[Federal Register Volume 81, Number 84 (Monday, May 2, 2016)]
[Notices]
[Pages 26285-26294]
[FR Doc No: 2016-10154]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77715; File No. SR-NASDAQ-2016-056]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change Relating to the Listing and
Trading of the Shares of the PowerShares Variable Rate Investment Grade
Portfolio, a Series of the PowerShares Actively Managed Exchange-Traded
Fund Trust

April 26, 2016.
    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 April 13 2016, The NASDAQ Stock Market LLC (``Nasdaq'' or the
``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 Nasdaq. 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

    Nasdaq proposes to list and trade the common shares of beneficial
interest of the PowerShares Variable Rate Investment Grade Portfolio
(the ``Fund''), a series of the PowerShares Actively Managed Exchange-
Traded Fund Trust (the ``Trust''), under Nasdaq Rule 5735 (``Rule
5735''). The common shares of beneficial interest of the Fund are
referred to herein as the ``Shares.''
    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, 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, Nasdaq included statements
concerning the purpose of, and basis for, the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. Nasdaq 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 list and trade the Shares of the Fund
under Rule 5735, which rule governs the listing and trading of Managed
Fund Shares \3\ on the Exchange.\4\ The Shares will be offered by the
Fund, which will be an actively managed exchange-traded fund (``ETF'').
The Fund is a series of the Trust. The Trust was established as a
Delaware statutory trust on November 6, 2007. The Trust is registered
with the Commission as an open-end management investment company and
has filed a post-effective amendment to its registration statement on
Form N-1A (the ``Registration Statement'') with the Commission to
register the Fund and its Shares under the 1940 Act and the Securities
Act of 1933.\5\
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    \3\ A ``Managed Fund Share'' is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (the ``1940 Act'') organized
as an open-end investment company or similar entity that invests in
a portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Index Fund Shares, listed
and traded on the Exchange under Nasdaq Rule 5705, seeks to provide
investment results that correspond generally to the price and yield
performance of a specific foreign or domestic stock index, fixed
income securities index or combination thereof.
    \4\ The Commission approved Nasdaq Rule 5735 (formerly Nasdaq
Rule 4420(o)) in Securities Exchange Act Release No. 57962 (June 13,
2008), 73 FR 35175 (June 20, 2008) (SR-NASDAQ-2008-039). There are
already multiple actively managed funds listed on the Exchange; see,
e.g., Securities Exchange Act Release Nos. 69464 (April 26, 2013),
78 FR 25774 (May 2, 2013) (SR-NASDAQ-2013-036) (order approving
listing and trading of First Trust Senior Loan Fund); and 66489
(February 29, 2012), 77 FR 13379 (March 6, 2012) (SR-NASDAQ-2012-
004) (order approving listing and trading of WisdomTree Emerging
Markets Corporate Bond Fund). Additionally, the Commission has
previously approved the listing and trading of a number of actively-
managed funds on NYSE Arca, Inc. pursuant to Rule 8.600 of that
exchange. See, e.g., Securities Exchange Act Release No. 68870
(February 8, 2013), 78 FR 11245 (February 15, 2013) (SR-NYSEArca-
2012-139) (order approving listing and trading of First Trust
Preferred Securities and Income ETF). Moreover, the Commission
previously approved the listing and trading of other actively
managed funds within the PowerShares family of ETFs. See, e.g.,
Securities Exchange Act Release Nos. 68158 (November 5, 2012), 77 FR
67412 (November 9, 2012) (SR-NYSEArca-2012-101) (order approving
listing and trading of PowerShares S&P 500 Downside Hedged
Portfolio); 69915 (July 2, 2013), 78 FR 41145 (July 9, 2013) (SR-
NYSEArca-2013-56) (order approving listing of PowerShares China A-
Share Portfolio); and 72241 (May 23, 2014), 79 FR 31156 (May 30,
2014) (SR-NASDAQ-2014-027) (order approving listing and trading of
PowerShares Multi-Strategy Alternative Portfolio). The Exchange
believes the proposed rule change raises no significant issues not
previously addressed in those prior Commission orders.
    \5\ See Registration Statement for the Trust, filed on April 13,
2015 (File Nos. 333-147622 and 811-22148). The descriptions of the
Fund and the Shares contained herein are based, in part, on
information in the Registration Statement. In addition, the
Commission has issued an order granting certain exemptive relief to
the Trust under the1940 Act. See Investment Company Act Release No.
28171 (February 27, 2008) (File No. 812-13386) (``Exemptive
Order'').
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    Invesco PowerShares Capital Management LLC will serve as the
investment adviser (the ``Adviser'') to the Fund. Invesco Advisers,
Inc. will serve as the sub-adviser to the Fund (``Sub-Adviser'').
Invesco Distributors, Inc. (the ``Distributor'') will serve as the
principal underwriter and distributor of the Fund's Shares. The Bank of
New York Mellon will act as the administrator, accounting agent,
custodian (the ``Custodian'') and transfer agent for the Fund.
    Paragraph (g) of Rule 5735 provides that, if the investment adviser
to an investment company issuing Managed Fund Shares is affiliated with
a broker-dealer, such investment adviser shall erect 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
investment company's portfolio.\6\ In addition, paragraph (g) of Rule
5735 further requires that personnel who make decisions on such
investment company's portfolio composition must be subject to
procedures designed to prevent the use and dissemination of material,
non-public information regarding the investment company's portfolio.
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    \6\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser and the Sub-Adviser and their
related personnel are subject to the provisions of Rule 204A-1 under
the Advisers Act relating to codes of ethics. This Rule requires
investment advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as well as
compliance with other applicable securities laws. Accordingly,
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with
the Advisers Act and Rule 204A-1 thereunder. In addition, Rule
206(4)-7 under the Advisers Act makes it unlawful for an investment
adviser to provide investment advice to clients unless such
investment adviser has (i) adopted and implemented written policies
and procedures reasonably designed to prevent violation, by the
investment adviser and its supervised persons, of the Advisers Act
and the Commission rules adopted thereunder; (ii) implemented, at a
minimum, an annual review regarding the adequacy of the policies and
procedures established pursuant to subparagraph (i) above and the
effectiveness of their implementation; and (iii) designated an
individual (who is a supervised person) responsible for
administering the policies and procedures adopted under subparagraph
(i) above.
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    Rule 5735(g) is similar to Nasdaq Rule 5705(b)(5)(A)(i), which
applies to index-based funds and requires ``fire-walls'' between
affiliated broker-dealers and investment advisers regarding the index-
based fund's underlying benchmark index. Rule 5735(g), however, applies
to the establishment of a ``fire wall'' between affiliated investment
advisers and the broker-dealers with respect to the investment
company's portfolio and not with respect to an underlying benchmark
index, as is the case with index-based funds. The Adviser and the Sub-
Adviser are not broker-dealers, but they are affiliated with the
Distributor, a broker-dealer. The Adviser and the Sub-Adviser have
therefore implemented, and will maintain, a fire wall between
themselves and the Distributor with respect to access to information
concerning the composition and/or changes to the Fund's portfolio. In
the event (a) the Adviser or Sub-Adviser becomes newly affiliated with
a different broker-dealer (or becomes a registered broker-dealer), or
(b) any new adviser or sub-adviser to the Fund is a registered broker-
dealer or becomes affiliated with a broker-dealer, each will implement
and maintain a fire wall with respect to its relevant personnel and/or
such broker-dealer affiliate, if applicable, regarding access to
information concerning the composition and/or changes to the Fund's
portfolio and will be subject to procedures designed to prevent the use
and dissemination of material non-public information regarding such
portfolio.
Principal Investments
    The Fund will be an actively managed ETF, and its investment
objectives are to seek to generate current income while maintaining low
portfolio duration as a primary objective and capital appreciation as a
secondary objective.
    The Fund will seek to achieve its investment objectives by
investing, under normal market conditions,\7\ at

least 80% of its net assets (plus any borrowings for investment
purposes) in a portfolio of investment-grade, variable rate \8\ debt
securities that are denominated in U.S. dollars and are issued by U.S.
private sector entities or U.S. government agencies and
instrumentalities. The Adviser or Sub-Adviser (as applicable) will
select the following types of securities for the Fund: (i) Floating
rate non-agency commercial mortgage-backed securities \9\ (``MBS''),
variable rate non-agency residential MBS, variable rate agency \10\
MBS, and floating rate non-agency asset-backed \11\ securities
(including floating rate non-agency commercial real estate
collateralized loan obligations (``CLOs'')) (``ABS''); (ii) floating
rate corporate debt securities, which will be comprised of corporate
notes, bonds, debentures, or loans, and may include 144A securities;
\12\ (iii) floating rate government sponsored enterprise (``GSEs'')
credit risk transfers; \13\ (iv) variable rate preferred stock; \14\
(v) floating rate U.S government securities, including floating rate
agency debt securities; \15\ and (vi) ETFs that invest primarily in any
or all of the foregoing securities, to the extent permitted by the 1940
Act \16\ (any or all of the foregoing securities, excluding variable
rate preferred stock and ETFs, are collectively ``Variable Rate Debt
Instruments''; Variable Rate Debt Instruments, variable rate preferred
stock and ETFs are collectively ``Variable Rate Investments'').
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    \7\ The term ``under normal market conditions'' as used herein
includes, but is not limited to, the absence of adverse market,
economic, political or other conditions, including extreme
volatility or trading halts in the fixed income markets or the
financial markets generally; operational issues causing
dissemination of inaccurate market information; or force majeure
type events such as systems failure, natural or man-made disaster,
act of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance. For temporary
defensive purposes, during the initial invest-up period and during
periods of high cash inflows or outflows, the Fund may depart from
its principal investment strategies; for example, it may hold a
higher than normal proportion of its assets in cash. During such
periods, the Fund may not be able to achieve its investment
objective. The Fund may adopt a defensive strategy when the Adviser
or Sub-Adviser believes securities in which the Fund normally
invests have elevated risks due to political or economic factors and
in other extraordinary circumstances.
    \8\ For the avoidance of doubt, the term ``variable-rate'' shall
also include similar terms, such as ``floating rate'' and
``adjustable rate.''
    \9\ Mortgage-backed securities, which are securities that
directly or indirectly represent a participation in, or are secured
by and payable from, mortgage loans on real property, will consist
of: (1) Residential mortgage-backed securities (``RMBS''); (2)
commercial mortgage-backed securities (``CMBS''); (3) stripped
mortgage-backed securities (``SMBS''), which are mortgage-backed
securities where mortgage payments are divided between paying the
loan's principal and paying the loan's interest; and (4)
collateralized mortgage obligations (``CMOs'') and real estate
mortgage investment conduits (``REMICs''), which are mortgage-backed
securities that are divided into multiple classes, with each class
being entitled to a different share of the principal and interest
payments received from the pool of underlying assets.
    \10\ Agency securities for these purposes generally includes
securities issued by the following entities: Government National
Mortgage Association (Ginnie Mae), Federal National Mortgage
Association (Fannie Mae), Federal Home Loan Banks (FHLBanks),
Federal Home Loan Mortgage Corporation (Freddie Mac), Farm Credit
System (FCS) Farm Credit Banks (FCBanks), Student Loan Marketing
Association (Sallie Mae), Resolution Funding Corporation (REFCORP),
Financing Corporation (FICO), and the FCS Financial Assistance
Corporation (FAC). Agency securities can include, but are not
limited to, mortgage-backed securities.
    \11\ Asset-backed securities are securities that are backed by a
pool of assets. The Fund currently intends to invest in asset-backed
securities that are consumer and corporate asset-backed securities.
    \12\ The Fund may invest in corporate securities, which
represent debt obligations of corporate borrowers. Corporate
securities may or may not be secured by collateral. The Fund will
invest in floating rate corporate securities that have interest
rates that reset periodically. The interest rates are based on a
percentage above the London Interbank Offered Rate (LIBOR), a U.S.
bank's prime or base rate, the overnight federal funds rate, or
another rate. Corporate securities in which the Fund invests may be
senior or subordinate obligations of the borrower. The Fund will not
invest in senior or junior loans of a commercial nature. Senior
secured and senior unsecured corporate securities generally rank at
the top of a borrower's capital structure in terms of priority of
payment, ahead of any subordinated unsecured debt securities or the
borrower's common equity. The Fund will generally invest in floating
rate corporate securities that the Adviser or Sub-Adviser (as
applicable) deems to be liquid with readily available prices;
notwithstanding the foregoing, the Fund may invest in corporate
securities that are deemed illiquid so long as the Fund complies
with the 15% limitation on investments of its net assets in illiquid
assets described below under ``Investment Restrictions.''
    \13\ Credit risk transfers are unsecured obligations of GSEs
such as Fannie Mae and Freddie Mac that are structured to provide
credit protection to the issuer with respect to defaults and other
credit events within pools of residential mortgage loans that
collateralize MBS issued and guaranteed by the GSEs. This credit
protection is achieved by allowing the GSEs to reduce the
outstanding class principal balance of the securities as designated
credit events on the loans arise. The GSEs make monthly payments of
accrued interest and periodic payments of principal to the holders
of the securities.
    \14\ The variable rate preferred stock in which the Fund may
invest will be limited to securities that trade in markets that are
members of the ISG, which includes all U.S. national securities
exchanges, or exchanges that are parties to a comprehensive
surveillance sharing agreement with the Exchange.
    \15\ U.S. government securities include U.S. Treasury
obligations and securities issued or guaranteed by various agencies
of the U.S. government, or by various instrumentalities which have
been established or sponsored by the U.S. government. U.S. Treasury
obligations are backed by the ``full faith and credit'' of the U.S.
government. Securities issued or guaranteed by federal agencies and
U.S. government sponsored instrumentalities may or may not be backed
by the full faith and credit of the U.S. government.
    \16\ An ETF is an investment company registered under the 1940
Act that holds a portfolio of securities. Many ETFs are designed to
track the performance of a securities index, including industry,
sector, country and region indexes. ETFs in which the Fund invests
will be listed and traded in the U.S. on registered exchanges. The
ETFs in which the Fund will invest include Index Fund Shares (as
described in Nasdaq Rule 5705), Portfolio Depositary Receipts (as
described in Nasdaq Rule 5705), and Managed Fund Shares (as
described in Nasdaq Rule 5735). The shares of ETFs in which the Fund
may invest will be limited to securities that trade in markets that
are members of the ISG, which includes all U.S. national securities
exchanges, or exchanges that are parties to a comprehensive
surveillance sharing agreement with the Exchange. The ETFs in which
the Fund will not invest include: (i) ``leveraged ETFs'' (i.e., ETFs
operated in a manner designed to seek a multiple of the performance
of an underlying reference index), and (ii) Index Fund Shares that
seek to provide investment results that correspond to the inverse
(opposite) of the performance of a specified domestic equity,
international or global equity, or fixed income index or a
combination thereof by a specified multiple.
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    At least 80% of the Fund's net assets will be invested in Variable
Rate Debt Instruments or variable rate preferred stock that are, at the
time of purchase, investment grade, or in ETFs that invest primarily in
any or all of the foregoing securities. Under normal market conditions,
Variable Rate Debt Instruments or variable rate preferred stock will be
investment grade if, at the time of purchase they have a rating in one
of the highest four rating categories of at least one nationally
recognized statistical ratings organization (``NRSRO'') (e.g., BBB- or
higher by Standard & Poor's Ratings Services (``S&P''), and/or Fitch
Ratings (``Fitch''), or Baa3 or higher by Moody's Investors Service,
Inc. (``Moody's'')).\17\ Unrated securities may be considered
investment grade if at the time of purchase, and under normal market
conditions, the Adviser or Sub-Adviser (as applicable) determines that
such securities are of comparable quality based on a fundamental credit
analysis of the unrated security and comparable NRSRO-rated securities.
The Fund will not invest more than 20% of its net assets in the
aggregate in Variable Rate Debt Instruments that are ABS or non-agency
MBS.\18\
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    \17\ For the avoidance of doubt, if a security is rated by
multiple NRSROs and receives different ratings, the Fund will treat
the security as being rated in the highest rating category received
from any one NRSRO.
    \18\ See note 25.
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    Under normal market conditions, the Fund will satisfy the following
requirements on a continuous basis measured at the time of purchase:
(i) At least 75% of the investments in the portfolio will be in
Variable Rate Debt Instruments, with a minimum original principal
amount outstanding of $100 million or more, variable rate preferred
stock, or in ETFs that invest primarily in any or all of the foregoing
securities; \19\ (ii) no Variable Rate Investment (excluding U.S.
government securities) will represent more than 30% of the weight of
the portfolio, and the five most heavily weighted portfolio securities
will not in the aggregate account for more than 65% of the weight of
the portfolio; (iii) the portfolio (excluding securities exempted by
Section 3(a)(12) of the Exchange Act)

will include a minimum of 13 non-affiliated issuers; and (iv) portfolio
securities that in aggregate account for at least 90% of the weight of
the portfolio, other than securities issued by certain issuers of non-
agency MBS and non-agency ABS, will be either (a) from issuers that are
required to file reports pursuant to Sections 13 and 15(d) of the
Exchange Act; (b) from issuers that have a worldwide market value of
outstanding common equity held by non-affiliates of $700 million or
more; (c) from issuers that have outstanding securities that are notes,
bonds, debentures, or evidence of indebtedness having a total remaining
principal amount of at least $1 billion; or (d) exempted securities as
defined in Section 3(a)(12) of the Exchange Act.
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    \19\ Notwithstanding this limitation, the Fund's investment in
ETFs that invest primarily in Variable Rate Debt Instruments, with a
minimum original principal amount outstanding of $100 million or
more, or variable rate preferred stock shall not be so limited.
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    In selecting Variable Rate Investments, for the Fund,\20\ the
Adviser or Sub-Adviser (as applicable) will take a strategic approach
to sector allocation by using overall sector investment return and risk
outlook data. Specifically, the Fund will seek capital appreciation
while mitigating excess risk from any one sector by using a strategic
distribution of risk across multiple sectors. In addition, the Fund
will allocate its investments within each sector in an attempt to
improve expected returns based on inflation and growth outlook, as well
as relative value across sub-sectors and individual securities.
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    \20\ The liquidity of a security, especially in the case of
asset-backed and mortgage-backed securities, will be a substantial
factor in the Fund's security selection process. Consistent with the
discussion below under ``Investment Restrictions,'' the Fund will
not purchase any Variable Rate Investments (including asset-backed
securities and mortgage-backed securities) that, in the Adviser's
opinion, are illiquid if, as a result, more than 15% of the value of
the Fund's net assets will be invested in illiquid assets.
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    Under normal market conditions, the Fund will have investment
exposure to a wide variety of Variable Rate Investments. During periods
of market volatility, however, the Fund may allocate a significant
portion of its net assets to floating rate U.S. Treasury debt
securities and agency MBS. The Adviser expects that the Fund's
portfolio will have average duration \21\ of one year or less.
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    \21\ Duration refers to the average life of a Variable Rate Debt
Instrument and serves as a measure of a Variable Rate Debt
Instrument's interest rate risk. In general, each year of duration
represents an expected 1% change in the value of a security for
every parallel 1% change in interest rates. To illustrate, if a
portfolio of mortgage-backed securities has an average duration of
three years, its value can be expected to fall approximately 3% if
interest rates rise by 1%. Conversely, the portfolio's value can be
expected to rise approximately 3% if interest rates fall by 1%. As a
result, prices of instruments with shorter durations, such as the
Variable Rate Debt Instruments in which the Fund invests, are
expected to be less sensitive to interest rate changes than
instruments with longer durations.
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Other Investments of the Fund
    According to the Registration Statement, under normal market
conditions, the Fund will invest primarily in the Variable Rate
Investments described above to meet its investment objectives. In
addition, the Fund may invest up to 20% of its net assets in Variable
Rate Debt Instruments or variable rate preferred stock that are rated
below investment grade, and in fixed-rate debt instruments that are
rated either investment grade or below investment grade. The Fund may
invest in the following fixed-rate debt instruments: (i) Fixed-rate MBS
and ABS (which includes fixed-rate commercial real estate CLOs); (ii)
fixed-rate U.S. government and agency securities; (iii) fixed-rate
corporate debt securities, which will be comprised of corporate notes,
bonds, debentures, or loans, and may include 144A corporate securities;
\22\ (iv) fixed-rate exchange traded preferred stock; \23\ and (v) ETFs
that invest primarily in any or all of the foregoing securities \24\
(any or all of the foregoing securities (excluding fixed-rate exchange
traded preferred stock, and ETFs that invest primarily in any or all of
the foregoing) are collectively, ``Fixed Rate Debt Instruments''; Fixed
Rate Debt Instruments, fixed-rate exchange traded preferred stock and
ETFs that invest primarily in any or all of the foregoing securities
are collectively ``Fixed Rate Investments''). The Fund will not invest
more than 20% of its net assets in Fixed Rate Debt Instruments that are
ABS or non-agency MBS.\25\ Below investment grade securities are
commonly referred to as ``junk'' or ``high yield'' securities and are
considered speculative with respect to the issuer's capacity to pay
interest and repay principal.
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    \22\ The Fund may invest in fixed-rate corporate securities,
which represent debt obligations of corporate borrowers. Corporate
securities may or may not be secured by collateral. The Fund will
generally invest in fixed-rate corporate securities that the Adviser
or Sub-Adviser (as applicable) deems to be liquid with readily
available prices; notwithstanding the foregoing, the Fund may invest
in corporate securities that are deemed illiquid so long as the Fund
complies with the 15% limitation on investments of its net assets in
illiquid assets described below under ``Investment Restrictions.''
    \23\ The fixed rate preferred stock in which the Fund may invest
will be limited to securities that trade in markets that are members
of the ISG, which includes all U.S. national securities exchanges,
or that are parties to a comprehensive surveillance sharing
agreement with the Exchange.
    \24\ The shares of ETFs in which the Fund may invest will be
limited to securities that trade in markets that are members of the
ISG, which includes all U.S. national securities exchanges, or that
are parties to a comprehensive surveillance sharing agreement with
the Exchange.
    \25\ This 20% limitation will apply to all investments in ABS
and MBS held by the Fund in the aggregate, whether fixed rate or
variable rate.
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    The Fund may also take a temporary defensive position and hold a
portion of its assets in cash and cash equivalents and money market
instruments \26\ if there are inadequate investment opportunities
available due to adverse market, economic, political or other
conditions, or atypical circumstances such as unusually large cash
inflows or redemptions. The Fund may invest in non-exchange listed
securities of other investment companies (including money market funds)
beyond the limits permitted under the 1940 Act, subject to certain
terms and conditions set forth in a Commission exemptive order issued
to the Trust pursuant to Section 12(d)(1)(J) of the 1940 Act.\27\
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    \26\ For the Fund's purposes, money market instruments will
include: Short-term, high quality securities issued or guaranteed by
non-U.S. governments, agencies, and instrumentalities; non-
convertible corporate debt securities with remaining maturities of
not more than 397 days that satisfy ratings requirements under Rule
2a-7 of the 1940 Act; money market mutual funds; and deposits and
other obligations of U.S. and non-U.S. banks and financial
institutions.
    \27\ See Investment Company Act Release No. 30238 (October 23,
2012) (File No. 812-13820).
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Investment Restrictions of the Fund
    The Fund may not concentrate its investments (i.e., invest more
than 25% of the value of its net assets) in securities of issuers in
any one industry or group of industries. This restriction will not
apply to obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities.\28\
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    \28\ See Form N-1A, Item 9. The Commission has taken the
position that a fund is concentrated if it invests more than 25% of
the value of its total assets in any one industry. See, e.g.,
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR
54241 (November 21, 1975).
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    The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including Rule 144A corporate debt securities deemed illiquid by the
Adviser.\29\ The Fund will monitor its portfolio liquidity on an
ongoing basis to determine whether, in light of current circumstances,
an adequate level of liquidity is being maintained, and will consider
taking appropriate steps in order to maintain adequate liquidity if,
through a change

in values, net assets, or other circumstances, more than 15% of the
Fund's net assets are held in illiquid securities or other illiquid
assets. Illiquid securities and other illiquid assets include those
subject to contractual or other restrictions on resale and other
instruments or assets that lack readily available markets as determined
in accordance with Commission staff guidance.\30\ The Fund will not
invest in futures, options, forwards, swaps or other derivatives.
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    \29\ In reaching liquidity decisions, the Adviser may consider
the following factors: The frequency of trades and quotes for the
security; the number of dealers wishing to purchase or sell the
security and the number of other potential purchasers; dealer
undertakings to make a market in the security; and the nature of the
security and the nature of the marketplace in which it trades (e.g.,
the time needed to dispose of the security, the method of soliciting
offers and the mechanics of transfer).
    \30\ Long-standing Commission guidelines have required open-end
funds to hold no more than 15% of their net assets in illiquid
securities and other illiquid assets. See Investment Company Act
Release No. 28193 (March 11, 2008), 73 FR 14618 (March 18, 2008), FN
34. See also Investment Company Act Release Nos. 5847 (October 21,
1969), 35 FR 19989 (December 31, 1970) (Statement Regarding
``Restricted Securities''); and 18612 (March 12, 1992), 57 FR 9828
(March 20, 1992) (Revisions of Guidelines to Form N-1A). A fund's
portfolio security is illiquid if it cannot be disposed of in the
ordinary course of business within seven days at approximately the
value ascribed to it by the fund. See Investment Company Act Release
Nos. 14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting
amendments to Rule 2a-7 under the 1940 Act); and 17452 (April 23,
1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under the
Securities Act of 1933).
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    The Fund intends to qualify for and to elect to be treated as a
regulated investment company under Subchapter M of the Internal Revenue
Code.\31\
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    \31\ 26 U.S.C. 851.
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    The Fund's investments will be consistent with the Fund's
investment objectives. Additionally, the Fund may engage in frequent
and active trading of portfolio securities to achieve its investment
objective. The Fund does not presently intend to engage in any form of
borrowing for investment purposes, and will not be operated as a
``leveraged ETF,'' i.e., it will not be operated in a manner designed
to seek a multiple of the performance of an underlying reference index.
Net Asset Value
    The Fund's administrator will calculate the Fund's net asset value
(``NAV'') per Share as of the close of regular trading (normally 4:00
p.m., Eastern time (``E.T.'')) on each day the New York Stock Exchange
(``NYSE'') is open for business (a ``Business Day''). NAV per Share
will be calculated for the Fund by taking the value of the Fund's total
assets, including interest or dividends accrued but not yet collected,
less all liabilities, and dividing such amount by the total number of
Shares outstanding. The result, rounded to the nearest cent, will be
the NAV per Share (although creations and redemptions will be processed
using a price denominated to the fifth decimal point, meaning that
rounding to the nearest cent may result in different prices in certain
circumstances).
    A market valuation generally means a valuation (i) obtained from an
exchange, an independent pricing service (``Pricing Service''), or a
major market maker (or dealer) or (ii) based on a price quotation or
other equivalent indication of value supplied by an exchange, a Pricing
Service, or a major market maker (or dealer).
    Securities listed or traded on an exchange generally are valued at
the last sales price or official closing price that day as of the close
of the exchange where the security is primarily traded. However,
certain securities, including some Variable Rate Debt Instruments (and
Fixed Rate Debt Instruments, to the extent applicable), in which the
Fund may invest will not be listed on any securities exchange or board
of trade. Such securities will typically be bought and sold by
institutional investors in individually negotiated private transactions
that function in many respects like an over-the-counter secondary
market, although typically no formal market makers will exist. Certain
securities, particularly debt securities, will have few or no trades,
or trade infrequently, and information regarding a specific security
may not be widely available or may be incomplete. Accordingly,
determinations of the fair value of debt securities may be based on
infrequent and dated information. Because there is less reliable,
objective data available, elements of judgment may play a greater role
in valuation of debt securities than for other types of securities.
    Typically, Variable Rate Debt Instruments, Fixed Rate Debt
Instruments and other debt securities in which the Fund may invest
(other than those specifically described below) will be valued using
information provided by a Pricing Service. Debt securities having a
remaining maturity of 60 days or less when purchased will be valued at
cost adjusted for amortization of premiums and accretion of discounts,
provided the Adviser has determined that the use of amortized cost is
an appropriate reflection of fair value given market and issuer-
specific conditions existing at the time of the determination.
    ABS and MBS will generally be valued by using a Pricing Service. If
a Pricing Service does not cover a particular asset-backed or mortgage-
backed security, or discontinues covering a particular asset-backed or
mortgage-backed security, the security will be priced using broker
quotes generally provided by brokers that make or participate in
markets in the security. To derive values, Pricing Services and broker-
dealers may use matrix pricing and valuation models, as well as recent
market transactions for the same or similar assets. As it deems
appropriate, the Adviser may determine that a Pricing Service price
does not represent an accurate value of an ABS or MBS, based on broker
quotes it receives, a recent trade in the security by the Fund,
information from a portfolio manager, or other market information. In
the event that the Adviser determines that the Pricing Service price is
unreliable or inaccurate based on such other information, broker quotes
may be used. Additionally, if the Adviser determines that the price of
an asset-backed or mortgage-backed security obtained from a Pricing
Service and available broker quotes is unreliable or inaccurate due to
market conditions or other reasons, or if a Pricing Service price or
broker quote is unavailable, the security will be valued using fair
value pricing, as described below.
    Shares of open-end registered investment companies (i.e., money
market mutual funds) will be valued at net asset value; shares of
preferred stock and ETFs will be valued at the last sale price or
official closing price on the exchange on which they primarily trade.
Deposits, other obligations of U.S. and non-U.S. banks and financial
institutions, and cash equivalents will be valued at their daily
account value.
    Certain securities, including certain Variable Rate Debt
Instruments and Fixed Rate Debt Instruments, in which the Fund will
invest will not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board or its
delegate at fair value. The use of fair value pricing by the Fund will
be governed by the valuation policies and procedures and conducted in
accordance with the provisions of the 1940 Act. Valuing the Fund's
securities using fair value pricing will result in using prices for
those securities that may differ from current market valuations or
official closing prices on the applicable exchange. All valuations will
be subject to review by the Board of Trustees of the Trust (``Board'')
or its delegate.
    In determining NAV, expenses will be accrued and applied daily and
securities and other assets for which market quotations are readily
available will be valued at market value. The NAV for the Fund will be
calculated and disseminated daily. If a security's market price is not
readily available, the security will be valued using pricing provided
from independent pricing services or by another method that the
Adviser, in its judgment, believes will

better reflect the security's fair value, in each case in accordance
with the Trust's valuation policies and procedures (which may be
revised from time to time) as adopted by the Trust's Board and in
accordance with the 1940 Act.
Creation and Redemption of Shares
    The Trust will issue Shares of the Fund at NAV only with authorized
participants (``APs'') and only in aggregations of 50,000 shares (each
aggregation is called a ``Creation Unit'') or multiples thereof, on a
continuous basis through the Distributor, without a sales load, at the
NAV next determined after receipt, on any Business Day, of an order in
proper form.
    The consideration an AP must provide for purchase of Creation Units
of the Fund may consist of (i) cash in lieu of all or a portion of the
Deposit Securities, as defined below, in an amount calculated based on
the NAV per Share, multiplied by the number of Shares representing a
Creation Unit (``Deposit Cash''), plus certain transaction fees; or
(ii) an ``in-kind'' deposit of a designated portfolio of securities
determined by the Adviser that generally will conform to the holdings
of the Fund consistent with its investment objective (the ``Deposit
Securities'') per each Creation Unit and generally an amount of cash
(the ``Cash Component'') computed as described below. Together, the
Deposit Securities and the Cash Component (including the cash in lieu
amount) will constitute the ``Fund Deposit,'' which will represent the
minimum initial and subsequent investment amount for a Creation Unit of
the Fund.
    The Cash Component is sometimes also referred to as the Balancing
Amount. The Cash Component will serve the function of compensating for
any differences between the NAV per Creation Unit and the Deposit
Amount (as defined below). For example, for a creation the Cash
Component will be an amount equal to the difference between the NAV of
Fund Shares (per Creation Unit) and the ``Deposit Amount''--an amount
equal to the market value of the Deposit Securities and/or cash in lieu
of all or a portion of the Deposit Securities. If the Cash Component is
a positive number (i.e., the NAV per Creation Unit exceeds the Deposit
Amount), the AP will deliver the Cash Component. If the Cash Component
is a negative number (i.e., the NAV per Creation Unit is less than the
Deposit Amount), the AP will receive the Cash Component. Shares may be
redeemed only in Creation Units at their NAV next determined after
receipt of a redemption request in proper form by the Fund through the
Custodian and only on a Business Day. The Fund will not redeem Shares
in amounts less than a Creation Unit. APs must accumulate enough Shares
in the secondary market to constitute a Creation Unit in order to have
such Shares redeemed by the Trust. The redemption proceeds for a
Creation Unit generally consist of (i) cash, in lieu of all or a
portion of the Fund Securities as defined below, in an amount
calculated based on the NAV per Share, multiplied by the number of
Shares representing a Creation Unit, less any redemption transaction
fees; or (ii) a designated portfolio of securities determined by the
Adviser that generally will conform to the holdings of the Fund
consistent with its investment objective per each Creation Unit (``Fund
Securities'')--as announced on the Business Day of the request for
redemption received in proper form--plus or minus cash in an amount
equal to the difference between the NAV of the Shares being redeemed,
as next determined after a receipt of a request in proper form, and the
value of the Fund Securities, less any redemption transaction fees. In
the event that the Fund Securities have a value greater than the NAV of
the Shares, a compensating Cash Component payment equal to the
difference is required to be made by or through an AP by the redeeming
shareholder.
    Creation Units of the Fund generally will be sold partially in cash
and partially in-kind plus a fixed and/or variable transaction fee.
    To the extent that the Fund permits Creation Units to be issued
principally or partially in-kind, the Custodian, through the National
Securities Clearing Corporation (``NSCC''), will make available on each
Business Day, prior to the opening of business of the NYSE (currently,
9:30 a.m., E.T.), the list of the names and the quantity of each
Deposit Security to be included in the current Fund Deposit (based on
information at the end of the previous Business Day), plus any
estimated Cash Component, for the Fund. Such Fund Deposit will be
applicable, subject to any adjustments as described below, to effect
creations of Creation Units of the Fund until such time as the next-
announced composition of the Deposit Securities is made available.
Information on the specific names and holdings in a Fund Deposit also
will be available at www.pstrader.net.
    To the extent that the Fund permits Creation Units to be redeemed
in-kind, the Custodian, through the NSCC, will make available on each
Business Day, prior to the opening of business of NYSE (currently, 9:30
a.m., E.T.), the identity of the Fund Securities that will be
applicable (subject to possible amendment or correction) to redemption
requests received in proper form on that day. Fund Securities received
on redemption may not be identical to Deposit Securities that are
applicable to creations of Creation Units.
    When applicable, during times that the Fund permits in-kind
creations, the identity and quantity of the Deposit Securities required
for a Fund Deposit for the Shares may change as rebalancing adjustments
and corporate action events occur and are reflected within the Fund
from time to time by the Adviser, consistent with the investment
objective of the Fund.
    To be eligible to place orders with respect to creations and
redemptions of Creation Units, an entity must be (i) a ``Participating
Party,'' i.e., a broker-dealer or other participant in the clearing
process through the continuous net settlement system of the NSCC or
(ii) a Depository Trust Company (``DTC'') Participant (a ``DTC
Participant''). In addition, each Participating Party or DTC
Participant (each, an AP) must execute an agreement that has been
agreed to by the Distributor and the Custodian with respect to
purchases and redemptions of Creation Units.
    All orders to create Creation Units must be received by the
transfer agent no later than the closing time of the regular trading
session on the NYSE (ordinarily, 4:00 p.m., E.T.) in each case on the
date such order is placed in order for creations of Creation Units to
be effected based on the NAV of Shares of the Fund as next determined
on such date after receipt of the order in proper form.
    In order to redeem Creation Units of the Fund, an AP must submit an
order to redeem for one or more Creation Units. All such orders must be
received by the Fund's transfer agent in proper form no later than the
close of regular trading on the NYSE (ordinarily, 4:00 p.m. E.T.) in
order to receive that day's closing NAV per Share.
Availability of Information
    The Fund's Web site (www.invescopowershares.com), which will be
publicly available prior to the public offering of Shares, will include
a form of the prospectus for the Fund that may be downloaded. The
Fund's Web site will include the ticker symbol for the Shares, CUSIP
and exchange information, along with additional quantitative
information updated on a daily basis, including, for the Fund: (1)
Daily trading volume, the prior Business

Day's reported NAV, closing price and mid-point of the bid/ask spread
at the time of calculation of such NAV (the ``Bid/Ask Price''),\32\ and
a calculation of the premium and discount of the Bid/Ask Price against
the NAV; and (2) data in chart format displaying the frequency
distribution of discounts and premiums of the daily Bid/Ask Price
against the NAV, within appropriate ranges, for the most recently
completed calendar year and each of the four most recently completed
calendar quarters since that year (or the life of the Fund if shorter).
On each Business Day, before commencement of trading in Shares in the
Regular Market Session \33\ on the Exchange, the Fund will disclose on
its Web site the identities and quantities of the portfolio of
securities and other assets (the ``Disclosed Portfolio'' as such term
is defined in Nasdaq Rule 5735(c)(2)) held by the Fund that will form
the basis for the Fund's calculation of NAV at the end of the Business
Day.\34\ In addition to disclosing the identities and quantities of the
portfolio of securities and other assets in the Disclosed Portfolio,
the Fund also will disclose on a daily basis on its Web site the
following information, as applicable to the type of holding: ticker
symbol, if any, CUSIP number or other identifier, if any; a description
of the holding (including the type of holding), quantity held (as
measured by, for example, par value, number of shares or units);
maturity date, if any; coupon rate, if any; market value of the
holding; and percentage weighting of the holding in the Fund's
portfolio. The Web site and information will be publicly available at
no charge.
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    \32\ The Bid/Ask Price of the Fund will be determined using the
mid-point of the highest bid and the lowest offer on the Exchange as
of the time of calculation of the Fund's NAV. The records relating
to Bid/Ask Prices will be retained by the Fund and its service
providers.
    \33\ See Nasdaq Rule 4120(b)(4) (describing the three trading
sessions on the Exchange: (1) Pre-Market Session from 4 a.m. to 9:30
a.m. E.T.; (2) Regular Market Session from 9:30 a.m. to 4 p.m. or
4:15 p.m. E.T.; and (3) Post-Market Session from 4 p.m. or 4:15 p.m.
to 8 p.m. E.T.).
    \34\ Under accounting procedures to be followed by the Fund,
trades made on the prior Business Day (``T'') will be booked and
reflected in NAV on the current Business Day (``T+1'').
Notwithstanding the foregoing, portfolio trades that are executed
prior to the opening of the Exchange on any Business Day may be
booked and reflected in NAV on such Business Day. Accordingly, the
Fund will be able to disclose at the beginning of the Business Day
the portfolio that will form the basis for the NAV calculation at
the end of the Business Day.
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    In addition, to the extent the Fund permits full or partial
creations in-kind, a basket composition file, which will include the
security names and share quantities to deliver (along with requisite
cash in lieu) in exchange for Shares, together with estimates and
actual Cash Components, will be publicly disseminated daily prior to
the opening of the Exchange via the NSCC and at www.pstrader.net. The
basket will represent the securities component of the Shares of the
Fund, and when added to the Cash Components will equal a Creation Unit.
    In addition, for the Fund, an estimated value, defined in Rule
5735(c)(3) as the ``Intraday Indicative Value,'' that reflects an
estimated intraday value of the Fund's portfolio, will be disseminated.
Moreover, the Intraday Indicative Value, available on the NASDAQ OMX
Information LLC proprietary index data service \35\ will be based upon
the current value for the components of the Disclosed Portfolio and
will be updated and widely disseminated by one or more major market
data vendors and broadly displayed at least every 15 seconds during the
Regular Market Session.
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    \35\ Currently, the NASDAQ OMX Global Index Data Service
(``GIDS'') is the NASDAQ OMX global index data feed service,
offering real-time updates, daily summary messages, and access to
widely followed indexes and Intraday Indicative Values for ETFs.
GIDS provides investment professionals with the daily information
needed to track or trade NASDAQ OMX indexes, listed ETFs, or third-
party partner indexes and ETFs.
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    The dissemination of the Intraday Indicative Value, together with
the Disclosed Portfolio, will allow investors to determine the value of
the underlying portfolio of the Fund on a daily basis and will provide
a close estimate of that value throughout the trading day.
    Intraday executable price quotations on exchange listed securities,
certain Variable Rate Debt Instruments, Fixed Rate Debt Instruments and
other assets not traded on an exchange will be available from major
broker-dealer firms or market data vendors, as well as from automated
quotation systems, published or other public sources, or online
information services. Additionally, the Trade Reporting and Compliance
Engine (``TRACE'') of the Financial Industry Regulatory Authority
(``FINRA'') will be a source of price information for corporate bonds,
privately-issued securities, MBS and ABS to the extent transactions in
such securities are reported to TRACE.\36\ Intra-day, executable price
quotations on the securities and other assets held by the Fund, as well
as closing price information, will be available from major broker-
dealer firms or on the exchange on which they are traded, as
applicable. Intra-day and closing price information related to U.S.
government securities, money market mutual funds, and other short-term
investments held by the Fund also will be available through
subscription services, such as Bloomberg, Markit and Thomson Reuters,
which can be accessed by APs and other investors.
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    \36\ Broker-dealers that are FINRA member firms have an
obligation to report transactions in specified debt securities to
TRACE to the extent required under applicable FINRA rules.
Generally, such debt securities will have at issuance a maturity
that exceeds one calendar year.
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    Investors also will be able to obtain the Fund's Statement of
Additional Information (``SAI''), the Fund's Shareholder Reports, and
its Trust's Form N-CSR and Form N-SAR, each of which is filed twice a
year, except the SAI, which is filed at least annually. The Fund's SAI
and Shareholder Reports will be available free upon request from the
Trust, and those documents and the Form N-CSR and Form N-SAR may be
viewed on-screen or downloaded from the Commission's Web site at
www.sec.gov. Information regarding market price and trading volume of
the Shares will be continually available on a real-time basis
throughout the day on brokers' computer screens and other electronic
services. Information regarding the previous day's closing price and
trading volume for the Shares will be published daily in the financial
section of newspapers. Quotation and last sale information for the
Shares will be available via Nasdaq proprietary quote and trade
services, as well as in accordance with the Unlisted Trading Privileges
and the Consolidated Tape Association plans for the Shares. Quotation
and last sale information for any exchange-traded instruments
(including preferred stocks and ETFs) also will be available via the
quote and trade service of their respective primary exchanges, as well
as in accordance with the Unlisted Trading Privileges and the
Consolidated Tape Association plans.
    Additional information regarding the Fund and the Shares, including
investment strategies, risks, creation and redemption procedures, fees,
portfolio holdings disclosure policies, distributions and taxes, will
be included in the Registration Statement.
Initial and Continued Listing of the Fund's Shares
    The Shares will conform to the initial and continued listing
criteria applicable to Managed Fund Shares, as set forth under Rule
5735. The Exchange represents that, for initial and/or continued
listing, the Fund will be in compliance with Rule 10A-3 \37\ under the
Exchange Act. A minimum of 100,000 Shares will be outstanding at

the commencement of trading on the Exchange. The Exchange will obtain a
representation from the issuer of the Shares that the NAV per Share
will be calculated daily and that the NAV and the Disclosed Portfolio
will be made available to all market participants at the same time.
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    \37\ See 17 CFR 240.10A-3.
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Trading Halts of the Fund's Shares
    With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund. Nasdaq will halt trading in the
Shares under the conditions specified in Nasdaq Rules 4120 and 4121,
including the trading pauses under Nasdaq Rules 4120(a)(11) and (12).
Trading also may be halted because of 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 trading is not
occurring in the securities and/or the financial instruments
constituting the Disclosed Portfolio of the Fund; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present. Trading in the Shares also will be
subject to Rule 5735(d)(2)(D), which sets forth circumstances under
which Shares of the Fund may be halted.
Trading Rules
    Nasdaq deems the Shares to be equity securities, thus rendering
trading in the Shares subject to Nasdaq's existing rules governing the
trading of equity securities. Nasdaq will allow trading in the Shares
from 4:00 a.m. until 8:00 p.m. E.T. The Exchange has appropriate rules
to facilitate transactions in the Shares during all trading sessions.
As provided in Nasdaq Rule 5735(b)(3), the minimum price variation for
quoting and entry of orders in Managed Fund Shares traded on the
Exchange is $0.01.
Surveillance
    The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by both Nasdaq and
FINRA, on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities
laws.\38\ The Exchange represents that these procedures are adequate to
properly monitor Exchange trading of the Shares in all trading sessions
and to deter and detect violations of Exchange rules and applicable
federal securities laws.
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    \38\ FINRA surveils trading on the Exchange pursuant to a
regulatory services agreement. The Exchange is responsible for
FINRA's performance under this regulatory services agreement.
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    The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations. FINRA, on
behalf of the Exchange, will communicate as needed regarding trading in
the Shares and other exchange-traded securities (including ETFs and
preferred stock) and instruments held by the Fund with other markets
and other entities that are members of the ISG,\39\ and FINRA may
obtain trading information regarding trading in the Shares and other
exchange-traded securities (including ETFs and preferred stock) and
instruments held by the Fund from such markets and other entities.
Moreover, FINRA, on behalf of the Exchange, will be able to access, as
needed, trade information for certain Variable Rate Debt Instruments,
Fixed Rate Debt Instruments, and other debt securities held by the Fund
reported to FINRA's TRACE.
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    \39\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on markets that are
members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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    In addition, the Exchange may obtain information regarding trading
in the Shares and other exchange-traded securities (including ETFs and
preferred stock) and instruments held by the Fund from markets and
other entities that are members of ISG, which includes securities
exchanges, or with which the Exchange has in place a comprehensive
surveillance sharing agreement.
    In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares. Specifically, the Information
Circular will discuss the following: (1) The procedures for purchases
and redemptions of Shares in Creation Units (and that Shares are not
individually redeemable); (2) Nasdaq Rule 2111A, which imposes
suitability obligations on Nasdaq members with respect to recommending
transactions in the Shares to customers; (3) how information regarding
the Intraday Indicative Value and the Disclosed Portfolio is
disseminated; (4) the risks involved in trading the Shares during the
Pre-Market and Post-Market Sessions when an updated Intraday Indicative
Value will not be calculated or publicly disseminated; (5) the
requirement that members purchasing Shares from the Fund for resale to
investors deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
and (6) trading information.
    In addition, the Information Circular will advise members, prior to
the commencement of trading, of the prospectus delivery requirements
applicable to the Fund. Members purchasing Shares from the Fund for
resale to investors will deliver a prospectus to such investors. The
Information Circular will also discuss any exemptive, no-action and
interpretive relief granted by the Commission from any rules under the
Exchange Act.
    Additionally, the Information Circular will reference that the Fund
is subject to various fees and expenses. The Information Circular will
also discuss any exemptive, no-action and interpretive relief granted
by the Commission from any rules under the Exchange Act. The
Information Circular will also disclose the trading hours of the Shares
of the Fund and the applicable NAV calculation time for the Shares. The
Information Circular will disclose that information about the Shares of
the Fund will be publicly available on the Fund's Web site.
    All statements and representations made in this filing regarding
(a) the description of the portfolio, (b) limitations on portfolio
holdings or reference assets, or (c) the applicability of Exchange
rules and surveillance procedures shall constitute continued listing
requirements for listing the Shares on the Exchange. In addition, the
issuer has represented to the Exchange that it will advise the Exchange
of any failure by the Fund to comply with the continued listing
requirements, and, pursuant to its obligations under Section 19(g)(1)
of the Act, the Exchange will monitor for compliance with the continued
listing requirements. If the Fund is not in compliance with the
applicable listing requirements, the Exchange will commence delisting
procedures under the Nasdaq 5800 Series.

2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b)
of the Exchange Act in general, and Section 6(b)(5) \40\ of the
Exchange Act in particular, in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, and to
remove impediments to, and perfect the mechanism of a free and open
market and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78(f)(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in Nasdaq Rule 5735. The
Exchange represents that trading in the Shares will be subject to the
existing trading surveillances, administered by both Nasdaq and FINRA,
on behalf of the Exchange, which are designed to deter and detect
violations of Exchange rules and applicable federal securities laws and
are adequate to properly monitor trading in the Shares in all trading
sessions. The Adviser and the Sub-Adviser are affiliated with a broker-
dealer and have implemented, and will maintain, a fire wall with
respect to its broker-dealer affiliate regarding access to information
concerning the composition and/or changes to the Fund's portfolio. In
addition, paragraph (g) of Nasdaq Rule 5735 further requires that
personnel who make decisions on an open-end fund's portfolio
composition must be subject to procedures designed to prevent the use
and dissemination of material, non-public information regarding the
open-end fund's portfolio.
    FINRA may obtain information via ISG from other exchanges that are
members of ISG. In addition, the Exchange may obtain information
regarding trading in the Shares and other exchange-traded securities
(including ETFs and preferred stock) and instruments held by the Fund
from markets and other entities that are members of ISG, which includes
securities exchanges, or with which the Exchange has in place a
comprehensive surveillance sharing agreement. The Fund will limit its
investments in illiquid securities or other illiquid assets to an
aggregate amount of 15% of its net assets (calculated at the time of
investment). The Fund also may invest directly in ETFs. The ETFs in
which the Fund will not invest include: (i) ``leveraged ETFs'' (i.e.,
ETFs operated in a manner designed to seek a multiple of the
performance of an underlying reference index), and (ii) Index Fund
Shares that seek to provide investment results that correspond to the
inverse (opposite) of the performance of a specified domestic equity,
international or global equity, or fixed income index or a combination
thereof by a specified multiple.
    Additionally, the Fund may engage in frequent and active trading of
portfolio securities to achieve its investment objective. The Fund does
not presently intend to engage in any form of borrowing for investment
purposes, and will not be operated as a ``leveraged ETF,'' i.e., it
will not be operated in a manner designed to seek a multiple of the
performance of an underlying reference index. The Fund will not invest
in futures, options, forwards, swaps or other derivatives.
    The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Exchange will obtain a representation from the issuer of the
Shares that the NAV per Share will be calculated daily every day that
the Fund is traded, and that the NAV and the Disclosed Portfolio will
be made available to all market participants at the same time. In
addition, a large amount of information will be publicly available
regarding the Fund and the Shares, thereby promoting market
transparency. Moreover, the Intraday Indicative Value, available on the
NASDAQ OMX Information LLC proprietary index data service, will be
widely disseminated by one or more major market data vendors at least
every 15 seconds during the Exchange's Regular Market Session. On each
Business Day, before commencement of trading in Shares in the Regular
Market Session on the Exchange, the Fund will disclose on its Web site
the Disclosed Portfolio of the Fund that will form the basis for the
Fund's calculation of NAV at the end of the Business Day. Information
regarding market price and trading volume of the Shares will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services, and quotation
and last-sale information for the Shares will be available via Nasdaq
proprietary quote and trade services, as well as in accordance with the
Unlisted Trading Privileges and the Consolidated Tape Association plans
for the Shares. Quotation and last sale information for any exchange-
traded instruments (including preferred stocks and ETFs) also will be
available via the quote and trade service of their respective primary
exchanges, as well as in accordance with the Unlisted Trading
Privileges and the Consolidated Tape Association plans. Intraday
executable price quotations on exchange listed securities, certain
Variable Rate Debt Instruments, Fixed Rate Debt Instruments and other
assets not traded on an exchange will be available from major broker-
dealer firms or market data vendors, as well as from automated
quotation systems, published or other public sources, or online
information services. Additionally, FINRA's TRACE will be a source of
price information for corporate bonds, privately-issued securities, MBS
and ABS to the extent transactions in such securities are reported to
TRACE. For exchange-traded assets, intraday pricing information will be
available directly from the applicable listing exchange.
    The Fund's Web site will include a form of the prospectus for the
Fund and additional data relating to NAV and other applicable
quantitative information. Moreover, prior to the commencement of
trading, the Exchange will inform its members in an Information
Circular of the special characteristics and risks associated with
trading the Shares. Trading in Shares of the Fund will be halted under
the conditions specified in Nasdaq Rules 4120 and 4121 or because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable, and trading in the Shares will
be subject to Nasdaq Rule 5735(d)(2)(D), which sets forth circumstances
under which Shares of the Fund may be halted. In addition, as noted
above, investors will have ready access to information regarding the
Fund's holdings, the Intraday Indicative Value, the Disclosed
Portfolio, and quotation and last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of actively-managed exchange-traded product that
will enhance competition among market participants, to the benefit of
investors and the marketplace.
    For the above reasons, Nasdaq believes the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Exchange
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 that is not necessary or appropriate in
furtherance of the purposes of the Exchange Act. The Exchange believes
that the proposed rule change will facilitate the listing and trading
of an additional type of actively-managed exchange-traded product that
will enhance competition among market participants, to the benefit of
investors and the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor 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 self-regulatory organization consents, the Commission will:
(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

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NASDAQ-2016-056 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2016-056. 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 Web site (http://www.sec.gov/rules/sro.shtml). 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 Web site 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
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of Nasdaq. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2016-056 and should
be submitted on or before May 23, 2016.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\41\
---------------------------------------------------------------------------

    \41\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-10154 Filed 4-29-16; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 79, Number 117 (Wednesday, June 18, 2014)]
[Notices]
[Pages 34759-34760]
[FR Doc No: 2014-14220]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2014-D-0397]

Draft Guidance for Industry on Internet/Social Media Platforms
With Character Space Limitations: Presenting Risk and Benefit
Information for Prescription Drugs and Medical Devices; Availability

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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SUMMARY: The Food and Drug Administration (FDA or Agency) is announcing
the availability of a draft guidance for industry entitled ``Internet/
Social Media Platforms with Character Space Limitations: Presenting
Risk and Benefit Information for Prescription Drugs and Medical
Devices.'' This draft guidance responds to, among other things,
stakeholder requests for specific guidance and describes FDA's current
thinking on how manufacturers, packers, and distributors (firms) of
prescription human and animal drugs (drugs) and medical devices for
human use (devices), including biological products, that choose to
present benefit information should present both benefit and risk
information within advertising and promotional labeling of their FDA-
regulated medical products on electronic/digital platforms that are
associated with character space limitations, specifically on the
Internet and through social media or other technological venues
(Internet/social media). The draft guidance represents FDA's current
thinking on specific aspects of FDA's evolving consideration of social
media platforms and other Internet-related matters. FDA continues
actively to review, analyze, and develop approaches to a variety of
topics related to the labeling and advertising of medical products,
including the development of this and other guidance addressing the use
of social media platforms and the Internet.

DATES: Although you can comment on any guidance at any time (see 21 CFR
10.115(g)(5)), to ensure that the Agency considers your comments on
this draft guidance before it begins work on the final version of the
guidance, submit either electronic or written comments on the draft
guidance by September 16, 2014.

ADDRESSES: Submit written requests for single copies of the draft
guidance to the Division of Drug Information, Center for Drug
Evaluation and Research, Food and Drug Administration, 10903 New
Hampshire Ave., Bldg. 51, Rm. 2201, Silver Spring, MD 20993-0002; or to
the Office of Communication, Outreach and Development, Center for
Biologics Evaluation and Research, Food and Drug Administration, 10903
New Hampshire Ave., Bldg. 71, Rm. 3128, Silver Spring, MD 20993-0002;
or to the Office of the Center Director, Guidance and Policy
Development, Center for Devices and Radiological Health, Food and Drug
Administration, 10903 New Hampshire Ave., Bldg. 66, Rm. 5431, Silver
Spring, MD 20993-0002. Send one self-addressed adhesive label to assist
that office in processing your requests. See the SUPPLEMENTARY
INFORMATION section for electronic access to the draft guidance
document.
    Submit electronic comments on the draft guidance to http://www.regulations.gov. Submit written comments to the Division of Dockets
Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane,
Rm. 1061, Rockville, MD 20852.

FOR FURTHER INFORMATION CONTACT:
    Regarding human prescription drugs: Jean-Ah Kang, Center for Drug
Evaluation and Research, Food and Drug Administration, 10903 New
Hampshire Ave., Bldg. 51, Silver Spring, MD 20993,<PHONE_NUMBER>.
    Regarding prescription human biological products: Stephen Ripley,
Center for Biologics Evaluation and Research, Food and Drug
Administration, 10903 New Hampshire Ave., Bldg. 71, Rm. 7301, Silver
Spring, MD 20993-0002,<PHONE_NUMBER>.
    Regarding animal prescription drugs: Dorothy McAdams, Center for
Veterinary Medicine (HFV-216), Food and Drug Administration, 7519
Standish Pl., Rockville, MD 20855,<PHONE_NUMBER>.
    Regarding medical devices for human use: Deborah Wolf, Center for
Devices and Radiological Health, Food and Drug Administration, 10903
New Hampshire Ave., Bldg. 66, Silver Spring, MD 20993,<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Background

    FDA is announcing the availability of a draft guidance for industry
entitled ``Internet/Social Media Platforms with Character Space
Limitations: Presenting Risk and Benefit Information for Prescription
Drugs and Medical Devices.''
    On November 12 and 13, 2009, FDA held a public hearing entitled
``Promotion of Food and Drug Administration--Regulated Medical Products
Using the Internet and Social Media Tools'' to provide an opportunity
for broad public participation and comment on the following questions
that relate specifically to promotional issues:
    1. For what online communications are manufacturers, packers, or
distributors accountable?
    2. How can manufacturers, packers, or distributors fulfill
regulatory requirements (e.g., fair balance, disclosure of indication
and risk information, and postmarketing submission requirements) in
their internet and social media promotion, particularly when using
tools that are associated with space limitations and tools that allow
for real-time communications (e.g., microblogs and mobile technology)?
    3. What parameters should apply to the posting of corrective
information on Web sites controlled by third parties?
    4. When is the use of links appropriate?
    Subsequent to the live testimony heard at the public hearing, FDA
received 72 comments to the docket.
    Specifically, this draft guidance presents considerations to
illustrate FDA's thinking on factors that are relevant to the
communication of benefit and risk information on Internet/social media
platforms with character space limitations. Examples of Internet/

social media platforms with character space limitations include online
microblog messaging (e.g., messages on Twitter or ``tweets,'' which are
currently limited to 140 character spaces per tweet) and online paid
search (e.g., sponsored links on search engines such as Google and
Yahoo, which have limited character spaces as well as other platform-
imposed considerations).
    Please note that this draft guidance does not address promotion via
product Web sites, Web pages on social media networking platforms
(e.g., individual product pages on Web sites such as Facebook, Twitter,
YouTube), and online Web banners as the Agency believes that these
specific types of Internet/social media platforms do not impose the
same character space constraints as online microblog messaging and
online paid search. This draft guidance also does not address
responsive Web design or other technology-specific layout features that
may result in product promotion presentations that differ depending on
the technology used to view them (e.g., desktop computer monitors,
mobile devices, tablets).
    This draft guidance is being issued consistent with FDA's good
guidance practices regulation (21 CFR 10.115). The draft guidance, when
finalized, will represent the Agency's current thinking on presenting
risk and benefit information for prescription drugs and medical devices
on Internet/social media platforms with character space limitations. It
does not create or confer any rights for or on any person and does not
operate to bind FDA or the public. An alternative approach may be used
if such approach satisfies the requirements of the applicable statutes
and regulations.

II. The Paperwork Reduction Act of 1995

    This draft guidance contains information collection provisions that
are subject to review by the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501-3520).
The collections of information in 21 CFR 202.1 and 21 CFR parts 801 and
809 have been approved under OMB control numbers 0910-0686 and 0910-
0485, respectively. In accordance with the PRA, prior to publication of
any final guidance document, FDA intends to solicit public comment and
obtain OMB approval for any information collections recommended in this
guidance that are new or that would represent material modifications to
previously approved collections of information found in FDA regulations
or guidances.

III. Comments

    Interested persons may submit either electronic comments regarding
this document to http://www.regulations.gov or written comments to the
Division of Dockets Management (see ADDRESSES). It is only necessary to
send one set of comments. Identify comments with the docket number
found in brackets in the heading of this document. Received comments
may be seen in the Division of Dockets Management between 9 a.m. and 4
p.m., Monday through Friday, and will be posted to the docket at http://www.regulations.gov.

IV. Electronic Access

    Persons with access to the Internet may obtain the document at
http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/default.htm, http://www.fda.gov/BiologicsBloodVaccines/GuidanceComplianceRegulatoryInformation/default.htm, http://www.fda.gov/AnimalVeterinary/GuidanceComplianceEnforcement/GuidanceforIndustry/default.htm, http://www.fda.gov/MedicalDevices/deviceregulationandguidance/guidancedocuments/default.htm, or http://www.regulations.gov.

    Dated: June 13, 2014.
Leslie Kux,
Assistant Commissioner for Policy.
[FR Doc. 2014-14220 Filed 6-17-14; 8:45 am]
BILLING CODE 4160-01-P


[Federal Register: March 1, 2010 (Volume 75, Number 39)]
[Notices]
[Page 9202]
[DOCID:fr01mr10-68]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Project No. 1354-081]

Pacific Gas & Electric Company; Notice of Availability of Final
Environmental Assessment

February 19, 2010.
    In accordance with the National Environmental Policy Act of 1969,
as amended, and the Federal Energy Regulatory Commission's (Commission)
regulations (18 CFR Part 380), Commission staff has prepared a Final
Environmental Assessment (FEA) regarding Pacific Gas & Electric
Company's (PG&E) proposal to perform seismic remediation work at Crane
Valley Dam, part of the Crane Valley Hydroelectric Project. The project
occupies approximately 738 acres of federal lands within Sierra
National Forest, approximately 40 miles northeast of the city of Fresno
in Modesto County, California. Crane Valley Dam is located on North
Fork Willow Creek, in the San Joaquin River Basin. The FEA analyzes the
environmental effects of the seismic remediation proposal, PG&E's
resource protection and mitigation plans, and recommends further
measures to minimize any environmental effects. The FEA concludes that
the proposed seismic remediation and resource plans, with the
recommended measures, would not constitute a major federal action
significantly affecting the quality of the human environment.
    A copy of the FEA is available for review at the Commission's
Public Reference Room, or it may be viewed on the Commission's Web site
at http://www.ferc.gov using the ``eLibrary'' link. Enter the docket
number (P-1354) in the docket number field to access the document. For
assistance, call<PHONE_NUMBER>, or<PHONE_NUMBER> (for TTY).
    For further information on this notice, please contact B. Peter
Yarrington at<PHONE_NUMBER>.

Kimberly D. Bose,
Secretary.
[FR Doc. 2010-4092 Filed 2-26-10; 8:45 am]
BILLING CODE 6717-01-P