Notice2025-09387
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Adopt Rule 5703 To Permit the Generic Listing and Trading of Multi-Class Exchange-Traded Fund Shares
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 27, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 100 (Tuesday, May 27, 2025)</title>
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[Federal Register Volume 90, Number 100 (Tuesday, May 27, 2025)]
[Notices]
[Pages 22373-22380]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-09387]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103072; File No. SR-NASDAQ-2025-037]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change To Adopt Rule 5703 To Permit
the Generic Listing and Trading of Multi-Class Exchange-Traded Fund
Shares
May 20, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 6, 2025, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt Rule 5703 to permit the generic
listing and trading of Multi-Class Exchange-Traded Fund (``ETF'')
Shares that comply with the requirements of Rule 6c-11 under the
Investment Company Act of 1940 (the ``Investment Company Act'') and are
eligible to operate in reliance on exemptive relief from certain
requirements of the Investment Company Act of 1940 and the rules and
regulations thereunder that permit the trust issuing the Multi-Class
ETF Shares to offer an exchange-traded fund class in addition to
classes of shares that are not exchange-traded. The Exchange is also
proposing to make conforming changes to Rule 5615 (Exemptions from
Certain Corporate Governance Requirements), Rule 5705(b) (Index Fund
Shares), Rule 5735 (Managed Fund Shares), and Equity 4, Rule 4120 in
order to accommodate the proposed listing of Multi-Class ETF Shares.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings">https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings</a>, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to adopt new Rule 5703 for the purpose of
permitting the generic listing and trading, or trading pursuant to
unlisted trading privileges, of Multi-Class Exchange-Traded Fund
(``ETF'') Shares that comply with the requirements of Rule 6c-11 under
the Investment Company Act of 1940 (the ``Investment Company Act''),
and are eligible to operate in reliance on exemptive relief from
certain requirements of the Investment Company Act and the rules and
regulations thereunder that permit the trust issuing the Multi-Class
ETF Shares to offer an exchange-traded fund class in addition to
classes of shares that are not exchange-traded of an open-end fund.\3\
The Exchange is also proposing to make conforming changes to Rule 5615
(Exemptions from Certain Corporate Governance Requirements), Rule
5705(b) (Index Fund Shares), Rule 5735 (Managed Fund Shares), and
Equity 4, Rule 4120 in order to accommodate the proposed listing of
Multi-Class ETF Shares.
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\3\ The Exchange notes that Cboe BZX Exchange, Inc. (``BZX'')
has filed a substantially similar filing. See Securities Exchange
Act Release No. 102594 (March 11, 2025), 90 FR 12387 (March 17,
2025) (SR-CboeBZX-2024-112).
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Consistent with Exchange Traded Fund Shares, Index Fund Shares, and
Managed Fund Shares listed under the generic listing standards in Rules
5704, 5705(b), and 5735, respectively, series of Multi-Class ETF Shares
that comply with the requirements of Rule 6c-11 under the Investment
Company Act, and are eligible to operate in reliance on exemptive
relief from certain requirements of the Investment Company Act and the
rules and regulations thereunder that permit the trust issuing the
Multi-Class ETF Shares to offer an exchange-traded fund class in
addition to classes of shares that are not exchange-traded of an open-
end fund would be permitted to be listed and traded on the Exchange
without prior Commission approval order or notice of effectiveness
pursuant to Section 19(b) of the Act.\4\
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\4\ Rule 19b-4(e)(1) provides that the listing and trading of a
new derivative securities product by a self-regulatory organization
(``SRO'') is not deemed a proposed rule change, pursuant to
paragraph (c)(1) of Rule 19b-4, if the Commission has approved,
pursuant to Section 19(b) of the Act, the SRO's trading rules,
procedures and listing standards for the product class that would
include the new derivative securities product and the SRO has a
surveillance program for the product class. As contemplated by this
Rule 5703, the Exchange proposes new Rule 5703 to establish generic
listing standards for Multi-Class ETFs that are permitted to operate
in reliance on exemptive relief to Rule 6c-11 under the Investment
Company Act that permits the trust issuing the Multi-Class ETF
Shares to offer an exchange-traded fund class in addition to classes
of shares that are not exchange-traded of an open-end fund. A Multi-
Class ETF listed under proposed Rule 5703 would therefore not need a
separate proposed rule change pursuant to Rule 19b-4 before it can
be listed and traded on the Exchange.
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[[Page 22374]]
Background
There are numerous applications for exemptive relief for Multi-
Class ETF Shares currently before the Commission \5\ that request
exemptive relief similar to that previously granted to other funds.\6\
This proposal would provide for the ``generic'' listing and/or trading
of Multi-Class ETF Shares under proposed Rule 5703 on the Exchange
immediately upon the Commission's applicable order granting exemptive
relief to the outstanding applications. The Exchange submits this
proposal only to prevent any unnecessary delay in listing additional
Multi-Class ETF Shares generically under Rule 5703 when and if such
requests are granted by the Commission.
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\5\ See e.g., DFA Investment Dimensions Group Inc. and
Dimensional Investment Group Inc., (amendment filed March 31, 2025);
F/m Investments LLC (amendment filed April 10, 2025); Fidelity
Hastings Street Trust and Fidelity Management & Research Company
(amendment filed April 11, 2025); Morgan Stanley Institutional Fund
Trust and Morgan Stanley Investment Management Inc. (amendment filed
April 11, 2025); BlackRock Funds (amendment filed April 15, 2025);
Guinness Atkinson Funds (amendment filed April 17, 2025);
Metropolitan West Funds, TCW ETF Trust, and TCW Funds, Inc.
(amendment filed April 22, 2025); and Northern Funds and Northern
Trust Investments, Inc. (amendment filed May 2, 2025).
\6\ See infra note 7.
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Starting in 2000, the Commission began granting limited relief for
The Vanguard Group, Inc. (``Vanguard'') to offer certain index-based
open-end management investment companies with Multi-class ETF
Shares.\7\ After this relief was granted, there was limited public
discourse about Multi-class ETF Shares until 2019, when the prospect of
providing blanket exemptive relief to Multi-class ETF Shares was
addressed in the Commission's adoption of Rule 6c-11 under the
Investment Company Act (the ``ETF Rule'').\8\ The ETF Rule permits ETFs
that satisfy certain conditions to operate without the expense or delay
of obtaining an exemptive order. However, the ETF Rule did not provide
blanket exemptive relief to allow for Multi-class ETF Shares as part of
the final rule. Instead, the Commission concluded that Multi-class ETF
Shares should request relief through the exemptive application process
so that the Commission may assess all relevant policy considerations in
the context of the facts and circumstances of particular applicants.
The Exchange adopted Rule 5704 shortly after the implementation of the
ETF Rule and, because there were no exemptive applications before the
Commission, did not propose to include any language comparable to what
is being proposed herein.\9\
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\7\ See Vanguard Index Funds, Investment Company Act Release
Nos. 24680 (Oct. 6, 2000) (notice) and 24789 (Dec. 12, 2000)
(order). The Commission itself, as opposed to the Commission staff
acting under delegated authority, considered the original Vanguard
application and determined that the relief was appropriate in the
public interest and consistent with the protection of investors and
the purposes fairly intended by the policy and provisions of the
Act. In the process of granting the order, the Commission also
considered and denied a hearing request on the original application,
as reflected in the final Commission order. See also the Vanguard
Group, Inc., Investment Company Act Release Nos. 26282 (Dec. 2,
2003) (notice) and 26317 (Dec. 30, 2003) (order); Vanguard
International Equity Index Funds, Investment Company Act Release
Nos. 26246 (Nov. 3, 2003) (notice) and 26281 (Dec. 1, 2003) (order);
Vanguard Bond Index Funds, Investment Company Act Release Nos. 27750
(Mar. 9, 2007) (notice) and 27773 (April 2, 2007) (order)
(collectively referred to as the ``Vanguard Orders'').
\8\ See Securities Exchange Act Release No. 33-10695 (October
24, 2019), 84 FR 57162 (the ``ETF Rule Adopting Release'').
\9\ See Securities Exchange Act Release No. 88561 (April 3,
2020), 85 FR 19984 (April 9, 2020) (SR-NASDAQ-2019-090).
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As noted above, a number of applications for exemptive relief to
permit the applicable fund to offer Multi-class ETF Shares (the
``Applications'') have been submitted to the Commission starting in
early 2023. In general, the Applications state that the ability of a
fund to offer Multi-class ETF Shares, i.e., both a class of mutual fund
shares (each such class, a ``Mutual Fund class'' and such shares
``Mutual Fund Shares'') and ETF Shares, could be beneficial to the fund
and to shareholders of each type of class for various reasons,
including more efficient portfolio management, better secondary market
trading opportunities, and cost efficiencies, among others.\10\
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\10\ Specifically, the Applicants believe that a Mutual Fund
class would benefit ETF class shareholders because investor cash
flows through a Mutual Fund class can be used for efficient
portfolio rebalancing. To the extent that cash flows come into a
fund through a Mutual Fund class, a portfolio manager may be able to
deploy that cash strategically to rebalance the portfolio. Second,
cash flows through a Mutual Fund class may allow for greater
creation basket flexibility for creations and redemptions through
the ETF class, which could promote arbitrage efficiency and smaller
spreads on the trading of ETF Shares in the secondary market. With
respect to existing funds, ETF classes would permit investors that
prefer the ETF structure to gain access to established funds'
investment strategies. Additionally, the establishment of an ETF
class as part of an existing fund could lead to cost efficiencies.
Specifically, in terms of fund expenses, an ETF class could have
initial and ongoing advantages for its shareholders, where
shareholders of an ETF class of a fund that already has substantial
assets could immediately benefit from economies of scale. Finally,
the tax-free conversion of shares from the Mutual Fund class to the
ETF class may accelerate the development of an ETF shareholder base.
Subsequent secondary market transactions by the ETF class
shareholders could generate greater trading volume, resulting in
lower trading spreads and/or premiums or discounts in the market
prices of the ETF Shares to the benefit of ETF shareholders. The
Applicants also believe that an ETF class would benefit Mutual Fund
class shareholders because in-kind transactions through the ETF
class may contribute to lower portfolio transaction costs and
greater tax efficiency. Additionally, the conversion feature could
allow Mutual Fund shareholders to convert Mutual Fund Shares for ETF
Shares without adverse consequences to the Fund by allowing Mutual
Fund shareholders to convert their shares into the ETF class of the
same fund rather than redeeming their Mutual Fund Shares and buying
shares of another ETF. In doing so, the converting shareholder could
save on transaction costs and potential tax consequences that may
otherwise be incurred in redeeming their existing shares and buying
separate ETF Shares. The ETF class would also represent an
additional distribution channel for a fund that could lead to
additional asset grown and economies of scale; greater assets under
management may lead to additional cost efficiencies and an improved
tax profile for the fund may also assist the competitive position of
the Fund for attracting prospective shareholders. Last, the class of
ETF Shares could allow certain investors to engage in more frequent
trading without disrupting the fund's portfolio.
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While Multi-class ETF Shares could potentially be listed under
existing Exchange Rules 5705(b) or 5735, doing so would unnecessarily
re-introduce the burdensome quantitative portfolio requirements and
ongoing compliance obligations associated therewith that existed before
the adoption of Rule 6c-11 and Exchange Rule 5704.\11\ The Exchange is
not aware of any clear policy rationale as to why those quantitative
requirements should apply to Multi-class ETF Shares other than the
rules are already in place. As such, listing Multi-class ETF Shares
under these older rules would place undue burdens on both the Exchange
and fund issuers because of the quantitative portfolio requirements
that currently do not apply to ETFs meeting the requirements of Rule
6c-11 and Rule 5704. Furthermore, while the Applicants generally seek
the same exemptive relief as granted under those previous orders,\12\
several Applicants have proposed different conditions to the relief
that reflect the adoption of Rule 6c-11. Therefore, the Exchange
believes there is a reasonable relationship between the Applications
and the proposed rule change to allow for the Commission's evaluation
of whether the proposed rule change is consistent with the Act. The
Exchange also acknowledges that approval of this proposed rule change
would not necessarily result in the listing and trading of the
additional Multi-class ETF Shares under the proposed Rule until and
unless the necessary relief was granted by the Division of Investment
Management, but approving this proposal would address any potential
concerns the Commission's Division of Trading and Markets might have as
it
[[Page 22375]]
specifically relates to the listing and trading of Multi-class ETF
Shares under proposed Rule 5704 and would allow for a smooth launch
process if and when such relief is granted.\13\
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\11\ See e.g., Exchange Rules 5705(b) and 5735.
\12\ See supra note 6.
\13\ The Commission has in some instances historically approved
Exchange listing rules even when no products would necessarily be
permitted to list under those rules. Recently, the Commission
approved Exchange proposals to list and trade shares of ether-based
exchange-traded products (``ETPs'') prior to any such products
having an effective registration statement. As those ether-based
ETPs could not trade on the Exchange without an effective
registration statement, which were separately considered by the
Commission's division of corporate finance, the Exchange could not
list and trade those products even with proper Exchange Rules in
place. The Exchange believes this example illustrates the
reasonability of the Exchange pursuing the adoption a proposed Rule
that would not immediately result in the listing and trading of the
applicable products thereunder. See Securities Exchange Act No.
100224 (May 23, 2024) 89 FR 46937 (May 30, 2024) (Order Granting
Accelerated Approval of Proposed Rule Changes, as Modified by
Amendments Thereto, To List and Trade Shares of Ether-Based
Exchange-Traded Products).
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Proposal
Proposed Rule 5703(a) provides that the Exchange will consider for
trading, whether by listing or pursuant to unlisted trading privileges,
the shares of Multi-Class ETF Shares that meet the criteria of this
Rule.\14\
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\14\ To the extent that a series of Multi-Class ETF Shares does
not satisfy one or more of the criteria in proposed Rule 5703, the
Exchange may file a separate proposal under Section 19(b) of the Act
in order to list such series on the Exchange. Any of the statements
or representations in that proposal regarding the index composition,
the description of the portfolio or reference assets, limitations on
portfolio holdings or reference assets, dissemination and
availability of index, reference asset, and intraday indicative
values (as applicable), or the applicability of Exchange listing
rules specified in any filing to list such series of Multi-Class ETF
Shares shall constitute continued listing requirements for the
series of Multi-Class ETF Shares. Further, in the event that a
series of Multi-Class ETF Shares becomes listed under proposed Rule
5703 and subsequently can no longer rely on the applicable exemptive
relief to Rule 6c-11, such series of Multi-Class ETF Shares may be
listed as a series of Index Fund Shares under Rule 5705(b) or
Managed Fund Shares under Rule 5735, as applicable, as long as the
series of Multi-Class ETF Shares meets all listing requirements
applicable under the applicable rule.
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Proposed Rule 5703(b) provides that the proposed rule would be
applicable only to Multi-Class ETF Shares. Except to the extent
inconsistent with this Rule, or unless the context otherwise requires,
the rules and procedures of the Board of Directors shall be applicable
to the trading on the Exchange of such securities. Multi-Class ETF
Shares are included within the definition of ``security'' or
``securities'' as such terms are used in the Rules of the Exchange.
Proposed Rule 5703(b) further provides that: (1) transactions in
Multi-Class ETF Shares will occur throughout the Exchange's trading
hours; and (2) the Exchange will implement and maintain written
surveillance procedures for Multi-Class ETF Shares.
Proposed Rule 5703(c) will set forth the definitions used in the
Rule. Specifically, proposed Rule 5703(c)(1) provides that the term
``Multi-Class ETF Shares'' means shares of stock issued by a Multi-
Class ETF.
Proposed Rule 5703(c)(2) provides that the term ``Multi-Class ETF''
means a fund that is subject to the same relief and constraints as
exchange-traded funds under Rule 6c-11 under the Investment Company
except that the security is issued by a trust that issues Multi-Class
ETF Shares in addition to classes of shares of an open-end fund that
are not exchange-traded.
Proposed Rule 5703(c)(3) provides that the term ``Reporting
Authority'' in respect of a particular series of Multi-Class ETF Shares
means the Exchange, an institution, or a reporting service designated
by the Exchange or by the exchange that lists a particular series of
Multi-Class ETF Shares (if the Exchange is trading such series pursuant
to unlisted trading privileges) as the official source for calculating
and reporting information relating to such series, including, but not
limited to, the amount of any dividend equivalent payment or cash
distribution to holders of Multi-Class ETF Shares, net asset value,
index or portfolio value, the current value of the portfolio of
securities required in connection with issuance of Multi-Class ETF
Shares, or other information relating to the issuance, redemption or
trading of Multi-Class ETF Shares. A series of Multi-Class ETF Shares
may have more than one Reporting Authority, each having different
functions.
Proposed Rule 5703(d) provides that the Exchange may approve a
series of Multi-Class ETF Shares for listing and/or trading (including
pursuant to unlisted trading privileges) on the Exchange pursuant to
Rule 19b-4(e) under the Act, provided such series of Multi-Class ETF
Shares complies with the requirements of Rule 6c-11 under the
Investment Company Act, and is eligible to operate in reliance on
exemptive relief from certain requirements of the Investment Company
Act and the rules and regulations thereunder that permits the fund to
offer Multi-Class ETF Shares, and must satisfy the requirements of this
Rule on an initial and continued listing basis.
Proposed Rule 5703(d)(1) provides that the requirements of
paragraph (d) of this Rule must be satisfied by a series of Multi-Class
ETF Shares on an initial and continued listing basis. Such securities
must also satisfy the following criteria on an initial and, except for
sub-paragraph (A) below, continued, listing basis. Further, proposed
Rule 5703(d)(1) provides that: (A) for each series, the Exchange will
establish a minimum number of Multi-Class ETF Shares required to be
outstanding at the time of commencement of trading on the Exchange; (B)
if an index underlying a series of Multi- Class ETF Shares is
maintained by a broker-dealer or fund adviser, the broker-dealer or
fund adviser shall erect and maintain a ``fire wall'' around the
personnel who have access to information concerning changes and
adjustments to the index and the index shall be calculated by a third
party who is not a broker-dealer or fund adviser. If the investment
adviser to the investment company issuing an actively managed series of
Multi-Class ETF Shares is affiliated with a broker-dealer, such
investment adviser shall erect and maintain a ``fire wall'' between the
investment adviser and the broker-dealer with respect to access to
information concerning the composition and/or changes to such Multi-
Class ETF's portfolio; and (C) any advisory committee, supervisory
board, or similar entity that advises a Reporting Authority or that
makes decisions on the composition, methodology, and related matters of
an index underlying a series of Multi-Class ETF Shares, must implement
and maintain, or be subject to, procedures designed to prevent the use
and dissemination of material non-public information regarding the
applicable index. For actively managed Multi-Class ETFs, personnel who
make decisions on the portfolio composition must be subject to
procedures designed to prevent the use and dissemination of material
nonpublic information regarding the applicable portfolio.
Proposed Rule 5703(d)(2) provides that each series of Multi-Class
ETF Shares will be listed and traded on the Exchange subject to
application of the continued listing criteria therein. Proposed Rule
5703(d)(2)(A) provides that the Exchange will consider the suspension
of trading in, and will initiate delisting proceedings under the Rule
5800 Series of, a series of Multi-Class ETF Shares under any of the
following circumstances: (i) if the Exchange becomes aware that the
issuer of the Multi-Class ETF Shares is no longer in compliance with
the requirements of Rule 6c-11 under the Investment Company Act or of
the applicable exemptive relief applicable to Muti-Class ETF Shares;
(ii) if any of the other listing requirements set forth
[[Page 22376]]
in this Rule are not continuously maintained; (iii) if, following the
initial twelve month period after commencement of trading on the
Exchange of a series of Multi-Class ETF Shares, there are fewer than 50
beneficial holders of the series of Multi-Class ETF Shares for 30 or
more consecutive trading days; or (iv) if such other event shall occur
or condition exists which, in the opinion of the Exchange, makes
further dealings on the Exchange inadvisable. Proposed Rule
5703(d)(2)(B) provides that upon termination of an investment company,
the Exchange requires that Multi-Class ETF Shares issued in connection
with such entity be removed from Exchange listing.
Proposed Rule 5703(e) provides that neither the Exchange, the
Reporting Authority, nor any agent of the Exchange shall have any
liability for damages, claims, losses or expenses caused by any errors,
omissions, or delays in calculating or disseminating any current index
or portfolio value; the current value of the portfolio of securities
required to be deposited in connection with issuance of Multi-Class ETF
Shares; the amount of any dividend equivalent payment or cash
distribution to holders of Multi-Class ETF Shares; net asset value; or
other information relating to the purchase, redemption, or trading of
Multi-Class ETF Shares, resulting from any negligent act or omission by
the Exchange, the Reporting Authority, or any agent of the Exchange, or
any act, condition, or cause beyond the reasonable control of the
Exchange, its agent, or the Reporting Authority, including, but not
limited to, an act of God; fire; flood; extraordinary weather
conditions; war; insurrection; riot; strike; accident; action of
government; communications or power failure; equipment or software
malfunction; or any error, omission, or delay in the reports of
transactions in one or more underlying securities.
The Exchange is also proposing to make corresponding amendments to
include Multi-Class ETF Shares in other Exchange rules, which are
intended to align the treatment of the proposed products with how other
open-end management investment company shares (e.g., Exchange Traded
Fund Shares, Index Fund Shares, and Managed Fund Shares) are treated
under the Exchange's rules. First, the Exchange proposes to amend the
definition of ``Derivative Securities'' in Rule 5615(a)(6)(B) to add
Multi-Class ETF Shares so that Rule 5615(a)(6)(A) and its exemptions
from certain corporate governance requirements are applicable to Multi-
Class ETF Shares.\15\
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\15\ Rule 5615(a)(6)(A) provides that issuers whose only
securities listed on Nasdaq are non-voting preferred securities,
debt securities or Derivative Securities, are exempt from the
requirements relating to Independent Directors (as set forth in Rule
5605(b)), Compensation Committees (as set forth in Rule 5605(d)),
Director Nominations (as set forth in Rule 5605(e)), Codes of
Conduct (as set forth in Rule 5610), and Meetings of Shareholders
(as set forth in Rule 5620(a)). In addition, these issuers are
exempt from the requirements relating to Audit Committees (as set
forth in Rule 5605(c)), except for the applicable requirements of
SEC Rule 10A-3. Notwithstanding, if the issuer also lists its common
stock or voting preferred stock, or their equivalent on Nasdaq it
will be subject to all the requirements of the Nasdaq 5600 Rule
Series.
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Second, the Exchange proposes to amend the definition of
``Derivative Securities Products in Rule 5705(b)(3)(A)(i)a. to add
Multi-Class ETF Shares so the exclusions applicable to Derivative
Securities Products in Nasdaq Rule 5705(b)(3)(A) will also apply to
Multi-Class ETF Shares. The Exchange believes this is appropriate to
ensure that Multi-Class ETF Shares are treated consistently with other
open-end management investment company shares listed on the Exchange
such as Exchange Traded Fund Shares, Index Fund Shares, and Managed
Fund Shares.
Third, the Exchange proposes to amend the definition of ``Exchange
Traded Derivative Securities'' in Rule 5735(c)(6) to add Multi-Class
ETF Shares so the exclusions applicable to Exchange Traded Derivative
Securities in Rule 5735(b)(1)(A) will also apply to Multi-Class ETF
Shares. The Exchange believes this is appropriate to ensure that Multi-
Class ETF Shares are treated consistently with other open-end
management investment company shares listed on the Exchange such as
Exchange Traded Fund Shares, Index Fund Shares, and Managed Fund
Shares.
Fourth, the Exchange proposes to amend Equity 4, Rule 4120 to
include Multi-Class ETF Shares in the Exchange's trading halt
provisions in Rule 4120(a)(9) and 4120(b)(4)(A).\16\ This will ensure
the applicability of trading halts to the trading of Multi-Class ETF
Shares listed on Nasdaq, and those traded on Nasdaq pursuant to
unlisted trading privileges.
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\16\ Rule 4120(b)(4)(A) sets out the definition of ``Derivative
Securities Product,'' which is referenced in the Exchange's halt
authority pursuant to Rules 4120(a)(10) and 4120(b).
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Discussion
Proposed Rule 5703 is based in large part on Rules 5704, 5705(b),
and 5735, related to the listing and trading of ETF Shares, Index Fund
Shares, and Managed Fund Shares, respectively, each of which are issued
under the Investment Company Act and qualify as ETF Shares under Rule
6c-11. Rules 5705(b) and 5735 are very similar, their primary
difference being that Index Fund Shares are designed to track an
underlying index and Managed Fund Shares are based on an actively
managed portfolio that is not designed to track an index. ETF Shares
are identical to Multi-Class ETF Shares except that Multi-Class ETF
Shares have received exemptive relief to operate an exchange-traded
fund class in addition to classes of shares that are not exchange-
traded. As such, the Exchange believes that using Rules 5705(b) and
5735 (collectively, the ``Current ETF Standards'') as well as Rule 5704
as the basis for proposed Rule 5703 is appropriate because they are
generally designed to address the issues associated with Multi-Class
ETF Shares. The only substantial difference between Rule 5704 and
proposed Rule 5703 from the Current ETF Standards that are not
otherwise required under Rule 6c-11 is that proposed Rule 5703 and Rule
5704 do not include the quantitative standards applicable to a fund or
an index that are included in the Current ETF Standards. This
difference is discussed below.
The Exchange believes that the proposal is designed to prevent
fraudulent and manipulative acts and practices because the Exchange
will perform ongoing surveillance of Multi-Class ETF Shares listed on
the Exchange in order to ensure compliance with Rule 6c-11, the
Investment Company Act, and any applicable exemptive relief on an
ongoing basis. While proposed Rule 5703 does not include the
quantitative requirements applicable to an ETF or an ETF's holdings or
underlying index that are included in Rules 5705(b) and 5735,\17\ the
Exchange believes that the manipulation concerns that such standards
are intended to address are otherwise mitigated by a combination of the
Exchange's surveillance procedures, the Exchange's ability to halt
trading under the proposed Rule 5703(d)(2)(B), and the Exchange's
ability to suspend trading and commence delisting proceedings under
proposed Rule 5703(d)(2)(A). The Exchange will halt
[[Page 22377]]
trading in the Shares under the conditions specified in Nasdaq Rules
4120 and 4121, including without limitation the conditions specified in
Nasdaq Rule 4120(a)(9) and (10) and under Nasdaq Rules 4120(a)(12). The
Exchange also believes that such concerns are further mitigated by
enhancements to the arbitrage mechanism that have come from Rule 6c-11,
specifically the additional flexibility provided to issuers of Multi-
Class ETF Shares through the use of custom baskets for creations and
redemptions and the additional information made available to the public
through the additional daily website disclosure obligations applicable
under Rule 6c-11.\18\ The Exchange believes that the combination of
these factors will act to keep Multi-Class ETF Shares trading near the
value of their underlying holdings and further mitigate concerns around
manipulation of Multi-Class ETF Shares on the Exchange without the
inclusion of quantitative standards.\19\ The Exchange will monitor for
compliance with Rule 6c-11 and any applicable exemptive relief in order
to ensure that the continued listing standards are being met.\20\
Specifically, the Exchange will review the website of each series of
Multi-Class ETF Shares listed on the Exchange in order to ensure that
the requirements of Rule 6c-11 are being met. The Exchange will also
employ numerous intraday alerts that will notify Exchange personnel of
trading activity throughout the day that is potentially indicative of
certain disclosures not being made accurately or the presence of other
unusual conditions or circumstances that could be detrimental to the
maintenance of a fair and orderly market. As a backstop to the
surveillances described above, the Exchange also notes that Rule 5703
would require an issuer of Multi-Class ETF Shares to notify the
Exchange of any failure to comply with Rule 6c-11 or the Investment
Company Act.
---------------------------------------------------------------------------
\17\ The Exchange notes that Rules 5705(b) and 5735 include
certain quantitative standards related to the size, trading volume,
concentration, and diversity of the holdings of a series of Index
Fund Shares or Managed Fund Shares (the ``Holdings Standards'') as
well as related to the minimum number of beneficial holders of a
fund (the ``Distribution Standards''). The Exchange believes that to
the extent that manipulation concerns are mitigated based on the
factors described herein, such concerns are mitigated both as it
relates to the Holdings Standards and the Distribution Standards.
\18\ The Exchange notes that the Commission came to a similar
conclusion in several places in the Rule 6c-11 Release. See Rule 6c-
11 Release at 15-18; 60-61; 69-70; 78-79; 82-84; and 95-96.
\19\ The Exchange believes that this applies to all quantitative
standards, whether applicable to the portfolio holdings of a series
of Multi-Class ETF Shares or the distribution of the Multi-Class ETF
Shares.
\20\ As noted throughout, proposed Rule 5703, unlike Rule
5705(b) and Rule 5735, does not include Holdings Standards and, as
such, there will be no quantitative standards applicable by the
Exchange to the portfolio holdings of a series of Multi-Class ETF
Shares on an initial or continued listing basis.
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The Exchange may suspend trading in and commence delisting
proceedings for a series of Multi-Class ETF Shares where such series is
not in compliance with the applicable listing standards or where the
Exchange believes that further dealings on the Exchange are
inadvisable.\21\ The Exchange also notes that Rule 5701(d) requires any
issuer to provide the Exchange with prompt notification after it
becomes aware of any non-compliance with proposed Rule 5703, which
would include any failure of the issuer to comply with Rule 6c-11, the
Investment Company Act, or any exemptive relief applicable to Multi-
Class ETF Shares.\22\
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\21\ Specifically, proposed Rule 5703(d)(2) provides that each
series of Multi-Class ETF Shares will be listed and traded on the
Exchange subject to application of Proposed Rule 5703(d)(2)(A) and
(B). Proposed Rule 5703(d)(2)(A) provides that the Exchange will
consider the suspension of trading in, and will commence delisting
proceedings under the Rule 5800 Series of, a series of Multi-Class
ETF Shares under any of the following circumstances: (i) if the
Exchange becomes aware that the issuer of the Multi-Class ETF Shares
is no longer eligible to operate in reliance on Rule 6c-11 under the
Investment Company Act of 1940 or any applicable exemptive relief
applicable to Multi-Class ETF Shares; (ii) if any of the other
listing requirements set forth in this Rule are not continuously
maintained; (iii) if, following the initial twelve month period
after commencement of trading on the Exchange of a series of Multi-
Class ETF Shares, there are fewer than 50 beneficial holders of the
series of Multi-Class ETF Shares for 30 or more consecutive trading
days; or (iv) if such other event shall occur or condition exists
which, in the opinion of the Exchange, makes further dealings on the
Exchange inadvisable. Proposed Rule 5703(d)(2)(B) provides that upon
termination of an investment company, the Exchange requires that
Multi-Class ETF Shares issued in connection with such entity be
removed from Exchange listing.
\22\ The Exchange notes that failure by an issuer to notify the
Exchange of non-compliance pursuant to Rule 5701(d) would itself be
considered non-compliance with the requirements of proposed Rule
5703 and would subject the series of Multi-Class ETF Shares to
potential trading halts and the delisting process under the Rule
5800 Series.
---------------------------------------------------------------------------
Further, the Exchange also represents that its surveillance
procedures are adequate to properly monitor the trading of the Multi-
Class ETF Shares in all trading sessions and to deter and detect
violations of Exchange rules and applicable federal securities laws.
Specifically, the Exchange intends to utilize its existing surveillance
procedures applicable to derivative products, which are currently
applicable to ETF Shares, Index Fund Shares and Managed Fund Shares,
among other product types, to monitor trading in Multi-Class ETF
Shares. The Exchange or the Financial Industry Regulatory Authority,
Inc. (``FINRA''), on behalf of the Exchange, will communicate as needed
regarding trading in Multi-Class ETF Shares and certain of their
applicable underlying components with other markets that are members of
the Intermarket Surveillance Group (``ISG'') or with which the Exchange
has in place a comprehensive surveillance sharing agreement. In
addition, the Exchange may obtain information regarding trading in
Multi-Class ETF Shares and certain of their applicable underlying
components from markets and other entities that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement. Finally, the issuer of a series of Multi-Class ETF
Shares will be required to comply with Rule 10A-3 under the Act for the
initial and continued listing of Multi-Class ETF Shares, as provided
under Rule 5615(a)(6).\23\
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\23\ See supra note 15. The Exchange notes that these proposed
changes in Rule 5615(a)(6)(B) would subject ETF Shares to the same
corporate governance requirements as other open-end management
investment companies listed on the Exchange.
---------------------------------------------------------------------------
The Exchange notes that it may consider all relevant factors in
exercising its discretion to halt or suspend trading in a series of
Multi-Class ETF Shares. Trading may be halted if the circuit breaker
parameters in Rule 4121 have been reached, because of other market
conditions, or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. These may include: (1) the extent to
which certain information about the Multi-Class ETF Shares that is
required to be disclosed under Rule 6c-11 of the Investment Company Act
is not being made available, including specifically where the Exchange
becomes aware that the net asset value or the daily portfolio
disclosure with respect to a series of Multi-Class ETF Shares is not
disseminated to all market participants at the same time, it will halt
trading in such series until such time as the net asset value or the
daily portfolio disclosure is available to all market participants;
\24\ (2) if an interruption to the dissemination to the value of the
index or reference asset on which a series of Multi-Class ETF Shares is
based persists past the trading day in which it occurred or is no
longer calculated or available; (3) trading in the securities
comprising the underlying index or portfolio has been halted in the
primary market(s); or (4) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present.
---------------------------------------------------------------------------
\24\ The Exchange will obtain a representation from the issuer
of Multi-Class ETF Shares that the net asset value per share will be
calculated daily and the requirements under 6c-11 will be satisfied
for the series will be calculated daily and made available to all
market participants at the same time.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b)
[[Page 22378]]
of the Act,\25\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\26\ in particular, in that it is designed to
promote just and equitable principles of trade, 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.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78f(b).
\26\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that proposed Rule 5703 is designed to
prevent fraudulent and manipulative acts and practices in that the
proposed rules relating to listing and trading Multi-Class ETF Shares
on the Exchange provide specific initial and continued listing criteria
required to be met by such securities. Proposed Rule 5703(d) sets forth
initial and continued listing criteria applicable to Multi-Class ETF
Shares, specifically providing that the Exchange may approve a series
of Multi-Class ETF Shares for listing and/or trading (including
pursuant to unlisted trading privileges) on the Exchange pursuant to
Rule 19b-4(e) under the Act, provided such series of Multi-Class ETF
Shares complies with the requirements of Rule 6c-11 under the
Investment Company Act, and is eligible to operate in reliance on
exemptive relief from certain requirements of the Investment Company
Act and the rules and regulations thereunder that permits the fund to
offer Multi-Class ETF Shares, and must satisfy the requirements of this
Rule on an initial and continued listing basis.\27\ The Exchange will
submit a Form 19b-4(e) for all series of Multi-Class ETF Shares upon
being listed pursuant to Rule 5703 and such Form 19b-4(e) will
specifically note that such series of Multi-Class ETF Shares are being
listed on the Exchange pursuant to Rule 5703.
---------------------------------------------------------------------------
\27\ The Exchange notes that eligibility to operate in reliance
on Rule 6c-11 or any applicable exemptive relief thereunder does not
necessarily mean that an investment company would be listed on the
Exchange pursuant to proposed Rule 5703. To this point, an
investment company that operates in reliance of exemptive relief
providing for Multi-Class ETF Shares could also be listed as a
series of Index Fund Shares or Managed Fund Shares pursuant to Rule
5705(b) or 5735, respectively, and would be subject to all
requirements under each of those rules. Further to this point, in
the event that a series of Multi-Class ETF Shares listed on the
Exchange preferred to be listed as a series of Index Fund Shares or
Managed Fund Shares (as applicable), nothing would preclude such a
series from changing to be listed as a series of Index Fund Shares
or Managed Fund Shares (as applicable), as long as the series met
each of the initial and continued listing obligations under the
applicable rules.
---------------------------------------------------------------------------
Proposed Rule 5704(d)(2) [sic] provides that each series of Multi-
Class ETF Shares will be listed and traded on the Exchange subject to
application of proposed Rules 5704(d)(2)(A) [sic] and (B). Proposed
Rule 5704(d)(2)(A) [sic] provides that the Exchange will consider the
suspension of trading in, and will commence delisting proceedings under
the Rule 5800 Series of, a series of Multi-Class ETF Shares under any
of the following circumstances: (i) if the Exchange becomes aware that
the issuer of the Multi-Class ETF Shares is no longer in compliance
with the requirements of Rule 6c-11 under the Investment Company Act of
1940 or the exemptive relief applicable to Multi-Class ETF Shares; (ii)
if any of the other listing requirements set forth in this Rule
14.11(n) are not continuously maintained; (iii) if, following the
initial twelve month period after commencement of trading on the
Exchange of a series of Multi-Class ETF Shares, there are fewer than 50
beneficial holders of the series of Multi-Class ETF Shares for 30 or
more consecutive trading days; or (d) if such other event shall occur
or condition exists which, in the opinion of the Exchange, makes
further dealings on the Exchange inadvisable. The Exchange notes that
it may become aware that the issuer is no longer compliant with Rule
6c-11 or any applicable exemptive relief thereunder, as described in
proposed Rule 5703(d)(2)(A)(i), as a result of either the Exchange
identifying non-compliance through its own monitoring process or
through notification by the issuer.
Proposed Rule 5703(d)(2)(B) provides that upon termination of an
investment company, the Exchange requires that Multi-Class ETF Shares
issued in connection with such entity be removed from Exchange listing.
The Exchange also notes that it will obtain a representation from the
issuer of each series of Multi-Class ETF Shares stating that the
requirements of Rule 6c-11 will be continuously satisfied and that the
issuer will notify the Exchange of any failure to do so.
The Exchange further believes that proposed Rule 5703 is designed
to prevent fraudulent and manipulative acts and practices because of
the robust surveillances in place on the Exchange as required under
proposed Rule 5703(b)(2) along with the similarities of proposed Rule
5703 to the rules related to other securities that are already listed
and traded on the Exchange and which would qualify as Multi-Class ETF
Shares. Proposed Rule 5703 is based in large part on Rules 5705(b) and
5735 related to the listing and trading of Index Fund Shares and
Managed Fund Shares on the Exchange, respectively, both of which are
issued under the 1940 Act and would qualify as Multi-Class ETF Shares.
Rules 5705(b) and 5735 are very similar, their primary difference being
that Index Fund Shares are designed to track an underlying index and
Managed Fund Shares are based on an actively managed portfolio that is
not designed to track an index. ETF Shares are identical to Multi-Class
ETF Shares except that Multi-Class ETF Shares have received exemptive
relief to operate an exchange-traded fund class in addition to classes
of shares that are not exchange-traded. As such, the Exchange believes
that using the Current ETF Standards and Rule 5704 as the basis for
proposed Rule 5703 is appropriate because they are generally designed
to address the issues associated with Multi-Class ETF Shares. The only
substantial difference between proposed Rule 5703 and the Current ETF
Standards that are not otherwise required under Rule 6c-11 is that
proposed Rule 5703 does not include the quantitative standards
applicable to a fund or an index that are included in the Current ETF
Standards.
The Exchange believes that the proposal is consistent with Section
6(b)(1) of the Act \28\ in that, in addition to being designed to
prevent fraudulent and manipulative acts and practices, the Exchange
has the capacity to enforce proposed Rule 5703 by performing ongoing
surveillance of Multi-Class ETF Shares listed on the Exchange in order
to ensure compliance with Rule 6c-11 and the 1940 Act on an ongoing
basis. While proposed Rule 5703 does not include the quantitative
requirements applicable to a fund and a fund's holdings or underlying
index that are included in Rules 5705(b) and 5735,\29\ the Exchange
believes that the manipulation concerns that such standards are
intended to address are otherwise mitigated by a combination of the
Exchange's surveillance procedures, the Exchange's ability to halt
trading under the proposed Rule 5703(d)(2)(B), and the Exchange's
ability to suspend trading and commence delisting proceedings under
proposed Rule 5703(d)(2)(A). The Exchange also believes that such
concerns are further mitigated by enhancements to the arbitrage
mechanism that have come from compliance with Rule 6c-11, specifically
the additional flexibility provided to issuers of Multi-Class ETF
[[Page 22379]]
Shares through the use of custom baskets for creations and redemptions
and the additional information made available to the public through the
additional daily website disclosure obligations applicable under Rule
6c-11.\30\ The Exchange believes that the combination of these factors
will act to keep Multi-Class ETF Shares trading near the value of their
underlying holdings and further mitigate concerns around manipulation
of Multi-Class ETF Shares on the Exchange without the inclusion of
quantitative standards.\31\ The Exchange will monitor for compliance
with Rule 6c-11 and any applicable exemptive relief in order to ensure
that the continued listing standards are being met. Specifically, the
Exchange plans to review the website of series of Multi-Class ETF
Shares in order to ensure that the requirements of Rule 6c-11 are being
met. The Exchange will also employ numerous intraday alerts that will
notify Exchange personnel of trading activity throughout the day that
is potentially indicative of certain disclosures not being made
accurately or the presence of other unusual conditions or circumstances
that could be detrimental to the maintenance of a fair and orderly
market. As a backstop to the surveillances described above, the
Exchange also notes that Rule 5701(d) would require an issuer of Multi-
Class ETF Shares to notify the Exchange of any failure to comply with
Rule 6c-11 or the Investment Company Act.
---------------------------------------------------------------------------
\28\ 15 U.S.C. 78f(b)(1).
\29\ The Exchange notes that Rules 5705(b) and 5735 include
certain Holdings Standards and Distribution Standards. The Exchange
believes that to the extent that manipulation concerns are mitigated
based on the factors described herein, such concerns are mitigated
both as it relates to the Holdings Standards and the Distribution
Standards.
\30\ The Exchange notes that the Commission came to a similar
conclusion in several places in the Rule 6c-11 Release. See Rule 6c-
11 Release at 15-18; 60-61; 69-70; 78-79; 82-84; and 95-96.
\31\ The Exchange believes that this applies to all quantitative
standards, whether applicable to the portfolio holdings of a series
of Multi-Class ETF Shares or the distribution of the Multi-Class ETF
Shares.
---------------------------------------------------------------------------
To the extent that any of the requirements under Rule 6c-11 or the
1940 Act are not being met, the Exchange may halt trading in a series
of Multi-Class ETF Shares as provided in proposed Rule 5703(d)(2)(B).
Further, the Exchange may also suspend trading in and commence
delisting proceedings for a series of Multi-Class ETF Shares where such
series is not in compliance with the applicable listing standards or
where the Exchange believes that further dealings on the Exchange are
inadvisable. As discussed above, the Exchange also notes that Rule
5701(d) requires any issuer to provide the Exchange with prompt
notification after it becomes aware of any non-compliance with proposed
Rule 5703, which would include any failure of the issuer to comply with
Rule 6c-11 or the 1940 Act.
Further, the Exchange also represents that its surveillance
procedures are adequate to properly monitor the trading of the Multi-
Class ETF Shares in all trading sessions and to deter and detect
violations of Exchange rules. Specifically, the Exchange intends to
utilize its existing surveillance procedures applicable to derivative
products, which are currently applicable to Index Fund Shares, Managed
Fund Shares and ETF Shares, among other product types, to monitor
trading in Multi-Class ETF Shares. The Exchange or FINRA, on behalf of
the Exchange, will communicate as needed regarding trading in Multi-
Class ETF Shares and certain of their applicable underlying components
with other markets that are members of the ISG or with which the
Exchange has in place a comprehensive surveillance sharing agreement.
In addition, the Exchange may obtain information regarding trading in
Multi-Class ETF Shares and certain of their applicable underlying
components from markets and other entities that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement.
Additionally, FINRA, on behalf of the Exchange, is able to access,
as needed, trade information for certain fixed income securities that
may be held by a series of Multi-Class ETF Shares reported to FINRA's
TRACE. FINRA also can access data obtained from the MSRB's EMMA system
relating to municipal bond trading activity for surveillance purposes
in connection with trading in a series of Multi-Class ETF Shares, to
the extent that a series of Multi-Class ETF Shares holds municipal
securities. Finally, as noted above, the issuer of a series of Multi-
Class ETF Shares will be required to comply with Rule 10A-3 under the
Act for the initial and continued listing of Multi-Class ETF Shares, as
provided under Rule 5615(a)(6).\32\
---------------------------------------------------------------------------
\32\ See supra notes 15 and 23.
---------------------------------------------------------------------------
The Exchange believes that permitting Multi-Class ETF Shares to
list on the Exchange is consistent with the applicable exemptive relief
and will help perfect the mechanism of a free and open market and, in
general, will protect investors and the public interest in that it will
permit the listing and trading of Multi-Class ETF Shares, consistent
with the applicable exemptive relief, and in a manner that will benefit
investors. Specifically, the Exchange believes that the relief proposed
in the Applications and the expected benefits of the Multi-Class ETF
Shares described above would be to the benefit of investors.
Eliminating any unnecessary delay for additional Multi-Class ETF Shares
listing on the Exchange under proposed Rule 5703 will simply help
accrue those benefits to investors more expeditiously. Further, the
Exchange is only proposing to amend its rules to allow such a series of
Multi-Class ETF Shares to list on the Exchange pursuant to Rule 5703, a
change to its rules that will only be meaningful if and when the
Commission grants such relief to an Applicant. As noted above, the
Exchange submits this proposal only to prevent any unnecessary delay in
listing additional Multi-Class ETF Shares generically under Rule 5703
when and if such requests are granted by the Commission.
The Exchange also believes that proposed Rule 5703 to explicitly
provide the initial and continued listing standards applicable to
Multi-Class ETF Shares, including the suspension of trading or removal
standards, are designed to promote transparency and clarity in the
Exchange's Rules. The Exchange believes that with these changes, Rule
5703 would clearly allow for the listing and trading of Multi-Class ETF
Shares upon the Commission's order of exemptive relief.
The Exchange also believes that the corresponding changes to add
Multi-Class ETF Shares in the Exchange's corporate governance
requirements under Rule 5615(a)(6)(B), the Index Fund Shares provisions
in Rule 5705(b), the Managed Fund Shares provisions in Rule 5735, and
the trading halt provisions in Equity 4, Rule 4120, each as discussed
in detail above, will add clarity to the Exchange's Rulebook. ETF
Shares, Managed Fund Shares, and Index Fund Shares are similarly
included in these provisions. Therefore, the Exchange believes these
are non-substantive changes meant only to subject Multi-Class ETF
Shares to the same exemptions and provisions currently applicable to
Index Fund Shares, Managed Fund Shares, and ETF Shares so that the
treatment of these open-end management investment companies is
consistent under the Exchange's rules.
For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not
[[Page 22380]]
necessary or appropriate in furtherance of the purposes of the Act. The
Exchange believes the proposal, by permitting the listing and trading
of Multi-Class ETF Shares under exemptive relief from the Investment
Company Act and the rules and regulations thereunder, would introduce
additional competition among various ETF products to the benefit of
investors.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) by order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#d1a3a4bdb4fcb2bebcbcb4bfa5a291a2b4b2ffb6bea7"><span class="__cf_email__" data-cfemail="4a383f262f67292527272f243e390a392f29642d253c">[email protected]</span></a>. Please include
file number SR-NASDAQ-2025-037 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NASDAQ-2025-037. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for website viewing and
printing in the Commission's Public Reference Room, 100 F Street NE,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-NASDAQ-2025-037 and should
be submitted on or before June 17, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-09387 Filed 5-23-25; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on May 27, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.