Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Nasdaq Rule 5940 To Adopt Entry and Annual Fees for NextShares

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), and Rule 19b-4 thereunder, notice is hereby given that on February 11, 2016, The NASDAQ Stock Market LLC (“NASDAQ” or the “Exchange”) filed with the Securities and Exchange Commission (“Commission”) a 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.

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

Nasdaq is proposing to amend certain fees in Nasdaq Rule 5940 in connection with listing a type of open-end management investment company registered under the Investment Company Act of 1940, as amended (“1940 Act”), called an exchange-traded managed fund (“NextShares”). The shares are collectively referred to herein as “NextShares.”

The text of the proposed rule change is available at nasdaq.cchwallstreet.com at Nasdaq principal office, and at the Commission's Public Reference Room.

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

In its filing with the Commission, Nasdaq included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those 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 parts of such statements.

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

1. Purpose

The Exchange proposes to amend certain fees in Nasdaq Rule 5940 (entitled “Exchange Traded Products”) associated with the listing of NextShares. At the time of the Commission's approval of Nasdaq Rule 5745, Nasdaq did not specify fees applicable to NextShares. The Exchange now proposes to amend Nasdaq Rule 5940 to adopt both the entry fees and annual fees for NextShares.

Specifically, the proposed entry fee for when a company submits an application for listing a series of NextShares under Nasdaq Rule 5745 will be $20,000 for the first series of NextShares (which will include a $1,000 non-refundable application fee) and an additional entry fee of $7,500 for each subsequent series of NextShares (which will include a $1,000 non-refundable application fee).

The proposed annual fee for the issuer of a series of NextShares will be paid for each individual series of NextShares and calculated on total shares outstanding for that specific series of NextShares. The annual fee, which can vary from year to year based on the NextShares' total shares outstanding, will be $6,500 for a series of NextShares with up to 25 million shares; $15,000 for over 25 million to 100 million shares; and $25,000 for over 100 million shares.

The Exchange intends to treat each series of NextShares independently and in connection with the calculation of the proposed annual fee, the Exchange will not aggregate the total shares outstanding across different series from the same issuer or sponsor.

NextShares will have a distinct fee schedule for both entry and annual fees because the costs Nasdaq incurs in support of NextShares is greater than the costs the Exchange incurs with other exchange-traded products (“ETPs”). The increased Nasdaq costs for NextShares, as compared with other ETPs, that the higher entry fees are intended to address, include the technological changes and the platform needed to support the initial listing, launch, and trading of NextShares. The Exchange also anticipates greater costs associated with the necessary regulatory review and extra legal work associated with the launch of each NextShares, which may include the preparation of filings under Section 19(b) of the Exchange Act and initial work with each NextShares licensee.

The increased Nasdaq costs for NextShares, as compared with other ETPs, that the higher annual fees are intended to address, include the ongoing trading and continued support of NextShares by the Exchange. This will require Nasdaq to expend greater resources than it currently expends on other ETPs. Specifically, the Exchange believes that as a result of supporting intra-day NAV-based trading, NextShares' will require additional daily support that is more than what is currently provided for traditional ETPs.

Each series of NextShares has a different investment strategy and strikes a unique net asset value (“NAV”) at the end of each trading day and will require the calculation of a final exchange trading price each day after the NAV is calculated. This involves supplementary operational procedures that are specific to NextShares (e.g., generating two daily trade confirmations, converting intra-day proxy price share trades that are recorded and stored intra-day by Nasdaq to the NextShares' end-of-day NAV, and the determination of final trade pricing). Nasdaq also anticipates an increase in time, effort and expense in responding to trading and data inquiries from third party vendors/counterparties, as compared with what it expends on other ETPs. The Exchange also anticipates greater costs associated with the necessary regulatory review and extra legal work associated with the ongoing support of each NextShares.

2. Statutory Basis

Nasdaq believes that the proposed rule change is consistent with the provisions of Section 6 of the Act, in general, and with Sections 6(b)(4) and (5) of the Act, in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers and other persons using its facilities, and does not unfairly discriminate between customers, issuers, brokers or dealers.

The Exchange believes that the addition of an initial entry fee and an annual fee in connection with each series of NextShares under proposed Nasdaq Rule 5940 is consistent with Section 6(b)(4) of the Act 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 or system that the Exchange operates or controls.

Specifically, Nasdaq believes that although the proposed entry fee of $20,000 for the first series of NextShares (which includes a $1,000 non-refundable application fee) and the additional entry fees of $7,500 for each subsequent series of NextShares (which includes a $1,000 non-refundable application fee) are higher than the entry fee of $5,000 (which includes a $1,000 non-refundable application fee) for other ETPs, the proposed entry fees for NextShares are reasonable because they will help offset the higher costs Nasdaq incurs in support of NextShares as compared with the costs it incurs for other ETPs. These higher costs include the technological changes and the platform needed to support the initial listing, launch, and trading of NextShares, as well as the greater costs that the Exchange anticipates that will be associated with the necessary regulatory review and extra legal work associated with the launch of each NextShares, which may include the preparation of SEC filings and initial work with each NextShares licensee.

The Exchange also believes that the proposed entry fees are equitable and not unfairly discriminatory because the Exchange assesses the same entry fees uniformly and for all series of NextShares. Additionally, Nasdaq believes that although the proposed entry fees are higher than those for other ETPs for the reasons explained above, they are equitable and not unfairly discriminatory.

Nasdaq also believes that the proposed annual fee for the issuer of a series of NextShares that will be paid for each individual series and calculated on total shares outstanding for that specific NextShares is reasonable because it will help offset the higher ongoing costs, including regulatory, legal, surveillance, and operational costs to monitor the listing of NextShares and that these costs are greater than what is currently provided for other ETPs.

These costs include the ongoing trading and continued support of NextShares by the Exchange and will require Nasdaq to expend greater resources than it currently expends on other ETPs. Specifically, the Exchange believes that as a result of supporting intra-day NAV-based trading, NextShares' will require additional daily support that is more than what is currently provided for traditional ETPs. Additionally, each series of NextShares has a different investment strategy and strikes a unique NAV at the end of each trading day and will require the calculation of a final exchange trading price each day after the NAV is calculated. This involves supplementary operational procedures that are specific to NextShares (e.g., generating two daily trade confirmations, converting intra-day proxy price share trades that are recorded and stored intra-day by Nasdaq to the NextShares' end-of-day NAV and the determination of final trade pricing).

Nasdaq also anticipates an increase in time, effort and expense in responding to trading and data inquiries from third party vendors/counterparties, as compared with what it expends on other ETPs. The Exchange also anticipates greater costs associated with the necessary regulatory review and extra legal work associated with the ongoing support of each NextShares.

The Exchange will not aggregate the total shares outstanding across different series of NextShares for purposes of the proposed annual fee. This differs with the methodology used to calculate the total shares outstanding for other ETPs, including Portfolio Depository Receipts, Index Fund Shares, Managed Fund Shares, or other security listed under the Rule 5700 Series where no other fee schedule is specifically applicable listed on The Nasdaq Global Market. The Exchange believes that although the proposed annual fees are higher for NextShares than for other ETPs, for the reasons discussed above, these fees are equitable and not unfairly discriminatory.

For the above reasons, Nasdaq believes the proposed rule change is consistent with the requirements of Sections 6(b)(4) and 6(b)(5) of the Act.

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

The Exchange 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. The Exchange believes that the proposed fees for this new exchange-traded product will promote competition to the benefit of the markets and investors by making NextShares available to investors at a reasonable cost across a broad range of actively managed investment strategies in a structure that offers the cost and tax efficiencies and shareholder protections of exchange-traded funds. In order to remain competitive with other exchanges that also develop and market new ETPs, Nasdaq scrutinizes its fees closely before adopting such entry and annual fees.

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

Written comments were neither solicited nor received.

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

The foregoing change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act. 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 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 email to rule-comments@sec.gov. Please include File Number SR-NASDAQ-2016-025 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-2016-025. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal offices 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-2016-025, and should be submitted on or before March 17, 2016.