[Federal Register Volume 87, Number 156 (Monday, August 15, 2022)]
[Notices]
[Pages 50155-50157]
[FR Doc No: 2022-17457]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95450; File No. SR-NASDAQ-2022-046]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend Its Schedule of Credits, at Equity 7, Section 118

August 9, 2022.
    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 August 1, 2022, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III, below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's transaction credits
at Equity 7, Section 118(a), as described further below. The text of
the proposed rule change is available on the Exchange's website at
https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's
schedule of credits, at Equity 7, Section 118. Specifically, the
Exchange proposes to add (1) a new credit in Tapes A, B and C for
displayed quotes/orders (other than Supplemental Orders or Designated
Retail Orders) and (2) a new credit in Tapes A, B and C for non-
displayed midpoint orders (other than Supplemental Orders).
Credit for Displayed Quotes/Orders
    The Exchange currently provides credits to members for displayed
quotes/orders (other than Supplemental Orders or Designated Retail
Orders). The Exchange is proposing to add a credit of $0.0020 per share
executed to Tapes A, B and C. The credit will be available to a member
that, through one or more of its Nasdaq Market Center MPIDs, (i)
increases its shares of liquidity provided in all securities by at
least 20% as a percentage of Consolidated Volume during the month
relative to the month of July 2022 and (ii) has shares of liquidity
provided of least 5 million average daily volume during the month. The
Exchange hopes that by proposing the new credit it will incentivize
members to increase their liquidity providing activity on the Exchange,
which will improve market quality.
Credit for Non-Displayed Midpoint Orders
    The Exchange proposes to provide a new supplemental credit for
midpoint orders (excluding buy (sell) orders with midpoint pegging that
receive an execution price that is lower (higher) than the midpoint of
the NBBO) that provide liquidity to the Exchange. This credit will be
in addition to other credits otherwise available to members for adding
non-displayed liquidity to the Exchange, but a member's activity will
qualify it to receive only one of the supplemental credits at a time,
meaning that they are not cumulative. Additionally, members that
receive a supplemental credit will be entitled to a combined credit
(regular and supplemental) up to a maximum of $0.0027 per share
executed.
    Specifically, the Exchange proposes to provide a supplemental
credit of $0.0001 per share executed for midpoint orders (excluding buy
(sell) orders with midpoint pegging that receive an execution price
that is lower (higher) than the midpoint of the NBBO) if the member,
during the month (i) provides at least 10 million shares of midpoint
liquidity per day during the month; and (ii) increases providing
liquidity through midpoint orders by 50% or more relative to the
member's July 2022 consolidated volume provided through midpoint
orders.
    The purpose of the new credit is to provide extra incentive to
members that provide non-displayed liquidity to the Exchange to do so
through midpoint orders, as well as to grow substantially the extent to
which they provide midpoint orders to the Exchange relative to a recent
benchmark month. The Exchange believes that if such incentives are
effective, then any ensuing increase in midpoint liquidity to the
Exchange will improve market quality, to the benefit of all
participants.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\3\ in general, and furthers the objectives of Sections
6(b)(4) and 6(b)(5) of the Act,\4\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees and other charges
among members and issuers and other persons using any facility, and is
not

designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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    \3\ 15 U.S.C. 78f(b).
    \4\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposal Is Reasonable
    The Exchange's proposed changes to its schedule of credits are
reasonable in several respects. As a threshold matter, the Exchange is
subject to significant competitive forces in the market for equity
securities transaction services that constrain its pricing
determinations in that market. The fact that this market is competitive
has long been recognized by the courts. In NetCoalition v. Securities
and Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one
disputes that competition for order flow is `fierce.' . . . As the SEC
explained, `[i]n the U.S. national market system, buyers and sellers of
securities, and the broker-dealers that act as their order-routing
agents, have a wide range of choices of where to route orders for
execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers'. . . .'' \5\
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    \5\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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    The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \6\
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    \6\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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    Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
equity security transaction services. The Exchange is only one of
several equity venues to which market participants may direct their
order flow. Competing equity exchanges offer similar tiered pricing
structures to that of the Exchange, including schedules of rebates and
fees that apply based upon members achieving certain volume thresholds.
    Within this environment, market participants can freely and often
do shift their order flow among the Exchange and competing venues in
response to changes in their respective pricing schedules. As such, the
proposal represents a reasonable attempt by the Exchange to increase
its liquidity and market share relative to its competitors.
    The Exchange believes that it is reasonable to establish new
transaction credits, at Equity 7, Section 118(a), because these new
credits will encourage the addition of and/or growth in the addition of
displayed liquidity and non-displayed midpoint liquidity to the
Exchange.
    The Exchange believes that it is reasonable to establish a new
$0.0020 per share executed transaction credit, at Equity 7, Section
118(a), for a member that, through one or more of its Nasdaq Market
Center MPIDs, (i) increases its shares of liquidity provided in all
securities by at least 20% as a percentage of Consolidated Volume
during the month relative to the month of July 2022 and (ii) has shares
of liquidity provided of least 5 million average daily volume during
the month. The new credit will encourage substantial activity on the
Exchange, which will improve the overall market quality to the benefit
of all market participants. The Exchange believes that if the new
credit is effective, then liquidity adding activity on the Exchange
will increase and market quality will improve for the benefit of all
participants.
    The Exchange also believes it is reasonable to establish a new
supplemental credit of $0.0001 per share executed for midpoint orders
(excluding buy (sell) orders with midpoint pegging that receive an
execution price that is lower (higher) than the midpoint of the NBBO)
if the member, during the month (i) provides at least 10 million shares
of midpoint liquidity per day during the month; and (ii) increases
providing liquidity through midpoint orders by 50% or more relative to
the member's July 2022 consolidated volume provided through midpoint
orders. This proposal is reasonable because it will provide extra
incentive to members that provide non-displayed liquidity to the
Exchange to do so through midpoint orders, as well as to grow
substantially the extent to which they provide midpoint orders to the
Exchange relative to a recent benchmark month. The Exchange believes
that if such incentive is effective, then any ensuing increase in
midpoint liquidity to the Exchange will once again improve market
quality, to the benefit of all participants.
    The Exchange believes that it is reasonable to exclude from the
supplemental credit orders with midpoint pegging which execute at
prices less aggressive than the midpoint of the NBBO because such
orders already receive price improvements, such that members do not
require additional inducements to enter these orders on the Exchange.
    The Exchange notes that those market participants that are
dissatisfied with the proposal are free to shift their order flow to
competing venues that offer more generous pricing or less stringent
qualifying criteria.
The Proposal is an Equitable Allocation of Credits
    The Exchange believes its proposal will allocate its charges and
credits fairly among its market participants.
    The Exchange believes that it is an equitable allocation to
establish new transaction credits because the proposal will encourage
members to increase the extent to which they add liquidity to the
Exchange. To the extent that the Exchange succeeds in increasing the
levels of liquidity and activity on the Exchange, then the Exchange
will experience improvements in its market quality, which stands to
benefit all market participants.
    Any participant that is dissatisfied with the proposal is free to
shift their order flow to competing venues that provide more generous
pricing or less stringent qualifying criteria.
The Proposal is Not Unfairly Discriminatory
    The Exchange believes that its proposal is not unfairly
discriminatory. As an initial matter, the Exchange believes that
nothing about its volume-based tiered pricing model is inherently
unfair; instead, it is a rational pricing model that is well-
established and ubiquitous in today's economy among firms in various
industries--from co-branded credit cards to grocery stores to cellular
telephone data plans--that use it to reward the loyalty of their best
customers that provide high levels of business activity and incent
other customers to increase the extent of their business activity. It
is also a pricing model that the Exchange and its competitors have long
employed with the assent of the Commission. It is fair because it
enhances price discovery and improves the overall quality of the equity
markets.
    The Exchange believes that its proposal to adopt new credits is not
unfairly discriminatory because the credits are available to all
members. Moreover, the proposal stands to

improve the overall market quality of the Exchange, to the benefit of
all market participants, by incentivizing members to increase the
extent of their liquidity adding activity on the Exchange. Any
participant that is dissatisfied with the proposal is free to shift
their order flow to competing venues that provide more generous pricing
or less stringent qualifying criteria.

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.
Intramarket Competition
    The Exchange does not believe that its proposal will place any
category of Exchange participant at a competitive disadvantage.
    As noted above, the Exchange's proposal to add new transaction
credits is intended to have market-improving effects, to the benefit of
all members. Any member may elect to achieve the levels of liquidity
required in order to qualify for the new credits.
    The Exchange notes that its members are free to trade on other
venues to the extent they believe that the credits are not attractive.
As one can observe by looking at any market share chart, price
competition between exchanges is fierce, with liquidity and market
share moving freely between exchanges in reaction to fee and credit
changes.
Intermarket Competition
    In terms of inter-market competition, the Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its credits and fees to remain competitive with
other exchanges and with alternative trading systems that have been
exempted from compliance with the statutory standards applicable to
exchanges. Because competitors are free to modify their own credits and
fees in response, and because market participants may readily adjust
their order routing practices, the Exchange believes that the degree to
which credit or fee changes in this market may impose any burden on
competition is extremely limited.
    The proposed new credits are reflective of this competition
because, as a threshold issue, the Exchange is a relatively small
market so its ability to burden intermarket competition is limited. In
this regard, even the largest U.S. equities exchange by volume only has
17-18% market share, which in most markets could hardly be categorized
as having enough market power to burden competition. Moreover, as noted
above, price competition between exchanges is fierce, with liquidity
and market share moving freely between exchanges in reaction to fee and
credit changes. This is in addition to free flow of order flow to and
among off-exchange venues which comprises more than 40% of industry
volume in recent months.
    The Exchange's proposal to add new transaction credits are pro-
competitive in that the Exchange intends for them to increase liquidity
addition activity on the Exchange, thereby rendering the Exchange a
more attractive and vibrant venue to market participants.
    In sum, if the changes proposed herein are unattractive to market
participants, it is likely that the Exchange will lose market share as
a result. Accordingly, the Exchange does not believe that the proposed
change will impair the ability of members or competing order execution
venues to maintain their competitive standing in the financial markets.

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

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\7\
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    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or 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 protected]. Please include
File Number SR-NASDAQ-2022-046 on the subject line.

Paper Comments

     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-2022-046. 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 (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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2022-046 and should be submitted
on or before September 6, 2022.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-17457 Filed 8-12-22; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 221 (Friday, November 15, 2013)]
[Notices]
[Page 68834]
[FR Doc No: 2013-27386]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. EL13-90-000]

Pacific Gas and Electric Company; Notice of Initiation of
Proceeding and Refund Effective Date

    On September 24, 2013, the Commission issued an order that
initiated a proceeding in Docket No. EL13-90-000, pursuant to section
206 of the Federal Power Act (FPA), 16 U.S.C. 824e (2006), to determine
the justness and reasonableness of the rate increase proposed by
Pacific Gas and Electric Company. Pacific Gas and Electric Company, 144
FERC ] 61,277 (2013).
    The refund effective date in Docket No. EL13-90-000, established
pursuant to section 206(b) of the FPA, will be the date of publication
of this notice in the Federal Register.

    Dated: November 7, 2013.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2013-27386 Filed 11-14-13; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 82, Number 28 (Monday, February 13, 2017)]
[Notices]
[Pages 10516-10518]
[FR Doc No: 2017-02835]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. IC-32472; File No. 812-14708]

NorthStar/Townsend Institutional Real Estate Fund Inc., et al.;
Notice of Application

February 7, 2017.
AGENCY:  Securities and Exchange Commission (``Commission'').

ACTION:  Notice of an application under section 6(c) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from sections
18(a)(2), 18(c) and 18(i) of the Act, under sections 6(c) and 23(c)(3)
of the Act for an exemption from rule 23c-3 under the Act, and for an
order pursuant to section 17(d) of the Act and rule 17d-1 under the
Act.

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SUMMARY:
    Summary of Application: Applicants request an order to permit
certain registered closed-end management investment companies to issue
multiple classes of shares and to impose asset-based distribution and/
or service fees and early withdrawal charges (``EWCs'').
    Applicants: NorthStar/Townsend Institutional Real Estate Fund Inc.
(the ``Fund''), Townsend Holdings LLC (the ``Adviser''), and NSAM B-
TCEF Ltd. (the ``Sub-Adviser,'' and together with the Adviser, the
``Advisers'').

DATES:
    Filing Dates: The application was filed on October 19, 2016,
January 6, 2017, and January 20, 2017.
    Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on March 6, 2017, and should be accompanied by proof of
service on the applicants, in the form of an affidavit, or, for
lawyers, a certificate of service. Pursuant to rule 0-5 under the Act,
hearing requests should state the nature of the writer's interest, any
facts bearing upon the desirability of a hearing on the matter, the
reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request notification by writing to the
Commission's Secretary.

ADDRESSES:  Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants: NorthStar/Townsend
Institutional Real Estate Fund Inc., 399 Park Avenue, 18th Floor, New
York, NY 10022; Townsend Holdings LLC, Skylight Office Tower, 1660 West
Second Street, 4th Floor, Cleveland, Ohio 44113; NSAM B-TCEF Ltd., 11
Waterloo Lane, Pembroke, HM 08, Bermuda.

FOR FURTHER INFORMATION CONTACT:  Jill Ehrlich, Senior Counsel, at
(202) 551-6819, or David J. Marcinkus, Branch Chief, at<PHONE_NUMBER>
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION:  The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling<PHONE_NUMBER>.

Applicants' Representations

    1. The Fund is a Maryland corporation that has registered under the
Act as a non-diversified, closed-end management investment company. The
Fund's primary investment objectives are to realize capital
appreciation and to preserve shareholders' capital, with a secondary
objective of generating income through cash distributions.
    2. The Adviser is a Delaware limited liability company that is
doing business as the Townsend Group and is registered as an investment
adviser under the Investment Advisers Act of 1940 (``Advisers Act'').
The Adviser serves as investment adviser to the Fund.
    3. The Sub-Adviser is a Bermuda limited exempted company and is a
registered investment adviser under the Advisers Act. The Sub-Adviser
serves as the investment sub-adviser to the Fund.
    4. The applicants seek an order to permit the Fund to issue
multiple classes of shares, each having its own fee and expense
structure, and to impose asset-based distribution and/or service fees
and EWCs.
    5. Applicants request that the order also apply to any
continuously-offered registered closed-end management investment
company that has been previously organized or that may be organized in
the future for which the Adviser or any entity controlling, controlled
by, or under common control with the Adviser, or any successor in
interest to any such entity,\1\ acts as investment adviser and which
operates as an interval fund pursuant to rule 23c-3 under the Act or
provides periodic liquidity with respect to its shares pursuant to rule
13e-4 under the Securities Exchange Act of 1934 (``Exchange Act'')
(each, a ``Future Fund'' and together with the Fund, the ``Funds'').\2\
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    \1\ A successor in interest is limited to an entity that results
from a reorganization into another jurisdiction or a change in the
type of business organization.
    \2\ Any Fund relying on this relief in the future will do so in
a manner consistent with the terms and conditions of the
application. Applicants represent that each entity presently
intending to rely on the requested relief is listed as an applicant.
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    6. The Fund intends to make a continuous public offering of its
common stock upon a declaration of effectiveness of its registration
statement (File Nos. 333-214167 and 811-23200). Applicants state that
additional offerings by any Fund relying on the order may be on a
private placement or public offering basis. Shares of the Funds will
not be listed on any securities exchange, nor quoted on any quotation
medium. The Funds do not expect there to be a secondary trading market
for their shares.
    7. If the requested relief is granted, the Fund intends to
continuously offer Class A Shares, Class C Shares, and Class I Shares.
Because of the different distribution and/or service fees, services and
any other class expenses that may be attributable to the Class A
Shares, Class C Shares and Class I Shares, the net income attributable
to, and the dividends payable on, each class of shares may differ from
each other.
    8. Applicants state that, from time to time, the Fund may create
additional

classes of shares, the terms of which may differ from the Class A,
Class C and Class I Shares in the following respects: (i) The amount of
fees permitted by different distribution plans or different service fee
arrangements; (ii) voting rights with respect to a distribution and/or
service plan of a class; (iii) different class designations; (iv) the
impact of any class expenses directly attributable to a particular
class of shares allocated on a class basis as described in the
application; (v) any differences in dividends and net asset value
resulting from differences in fees under a distribution and/or service
plan or in class expenses; (vi) any EWC or other sales load structure;
and (vii) exchange or conversion privileges of the classes as permitted
under the Act.
    9. Applicants state that the Fund has adopted a fundamental policy
to repurchase a specified percentage of its shares (no less than 5%,
and not more than 25%) at net asset value on a quarterly basis. Such
repurchase offers will be conducted pursuant to rule 23c-3 under the
Act. Each of the other Funds will likewise adopt fundamental investment
policies in compliance with rule 23c-3 and make quarterly repurchase
offers to its shareholders or provide periodic liquidity with respect
to its shares pursuant to rule 13e-4 under the Exchange Act.\3\ Any
repurchase offers made by the Funds will be made to all holders of
shares of each such Fund.
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    \3\ Applicants submit that rule 23c-3 and Regulation M under the
Exchange Act permit an interval fund to make repurchase offers to
repurchase its shares while engaging in a continuous offering of its
shares pursuant to Rule 415 under the Securities Act of 1933.
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    10. Applicants represent that any asset-based service and
distribution fees for each class of shares will comply with the
provisions of NASD Rule 2830(d) (``NASD Sales Charge Rule'').\4\
Applicants also represent that each Fund will disclose in its
prospectus the fees, expenses and other characteristics of each class
of shares offered for sale by the prospectus, as is required for open-
end multiple class funds under Form N-1A. As is required for open-end
funds, each Fund will disclose its expenses in shareholder reports, and
describe any arrangements that result in breakpoints in or elimination
of sales loads in its prospectus.\5\ In addition, applicants will
comply with applicable enhanced fee disclosure requirements for fund of
funds, including registered funds of hedge funds.\6\
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    \4\ Any reference to the NASD Sales Charge Rule includes any
successor or replacement rule that may be adopted by the Financial
Industry Regulatory Authority (``FINRA'').
    \5\ See Shareholder Reports and Quarterly Portfolio Disclosure
of Registered Management Investment Companies, Investment Company
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring
open-end investment companies to disclose fund expenses in
shareholder reports); and Disclosure of Breakpoint Discounts by
Mutual Funds, Investment Company Act Release No. 26464 (June 7,
2004) (adopting release) (requiring open-end investment companies to
provide prospectus disclosure of certain sales load information).
    \6\ Fund of Funds Investments, Investment Company Act Rel. Nos.
26198 (Oct. 1, 2003) (proposing release) and 27399 (Jun. 20, 2006)
(adopting release). See also Rules 12d1-1, et seq. of the Act.
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    11. Each of the Funds will comply with any requirements that the
Commission or FINRA may adopt regarding disclosure at the point of sale
and in transaction confirmations about the costs and conflicts of
interest arising out of the distribution of open-end investment company
shares, and regarding prospectus disclosure of sales loads and revenue
sharing arrangements, as if those requirements applied to the Fund. In
addition, each Fund will contractually require that any distributor of
the Fund's shares comply with such requirements in connection with the
distribution of such Fund's shares.
    12. Each Fund will allocate all expenses incurred by it among the
various classes of shares based on the net assets of the Fund
attributable to each class, except that the net asset value and
expenses of each class will reflect distribution fees, service fees,
and any other incremental expenses of that class. Expenses of the Fund
allocated to a particular class of shares will be borne on a pro rata
basis by each outstanding share of that class. Applicants state that
each Fund will comply with the provisions of rule 18f-3 under the Act
as if it were an open-end investment company.
    13. Applicants state that each Fund may impose an EWC on shares
submitted for repurchase that have been held less than a specified
period and may waive the EWC for certain categories of shareholders or
transactions to be established from time to time. Applicants state that
each of the Funds will apply the EWC (and any waivers or scheduled
variations of the EWC) uniformly to all shareholders in a given class
and consistently with the requirements of rule 22d-1 under the Act as
if the Funds were open-end investment companies.
    14. Each Fund operating as an interval fund pursuant to rule 23c-3
under the Act may offer its shareholders an exchange feature under
which the shareholders of the Fund may, in connection with the Fund's
periodic repurchase offers, exchange their shares of the Fund for
shares of the same class of (i) registered open-end investment
companies or (ii) other registered closed-end investment companies that
comply with rule 23c-3 under the Act and continuously offer their
shares at net asset value, that are in the Fund's group of investment
companies (collectively, ``Other Funds''). Shares of a Fund operating
pursuant to rule 23c-3 that are exchanged for shares of Other Funds
will be included as part of the amount of the repurchase offer amount
for such Fund as specified in rule 23c-3 under the Act. Any exchange
option will comply with rule 11a-3 under the Act, as if the Fund were
an open-end investment company subject to rule 11a-3. In complying with
rule 11a-3, each Fund will treat an EWC as if it were a contingent
deferred sales load (``CDSL'').

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(a)(2) of the Act provides that a closed-end
investment company may not issue or sell a senior security that is a
stock unless certain requirements are met. Applicants state that the
creation of multiple classes of shares of the Funds may violate section
18(a)(2) because the Funds may not meet such requirements with respect
to a class of shares that may be a senior security.
    2. Section 18(c) of the Act provides, in relevant part, that a
closed-end investment company may not issue or sell any senior security
if, immediately thereafter, the company has outstanding more than one
class of senior security. Applicants state that the creation of
multiple classes of shares of the Funds may be prohibited by section
18(c), as a class may have priority over another class as to payment of
dividends because shareholders of different classes would pay different
fees and expenses.
    3. Section 18(i) of the Act provides that each share of stock
issued by a registered management investment company will be a voting
stock and have equal voting rights with every other outstanding voting
stock. Applicants state that multiple classes of shares of the Funds
may violate section 18(i) of the Act because each class would be
entitled to exclusive voting rights with respect to matters solely
related to that class.
    4. Section 6(c) of the Act provides that the Commission may exempt
any person, security or transaction or any class or classes of persons,
securities or transactions from any provision of the Act, or from any
rule or regulation under the Act, if and to the extent such

exemption is necessary or appropriate in the public interest and
consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Act. Applicants request an
exemption under section 6(c) from sections 18(a)(2), 18(c) and 18(i) to
permit the Funds to issue multiple classes of shares.
    5. Applicants submit that the proposed allocation of expenses
relating to distribution and voting rights among multiple classes is
equitable and will not discriminate against any group or class of
shareholders. Applicants submit that the proposed arrangements would
permit a Fund to facilitate the distribution of its shares and provide
investors with a broader choice of shareholder services. Applicants
assert that the proposed closed-end investment company multiple class
structure does not raise the concerns underlying section 18 of the Act
to any greater degree than open-end investment companies' multiple
class structures that are permitted by rule 18f-3 under the Act.
Applicants state that each Fund will comply with the provisions of rule
18f-3 as if it were an open-end investment company.

Early Withdrawal Charges

    1. Section 23(c) of the Act provides, in relevant part, that no
registered closed-end investment company shall purchase securities of
which it is the issuer, except: (a) On a securities exchange or other
open market; (b) pursuant to tenders, after reasonable opportunity to
submit tenders given to all holders of securities of the class to be
purchased; or (c) under other circumstances as the Commission may
permit by rules and regulations or orders for the protection of
investors.
    2. Rule 23c-3 under the Act permits a registered closed-end
investment company (an ``interval fund'') to make repurchase offers of
between five and twenty-five percent of its outstanding shares at net
asset value at periodic intervals pursuant to a fundamental policy of
the interval fund. Rule 23c-3(b)(1) under the Act permits an interval
fund to deduct from repurchase proceeds only a repurchase fee, not to
exceed two percent of the proceeds, that is paid to the interval fund
and is reasonably intended to compensate the fund for expenses directly
related to the repurchase.
    3. Section 23(c)(3) provides that the Commission may issue an order
that would permit a closed-end investment company to repurchase its
shares in circumstances in which the repurchase is made in a manner or
on a basis that does not unfairly discriminate against any holders of
the class or classes of securities to be purchased.
    4. Applicants request relief under section 6(c), discussed above,
and section 23(c)(3) from rule 23c-3 to the extent necessary for the
Funds to impose EWCs on shares of the Funds submitted for repurchase
that have been held for less than a specified period.
    5. Applicants state that the EWCs they intend to impose are
functionally similar to CDSLs imposed by open-end investment companies
under rule 6c-10 under the Act. Rule 6c-10 permits open-end investment
companies to impose CDSLs, subject to certain conditions. Applicants
note that rule 6c-10 is grounded in policy considerations supporting
the employment of CDSLs where there are adequate safeguards for the
investor and state that the same policy considerations support
imposition of EWCs in the interval fund context. In addition,
applicants state that EWCs may be necessary for the distributor to
recover distribution costs. Applicants represent that any EWC imposed
by the Funds will comply with rule 6c-10 under the Act as if the rule
were applicable to closed-end investment companies. The Funds will
disclose EWCs in accordance with the requirements of Form N-1A
concerning CDSLs.

Asset-Based Distribution and/or Service Fees

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of a registered investment company, or an
affiliated person of such person, acting as principal, from
participating in or effecting any transaction in connection with any
joint enterprise or joint arrangement in which the investment company
participates unless the Commission issues an order permitting the
transaction. In reviewing applications submitted under section 17(d)
and rule 17d-1, the Commission considers whether the participation of
the investment company in a joint enterprise or joint arrangement is
consistent with the provisions, policies and purposes of the Act, and
the extent to which the participation is on a basis different from or
less advantageous than that of other participants.
    2. Rule 17d-3 under the Act provides an exemption from section
17(d) and rule 17d-1 to permit open-end investment companies to enter
into distribution arrangements pursuant to rule 12b-1 under the Act.
Applicants request an order under section 17(d) and rule 17d-1 under
the Act to the extent necessary to permit the Fund to impose asset-
based distribution and/or service fees. Applicants have agreed to
comply with rules 12b-1 and 17d-3 as if those rules applied to closed-
end investment companies, which they believe will resolve any concerns
that might arise in connection with a Fund financing the distribution
of its shares through asset-based distribution fees.
    For the reasons stated above, applicants submit that the exemptions
requested under section 6(c) are necessary and appropriate in the
public interest and are consistent with the protection of investors and
the purposes fairly intended by the policy and provisions of the Act.
Applicants further submit that the relief requested pursuant to section
23(c)(3) will be consistent with the protection of investors and will
insure that applicants do not unfairly discriminate against any holders
of the class of securities to be purchased. Finally, applicants state
that the Funds' imposition of asset-based distribution fees is
consistent with the provisions, policies and purposes of the Act and
does not involve participation on a basis different from or less
advantageous than that of other participants.

Applicants' Condition

    Applicants agree that any order granting the requested relief will
be subject to the following condition:
    Each Fund relying on the order will comply with the provisions of
rules 6c-10, 12b-1, 17d-3, 18f-3, 22d-1, and, where applicable, 11a-3
under the Act, as amended from time to time, as if those rules applied
to closed-end management investment companies, and will comply with the
NASD Sales Charge Rule, as amended from time to time, as if that rule
applied to all closed-end management investment companies.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02835 Filed 2-10-17; 8:45 am]
 BILLING CODE 8011-01-P