Document ID: SEC-2015-1669-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market, LLC
Posted Date: 2015-10-16T04:00Z

[Federal Register Volume 80, Number 200 (Friday, October 16, 2015)]
[Notices]
[Pages 62580-62584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26323]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76126; File No. SR-NASDAQ-2015-095]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Granting Approval of Proposed Rule Change Relating to the Listing and 
Trading of the Shares of the AltShares Long/Short High Yield Fund of 
ETFis Series Trust I

October 9, 2015.

I. Introduction

    On August 7, 2015, The NASDAQ Stock Market LLC (the ``Exchange'' or 
``Nasdaq'') filed with the Securities and Exchange Commission'' 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to list and trade shares 
(``Shares'') of the AltShares Long/Short High Yield Fund (``Fund'') of 
ETFis Series Trust I (``Trust'') under NASDAQ Rule 5735. The proposed 
rule change was published for comment in the Federal Register on August 
25, 2015.\3\ The Commission received no comments on the proposed rule 
change. This order grants approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 75738 (August 19, 
2015), 80 FR 51632 (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to list and trade the Shares under Nasdaq 
Rule 5735, which governs the listing and trading of Managed Fund Shares 
on the Exchange. The Fund will be an actively-managed exchange-traded 
fund (``ETF''). The Shares will be offered by the Trust,\4\ which is 
registered with the Commission as an investment company and has filed a 
registration statement on Form N-1A (``Registration Statement'')

[[Page 62581]]

with the Commission.\5\ The Fund will be a series of the Trust.
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    \4\ According to the Exchange, the Adviser (as defined herein) 
has obtained certain exemptive relief, upon which the Trust may 
rely, under the Investment Company Act of 1940 (``1940 Act''). See 
Investment Company Act Release No. 30607 (July 23, 2013) (File No. 
812-14080).
    \5\ See Post-Effective Amendment No. 40/41 to Form N-1A 
Registration Statement for the Trust, dated May 4, 2015 (File Nos. 
333-187668 and 811-22819).
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    Etfis Capital LLC will be the investment adviser (``Adviser'') to 
the Fund, and Bramshill Investments, LLC will be the investment sub-
adviser to the Fund (``Sub-Adviser''). ETF Distributors LLC 
(``Distributor'') will be the principal underwriter and distributor of 
the Fund's Shares. The Bank of New York Mellon Corporation (``BNY'') 
will act as the administrator, accounting agent, custodian, and 
transfer agent to the Fund. The Exchange states that the Adviser is not 
a broker-dealer, although it is affiliated with the Distributor, a 
broker-dealer.\6\ The Exchange represents that the Adviser has 
implemented a fire wall with respect to its broker-dealer affiliate 
regarding access to information concerning the composition and/or 
changes to the portfolio.\7\ According to the Exchange, the Sub-Adviser 
is not a broker-dealer and is not affiliated with a broker-dealer.\8\
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    \6\ See Notice, supra note 3, 80 FR at 51632.
    \7\ See id.
    \8\ In the event (a) the Adviser or the Sub-Adviser becomes 
newly affiliated with a broker-dealer or registers as a broker-
dealer, or (b) any new adviser or new sub-adviser is a registered 
broker-dealer or is or becomes affiliated with a broker-dealer, it 
will implement a fire wall with respect to its relevant personnel 
and/or such broker-dealer affiliate, as applicable, regarding access 
to information concerning the composition and/or changes to the Fund 
portfolio and will be subject to procedures designed to prevent the 
use and dissemination of material nonpublic information regarding 
such portfolio.
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    The Exchange has made the following representations and statements 
in describing the Fund and its investment strategy, including the 
Fund's portfolio holdings and investment restrictions.\9\
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    \9\ The Commission notes that additional information regarding 
the Fund, the Trust, and the Shares, including investment 
strategies, risks, creation and redemption procedures, fees, 
portfolio holdings disclosure policies, calculation of net asset 
value (``NAV''), distributions, and taxes, among other things, can 
be found in the Notice and the Registration Statement, as 
applicable. See Notice and Registration Statement, supra notes 3 and 
5, respectively.
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A. Exchange's Description of the Fund's Principal Investments

    The investment objective of the Fund will be to seek current income 
and capital appreciation with reduced volatility over time. The Fund 
will seek to achieve its investment objective primarily by investing in 
a portfolio of ``high yield'' debt securities of U.S. companies. Under 
normal market conditions,\10\ the Fund will hold long positions in high 
yield debt securities selected because the Sub-Adviser believes they 
are likely to outperform the market over time or increase in value in 
the near term (``Long Position''), and will hold short positions in 
high yield debt securities selected because the Sub-Adviser believes 
they are likely to lose value in the near or longer term (``Short 
Position'').
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    \10\ The term ``under normal market conditions'' as used herein 
includes, but is not limited to, the absence of adverse market, 
economic, political or other conditions, including extreme 
volatility or trading halts in the fixed income or other securities 
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 man-made 
disaster, act of God, armed conflict, act of terrorism, riot or 
labor disruption, or any similar intervening circumstance.
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    The Fund will not have any portfolio maturity limitation and may 
invest its assets in instruments with short-term, medium-term, or long-
term maturities. Issuers of securities in which the Fund expects to 
invest will include large and medium capitalization companies, and may 
include small capitalization companies. According to the Exchange, the 
Sub-Adviser expects the Fund's investment portfolio to include up to 
200 different securities positions with a target portfolio net exposure 
(the market value of the Long Position minus the market value of the 
Short Position) of between -20% and 100%.\11\
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    \11\ See Notice, supra note 3, 80 FR at 51633.
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    In selecting securities for the Fund's portfolio, the Sub-Adviser 
generally will analyze debt securities included in the Bloomberg USD 
Corporate High Yield Bond Index. While the Fund may invest directly in 
high yield debt securities, the Sub-Adviser may also implement the 
Fund's strategy by investing in exchange-traded pools (which will 
consist of exchange-traded funds, exchange-traded notes, or closed-end 
funds, each of which will be listed for trading on a U.S. exchange, 
collectively, ``ETPs'') that invest a significant portion of their 
portfolios in high yield debt instruments (``High Yield ETPs'').
    Positions in high-yield debt securities also may include foreign 
debt securities traded on U.S. or foreign exchanges or in U.S. or 
foreign over-the-counter markets, which may be denominated in foreign 
currencies. Any currency hedging will be accomplished by taking long or 
short positions in ETPs.
    The Exchange states that ``high yield debt securities'' generally 
include debt securities that are rated lower than ``BBB-'' by Standard 
& Poor's Ratings Group or ``Baa3'' by Moody's Investors Service, Inc. 
or at a similar level by another nationally recognized statistical 
rating organization, or are unrated but are deemed to be of comparable 
quality by the Sub-Adviser.\12\ These securities will consist of: (a) 
Senior and subordinated corporate debt obligations (bonds, debentures, 
notes, and commercial paper); (b) senior bank loans (including through 
loan assignments and loan participations); (c) preferred stocks; (d) 
municipal bonds; (e) convertible bonds; and (f) convertible preferred 
stocks.\13\ The Fund will not invest in other types of high-yield debt 
securities, such as asset-backed securities. The Fund will not be 
limited to investing in high-yield securities, so any of the securities 
listed may also be investment grade. In addition, the Fund may invest 
in U.S. treasuries.
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    \12\ See id.
    \13\ The Exchange states that convertible bonds and convertible 
preferred stocks in which the Fund may invest, and the equity 
securities into which these securities may be converted, and also 
preferred stocks (non-convertible) in which the Fund may invest, 
generally will be exchange-traded. According to the Exchange, the 
Sub-Adviser's current expectation is that at least 80% of these 
securities will be exchange-traded. The Exchange represents that at 
least 90% of these exchange-traded securities will be traded on 
exchanges that are Intermarket Surveillance Group (``ISG'') members. 
See id. at 51633 n.12.
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    According to the Exchange, as a result of its trading strategy, the 
Fund expects to engage in frequent portfolio transactions that will 
likely result in higher portfolio turnover than other similar 
investment companies.\14\ Under normal circumstances, the anticipated 
annual portfolio turnover rate for the Fund is expected to be greater 
than 100%.
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    \14\ See id. at 51633.
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B. Exchange's Description of the Fund's Other Investments

    In addition to investing in High Yield ETPs, the Fund may invest in 
other fixed-income ETPs, but the Fund will not invest in leveraged 
ETPs. The Exchange states that the Fund will not purchase more than 3% 
of an ETF's outstanding shares unless: (i) The ETF or the Fund has 
received an order for exemptive relief from the 3% limitation from the 
Commission that is applicable to the Fund; and (ii) the ETF and the 
Fund take appropriate steps to comply with any conditions in such 
order.\15\ The Fund also may invest in warrants.\16\
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    \15\ See id.
    \16\ The Exchange states that warrants in which the Fund 
invests, and the equity securities into which these warrants may be 
converted, generally will be exchange-traded. According to the 
Exchange, the Sub-Adviser's current expectation is that at least 80% 
of these securities will be exchange-traded. The Exchange represents 
that at least 90% of these exchange-traded securities will be traded 
on exchanges that are ISG members. See Notice, supra note 3, 80 FR 
at 51633 n.13.
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    In certain adverse market, economic, political, or other 
conditions, the Fund

[[Page 62582]]

may temporarily depart from its normal investment policies and 
strategy, provided that the alternative is consistent with the Fund's 
investment objective and is in the best interest of the Fund. At such 
times, the Fund may invest in cash or cash equivalents, such as money 
market instruments,\17\ and to the extent permitted by applicable law 
and the Fund's investment restrictions, the Fund may invest in shares 
of money market mutual funds. Under such circumstances, the Fund may 
invest up to 100% of its assets in these investments and may do so for 
extended periods of time. Under normal circumstances, however, the Fund 
may also hold money market instruments and/or shares of money market 
mutual funds for various reasons including to provide for funds 
awaiting investment, to accumulate cash for anticipated purchases of 
portfolio securities, to allow for shareholder redemptions, and to 
provide for the Fund's operating expenses.
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    \17\ The Exchange states that the money market instruments in 
which the Fund may invest are short-term (less than one-year) notes 
issued by (i) the U.S. government, (ii) an agency of the U.S. 
government, or (iii) a U.S. corporation. See id. at 51633 n.14.
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C. Exchange's Description of the Fund's Investment Restrictions

    According to the Exchange, the Fund anticipates investing entirely 
in fully liquid assets, but it has the flexibility to invest up to 15% 
of its net assets in illiquid securities and other illiquid assets.\18\ 
Under the supervision of the Board of Trustees of the Trust (``Trust 
Board''), the Sub-Adviser will determine the liquidity of the Fund's 
investments, and through reports from the Sub-Adviser, the Trust Board 
will monitor investments in illiquid instruments.\19\ The Exchange 
represents that, if through a change in values, net assets, or other 
circumstances, the Fund were in a position where more than 15% of its 
net assets were invested in illiquid securities or other illiquid 
assets, it would seek to take appropriate steps to protect 
liquidity.\20\
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    \18\ See id. at 51633-34.
    \19\ According to the Exchange, in determining the liquidity of 
the Fund's investments, the Sub-Adviser may consider various factors 
including: (i) The frequency of trades and quotations; (ii) the 
number of dealers and prospective purchasers in the marketplace; 
(iii) dealer undertakings to make a market; (iv) the nature of the 
security (including any demand or tender features); and (v) the 
nature of the marketplace for trades (including the ability to 
assign or offset the Fund's rights and obligations relating to the 
investment). See Notice, supra note 3, 80 FR at 51634.
    \20\ See id.
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    The Fund will generally seek to invest in high-yield debt 
securities, bank loans, and other debt issuances that the Sub-Adviser 
deems to be liquid, with readily available prices. The Fund will only 
invest in bank loans that have a par amount outstanding of U.S. $100 
million or greater at the time the loan is originally issued. The Fund 
will not enter into a long or short position in high yield debt 
securities with a par amount outstanding of less than U.S. $100 million 
at the time of issuance of such high yield debt securities, if upon 
establishing such position, the total value of such positions would 
represent fifty percent or greater of the Fund's net assets.
    The Fund will not invest more than 25% of the value of its total 
assets in securities of issuers in any particular industry.
    The Fund's investments (including investments in ETPs) will not be 
utilized to seek to achieve a leveraged return on the Fund's net 
assets. The Exchange represents that the Fund will not invest in 
futures contracts, options, swaps, or other derivative instruments.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\21\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Exchange 
Act,\22\ which requires, among other things, that the Exchange's rules 
be designed to promote just and equitable principles of trade, 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.
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    \21\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \22\ 15 U.S.C. 78f(b)(5).
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    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 Exchange Act,\23\ 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. Quotation 
and last-sale information for the Shares and the exchange-traded 
securities held by the Fund will be available via UTP Level 1, as well 
as Nasdaq proprietary quote and trade services.\24\ On each business 
day, before commencement of trading in Shares in the Regular Market 
Session \25\ on the Exchange, the Trust will disclose on its Web site 
the identities and quantities of the portfolio of securities and other 
assets (``Disclosed Portfolio'') held by the Fund that will form the 
basis for the Fund's calculation of NAV at the end of the business 
day.\26\ In addition, the Intraday Indicative Value, available on the 
NASDAQ OMX Information LLC proprietary index data service,\27\ will be 
based upon the current value for the components of the Disclosed 
Portfolio and will be updated and widely disseminated and broadly 
displayed at least every 15 seconds during the Regular Market 
Session.\28\ During hours when the local markets for foreign securities 
in the Fund's portfolio are closed, the Intraday Indicative Value will 
be updated at least every 15 seconds during the Regular Market Session 
to reflect currency exchange fluctuations.\29\ The NAV of the Fund will 
be calculated by BNY and determined at the close of regular trading on 
the New York Stock

[[Page 62583]]

Exchange (ordinarily 4:00 p.m. Eastern time) on each day that such 
exchange is open.\30\ The Web site for the Fund will include a form of 
the prospectus for the Fund and additional data relating to NAV and 
other applicable quantitative information.\31\
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    \23\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \24\ See Notice, supra note 3, 80 FR at 51636.
    \25\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 7:00 a.m. to 
9:30 a.m. Eastern time; (2) Regular Market Session from 9:30 a.m. to 
4:00 p.m. or 4:15 p.m. Eastern time; and (3) Post-Market Session 
from 4:00 p.m. or 4:15 p.m. to 8:00 p.m. Eastern time).
    \26\ Under accounting procedures to be followed by the Fund, 
trades made on the prior business day (``T'') will be booked and 
reflected in NAV on the current business day (``T+1''). 
Notwithstanding the foregoing, portfolio trades that are executed 
prior to the opening of the Exchange on any business day may be 
booked and reflected in NAV on such business day. Accordingly, the 
Fund will be able to disclose at the beginning of the business day 
the portfolio that will form the basis for the NAV calculation at 
the end of the business day. The daily disclosure will include for 
each portfolio security and other asset of the Fund the following 
information on the Fund's Web site (if applicable): name, ticker 
symbol, CUSIP number or other identifier, if any; type of holding 
(such as ``bond,'' ``note,'' ``preferred stock,'' ``ETP,'' ``mutual 
fund''); quantity held (as measured by, for example, number of 
shares, contracts or units); maturity date, if any; coupon rate, if 
any; effective date, if any; market value of the holding; and the 
percentage weighting of the holdings in the Fund's portfolio. The 
Web site information will be publicly available at no charge.
    \27\ Currently, the NASDAQ OMX Global Index Data Service 
(``GIDS'') is the NASDAQ OMX global index data feed service, 
offering real-time updates, daily summary messages, and access to 
widely followed indexes and Intraday Indicative Values for ETFs. The 
Exchange represents that GIDS provides investment professionals with 
the daily information needed to track or trade NASDAQ OMX indexes, 
listed ETFs, or third-party partner indexes and ETFs. See Notice, 
supra note 3, 80 FR at 51636, n.23.
    \28\ See id. at 51636.
    \29\ See id.
    \30\ According to the Exchange, ETPs, exchange-traded fixed 
income securities, exchange-traded convertible securities, exchange-
traded warrants, and any other exchange traded securities will be 
valued at the official closing price on their principal exchange or 
board of trade, or lacking any current reported sale at the time of 
valuation, at the mean between the most recent bid and asked 
quotations on the principal exchange or board of trade. Portfolio 
securities traded on more than one securities exchange will be 
valued at the last sale price or official closing price, as 
applicable, on the business day as of which such value is being 
determined at the close of the exchange representing the principal 
market for such securities. Fixed-income securities traded over-the-
counter (including high yield fixed-income securities and money 
market instruments); warrants traded over-the-counter; and 
convertible securities traded over-the-counter will be valued at the 
mean between the most recent available bid and asked quotations 
provided by parties that make a market in the instrument. If recent 
bid and ask quotations are not available, these securities will be 
valued in accordance with the Fund's fair valuation procedures. 
Money market instruments with maturities of less than 60 days will 
be valued at amortized cost. Shares of mutual funds that are not 
exchange-listed will be valued at their net asset value.
    \31\ See id. at 51638.
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    The Exchange further states that the intra-day, executable price 
quotations on the high yield debt securities, bank loans, warrants, 
other fixed-income and convertible securities, including cash and cash 
equivalents, ETPs, and other assets held by the Fund will be available 
from major broker-dealer firms or on the exchange on which they are 
traded, if applicable.\32\ The foregoing intra-day price information is 
available through subscription services, such as Bloomberg and Thomson 
Reuters, which can be accessed by Authorized Participants and other 
investors. Information regarding market price and volume of the Shares 
is and will be continually available on a real-time basis throughout 
the day on brokers' computer screens and other electronic services. The 
previous day's closing price and trading volume information for the 
Shares will be published daily in the financial section of newspapers.
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    \32\ See id.
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    The Commission also believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Exchange states that it will obtain a representation from 
the issuer of the Shares that the NAV per Share will be calculated 
daily and that the NAV and the Disclosed Portfolio will be made 
available to all market participants at the same time.\33\ The Exchange 
also represents that the Exchange may consider all relevant factors in 
exercising its discretion to halt or suspend trading in the Shares of 
the Fund. Nasdaq will halt or pause trading in the Shares under the 
conditions specified in Nasdaq Rules 4120 and 4121, including the 
trading pauses under Nasdaq Rules 4120(a)(11) and (12). Trading may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable.\34\ Trading in 
the Shares also will be subject to Rule 5735(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted.\35\ The 
Exchange states that it has a general policy prohibiting the 
distribution of material, non-public information by its employees.\36\ 
In addition, the Exchange states that the Adviser is not a broker-
dealer, although it is affiliated with the Distributor, a broker-
dealer, and that the Adviser has implemented a fire wall with respect 
to its broker-dealer affiliate regarding access to information 
concerning the composition and/or changes to the portfolio.\37\ The 
Exchange states that the Sub-Adviser is not a broker-dealer and is not 
affiliated with a broker-dealer.\38\ Further, the Commission notes that 
the Reporting Authority \39\ that provides the Disclosed Portfolio must 
implement and maintain, or be subject to, procedures designed to 
prevent the use and dissemination of material, non-public information 
regarding the actual components of the portfolio.\40\ The Exchange 
represents that trading in the Shares will be subject to the existing 
trading surveillances, administered by both Nasdaq and also the 
Financial Industry Regulatory Authority (``FINRA'') on behalf of the 
Exchange, which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\41\
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    \33\ See id.
    \34\ These may include: (1) the extent to which trading is not 
occurring in the securities and/or the financial instruments 
constituting the Disclosed Portfolio of the Fund; or (2) whether 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. See id. at 
51636.
    \35\ See id.
    \36\ See id. at 51637.
    \37\ See id. at 51632. See also supra note 8. The Exchange 
further represents that an investment adviser to an open-end fund is 
required to be registered under the Investment Advisers Act of 1940 
(``Advisers Act''). As a result, the Adviser and its related 
personnel are subject to the provisions of Rule 204A-1 under the 
Advisers Act, which requires investment advisers to adopt a code of 
ethics that reflects the fiduciary nature of their relationship with 
their clients as well as compliance with other applicable securities 
laws. Accordingly, investment advisers must have procedures designed 
to prevent the communication and misuse of non-public information, 
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.
    \38\ See id. at 51632.
    \39\ Nasdaq Rule 5730(c)(4) defines ``Reporting Authority.''
    \40\ See Nasdaq Rule 5735(d)(2)(B)(ii).
    \41\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
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    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. In support of this proposal, the Exchange 
represented that:
    (1) The Shares will be subject to Nasdaq Rule 5735, which sets 
forth the initial and continued listing criteria applicable to Managed 
Fund Shares.
    (2) Trading in the Shares will be subject to the existing trading 
surveillances administered by both Nasdaq and FINRA on behalf of the 
Exchange, which are designed to detect violations of Exchange rules and 
applicable federal securities laws, and these procedures are adequate 
to properly monitor Exchange trading of the Shares in all trading 
sessions and to detect and help deter violations of Exchange rules and 
applicable federal securities laws.
    (3) FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares or other exchange-traded securities 
with other markets and other entities that are ISG \42\ members, and 
FINRA, on behalf of the Exchange, may obtain trading information 
regarding trading in the Shares; exchange-traded fixed income 
securities; exchange-traded warrants; exchange-traded convertible 
securities; ETPs; or other exchange-traded securities from such markets 
and other entities. In addition, the Exchange may obtain information 
regarding trading in the Shares; exchange-traded warrants; exchange-
traded fixed-income securities; exchange-traded convertible

[[Page 62584]]

securities; ETPs; or other exchange-traded securities from markets and 
other entities that are members of ISG or with which the Exchange has 
in place a comprehensive surveillance sharing agreement. FINRA, on 
behalf of the Exchange, is able to access, as needed, trade information 
for certain fixed income securities, including corporate debt 
securities and money market instruments, held by the Fund reported to 
FINRA's TRACE.
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    \42\ For a list of the current members of ISG, see 
www.isgportal.org.
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    (4) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (5) Prior to the commencement of trading, the Exchange will inform 
its members in an Information Circular of the special characteristics 
and risks associated with trading the Shares. Specifically, the 
Information Circular will discuss the following: (a) The procedures for 
purchases and redemptions of Shares in Creation Units (and that Shares 
are not individually redeemable); (b) Nasdaq Rule 2111A, which imposes 
suitability obligations on Nasdaq members with respect to recommending 
transactions in the Shares to customers; (c) how and by whom 
information regarding the Intraday Indicative Value and the Disclosed 
Portfolio is disseminated; (d) the risks involved in trading the Shares 
during the Pre-Market and Post-Market Sessions when an updated Intraday 
Indicative Value will not be calculated or publicly disseminated; (e) 
the requirement that members deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (f) trading information.
    (6) For initial and continued listing, the Fund must be in 
compliance with Rule 10A-3 under the Act.\43\
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    \43\ See 17 CFR 240.10A-3.
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    (7) At least 90% of the convertible bonds, convertible preferred 
stocks, and warrants in which the Fund invests, and the equity 
securities into which these securities may be converted, and also 
preferred stocks (non-convertible) in which the Fund invests, will be 
traded on exchanges that are ISG members.
    (8) The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets.
    (9) The Fund will only invest in bank loans that have a par amount 
outstanding of U.S. $100 million or greater at the time the loan is 
originally issued.
    (10) The Fund will not enter into a long or short position in high 
yield debt securities with a par amount outstanding of less than U.S. 
$100 million at the time of issuance of such high yield debt 
securities, if upon establishing such position, the total value of such 
positions would represent fifty percent or greater of the Fund's net 
assets. In addition, the Fund will not invest in other types of high-
yield debt securities, such as asset-backed securities.
    (11) The Fund will not invest more than 25% of the value of its 
total assets in securities of issuers in any particular industry.
    (12) The Fund's investments (including investments in ETPs) will 
not be utilized to seek to achieve a leveraged return on the Fund's net 
assets.
    (13) The Fund will not invest in futures contracts, options, swaps, 
or other derivative instruments.
    (14) A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange.
    This approval order is based on all of the Exchange's 
representations, including those set forth above and in the Notice. The 
Commission notes that the Fund and the Shares must comply with the 
requirements of Nasdaq Rule 5735 to be listed and traded on the 
Exchange.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \44\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \44\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\45\ that the proposed rule change (SR-NASDAQ-2015-095) 
be, and it hereby is, approved.
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    \45\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\46\
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    \46\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26323 Filed 10-15-15; 8:45 am]
 BILLING CODE 8011-01-P