Document ID: SEC-2015-0735-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC
Posted Date: 2015-04-29T04:00Z

[Federal Register Volume 80, Number 82 (Wednesday, April 29, 2015)]
[Notices]
[Pages 23831-23838]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09919]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74797; File No. SR-NASDAQ-2015-036]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change, as Modified by Amendments 
Nos. 1 and 2 Thereto, Relating to the Listing and Trading of the Shares 
of 18 Eaton Vance NextShares ETMFs of Either the Eaton Vance ETMF Trust 
or the Eaton Vance ETMF Trust II

April 23, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on April 10, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. On April 21, 
2015, the Exchange filed Amendments Nos. 1 and 2 to the proposal.\3\ 
The Commission is publishing this notice to solicit comments on the 
proposed rule change, as modified by Amendments Nos. 1 and 2 thereto, 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 amended and replaced the proposed rule 
change in its entirety. Amendment No. 2 subsequently amended the 
proposal to include a new footnote to reflect a Web site reference.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to list and trade under Nasdaq Rule 5745 (Exchange-
Traded Managed Fund Shares) the common shares (``Shares'') of the 
below-listed exchange-traded managed funds (each, a ``Fund,'' and 
collectively, the ``Funds''):

Eaton Vance Balanced NextShares TM
Eaton Vance Global Dividend Income NextShares TM
Eaton Vance Growth NextShares TM
Eaton Vance Large-Cap Value NextShares TM
Eaton Vance Richard Bernstein All Asset Strategy NextShares 
TM
Eaton Vance Richard Bernstein Equity Strategy NextShares TM
Eaton Vance Small-Cap NextShares TM
Eaton Vance Stock NextShares TM
Parametric Emerging Markets NextShares TM
Parametric International Equity NextShares TM
Eaton Vance Bond NextShares TM
Eaton Vance TABS 5-to-15 Year Laddered Municipal Bond NextShares 
TM
Eaton Vance Floating-Rate & High Income NextShares TM
Eaton Vance Global Macro Absolute Return NextShares TM
Eaton Vance Government Obligations NextShares TM
Eaton Vance High Income Opportunities NextShares TM
Eaton Vance High Yield Municipal Income NextShares TM
Eaton Vance National Municipal Income NextShares TM
    Each Fund is a series of either Eaton Vance ETMF Trust or Eaton 
Vance ETMF Trust II (each, a ``Trust,'' and together, the ``Trusts''). 
The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, and at the 
Commission's Public Reference Room.

[[Page 23832]]

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

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

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

1. Purpose
    The Exchange proposes to list and trade the Shares of each Fund 
under Nasdaq Rule 5745, which governs the listing and trading of 
exchange-traded managed fund shares, as defined in Nasdaq Rule 
5745(c)(1), on the Exchange.\4\ Each Trust is registered with the 
Commission as an open-end investment company and has filed a 
registration statement on Form N-1A (``Registration Statement'') with 
the Commission.\5\ Each Fund is a series of a Trust.\6\
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    \4\ The Commission approved Nasdaq Rule 5745 in Securities 
Exchange Act Release No. 34-73562 (Nov. 7, 2014), 79 FR 68309 (Nov. 
14, 2014) (SR-NASDAQ-2014-020). The Funds would be the first 
exchange-traded managed funds listed on the Exchange.
    \5\ See Registration Statements on Form N-1A for the Eaton Vance 
NextShares Trust dated April 9, 2015 (File Nos. 333-197733 and 811-
22982) and for the Eaton Vance NextShares Trust II dated April 9, 
2015 (File Nos. 333-197734 and 811-22983). The descriptions of the 
Funds and the Shares contained herein conform to the Registration 
Statements.
    \6\ The Commission has issued an order granting the Trusts and 
certain affiliates exemptive relief under the Investment Company Act 
(the ``Exemptive Order''). See Investment Company Act Release No. 
31361 (Dec. 2, 2014) (File No. 812-14139). In compliance with Nasdaq 
Rule 5745(b)(5), which applies to Shares based on an international 
or global portfolio, the application for exemptive relief under the 
Investment Company Act states that the Funds will comply with the 
federal securities laws in accepting securities for deposits and 
satisfying redemptions with securities, including that the 
securities accepted for deposits and the securities used to satisfy 
redemption requests are sold in transactions that would be exempt 
from registration under the Securities Act of 1933, as amended (15 
U.S.C. 77a) (``Securities Act'').
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    Eaton Vance Management will be the investment adviser (``Adviser'') 
to the Funds. Foreside Fund Services, LLC will be the principal 
underwriter and distributor of each Fund's Shares. State Street Bank 
and Trust Company will act as the administrator, accounting agent, 
custodian and transfer agent to the Funds. Interactive Data Corporation 
will be the intraday indicative value (``IIV'') calculator to the 
Funds.
Principal Investment Strategies Applicable to Each Fund
    Each Fund will be actively managed and will pursue the various 
principal investment strategies described below.\7\
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    \7\ Additional information regarding the Funds will be available 
on the public Web site for the Funds and in the Registration 
Statements for the Funds. See supra note 5.
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Eaton Vance Balanced NextShares TM
    The investment objective of this Fund is to provide current income 
and long-term growth of capital. The Fund normally will invest between 
50% and 75% of its net assets in equity securities and between 25% and 
50% of its net assets in fixed-income securities.
Eaton Vance Global Dividend Income NextShares TM
    The investment objective of this Fund is to provide current income 
and long-term growth of capital. The Fund normally will invest 
primarily in common stocks and, in the adviser's discretion, preferred 
stocks of U.S. and foreign companies that pay dividends.
Eaton Vance Growth NextShares TM
    The investment objective of this Fund is total return. The Fund 
will invest in a broadly diversified selection of equity securities, 
seeking companies with above-average growth and financial strength. 
Under normal market conditions, the Fund will invest primarily in 
large-cap companies.
Eaton Vance Large-Cap Value NextShares TM
    The investment objective of this Fund is total return. Under normal 
market conditions, the Fund will invest primarily in value stocks of 
large-cap companies.
Eaton Vance Richard Bernstein All Asset Strategy NextShares 
TM
    The investment objective of this Fund is total return. In seeking 
its investment objective, the Fund will have flexibility to allocate 
its assets in markets around the world and among various asset classes, 
including equity, fixed-income, commodity, currency and cash 
investments.
Eaton Vance Richard Bernstein Equity Strategy NextShares TM
    The investment objective of this Fund is total return. Under normal 
market conditions, the Fund will invest primarily in equity securities 
and derivative instruments that provide exposure to equity securities.
Eaton Vance Small-Cap NextShares TM
    The investment objective of this Fund is long-term capital 
appreciation. The Fund normally will invest primarily in equity 
securities of small-cap companies.
Eaton Vance Stock NextShares TM
    The investment objective of this Fund is to achieve long-term 
capital appreciation by investing in a diversified portfolio of equity 
securities. The Fund normally will invest primarily in a diversified 
portfolio of common stocks.
Parametric Emerging Markets NextShares TM
    The investment objective of this Fund is long-term capital 
appreciation. The Fund normally will invest primarily in equity 
securities of companies located in emerging market countries.
Parametric International Equity NextSharesTM
    The investment objective of this Fund is long-term capital 
appreciation. The Fund normally will invest primarily in companies 
domiciled in developed markets outside of the United States, including 
securities trading in the form of depositary receipts.
Eaton Vance Bond NextSharesTM
    The investment objective of this Fund is total return. The Fund 
normally will invest primarily in bonds and other fixed and floating-
rate income instruments.
Eaton Vance TABS 5-to-15 Year Laddered Municipal Bond 
NextSharesTM
    The investment objective of this Fund is to provide current income 
exempt from regular federal income tax. The Fund normally will invest 
primarily in municipal obligations with remaining maturities of between 
5 and 15 years, the interest on which is exempt from regular federal 
income tax.
Eaton Vance Floating-Rate & High Income NextSharesTM
    The investment objective of this Fund is to provide a high level of 
current income. The Fund normally will invest primarily in a 
combination of income-producing floating rate loans and other floating 
rate debt securities and high-yield corporate bonds.
Eaton Vance Global Macro Absolute Return NextSharesTM
    The investment objective of this Fund is total return. The Fund 
will seek its investment objective by investing in securities, 
derivatives and other

[[Page 23833]]

instruments to establish long and short investment exposures around the 
world.
Eaton Vance Government Obligations NextSharesTM
    The investment objective of this Fund is to provide a high current 
return. The Fund normally will invest primarily in securities issued, 
backed or otherwise guaranteed by the U.S. Government, its agencies or 
instrumentalities.
Eaton Vance High Income Opportunities NextSharesTM
    The primary investment objective of this Fund is to provide a high 
level of current income. The Fund will seek growth of capital as a 
secondary investment objective. The Fund normally will invest primarily 
in fixed-income securities, including preferred stocks, senior and 
subordinated floating rate loans, and convertible securities.
Eaton Vance High Yield Municipal Income NextSharesTM
    The investment objective of this Fund is to provide high current 
income exempt from regular federal income tax. The Fund normally will 
invest primarily in municipal obligations, the interest on which is 
exempt from regular federal income tax.
Eaton Vance National Municipal Income NextSharesTM
    The investment objective of this Fund is to provide current income 
exempt from regular federal income tax. The Fund normally will invest 
primarily in municipal obligations, the interest on which is exempt 
from regular federal income tax.
Creations and Redemptions of Shares
    Shares will be issued and redeemed on a daily basis at the Fund's 
next-determined net asset value (``NAV'') \8\ in specified blocks of 
Shares called ``Creation Units.'' A Creation Unit will consist of at 
least 25,000 Shares. Creation Units may be purchased and redeemed by or 
through ``Authorized Participants.'' \9\ Purchases and sales of Shares 
in amounts less than a Creation Unit may be effected only in the 
secondary market, as described below, and not directly with the Fund.
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    \8\ As with other registered open-end investment companies, NAV 
generally will be calculated daily Monday through Friday as of the 
close of regular trading on the New York Stock Exchange, normally 
4:00 p.m. Eastern Time. NAV will be calculated by dividing a Fund's 
net asset value by the number of Shares outstanding. Information 
regarding the valuation of investments in calculating a Fund's NAV 
will be contained in the Registration Statement for its Shares.
    \9\ ``Authorized Participants'' will be either: (1) 
``participating parties,'' i.e., brokers or other participants in 
the Continuous Net Settlement System (``CNS System'') of the 
National Securities Clearing Corporation (``NSCC''), a clearing 
agency registered with the Commission and affiliated with the 
Depository Trust Company (``DTC''), or (2) DTC participants, which 
in either case have executed participant agreements with the Fund's 
distributor and transfer agent regarding the creation and redemption 
of Creation Units. Investors will not have to be Authorized 
Participants in order to transact in Creation Units, but must place 
an order through and make appropriate arrangements with an 
Authorized Participant for such transactions.
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    The creation and redemption process for Funds may be effected ``in 
kind,'' in cash, or in a combination of securities and cash. Creation 
``in kind'' means that an Authorized Participant--usually a brokerage 
house or large institutional investor--purchases the Creation Unit with 
a basket of securities equal in value to the aggregate NAV of the 
Shares in the Creation Unit. When an Authorized Participant redeems a 
Creation Unit in kind, it receives a basket of securities equal in 
value to the aggregate NAV of the Shares in the Creation Unit.
Composition File
    As defined in Nasdaq Rule 5745(c)(3), the Composition File is the 
specified portfolio of securities and/or cash that a Fund will accept 
as a deposit in issuing a Creation Unit of Shares, and the specified 
portfolio of securities and/or cash that a Fund will deliver in a 
redemption of a Creation Unit of Shares. The Composition File will be 
disseminated through the NSCC once each business day before the open of 
trading in Shares on such day and also will be made available to the 
public each day on a free Web site.\10\ Because the Funds seek to 
preserve the confidentiality of their current portfolio trading 
program, a Fund's Composition File generally will not be a pro rata 
reflection of the Fund's investment positions. Each security included 
in the Composition File will be a current holding of the Fund, but the 
Composition File generally will not include all of the securities in 
the Fund's portfolio or match the weightings of the included securities 
in the portfolio. Securities that the Adviser is in the process of 
acquiring for a Fund generally will not be represented in the Fund's 
Composition File until their purchase has been completed. Similarly, 
securities that are held in a Fund's portfolio but in the process of 
being sold may not be removed from its Composition File until the sale 
program is substantially completed. Funds creating and redeeming Shares 
in kind will use cash amounts to supplement the in-kind transactions to 
the extent necessary to ensure that Creation Units are purchased and 
redeemed at NAV. The Composition File also may consist entirely of 
cash, in which case it will not include any of the securities in the 
Fund's portfolio.\11\
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    \10\ The free Web site will be www.eatonvance.com or 
www.nextshares.com.
    \11\ In determining whether a Fund will issue or redeem Creation 
Units entirely on a cash basis, the key consideration will be the 
benefit that would accrue to the Fund and its investors. For 
instance, in bond transactions, the Adviser may be able to obtain 
better execution for a Fund than Authorized Participants because of 
the Adviser's size, experience and potentially stronger 
relationships in the fixed-income markets.
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Transaction Fees
    All persons purchasing or redeeming Creation Units are expected to 
incur a transaction fee to cover the estimated cost to the Fund of 
processing the transaction, including the costs of clearance and 
settlement charged to it by NSCC or DTC, and the estimated trading 
costs (i.e., brokerage commissions, bid-ask spread and market impact) 
to be incurred in converting the Composition File to or from the 
desired portfolio holdings. The transaction fee is determined daily and 
will be limited to amounts approved by the board of trustees of a Fund 
and determined by the Adviser to be appropriate to defray the expenses 
that a Fund incurs in connection with the purchase or redemption of 
Creation Units. The purpose of transaction fees is to protect a Fund's 
existing shareholders from the dilutive costs associated with the 
purchase and redemption of Creation Units. Transaction fees will differ 
among Funds and may vary over time for a given Fund depending on the 
estimated trading costs for its portfolio positions and Composition 
File, processing costs and other considerations. Funds that specify 
greater amounts of cash in their Composition File may impose higher 
transaction fees. In addition, Funds that include in their Composition 
File instruments that clear through DTC may impose higher transaction 
fees than Funds whose Composition File consists solely of instruments 
that clear through NSCC, because DTC may charge more than NSCC in 
connection with Creation Unit transactions.\12\ The transaction fees 
applicable to each Fund's purchases and redemptions on a given business 
day

[[Page 23834]]

will be disseminated through the NSCC prior to the open of market 
trading on that day and also will be made available to the public each 
day on a free Web site.\13\ In all cases, the transaction fees will be 
limited in accordance with the requirements of the Commission 
applicable to open-end management investment companies offering 
redeemable securities.
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    \12\ Authorized Participants that participate in the CNS System 
of the NSCC are expected to be able to use the enhanced NSCC/CNS 
process for effecting in-kind purchases and redemptions of ETFs (the 
``NSCC Process'') to purchase and redeem Creation Units of Funds 
that limit the composition of their baskets to include only NSCC 
Process-eligible instruments (generally domestic equity securities 
and cash). Because the NSCC Process is generally more efficient than 
the DTC clearing process, NSCC is likely to charge a Fund less than 
DTC to settle purchases and redemptions of Creation Units.
    \13\ The free Web site will be www.eatonvance.com or 
www.nextshares.com.
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NAV-Based Trading
    Because Shares will be listed and traded on the Exchange, Shares 
will be available for purchase and sale on an intraday basis. Shares 
will be purchased and sold in the secondary market at prices directly 
linked to the Fund's next-determined NAV using a new trading protocol 
called ``NAV-Based Trading.'' \14\ All bids, offers and execution 
prices of Shares will be expressed as a premium/discount (which may be 
zero) to the Fund's next-determined NAV (e.g., NAV-$0.01, NAV+$0.01). A 
Fund's NAV will be determined each business day, normally as of 4:00 
p.m. Eastern Time. Trade executions will be binding at the time orders 
are matched on Nasdaq's facilities, with the transaction prices 
contingent upon the determination of NAV.
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    \14\ Aspects of NAV-Based Trading are protected intellectual 
property subject to issued and pending U.S. patents held by Navigate 
Fund Solutions LLC (``Navigate''), a wholly owned subsidiary of 
Eaton Vance Corp. Nasdaq will enter into a license agreement with 
Navigate to allow for NAV-Based Trading on the Exchange of exchange-
traded managed funds that have themselves entered into license 
agreements with Navigate.
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     Trading Premiums and Discounts. Bid and offer prices for 
Shares will be quoted throughout the day relative to NAV. The premium 
or discount to NAV at which Share prices are quoted and transactions 
are executed will vary depending on market factors, including the 
balance of supply and demand for Shares among investors, transaction 
fees and other costs in connection with creating and redeeming Creation 
Units of Shares, the cost and availability of borrowing Shares, 
competition among market makers, the Share inventory positions and 
inventory strategies of market makers, the profitability requirements 
and business objectives of market makers, and the volume of Share 
trading. Reflecting such market factors, prices for Shares in the 
secondary market may be above, at or below NAV. Funds with higher 
transaction fees may trade at wider premiums or discounts to NAV than 
other Funds with lower transaction fees, reflecting the added costs to 
market makers of managing their Share inventory positions through 
purchases and redemptions of Creation Units.
    Because making markets in Shares will be simple to manage and low 
risk, competition among market makers seeking to earn reliable, low-
risk profits should enable the Shares to routinely trade at tight bid-
ask spreads and narrow premiums/discounts to NAV. As noted below, each 
Fund will maintain a public Web site that will be updated on a daily 
basis to show current and historical trading spreads and premiums/
discounts of Shares trading in the secondary market.
     Transmitting and Processing Orders. Member firms will 
utilize certain existing order types and interfaces to transmit Share 
bids and offers to Nasdaq, which will process Share trades like trades 
in shares of other listed securities.\15\ In the systems used to 
transmit and process transactions in Shares, a Fund's next-determined 
NAV will be represented by a proxy price (e.g., 100.00) and a premium/
discount of a stated amount to the next-determined NAV to be 
represented by the same increment/decrement from the proxy price used 
to denote NAV (e.g., NAV-$0.01 would be represented as 99.99; NAV+$0.01 
as 100.01).
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    \15\ As noted below, all orders to buy or sell Shares that are 
not executed on the day the order is submitted will be automatically 
cancelled as of the close of trading on such day. Prior to the 
commencement of trading in a Fund, the Exchange will inform its 
members in an Information Circular of the effect of this 
characteristic on existing order types.
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    To avoid potential investor confusion, Nasdaq will work with member 
firms and providers of market data services to seek to ensure that 
representations of intraday bids, offers and execution prices of Shares 
that are made available to the investing public follow the ``NAV-$0.01/
NAV+$0.01'' (or similar) display format. All Shares listed on the 
Exchange will have a unique identifier associated with their ticker 
symbols, which would indicate that the Shares are traded using NAV-
Based Trading. Nasdaq makes available to member firms and market data 
services certain proprietary data feeds that are designed to supplement 
the market information disseminated through the consolidated tape 
(``Consolidated Tape''). Specifically, the Exchange will use the NASDAQ 
Basic and NASDAQ Last Sale data feeds to disseminate intraday price and 
quote data for Shares in real time in the ``NAV-$0.01/NAV+$0.01'' (or 
similar) display format. Member firms could use the NASDAQ Basic and 
NASDAQ Last Sale data feeds to source intraday Share prices for 
presentation to the investing public in the ``NAV-$0.01/NAV+$0.01'' (or 
similar) display format. Alternatively, member firms could source 
intraday Share prices in proxy price format from the Consolidated Tape 
and other Nasdaq data feeds (e.g., Nasdaq TotalView and Nasdaq Level 2) 
and use a simple algorithm to convert prices into the ``NAV-$0.01/
NAV+$0.01'' (or similar) display format. As noted below, prior to the 
commencement of trading in a Fund, the Exchange will inform its members 
in an Information Circular of the identities of the specific Nasdaq 
data feeds from which intraday Share prices in proxy price format may 
be obtained.
     Intraday Reporting of Quotes and Trades. All bids and 
offers for Shares and all Share trade executions will be reported 
intraday in real time by the Exchange to the Consolidated Tape \16\ and 
separately disseminated to member firms and market data services 
through the Exchange data feeds listed above. The Exchange will also 
provide the member firms participating in each Share trade with a 
contemporaneous notice of trade execution, indicating the number of 
Shares bought or sold and the executed premium/discount to NAV.\17\
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    \16\ Due to systems limitations, the Consolidated Tape will 
report intraday execution prices and quotes for Shares using a proxy 
price format. As noted, Nasdaq will separately report real-time 
execution prices and quotes to member firms and providers of market 
data services in the ``NAV-$0.01/NAV+$0.01'' (or similar) display 
format, and otherwise seek to ensure that representations of 
intraday bids, offers and execution prices for Shares that are made 
available to the investing public follow the same display format.
    \17\ All orders to buy or sell Shares that are not executed on 
the day the order is submitted will be automatically cancelled as of 
the close of trading on such day.
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     Final Trade Pricing, Reporting and Settlement. All 
executed Share trades will be recorded and stored intraday by Nasdaq to 
await the calculation of the Fund's end-of-day NAV and the 
determination of final trade pricing. After a Fund's NAV is calculated 
and provided to the Exchange, Nasdaq will price each Share trade 
entered into during the day at the Fund's NAV plus/minus the trade's 
executed premium/discount. Using the final trade price, each executed 
Share trade will then be disseminated to member firms and market data 
services via an FTP file to be created for exchange-traded managed 
funds and confirmed to the member firms participating in the trade to 
supplement the previously provided information to include final 
pricing.\18\

[[Page 23835]]

After the pricing is finalized, Nasdaq will deliver the Share trading 
data to NSCC for clearance and settlement, following the same processes 
used for the clearance and settlement of trades in other exchange-
traded securities.
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    \18\ File Transfer Protocol (``FTP'') is a standard network 
protocol used to transfer computer files on the Internet. Nasdaq 
will arrange for the daily dissemination of an FTP file with 
executed Share trades to member firms and market data services.
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Availability of Information
    Prior to the commencement of market trading in Shares, each Fund 
will be required to establish and maintain a public Web site through 
which its current prospectus may be downloaded. The Web site will 
include additional Fund information updated on a daily basis, including 
the prior business day's NAV, and the following trading information for 
such business day expressed as premiums/discounts to NAV: (a) Intraday 
high, low, average and closing prices of Shares in Exchange trading; 
(b) the midpoint of the highest bid and lowest offer prices as of the 
close of Exchange trading, expressed as a premium/discount to NAV (the 
``Closing Bid/Ask Midpoint''); and (c) the spread between highest bid 
and lowest offer prices as of the close of Exchange trading (the 
``Closing Bid/Ask Spread.''). The Web site will also contain charts 
showing the frequency distribution and range of values of trading 
prices, Closing Bid/Ask Midpoints and Closing Bid/Ask Spreads over 
time.
    The Composition File will be disseminated through the NSCC before 
the open of trading in Shares on each business day and also will be 
made available to the public each day on a free Web site. Consistent 
with the disclosure requirements that apply to traditional open-end 
investment companies, a complete list of current Fund portfolio 
positions will be made available at least once each calendar quarter, 
with a reporting lag of not more than 60 days. Funds may provide more 
frequent disclosures of portfolio positions at their discretion.
    Reports of Share transactions will be disseminated to the market 
and delivered to the member firms participating in the trade 
contemporaneous with execution. Once a Fund's daily NAV has been 
calculated and disseminated, Nasdaq will price each Share trade entered 
into during the day at the Fund's NAV plus/minus the trade's executed 
premium/discount. Using the final trade price, each executed Share 
trade will then be disseminated to member firms and market data 
services via an FTP file to be created for exchange-traded managed 
funds and confirmed to the member firms participating in the trade to 
supplement the previously provided information to include final 
pricing.
    Information regarding NAV-based trading prices, best bids and 
offers for Shares, and volume of Shares traded will be continuously 
available on a real-time basis throughout each trading day on brokers' 
computer screens and other electronic services.
Initial and Continued Listing
    Shares will conform to the initial and continued listing criteria 
as set forth under Nasdaq Rule 5745. A minimum of 50,000 Shares and no 
less than two Creation Units of each Fund will be outstanding at the 
commencement of trading on the Exchange. The Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily and provided to Nasdaq via the Mutual Fund 
Quotation Service (``MFQS'') by the fund accounting agent. As soon as 
the NAV is entered into MFQS, Nasdaq will disseminate the value to 
market participants and market data vendors via the Mutual Fund 
Dissemination Service (``MFDS'') so all firms will receive the data 
element at the same time.
    For each series of Shares, an estimated value of an individual 
Share, defined in Nasdaq Rule 5745(c)(2) as the ``Intraday Indicative 
Value,'' will be calculated and disseminated at intervals of not more 
than 15 minutes throughout the Regular Market Session \19\ when Shares 
trade on the Exchange. The Exchange will obtain a representation from 
the issuer of the Shares that the IIV will be calculated on an intraday 
basis and provided to Nasdaq for dissemination via the Nasdaq Global 
Index Service (``GIDS''). The IIV will be based on current information 
regarding the value of the securities and other assets held by a 
Fund.\20\ The purpose of the IIVs is to enable investors to estimate 
the next-determined NAV so they can determine the number of Shares to 
buy or sell if they want to transact in an approximate dollar amount 
(e.g., if an investor wants to acquire approximately $5,000 of a Fund, 
how many Shares should the investor buy?).\21\
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    \19\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 4 a.m. to 9:30 
a.m. E.T.; (2) Regular Market Session from 9:30 a.m. to 4 p.m. or 
4:15 p.m. E.T.; and (3) Post-Market Session from 4 p.m. or 4:15 p.m. 
to 8 p.m. E.T.).
    \20\ IIVs disseminated throughout each trading day would be 
based on the same portfolio as used to calculate that day's NAV. 
Funds will reflect purchases and sales of portfolio positions in 
their NAV the next business day after trades are executed.
    \21\ Because, in NAV-Based Trading, prices of executed trades 
are not determined until the reference NAV is calculated, buyers and 
sellers of Shares during the trading day will not know the final 
value of their purchases and sales until the end of the trading day. 
A Fund's Registration Statement, Web site and any advertising or 
marketing materials will include prominent disclosure of this fact. 
Although IIVs may provide useful estimates of the value of intraday 
trades, they cannot be used to calculate with precision the dollar 
value of the Shares to be bought or sold.
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    The Adviser is not a broker-dealer, although it is affiliated with 
a broker-dealer. 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 each Fund's portfolio. In 
the event (a) the Adviser registers as a broker-dealer or becomes newly 
affiliated with a broker-dealer, or (b) any new adviser or a sub-
adviser to a Fund is a registered broker-dealer or becomes affiliated 
with a broker-dealer, it will implement a fire wall with respect to its 
relevant personnel and/or such broker-dealer affiliate, if applicable, 
regarding access to information concerning the composition and/or 
changes to the relevant Fund's portfolio and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding such portfolio.
Trading Halts
    The Exchange may consider all relevant factors in exercising its 
discretion to halt or suspend trading in Shares. Nasdaq will halt 
trading in Shares under the conditions specified in Nasdaq Rules 4120 
and in Nasdaq Rule 5745(d)(2)(C). Additionally, Nasdaq may cease 
trading Shares if other unusual conditions or circumstances exist 
which, in the opinion of Nasdaq, make further dealings on Nasdaq 
detrimental to the maintenance of a fair and orderly market. To manage 
the risk of a non-regulatory Share trading halt, Nasdaq has in place 
back-up processes and procedures to ensure orderly trading. Because, in 
NAV-Based Trading, all trade execution prices are linked to end-of-day 
NAV, buyers and sellers of Shares should be less exposed to risk of 
loss due to intraday trading halts than buyers and sellers of 
conventional exchange-traded funds (``ETFs'') and other exchange-traded 
securities.
Trading Rules
    Nasdaq deems Shares to be equity securities, thus rendering trading 
in Shares to be subject to Nasdaq's existing rules governing the 
trading of equity securities. Nasdaq will allow trading in

[[Page 23836]]

Shares from 9:30 a.m. until 4:00 p.m. Eastern Time.
Surveillance
    The Exchange represents that trading in Shares will be subject to 
the existing trading surveillances, administered by both Nasdaq and the 
Financial Industry Regulatory Authority, Inc. (``FINRA'') on behalf of 
the Exchange, which are designed to detect violations of Exchange rules 
and applicable federal securities laws.\22\ The Exchange represents 
that these procedures are adequate to properly monitor trading of 
Shares on the Exchange and to deter and detect violations of Exchange 
rules and applicable federal securities laws.
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    \22\ FINRA provides surveillance of trading on the Exchange 
pursuant to a regulatory services agreement. The Exchange is 
responsible for FINRA's performance under this regulatory services 
agreement.
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    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    FINRA, on behalf of the Exchange, will communicate as needed with 
other markets and other entities that are members of the Intermarket 
Surveillance Group (``ISG'') \23\ regarding trading in Shares, and in 
exchange-traded securities and instruments held by the Funds (to the 
extent such exchange-traded securities and instruments are known 
through the publication of the Composition File and periodic public 
disclosures of a Fund's portfolio holdings), and FINRA may obtain 
trading information regarding such trading from other markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in Shares, and in exchange-traded securities and instruments 
held by the Funds (to the extent such exchange-traded securities and 
instruments are known through the publication of the Composition File 
and periodic public disclosures of a Fund's portfolio holdings), from 
markets and other entities that are members of ISG, which includes 
securities and futures exchanges, or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.
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    \23\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of a 
Fund's portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
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    In addition, the Exchange also has a general policy prohibiting the 
distribution of material non-public information by its employees.
Information Circular
    Prior to the commencement of trading in a Fund, the Exchange will 
inform its members in an Information Circular of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Circular will discuss the following: (1) 
The procedures for purchases and redemptions of Shares in Creation 
Units (and noting that Shares are not individually redeemable); (2) 
Nasdaq Rule 2111A, which imposes suitability obligations on Nasdaq 
members with respect to recommending transactions in Shares to 
customers; (3) how information regarding the IIV and Composition File 
is disseminated; (4) the requirement that members deliver a prospectus 
to investors purchasing Shares prior to or concurrently with the 
confirmation of a transaction; and (5) information regarding NAV-Based 
Trading protocols.
    As noted above, all orders to buy or sell Shares that are not 
executed on the day the order is submitted will be automatically 
cancelled as of the close of trading on such day. The Information 
Circular will discuss the effect of this characteristic on existing 
order types. The Information Circular also will identify the specific 
Nasdaq data feeds from which intraday Share prices in proxy price 
format may be obtained.
    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Funds. Members purchasing Shares from a Fund for 
resale to investors will deliver a summary prospectus to such 
investors. The Information Circular will also discuss any exemptive, 
no-action and interpretive relief granted by the Commission from any 
rules under the Act.
    The Information Circular also will reference that the Funds are 
subject to various fees and expenses described in the Registration 
Statements. The Information Circular will also disclose the trading 
hours of the Shares and the applicable NAV calculation time for the 
Shares. The Information Circular will disclose that information about 
the Shares will be publicly available on the Fund's Web site.
    Information regarding Fund trading protocols will be disseminated 
to Nasdaq members in accordance with current processes for newly listed 
products. Nasdaq intends to provide its members with a detailed 
explanation of NAV-Based Trading through a Trading Alert issued prior 
to the commencement of trading in Shares on the Exchange.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b) 
of the Act \24\ in general, and Section 6(b)(5) of the Act \25\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares would be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Nasdaq Rule 5745. The 
Exchange believes that its surveillance procedures are adequate to 
properly monitor the trading of Shares on Nasdaq and to deter and 
detect violations of Exchange rules and the applicable federal 
securities laws. The Adviser is affiliated with a broker-dealer and has 
implemented a ``fire wall'' between the investment adviser and the 
broker-dealer affiliate with respect to access to information 
concerning the composition and/or changes to the Funds' portfolio 
holdings. The Exchange may obtain information via ISG from other 
exchanges that are members of ISG or with which the Exchange has 
entered into a comprehensive surveillance sharing agreement, to the 
extent necessary.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest. 
The Exchange will obtain a representation from each issuer of Shares 
that the NAV per Share will be calculated on each business day that the 
New York Stock Exchange is open for trading and that the NAV will be 
made available to all market participants at the same time. In 
addition, a large amount of information would be publicly available 
regarding the Funds and the Shares, thereby promoting market 
transparency.
    Prior to the commencement of market trading in Shares, the Funds 
will be required to establish and maintain a public Web site through 
which its

[[Page 23837]]

current prospectus may be downloaded. The Web site will display 
additional Fund information updated on a daily basis, including the 
prior business day's NAV, and the following trading information for 
such business day expressed as premiums/discounts to NAV: (a) Intraday 
high, low, average and closing prices of Shares in Exchange trading; 
(b) the Closing Bid/Ask Midpoint; and (c) the Closing Bid/Ask Spread. 
The Web site will also contain charts showing the frequency 
distribution and range of values of trading prices, Closing Bid/Ask 
Midpoints and Closing Bid/Ask Spreads over time. The Composition File 
will be disseminated through the NSCC before the open of trading in 
Shares on each business day and also will be made available to the 
public each day on a free Web site. The Exchange will obtain a 
representation from the issuer of the Shares that the IIV will be 
calculated and disseminated on an intraday basis at intervals of not 
more than 15 minutes during trading on the Exchange and provided to 
Nasdaq for dissemination via GIDS. A complete list of current portfolio 
positions for the Funds will be made available at least once each 
calendar quarter, with a reporting lag of not more than 60 days. Funds 
may provide more frequent disclosures of portfolio positions at their 
discretion.
    Transactions in Shares will be reported to the Consolidated Tape at 
the time of execution in proxy price format and will be disseminated to 
member firms and market data services through Nasdaq's trading service 
and market data interfaces, as defined above. Once each Fund's daily 
NAV has been calculated and the final price of its intraday Share 
trades has been determined, Nasdaq will deliver a confirmation with 
final pricing to the transacting parties. At the end of the day, Nasdaq 
will also post a newly created FTP file with the final transaction data 
for the trading and market data services. The Exchange expects that 
information regarding NAV-based trading prices and volumes of Shares 
traded will be continuously available on a real-time basis throughout 
each trading day on brokers' computer screens and other electronic 
services. Because Shares will trade at prices based on the next-
determined NAV, investors will be able to buy and sell individual 
Shares at a known premium or discount to NAV that they can limit by 
transacting using limit orders at the time of order entry. Trading in 
Shares will be subject to Nasdaq Rules 5745(d)(2)(B) and (C), which 
provide for the suspension of trading or trading halts under certain 
circumstances, including if, in the view of the Exchange, trading in 
Shares becomes inadvisable.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
the Funds, which seek to provide investors with access to a broad range 
of actively managed investment strategies in a structure that offers 
the cost and tax efficiencies and shareholder protections of ETFs, 
while removing the requirement for daily portfolio holdings disclosure 
to ensure a tight relationship between market trading prices and NAV.
    For the above reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

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

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

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

    Written comments were neither solicited nor received.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will: 
(a) By order approve or disapprove such proposed rule change; or (b) 
institute proceedings to determine whether the proposed rule change 
should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an Email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2015-036 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2015-036. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-

[[Page 23838]]

NASDAQ-2015-036 and should be submitted on or before May 20, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-09919 Filed 4-28-15; 8:45 am]
 BILLING CODE 8011-01-P