Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Granting Approval of a Proposed Rule Change To List and Trade the Shares of the Reinhart Intermediate Bond NextShares Fund Under Nasdaq Rule 5745, 8118-8122 [2018-03692]

Download as PDF 8118 Federal Register / Vol. 83, No. 37 / Friday, February 23, 2018 / Notices This Notice will be published in the Federal Register. Ruth Ann Abrams, Acting Secretary. comment letters on the proposed rule change. This order grants approval of the proposed rule change. [FR Doc. 2018–03685 Filed 2–22–18; 8:45 am] BILLING CODE 7710–FW–P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meetings TIME AND DATE OF PREVIOUSLY ANNOUNCED MEETING: Wednesday, February 21, 2018 at 10:00 a.m. 100 F Street NE, Washington, DC 20549. STATUS: Open meeting. CHANGE IN MEETING: Cancellation of meeting. The Open Meeting scheduled for Wednesday, February 21, 2018 at 10:00 a.m. was cancelled. The Office of the Secretary at (202) 551–5400. PLACE: Dated: February 20, 2018. Brent J. Fields, Secretary. [FR Doc. 2018–03799 Filed 2–21–18; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82730; File No. SR– NASDAQ–2017–131] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Granting Approval of a Proposed Rule Change To List and Trade the Shares of the Reinhart Intermediate Bond NextShares Fund Under Nasdaq Rule 5745 daltland on DSKBBV9HB2PROD with NOTICES February 16, 2018. I. Introduction On December 20, 2017, The NASDAQ Stock Market LLC (‘‘Nasdaq’’ 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 list and trade common shares (‘‘Shares’’) of the Reinhart Intermediate Bond NextShares Fund (‘‘Fund’’) under Nasdaq Rule 5745. The proposed rule change was published for comment in the Federal Register on January 2, 2018.3 The Commission received no 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 82408 (Dec. 27, 2017), 83 FR 186 (‘‘Notice’’). 2 17 VerDate Sep<11>2014 18:52 Feb 22, 2018 Jkt 244001 II. Exchange’s Description of the Proposed Rule Change The Exchange proposes to list and trade the Shares of the Fund under Nasdaq Rule 5745, which governs the listing and trading of Exchange-Traded Managed Fund Shares, as defined in Nasdaq Rule 5745(c)(1). The Fund is a series of Managed Portfolio Series and will be advised by an investment adviser registered under the Investment Advisers Act of 1940 (‘‘Advisers Act’’), as described below.4 The Exchange represents that Managed Portfolio Series is registered with the Commission as an open-end investment company and has filed a Registration Statement with the Commission.5 Reinhart Partners, Inc. (‘‘Adviser’’) will be the adviser to the Fund. Quasar Distributors, LLC will be the principal underwriter and distributor of the Fund’s Shares. U.S. Bancorp Fund Services, LLC will act as the administrator and accounting agent to the Fund. U.S. Bancorp Fund Services, LLC will act as transfer agent to the Fund, and U.S. Bank, NA will act as custodian to the Fund. The Adviser is not a registered brokerdealer, and is not affiliated with a broker-dealer. Personnel who make decisions on the Fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material, nonpublic information regarding the openend fund’s portfolio.6 In the event that 4 The Commission has issued an order granting Managed Portfolio Series and certain affiliates exemptive relief under the Investment Company Act of 1940. See Investment Company Act Release No. 32893 (Nov. 28, 2017) (File No. 812–14830). 5 See Post-Effective Amendment number 316 to the Registration Statement on Form N–1A for Managed Portfolio Series dated Oct. 26, 2017 (File Nos. 333–172080 and 811–22525) (‘‘Registration Statement’’). 6 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 PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 (a) the Adviser registers as a brokerdealer or becomes newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser to the 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 brokerdealer affiliate, as applicable, regarding access to information concerning the composition of, and/or changes to, the Fund’s portfolio and will be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding such portfolio. The Exchange has made the following representations and statements in describing the Fund.7 According to the Exchange, the Fund will be actively managed and will pursue the principal investment strategy described below.8 A. Principal Investment Strategy The Exchange represents that the Fund’s investment objective is to outperform its benchmark, the Barclays Capital Intermediate Government/Credit Index, measured over an entire market cycle, while maintaining key risks (interest rate risk, credit risk, structure risk, and liquidity risk) similar to the benchmark. An entire market cycle refers to the broad economy transitioning from a peak in economic growth through a trough and back. Under normal market conditions, the Reinhart Intermediate Bond NextShares will invest primarily in investment grade fixed income securities. The Fund considers a fixed income security to be investment grade if it is rated within the BBB-category or better by Standard & Poor’s Ratings Services or the Baa3 category or better by Moody’s Investors Services, Inc., or an equivalent rating by another nationally recognized statistical rating organization, or, if unrated, determined by the Adviser to be of comparable quality. 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. 7 The Commission notes that additional information regarding Managed Portfolio Series, the Fund, and the Shares, including investment strategies, risks, creation and redemption procedures, calculation of net asset value (‘‘NAV’’), fees, distributions, and taxes, among other things, can be found in the Notice and the Registration Statement, as applicable. See supra notes 3 and 5, respectively, and accompanying text. 8 According to the Exchange, additional information regarding the Fund will be available on a free public website for the Fund (www.reinhartfunds.com, which may contain links for certain information to www.nextshares.com) and in the Registration Statement for the Fund. E:\FR\FM\23FEN1.SGM 23FEN1 Federal Register / Vol. 83, No. 37 / Friday, February 23, 2018 / Notices daltland on DSKBBV9HB2PROD with NOTICES The Fund will normally invest within the intermediate term structure of the yield curve. The average-dollar weighted maturity of the securities in which the Fund expects to invest will generally range from 3 to 10 years. The Fund’s investments in fixed income securities may include government or agency securities or obligations, corporate bonds, mortgage-backed securities, asset-backed securities, municipal bonds, revenue bonds, variable and floating rate securities, zero coupon bonds and collateralized mortgage obligations (‘‘CMOs’’). Normally, the Reinhart Intermediate Bond NextShares will invest at least 80% of its total assets in fixed income securities. B. Portfolio Disclosure and Composition File 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. The Fund may provide more frequent disclosures of portfolio positions at its discretion. As defined in Nasdaq Rule 5745(c)(3), the Composition File is the specified portfolio of securities and/or cash that the Fund will accept as a deposit in issuing a creation unit of Shares, and the specified portfolio of securities and/ or cash that the Fund will deliver in a redemption of a creation unit of Shares. The Composition File will be disseminated through the National Securities Clearing Corporation 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 website.9 Because the Fund will seek to preserve the confidentiality of its current portfolio trading program, the Fund’s Composition File generally will not be a pro rata reflection of the Fund’s investment positions. Each security included in the Composition File will be a current holding of the Fund, but the Composition File generally will not include all of the securities in the Fund’s portfolio or match the weightings of the included securities in the portfolio. Securities that the Adviser is in the process of acquiring for the Fund generally will not be represented in the Fund’s Composition File until the purchase has been completed. Similarly, securities that are held in the Fund’s 9 The free public website containing the Composition File will be www.nextshares.com. VerDate Sep<11>2014 18:52 Feb 22, 2018 Jkt 244001 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 the 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 the Fund’s portfolio.10 C. Intraday Indicative Value An estimated value of an individual Share, defined in Nasdaq Rule 5745(c)(2) as the ‘‘Intraday Indicative Value (‘‘IIV’’),’’ will be calculated and disseminated at intervals of not more than 15 minutes throughout the Regular Market Session 11 when Shares trade on the Exchange. The Exchange will obtain a representation from the issuer of the Shares that the IIV for the Fund will be calculated on an intraday basis and provided to Nasdaq for dissemination via the Nasdaq Global Index Service. The IIV for the Fund will be based on current information regarding the value of the securities and other assets held by the Fund.12 The purpose of the IIV for the 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.13 10 In determining whether the 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 the Fund than authorized participants because of the Adviser’s size, experience and potentially stronger relationships in the fixed-income markets. 11 See Nasdaq Rule 4120(b)(4) (describing the three trading sessions on the Exchange: (1) PreMarket Session from 4:00 a.m. to 9:30 a.m. Eastern Time; (2) Regular Market Session from 9:30 a.m. to 4:00 p.m. or 4:15 p.m. Eastern Time; and (3) PostMarket Session from 4:00 p.m. or 4:15 p.m. to 8:00 p.m. Eastern Time). 12 IIVs for the Fund disseminated throughout each trading day will be based on the same portfolio as used to calculate that day’s NAV. The Fund will reflect purchases and sales of portfolio positions in its NAV the next business day after trades are executed. 13 Because, in NAV-Based Trading (as defined herein), 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. The Exchange represents that the Fund’s Registration Statement, free public website and any advertising or marketing materials will include prominent disclosure of this fact. The Exchange represents that although the IIVs for the 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. PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 8119 D. NAV-Based Trading Because Shares will be listed and traded on the Exchange, Shares will be available for purchase and sale on an intraday basis. Shares will be purchased and sold in the secondary market at prices directly linked to the Fund’s next-determined NAV using a trading protocol called ‘‘NAV-Based Trading.’’ All bids, offers and execution prices of Shares will be expressed as a premium/ discount (which may be zero) to the Fund’s next-determined NAV (e.g., NAV ¥$0.01, NAV +$0.01).14 The 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. Nasdaq represents that the Shares listed on the Exchange will have a unique identifier associated with its ticker symbol, which will indicate that the Shares are traded using NAV-Based Trading. According to the Exchange, member firms will utilize certain existing order types and interfaces to transmit Share bids and offers to Nasdaq, which will process Share trades like trades in shares of other listed securities.15 In the systems used to transmit and process transactions in Shares, the Fund’s nextdetermined NAV will be represented by a proxy price (e.g., 100.00) and a premium/discount of a stated amount to the next-determined NAV to be represented by the same increment/ decrement from the proxy price used to denote NAV (e.g., NAV ¥$0.01 would be represented as 99.99; NAV +$0.01 as 100.01). To avoid potential investor confusion, Nasdaq represents that it 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 14 According to the Exchange, 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. 15 According to the Exchange, 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 the Fund, the Exchange will inform its members in an Information Circular of the effect of this characteristic on existing order types. E:\FR\FM\23FEN1.SGM 23FEN1 8120 Federal Register / Vol. 83, No. 37 / Friday, February 23, 2018 / Notices daltland on DSKBBV9HB2PROD with NOTICES made available to the investing public follow the ‘‘NAV ¥$0.01/NAV +$0.01’’ (or similar) display format. 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 may 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 may 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. Prior to the commencement of trading in the 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. III. Discussion and Commission Findings After careful review, the Commission finds that the Exchange’s proposal to list and trade the Shares is consistent with the Act 16 and the rules and regulations thereunder applicable to a national securities exchange.17 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,18 which requires, among other things, that the Exchange’s rules be 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, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Shares will be subject to Nasdaq Rule 5745, which sets forth the initial and continued listing criteria applicable to Exchange-Traded Managed Fund Shares. A minimum of 50,000 Shares 16 15 U.S.C. 78f. approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 18 15 U.S.C. 78f(b)(5). 17 In VerDate Sep<11>2014 18:52 Feb 22, 2018 Jkt 244001 and no less than two creation units of the Fund will be outstanding at the commencement of trading on the Exchange. Nasdaq deems the Shares to be equity securities, thus rendering trading in the Shares subject to Nasdaq’s existing rules governing the trading of equity securities. Every order to trade Shares of the Fund is subject to the proxy price protection threshold of plus/minus $1.00, which determines the lower and upper thresholds for the life of the order and provides that the order will be cancelled at any point if it exceeds $101.00 or falls below $99.00, the established thresholds.19 With certain exceptions, each order also must contain the applicable order attributes, including routing instructions and timein-force information, as described in Nasdaq Rule 4703.20 Nasdaq also represents that trading in the 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.21 The Exchange represents that these surveillance 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. 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’’) 22 regarding trading in Shares, and in exchangetraded securities and instruments held by the Fund (to the extent such exchange-traded securities and instruments are known through the publication of the Composition File and periodic public disclosures of the Fund’s portfolio holdings), and FINRA may obtain trading information regarding such trading from other markets and other entities. In addition, the Exchange may obtain information regarding trading in Shares, and in exchange-traded securities and instruments held by the Fund (to the 19 See Nasdaq Rule 5745(g). Nasdaq Rule 5745(b)(6). 21 The Exchange states that FINRA provides surveillance of trading on the Exchange pursuant to a regulatory services agreement and that the Exchange is responsible for FINRA’s performance under this regulatory services agreement. 22 For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all components of the 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. 20 See PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 extent such exchange-traded securities and instruments are known through the publication of the Composition File and periodic public disclosures of the 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. Moreover, FINRA, on behalf of the Exchange, will be able to access, as needed, trade information for certain fixed income securities held by the Fund reported to FINRA’s Trade Reporting and Compliance Engine (‘‘TRACE’’).23 Prior to the commencement of trading in the Fund, the Exchange will inform its members in an Information Circular of the special characteristics and risks associated with trading the Shares of the Fund. Specifically, the Information Circular will discuss the following: (a) The procedures for purchases and redemptions of Shares in creation units (and noting that Shares are not individually redeemable); (b) Nasdaq Rule 2111A, which imposes suitability obligations on Nasdaq members with respect to recommending transactions in Shares to customers; (c) how information regarding the IIV and Composition File is disseminated; (d) the requirement that members deliver a prospectus to investors purchasing Shares prior to or concurrently with the confirmation of a transaction; and (e) information regarding NAV-Based Trading protocols. The Information Circular also will identify the specific Nasdaq data feeds from which intraday Share prices in proxy price format may be obtained. 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, and the Information Circular will discuss the effect of this characteristic on existing order types. In addition, 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. Nasdaq states that the Adviser is not a registered broker-dealer, and is not affiliated with a broker-dealer. Personnel who make decisions on the Fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of 23 For municipal securities, trade information can generally be found on the Electronic Municipal Market Access (‘‘EMMA’’) of the Municipal Securities Rulemaking Board (‘‘MSRB’’). E:\FR\FM\23FEN1.SGM 23FEN1 Federal Register / Vol. 83, No. 37 / Friday, February 23, 2018 / Notices material, non-public information regarding the open-end fund’s portfolio. The Exchange represents that the Reporting Authority 24 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 nonpublic information regarding the Fund’s portfolio positions and changes in the positions. In the event that (a) the Adviser registers as a broker-dealer or becomes newly affiliated with a brokerdealer, or (b) any new adviser or subadviser to the Fund is a registered broker-dealer or is affiliated with a broker-dealer, such adviser or subadviser will implement and will maintain a fire wall with respect to its relevant personnel and/or such brokerdealer affiliate, as applicable, regarding access to information concerning the composition of, and/or changes to, the Fund’s portfolio 25 and will be subject to procedures designed to prevent the use and dissemination of material, nonpublic information regarding such portfolio. The Commission finds that the proposal to list and trade the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Act,26 which sets forth Congress’ finding that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure the availability to brokers, dealers, and investors of information with respect to quotations for, and transactions in, securities. 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. 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 27 and separately disseminated to member firms and 24 See Nasdaq Rule 5745(c)(4). Exchange further represents that an investment adviser to an open-end fund is required to be registered under the Advisers Act. See supra note 6. 26 15 U.S.C. 78k–1(a)(1)(C)(iii). 27 Due to systems limitations, the Consolidated Tape will report intraday execution prices and quotes for Shares using a proxy price format. Nasdaq has represented that it 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. daltland on DSKBBV9HB2PROD with NOTICES 25 The VerDate Sep<11>2014 18:52 Feb 22, 2018 Jkt 244001 market data services through the Exchange data feeds listed above. The Commission notes that once the Fund’s daily NAV has been calculated and disseminated, Nasdaq will price each Share trade entered into during the day at the Fund’s NAV plus/minus the trade’s executed premium/discount. Using the final trade price, each executed Share trade will then be disseminated to member firms and market data services via a File Transfer Protocol (‘‘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.28 The Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily (on each business 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 so all firms will receive the NAV per Share at the same time. The Exchange further represents that it may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares. The Exchange will halt trading in the Shares under the conditions specified in Nasdaq Rule 4120 and in Nasdaq Rule 5745(d)(2)(C). Additionally, the Exchange may cease trading the Shares if other unusual conditions or circumstances exist that, in the opinion of the Exchange, make further dealings on the Exchange 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. Prior to the commencement of market trading in Shares, the Fund will be required to establish and maintain a free public website through which its current prospectus may be downloaded.29 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 28 According to Nasdaq, 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. 29 The free public website containing this information will be www.reinhartfunds.com. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 8121 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 (‘‘Closing Bid/Ask Midpoint’’); and (c) the spread between highest bid and lowest offer prices as of the close of Exchange trading (‘‘Closing Bid/Ask Spread.’’). 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 Exchange represents that all statements and representations made in this filing regarding (a) the description of the portfolio 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 the 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 compliance with the continued listing requirements. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under the Nasdaq 5800 Series. The approval order is based on all of the Exchange’s representations, including those set forth above and in the Notice. In particular, the Commission notes that, although the Shares will be available for purchase and sale on an intraday basis, the Shares will be purchased and sold at prices directly linked to the Fund’s nextdetermined NAV. In addition, the Commission notes that the Fund will not invest in assets that have not been described in this proposed rule change. Further, the Commission notes that the Fund and the Shares must comply with the requirements of Nasdaq Rule 5745 and the conditions set forth in this proposed rule change to be listed and traded on the Exchange on an initial and continuing basis. For the foregoing reasons, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) 30 and Section 11A(a)(1)(C)(iii) of 30 15 E:\FR\FM\23FEN1.SGM U.S.C. 78f(b)(5). 23FEN1 8122 Federal Register / Vol. 83, No. 37 / Friday, February 23, 2018 / Notices the Act 31 and the rules and regulations thereunder applicable to a national securities exchange. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,32 that the proposed rule change (SR–NASDAQ– 2017–131) be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.33 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–03692 Filed 2–22–18; 8:45 am] A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82732; File No. SR–MRX– 2018–06] Self-Regulatory Organizations; Nasdaq MRX, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 100 February 16, 2018. 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 February 13, 2018 Nasdaq MRX, LLC (‘‘MRX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘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. daltland on DSKBBV9HB2PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Rule 100 to include Monday and Wednesday expirations for options listed pursuant to the Short Term Option Series Program, including options on the SPDR S&P 500 ETF Trust. The text of the proposed rule change is available on the Exchange’s website at https://nasdaqmrx.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 31 15 U.S.C. 78k–1(a)(1)(C)(iii). 32 15 U.S.C. 78s(b)(2). 33 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. VerDate Sep<11>2014 18:52 Feb 22, 2018 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. 1. Purpose The Exchange proposes to amend Rule 100(a)(53) to amend Rule 100 to include Monday and Wednesday expirations for options listed pursuant to the Short Term Option Series program (‘‘Program’’), including options on the SPDR S&P 500 ETF Trust. The actual listing and trading of the options series included in the Program is governed by Chapter 5 (‘‘Securities Traded on the Exchange’’). Chapter 5 incorporates by reference the rules of Nasdaq ISE, LLC (‘‘ISE’’). ISE has already amended its Chapter 5 to list both Monday and Wednesday expirations for SPY options pursuant to its Short Terms Options Series program; accordingly, the Exchange’s Chapter 5 incorporates these changes by reference.3 Chapter 1 does not have a similar incorporation by reference, and so the Exchange is therefore submitting this proposed rule change to amend the definition of ‘‘Short Term Option Series’’ in Rule 100(a)(53) to include Monday and Wednesday expirations within that definition. Currently, ‘‘Short Term Option Series’’ is defined as ‘‘a series in an option class that is approved for listing and trading on the Exchange in which the series is opened for trading on any Thursday or Friday that is a business day and that expires on the Friday of the following business week that is a business day. If a Friday is not a business day, the series may be opened (or shall expire) on the first business day immediately prior to that Friday.’’ In order to include Wednesday expirations within this definition, the Exchange is amending Rule 100(a)(53) 3 See Securities Exchange Act Release No. 78715 (August 29, 2016), 81 FR 60765 (September 2, 2016) (SR–ISE–2016–18) (SPY Wednesdays); SR–ISE– 2018–13 (SPY Mondays). Jkt 244001 PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 to include a series in an option class that is opened for trading on any Tuesday or Wednesday that is a business day and that expires the Wednesday of the following business week that is a business day. If a Tuesday, Wednesday, Thursday is not a business day, the series may be opened (or shall expire) on the first business day immediately prior to that Tuesday, Wednesday, Thursday. As noted above, ISE filed its proposal to amend its Rule 100 and Rule 504 to provide for the listing of Wednesday expirations 4 shortly after the Commission approved a similar proposal for BOX Options Exchange LLC.5 Once ISE’s proposal became operative, the Exchange’s Chapter 5 changed accordingly. The Exchange is also proposing to amend Rule 100(a)(53) to permit the listing of options series that expire on Mondays (‘‘Monday SPY Expirations’’). Specifically, the Exchange is proposing that it may open for trading series of options on any Monday that is a business day and that expires on the Monday of the following business week that is a business day. The Exchange is also proposing to list Monday expirations series on Fridays that precede the expiration Monday by one business week plus one business day. Since Rule 100(a)(53) already provides for the listing of short term option series on Fridays, the Exchange is not modifying this provision to allow for Friday listing of Monday expiration series. However, the Exchange is amending Rule 100(a)(53) to clarify that, in the case of a series that is listed on a Friday and expires on a Monday, that series must be listed one business week and one business day prior to that expiration (i.e., two Fridays prior to expiration). The Exchange notes that having Monday expirations is not a novel proposal. Specifically, Nasdaq PHLX LLC (‘‘Phlx’’) recently received approval to list Monday expirations for SPY options pursuant to its Short Terms Options Series program.6 As part of this proposal, the Exchange is also amending Rule 100(a)(53) to address the expiration of Monday expiration series when the Monday is not a business day. In that case, the rule will provide that the series shall expire on the first business day immediately following that Monday. This procedure 4 See supra note 4 [sic]. Securities Exchange Act Release No. 59696 (August 24, 2016), 81 FR 59696 (August 30, 2016) (SR–BOX–2016–28). 6 See Securities Exchange Act Release No. 82611 (February 1, 2018), 83 FR 5473 (February 7, 2018) (SR–Phlx–2017–103). 5 See E:\FR\FM\23FEN1.SGM 23FEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 83, Number 37 (Friday, February 23, 2018)]
[Notices]
[Pages 8118-8122]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03692]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82730; File No. SR-NASDAQ-2017-131]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Granting Approval of a Proposed Rule Change To List and Trade the 
Shares of the Reinhart Intermediate Bond NextShares Fund Under Nasdaq 
Rule 5745

February 16, 2018.

I. Introduction

    On December 20, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' 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 list and trade common shares (``Shares'') of 
the Reinhart Intermediate Bond NextShares Fund (``Fund'') under Nasdaq 
Rule 5745. The proposed rule change was published for comment in the 
Federal Register on January 2, 2018.\3\ The Commission received no 
comment letters on the proposed rule change. This order grants approval 
of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 82408 (Dec. 27, 
2017), 83 FR 186 (``Notice'').
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II. Exchange's Description of the Proposed Rule Change

    The Exchange proposes to list and trade the Shares of the Fund 
under Nasdaq Rule 5745, which governs the listing and trading of 
Exchange-Traded Managed Fund Shares, as defined in Nasdaq Rule 
5745(c)(1). The Fund is a series of Managed Portfolio Series and will 
be advised by an investment adviser registered under the Investment 
Advisers Act of 1940 (``Advisers Act''), as described below.\4\ The 
Exchange represents that Managed Portfolio Series is registered with 
the Commission as an open-end investment company and has filed a 
Registration Statement with the Commission.\5\ Reinhart Partners, Inc. 
(``Adviser'') will be the adviser to the Fund. Quasar Distributors, LLC 
will be the principal underwriter and distributor of the Fund's Shares. 
U.S. Bancorp Fund Services, LLC will act as the administrator and 
accounting agent to the Fund. U.S. Bancorp Fund Services, LLC will act 
as transfer agent to the Fund, and U.S. Bank, NA will act as custodian 
to the Fund.
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    \4\ The Commission has issued an order granting Managed 
Portfolio Series and certain affiliates exemptive relief under the 
Investment Company Act of 1940. See Investment Company Act Release 
No. 32893 (Nov. 28, 2017) (File No. 812-14830).
    \5\ See Post-Effective Amendment number 316 to the Registration 
Statement on Form N-1A for Managed Portfolio Series dated Oct. 26, 
2017 (File Nos. 333-172080 and 811-22525) (``Registration 
Statement'').
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    The Adviser is not a registered broker-dealer, and is not 
affiliated with a broker-dealer. Personnel who make decisions on the 
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.\6\ 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 the 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 of, and/or changes to, the Fund's portfolio and will be 
subject to procedures designed to prevent the use and dissemination of 
material non-public information regarding such portfolio.
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    \6\ 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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    The Exchange has made the following representations and statements 
in describing the Fund.\7\ According to the Exchange, the Fund will be 
actively managed and will pursue the principal investment strategy 
described below.\8\
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    \7\ The Commission notes that additional information regarding 
Managed Portfolio Series, the Fund, and the Shares, including 
investment strategies, risks, creation and redemption procedures, 
calculation of net asset value (``NAV''), fees, distributions, and 
taxes, among other things, can be found in the Notice and the 
Registration Statement, as applicable. See supra notes 3 and 5, 
respectively, and accompanying text.
    \8\ According to the Exchange, additional information regarding 
the Fund will be available on a free public website for the Fund 
(www.reinhartfunds.com, which may contain links for certain 
information to www.nextshares.com) and in the Registration Statement 
for the Fund.
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A. Principal Investment Strategy

    The Exchange represents that the Fund's investment objective is to 
outperform its benchmark, the Barclays Capital Intermediate Government/
Credit Index, measured over an entire market cycle, while maintaining 
key risks (interest rate risk, credit risk, structure risk, and 
liquidity risk) similar to the benchmark. An entire market cycle refers 
to the broad economy transitioning from a peak in economic growth 
through a trough and back.
    Under normal market conditions, the Reinhart Intermediate Bond 
NextShares will invest primarily in investment grade fixed income 
securities. The Fund considers a fixed income security to be investment 
grade if it is rated within the BBB-category or better by Standard & 
Poor's Ratings Services or the Baa3 category or better by Moody's 
Investors Services, Inc., or an equivalent rating by another nationally 
recognized statistical rating organization, or, if unrated, determined 
by the Adviser to be of comparable quality.

[[Page 8119]]

    The Fund will normally invest within the intermediate term 
structure of the yield curve. The average-dollar weighted maturity of 
the securities in which the Fund expects to invest will generally range 
from 3 to 10 years. The Fund's investments in fixed income securities 
may include government or agency securities or obligations, corporate 
bonds, mortgage-backed securities, asset-backed securities, municipal 
bonds, revenue bonds, variable and floating rate securities, zero 
coupon bonds and collateralized mortgage obligations (``CMOs''). 
Normally, the Reinhart Intermediate Bond NextShares will invest at 
least 80% of its total assets in fixed income securities.

B. Portfolio Disclosure and Composition File

    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. The 
Fund may provide more frequent disclosures of portfolio positions at 
its discretion.
    As defined in Nasdaq Rule 5745(c)(3), the Composition File is the 
specified portfolio of securities and/or cash that the Fund will accept 
as a deposit in issuing a creation unit of Shares, and the specified 
portfolio of securities and/or cash that the Fund will deliver in a 
redemption of a creation unit of Shares. The Composition File will be 
disseminated through the National Securities Clearing Corporation 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 
website.\9\ Because the Fund will seek to preserve the confidentiality 
of its current portfolio trading program, the Fund's Composition File 
generally will not be a pro rata reflection of the Fund's investment 
positions.
---------------------------------------------------------------------------

    \9\ The free public website containing the Composition File will 
be www.nextshares.com.
---------------------------------------------------------------------------

    Each security included in the Composition File will be a current 
holding of the Fund, but the Composition File generally will not 
include all of the securities in the Fund's portfolio or match the 
weightings of the included securities in the portfolio. Securities that 
the Adviser is in the process of acquiring for the Fund generally will 
not be represented in the Fund's Composition File until the purchase 
has been completed. Similarly, securities that are held in the 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 the 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 the Fund's 
portfolio.\10\
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    \10\ In determining whether the 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 the Fund than authorized participants because 
of the Adviser's size, experience and potentially stronger 
relationships in the fixed-income markets.
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C. Intraday Indicative Value

    An estimated value of an individual Share, defined in Nasdaq Rule 
5745(c)(2) as the ``Intraday Indicative Value (``IIV''),'' will be 
calculated and disseminated at intervals of not more than 15 minutes 
throughout the Regular Market Session \11\ when Shares trade on the 
Exchange. The Exchange will obtain a representation from the issuer of 
the Shares that the IIV for the Fund will be calculated on an intraday 
basis and provided to Nasdaq for dissemination via the Nasdaq Global 
Index Service.
---------------------------------------------------------------------------

    \11\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 4:00 a.m. to 
9:30 a.m. Eastern Time; (2) Regular Market Session from 9:30 a.m. to 
4:00 p.m. or 4:15 p.m. Eastern Time; and (3) Post-Market Session 
from 4:00 p.m. or 4:15 p.m. to 8:00 p.m. Eastern Time).
---------------------------------------------------------------------------

    The IIV for the Fund will be based on current information regarding 
the value of the securities and other assets held by the Fund.\12\ The 
purpose of the IIV for the 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.\13\
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    \12\ IIVs for the Fund disseminated throughout each trading day 
will be based on the same portfolio as used to calculate that day's 
NAV. The Fund will reflect purchases and sales of portfolio 
positions in its NAV the next business day after trades are 
executed.
    \13\ Because, in NAV-Based Trading (as defined herein), 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. The Exchange represents that the Fund's 
Registration Statement, free public website and any advertising or 
marketing materials will include prominent disclosure of this fact. 
The Exchange represents that although the IIVs for the 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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D. NAV-Based Trading

    Because Shares will be listed and traded on the Exchange, Shares 
will be available for purchase and sale on an intraday basis. Shares 
will be purchased and sold in the secondary market at prices directly 
linked to the Fund's next-determined NAV using a trading protocol 
called ``NAV-Based Trading.'' All bids, offers and execution prices of 
Shares will be expressed as a premium/discount (which may be zero) to 
the Fund's next-determined NAV (e.g., NAV -$0.01, NAV +$0.01).\14\ The 
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. Nasdaq represents that the Shares listed on the 
Exchange will have a unique identifier associated with its ticker 
symbol, which will indicate that the Shares are traded using NAV-Based 
Trading.
---------------------------------------------------------------------------

    \14\ According to the Exchange, 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.
---------------------------------------------------------------------------

    According to the Exchange, member firms will utilize certain 
existing order types and interfaces to transmit Share bids and offers 
to Nasdaq, which will process Share trades like trades in shares of 
other listed securities.\15\ In the systems used to transmit and 
process transactions in Shares, the Fund's next-determined NAV will be 
represented by a proxy price (e.g., 100.00) and a premium/discount of a 
stated amount to the next-determined NAV to be represented by the same 
increment/decrement from the proxy price used to denote NAV (e.g., NAV 
-$0.01 would be represented as 99.99; NAV +$0.01 as 100.01).
---------------------------------------------------------------------------

    \15\ According to the Exchange, 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 the 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 represents that it 
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

[[Page 8120]]

made available to the investing public follow the ``NAV -$0.01/NAV 
+$0.01'' (or similar) display format. 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 
may 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 may 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. Prior to the commencement of trading in the 
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.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Act \16\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\17\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\18\ 
which requires, among other things, that the Exchange's rules be 
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, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f.
    \17\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Shares will be subject to Nasdaq Rule 5745, which sets forth 
the initial and continued listing criteria applicable to Exchange-
Traded Managed Fund Shares. A minimum of 50,000 Shares and no less than 
two creation units of the Fund will be outstanding at the commencement 
of trading on the Exchange.
    Nasdaq deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to Nasdaq's existing rules governing the 
trading of equity securities. Every order to trade Shares of the Fund 
is subject to the proxy price protection threshold of plus/minus $1.00, 
which determines the lower and upper thresholds for the life of the 
order and provides that the order will be cancelled at any point if it 
exceeds $101.00 or falls below $99.00, the established thresholds.\19\ 
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.\20\
---------------------------------------------------------------------------

    \19\ See Nasdaq Rule 5745(g).
    \20\ See Nasdaq Rule 5745(b)(6).
---------------------------------------------------------------------------

    Nasdaq also represents that trading in the 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.\21\ The Exchange 
represents that these surveillance 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. 
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'') \22\ regarding trading in Shares, and in 
exchange-traded securities and instruments held by the Fund (to the 
extent such exchange-traded securities and instruments are known 
through the publication of the Composition File and periodic public 
disclosures of the Fund's portfolio holdings), and FINRA may obtain 
trading information regarding such trading from other markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in Shares, and in exchange-traded securities and instruments 
held by the Fund (to the extent such exchange-traded securities and 
instruments are known through the publication of the Composition File 
and periodic public disclosures of the 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. Moreover, FINRA, 
on behalf of the Exchange, will be able to access, as needed, trade 
information for certain fixed income securities held by the Fund 
reported to FINRA's Trade Reporting and Compliance Engine 
(``TRACE'').\23\
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    \21\ The Exchange states that FINRA provides surveillance of 
trading on the Exchange pursuant to a regulatory services agreement 
and that the Exchange is responsible for FINRA's performance under 
this regulatory services agreement.
    \22\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
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.
    \23\ For municipal securities, trade information can generally 
be found on the Electronic Municipal Market Access (``EMMA'') of the 
Municipal Securities Rulemaking Board (``MSRB'').
---------------------------------------------------------------------------

    Prior to the commencement of trading in the Fund, the Exchange will 
inform its members in an Information Circular of the special 
characteristics and risks associated with trading the Shares of the 
Fund. Specifically, the Information Circular will discuss the 
following: (a) The procedures for purchases and redemptions of Shares 
in creation units (and noting that Shares are not individually 
redeemable); (b) Nasdaq Rule 2111A, which imposes suitability 
obligations on Nasdaq members with respect to recommending transactions 
in Shares to customers; (c) how information regarding the IIV and 
Composition File is disseminated; (d) the requirement that members 
deliver a prospectus to investors purchasing Shares prior to or 
concurrently with the confirmation of a transaction; and (e) 
information regarding NAV-Based Trading protocols.
    The Information Circular also will identify the specific Nasdaq 
data feeds from which intraday Share prices in proxy price format may 
be obtained. 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, and the Information 
Circular will discuss the effect of this characteristic on existing 
order types. In addition, 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.
    Nasdaq states that the Adviser is not a registered broker-dealer, 
and is not affiliated with a broker-dealer. Personnel who make 
decisions on the Fund's portfolio composition must be subject to 
procedures designed to prevent the use and dissemination of

[[Page 8121]]

material, non-public information regarding the open-end fund's 
portfolio. The Exchange represents that the Reporting Authority \24\ 
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 the Fund's 
portfolio positions and changes in the positions. 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 the 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 of, and/or changes to, the Fund's portfolio \25\ and 
will be subject to procedures designed to prevent the use and 
dissemination of material, non-public information regarding such 
portfolio.
---------------------------------------------------------------------------

    \24\ See Nasdaq Rule 5745(c)(4).
    \25\ The Exchange further represents that an investment adviser 
to an open-end fund is required to be registered under the Advisers 
Act. See supra note 6.
---------------------------------------------------------------------------

    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\26\ which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. 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. 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 \27\ and separately disseminated to member firms 
and market data services through the Exchange data feeds listed above.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \27\ Due to systems limitations, the Consolidated Tape will 
report intraday execution prices and quotes for Shares using a proxy 
price format. Nasdaq has represented that it 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.
---------------------------------------------------------------------------

    The Commission notes that once the Fund's daily NAV has been 
calculated and disseminated, Nasdaq will price each Share trade entered 
into during the day at the Fund's NAV plus/minus the trade's executed 
premium/discount. Using the final trade price, each executed Share 
trade will then be disseminated to member firms and market data 
services via a File Transfer Protocol (``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.\28\
---------------------------------------------------------------------------

    \28\ According to Nasdaq, 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.
---------------------------------------------------------------------------

    The Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily (on each 
business 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 so all firms will 
receive the NAV per Share at the same time.
    The Exchange further represents that it may consider all relevant 
factors in exercising its discretion to halt or suspend trading in the 
Shares. The Exchange will halt trading in the Shares under the 
conditions specified in Nasdaq Rule 4120 and in Nasdaq Rule 
5745(d)(2)(C). Additionally, the Exchange may cease trading the Shares 
if other unusual conditions or circumstances exist that, in the opinion 
of the Exchange, make further dealings on the Exchange 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. Prior to the 
commencement of market trading in Shares, the Fund will be required to 
establish and maintain a free public website through which its current 
prospectus may be downloaded.\29\ 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 (``Closing Bid/Ask Midpoint''); and (c) the 
spread between highest bid and lowest offer prices as of the close of 
Exchange trading (``Closing Bid/Ask Spread.''). 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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    \29\ The free public website containing this information will be 
www.reinhartfunds.com.
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    The Exchange represents that all statements and representations 
made in this filing regarding (a) the description of the portfolio 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 the 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 compliance with the continued listing 
requirements. If the Fund is not in compliance with the applicable 
listing requirements, the Exchange will commence delisting procedures 
under the Nasdaq 5800 Series.
    The approval order is based on all of the Exchange's 
representations, including those set forth above and in the Notice. In 
particular, the Commission notes that, although the Shares will be 
available for purchase and sale on an intraday basis, the Shares will 
be purchased and sold at prices directly linked to the Fund's next-
determined NAV. In addition, the Commission notes that the Fund will 
not invest in assets that have not been described in this proposed rule 
change. Further, the Commission notes that the Fund and the Shares must 
comply with the requirements of Nasdaq Rule 5745 and the conditions set 
forth in this proposed rule change to be listed and traded on the 
Exchange on an initial and continuing basis.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) \30\ and Section 
11A(a)(1)(C)(iii) of

[[Page 8122]]

the Act \31\ and the rules and regulations thereunder applicable to a 
national securities exchange.
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    \30\ 15 U.S.C. 78f(b)(5).
    \31\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\32\ that the proposed rule change (SR-NASDAQ-2017-131) be, and it 
hereby is, approved.
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    \32\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-03692 Filed 2-22-18; 8:45 am]
BILLING CODE 8011-01-P

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