Notice2025-21406
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 2, To Adopt New Rule 5703 To Permit the Generic Listing and Trading of 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
November 28, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 90 Issue 227 (Friday, November 28, 2025)</title>
</head>
<body><pre>
[Federal Register Volume 90, Number 227 (Friday, November 28, 2025)]
[Notices]
[Pages 54781-54791]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-21406]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104252; File No. SR-NASDAQ-2025-037]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Amendment No. 2 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment No. 2, To
Adopt New Rule 5703 To Permit the Generic Listing and Trading of Class
Exchange-Traded Fund Shares
November 24, 2025.
On May 6, 2025, 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 adopt new Nasdaq Rule 5703 to permit the
generic listing and trading of Class Exchange-Traded Fund Shares. The
proposed rule change was published for comment in the Federal Register
on May 27, 2025.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 103072 (May 20,
2025), 90 FR 22373.
---------------------------------------------------------------------------
[[Page 54782]]
On June 30, 2025, pursuant to Section 19(b)(2) of the Act,\4\ the
Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\5\ On August 15, 2025, the Exchange filed Amendment No. 1 to
the proposed rule change, and on August 21, 2025, the Commission issued
notice of filing of Amendment No. 1 to the proposed rule change and
instituted proceedings pursuant to Section 19(b)(2)(B) of the Act \6\
to determine whether to approve or disapprove the proposed rule change,
as modified by Amendment No. 1.\7\ On November 3, 2025, pursuant to
Section 19(b)(2) of the Act,\8\ the Commission designated a longer
period for Commission action on the proposed rule change, as modified
by Amendment No. 1.\9\ On November 19, 2025, the Exchange filed
Amendment No. 2, which amended and replaced the proposed rule change,
as modified by Amendment No. 1, in its entirety.\10\ The Commission has
received no comments regarding the proposed rule change.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 103357, 90 FR 29598
(July 3, 2025).
\6\ 15 U.S.C. 78s(b)(2)(B).
\7\ See Securities Exchange Act Release No. 103758, 90 FR 41611
(Aug. 26, 2025).
\8\ 15 U.S.C. 78s(b)(2).
\9\ See Securities Exchange Act Release No. 104173, 90 FR 51424
(Nov. 17, 2025). The Commission, pursuant to Section 19(b)(2) of the
Act, designated January 22, 2026, as the date by which the
Commission shall either approve or disapprove the proposed rule
change.
\10\ Amendment No. 2 to the proposed rule change is available on
the Commission's website at: <a href="https://www.sec.gov/comments/sr-nasdaq-2025-037/srnasdaq2025037-677367-2073094.pdf">https://www.sec.gov/comments/sr-nasdaq-2025-037/srnasdaq2025037-677367-2073094.pdf</a>.
---------------------------------------------------------------------------
The Commission is publishing this notice and order to solicit
comments on the proposed rule change, as modified by Amendment No. 2,
from interested persons and to grant approval of the proposed rule
change, as modified by Amendment No. 2, on an accelerated basis.
I. The Exchange's Description of the Proposal, as Modified by Amendment
No. 2
The Exchange proposes to adopt Rule 5703 to permit the generic
listing and trading of Class Exchange-Traded Fund (``ETF'') Shares. 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
Class ETF Shares. This Amendment No. 2 to SR-NASDAQ-2025-037 amends and
replaces in its entirety Amendment No. 1 as submitted on August 15,
2025. The Exchange submits this Amendment No. 2 in order to clarify
certain points and make technical revisions to the proposed rule text.
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>
and at the principal office of the Exchange.
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 Class ETF Shares.\11\ 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 Class ETF Shares.
Consistent with Exchange Traded Fund Shares listed under the generic
listing standards in Rule 5704, Class ETF Shares 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.\12\
---------------------------------------------------------------------------
\11\ The Exchange notes that Cboe BZX Exchange, Inc. (``BZX'')
has filed a substantially similar filing. See Securities Exchange
Act Release No. 103188 (June 4, 2025), 90 FR 24457 (June 10, 2025)
(SR-CboeBZX-2025-076).
\12\ 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 Class ETF Shares of the ETF Class (as defined
herein) that would be required to operate as an ETF pursuant to the
Multi-Class Fund Exemptive Relief (as defined herein) and be in
compliance with the conditions and requirements of Rule 6c-11 under
the Investment Company Act of 1940 (the ``Investment Company Act''),
except as noted in the Multi-Class Fund Exemptive Relief. Class ETF
Shares 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.
---------------------------------------------------------------------------
Background
There are numerous applications for exemptive relief for Class ETF
Shares currently before the Commission \13\ that request exemptive
relief similar to that previously granted to other funds.\14\ This
proposal would provide for the ``generic'' listing and/or trading of
Class ETF Shares under proposed Rule 5703 on the Exchange.
---------------------------------------------------------------------------
\13\ 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).
\14\ See infra note 15.
---------------------------------------------------------------------------
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 Class ETF Shares.\15\
After this relief was granted, there was limited public discourse about
Class ETF Shares until 2019, when the prospect of providing blanket
exemptive relief to Class ETF Shares was addressed in the Commission's
adoption of Rule 6c-11 under the Investment Company Act (the
[[Page 54783]]
``ETF Rule'').\16\ 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 Class ETF Shares as part of the final
rule. Instead, the Commission concluded that 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.\17\
---------------------------------------------------------------------------
\15\ 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
Investment Company 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'').
\16\ See Securities Exchange Act Release No. 33-10695 (September
25, 2019), 84 FR 57162 (October 24, 2019) (the ``ETF Rule Adopting
Release'').
\17\ See Securities Exchange Act Release No. 88561 (April 3,
2020), 85 FR 19984 (April 9, 2020) (SR-NASDAQ-2019-090).
---------------------------------------------------------------------------
As noted above, a number of applications for exemptive relief to
permit the applicable fund to offer 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 Class ETF Shares, i.e., a fund offering both a class of
mutual fund shares and a class of shares that are exchange traded,
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.\18\ The Commission has granted, by order,
specific exemptive relief (``Multi-Class Fund Exemptive Relief'') under
the Investment Company Act on November 17, 2025, that permits, subject
to certain conditions and requirements, a Multi-Class Fund (as defined
below) to issue Class ETF Shares (as defined below) and one or more
classes of shares that are not exchange traded, among other things.\19\
---------------------------------------------------------------------------
\18\ See supra note 13.
\19\ See Investment Company Act Release No. 35786 (Nov. 17,
2025) (In the Matter of DFA Investment Dimensions Group Inc.,
Dimensional Investment Group Inc., Dimensional ETF Trust and
Dimensional Fund Advisors LP) (File No. 812-15484).
---------------------------------------------------------------------------
Proposal
Proposed Rule 5703(a) provides that the Exchange will consider for
trading, whether by listing or pursuant to unlisted trading privileges,
Class ETF Shares that meet the criteria of this Rule.\20\
---------------------------------------------------------------------------
\20\ To the extent that Class ETF Shares do 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 securities 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 Class ETF Shares shall
constitute continued listing requirements for the Class ETF Shares.
Further, in the event that Class ETF Shares become listed under
proposed Rule 5703 and subsequently can no longer satisfy the
requirements of proposed Rule 5703, such 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
Class ETF Shares meets all listing requirements applicable under the
alternate listing rule. If the Class ETF Shares do change listing
standards, the Exchange would have to comply with all of the
requirements of Rule 19b-4(e) with respect to such Class ETF Shares.
---------------------------------------------------------------------------
Proposed Rule 5703(b) provides that the proposed rule would be
applicable only to 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. 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
Class ETF Shares will occur throughout the Exchange's trading hours;
and (2) the Exchange will implement and maintain written surveillance
procedures for 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
``Class ETF Shares'' means shares of the ETF Class issued by a Multi-
Class Fund.
Proposed Rule 5703(c)(2) provides that the term ``ETF Class'' means
the class of exchange-traded shares of a Multi-Class Fund that (i)
operates as an exchange-traded fund pursuant to exemptive relief
granted by order under the Investment Company Act (``Multi-Class Fund
Exemptive Relief''), and (ii) is in compliance with the requirements of
Rules 5703(d)(ii) and 5703(d)(2)(A)(i)(2) below on an initial and
continued listing basis.
Proposed Rule 5703(c)(3) provides that the term ``Multi-Class
Fund'' means a registered open-end management company that (i) pursuant
to Multi-Class Fund Exemptive Relief, issues Class ETF Shares and one
or more classes of shares that are not exchange traded, and (ii) is in
compliance with the conditions and requirements of the Multi-Class Fund
Exemptive Relief.
Proposed Rule 5703(c)(4) provides that the term ``Reporting
Authority'' in respect of a particular Multi-Class Fund means the
Exchange, an institution, or a reporting service designated by the
Exchange or by the exchange that lists Class ETF Shares (if the
Exchange is trading such securities pursuant to unlisted trading
privileges) as the official source for calculating and reporting
information relating to such Multi-Class Fund, including, but not
limited to, the amount of any dividend equivalent payment or cash
distribution to holders of Class ETF Shares, net asset value, index or
portfolio value, the current value of the portfolio of securities
required to be deposited in connection with the issuance of Class ETF
Shares, or other information relating to the issuance, redemption or
trading of Class ETF Shares. A Multi-Class Fund may have more than one
Reporting Authority, each having different functions.
Proposed Rule 5703(d) provides that the Exchange may approve Class
ETF Shares of a Multi-Class Fund for listing and/or trading (including
pursuant to unlisted trading privileges) on the Exchange pursuant to
Rule 19b-4(e) under the Act, provided that: (i) the Multi-Class Fund is
eligible to operate an ETF Class as an exchange-traded fund pursuant
to, and is otherwise in compliance with the terms and conditions of,
the Multi-Class Fund Exemptive Relief; (ii) the ETF Class is in
compliance with the conditions and requirements of Rule 6c-11 under the
Investment Company Act, except as noted in such Multi-Class Fund
Exemptive Relief; and (iii) the ETF Class and the Multi-Class Fund each
satisfies the requirements of this Rule 5703, as applicable, 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 the Multi-Class Fund
issuing the Class ETF Shares on an initial and continued listing basis.
The Multi-Class Fund with respect to such Class ETF Shares 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 Multi-Class Fund, the Exchange
will establish a minimum number of Class ETF Shares required to be
outstanding at the time of commencement of trading on the Exchange; (B)
if an index underlying a Multi-Class Fund is maintained by a broker-
dealer or fund adviser, the broker-dealer or fund adviser shall erect
[[Page 54784]]
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 an actively managed
Multi-Class Fund 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 Fund'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 Multi-Class Fund, 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 Funds, 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 Class ETF Shares of each
Multi-Class Fund 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, Class ETF Shares under any of the following
circumstances: (i) if the Exchange becomes aware, with respect to the
Class ETF Shares: (1) the Multi-Class Fund is no longer eligible to
operate an ETF Class as an exchange-traded fund pursuant to, or is
otherwise no longer in compliance with the terms and conditions of, the
Multi-Class Fund Exemptive Relief; or (2) the ETF Class is no longer in
compliance with the conditions and requirements of Rule 6c-11 under the
Investment Company Act, except as noted in such Multi-Class Fund
Exemptive Relief; (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 the Class ETF Shares, there are fewer than 50 beneficial
holders of the 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 with
respect to the Class ETF Shares, upon termination of the Multi-Class
Fund or the ETF Class, as the case may be, the Exchange requires that
the Class ETF Shares 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 to the Multi-Class Fund in connection with the
issuance of Class ETF Shares; the amount of any dividend equivalent
payment or cash distribution to holders of Class ETF Shares; net asset
value; or other information relating to the purchase, redemption, or
trading of 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 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
Class ETF Shares so that Rule 5615(a)(6)(A) and its exemptions from
certain corporate governance requirements are applicable to Class ETF
Shares.\21\
---------------------------------------------------------------------------
\21\ 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.
---------------------------------------------------------------------------
Second, the Exchange proposes to amend the definition of
``Derivative Securities Products'' in Rule 5705(b)(3)(A)(i)a. to add
Class ETF Shares so the exclusions applicable to Derivative Securities
Products in Nasdaq Rule 5705(b)(3)(A) will also apply to Class ETF
Shares. The Exchange believes this is appropriate to ensure that 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 Class ETF
Shares so the exclusions applicable to Exchange Traded Derivative
Securities in Rule 5735(b)(1)(A) will also apply to Class ETF Shares.
The Exchange believes this is appropriate to ensure that 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 Class ETF Shares in the Exchange's trading halt provisions in
Rule 4120(a)(9) and 4120(b)(4)(A).\22\ This will ensure the
applicability of trading halts to the trading of Class ETF Shares
listed on Nasdaq, and those traded on Nasdaq pursuant to unlisted
trading privileges.
---------------------------------------------------------------------------
\22\ 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).
---------------------------------------------------------------------------
Discussion
Proposed Rule 5703 is based on Rule 5704 related to the listing and
trading of ETF Shares on the Exchange, which are issued under the
Investment Company Act and qualify as ETF Shares under Rule 6c-11.
Exchange Traded Fund Shares are similar to Class ETF Shares because the
ETF Class is required to operate as an ETF pursuant to the Multi-Class
Fund Exemptive Relief and be in compliance with the conditions and
requirements of Rule 6c-11 under the Investment Company Act (except as
noted in the Multi-Class Fund
[[Page 54785]]
Exemptive Relief).\23\ The proposed Class ETF Shares generic listing
rule would apply only to the class of shares that are exchange traded.
Because the ETF Class would be required to comply, among other things,
with the conditions and requirements of Rule 6c-11 under the Investment
Company Act, similar to Exchange Traded Fund Shares under Rule 5704,
the Exchange believes that using Rule 5704 as the basis for proposed
Rule 5703 is appropriate.
---------------------------------------------------------------------------
\23\ See supra note 19.
---------------------------------------------------------------------------
The Exchange believes that the proposal is designed to prevent
fraudulent and manipulative acts and practices because the Exchange
will perform ongoing surveillance of Class ETF Shares listed on the
Exchange in order to ensure that (i) the Multi-Class Fund is, and
continues to be, eligible to operate an ETF Class as an exchange-traded
fund pursuant to, and is in otherwise in compliance with, the terms and
conditions of, the Multi-Class Fund Exemptive Relief, (ii) the ETF
Class continues to be compliant with the conditions and requirements of
Rule 6c-11 under the Investment Company Act, except as noted in such
Multi-Class Fund Exemptive Relief, and (iii) the ETF Class and the
Multi-Class Fund each satisfies the requirements of 5703, as
applicable, on an initial and continuing basis. The Exchange believes
that the manipulation concerns are 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 trading in the
Class ETF 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 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.\24\ The
Exchange also notes that there are firewall and other information
barrier restrictions in place in the proposed rule text.\25\ The
Exchange believes that the combination of these factors will act to
keep Class ETF Shares trading near the value of their underlying
holdings and further mitigate concerns around manipulation of Class ETF
Shares on the Exchange. The Exchange will monitor for compliance to
ensure that (i) the Multi-Class Fund is, and continues to be, eligible
to operate an ETF Class as an exchange-traded fund pursuant to, and is
in otherwise in compliance with, the terms and conditions of, the
Multi-Class Fund Exemptive Relief, (ii) the ETF Class continues to be
compliant with the conditions and requirements of Rule 6c-11 under the
Investment Company Act, except as noted in such Multi-Class Fund
Exemptive Relief, and (iii) the ETF Class and the Multi-Class Fund each
satisfies the requirements of 5703, as applicable, on an initial and
continuing basis. Specifically, the Exchange will review the website of
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 Class ETF Shares to notify the Exchange of
any failure to comply with the requirements of proposed Rule 5703, the
Multi-Class Fund Exemptive Relief, or Rule 6c-11 under the Investment
Company Act.
---------------------------------------------------------------------------
\24\ The Exchange notes that the Commission came to a similar
conclusion in several places in the ETF Rule Adopting Release. See
ETF Rule Adopting Release at 15-18; 60-61; 69-70; 78-79; 82-84; and
95-96.
\25\ See proposed Rules 5703(d)(1)(B) and (C).
---------------------------------------------------------------------------
The Exchange may suspend trading in and commence delisting
proceedings for Class ETF Shares where such securities are not in
compliance with the applicable listing standards or where the Exchange
believes that further dealings on the Exchange are inadvisable.\26\ The
Exchange also notes that Rule 5701(d) requires any issuer to provide
the Exchange with prompt notification after it becomes aware that (i)
the Multi-Class Fund is no longer eligible to operate an ETF Class as
an exchange-traded fund pursuant to, or otherwise no longer complies
with, the terms and conditions of, the Multi-Class Fund Exemptive
Relief, (ii) the ETF Class is no longer compliant with the conditions
and requirements of Rule 6c-11 under the Investment Company Act, except
as noted in such Multi-Class Fund Exemptive Relief, or (iii) the ETF
Class or the Multi-Class Fund no longer satisfies the requirements of
5703, as applicable, on an initial and continuing basis.\27\
---------------------------------------------------------------------------
\26\ Specifically, proposed Rule 5703(d)(2) provides that 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, Class ETF Shares under any of the
following circumstances: (i) if the Exchange becomes aware, with
respect to the Class ETF Shares: (1) the Multi-Class Fund is no
longer eligible to operate an ETF Class as an exchange-traded fund
pursuant to, or is otherwise no longer in compliance with the terms
and conditions of, the Multi-Class Fund Exemptive Relief; or (2) the
ETF Class is no longer in compliance with the conditions and
requirements of Rule 6c-11 under the Investment Company Act, except
as noted in such Multi-Class Fund Exemptive Relief; (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 Class
ETF Shares, there are fewer than 50 beneficial holders of the 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 with respect to the Class
ETF Shares, upon termination of the Multi-Class Fund or the ETF
Class, as the case may be, the Exchange requires that the Class ETF
Shares be removed from Exchange listing.
\27\ 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 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 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
Exchange Traded Fund Shares, Index Fund Shares and Managed Fund Shares,
among other product types, to monitor trading in 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 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 Class ETF
Shares and certain of their applicable underlying
[[Page 54786]]
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 Class ETF Shares will be
required to comply with Rule 10A-3 under the Act for the initial and
continued listing of Class ETF Shares, as provided under Rule
5615(a)(6).\28\
---------------------------------------------------------------------------
\28\ See supra note 21. The Exchange notes that these proposed
changes in Rule 5615(a)(6)(B) would subject Class 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 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 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
Class ETF Shares is not disseminated to all market participants at the
same time, it will halt trading in such securities until such time as
the net asset value or the daily portfolio disclosure is available to
all market participants; \29\ (2) if an interruption to the
dissemination to the value of the index or reference asset on which
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. The Exchange deems Class ETF Shares to be equity
securities and therefore they would be subject to the full panoply of
Exchange rules and procedures that currently govern the trading of
equity securities on the Exchange.\30\
---------------------------------------------------------------------------
\29\ The Exchange will obtain a representation from the issuer
of Class ETF Shares that the net asset value per share will be
calculated daily and made available to all market participants at
the same time, and the requirements pertaining to the Multi-Class
Fund Exemptive Relief and Rule 6c-11 under the Investment Company
Act in proposed Rule 5703 will be satisfied.
\30\ With respect to trading in Class ETF Shares, the Exchange
represents that all of the Nasdaq member obligations relating to
product description and prospectus delivery requirements will
continue to apply in accordance with the Exchange's rules and
federal securities laws, and Nasdaq will continue to monitor its
members for compliance with such requirements, which are not
changing as a result of the Multi-Class Fund Exemptive Relief order
issued under the Investment Company Act.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\31\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\32\ 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.
---------------------------------------------------------------------------
\31\ 15 U.S.C. 78f(b).
\32\ 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 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 Class ETF Shares,
specifically providing that the Exchange may approve 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 that: (i) the Multi-Class Fund is eligible to operate an ETF
Class as an exchange-traded fund pursuant to, and is otherwise in
compliance with the terms and conditions of, the Multi-Class Fund
Exemptive Relief; (ii) the ETF Class is in compliance with the
conditions and requirements of Rule 6c-11 under the Investment Company
Act, except as noted in such Multi-Class Fund Exemptive Relief; and
(iii) the ETF Class and the Multi-Class Fund each satisfies the
requirements of this Rule 5703, as applicable, on an initial and
continued listing basis.\33\ The Exchange will comply with all the
requirements of Rule 19b-4(e) to specifically note that such Class ETF
Shares are being listed on the Exchange pursuant to Rule 5703.
---------------------------------------------------------------------------
\33\ The Exchange notes that eligibility to operate in reliance
on Rule 6c-11 or any applicable exemptive relief under the
Investment Company Act 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 Class ETF Shares could
alternatively 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 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
security from changing to be listed as a series of Index Fund Shares
or Managed Fund Shares (as applicable), as long as the security met
each of the initial and continued listing obligations under the
applicable rules.
---------------------------------------------------------------------------
Proposed Rule 5703(d)(2) provides that Class ETF Shares of each
Multi-Class Fund will be listed and traded on the Exchange subject to
application of proposed Rules 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 initiate delisting proceedings under the Rule
5800 Series of, Class ETF Shares under any of the following
circumstances: (i) if the Exchange becomes aware, with respect to the
Class ETF Shares: (1) the Multi-Class Fund is no longer eligible to
operate an ETF Class as an exchange-traded fund pursuant to, or is
otherwise no longer in compliance with the terms and conditions of, the
Multi-Class Fund Exemptive Relief; or (2) the ETF Class is no longer in
compliance with the conditions and requirements of Rule 6c-11 under the
Investment Company Act, except as noted in such Multi-Class Fund
Exemptive Relief; (ii) if any of the other listing requirements set
forth in this Rule 5703 are not continuously maintained; (iii) if,
following the initial twelve month period after commencement of trading
on the Exchange of the Class ETF Shares, there are fewer than 50
beneficial holders of the 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. 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 with respect to the Class
ETF Shares, upon termination of the Multi-Class Fund or the ETF Class,
as the case may be, the Exchange requires that the Class ETF Shares be
removed from Exchange listing. The Exchange also notes that it will
obtain a representation from the issuer of Class ETF Shares stating
that the requirements of Rule 6c-11 and the applicable exemptive relief
under the Investment Company Act 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
[[Page 54787]]
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 Class ETF Shares. ETF Shares are identical to Class
ETF Shares except that 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
because the ETF Class would be required to comply, among other things,
with the conditions and requirements of Rule 6c-11 under the Investment
Company Act, similar to an exchange-traded fund under Rule 5704, the
Exchange believes that using Rule 5704 as the basis for proposed Rule
5703 is appropriate.
The Exchange believes that the proposal is consistent with Section
6(b)(1) of the Act \34\ 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 Class ETF Shares listed on the Exchange in order to
ensure that (i) the Multi-Class Fund is, and continues to be, eligible
to operate an ETF Class as an exchange-traded fund pursuant to, and is
in otherwise in compliance with, the terms and conditions of, the
Multi-Class Fund Exemptive Relief, (ii) the ETF Class continues to be
compliant with the conditions and requirements of Rule 6c-11 under the
Investment Company Act, except as noted in such Multi-Class Fund
Exemptive Relief, and (iii) the ETF Class and the Multi-Class Fund each
satisfies the requirements of 5703, as applicable, on an initial and
continuing basis. The Exchange believes that the manipulation concerns
that such standards are intended to address are 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 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.\35\ The
Exchange believes that the combination of these factors will act to
keep Class ETF Shares trading near the value of their underlying
holdings and further mitigate concerns around manipulation of Class ETF
Shares on the Exchange. 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 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 Class ETF Shares to notify
the Exchange of any failure to comply with Rule 6c-11 or the
requirements of the Multi-Class Fund Exemptive Relief under the
Investment Company Act.
---------------------------------------------------------------------------
\34\ 15 U.S.C. 78f(b)(1).
\35\ The Exchange notes that the Commission came to a similar
conclusion in several places in the ETF Rule Adopting Release. See
ETF Rule Adopting Release at 15-18; 60-61; 69-70; 78-79; 82-84; and
95-96.
---------------------------------------------------------------------------
To the extent that any of the requirements under Rule 6c-11 or the
Multi-Class Fund Exemptive Relief under the Investment Company Act are
not being met, the Exchange may halt trading in 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 Class ETF
Shares where such securities are 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 Multi-Class Fund Exemptive Relief
under the Investment Company Act.
Further, the Exchange also represents that its surveillance
procedures are adequate to properly monitor the trading of the 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
Class ETF Shares. The Exchange or FINRA, on behalf of the Exchange,
will communicate as needed regarding trading in 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 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 Multi-Class Fund for the 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 Class ETF Shares, to the extent
that the Multi-Class Fund for the Class ETF Shares holds municipal
securities. Finally, as noted above, the issuer of Class ETF Shares
will be required to comply with Rule 10A-3 under the Act for the
initial and continued listing of Class ETF Shares, as provided under
Rule 5615(a)(6).\36\
---------------------------------------------------------------------------
\36\ See supra notes 21 and 28.
---------------------------------------------------------------------------
The Exchange believes that permitting Class ETF Shares to list on
the Exchange 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 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 Class ETF Shares
described above would be to the benefit of investors.
The Exchange also believes that proposed Rule 5703 to explicitly
provide the initial and continued listing standards applicable to Class
ETF Shares, including the suspension of trading or removal standards,
are
[[Page 54788]]
designed to promote transparency and clarity in the Exchange's Rules.
The Exchange also believes that the corresponding changes to add
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 Class ETF Shares to the same
exemptions and provisions currently applicable to ETF Shares, among
other product types, 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 necessary or appropriate in
furtherance of the purposes of the Act. The Exchange believes the
proposal, by permitting the listing and trading of 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. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 2, is consistent with the Act and
the rules and regulations thereunder applicable to a national
securities exchange.\37\ In particular, the Commission finds that the
proposed rule change, as modified by Amendment No. 2, is consistent
with Section 6(b)(5) of the Act,\38\ which requires, among other
things, that the Exchange's rules be designed to prevent fraudulent and
manipulative acts and practices, to remove impediments to and perfect
the mechanism of a free and open market, and, in general, to protect
investors and the public interest. The Commission also finds that the
proposed rule change, as modified by Amendment No. 2, is consistent
with Section 11A(a)(1)(C)(iii) of the Act, 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.\39\ In addition, the Commission finds that the proposed
rule change, as modified by Amendment No. 2, is consistent with Section
6(b)(1) of the Act,\40\ which requires, among other things, that the
Exchange is so organized and has the capacity to be able to enforce
compliance by its members and persons associated with its members with
the rules of the Exchange.
---------------------------------------------------------------------------
\37\ In approving this proposed rule change, as modified by
Amendment No. 2, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. See 15
U.S.C. 78c(f).
\38\ 15 U.S.C. 78f(b)(5).
\39\ See 15 U.S.C. 78k-1(a)(1)(C)(iii).
\40\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------
The Exchange proposes to adopt new Nasdaq Rule 5703 to permit the
generic listing and trading, or trading pursuant to unlisted trading
privileges, of Class ETF Shares in connection with the Multi-Class Fund
Exemptive Relief granted by order under the Investment Company Act.\41\
Under the proposal and pursuant to the Multi-Class Fund Exemptive
Relief, a Multi-Class Fund is permitted to issue a class of shares that
are exchange-traded (i.e., ETF Class) and one or more classes of shares
that are not exchange-traded. In accordance with the Multi-Class Fund
Exemptive Relief, the ETF Class operates as an ETF in compliance with
the conditions and requirements of Rule 6c-11 under the Investment
Company Act, except as noted in the Multi-Class Fund Exemptive Relief.
The Exchange also proposes to make conforming changes to Nasdaq Rule
5615 (Exemptions from Certain Corporate Governance Requirements),
Nasdaq Rule 5705(b) (Index Fund Shares), Nasdaq Rule 5735 (Managed Fund
Shares), and Equity 4, Nasdaq Rule 4120 in order to accommodate the
proposed listing of Class ETF Shares.
---------------------------------------------------------------------------
\41\ See supra note 19 and accompanying text.
---------------------------------------------------------------------------
A. Consistency With Section 6(b)(5) of the Act
(1) Proposed Nasdaq Rule 5703
Proposed Nasdaq Rule 5703 is reasonably designed to help prevent
fraudulent and manipulative acts and practices. Proposed Nasdaq Rule
5703 is based on Nasdaq Rule 5704, which governs the generic listing
and trading of ETF Shares on the Exchange.\42\ Under current Nasdaq
Rule 5704, ETF Shares, which must be eligible to operate in reliance on
Rule 6c-11 under the Investment Company Act and must satisfy the
requirements of Rule 6c-11 under the Investment Company Act on an
initial and continued listing basis, are similar to Class ETF Shares
because, under the proposal, the ETF Class also is required to operate
as an ETF and be in compliance with the conditions and requirements of
Rule 6c-11 under the Investment Company Act (except as noted in the
Multi-Class Fund Exemptive Relief).\43\
---------------------------------------------------------------------------
\42\ See Nasdaq Rule 5704. See also supra note 17 and
accompanying text; Securities Exchange Act Release No. 88561 (April
3, 2020), 85 FR 19984 (Apr. 9, 2020) (SR-NASDAQ-2019-090) (``ETF
Shares Approval Order'').
\43\ The Exchange represents that the proposed Class ETF Shares
generic listing rules apply only to the class of shares (ETF Class)
that are exchange-traded.
---------------------------------------------------------------------------
As stated in the ETF Shares Approval Order, a central qualification
for listing under the proposed rule is ongoing compliance with Rule 6c-
11 under the Investment Company Act, which requires, among other
things, ETFs to prominently disclose the portfolio holdings that will
form the basis for each calculation of net asset value per share.\44\
Because initial and ongoing compliance with Rule 6c-11 of the
Investment Company Act is a condition for listing and trading Class ETF
Shares on the Exchange,\45\ proposed Nasdaq Rule 5703 would permit the
Exchange to list and trade shares of an investment company with a fully
transparent
[[Page 54789]]
portfolio,\46\ and as the Commission previously stated for ETF
Shares,\47\ portfolio transparency should equally help prevent
manipulation of the price of Class ETF Shares.\48\ Additionally,
proposed Nasdaq Rule 5703 includes requirements relating to fire walls
and procedures to prevent the use and dissemination of material, non-
public information regarding the applicable Multi-Class Fund index and
portfolio,\49\ all such requirements of which are substantively
identical to those applicable to ETF Shares under Nasdaq Rule 5704 and
are designed to prevent fraudulent and manipulative acts and
practices.\50\ Certain of these requirements relating to such fire
walls and procedures apply in addition to what is already required
under the Act and the Investment Company Act and respective rules and
regulations thereunder, and such requirements collectively provide
additional protections against the potential misuse of material, non-
public information.\51\ The Commission concludes that the proposed
requirements relating to such fire walls and procedures, combined with
Multi-Class Fund portfolio transparency with respect to the ETF Class
and the existing requirements under the Act and Investment Company Act,
should help to protect against fraudulent and manipulative acts and
practices under Section 6(b)(5) of the Act.\52\
---------------------------------------------------------------------------
\44\ See ETF Shares Approval Order, supra note 42, 85 FR at
19992. See also ETF Rule Adopting Release, supra note 16, 84 FR at
57180-81.
\45\ See proposed Nasdaq Rule 5703(d) (``The Exchange may
approve Class ETF Shares of a Multi-Class Fund for listing and/or
trading (including pursuant to unlisted trading privileges) on the
Exchange pursuant to Rule 19b-4(e) under the Act, provided that . .
. the ETF Class is in compliance with the conditions and
requirements of Rule 6c-11 under the Investment Company Act of 1940,
except as noted in such Multi-Class Fund Exemptive Relief'') and
Nasdaq Rule 5703(d)(2)(A) (``The Exchange will consider the
suspension of trading in, and will initiate delisting proceedings
under the Rule 5800 Series of, Class ETF Shares . . . if the
Exchange becomes aware that, with respect to the Class ETF Shares .
. . the ETF Class is no longer in compliance with the conditions and
requirements of Rule 6c-11 under the Investment Company Act of 1940,
except as noted in such Multi-Class Fund Exemptive Relief'').
\46\ The Commission stated that, with respect to ETF portfolio
transparency, the disclosures are designed to promote an effective
arbitrage mechanism and inform investors about the risks of
deviation between market price and net asset value when deciding
whether to invest in ETFs generally or in a particular ETF. See ETF
Rule Adopting Release, supra note 16, 84 FR at 57166.
\47\ See ETF Shares Approval Order, supra note 42, 85 FR at
19992 (concluding that because initial and ongoing compliance with
Rule 6c-11 of the Investment Company Act is a condition for listing
and trading on the Exchange, the proposed rule would permit the
listing and trading of shares of an investment company with a fully
transparent portfolio, and the Commission believes that portfolio
transparency should help prevent manipulation of the price of ETF
Shares).
\48\ See ETF Rule Adopting Release, supra note 16, 84 FR at
57169 (concluding that portfolio transparency combined with existing
requirements should be sufficient to protect against certain
abuses).
\49\ For example, proposed Nasdaq Rule 5703(d)(1)(B) provides
that if an index underlying a Multi-Class Fund 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. Proposed Nasdaq Rule 5703(d)(1)(B)
further states that if the investment adviser to an actively managed
Multi-Class Fund 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 Fund's portfolio. Proposed Nasdaq Rule 5703(d)(1)(C) requires
that 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 Multi-Class Fund, 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 Funds, personnel who make decisions on
the portfolio composition must be subject to procedures designed to
prevent the use and dissemination of material, non-public
information regarding the applicable portfolio. See generally
proposed Nasdaq Rule 5703(d)(1)(C). Compare proposed Nasdaq Rule
5703(d) (encompassing the initial and continued listing requirements
for Class ETF Shares) with Nasdaq Rule 5704(b) (encompassing the
initial and continued listing requirements for ETF Shares).
\50\ In adopting Rule 6c-11 under the Investment Company Act,
the Commission stated that the safeguards in the existing regulatory
regime adequately address ``special concerns that self-indexed ETFs
present, including the potential ability of an affiliated index
provider to manipulate an underlying index to the benefit or
detriment of a self-indexed ETF.'' See ETF Rule Adopting Release,
supra note 16, 84 FR at 57168. See also ETF Shares Approval Order,
supra note 42, 85 FR at 19992 (concluding that the requirements of
Nasdaq Rule 5704, which includes provisions relating to fire walls
and procedures to prevent the use and dissemination of material,
non-public information regarding the applicable ETF index and
portfolio for ETF Shares, are designed to prevent fraudulent and
manipulative acts and practices).
\51\ See ETF Shares Approval Order, supra note 42, 85 FR at
19992 (stating that the requirements for ETF Shares relating to fire
walls and procedures, which are substantively identical to Nasdaq's
rules governing the listing and trading of index-based and actively
managed ETFs, apply in addition to what is already required under
the Act and the Investment Company Act and respective rules and
regulations thereunder, and that such requirements collectively
provide additional protections against the potential misuse of
material, non-public information).
\52\ See id. (``Therefore, the Commission concludes that the
proposed requirements relating to such fire walls and procedures,
combined with ETF portfolio transparency and the existing
requirements under the Act and [Investment Company Act], should help
to protect against fraudulent and manipulative acts and practices
under Section 6(b)(5) of the Act.'').
---------------------------------------------------------------------------
Proposed Nasdaq Rule 5703(b)(2) requires that the Exchange
implement and maintain written surveillance procedures for Class ETF
Shares. The Exchange represents that it will utilize its existing
surveillance procedures applicable to derivative products, which are
currently applicable to ETF Shares, among other product types, to
monitor trading in Class ETF Shares, and further represents that its
surveillance procedures are adequate to (a) properly monitor the
trading of the Class ETF Shares during all trading sessions and (b)
deter and detect violations of Exchange rules and the applicable
federal securities laws. The Exchange also represents that the
Exchange, or FINRA, on behalf of the Exchange, will communicate as
needed regarding trading in 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. The Exchange also may obtain
information regarding trading in 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 Multi-Class
Fund for the Class ETF Shares reported to TRACE. FINRA also can access
data obtained from the EMMA system relating to municipal bond trading
activity for surveillance purposes in connection with trading in Class
ETF Shares, to the extent that the Multi-Class Fund for the Class ETF
Shares holds municipal securities. The Exchange states that Nasdaq Rule
5701(d) requires any issuer to provide the Exchange with prompt
notification after it becomes aware that (i) the Multi-Class Fund is no
longer eligible to operate an ETF Class as an exchange-traded fund
pursuant to, or otherwise no longer complies with, the terms and
conditions of, the Multi-Class Fund Exemptive Relief, (ii) the ETF
Class is no longer compliant with the conditions and requirements of
Rule 6c-11 under the Investment Company Act, except as noted in such
Multi-Class Fund Exemptive Relief, or (iii) the ETF Class or the Multi-
Class Fund no longer satisfies the requirements of Nasdaq Rule 5703, as
applicable, on an initial and continuing basis.\53\ The Exchange
further states that it will obtain a representation from the issuer of
Class ETF Shares stating that the requirements of Rule 6c-11 and the
applicable exemptive relief under the Investment Company Act will be
continuously satisfied and that the issuer will notify the Exchange of
any failure to do so.
---------------------------------------------------------------------------
\53\ See supra note 27 and accompanying text. See also Nasdaq
Rule 5701(d) (requiring that ``[a] Company with securities listed
under this Rule 5700 Series must provide Nasdaq with prompt
notification after the Company becomes aware of any noncompliance by
the Company with the requirements of the Rule 5700 Series.'').
---------------------------------------------------------------------------
Consistent with the requirement of Section 6(b)(5) of the Act \54\
that the Exchange's rules be designed to remove impediments to and
perfect the mechanism of a free and open market, the Exchange's rules
regarding trading halts will help to ensure the maintenance of fair and
orderly markets
[[Page 54790]]
for Class ETF Shares. Specifically, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in Class ETF Shares. The Exchange states that trading in Class
ETF Shares may be halted if the circuit breaker parameters in Nasdaq
Rule 4121 have been reached, because of other market conditions, or for
reasons that, in the view of the Exchange, make trading in the Class
ETF Shares inadvisable. According to the Exchange, the reasons to halt
trading may include: (1) the extent to which certain information about
the Class ETF Shares that is required to be disclosed pursuant to Rule
6c-11 under the Investment Company Act is not being made available;
\55\ (2) if an interruption to the dissemination to the value of the
index or reference asset on which the 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. As the
Exchange further represents in the proposal, if the Exchange becomes
aware that the net asset value or the daily portfolio disclosure with
respect to the Class ETF Shares is not disseminated to all market
participants at the same time, it will halt trading in the Class ETF
Shares until such time as the net asset value or the daily portfolio
disclosure is available to all market participants.\56\ The Exchange
represents that it may suspend trading in and commence delisting
proceedings for Class ETF Shares where such securities are not in
compliance with the applicable listing standards or where the Exchange
believes that further dealings on the Exchange are inadvisable.\57\
---------------------------------------------------------------------------
\54\ 15 U.S.C. 78f(b)(5).
\55\ The Exchange will obtain a representation from the issuer
of Class ETF Shares that the net asset value per share will be
calculated daily and made available to all market participants at
the same time, and the requirements pertaining to the Multi-Class
Fund Exemptive Relief and Rule 6c-11 under the Investment Company
Act in proposed Nasdaq Rule 5703 will be satisfied. See supra note
29 and accompanying text.
\56\ See id.
\57\ See supra note 26 and accompanying text.
---------------------------------------------------------------------------
The Commission also finds that, consistent with Section
11A(a)(1)(C)(iii) of the Act,\58\ the proposed rule change, as modified
by Amendment No. 2, is reasonably designed to promote fair disclosure
of information that may be necessary to price the Class ETF Shares
appropriately, to prevent trading when a reasonable degree of
transparency cannot be assured, to safeguard material non-public
information relating to the Class ETF Shares, and to ensure fair and
orderly markets for Class ETF Shares.
---------------------------------------------------------------------------
\58\ See supra note 39 and accompanying text.
---------------------------------------------------------------------------
(2) Other Related Proposed Rule Changes
The Exchange also proposes changes to accommodate Class ETF Shares
in other Exchange rules. The Exchange proposes to amend: (1) the
definition of ``Derivative Securities'' in Nasdaq Rule 5615(a)(6)(B) to
add Class ETF Shares so that Nasdaq Rule 5615(a)(6)(A) and its
exemptions from certain corporate governance requirements are
applicable to Class ETF Shares; \59\ and (2) the definition of
``Derivative Securities Products'' in Nasdaq Rule 5705(b)(3)(A)(i)a. to
add Class ETF Shares so that the exclusions applicable to Derivative
Securities Products in Nasdaq Rule 5705(b)(3)(A) will also apply to
Class ETF Shares. In addition, the Exchange proposes to amend the
definition of ``Exchange Traded Derivative Securities'' in Nasdaq Rule
5735(c)(6) to add Class ETF Shares so the exclusions applicable to
Exchange Traded Derivative Securities in Nasdaq Rule 5735(b)(1)(A) will
also apply to Class ETF Shares. The Exchange also proposes to amend
Equity 4, Nasdaq Rule 4120 to include Class ETF Shares in the
Exchange's trading halt provisions in Nasdaq Rules 4120(a)(9) and
4120(b)(4)(A) \60\ to ensure the applicability of trading halts to the
trading of Class ETF Shares listed on Nasdaq, and those traded on
Nasdaq pursuant to unlisted trading privileges.\61\ These proposed
changes incorporate proposed Nasdaq Rule 5703 into the existing
framework of Nasdaq's rules, and therefore the Commission finds that
such changes are consistent with Section 6(b)(5) of the Act.
---------------------------------------------------------------------------
\59\ See supra note 21 and accompanying text.
\60\ See supra note 22 and accompanying text.
\61\ The Exchange states that these proposed changes would
subject Class ETF Shares to the same corporate governance
requirements as other open-end management investment companies
listed on the Exchange. See supra note 28 and accompanying text.
---------------------------------------------------------------------------
B. Consistency With Section 6(b)(1) of the Act
The Commission also finds that the proposed rule change, as
modified by Amendment No. 2, is consistent with Section 6(b)(1) of the
Act,\62\ which requires, among other things, that the Exchange is so
organized and has the capacity to be able to enforce compliance by its
members and persons associated with its members with the rules of the
Exchange. The Exchange represents that, consistent with Section 6(b)(1)
of the Act,\63\ it has the capacity to enforce proposed Nasdaq Rule
5703 and that it will perform ongoing surveillance of Class ETF Shares
listed on the Exchange to ensure that: (1) the Multi-Class Fund is and
continues to be eligible to operate an ETF Class as an ETF pursuant to,
and is otherwise in compliance with, the terms and conditions of, the
Multi-Class Fund Exemptive Relief; (2) the ETF Class continues to be
compliant with the conditions and requirements of Rule 6c-11 under the
Investment Company Act, except as noted in such Multi-Class Fund
Exemptive Relief; and (3) the ETF Class and the Multi-Class Fund each
satisfies the requirements of proposed Nasdaq Rule 5703, as applicable,
on an initial and continued listing basis. In addition, the Exchange
represents that it will review the website of the Class ETF Shares to
ensure that the requirements of Rule 6c-11 under the Investment Company
Act are being met, and will obtain a representation from the issuer of
the Class ETF Shares that the requirements of Rule 6c-11 and the
applicable exemptive relief under the Investment Company Act will be
continuously satisfied, and that the issuer will notify the Exchange of
any failure to do so. The Exchange also represents that it will comply
with all the requirements of Rule 19b-4(e) to specifically note that
such Class ETF Shares are being listed on the Exchange pursuant to
Nasdaq Rule 5703.\64\
---------------------------------------------------------------------------
\62\ 15 U.S.C. 78f(b)(1).
\63\ Id.
\64\ Rule 19b-4(e) requires an SRO seeking to rely on Rule 19b-
4(e) to post on its publicly available internet website within five
business days after commencement of trading a new derivative
securities product the following information relating to the new
derivative securities product, using the most recent versions of the
XML schema and the associated PDF renderer as published on the
Commission's website: (A) type of issuer; (B) class; (C) name of
underlying instrument; (D) if the underlying instrument is an index,
whether it is broad-based or narrow-based; (E) ticker symbol(s); (F)
market(s) upon which securities composing the underlying instrument
trade; (G) settlement methodology; and (H) position limits (if
applicable). See 17 CFR 240.19b-4(e)(2)(ii). See also supra note 20
and accompanying text.
---------------------------------------------------------------------------
The Exchange states that it will employ numerous intraday alerts to
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. The Exchange also states that Nasdaq Rule 5701(d) requires any
issuer to provide the Exchange with prompt notification after it
becomes aware of any non-
[[Page 54791]]
compliance with proposed Nasdaq Rule 5703,\65\ which would include any
failure of the issuer to comply with Rule 6c-11 under the Investment
Company Act or with the terms and conditions of the Multi-Class Fund
Exemptive Relief.\66\ Further, proposed Nasdaq Rule 5703(d)(2)(A)(iii)
requires that the Exchange commence delisting proceedings for Class ETF
Shares if, following the initial 12-month period after commencement of
trading on the Exchange, there are fewer than 50 beneficial holders of
the Class ETF Shares for 30 or more consecutive trading days.\67\
Finally, the Exchange deems Class ETF Shares to be equity securities
and represents, therefore, that such Class ETF Shares would be subject
to the full panoply of Exchange rules and procedures that currently
govern the trading of equity securities on the Exchange.\68\ The
Exchange states that Class ETF Shares will be subject to rules
governing Exchange member disclosure obligations in connection with
equities trading, and that Rule 6c-11 under the Investment Company Act
does not change the applicability of these Exchange rules with respect
to these securities.\69\
---------------------------------------------------------------------------
\65\ See Nasdaq Rule 5701(d) (requiring a company with
securities listed under the Nasdaq Rule 5700 Series to provide the
Exchange with prompt notification after the company becomes aware of
any non-compliance by the company with the requirements of the
Nasdaq Rule 5700 Series). See supra note 53 and accompanying text.
\66\ The Exchange further represents that failure by an issuer
to notify the Exchange of non-compliance pursuant to Nasdaq Rule
5701(d) would itself be considered non-compliance with the
requirements of Nasdaq Rule 5703 and would subject the Class ETF
Shares to potential trading halts and the delisting process under
the Nasdaq Rule 5800 Series. See supra note 27 and accompanying
text.
\67\ See proposed Nasdaq Rule 5703(d)(2)(A)(iii).
\68\ See supra note 30 and accompanying text.
\69\ With respect to trading in Class ETF Shares, the Exchange
further represents that all of the Nasdaq member obligations
relating to product description and prospectus delivery requirements
will continue to apply in accordance with the Exchange rules and
federal securities laws, and Nasdaq will continue to monitor its
members for compliance with such requirements, which are not
changing as a result of the Multi-Class Fund Exemptive Relief order
issued under the Investment Company Act. See supra note 30 and
accompanying text.
---------------------------------------------------------------------------
This approval order is based on all of the Exchange's
representations and descriptions in the proposed rule change, including
those set forth above and in Amendment No. 2, which the Commission has
carefully evaluated as discussed above. For the foregoing reasons, the
Commission finds that the proposed rule change, as modified by
Amendment No. 2, is consistent with Sections 6(b)(1) and 6(b)(5) of the
Act \70\ and the rules and regulations thereunder applicable to a
national securities exchange.
---------------------------------------------------------------------------
\70\ 15 U.S.C. 78f(b)(1) and 15 U.S.C. 78f(b)(5), respectively.
---------------------------------------------------------------------------
IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule
Change
Interested persons are invited to submit written data, views, and
arguments concerning whether the proposed rule change, as modified by
Amendment No. 2, 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#daa8afb6bff7b9b5b7b7bfb4aea99aa9bfb9f4bdb5ac"><span class="__cf_email__" data-cfemail="1f6d6a737a327c7072727a716b6c5f6c7a7c31787069">[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 filing 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 December 19, 2025.
V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 2
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 2, prior to the 30th day after the
date of publication of Amendment No. 2 in the Federal Register.
Amendment No. 2 reflects the Commission's grant of the Multi-Class Fund
Exemptive Relief and provides additional clarity with respect to the
application of the Exchange's proposed listing standards and the
requirements of the Multi-Class Fund Exemptive Relief. Amendment No. 2
also makes certain additional corrections that are minor and technical
in nature. In addition, the proposal, as modified by Amendment No. 1,
has been subject to public comment and no comments have been received.
The Commission finds that Amendment No. 2 to the proposed rule
change raises no novel regulatory issues that have not previously been
subject to comment, and is reasonably designed, among other things, to
prevent fraudulent and manipulative acts and practices, to remove
impediments to and perfect the mechanism of a free and open market,
and, in general, to protect investors and the public interest. The
Commission also finds that Amendment No. 2 to the proposed rule change
is consistent with Section 11A(a)(1)(C)(iii) of the Act.\71\
Accordingly, pursuant to Section 19(b)(2) of the Act,\72\ the
Commission finds good cause to approve the proposed rule change, as
modified by Amendment No. 2, on an accelerated basis.
---------------------------------------------------------------------------
\71\ See supra note 39 and accompanying text.
\72\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\73\ that the proposed rule change (SR-NASDAQ-2025-037), as
modified by Amendment No. 2, be, and it hereby is, approved on an
accelerated basis.
---------------------------------------------------------------------------
\73\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\74\
---------------------------------------------------------------------------
\74\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-21406 Filed 11-26-25; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on November 28, 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.