
[Federal Register Volume 80, Number 209 (Thursday, October 29, 2015)]
[Notices]
[Pages 66594-66600]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27515]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76245; File No. SR-NASDAQ-2015-124]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change Relating to the Listing and 
Trading of the Shares of the Active Alts Contrarian ETF of ETFis Series 
Trust I

October 23, 2015.
    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 October 19, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in in Items I, 
II, and III below, which Items have been prepared by Nasdaq. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to list and trade the shares of the Active Alts 
Contrarian ETF (the ``Fund'') of ETFis Series Trust I (the ``Trust'') 
under Nasdaq Rule 5735 (``Managed Fund Shares'').\3\ The shares of the 
Fund are referred to herein as the ``Shares.''
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    \3\ The Commission approved Nasdaq Rule 5735 in Securities 
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June 
20, 2008) (SR-NASDAQ-2008-039). The Exchange believes the proposed 
rule change raises no significant issues not previously addressed in 
prior Commission orders.
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    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, and at the 
Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to list and trade the Shares of the Fund 
under Nasdaq Rule 5735, which governs the listing and trading of 
Managed Fund Shares \4\ on the Exchange. The Fund will be an actively-
managed exchange-traded fund (``ETF''). The Shares will be offered by 
the Trust, which was established as a Delaware series trust on 
September 20, 2012.\5\ 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.\6\ The Fund is a 
series of the Trust.
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    \4\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940, as amended (15 U.S.C. 80a-1) (the ``1940 Act'') 
organized as an open-end investment company or similar entity that 
invests in a portfolio of securities selected by its investment 
adviser consistent with its investment objectives and policies. In 
contrast, an open-end investment company that issues Index Fund 
Shares, listed and traded on the Exchange under Nasdaq Rule 5705, 
seeks to provide investment results that correspond generally to the 
price and yield performance of a specific foreign or domestic stock 
index, fixed income securities index or combination thereof.
    \5\ The Commission has issued an order, upon which the Trust may 
rely (the ``Exemptive Order''), granting certain exemptive relief to 
the investment adviser to the Fund under the 1940 Act. See 
Investment Company Act Release No. 30607 (July 23, 2013) (File No. 
812-14080).
    \6\ See Post-Effective Amendment No. 70 to Registration 
Statement on Form N-1A for the Trust, dated October 16, 2015 (File 
Nos. 333-187668 and 811-22819). The description of the Fund and the 
Shares contained herein is based, in part, on information in the 
Registration Statement.
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Description of the Shares and the Fund
    Etfis Capital LLC is the investment adviser (``Adviser'') to the 
Fund. Active Alts Inc. is the investment sub-adviser to the Fund (the 
``Sub-Adviser''). The Sub-Adviser is responsible for daily portfolio 
management and all investment decisions for the Fund. ETF Distributors 
LLC (the ``Distributor'') will be the principal underwriter and 
distributor of the Fund's Shares. The Bank of New York Mellon 
Corporation (``BNY'') will act as the administrator, accounting agent, 
custodian and transfer agent to the Fund.
    Paragraph (g) of Rule 5735 provides that if the investment adviser 
to the investment company issuing Managed Fund Shares is affiliated 
with a broker-dealer, such investment adviser shall erect a ``fire 
wall'' between the investment adviser and the broker-dealer with 
respect to access to

[[Page 66595]]

information concerning the composition and/or changes to such 
investment company portfolio.\7\ In addition, paragraph (g) further 
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, nonpublic information regarding 
the open-end fund's portfolio. Rule 5735(g) is similar to Nasdaq Rule 
5705(b)(5)(A)(i); however, paragraph (g) in connection with the 
establishment of a ``fire wall'' between the investment adviser and the 
broker-dealer reflects the applicable open-end fund's portfolio, not an 
underlying benchmark index, as is the case with index-based funds. The 
Adviser is not a broker-dealer, although it is affiliated with the 
Distributor, a broker-dealer. The Adviser has implemented a fire wall 
with respect to its broker-dealer affiliate regarding access to 
information concerning the composition and/or changes to the portfolio. 
The Sub-Adviser is not a broker-dealer and is not affiliated with a 
broker-dealer. In the event (a) the Adviser or the Sub-Adviser becomes 
newly affiliated with a broker-dealer \8\ or registers as a broker-
dealer, or (b) any new adviser or new sub-adviser is a registered 
broker-dealer or is or becomes affiliated with a broker-dealer, it will 
implement a fire wall with respect to its relevant personnel and/or 
such broker-dealer affiliate, as applicable, regarding access to 
information concerning the composition and/or changes to the Fund 
portfolio and will be subject to procedures designed to prevent the use 
and dissemination of material nonpublic information regarding such 
portfolio.
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    \7\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser, the Sub-Adviser and each such 
party's 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 applicable federal securities laws as defined in 
Rule 204A-1(e)(4). Accordingly, procedures designed to prevent the 
communication and misuse of nonpublic 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.
    \8\ In the case of the Adviser, which is already affiliated with 
a broker-dealer and has implemented a fire wall with respect to such 
affiliated broker-dealer, this refers to a new affiliation with an 
additional broker-dealer.
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Investment Objective
    The Fund's investment objective is to seek current income and 
capital appreciation. The Fund will seek to achieve its investment 
objective by primarily investing in U.S. exchange-traded equity 
securities (U.S. exchange-traded equity securities are referred to 
herein as ``Equities'' \9\) that the Sub-Adviser believes may be 
subject to a ``short squeeze'' (as described below). The Fund may also 
lend portfolio securities that the Sub-Adviser believes may be subject 
to a short squeeze to short sellers and other market participants for a 
premium recognized as income. The Fund is an actively managed ETF and 
thus does not seek to replicate the performance of any index. Instead, 
the Fund uses an active investment strategy in an effort to meet its 
investment objective.\10\
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    \9\ As used herein, the term ``Equities'' includes American 
Depository Receipts, but does not include shares of ETFs or closed-
end investment companies that are U.S. exchange-traded.
    \10\ All Equities traded by the Fund will be listed on a U.S. 
exchange that is a member of the Intermarket Surveillance Group 
(``ISG'') or a party to a comprehensive surveillance sharing 
agreement with the Exchange.
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Principal Investments
    In selecting securities for the Fund's portfolio, the Sub-Adviser 
will seek to identify Equities that it believes have a higher potential 
for capital appreciation as a result of a short squeeze. A ``short 
squeeze'' occurs when investors who have sold short shares of an equity 
security seek to rapidly cover or buy back the short position due to 
actual or perceived appreciation in the security, which may occur 
because of positive news or events related to the company, its market 
sector or the market generally. Often, the additional buying momentum 
created by short sellers covering their short positions escalates the 
increase in the price of the shares. The Fund will not be limited with 
respect to its investments in any sector or industry, but the Fund will 
limit investments in a single issuer to no more than five percent (5%) 
of the total assets of the Fund and to no more than five percent (5%) 
of the security's public float. In addition, the Fund will limit its 
Equities investments to companies with a market capitalization of $250 
million or more.
    The Sub-Adviser's process for identifying short squeeze 
opportunities involves analysis of both fundamental factors (e.g., 
quality of earnings, fundamental stability of business, etc.) and 
technical factors (e.g., price and volume characteristics, relative 
strength, etc.). Using this analysis, the Sub-Adviser seeks to identify 
securities where, in the opinion of the Sub-Adviser, short interest is 
significant, is increasing or is expected to increase, but is 
unjustified based on the Sub-Adviser's analysis.
    To the extent that the Sub-Adviser has not identified Equities 
suitable for investment, the Fund principally will be invested in cash 
or money market instruments,\11\ and to the extent permitted by 
applicable law and the Fund's investment restrictions, the Fund may 
invest in shares of money-market mutual funds. At times the Fund's 
investment in such investments may be significant.
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    \11\ The following is a list of the money market instruments in 
which the Fund may invest: Short-term (less than one-year) notes 
issued by (i) the U.S. government, (ii) an agency of the U.S. 
government, or (iii) a U.S. corporation.
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    The Fund may also determine to lend out portfolio securities that 
the Sub-Adviser believes to be strong candidates for a short squeeze to 
short sellers and other market participants for a premium recognized as 
income.
    As a result of its trading strategy, the Fund expects to engage in 
frequent portfolio transactions that will likely result in higher 
portfolio turnover than many investment companies. Portfolio turnover 
is a ratio that indicates how often the securities in an investment 
company's portfolio change during a year. A higher portfolio turnover 
rate indicates a greater number of changes, and a lower portfolio 
turnover rate indicates a smaller number of changes. Under normal 
circumstances, the anticipated annual portfolio turnover rate for the 
Fund is expected to be greater than 100%.
Other Investments
    The Fund may invest in other types of investments, as set forth in 
this section. The Fund may invest in any type of ETF that is U.S. 
exchange-traded, including index based ETFs, sector based ETFs, and 
fixed-income ETFs--but will not invest in leveraged ETFs. Due to legal 
limitations, the Fund will be prevented from purchasing more than 3% of 
an ETF's outstanding shares unless: (i) The ETF or the Fund has 
received an order for exemptive relief from the 3% limitation from the 
Commission that is applicable to the Fund; and (ii) the ETF and the 
Fund take appropriate steps to comply with any conditions in such 
order. The Fund

[[Page 66596]]

also may invest in closed-end investment companies that are U.S. 
exchange-traded.
    The Fund may not invest more than 25% of the value of its total 
assets in securities of issuers in any particular industry.\12\ The 
Fund's investments (including investments in ETFs) will not be utilized 
to seek to achieve a leveraged return on the Fund's net assets. The 
Fund will not invest in futures contracts, will not invest in options, 
will not invest in swaps, and will not invest in other derivative 
instruments.
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    \12\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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The Shares
    The Fund will issue and redeem Shares only in Creation Units, 
through the Distributor, without a sales load (but subject to 
transaction fees), at the net asset value (``NAV'') next determined 
after receipt of an order in proper form, on a continuous basis every 
day except weekends and specified holidays, pursuant to the terms of 
the agreement executed with each Authorized Participant (as defined 
below). The NAV of the Fund will be determined once each business day, 
normally as of the close of regular trading on the NYSE, generally, 
4:00 p.m. Eastern time.\13\ Creation Unit sizes will be 25,000 Shares 
per Creation Unit.
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    \13\ NAV per Share will be calculated by dividing the Fund's net 
assets by the number of Fund Shares outstanding. For more 
information regarding the valuation of Fund investments in 
calculating the Fund's NAV, see ``Net Asset Value'' below.
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    The consideration for purchase of a Creation Unit will consist of 
either (i) an in-kind deposit of a designated portfolio of securities 
(the ``Deposit Securities'') for each Creation Unit constituting a 
substantial replication, or a representation, of the securities 
included in the Fund's portfolio and an amount of cash (the ``Cash 
Component'') computed as described below or (ii) cash totaling the NAV 
of the Creation Unit (``Deposit Cash''). The ``Cash Component'' will be 
an amount equal to the difference between the NAV of the shares (per 
Creation Unit) and the market value of the Deposit Securities. The Fund 
may also effect a portion of an otherwise in-kind creation or 
redemption for cash, in accordance with the Exemptive Order.
    As applicable, (i) the Deposit Securities and the Cash Component, 
together, or (ii) the Deposit Cash, will constitute the ``Fund 
Deposit,'' which will represent the minimum initial and subsequent 
investment amount for a Creation Unit of the Fund. If the Cash 
Component is a positive number (i.e., the NAV per Creation Unit exceeds 
the market value of the Deposit Securities), the Cash Component will be 
such positive amount. If the Cash Component is a negative number (i.e., 
the NAV per Creation Unit is less than the market value of the Deposit 
Securities), the Cash Component will be such negative amount and the 
creator will be entitled to receive cash from the Fund in an amount 
equal to the Cash Component. The Cash Component will serve the function 
of compensating for any difference between the NAV per Creation Unit 
and the market value of the Deposit Securities.
    To be eligible to place orders with respect to creations and 
redemptions of Creation Units, an entity must be (i) a ``Participating 
Party,'' i.e., a broker-dealer or other participant in the clearing 
process through the Continuous Net Settlement System of the National 
Securities Clearing Corporation (``NSCC'') or (ii) a Depository Trust 
Company (``DTC'') Participant (a ``DTC Participant''). In addition, 
each Participating Party or DTC Participant (each, an ``Authorized 
Participant'') must execute an agreement that has been agreed to by the 
Distributor and the Fund Administrator, BNY, with respect to purchases 
and redemptions of Creation Units.
    BNY, through the NSCC, will make available on each business day, 
immediately prior to the opening of business on the Exchange's Regular 
Market Session (currently 9:30 a.m. Eastern time), the list of the 
names and the required number of shares of each Deposit Security to be 
included in the current Fund Deposit (based on information at the end 
of the previous business day) for the Fund. Such Fund Deposit, subject 
to any relevant adjustments, will be applicable in order to effect 
purchases of Creation Units of the Fund until such time as the next 
announced composition of the Deposit Securities is made available.
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by the 
Fund through BNY and only on a business day. With respect to the Fund, 
BNY, through the NSCC, will make available immediately prior to the 
opening of business on the Exchange (9:30 a.m. Eastern time) on each 
business day, the list of the names and share quantities of the Fund's 
portfolio securities (``Fund Securities'') that will be applicable 
(subject to possible amendment or correction) to redemption requests 
received in proper form on that day. Fund Securities received on 
redemption may not be identical to Deposit Securities.
    Unless cash redemptions are available or specified for the Fund, 
redemption proceeds for a Creation Unit will consist of Fund Securities 
as announced by BNY on the business day of the request for redemption 
received in proper form plus cash in an amount equal to the difference 
between the NAV of the Shares being redeemed, as next determined after 
a receipt of a request in proper form, and the value of the Fund 
Securities (the ``Cash Redemption Amount''), less a fixed redemption 
transaction fee and any applicable additional variable charge as set 
forth in the Registration Statement. In the event that the Fund 
Securities have a value greater than the NAV of the Shares, a 
compensating cash payment equal to the differential will be required to 
be made by or through an Authorized Participant by the redeeming 
shareholder. Notwithstanding the foregoing, at the Trust's discretion, 
an Authorized Participant may receive the corresponding cash value of 
the securities in lieu of one or more Fund Securities.
    The creation order and redemption order cut off time for the Fund 
is expected to be one hour prior to the close of the regular trading 
session on the Exchange (i.e., typically 3:00 p.m. Eastern time). In 
the case of custom orders, the Fund may require orders for Creation 
Units to be placed earlier in the day.
Net Asset Value
    The NAV per Share for the Fund will be computed by dividing the 
value of the net assets of the Fund (i.e., the value of its total 
assets less total liabilities) by the total number of Shares 
outstanding, rounded to the nearest cent. Expenses and fees, including 
the management fees, will be accrued daily and taken into account for 
purposes of determining NAV. The NAV of the Fund will be calculated by 
BNY and determined at the close of regular trading on the NYSE 
(ordinarily 4:00 p.m. Eastern time) on each day that such exchange is 
open. In calculating the Fund's NAV per Share, investments will 
generally be valued by using market valuations. A market valuation 
generally means a valuation (i) obtained from an exchange, a pricing 
service, or a major market maker (or dealer) or (ii) based on a price 
quotation or other equivalent indication of value supplied by an

[[Page 66597]]

exchange, a pricing service, or a major market maker (or dealer).\14\
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    \14\ Under normal market conditions, the Fund will obtain 
pricing information on all of its assets from these sources.
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    Equities and any other exchange traded securities (such as shares 
of ETFs or closed-end investment companies) will be valued at the 
official closing price on their principal exchange, or lacking any 
current reported sale at the time of valuation, at the mean between the 
most recent bid and asked quotations on the principal exchange. 
Portfolio securities traded on more than one securities exchange will 
be valued at the last sale price or official closing price, as 
applicable, on the business day as of which such value is being 
determined at the close of the exchange representing the principal 
market for such securities. Shares of money market mutual funds will be 
valued at their NAV. Money market instruments will be valued at the 
mean between the most recent available bid and asked quotations 
provided by parties that make a market in the instrument. If recent bid 
and asked quotations are not available, these securities will be valued 
in accordance with the Fund's fair valuation procedures. Money market 
instruments with maturities of less than 60 days will be valued at 
amortized cost.
    Notwithstanding the foregoing, in determining the value of any 
security or asset, the Fund may use a valuation provided by a pricing 
vendor employed by the Trust and approved by the Trust Board. The 
pricing vendor may base such valuations upon dealer quotes, by 
analyzing the listed market, by utilizing matrix pricing, by analyzing 
market correlations and pricing and/or employing sensitivity analysis.
    The Adviser may use various pricing services, or discontinue the 
use of any pricing service, as approved by the Trust Board from time to 
time. A price obtained from a pricing service based on such pricing 
service's valuation matrix may be considered a market valuation.
    In the event that current market valuations are not readily 
available or such valuations do not reflect current market value, the 
Trust's procedures require the Adviser's Pricing Committee to determine 
a security's fair value in accordance with the Fund's Fair Value 
Pricing Procedures, which are approved by the Trust Board and 
consistent with the 1940 Act.\15\ In determining such value the 
Adviser's Pricing Committee may consider, among other things, (i) price 
comparisons among multiple sources, (ii) a review of corporate actions 
and news events, and (iii) a review of relevant financial indicators. 
In these cases, the Fund's NAV may reflect certain portfolio 
securities' fair values rather than their market prices. Fair value 
pricing involves subjective judgments and it is possible that the fair 
value determination for a security is materially different than the 
value that could be realized upon the sale of the security.
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    \15\ The Valuation Committee of the Trust Board will be 
responsible for the oversight of the pricing procedures of the Fund 
and the valuation of the Fund's portfolio. The Valuation Committee 
has delegated day-to-day pricing responsibilities to the Adviser's 
Pricing Committee, which will be composed of officers of the 
Adviser. The Pricing Committee will be responsible for the valuation 
and revaluation of any portfolio investments for which market 
quotations or prices are not readily available. The Trust and the 
Adviser have implemented procedures designed to prevent the use and 
dissemination of material, nonpublic information regarding valuation 
and revaluation of any portfolio investments.
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Availability of Information
    The Fund's Web site, ActiveAlts.com, which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Web site 
will include additional quantitative information updated on a daily 
basis, including, for the Fund: (1) The prior business day's reported 
NAV, mid-point of the bid/ask spread at the time of calculation of such 
NAV (the ``Bid/Ask Price''),\16\ and a calculation of the premium and 
discount of the Bid/Ask Price against the NAV; (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; and (3) daily trading 
volume. On each business day, before commencement of trading in Shares 
in the Regular Market Session \17\ on the Exchange, the Trust will 
disclose on its Web site the identities and quantities of the portfolio 
of securities and other assets (the ``Disclosed Portfolio'') held by 
the Fund that will form the basis for the Fund's calculation of NAV at 
the end of the business day.\18\
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    \16\ The Bid/Ask Price of the Fund will be determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of such Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and its service 
providers.
    \17\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 7 a.m. to 9:30 
a.m. Eastern time; (2) Regular Market Session from 9:30 a.m. to 4 
p.m. or 4:15 p.m. Eastern time; and (3) Post-Market Session from 4 
p.m. or 4:15 p.m. to 8 p.m. Eastern time).
    \18\ Under accounting procedures to be followed by the Fund, 
trades made on the prior business day (``T'') will be booked and 
reflected in NAV on the current business day (``T+1''). 
Notwithstanding the foregoing, portfolio trades that are executed 
prior to the opening of the Exchange on any business day may be 
booked and reflected in NAV on such business day. Accordingly, the 
Fund will be able to disclose at the beginning of the business day 
the portfolio that will form the basis for the NAV calculation at 
the end of the business day.
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    On a daily basis, the Fund will disclose for each portfolio 
security and other asset of the Fund the following information on the 
Fund's Web site (if applicable): Name, ticker symbol, CUSIP number or 
other identifier, if any; type of holding (such as ``common stock'', 
``note'', ``mutual fund''); quantity held (as measured by, for example, 
number of shares, contracts or units); maturity date, if any; coupon 
rate, if any; effective date, if any; market value of the holding; and 
the percentage weighting of the holdings in the Fund's portfolio. The 
Web site information will be publicly available at no charge.
    In addition, for the Fund, an estimated value, defined in Rule 5735 
as the ``Intraday Indicative Value,'' that reflects an estimated 
intraday value of the Fund's portfolio, will be disseminated. Moreover, 
the Intraday Indicative Value, available on the NASDAQ OMX Information 
LLC proprietary index data service,\19\ will be based upon the current 
value for the components of the Disclosed Portfolio and will be updated 
and widely disseminated and broadly displayed at least every 15 seconds 
during the Regular Market Session. In addition, during hours when the 
local markets for foreign securities in the Fund's portfolio are 
closed, the Intraday Indicative Value will be updated at least every 15 
seconds during the Regular Market Session to reflect currency exchange 
fluctuations.
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    \19\ Currently, the NASDAQ OMX Global Index Data Service 
(``GIDS'') is the NASDAQ OMX global index data feed service, 
offering real-time updates, daily summary messages, and access to 
widely followed indexes and Intraday Indicative Values for ETFs. 
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.
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    The dissemination of the Intraday Indicative Value, together with 
the Disclosed Portfolio, will allow investors to determine the value of 
the underlying portfolio of the Fund on a daily basis and to provide a 
close estimate of that value throughout the trading day.
    Investors will also be able to obtain the Fund's Statement of 
Additional Information (``SAI''), the Fund's Shareholder Reports, and 
its Form N-CSR and Form N-SAR, filed twice a year. The Fund's SAI and 
Shareholder Reports will be available from the Fund free upon request, 
and those documents and the Form N-CSR and Form N-SAR

[[Page 66598]]

may be viewed on-screen or downloaded from the Commission's Web site at 
www.sec.gov.
    Intra-day, executable price quotations of the Equities, any other 
exchange-traded securities, and money market instruments and money-
market mutual funds, held by the Fund are available from major broker-
dealer firms or on the exchanges on which they are traded, if 
applicable. The foregoing intra-day price information is available 
through subscription services, such as Bloomberg and Thomson Reuters, 
which can be accessed by authorized participants and other investors. 
The previous day's closing price and trading volume information for the 
Equities and any other exchange-traded securities held by the Fund will 
be published daily in the financial section of newspapers. Quotation 
and last sale information for the Equities and any other exchange-
traded securities held by the Fund will be available via UTP Level 1, 
as well as Nasdaq proprietary quote and trade services.
    Information regarding market price and volume of the Shares is and 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. The 
previous day's closing price and trading volume information for the 
Shares will be published daily in the financial section of newspapers. 
Quotation and last sale information for the Shares will be available 
via UTP Level 1, as well as Nasdaq proprietary quote and trade 
services.
Initial and Continued Listing
    The Shares will be subject to Rule 5735, which sets forth the 
initial and continued listing criteria applicable to Managed Fund 
Shares. The Exchange represents that, for initial and/or continued 
listing, the Fund must be in compliance with Rule 10A-3 \20\ under the 
Act. A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange. The Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily and that the NAV and the Disclosed Portfolio 
will be made available to all market participants at the same time.
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    \20\ See 17 CFR 240.10A-3.
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Trading Halts and Trading Pauses
    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 the Fund. Nasdaq will halt or pause trading in 
the Shares under the conditions specified in Nasdaq Rules 4120 and 
4121, including the trading pauses under Nasdaq Rules 4120(a)(11) and 
(12). Trading may be halted because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) The extent to which trading is not 
occurring in the securities and/or the financial instruments 
constituting the Disclosed Portfolio of the Fund; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present. Trading in the Shares also will be 
subject to Rule 5735(d)(2)(D), which sets forth circumstances under 
which Shares of the Fund may be halted.
Trading Rules
    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. Nasdaq will allow trading in the Shares 
from 7:00 a.m. until 8:00 p.m. Eastern time. The Exchange has 
appropriate rules to facilitate transactions in the Shares during all 
trading sessions. As provided in Nasdaq Rule 5735(b)(3), the minimum 
price variation for quoting and entry of orders in Managed Fund Shares 
traded on the Exchange is $0.01.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by both Nasdaq and 
also the Financial Industry Regulatory Authority (``FINRA'') on behalf 
of the Exchange, which are designed to detect violations of Exchange 
rules and applicable federal securities laws.\21\ The Exchange 
represents 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.
---------------------------------------------------------------------------

    \21\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
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    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations. 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.\22\
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    \22\ All broker/dealers who are FINRA member firms have an 
obligation to report transactions in corporate bonds to TRACE.
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    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares, Equities, or other exchange-traded 
securities with other markets and other entities that are Intermarket 
Surveillance Group (``ISG'') members, and FINRA, on behalf of the 
Exchange, may obtain trading information regarding trading in the 
Shares, Equities, or other exchange-traded securities from such markets 
and other entities. In addition, the Exchange may obtain information 
regarding trading in the Shares, Equities, or other exchange-traded 
securities from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.\23\ FINRA, on behalf of the Exchange, is able to 
access, as needed, trade information for certain money market 
instruments held by the Fund reported to FINRA's TRACE.
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    \23\ For a list of the current members of ISG, see 
www.isgportal.org.
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    All Equities, and any shares of ETFs or closed-end investment 
companies, held by the Fund will be listed on a U.S. exchange that is a 
member of the ISG or a party to a comprehensive surveillance sharing 
agreement with the Exchange. In addition, the Exchange also has a 
general policy prohibiting the distribution of material, nonpublic 
information by its employees.
Information Circular
    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: (1) The procedures for purchases 
and redemptions of Shares in Creation Units (and that Shares are not 
individually redeemable); (2) Nasdaq Rule 2111A, which imposes 
suitability obligations on Nasdaq members with respect to recommending 
transactions in the Shares to customers; (3) how and by whom 
information regarding the Intraday Indicative Value and the Disclosed 
Portfolio is disseminated; (4) 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; (5) 
the requirement that members deliver a

[[Page 66599]]

prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (6) trading 
information.
    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Fund. Members purchasing Shares from the Fund for 
resale to investors will deliver a prospectus to such investors. The 
Information Circular will also discuss any exemptive, no-action and 
interpretive relief granted by the Commission from any rules under the 
Act.
    Additionally, the Information Circular will reference that the Fund 
is subject to various fees and expenses described in the Registration 
Statement. The Information Circular will also disclose the trading 
hours of the Shares of the Fund and the applicable NAV Calculation Time 
for the Shares. The Information Circular will disclose that information 
about the Shares of the Fund will be publicly available on the Fund's 
Web site.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b) 
of the Act \24\ in general and Section 6(b)(5) of the Act \25\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \24\ 15 U.S.C. 78f.
    \25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Nasdaq Rule 5735. The 
Exchange believes that its surveillance procedures are adequate to 
properly monitor the trading of the Shares on Nasdaq during all trading 
sessions and to deter and detect violations of Exchange rules and the 
applicable federal securities laws. The Adviser is affiliated with a 
broker-dealer and has implemented a ``fire wall'' with respect to such 
broker-dealer regarding access to information concerning the 
composition and/or changes to the Fund's portfolio. In addition, as 
noted above, investors will have ready access to information regarding 
the Fund's holdings, the Intraday Indicative Value, the Disclosed 
Portfolio, and quotation and last sale information for the Shares. The 
Exchange may obtain information via ISG from other exchanges that are 
members of ISG or with which the Exchange has entered into a 
comprehensive surveillance sharing agreement.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that 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. In addition, a large amount of 
information is publicly available regarding the Fund and the Shares, 
thereby promoting market transparency. All Equities, and any shares of 
ETFs or exchange-traded investment companies, traded by the Fund will 
be listed on a U.S. exchange that is a member of the ISG or a party to 
a comprehensive surveillance sharing agreement with the Exchange. The 
Fund's portfolio holdings will be disclosed on its Web site daily after 
the close of trading on the Exchange and prior to the opening of 
trading on the Exchange the following day. Moreover, the Intraday 
Indicative Value, available on the NASDAQ OMX Information LLC 
proprietary index data service will be widely disseminated and broadly 
displayed at least every 15 seconds during the Regular Market Session. 
On each business day, before commencement of trading in Shares in the 
Regular Market Session on the Exchange, the Fund will disclose on its 
Web site the Disclosed Portfolio that will form the basis for the 
Fund's calculation of NAV at the end of the business day. Information 
regarding market price and trading volume of the Shares is and will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services, and quotation 
and last sale information for the Shares will be available via UTP 
Level 1, as well as Nasdaq proprietary quote and trade services. Intra-
day, executable price quotations on the Equities, money market 
instruments, shares of ETFs, shares of exchange-traded investment 
companies, and other assets held by the Fund are available from major 
broker-dealer firms or on the exchanges on which they are traded, if 
applicable. The foregoing Intra-day price information is available 
through subscription services, such as Bloomberg and Thomson Reuters, 
which can be accessed by authorized participants and other investors.
    The Web site for the Fund will include a form of the prospectus for 
the Fund and additional data relating to NAV and other applicable 
quantitative information. Trading in Shares of the Fund will be halted 
if the circuit breaker parameters in Nasdaq Rule 4120(a)(11) have been 
reached or because of market conditions or for reasons that, in the 
view of the Exchange, make trading in the Shares inadvisable, and 
trading in the Shares will be subject to Nasdaq Rule 5735(d)(2)(D), 
which sets forth circumstances under which Shares of the Fund may be 
halted. In addition, as noted above, investors will have ready access 
to information regarding the Fund's holdings, the Intraday Indicative 
Value, the Disclosed Portfolio, and quotation and last sale information 
for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, as noted above, investors 
will have ready access to information regarding the Fund's holdings, 
the Intraday Indicative Value, the Disclosed Portfolio, and quotation 
and last sale information for the Shares.
    For the above reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that 
the proposed rule change will facilitate the listing and trading of an 
additional type of actively-managed exchange-traded fund that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace.

[[Page 66600]]

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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2015-124 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2015-124. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2015-124 and should 
be submitted on or before November 19, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-27515 Filed 10-28-15; 8:45 am]
BILLING CODE 8011-01-P


