[Federal Register Volume 77, Number 234 (Wednesday, December 5, 2012)]
[Notices]
[Pages 72416-72423]
[FR Doc No: 2012-29317]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30284; 812-14023]

Foreside Advisor Services, LLC, et al.; Notice of Application

November 29, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940 (``Act'') for an exemption from sections
2(a)(32), 5(a)(1), 22(d) and 22(e) of the Act and rule 22c-1 under the
Act, and under sections 6(c) and 17(b) of the Act for an exemption from
sections 17(a)(1) and (2) of the Act, and under section 12(d)(1)(J) for
an exemption from sections 12(d)(1)(A) and (B) of the Act.

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Applicants: Foreside Advisor Services, LLC (``FAS''), Foreside ETF
Trust (the ``Trust'') and Foreside Fund Services, LLC
(``Distributor'').

Summary of Application: Applicants request an order that permits: (a)
Certain

open-end management investment companies or series thereof to issue
shares (``Shares'') redeemable in large aggregations only (``Creation
Units''); (b) secondary market transactions in Shares to occur at
negotiated market prices; (c) certain series to pay redemption
proceeds, under certain circumstances, more than seven days from the
tender of Shares for redemption; (d) certain affiliated persons of the
series to deposit securities into, and receive securities from, the
series in connection with the purchase and redemption of Creation
Units; and (e) certain registered management investment companies and
unit investment trusts outside of the same group of investment
companies as the series to acquire Shares.

Filing Dates: The application was filed on April 2, 2012, and amended
on November 29, 2012.

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. December 26, 2012, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, 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: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090. Applicants,
Three Canal Plaza, Suite 100, Portland, ME 04101.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at
(202) 551-6876 or Mary Kay Frech, Branch Chief, at<PHONE_NUMBER>
(Division of Investment Management, Office of Investment Company
Regulation).

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 an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling<PHONE_NUMBER>.

Applicants' Representations

    1. The Trust, a Delaware statutory trust, will be registered under
the Act as an open-end management investment company. Applicants
request that the order apply to the initial series of the Trust, The
ETF 50, described in Exhibit A to the application (``Initial Fund''),
and future series of the Trust and future open-end management
investment companies and series thereof advised by FAS or an entity
controlling, controlled by or under common control with FAS (the
``Adviser'') that comply with the terms and conditions of the
application (each such company or series, a ``Future Fund,'' and
collectively with the Initial Fund, the ``Funds'').\1\ The Initial Fund
and the Future Funds will each track the performance of a specified
equity or fixed income securities index (``Underlying Index''). Future
Funds may be based on Underlying Indexes that include only foreign
equity or fixed income securities (``International Funds''). Other
Future Funds may be based on Underlying Indexes that include foreign
and domestic equity or fixed income securities (``Global Funds'').
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    \1\ All existing entities that intend to rely on the requested
order have been named as applicants. Any other existing or future
entity that subsequently relies on the order will comply with the
terms and conditions of the application. An Acquiring Fund (as
defined below) may rely on the order only to invest in a Fund and
not in any other registered investment company.
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    2. FAS or another Adviser will serve as the investment adviser to
the Funds. FAS and each other Adviser will be registered as an
investment adviser under the Investment Advisers Act of 1940
(``Advisers Act''). The Adviser may enter into subadvisory agreements
with investment advisers to act as subadvisers with respect to any Fund
(each, a ``Subadviser''). Any Subadviser to a Fund will be registered
under the Advisers Act. The Distributor, a broker-dealer registered
under the Securities Exchange Act of 1934 (``Broker'') and an affiliate
of the Adviser, will act as the distributor and principal underwriter
of Creation Units of Shares. In the future, another Broker may act as
distributor and principal underwriter. No Distributor will be
affiliated with any Exchange (as defined below) or any Index Provider
(as defined below).
    3. Each Fund will consist of a portfolio of securities and other
instruments (``Portfolio Instruments'') selected to correspond
generally to the price and yield performance of an Underlying Index. No
entity that creates, compiles, sponsors or maintains an Underlying
Index (``Index Provider'') is or will be an affiliated person, as
defined in section 2(a)(3) of the Act, or an affiliated person of an
affiliated person of the Trust or a Fund, a promoter, the Adviser, a
Subadviser, or a Distributor.
    4. The investment objective of each Fund will be to provide
investment returns that closely correspond, before fees and expenses,
to the price and yield performance of its Underlying Index.\2\ Each
Fund will sell and redeem Creation Units on a ``Business Day,'' which
is defined to include any day that the Trust is open for business as
required by section 22(e) of the Act. The Adviser and/or Subadviser may
utilize a replication or a representative sampling strategy to track
its Underlying Index. A Fund using a replication strategy will invest
in substantially all of the Component Securities in its Underlying
Index in the same approximate proportions as in the Underlying Index. A
Fund using a representative sampling strategy generally will hold a
significant number, but not necessarily all, of the Component
Securities of its Underlying Index. Applicants state that if
representative sampling is used, a Fund will not be expected to track
its Underlying Index with the same degree of accuracy as a Fund
employing the replication strategy. Applicants expect that each Fund
will have a tracking error relative to the performance of its
Underlying Index of no more than five percent.
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    \2\ Applicants represent that at least 80% of each Fund's total
assets will be invested in the constituent securities of its
respective Underlying Index (``Component Securities''), TBA
Transactions (as defined below) representing Component Securities,
and Depositary Receipts (as defined below) representing Component
Securities. Each Fund also may invest the remaining 20% of its total
assets in a broad variety of other instruments, including securities
not included in its Underlying Index, which the Adviser or
Subadviser believes will assist the Fund in tracking the performance
of its Underlying Index.
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    5. Applicants anticipate that the price of a Share will range from
$15 to $25, and that Creation Units will consist of at least 25,000
Shares. All orders to purchase and redeem Creation Units must be placed
with the Distributor by or through an ``Authorized Participant,'' which
is either: (a) A ``participating party,'' i.e., a Broker or other
participant in the Continuous Net Settlement System of the National
Securities Clearing Corporation (``NSCC''), a clearing agency
registered with the Commission and affiliated with the Depository Trust
Company (``DTC''), or (b) a participant in the DTC (``DTC
Participant''), which in any case, has executed an agreement with the
Distributor. The Distributor will transmit all purchase orders to the
relevant Fund.
    6. The Shares will be purchased and redeemed in Creation Units and

generally on an in-kind basis. Except where the purchase or redemption
will include cash under the limited circumstances specified below,
purchasers will be required to purchase Creation Units by making an in-
kind deposit of specified instruments (``Deposit Instruments''), and
shareholders redeeming their Shares will receive an in-kind transfer of
specified instruments (``Redemption Instruments'').\3\ On any given
Business Day the names and quantities of the instruments that
constitute the Deposit Instruments and the names and quantities of the
instruments that constitute the Redemption Instruments will be
identical, unless the Fund is Rebalancing (as defined below). In
addition, the Deposit Instruments and the Redemption Instruments will
each correspond pro rata to the positions in a Fund's portfolio
(including cash positions),\4\ except: (a) In the case of bonds, for
minor differences when it is impossible to break up bonds beyond
certain minimum sizes needed for transfer and settlement; (b) for minor
differences when rounding is necessary to eliminate fractional shares
or lots that are not tradeable round lots; \5\ (c) ``to be announced''
transactions (``TBA Transactions''),\6\ derivatives and other positions
that cannot be transferred in kind \7\ will be excluded from the
Deposit Instruments and the Redemption Instruments; \8\ (d) to the
extent the Fund determines, on a given Business Day, to use a
representative sampling of the Fund's portfolio; \9\ or (e) for
temporary periods, to effect changes in the Fund's portfolio as a
result of the rebalancing of its Underlying Index (any such change, a
``Rebalancing''). If there is a difference between the net asset value
(``NAV'') attributable to a Creation Unit and the aggregate market
value of the Deposit Instruments or Redemption Instruments exchanged
for the Creation Unit, the party conveying instruments with the lower
value will also pay to the other an amount in cash equal to that
difference (the ``Cash Amount'').
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    \3\ The Funds must comply with the federal securities laws in
accepting Deposit Instruments and satisfying redemptions with
Redemption Instruments, including that the Deposit Instruments and
Redemption Instruments are sold in transactions that would be exempt
from registration under the Securities Act of 1933 (``Securities
Act''). In accepting Deposit Instruments and satisfying redemptions
with Redemption Instruments that are restricted securities eligible
for resale pursuant to Rule 144A under the Securities Act, the Funds
will comply with the conditions of Rule 144A.
    \4\ The portfolio used for this purpose will be the same
portfolio used to calculate the Fund's NAV for that Business Day.
    \5\ A tradeable round lot for a security will be the standard
unit of trading in that particular type of security in its primary
market.
    \6\ A TBA Transaction is a method of trading mortgage-backed
securities. In a TBA Transaction, the buyer and seller agree on
general trade parameters such as agency, settlement date, par amount
and price. The actual pools delivered generally are determined two
days prior to the settlement date.
    \7\ This includes instruments that can be transferred in kind
only with the consent of the original counterparty to the extent the
Fund does not intend to seek such consents.
    \8\ Because these instruments will be excluded from the Deposit
Instruments and the Redemption Instruments, their value will be
reflected in the determination of the Cash Amount (defined below).
    \9\ A Fund may only use sampling for this purpose if the sample:
(i) Is designed to generate performance that is highly correlated to
the performance of the Fund's portfolio; (ii) consists entirely of
instruments that are already included in the Fund's portfolio; and
(iii) is the same for all Authorized Participants on a given
Business Day.
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    7. Purchases and redemptions of Creation Units may be made in whole
or in part on a cash basis, rather than in kind, solely under the
following circumstances: (a) To the extent there is a Cash Amount, as
described above; (b) if, on a given Business Day, a Fund announces
before the open of trading that all purchases, all redemptions or all
purchases and redemptions on that day will be made entirely in cash;
(c) if, upon receiving a purchase or redemption order from an
Authorized Participant, a Fund determines to require the purchase or
redemption, as applicable, to be made entirely in cash; \10\ (d) if, on
a given Business Day, a Fund requires all Authorized Participants
purchasing or redeeming Shares on that day to deposit or receive (as
applicable) cash in lieu of some or all of the Deposit Instruments or
Redemption Instruments, respectively, solely because: (i) Such
instruments are not eligible for transfer through either the NSCC or
DTC; or (ii) in the case of Global Funds and International Funds, such
instruments are not eligible for trading due to local trading
restrictions, local restrictions on securities transfers or other
similar circumstances; or (e) if a Fund permits an Authorized
Participant to deposit or receive (as applicable) cash in lieu of some
or all of the Deposit Instruments or Redemption Instruments,
respectively, solely because: (i) Such instruments are, in the case of
the purchase of a Creation Unit, not available in sufficient quantity;
(ii) such instruments are not eligible for trading by an Authorized
Participant or the investor on whose behalf the Authorized Participant
is acting; or (iii) a holder of Shares of a Global Fund or
International Fund would be subject to unfavorable income tax treatment
if the holder receives redemption proceeds in kind.\11\
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    \10\ In determining whether a particular Fund will sell or
redeem Creation Units entirely on a cash or in kind basis (whether
for a given day or a given order), the key consideration will be the
benefit that would accrue to the Fund and its investors. For
instance, in bond transactions, the Adviser may be able to obtain
better execution than Share purchasers because of the Adviser's
size, experience and potentially stronger relationships in the fixed
income markets. Purchases of Creation Units either on an all cash
basis or in kind are expected to be neutral to the Funds from a tax
perspective. In contrast, cash redemptions typically require selling
portfolio holdings, which may result in adverse tax consequences for
the remaining Fund shareholders that would not occur with an in kind
redemption. As a result, tax considerations may warrant in kind
redemptions.
    \11\ A ``custom order'' is any purchase or redemption of Shares
made in whole or in part on a cash basis in reliance on clause
(e)(i) or (e)(ii).
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    8. Each Business Day, before the open of trading on a national
securities exchange, as defined in section 2(a)(26) of the Act
(``Exchange'') on which Shares are listed (``Primary Listing
Exchange''), each Fund will cause to be published through the NSCC the
names and quantities of the instruments comprising the Deposit
Instruments and the Redemption Instruments, as well as the estimated
Cash Amount (if any), for that day. The list of Deposit Instruments and
Redemption Instruments will apply until a new list is announced on the
following Business Day, and there will be no intra-day changes to the
list except to correct errors in the published list. The intra-day
indicative value of Shares, which will represent on a per Share basis
the sum of the current value of the Portfolio Instruments, will be
published on the Consolidated Tape every 15 seconds throughout the
regular trading hours of the Primary Listing Exchange.
    9. Each Fund may recoup settlement costs charged by NSCC and DTC by
imposing a transaction fee on investors purchasing or redeeming
Creation Units (``Transaction Fee''). The Transaction Fee will be borne
only by purchasers and redeemers of Creation Units and will be limited
to amounts that have been determined appropriate by the Adviser to
defray the transaction expenses that will be incurred by a Fund when an
investor purchases or redeems Creation Units.\12\ All orders to
purchase Creation Units will be placed with the Distributor by or
through an Authorized Participant, and the Distributor will transmit
all purchase

orders to the relevant Fund. The Distributor will furnish a prospectus
and a confirmation to Authorized Participants placing purchase orders
and will maintain a record of the instructions given to a Fund to
implement delivery of its Shares.
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    \12\ Where a Fund permits an in-kind purchaser to substitute
cash-in-lieu of depositing one or more Deposit Instruments, the
purchaser may be assessed a higher Transaction Fee to cover the cost
of purchasing those particular Deposit Instruments. In all cases,
the Transaction Fee will be limited in accordance with the
requirements of the Commission applicable to open-end management
investment companies offering redeemable securities.
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    10. Shares of each Fund will be listed on an Exchange. The
principal secondary market for the Shares will be the Primary Listing
Exchange. It is expected that one or more member firms of the Primary
Listing Exchange will be designated to act as a specialist or market
maker and maintain a market for the Shares trading on the Primary
Listing Exchange. The price of Shares will be based on a current bid/
offer in the secondary market. Transactions involving the purchases or
sales of Shares on an Exchange will be subject to customary brokerage
fees and charges.
    11. Applicants expect that purchasers of Creation Units will
include institutional investors and arbitrageurs. Authorized
Participants also may purchase or redeem Creation Units in connection
with their market making activities. Applicants expect that secondary
market purchasers of Shares will include both institutional and retail
investors.\13\ The price at which Shares trade will be disciplined by
arbitrage opportunities created by the ability to purchase or redeem
Creation Units at NAV, which applicants believe should ensure that
Shares similarly do not trade at a material premium or discount in
relation to NAV.
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    \13\ Shares will be registered in book-entry form only. DTC or
its nominee will be the record or registered owner of all
outstanding Shares. Beneficial ownership of Shares will be shown on
the records of DTC or DTC Participants.
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    12. Shares will not be individually redeemable and owners of Shares
may acquire those Shares from a Fund or tender such shares for
redemption to the Fund, in Creation Units only. To redeem, an investor
must accumulate enough Shares to constitute a Creation Unit. Redemption
requests must be placed by or through an Authorized Participant.
    13. Neither the Trust nor any Fund will be marketed or otherwise
held out as a traditional open-end investment company or a ``mutual
fund''. Instead, each Fund will be marketed as an ``exchange-traded
fund.'' All marketing materials that describe the features or method of
obtaining, buying or selling Creation Units, or Shares being listed and
traded on an Exchange, or refer to redeemability, will prominently
disclose that Shares are not individually redeemable shares and will
disclose that the owners of Shares may acquire those Shares from the
Fund or tender such Shares for redemption to the Fund only in Creation
Units. Copies of annual and semi-annual shareholder reports will also
be provided to the DTC Participants for distribution to beneficial
owners of Shares.

Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act
granting an exemption from sections 2(a)(32), 5(a)(1), 22(d) and 22(e)
of the Act and rule 22c-1 under the Act, under sections 6(c) and 17(b)
of the Act granting an exemption from sections 17(a)(1) and (2) of the
Act, and under section 12(d)(1)(J) for an exemption from sections
12(d)(1)(A) and (B) of the Act.
    2. Section 6(c) of the Act provides that the Commission may exempt
any person, security or transaction, or any class of persons,
securities or transactions, from any provision of the Act, if and to
the extent that 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.
Section 17(b) of the Act authorizes the Commission to exempt a proposed
transaction from section 17(a) of the Act if evidence establishes that
the terms of the transaction, including the consideration to be paid or
received, are reasonable and fair and do not involve overreaching on
the part of any person concerned, and the proposed transaction is
consistent with the policies of the registered investment company and
the general provisions of the Act. Section 12(d)(1)(J) 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 section 12(d)(1) if the exemption
is consistent with the public interest and the protection of investors.

Sections 5(a)(1) and 2(a)(32) of the Act

    3. Section 5(a)(1) of the Act defines an ``open-end company'' as a
management investment company that is offering for sale or has
outstanding any redeemable security of which it is the issuer. Section
2(a)(32) of the Act defines a redeemable security as any security,
other than short-term paper, under the terms of which the holder, upon
its presentation to the issuer, is entitled to receive approximately a
proportionate share of the issuer's current net assets, or the cash
equivalent. Because Shares will not be individually redeemable,
applicants request an order that would permit the Trust to issue Shares
in Creation Units only. Applicants state that Creation Units will
always be redeemable in accordance with the provisions of the Act.
Applicants further state that because the market price of Shares will
be disciplined by arbitrage opportunities, investors should be able to
sell Shares in the secondary market at prices that do not vary
materially from their NAV per Share.

Section 22(d) of the Act and Rule 22c-1 Under the Act

    4. Section 22(d) of the Act, among other things, prohibits a dealer
from selling a redeemable security that is currently being offered to
the public by or through an underwriter, except at a current public
offering price described in the prospectus. Rule 22c-1 under the Act
generally requires that a dealer selling, redeeming, or repurchasing a
redeemable security do so only at a price based on its NAV. Applicants
state that the purchase and sale of Shares of a Fund will not be
accomplished at an offering price described in the Fund's prospectus,
as required by section 22(d), nor will sales and repurchases be made at
a price based on the current NAV next computed after receipt of an
order, as required by rule 22c-1. Applicants request an exemption under
section 6(c) from these provisions.
    5. Applicants believe that the concerns sought to be addressed by
section 22(d) of the Act and rule 22c-1 under the Act with respect to
pricing are equally satisfied by the proposed method of pricing Shares.
Applicants maintain that, while there is little legislative history
regarding section 22(d), its provisions, as well as those of rule 22c-
1, appear to have been intended to (a) prevent dilution caused by
certain riskless-trading schemes by principal underwriters and contract
dealers, (b) prevent unjust discrimination or preferential treatment
among buyers, and (c) ensure an orderly distribution system of shares
by contract dealers by eliminating price competition from non-contract
dealers who could offer investors shares at less than the published
sales price and who could pay investors a little more than the
published redemption price.
    6. Applicants believe that none of these purposes will be thwarted
by permitting Shares to trade in the secondary market at negotiated
prices. Applicants state that secondary market transactions in Shares
would not cause dilution for owners of such Shares, because such
transactions do not directly involve Fund assets. Similarly, secondary
market trading in Shares should not create unjust discrimination or
preferential treatment among buyers

to the extent different prices exist during a given trading day, or
from day to day. Applicants state that such variances occur as a result
of third-party market forces, such as supply and demand, but do not
occur as a result of unjust or discriminatory manipulation. Finally,
applicants contend that the proposed distribution system will be
orderly because arbitrage activity will ensure that the Shares do not
trade at a material discount or premium in relation to their NAV.

Section 22(e) of the Act

    7. Section 22(e) of the Act generally prohibits a registered
investment company from suspending the right of redemption or
postponing the date of payment of redemption proceeds for more than
seven days after the tender of a security for redemption. Applicants
observe that the settlement of redemptions of Creation Units of the
Global and International Funds is contingent not only on the settlement
cycle of the U.S. securities markets but also on the delivery cycles
present in foreign markets in which those Funds invest. Applicants have
been advised that, under certain circumstances, the delivery cycles for
transferring Portfolio Instruments to redeeming investors, coupled with
local market holiday schedules, will require a delivery process of up
to fourteen (14) calendar days. Applicants request relief under section
6(c) of the Act from section 22(e) to allow Global and International
Funds to pay redemption proceeds up to 14 calendar days after the
tender of the Creation Units. With respect to Future Funds based on a
global or an international Underlying Index, applicants seek the same
relief from section 22(e) only to the extent that similar circumstances
exist. Except as disclosed in the relevant Global Fund's or
International Fund's SAI, applicants expect that the Global Funds and
International Funds will be able to deliver redemption proceeds within
seven days.\14\
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    \14\ Applicants acknowledge that no relief obtained from the
requirements of section 22(e) will affect any obligations that
applicants may otherwise have under rule 15c6-1 under the Exchange
Act. Rule 15c6-1 requires that most securities transactions be
settled within three business days of the trade date.
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    8. Applicants submit that Congress adopted section 22(e) to prevent
unreasonable, undisclosed and unforeseen delays in the actual payment
of redemption proceeds. Applicants state that allowing redemption
payments for Creation Units of a Fund to be made within 14 calendar
days would not be inconsistent with the spirit and intent of section
22(e). Applicants state that the SAI will disclose those local holidays
(over the period of at least one year following the date thereof), if
any, that are expected to prevent the delivery of redemption proceeds
in seven calendar days and the maximum number of days (up to 14
calendar days) needed to deliver the proceeds for each affected Global
Fund and International Fund.
    9. Applicants are not seeking relief from section 22(e) for Global
or International Funds that do not effect redemptions of Creation Units
in-kind.

Section 12(d)(1) of the Act

    10. Section 12(d)(1)(A) of the Act prohibits a registered
investment company from acquiring shares of an investment company if
the securities represent more than 3% of the total outstanding voting
stock of the acquired company, more than 5% of the total assets of the
acquiring company, or, together with the securities of any other
investment companies, more than 10% of the total assets of the
acquiring company. Section 12(d)(1)(B) of the Act prohibits a
registered open-end investment company, its principal underwriter, or
any other broker or dealer from selling the investment company's shares
to another investment company if the sale would cause the acquiring
company to own more than 3% of the acquired company's voting stock, or
if the sale would cause more than 10% of the acquired company's voting
stock to be owned by investment companies generally.
    11. Applicants request an exemption to permit management investment
companies (``Acquiring Management Companies'') and unit investment
trusts (``Acquiring Trusts'') registered under the Act that are not
advised or sponsored by the Adviser and are not part of the same
``group of investment companies,'' as defined in section
12(d)(1)(G)(ii) of the Act, as the Funds (collectively, ``Acquiring
Funds'') to acquire Shares beyond the limits of section 12(d)(1)(A). In
addition, applicants seek relief to permit each Fund, the Distributor
and/or a Broker to sell Shares to Acquiring Funds in excess of the
limits of section 12(d)(1)(B).
    12. Each investment adviser to an Acquiring Management Company
within the meaning of section 2(a)(20)(A) of the Act (``Acquiring Fund
Adviser'') will be registered as an investment adviser under the
Advisers Act. An ``Acquiring Fund Subadviser'' is any investment
advisor within the meaning of section 2(a)(20)(B) of the Act to an
Acquiring Management Company. Each Acquiring Trust's sponsor is the
``Sponsor.''
    13. Applicants submit that the proposed conditions to the requested
relief adequately address the concerns underlying the limits in section
12(d)(1)(A) and (B), which include concerns about undue influence by a
fund of funds over underlying funds, excessive layering of fees and
overly complex fund structures. Applicants believe that the requested
exemption is consistent with the public interest and the protection of
investors.
    14. Applicants believe that neither an Acquiring Fund nor an
Acquiring Fund Affiliate would be able to exert undue influence over a
Fund.\15\ Condition 5 limits the ability of an Acquiring Fund's
Advisory Group \16\ or an Acquiring Fund's Subadvisory Group \17\ to
control a Fund within the meaning of section 2(a)(9) of the Act.
Applicants propose other conditions to limit the potential for undue
influence over the Funds, including that no Acquiring Fund or Acquiring
Fund Affiliate will cause a Fund to purchase a security in an offering
of securities during the existence of an underwriting or selling
syndicate of which a principal underwriter is an Underwriting Affiliate
(``Affiliated Underwriting'').\18\
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    \15\ An ``Acquiring Fund Affiliate'' is defined as the Acquiring
Fund Adviser, Acquiring Fund Subadviser(s), any Sponsor, promoter or
principal underwriter of an Acquiring Fund and any person
controlling, controlled by or under common control with any of these
entities. A ``Fund Affiliate'' is defined as the Adviser,
Subadviser(s), promoter or principal underwriter of a Fund and any
person controlling, controlled by or under common control with any
of these entities.
    \16\ An ``Acquiring Fund's Advisory Group'' is defined as the
Acquiring Fund Adviser, Sponsor, any person controlling, controlled
by or under common control with the Acquiring Fund Adviser or
Sponsor, and any investment company or issuer that would be an
investment company but for section 3(c)(l) or 3(c)(7) of the Act,
that is advised or sponsored by the Acquiring Fund Adviser, Sponsor
or any person controlling, controlled by or under common control
with the Acquiring Fund Adviser or Sponsor.
    \17\ An ``Acquiring Fund's Subadvisory Group'' is defined as any
Acquiring Fund Subadviser, any person controlling, controlled by, or
under common control with the Acquiring Fund Subadviser, and any
investment company or issuer that would be an investment company but
for section 3(c)(l) or 3(c)(7) of the Act (or portion of such
investment company or issuer) advised or sponsored by the Acquiring
Fund Subadviser or any person controlling, controlled by or under
common control with the Acquiring Fund Subadviser.
    \18\ An ``Underwriting Affiliate'' is defined as a principal
underwriter in any underwriting or selling syndicate that is an
officer, director, member of an advisory board, Acquiring Fund
Adviser, Acquiring Fund Subadviser, Sponsor, or employee of the
Acquiring Fund, or a person of which any such officer, director,
member of an advisory board, Acquiring Fund Adviser, Acquiring Fund
Subadviser, Sponsor, or employee is an affiliated person, except any
person whose relationship to the Fund is covered by section 10(f) of
the Act is not an Underwriting Affiliate.

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    15. Applicants do not believe that the proposed arrangement will
involve excessive layering of fees. With respect to Acquiring
Management Companies, applicants note that the board of directors or
trustees, including a majority of the independent directors or trustees
within the meaning of section 2(a)(19) of the Act, of any Acquiring
Fund, will find that any fees charged under the Acquiring Management
Company's advisory contract(s) are based on services provided that will
be in addition to, rather than duplicative of, services provided under
the advisory contract(s) of any Fund in which the Acquiring Management
Company may invest. Under condition 13, the Acquiring Fund Adviser, or
trustee of any Acquiring Trust (``Trustee''), or Sponsor, will waive
fees otherwise payable to it by the Acquiring Fund in an amount at
least equal to any compensation (including fees received pursuant to
any plan adopted under rule 12b-1 under the Act) received from a Fund
by the Acquiring Fund Adviser, Trustee or Sponsor, or an affiliated
person of the Acquiring Fund Adviser, Trustee or Sponsor, in connection
with the investment by the Acquiring Fund in the Fund. Applicants also
state that any sales charges or service fees charged with respect to
shares of an Acquiring Fund will not exceed the limits applicable to a
fund of funds as set forth in NASD Conduct Rule 2830.\19\
---------------------------------------------------------------------------

    \19\ Any references to NASD Conduct Rule 2830 include any
successor or replacement rule that may be adopted by the Financial
Industry Regulatory Authority.
---------------------------------------------------------------------------

    16. Applicants submit that the proposed arrangement will not create
an overly complex fund structure. Applicants note that no Fund will
acquire securities of any investment company or company relying on
section 3(c)(l) or 3(c)(7) of the Act in excess of the limits contained
in section 12(d)(l)(A) of the Act, except to the extent permitted by
exemptive relief from the Commission permitting the Fund to purchase
shares of other investment companies for short-term cash management
purposes. To ensure that the Acquiring Funds understand and will comply
with the terms and conditions of the requested order, any Acquiring
Fund will be required to enter into a written agreement with the Fund
(the ``Acquiring Fund Agreement''). The Acquiring Fund Agreement will
include an acknowledgment from the Acquiring Fund that it may rely on
the order only to invest in a Fund and not in any other investment
company.
    17. Applicants note that a Fund may choose to reject any direct
purchase of Creation Units by an Acquiring Fund. A Fund would also
retain its right to reject any initial investment by an Acquiring Fund
in excess of the limits in section 12(d)(l)(A) of the Act by declining
to execute an Acquiring Fund Agreement with an Acquiring Fund.

Section 17 of the Act

    18. Section 17(a) of the Act generally prohibits an affiliated
person of a registered investment company, or an affiliated person of
such a person (``second-tier affiliate''), from selling any security to
or purchasing any security from the company. Section 2(a)(3) of the Act
defines ``affiliated person'' of another person to include any person
directly or indirectly owning, controlling, or holding with power to
vote 5% or more of the outstanding voting securities of the other
person and any person directly or indirectly controlling, controlled
by, or under common control with, the other person. Section 2(a)(9) of
the Act defines ``control'' as the power to exercise a controlling
influence over the management or policies of a company, and provides
that a control relationship will be presumed where one person owns more
than 25% of a company's voting securities. The Funds may be deemed to
be controlled by the Adviser and hence affiliated persons of each
other. In addition, the Funds may be deemed to be under common control
with any other registered investment company (or series thereof)
advised by the Adviser (an ``Affiliated Fund''). Applicants believe
there exists a possibility that, with respect to one or more Funds and
the Trust, a large institutional investor could own more than 5% of a
Fund or the Trust, or in excess of 25% of the outstanding Shares of a
Fund or the Trust, making that investor a first-tier affiliate of each
Fund under section 2(a)(3)(A) or section 2(a)(3)(C) of the Act. In
addition, a large institutional investor could own 5% or more of, or in
excess of 25% of the outstanding shares of one or more Affiliated
Funds, making that investor a second-tier affiliate of a Fund.
    19. Applicants request an exemption under sections 6(c) and 17(b)
of the Act from sections 17(a)(1) and 17(a)(2) of the Act in order to
permit persons that are affiliated persons or second-tier affiliates of
the Funds solely by virtue of (a) holding 5% or more, or in excess of
25% of the outstanding Shares of one or more Funds; (b) having an
affiliation with a person with an ownership interest described in (a);
or (c) holding 5% or more, or more than 25% of the Shares of one or
more Affiliated Funds, to effectuate purchases and redemptions in-kind.
Applicants also request an exemption in order to permit a Fund to sell
Shares to, and purchase Shares from, and to engage in any accompanying
in-kind transactions with, an Acquiring Fund of which the Fund is an
affiliated person or a second-tier affiliate.\20\
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    \20\ To the extent that purchases and sales of Shares of a Fund
occur in the secondary market and not through principal transactions
directly between an Acquiring Fund and a Fund, relief from section
17(a) would not be necessary. However, the requested relief would
apply to direct sales of Shares in Creation Units by a Fund to an
Acquiring Fund and redemptions of those Shares. Applicants are not
seeking relief from section 17(a) for, and the requested relief will
not apply to, transactions where a Fund could be deemed an
affiliated person or a second-tier affiliate of an Acquiring Fund
because the Adviser provides investment advisory services to that
Acquiring Fund.
---------------------------------------------------------------------------

    20. Applicants assert that no useful purpose would be served by
prohibiting such affiliated persons from making in-kind purchases or
in-kind redemptions of Shares of a Fund in Creation Units. Deposit
Instruments and Redemption Instruments will be valued in the same
manner as those Portfolio Instruments currently held by the relevant
Funds, and the valuation of the Deposit Instruments and Redemption
Instruments will be made in the same manner and on the same terms for
all, regardless of the identity of the purchaser or redeemer. Deposit
Instruments, Redemption Instruments, and the balancing Cash Amounts,
except for any permitted cash-in-lieu amounts consistent with the terms
of the application, will be the same regardless of the identity of the
purchaser or redeemer. Therefore, applicants state that in-kind
purchases and redemptions create no opportunity for affiliated persons
or applicants to effect a transaction detrimental to the other holders
of Shares of that Fund. Applicants also believe that in-kind purchases
and redemptions will not result in abusive self-dealing or overreaching
of the Fund. Applicants believe that an exemption is appropriate under
sections 17(b) and 6(c) because the proposed arrangement meets the
standards for relief in those sections. Applicants note that any
consideration paid for the purchase or redemption of Shares directly
from a Fund will be based on the NAV of the Fund in accordance with
policies and procedures set forth in the Fund's registration
statement.\21\ Applicants also

state that the proposed transactions are consistent with the general
purposes of the Act and appropriate in the public interest.
---------------------------------------------------------------------------

    \21\ Applicants acknowledge that the receipt of compensation by
(a) an affiliated person of an Acquiring Fund, or a second-tier
affiliate, for the purchase by the Acquiring Fund of Shares or (b)
an affiliated person of a Fund, or a second-tier affiliate, for the
sale by the Fund of its Shares to an Acquiring Fund, may be
prohibited by section 17(e) of the Act. The Acquiring Fund Agreement
also will include this acknowledgment.
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Applicants' Conditions

    Applicants agree that any order of the Commission granting the
requested relief will be subject to the following conditions:

ETF Relief

    1. As long as a Fund operates in reliance on the requested relief
to permit ETF operations, its Shares will be listed on an Exchange.
    2. Neither the Trust nor any Fund will be advertised or marketed as
an open-end investment company or a mutual fund. Any advertising
material that describes the purchase or sale of Creation Units or
refers to redeemability will prominently disclose that Shares are not
individually redeemable and that owners of Shares may acquire those
Shares from a Fund and tender those Shares for redemption to a Fund in
Creation Units only.
    3. The Web site for the Funds, which is and will be publicly
accessible at no charge, will contain, on a per Share basis for each
Fund, the prior Business Day's NAV and the market closing price or the
midpoint of the bid/ask spread at the time of the calculation of such
NAV (``Bid/Ask Price''), and a calculation of the premium or discount
of the market closing price or Bid/Ask Price against such NAV.
    4. The requested relief to permit ETF operations will expire on the
effective date, of any Commission rule under the Act that provides
relief permitting the operation of index-based exchange-traded funds.

12(d)(1) Relief

    5. The members of the Acquiring Fund's Advisory Group will not
control (individually or in the aggregate) a Fund within the meaning of
section 2(a)(9) of the Act. The members of an Acquiring Fund's
Subadvisory Group will not control (individually or in the aggregate) a
Fund within the meaning of section 2(a)(9) of the Act. If, as a result
of a decrease in the outstanding voting securities of a Fund, the
Acquiring Fund's Advisory Group or the Acquiring Fund's Subadvisory
Group, each in the aggregate, becomes a holder of more than 25 percent
of the outstanding voting securities of a Fund, it will vote its Shares
in the same proportion as the vote of all other holders of the Shares.
This condition does not apply to an Acquiring Fund Subadvisory Group
with respect to a Fund for which the Acquiring Fund Subadviser or a
person controlling, controlled by, or under common control with the
Acquiring Fund Subadviser acts as the investment adviser within the
meaning of section 2(a)(20)(A) of the Act.
    6. No Acquiring Fund or Acquiring Fund Affiliate will cause any
existing or potential investment by the Acquiring Fund in a Fund to
influence the terms of any services or transactions between the
Acquiring Fund or an Acquiring Fund Affiliate and the Fund or a Fund
Affiliate.
    7. The board of directors or trustees of an Acquiring Management
Company, including a majority of the disinterested directors or
trustees, will adopt procedures reasonably designed to ensure that the
Acquiring Fund Adviser and any Acquiring Fund Subadviser are conducting
the investment program of the Acquiring Management Company without
taking into account any consideration received by the Acquiring
Management Company or an Acquiring Fund Affiliate from a Fund or a Fund
Affiliate in connection with any services or transactions.
    8. Once an investment by an Acquiring Fund in Shares exceeds the
limits in section 12(d)(1)(A)(i) of the Act, the board of trustees of
the Trust (``Board''), including a majority of the disinterested
directors/trustees, will determine that any consideration paid by the
Fund to an Acquiring Fund or an Acquiring Fund Affiliate in connection
with any services or transactions: (i) Is fair and reasonable in
relation to the nature and quality of the services and benefits
received by the Fund; (ii) is within the range of consideration that
the Fund would be required to pay to another unaffiliated entity in
connection with the same services or transactions; and (iii) does not
involve overreaching on the part of any person concerned. This
condition does not apply with respect to any services or transactions
between a Fund and its investment adviser(s), or any person
controlling, controlled by or under common control with such investment
adviser(s).
    9. No Acquiring Fund or Acquiring Fund Affiliate (except to the
extent it is acting in its capacity as an investment adviser to a Fund)
will cause the Fund to purchase a security in any Affiliated
Underwriting.
    10. The Board, including a majority of the independent trustees,
will adopt procedures reasonably designed to monitor any purchases of
securities by the Fund in an Affiliated Underwriting, once an
investment by an Acquiring Fund in the securities of the Fund exceeds
the limit of section 12(d)(1)(A)(i) of the Act, including any purchases
made directly from an Underwriting Affiliate. The Board will review
these purchases periodically, but no less frequently than annually, to
determine whether the purchases were influenced by the investment by
the Acquiring Fund in the Fund. The Board will consider, among other
things: (i) Whether the purchases were consistent with the investment
objectives and policies of the Fund; (ii) how the performance of
securities purchased in an Affiliated Underwriting compares to the
performance of comparable securities purchased during a comparable
period of time in underwritings other than Affiliated Underwritings or
to a benchmark such as a comparable market index; and (iii) whether the
amount of securities purchased by the Fund in Affiliated Underwritings
and the amount purchased directly from an Underwriting Affiliate have
changed significantly from prior years. The Board will take any
appropriate actions based on its review, including, if appropriate, the
institution of procedures designed to assure that purchases of
securities in Affiliated Underwritings are in the best interest of
shareholders of the Fund.
    11. Each Fund will maintain and preserve permanently in an easily
accessible place a written copy of the procedures described in the
preceding condition, and any modifications to such procedures, and will
maintain and preserve for a period of not less than six years from the
end of the fiscal year in which any purchase in an Affiliated
Underwriting occurred, the first two years in an easily accessible
place, a written record of each purchase of securities in Affiliated
Underwritings, once an investment by an Acquiring Fund in the
securities of the Fund exceeds the limit of section 12(d)(1)(A)(i) of
the Act, setting forth from whom the securities were acquired, the
identity of the underwriting syndicate's members, the terms of the
purchase, and the information or materials upon which the
determinations of the Board were made.
    12. Before investing in Shares in excess of the limits in section
12(d)(1)(A), each Acquiring Fund and the Fund will execute an Acquiring
Fund Agreement stating, without limitation, that their boards of
directors or trustees and their investment adviser(s), or their
Sponsors or Trustee, as applicable, understand the terms and

conditions of the order, and agree to fulfill their responsibilities
under the order. At the time of its investment in Shares in excess of
the limit in section 12(d)(1)(A)(i), an Acquiring Fund will notify the
Fund of the investment. At such time, the Acquiring Fund will also
transmit to the Fund a list of the names of each Acquiring Fund
Affiliate and Underwriting Affiliate. The Acquiring Fund will notify
the Fund of any changes to the list of the names as soon as reasonably
practicable after a change occurs. The Fund and the Acquiring Fund will
maintain and preserve a copy of the order, the Acquiring Fund
Agreement, and the list with any updated information for the duration
of the investment and for a period of not less than six years
thereafter, the first two years in an easily accessible place.
    13. The Acquiring Fund Adviser, Trustee or Sponsor, as applicable,
will waive fees otherwise payable to it by the Acquiring Fund in an
amount at least equal to any compensation (including fees received
pursuant to any plan adopted under rule 12b-1 under the Act) received
from the Fund by the Acquiring Fund Adviser, Trustee or Sponsor, or an
affiliated person of the Acquiring Fund Adviser, Trustee or Sponsor,
other than any advisory fees paid to the Acquiring Fund Adviser,
Trustee, or Sponsor, or its affiliated person by the Fund, in
connection with the investment by the Acquiring Fund in the Fund. Any
Acquiring Fund Subadviser will waive fees otherwise payable to the
Acquiring Fund Subadviser, directly or indirectly, by the Acquiring
Management Company in an amount at least equal to any compensation
received from a Fund by the Acquiring Fund Subadviser, or an affiliated
person of the Acquiring Fund Subadviser, other than any advisory fees
paid to the Acquiring Fund Subadviser or its affiliated person by the
Fund, in connection with any investment by the Acquiring Management
Company in the Fund made at the direction of the Acquiring Fund
Subadviser. In the event that the Acquiring Fund Subadviser waives
fees, the benefit of the waiver will be passed through to the Acquiring
Management Company.
    14. Any sales charges and/or service fees charged with respect to
shares of an Acquiring Fund will not exceed the limits applicable to a
fund of funds as set forth in NASD Conduct Rule 2830.
    15. No Fund will acquire securities of any other investment company
or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess
of the limits contained in section 12(d)(1)(A) of the Act, except to
the extent permitted by exemptive relief from the Commission permitting
the Fund to purchase shares of other investment companies for short-
term cash management purposes.
    16. Before approving any advisory contract under section 15 of the
Act, the board of directors or trustees of each Acquiring Management
Company, including a majority of the disinterested directors or
trustees, will find that the advisory fees charged under such advisory
contract are based on services provided that will be in addition to,
rather than duplicative of, the services provided under the advisory
contract(s) of any Fund in which the Acquiring Management Company may
invest. These findings and their basis will be recorded fully in the
minute books of the appropriate Acquiring Management Company.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29317 Filed 12-4-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: November 6, 2009 (Volume 74, Number 214)]
[Notices]
[Page 57544-57546]
[DOCID:fr06no09-109]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60905; File No. SR-NASDAQ-2009-093]

Self-Regulatory Organizations; the NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to
Modify the Opening of Trading on the NASDAQ Options Market

October 30, 2009.
    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 October 26, 2009, The NASDAQ Stock Market LLC (``Nasdaq'') 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 Nasdaq. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Nasdaq is filing a proposal for the NASDAQ Options Market (``NOM''
or ``Exchange'') to modify Chapter VI, Section 8 of the Exchange's
rules, dealing with the Nasdaq Opening Cross. The Exchange proposes to
implement this change on or about November 23, 2009.
    The text of the proposed rule change is available from Nasdaq's Web
site 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, 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
    Nasdaq proposes to modify Chapter VI, Section 8 of the rules
governing NOM, and in particular governing the opening of trading in
that market. Since NOM was launched on March 31, 2008, Nasdaq has
monitored the operation of the market to identify instances where
market efficiency can be enhanced.\3\ Nasdaq believes that the opening
of the market, while currently quite effective, can be further
enhanced.
---------------------------------------------------------------------------

    \3\ For instance, in May 2008 Nasdaq filed a proposed rule
change to enhance its opening process by (1) delaying the Opening
Cross in the event that after the execution of the Opening Cross the
NOM best bid and offer would be outside certain pre-determined
threshold amounts, and (2) delaying the opening of trading if after
the opening print the NOM best bid and offer would be outside the
same pre-determined threshold amounts in instances where there is
insufficient interest available to initiate the Opening Cross. See
Securities Exchange Act Release No. 57822 (May 15, 2008), 73 FR
29800 (May 22, 2008) (SR-NASDAQ-2008-045). In June 2008 Nasdaq filed
a proposed rule change to allow the opening of trading in those
instances where trading interest at the National Best Bid and Offer
(``NBBO''), which includes the non-firm Nasdaq Best Bid and Offer
(Nasdaq BBO), is within the currently authorized trading thresholds.
See Securities Exchange Act Release No. 57977 (June 17, 2008), 73 FR
35429 (June 23, 2008) (SR-NASDAQ-2008-052).
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    Currently, pursuant to Chapter VI, Section 8(b) of NOM's rules, the
Nasdaq Opening Cross occurs at 9:30 a.m., unless the Opening Cross is
delayed pursuant to Section 8(b)(5) of Chapter VI in order to avoid
opening at a price that is away from the prevailing market. Pursuant to
that provision, the opening is delayed if the Nasdaq BBO after
execution of the opening print would be wider than pre-determined
authorized trading thresholds. In the event that no Opening Cross
occurs due to insufficient interest, Nasdaq systematically delays the
opening of trading if the NBBO (which includes the non-firm Nasdaq BBO)
is wider than certain spread requirements set from time to time by
Nasdaq management. Thus, both the NBBO and the Nasdaq BBO are currently
analyzed by NOM when determining to open trading, in order to ensure
opening the market in an orderly fashion. If a delay occurs pursuant to
Section 8(b)(5) of Chapter VI, the Opening Cross (and thus regular
market trading) does not commence until such time as it is determined
that the width requirements can be met.\4\
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    \4\ Except for executions arising from the Opening Cross,
executions are only permitted if they will not result in a trade-
through violation of the NBBO as described in Chapter VI, Sec.
7(b)(3)(C) of the NOM rules.
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    The Exchange is proposing to alter its methodology for opening
trading by deleting the delay provisions of Section 8(b)(5) of Chapter
VI, and instead requiring certain other preconditions to be met.
Additionally, Section 8(b)(2)(A) of Chapter VI would be amended to
require the Nasdaq Opening Cross to occur at the price that maximizes
the number of contracts of Eligible Interest \5\ in NOM to be executed
at or within the NBBO.
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    \5\ ``Eligible Interest'' is defined in Section 8(a)(1) [sic] of
Chapter VI as any quotation or any order that may be entered into
the system and designated with a time-in-force of IOC, DAY, GTC, or
EXPR.
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    In order to improve the opening process on NOM by streamlining the
opening timeline and providing further price protection to orders
received prior to market open, Nasdaq is proposing to revise Section
8(b) of Chapter VI to permit the Opening Cross to occur at or after
9:30 if there is no Imbalance,\6\ if the dissemination of a quote or
trade by the Market for the Underlying Security \7\ has occurred (or,
in the case of index options, the Exchange has received the opening
price of the underlying index) and if a certain number (as the Exchange
may determine from time to time) of other options exchanges have
disseminated a firm quote on the Options Price Reporting Authority
(``OPRA''). If all the conditions specified

in Section 8(b) of Chapter VI have been met except that there is an
Imbalance, Section 8(b)(5) would require one additional Order Imbalance
Indicator message to be disseminated, after which the Opening Cross
would occur, executing the maximum number of contracts. Any remaining
Imbalance that is not executable in the Opening Cross would be
canceled.
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    \6\ ``Imbalance'' is defined in Section 8(a)(1) of Chapter VI as
the number of contracts of Eligible Interest that may not be matched
with other order contracts at a particular price at any given time.
    \7\ New Section 8(a)(5) of Chapter VI would define ``Market for
the Underlying Security'' as meaning either the primary listing
market, the primary volume market (defined as the market with the
most liquidity in that underlying security for the previous two
calendar months), or the first market to open the underlying
security, as determined by the Exchange on an issue-by-issue basis
and announced to the membership on the Exchange's Web site.
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    By amending the NOM rules as explained above, Nasdaq accomplishes
two main objectives. First, relying on a quote or trade of the
underlying asset upon which a particular option is based aligns the NOM
rules with accepted practices on various other options exchanges.\8\
Second, waiting for the dissemination of firm quotes from other options
exchanges allows NOM to build an NBBO upon which it can bound the
Opening Cross. This adds an additional layer of protection to customers
entering orders into the market and assists in creating an orderly
opening to trading.\9\
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    \8\ See, e.g., Section (j) of NASDAQ OMX PHLX Rule 1017,
Openings in Options, and Chicago Board Options Exchange Chapter VI,
Rule 6.2B, Hybrid Opening System (``HOSS''), Section (b).
    \9\ NASDAQ OMX PHLX has a similar process in which it considers
the NBBO before executing. See NASDAQ PHLX Rule 1017(l)(ii)(C).
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    Proposed Section 8(c) of Chapter VI governs situations in which the
requisite number of firm quotes have not been disseminated for an
option by other options exchanges. No Opening Cross will occur if firm
quotes are not disseminated for an option by the predetermined number
of options exchanges by a specific time during the day that the
Exchange determines. In that case, provided dissemination of a quote or
trade by the Market for the Underlying Security has occurred (or, in
the case of index options, the Exchange has received the opening price
of the underlying index), the option will open for trading. However, if
there is interest in the Opening Cross, the option will not open for
trading in that option until the orders that would be executed in the
Opening Cross are resolved through the cancellation or modification of
the orders by the entering party or parties.
    In connection with the Opening Cross, pursuant to Section 8(b)(1)
of Chapter VI Nasdaq disseminates an Order Imbalance Indicator
beginning at 9:25 a.m. The Order Imbalance Indicator for the Opening
Cross includes, among other information, a Current Reference Price,
which generally is the single price at which the maximum number of
contracts of Eligible Interest can be paired. Section 8(a)(2)(A)(i) of
Chapter VI is proposed to be amended so that the definition of
``Current Reference Price'' is limited to the single price at which the
maximum number of contracts of Eligible Interest can be paired at or
within the NBBO. The Exchange believes that limiting the opening
execution price to be at or within the NBBO will provide customers with
prices that are more aligned with prices available across the national
option exchange system. If there is more than one such price, Sections
8(a)(2)(A)(ii)--(iv) provide certain ``tie-breaker'' rules to determine
the Current Reference Price. The ``tie-breaker'' rule of Section
8(a)(2)(A)(iv) is proposed to be amended such that the Current
Reference Price provided for in that rule would be the price that is
closest to the midpoint of the NBBO (as opposed to the current rule
which would result in the price that is closest to the midpoint price
of the interest available in NOM the time of the Opening Cross).
    Finally, references to the ``Nasdaq Opening/Halt Cross'' are being
replaced in Chapter VI, Section 8 with references to the ``Nasdaq
Opening Cross''. This housekeeping change is necessary to reflect that
following a trading halt, trading resumes as specified in Chapter V,
Section 4 (Resumption of Trading After a Halt) rather than as specified
in Chapter VI, Section 8.\10\
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    \10\ When Nasdaq first proposed its options trading rules, it
planned to resume trading by operating a ``Halt Cross,'' which it
originally described in Chapter VI, Section 8. Nasdaq later amended
the proposed rules to remove the Halt Cross and to make clear that
trading after a halt would ``resume'' rather than ``open.'' See
Securities Exchange Act Release Nos. 57478 (March 12, 2008), 73 FR
14521 (March 18, 2008) (SR-NASDAQ-2007-004 and SR-NASDAQ-2007-080)
(approval order regarding NOM Rules including Chapters III and XIV).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act \11\ in general, and furthers the objectives of Section
6(b)(5) of the Act \12\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and in general, to protect investors and the public
interest. Nasdaq believes that the proposal is consistent with this
standard because the proposed rule change is designed to improve
execution quality at the critical opening of the market. By waiting for
the Market for the Underlying Security to be open, liquidity providers
on the Exchange will have better information on which to base their
quotes and will thus provide better markets for investor orders.
Additionally, the Exchange believes that limiting the opening execution
price to be at or within the NBBO will provide customers with prices
that are better aligned with the national option exchange system.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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.

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 Exchange believes that the foregoing proposed rule change
effects a change in an existing order-entry or trading system pursuant
to Section 19(b)(3)(A) \13\ of the Act, and Rule 19b-4(f)(5) \14\
thereunder, which renders the proposal effective upon filing with the
Commission. The Exchange believes that the proposed rule change effects
a change in an existing order-entry or trading system that does not
significantly affect the protection of investors or the public
interest, does not impose any significant burden on competition, and
does not have the effect of limiting the access to or availability of
the system. Specifically, the proposed rule change will benefit the
protection of investors and the public interest by enhancing market
quality and protecting investors and market participants from
executions that are away from the prevailing market. The proposed rule
change does not place a burden on competition but rather enhances
competition among the markets. The proposed rule change does not limit
access to or availability of the system. To the contrary, Nasdaq
believes that the proposed rule change will prompt additional market
participants to utilize the system at the opening of trading. NOM's
participants will not need to make systems changes relating to the
changes proposed by NOM in this proposed rule change.
---------------------------------------------------------------------------

    \13\ 15 U.S.C.78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(5).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public

interest, for the protection of investors, or otherwise in furtherance
of the purposes of the Act.

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 e-mail to<EMAIL_ADDRESS>Please include
File Number SR-NASDAQ-2009-093 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2009-093. This
file number should be included on the subject line if e-mail 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 inspection
and copying in the Commission's Public Reference Room, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. 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-2009-093 and
should be submitted on or before November 27, 2009.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-26748 Filed 11-5-09; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register: May 11, 2010 (Volume 75, Number 90)]
[Notices]
[Page 26213-26214]
[DOCID:fr11my10-64]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Combined Notice of Filings No. 1

May 5, 2010.
    Take notice that the Commission has received the following Natural
Gas Pipeline Rate and Refund Report filings:

    Docket Numbers: RP10-705-000.
    Applicants: Northern Natural Gas Company.
    Description: Northern Natural Gas Company submits Thirty Sixth
Revised Sheet No 54 et al to FERC Gas Tariff, Fifth Revised Volume No
1, to be effective 11/1/10.
    Filed Date: 05/03/2010.
    Accession Number: 20100503-0227.
    Comment Date: 5 p.m. Eastern Time on Monday, May 17, 2010.

    Docket Numbers: RP10-706-000.
    Applicants: Mojave Pipeline Company.
    Description: Mojave Pipeline Company submits Fourth Revised Sheet 1
et al to FERC Electric Tariff, Second Revised Volume 1 to be effective
6/3/10.
    Filed Date: 05/03/2010.
    Accession Number: 20100504-0211.
    Comment Date: 5 p.m. Eastern Time on Monday, May 17, 2010.

    Docket Numbers: RP10-707-000.
    Applicants: Gulf Crossing Pipeline Company LLC.
    Description: Gulf Crossing Pipeline Company, LLC submits capacity
release agreement containing negotiated rate provisions with Tenaska
Marketing Ventures.
    Filed Date: 05/03/2010.
    Accession Number: 20100504-0202.
    Comment Date: 5 p.m. Eastern Time on Monday, May 17, 2010.

    Docket Numbers: RP10-708-000.
    Applicants: Gulf South Pipeline Company, LP.
    Description: Gulf South Pipeline Company, LP submits capacity
release agreement containing rate provisions with Texla Energy
Management, Inc.
    Filed Date: 05/03/2010.
    Accession Number: 20100504-0201.
    Comment Date: 5 p.m. Eastern Time on Monday, May 17, 2010.

    Docket Numbers: RP10-709-000.
    Applicants: National Fuel Gas Supply Corporation.
    Description: National Fuel Gas Supply Corporation submits
Nineteenth Revised Sheet 478 to FERC Gas Tariff, Fourth Revised Volume
1 to be effective 6/3/10.
    Filed Date: 05/04/2010.
    Accession Number: 20100504-0217.
    Comment Date: 5 p.m. Eastern Time on Monday, May 17, 2010.

    Docket Numbers: RP10-710-000.
    Applicants: Gulf South Pipeline Company, LP.
    Description: Gulf South Pipeline Company, LP submits capacity
release agreement containing negotiated rate provisions with Texla
Energy Management, Inc.
    Filed Date: 05/04/2010.
    Accession Number: 20100504-0216.
    Comment Date: 5 p.m. Eastern Time on Monday, May 17, 2010.

    Docket Numbers: RP10-711-000.
    Applicants: Cameron Interstate Pipeline, LLC.
    Description: Cameron Interstate Pipeline, LLC Submits Annual Report
of Operational Imbalances and Cash-out Activity.
    Filed Date: 05/03/2010.
    Accession Number: 20100503-5157.
    Comment Date: 5 p.m. Eastern Time on Monday, May 17, 2010.

    Docket Numbers: RP10-712-000.
    Applicants: Eastern Shore Natural Gas Company.
    Description: Eastern Shore Natural Gas Company 2009-2010 IT Revenue
Sharing Report.
    Filed Date: 04/30/2010.
    Accession Number: 20100430-5500.
    Comment Date: 5 p.m. Eastern Time on Wednesday, May 12, 2010.

    Any person desiring to intervene or to protest in any of the above
proceedings

must file in accordance with Rules 211 and 214 of the Commission's
Rules of Practice and Procedure (18 CFR 385.211 and.385.214) on or
before 5 p.m. Eastern time on the specified comment date. It is not
necessary to separately intervene again in a subdocket related to a
compliance filing if you have previously intervened in the same docket.
Protests will be considered by the Commission in determining the
appropriate action to be taken, but will not serve to make protestants
parties to the proceeding. Anyone filing a motion to intervene or
protest must serve a copy of that document on the Applicant. In
reference to filings initiating a new proceeding, interventions or
protests submitted on or before the comment deadline need not be served
on persons other than the Applicant.
    The Commission encourages electronic submission of protests and
interventions in lieu of paper, using the FERC Online links at http://
www.ferc.gov. To facilitate electronic service, persons with Internet
access who will eFile a document and/or be listed as a contact for an
intervenor must create and validate an eRegistration account using the
eRegistration link. Select the eFiling link to log on and submit the
intervention or protests.
    Persons unable to file electronically should submit an original and
14 copies of the intervention or protest to the Federal Energy
Regulatory Commission, 888 First St., NE., Washington, DC 20426.
    The filings in the above proceedings are accessible in the
Commission's eLibrary system by clicking on the appropriate link in the
above list. They are also available for review in the Commission's
Public Reference Room in Washington, DC. There is an eSubscription link
on the Web site that enables subscribers to receive email notification
when a document is added to a subscribed dockets(s). For assistance
with any FERC Online service, please e-mail<EMAIL_ADDRESS>
or call<PHONE_NUMBER> (toll free). For TTY, call<PHONE_NUMBER>.

Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2010-11123 Filed 5-10-10; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 83, Number 71 (Thursday, April 12, 2018)]
[Notices]
[Page 15827]
[FR Doc No: 2018-07560]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RA16-3-000]

Avocent Corporation; Notice of Termination of Proceeding

    On August 4, 2016, Avocent Corporation (Avocent) filed a Petition
for Review of Denial of Adjustment Request, Request for Hearing, and
Request for Confidential Treatment (Petition) under Subpart J of the
Commission's Rules of Practice and Procedure.\1\ Avocent's Petition
alleged that the Department of Energy (DOE) Office of Hearings and
Appeals (OHA) inappropriately denied Avocent's February 9, 2016
applications for various forms of relief from DOE energy conservation
standards applicable to external power supplies.
---------------------------------------------------------------------------

    \1\ 18 CFR 385.1004 and 385.1006 (2017).
---------------------------------------------------------------------------

    On March 23, 2017, the Administrative Law Judge designated to serve
as the presiding officer, Judge David H. Coffman, issued a Report to
the Commission and reported that on March 17, 2017, Avocent and DOE
filed a Joint Notice of Satisfaction representing that OHA vacated its
orders denying Avocent's applications for relief. Accordingly,
consistent with the Proposed Settlement filed on February 6, 2017, the
Judge deemed the Petition and Avocent's applications to OHA to be
withdrawn.
    Take notice that the proceeding in Docket No. RA16-3-000 is, as a
consequence, deemed terminated.

    Dated: April 6, 2018.
Kimberly D. Bose,
Secretary.
[FR Doc. 2018-07560 Filed 4-11-18; 8:45 am]
 BILLING CODE 6717-01-P


[Federal Register Volume 77, Number 145 (Friday, July 27, 2012)]
[Rules and Regulations]
[Pages 44120-44121]
[FR Doc No: 2012-18146]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 71

[Docket No. FAA-2012-0274; Airspace Docket No. 12-ANM-4]

Establishment of Class E Airspace; Roundup, MT

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This action establishes Class E airspace at Roundup Airport,
Roundup, MT, to accommodate aircraft using new Area Navigation (RNAV)
Global Positioning System (GPS) standard instrument approach procedures
at Roundup Airport. This improves the safety and management of
Instrument Flight Rules (IFR) operations at the airport.

DATES: Effective date, 0901 UTC, September 20, 2012. The Director of
the Federal Register approves this incorporation by reference action
under 1 CFR part 51, subject to the annual revision of FAA Order 7400.9
and publication of conforming amendments.

FOR FURTHER INFORMATION CONTACT: Eldon Taylor, Federal Aviation
Administration, Operations Support Group, Western Service Center, 1601
Lind Avenue SW., Renton, WA 98057; telephone<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

History

    On May 9, 2012, the FAA published in the Federal Register a notice
of proposed rulemaking (NPRM) to establish controlled airspace at
Roundup, MT (77 FR 27148). Interested parties were invited to
participate in this rulemaking effort by submitting written comments on
the proposal to the FAA. The FAA received three comments, all from the
National Business Aviation Association (NBAA).
    The NBAA comments recommended that the FAA lower some of the
adjacent Class E airspace, which is beyond the TAAs, down to 1,200 feet
above the surface to accommodate orderly en route descent into the
respective TAA because the NBAA feels that aircraft will not have
enough airspace to access the TAAs. The airspace in question includes
the following areas where Class E begins at 14,500 feet MSL: The large
area to the north, the two smaller areas to the west, and the small
area to the east. The NBAA is also concerned that the Minimum
Instrument Flight Rules Altitude (MIA) outside the 1,200 feet above the
surface would affect air traffic services into the TAAs from the north,
west and east. Finally, the commenter points out that extending the
Class E 1,200-foot area would provide relief to Salt Lake City Air
Route Traffic Control Center (ARTCC).
    The FAA believes that lowering this airspace is outside the scope
of this rulemaking at this time, and would not serve the immediate
purpose of establishing the airspace necessary for the safety of
aircraft within the Roundup, MT, airport area.
    Class E airspace designations are published in paragraph 6005, of
FAA Order 7400.9V dated August 9, 2011, and effective September 15,
2011, which is incorporated by reference in 14 CFR 71.1. The Class E
airspace designations listed in this document will be published
subsequently in that Order.

The Rule

    This action amends Title 14 Code of Federal Regulations (14 CFR)
Part 71 by establishing Class E airspace, extending upward from 700
feet above the surface, at Roundup Airport, to accommodate IFR aircraft
executing new RNAV (GPS) standard instrument approach procedures at the
airport. This action is necessary for the safety and management of IFR
operations.
    The FAA has determined this regulation only involves an established
body of technical regulations for which frequent and routine amendments
are necessary to keep them operationally current. Therefore, this
regulation: (1) Is not a ``significant regulatory action'' under
Executive Order 12866; (2) is not a ``significant rule'' under DOT
Regulatory Policies and Procedures (44 FR 11034, February 26, 1979);
and (3) does not warrant preparation of a regulatory evaluation because
the anticipated impact is minimal. This rule will not have a
significant economic impact on a substantial number of small entities
under the criteria of the Regulatory Flexibility Act because this is a
routine matter that will only affect air traffic procedures and air
navigation. The FAA's authority to issue rules regarding aviation
safety is found in Title 49 of the U.S. Code. Subtitle 1, Section 106
discusses the authority of the FAA Administrator. Subtitle VII,
Aviation Programs, describes in more detail the scope of the agency's
authority. This rulemaking is promulgated under the authority described
in Subtitle VII, Part A, Subpart I, Section 40103. Under that section,
the FAA is charged with prescribing regulations to assign the use of
airspace necessary to ensure the safety of aircraft and the efficient
use of

airspace. This regulation is within the scope of that authority because
it establishes additional controlled airspace at Roundup Airport,
Roundup, MT.

Environmental Review

    The FAA has determined that this action qualifies for categorical
exclusion under the National Environmental Policy Act in accordance
with FAA Order 1050.1E, ``Environmental Impacts: Policies and
Procedures,'' paragraph 311a. This airspace action is not expected to
cause any potentially significant environmental impacts, and no
extraordinary circumstances exist that warrant preparation of an
environmental assessment.

List of Subjects in 14 CFR Part 71

    Airspace, Incorporation by reference, Navigation (air).

Adoption of the Amendment

    In consideration of the foregoing, the Federal Aviation
Administration amends 14 CFR part 71 as follows:

PART 71--DESIGNATION OF CLASS A, B, C, D AND E AIRSPACE AREAS; AIR
TRAFFIC SERVICE ROUTES; AND REPORTING POINTS

0
1. The authority citation for 14 CFR part 71 continues to read as
follows:

    Authority:  49 U.S.C. 106(g), 40103, 40113, 40120; E.O. 10854,
24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.

Sec.  71.1  [Amended]

0
2. The incorporation by reference in 14 CFR 71.1 of the Federal
Aviation Administration Order 7400.9V, Airspace Designations and
Reporting Points, dated August 9, 2011, and effective September 15,
2011 is amended as follows:

Paragraph 6005 Class E airspace areas extending upward from 700
feet or more above the surface of the earth.

* * * * *

ANM MT E5 Roundup, MT [New]

Roundup Airport, MT
    (Lat. 46[deg]28[min]30'' N., long. 108[deg]32[min]36'' W.)

    That airspace extending from 700 feet above the surface within a
7.6-mile radius of the Roundup Airport; that airspace extending
upward from 1,200 feet above the surface within an area bounded by a
line beginning at lat. 46[deg]53[min]00'' N., long.
109[deg]17[min]00'' W.; lat. 47[deg]04[min]00'' N., long.
108[deg]04[min]00'' W.; lat. 46[deg]51[min]00'' N., long.
107[deg]39[min]00'' W.; lat. 46[deg]32[min]00'' N., long.
107[deg]27[min]00'' W.; lat. 46[deg]06[min]00'' N., long.
107[deg]42[min]00'' W.; lat. 45[deg]54[min]00'' N., long.
109[deg]01[min]00'' W.; lat. 46[deg]10[min]00'' N., long.
109[deg]33[min]00'' W.; lat. 46[deg]32[min]00'' N., long.
109[deg]37[min]00'' W.; thence to the point of beginning.

    Issued in Seattle, Washington, on July 19, 2012.
Robert Henry,
Acting Manager, Operations Support Group, Western Service Center.
[FR Doc. 2012-18146 Filed 7-26-12; 8:45 am]
BILLING CODE 4910-13-P