
[Federal Register Volume 82, Number 179 (Monday, September 18, 2017)]
[Notices]
[Pages 43611-43618]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-19802]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81591; File No. SR-NASDAQ-2017-091]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To List and Trade Shares of 
Calvert Ultra-Short Income NextSharesTM

September 13, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 30, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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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 list and trade under Nasdaq Rule 5745 
(Exchange-Traded Managed Fund

[[Page 43612]]

Shares (``NextShares'')) the common shares (``Shares'') of Calvert 
Ultra-Short Income NextSharesTM (the ``Fund''), a series of 
Calvert Management Series (the ``CMS Trust'').\3\
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    \3\ Except for the specific Fund information set forth below, 
this rule filing conforms to the rule filing, as modified by 
amendments 1 and 2 thereto, relating to the listing and trading on 
Nasdaq of the shares of 18 series of the Eaton Vance ETMF Trust and 
the Eaton Vance ETMF Trust II, as approved by the Commission in 
Securities Exchange Act Release No. 75499 (July 21, 2015) (SR-
NASDAQ-2015-036).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

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

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

1. Purpose
    The Exchange proposes to list and trade the Shares of the Fund 
under Nasdaq Rule 5745, which governs the listing and trading of 
exchange-traded managed fund shares, as defined in Nasdaq Rule 
5745(c)(1), on the Exchange.\4\ The CMS Trust is registered with the 
Commission as an open-end investment company and has filed a 
registration statement on Form N-1A (``Registration Statement'') with 
the Commission. The Fund is a series of the CMS Trust and will be 
advised by an investment adviser (``Adviser'') registered under the 
Investment Advisers Act of 1940 (``Advisers Act''), as described below. 
The Fund will be actively managed and will pursue the principal 
investment strategies discussed below.\5\
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    \4\ The Commission approved Nasdaq Rule 5745 in Securities 
Exchange Act Release No. 34-73562 (Nov. 7, 2014), 79 FR 68309 (Nov. 
14, 2014) (SR-NASDAQ-2014-020).
    \5\ Additional information regarding the Fund will be available 
on a free public Web site for the Fund (www.calvert.com and/or 
www.nextshares.com) and in the Registration Statement for the Fund.
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The CMS Trust
    The CMS Trust is registered with the Commission as an open-end 
investment company and has filed a Registration Statement with the 
Commission.\6\
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    \6\ See Post-Effective Amendment No. 86 to the Registration 
Statement on Form N-1A for CMS Trust dated July 20, 2017 (File Nos. 
002-69565 and 811-03101). The description of the Fund and the Shares 
contained herein conform to the Registration Statement.
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    Calvert Research and Management,\7\ a wholly owned subsidiary of 
Eaton Vance Management, will be the Adviser to the Fund. The Adviser is 
not a registered broker-dealer, although it is affiliated with a 
broker-dealer. The Adviser has implemented and will maintain a fire 
wall with respect to its affiliated broker-dealer regarding access to 
information concerning the composition and/or changes to the Fund's 
portfolio.\8\ In addition, personnel who make decisions on the Fund's 
portfolio composition must be subject to procedures designed to prevent 
the use and dissemination of material, non-public information regarding 
the open-end fund's portfolio.
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    \7\ The Commission has issued an order granting Eaton Vance 
Management, Eaton Vance ETMF Trust and Eaton Vance ETMF Trust II and 
certain affiliates exemptive relief under the Investment Company 
Act. See Investment Company Act Release No. 31361 (December 2, 2014) 
(File No. 812-14139) (the ``Order''). Because the Adviser is a 
wholly-owned subsidiary of Eaton Vance Management, it may rely this 
exemptive order with respect to the Fund.
    \8\ An investment adviser to an open-end fund is required to be 
registered under the Advisers Act. As a result, the Adviser, and its 
related personnel, are subject to the provisions of Rule 204A-1 
under the Advisers Act relating to codes of ethics. This Rule 
requires investment advisers to adopt a code of ethics that reflects 
the fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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    In the event that (a) the Adviser registers as a broker-dealer or 
becomes newly affiliated with a broker-dealer, or (b) any new adviser 
or sub-adviser to the Fund is a registered broker-dealer or is 
affiliated with a broker-dealer, such adviser or sub-adviser will 
implement and will maintain a fire wall with respect to its relevant 
personnel and/or such broker-dealer affiliate, if applicable, regarding 
access to information concerning the composition and/or changes to the 
Fund's portfolio and will be subject to procedures designed to prevent 
the use and dissemination of material non-public information regarding 
such portfolio.
    Foreside Fund Services, LLC will be the principal underwriter and 
distributor of the Fund's Shares. State Street Bank and Trust Company 
will act as the accounting agent, custodian and transfer agent to the 
Fund. ICE Data Services will be the intraday indicative value (``IIV'') 
calculator to the Fund.
    The Fund will be actively managed and will pursue the principal 
investment strategies described below.\9\
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    \9\ Additional information regarding the Fund will be available 
on a free public Web site for the Fund (www.calvert.com and/or 
www.nextshares.com) and in the Registration Statement for the Fund.
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Calvert Ultra-Short Income NextSharesTM
    The investment objective of the Fund is to seek to maximize income, 
to the extent consistent with preservation of capital, through 
investment in bonds and income-producing securities.
    The Fund will seek to achieve its investment objective by 
investing, under normal circumstances, at least 80% of its net assets 
(including borrowings for investment purposes) in a portfolio of 
floating-rate debt securities (e.g., corporate floating-rate 
securities) and debt securities with durations of less than or equal to 
one year. The Fund will typically invest at least 65% of its net assets 
in investment grade, U.S. dollar-denominated debt securities, as 
assessed at the time of purchase. The Fund will invest principally in 
bonds issued by U.S. corporations, the U.S. Government or its agencies, 
and U.S. Government-sponsored enterprises such as the Federal National 
Mortgage Association and the Federal Home Loan Mortgage Corporation. 
The Fund may also invest up to 25% of its net assets in foreign debt 
securities.
Creations and Redemptions of Shares
    Shares will be issued and redeemed on a daily basis at the Fund's 
next-determined net asset value (``NAV'') \10\ in specified blocks of 
Shares called ``Creation Units.'' A Creation Unit will consist of at 
least 25,000 Shares. Creation Units may be purchased and

[[Page 43613]]

redeemed by or through ``Authorized Participants.'' \11\ Purchases and 
sales of Shares in amounts less than a Creation Unit may be effected 
only in the secondary market, as described below, and not directly with 
the Fund.
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    \10\ As with other registered open-end investment companies, NAV 
generally will be calculated daily Monday through Friday as of the 
close of regular trading on the New York Stock Exchange, normally 
4:00 p.m. Eastern Time. NAV will be calculated by dividing the 
Fund's net asset value by the number of Shares outstanding. 
Information regarding the valuation of investments in calculating 
the Fund's NAV will be contained in the Registration Statement for 
its Shares.
    \11\ ``Authorized Participants'' will be either: (1) 
``Participating parties,'' i.e., brokers or other participants in 
the Continuous Net Settlement System (``CNS System'') of the 
National Securities Clearing Corporation (``NSCC''), a clearing 
agency registered with the Commission and affiliated with the 
Depository Trust Company (``DTC''), or (2) DTC participants, which 
in either case have executed participant agreements with the Fund's 
distributor and transfer agent regarding the creation and redemption 
of Creation Units. Investors will not have to be Authorized 
Participants in order to transact in Creation Units, but must place 
an order through and make appropriate arrangements with an 
Authorized Participant for such transactions.
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    The creation and redemption process for the Fund may be effected 
``in kind,'' in cash, or in a combination of securities and cash. 
Creation ``in kind'' means that an Authorized Participant--usually a 
brokerage house or large institutional investor--purchases the Creation 
Unit with a basket of securities equal in value to the aggregate NAV of 
the Shares in the Creation Unit. When an Authorized Participant redeems 
a Creation Unit in kind, it receives a basket of securities equal in 
value to the aggregate NAV of the Shares in the Creation Unit.\12\
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    \12\ In compliance with Nasdaq Rule 5745(b)(5), which applies to 
Shares based on an international or global portfolio, the 
application for the Order states that the Fund will comply with the 
federal securities laws in accepting securities for deposits and 
satisfying redemptions with securities, including that the 
securities accepted for deposits and the securities used to satisfy 
redemption requests are sold in transactions that would be exempt 
from registration under the Securities Act of 1933, as amended (15 
U.S.C. 77a).
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Composition File
    As defined in Nasdaq Rule 5745(c)(3), the Composition File is the 
specified portfolio of securities and/or cash that the Fund will accept 
as a deposit in issuing a Creation Unit of Shares, and the specified 
portfolio of securities and/or cash that the Fund will deliver in a 
redemption of a Creation Unit of Shares. The Composition File will be 
disseminated through the NSCC once each business day before the open of 
trading in Shares on such day and also will be made available to the 
public each day on a free Web site.\13\ Because the Fund seeks to 
preserve the confidentiality of its current portfolio trading program, 
the Fund's Composition File generally will not be a pro rata reflection 
of the Fund's investment positions. Each security included in the 
Composition File will be a current holding of the Fund, but the 
Composition File generally will not include all of the securities in 
the Fund's portfolio or match the weightings of the included securities 
in the portfolio.
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    \13\ The free public Web site containing the Composition File 
will be at www.calvert.com and/or www.nextshares.com.
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    Securities that the Adviser is in the process of acquiring for the 
Fund generally will not be represented in the Fund's Composition File 
until their purchase has been completed. Similarly, securities that are 
held in the Fund's portfolio but in the process of being sold may not 
be removed from its Composition File until the sale program is 
substantially completed. When creating and redeeming Shares in kind, 
the Fund will use cash amounts to supplement the in-kind transactions 
to the extent necessary to ensure that Creation Units are purchased and 
redeemed at NAV. The Composition File also may consist entirely of 
cash, in which case it will not include any of the securities in the 
Fund's portfolio.\14\
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    \14\ In determining whether the Fund will issue or redeem 
Creation Units entirely on a cash basis, the key consideration will 
be the benefit that would accrue to the Fund and its investors. For 
instance, in bond transactions, the Adviser may be able to obtain 
better execution for the Fund than Authorized Participants because 
of the Adviser's size, experience and potentially stronger 
relationships in the fixed-income markets.
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Transaction Fees
    All persons purchasing or redeeming Creation Units are expected to 
incur a transaction fee to cover the estimated cost to the Fund of 
processing the transaction, including the costs of clearance and 
settlement charged to it by NSCC or DTC, and the estimated trading 
costs (i.e., brokerage commissions, bid-ask spread and market impact) 
to be incurred in converting the Composition File to or from the 
desired portfolio holdings. The transaction fee is determined daily and 
will be limited to amounts approved by the board of trustees of the 
Fund and determined by the Adviser to be appropriate to defray the 
expenses that the Fund incurs in connection with the purchase or 
redemption of Creation Units.
    The purpose of transaction fees is to protect the Fund's existing 
shareholders from the dilutive costs associated with the purchase and 
redemption of Creation Units. Transaction fees may vary over time for 
the Fund depending on the estimated trading costs for its portfolio 
positions and Composition File, processing costs and other 
considerations. If the Fund specifies greater amounts of cash in its 
Composition File it may impose higher transaction fees. In addition, if 
the Fund's Composition File includes instruments that clear through 
DTC, it may impose higher transaction fees than if its Composition File 
consists solely of instruments that clear through NSCC, because DTC may 
charge more than NSCC in connection with Creation Unit 
transactions.\15\ The transaction fees applicable to the Fund's 
purchases and redemptions on a given business day will be disseminated 
through the NSCC prior to the open of market trading on that day and 
also will be made available to the public each day on a free Web 
site.\16\ In all cases, the transaction fees will be limited in 
accordance with the requirements of the Commission applicable to open-
end management investment companies offering redeemable securities.
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    \15\ Authorized Participants that participate in the CNS System 
of the NSCC are expected to be able to use the enhanced NSCC/CNS 
process for effecting in-kind purchases and redemptions of ETFs (the 
``NSCC Process'') to purchase and redeem Creation Units of the Fund 
if it limits the composition of its baskets to include only NSCC 
Process-eligible instruments (generally domestic equity securities 
and cash). Because the NSCC Process is generally more efficient than 
the DTC clearing process, NSCC is likely to charge the Fund less 
than DTC to settle purchases and redemptions of Creation Units.
    \16\ The free public Web site will be at www.calvert.com and/or 
www.nextshares.com.
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NAV-Based Trading
    Because Shares will be listed and traded on the Exchange, Shares 
will be available for purchase and sale on an intraday basis. Shares 
will be purchased and sold in the secondary market at prices directly 
linked to the Fund's next-determined NAV using a new trading protocol 
called ``NAV-Based Trading.'' \17\ All bids, offers and execution 
prices of Shares will be expressed as a premium/discount (which may be 
zero) to the Fund's next-determined NAV (e.g., NAV-$0.01, NAV+$0.01). 
The Fund's NAV will be determined each business day, normally as of 
4:00 p.m. Eastern Time. Trade executions will be binding at the time 
orders are matched on Nasdaq's facilities, with the transaction prices 
contingent upon the determination of NAV.
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    \17\ Aspects of NAV-Based Trading are protected intellectual 
property subject to issued and pending U.S. patents held by 
NextShares Solutions LLC (``NextShares Solutions''), a wholly owned 
subsidiary of Eaton Vance Corp. Nasdaq has entered into a license 
agreement with NextShares Solutions to allow for NAV-Based Trading 
on the Exchange of exchange-traded managed funds that have 
themselves entered into license agreements with NextShares 
Solutions.
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Trading Premiums and Discounts
    Bid and offer prices for Shares will be quoted throughout the day 
relative to NAV. The premium or discount to NAV at which Share prices 
are quoted and transactions are executed will vary

[[Page 43614]]

depending on market factors, including the balance of supply and demand 
for Shares among investors, transaction fees and other costs in 
connection with creating and redeeming Creation Units of Shares, the 
cost and availability of borrowing Shares, competition among market 
makers, the Share inventory positions and inventory strategies of 
market makers, the profitability requirements and business objectives 
of market makers, and the volume of Share trading. Reflecting such 
market factors, prices for Shares in the secondary market may be above, 
at or below NAV. If the Fund has higher transaction fees, it may trade 
at wider premiums or discounts to NAV than if it had lower transaction 
fees, reflecting the added costs to market makers of managing their 
Share inventory positions through purchases and redemptions of Creation 
Units.
    Because making markets in Shares will be simple to manage and low 
risk, competition among market makers seeking to earn reliable, low-
risk profits should enable the Shares to routinely trade at tight bid-
ask spreads and narrow premiums/discounts to NAV. As noted below, the 
Fund will maintain a public Web site that will be updated on a daily 
basis to show current and historical trading spreads and premiums/
discounts of Shares trading in the secondary market.\18\
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    \18\ The free public Web site will be at www.calvert.com and/or 
www.nextshares.com.
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    Transmitting and Processing Orders. Member firms will utilize 
certain existing order types and interfaces to transmit Share bids and 
offers to Nasdaq, which will process Share trades like trades in shares 
of other listed securities.\19\ In the systems used to transmit and 
process transactions in Shares, the Fund's next-determined NAV will be 
represented by a proxy price (e.g., 100.00) and a premium/discount of a 
stated amount to the next-determined NAV to be represented by the same 
increment/decrement from the proxy price used to denote NAV (e.g., NAV-
$0.01 would be represented as 99.99; NAV+$0.01 as 100.01).
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    \19\ As noted below, all orders to buy or sell Shares that are 
not executed on the day the order is submitted will be automatically 
cancelled as of the close of trading on such day. Prior to the 
commencement of trading in the Fund, the Exchange will inform its 
members in an Information Circular of the effect of this 
characteristic on existing order types.
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    To avoid potential investor confusion, Nasdaq will work with member 
firms and providers of market data services to seek to ensure that 
representations of intraday bids, offers and execution prices of Shares 
that are made available to the investing public follow the ``NAV-$0.01/
NAV+$0.01'' (or similar) display format. All Shares listed on the 
Exchange will have a unique identifier associated with their ticker 
symbol, which would indicate that the Shares are traded using NAV-Based 
Trading. Nasdaq makes available to member firms and market data 
services certain proprietary data feeds that are designed to supplement 
the market information disseminated through the consolidated tape 
(``Consolidated Tape''). Specifically, the Exchange will use the NASDAQ 
Basic and NASDAQ Last Sale data feeds to disseminate intraday price and 
quote data for Shares in real time in the ``NAV-$0.01/NAV+$0.01'' (or 
similar) display format. Member firms could use the NASDAQ Basic and 
NASDAQ Last Sale data feeds to source intraday Share prices for 
presentation to the investing public in the ``NAV-$0.01/NAV+$0.01'' (or 
similar) display format. Alternatively, member firms could source 
intraday Share prices in proxy price format from the Consolidated Tape 
and other Nasdaq data feeds (e.g., Nasdaq TotalView and Nasdaq Level 2) 
and use a simple algorithm to convert prices into the ``NAV-$0.01/
NAV+$0.01'' (or similar) display format. As noted below, prior to the 
commencement of trading in the Fund, the Exchange will inform its 
members in an Information Circular of the identities of the specific 
Nasdaq data feeds from which intraday Share prices in proxy price 
format may be obtained.
    Intraday Reporting of Quotes and Trades. All bids and offers for 
Shares and all Share trade executions will be reported intraday in real 
time by the Exchange to the Consolidated Tape \20\ and separately 
disseminated to member firms and market data services through the 
Exchange data feeds listed above. The Exchange will also provide the 
member firms participating in each Share trade with a contemporaneous 
notice of trade execution, indicating the number of Shares bought or 
sold and the executed premium/discount to NAV.\21\
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    \20\ Due to systems limitations, the Consolidated Tape will 
report intraday execution prices and quotes for Shares using a proxy 
price format. As noted, Nasdaq will separately report real-time 
execution prices and quotes to member firms and providers of market 
data services in the ``NAV-$0.01/NAV+$0.01'' (or similar) display 
format, and otherwise seek to ensure that representations of 
intraday bids, offers and execution prices for Shares that are made 
available to the investing public follow the same display format.
    \21\ All orders to buy or sell Shares that are not executed on 
the day the order is submitted will be automatically cancelled as of 
the close of trading on such day.
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    Final Trade Pricing, Reporting and Settlement. All executed Share 
trades will be recorded and stored intraday by Nasdaq to await the 
calculation of the Fund's end-of-day NAV and the determination of final 
trade pricing. After the Fund's NAV is calculated and provided to the 
Exchange, Nasdaq will price each Share trade entered into during the 
day at the Fund's NAV plus/minus the trade's executed premium/discount. 
Using the final trade price, each executed Share trade will then be 
disseminated to member firms and market data services via an FTP file 
to be created for exchange-traded managed funds and confirmed to the 
member firms participating in the trade to supplement the previously 
provided information to include final pricing.\22\ After the pricing is 
finalized, Nasdaq will deliver the Share trading data to NSCC for 
clearance and settlement, following the same processes used for the 
clearance and settlement of trades in other exchange-traded securities.
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    \22\ File Transfer Protocol (``FTP'') is a standard network 
protocol used to transfer computer files on the Internet. Nasdaq 
will arrange for the daily dissemination of an FTP file with 
executed Share trades to member firms and market data services.
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Availability of Information
    Prior to the commencement of market trading in Shares, the Fund 
will be required to establish and maintain a public Web site through 
which its current prospectus may be downloaded.\23\ The Web site will 
include additional Fund information updated on a daily basis, including 
the prior business day's NAV, and the following trading information for 
such business day expressed as premiums/discounts to NAV: (a) Intraday 
high, low, average and closing prices of Shares in Exchange trading; 
(b) the midpoint of the highest bid and lowest offer prices as of the 
close of Exchange trading, expressed as a premium/discount to NAV (the 
``Closing Bid/Ask Midpoint''); and (c) the spread between highest bid 
and lowest offer prices as of the close of Exchange trading (the 
``Closing Bid/Ask Spread.''). The Web site will also contain charts 
showing the frequency distribution and range of values of trading 
prices, Closing Bid/Ask Midpoints and Closing Bid/Ask Spreads over 
time.
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    \23\ The free public Web site will be at www.calvert.com.
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    The Composition File will be disseminated through the NSCC before 
the open of trading in Shares on each business day and also will be 
made available to the public each day on a free Web site.\24\ 
Consistent with the

[[Page 43615]]

disclosure requirements that apply to traditional open-end investment 
companies, a complete list of current Fund portfolio positions will be 
made available at least once each calendar quarter, with a reporting 
lag of not more than 60 days. The Fund may provide more frequent 
disclosures of portfolio positions at its discretion.
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    \24\ The free public Web site containing the Composition File 
will be at www.calvert.com and/or www.nextshares.com.
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    Reports of Share transactions will be disseminated to the market 
and delivered to the member firms participating in the trade 
contemporaneous with execution. Once the Fund's daily NAV has been 
calculated and disseminated, Nasdaq will price each Share trade entered 
into during the day at the Fund's NAV plus/minus the trade's executed 
premium/discount. Using the final trade price, each executed Share 
trade will then be disseminated to member firms and market data 
services via an FTP file to be created for exchange-traded managed 
funds and confirmed to the member firms participating in the trade to 
supplement the previously provided information to include final 
pricing.
    Information regarding NAV-based trading prices, best bids and 
offers for Shares, and volume of Shares traded will be continuously 
available on a real-time basis throughout each trading day on brokers' 
computer screens and other electronic services.
Initial and Continued Listing
    Shares will conform to the initial and continued listing criteria 
as set forth under Nasdaq Rule 5745. A minimum of 50,000 Shares and no 
less than two Creation Units of the Fund will be outstanding at the 
commencement of trading on the Exchange. The Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily (on each day the New York Stock Exchange is 
open for trading) and provided to Nasdaq via the Mutual Fund Quotation 
Service (``MFQS'') by the fund accounting agent. As soon as the NAV is 
entered into MFQS, Nasdaq will disseminate the NAV to market 
participants and market data vendors via the Mutual Fund Dissemination 
Service (``MFDS'') so all firms will receive the NAV per Share at the 
same time. The Reporting Authority \25\ also will implement and 
maintain, or ensure that the Composition File will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding the Fund's portfolio positions and 
changes in the positions.
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    \25\ See Nasdaq Rule 5745(c)(4).
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    An estimated value of an individual Share, defined in Nasdaq Rule 
5745(c)(2) as the ``Intraday Indicative Value,'' will be calculated and 
disseminated at intervals of not more than 15 minutes throughout the 
Regular Market Session \26\ when Shares trade on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares 
that the IIV will be calculated on an intraday basis and provided to 
Nasdaq for dissemination via the Nasdaq Global Index Service 
(``GIDS'').
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    \26\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 4 a.m. to 9:30 
a.m. Eastern Time; (2) Regular Market Session from 9:30 a.m. to 4 
p.m. or 4:15 p.m. Eastern Time; and (3) Post-Market Session from 4 
p.m. or 4:15 p.m. to 8 p.m. Eastern Time).
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    The IIV will be based on current information regarding the value of 
the securities and other assets held by the Fund.\27\ The purpose of 
the IIVs is to enable investors to estimate the next-determined NAV so 
they can determine the number of Shares to buy or sell if they want to 
transact in an approximate dollar amount (e.g., if an investor wants to 
acquire approximately $5,000 of the Fund, how many Shares should the 
investor buy?).\28\
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    \27\ IIVs disseminated throughout each trading day would be 
based on the same portfolio as used to calculate that day's NAV. The 
Fund will reflect purchases and sales of portfolio positions in its 
NAV the next business day after trades are executed.
    \28\ Because, in NAV-Based Trading, prices of executed trades 
are not determined until the reference NAV is calculated, buyers and 
sellers of Shares during the trading day will not know the final 
value of their purchases and sales until the end of the trading day. 
The Fund's Registration Statement, Web site and any advertising or 
marketing materials will include prominent disclosure of this fact. 
Although IIVs may provide useful estimates of the value of intraday 
trades, they cannot be used to calculate with precision the dollar 
value of the Shares to be bought or sold.
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    The Adviser is not a registered broker-dealer, although it is 
affiliated with a broker-dealer. The Adviser has implemented and will 
maintain a fire wall with respect to its relevant broker-dealer 
personnel or broker-dealer affiliate, as applicable, regarding access 
to information concerning the composition and/or changes to the Fund's 
portfolio. In the future event that (a) the Adviser registers as a 
broker-dealer or becomes newly affiliated with a broker-dealer, or (b) 
any new adviser or a sub-adviser to the Fund is a registered broker-
dealer 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, if applicable, regarding access to information 
concerning the composition and/or changes to the relevant Fund's 
portfolio and will be subject to procedures designed to prevent the use 
and dissemination of material non-public information regarding such 
portfolio.
Trading Halts
    The Exchange may consider all relevant factors in exercising its 
discretion to halt or suspend trading in Shares. Nasdaq will halt 
trading in Shares under the conditions specified in Nasdaq Rules 4120 
and in Nasdaq Rule 5745(d)(2)(C). Additionally, Nasdaq may cease 
trading Shares if other unusual conditions or circumstances exist 
which, in the opinion of Nasdaq, make further dealings on Nasdaq 
detrimental to the maintenance of a fair and orderly market. To manage 
the risk of a non-regulatory Share trading halt, Nasdaq has in place 
back-up processes and procedures to ensure orderly trading. Because, in 
NAV-Based Trading, all trade execution prices are linked to end-of-day 
NAV, buyers and sellers of Shares should be less exposed to risk of 
loss due to intraday trading halts than buyers and sellers of 
conventional exchange-traded funds (``ETFs'') and other exchange-traded 
securities.
    Every order to trade Shares of the Fund is subject to the proxy 
price protection threshold of plus/minus $1.00, which determines the 
lower and upper threshold for the life of the order and whereby the 
order will be cancelled at any point if it exceeds $101.00 or falls 
below $99.00, the established thresholds.\29\ With certain exceptions, 
each order also must contain the applicable order attributes, including 
routing instructions and time-in-force information, as described in 
Nasdaq Rule 4703.\30\
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    \29\ See Nasdaq Rule 5745(h).
    \30\ See Nasdaq Rule 5745(b)(6).
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Trading Rules
    Nasdaq deems Shares to be equity securities, thus rendering trading 
in Shares to be subject to Nasdaq's existing rules governing the 
trading of equity securities. Nasdaq will allow trading in Shares from 
9:30 a.m. until 4:00 p.m. Eastern Time.
Surveillance
    The Exchange represents that trading in Shares will be subject to 
the existing trading surveillances, administered by both Nasdaq and the 
Financial Industry Regulatory Authority, Inc. (``FINRA'') on behalf of 
the Exchange, which are designed to detect violations of Exchange rules 
and applicable federal securities laws.\31\ The Exchange

[[Page 43616]]

represents that these procedures are adequate to properly monitor 
trading of Shares on the Exchange and to deter and detect violations of 
Exchange rules and applicable federal securities laws.
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    \31\ FINRA provides surveillance of trading on the Exchange 
pursuant to a regulatory services agreement. The Exchange is 
responsible for FINRA's performance under this regulatory services 
agreement.
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    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    FINRA, on behalf of the Exchange, will communicate as needed with 
other markets and other entities that are members of the Intermarket 
Surveillance Group (``ISG'') \32\ regarding trading in Shares, and in 
exchange-traded and non-exchange-traded securities and instruments held 
by the Fund (to the extent such exchange-traded and non-exchange traded 
securities and instruments are known through the publication of the 
Composition File and periodic public disclosures of the Fund's 
portfolio holdings), and FINRA may obtain trading information regarding 
such trading from other markets and other entities. In addition, the 
Exchange may obtain information regarding trading in Shares, and in 
exchange-traded and non-exchange-traded securities and instruments held 
by the Fund (to the extent such exchange-traded and non-exchange-traded 
securities and instruments are known through the publication of the 
Composition File and periodic public disclosures of the Fund's 
portfolio holdings), from markets and other entities that are members 
of ISG, which includes securities and futures exchanges, or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement. Moreover, FINRA, on behalf of the Exchange, will be able to 
access, as needed, trade information for certain fixed income 
securities held by the Fund reported to FINRA's Trade Reporting and 
Compliance Engine (``TRACE'').\33\
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    \32\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Fund's portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
    \33\ For municipal securities, trade information can generally 
be found on the Electronic Municipal Market Access (``EMMA'') of the 
Municipal Securities Rulemaking Board (``MSRB'').
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material non-public information by its employees.
Information Circular
    Prior to the commencement of trading in the Fund, 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 noting that Shares are not individually redeemable); (2) 
Nasdaq Rule 2111A, which imposes suitability obligations on Nasdaq 
members with respect to recommending transactions in Shares to 
customers; (3) how information regarding the IIV and Composition File 
is disseminated; (4) the requirement that members deliver a prospectus 
to investors purchasing Shares prior to or concurrently with the 
confirmation of a transaction; and (5) information regarding NAV-Based 
Trading protocols.
    As noted above, all orders to buy or sell Shares that are not 
executed on the day the order is submitted will be automatically 
cancelled as of the close of trading on such day. The Information 
Circular will discuss the effect of this characteristic on existing 
order types. The Information Circular also will identify the specific 
Nasdaq data feeds from which intraday Share prices in proxy price 
format may be obtained.
    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Fund. Members purchasing Shares from the Fund for 
resale to investors will deliver a summary prospectus to such 
investors. The Information Circular will also discuss any exemptive, 
no-action and interpretive relief granted by the Commission from any 
rules under the Act.
    The Information Circular also will reference that 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 and the applicable NAV calculation time for the 
Shares. The Information Circular will disclose that information about 
the Shares will be publicly available on the Fund's Web site.
    Information regarding Fund trading protocols will be disseminated 
to Nasdaq members in accordance with current processes for newly listed 
products. Nasdaq intends to provide its members with a detailed 
explanation of NAV-Based Trading through a Trading Alert issued prior 
to the commencement of trading in Shares on the Exchange.
Continued Listing Representations
    All statements and representations made in this filing regarding 
(a) the description of the portfolio or reference assets, (b) 
limitations on portfolio holdings or reference assets, (c) 
dissemination and availability of the reference asset or intraday 
indicative values, or (d) the applicability of Exchange listing rules 
shall constitute continued listing requirements for listing the Shares 
on the Exchange. In addition, the issuer has represented to the 
Exchange that it will advise the Exchange of any failure by the Fund to 
comply with the continued listing requirements, and, pursuant to its 
obligations under Section 19(g)(1) of the Act, the Exchange will 
monitor for compliance with the continued listing requirements. If the 
Fund is not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under the Nasdaq 5800 
Series.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b) 
of the Act \34\ in general, and Section 6(b)(5) of the Act \35\ 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.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f(b).
    \35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares would be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Nasdaq Rule 5745. The 
Exchange believes that its surveillance procedures are adequate to 
properly monitor the trading of Shares on Nasdaq and to deter and 
detect violations of Exchange rules and the applicable federal 
securities laws. Although the Adviser is not a registered broker-
dealer, it is affiliated with a broker-dealer. The Adviser has 
implemented and will maintain a ``fire wall'' between the Adviser and 
the relevant broker-dealer personnel or broker-dealer affiliate with 
respect to access to information concerning the

[[Page 43617]]

composition and/or changes to the Fund's portfolio holdings. In the 
event that (a) the Adviser registers as a broker-dealer or becomes 
newly affiliated with a broker-dealer, or (b) any new adviser or sub-
adviser to the Fund is a registered broker-dealer or is affiliated with 
a broker-dealer, such adviser or sub-adviser will implement and will 
maintain a fire wall with respect to its relevant personnel and/or such 
broker-dealer affiliate, if applicable, regarding access to information 
concerning the composition and/or changes to the Fund's portfolio and 
will be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio. 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, to the 
extent necessary. Moreover, FINRA, on behalf of the Exchange, will be 
able to access, as needed, trade information for certain fixed income 
securities held by the Fund reported to FINRA's TRACE.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest. 
The Exchange will obtain a representation from the issuer of Shares 
that the NAV per Share will be calculated on each business day that the 
New York Stock Exchange is open for trading and that the NAV will be 
made available to all market participants at the same time. In 
addition, a large amount of information would be publicly available 
regarding the Fund and the Shares, thereby promoting market 
transparency.
    Prior to the commencement of market trading in Shares, the Fund 
will be required to establish and maintain a public Web site through 
which its current prospectus may be downloaded. The Web site will 
display additional Fund information updated on a daily basis, including 
the prior business day's NAV, and the following trading information for 
such business day expressed as premiums/discounts to NAV: (a) Intraday 
high, low, average and closing prices of Shares in Exchange trading; 
(b) the Closing Bid/Ask Midpoint; and (c) the Closing Bid/Ask Spread. 
The Web site will also contain charts showing the frequency 
distribution and range of values of trading prices, Closing Bid/Ask 
Midpoints and Closing Bid/Ask Spreads over time. The Composition File 
will be disseminated through the NSCC before the open of trading in 
Shares on each business day and also will be made available to the 
public each day on a free Web site. The Exchange will obtain a 
representation from the issuer of the Shares that the IIV will be 
calculated and disseminated on an intraday basis at intervals of not 
more than 15 minutes during trading on the Exchange and provided to 
Nasdaq for dissemination via GIDS. A complete list of current portfolio 
positions for the Fund will be made available at least once each 
calendar quarter, with a reporting lag of not more than 60 days. The 
Fund may provide more frequent disclosures of portfolio positions at 
its discretion.
    Transactions in Shares will be reported to the Consolidated Tape at 
the time of execution in proxy price format and will be disseminated to 
member firms and market data services through Nasdaq's trading service 
and market data interfaces, as defined above. Once the Fund's daily NAV 
has been calculated and the final price of its intraday Share trades 
has been determined, Nasdaq will deliver a confirmation with final 
pricing to the transacting parties. At the end of the day, Nasdaq will 
also post a newly created FTP file with the final transaction data for 
the trading and market data services. The Exchange expects that 
information regarding NAV-based trading prices and volumes of Shares 
traded will be continuously available on a real-time basis throughout 
each trading day on brokers' computer screens and other electronic 
services. Because Shares will trade at prices based on the next-
determined NAV, investors will be able to buy and sell individual 
Shares at a known premium or discount to NAV that they can limit by 
transacting using limit orders at the time of order entry. Trading in 
Shares will be subject to Nasdaq Rules 5745(d)(2)(B) and (C), which 
provide for the suspension of trading or trading halts under certain 
circumstances, including if, in the view of the Exchange, trading in 
Shares becomes inadvisable.
    Every order to trade Shares of the Fund is subject to the proxy 
price protection threshold of plus/minus $1.00, which determines the 
lower and upper threshold for the life of the order and whereby the 
order will be cancelled at any point if it exceeds $101.00 or falls 
below $99.00, the established thresholds. With certain exceptions, each 
order also must contain the applicable order attributes, including 
routing instructions and time-in-force information, as described in 
Nasdaq Rule 4703.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
the Fund, which seeks to provide investors with access to an actively 
managed investment strategy in a structure that offers the cost and tax 
efficiencies and shareholder protections of ETFs, while removing the 
requirement for daily portfolio holdings disclosure to ensure a tight 
relationship between market trading prices and NAV.
    For the above reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. In fact, the 
Exchange believes that the introduction of the Fund would promote 
competition by making available to investors an actively managed 
investment strategy in a structure that offers the cost and tax 
efficiencies and shareholder protections of ETFs, while removing the 
requirement for daily portfolio holdings disclosure to ensure a tight 
relationship between market trading prices and NAV. Moreover, the 
Exchange believes that the proposed method of Share trading would 
provide investors with transparency of trading costs, and the ability 
to control trading costs using limit orders, that is not available for 
conventionally traded ETFs.
    These developments could significantly enhance competition to the 
benefit of the markets and investors.

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

    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.

[[Page 43618]]

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-2017-091 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-2017-091. 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 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-2017-091 and should 
be submitted on or before October 10, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
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    \36\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-19802 Filed 9-15-17; 8:45 am]
 BILLING CODE 8011-01-P


