Document ID: SEC-2016-1611-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2016-09-08T04:00Z

[Federal Register Volume 81, Number 174 (Thursday, September 8, 2016)]
[Notices]
[Pages 62229-62233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-21486]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78738; File No. SR-NASDAQ-2016-103]

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

August 31, 2016.

I. Introduction

    On July 13, 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: Ivy Focused Growth 
NextShares; Ivy Focused Value NextShares; and Ivy Energy NextShares 
(individually, ``Fund,'' and collectively, ``Funds''). On July 14, 
2016, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ The proposed rule change, as modified by Amendment No. 1 
thereto, was published for comment in the Federal Register on July 27, 
2016.\4\ 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 thereto.
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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.
    \4\ See Securities Exchange Act Release No. 78385 (Jul. 21, 
2016), 81 FR 49341 (``Notice'').

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[[Page 62230]]

II. Exchange's Description of 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, as defined in Nasdaq Rule 
5745(c)(1). Each Fund is a series of Ivy NextShares (``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. 31816 (Sept. 9, 2015) (File No. 812-14526). 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 
April 18, 2016 (File Nos. 333-210814 and 811-23155).
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    Ivy Investment Management Company (``Adviser'') will be the adviser 
to the Funds. ALPS Distributors, Inc. will be the principal underwriter 
and distributor of each Fund's Shares. Waddell & Reed Services Company, 
doing business as WI Services Company (``WISC''), will act as the 
administrator and accounting agent to the Funds. State Street Bank and 
Trust Company (``State Street'') will act as the custodian and transfer 
agent to the Funds. In addition, State Street has entered into 
agreements with WISC pursuant to which State Street will serve as sub-
administrator and sub-accounting agent 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 and Registration Statement, 
as applicable. See supra notes 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 the public Web site for the 
Funds.
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1. Ivy Focused Growth NextShares
    The investment objective of this Fund is to provide growth of 
capital. The Fund normally will invest primarily in a portfolio of 
common stocks issued by large-capitalization, growth-oriented companies 
with above-average levels of profitability and that the Adviser 
believes have the ability to sustain growth over the long term. 
Although the Fund primarily will invest in securities issued by large-
capitalization companies (defined as companies with market 
capitalizations of at least $10 billion at the time of acquisition), it 
may invest in securities issued by companies of any size.
2. Ivy Focused Value NextShares
    The investment objective of this Fund is to provide capital 
appreciation, with a secondary objective of providing current income. 
The Fund normally will invest in the common stocks of companies that 
the Adviser believes are undervalued, trading at a significant discount 
relative to the intrinsic value of the company as estimated by the 
Adviser and/or are out of favor in the financial markets, but have a 
favorable outlook for capital appreciation. Although the Fund will 
often invest in securities issued by large-capitalization companies 
(defined as companies with market capitalizations of at least $10 
billion at the time of acquisition), it may invest in securities issued 
by companies of any size.
3. Ivy Energy NextShares
    The investment objective of this Fund is to provide capital growth 
and appreciation. The Fund will invest, under normal circumstances, at 
least 80% of its net assets in the common stock of companies within the 
energy sector, which includes all aspects of the energy industry, such 
as exploration, discovery, production, distribution or infrastructure 
of energy, and/or alternative energy sources.

B. Portfolio Disclosure & 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 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 National Securities Clearing Corporation 
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.\9\ 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.\10\
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    \9\ The free Web site containing the Composition File will be 
www.nextshares.com.
    \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

[[Page 62231]]

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 Value 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 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.'' 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).\14\ 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. 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.
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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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    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/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\ 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 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 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 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 whereby the order will be cancelled 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

[[Page 62232]]

markets and other entities that are members of the Intermarket 
Surveillance Group (``ISG'') \21\ 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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    \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 
cancelled as of the close of trading on such 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/or such 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 such 
portfolio.
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    \22\ See Notice, supra note 4, 81 FR at 49341.
    \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 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. 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 \26\ 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. 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 all 
firms will receive the NAV per share at the same time.
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    \25\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \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 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 which, in the opinion of Nasdaq, make 
further

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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 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 (``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 Rule 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 and in the Notice,\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 conditions set forth in this proposed rule change to be 
listed and traded on the Exchange on an initial and continued basis.
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    \28\ See supra note 4.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1 thereto, 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-2016-103), as 
modified by Amendment No. 1 thereto, 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. 2016-21486 Filed 9-7-16; 8:45 am]
 BILLING CODE 8011-01-P