[Federal Register Volume 82, Number 191 (Wednesday, October 4, 2017)]
[Notices]
[Pages 46329-46332]
[FR Doc No: 2017-21282]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32839; File No. 812-14818]

National Securities Clearing Corporation

September 28, 2017.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice. Notice of application for an order under section
3(b)(2) of the Investment Company Act of 1940 (``Act'').

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Applicant: National Securities Clearing Corporation (``NSCC'').

Summary of Application: Applicant seeks an order under Section 3(b)(2)
of the Act declaring it to be primarily engaged in a business other
than that of investing, reinvesting, owning, holding or trading in
securities. Applicant is primarily in the business of providing
clearing, settlement, risk management, central counterparty (``CCP'')
and ancillary services to the registered broker-dealers, banks and
other market participants that are its ``Members'', as such term is
defined in the rules and procedures of Applicant (``NSCC Rules'').

Filing Date: The application was filed on September 8, 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 applicant with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on October 23, 2017, and should be accompanied by proof of
service on applicant, 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: Secretary, Securities and Exchange Commission, 100 F Street
NE., Washington, DC 20549-1090. Applicant, c/o David F. Freeman, Jr.,
Arnold & Porter LLP, 601 Massachusetts Avenue NW., Washington, DC
20001.

FOR FURTHER INFORMATION CONTACT: Jennifer O. Palmer, Senior Counsel, at
(202) 551-5786, or Nadya B. Roytblat, Assistant Chief Counsel, at (202)
551-6825 (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 applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling<PHONE_NUMBER>.

Applicant's Representations

    1. Formed in 1976, Applicant is organized under the Business
Corporation Law of the State of New York and is registered as a
clearing agency under the Securities and Exchange Act of 1934, as
amended (``Exchange Act''), and the rules and regulations thereunder
(``Exchange Act Rules''). Applicant is also designated as a
systemically important financial market utility (``SIFMU'') by the
Financial Stability Oversight Council (``FSOC'') under Title VIII of
The Dodd-Frank Wall Street Reform and Consumer Protection Act (``Dodd-
Frank Act''). As a registered clearing agency, Applicant is regulated
by the Commission. As a SIFMU, Applicant is subject to enhanced
supervision by the Commission in consultation with the Board of
Governors of the Federal Reserve System (``FRB'').\1\
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    \1\ See Securities Exchange Act Release No. 34-78961 (Sep. 28,
2016), 81 FR 70786, 70788 (Oct. 13, 2016).
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    2. Applicant is a wholly-owned subsidiary of The Depository Trust &
Clearing Corporation (``DTCC''). Applicant has one authorized class of
stock, which is common stock. All issued and outstanding shares of
Applicant's common stock are held by DTCC and there are no plans to
alter this wholly-owned subsidiary structure. There is no trading
market in Applicant's shares.
    3. Applicant provides clearing, settlement, risk management and CCP
services to its Members for broker-to-broker trades in the United
States involving equities, corporate and municipal debt, American
depositary receipts, exchange traded funds and unit investment trusts.
In addition to these core services, Applicant also offers ancillary,
non-guaranteed services, including wealth management services (``WMS'')
and insurance and retirement services (``I&RS''), which automate manual
processes in the mutual funds, insurance and alternative investment
products areas. Applicant's operations are national.
    4. Applicant operates a continuous net settlement (``CNS'') system,
through which the trades in CNS-eligible securities are processed.
Applicant acts as a CCP in respect of such CNS trades, becoming the
buyer to every seller and the seller to every buyer, thereby
guaranteeing the completion of such trades and eliminating counterparty
risk among its Members. As a result, Applicant has obligations to and
claims against its Members on opposite sides of guaranteed netted
transactions. Applicant also provides a trade guarantee with respect to
balance order transactions.
    5. Due to the nature of Applicant's operations and the large volume
and dollar value of trades that it guarantees, Applicant maintains a
large clearing fund (``Clearing Fund'') and a large amount of other
cash on hand. The Clearing Fund consists of deposits (i.e., margin and
other contributions) posted by Members in the form of cash and

eligible securities. Pursuant to the NSCC Rules, Members are required
to maintain deposits in the Clearing Fund. The amount of each Member's
required deposit is calculated by Applicant using a risk-based margin
methodology.
    6. Applicant uses the Clearing Fund, among other resources, to
manage its risks related to its trade guarantee. Specifically, deposits
in the Clearing Fund, among other resources, are available to Applicant
to facilitate settlement in the event of a Member default and to cover
potential losses due to such an event. Additionally, Applicant uses its
liquid assets to meet the requirements imposed on it as a registered
clearing agency and SIFMU and to generate revenue to the extent such
assets are not otherwise being put to productive use.
    7. To more efficiently utilize Clearing Fund cash and other cash on
hand, Applicant seeks to prudently invest part of the Clearing Fund
cash and other cash on hand in bank certificates of deposit (``CDs'')
and other investment securities. The managed investment of cash on hand
also provides a measure of protection against inflationary factors and
bolsters and protects NSCC's financial position over time.
    8. Applicant is permitted under the NSCC Rules to invest Clearing
Fund cash in accordance with an investment policy approved by
Applicant's board of directors (``Board of Directors''). Applicant is
also permitted to invest other cash on hand in accordance with such
investment policy (``Clearing Agency Investment Policy'').
    9. The Clearing Agency Investment Policy is designed to comply with
the laws, rules and regulations applicable to Applicant as a registered
clearing agency and SIFMU, including, without limitation, Exchange Act
Section 17A and Exchange Act Rule 17Ad-22.\2\ The Clearing Agency
Investment Policy was approved by the Commission pursuant to delegated
authority.\3\ Any material changes to the Clearing Agency Investment
Policy must be approved by the Board of Directors. Any changes to the
Clearing Agency Investment Policy, regardless of materiality, will be
submitted to the Commission pursuant to Exchange Act Rule 19b-4, with
confidential treatment requested.
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    \2\ Exchange Act Rule 17 Ad-22 requires, among other things,
that Applicant hold assets in a way that minimizes risk of loss or
delay in access to them and to invest assets in instruments with
minimal credit, market, and liquidity risks.
    \3\ See Securities Exchange Act Release No. 34-75730 (August 19,
2015), 80 FR 51638 (August 25, 2015) (SR-NSCC-2015-802) (Notice of
Filing of Amendment No. 1 and No Objection to Advance Notice Filing,
as Modified by Amendment No. 1, to Establish a Prefunded Liquidity
Program As Part of NSCC's Liquidity Risk Management).
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Applicant's Legal Analysis

    1. Section 3(a)(l)(A) of the Act defines the term ``investment
company'' to include an issuer that is or holds itself out as being
engaged primarily, or proposes to engage primarily, in the business of
investing, reinvesting or trading in securities. Section 3(a)(l)(C) of
the Act further defines an investment company as an issuer that is
engaged or proposes to engage in the business of investing,
reinvesting, owning, holding or trading in securities, and owns or
proposes to acquire investment securities having a value in excess of
40 percent of the value of the issuer's total assets (exclusive of
Government securities and cash items) on an unconsolidated basis.
Applicant states that it does not hold itself out as being engaged
primarily in the business of investing, reinvesting or trading in
securities within the meaning of Section 3(a)(l)(A) of the Act.
Applicant states that it does not currently hold, but has previously
held \4\ and may again wish to hold, more than 40 percent of its total
assets, exclusive of Government securities and cash items, in bank CDs
and other investment securities. Upon such change in composition of its
assets, Applicant might fall within the definition of investment
company under Section 3(a)(l)(C) of the Act.
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    \4\ Applicant has previously held greater than 40% of the value
of its total assets, exclusive of Government securities and cash
items, in bank CDs and other investment securities. Applicant has
relied on Rule 3a-3 under the Act, which provides an exemption from
the definition of investment company for wholly-owned subsidiaries
of a company that is not itself an investment company. However, that
exemption does not apply if the wholly-owned subsidiary has issued
paper (other than short-term paper) to other holders. On September
10, 2015, Applicant launched a commercial paper and extendible note
program (``CP Program'') under which Applicant could issue paper
other than short-term paper. Out of an abundance of caution, (a)
prior to the launch of the CP Program, Applicant reduced its
holdings of investment securities to less than 40% of the value of
Applicant's total assets, exclusive of Government securities and
cash items, and (b) pending the application, Applicant has
maintained its holdings of investment securities below the 40%
threshold.
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    2. Rule 3a-1 under the Act provides an exemption from the
definition of investment company if no more than 45 percent of a
company's total assets consist of, and not more than 45 percent of its
net income over the last four quarters is derived from, securities
other than Government securities and securities of majority-owned
subsidiaries and companies primarily controlled by it. Applicant states
that it cannot rely on Rule 3a-1 because it may again wish to hold more
than 45 percent of its total assets in bank CDs and other investment
securities and, upon such change in composition of its assets, it will
not meet the requirements of Rule 3a-1.
    3. Section 3(b)(2) of the Act provides that, notwithstanding
Section 3(a)(l)(C) of the Act, the Commission may issue an order
declaring an issuer to be primarily engaged in a business other than
that of investing, reinvesting, owning, holding, or trading in
securities directly, through majority-owned subsidiaries, or controlled
companies conducting similar types of businesses. Applicant requests an
order under Section 3(b)(2) of the Act declaring that it is primarily
engaged in a business other than that of investing, reinvesting,
owning, holding or trading in securities, and therefore is not an
investment company as defined in the Act. In determining whether an
issuer is ``primarily engaged'' in a non-investment company business
under Section 3(b)(2) of the Act, the Commission considers the
following factors: (a) The company's historical development, (b) its
public representations of policy, (c) the activities of its officers
and directors, (d) the nature of its present assets, and (e) the
sources of its present income.\5\
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    \5\ Tonopah Mining Company of Nevada, 26 SEC 426, 427 (1947).
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    4. Applicant submits that it satisfies the criteria for issuance of
an order under Section 3(b)(2) of the Act because the facts show that
Applicant is primarily engaged in the business of providing clearing,
settlement, risk management, CCP and ancillary services to its Members,
and not in the business of investing, reinvesting, owning, holding or
trading in securities.
    a. Historical Development. Applicant states that its origins date
back to the back-office crisis of the late 1960s and early 1970s and
the enactment of the Securities Acts Amendments of 1975, which enabled
the development of a national securities market system and a national
clearance and settlement system and their regulation.\6\ Applicant was
formed in 1976 and now operates as a wholly-owned subsidiary of DTCC.
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    \6\ See Securities Acts Amendments of 1975, Public Law 94-29, 89
Stat. 97 (1975).
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    Applicant states that it (a) is a clearing agency registered under
the Exchange Act and, as such, is subject to comprehensive regulation
by the Commission and (b) has been designated by FSOC as a SIFMU under
Title VIII of the Dodd-Frank Act and, as such, is subject to enhanced
supervision by the Commission in consultation with the FRB. Applicant
states that both the

Commission and the FRB, among other federal agencies, have previously
indicated that they believe FMUs such as securities clearing agencies
generally engage in activities other than those of an investment
company.\7\
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    \7\ Specifically, Applicant asserts that in the notice of final
rulemaking issued by the Commission and the FRB (among other federal
agencies) to implement the Volcker Rule, the agencies supported
their decision not to expressly exclude FMUs from the definition of
``covered funds'' for purposes of the Volcker Rule by (a) stating
that ``[they] believe that FMUs are not investment vehicles of the
type [the Volcker Rule] was designed to address, but rather entities
that generally engage in other activities, including acting as
central counterparties that reduce counterparty risk in clearing and
settlement activities'' and (b) noting that ``if the FMU is
primarily engaged in transferring, clearing, or settling payments,
securities, or other financial transactions among or between
financial institutions, the FMU could rely on the exclusion to the
definition of investment company provided by section 3(b)(1)'' of
the Act. See 79 FR 5536, 5700 (Jan. 31, 2014).
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    Applicant represents that substantially all of its activities since
its formation have been devoted to providing clearing, settlement, risk
management, CCP and ancillary services to its Members, and Applicant
intends to continue to be primarily engaged in providing such services.
    Applicant further represents that all of its issued and outstanding
shares are held by DTCC. Applicant states that its shares have not
been, and will not be, held out as a financial investment for profit to
the public.
    b. Public Representations of Policy. Applicant states that it has
never made any public representations that would indicate that it is in
any business other than providing clearing, settlement, risk
management, CCP and ancillary services. Applicant represents that it
has never held itself out as an investment company within the meaning
of the Act. Applicant provides that all annual reports, web postings,
press releases and written communications issued by Applicant have
related to its business of providing clearing, settlement, risk
management, CCP and ancillary services. Applicant states that no press
release or advertising or promotional piece has been issued by
Applicant concerning its holdings of investment securities or its
capital investment policies, or concerning any potential for profit or
appreciation in value relating to its own shares.
    c. Activities of Officers and Directors. Applicant represents that
all of its directors and officers devote substantially all of their
time spent on Applicant's matters to its business of providing
clearing, settlement, risk management, CCP and ancillary services.
Applicant states that its directors and officers receive no extra or
separate compensation for any services that may directly or indirectly
involve Applicant's investment securities. Applicant states that the
composition of its Board of Directors is designed to comply with the
fair representation requirement for clearing agencies set forth in
Exchange Act Section 17A and the governance standards for registered
clearing agencies set forth in Exchange Act Rule 17Ad-22.
    d. Nature of Assets. Applicant states that, as a service
organization and a wholly-owned subsidiary of DTCC, Applicant owns very
few fixed assets and the vast majority of its assets consist of cash
and securities. Applicant states that, as of March 31, 2017, it had
about $7.85 billion in total assets, of which cash and cash equivalents
accounted for about $2.89 billion (36.84%), Members' segregated cash
accounted for about $29.59 million (0.38%), receivables accounted for
about $32.82 million (0.42%), other current assets accounted for about
$5.19 million (0.07%) and Clearing Fund accounted for about $4.84
billion (61.65%). Applicant states that, as of March 31, 2017, it owned
Government securities valued at $201.60 million (2.57% of total assets)
but did not own investment securities (as defined in Section 3(a)(2) of
the Act).
    Applicant states that it has previously held greater than 40% of
the value of its total assets, exclusive of Government securities and
cash items, in bank CDs and other investment securities (as defined in
Section 3(a)(2) of the Act), and Applicant may wish to do so again.
Applicant believes that the fact that it has held, and may again wish
to hold, investment securities in excess of the 40% threshold should
not preclude a finding that it is engaged primarily in a business other
than that of investing, reinvesting, owning, holding or trading in
securities, provided that it uses its investment securities for bona
fide purposes relating to its clearing, settlement, risk management,
CCP and ancillary services, and that it does not invest or trade in
securities for speculative purposes.
    Applicant states that it provides CCP services and certain trade
guarantees to its Members and requires Members that utilize such
services to make required deposits to the Clearing Fund. Applicant
notes that it is a clearing agency registered under the Exchange Act
and, as such, is subject to comprehensive regulation by the Commission.
Applicant further notes that it is a SIFMU designated by FSOC under
Title VIII of the Dodd-Frank Act and, as such, is subject to enhanced
supervision by the Commission in consultation with the FRB. Applicant
represents that its allocation, management and use of investment
securities is consistent with its business of providing CCP and trade
guaranty services to its Members. Applicant represents that all of its
investments are and will be managed in accordance with the Clearing
Agency Investment Policy. Applicant states that it bears the entire
counterparty risk for the obligations of Members to each other with
respect to all trades guaranteed by Applicant. Applicant explains that
it manages this risk by, among other things, requiring Members to
maintain deposits in the Clearing Fund; however, that does not transfer
the risk from Applicant. Accordingly, Applicant submits that its
primary business for purposes of Section 3(b)(2) of the Act may be
determined without regard to the nature of its assets.
    e. Sources of Income. Applicant represents that it has always
received the vast majority of its revenues from the provision of
clearing, settlement, risk management, CCP and ancillary services to
its Members and not from interest on investment securities. Applicant
states that, for the quarter ended March 31, 2017, it derived about
$70.56 million of its total revenues from the provision of clearing
services, about $27.21 million from ancillary services (WMS and I&RS),
and $0.79 million from settlement and asset services. Applicant states
that it realized interest income of about $5.87 million for the quarter
ended March 31, 2017. Applicant further provides that, for the year
ended December 31, 2016, it had total revenues of $378,943,000 and
interest income of $11,325,000. Applicant states that it currently
invests its cash in Government securities and bank deposits. Applicant
notes that total revenues as presented in the application and the
Applicant's financial statements reflect revenues from operations and
do not include interest income (Applicant's financial statements
account for interest income as a separate line item). Applicant further
states that it does not break out its expenses using a cost allocation
method such that a net income after taxes figure is available for each
category of services or interest income. Accordingly, Applicant submits
that its revenues, not net income, should be used as the basis for
evaluating its investment company status.
    Applicant projects that its interest income will increase over the
next three years, reaching an estimated $55,700,000 in 2019. Applicant
represents that the projected increase in interest income will mostly
be driven by growth in Applicant's CP Program and

rising interest rates. Applicant states that this projection also
reflects anticipated increases in its holdings of investment securities
should the Commission grant the requested Order; however, Applicant
does not anticipate that its interest income from investment securities
would ever represent other than a small amount as compared to its total
revenues. Applicant further states that its projected increase in
interest income will not result in any material increase in net income
for Applicant because (a) it passes through to its Members
substantially all of its earnings on Clearing Fund cash and (b) its
earnings on CP Program proceeds are substantially offset by its
interest expense on the commercial paper notes and extendible notes
that are issued to holders.
    5. Applicant asserts that its historical development, its public
representations of policy, the activities of its officers and directors
and its sources of revenue, as discussed in the application,
demonstrate that it is engaged primarily in the business of providing
clearing, settlement, risk management, CCP and ancillary services to
its Members, and not in an investment business. Applicant thus asserts
that it satisfies the criteria for issuing an order under Section
3(b)(2) of the Act.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-21282 Filed 10-3-17; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 78, Number 3 (Friday, January 4, 2013)]
[Notices]
[Pages 716-717]
[FR Doc No: 2012-31680]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

Combined Notice of Filings

    Take notice that the Commission received the following electric
rate filings:

Filings Instituting Proceedings

    Docket Numbers: RP13-416-000.
    Applicants: Rockies Express Pipeline LLC.
    Description: Rate Schedule FTS and ITS correction to RP13-326 to be
effective 12/1/2012.
    Filed Date: 12/27/12.
    Accession Number: 20121227-5139.
    Comments Due: 5 p.m. ET 1/8/13.

    Docket Numbers: RP13-417-000.
    Applicants: Florida Gas Transmission Company, LLC.
    Description: Annual Accounting Report filing on 12/28/12 to be
effective N/A.
    Filed Date: 12/28/12.
    Accession Number: 20121228-5045.
    Comments Due: 5 p.m. ET 1/9/13.

    Docket Numbers: RP13-418-000.
    Applicants: Sea Robin Pipeline Company, LLC.
    Description: Annual Flowthrough Crediting Mechanism filing on 12/
28/12 to be effective N/A.
    Filed Date: 12/28/12.
    Accession Number: 20121228-5046.
    Comments Due: 5 p.m. ET 1/9/13.

    Docket Numbers: RP13-419-000.
    Applicants: Midwestern Gas Transmission Company.
    Description: Update of Part 8, Section 32 to be effective 1/28/
2013.
    Filed Date: 12/28/12.
    Accession Number: 20121228-5047.
    Comments Due: 5 p.m. ET 1/9/13.

    Docket Numbers: RP13-420-000.
    Applicants: Columbia Gas Transmission, LLC.
    Description: Environmental Filing 2012 to be effective 2/1/2013.
    Filed Date: 12/28/12.
    Accession Number: 20121228-5048.
    Comments Due: 5 p.m. ET 1/9/13.
    Any person desiring to intervene or protest in any of the above
proceedings must file in accordance with Rules 211 and 214 of the
Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00
p.m. Eastern time on the specified comment date. Protests may be
considered, but intervention is necessary to become a party to the
proceeding.

Filings in Existing Proceedings

    Docket Numbers: RP13-234-001.
    Applicants: Pine Needle LNG Company, LLC.
    Description: Pine Needle LNG Company, LLC. submits tariff filing
per 154.203: PN Limit Sec 4 Compliance to be effective N/A.
    Filed Date: 12/27/12.
    Accession Number: 20121227-5055.
    Comments Due: 5 p.m. ET 1/8/13.
    Any person desiring to protest in any the above proceedings must
file in accordance with Rule 211 of the Commission's Regulations (18
CFR 385.211) on or before 5:00 p.m. Eastern time on the specified
comment date.
    The filings are accessible in the Commission's eLibrary system by
clicking on the links or querying the docket number.
    eFiling is encouraged. More detailed information relating to filing
requirements, interventions, protests, and service can be found at:
http://www.ferc.gov/docs-filing/efiling/filing-req.pdf. For other
information, call<PHONE_NUMBER> (toll free). For TTY, call (202) 502-
8659.

     Dated:December 28, 2012.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2012-31680 Filed 1-3-13; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 85, Number 2 (Friday, January 3, 2020)]
[Notices]
[Pages 391-394]
[FR Doc No: 2019-28414]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87870; File No. SR-NASDAQ-2019-095]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Modify the Exchange's All-Inclusive Annual Listing Fees for Exchange
Traded Products

December 30, 2019.
    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 December 23, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``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 modify the Exchange's all-inclusive annual
listing fees for exchange traded products under Nasdaq Rule 5940(b).
While changes proposed herein are effective upon filing, the Exchange
has designated the proposed amendments to be operative on January 2,
2020. Therefore, any exchange traded product that lists on Nasdaq
before January 2, 2020 will be subject to the rule as in effect before
this amendment.\3\
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    \3\ Nasdaq will maintain in its online rule book, until January
2, 2020, a link to the text of the rule as in effect before this
amendment.
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    The text of the proposed rule change is available on the Exchange's
website at http://nasdaq.cchwallstreet.com, 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 modify the Exchange's
all-inclusive annual listing fees (``All-Inclusive Annual Listing
Fee'') for exchange traded products (``ETPs'') under Nasdaq Rule
5940(b).\4\ As stated in Nasdaq Rule 5940(b)(1), the issuer of a series
of Portfolio Depository Receipts, Index Fund Shares, Managed Fund
Shares or other security listed under the Nasdaq Rule 5700 Series where
no other fee schedule is specifically applicable listed on The Nasdaq
Global Market pays to Nasdaq an All-Inclusive Annual Listing Fee,
calculated on total shares outstanding (``TSO'') \5\ and as set forth
in Nasdaq Rule 5940(b)(1).\6\ The proposed rule changes are designed to
incentivize issuers to list new products, transfer existing products to
the Exchange, and retain listings on the Exchange, which the Exchange
believes will enhance competition both among issuers and listing
venues, to the benefit of investors. In addition, and as described
below, the proposed fee changes will also allow for increased
investment by the Exchange into its ETP business and allow for
enhancements that will benefit issuers of Nasdaq-listed ETPs and their
investors.
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    \4\ See Nasdaq Rule 5940(b).
    \5\ In addition, proposed Nasdaq Rule 5940(b)(3) would calculate
TSO as ``the aggregate number of shares, issued by one or more
Companies with the same sponsor, of Portfolio Depository Receipts,
Index Fund Shares, Managed Fund Shares or other security listed
under the Nasdaq Rule 5700 Series where no other fee schedule is
specifically applicable, listed on The Nasdaq Global Market as shown
in the Company's most recent periodic report required to be filed
with the Company's appropriate regulatory authority or in more
recent information held by Nasdaq. For purposes of this rule,
``sponsor'' is defined as an investment adviser (or investment
advisers who are ``affiliated persons'' as defined in Section
2(a)(3) of the Investment Company Act of 1940, as amended) to one or
more Companies.''
    \6\ See Nasdaq Rule 5940(b)(1).
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    The fees in the current All-Inclusive Annual Listing Fee schedule
have remained unchanged for more than 17 years since they were first
adopted back in 2002.\7\ The ETP world has evolved greatly since 2002
when ETPs in the U.S. numbered approximately 130 with total net assets
of $102 billion. Compare this to 2018 when the number of ETPs in the
U.S. had grown to over 2,300 with $3.37 trillion in total net
assets.\8\
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    \7\ See Securities Exchange Act Release No. 45920 (May 13,
2002), 67 FR 35605 (May 20, 2002) (SR-NASD-2002-45).
    \8\ See M. Sznuguera. Number of ETPs in the U.S. 2000-2018 (Mar.
15, 2019) (Graph); Total net assets of ETFs in the U.S. 2002-2018
(May 10, 2019) (Graph). Retrieved from Statista database.
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    Under the current All-Inclusive Annual Listing Fees schedule,
included below, there are 17 pricing tiers. The tiers begin with the
lowest pricing tier of $6,500 for TSOs of up to 1 million to the top
pricing tier of $14,500 for TSOs over 16 million.
    As detailed in the charts below, the proposed new fee schedule
reduces the number of pricing tiers from 17 to 10. The 10 new proposed
pricing tiers begin with the lowest pricing tier of up to 1 million TSO
to the top pricing tier for over 250 million TSO. The proposed All-
Inclusive Annual Listing Fees range from $6,000 to $50,000. In each
case, the All-Inclusive Annual Listing Fee will be based on a sponsor's
\9\ aggregate TSO.
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    \9\ As proposed, the term ``sponsor'' is defined as an
investment adviser (or investment advisers who are ``affiliated
persons'' as defined in Section 2(a)(3) of the Investment Company
Act of 1940, as amended) to one or more Companies.
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    As a result of the Exchange simplifying the pricing tiers for its
All-

Inclusive Annual Fee for ETPs by reducing their number from 17 to 10,
some sponsors may pay more while others may pay the same or less.
Specifically, the Exchange will charge an All-Inclusive Annual Listing
Fee for ETPs with the fewest total shares outstanding (sponsors with up
to 1 million TSO) of $500 less.\10\ Sponsors in the next proposed
pricing tier of 1+ to 5 million shares TSO will pay from $1,000 less to
$500 more. Sponsors in the next proposed pricing tier of 5+ to 10
million shares TSO will pay from $1,000 less to $1,000 more. Put
another way, sponsors with a TSO up to the current TSO tier of 10
million will see a minimal change to their All-Inclusive Annual Listing
Fees ranging from $1,000 less to $1,000 more. Sponsors in the remaining
proposed pricing tiers will pay more than in the current pricing
schedule.
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    \10\ The All-Inclusive Annual Listing Fee would drop from $6,500
to $6,000.
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    The current All-Inclusive Annual Fee for ETPs listed on The Nasdaq
Global Market are as follows:

                        Exchange Traded Products
Up to 1 million shares..................................          $6,500
1+ to 2 million shares..................................           7,000
2+ to 3 million shares..................................           7,500
3+ to 4 million shares..................................           8,000
4+ to 5 million shares..................................           8,500
5+ to 6 million shares..................................           9,000
6+ to 7 million shares..................................           9,500
7+ to 8 million shares..................................          10,000
8+ to 9 million shares..................................          10,500
9+ to 10 million shares.................................          11,000
10+ to 11 million shares................................          11,500
11+ to 12 million shares................................          12,000
12+ to 13 million shares................................          12,500
13+ to 14 million shares................................          13,000
14+ to 15 million shares................................          13,500
15+ to 16 million shares................................          14,000
Over 16 million shares..................................          14,500
------------------------------------------------------------------------

    The proposed All-Inclusive Annual Fee for ETPs listed on The Nasdaq
Global Market are as follows and effective January 2, 2020:

                        Exchange Traded Products
Up to 1 million shares..................................          $6,000
1+ to 5 million shares..................................           7,500
5+ to 10 million shares.................................          10,000
10+ to 25 million shares................................          15,000
25+ to 50 million shares................................          20,000
50+ to 75 million shares................................          25,000
75+ to 100 million shares...............................          30,000
100+ to 150 million shares..............................          35,000
150+ to 250 million shares..............................          40,000
250+ million shares.....................................          50,000
------------------------------------------------------------------------

    As described below, Nasdaq believes that the aforementioned
proposed fee changes better reflect the value provided by the Exchange
to issuers of ETPs.
    Nasdaq also proposes a change to Nasdaq Rule 5940(b)(3) as to how
the Exchange calculates ``total shares outstanding'' by aggregating the
number of shares of all Portfolio Depository Receipts, Index Fund
Shares, Managed Fund Shares or other security listed under the Nasdaq
Rule 5700 Series where no other fee schedule is specifically
applicable, issued by one or more Companies \11\ with the same sponsor,
listed on The Nasdaq Global Market, and to ensure that the All-
Inclusive Annual Listing Fees under Nasdaq Rule 5940(b)(1) are
calculated correctly.\12\ Additionally, Nasdaq proposes to amend Nasdaq
Rule 5940(b)(3) to define the term ``sponsor'' for the purposes of
assessing the fees in Nasdaq Rule 5940(b)(1).\13\ Nasdaq believes the
term ``sponsor'' is a frequently used term throughout the investment
community to refer to the entity that oversees the issuers of ETPs and
that the inclusion in the proposed rule language clarifies Nasdaq's
method for calculating the All-Inclusive Annual Fee.
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    \11\ Nasdaq Rule 5005(a)(6) defines ``Company'' as ``the issuer
of a security listed or applying to list on Nasdaq. For purposes of
the Nasdaq Rule 5000 Series, the term ``Company'' includes an issuer
that is not incorporated, such as, for example, a limited
partnership.''
    \12\ This change will not result in any impact on sponsors
because it reflects the Exchange's current practice.
    \13\ See supra note 9.
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    Nasdaq proposes to amend Nasdaq Rule 5940(b)(5) to clarify the
application of the rule for market participants. Nasdaq also proposes
to remove references to fees that are no longer applicable because they
were superseded by new fee rates specified in the rule text.
Implementation Date
    While these changes are effective upon filing, Nasdaq has
designated the proposed amendments to be operative on January 2,
2020.\14\
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    \14\ Nasdaq will maintain in its online rule book, until January
2, 2020, a link to the text of the rule as in effect before this
amendment.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\15\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\16\ 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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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4) and (5).
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    Nasdaq believes that the proposed rule change is a reasonable, fair
and equitable, and not unfairly discriminatory allocation of fees and
other charges because the All-Inclusive Annual Fee for ETPs, as
amended, provides sponsors with a fair and economical way to list
multiple ETPs without incurring significant additional cost. Overall,
Nasdaq believes that the proposed rule change is a reasonable attempt
to attract new issuers and sponsors, retain existing listings on the
Exchange, and is reasonable and necessary to support the enhanced
services provided by the Exchange to issuers of ETPs and as discussed
below.
    As discussed above, sponsors with an aggregate TSO up to the
current TSO tier of 10 million will see a minimal change to their All-
Inclusive Annual Listing Fees ranging from $1,000 less to $1,000 more,
while sponsors in the remaining proposed pricing tiers will pay more
than in the current pricing schedule. Nasdaq believes charging a lower
or slightly modified All-Inclusive Annual Fee for sponsors with smaller
aggregate TSOs will serve to continue to encourage sponsors of smaller
and new to market ETPs to list on the Exchange. Although there will be
some fluctuation as to the amount sponsors will pay within the proposed
lower TSO pricing tiers as compared with what sponsors currently pay
under the lower TSO pricing tiers (generally, a relatively small amount
more or a small amount less), as previously stated, this is to some
extent a result of reducing the current 17 pricing tiers down to 10
pricing tiers. The Exchange also believes that the reduction in the
overall number of pricing tiers will serve to simplify, lessen
confusion and increase the ease of use of the All-Inclusive Annual Fee
schedule.
    The Exchange also believes that it is a reasonable, fair and
equitable, and not unfairly discriminatory allocation of fees and other
charges to increase the All-Inclusive Annual Listing Fee for the other
sponsors, as noted above and as set forth in the chart above, because
of the increased value provided by the Exchange to issuers of ETPs
since the Exchange first established the current rates over 17 years
ago when the number of ETPs and the total net assets of exchange traded
funds was much smaller.\17\ Nasdaq also believes it is not unfairly
discriminatory to charge a higher All-Inclusive Annual Listing Fee for
sponsors with a higher TSO because these proposed fees will be provided
on an equal basis to all sponsors within the same TSO pricing tier.
Additionally, the Exchange believes it is reasonable, fair and
equitable, and not unfairly

discriminatory for sponsors with larger TSOs to pay more since the
Exchange expends more resources on these sponsors.
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    \17\ See supra note 8.
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    The Exchange notes that its general costs have increased, including
due to price inflation. In addition, the Exchange continues to improve
the value it provides to issuers of Nasdaq-listed ETPs through enhanced
services. These improvements include the continued development and
enhancement of Nasdaq's online tools, including the Nasdaq Listing
Center and Reference Library, to the benefit of issuers of Nasdaq-
listed ETPs and prospective investors. In addition, the proposed
increase will help Nasdaq continue to invest in these initiatives and
its regulatory programs. The proposed fee change will also allow for
increased investment by the Exchange into its ETP business, including
operational support, reporting resources and trading market
enhancements, which will benefit issuers of Nasdaq-listed ETPs and
their investors.
    Nasdaq notes that it operates in a highly competitive market in
which issuers can readily switch exchanges for their ETPs if they deem
its All-Inclusive Annual Listing Fees excessive. In such an
environment, Nasdaq must continually review its fees to assure that
they remain competitive. As stated above, Nasdaq believes its All-
Inclusive Annual Fee for ETPs, as amended, is a reasonable, fair and
equitable, and not unfairly discriminatory allocation of fees and other
charges since, in totality, it results in issuer fees that are very
competitive with its competition in this space. Nasdaq notes that
changes to its issuer fees can have a direct effect on the ability of
the Exchange to compete for new listings and retain existing listings
and serves to constrain such fees.
    The Exchange also believes that the proposed change to Nasdaq Rule
5940(b)(3) as to the term ``total shares outstanding'' by aggregating
the number of shares of all Portfolio Depository Receipts, Index Fund
Shares, Managed Fund Shares or other security listed under the Nasdaq
Rule 5700 Series where no other fee schedule is specifically
applicable, issued by one or more Companies with the same sponsor,
listed on The Nasdaq Global Market, to ensure that the calculation of
the All-Inclusive Annual Listing Fees under Nasdaq Rule 5940(b)(1)
reflects the Exchange's current practice,\18\ is consistent with
Section 6(b)(5) of the Act 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 because it
will increase the transparency of the assessment of the All-Inclusive
Annual Listing Fees.
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    \18\ See supra note 12.
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    In addition, the Exchange believes that the proposed change to
Nasdaq Rule 5940(b)(3) as to the term ``sponsor'' to define it as an
investment adviser (or investment advisers who are ``affiliated
persons'' as defined in Section 2(a)(3) of the Investment Company Act
of 1940, as amended) to one or more Companies, is consistent with
Section 6(b)(5) of the Act 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 because it
increases the clarity of the rule.
    Additionally, Nasdaq believes the proposed change to Nasdaq Rule
5940(b)(5) is consistent with Section 6(b)(5) of the Act 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 because it clarifies the application of the rule for
market participants.
    The proposed removal of rule text relating to fees that are no
longer applicable is ministerial in nature and has no substantive
effect.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. The market for
listing ETPs is competitive and sponsors may freely choose alternative
venues. The proposal is a competitive proposal designed to implement
pricing that better reflects the value, revenue and expenses associated
with listing ETPs on the Exchange. Nasdaq notes that changes to its
issuer fees can have a direct effect on the ability of the Exchange to
compete for new listings and retain existing listings and serves to
constrain such fees. For these reasons, Nasdaq does not believe that
the proposed rule change will result in any undue burden on competition
for listing ETPs.

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.\19\
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    \19\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    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_ADDRESS>Please include
File Number SR-NASDAQ-2019-095 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-2019-095. 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-2019-095 and should
be submitted on or before January 24, 2020.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-28414 Filed 1-2-20; 8:45 am]
 BILLING CODE 8011-01-P