[Federal Register Volume 86, Number 26 (Wednesday, February 10, 2021)]
[Notices]
[Pages 8972-8977]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02711]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91062; File No. SR-NASDAQ-2021-005]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the ALPS Active REIT ETF of ALPS ETF Trust To List and 
Trade Shares of the Fund Under Nasdaq Rule 5750

February 4, 2021.
    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 January 25, 2021, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes a rule change relating to the ALPS Active 
REIT ETF (the ``Fund'') of ALPS ETF Trust (the ``Trust''), to list and 
trade shares of the Fund under Nasdaq Rule 5750 (``Proxy Portfolio 
Shares''). The shares of the Fund are collectively referred to herein 
as the ``Shares.''
    (b) Not applicable. [sic]
    The text of the proposed rule change is available on the Exchange's 
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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 Commission has approved the listing and trading of Proxy 
Portfolio Shares under Nasdaq Rule 5750, which governs the listing and 
trading of Proxy Portfolio Shares on the Exchange.\3\
---------------------------------------------------------------------------

    \3\ The Commission approved Nasdaq Rule 5750 in Securities 
Exchange Act Release No. 89110 (June 22, 2020), 85 FR 38461 (June 
26, 2020) (SR-NASDAQ-2020-032).
---------------------------------------------------------------------------

    The Fund is an actively-managed exchange-traded fund (``ETF''). The 
Shares are offered by the Trust, which was established as a Delaware 
statutory trust on September 13, 2007.\4\ The Trust, which is 
registered with the Commission as an investment company under the 
Investment Company Act of 1940 (the ``1940 Act''), has filed a 
registration statement on Form N-1A (``Registration Statement'') 
relating to the Fund with the Commission.\5\ The Fund is a series of 
the Trust. ALPS Advisors, Inc. (``Adviser'') is the investment adviser 
to the Fund. ALPS Portfolio Solutions Distributor, Inc. is the 
principal underwriter and distributor of the Fund's Shares. ALPS Fund 
Services, Inc. acts as the administrator and provides fund

[[Page 8973]]

accounting services to the Fund. State Street Bank and Trust Company 
acts as the custodian and transfer agent to the Fund.
---------------------------------------------------------------------------

    \4\ The Commission has issued an order, upon which the Trust may 
rely, granting certain exemptive relief under the 1940 Act. See 
Investment Company Act Release No. 34181 (Jan. 21, 2021) 
(``Exemptive Order'').
    \5\ The Registration Statement is available on the Commission's 
website at https://www.sec.gov/Archives/edgar/data/1414040/000139834420019856/fp0058104_485apos.htm.
---------------------------------------------------------------------------

    Nasdaq Rule 5750(b)(5) provides that if the investment adviser to 
the investment company issuing Proxy Portfolio Shares \6\ is registered 
as a broker-dealer or is affiliated with a broker-dealer, such 
investment adviser will erect and maintain a ``fire wall'' between the 
investment adviser and personnel of the broker-dealer or broker-dealer 
affiliate, as applicable, with respect to access to information 
concerning the composition and/or changes to the Fund Portfolio \7\ 
and/or the Proxy Basket.\8\ In addition, Nasdaq Rule 5750(b)(5) further 
requires that any person related to the investment adviser or 
Investment Company who makes decisions pertaining to the Investment 
Company's Fund Portfolio and/or the Proxy Basket or has access to 
nonpublic information regarding the Fund Portfolio and/or Proxy Basket 
or changes thereto must be subject to procedures designed to prevent 
the use and dissemination of material non-public information regarding 
the Fund Portfolio or the Proxy Basket or changes thereto.\9\
---------------------------------------------------------------------------

    \6\ The term ``Proxy Portfolio Share'' means a security that: 
(A) Represents an interest in an investment company registered under 
the Investment Company Act of 1940 (``Investment Company'') 
organized as an open-end management investment company, 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 
Proxy Basket and/or a cash amount with a value equal to the next 
determined net asset value; (C) when aggregated in the same 
specified minimum number, may be redeemed at a holder's request, 
which holder will be paid specified Proxy Basket and/or a cash 
amount with a value equal to the next determined net asset value; 
and (D) the portfolio holdings for which are disclosed within at 
least 60 days following the end of every fiscal quarter.
    \7\ The term ``Fund Portfolio'' means the identities and 
quantities of the securities and other assets held by the Investment 
Company that will form the basis for the Investment Company's 
calculation of net asset value at the end of the business day.
    \8\ The term ``Proxy Basket'' means the identities and 
quantities of the securities and other assets included in a basket 
that is designed to closely track the daily performance of the Fund 
Portfolio, as provided in the exemptive relief under the 1940 Act 
applicable to a series of Proxy Portfolio Shares. The website for 
each series of Proxy Portfolio Shares shall disclose the following 
information regarding the Proxy Basket as required under Rule 5750, 
to the extent applicable:
    (A) Ticker symbol;
    (B) CUSIP or other identifier;
    (C) Description of holding;
    (D) Quantity of each security or other asset held; and
    (E) Percentage weight of the holding in the portfolio.
    \9\ 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 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.
---------------------------------------------------------------------------

    In addition, any person or entity, including a custodian, Reporting 
Authority,\10\ distributor, or administrator, who has access to 
nonpublic information regarding the Fund Portfolio or the Proxy Basket 
or changes thereto, must be subject to procedures designed to prevent 
the use and dissemination of material nonpublic information regarding 
the applicable Fund Portfolio or the Proxy Basket or changes thereto. 
Moreover, if any such person or entity is registered as a broker-dealer 
or affiliated with a broker-dealer, such person or entity will erect 
and maintain a ``fire wall'' between the person or entity and the 
broker-dealer with respect to access to information concerning the 
composition and/or changes to such Fund Portfolio or Proxy Basket.
---------------------------------------------------------------------------

    \10\ The term ``Reporting Authority'' in respect of a particular 
series of Proxy Portfolio Shares means the Exchange, an institution, 
or a reporting service designated by the Exchange or by the exchange 
that lists a particular series of Proxy Portfolio Shares (if the 
Exchange is trading such series pursuant to unlisted trading 
privileges) as the official source for calculating and reporting 
information relating to such series, including, but not limited to, 
the Proxy Basket; the Fund Portfolio; the amount of any cash 
distribution to holders of Proxy Portfolio Shares, net asset value, 
or other information relating to the issuance, redemption or trading 
of Proxy Portfolio Shares. A series of Proxy Portfolio Shares may 
have more than one Reporting Authority, each having different 
functions.
---------------------------------------------------------------------------

    In the event (a) the Adviser or any sub-adviser registers as a 
broker-dealer, or becomes newly affiliated with a broker-dealer, or (b) 
any new adviser or sub-adviser is a registered broker-dealer or becomes 
affiliated with another broker-dealer, it will implement and will 
maintain a fire wall with respect to its relevant personnel and/or such 
broker-dealer affiliate, as applicable, regarding access to information 
concerning the composition and/or changes to the Fund's Portfolio and/
or the Proxy Basket and will be subject to procedures designed to 
prevent the use and dissemination of material non-public information 
regarding the Fund's Portfolio and/or the Proxy Basket.
    The Fund intends to qualify each year as a regulated investment 
company under Subchapter M of the Internal Revenue Code of 1986, as 
amended.
The Fund's Principal Investment Strategies
    The investment objective of the Fund will be to seek total return 
through dividends and capital appreciation. Under normal market 
conditions,\11\ the Fund will seek to achieve its investment objective 
by investing at least 80% of its net assets in exchange-traded equity 
securities of real estate investment trusts.
---------------------------------------------------------------------------

    \11\ The term ``normal market conditions'' as used herein, is 
defined in Nasdaq Rule 5750(c)(4). On a temporary basis, including 
for defensive purposes, during the initial invest-up period and 
during periods of high cash inflows or outflows, the Fund may depart 
from its principal investment strategies; for example, it may hold a 
higher than normal proportion of its assets in cash. During such 
periods, the Fund may not be able to achieve its investment 
objective. The Fund may adopt a defensive strategy when the Adviser 
or any sub-adviser believes securities in which such Fund normally 
invests have elevated risks due to political or economic factors and 
in other extraordinary circumstances.
---------------------------------------------------------------------------

    Under the terms of the Exemptive Order,\12\ the Fund's investments 
are limited to the following: ETFs, exchange-traded notes, exchange 
listed common stocks (excluding ``penny stocks'' as defined in Rule 
3a51-1 under the Act), exchange-traded preferred stocks, exchange-
traded American Depositary Receipts (ADRs), exchange-traded real estate 
investment trusts, exchange-traded commodity pools, exchange-traded 
metals trusts, and exchange-traded currency trusts, in each case that 
are traded on a U.S. securities exchange contemporaneously with the 
Fund Shares; exchange-traded futures that trade contemporaneously with 
the Fund Shares that are U.S. listed futures contracts where the future 
contract's reference asset is an asset that the Fund could invest in 
directly, or in the case of an index future, is based on an index of a 
type of asset that the Fund could invest in directly; common stocks 
listed on a foreign exchange that trade on such exchange 
contemporaneously with the Fund Shares; and cash and cash equivalents 
(which are short-term U.S. Treasury securities, government money market 
funds, and repurchase agreements). The Fund's holdings will conform to 
the permissible investments

[[Page 8974]]

as set forth in the Exemptive Order and the holdings will be consistent 
with all requirements in the Exemptive Order. Any foreign common stocks 
held by the Fund will be traded on an exchange that is a member of the 
Intermarket Surveillance Group (``ISG'') or with which the Exchange has 
in place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    \12\ See supra note 4.
---------------------------------------------------------------------------

Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of Proxy Portfolio Shares on the 
Exchange during all trading sessions and to deter and detect violations 
of Exchange rules and the applicable federal securities laws. Trading 
of Proxy Portfolio Shares on the Exchange will be subject to the 
Exchange's surveillance procedures for derivative products. The 
Exchange will require the issuer of each series of Proxy Portfolio 
Shares listed on the Exchange to represent 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 Exchange Act, the Exchange will surveil 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. In 
addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    The Adviser will upon request make available to the Exchange and/or 
Financial Industry Regulatory Authority (``FINRA''), on behalf of the 
Exchange, the daily Fund Portfolio of each series of Proxy Portfolio 
Shares. The Exchange believes that this is appropriate because it will 
provide the Exchange or FINRA, on behalf of the Exchange, with access 
to the daily Fund Portfolio of any series of Proxy Portfolio Shares 
upon request on an as needed basis. The Exchange believes that the 
ability to access the information on an as needed basis will provide it 
with sufficient information to perform the necessary regulatory 
functions associated with listing and trading series of Proxy Portfolio 
Shares on the Exchange, including the ability to monitor compliance 
with the initial and continued listing requirements as well as the 
ability to surveil for manipulation of the Shares.
Trading Halts
    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 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 Proxy Portfolio 
Shares inadvisable. These may include: (1) The extent to which trading 
is not occurring in the securities and/or the financial instruments 
composing the Proxy Basket or Fund Portfolio; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present. Trading in the Proxy Portfolio 
Shares also will be subject to Rule 5750(d)(2)(D), which sets forth 
circumstances under which a series of Proxy Portfolio Shares 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 4:00 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 5750(b)(3), the minimum 
price variation for quoting and entry of orders in Proxy Portfolio 
Shares traded on the Exchange is $0.01.
Availability of Information
    Form N-PORT requires reporting of a fund's complete portfolio 
holdings on a position-by-position basis on a quarterly basis within 60 
days after fiscal quarter end. Investors can obtain a fund's Statement 
of Additional Information, its Shareholder Reports, its Form N-CSR, 
filed twice a year, and its Form N-CEN, filed annually. A fund's SAI 
and Shareholder Reports are available for free upon request from the 
Investment Company, and those documents and the Form N-PORT, Form N-
CSR, and Form N-CEN may be viewed on-screen or downloaded from the 
Commission's website at www.sec.gov. The Exchange also notes that the 
Exemptive Order provides that an issuer will comply with Regulation 
Fair Disclosure, which prohibits selective disclosure of any material 
non-public information, which otherwise does not apply to issuers of 
Proxy Portfolio Shares. Information regarding market price and trading 
volume of the Shares will be continually available on a real-time basis 
throughout the day on brokers' computer screens and other electronic 
services. Information regarding the previous day's closing price and 
trading volume information for the Shares will be published daily in 
the financial section of newspapers.
Proxy Basket for the Proposed Fund
    For the Fund, the Proxy Basket will consist of all of the Fund's 
portfolio holdings but will be weighted differently, subject to a 
minimum weightings overlap of 90% with the Fund's Portfolio at the 
beginning of each business day. Intraday pricing information for all 
constituents of the Proxy Basket that are exchange-traded, which 
includes all eligible instruments except cash and cash equivalents, 
will be available on the exchanges on which they are traded and through 
subscription services. Intraday pricing information for cash 
equivalents will be available through subscription services and/or 
pricing services. The Exchange notes that the Fund's net asset value 
(``NAV'') will form the basis for creations and redemptions for the 
Fund and creations and redemptions will work in a manner substantively 
identical to that of series of Managed Fund Shares.\13\ The Adviser 
expects that the Shares of the Fund will generally be created and 
redeemed in-kind, with limited exceptions. The names and quantities of 
the instruments that constitute the basket of securities for creations 
and redemptions will be the same as the Fund's Proxy Basket, except to 
the extent purchases and redemptions are made entirely or in part on a 
cash basis. In the event that the value of the Proxy Basket is not the 
same as the Fund's NAV, the creation and redemption baskets will 
consist of the securities included in the Proxy Basket plus or minus an 
amount of cash equal to the difference between the NAV and the value of 
the Proxy Basket, as further described below.
---------------------------------------------------------------------------

    \13\ See Nasdaq Rule 5735.
---------------------------------------------------------------------------

    The Proxy Basket will be constructed utilizing a proprietary 
algorithmic process that will be applied to the Fund Portfolio on a 
daily basis. The Proxy Basket will be publicly available on the Fund 
website before the commencement of trading in Fund Shares on each 
business day. The Proxy Basket will contain all of the names of the 
securities in the Fund Portfolio, and only the securities that are in 
the Fund Portfolio (and also could contain cash to represent the Fund 
Portfolio's holdings of cash). The Proxy Basket will have a minimum 
overlap of 90% with the Fund Portfolio at the beginning of each 
business day, with the precise

[[Page 8975]]

percentage of aggregate overlap in weightings from 90% to 100% to be 
randomly generated each day.
    In addition to the disclosure of the Proxy Basket, the Fund will 
also publish the ``Guardrail Amount'' on its website on each business 
day before the commencement of trading in Shares on the Exchange. The 
Guardrail Amount is the maximum deviation between the weightings of the 
specific securities and cash positions in the Proxy Basket from the 
weightings of those specific securities and cash positions in the Fund 
Portfolio. The Guardrail Amount is intended to ensure that no 
individual security in the Proxy Basket will be overweighted or 
underweighted by more than the publicly disclosed percentage when 
compared to the actual weighting of each security within the Fund 
Portfolio as of the beginning of each business day. The Adviser expects 
the performance of the Proxy Basket and the Fund Portfolio to be 
closely aligned in light of the construction of the Proxy Basket, and 
does not expect the ``Tracking Error'' to exceed 1%. ``Tracking Error'' 
is defined to mean the standard deviation over the past three months of 
the daily difference, in percentage terms, between the Proxy Basket per 
Share NAV and that of the Fund at the end of the business day.
    The Fund will also disclose the entirety of its portfolio holdings, 
including the name, identifier, market value and weight of each 
security and instrument in the portfolio, at a minimum within at least 
60 days following the end of every fiscal quarter. As described above, 
the Exchange notes that the concept of the Proxy Basket employed under 
this structure is designed to provide investors with the traditional 
benefits of ETFs while protecting the Fund from the potential for front 
running or free riding of portfolio transactions, which could adversely 
impact the performance of the Fund.
Additional Information
    The Exchange represents that the Shares of the Fund will continue 
to comply with all other proposed requirements applicable to Proxy 
Portfolio Shares, including the dissemination of key information such 
as the Proxy Basket, the Fund Portfolio, and NAV, suspension of trading 
or removal, trading halts, surveillance, minimum price variation for 
quoting and order entry, an information circular informing members of 
the special characteristics and risks associated with trading in the 
series of Proxy Portfolio Shares, and firewalls as set forth in the 
proposed Exchange rules applicable to Proxy Portfolio Shares.
    Price information for the exchange-listed instruments held by the 
Fund, including both U.S. and non-U.S. listed equity securities and 
U.S. exchange-listed futures will be available through major market 
data vendors or securities exchanges listing and trading such 
securities. Moreover, U.S.-listed equity securities held by the Fund 
will trade on markets that are a member of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing 
agreement.\14\ Any foreign common stocks held by the Fund will be 
traded on an exchange that is a member of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement. 
All futures contracts that the Fund may invest in will be traded on a 
U.S. futures exchange. The Exchange or FINRA, on behalf of the 
Exchange, or both, will communicate as needed regarding trading in the 
Shares, underlying U.S. exchange-listed equity securities, and U.S. 
exchange-listed futures with other markets and other entities that are 
members of ISG, and the Exchange or FINRA, on behalf of the Exchange, 
or both, may obtain trading information regarding trading such 
instruments from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in the Shares, 
underlying equity securities, and U.S. exchange-listed futures from 
markets and other entities that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    \14\ For a list of the current members of ISG, see 
www.isgportal.com. The Exchange notes that not all components of the 
Fund may trade on markets that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing 
agreement.
---------------------------------------------------------------------------

    All statements and representations made in this filing regarding 
the description of the portfolio or reference assets, limitations on 
portfolio holdings or reference assets, dissemination and availability 
of reference assets (as applicable) such as the Fund Portfolio and 
Proxy Basket, or the applicability of Exchange listing rules specified 
in this filing shall constitute continued listing requirements for the 
Shares. A minimum of 100,000 Shares 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 of the Fund that the NAV 
per share of the Fund will be calculated daily and will be made 
available to all market participants at the same time.
    The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund or Shares to comply with the 
continued listing requirements, and, pursuant to its obligations under 
Section 19(g)(1) of the Act, the Exchange will surveil for compliance 
with the continued listing requirements. FINRA conducts certain cross-
market surveillances on behalf of the Exchange pursuant to a regulatory 
services agreement. The Exchange is responsible for FINRA's performance 
under this regulatory services agreement. If a 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 in general and Section 6(b)(5) of the Act, 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, in general, to protect 
investors and the public interest.
    The Exchange believes that the particular instruments that may be 
included in the Fund Portfolio and Proxy Basket do not raise any 
concerns related to the Proxy Basket being able to closely track the 
NAV of the Fund because such instruments include only instruments that 
trade on an exchange contemporaneously with the Shares. In addition, 
the Fund's Proxy Basket is designed to reliably and consistently 
correlate to the performance of the Fund.
    The Adviser anticipates that the returns between the Fund and its 
respective Proxy Basket will have a consistent relationship and that 
the deviation in the returns between the Fund and its Proxy Basket will 
be sufficiently small such that the Proxy Basket will provide 
authorized participants, arbitrageurs and other market participants 
(collectively, ``Market Makers'') with a reliable hedging vehicle that 
they can use to effectuate low-risk arbitrage trades in Fund Shares. 
The Exchange believes that the disclosures provided by the Fund will 
allow Market Makers to understand the relationship between the 
performance of the Fund and its Proxy Basket. Market Makers will be 
able to estimate the value of and hedge positions in the Fund's Shares, 
which

[[Page 8976]]

the Exchange believes will facilitate the arbitrage process and help 
ensure that the Fund's Shares normally will trade at market prices 
close to their NAV. The Exchange also believes that competitive market 
making, where traders are looking to take advantage of differences in 
bid-ask spread, will aid in keeping spreads tight.
    The Exchange notes that a significant amount of information about 
the Fund and its Fund Portfolio is publicly available at all times. 
Each series will disclose the Proxy Basket, which is designed to 
closely track the daily performance of the Fund Portfolio, on a daily 
basis. Intraday pricing information for all constituents of the Proxy 
Basket that are exchange-traded, which includes all eligible 
instruments except cash and cash equivalents, will be available on the 
exchanges on which they are traded and through subscription services. 
Intraday pricing information for cash equivalents will be available 
through subscription services and/or pricing services. Each series of 
Proxy Portfolio Shares will at a minimum publicly disclose the entirety 
of its portfolio holdings, including the name, identifier, market value 
and weight of each security and instrument in the portfolio within at 
least 60 days following the end of every fiscal quarter in a manner 
consistent with normal disclosure requirements otherwise applicable to 
open-end investment companies registered under the 1940 Act.
    The website will include additional quantitative information 
updated on a daily basis, including, on a per Share basis for the Fund, 
the prior business day's NAV and the closing price or bid/ask price at 
the time of calculation of such NAV, and a calculation of the premium 
or discount of the closing price or bid/ask price against such NAV. The 
website will also disclose any other information regarding premiums and 
discounts and the bid/ask spread for the Fund as may be required for 
other ETFs under Rule 6c-11 under the 1940 Act, as amended. On each 
business day, before the commencement of trading of Shares, the Fund 
will publish on its website the Proxy Basket and the Guardrail Amount 
for that day.
    The Exchange represents that the Shares of the Fund will continue 
to comply with all other proposed requirements applicable to Proxy 
Portfolio Shares, including the dissemination of key information such 
as the Proxy Basket, disclosure of the Fund Portfolio quarterly, and 
NAV, suspension of trading or removal, trading halts, surveillance, 
minimum price variation for quoting and order entry, an information 
circular informing members of the special characteristics and risks 
associated with trading in the series of Proxy Portfolio Shares, and 
firewalls as set forth in the proposed Exchange rules applicable to 
Proxy Portfolio Shares and the orders approving such rules. Moreover, 
U.S.-listed equity securities held by the Fund will trade on markets 
that are a member of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.\15\
---------------------------------------------------------------------------

    \15\ Id.
---------------------------------------------------------------------------

    All statements and representations made in this filing regarding 
the description of the portfolio or reference assets, limitations on 
portfolio holdings or reference assets, dissemination and availability 
of reference asset (as applicable), or the applicability of Exchange 
listing rules specified in this filing shall constitute continued 
listing requirements for the Shares. The issuer has represented to the 
Exchange that it will advise the Exchange of any failure by the Fund or 
Shares to comply with the continued listing requirements, and, pursuant 
to its obligations under Section 19(g)(1) of the Act, the Exchange will 
surveil for compliance with the continued listing requirements. A 
minimum of 100,000 Shares 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 of the Fund that the NAV 
per share of the Fund will be calculated daily and will be made 
available to all market participants at the same time.
    FINRA conducts certain cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange is 
responsible for FINRA's performance under this regulatory services 
agreement. If a Fund is not in compliance with the applicable listing 
requirements, the Exchange will commence delisting procedures under the 
Nasdaq 5800 Series.
    For the above reasons, the Exchange believes that 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. Rather, the Exchange notes 
that the proposed rule change will facilitate the listing of a new type 
of actively-managed exchange-traded product, thus enhancing competition 
among both market participants and listing venues, to the benefit of 
investors and the marketplace.

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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \16\ and Rule 19b-
4(f)(6) thereunder.\17\
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of 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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \18\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \19\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay. The 
proposed rule change is substantially similar to previous proposals on 
which the Commission has granted waiver of the operative delay,\20\ 
does not raise any novel regulatory issues, and the Commission believes 
that waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposal as operative upon filing.\21\
---------------------------------------------------------------------------

    \18\ 17 CFR 240.19b-4(f)(6).
    \19\ 17 CFR 240.19b-4(f)(6)(iii).
    \20\ See Securities Exchange Act Releases No. 90684 (Dec. 16, 
2020), 85 FR 83637 (Dec. 22, 2020) (File No. SR-CboeBZX-2020-091) 
and 90686 (Dec. 16, 2020), 85 FR 83657 (Dec. 22, 2020) (File No. SR-
CboeBZX-2020-090).
    \21\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may

[[Page 8977]]

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-2021-005 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-2021-005. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2021-005, and should be submitted 
on or before March 3, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02711 Filed 2-9-21; 8:45 am]
BILLING CODE 8011-01-P


