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]
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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.
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15 The
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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).
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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
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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
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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
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.
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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.
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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.
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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.
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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.
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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.
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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.
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NAV-Based Trading
Because Shares will be listed and
traded on the Exchange, Shares will be
available for purchase and sale on an
intraday basis. Shares will be purchased
and sold in the secondary market at
prices directly linked to the 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.
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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.
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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.
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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
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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.
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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
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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
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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
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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).
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23:42 Dec 14, 2017
Jkt 244001
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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
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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 (https://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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for 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]
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
[[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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
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\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.
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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 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.
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\25\ The free public website containing this information will be
www.nextshares.com.
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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.
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\26\ See Nasdaq Rule 5745(c)(4).
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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'').
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\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).
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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\
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\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.
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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\
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\30\ See Nasdaq Rule 5745(h).
\31\ See Nasdaq Rule 5745(b)(6).
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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.
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\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.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
FINRA, on behalf of the Exchange, will communicate as needed with
other markets and other entities that are members of the Intermarket
Surveillance Group (``ISG'') \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.
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\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.
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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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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 (https://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 (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for 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
