Citation: "79 FR 35598"
Document Number: "Release No. 34-72411; File No. SR-NASDAQ-2014-040"
June 17, 2014.
FOOTNOTE 1 15 U.S.C.78s(b)(1). END FOOTNOTE
FOOTNOTE 2 17 CFR 240.19b-4. END FOOTNOTE
FOOTNOTE 3 See Securities Exchange Act Release No. 72096 (
II. Description of the Proposed Rule Change
A. The Exchange's Proposal
The Exchange proposes to list and trade Shares of the Fund under Nasdaq Rule 5735, which governs the listing and trading of Managed Fund Shares on the Exchange. The Shares will be offered by
FOOTNOTE 4 The Trust has filed a registration statement on Form N-1A ("Registration Statement") with the Commission. See Initial Registration Statement on Form N-1A for the Trust, dated
Calamos Advisors LLC will be the investment adviser ("Adviser") to the Fund.
The Exchange represents that the Adviser is not a broker-dealer, but is affiliated with
FOOTNOTE 5 See Nasdaq Rule 5735(g). The Exchange states that, in the event (a) the Adviser becomes newly affiliated with a broker-dealer or registers as a broker-dealer, or (b) any new adviser or sub-adviser is a registered broker-dealer or becomes affiliated with a broker-dealer, [the Adviser, or the relevant adviser or sub-adviser,] will implement a fire wall with respect to its relevant personnel and its broker-dealer affiliate, if applicable, regarding access to information concerning the composition of or changes to the portfolio and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding the portfolio. END FOOTNOTE
FOOTNOTE 6 See 17 CFR 240.10A-3. END FOOTNOTE
B. The Exchange's Description of the Fund
The Exchange has made the following additional representations and statements in describing the Fund and its investment strategy, including portfolio holdings and investment restrictions.
According to the Exchange, the Fund's primary investment objective is to achieve long-term capital growth. The Fund will pursue its objective by investing primarily, i.e., at least 80% of its assets under normal market conditions, /7/ in U.S. exchange-listed equity securities. Under normal market conditions, the Fund will invest primarily in companies with market capitalization of greater than
FOOTNOTE 7 The term "under normal market conditions" as used herein includes, but is not limited to, the absence of adverse market, economic, political, or other conditions, including extreme volatility or trading halts in the securities markets or the financial markets generally; operational issues causing dissemination of inaccurate market information; or force majeure type events such as systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption, or any similar intervening circumstance. In periods of extreme market disturbance, the Fund may take temporary defensive positions, by overweighting its portfolio in cash or cash-like instruments; however, to the extent possible, the Adviser would continue to seek to achieve the Fund's investment objectives. END FOOTNOTE
When buying and selling growth-oriented securities, the Adviser will focus on the company's growth potential coupled with financial strength and stability. When selecting specific growth-oriented securities, the Adviser will combine its top-down macroeconomic views with individual security selection based on qualitative and quantitative research. The equity securities held by the Fund may include small- and mid-cap sized companies. The Fund may invest in equity securities issued by other registered investment companies (including money market funds).
The Fund may invest up to 25% of its assets in foreign securities. The Fund's investment in such stocks may be in the form of direct investments in non-U.S. securities that are listed on non-U.S. exchanges or in the form of American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs"), and European Depositary Receipts ("EDRs") (collectively, "Depositary Receipts"). /8/ With respect to its investments in exchange-listed common stocks and Depositary Receipts of non-U.S. issuers, the Fund will generally invest in securities that trade in markets that are members of the
FOOTNOTE 8 Depositary Receipts are receipts, typically issued by a bank or trust issuer, that evidence ownership of underlying securities issued by a non-U.S. issuer. For ADRs, the depository is typically a U.S. financial institution and the underlying securities are issued by a non-U.S. issuer. For other forms of Depositary Receipts, the depository may be a non-U.S. or a U.S. entity, and the underlying securities may be issued by a non-U.S. or a U.S. issuer. Depositary Receipts are not necessarily denominated in the same currency as their underlying securities. Generally, ADRs, issued in registered form, are designed for use in the U.S. securities markets, and EDRs, issued in bearer form, are designed for use in European securities markets. GDRs are tradable both in
The Fund will generally invest in sponsored Depositary Receipts that are listed on ISG member exchanges and that the Adviser deems as liquid at time of purchase. In certain limited circumstances, the Fund may invest in unlisted or unsponsored Depositary Receipts, Depositary Receipts listed on non-ISG member exchanges, or Depositary Receipts that the Adviser deems illiquid at the time of purchase or for which pricing information is not readily available. /9/ The issuers of unlisted or unsponsored Depositary Receipts are not obligated to disclose material information in
FOOTNOTE 9 Not more than 10% of the net assets of the Fund, in the aggregate, will be invested in (1) unlisted or unsponsored Depositary Receipts; (2) Depositary Receipts not listed on an exchange that is a member of the ISG or a party to a comprehensive surveillance sharing agreement with the Exchange; or (3) unlisted common stocks or common stocks not listed on an exchange that is a member of the ISG or a party to a comprehensive surveillance sharing agreement with the Exchange. END FOOTNOTE
While the Fund under normal circumstances will invest at least 80% of its assets in exchange-listed equity securities issued by U.S. companies, the Fund may invest the remaining assets in a variety of other securities and investments in support of its primary investment strategy, including, but not limited to: Equity securities traded over-the-counter; /10/ convertible securities; synthetic convertible instruments; debt securities (including high-yield fixed-income securities, loan participations and assignments, inflation-indexed bonds, municipal bonds,
FOOTNOTE 10 See Notice, supra note 3, 79 FR at 26791 (noting that not more than 10% of the net assets of the Fund, in the aggregate, will be invested in certain Depositary Receipts or in unlisted common stocks or common stocks not listed on an exchange that is a member of the ISG or a party to a comprehensive surveillance sharing agreement with the Exchange). END FOOTNOTE
FOOTNOTE 11 The term "stripped security," as used herein, means a security that evidences ownership in either the future interest payments or the future principal payments on underlying
FOOTNOTE 12 The term "money market instruments," as used herein, means: (i) Short-term obligations issued by the
The Fund may hold up to an aggregate amount of 15% of its net assets in illiquid securities or other illiquid assets (calculated at the time of investment). The Fund will monitor its portfolio liquidity on an ongoing basis to determine whether, in light of current circumstances, an adequate level of liquidity is being maintained and will consider taking appropriate steps in order to maintain adequate liquidity if, through a change in values, net assets, or other circumstances, more than 15% of the Fund's net assets are held in illiquid assets. Illiquid assets include securities subject to contractual or other restrictions on resale and other instruments that lack readily available markets as determined in accordance with Commission staff guidance.
The Fund may not invest more than 25% of the value of its total assets in securities of issuers in any one industry or group of industries. This restriction does not apply to obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, or securities of other registered investment companies.
Additional information regarding the Trust, Fund, and Shares, including investment strategies and restrictions, risks, creation and redemption procedures, fees, portfolio holdings, disclosure policies, distributions and taxes, calculation of net asset value per share ("NAV"), availability of information, trading rules and halts, and surveillance procedures, among other things, can be found in the Notice, Registration Statement, and Exemptive Order, as applicable. /13/
FOOTNOTE 13 See Notice, supra note 3; see also Registration Statement and Exemptive Order, supra note 4. END FOOTNOTE
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of Section 6 of the Act; /14/ and the rules and regulations thereunder applicable to a national securities exchange. /15/ In particular, the Commission finds that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act, /16/ which requires, among other things, that the Exchange's rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, 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. The Commission notes that the Fund and the Shares must comply with the requirements of Nasdaq Rule 5735 to be listed and traded on the Exchange.
FOOTNOTE 14 15 U.S.C. 78(f). END FOOTNOTE
FOOTNOTE 15 In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). END FOOTNOTE
FOOTNOTE 16 15 U.S.C. 78f(b)(5). END FOOTNOTE
The Commission finds that the proposal to list and trade the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Act, /17/ which sets forth
FOOTNOTE 17 15 U.S.C. 78k-1(a)(1)(C)(iii). END FOOTNOTE
FOOTNOTE 18 See Notice, supra note 3, 79 FR at 26794. END FOOTNOTE
FOOTNOTE 19 According to the Exchange, the NASDAQ OMX Global Index Data Service offers real-time updates, daily summary messages, and access to widely followed indexes and Intraday Indicative Values for exchange-traded funds. See id. at 26793. END FOOTNOTE
FOOTNOTE 20 See id. END FOOTNOTE
FOOTNOTE 21 On a daily basis, the Disclosed Portfolio will include each portfolio security and other financial instruments of the Fund with the following information on the Fund's Web site: (1) Ticker symbol (if applicable); (2) name of security and financial instrument; (3) number of shares (if applicable);
FOOTNOTE 22 See id. at 26791. The Exchange notes that, for purposes of calculating NAV, exchange-traded equities; futures contracts on securities indices and options on futures contracts on securities indices; warrants; exchange-traded options on exchange-traded securities, indexes, or currencies; sponsored or unsponsored Depositary Receipts; or other exchange-traded securities will be valued at the official closing price on their principal exchange or board of trade, or, lacking any current reported sale at the time of valuation, at the mean between the most recent bid and asked quotations on its principal exchange or board of trade. Portfolio securities traded on more than one securities exchange will be valued at the last sale price or official closing price, as applicable, on the exchange representing the principal market for the securities. Equity securities traded over-the-counter, convertible securities, synthetic convertible instruments, debt securities (including high-yield fixed-income securities, loan participations and assignments, inflation-indexed bonds, municipal bonds,
FOOTNOTE 23 See id. at 26794. END FOOTNOTE
FOOTNOTE 24 See id. END FOOTNOTE
FOOTNOTE 25 See id. at 26793. END FOOTNOTE
FOOTNOTE 26 See id. at 26794. END FOOTNOTE
FOOTNOTE 27 See id. at 26793. END FOOTNOTE
The Commission further believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. The Commission notes that the Exchange will obtain a representation from the issuer of the Shares that the NAV will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time. /28/ Further, trading in the Shares will be subject to Nasdaq 5735(d)(2)(D), which sets forth circumstances under which trading in the Shares may be halted. /29/ The Exchange also may halt trading in the Shares if trading is not occurring in the securities or the financial instruments constituting the Disclosed Portfolio or if other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. /30/ Further, the Commission notes that the Reporting Authority that provides the Disclosed Portfolio must implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material, non-public information regarding the actual components of the portfolio. /31/ The Exchange states that it has a general policy prohibiting the distribution of material, non-public information by its employees. /32/ The Exchange also states that the Adviser is not a broker-dealer but is affiliated with a broker-dealer and that the Adviser has implemented a fire wall with respect to its broker-dealer affiliate regarding access to information concerning the composition or changes to the portfolio. /33/ The
FOOTNOTE 28 See id. at 26794. END FOOTNOTE
FOOTNOTE 29 See id. END FOOTNOTE
FOOTNOTE 30 See id. See also Nasdaq Rule 5735(d)(2)(C) (providing additional considerations for the suspension of trading in or removal from listing of Managed Fund Shares on the Exchange). With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund. Nasdaq will halt or pause trading in the Shares under the conditions specified in Nasdaq Rules 4120 and 4121, including the trading pauses under Nasdaq Rules 4120(a)(11) and (12). Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable.
FOOTNOTE 31 See Nasdaq Rule 5735(d)(2)(B)(ii). END FOOTNOTE
FOOTNOTE 32 See Notice, supra note 3, 79 FR at 26795. END FOOTNOTE
FOOTNOTE 33 See supra note 5 and accompanying text. The Exchange further represents that an investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 ("Advisers Act"). As a result, the Adviser and its related personnel are subject to the provisions of Rule 204A-1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with applicable federal securities laws as defined in Rule 204A-1(e)(4). Accordingly, procedures designed to prevent the communication and misuse of nonpublic information by an investment adviser must be consistent with Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful for an investment adviser to provide investment advice to clients unless such investment adviser has (i) adopted and implemented written policies and procedures reasonably designed to prevent violation, by the investment adviser and its supervised persons, of the Advisers Act and the Commission rules adopted thereunder; (ii) implemented, at a minimum, an annual review regarding the adequacy of the policies and procedures established pursuant to subparagraph (i) above and the effectiveness of their implementation; and (iii) designated an individual (who is a supervised person) responsible for administering the policies and procedures adopted under subparagraph (i) above. END FOOTNOTE
FOOTNOTE 34 For a list of the current members of ISG, See www.isgportal.org. END FOOTNOTE
In support of this proposal, the Exchange has made representations, including:
(1) The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange's existing rules governing the trading of equity securities.
(2) The Shares will be subject to Rule 5735, which sets forth the initial and continued listing criteria applicable to Managed Fund Shares.
(3) The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions.
(4) Prior to the commencement of trading, the Exchange will inform its members in an Information Circular of the special characteristics and risks associated with trading the Shares. Specifically, the Information Circular will discuss the following: (a) The procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (b) Nasdaq Rule 2111A, which imposes suitability obligations on Nasdaq members with respect to recommending transactions in the Shares to customers; (c) how information regarding the Intraday Indicative Value is disseminated; (d) the risks involved in trading the Shares during the Pre-Market and Post-Market Sessions when an updated Intraday Indicative Value will not be calculated or publicly disseminated; (e) the requirement that members deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (f) trading information.
(5) Trading in the Shares will be subject to the existing trading surveillances, administered by both Nasdaq and FINRA, /35/ on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws, and these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws.
FOOTNOTE 35 According to the Exchange, FINRA surveils trading on the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA's performance under this regulatory services agreement.
(6) Not more than 10% of the net assets of the Fund, in the aggregate, will be invested in: (a) Unlisted or unsponsored Depositary Receipts; (b) Depositary Receipts not listed on an exchange that is not a member of ISG or a party to a comprehensive surveillance sharing agreement with the Exchange; or (c) unlisted common stocks or common stocks not listed on an exchange that is a member of the ISG or a party to a comprehensive surveillance sharing agreement with the Exchange. In addition, all futures and options held by the Fund will be listed on an exchange that is a member of the ISG or a party to a comprehensive surveillance sharing agreement with the Exchange.
(7) For initial and continued listing, the Fund must be in compliance with Rule 10A-3 under the Exchange Act. /36/
FOOTNOTE 36 17 CFR 240.10A-3. END FOOTNOTE
(8) A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange.
(9) The Fund will invest at least 80% of its assets under normal market conditions in U.S. exchange-listed equity securities. The Fund will invest primarily in companies with market capitalization of greater than
(10) The Fund may hold up to an aggregate amount of 15% of its net assets in illiquid assets (calculated at the time of investment); will monitor its portfolio liquidity on an ongoing basis to determine whether, in light of current circumstances, an adequate level of liquidity is being maintained; and will consider taking appropriate steps in order to maintain adequate liquidity if, through a change in values, net assets, or other circumstances, more than 15% of the Fund's net assets are held in illiquid assets.
(11) The Fund does not intend to use its other investments to create a leveraged return on the Fund's portfolio.
(12) The Fund's investments will be consistent with the Fund's investment objective.
This approval order is based on all of the Exchange's representations and description of the Fund, including those set forth above and in the Notice.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act, /37/ that the proposed rule change (SR-NASDAQ-2014-040), be, and it hereby is, approved.
FOOTNOTE 37 15 U.S.C. 78s(b)(2). END FOOTNOTE
For the Commission, by the
FOOTNOTE 38 17 CFR 200.30-3(a)(12). END FOOTNOTE
Kevin M. O'Neill,
[FR Doc. 2014-14541 Filed 6-20-14;
BILLING CODE 8011-01-P
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