111A, which imposes suitability obligations on Nasdaq members with respect to recommending transactions in Shares to customers; (3) how information regarding the IIV and Composition File is disseminated; (4) the requirement that members deliver a prospectus to investors purchasing Shares prior to or concurrently with the 30 See 31 See VerDate Sep<11>2014 23:42 Dec 14, 2017 Jkt 244001 33 For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all components of a Fund’s portfolio may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 confirmation of a transaction; and (5) information regarding NAV-Based Trading protocols. As noted above, all orders to buy or sell Shares that are not executed on the day the order is submitted will be automatically cancelled as of the close of trading on such day. The Information Circular will discuss the effect of this characteristic on existing order types. The Information Circular also will identify the specific Nasdaq data feeds from which intraday Share prices in proxy price format may be obtained. In addition, the Information Circular will advise members, prior to the commencement of trading, of the prospectus delivery requirements applicable to a Fund. Members purchasing Shares from a Fund for resale to investors will deliver a summary prospectus to such investors. The Information Circular will also discuss any exemptive, no-action and interpretive relief granted by the Commission from any rules under the Act. The Information Circular also will reference that a 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 and the applicable NAV calculation time for the Shares. The Information Circular will disclose that information about the Shares will be publicly available on a Fund’s free public website.34 Information regarding Fund trading protocols will be disseminated to Nasdaq members in accordance with current processes for newly listed products. Nasdaq intends to provide its members with a detailed explanation of NAV-Based Trading through a Trader Alert issued prior to the commencement of trading in Shares on the Exchange. Continued Listing Representations All statements and representations made in this filing regarding (a) the description of the portfolios or reference assets, (b) limitations on portfolio holdings or reference assets, (c) dissemination and availability of the reference asset or intraday indicative values, or (d) the applicability of Exchange listing rules shall constitute continued listing requirements for listing the Shares on the Exchange. In addition, the issuer has represented to the Exchange that it will advise the Exchange of any failure by a Fund to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for 34 See E:\FR\FM\15DEN1.SGM supra footnote 24. 15DEN1 Federal Register / Vol. 82, No. 240 / Friday, December 15, 2017 / Notices sradovich on DSK3GMQ082PROD with NOTICES compliance with the continued listing requirements. If a Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under the Nasdaq 5800 Series. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,35 in general, and furthers the objectives of Section 6(b)(5) of the Act,36 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares would be listed and traded on the Exchange pursuant to the initial and continued listing criteria in Nasdaq Rule 5745. The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of Shares on Nasdaq and to deter and detect violations of Exchange rules and the applicable federal securities laws. The Adviser is not a registered broker-dealer, and is not affiliated with a brokerdealer. Personnel who make decisions on a Fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material, non-public information regarding the open-end fund’s portfolio. In the event that (a) the Adviser registers as a broker-dealer or becomes newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser to a Fund is a registered broker-dealer or becomes affiliated with a broker-dealer, such adviser or sub-adviser will implement and will maintain 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 a Fund’s portfolio and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. 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. The Exchange will obtain a representation from the issuer of Shares that the NAV per Share will be calculated daily (on each day the New York Stock Exchange is open for trading) and provided to Nasdaq via the MFQS by the fund accounting agent. As soon as the NAV is entered into MFQS, Nasdaq will disseminate the NAV to market participants and market data vendors via MFDS so all firms will receive the NAV per share at the same time. In addition, a large amount of information would be publicly available regarding a Fund and the Shares, thereby promoting market transparency. Prior to the commencement of market trading in Shares, a Fund will be required to establish and maintain a free public website through which its current prospectus may be downloaded.37 The free public website will include directly or through a link additional Fund information updated on a daily basis, including the prior business day’s NAV, and the following trading information for such business day expressed as premiums/discounts to NAV: (a) Intraday high, low, average and closing prices of Shares in Exchange trading; (b) the Closing Bid/ Ask Midpoint; and (c) the Closing Bid/ Ask Spread.38 The free public website will also contain charts showing the frequency distribution and range of values of trading prices, Closing Bid/ Ask Midpoints and Closing Bid/Ask Spreads over time. The Composition File will be disseminated through the NSCC before the open of trading in Shares on each business day and also will be made available to the public each day on a free public website.39 An estimated value of an individual Share, defined in Nasdaq Rule 5745(c)(2) as the ‘‘Intraday Indicative Value,’’ will be calculated and disseminated at intervals of not more than 15 minutes throughout the Regular Market Session 40 when Shares trade on the Exchange. The Exchange will obtain a representation from the issuer of the Shares that the IIV for each Fund will be calculated on an intraday basis and provided to Nasdaq for dissemination via GIDS. A complete list of current portfolio positions for a Fund will be made available at least once each calendar quarter, with a reporting lag of not more than 60 days. A Fund may 37 See supra footnote 23. supra footnote 24. 39 See supra footnote 13. 40 See supra footnote 27. 38 See 35 15 36 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). VerDate Sep<11>2014 23:42 Dec 14, 2017 Jkt 244001 PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 59693 provide more frequent disclosures of portfolio positions at its discretion. Transactions in Shares will be reported to the Consolidated Tape at the time of execution in proxy price format and will be disseminated to member firms and market data services through Nasdaq’s trading service and market data interfaces, as defined above. Once a Fund’s daily NAV has been calculated and the final price of its intraday Share trades has been determined, Nasdaq will deliver a confirmation with final pricing to the transacting parties. At the end of the day, Nasdaq will also post a newly created FTP file with the final transaction data for the trading and market data services. Information regarding NAV-based trading prices, best bids and offers for Shares, and volume of Shares traded will be continuously available on a real-time basis throughout each trading day on brokers’ computer screens and other electronic services. Because Shares will trade at prices based on the nextdetermined NAV, investors will be able to buy and sell individual Shares at a known premium or discount to NAV that they can limit by transacting using limit orders at the time of order entry. Trading in Shares will be subject to Nasdaq Rules 5745(d)(2)(B) and (C), which provide for the suspension of trading or trading halts under certain circumstances, including if, in the view of the Exchange, trading in Shares becomes inadvisable. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of the Funds, which seek to provide investors with access to actively managed investment strategies in a structure that offers the cost and tax efficiencies and shareholder protections of ETFs, while removing the requirement for daily portfolio holdings disclosure, and is designed to ensure a tight relationship between market trading prices and NAV. For the above reasons, Nasdaq believes the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. In fact, the Exchange believes that the introduction of the Funds would promote competition by making available to investors actively managed investment E:\FR\FM\15DEN1.SGM 15DEN1 59694 Federal Register / Vol. 82, No. 240 / Friday, December 15, 2017 / Notices strategies in structures that offer the cost and tax efficiencies and shareholder protections of ETFs, while removing the requirement for daily portfolio holdings disclosure, and is designed to ensure a tight relationship between market trading prices and NAV. Moreover, the Exchange believes that the proposed method of Share trading would provide investors with transparency of trading costs, and the ability to control trading costs using limit orders, that is not available for conventionally traded ETFs. These developments could significantly enhance competition to the benefit of the markets and investors. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or 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 the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments 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 No. SR– NASDAQ–2017–123 on the subject line. sradovich on DSK3GMQ082PROD with NOTICES 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 No. SR–NASDAQ–2017–123. This file number should be included on the subject line if email is used. To help the 23:42 Dec 14, 2017 Jkt 244001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.41 Robert Errett, Deputy Secretary. [FR Doc. 2017–27012 Filed 12–14–17; 8:45 am] BILLING CODE 8011–01–P 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: VerDate Sep<11>2014 Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (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 website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–NASDAQ–2017–123 and should be submitted on or before January 5, 2018. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82283; File No. SR–ISE– 2017–045] Self-Regulatory Organizations; Nasdaq ISE, LLC Notice of Filing of Amendment No. 2 to a Proposed Rule Change To Adopt Rule 7004 and Chapter XV, Section 11 December 11, 2017. On May 12, 2017, Nasdaq ISE, LLC (‘‘ISE’’ 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 adopt a fee schedule to establish the fees 41 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 for Industry Members related to the National Market System Plan Governing the Consolidated Audit Trail (‘‘CAT NMS Plan’’). The proposed rule change was published in the Federal Register for comment on May 24, 2017.3 The Commission received seven comment letters on the proposed rule change,4 and a response to comments from the Participants.5 On June 30, 2017, the Commission temporarily suspended and initiated proceedings to determine whether to approve or disapprove the proposed rule change.6 The Commission thereafter received seven comment letters,7 and a response to comments 3 See Securities Exchange Act Release No. 80715 (May 18, 2017), 82 FR 23895 (May 24, 2017) (‘‘Original Proposal’’). 4 Since the CAT NMS Plan Participants’ proposed rule changes to adopt fees to be charged to Industry Members to fund the consolidated audit trail are substantively identical, the Commission is considering all comments received on the proposed rule changes regardless of the comment file to which they were submitted. See text accompanying notes 13–16 infra, for a list of the CAT NMS Plan Participants. See Letter from Theodore R. Lazo, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association, to Brent J. Fields, Secretary, Commission (dated June 6, 2017), available at: https://www.sec.gov/comments/sr-batsbzx-2017-38/ batsbzx201738-1788188-153228.pdf; Letter from Patricia L. Cerny and Steven O’Malley, Compliance Consultants, to Brent J. Fields, Secretary, Commission (dated June 12, 2017), available at: https://www.sec.gov/comments/sr-cboe-2017-040/ cboe2017040-1799253-153675.pdf; Letter from Daniel Zinn, General Counsel, OTC Markets Group Inc., to Eduardo A. Aleman, Assistant Secretary, Commission (dated June 13, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/ finra2017011-1801717-153703.pdf; Letter from Joanna Mallers, Secretary, FIA Principal Traders Group, to Brent J. Fields, Secretary, Commission (dated June 22, 2017), available at: https:// www.sec.gov/comments/sr-cboe-2017-040/ cboe2017040-1819670-154195.pdf; Letter from Stuart J. Kaswell, Executive Vice President and Managing Director, General Counsel, Managed Funds Association, to Brent J. Fields, Secretary, Commission (dated June 23, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/ finra2017011-1822454-154283.pdf; and Letter from Suzanne H. Shatto, Investor, to Commission (dated June 27, 2017), available at: https://www.sec.gov/ comments/sr-batsedgx-2017-22/batsedgx201722154443.pdf. The Commission also received a comment letter which is not pertinent to these proposed rule changes. See Letter from Christina Crouch, Smart Ltd., to Brent J. Fields, Secretary, Commission (dated June 5, 2017), available at: https://www.sec.gov/comments/sr-batsbzx-2017-38/ batsbzx201738-1785545-153152.htm. 5 See Letter from CAT NMS Plan Participants to Brent J. Fields, Secretary, Commission (dated June 29, 2017), available at: https://www.sec.gov/ comments/sr-batsbyx-2017-11/batsbyx2017111832632-154584.pdf. 6 See Securities Exchange Act Release No. 81067 (June 30, 2017), 82 FR 31656 (July 7, 2017). 7 See Letter from W. Hardy Callcott, Partner, Sidley Austin LLP, to Brent J. Fields, Secretary, Commission (dated July 27, 2017), available at: https://www.sec.gov/comments/sr-batsbyx-2017-11/ batsbyx201711-2148338-157737.pdf; Letter from Kevin Coleman, General Counsel and Chief Compliance Officer, Belvedere Trading LLC, to Brent J. Fields, Secretary, Commission (dated July E:\FR\FM\15DEN1.SGM 15DEN1

Agencies

[Federal Register Volume 82, Number 240 (Friday, December 15, 2017)]
[Notices]
[Pages 59687-59694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-27012]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82290; File No. SR-NASDAQ-2017-123]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change To List and Trade the Shares 
of the Causeway International Value NextSharesTM and the 
Causeway Global Value NextSharesTM

December 11, 2017.
    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 November 28, 2017, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``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 the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 59688]]

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

    The Exchange proposes to list and trade under Nasdaq Rule 5745 
(Exchange-Traded Managed Fund Shares (``NextShares'')) the common 
shares (``Shares'') of the exchange-traded managed funds described 
herein (each a ``Fund'' and together, the ``Funds'').\3\
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    \3\ Except for the specific Fund information set forth below, 
this rule filing conforms to the rule filing, as modified by 
amendments 1 and 2 thereto, relating to the listing and trading on 
Nasdaq of the shares of 18 series of the Eaton Vance ETMF Trust and 
the Eaton Vance ETMF Trust II, as approved by the Commission in 
Securities Exchange Act Release No. 75499 (July 21, 2015) (SR-
NASDAQ-2015-036).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade the Shares of the Funds 
under Nasdaq Rule 5745, which governs the listing and trading of 
exchange-traded managed fund shares, as defined in Nasdaq Rule 
5745(c)(1), on the Exchange.\4\ Causeway ETMF Trust, which is discussed 
below, is registered with the Commission as an open-end investment 
company and has filed a registration statement on Form N-1A 
(``Registration Statement'') with the Commission. The Funds are each a 
series of Causeway ETMF Trust and will be advised by an investment 
adviser registered under the Investment Advisers Act of 1940 
(``Advisers Act''), as described below. The Funds will be actively 
managed and will pursue the principal investment strategies noted 
below.\5\
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    \4\ The Commission approved Nasdaq Rule 5745 in Securities 
Exchange Act Release No. 34-73562 (Nov. 7, 2014), 79 FR 68309 (Nov. 
14, 2014) (SR-NASDAQ-2014-020).
    \5\ Additional information regarding the Funds will be available 
on the free public website for the Funds at www.causewayfunds.com 
and in the Registration Statement for the Funds.
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I. Causeway ETMF Trust
    Causeway ETMF Trust is registered with the Commission as an open-
end investment company and has filed a Registration Statement with the 
Commission.\6\ The following Funds are each a series of Causeway ETMF 
Trust.\7\
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    \6\ See initial Registration Statement on Form N-1A for Causeway 
ETMF Trust dated September 20, 2017 (File Nos. 333-220536 and 811-
23294). The descriptions of the Funds and the Shares contained 
herein conform to the initial Registration Statement.
    \7\ The Commission has issued an order granting Causeway ETMF 
Trust and certain affiliates exemptive relief under the Investment 
Company Act of 1940, as amended (the ``Investment Company Act''). 
See Investment Company Act Release No. 32485 (February 22, 2017) 
(File No. 812-14729).
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    Causeway Capital Management LLC (the ``Adviser'') will be the 
adviser to the Funds. The Adviser is not a registered broker-dealer, 
and is not affiliated with a broker-dealer. Personnel who make 
decisions on a Fund's portfolio composition must be subject to 
procedures designed to prevent the use and dissemination of material, 
non-public information regarding the open-end fund's portfolio.\8\
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    \8\ An investment adviser to an open-end fund is required to be 
registered under the Advisers Act. As a result, the Adviser and its 
related personnel are subject to the provisions of Rule 204A-1 under 
the Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public 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.
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    In the event that (a) the Adviser registers as a broker-dealer or 
becomes newly affiliated with a broker-dealer, or (b) any new adviser 
or sub-adviser to a Fund is a registered broker-dealer or is affiliated 
with a broker-dealer, such adviser or sub-adviser will implement and 
will maintain 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 a Fund's 
portfolio and will be subject to procedures designed to prevent the use 
and dissemination of material non-public information regarding such 
portfolio.
    SEI Investments Distribution Co. (``SIDCO'') will be the principal 
underwriter and distributor of each Fund's Shares. SEI Investments 
Global Funds Services, Inc. will act as the administrator and 
accounting agent to each Fund; The Bank of New York Mellon will act as 
transfer agent and custodian to the Funds; ICE Data Indices, LLC will 
calculate intraday indicative values (``IIVs'') for each Fund.
    The Funds will be actively managed and will pursue the principal 
investment strategies described below.\9\
---------------------------------------------------------------------------

    \9\ Additional information regarding the Funds will be available 
on a free public website for the Funds (www.causewayfunds.com, which 
may contain links for certain information to www.nextshares.com) and 
in the Registration Statement for the Funds.
---------------------------------------------------------------------------

Causeway International Value NextShares (``International Value 
NextShares'')
    The investment objective of the International Value NextShares is 
to seek long-term growth of capital and income. Under normal market 
conditions, the International Value NextShares will invest primarily in 
equity securities of companies in developed countries outside the U.S. 
Normally, the International Value NextShares will invest at least 80% 
of its total assets in equity securities of companies in a number of 
foreign countries and normally will invest the majority of its total 
assets in equity securities of companies that pay dividends or 
repurchase their shares. The International Value NextShares may invest 
in emerging (less developed) markets. The International Value 
NextShares considers a country to be an emerging market if the country 
is included in the MSCI Emerging Markets Index. The International Value 
NextShares may invest in equity securities of companies of any market 
capitalization, and will not be required to invest a minimum amount and 
will not be limited to investing a maximum amount in any particular 
country.
Causeway Global Value NextShares (``Global Value NextShares'')
    The investment objective of the Global Value NextShares is to seek 
long-term growth of capital and income. Under normal market conditions, 
the Global Value NextShares will invest primarily in equity securities 
of companies in developed and emerging countries outside the U.S. and 
of companies in the U.S. Normally, the Global Value NextShares will 
invest the

[[Page 59689]]

majority of its total assets in equity securities of companies that pay 
dividends or repurchase their shares.
    Under normal circumstances, the Global Value NextShares will invest 
at least 40% of its total assets in a number of countries outside the 
U.S. The Global Value NextShares may invest in emerging (less 
developed) markets. The Global Value NextShares considers a country to 
be an emerging market if the country is included in the MSCI Emerging 
Markets Index. The Global Value NextShares may also invest in frontier 
markets. The Global Value NextShares considers a country to be a 
frontier market if the country is classified by MSCI, based on a 
country's economic development, size, liquidity and market 
accessibility, as a frontier market.
    The Global Value NextShares may invest in equity securities of 
companies of any market capitalization, and will not be required to 
invest a minimum amount and will not be limited to investing a maximum 
amount in any particular country.
Creations and Redemptions of Shares
    Shares will be issued and redeemed on a daily basis at a Fund's 
next-determined net asset value (``NAV'') \10\ in specified blocks of 
Shares called ``Creation Units.'' A Creation Unit will consist of at 
least 25,000 Shares. Creation Units may be purchased and redeemed by or 
through ``Authorized Participants.'' \11\ Purchases and sales of Shares 
in amounts less than a Creation Unit may be effected only in the 
secondary market, as described below, and not directly with a Fund.
---------------------------------------------------------------------------

    \10\ As with other registered open-end investment companies, NAV 
generally will be calculated daily (on each day the New York Stock 
Exchange is open for trading), as of 4:00 p.m. Eastern Time. NAV 
will be calculated by dividing a Fund's net asset value by the 
number of Shares outstanding. Information regarding the valuation of 
investments in calculating a Fund's NAV will be contained in the 
Registration Statement for its Shares.
    \11\ ``Authorized Participants'' will be either: (1) 
``participating parties,'' i.e., brokers or other participants in 
the Continuous Net Settlement System (``CNS System'') of the 
National Securities Clearing Corporation (``NSCC''), a clearing 
agency registered with the Commission and affiliated with the 
Depository Trust Company (``DTC''), or (2) DTC participants, which 
in either case have executed participant agreements with a Fund's 
distributor, and which have been acknowledged by the transfer agent, 
regarding the creation and redemption of Creation Units. Investors 
will not have to be Authorized Participants in order to transact in 
Creation Units, but must place an order through and make appropriate 
arrangements with an Authorized Participant for such transactions.
---------------------------------------------------------------------------

    The creation and redemption process for a Fund may be effected ``in 
kind,'' in cash, or in a combination of securities and cash. Creation 
``in kind'' means that an Authorized Participant--usually a brokerage 
house or large institutional investor--purchases the Creation Unit with 
a basket of securities equal in value to the aggregate NAV of the 
Shares in the Creation Unit. When an Authorized Participant redeems a 
Creation Unit in kind, it receives a basket of securities equal in 
value to the aggregate NAV of the Shares in the Creation Unit.\12\
---------------------------------------------------------------------------

    \12\ In compliance with Nasdaq Rule 5745(b)(5), which applies to 
Shares based on an international or global portfolio, Causeway ETMF 
Trust's application for exemptive relief under the Investment 
Company Act states that Causeway ETMF Trust will comply with the 
federal securities laws in accepting securities for deposits and 
satisfying redemptions with securities, including that the 
securities accepted for deposits and the securities used to satisfy 
redemption requests are sold in transactions that would be exempt 
from registration under the Securities Act of 1933, as amended (15 
U.S.C. 77a).
---------------------------------------------------------------------------

Composition File
    As defined in Nasdaq Rule 5745(c)(3), the Composition File is the 
specified portfolio of securities and/or cash that a Fund will accept 
as a deposit in issuing a Creation Unit of Shares, and the specified 
portfolio of securities and/or cash that a Fund will deliver in a 
redemption of a Creation Unit of Shares. The Composition File will be 
disseminated through the NSCC once each business day before the open of 
trading in Shares on such day and also will be made available to the 
public each day on a free public website.\13\ Because each Fund seeks 
to preserve the confidentiality of its current portfolio trading 
program, a Fund's Composition File generally will not be a pro rata 
reflection of the Fund's investment positions. Each security included 
in the Composition File will be a current holding of the relevant Fund, 
but the Composition File generally will not include all of the 
securities in that Fund's portfolio or match the weightings of the 
included securities in the portfolio. Securities that the Adviser is in 
the process of acquiring for a Fund generally will not be represented 
in the Fund's Composition File until their purchase has been completed. 
Similarly, securities that are held in a Fund's portfolio but in the 
process of being sold may not be removed from its Composition File 
until the sale program is substantially completed. To the extent that a 
Fund creates or redeems Shares in kind, it will use cash amounts to 
supplement the in-kind transactions to the extent necessary to ensure 
that Creation Units are purchased and redeemed at NAV. The Composition 
File also may consist entirely of cash, in which case it will not 
include any of the securities in a Fund's portfolio.\14\
---------------------------------------------------------------------------

    \13\ The free public website containing the Composition File 
will be www.nextshares.com.
    \14\ In determining whether a Fund will issue or redeem Creation 
Units entirely on a cash basis, the key consideration will be the 
benefit that would accrue to the Fund and its investors. For 
instance, in bond transactions, the Adviser may be able to obtain 
better execution for a Fund than Authorized Participants because of 
the Adviser's size, experience and potentially stronger 
relationships in the fixed- income markets.
---------------------------------------------------------------------------

Transaction Fees
    All persons purchasing or redeeming Creation Units are expected to 
incur a transaction fee to cover the estimated cost to the relevant 
Fund of processing the transaction, including the costs of clearance 
and settlement charged to it by NSCC or DTC, and the estimated trading 
costs (i.e., brokerage commissions, bid-ask spread and market impact) 
to be incurred in converting the Composition File to or from the 
desired portfolio holdings. The transaction fee is determined daily and 
will be limited to amounts approved by the board of trustees of the 
Funds and determined by the Adviser to be appropriate to defray the 
expenses that a Fund incurs in connection with the purchase or 
redemption of Creation Units.
    The purpose of transaction fees is to protect a Fund's existing 
shareholders from the dilutive costs associated with the purchase and 
redemption of Creation Units. Transaction fees may vary over time for a 
Fund depending on the estimated trading costs for its portfolio 
positions and Composition File, processing costs and other 
considerations. To the extent that a Fund specifies greater amounts of 
cash in its Composition File, it may impose higher transaction fees. In 
addition, to the extent that a Fund includes in its Composition File 
instruments that clear through DTC, the Fund may impose higher 
transaction fees than when the Composition File consists solely of 
instruments that clear through NSCC, because DTC may charge more than 
NSCC in connection with Creation Unit transactions.\15\ The transaction 
fees applicable to a Fund's purchases and redemptions on a given 
business day will be disseminated through the NSCC prior to the open of 
market trading on that day and also will be made available

[[Page 59690]]

to the public each day on a free public website.\16\ In all cases, the 
transaction fees will be limited in accordance with the requirements of 
the Commission applicable to open-end management investment companies 
offering redeemable securities.
---------------------------------------------------------------------------

    \15\ Authorized Participants that participate in the CNS System 
of the NSCC are expected to be able to use the enhanced NSCC/CNS 
process for effecting in-kind purchases and redemptions of Shares 
(the ``NSCC Process'') to purchase and redeem Creation Units of a 
Fund that limits the composition of its basket to include only NSCC 
Process-eligible instruments (generally domestic equity securities 
and cash). Because the NSCC Process is generally more efficient than 
the DTC clearing process, NSCC is likely to charge a Fund less than 
DTC to settle purchases and redemptions of Creation Units.
    \16\ The free public website will be www.nextshares.com.
---------------------------------------------------------------------------

NAV-Based Trading
    Because Shares will be listed and traded on the Exchange, Shares 
will be available for purchase and sale on an intraday basis. Shares 
will be purchased and sold in the secondary market at prices directly 
linked to the relevant Fund's next-determined NAV using a new trading 
protocol called ``NAV-Based Trading.'' \17\ All bids, offers and 
execution prices of Shares will be expressed as a premium/discount 
(which may be zero) to a Fund's next-determined NAV (e.g., NAV-$0.01, 
NAV+$0.01). A Fund's NAV will be determined daily (on each day the New 
York Stock Exchange is open for trading), as of 4:00 p.m. Eastern Time. 
Trade executions will be binding at the time orders are matched on 
Nasdaq's facilities, with the transaction prices contingent upon the 
determination of NAV.
---------------------------------------------------------------------------

    \17\ Aspects of NAV-Based Trading are protected intellectual 
property subject to issued and pending U.S. patents held by 
NextShares Solutions LLC (``NextShares Solutions''), a wholly owned 
subsidiary of Eaton Vance Corp. Nasdaq has entered into a license 
agreement with NextShares Solutions to allow for NAV- Based Trading 
on the Exchange of exchange-traded managed funds that have 
themselves entered into license agreements with NextShares 
Solutions.
---------------------------------------------------------------------------

Trading Premiums and Discounts
    Bid and offer prices for Shares will be quoted throughout the day 
relative to NAV. The premium or discount to NAV at which Share prices 
are quoted and transactions are executed will vary depending on market 
factors, including the balance of supply and demand for Shares among 
investors, transaction fees and other costs in connection with creating 
and redeeming Creation Units of Shares, the cost and availability of 
borrowing Shares, competition among market makers, the Share inventory 
positions and inventory strategies of market makers, the profitability 
requirements and business objectives of market makers, and the volume 
of Share trading. Reflecting such market factors, prices for Shares in 
the secondary market may be above, at or below NAV. A Fund with higher 
transaction fees may trade at wider premiums or discounts to NAV than 
other funds with lower transaction fees, reflecting the added costs to 
market makers of managing their Share inventory positions through 
purchases and redemptions of Creation Units.
    Because making markets in Shares will be simple to manage and low 
risk, competition among market makers seeking to earn reliable, low-
risk profits should enable the Shares to routinely trade at tight bid-
ask spreads and narrow premiums/discounts to NAV. As noted below, each 
Fund will make available on a free public website that will be updated 
on a daily basis current and historical trading spreads and premiums/
discounts of Shares trading in the secondary market.\18\
---------------------------------------------------------------------------

    \18\ The free public website containing this information will be 
www.nextshares.com, which will be available directly and through a 
link from www.causewayfunds.com.
---------------------------------------------------------------------------

    Transmitting and Processing Orders. Member firms will utilize 
certain existing order types and interfaces to transmit Share bids and 
offers to Nasdaq, which will process Share trades like trades in shares 
of other listed securities.\19\ In the systems used to transmit and 
process transactions in Shares, a Fund's next-determined NAV will be 
represented by a proxy price (e.g., 100.00) and a premium/discount of a 
stated amount to the next-determined NAV to be represented by the same 
increment/decrement from the proxy price used to denote NAV (e.g., NAV-
$0.01 would be represented as 99.99; NAV+$0.01 as 100.01).
---------------------------------------------------------------------------

    \19\ As noted below, all orders to buy or sell Shares that are 
not executed on the day the order is submitted will be automatically 
cancelled as of the close of trading on such day. Prior to the 
commencement of trading in a Fund, the Exchange will inform its 
members in an Information Circular of the effect of this 
characteristic on existing order types.
---------------------------------------------------------------------------

    To avoid potential investor confusion, Nasdaq will work with member 
firms and providers of market data services to seek to ensure that 
representations of intraday bids, offers and execution prices of Shares 
that are made available to the investing public follow the ``NAV-$0.01/
NAV+$0.01'' (or similar) display format. All Shares listed on the 
Exchange will have a unique identifier associated with their ticker 
symbols, which would indicate that the Shares are traded using NAV-
Based Trading. Nasdaq makes available to member firms and market data 
services certain proprietary data feeds that are designed to supplement 
the market information disseminated through the consolidated tape 
(``Consolidated Tape''). Specifically, the Exchange will use the Nasdaq 
Basic and Nasdaq Last Sale data feeds to disseminate intraday price and 
quote data for Shares in real time in the ``NAV-$0.01/NAV+$0.01'' (or 
similar) display format. Member firms could use the Nasdaq Basic and 
Nasdaq Last Sale data feeds to source intraday Share prices for 
presentation to the investing public in the ``NAV-$0.01/NAV+$0.01'' (or 
similar) display format. Alternatively, member firms could source 
intraday Share prices in proxy price format from the Consolidated Tape 
and other Nasdaq data feeds (e.g., Nasdaq TotalView and Nasdaq Level 2) 
and use a simple algorithm to convert prices into the ``NAV-$0.01/
NAV+$0.01'' (or similar) display format. As noted below, prior to the 
commencement of trading in a Fund, the Exchange will inform its members 
in an Information Circular of the identities of the specific Nasdaq 
data feeds from which intraday Share prices in proxy price format may 
be obtained.
    Intraday Reporting of Quotes and Trades. All bids and offers for 
Shares and all Share trade executions will be reported intraday in real 
time by the Exchange to the Consolidated Tape \20\ and separately 
disseminated to member firms and market data services through the 
Exchange data feeds listed above. The Exchange will also provide the 
member firms participating in each Share trade with a contemporaneous 
notice of trade execution, indicating the number of Shares bought or 
sold and the executed premium/discount to NAV.\21\
---------------------------------------------------------------------------

    \20\ Due to systems limitations, the Consolidated Tape will 
report intraday execution prices and quotes for Shares using a proxy 
price format. As noted, Nasdaq will separately report real-time 
execution prices and quotes to member firms and providers of market 
data services in the ``NAV-$0.01/NAV+$0.01'' (or similar) display 
format, and otherwise seek to ensure that representations of 
intraday bids, offers and execution prices for Shares that are made 
available to the investing public follow the same display format.
    \21\ All orders to buy or sell Shares that are not executed on 
the day the order is submitted will be automatically cancelled as of 
the close of trading on such day.
---------------------------------------------------------------------------

    Final Trade Pricing, Reporting and Settlement. All executed Share 
trades will be recorded and stored intraday by Nasdaq to await the 
calculation of a Fund's end-of- day NAV and the determination of final 
trade pricing. After a Fund's NAV is calculated and provided to the 
Exchange, Nasdaq will price each Share trade entered into during the 
day at that Fund's NAV plus/minus the trade's executed premium/
discount. Using the final trade price, each executed Share trade will 
then be disseminated to member firms and market data services via an 
FTP file to be created for exchange-traded managed funds and confirmed 
to the member firms participating in the trade to supplement the 
previously provided

[[Page 59691]]

information to include final pricing.\22\ After the pricing is 
finalized, Nasdaq will deliver the Share trading data to NSCC for 
clearance and settlement, following the same processes used for the 
clearance and settlement of trades in other exchange-traded securities.
---------------------------------------------------------------------------

    \22\ File Transfer Protocol (``FTP'') is a standard network 
protocol used to transfer computer files on the internet. Nasdaq 
will arrange for the daily dissemination of an FTP file with 
executed Share trades to member firms and market data services.
---------------------------------------------------------------------------

Availability of Information
    Prior to the commencement of market trading in Shares, a Fund will 
be required to establish and maintain a free public website through 
which its current prospectus may be downloaded.\23\ The free public 
website will include directly or through a link additional Fund 
information updated on a daily basis, including the prior business 
day's NAV, and the following trading information for such business day 
expressed as premiums/discounts to NAV: (a) Intraday high, low, average 
and closing prices of Shares in Exchange trading; (b) the midpoint of 
the highest bid and lowest offer prices as of the close of Exchange 
trading, expressed as a premium/discount to NAV (the ``Closing Bid/Ask 
Midpoint''); and (c) the spread between highest bid and lowest offer 
prices as of the close of Exchange trading (the ``Closing Bid/Ask 
Spread.'').\24\ The free public website will also contain charts 
showing the frequency distribution and range of values of trading 
prices, Closing Bid/Ask Midpoints and Closing Bid/Ask Spreads over 
time.
---------------------------------------------------------------------------

    \23\ The free public website containing this information will be 
www.causewayfunds.com.
    \24\ The free public website containing a Fund's NAV will be 
www.causewayfunds.com. All other information listed will be made 
available on www.nextshares.com, which can be accessed directly and 
via a link on www.causewayfunds.com.
---------------------------------------------------------------------------

    The Composition File will be disseminated through the NSCC before 
the open of trading in Shares on each business day and also will be 
made available to the public each day on a free public website as noted 
above.\25\ Consistent with the disclosure requirements that apply to 
traditional open-end investment companies, a complete list of current 
Fund portfolio positions will be made available at least once each 
calendar quarter, with a reporting lag of not more than 60 days. A Fund 
may provide more frequent disclosures of portfolio positions at its 
discretion.
---------------------------------------------------------------------------

    \25\ The free public website containing this information will be 
www.nextshares.com.
---------------------------------------------------------------------------

    Reports of Share transactions will be disseminated to the market 
and delivered to the member firms participating in the trade 
contemporaneous with execution. Once a Fund's daily NAV has been 
calculated and disseminated, Nasdaq will price each Share trade entered 
into during the day at the relevant Fund's NAV plus/minus the trade's 
executed premium/discount. Using the final trade price, each executed 
Share trade will then be disseminated to member firms and market data 
services via an FTP file to be created for exchange-traded managed 
funds and confirmed to the member firms participating in the trade to 
supplement the previously provided information to include final 
pricing.
    Information regarding NAV-based trading prices, best bids and 
offers for Shares, and volume of Shares traded will be continuously 
available on a real-time basis throughout each trading day on brokers' 
computer screens and other electronic services.
Initial and Continued Listing
    Shares will conform to the initial and continued listing criteria 
as set forth under Nasdaq Rule 5745. A minimum of 50,000 Shares and no 
less than two Creation Units of each Fund will be outstanding at the 
commencement of trading on the Exchange. The Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily (on each day the New York Stock Exchange is 
open for trading) and provided to Nasdaq via the Mutual Fund Quotation 
Service (''MFQS'') by the fund accounting agent. As soon as the NAV is 
entered into MFQS, Nasdaq will disseminate the NAV to market 
participants and market data vendors via the Mutual Fund Dissemination 
Service (``MFDS'') so all firms will receive the NAV per Share at the 
same time. The Reporting Authority \26\ also will implement and 
maintain, or will ensure that the Composition File will be subject to, 
procedures designed to prevent the use and dissemination of material 
non-public information regarding a Fund's portfolio positions and 
changes in the positions.
---------------------------------------------------------------------------

    \26\ See Nasdaq Rule 5745(c)(4).
---------------------------------------------------------------------------

    An estimated value of an individual Share, defined in Nasdaq Rule 
5745(c)(2) as the ``Intraday Indicative Value,'' will be calculated and 
disseminated at intervals of not more than 15 minutes throughout the 
Regular Market Session \27\ when Shares trade on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares 
that the IIV for each Fund will be calculated on an intraday basis and 
provided to Nasdaq for dissemination via the Nasdaq Global Index 
Service (``GIDS'').
---------------------------------------------------------------------------

    \27\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 4 a.m. to 9:30 
a.m. Eastern Time; (2) Regular Market Session from 9:30 a.m. to 4 
p.m. or 4:15 p.m. Eastern Time; and (3) Post-Market Session from 4 
p.m. or 4:15 p.m. to 8 p.m. Eastern Time).
---------------------------------------------------------------------------

    The IIV for each Fund will be based on current information 
regarding the value of the securities and other assets held by a 
Fund.\28\ The purpose of the IIV for each Fund is to enable investors 
to estimate the next-determined NAV so they can determine the number of 
Shares to buy or sell if they want to transact in an approximate dollar 
amount (e.g., if an investor wants to acquire approximately $5,000 of a 
Fund, how many Shares should the investor buy?).\29\
---------------------------------------------------------------------------

    \28\ IIVs for each Fund disseminated throughout each trading day 
would be based on the same portfolio as used to calculate that day's 
NAV. A Fund will reflect purchases and sales of portfolio positions 
in its NAV the next business day after trades are executed.
    \29\ Because, in NAV-Based Trading, prices of executed trades 
are not determined until the reference NAV is calculated, buyers and 
sellers of Shares during the trading day will not know the final 
value of their purchases and sales until the end of the trading day. 
A Fund's Registration Statement, free public website and any 
advertising or marketing materials will include prominent disclosure 
of this fact. Although the IIV for a Fund may provide useful 
estimates of the value of intraday trades, they cannot be used to 
calculate with precision the dollar value of the Shares to be bought 
or sold.
---------------------------------------------------------------------------

    The Adviser is not a registered broker-dealer, or affiliated with a 
broker-dealer. Personnel who make decisions on a Fund's portfolio 
composition must be subject to procedures designed to prevent the use 
and dissemination of material, non-public information regarding the 
open-end fund's portfolio.
    In the event that (a) the Adviser registers as a broker-dealer or 
becomes newly affiliated with a broker-dealer, or (b) any new adviser 
or sub-adviser to a Fund is a registered broker-dealer or becomes 
affiliated with a broker-dealer, such adviser or sub-adviser will 
implement and will maintain 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 a 
Fund's portfolio and will be subject to procedures designed to prevent 
the use and dissemination of material non- public information regarding 
such portfolio.
Trading Halts
    The Exchange may consider all relevant factors in exercising its 
discretion to halt or suspend trading in Shares. Nasdaq will halt 
trading in Shares under the conditions specified in

[[Page 59692]]

Nasdaq Rules 4120 and in Nasdaq Rule 5745(d)(2)(C). Additionally, 
Nasdaq may cease trading Shares if other unusual conditions or 
circumstances exist which, in the opinion of Nasdaq, make further 
dealings on Nasdaq detrimental to the maintenance of a fair and orderly 
market. To manage the risk of a non-regulatory Share trading halt, 
Nasdaq has in place back-up processes and procedures to ensure orderly 
trading.
    Because, in NAV-Based Trading, all trade execution prices are 
linked to end-of-day NAV, buyers and sellers of Shares should be less 
exposed to risk of loss due to intraday trading halts than buyers and 
sellers of conventional exchange-traded funds (``ETFs'') and other 
exchange-traded securities.
    Every order to trade Shares of a Fund is subject to the proxy price 
protection threshold of plus/minus $1.00, which determines the lower 
and upper threshold for the life of the order and whereby the order 
will be cancelled at any point if it exceeds $101.00 or falls below 
$99.00, the established thresholds.\30\ With certain exceptions, each 
order also must contain the applicable order attributes, including 
routing instructions and time-in-force information, as described in 
Nasdaq Rule 4703.\31\
---------------------------------------------------------------------------

    \30\ See Nasdaq Rule 5745(h).
    \31\ See Nasdaq Rule 5745(b)(6).
---------------------------------------------------------------------------

Trading Rules
    Nasdaq deems Shares to be equity securities, thus rendering trading 
in Shares subject to Nasdaq's existing rules governing the trading of 
equity securities. Nasdaq will allow trading in Shares from 9:30 a.m. 
until 4:00 p.m. Eastern Time.
Surveillance
    The Exchange represents that trading in Shares will be subject to 
the existing trading surveillances, administered by both Nasdaq and the 
Financial Industry Regulatory Authority, Inc. (``FINRA'') on behalf of 
the Exchange, which are designed to detect violations of Exchange rules 
and applicable federal securities laws.\32\ The Exchange represents 
that these procedures are adequate to properly monitor trading of 
Shares on the Exchange and to deter and detect violations of Exchange 
rules and applicable federal securities laws.
---------------------------------------------------------------------------

    \32\ FINRA provides surveillance of trading on the Exchange 
pursuant to a regulatory services agreement. The Exchange is 
responsible for FINRA's performance under this regulatory services 
agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    FINRA, on behalf of the Exchange, will communicate as needed with 
other markets and other entities that are members of the Intermarket 
Surveillance Group (``ISG'') \33\ regarding trading in Shares, and in 
exchange-traded securities and instruments held by a Fund (to the 
extent such exchange-traded securities and instruments are known 
through the publication of the Composition File and periodic public 
disclosures of a Fund's portfolio holdings), and FINRA may obtain 
trading information regarding such trading from other markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in Shares, and in exchange-traded securities and instruments 
held by a Fund (to the extent such exchange-traded securities and 
instruments are known through the publication of the Composition File 
and periodic public disclosures of a Fund's portfolio holdings), from 
markets and other entities that are members of ISG, which includes 
securities and futures exchanges, or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    \33\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of a 
Fund's portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material non-public information by its employees.
Information Circular
    Prior to the commencement of trading in a Fund, the Exchange will 
inform its members in an Information Circular of the special 
characteristics and risks associated with trading the Shares of each 
Fund. Specifically, the Information Circular will discuss the 
following: (1) The procedures for purchases and redemptions of Shares 
in Creation Units (and noting that Shares are not individually 
redeemable); (2) Nasdaq Rule 2111A, which imposes suitability 
obligations on Nasdaq members with respect to recommending transactions 
in Shares to customers; (3) how information regarding the IIV and 
Composition File is disseminated; (4) the requirement that members 
deliver a prospectus to investors purchasing Shares prior to or 
concurrently with the confirmation of a transaction; and (5) 
information regarding NAV-Based Trading protocols.
    As noted above, all orders to buy or sell Shares that are not 
executed on the day the order is submitted will be automatically 
cancelled as of the close of trading on such day. The Information 
Circular will discuss the effect of this characteristic on existing 
order types. The Information Circular also will identify the specific 
Nasdaq data feeds from which intraday Share prices in proxy price 
format may be obtained.
    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to a Fund. Members purchasing Shares from a Fund for resale 
to investors will deliver a summary prospectus to such investors. The 
Information Circular will also discuss any exemptive, no-action and 
interpretive relief granted by the Commission from any rules under the 
Act.
    The Information Circular also will reference that a 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 and the applicable NAV calculation time for the Shares. The 
Information Circular will disclose that information about the Shares 
will be publicly available on a Fund's free public website.\34\
---------------------------------------------------------------------------

    \34\ See supra footnote 24.
---------------------------------------------------------------------------

    Information regarding Fund trading protocols will be disseminated 
to Nasdaq members in accordance with current processes for newly listed 
products. Nasdaq intends to provide its members with a detailed 
explanation of NAV-Based Trading through a Trader Alert issued prior to 
the commencement of trading in Shares on the Exchange.
Continued Listing Representations
    All statements and representations made in this filing regarding 
(a) the description of the portfolios or reference assets, (b) 
limitations on portfolio holdings or reference assets, (c) 
dissemination and availability of the reference asset or intraday 
indicative values, or (d) the applicability of Exchange listing rules 
shall constitute continued listing requirements for listing the Shares 
on the Exchange. In addition, the issuer has represented to the 
Exchange that it will advise the Exchange of any failure by a Fund to 
comply with the continued listing requirements, and, pursuant to its 
obligations under Section 19(g)(1) of the Act, the Exchange will 
monitor for

[[Page 59693]]

compliance with the continued listing requirements. If a Fund is not in 
compliance with the applicable listing requirements, the Exchange will 
commence delisting procedures under the Nasdaq 5800 Series.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\35\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\36\ in particular, in that it is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system.
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    \35\ 15 U.S.C. 78f(b).
    \36\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares would be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Nasdaq Rule 5745. The 
Exchange believes that its surveillance procedures are adequate to 
properly monitor the trading of Shares on Nasdaq and to deter and 
detect violations of Exchange rules and the applicable federal 
securities laws. The Adviser is not a registered broker-dealer, and is 
not affiliated with a broker-dealer. Personnel who make decisions on a 
Fund's portfolio composition must be subject to procedures designed to 
prevent the use and dissemination of material, non-public information 
regarding the open-end fund's portfolio.
    In the event that (a) the Adviser registers as a broker-dealer or 
becomes newly affiliated with a broker-dealer, or (b) any new adviser 
or sub-adviser to a Fund is a registered broker-dealer or becomes 
affiliated with a broker-dealer, such adviser or sub-adviser will 
implement and will maintain 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 a 
Fund's portfolio and will be subject to procedures designed to prevent 
the use and dissemination of material non-public information regarding 
such portfolio.
    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. 
The Exchange will obtain a representation from the issuer of Shares 
that the NAV per Share will be calculated daily (on each day the New 
York Stock Exchange is open for trading) and provided to Nasdaq via the 
MFQS by the fund accounting agent. As soon as the NAV is entered into 
MFQS, Nasdaq will disseminate the NAV to market participants and market 
data vendors via MFDS so all firms will receive the NAV per share at 
the same time. In addition, a large amount of information would be 
publicly available regarding a Fund and the Shares, thereby promoting 
market transparency.
    Prior to the commencement of market trading in Shares, a Fund will 
be required to establish and maintain a free public website through 
which its current prospectus may be downloaded.\37\ The free public 
website will include directly or through a link additional Fund 
information updated on a daily basis, including the prior business 
day's NAV, and the following trading information for such business day 
expressed as premiums/discounts to NAV: (a) Intraday high, low, average 
and closing prices of Shares in Exchange trading; (b) the Closing Bid/
Ask Midpoint; and (c) the Closing Bid/Ask Spread.\38\ The free public 
website will also contain charts showing the frequency distribution and 
range of values of trading prices, Closing Bid/Ask Midpoints and 
Closing Bid/Ask Spreads over time.
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    \37\ See supra footnote 23.
    \38\ See supra footnote 24.
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    The Composition File will be disseminated through the NSCC before 
the open of trading in Shares on each business day and also will be 
made available to the public each day on a free public website.\39\ An 
estimated value of an individual Share, defined in Nasdaq Rule 
5745(c)(2) as the ``Intraday Indicative Value,'' will be calculated and 
disseminated at intervals of not more than 15 minutes throughout the 
Regular Market Session \40\ when Shares trade on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares 
that the IIV for each Fund will be calculated on an intraday basis and 
provided to Nasdaq for dissemination via GIDS. A complete list of 
current portfolio positions for a Fund will be made available at least 
once each calendar quarter, with a reporting lag of not more than 60 
days. A Fund may provide more frequent disclosures of portfolio 
positions at its discretion.
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    \39\ See supra footnote 13.
    \40\ See supra footnote 27.
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    Transactions in Shares will be reported to the Consolidated Tape at 
the time of execution in proxy price format and will be disseminated to 
member firms and market data services through Nasdaq's trading service 
and market data interfaces, as defined above. Once a Fund's daily NAV 
has been calculated and the final price of its intraday Share trades 
has been determined, Nasdaq will deliver a confirmation with final 
pricing to the transacting parties. At the end of the day, Nasdaq will 
also post a newly created FTP file with the final transaction data for 
the trading and market data services. Information regarding NAV-based 
trading prices, best bids and offers for Shares, and volume of Shares 
traded will be continuously available on a real-time basis throughout 
each trading day on brokers' computer screens and other electronic 
services. Because Shares will trade at prices based on the next-
determined NAV, investors will be able to buy and sell individual 
Shares at a known premium or discount to NAV that they can limit by 
transacting using limit orders at the time of order entry. Trading in 
Shares will be subject to Nasdaq Rules 5745(d)(2)(B) and (C), which 
provide for the suspension of trading or trading halts under certain 
circumstances, including if, in the view of the Exchange, trading in 
Shares becomes inadvisable.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
the Funds, which seek to provide investors with access to actively 
managed investment strategies in a structure that offers the cost and 
tax efficiencies and shareholder protections of ETFs, while removing 
the requirement for daily portfolio holdings disclosure, and is 
designed to ensure a tight relationship between market trading prices 
and NAV.
    For the above reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. In fact, the 
Exchange believes that the introduction of the Funds would promote 
competition by making available to investors actively managed 
investment

[[Page 59694]]

strategies in structures that offer the cost and tax efficiencies and 
shareholder protections of ETFs, while removing the requirement for 
daily portfolio holdings disclosure, and is designed to ensure a tight 
relationship between market trading prices and NAV. Moreover, the 
Exchange believes that the proposed method of Share trading would 
provide investors with transparency of trading costs, and the ability 
to control trading costs using limit orders, that is not available for 
conventionally traded ETFs.
    These developments could significantly enhance competition to the 
benefit of the markets and investors.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or 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 the 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 [email protected]. Please include 
File No. SR-NASDAQ-2017-123 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 No. SR-NASDAQ-2017-123. 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 website (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File No. SR-NASDAQ-2017-123 and should be submitted on 
or before January 5, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\41\
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    \41\ 17 CFR 200.30-3(a)(12).
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Robert Errett,
Deputy Secretary.
[FR Doc. 2017-27012 Filed 12-14-17; 8:45 am]
 BILLING CODE 8011-01-P