
[Federal Register Volume 80, Number 230 (Tuesday, December 1, 2015)]
[Notices]
[Pages 75147-75148]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30384]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76518; File No. SR-NASDAQ-2015-145]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Include Managed Fund Shares in the Lead Market Maker Program

November 24, 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 November 18, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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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

    The Exchange proposes to add Managed Fund Shares to the list of 
securities eligible to be Qualified Securities under the Lead Market 
Maker Program of Rule 7014(f). The Exchange will implement the proposed 
change no earlier than December 1, 2015 and no later than January 4, 
2016. The implementation date will be announced by an Equity Trader 
Alert.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, 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, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange is proposing to include Managed Fund Shares, as 
described under Rule 5735, to the list of securities eligible to be 
treated as a Qualified Security under the Lead Market Maker (``LMM'') 
Program of Rule 7014(f). The LMM Program is designed to provide 
incentive to market makers to make markets in certain relatively 
illiquid exchange-traded products (``ETPs''). The Exchange provides 
credits to a designated LMM for execution of a Qualified Security. 
Under Rule 7014(f)(1), a Qualified Security is defined as an exchange-
traded fund or index-linked security listed on Nasdaq pursuant to 
Nasdaq Rules 5705 (Exchange Traded Funds: Portfolio Depository Receipts 
and Index Fund Shares), 5710 (Securities Linked to the Performance of 
Indexes and Commodities, Including Currencies), or 5720 (Trust Issued 
Receipts), and it must have at least one LMM. A LMM is a registered 
Nasdaq market maker for a Qualified Security that has committed to 
maintain minimum performance standards. A LMM is selected by Nasdaq 
based on factors including, but not limited to, experience with making 
markets in exchange-traded funds and index-linked securities, adequacy 
of capital, willingness to promote Nasdaq as a marketplace, issuer 
preference, operational capacity, support personnel, and history of 
adherence to Nasdaq rules and securities laws. Nasdaq may limit the 
number of LMMs in a security, or modify a previously established limit, 
upon prior written notice to members.
    As noted above, Nasdaq currently includes in the program Portfolio 
Depository Receipts, Index Fund Shares, Securities Liked to the 
Performance of Indexes and Commodities, and Trust Issued Receipts. 
Nasdaq is proposing to add another ETP, Managed Fund Shares, as 
eligible to be a Qualified Security under the LMM Program. A Managed 
Fund Share is a security that (a) represents an interest in a 
registered investment company (``Investment Company'') organized as an 
open-end management investment company or similar entity, that invests 
in a portfolio of securities selected by the Investment Company's 
investment adviser consistent with the Investment Company's investment 
objectives and policies; (b) is issued in a specified aggregate minimum 
number in return for a deposit of a specified portfolio of securities 
and/or a cash amount with a value equal to the next determined net 
asset value; and (c) when aggregated in the same specified minimum 
number, may be redeemed at a holder's request, which holder will be 
paid a specified portfolio of securities and/or cash with a value equal 
to the next determined net asset value.\3\ Managed Fund Shares are 
similar to other Exchange Traded Funds (``ETFs'') listed pursuant to 
Rule 5705(b), which, like Managed Fund Shares, are organized as an 
open-end investment company or similar entity. Unlike Rule 5705(b) ETFs 
that seek 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, Managed 
Fund Share ETFs are actively-managed, in that they invest in a 
portfolio of securities selected by its investment adviser consistent 
with its investment objectives and policies. Nasdaq has observed that 
Managed Fund Shares are generally less liquid than other ETPs. 
Consequently, Nasdaq has determined to allow Managed Fund Shares to be 
considered Qualified Securities under the program, which the Exchange 
believes will improve market quality in these securities.
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    \3\ See Rule 5735(c)(1).
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2. Statutory Basis
    Nasdaq believes that the proposed rule change is consistent with 
the provisions of Section 6 of the Act,\4\ in general, and with 
Sections 6(b)(4) and 6(b)(5) of the Act,\5\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility or system which Nasdaq operates or controls, and 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 regulating, clearing, settling, 
processing information with respect to, and 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; and is not designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that inclusion of Managed Fund Shares in the 
LMM Program is reasonable because they are currently relatively thinly-
traded on Nasdaq, and the LMM Program is

[[Page 75148]]

designed [sic] improve liquidity in ETPs. Specifically, the LMM Program 
allocates rebates to LMMs that quote at the national best bid and best 
offer for certain percentages of time. As additional incentive, the LMM 
Program also provides different levels of fee caps on the fees assessed 
for participation in the Opening and Closing Crosses on Nasdaq. The LMM 
Program has been successful at improving market quality in the 
securities covered by the program. As such, the Exchange believes the 
program will be effective at providing incentive to market makers on 
Nasdaq to become LMMs in a [sic] Managed Fund Shares thereby improving 
market quality in those securities. The Exchange also believes that 
including Managed Fund Shares is reasonable because they are similar to 
other ETFs, which are currently included in the LMM Program. The 
Exchange believes that the proposed change to Rule 7014(f) is an 
equitable allocation and is not unfairly discriminatory because all 
market makers that voluntarily elect to be designated as LMMs and meet 
the minimum performance criteria have the opportunity to qualify for a 
rebate and fee cap under the program in Managed Fund Shares.

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. 
Specifically, the change is designed to promote improved market quality 
through the application of an ETP incentive program to a type of ETP 
that is currently not part of the program, and has comparatively low 
liquidity. Such a change is designed to improve market quality in 
Qualified Securities on Nasdaq, and does not place a burden on 
competition between market participants as the changes are applied 
consistently to all participants. Lastly, to the extent market quality 
improves on Nasdaq in Managed Fund Shares, the proposed change may 
promote competition among exchanges for new Managed Fund Share listings 
and similar incentive programs, to the benefit of all market 
participants transacting in Managed Fund Shares.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\6\ and Rule 19b-4(f)(6) thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule change should be approved or 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-2015-145 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NASDAQ-2015-145. 
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 the filing also will be 
available for inspection and copying at the principal offices 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-2015-145 and should be submitted on or before December 22, 2015.
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    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-30384 Filed 11-30-15; 8:45 am]
BILLING CODE 8011-01-P


