Document ID: SEC-2016-2083-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market, LLC
Posted Date: 2016-11-29T05:00Z

[Federal Register Volume 81, Number 229 (Tuesday, November 29, 2016)]
[Notices]
[Pages 86056-86060]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28636]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79377; File No. SR-NASDAQ-2016-134]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment No. 
1, To List and Trade Certain Exchange-Traded Managed Funds

November 22, 2016.

I. Introduction

    On September 28, 2016, 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 to list and trade the common shares (``Shares'') 
of the following Exchange-Traded Managed Funds: Gabelli ESG NextShares; 
Gabelli All Cap NextShares; Gabelli Equity Income NextShares; Gabelli 
Small and Mid Cap Value NextShares; and Gabelli Media Mogul NextShares 
(individually, ``Fund,'' and collectively, ``Funds''). The proposed 
rule change was published for comment in the Federal Register on 
October 17, 2016.\3\ On October 18, 2016, the Exchange filed Amendment 
No. 1 to the proposed rule change.\4\
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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. 79082 (Oct. 11, 
2016), 81 FR 71549 (``Notice'').
    \4\ In Amendment No. 1 to the proposed rule change, the 
Exchange: (a) Identified the public Web sites on which certain 
information about the Funds would be available; (b) discussed the 
obligations of the Adviser and its related personnel under the 
Advisers Act (as defined herein); (c) noted that the Bank of New 
York Mellon would act as custodian and transfer agent for the Funds; 
(d) clarified certain investment strategies of the Funds; and (e) 
made other technical, non-substantive corrections in the proposed 
rule change. Amendment No. 1 is available at https://www.sec.gov/comments/sr-nasdaq-2016-134/nasdaq2016134-1.pdf. Because Amendment 
No. 1 to the proposed rule change does not materially alter the 
substance of the proposed rule change or raise unique or novel 
regulatory issues, Amendment No. 1 is not subject to notice and 
comment.

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[[Page 86057]]

    The Commission received no comments on the proposed rule change. 
This order grants approval of the proposed rule change, as modified by 
Amendment No. 1.

II. Exchange's Description of the Proposed Rule Change

    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, which are defined in Nasdaq Rule 
5745(c)(1). Each Fund is a series of Gabelli NextShares Trust 
(``Trust'').\5\ The Exchange represents that the 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.\6\
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    \5\ According to the Exchange, the Trust and certain affiliates 
of the Trusts have obtained exemptive relief under the Investment 
Company Act of 1940 (``1940 Act''). See Investment Company Act 
Release No. 31608 (May 19, 2015) (File No. 812-14438). The Exchange 
represents that, in compliance with Nasdaq Rule 5745(b)(5), which 
applies to Shares based on an international or global portfolio, the 
Trust's application for exemptive relief under the 1940 Act states 
that each Fund will comply with the federal securities laws in 
accepting securities for deposits and satisfying redemptions with 
securities, including that the securities accepted for deposits and 
the securities used to satisfy redemption requests are sold in 
transactions that would be exempt from registration under the 
Securities Act of 1933, as amended.
    \6\ See Registration Statement on Form N-1A for the Trust dated 
June 6, 2016 (File Nos. 333-211881 and 811-23160).
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    Gabelli Funds, LLC (``Adviser'') will be the adviser to the Funds. 
G.distributors, LLC will be the principal underwriter and distributor 
of each Fund's Shares. The Bank of New York Mellon will act as 
custodian and transfer agent. BNY Mellon Investment Servicing (US) Inc. 
will act as the sub-administrator to the Funds.
    The Exchange has made the following representations and statements 
in describing the Funds.\7\
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    \7\ The Commission notes that additional information regarding 
the Trust, the Funds, and the Shares, including investment 
strategies, risks, creation and redemption procedures, calculation 
of net asset value (``NAV''), fees, distributions, and taxes, among 
other things, can be found in the Notice, Amendment No. 1, and 
Registration Statement, as applicable. See supra notes 3, 4, and 6, 
respectively, and accompanying text.
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A. Principal Investment Strategies of the Funds

    According to the Exchange, each Fund will be actively managed and 
will pursue the various principal investment strategies described 
below.\8\
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    \8\ According to the Exchange, additional information regarding 
the Funds also will be available on one of two public Web sites for 
the Funds.
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1. Gabelli ESG NextShares (``Gabelli ESG Fund'')
    The Gabelli ESG Fund seeks to provide capital appreciation. The 
Gabelli ESG Fund will seek to achieve its objective by investing 
substantially all, and in any case no less than 80%, of its net assets 
(plus borrowings for investment purposes) in common and preferred 
stocks of companies that meet the Gabelli ESG Fund's guidelines for 
social responsibility at the time of investment. Pursuant to its social 
responsibility guidelines, the Gabelli ESG Fund will not invest in 
publicly traded fossil fuel (coal, oil, and gas) companies, the top 50 
defense/weapons contractors, or in companies that derive more than 5% 
of their revenues from the following areas: Tobacco, alcohol, gaming, 
defense/weapons production, and companies involved in the manufacture 
of abortion-related products.
2. Gabelli All Cap NextShares (``Gabelli All Cap Fund'')
    The Gabelli All Cap Fund primarily seeks to provide capital 
appreciation. Under normal market conditions, the Gabelli All Cap Fund 
will invest at least 80% of its net assets plus borrowings for 
investment purposes in common stocks and preferred stocks of companies 
of all capitalization ranges that are listed on a recognized securities 
exchange or similar market. The Gabelli All Cap Fund may also invest in 
common and preferred securities of foreign issuers.
3. Gabelli Equity Income NextShares (``Gabelli Equity Income Fund'')
    The Gabelli Equity Income Fund seeks a high level of total return 
on its assets with an emphasis on income. The Gabelli Equity Income 
Fund will seek to achieve its investment objective through a 
combination of capital appreciation and current income by investing, 
under normal market conditions, at least 80% of its net assets plus 
borrowings for investment purposes in income-producing equity 
securities. Income-producing equity securities include, for example, 
common stock and preferred stock.
4. Gabelli Small and Mid Cap Value NextShares (``Gabelli Small and Mid 
Cap Value Fund'')
    The Gabelli Small and Mid Cap Value Fund seeks long-term capital 
growth. Under normal market conditions, the Gabelli Small and Mid Cap 
Value Fund will invest at least 80% of its net assets plus borrowings 
for investment purposes in equity securities (such as common stock and 
preferred stock) of companies with small or medium-sized market 
capitalizations (``small cap'' and ``mid cap'' companies, 
respectively). The Gabelli Small and Mid Cap Value Fund defines ``small 
cap companies'' as those with a market capitalization generally less 
than $3 billion at the time of investment and ``mid cap companies'' as 
those with a market capitalization between $3 billion and $12 billion 
at the time of investment. The Gabelli Small and Mid Cap Value Fund may 
invest in the equity securities of companies of any market 
capitalization, subject to its policy of investing at least 80% of its 
net assets in the equity securities of small-cap and mid-cap companies 
at the time of investment. In addition, the Gabelli Small and Mid Cap 
Value Fund may invest up to 25% of its total assets in securities of 
issuers in a single industry.
5. Gabelli Media Mogul NextShares (``Gabelli Media Mogul Fund'')
    The Gabelli Media Mogul Fund seeks to provide capital appreciation. 
Under normal market conditions, the Fund will invest at least 80% of 
net assets plus borrowings for investment purposes in (a) companies 
that were spun-off from Liberty Media Corporation  as constituted in 
2001, (b) companies that resulted from subsequent mergers of any of 
those spin-offs, (c) stocks that track performance of those spin-offs 
or  companies that resulted from subsequent mergers of any of those 
spin-offs, and (d) public companies in which Liberty Media Corporation 
and its successor companies invest. The current set of companies in 
which the Fund may invest includes U.S. and non-U.S. listed companies 
in the telecommunications, media, publishing, and entertainment 
industries.
B. Portfolio Disclosure and Composition File
    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.
    As defined in Nasdaq Rule 5745(c)(3), the ``Composition File'' is 
the specified portfolio of securities, cash, or both that a Fund will 
accept as a deposit in issuing a Creation Unit of Shares, and the 
specified portfolio of securities, cash, or both that a Fund will 
deliver in a redemption of a Creation Unit of Shares. The Composition 
File will be disseminated through the National

[[Page 86058]]

Securities Clearing Corporation once each business day before the open 
of trading in Shares on that day and also will be made available to the 
public each day on a free Web site.\9\
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    \9\ The free Web site containing the Composition File will be 
www.nextshares.com.
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    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 a 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.\10\
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    \10\ 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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C. Intraday Indicative Value
    For each Fund, 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 \11\ when Shares trade on the 
Exchange. The Exchange will obtain a representation from the issuer of 
the Shares that the Intraday Indicative Value will be calculated on an 
intraday basis and provided to Nasdaq for dissemination via the Nasdaq 
Global Index Service. The Intraday Indicative Value will be based on 
current information regarding the value of the securities and other 
assets held by a Fund.\12\ The purpose of the Intraday Indicative Value 
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?).\13\
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    \11\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 4:00 a.m. to 
9:30 a.m. Eastern Time or ``E.T.''; (2) Regular Market Session from 
9:30 a.m. to 4:00 p.m. or 4:15 p.m. E.T.; and (3) Post-Market 
Session from 4:00 p.m. or 4:15 p.m. to 8:00 p.m. E.T.).
    \12\ The Intraday Indicative Values 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.
    \13\ 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 Intraday Indicative Values 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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D. NAV-Based Trading
    Shares of a Fund will be purchased and sold in the secondary market 
at prices directly linked to the Fund's next-determined NAV using a 
trading protocol called ``NAV-Based Trading.'' All bids, offers, and 
execution prices of Shares will be expressed as a premium or discount 
(which may be zero) to a Fund's next-determined NAV (e.g., NAV-$0.01, 
NAV+$0.01).\14\ Each Fund's NAV will be determined each business day, 
normally as of 4:00 p.m. E.T.
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    \14\ According to the Exchange, 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.
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    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. Nasdaq represents that all Shares listed on the 
Exchange will have a unique identifier associated with their ticker 
symbols, which will indicate that the Shares are traded using NAV-Based 
Trading.
    According to the Exchange, 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 or discount 
of a stated amount to the next-determined NAV to be represented by the 
same increment or 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\ According to the Exchange, all orders to buy or sell Shares 
that are not executed on the day the order is submitted will be 
automatically canceled as of the close of trading on that 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 represents that it 
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. 
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 may 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 may 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. 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.

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 Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\16\ In particular, the Commission finds that the 
proposed rule change is consistent with Section

[[Page 86059]]

6(b)(5) of the Act,\17\ 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.
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    \16\ 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).
    \17\ 15 U.S.C. 78f(b)(5).
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    The Shares will be subject to Rule 5745, which sets forth the 
initial and continued listing criteria applicable to Exchange-Traded 
Managed Fund Shares. 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.
    Nasdaq deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to the Exchange's existing rules 
governing the trading of equity securities. Every order to trade Shares 
of the Funds is subject to the proxy price protection threshold of 
plus/minus $1.00, which determines the lower and upper threshold for 
the life of the order and provides that the order will be canceled at 
any point if it exceeds $101.00 or falls below $99.00, the established 
thresholds.\18\ With certain exceptions, each order also must contain 
the applicable order attributes, including routing instructions and 
time-in-force information, as described in Nasdaq Rule 4703.\19\
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    \18\ See Nasdaq Rule 5745(h).
    \19\ See Nasdaq Rule 5745(b)(6).
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    Nasdaq also represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by both Nasdaq and 
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.\20\ The Exchange represents 
that its surveillance 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. 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'') \21\ regarding trading in the Shares, and in exchange-traded 
securities and instruments held by the Funds (to the extent those 
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 
from other markets and other entities. In addition, the Exchange may 
obtain information regarding trading in the Shares, and in exchange-
traded securities and instruments held by the Funds (to the extent 
those 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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    \20\ The Exchange states that FINRA provides surveillance of 
trading on the Exchange pursuant to a regulatory services agreement, 
and that the Exchange is responsible for FINRA's performance under 
this regulatory services agreement.
    \21\ 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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    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) the dissemination of 
information regarding the Intraday Indicative Value and Composition 
File; (d) the requirement that members deliver a prospectus to 
investors purchasing Shares prior to or concurrently with the 
confirmation of a transaction; and (e) information regarding NAV-Based 
Trading protocols.
    The Information Circular also will identify the specific Nasdaq 
data feeds from which intraday Share prices in proxy price format may 
be obtained. As noted above, all orders to buy or sell Shares that are 
not executed on the day the order is submitted will be automatically 
canceled as of the close of trading on that day. The Information 
Circular will discuss the effect of this characteristic on existing 
order types. In addition, 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.
    Nasdaq states that the Adviser is not a registered broker-dealer, 
although it is affiliated with a broker-dealer.\22\ The Exchange 
represents that the Adviser has implemented a fire wall with respect to 
its affiliated broker-dealer regarding access to information concerning 
the composition of, and changes to, each Fund's portfolio.\23\ The 
Reporting Authority \24\ will ensure that the Composition File will 
implement and maintain, or be subject to, procedures designed to 
prevent the use and dissemination of material non-public information 
regarding each Fund's portfolio positions and changes in the positions. 
In the event that (a) the Adviser registers as a broker-dealer or 
becomes newly affiliated with a broker-dealer, or (b) any new adviser 
or a sub-adviser to a Fund is a registered broker-dealer or becomes 
affiliated with a broker-dealer, the applicable entity will implement a 
fire wall with respect to its relevant personnel and broker-dealer 
affiliate, as the case may be, regarding access to information 
concerning the composition of, and 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 the 
portfolio.
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    \22\ See Notice, supra note 3, 81 FR at 71550.
    \23\ See id. 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 relating to codes of ethics. This 
Rule requires investment advisers to adopt a code of ethics that 
reflects the fiduciary nature of the relationship to clients as well 
as compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
    \24\ See Nasdaq Rule 5745(c)(4).
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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 Act,\25\ which sets forth Congress' finding that it is in the 
public interest and appropriate for the

[[Page 86060]]

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. Information regarding NAV-based trading prices, best bids 
and offers for Shares, and volume of Shares traded will be continually 
available on a real-time basis throughout the day on brokers' computer 
screens and other electronic services. 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 and separately disseminated to 
member firms and market data services through the Exchange data feeds.
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    \25\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    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 or minus the trade's executed premium or 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 
\26\ that will be created for exchange-traded managed funds and that 
will be confirmed to the member firms participating in the trade to 
supplement the previously provided information with final pricing.
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    \26\ According to Nasdaq, 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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    The Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily (on each 
business day that the New York Stock Exchange is open for trading) and 
provided to Nasdaq via the Mutual Fund Quotation Service (``MFQS'') by 
the fund accounting agent. As soon as the NAV is entered into MFQS, 
Nasdaq will disseminate the value to market participants and market 
data vendors via the Mutual Fund Dissemination Service so that all 
firms will receive the NAV per share at the same time.
    The Exchange further represents that it 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 Rule 4120 and in Nasdaq Rule 5745(d)(2)(C). 
Additionally, Nasdaq may cease trading Shares if other unusual 
conditions or circumstances exist that, 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.
    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. In addition, a separate 
Web site (www.nextshares.com) will include the prior business day's 
NAV, and the following trading information for that business day 
expressed as premiums or 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 or discount to NAV (``Closing 
Bid/Ask Midpoint''); and (c) the spread between highest bid and lowest 
offer prices as of the close of Exchange trading (``Closing Bid/Ask 
Spread.''). The Web site at www.nextshares.com 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 Exchange represents that all statements and representations 
made in this filing regarding (a) the description of the Funds' 
portfolios, (b) limitations on portfolio holdings or reference assets, 
or (c) the applicability of Exchange rules and surveillance procedures 
shall constitute continued listing requirements for listing the Shares 
of the Funds on the Exchange. The issuer has represented to the 
Exchange that it will advise the Exchange of any failure by any Fund to 
comply with the continued listing requirements, and, pursuant to its 
obligations under Section 19(g)(1) of the Act, the Exchange will 
monitor for compliance with the continued listing requirements.\27\ If 
a Fund is not in compliance with the applicable listing requirements, 
the Exchange will commence delisting procedures under Nasdaq Rules 
5800, et seq.
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    \27\ The Commission notes that certain other proposals for the 
listing and trading of Managed Fund Shares include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Securities Exchange Act Release No. 
78005 (Jun. 7, 2016), 81 FR 38247 (Jun. 13, 2016) (SR-BATS-2015-
100). In the context of this representation, it is the Commission's 
view that ``monitor'' and ``surveil'' both mean ongoing oversight of 
a fund's compliance with the continued listing requirements. 
Therefore, the Commission does not view ``monitor'' as a more or 
less stringent obligation than ``surveil'' with respect to the 
continued listing requirements.
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    This approval order is based on all of the Exchange's 
representations, including those set forth above, in the Notice and 
Amendment No. 1,\28\ and the Exchange's description of the Funds. The 
Commission notes that the Funds and the Shares must comply with the 
requirements of Nasdaq Rule 5745 and the conditions set forth in this 
proposed rule change to be listed and traded on the Exchange on an 
initial and continuing basis.
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    \28\ See supra notes 3 and 4, respectively.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1, is consistent with Section 
6(b)(5) of the Act \29\ and the rules and regulations thereunder 
applicable to a national securities exchange.
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    \29\ 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 
Act,\30\ that the proposed rule change (SR-NASDAQ-2016-134), as 
modified by Amendment No. 1, be, and it hereby is, approved.
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    \30\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-28636 Filed 11-28-16; 8:45 am]
 BILLING CODE 8011-01-P