82_FR_22128 82 FR 22038 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Granting Approval of Proposed Rule Change, as Modified by Amendment Nos. 2, 3, and 4, to List and Trade Shares of the Gabelli Small Cap Growth Fund and the Gabelli RBI Fund Under Nasdaq Rule 5745

82 FR 22038 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Granting Approval of Proposed Rule Change, as Modified by Amendment Nos. 2, 3, and 4, to List and Trade Shares of the Gabelli Small Cap Growth Fund and the Gabelli RBI Fund Under Nasdaq Rule 5745

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 90 (May 11, 2017)

Page Range22038-22042
FR Document2017-09530

Federal Register, Volume 82 Issue 90 (Thursday, May 11, 2017) 
[Federal Register Volume 82, Number 90 (Thursday, May 11, 2017)]
[Notices]
[Pages 22038-22042]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-09530]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80614; File No. SR-NASDAQ-2017-029]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment 
Nos. 2, 3, and 4, to List and Trade Shares of the Gabelli Small Cap 
Growth Fund and the Gabelli RBI Fund Under Nasdaq Rule 5745

May 5, 2017.

I. Introduction

    On March 17, 2017, 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 common shares (``Shares'') of 
the Gabelli Small Cap Growth NextSharesTM (``Gabelli Small 
Cap Growth Fund'') and the Gabelli RBI NextSharesTM 
(``Gabelli RBI Fund'') (each, a ``Fund,'' and collectively, the 
``Funds'') under Nasdaq Rule 5745. The proposed rule change was 
published for comment in the Federal Register on March 31, 2017.\3\ On 
April 13, 2017, the Exchange filed Amendment No. 2 to the proposed rule 
change; on April 24, 2017, the Exchange filed Amendment No. 3 to the 
proposed rule change; and on May 3, 2017, the Exchange filed Amendment 
No. 4 to the proposed rule change.\4\ The Commission received no 
comments on the proposed rule change. This order grants approval of the 
proposed rule change, as modified by Amendment Nos. 2, 3, and 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. 80315 (March 27, 
2017), 82 FR 16075 (``Notice'').
    \4\ On April 11, 2017, the Exchange filed Amendment No. 1 to the 
proposed rule change and, on April 13, 2017, the Exchange withdrew 
Amendment No. 1. Amendment No. 2 to the proposed rule change 
replaces and supersedes the original filing in its entirety. In 
Amendment No. 2, the Exchange: (a) Represents that the Adviser will 
maintain a fire wall with respect to its affiliated broker-dealer 
regarding access to information concerning the composition of, and/
or changes to, each Fund's portfolio; (b) represents that personnel 
who make decisions on each Fund's portfolio composition must be 
subject to procedures designed to prevent the use and dissemination 
of material, non-public information regarding each Fund's portfolio; 
(c) provides additional detail regarding the investments of each 
Fund; (d) modifies the continued listing representations to conform 
to Nasdaq rules; and (e) makes other technical, non-substantive 
corrections in the proposed rule change. Amendment No. 2 is 
available at: https://www.sec.gov/comments/sr-nasdaq-2017-029/nasdaq2017029-1701356-149968.pdf. Amendment Nos. 3 to the proposed 
rule change is a partial amendment in which the Exchange clarifies 
that, under normal market conditions, the Gabelli RBI Fund invests 
primarily in equity securities, such as common stock, of domestic 
and foreign services and equipment companies focused on physical 
asset development, including roads, bridges, and infrastructure 
(RBI). Amendment No. 3 is available at: https://www.sec.gov/comments/sr-nasdaq-2017-029/nasdaq2017029-1717445-150417.pdf. 
Amendment No. 4 to the proposed rule change is a partial amendment 
in which the Exchange clarifies that the Reporting Authority (as 
defined in Nasdaq Rule 5745) will implement and maintain, or ensure 
that the Composition File (as defined in Nasdaq Rule 5745) will be 
subject to, procedures designed to prevent the use and dissemination 
of material non-public information regarding the Fund's portfolio 
positions and changes in the positions. Amendment No. 4 is available 
at: https://www.sec.gov/comments/sr-nasdaq-2017-029/nasdaq2017029-1734987-150973.pdf. Because Amendment Nos. 2, 3, and 4 to the 
proposed rule change do not materially alter the substance of the 
proposed rule change or raise unique or novel regulatory issues, 
Amendment Nos. 2, 3, and 4 are not subject to notice and comment.
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II. Exchange's Description of the Proposed Rule Change

    The Exchange proposes to list and trade the Shares of the Funds 
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 the Gabelli 
NextSharesTM Trust (``Trust'').\5\ The Exchange represents 
that the Trust is registered with the Commission as an open-end 
investment company and that it has filed a registration statement on 
Form N-1A (``Registration Statement'') with the Commission with respect 
to the Funds.\6\
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    \5\ According to the Exchange, the Commission has issued an 
order granting the Trust and certain affiliates of the Trust 
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 the Trust 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 
March 14, 2017 (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 the Funds' 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. Interactive Data Pricing and 
Reference Data, Inc. will calculate the Intraday Indicative Value (as 
described below) for the Funds.
    The Exchange has made the following representations and statements 
in describing the Funds.\7\ 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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    \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 Nos. 2, 3, and 
4, and Registration Statement, as applicable. See supra notes 3, 4, 
and 6, respectively, and accompanying text.
    \8\ According to the Exchange, additional information regarding 
the Funds will be available on one of two free public Web sites 
(www.gabelli.com or www.nextshares.com), as well as in the 
Registration Statement for the Funds.
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A. Principal Investment Strategies

1. The Gabelli Small Cap Growth Fund
    The Gabelli Small Cap Growth Fund seeks to provide a high level of 
capital appreciation. Under normal market conditions, the Gabelli Small 
Cap Growth Fund invests at least 80% of its net assets, plus borrowings 
for investment purposes, in equity securities of companies that are 
considered to be small companies at the time the Gabelli Small Cap 
Growth Fund makes its investment. The Gabelli Small Cap Growth Fund 
invests primarily in the common stocks of companies, which the Adviser 
believes are likely to have rapid growth in revenues and above average 
rates of earnings growth. The Adviser currently characterizes small 
companies for the Gabelli Small Cap Growth Fund as those with total 
common stock market values of $3 billion or less at the time of 
investment.
2. The Gabelli RBI Fund
    The Gabelli RBI Fund seeks to provide above average capital-
appreciation. Under normal market conditions, the Gabelli RBI Fund 
primarily invests in equity securities, such as common stock, of 
domestic and foreign services and equipment companies focused on 
physical asset development, including roads, bridges, and 
infrastructure (RBI). The Adviser

[[Page 22039]]

selects companies which it believes are currently undervalued and have 
the potential to benefit from domestic and global reinvestment and 
development of physical assets, including roads, bridges, and other 
infrastructure-related industries.

B. Portfolio Disclosure and Composition File

    Consistent with the disclosure requirements that apply to 
traditional open-end investment companies, a complete list of each 
Fund's current portfolio positions will be made available at least once 
each calendar quarter, with a reporting lag of not more than 60 days. 
The Funds may provide more frequent disclosures of portfolio positions 
at its 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 that day 
and also will be made available to the public each day on a free Web 
site.\9\ Because each Fund seeks to preserve the confidentiality of its 
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 are in the process of being sold may not be removed from 
its Composition File until the sale is substantially completed. A Fund 
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 a Fund's portfolio.\10\
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    \9\ The Exchange represents that 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.
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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'' 
(``IIV'') 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 IIV will be calculated on an intraday 
basis and provided to Nasdaq for dissemination via the Nasdaq Global 
Index Service. The IIV will be based on current information regarding 
the value of the securities and other assets held by a Fund.\12\ The 
purpose of the IIV 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.\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 (``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\ IIVs disseminated throughout each trading day would be 
based on the same portfolio as used to calculate that day's NAV. 
Each Fund will reflect purchases and sales of portfolio positions in 
its NAV the next business day after trades are executed.
    \13\ In NAV-Based Trading, prices of executed trades are not 
determined until the reference NAV is calculated, so 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. 
The Exchange represents that the Registration Statement, Web site 
and any advertising or marketing materials will include prominent 
disclosure of this fact. The Exchange states that although IIVs may 
provide useful estimates of the value of intraday trades, they 
cannot be used to calculate with precision the dollar value of the 
Shares to be bought or sold.
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D. NAV-Based Trading

    Because Shares will be listed and traded on the Exchange, Shares 
will be available for purchase and sale on an intraday basis. Shares 
will be purchased and sold in the secondary market at prices directly 
linked to a 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/discount (which may be zero) to a 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., E.T. 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 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.,

[[Page 22040]]

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 for each Fund 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 Nasdaq'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 thresholds for the life of the 
order and provides that the order will be cancelled at any point if it 
exceeds $101.00 or falls below $99.00.\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, Inc. (``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 these 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, and 
may obtain information from, other markets and 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). 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 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 in a Fund, the Exchange will 
inform its members in an Information Circular of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Circular will discuss the following: (a) 
The procedures for purchases and redemptions of Shares in creation 
units (and that Shares are not individually redeemable); (b) Nasdaq 
Rule 2111A, which imposes suitability obligations on Nasdaq members 
with respect to recommending transactions in the Shares to customers; 
(c) how information regarding the IIV and Composition File is 
disseminated; (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 that day, and 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; 
however, it is is affiliated with a broker-dealer and has implemented 
and will maintain a fire wall with respect to its affiliated broker-
dealer regarding access to information concerning the composition of, 
and/or changes to, each Fund's portfolio.\22\ The Reporting Authority 
\23\ will implement and maintain, or ensure that the Composition File 
will be subject to, procedures designed to prevent the use and 
dissemination of material non-public information regarding a Fund's 
portfolio positions and changes in the positions.\24\ 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 sub-

[[Page 22041]]

adviser to a Fund is a registered broker-dealer or becomes affiliated 
with a broker-dealer, such new adviser or sub-adviser will implement 
and maintain 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/or changes to, a Fund's 
portfolio, and will be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding the 
portfolio.\25\
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    \22\ See Amendment No. 2, supra note 4. 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. See Amendment No. 
2, supra note 4, at note 9.
    \23\ See Nasdaq Rule 5745(c)(4).
    \24\ See Amendment No. 4, supra note 4.
    \25\ See Amendment No. 2, supra note 4.
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    The Commission 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,\26\ 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 continuously available on a real-time basis 
throughout each trading 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 \27\ and separately disseminated to member firms 
and market data services through the Exchange data feeds.
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    \26\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \27\ Due to systems limitations, the Consolidated Tape will 
report intraday execution prices and quotes for Shares using a proxy 
price format. Nasdaq has represented that it will separately report 
real-time execution prices and quotes to member firms and providers 
of market data services in the ``NAV-$0.01/NAV+$0.01'' (or similar) 
display format, and will otherwise seek to ensure that 
representations of intraday bids, offers and execution prices for 
Shares that are made available to the investing public follow the 
same display format.
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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/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 a File Transfer Protocol 
(``FTP'') file \28\ that will be created for exchange-traded managed 
funds and will be confirmed to the member firms participating in the 
trade to supplement the previously provided information with final 
pricing.
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    \28\ According to Nasdaq, 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 the MFQS, 
Nasdaq will disseminate the NAV 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 the 
Shares. The Exchange will halt trading in the Shares under the 
conditions specified in Nasdaq Rule 4120 and in Nasdaq Rule 
5745(d)(2)(C). Additionally, the Exchange may cease trading the Shares 
if other unusual conditions or circumstances exist that, in the opinion 
of the Exchange, make further dealings on the exchange 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 the Shares, the Funds will be 
required to establish and maintain a public Web site through which its 
current prospectus may be downloaded.\29\ A separate Web site 
(www.nextshares.com) will include additional information concerning the 
Funds updated on a daily basis, including the prior business day's NAV, 
and the following trading information for that 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 www.nextshares.com Web site will also contain charts 
showing the frequency distribution and range of values of trading 
prices, Closing Bid/Ask Midpoints, and Closing Bid/Ask Spreads over 
time.
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    \29\ The Exchange represents that the Web site containing this 
information will be www.gabelli.com.
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    The Exchange represents that all statements and representations 
made in the filing regarding: (a) The description of the Funds' 
portfolio, (b) limitations on portfolio holdings or reference assets, 
(c) dissemination and availability of the reference asset or intraday 
indicative values, or (d) the applicability of Exchange listing rules 
shall constitute continued listing requirements for listing the Shares 
on the Exchange. The issuer has represented to the Exchange that it 
will advise the Exchange of any failure by either 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.\30\ If a Fund is 
not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures for the Fund under the 
Nasdaq 5800 Series.
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    \30\ 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.
---------------------------------------------------------------------------

    This approval order is based on all of the Exchange's 
representations, including those set forth above, in the Notice, and 
Amendment Nos. 2, 3, and 4,\31\ 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.
---------------------------------------------------------------------------

    \31\ See supra notes 3 and 4.
---------------------------------------------------------------------------

    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment Nos. 2, 3, and 4, is consistent 
with Section 6(b)(5) \32\ and Section 11A(a)(1)(C)(iii) of the Act,\33\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(5).
    \33\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\34\ that the proposed rule change (SR-NASDAQ-2017-029), as 
modified by Amendment

[[Page 22042]]

Nos. 2, 3, and 4, be, and it hereby is, approved.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
---------------------------------------------------------------------------

    \35\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09530 Filed 5-10-17; 8:45 am]
 BILLING CODE 8011-01-P

22038 Federal Register / Vol. 82, No. 90 / Thursday, May 11, 2017 / Notices For the Commission, by the Division of comments on the proposed rule change. G.distributors, LLC, will be the Trading and Markets, pursuant to delegated This order grants approval of the principal underwriter and distributor of authority.22 proposed rule change, as modified by the Funds’ Shares. The Bank of New Eduardo A. Aleman, Amendment Nos. 2, 3, and 4. York Mellon will act as custodian and Assistant Secretary. transfer agent. BNY Mellon Investment II. Exchange’s Description of the [FR Doc. 2017–09531 Filed 5–10–17; 8:45 am] Servicing (US) Inc. will act as the sub- Proposed Rule Change BILLING CODE 8011–01–P administrator to the Funds. Interactive The Exchange proposes to list and Data Pricing and Reference Data, Inc. trade the Shares of the Funds under will calculate the Intraday Indicative SECURITIES AND EXCHANGE Nasdaq Rule 5745, which governs the Value (as described below) for the COMMISSION listing and trading of Exchange-Traded Funds. Managed Fund Shares, as defined in The Exchange has made the following [Release No. 34–80614; File No. SR– Nasdaq Rule 5745(c)(1). Each Fund is a representations and statements in NASDAQ–2017–029] series of the Gabelli NextSharesTM Trust describing the Funds.7 According to the (‘‘Trust’’).5 The Exchange represents Exchange, each Fund will be actively Self-Regulatory Organizations; The that the Trust is registered with the NASDAQ Stock Market LLC; Order managed and will pursue the various Commission as an open-end investment principal investment strategies Granting Approval of Proposed Rule company and that it has filed a Change, as Modified by Amendment described below.8 registration statement on Form N–1A Nos. 2, 3, and 4, to List and Trade (‘‘Registration Statement’’) with the A. Principal Investment Strategies Shares of the Gabelli Small Cap Commission with respect to the Funds.6 1. The Gabelli Small Cap Growth Fund Growth Fund and the Gabelli RBI Fund Gabelli Funds, LLC (‘‘Adviser’’) will Under Nasdaq Rule 5745 be the Adviser to the Funds. The Gabelli Small Cap Growth Fund seeks to provide a high level of capital May 5, 2017. appreciation. Under normal market regarding the investments of each Fund; (d) I. Introduction modifies the continued listing representations to conditions, the Gabelli Small Cap conform to Nasdaq rules; and (e) makes other Growth Fund invests at least 80% of its On March 17, 2017, The NASDAQ technical, non-substantive corrections in the net assets, plus borrowings for Stock Market LLC (‘‘Nasdaq’’ or proposed rule change. Amendment No. 2 is available at: https://www.sec.gov/comments/sr- investment purposes, in equity ‘‘Exchange’’) filed with the Securities nasdaq-2017–029/nasdaq2017029–1701356– securities of companies that are and Exchange Commission 149968.pdf. Amendment Nos. 3 to the proposed considered to be small companies at the (‘‘Commission’’), pursuant to Section rule change is a partial amendment in which the time the Gabelli Small Cap Growth 19(b)(1) of the Securities Exchange Act Exchange clarifies that, under normal market conditions, the Gabelli RBI Fund invests primarily Fund makes its investment. The Gabelli of 1934 (‘‘Act’’) 1 and Rule 19b–4 in equity securities, such as common stock, of Small Cap Growth Fund invests thereunder,2 a proposed rule change to domestic and foreign services and equipment primarily in the common stocks of list and trade common shares (‘‘Shares’’) companies focused on physical asset development, companies, which the Adviser believes of the Gabelli Small Cap Growth including roads, bridges, and infrastructure (RBI). Amendment No. 3 is available at: https:// are likely to have rapid growth in NextSharesTM (‘‘Gabelli Small Cap www.sec.gov/comments/sr-nasdaq-2017–029/ revenues and above average rates of Growth Fund’’) and the Gabelli RBI nasdaq2017029–1717445–150417.pdf. Amendment earnings growth. The Adviser currently NextSharesTM (‘‘Gabelli RBI Fund’’) No. 4 to the proposed rule change is a partial characterizes small companies for the (each, a ‘‘Fund,’’ and collectively, the amendment in which the Exchange clarifies that the Reporting Authority (as defined in Nasdaq Rule Gabelli Small Cap Growth Fund as those ‘‘Funds’’) under Nasdaq Rule 5745. The 5745) will implement and maintain, or ensure that with total common stock market values proposed rule change was published for the Composition File (as defined in Nasdaq Rule of $3 billion or less at the time of comment in the Federal Register on 5745) will be subject to, procedures designed to investment. prevent the use and dissemination of material non- March 31, 2017.3 On April 13, 2017, the public information regarding the Fund’s portfolio Exchange filed Amendment No. 2 to the positions and changes in the positions. Amendment 2. The Gabelli RBI Fund proposed rule change; on April 24, No. 4 is available at: https://www.sec.gov/ The Gabelli RBI Fund seeks to 2017, the Exchange filed Amendment comments/sr-nasdaq-2017–029/nasdaq2017029– provide above average capital- 1734987–150973.pdf. Because Amendment Nos. 2, No. 3 to the proposed rule change; and 3, and 4 to the proposed rule change do not appreciation. Under normal market on May 3, 2017, the Exchange filed materially alter the substance of the proposed rule conditions, the Gabelli RBI Fund Amendment No. 4 to the proposed rule change or raise unique or novel regulatory issues, primarily invests in equity securities, change.4 The Commission received no Amendment Nos. 2, 3, and 4 are not subject to notice and comment. such as common stock, of domestic and 5 According to the Exchange, the Commission has foreign services and equipment 1 15 U.S.C. 78s(b)(1). issued an order granting the Trust and certain companies focused on physical asset 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 80315 affiliates of the Trust exemptive relief under the development, including roads, bridges, Investment Company Act of 1940 (‘‘1940 Act’’). See and infrastructure (RBI). The Adviser (March 27, 2017), 82 FR 16075 (‘‘Notice’’). Investment Company Act Release No. 31608 (May 4 On April 11, 2017, the Exchange filed 19, 2015) (File No. 812–14438). The Exchange 7 The Commission notes that additional Amendment No. 1 to the proposed rule change and, represents that, in compliance with Nasdaq Rule on April 13, 2017, the Exchange withdrew 5745(b)(5), which applies to Shares based on an information regarding the Trust, the Funds, and the Amendment No. 1. Amendment No. 2 to the international or global portfolio, the Trust’s Shares, including investment strategies, risks, proposed rule change replaces and supersedes the application for exemptive relief under the 1940 Act creation and redemption procedures, calculation of states that the Trust will comply with the federal net asset value (‘‘NAV’’), fees, distributions, and asabaliauskas on DSK3SPTVN1PROD with NOTICES original filing in its entirety. In Amendment No. 2, the Exchange: (a) Represents that the Adviser will securities laws in accepting securities for deposits taxes, among other things, can be found in the maintain a fire wall with respect to its affiliated and satisfying redemptions with securities, Notice, Amendment Nos. 2, 3, and 4, and broker-dealer regarding access to information including that the securities accepted for deposits Registration Statement, as applicable. See supra concerning the composition of, and/or changes to, and the securities used to satisfy redemption notes 3, 4, and 6, respectively, and accompanying each Fund’s portfolio; (b) represents that personnel requests are sold in transactions that would be text. who make decisions on each Fund’s portfolio exempt from registration under the Securities Act 8 According to the Exchange, additional composition must be subject to procedures of 1933, as amended. information regarding the Funds will be available designed to prevent the use and dissemination of 6 See Registration Statement on Form N–1A for on one of two free public Web sites material, non-public information regarding each the Trust dated March 14, 2017 (File Nos. 333– (www.gabelli.com or www.nextshares.com), as well Fund’s portfolio; (c) provides additional detail 211881 and 811–23160). as in the Registration Statement for the Funds. 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Federal Register / Vol. 82, No. 90 / Thursday, May 11, 2017 / Notices 22039 selects companies which it believes are not include any of the securities in a NAV will be determined each business currently undervalued and have the Fund’s portfolio.10 day, normally as of 4:00 p.m., E.T. Trade potential to benefit from domestic and executions will be binding at the time C. Intraday Indicative Value global reinvestment and development of orders are matched on Nasdaq’s physical assets, including roads, For each Fund, an estimated value of facilities, with the transaction prices bridges, and other infrastructure-related an individual Share, defined in Nasdaq contingent upon the determination of industries. Rule 5745(c)(2) as the ‘‘Intraday NAV. Nasdaq represents that all Shares Indicative Value’’ (‘‘IIV’’) will be listed on the Exchange will have a B. Portfolio Disclosure and Composition calculated and disseminated at intervals unique identifier associated with their File of not more than 15 minutes throughout ticker symbols, which will indicate that the Regular Market Session 11 when the Shares are traded using NAV-Based Consistent with the disclosure Shares trade on the Exchange. The Trading. requirements that apply to traditional Exchange will obtain a representation According to the Exchange, member open-end investment companies, a from the issuer of the Shares that the IIV firms will utilize certain existing order complete list of each Fund’s current will be calculated on an intraday basis types and interfaces to transmit Share portfolio positions will be made and provided to Nasdaq for bids and offers to Nasdaq, which will available at least once each calendar dissemination via the Nasdaq Global process Share trades like trades in quarter, with a reporting lag of not more Index Service. The IIV will be based on shares of other listed securities.15 In the than 60 days. The Funds may provide current information regarding the value systems used to transmit and process more frequent disclosures of portfolio of the securities and other assets held by transactions in Shares, a Fund’s next- positions at its discretion. a Fund.12 The purpose of the IIV is to determined NAV will be represented by As defined in Nasdaq Rule 5745(c)(3), enable investors to estimate the next- a proxy price (e.g., 100.00) and a the ‘‘Composition File’’ is the specified determined NAV so they can determine premium/discount of a stated amount to portfolio of securities and/or cash that a the number of Shares to buy or sell if the next-determined NAV to be Fund will accept as a deposit in issuing they want to transact in an approximate represented by the same increment/ a creation unit of Shares, and the dollar amount.13 decrement from the proxy price used to specified portfolio of securities and/or denote NAV (e.g., NAV¥$0.01 would cash that a Fund will deliver in a D. NAV-Based Trading be represented as 99.99; NAV+$0.01 as redemption of a creation unit of Shares. Because Shares will be listed and 100.01). The Composition File will be traded on the Exchange, Shares will be To avoid potential investor confusion, disseminated through the National available for purchase and sale on an Nasdaq represents that it will work with Securities Clearing Corporation once intraday basis. Shares will be purchased member firms and providers of market each business day before the open of and sold in the secondary market at data services to seek to ensure that trading in Shares on that day and also prices directly linked to a Fund’s next- representations of intraday bids, offers, will be made available to the public determined NAV using a trading and execution prices of Shares that are each day on a free Web site.9 Because protocol called ‘‘NAV-Based Trading.’’ made available to the investing public each Fund seeks to preserve the All bids, offers, and execution prices of follow the ‘‘NAV¥$0.01/NAV+$0.01’’ confidentiality of its current portfolio Shares will be expressed as a premium/ (or similar) display format. Specifically, trading program, a Fund’s Composition discount (which may be zero) to a the Exchange will use the NASDAQ File generally will not be a pro rata Fund’s next-determined NAV (e.g., Basic and NASDAQ Last Sale data feeds reflection of the Fund’s investment NAV¥$0.01, NAV+$0.01).14 A Fund’s to disseminate intraday price and quote positions. Each security included in the data for Shares in real time in the 10 In determining whether a Fund will issue or Composition File will be a current ‘‘NAV¥$0.01/NAV+$0.01’’ (or similar) redeem creation units entirely on a cash basis, the holding of a Fund, but the Composition key consideration will be the benefit that would display format. Member firms may use File generally will not include all of the accrue to the Fund and its investors. the NASDAQ Basic and NASDAQ Last securities in the Fund’s portfolio or 11 See Nasdaq Rule 4120(b)(4) (describing the Sale data feeds to source intraday Share match the weightings of the included three trading sessions on the Exchange: (1) Pre- prices for presentation to the investing Market Session from 4:00 a.m. to 9:30 a.m. Eastern securities in the portfolio. Securities Time (‘‘E.T.’’); (2) Regular Market Session from 9:30 public in the ‘‘NAV¥$0.01/ that the Adviser is in the process of a.m. to 4:00 p.m. or 4:15 p.m. E.T.; and (3) Post- NAV+$0.01’’ (or similar) display format. acquiring for a Fund generally will not Market Session from 4:00 p.m. or 4:15 p.m. to 8:00 Alternatively, member firms may be represented in the Fund’s p.m. E.T.). source intraday Share prices in proxy 12 IIVs disseminated throughout each trading day Composition File until their purchase price format from the Consolidated Tape would be based on the same portfolio as used to has been completed. Similarly, calculate that day’s NAV. Each Fund will reflect and other Nasdaq data feeds (e.g., securities that are held in a Fund’s purchases and sales of portfolio positions in its portfolio but are in the process of being NAV the next business day after trades are on market factors, including the balance of supply sold may not be removed from its executed. and demand for Shares among investors, 13 In NAV-Based Trading, prices of executed transaction fees, and other costs in connection with Composition File until the sale is trades are not determined until the reference NAV creating and redeeming creation units of Shares, the substantially completed. A Fund is calculated, so buyers and sellers of Shares during cost and availability of borrowing Shares, creating and redeeming Shares in kind the trading day will not know the final value of competition among market makers, the Share will use cash amounts to supplement their purchases and sales until the end of the inventory positions and inventory strategies of trading day. The Exchange represents that the market makers, the profitability requirements and asabaliauskas on DSK3SPTVN1PROD with NOTICES the in-kind transactions to the extent Registration Statement, Web site and any business objectives of market makers, and the necessary to ensure that creation units advertising or marketing materials will include volume of Share trading. are purchased and redeemed at NAV. prominent disclosure of this fact. The Exchange 15 According to the Exchange, all orders to buy or The Composition File also may consist states that although IIVs may provide useful sell Shares that are not executed on the day the estimates of the value of intraday trades, they order is submitted will be automatically cancelled entirely of cash, in which case it will cannot be used to calculate with precision the as of the close of trading on that day. Prior to the dollar value of the Shares to be bought or sold. commencement of trading in a Fund, the Exchange 9 The Exchange represents that the free Web site 14 According to the Exchange, the premium or will inform its members in an Information Circular containing the Composition File will be discount to NAV at which Share prices are quoted of the effect of this characteristic on existing order www.nextshares.com. and transactions are executed will vary depending types. 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22040 Federal Register / Vol. 82, No. 90 / Thursday, May 11, 2017 / Notices Nasdaq TotalView and Nasdaq Level 2) trading surveillances, administered by Shares prior to or concurrently with the and use a simple algorithm to convert both Nasdaq and the Financial Industry confirmation of a transaction; and (e) prices into the ‘‘NAV¥$0.01/ Regulatory Authority, Inc. (‘‘FINRA’’) on information regarding NAV-Based NAV+$0.01’’ (or similar) display format. behalf of the Exchange, which are Trading protocols. Prior to the commencement of trading in designed to detect violations of The Information Circular also will a Fund, the Exchange will inform its Exchange rules and applicable federal identify the specific Nasdaq data feeds members in an Information Circular of securities laws.20 The Exchange from which intraday Share prices in the identities of the specific Nasdaq data represents that these surveillance proxy price format may be obtained. As feeds from which intraday Share prices procedures are adequate to properly noted above, all orders to buy or sell in proxy price format may be obtained. monitor trading of Shares on the Shares that are not executed on the day Exchange and to deter and detect the order is submitted will be III. Discussion and Commission automatically cancelled as of the close violations of Exchange rules and Findings of trading on that day, and the applicable federal securities laws. After careful review, the Commission FINRA, on behalf of the Exchange, will Information Circular will discuss the finds that the Exchange’s proposal to list communicate as needed with, and may effect of this characteristic on existing and trade the Shares is consistent with obtain information from, other markets order types. In addition, Nasdaq intends the Act and the rules and regulations and entities that are members of the to provide its members with a detailed thereunder applicable to a national Intermarket Surveillance Group explanation of NAV-Based Trading securities exchange.16 In particular, the (‘‘ISG’’) 21 regarding trading in the through a Trading Alert issued prior to Commission finds that the proposed Shares, and in exchange-traded the commencement of trading in Shares rule change is consistent with Section securities and instruments held by the on the Exchange. 6(b)(5) of the Act,17 which requires, Funds (to the extent those exchange- Nasdaq states that the Adviser is not among other things, that the Exchange’s traded securities and instruments are a registered broker-dealer; however, it is rules be designed to prevent fraudulent known through the publication of the is affiliated with a broker-dealer and has and manipulative acts and practices, to Composition File and periodic public implemented and will maintain a fire promote just and equitable principles of disclosures of a Fund’s portfolio wall with respect to its affiliated broker- trade, to foster cooperation and holdings). In addition, the Exchange dealer regarding access to information coordination with persons engaged in may obtain information regarding concerning the composition of, and/or facilitating transactions in securities, to trading in the Shares, and in exchange- changes to, each Fund’s portfolio.22 The remove impediments to and perfect the traded securities and instruments held Reporting Authority 23 will implement mechanism of a free and open market by the Funds (to the extent those and maintain, or ensure that the and a national market system, and, in exchange-traded securities and Composition File will be subject to, general, to protect investors and the instruments are known through the procedures designed to prevent the use public interest. publication of the Composition File and and dissemination of material non- The Shares will be subject to Rule periodic public disclosures of a Fund’s public information regarding a Fund’s 5745, which sets forth the initial and portfolio holdings), from markets and portfolio positions and changes in the continued listing criteria applicable to other entities that are members of ISG or positions.24 In the event that (a) the Exchange-Traded Managed Fund with which the Exchange has in place Adviser registers as a broker-dealer or Shares. A minimum of 50,000 Shares for a comprehensive surveillance sharing becomes newly affiliated with a broker- each Fund and no less than two creation agreement. dealer, or (b) any new adviser or sub- units of each Fund will be outstanding Prior to the commencement of trading at the commencement of trading on the in a Fund, the Exchange will inform its 22 See Amendment No. 2, supra note 4. The Exchange. members in an Information Circular of Exchange further represents that an investment Nasdaq deems the Shares to be equity the special characteristics and risks adviser to an open-end fund is required to be securities, thus rendering trading in the registered under the Investment Advisers Act of associated with trading the Shares. 1940 (‘‘Advisers Act’’). As a result, the Adviser and Shares subject to Nasdaq’s existing rules Specifically, the Information Circular its related personnel are subject to the provisions governing the trading of equity will discuss the following: (a) The of Rule 204A–1 under the Advisers Act relating to securities. Every order to trade Shares of procedures for purchases and codes of ethics. This Rule requires investment the Funds is subject to the proxy price advisers to adopt a code of ethics that reflects the redemptions of Shares in creation units fiduciary nature of the relationship to clients as protection threshold of plus/minus (and that Shares are not individually well as compliance with other applicable securities $1.00, which determines the lower and redeemable); (b) Nasdaq Rule 2111A, laws. Accordingly, procedures designed to prevent upper thresholds for the life of the order which imposes suitability obligations on the communication and misuse of non-public and provides that the order will be information by an investment adviser must be Nasdaq members with respect to consistent with Rule 204A–1 under the Advisers cancelled at any point if it exceeds recommending transactions in the Act. In addition, Rule 206(4)–7 under the Advisers $101.00 or falls below $99.00.18 With Shares to customers; (c) how Act makes it unlawful for an investment adviser to certain exceptions, each order also must information regarding the IIV and provide investment advice to clients unless such contain the applicable order attributes, investment adviser has: (i) Adopted and Composition File is disseminated; (d) implemented written policies and procedures including routing instructions and time- the requirement that members deliver a reasonably designed to prevent violation, by the in-force information, as described in prospectus to investors purchasing investment adviser and its supervised persons, of Nasdaq Rule 4703.19 the Advisers Act and the Commission rules adopted Nasdaq also represents that trading in thereunder; (ii) implemented, at a minimum, an asabaliauskas on DSK3SPTVN1PROD with NOTICES 20 The Exchange states that FINRA provides annual review regarding the adequacy of the the Shares will be subject to the existing surveillance of trading on the Exchange pursuant to policies and procedures established pursuant to a regulatory services agreement, and that the Exchange is responsible for FINRA’s performance subparagraph (i) above and the effectiveness of their 16 In approving this proposed rule change, the under this regulatory services agreement. implementation; and (iii) designated an individual Commission has considered the proposed rule’s 21 For a list of the current members of ISG, see (who is a supervised person) responsible for impact on efficiency, competition, and capital administering the policies and procedures adopted www.isgportal.org. The Exchange notes that not all formation. See 15 U.S.C. 78c(f). under subparagraph (i) above. See Amendment No. components of a Fund’s portfolio may trade on 17 15 U.S.C. 78f(b)(5). 2, supra note 4, at note 9. markets that are members of ISG or with which the 18 See Nasdaq Rule 5745(h). 23 See Nasdaq Rule 5745(c)(4). Exchange has in place a comprehensive 19 See Nasdaq Rule 5745(b)(6). surveillance sharing agreement. 24 See Amendment No. 4, supra note 4. VerDate Sep<11>2014 16:52 May 10, 2017 Jkt 241001 PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 E:\FR\FM\11MYN1.SGM 11MYN1

Federal Register / Vol. 82, No. 90 / Thursday, May 11, 2017 / Notices 22041 adviser to a Fund is a registered broker- member firms participating in the trade Ask Midpoints, and Closing Bid/Ask dealer or becomes affiliated with a to supplement the previously provided Spreads over time. broker-dealer, such new adviser or sub- information with final pricing. The Exchange represents that all adviser will implement and maintain a statements and representations made in The Exchange will obtain a fire wall with respect to its relevant the filing regarding: (a) The description representation from the issuer of the personnel and/or such broker-dealer of the Funds’ portfolio, (b) limitations Shares that the NAV per Share will be affiliate, as the case may be, regarding on portfolio holdings or reference assets, calculated daily (on each business day (c) dissemination and availability of the access to information concerning the that the New York Stock Exchange is reference asset or intraday indicative composition of, and/or changes to, a open for trading) and provided to values, or (d) the applicability of Fund’s portfolio, and will be subject to procedures designed to prevent the use Nasdaq via the Mutual Fund Quotation Exchange listing rules shall constitute and dissemination of material non- Service (‘‘MFQS’’) by the fund continued listing requirements for public information regarding the accounting agent. As soon as the NAV listing the Shares on the Exchange. The portfolio.25 is entered into the MFQS, Nasdaq will issuer has represented to the Exchange The Commission finds that the disseminate the NAV to market that it will advise the Exchange of any proposal to list and trade the Shares on participants and market data vendors failure by either Fund to comply with the Exchange is consistent with Section via the Mutual Fund Dissemination the continued listing requirements, and, 11A(a)(1)(C)(iii) of the Act,26 which sets Service so that all firms will receive the pursuant to its obligations under forth Congress’ finding that it is in the NAV per share at the same time. Section 19(g)(1) of the Act, the Exchange public interest and appropriate for the The Exchange further represents that will monitor for compliance with the protection of investors and the it may consider all relevant factors in continued listing requirements.30 If a maintenance of fair and orderly markets exercising its discretion to halt or Fund is not in compliance with the to assure the availability to brokers, suspend trading in the Shares. The applicable listing requirements, the dealers, and investors of information Exchange will halt trading in the Shares Exchange will commence delisting with respect to quotations for, and under the conditions specified in procedures for the Fund under the transactions in, securities. Information Nasdaq Rule 4120 and in Nasdaq Rule Nasdaq 5800 Series. regarding NAV-based trading prices, This approval order is based on all of 5745(d)(2)(C). Additionally, the best bids and offers for Shares, and the Exchange’s representations, Exchange may cease trading the Shares volume of Shares traded will be including those set forth above, in the if other unusual conditions or Notice, and Amendment Nos. 2, 3, and continuously available on a real-time circumstances exist that, in the opinion 4,31 and the Exchange’s description of basis throughout each trading day on of the Exchange, make further dealings the Funds. The Commission notes that brokers’ computer screens and other on the exchange detrimental to the the Funds and the Shares must comply electronic services. All bids and offers for Shares and all Share trade maintenance of a fair and orderly with the requirements of Nasdaq Rule executions will be reported intraday in market. To manage the risk of a non- 5745 and the conditions set forth in this real time by the Exchange to the regulatory Share trading halt, Nasdaq proposed rule change to be listed and Consolidated Tape 27 and separately has in place back-up processes and traded on the Exchange on an initial and disseminated to member firms and procedures to ensure orderly trading. continuing basis. market data services through the Prior to the commencement of market For the foregoing reasons, the Exchange data feeds. trading in the Shares, the Funds will be Commission finds that the proposed Once a Fund’s daily NAV has been required to establish and maintain a rule change, as modified by Amendment calculated and disseminated, Nasdaq public Web site through which its Nos. 2, 3, and 4, is consistent with will price each Share trade entered into current prospectus may be Section 6(b)(5) 32 and Section during the day at the Fund’s NAV plus/ downloaded.29 A separate Web site 11A(a)(1)(C)(iii) of the Act,33 and the minus the trade’s executed premium/ (www.nextshares.com) will include rules and regulations thereunder discount. Using the final trade price, additional information concerning the applicable to a national securities each executed Share trade will then be Funds updated on a daily basis, exchange. disseminated to member firms and including the prior business day’s NAV, and the following trading information IV. Conclusion market data services via a File Transfer Protocol (‘‘FTP’’) file 28 that will be for that business day expressed as It is therefore ordered, pursuant to created for exchange-traded managed premiums/discounts to NAV: (a) Section 19(b)(2) of the Act,34 that the funds and will be confirmed to the Intraday high, low, average, and closing proposed rule change (SR–NASDAQ– prices of Shares in Exchange trading; (b) 2017–029), as modified by Amendment 25 See Amendment No. 2, supra note 4. the midpoint of the highest bid and 30 The Commission notes that certain other 26 15 U.S.C. 78k–1(a)(1)(C)(iii). lowest offer prices as of the close of proposals for the listing and trading of Managed 27 Due to systems limitations, the Consolidated Exchange trading, expressed as a Fund Shares include a representation that the Tape will report intraday execution prices and premium/discount to NAV (‘‘Closing quotes for Shares using a proxy price format. exchange will ‘‘surveil’’ for compliance with the Nasdaq has represented that it will separately report Bid/Ask Midpoint’’); and (c) the spread continued listing requirements. See, e.g., Securities real-time execution prices and quotes to member between highest bid and lowest offer Exchange Act Release No. 78005 (Jun. 7, 2016), 81 firms and providers of market data services in the FR 38247 (Jun. 13, 2016) (SR–BATS–2015–100). In prices as of the close of Exchange the context of this representation, it is the ‘‘NAV¥$0.01/NAV+$0.01’’ (or similar) display asabaliauskas on DSK3SPTVN1PROD with NOTICES format, and will otherwise seek to ensure that trading (‘‘Closing Bid/Ask Spread.’’). Commission’s view that ‘‘monitor’’ and ‘‘surveil’’ representations of intraday bids, offers and The www.nextshares.com Web site will both mean ongoing oversight of a fund’s compliance execution prices for Shares that are made available also contain charts showing the with the continued listing requirements. Therefore, to the investing public follow the same display the Commission does not view ‘‘monitor’’ as a more frequency distribution and range of or less stringent obligation than ‘‘surveil’’ with format. 28 According to Nasdaq, FTP is a standard values of trading prices, Closing Bid/ respect to the continued listing requirements. 31 See supra notes 3 and 4. network protocol used to transfer computer files on 32 15 U.S.C. 78f(b)(5). the Internet. Nasdaq will arrange for the daily 29 The Exchange represents that the Web site 33 15 U.S.C. 78k–1(a)(1)(C)(iii). dissemination of an FTP file with executed Share containing this information will be trades to member firms and market data services. www.gabelli.com. 34 15 U.S.C. 78s(b)(2). VerDate Sep<11>2014 16:52 May 10, 2017 Jkt 241001 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 E:\FR\FM\11MYN1.SGM 11MYN1

22042 Federal Register / Vol. 82, No. 90 / Thursday, May 11, 2017 / Notices Nos. 2, 3, and 4, be, and it hereby is, the Act 7 to determine whether to results that correspond (before fees and approved. approve or disapprove the proposed expenses) to a multiple three times (3x) For the Commission, by the Division of rule change. of the daily performance of the Trading and Markets, pursuant to delegated Bloomberg WTI Crude Oil SubindexSM II. Exchange’s Description of the authority.35 (a subindex of the Bloomberg Proposal Eduardo A. Aleman, Commodity IndexSM) (‘‘Benchmark’’).13 Assistant Secretary. The Exchange proposes to list and The investment objective of the trade Shares of the Funds under NYSE Direxion Daily Crude Oil Bear 3X [FR Doc. 2017–09530 Filed 5–10–17; 8:45 am] Arca Equities Rule 8.200, Commentary Shares is to seek, on a daily basis,14 BILLING CODE 8011–01–P .02, which governs the listing and investment results that correspond trading of Trust Issued Receipts.8 Each (before fees and expenses) to three times SECURITIES AND EXCHANGE Fund is a series of the Direxion Shares (3x) the inverse of the performance of COMMISSION ETF Trust II (‘‘Trust’’), a Delaware the Benchmark. The Benchmark is statutory trust.9 The Trust and the intended to reflect the performance of [Release No. 34–80606; File No. SR– Funds are managed and controlled by crude oil as measured by the price of NYSEArca-2017–05] Direxion Asset Management, LLC West Texas Intermediate crude oil (‘‘Sponsor’’).10 Bank of New York futures contracts traded on the New Self-Regulatory Organizations; NYSE Mellon will be the custodian and York Mercantile Exchange (which is Arca, Inc.; Order Instituting transfer agent for the Funds. U.S. part of the Chicago Mercantile Proceedings To Determine Whether To Bancorp Fund Services, LLC is the Exchange), including the impact of Approve or Disapprove a Proposed administrator for the Funds. Foreside rolling,15 without regard to income Rule Change To List and Trade Shares Fund Services, LLC serves as the earned on cash positions. According to of Direxion Daily Crude Oil Bull 3x distributor of the Shares. the Exchange, the Funds will not be Shares and Direxion Daily Crude Oil The Exchange has made the following directly linked to the ‘‘spot’’ price of Bear 3x Shares Under NYSE Arca representations and statements in crude oil.16 Equities Rule 8.200 describing the Funds and their investment strategies, including the B. Investments of the Funds May 5, 2017. Funds’ portfolio holdings and In seeking to achieve the Funds’ I. Introduction investment restrictions.11 investment objectives, the Exchange On January 23, 2017, NYSE Arca, Inc. states that the Sponsor will utilize a A. Investment Objectives of the Funds (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed mathematical approach to determine the with the Securities and Exchange The investment objective of the type, quantity, and mix of investment Commission (‘‘Commission’’), pursuant Direxion Daily Crude Oil Bull 3X Shares positions that the Sponsor believes, in to Section 19(b)(1) 1 of the Securities is to seek, on a daily basis,12 investment combination, should produce daily Exchange Act of 1934 (‘‘Act’’) 2 and Rule returns consistent with the Funds’ 7 15 U.S.C. 78s(b)(2)(B). 19b–4 thereunder,3 a proposed rule respective objectives.17 The Sponsor 8 Commentary .02 to NYSE Arca Equities Rule change to list and trade shares would rely on a pre-determined model 8.200 applies to Trust Issued Receipts that invest (‘‘Shares’’) of Direxion Daily Crude Oil in ‘‘Financial Instruments.’’ The term ‘‘Financial to generate orders that result in Bull 3x Shares and Direxion Daily Instruments,’’ as defined in Commentary .02(b)(4) to repositioning the Funds’ investments in Crude Oil Bear 3x Shares (each a NYSE Arca Equities Rule 8.200, means any accordance with their respective combination of investments, including cash; investment objectives. ‘‘Fund,’’ and collectively the ‘‘Funds’’) securities; options on securities and indices; futures under NYSE Arca Equities Rule 8.200. contracts; options on futures contracts; forward According to the Exchange, each The proposed rule change was contracts; equity caps, collars, and floors; and swap Fund will seek to achieve its investment published for comment in the Federal agreements. objectives by investing, under normal 9 According to the Exchange, on December 14, Register on February 7, 2017.4 On market conditions,18 substantially all of 2016, the Trust filed with the Commission a March 16, 2017, pursuant to Section registration statement on Form S–1 under the 19(b)(2) of the Act,5 the Commission Securities Act of 1933, as amended, relating to the of its return for each day compounded over the Funds (File No. 333–215091) (‘‘Registration period and thus will usually differ from a Fund’s designated a longer period within which multiple times the return of the Benchmark for the Statement’’). to approve the proposed rule change, 10 According to the Exchange, the Sponsor is same period. See Notice, supra note 4, 82 FR at disapprove the proposed rule change, or registered as a commodity pool operator with the 9609. 13 According to the Exchange, the Benchmark is institute proceedings to determine Commodity Futures Trading Commission and is a a ‘‘rolling index,’’ which means that the index does whether to disapprove the proposed member of the National Futures Association. See not take physical possession of any commodities. rule change.6 The Commission has Notice, supra note 4, 82 FR at 9608. 11 The Commission notes that additional See id. at 9609 n.7. received no comments on the proposed information regarding the Trust, the Funds, and the 14 See supra note 12. rule change. This order institutes Shares, including investment strategies, risks, net 15 The Exchange states that futures contracts held proceedings under Section 19(b)(2)(B) of asset value (‘‘NAV’’) calculation, creation and by the Funds near expiration are generally closed redemption procedures, fees, availability of out and replaced by contracts with a later 35 17 information, trading rules and halts, surveillance, expiration as required by the Benchmark. The CFR 200.30–3(a)(12). Exchange states that this process is referred to as 1 15 information bulletins, distributions, and taxes, U.S.C. 78s(b)(1). ‘‘rolling,’’ and that the Funds do not intend to hold 2 15 U.S.C. 78a. among other information, is included in the Notice and the Registration Statement, as applicable. See futures contracts through expiration, but instead to asabaliauskas on DSK3SPTVN1PROD with NOTICES 3 17 CFR 240.19b–4. ‘‘roll’’ their respective positions. See Notice, supra Notice and Registration Statement, supra notes 4 4 See Securities Exchange Act Release No. 79916 and 9, respectively. note 4, 82 FR at 9609 n.8. (February 1, 2017), 82 FR 9608 (‘‘Notice’’). 12 According to the Exchange, the Funds do not 16 See id. at 9609. 5 15 U.S.C. 78s(b)(2). 17 See id. seek to achieve their investment objectives over a 6 See Securities Exchange Act Release No. 80265 period greater than a single trading day. The 18 The Exchange states that the term ‘‘normal (March 22, 2017), 82 FR 14778. The Commission Exchange states that a single trading day is market conditions’’ includes, but is not limited to, designated May 8, 2017 as the date by which the measured from the time a Fund calculates its NAV the absence of trading halts in the applicable Commission shall either approve or disapprove, or to the time of a Fund’s next NAV calculation. The financial markets generally; operational issues (e.g., institute proceedings to determine whether to Exchange states that the return of a Fund for a systems failure) causing dissemination of inaccurate disapprove, the proposed rule change. period longer than a single trading day is the result market information; or force majeure type events VerDate Sep<11>2014 16:52 May 10, 2017 Jkt 241001 PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 E:\FR\FM\11MYN1.SGM 11MYN1


Document Created: 2017-05-11 00:14:38
Document Modified: 2017-05-11 00:14:38
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 22038 
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