81 FR 76975 - Order Granting a Limited Exemption From Rule 102 of Regulation M Concerning NASDAQ Stock Market LLC's New Product Support Incentives Pursuant to Regulation M Rule 102(e)
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 214 (November 4, 2016)
Federal Register Volume 81, Issue 214 (November 4, 2016)
| Page Range | 76975-76977 | |
| FR Document | 2016-26646 |
[Federal Register Volume 81, Number 214 (Friday, November 4, 2016)] [Notices] [Pages 76975-76977] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-26646] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79200] Order Granting a Limited Exemption From Rule 102 of Regulation M Concerning NASDAQ Stock Market LLC's New Product Support Incentives Pursuant to Regulation M Rule 102(e) October 31, 2016. On September 23, 2016, NASDAQ Stock Market LLC (``Exchange'' or ``NASDAQ'') filed with the Securities and Exchange Commission (``Commission'') a proposal to amend NASDAQ Rule 7014(f) to, among other things, change their Lead Market Maker Program (now renamed the ``Designated Liquidity Provider (``DLP'') Program'') to include a new rebate, the New Product Support Incentive (``NPSI'').\1\ Under the NPSI, the Exchange will pay a higher rebate to market makers that act as DLPs in newly launched exchange-traded products (``ETPs'') that meet certain conditions.\2\ The proposal became effective upon filing pursuant to Section 19(b)(3)(A)(ii) of the Securities Exchange Act of 1934, as amended (``Exchange Act'').\3\ --------------------------------------------------------------------------- \1\ Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Amend Nasdaq's Fees at Rule 7014(f), Exchange Act Release No. 78912 (Sep. 23, 2016); 81 FR 67019 (Sep. 29, 2016) (``NPSI Release''). \2\ ETPs eligible to be qualified securities for the DLP Program are exchange-traded funds or index-linked securities listed on NASDAQ pursuant to NASDAQ Rules 5705 (Exchange Traded Funds: Portfolio Depository Receipts and Index Fund Shares), 5710 (Securities Linked to the Performance of Indexes and Commodities, Including Currencies), 5720 (Trust Issued Receipts), 5735 (Managed Fund Shares), or 5745 (NextShares). In addition, the ETPs must have at least one DLP. Further, to qualify for the NPSI, the DLP must be at the national best bid or offer at least 20% of the time on average in the assigned ETP, the ETP must have a three-month ADV of less than 500,000, and the ETP must be less than 36 months old. See NASDAQ Rule 7014(f)(1) and (4). Collectively, securities for which rebates under the NPSI are made are referred to in this order as ``NPSI Securities.'' \3\ 15 U.S.C. 78s(b)(3)(A)(ii). See also NPSI Release. --------------------------------------------------------------------------- Specifically, the Exchange will pay an NPSI rebate to a DLP of $0.0070 per executed share in the first year from the ETP's launch, on a decreasing scale until the NPSI is phased out as the ETP ages, terminating three years from the ETP's launch.\4\ In contrast, the largest rebate that a DLP can collect under the DLP Program's ``Basic Rebate'' for a non-NPSI ETP is $0.0047 per executed share.\5\ NASDAQ represents that the NPSI is designed for the purpose of incentivizing DLPs to support trading in newly launched ETPs.\6\ --------------------------------------------------------------------------- \4\ NASDAQ Rule 7014(f)(5)(B). The rebate decreases to $0.0065 per executed share in the second year and $0.0055 per executed share in the third. After the third year, no rebate is paid under the NPSI. These rebates collectively are referred to in this order as ``NPSI Rebates.'' \5\ See NASDAQ Rule 7014(f)(4)-(5)(A). In addition to the Basic Rebate and NPSI, a DLP in qualifying ETPs can also receive the ``Additional Tape C ETP Incentive,'' which provides $0.0003 to $0.0005 per executed share, depending on how many ETPs the DLP is assigned to and other conditions are met. See NASDAQ Rule 7014(f)(5)(C). \6\ NPSI Release. --------------------------------------------------------------------------- With the implementation of the NPSI, issuers of newly launched ETPs that choose to list on NASDAQ are automatically enrolled in the NPSI and would indirectly benefit from this liquidity support, which is intended to incentivize market makers to engage in more quotation and trading activity than might otherwise be undertaken in the absence of payments under the NPSI in order to help facilitate the distribution of newly launched ETPs. As such, the Commission believes that participating in the NPSI could constitute an indirect attempt by the issuer to induce a bid for or purchase of a covered security during a restricted period potentially in violation of Rule 102 of Regulation M.\7\ NASDAQ represents that the NPSI may incentivize DLPs to support trading in newly launched ETPs.\8\ --------------------------------------------------------------------------- \7\ 17 CFR 242.102. The Commission notes in this regard the focus of the NPSI on newly launched ETPs. Cf. Order Instituting Proceedings to Determine Whether to Approve or Disapprove Proposed Rule Changes Relating to Market Maker Incentive Programs for Certain Exchange-Traded Products, Exchange Act Release No. 67411 (Jul. 11, 2012), 77 FR 42052 (Jul. 17, 2012) (regarding the similar NASDAQ Market Quality Program (``MQP''), stating that ``[t]he Commission believes that issuer payments made under the SRO Proposals would constitute an indirect attempt by the issuer of a covered security to induce a purchase or bid in a covered security during a restricted period in violation of Rule 102'' and noting that ``under the NASDAQ Proposal, the issuer payments would `be used for the purpose of incentivizing one or more Market Makers in the MQP Security,' which could induce bids or purchases for the issuer's security during a restricted period''). \8\ NPSI Release. --------------------------------------------------------------------------- The Commission has provided limited, conditional exemptions from Rule 102 for issuers to participate in a number of similar programs, such as the NASDAQ MQP, which also involved an indirect attempt by the issuer to induce a bid for or a purchase of a covered security during a restricted period.\9\ Like [[Page 76976]] the NPSI, these programs are designed to incentivize market makers to make markets in specific securities. The Commission's exemptions for these programs are intended to ensure that investors purchasing ETPs that are being quoted or traded as a result of incentive payments are notified in advance of the potential consequences of such payments on the prices and liquidity of such ETPs. The Commission believes that it is appropriate to exempt issuers from Rule 102 to permit participation in the NPSI with similar disclosure to investors. --------------------------------------------------------------------------- \9\ See Order Granting a Limited Exemption from Rule 102 of Regulation M Concerning the NASDAQ Stock Market LLC Market Quality Program Pilot Pursuant to Regulation M Rule 102(e), Exchange Act Rel. No. 69196 (Mar. 20, 2013); 78 FR 18410 (Mar. 26, 2013); Order Granting a Limited Exemption from Rule 102 of Regulation M Concerning the NYSE Arca, Inc.'s Exchange Traded Product Incentive Program Pilot Pursuant to Regulation M Rule 102(e), Exchange Act Rel. No. 69707 (Jun. 6, 2013); 78 FR 35330 (Jun. 12, 2013); Order Granting a Limited Exemption from Rule 102 of Regulation M Concerning the NYSE Arca, Inc.'s Crowd Participant Program Pilot, Exchange Act Rel. No. 71805 (Mar. 26, 2014); 79 FR 18365 (Apr. 1, 2014); and Order Granting a Limited Exemption from Rule 102 of Regulation M Concerning the BATS Exchange, Inc.'s Pilot Supplemental Competitive Liquidity Provider Program, Exchange Act Rel. No. 72693 (Jul. 28, 2014); 79 FR 44875 (Aug. 1, 2014). --------------------------------------------------------------------------- The Commission believes that potential investors in NPSI Securities should be provided with sufficient information regarding the potential impact of the NPSI on the price and liquidity of the ETPs, particularly given the temporary and limited nature of each ETP's enrollment in the program. Accordingly, the Commission is granting a limited exemption from Rule 102 of Regulation M solely to permit issuers to participate indirectly in the NPSI Rebates, subject to certain conditions described below. Rule 102 of Regulation M Rule 102 of Regulation M prohibits issuers, selling security holders, or any affiliated purchaser of such persons, directly or indirectly, from bidding for, purchasing, or attempting to induce any person to bid for or purchase a covered security \10\ during the applicable restricted period in connection with a distribution of securities effected by or on behalf of an issuer or selling security holder, except as specifically permitted in the rule.\11\ As mentioned above, the Commission believes that issuers participating in the NPSI could constitute an indirect attempt to induce a bid for or purchase of a covered security during the applicable restricted period. Accordingly, absent exemptive relief, issuers of NPSI Securities (``NPSI Issuers'') that list on NASDAQ while the NPSI is in effect may violate Rule 102. --------------------------------------------------------------------------- \10\ Covered security is defined as any security that is the subject of a distribution, or any reference security. 17 CFR 242.100(b). \11\ 17 CFR 242.102(a). --------------------------------------------------------------------------- On the basis of the conditions set out below, which in general are designed to help inform investors about the potential impact of the NPSI to potential investors of NPSI Securities, the Commission finds that it is appropriate in the public interest, and is consistent with the protection of investors, to grant a limited exemption from Rule 102 of Regulation M solely to permit NPSI Issuers to list NPSI Securities on NASDAQ while the NPSI is in effect and thus, to participate indirectly in the payment of the NPSI Rebates to DLPs.\12\ --------------------------------------------------------------------------- \12\ Rule 102(e) allows the Commission to grant an exemption from the provision of Rule 102, either unconditionally or on specified terms and conditions, to any transaction or class of transactions, or to any security or class of securities. --------------------------------------------------------------------------- This limited exemption is conditioned on the NPSI Issuer, or sponsor if applicable, making specific disclosures, as set forth below. The disclosures are designed to alert potential investors that the trading market for NPSI Securities may be affected by these payments. Specifically, these disclosures are designed to inform potential investors about the potential impact of the NPSI on the natural market forces of supply and demand prior to making an investment decision in these newly launched securities products. These disclosures are expected to promote greater investor protection by helping to ensure that investors adequately informed as to this potential impact. We also note that, to the extent that information about the NPSI is material, disclosure of this kind may already be required by the federal securities laws. Conclusion It is therefore ordered, pursuant to Rule 102(e) of Regulation M, that NPSI Issuers are hereby exempted from Rule 102 of Regulation M solely to permit NPSI Issuers to participate in the NPSI as set forth in NASDAQ Rule 7014(f), subject to the condition that the NPSI Issuer (or the sponsor, if applicable) shall make the following disclosures in a press release, as well as prominently and continuously on its Web site, for each specific ETP that it intends to list, or has listed, on NASDAQ: (1) At the beginning of the restricted period, as defined in Rule 100 of Regulation M,\13\ for the NPSI Security, the following disclosure shall be continuously provided until the disclosure in (2) below is required: ``[Specific ETP name] intends to list on NASDAQ on or around [anticipated date]. Once listed, [Specific ETP] is automatically eligible for NASDAQ's New Product Support Incentives Rebate (``NPSI Rebate''), which is a payment made to certain market makers depending on how actively they quote and trade [Specific ETP]. Market makers quoting and trading [Specific ETP] on NASDAQ will receive such payments for up to three years from the launch date for [Specific ETP] if they meet the requirements for such payments.''; --------------------------------------------------------------------------- \13\ 17 CFR 242.100(b). --------------------------------------------------------------------------- (2) Immediately after launch, or immediately at the beginning of the period in which a market maker's trading activity can qualify for an NPSI Rebate in an NPSI Security, as applicable, the following disclosure shall be continuously maintained and updated until termination of the NPSI Rebate, and shall, as necessary, be supplemented with the disclosure in (3) below: ``The [Specific ETP name] is listed on NASDAQ. As such, it is enrolled in NASDAQ's New Product Support Incentives Rebate (``NPSI Rebate''), which is a payment made to certain market makers depending on how actively they quote and trade [Specific ETP]. The [Specific ETP] has participated in the NPSI Rebate since [date], and will no longer be eligible to participate in the program on [date], which is three years from the launch date (unless the program is terminated or modified before then or if [Specific ETP] becomes too liquid to participate in the NPSI before then). Certain market makers quoting and trading [Specific ETP] on NASDAQ will be eligible to receive NPSI Rebates until that date, unless, again, the program is terminated or modified before then or if [Specific ETP] becomes too liquid to participate in the NPSI before then. The payment of the NPSI Rebates is intended to help provide liquidity support for newly launched exchange-traded products by generating more quotes and trading than might otherwise exist absent these payments. Investors should be aware that when these payments cease, there may be an adverse impact on the price and liquidity of [Specific ETP], which could adversely impact a purchaser's subsequent sale of the security.''; and (3) No less than 30 days before the expected termination date, or as soon as practicable after the NPSI Issuer becomes aware or should become aware that the NPSI Security will no longer be eligible to participate in the NPSI and before the end of such eligibility, the following disclosure shall be added to the disclosure required in (2) above: ``UPDATE: [Specific ETP] is expected to no longer qualify for the NPSI rebates on [or around] [date]. This may impact the price or liquidity of [Specific ETP], which could adversely impact a [[Page 76977]] purchaser's subsequent sale of the security.'' This exemptive relief shall terminate upon the event of any material change to the NPSI, including a change to the types of securities permitted to participate in the program or to the terms or amount of the payments made pursuant to the NPSI.\14\ Further, this exemptive relief is subject to modification or revocation at any time the Commission determines that such action is necessary or appropriate in furtherance of the purposes of the Exchange Act. This exemptive relief is limited solely to the issuer's indirect participation in the payment of the NPSI Rebates as set forth in NASDAQ Rule 7014(f)(5)(B) for an NPSI Security, and does not extend to any other activities of the issuer, any other security of the issuer or sponsor, or any other issuers.\15\ In addition, persons relying on this exemption are directed to the anti-fraud and anti-manipulation provisions of the Exchange Act, particularly Sections 9(a) and 10(b), and Rule 10b-5 thereunder. Responsibility for compliance with these and any other applicable provisions of the federal securities laws must rest with the persons relying on this exemption. This order does not represent Commission views with respect to any other question that the proposed activities may raise, including, but not limited to the adequacy of the disclosure required by federal securities laws and rules, and the applicability of other federal or state laws and rules to, the proposed activities. --------------------------------------------------------------------------- \14\ Accordingly, we expect NASDAQ to contact staff in the Office of Trading Practices in the Division of Trading and Markets before making any material change to the NPSI. \15\ Other activities, such as ETF redemptions, are not covered by this exemptive relief. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\16\ --------------------------------------------------------------------------- \16\ 17 CFR 200.30-3(a)(6). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-26646 Filed 11-3-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 214 / Friday, November 4, 2016 / Notices 76975
Week of November 21, 2016—Tentative Dated: November 2, 2016. rebate that a DLP can collect under the
Glenn Ellmers, DLP Program’s ‘‘Basic Rebate’’ for a non-
There are no meetings scheduled for NPSI ETP is $0.0047 per executed
Policy Coordinator, Office of the Secretary.
the week of November 21, 2016. share.5 NASDAQ represents that the
[FR Doc. 2016–26827 Filed 11–2–16; 4:15 pm]
Week of November 28, 2016—Tentative BILLING CODE 7590–01–P
NPSI is designed for the purpose of
incentivizing DLPs to support trading in
Tuesday, November 29, 2016 newly launched ETPs.6
9:00 A.M. Briefing on Uranium With the implementation of the NPSI,
SECURITIES AND EXCHANGE
Recovery (Public Meeting) (Contact: issuers of newly launched ETPs that
COMMISSION choose to list on NASDAQ are
Samantha Crane: 301–415–6380)
[Release No. 34–79200] automatically enrolled in the NPSI and
This meeting will be webcast live at would indirectly benefit from this
the Web address—http://www.nrc.gov/. Order Granting a Limited Exemption liquidity support, which is intended to
From Rule 102 of Regulation M incentivize market makers to engage in
Week of December 5, 2016—Tentative
Concerning NASDAQ Stock Market more quotation and trading activity than
There are no meetings scheduled for LLC’s New Product Support Incentives might otherwise be undertaken in the
the week of December 5, 2016. Pursuant to Regulation M Rule 102(e) absence of payments under the NPSI in
order to help facilitate the distribution
Week of December 12, 2016—Tentative October 31, 2016.
of newly launched ETPs. As such, the
On September 23, 2016, NASDAQ
Thursday, December 15, 2016 Commission believes that participating
Stock Market LLC (‘‘Exchange’’ or
in the NPSI could constitute an indirect
9:30 A.M. Briefing on Equal ‘‘NASDAQ’’) filed with the Securities
attempt by the issuer to induce a bid for
Employment Opportunity, Affirmative and Exchange Commission
or purchase of a covered security during
Employment, and Small Business (‘‘Commission’’) a proposal to amend a restricted period potentially in
(Public Meeting) (Contact: Larniece NASDAQ Rule 7014(f) to, among other violation of Rule 102 of Regulation M.7
Moore McKoy: 301–415–1942) things, change their Lead Market Maker NASDAQ represents that the NPSI may
Program (now renamed the ‘‘Designated incentivize DLPs to support trading in
This meeting will be webcast live at
Liquidity Provider (‘‘DLP’’) Program’’) to newly launched ETPs.8
the Web address—http://www.nrc.gov/.
include a new rebate, the New Product The Commission has provided
* * * * * Support Incentive (‘‘NPSI’’).1 Under the limited, conditional exemptions from
The schedule for Commission NPSI, the Exchange will pay a higher Rule 102 for issuers to participate in a
meetings is subject to change on short rebate to market makers that act as DLPs number of similar programs, such as the
notice. For more information or to verify in newly launched exchange-traded NASDAQ MQP, which also involved an
the status of meetings, contact Glenn products (‘‘ETPs’’) that meet certain indirect attempt by the issuer to induce
Ellmers at 301–415–0442 or via email at conditions.2 The proposal became a bid for or a purchase of a covered
Glenn.Ellmers@nrc.gov. effective upon filing pursuant to Section security during a restricted period.9 Like
* * * * * 19(b)(3)(A)(ii) of the Securities
The NRC Commission Meeting Exchange Act of 1934, as amended third. After the third year, no rebate is paid under
Schedule can be found on the Internet (‘‘Exchange Act’’).3 the NPSI. These rebates collectively are referred to
Specifically, the Exchange will pay an in this order as ‘‘NPSI Rebates.’’
at: http://www.nrc.gov/public-involve/ 5 See NASDAQ Rule 7014(f)(4)–(5)(A). In addition
public-meetings/schedule.html. NPSI rebate to a DLP of $0.0070 per
to the Basic Rebate and NPSI, a DLP in qualifying
executed share in the first year from the ETPs can also receive the ‘‘Additional Tape C ETP
* * * * *
ETP’s launch, on a decreasing scale Incentive,’’ which provides $0.0003 to $0.0005 per
The NRC provides reasonable until the NPSI is phased out as the ETP executed share, depending on how many ETPs the
accommodation to individuals with ages, terminating three years from the DLP is assigned to and other conditions are met.
disabilities where appropriate. If you See NASDAQ Rule 7014(f)(5)(C).
ETP’s launch.4 In contrast, the largest 6 NPSI Release.
need a reasonable accommodation to 7 17 CFR 242.102. The Commission notes in this
participate in these public meetings, or 1 Notice of Filing and Immediate Effectiveness of
regard the focus of the NPSI on newly launched
need this meeting notice or the Proposed Rule Change to Amend Nasdaq’s Fees at ETPs. Cf. Order Instituting Proceedings to
transcript or other information from the Rule 7014(f), Exchange Act Release No. 78912 (Sep. Determine Whether to Approve or Disapprove
23, 2016); 81 FR 67019 (Sep. 29, 2016) (‘‘NPSI Proposed Rule Changes Relating to Market Maker
public meetings in another format (e.g. Release’’). Incentive Programs for Certain Exchange-Traded
braille, large print), please notify 2 ETPs eligible to be qualified securities for the Products, Exchange Act Release No. 67411 (Jul. 11,
Kimberly Meyer, NRC Disability DLP Program are exchange-traded funds or index- 2012), 77 FR 42052 (Jul. 17, 2012) (regarding the
Program Manager, at 301–287–0739, by linked securities listed on NASDAQ pursuant to similar NASDAQ Market Quality Program (‘‘MQP’’),
videophone at 240–428–3217, or by NASDAQ Rules 5705 (Exchange Traded Funds: stating that ‘‘[t]he Commission believes that issuer
Portfolio Depository Receipts and Index Fund payments made under the SRO Proposals would
email at Kimberly.Meyer-Chambers@ Shares), 5710 (Securities Linked to the Performance constitute an indirect attempt by the issuer of a
nrc.gov. Determinations on requests for of Indexes and Commodities, Including Currencies), covered security to induce a purchase or bid in a
reasonable accommodation will be 5720 (Trust Issued Receipts), 5735 (Managed Fund covered security during a restricted period in
made on a case-by-case basis. Shares), or 5745 (NextShares). In addition, the ETPs violation of Rule 102’’ and noting that ‘‘under the
must have at least one DLP. Further, to qualify for NASDAQ Proposal, the issuer payments would ‘be
* * * * * the NPSI, the DLP must be at the national best bid used for the purpose of incentivizing one or more
Members of the public may request to or offer at least 20% of the time on average in the Market Makers in the MQP Security,’ which could
asabaliauskas on DSK3SPTVN1PROD with NOTICES
assigned ETP, the ETP must have a three-month induce bids or purchases for the issuer’s security
receive this information electronically. ADV of less than 500,000, and the ETP must be less during a restricted period’’).
If you would like to be added to the than 36 months old. See NASDAQ Rule 7014(f)(1) 8 NPSI Release.
distribution, please contact the Nuclear and (4). Collectively, securities for which rebates 9 See Order Granting a Limited Exemption from
Regulatory Commission, Office of the under the NPSI are made are referred to in this Rule 102 of Regulation M Concerning the NASDAQ
order as ‘‘NPSI Securities.’’ Stock Market LLC Market Quality Program Pilot
Secretary, Washington, DC 20555 (301– 3 15 U.S.C. 78s(b)(3)(A)(ii). See also NPSI Release.
Pursuant to Regulation M Rule 102(e), Exchange
415–1969), or email 4 NASDAQ Rule 7014(f)(5)(B). The rebate Act Rel. No. 69196 (Mar. 20, 2013); 78 FR 18410
Brenda.Akstulewicz@nrc.gov or decreases to $0.0065 per executed share in the (Mar. 26, 2013); Order Granting a Limited
Patricia.Jimenez@nrc.gov. second year and $0.0055 per executed share in the Continued
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![76976 Federal Register / Vol. 81, No. 214 / Friday, November 4, 2016 / Notices
the NPSI, these programs are designed Issuers’’) that list on NASDAQ while the automatically eligible for NASDAQ’s
to incentivize market makers to make NPSI is in effect may violate Rule 102. New Product Support Incentives Rebate
markets in specific securities. The On the basis of the conditions set out (‘‘NPSI Rebate’’), which is a payment
Commission’s exemptions for these below, which in general are designed to made to certain market makers
programs are intended to ensure that help inform investors about the depending on how actively they quote
investors purchasing ETPs that are being potential impact of the NPSI to potential and trade [Specific ETP]. Market makers
quoted or traded as a result of incentive investors of NPSI Securities, the quoting and trading [Specific ETP] on
payments are notified in advance of the Commission finds that it is appropriate NASDAQ will receive such payments
potential consequences of such in the public interest, and is consistent for up to three years from the launch
payments on the prices and liquidity of with the protection of investors, to grant date for [Specific ETP] if they meet the
such ETPs. The Commission believes a limited exemption from Rule 102 of requirements for such payments.’’;
that it is appropriate to exempt issuers Regulation M solely to permit NPSI (2) Immediately after launch, or
from Rule 102 to permit participation in Issuers to list NPSI Securities on immediately at the beginning of the
NASDAQ while the NPSI is in effect period in which a market maker’s
the NPSI with similar disclosure to
and thus, to participate indirectly in the trading activity can qualify for an NPSI
investors.
payment of the NPSI Rebates to DLPs.12 Rebate in an NPSI Security, as
The Commission believes that This limited exemption is applicable, the following disclosure
potential investors in NPSI Securities conditioned on the NPSI Issuer, or shall be continuously maintained and
should be provided with sufficient sponsor if applicable, making specific updated until termination of the NPSI
information regarding the potential disclosures, as set forth below. The Rebate, and shall, as necessary, be
impact of the NPSI on the price and disclosures are designed to alert supplemented with the disclosure in (3)
liquidity of the ETPs, particularly given potential investors that the trading below: ‘‘The [Specific ETP name] is
the temporary and limited nature of market for NPSI Securities may be listed on NASDAQ. As such, it is
each ETP’s enrollment in the program. affected by these payments. Specifically, enrolled in NASDAQ’s New Product
Accordingly, the Commission is these disclosures are designed to inform Support Incentives Rebate (‘‘NPSI
granting a limited exemption from Rule potential investors about the potential Rebate’’), which is a payment made to
102 of Regulation M solely to permit impact of the NPSI on the natural certain market makers depending on
issuers to participate indirectly in the market forces of supply and demand how actively they quote and trade
NPSI Rebates, subject to certain prior to making an investment decision [Specific ETP]. The [Specific ETP] has
conditions described below. in these newly launched securities participated in the NPSI Rebate since
products. These disclosures are [date], and will no longer be eligible to
Rule 102 of Regulation M expected to promote greater investor participate in the program on [date],
protection by helping to ensure that which is three years from the launch
Rule 102 of Regulation M prohibits investors adequately informed as to this date (unless the program is terminated
issuers, selling security holders, or any potential impact. We also note that, to or modified before then or if [Specific
affiliated purchaser of such persons, the extent that information about the ETP] becomes too liquid to participate
directly or indirectly, from bidding for, NPSI is material, disclosure of this kind in the NPSI before then). Certain market
purchasing, or attempting to induce any may already be required by the federal makers quoting and trading [Specific
person to bid for or purchase a covered securities laws. ETP] on NASDAQ will be eligible to
security 10 during the applicable receive NPSI Rebates until that date,
restricted period in connection with a Conclusion
unless, again, the program is terminated
distribution of securities effected by or It is therefore ordered, pursuant to or modified before then or if [Specific
on behalf of an issuer or selling security Rule 102(e) of Regulation M, that NPSI ETP] becomes too liquid to participate
holder, except as specifically permitted Issuers are hereby exempted from Rule in the NPSI before then. The payment of
in the rule.11 As mentioned above, the 102 of Regulation M solely to permit the NPSI Rebates is intended to help
Commission believes that issuers NPSI Issuers to participate in the NPSI provide liquidity support for newly
participating in the NPSI could as set forth in NASDAQ Rule 7014(f), launched exchange-traded products by
constitute an indirect attempt to induce subject to the condition that the NPSI generating more quotes and trading than
a bid for or purchase of a covered Issuer (or the sponsor, if applicable) might otherwise exist absent these
security during the applicable restricted shall make the following disclosures in payments. Investors should be aware
period. Accordingly, absent exemptive a press release, as well as prominently that when these payments cease, there
relief, issuers of NPSI Securities (‘‘NPSI and continuously on its Web site, for may be an adverse impact on the price
each specific ETP that it intends to list, and liquidity of [Specific ETP], which
Exemption from Rule 102 of Regulation M
or has listed, on NASDAQ: could adversely impact a purchaser’s
Concerning the NYSE Arca, Inc.’s Exchange Traded (1) At the beginning of the restricted subsequent sale of the security.’’; and
Product Incentive Program Pilot Pursuant to period, as defined in Rule 100 of (3) No less than 30 days before the
Regulation M Rule 102(e), Exchange Act Rel. No. Regulation M,13 for the NPSI Security, expected termination date, or as soon as
69707 (Jun. 6, 2013); 78 FR 35330 (Jun. 12, 2013);
Order Granting a Limited Exemption from Rule 102
the following disclosure shall be practicable after the NPSI Issuer
of Regulation M Concerning the NYSE Arca, Inc.’s continuously provided until the becomes aware or should become aware
Crowd Participant Program Pilot, Exchange Act Rel. disclosure in (2) below is required: that the NPSI Security will no longer be
No. 71805 (Mar. 26, 2014); 79 FR 18365 (Apr. 1, ‘‘[Specific ETP name] intends to list on eligible to participate in the NPSI and
asabaliauskas on DSK3SPTVN1PROD with NOTICES
2014); and Order Granting a Limited Exemption
from Rule 102 of Regulation M Concerning the
NASDAQ on or around [anticipated before the end of such eligibility, the
BATS Exchange, Inc.’s Pilot Supplemental date]. Once listed, [Specific ETP] is following disclosure shall be added to
Competitive Liquidity Provider Program, Exchange the disclosure required in (2) above:
Act Rel. No. 72693 (Jul. 28, 2014); 79 FR 44875 12 Rule 102(e) allows the Commission to grant an
‘‘UPDATE: [Specific ETP] is expected to
(Aug. 1, 2014). exemption from the provision of Rule 102, either
10 Covered security is defined as any security that
no longer qualify for the NPSI rebates on
unconditionally or on specified terms and
is the subject of a distribution, or any reference conditions, to any transaction or class of [or around] [date]. This may impact the
security. 17 CFR 242.100(b). transactions, or to any security or class of securities. price or liquidity of [Specific ETP],
11 17 CFR 242.102(a). 13 17 CFR 242.100(b). which could adversely impact a
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![Federal Register / Vol. 81, No. 214 / Friday, November 4, 2016 / Notices 76977
purchaser’s subsequent sale of the SECURITIES AND EXCHANGE A. Self-Regulatory Organization’s
security.’’ COMMISSION Statement of the Purpose of, and the
This exemptive relief shall terminate Statutory Basis for, the Proposed Rule
upon the event of any material change [Release No. 34–79201; File No. SR– Change
NYSEArca–2016–120]
to the NPSI, including a change to the 1. Purpose
types of securities permitted to Self-Regulatory Organizations; NYSE The Exchange proposes to list and
participate in the program or to the Arca, Inc.; Notice of Filing of Proposed trade shares (‘‘Shares’’) of the following
terms or amount of the payments made Rule Change Relating to the Listing under Commentary .02 to NYSE Arca
pursuant to the NPSI.14 Further, this and Trading of Shares of the Equities Rule 8.200, which governs the
exemptive relief is subject to ForceShares Daily 4X US Market listing and trading of Trust Issued
modification or revocation at any time Futures Long Fund and ForceShares Receipts (‘‘TIRs’’): 4 ForceShares Daily
the Commission determines that such Daily 4X US Market Futures Short Fund 4X US Market Futures Long Fund
action is necessary or appropriate in Under Commentary .02 to NYSE Arca (‘‘Fund’’ or ‘‘Long Fund’’) and
furtherance of the purposes of the Equities Rule 8.200 ForceShares Daily 4X US Market
Exchange Act. This exemptive relief is Futures Short Fund (‘‘Fund’’ or ‘‘Short
October 31, 2016. Fund’’ and, together with the Long
limited solely to the issuer’s indirect
participation in the payment of the NPSI Pursuant to Section 19(b)(1) 1 of the Fund, the ‘‘Funds’’).5
Securities Exchange Act of 1934 (the Each of the Funds is a commodity
Rebates as set forth in NASDAQ Rule
‘‘Act’’) 2 and Rule 19b–4 thereunder,3 pool that is a series of the ForceShares
7014(f)(5)(B) for an NPSI Security, and
notice is hereby given that, on October Trust (‘‘Trust’’), a Delaware statutory
does not extend to any other activities
17, 2016, NYSE Arca, Inc. (the trust. The Funds’ sponsor is
of the issuer, any other security of the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with ForceShares LLC (the ‘‘Sponsor’’). ALPS
issuer or sponsor, or any other issuers.15 the Securities and Exchange Distributors, Inc. is the marketing agent
In addition, persons relying on this Commission (the ‘‘Commission’’) the for the Funds’ Shares (‘‘Marketing
exemption are directed to the anti-fraud proposed rule change as described in Agent’’). U.S. Bank National Association
and anti-manipulation provisions of the Items I and II below, which Items have is the Funds’ custodian (‘‘Custodian’’),
Exchange Act, particularly Sections 9(a) been prepared by the self-regulatory which, in such capacity, holds the
and 10(b), and Rule 10b-5 thereunder. organization. The Commission is Funds’ ‘‘Cash Equivalents’’ (as
Responsibility for compliance with publishing this notice to solicit described below) and/or cash pursuant
these and any other applicable comments on the proposed rule change to a custodial agreement. The Custodian
provisions of the federal securities laws from interested persons. is also the registrar and transfer agent
must rest with the persons relying on for the Funds’ Shares.
I. Self-Regulatory Organization’s The Long Fund’s primary investment
this exemption. This order does not
Statement of the Terms of Substance of objective is to seek daily investment
represent Commission views with the Proposed Rule Change
respect to any other question that the results, before fees and expenses, that
proposed activities may raise, including, The Exchange proposes to list and correspond to approximately four times
but not limited to the adequacy of the trade shares of the following under (400%) the daily performance, and the
disclosure required by federal securities Commentary .02 to NYSE Arca Equities Short Fund’s primary investment
laws and rules, and the applicability of Rule 8.200 (‘‘Trust Issued Receipts’’): objective is to seek daily investment
ForceShares Daily 4X US Market results, before fees and expenses, that
other federal or state laws and rules to,
Futures Long Fund and ForceShares correspond to approximately four times
the proposed activities.
Daily 4X US Market Futures Short
For the Commission, by the Division of Fund. The proposed rule change is 4 Commentary .02 to NYSE Arca Equities Rule
Trading and Markets, pursuant to delegated available on the Exchange’s Web site at 8.200 applies to TIRs that invest in ‘‘Financial
authority.16 Instruments.’’ The term ‘‘Financial Instruments,’’ as
www.nyse.com, at the principal office of defined in Commentary .02(b)(4) to NYSE Arca
Brent J. Fields, the Exchange, and at the Commission’s Equities Rule 8.200, means any combination of
Secretary. Public Reference Room. investments, including cash; securities; options on
securities and indices; futures contracts; options on
[FR Doc. 2016–26646 Filed 11–3–16; 8:45 am] II. Self-Regulatory Organization’s futures contracts; forward contracts; equity caps,
BILLING CODE 8011–01–P Statement of the Purpose of, and collars and floors; and swap agreements.
5 On July 27, 2015, the Trust submitted to the
Statutory Basis for, the Proposed Rule
Commission its draft registration statement on Form
Change S–1 under the Securities Act of 1933 (15 U.S.C. 77a)
In its filing with the Commission, the (‘‘Securities Act’’). The Jumpstart Our Business
Startups Act, enacted on April 5, 2012, added
self-regulatory organization included Section 6(e) to the Securities Act. Section 6(e) of the
statements concerning the purpose of, Securities Act provides that an ‘‘emerging growth
and basis for, the proposed rule change company’’ may confidentially submit to the
and discussed any comments it received Commission a draft registration statement for
confidential, non-public review by the Commission
on the proposed rule change. The text staff prior to public filing, provided that the initial
of those statements may be examined at confidential submission and all amendments
asabaliauskas on DSK3SPTVN1PROD with NOTICES
the places specified in Item IV below. thereto shall be publicly filed not later than 21 days
The Exchange has prepared summaries, before the date on which the issuer conducts a road
show, as such term is defined in Securities Act Rule
14 Accordingly, we expect NASDAQ to contact
set forth in sections A, B, and C below, 433(h)(4). An emerging growth company is defined
staff in the Office of Trading Practices in the of the most significant parts of such in Section 2(a)(19) of the Securities Act as an issuer
Division of Trading and Markets before making any statements. with less than $1,000,000,000 total annual gross
revenues during its most recently completed fiscal
material change to the NPSI.
year. The Funds meet the definition of an emerging
15 Other activities, such as ETF redemptions, are 1 15 U.S.C. 78s(b)(1). growth company and consequently have filed their
not covered by this exemptive relief. 2 15 U.S.C. 78a. Form S–1 registration statement on a confidential
16 17 CFR 200.30–3(a)(6). 3 17 CFR 240.19b–4. basis with the Commission.
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Document Created: 2018-02-14 08:26:08
Document Modified: 2018-02-14 08:26:08
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| Dates | [Specific ETP] is expected to no longer qualify for the NPSI rebates on [or around] [date]. This may impact the price or liquidity of [Specific ETP], which could adversely impact a purchaser's subsequent sale of the security.'' | |
| FR Citation | 81 FR 76975 |
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