
[Federal Register Volume 79, Number 214 (Wednesday, November 5, 2014)]
[Notices]
[Pages 65751-65756]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-26229]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73471; File No. SR-NASDAQ-2014-080]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Granting Approval of a Proposed Rule Change, as Modified by Amendment 
No. 1 Thereto, Relating to the Listing and Trading of the Shares of the 
PowerShares DB Optimum Yield Diversified Commodity Strategy Portfolio, 
PowerShares Agriculture Commodity Strategy Portfolio, PowerShares 
Precious Metals Commodity Strategy Portfolio, PowerShares Energy 
Commodity Strategy Portfolio, PowerShares Base Metals Commodity 
Strategy Portfolio and PowerShares Bloomberg Commodity Strategy 
Portfolio, Each a Series of PowerShares Actively Managed Exchange-
Traded Commodity Fund Trust

October 30, 2014.

I. Introduction

    On August 29, 2014, 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 the shares (``Shares'') of the 
PowerShares DB Optimum Yield Diversified Commodity Strategy Portfolio, 
PowerShares Agriculture Commodity Strategy Portfolio, PowerShares 
Precious Metals Commodity Strategy Portfolio, PowerShares Energy 
Commodity Strategy Portfolio, PowerShares Base Metals Commodity 
Strategy Portfolio, and PowerShares Bloomberg Commodity Strategy 
Portfolio (individually, ``Fund,'' and collectively, ``Funds''), each a 
series of PowerShares Actively Managed Exchange-Traded Commodity Fund 
Trust (``Trust''). On September 8, 2014, the Exchange filed Amendment 
No. 1 to the proposed rule change.\3\ The proposed rule change, as 
modified by Amendment No. 1 thereto, was published for comment in the 
Federal Register on September 17, 2014.\4\ The Commission received no 
comments 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\ In Amendment No. 1, the Exchange changed the name of the 
``PowerShares Diversified Commodity Strategy Portfolio'' to 
``PowerShares DB Optimum Yield Diversified Commodity Strategy 
Portfolio,'' and changed the name of the ``PowerShares Balanced 
Commodity Strategy Portfolio'' to ``PowerShares Bloomberg Commodity 
Strategy Portfolio.''
    \4\ See Securities Exchange Act Release No. 73078 (Sept. 11, 
2014), 79 FR 55851 (``Notice'').
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II. Description of Proposed Rule Change

    The Exchange proposes to list and trade the Shares of each Fund 
under Nasdaq Rule 5735, which governs the listing and trading of 
Managed Fund Shares on the Exchange. Each Fund will be an actively 
managed exchange-traded fund (``ETF''). Each Fund's Shares will be 
offered by the Trust, which was established as a Delaware statutory 
trust on December 23, 2013.\5\ Each Fund is a series of the Trust. 
Invesco PowerShares Capital Management LLC will be the investment 
adviser (``Adviser'') to the Funds.\6\ Invesco Distributors, Inc. 
(``Distributor'') will be the principal underwriter and distributor of 
each Fund's Shares. The Bank of New York Mellon will act as the 
administrator, accounting agent, custodian, and transfer agent to the 
Funds.
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    \5\ According to the Exchange, the Trust is registered with the 
Commission as an investment company and has filed a registration 
statement on Form N-1A (``Registration Statement'') with the 
Commission. See Registration Statement on Form N-1A for the Trust, 
dated May 20, 2014 (File Nos. 333-193135 and 811-22927). The 
Exchange states that the Commission has issued an order granting 
certain exemptive relief to affiliates of the Trust, and which 
extends to the Trust, under the Investment Company Act of 1940 
(``1940 Act''). See Investment Company Act Release No. 30029 (Apr. 
10, 2012) (File No. 812-13795).
    \6\ The Exchange states that, although the Adviser is not a 
broker-dealer, the Adviser is affiliated with the Distributor, which 
is a broker-dealer. The Exchange represents that the Adviser has 
implemented a fire wall with respect to its broker-dealer affiliate 
regarding access to information concerning the composition and/or 
changes to a Fund's portfolio (including the portfolio of a 
Subsidiary, as defined herein). Nasdaq Rule 5735(g) requires that 
personnel who make decisions on the open-end fund's portfolio 
composition must be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding 
the open-end fund's portfolio (including the portfolio of a 
Subsidiary, as defined herein). In addition, the Exchange represents 
that in the event (a) the Adviser registers as a broker-dealer or 
becomes newly affiliated with a broker-dealer, or (b) any new 
adviser or sub-adviser is a registered broker-dealer or becomes 
affiliated with a broker-dealer, the Adviser will implement a fire 
wall with respect to its relevant personnel or such broker-dealer 
affiliate, as applicable, regarding access to information concerning 
the composition and changes to the portfolio, and the Adviser will 
be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio. The Exchange also states that the Funds do not currently 
intend to use a sub-adviser.
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    The Exchange has made the following representations and statements 
in describing the Funds and their principal investments (including 
those of the Subsidiaries, as defined herein), other investments, and 
investment restrictions.\7\
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    \7\ The Commission notes that additional information regarding 
the Trust, the Funds, and the Shares, including investment 
strategies, risks, creation and redemption procedures, calculation 
of net asset value (``NAV''), fees, portfolio holdings disclosure 
policies, distributions, and taxes, among other things, can be found 
in the Notice and Registration Statement, as applicable. See supra 
notes 4 and 5, respectively.
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Principal Investment Strategies Applicable to Each Fund

    Each Fund's investment objective will be to seek long term capital 
appreciation. Each Fund will be an actively managed ETF that will seek 
to achieve its investment objective by investing, under normal 
circumstances,\8\ in a combination of securities and futures contracts, 
either directly or through each Fund's own wholly-owned subsidiary 
controlled by such Fund and organized under the laws of the Cayman 
Islands (individually, ``Subsidiary,'' and collectively, 
``Subsidiaries'').\9\ Each Fund will invest in: (i) Its respective 
Subsidiary; (ii) exchange-traded

[[Page 65752]]

products or exchange-traded commodity pools; \10\ and (iii) U.S. 
Treasury Securities,\11\ money market mutual funds, high quality 
commercial paper, and similar instruments, as described more fully 
below. Each respective Subsidiary will invest in exchange-traded 
commodity futures contracts (``Commodities''). The Commodities 
generally will be components of certain benchmark indices, as set forth 
below for each Fund, but each Subsidiary also may invest in Commodities 
that are outside of those benchmark indices.\12\
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    \8\ The term ``under normal circumstances'' includes, but is not 
limited to, the absence of extreme volatility or trading halts in 
the equity, commodities and futures markets or the financial markets 
generally; operational issues causing dissemination of inaccurate 
market information; or force majeure type events such as systems 
failure, natural or man-made disaster, act of God, armed conflict, 
act of terrorism, riot or labor disruption, or any similar 
intervening circumstance.
    \9\ According to the Exchange, all of the exchange-traded 
securities held by a Fund will be traded in a principal trading 
market that is a member of the Intermarket Surveillance Group 
(``ISG'') or a market with which the Exchange has a comprehensive 
surveillance sharing agreement. The Exchange states that with 
respect to futures contracts held indirectly through a Subsidiary, 
not more than 10% of the weight of such futures contracts in the 
aggregate shall consist of instruments whose principal trading 
market is not a member of the ISG or a market with which the 
Exchange does not have a comprehensive surveillance sharing 
agreement.
    \10\ Specifically, the Funds will invest in: (1) ETFs that 
provide exposure to commodities as would be listed under Nasdaq 
Rules 5705 and 5735; (2) exchange-traded notes (``ETNs'') that 
provide exposure to commodities as would be listed under Nasdaq Rule 
5710; or (3) exchange-traded pooled investment vehicles that invest 
primarily in commodities and commodity-linked instruments as would 
be listed under Nasdaq Rules 5711(b), (d), (f), (g), (h), (i), and 
(j) (``Commodity Pool'' or ``Commodity Pools'').
    \11\ U.S. Treasury obligations are backed by the ``full faith 
and credit'' of the U.S. government.
    \12\ In addition, each Subsidiary may, for administrative 
convenience, also invest in U.S. Treasury Securities, money market 
mutual funds, high quality commercial paper, and similar 
instruments, as discussed more fully below, for purposes of 
collateralizing investments in Commodities. Although each Fund's 
Subsidiary generally will hold many of the Commodities that are 
components of that Fund's respective benchmark index 
(``Benchmark''), each Subsidiary (and its respective parent Fund) 
will be actively managed by the Adviser and will not be obligated to 
invest in all of (or limit its investments solely to) the component 
Commodities within its respective Benchmark. Each Subsidiary (and 
its respective parent Fund) also will not be obligated to invest in 
the same amount or proportion as its respective Benchmark, or be 
obligated to track the performance of a Benchmark or of any index. 
Rather, the Adviser will determine the weightings of these 
investments by using a rules-based approach that is designed to 
ensure that the relative weight of each investment within a Fund's 
Subsidiary reflects the Adviser's view of the economic significance 
and market liquidity of the corresponding, underlying physical 
commodities.
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    Each Fund's investments will include investments directly in other 
ETFs,\13\ to the extent permitted under the 1940 Act,\14\ or ETNs that 
provide exposure to the relevant Commodities. Each Fund also may invest 
in a Commodity Pool that is designed to track the performance of the 
applicable Benchmark through investments in Commodities.
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    \13\ An ETF is an investment company registered under the 1940 
Act that holds a portfolio of securities. Many ETFs are designed to 
track the performance of a securities index, including industry, 
sector, country and region indexes. ETFs included in a Fund will be 
listed and traded in the U.S. on registered exchanges. Each Fund may 
invest in the securities of other ETFs in excess of the limits 
imposed under the 1940 Act pursuant to exemptive relief obtained by 
an affiliate of the Trust that also applies to the Trust. The ETFs 
in which a Fund may invest include Index Fund Shares (as described 
in Nasdaq Rule 5705), Portfolio Depositary Receipts (as described in 
Nasdaq Rule 5705), and Managed Fund Shares (as described in Nasdaq 
Rule 5735).
    \14\ The shares of ETFs in which a Fund may invest will be 
limited to securities that trade in markets that are members of the 
ISG, which includes all U.S. national securities exchanges, or are 
parties to a comprehensive surveillance sharing agreement with the 
Exchange.
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    The Exchange notes that no Fund will invest directly in 
Commodities. However, each Fund expects to gain significant exposure to 
Commodities indirectly by investing directly in the applicable 
Subsidiary. Each Fund's investment in its applicable Subsidiary may not 
exceed 25% of such Fund's total assets at each quarter end of such 
Fund's fiscal year. In addition, the Exchange states that no Fund or 
Subsidiary will invest directly in physical commodities. The remainder 
of a Fund's assets that are not invested in ETFs, ETNs, Commodity 
Pools, or its Subsidiary will be invested in U.S. government 
securities,\15\ money market instruments,\16\ cash and cash equivalents 
(e.g., corporate commercial paper).\17\ Each Fund will use these assets 
to provide liquidity and to collateralize the Subsidiary's investments 
in the applicable Commodities.
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    \15\ Such securities will include securities that are issued or 
guaranteed by the U.S. Treasury, by various agencies of the U.S. 
government, or by various instrumentalities, which have been 
established or sponsored by the U.S. government. U.S. Treasury 
obligations are backed by the ``full faith and credit'' of the U.S. 
government. Securities issued or guaranteed by federal agencies and 
U.S. government-sponsored instrumentalities may or may not be backed 
by the full faith and credit of the U.S. government.
    \16\ For a Fund's purposes, money market instruments will 
include: Short-term, high quality securities issued or guaranteed by 
non-U.S. governments, agencies, and instrumentalities; non-
convertible corporate debt securities with remaining maturities of 
not more than 397 days that satisfy ratings requirements under Rule 
2a-7 of the 1940 Act; money market mutual funds; and deposits and 
other obligations of U.S. and non-U.S. banks and financial 
institutions.
    \17\ The remainder of a Subsidiary's assets, if any, may be 
invested (like its respective Fund's assets) in these assets to 
serve as margin or collateral or otherwise support the Subsidiary's 
positions in Commodities.
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Principal Investments for Each Fund

PowerShares DB Optimum Yield Diversified Commodity Strategy Portfolio

    According to the Exchange, this Fund will seek to achieve its 
investment objective through indirect investments that provide exposure 
to a diverse group of the most heavily traded physical commodities in 
the world. The Fund's indirect investments in commodities primarily 
will include futures contracts contained in DBIQ Optimum Yield 
Diversified Commodity Index Excess Return (which the Exchange states is 
the Fund's Benchmark), an index composed of futures contracts on 14 
heavily traded commodities in the energy, precious metals, industrial 
metals, and agriculture sectors.

PowerShares Agriculture Strategy Portfolio

    The Exchange states that this Fund will seek to achieve its 
investment objective through indirect investments that provide exposure 
to physical commodities within the agriculture sector. The Fund's 
indirect investments in commodities primarily will include futures 
contracts contained in DBIQ Diversified Agriculture Index Excess Return 
(which the Exchange states is the Fund's Benchmark), an index composed 
of futures contracts on 11 of the most liquid and widely traded 
agricultural commodities, including corn, soybeans, wheat, Kansas City 
wheat, sugar, cocoa, coffee, cotton, live cattle, feeder cattle, and 
lean hogs.

PowerShares Precious Metals Strategy Portfolio

    According to the Exchange, this Fund will seek to achieve its 
investment objective through indirect investments that provide exposure 
to two of the most important precious metals--gold and silver. The 
Fund's indirect investments in commodities primarily will include 
futures contracts contained in DBIQ Optimum Yield Precious Metals Index 
Excess Return (which the Exchange states is the Fund's Benchmark), an 
index composed of futures contracts on gold and silver.

PowerShares Energy Strategy Portfolio

    The Exchanges states that this Fund will seek to achieve its 
investment objective through indirect investments that provide exposure 
to physical commodities within the energy sector. The Fund's indirect 
investments in commodities primarily will include futures contracts 
contained in DBIQ Optimum Yield Energy Index Excess Return (which the 
Exchange states is the Fund's Benchmark), an index composed of futures 
contracts on heavily traded energy commodities, including light sweet 
crude oil (WTI), heating oil, Brent crude oil, RBOB gasoline, and 
natural gas.

PowerShares Base Metals Strategy Portfolio

    The Exchange states that this Fund will seek to achieve its 
investment objective through indirect investments that provide exposure 
to the most widely used physical commodities within the base metals 
sector. The Fund's indirect investments in

[[Page 65753]]

commodities primarily will include futures contracts contained in DBIQ 
Optimum Yield Industrial Metals Index Excess Return (which the Exchange 
states is the Fund's Benchmark), an index composed of futures contracts 
on physical commodities in the base metals sector, including aluminum, 
zinc, and Grade A copper.

PowerShares Bloomberg Commodity Strategy Portfolio

    According to the Exchange, this Fund will seek to achieve its 
investment objective through indirect investments that provide exposure 
to a broadly diversified representation of the commodity markets. The 
Fund's indirect investments in commodities primarily will include 
futures contracts contained in the Bloomberg Commodity Total Return 
Index (which the Exchange states is the Fund's Benchmark), a 
diversified index composed of futures contracts on various physical 
commodities across seven industry sectors. Historically, the Benchmark 
has included futures contracts on the following: aluminum, Brent Crude 
oil, coffee, copper, corn, cotton, gold, heating oil, Kansas wheat, 
lean hogs, live cattle, natural gas, nickel, silver, soybeans, soybean 
meal, soybean oil, sugar, unleaded gasoline, wheat, West Texas 
Intermediate crude oil, and zinc.

Investments of the Subsidiaries

    According to the Exchange, each Subsidiary will be wholly-owned and 
controlled by the applicable Fund, and its investments will be 
consolidated into such Fund's financial statements. A Fund's investment 
in its Subsidiary will be designed to help such Fund achieve exposure 
to Commodities returns in a manner consistent with the federal tax 
requirements applicable to regulated investment companies, such as the 
Funds, which limit the ability of investment companies to invest 
directly in the derivative instruments.
    Each Subsidiary will invest in Commodities. The remainder of a 
Subsidiary's assets, if any, may be invested (like its respective 
Fund's assets) in U.S. government securities, money market instruments, 
cash, and cash equivalents intended to serve as margin or collateral or 
otherwise support the Subsidiary's positions in Commodities. The 
Exchange states that each respective Subsidiary will therefore be 
subject to the same general investment policies and restrictions as the 
applicable Fund, except that unlike such Fund, which must invest in 
assets in compliance with the requirements of Subchapter M of the 
Internal Revenue Code, a Subsidiary may invest without limitation in 
Commodities. References to the investment strategies and risks of each 
Fund include the investment strategies and risks of the applicable 
Subsidiary. Each Subsidiary will be advised by the Adviser.\18\
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    \18\ The Exchange states that the Subsidiaries will not be 
registered under the 1940 Act, and that, as an investor in a 
Subsidiary, a Fund, as that Subsidiary's sole shareholder, will not 
have the protections offered to investors in registered investment 
companies. However, because each Fund will wholly own and control 
its respective Subsidiary, and each Fund and its respective 
Subsidiary will be managed by the Adviser, no Subsidiary will take 
action contrary to the interests of its Fund or its Fund's 
shareholders. The Trust's Board (``Board'') will have oversight 
responsibility for the investment activities of each Fund, including 
its expected investments in its Subsidiary, and that Fund's role as 
the sole shareholder of such Subsidiary. The Adviser will receive no 
additional compensation for managing the assets of each Subsidiary. 
Also, in managing a Subsidiary's portfolio, the Adviser will be 
subject to the same investment restrictions and operational 
guidelines that apply to the management of a Fund. Each Subsidiary 
also will enter into separate contracts for the provision of 
custody, transfer agency, and accounting agent services with the 
same or with affiliates of the same service providers that provide 
those services to the applicable Fund.
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    As a result of the instruments that each Fund will hold indirectly, 
the Funds and the Subsidiaries are subject to regulation by the 
Commodity Futures Trading Commission and the National Futures 
Association (``NFA''), as well as additional disclosure, reporting, and 
recordkeeping rules imposed upon commodity pools.\19\
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    \19\ The Exchange represents that the Adviser has previously 
registered as a commodity pool operator and is also a member of the 
NFA.
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Other Investments

    Each Fund may invest (either directly or through its Subsidiary) in 
U.S. government securities, money market instruments, cash and cash 
equivalents (e.g., corporate commercial paper) to provide liquidity and 
to collateralize the Subsidiary's investments in Commodities. The 
instruments in which each Fund, or its respective Subsidiary, can 
invest include any one or more of the following: (i) Short-term 
obligations issued by the U.S. government; \20\ (ii) short term 
negotiable obligations of commercial banks, fixed time deposits and 
bankers' acceptances of U.S. banks and similar institutions; \21\ (iii) 
commercial paper rated at the date of purchase ``Prime-1'' by Moody's 
Investors Service, Inc. or ``A-1+'' or ``A-1'' by Standard & Poor's or, 
if unrated, of comparable quality, as the Adviser to the Funds 
determines; and (iv) money market mutual funds, including affiliated 
money market mutual funds.
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    \20\ Each Fund may invest in U.S. government obligations. 
Obligations issued or guaranteed by the U.S. government, its 
agencies and instrumentalities include bills, notes and bonds issued 
by the U.S. Treasury, as well as ``stripped'' or ``zero coupon'' 
U.S. Treasury obligations representing future interest or principal 
payments on U.S. Treasury notes or bonds. See supra note 11.
    \21\ Time deposits are non-negotiable deposits maintained in 
banking institutions for specified periods of time at stated 
interest rates. Banker's acceptances are time drafts drawn on 
commercial banks by borrowers, usually in connection with 
international transactions.
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    In addition, according to the Exchange, each Fund's investment in 
securities of other investment companies (including money market funds) 
may exceed the limits permitted under the 1940 Act, in accordance with 
certain terms and conditions set forth in a Commission exemptive order 
issued to an affiliate of the Trust (which applies equally to the 
Trust) pursuant to Section 12(d)(1)(J) of the 1940 Act. The Exchange 
states that no Fund, or its respective Subsidiary, anticipates 
investing in options, swaps, or forwards.

Investment Restrictions

    Each Fund may not concentrate its investments (i.e., invest more 
than 25% of the value of its net assets) in securities of issuers in 
any one industry or group of industries. This restriction will not 
apply to obligations issued or guaranteed by the U.S. government, its 
agencies or instrumentalities.
    Each Subsidiary's shares will be offered only to the applicable 
Fund and such Fund will not sell shares of that Subsidiary to other 
investors. Each Fund and the applicable Subsidiary will not invest in 
any non-U.S. equity securities (other than shares of the Subsidiary).
    Each Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid securities and other illiquid assets (calculated at 
the time of investment). Each Fund will monitor its portfolio liquidity 
on an ongoing basis to determine whether, in light of current 
circumstances, an adequate level of liquidity is being maintained, and 
will consider taking appropriate steps in order to maintain adequate 
liquidity if, through a change in values, net assets, or other 
circumstances, more than 15% of a Fund's net assets are held in 
illiquid securities or other illiquid assets.\22\
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    \22\ Illiquid securities and other illiquid assets include 
securities subject to contractual or other restrictions on resale 
and other instruments that lack readily available markets as 
determined in accordance with Commission staff guidance.
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    Each Fund intends to qualify for and to elect to be treated as a 
separate regulated investment company under Subchapter M of the 
Internal Revenue Code.
    Each Fund's and its respective Subsidiary's investments will be 
consistent with that Fund's investment

[[Page 65754]]

objective. In pursuing its investment objective, a Fund may utilize 
instruments that have a leveraging effect on that Fund. This effective 
leverage occurs when a Fund's market exposure exceeds the amounts 
actually invested. The Exchange represents that any instance of 
effective leverage will be covered in accordance with guidance 
promulgated by the Commission and its staff. According to the Exchange, 
each Fund does not presently intend to engage in any form of borrowing 
for investment purposes, and will not be operated as ``leveraged 
ETFs,'' i.e., it will not be operated in a manner designed to seek a 
multiple of the performance of an underlying reference index.

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 and 
the rules and regulations thereunder applicable to a national 
securities exchange.\23\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\24\ 
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 Commission notes that 
the Funds and the Shares must comply with the requirements of Nasdaq 
Rule 5735 to be listed and traded on the Exchange.
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    \23\ 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).
    \24\ 15 U.S.C. 78f(b)(5).
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    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,\25\ 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. Quotation and last-
sale information for the Shares will be available via Nasdaq 
proprietary quote and trade services, as well as in accordance with the 
Unlisted Trading Privileges and the Consolidated Tape Association plans 
for the Shares. In addition, for each Fund, an estimated value, defined 
in Nasdaq Rule 5735(c)(3) as the ``Intraday Indicative Value,'' \26\ 
will be available on the NASDAQ OMX Information LLC proprietary index 
data service,\27\ and will be updated and widely disseminated by one or 
more major market data vendors and broadly displayed at least every 15 
seconds during the Regular Market Session.\28\ On each business day, 
before commencement of trading in Shares in the Regular Market Session 
on the Exchange, each Fund will disclose on its Web site the Disclosed 
Portfolio, as defined in Nasdaq Rule 5735(c)(2), that will form the 
basis for each Fund's calculation of NAV at the end of the business 
day.\29\
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    \25\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \26\ According to the Exchange, the Intraday Indicative Value 
for each Fund will reflect an estimated intraday value of such 
Fund's portfolio (including the Subsidiary's portfolio) and will be 
based upon the current value for the components of a Disclosed 
Portfolio.
    \27\ Currently, the NASDAQ OMX Global Index Data Service 
(``GIDS'') is the NASDAQ OMX global index data feed service. The 
Exchange represents that GIDS offers real-time updates, daily 
summary messages, and access to widely followed indexes and Intraday 
Indicative Values for ETFs, and that GIDS provides investment 
professionals with the daily information needed to track or trade 
NASDAQ OMX indexes, listed ETFs, or third-party partner indexes and 
ETFs
    \28\ 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).
    \29\ The Disclosed Portfolio will include, as applicable, the 
names, quantity, percentage weighting and market value of securities 
and other assets held by a Fund and the Subsidiary and the 
characteristics of such assets. The Web site and information will be 
publicly available at no charge.
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    The Funds' administrator will calculate each Fund's NAV as of the 
close of trading (normally 4:00 p.m., Eastern Time) on each day Nasdaq 
is open for business.\30\ Information regarding market price and 
trading volume of the Shares will be continually available on a real-
time basis throughout the day on brokers' computer screens and other 
electronic services. Information regarding the previous day's closing 
price and trading volume information for the Shares will be published 
daily in the financial section of newspapers. Quotation and last-sale 
information for any underlying exchange-traded instruments (including 
ETFs, ETNs, and Commodity Pools) will also be available via the quote 
and trade service of their respective primary exchanges, as well as in 
accordance with the Unlisted Trading Privileges and the Consolidated 
Tape Association plans. Quotation and last-sale information for any 
underlying Commodities will be available via the quote and trade 
service of their respective primary exchanges. Pricing information 
related to U.S. government securities, money market mutual funds, 
commercial paper, and other short-term investments held by a Fund or 
its Subsidiary will be available through publicly available quotation 
services, such as Bloomberg, Markit, and Thomson Reuters. The Funds' 
Web site (www.invescopowershares.com), which will be publicly available 
prior to the public offering of Shares, will include a form of the 
prospectus for each Fund and additional data relating to NAV and other 
applicable quantitative information.\31\
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    \30\ NAV per Share will be calculated for a Fund by taking the 
market price of such Fund's total assets, including interest or 
dividends accrued but not yet collected, less all liabilities, 
dividing such amount by the total number of Shares outstanding, 
rounded to the nearest cent (although creations and redemptions will 
be processed using a price denominated to the fifth decimal point, 
meaning that rounding to the nearest cent may result in different 
prices in certain circumstances). All valuations will be subject to 
review by the Board or its delegate. Expenses will be accrued and 
applied daily and securities and other assets for which market 
quotations are readily available will be valued at market value. 
Securities listed or traded on an exchange generally will be valued 
at the last sales price or official closing price that day as of the 
close of the exchange where the security primarily is traded. 
Commodities will be valued at the closing price in the market where 
such contracts are principally traded. Investment company shares 
will be valued at net asset value, unless the shares are exchange-
traded, in which case they will be valued at the last sale or 
official closing price on the market on which they primarily trade. 
ETNs will be valued at the last sale or official closing price on 
the market on which they primarily trade. Commodity Pools will be 
valued at the last sale or official closing price on the market on 
which they primarily trade. U.S. government securities will be 
valued at the mean price provided by a third party vendor for U.S. 
government securities. Short term money market instruments, cash and 
cash equivalents (including corporate commercial paper, negotiable 
obligations of commercial banks, fixed time deposits, bankers 
acceptances and similar securities) will be valued in accordance 
with the Trust's valuation policies and procedures approved by the 
Board. A Fund's investment in its Subsidiary will be valued by 
aggregating the value of the Subsidiary's underlying holdings, and 
they, in turn, will be valued as discussed above.
    \31\ The Funds' Web site will include the Share's ticker, CUSIP 
and exchange information along with additional quantitative 
information updated on a daily basis, including, for each Fund: (1) 
Daily trading volume, the prior business day's reported NAV and 
closing price, mid-point of the bid/ask spread at the time of 
calculation of such NAV (the ``Bid/Ask Price'') and a calculation of 
the premium and discount of the Bid/Ask Price against the NAV; and 
(2) data in chart format displaying the frequency distribution of 
discounts and premiums of the daily Bid/Ask Price against the NAV, 
within appropriate ranges, for each of the four previous calendar 
quarters.
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    The Commission further believes that the proposal to list and trade 
the Shares

[[Page 65755]]

is reasonably designed to promote fair disclosure of information that 
may be necessary to price the Shares appropriately and to prevent 
trading when a reasonable degree of transparency cannot be assured. The 
Exchange will obtain a representation from the issuer of the Shares 
that the NAV per Share will be calculated daily and that the NAV and 
the Disclosed Portfolio will be made available to all market 
participants at the same time. Nasdaq will halt trading in the Shares 
under the conditions specified in Nasdaq Rules 4120 and 4121, including 
the trading pause provisions under Nasdaq Rules 4120(a)(11) and (12). 
Trading in the Shares may be halted because of market conditions or for 
reasons that, in the view of the Exchange, make trading in a Fund's 
Shares inadvisable,\32\ and trading in the Shares will be subject to 
Nasdaq Rule 5735(d)(2)(D), which sets forth additional circumstances 
under which trading in Shares of a Fund may be halted. The Exchange 
states that it has a general policy prohibiting the distribution of 
material, non-public information by its employees. Further, the 
Commission notes that the Reporting Authority, as defined in Nasdaq 
Rule 5735(c)(4), that provides the Disclosed Portfolio must implement 
and maintain, or be subject to, procedures designed to prevent the use 
and dissemination of material, non-public information regarding the 
actual components of the portfolio.\33\ In addition, the Exchange 
states that, while the Adviser is not registered as a broker-dealer, 
the Adviser is affiliated with a broker-dealer and has implemented a 
fire wall with respect to that broker-dealer regarding access to 
information concerning the composition of, or changes to, the 
portfolio, and that personnel who make decisions on each Fund's 
portfolio composition will be subject to procedures designed to prevent 
the use and dissemination of material non-public information regarding 
each Fund's portfolio.\34\
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    \32\ These reasons may include: (1) The extent to which trading 
is not occurring in the securities and other assets constituting the 
Disclosed Portfolio of a Fund and the applicable Subsidiary; or (2) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. With respect 
to trading halts, the Exchange may consider all relevant factors in 
exercising its discretion to halt or suspend trading in the Shares 
of a Fund.
    \33\ See Nasdaq Rule 5735(d)(2)(B)(ii).
    \34\ See supra note 6. The Exchange states that an investment 
adviser to an open-end fund is required to be registered under the 
Investment Advisers Act of 1940 (``Advisers Act''). As a result, the 
Adviser and its related personnel are subject to the provisions of 
Rule 204A-1 under the Advisers Act 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 represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by both Nasdaq and 
the Financial Industry Regulatory Authority (``FINRA'') on behalf of 
the Exchange, which are designed to detect violations of Exchange rules 
and applicable federal securities laws.\35\ In addition, the Exchange 
may obtain information from the Trade Reporting and Compliance Engine 
(``TRACE''), which is the FINRA-developed vehicle that facilitates 
mandatory reporting of over-the-counter secondary market transactions 
in eligible fixed income securities. Prior to the commencement of 
trading, the Exchange states that it will inform its members in an 
Information Circular of the special characteristics and risks 
associated with trading the Shares.
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    \35\ The Exchange states that FINRA surveils 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.
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    The Exchange represents that the Shares are deemed to be equity 
securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities. 
In support of this proposal, the Exchange has made the following 
representations:
    (1) The Shares will conform to the initial and continued listing 
criteria applicable to Managed Fund Shares, as set forth under Rule 
5735.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) Trading in the Shares will be subject to the existing trading 
surveillances, administered by both Nasdaq and FINRA, on behalf of the 
Exchange, which are designed to detect violations of Exchange rules and 
applicable federal securities laws, and that these procedures are 
adequate to properly monitor Exchange trading of the Shares in all 
trading sessions and to deter and detect violations of Exchange rules 
and applicable federal securities laws. FINRA, on behalf of the 
Exchange, will communicate as needed regarding trading in the Shares, 
Commodities, ETFs, ETNs, and Commodity Pools held by a Fund or a Fund's 
Subsidiary, as applicable, with other markets and other entities that 
are members of the ISG,\36\ and FINRA may obtain trading information 
regarding trading in the Shares, Commodities, ETFs, ETNs, and Commodity 
Pool held by such Fund, or its Subsidiary, as applicable, from such 
markets and other entities. In addition, the Exchange may obtain 
information regarding trading in the Shares, Commodities, ETFs, ETNs, 
and Commodity Pools held by a Fund or its respective Subsidiary 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. FINRA, on behalf 
of the Exchange, is also able to access, as needed, trade information 
for certain fixed income securities held by a Fund reported to FINRA's 
TRACE.
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    \36\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
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    (4) All of the exchange-traded securities held by a Fund will be 
traded in a principal trading market that is a member of ISG or a 
market with which the Exchange has a comprehensive surveillance sharing 
agreement. With respect to Commodities held indirectly through a 
Subsidiary, not more than 10% of the weight of such Commodities, in the 
aggregate, shall consist of instruments whose principal trading market 
is not a member of ISG or a market with which the Exchange does not 
have a comprehensive surveillance sharing agreement.
    (5) Prior to the commencement of trading, the Exchange will inform 
its members in an Information Circular of the special characteristics 
and risks associated with trading the Shares. Specifically, the 
Information Circular will discuss the following: (a) The procedures for 
purchases and redemptions of Shares in creation units (and that Shares 
are not individually redeemable); (b) Nasdaq Rule 2111A, which imposes 
suitability obligations on Nasdaq members with respect to recommending 
transactions in the Shares to customers; (c) how and by whom 
information regarding the Intraday Indicative Value and Disclosed 
Portfolio is disseminated, including

[[Page 65756]]

how it is made available and by whom; (d) the risks involved in trading 
the Shares during the Pre-Market and Post-Market Sessions when an 
updated Intraday Indicative Value will not be calculated or publicly 
disseminated; (e) the requirement that members deliver a prospectus to 
investors purchasing newly issued Shares prior to or concurrently with 
the confirmation of a transaction; and (f) trading information.
    (6) For initial and continued listing, each Fund and its respective 
Subsidiary must be in compliance with Rule 10A-3 under the Act.\37\
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    \37\ See 17 CFR 240.10A-3.
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    (7) Each Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment). Each 
Fund will monitor its portfolio liquidity on an ongoing basis to 
determine whether, in light of current circumstances, an adequate level 
of liquidity is being maintained, and will consider taking appropriate 
steps in order to maintain adequate liquidity if, through a change in 
values, net assets, or other circumstances, more than 15% of a Fund's 
net assets are held in illiquid assets.
    (8) No Fund will invest directly in Commodities. However, each Fund 
expects to gain significant exposure to Commodities indirectly by 
investing directly in the applicable Subsidiary. Each Fund's investment 
in its applicable Subsidiary may not exceed 25% of such Fund's total 
assets at each quarter end of such Fund's fiscal year. Each Fund and 
the applicable Subsidiary will not invest in any non-U.S. equity 
securities (other than shares of the Subsidiary).
    (9) No Fund or Subsidiary will invest directly in physical 
commodities.
    (10) Each Fund's Subsidiary will invest in Commodities. The 
Commodities generally will be components of the Benchmark for each 
Fund, but each Subsidiary also may invest in Commodities that are 
outside of the Benchmark.
    (11) Each Fund's and its respective Subsidiary's investments will 
be consistent with that Fund's investment objectives. In pursuing its 
investment objective, a Fund may utilize instruments that have a 
leveraging effect on that Fund. Any instance of effective leverage will 
be covered in accordance with guidance promulgated by the Commission 
and its staff. Each Fund does not presently intend to engage in any 
form of borrowing for investment purposes, and will not be operated as 
``leveraged ETFs, i.e., it will not be operated in a manner designed to 
seek a multiple of the performance of an underlying reference index.
    (12) A minimum of 100,000 Shares of each Fund will be outstanding 
at the commencement of trading on the Exchange.
    This approval order is based on all of the Exchange's 
representations, including those set forth above and in the Notice, and 
the Exchange's description of the Funds.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \38\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \38\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\39\ that the proposed rule change (SR-NASDAQ-2014-080), as 
modified by Amendment No. 1 thereto, be, and it hereby is, approved.
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    \39\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
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    \40\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2014-26229 Filed 11-4-14; 8:45 am]
BILLING CODE 8011-01-P


