Document ID: SEC-2015-1131-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market, LLC
Posted Date: 2015-07-08T04:00Z

[Federal Register Volume 80, Number 130 (Wednesday, July 8, 2015)]
[Notices]
[Pages 39166-39169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-16652]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75349; File No. SR-NASDAQ-2015-049]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment 
Nos. 1 and 2 Thereto, Relating to the Listing and Trading of the Shares 
of the PowerShares DB Optimum Yield Diversified Commodity Strategy 
Portfolio, PowerShares Agriculture Commodity Strategy Portfolio, 
PowerShares Precious Metals Commodity Strategy Portfolio, PowerShares 
Energy Commodity Strategy Portfolio, PowerShares Base Metals Commodity 
Strategy Portfolio and PowerShares Bloomberg Commodity Strategy 
Portfolio, Each a Series of PowerShares Actively Managed Exchange-
Traded Commodity Fund Trust

July 1, 2015.

I. Introduction

    On April 30, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change relating to the listing and trading of shares 
(``Shares'') of the PowerShares DB Optimum Yield Diversified Commodity 
Strategy Portfolio, PowerShares Agriculture Commodity Strategy 
Portfolio, PowerShares Precious Metals Commodity Strategy Portfolio, 
PowerShares Energy Commodity Strategy Portfolio, PowerShares Base 
Metals Commodity Strategy Portfolio and PowerShares Bloomberg Commodity 
Strategy Portfolio (individually, ``Fund,'' and collectively, 
``Funds''), each a series of the PowerShares Actively Managed Exchange-
Traded Commodity Fund Trust (``Trust'') \3\ under Nasdaq Rule 5735. The 
proposed rule change was published for comment in the Federal Register 
on May 21, 2015.\4\ On June 30, 2015, the Exchange filed Amendment No. 
1 to the proposed rule change, and on July 1, 2015, the Exchange filed 
Amendment No. 2 to the proposed rule change.\5\ The Commission received 
no comments on the proposal. This order grants approval of the proposed 
rule change, as modified by Amendment Nos. 1 and 2 thereto.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ According to the Exchange, the Trust is registered with the 
Commission as an investment company and has filed a registration 
statement on Form N-1A with the Commission. A description of each 
Fund's investment strategy is set forth in the Trust's registration 
statement (``Registration Statement''). See Pre-effective Amendment 
No. 1 to the Registration Statement for the Trust, dated May 20, 
2014 (File Nos. 333-193135 and 811-22927).
    \4\ See Securities Exchange Act Release No. 74979 (May 15, 
2015), 80 FR 29359 (``Notice'').
    \5\ In Amendment No. 1 to the proposed rule change, the 
Exchange: (a) Made a technical typographical correction to the 
citation in its filing referencing an exemptive order issued under 
the Investment Company Act of 1940 (``1940 Act''); and (b) clarified 
that only the Subsidiary (as defined herein) will hold Commodity-
Linked Instruments (as defined herein) by removing the following 
statement in the filing: ``in addition, each Fund may hold 
instruments that its respective Subsidiary is entitled to hold, and 
vice versa, to the extent consistent with federal tax 
requirements.''. In Amendment No. 2 to the proposed rule change, the 
Exchange further clarified that (a) each Fund, through its 
respective Subsidiary (but not directly), will only invest in those 
commodity-linked notes, OTC Swaps, Forwards, or other over-the-
counter instruments that are based on the price of relevant 
Commodities Futures, as applicable, and tend to exhibit trading 
prices or returns that correlate with any Commodities Futures and 
that will further the investment objective of such Fund (each ``OTC 
Swaps,'' ``Forwards,'' and ``Commodities Futures,'' as defined 
herein); and (b) each Subsidiary (not each Fund) will enter into 
swap agreements and other over-the-counter transactions only with 
large, established, and well capitalized financial institutions that 
meet certain credit quality standards and monitoring policies, and 
each Subsidiary (not each Fund) will use various techniques to 
minimize credit risk, including early termination, or reset and 
payment of such investments, the use of different counterparties, or 
limiting the net amount due from any individual counterparty. 
Because Amendment Nos. 1 and 2 to the proposed rule change seek to 
make certain clarifications and technical corrections, and do not 
materially affect the substance of the proposed rule change or raise 
unique or novel regulatory issues, Amendment Nos. 1 and 2 to the 
proposed rule change do not require notice and comment. The text of 
Amendment Nos. 1 and 2 is available at: http://www.sec.gov/rules/sro/nasdaq.shtml.
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II. Description of the Proposed Rule Change

    The Commission previously approved the listing and trading of the 
Shares on the Exchange under Nasdaq Rule 5735, which governs the 
listing and trading of Managed Fund Shares.\6\ According to the 
Exchange, the Shares of the PowerShares DB Optimum Yield Diversified 
Commodity Strategy

[[Page 39167]]

Portfolio have commenced trading on the Exchange; the Shares of the 
other Funds have not. The Exchange proposes to permit the listing or 
continued listing, as the case may be, of the Shares based on certain 
proposed revisions to their investment strategies, as described in more 
detail below.\7\
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    \6\ See Securities Exchange Act Release Nos. 73078 (Sept. 11, 
2014), 79 FR 55851 (Sept. 17, 2014) (SR-NASDAQ-2014-80) (``Prior 
Notice''); and 73471 (Oct. 30, 2014), 79 FR 65751 (Nov. 5, 2014) 
(SR-NASDAQ-2014-080) (``Prior Order,'' and, together with the Prior 
Notice, collectively, ``Prior Release'').
    \7\ The Exchange states that the changes described herein will 
be effective contingent upon effectiveness of a post-effective 
amendment to the Registration Statement of the Trust, on behalf of 
each Fund.
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A. Principal Investments

    As stated in the Prior Release, each Fund's investment objective is 
to seek long-term capital appreciation. The Prior Release states that 
each Fund seeks to achieve its investment objective by investing, under 
normal circumstances,\8\ in a combination of: (i) A wholly-owned 
subsidiary organized under the laws of the Cayman Islands 
(individually, ``Subsidiary,'' and collectively, ``Subsidiaries''); 
(ii) exchange-traded products or exchange-traded commodity pools; \9\ 
and (iii) U.S. Treasury Securities, money market mutual funds, high 
quality commercial paper, and similar instruments (``Collateral 
Instruments'').\10\
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    \8\ The term ``under normal circumstances'' includes, but is not 
limited to, the absence of extreme volatility or trading halts in 
the equity, commodities and futures markets or the financial markets 
generally; operational issues causing dissemination of inaccurate 
market information; or force majeure type events such as systems 
failure, natural or manmade disaster, act of God, armed conflict, 
act of terrorism, riot or labor disruption, or any similar 
intervening circumstance.
    \9\ Specifically, the Prior Release noted that the Funds will 
invest in: (1) Exchange-traded funds (``ETFs'') that provide 
exposure to commodities, as would be listed under Nasdaq Rules 5705 
and 5735; (2) exchange-traded notes (``ETNs'') that provide exposure 
to commodities, as would be listed under Nasdaq Rule 5710; or (3) 
exchange-traded pooled investment vehicles that invest primarily in 
commodities and commodity-linked instruments, as would be listed 
under Nasdaq Rules 5711(b), (d), (f), (g), (h), (i), and (j) 
(``Commodity Pool'' or ``Commodity Pools'').
    \10\ The Exchange represents that, for a Fund's purposes, money 
market instruments will include: Short-term, high quality securities 
issued or guaranteed by non-U.S. governments, agencies, and 
instrumentalities; non-convertible corporate debt securities with 
remaining maturities of not more than 397 days that satisfy ratings 
requirements under Rule 2a-7 of the 1940 Act; money market mutual 
funds; and deposits and other obligations of U.S. and non-U.S. banks 
and financial institutions.
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    The Prior Release also states that each Subsidiary will invest in 
exchange-traded futures contracts linked to commodities (``Commodities 
Futures'') to provide its parent Fund with additional indirect exposure 
to the commodities markets. Each Fund's investment in its Subsidiary is 
designed to help the Fund obtain exposure to Commodities Futures 
returns in a manner consistent with the federal tax requirements 
applicable to regulated investment companies, such as the Funds, which 
limit the ability of investment companies to invest directly in 
derivative instruments such as Commodities Futures.
    In this proposed rule change, the Exchange seeks to make certain 
revisions to the investment strategy described in the Prior Release. 
Specifically, the proposal seeks to allow the Funds and the 
Subsidiaries, as applicable, to also invest in a variety of other 
securities and instruments beyond those set forth in the Prior Release, 
as follows:
     Each Fund, which already may invest in ETFs, ETNs, and 
Commodity Pools, seeks to also invest in: (i) Other investment 
companies,\11\ to the extent permitted under the 1940 Act; \12\ and 
(ii) exchange-traded commodity-linked equity securities \13\ (``Equity 
Securities'') (collectively, ``Commodity-Related Assets'').
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    \11\ In addition to ETFs, the other investment companies will 
consist of non-exchange traded U.S. registered open-end investment 
companies (mutual funds), closed-end investment companies traded on 
U.S. exchanges, or exchange-traded non-U.S. investment companies 
traded on foreign exchanges.
    \12\ According to the Exchange, each Fund's investment in 
securities of other investment companies may exceed the limits 
permitted under the 1940 Act, in accordance with certain terms and 
conditions set forth in a Commission exemptive order issued to an 
affiliate of the Trust (which applies equally to the Trust) pursuant 
to Section 12(d)(1)(J) of the 1940 Act. See Investment Company Act 
Release No. 30238 (Oct. 23, 2012) (File No. 812-13820) or, in the 
case of non-U.S. investment companies, pursuant to Commission No-
Action relief. See Red Rocks Capital, LLC (pub. avail. June 3, 
2011).
    \13\ Equity Securities will be comprised of exchange-traded 
common stocks of companies that operate in commodities, natural 
resources, and energy businesses, and in associated businesses, as 
well as companies that provide services or have exposure to such 
businesses.
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     each Subsidiary, which already may invest in Commodities 
Futures, now also seeks to invest in: (i) Exchange-traded futures 
contracts on commodity indices; (ii) commodity-linked notes; \14\ (iii) 
ETNs; (iv) exchange-traded options on Commodities Futures 
(``Options''); \15\ (v) centrally-cleared or over the counter (``OTC'') 
swaps on commodities (``Swaps''); and (vi) commodity-related forward 
contracts (``Forwards'') (collectively, ``Commodity-Linked 
Instruments''), which provide exposure to the investment returns of the 
commodities markets, without investing directly in physical 
commodities.
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    \14\ According to the Exchange, such commodity-linked notes 
generally will not be exchange-traded; however it is possible that 
in the future some of those instruments could be listed for trading 
on an exchange.
    \15\ The Prior Release noted that with respect to Commodities 
Futures held indirectly through a Subsidiary, not more than 10% of 
the weight of such Commodities Futures in the aggregate shall 
consist of instruments whose principal trading market is not a 
member of the Intermarket Surveillance Group (``ISG'') or a market 
with which the Exchange does not have a comprehensive surveillance 
sharing agreement. The Exchange now clarifies that Options and 
commodity index futures will be subject to the same restrictions as 
Commodities Futures, and that Options and commodity index futures 
will be considered in the aggregate with Commodities Futures. 
Therefore, with respect to Commodities Futures, commodity index 
futures, and Options, not more than 10% of the weight of such 
Commodities Futures, commodity index futures, and Options, in the 
aggregate, shall consist of instruments whose principal trading 
market is not a member of the ISG or a market with which the 
Exchange does not have a comprehensive surveillance sharing 
agreement. The Exchange states that this 10% limitation applicable 
to Commodities Futures, commodity index futures, and Options, in the 
aggregate, is separate from the 10% limitation applicable to 
exchange traded equity securities described herein, and is 
determined separately from this other limitation.
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    The Prior Release notes that all of the exchange-traded securities 
held by a Fund will be traded in a principal trading market that is a 
member of ISG or a market with which the Exchange has a comprehensive 
surveillance sharing agreement. The Funds propose to invest in Equity 
Securities, closed-end funds, ETFs, ETNs, Commodity Pools, and non-U.S. 
investment companies that are not traded in a principal trading market 
that is a member of ISG or a market with which the Exchange has a 
comprehensive surveillance sharing agreement; however, not more than 
10% of each Fund's investments in these investments (in the aggregate) 
will be invested in instruments that trade in markets that are not 
members of the ISG or that are not parties to a comprehensive 
surveillance sharing agreement with the Exchange.
    According to the Exchange, these additional instruments are 
intended to support each Fund's principal investment strategy by 
providing each Fund with the flexibility to obtain additional exposure 
to the investment returns of the commodities markets within the limits 
of applicable federal tax requirements and without investing directly 
in physical commodities. Each Fund, through its respective Subsidiary, 
will only invest in those commodity-linked notes, OTC Swaps, Forwards, 
or other over-the-counter instruments that are based on the price of 
relevant Commodities Futures, as applicable, and tend to exhibit 
trading prices or returns that correlate with any Commodities Futures 
and that will further the investment objective of such Fund.\16\ The 
Funds represent that the

[[Page 39168]]

descriptions of the original asset types included in the Prior Release 
remain otherwise unchanged and that the Funds and their Subsidiaries 
will adhere to all investment restrictions set forth in the Prior 
Release as they apply to the original asset types. The Funds also 
represent that the investments in these additional asset types will be 
consistent with each Fund's investment objective.
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    \16\ Each Subsidiary will enter into swap agreements and other 
over-the-counter transactions only with large, established, and well 
capitalized financial institutions that meet certain credit quality 
standards and monitoring policies. Each Subsidiary will use various 
techniques to minimize credit risk, including early termination, or 
reset and payment of such investments, the use of different 
counterparties, or limiting the net amount due from any individual 
counterparty.
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    The Exchange represents that, except for these changes described 
herein, all other facts presented and representations made in the Prior 
Release remain unchanged and in full effect. Additional information 
regarding the Trust, Fund, and Shares, including investment strategies 
and restrictions, risks, creation and redemption procedures, fees, 
portfolio holdings disclosure policies, distributions and taxes, 
calculation of net asset value (``NAV''), availability of information, 
trading rules and halts, and surveillance procedures, among other 
things, can be found in the Registration Statement, Notice, and Prior 
Release, as applicable.\17\
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    \17\ See Registration Statement, Notice, and Prior Release, 
supra notes 3, 4, and 6, respectively, and accompanying text.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment Nos. 1 and 2 thereto, is consistent 
with the requirements of Section 6 of the Act \18\ and the rules and 
regulations thereunder applicable to a national securities 
exchange.\19\ In particular, the Commission finds that the proposed 
rule change, as modified by Amendment Nos. 1 and 2 thereto, is 
consistent with the requirements of Section 6(b)(5) of the Act,\20\ 
which requires, among other things, that the Exchange's rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. The Commission also finds 
that the proposal to list and trade the Shares on the Exchange is 
consistent with Section 11A(a)(1)(C)(iii) of the Act,\21\ which sets 
forth the finding of Congress that it is in the public interest and 
appropriate for the protection of investors and the maintenance of fair 
and orderly markets to assure the availability to brokers, dealers, and 
investors of information with respect to quotations for, and 
transactions in, securities.
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    \18\ 15 U.S.C. 78(f).
    \19\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Exchange represents that not more than 10% of each Fund's 
investments in Equity Securities, closed-end funds, ETFs, ETNs, 
Commodity Pools, and non-U.S. investment companies, in the aggregate, 
will be invested in instruments that trade in markets that are not 
members of the ISG or that are not parties to a comprehensive 
surveillance sharing agreement with the Exchange. In addition, the 
Exchange represents that, with respect to Commodities Futures, 
commodity index futures, and Options, not more than 10% of the weight 
of such Commodities Futures, commodity index futures, and Options, in 
the aggregate, will consist of instruments whose principal trading 
market is not a member of the ISG or a market with which the Exchange 
does not have a comprehensive surveillance sharing agreement. The 
Commission further notes that: (1) Commodity-Linked Instruments will 
only be held at the Fund's Subsidiary level; \22\ and (2) according to 
the Prior Release, each Fund's investment in a Subsidiary may not 
exceed 25% of the Fund's total assets.\23\
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    \22\ See Amendment No. 1, supra note 5.
    \23\ See Prior Release, supra note 6. The Commission further 
notes that, according to the Prior Release, because each Fund will 
wholly own and control its respective Subsidiary, and the Fund and 
the Subsidiary will be managed by Invesco PowerShares Capital 
Management LLC (``Adviser''), the Subsidiary will not take action 
contrary to the interests of the Fund or the Fund's shareholders. 
The Board of Trustees of the Trust has oversight responsibility for 
the investment activities of each Fund, including its expected 
investments in its Subsidiary, and that Fund's role as the sole 
shareholder of such Subsidiary. In managing a Subsidiary's 
portfolio, the Adviser will be subject to the same investment 
restrictions and operational guidelines that apply to the management 
of a Fund. See Prior Release, supra note 6, 79 FR at 55853.
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    With respect to the calculation of NAV, in addition to the 
information set forth in the Prior Release, the Exchange represents 
that: (i) Equity Securities, ETNs, and futures on commodity indices 
will be valued at the last sales price or the official closing price on 
the exchange where such securities principally trade; (ii) investment 
companies will be valued using such company's end of the day NAV per 
share, unless the shares are exchange-traded, in which case they will 
be valued at the last sales price or official closing price on the 
exchanges on which they primarily trade; (iii) Options generally will 
be valued at the closing price (and, if no closing price is available, 
at the mean of the last bid/ask quotations) generally from the exchange 
where such instruments principally trade; and (iv) Swaps, commodity-
linked notes and Forwards generally will be valued based on quotations 
from a pricing vendor (such quotations being derived from available 
market- and company-specific data), all in accordance with valuation 
procedures adopted by the Board of Trustees of the Trust. All other 
valuation procedures pertaining to the Funds, and as set forth in the 
Prior Release, are unchanged.
    On each business day, before commencement of trading in Shares in 
the Regular Market Session on the Exchange, each Fund will disclose on 
its Web site the identities and quantities of its portfolio of 
securities and other assets (``Disclosed Portfolio,'' as defined in 
Nasdaq Rule 5735(c)(2)) held by such Fund and its Subsidiary, which 
will form the basis for each Fund's calculation of NAV at the end of 
the business day. In addition to the information set forth in the Prior 
Release, the Funds will disclose on a daily basis on the Funds' Web 
site the following information regarding each portfolio holding, as 
applicable to the type of holding: ticker symbol, CUSIP number or other 
identifier, if any; a description of the holding (including the type of 
holding), the identity of the security or other asset or instrument 
underlying the holding, if any; for options, the option strike price; 
for Swaps, a description of the type of Swap; quantity held (as 
measured by, for example, par value, notional value or number of 
shares, contracts or units); maturity date, if any; coupon rate, if 
any; effective date, if any; market value of the holding; and 
percentage weighting of the holding in the Fund's portfolio. The Web 
site information will be publicly available at no charge. Intra-day 
price information on the exchange-traded assets held by the Fund and 
the Subsidiary, including the Equity Securities, ETNs, Options, 
exchange-traded investment companies (including closed-end funds), and 
exchange-traded futures contracts on commodity indices will be 
available via the quote and trade service of the respective exchanges 
on

[[Page 39169]]

which they principally trade. Additionally, price information on Swaps, 
commodity-linked notes, Forwards, and non-exchange traded investment 
companies will be available from major broker-dealer firms or through 
subscription services, such as Bloomberg, Markit, and Thomson Reuters, 
which can be accessed by entities that have entered into an authorized 
participant agreement with the Trust and other investors.
    In addition to the information set forth in the Prior Release, the 
Exchange represents that: (i) FINRA, on behalf of the Exchange, will 
communicate as needed regarding trading information it can obtain 
relating to exchange-traded or centrally-cleared equity securities and 
assets held by a Fund or its Subsidiary, as applicable, which include 
exchange-traded Commodity-Related Assets and exchange-traded or 
centrally-cleared Commodity-Linked Instruments, with other markets and 
other entities that are members of the ISG; (ii) FINRA may obtain 
trading information regarding trading in exchange-traded equity 
securities and other assets held by each Fund and each Subsidiary, as 
applicable, from such markets and other entities; and (iii) the 
Exchange may obtain information regarding trading in exchange-traded 
equity securities and other assets held by each Fund and each 
Subsidiary from such markets and other entities (as long as such 
markets and other entities are members of ISG or have in place a 
comprehensive surveillance sharing agreement with the Exchange). The 
Exchange has a general policy prohibiting the distribution of material, 
non-public information by its employees.
    The Commission notes that, beyond the changes described herein, the 
Exchange represents that there are no changes to any other information 
included in the Prior Release, and all other facts presented and 
representations made in the Prior Release remain true and in effect. 
The Commission further notes that the Funds and the Shares must comply 
with the requirements of Nasdaq Rule 5735 to be initially and 
continuously listed and traded on the Exchange. This approval order is 
based on all of the Exchange's representations and description of the 
Funds, including those set forth above, in the Prior Release, and in 
the Notice.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\24\ that the proposed rule change (SR-NASDAQ-2015-049), as 
modified by Amendment Nos. 1 and 2 thereto, be, and it hereby is, 
approved.
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    \24\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-16652 Filed 7-7-15; 8:45 am]
 BILLING CODE 8011-01-P