[Federal Register Volume 79, Number 115 (Monday, June 16, 2014)]
[Notices]
[Pages 34376-34384]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-13932]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72357; File No. SR-NASDAQ-2014-059]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change Relating to the Listing and 
Trading of the Shares of the Global X Commodities ETF of Global X Funds

June 10, 2014.
    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 May 28, 2014, The NASDAQ Stock Market LLC (``Nasdaq'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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 proposes to list and trade the shares of Global X 
Commodities Strategy ETF (the ``Fund'') of Global X Funds (the 
``Trust'') under Nasdaq Rule 5735 (``Managed Fund Shares''). The shares 
of the Fund are collectively referred to herein as the ``Shares.''
    The text of the proposed rule change is available 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, Nasdaq included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. Nasdaq 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 Exchange proposes to list and trade the Shares of the Fund 
under Nasdaq Rule 5735, which governs the listing and trading of 
Managed Fund Shares \3\ on the Exchange.\4\ The Fund will be an 
actively-managed exchange-traded fund (``ETF''). The Shares will be 
offered by the Trust, which was established as a Delaware statutory 
trust on March 6, 2008.\5\ The Trust is registered with the Commission 
as an investment company and has filed a registration statement on Form 
N-1A (``Registration Statement'') with the Commission.\6\ The Fund will 
be a series of the Trust. The Fund will invest in, among other things, 
exchange-traded futures contracts and exchange-traded commodity-linked 
instruments held indirectly through a wholly-owned subsidiary 
controlled by the Fund and organized under the laws of the Cayman 
Islands (referred to herein as the ``Subsidiary'').
---------------------------------------------------------------------------

    \3\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (the ``1940 Act'') organized 
as an open-end investment company or similar entity that invests in 
a portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Index Fund Shares, listed 
and traded on the Exchange under Nasdaq Rule 5705, seeks to provide 
investment results that correspond generally to the price and yield 
performance of a specific foreign or domestic stock index, fixed 
income securities index or combination thereof.
    \4\ The Commission approved Nasdaq Rule 5735 in Securities 
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June 
20, 2008) (SR-NASDAQ-2008-039). The Fund would not be the first 
actively-managed fund listed on the Exchange; see Securities 
Exchange Act Release No. 66489 (February 29, 2012), 77 FR 13379 
(March 6, 2012) (SR-NASDAQ-2012-004) (order approving listing and 
trading of WisdomTree Emerging Markets Corporate Bond Fund). The 
Exchange believes the proposed rule change raises no significant 
issues not previously addressed in those prior Commission orders.
    \5\ The Trust will obtain from the Commission an order granting 
certain exemptive relief to the Trust under the 1940 Act (File No. 
812-14241). In compliance with Nasdaq Rule 5735(b)(5), which applies 
to Managed Fund Shares based on an international or global 
portfolio, the Trust's application for exemptive relief under the 
1940 Act states that the Fund will comply with the federal 
securities laws in accepting securities for deposits and satisfying 
redemptions with redemption securities, including that the 
securities accepted for deposits and the securities used to satisfy 
redemption requests are sold in transactions that would be exempt 
from registration under the Securities Act of 1933 (15 U.S.C. 77a).
    \6\ See Registration Statement on Form N-1A for the Trust dated 
May 23, 2014 (File No. 811-22209). The descriptions of the Fund and 
the Shares contained herein are based, in part, on information in 
the Registration Statement.
---------------------------------------------------------------------------

    Global X Management Company LLC will be the investment adviser (the 
``Adviser'') and administrator to the Fund and will monitor the Fund's 
investment portfolio. The Fund and the Adviser will contract with an 
investment sub-adviser (the ``Sub-Adviser'') to provide day-to-day 
portfolio management for the Fund. SEI Investments Distribution Company 
(the ``Distributor'') will be the principal underwriter and distributor 
of the Fund's Shares. Brown Brothers Harriman (``Custodian'') will act 
as the custodian and transfer agent to the Fund.
    Paragraph (g) of Rule 5735 provides that if the investment adviser 
to the investment company issuing Managed Fund Shares is affiliated 
with a broker-dealer, such investment adviser shall erect a ``fire 
wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio.\7\ In addition,

[[Page 34377]]

paragraph (g) further requires that personnel who make decisions on the 
open-end fund's portfolio composition must be subject to procedures 
designed to prevent the use and dissemination of material, non-public 
information regarding the open-end fund's portfolio. Rule 5735(g) is 
similar to Nasdaq Rule 5705(b)(5)(A)(i); however, paragraph (g) in 
connection with the establishment of a ``fire wall'' between the 
investment adviser and the broker-dealer reflects the applicable open-
end fund's portfolio, not an underlying benchmark index, as is the case 
with index-based funds. The Adviser is not registered as a broker-
dealer and is not affiliated with a broker-dealer. In the event (a) the 
Adviser registers as a broker-dealer or becomes newly affiliated with a 
broker-dealer; or (b) the Sub-Adviser, any new adviser or new sub-
adviser is a registered broker-dealer or becomes affiliated with a 
broker-dealer, it will implement a fire wall with respect to its 
relevant personnel and/or such broker-dealer affiliate, as applicable, 
regarding access to information concerning the composition and/or 
changes to the portfolio and will be subject to procedures designed to 
prevent the use and dissemination of material non-public information 
regarding such portfolio.
---------------------------------------------------------------------------

    \7\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and the Sub-Adviser and their 
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 other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public 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.
---------------------------------------------------------------------------

Global X Commodities Strategy ETF
    The Fund's investment objective will be to provide total return 
which exceeds that of the Credit Suisse Composite Commodities Index 
(the ``Benchmark''),\8\ consistent with prudent investment management. 
The Fund will pursue its objective by seeking to invest in commodity-
linked futures in similar weightings to the Benchmark and other 
commodity-linked instruments, backed by an actively-managed, low 
volatility portfolio of fixed income instruments. The Fund will gain 
access to futures through the Subsidiary. The Fund will not be an 
``index tracking'' ETF and will not be required to invest in all of the 
components of the Benchmark. However, through the Subsidiary, the Fund 
will generally seek to hold similar instruments to those included in 
the Benchmark and seek exposure to commodities included in the 
Benchmark. There can be no assurance that the Fund's performance will 
exceed the performance of the Benchmark at any time.
---------------------------------------------------------------------------

    \8\ The Benchmark is developed, maintained and sponsored by 
Credit Suisse International (``CS''). CS is not a U.S. registered 
broker-dealer, but CS is affiliated with a broker-dealer and, with 
respect to such broker-dealer affiliate, has implemented a fire wall 
and procedures designed to prevent the illicit use and dissemination 
of material, non-public information regarding the Benchmark.
---------------------------------------------------------------------------

    The Fund will not be sponsored, endorsed, sold or promoted by CS. 
CS's only relationship to the Fund will be the licensing of certain 
service marks and service names of CS and of the Benchmark, which will 
be determined, composed and calculated by CS without regard to the 
Adviser, the Sub-Adviser or the Fund. CS will have no obligation to 
take the needs of the Adviser, the Sub-Adviser or the Fund into 
consideration in determining, composing or calculating the Benchmark. 
The Benchmark is a monthly rebalancing, long-only commodity index 
composed of notional futures contracts on physical commodities. More 
specifically, the Benchmark is a fully collateralized futures index 
that offers multi-sector exposure to energy, industrial metals, 
precious metals, and agricultural commodities. Further, it is a total 
return index that measures the hypothetical returns on an 
uncollateralized investment in certain futures contracts, plus the 
interest that could be earned on the funds committed to a 
collateralized investment in such contracts.
    The Fund intends to qualify for and to elect to be treated as a 
separate regulated investment company under Subchapter M of the 
Internal Revenue Code.\9\ As a whole, the Fund's investments will seek 
to exceed the investment returns of the Benchmark within the 
limitations of the federal tax requirements applicable to regulated 
investment companies.
---------------------------------------------------------------------------

    \9\ 26 U.S.C. 851.
---------------------------------------------------------------------------

Principal Investments
Fund's Investments
    The Fund will be an actively-managed ETF that will seek to achieve 
a total return which exceeds that of the Benchmark. Under normal market 
conditions,\10\ the Fund, will invest in exchange-traded commodity 
futures contracts and exchange-traded commodity-linked instruments \11\ 
(collectively, ``Commodities'') through the Subsidiary. The Fund's 
investment in the Subsidiary may not exceed 25% of the Fund's total 
assets. The remainder of the Fund's assets will be invested in: (1) 
Short-term investment grade fixed income securities that include U.S. 
government and agency securities,\12\ corporate debt obligations and 
repurchase agreements; \13\ (2) money market instruments; \14\ (3) ETFs 
(other than those that are commodity-linked instruments) \15\ and other 
investment

[[Page 34378]]

companies registered under the 1940 Act, including exchange-traded 
closed-end funds, that provide exposure to commodities, equity 
securities and fixed income securities to the extent permitted under 
the 1940 Act and any applicable exemptive relief; (4) certain bank 
instruments; \16\ and (5) cash and other cash equivalents. In addition, 
the Fund may enter into foreign currency transactions on a spot (i.e., 
cash) basis.
---------------------------------------------------------------------------

    \10\ The term ``under normal market conditions'' includes, but 
is not limited to, the absence of extreme volatility or trading 
halts in the fixed income markets, futures 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.
    \11\ Exchange-traded commodity-linked instruments include: (1) 
ETFs that provide exposure to commodities as would be listed under 
Nasdaq Rules 5705 and 5735; and (2) pooled investment vehicles that 
invest primarily in commodities and commodity-linked instruments as 
would be listed under Nasdaq Rules 5710 and 5711(a)-(k). Such pooled 
investment vehicles are commonly referred to as ``exchange traded 
funds'' but they are not registered as investment companies because 
of the nature of their underlying investments.
    \12\ Such securities will include securities that are issued or 
guaranteed by the U.S. Treasury, by various agencies of the U.S. 
government, or by various instrumentalities, which have been 
established or sponsored by the U.S. government. U.S. Treasury 
obligations are backed by the ``full faith and credit'' of the U.S. 
government. Securities issued or guaranteed by federal agencies and 
U.S. government-sponsored instrumentalities may or may not be backed 
by the full faith and credit of the U.S. government.
    \13\ The Fund intends to enter into repurchase agreements only 
with financial institutions and dealers believed by the Adviser to 
present minimal credit risks in accordance with criteria approved by 
the Trust's Board of Trustees (the ``Board''). The Adviser will 
review and monitor the creditworthiness of such institutions. The 
Adviser will monitor the value of the collateral at the time the 
transaction is entered into and at all times during the term of the 
repurchase agreement.
    \14\ For the Fund's purposes, money market instruments will 
include: Short-term, high-quality securities issued or guaranteed by 
non-U.S. governments, agencies and instrumentalities; non-
convertible corporate debt securities with remaining maturities of 
not more than 397 days that satisfy ratings requirements under Rule 
2a-7 of the 1940 Act; money market mutual funds; and deposits and 
other obligations of U.S. and non-U.S. banks and financial 
institutions. In addition, the Fund may invest in commercial paper, 
which are short-term unsecured promissory notes. The Fund may 
additionally invest in commercial paper only if it has received the 
highest rating from at least one nationally recognized statistical 
rating organization or, if unrated, has been judged by the Adviser 
to be of comparable quality.
    \15\ An ETF is an investment company registered under the 1940 
Act that holds a portfolio of securities. Many ETFs are designed to 
track the performance of a securities index, including industry, 
sector, country and region indexes. ETFs included in the Fund will 
be listed and traded in the U.S. on registered exchanges. The Fund 
may invest in the securities of ETFs in excess of the limits imposed 
under the 1940 Act pursuant to exemptive orders obtained by other 
ETFs and their sponsors from the Commission. In addition, the Fund 
may invest in the securities of certain other investment companies 
in excess of the limits imposed under the 1940 Act pursuant to an 
exemptive order obtained by the Trust and the Adviser from the 
Commission. See Investment Company Act Release No. 30454 (April 9, 
2013) (File No. 812-14079). The ETFs in which the Fund may invest 
include Index Fund Shares (as described in Nasdaq Rule 5705), 
Portfolio Depository Receipts (as described in Nasdaq Rule 5705), 
and Managed Fund Shares (as described in Nasdaq Rule 5735). While 
the Fund and the Subsidiary may invest in inverse commodity-linked 
instruments, the Fund and the Subsidiary will not invest in 
leveraged or inverse leveraged (e.g., 2X or -3X) commodity-linked 
instruments.
    \16\ The Fund may invest in certificates of deposit issued 
against funds deposited in a bank or savings and loan association. 
In addition, the Fund may invest in bankers' acceptances, which are 
short-term credit instruments used to finance commercial 
transactions. The Fund also may invest in bank time deposits, which 
are monies kept on deposit with banks or savings and loan 
associations for a stated period of time at a fixed rate of 
interest.
---------------------------------------------------------------------------

    The Fund will not invest directly in Commodities. The Fund expects 
to primarily gain exposure to these investments by investing in the 
Subsidiary.
    The Fund will use the fixed income securities as investments and to 
collateralize the Subsidiary's commodity exposure on a day-to-day 
basis.
    The Fund's investment in the Subsidiary will be designed to help 
the Fund achieve exposure to commodity returns in a manner consistent 
with the federal tax requirements applicable to the Fund and other 
regulated investment companies.
Subsidiary's Investments
    The Subsidiary will generally seek to make investments in 
Commodities. In this regard, under normal market conditions, the 
Subsidiary is expected, as a general matter, to invest in futures 
contracts in proportional weights and allocations that are similar to 
the Benchmark, as well as in other exchange-traded commodity-linked 
instruments.
    The Subsidiary will be advised by the Sub-Adviser.\17\ The Fund's 
investment in the Subsidiary is intended to provide the Fund with 
exposure to commodity markets within the limits of current federal 
income tax laws applicable to investment companies such as the Fund, 
which limit the ability of investment companies to invest directly in 
the derivative instruments. The Subsidiary will have the same 
investment objective as the Fund, but unlike the Fund, it may invest 
without limitation in Commodities. The Subsidiary's investments will 
provide the Fund with exposure to domestic and international markets.
---------------------------------------------------------------------------

    \17\ The Subsidiary will not be registered under the 1940 Act 
and will not be directly subject to its investor protections, except 
as noted in the Registration Statement. However, the Subsidiary will 
be wholly-owned and controlled by the Fund. Therefore, the Fund's 
ownership and control of the Subsidiary will prevent the Subsidiary 
from taking action contrary to the interests of the Fund or its 
shareholders. The Board will have oversight responsibility for the 
investment activities of the Fund, including its expected investment 
in the Subsidiary, and the Fund's role as the sole shareholder of 
the Subsidiary. The Subsidiary will also enter into separate 
contracts for the provision of custody, transfer agency, and 
accounting agent services with the same or with affiliates of the 
same service providers that provide those services to the Fund.
---------------------------------------------------------------------------

    The Benchmark will include and the Subsidiary will have holdings in 
futures contracts that consist of only long positions in Commodities. 
The following table describes each of the commodities underlying the 
futures contracts included in the Benchmark as of May 23, 2014. The 
table also provides each instrument's trading hours, exchange and 
ticker symbol. The table is subject to change and the Subsidiary will 
not in all cases invest in the futures contracts included in the 
Benchmark.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Trading hours pit         Trading hours
             Commodity                   Exchange code        Exchange name \18\            (E.T.)            electronic (E.T.)      Contract symbol(s)
--------------------------------------------------------------------------------------------------------------------------------------------------------
WTI Crude Oil......................  NYM                   New York Mercantile      09:00-14:30..........  18:00-17:15...........  CL
                                                            Exchange.
WTI Crude Oil......................  ICE                   ICE Futures Europe.....  .....................  20:00-18:00...........  T
Brent Crude Oil....................  ICE                   ICE Futures Europe.....  .....................  20:00-18:00...........  B
NY Harbor ULSD.....................  NYM                   New York Mercantile      09:00-14:30..........  18:00-17:15...........  HO
                                                            Exchange.
Gasoil.............................  ICE                   ICE Futures Europe.....  .....................  20:00-18:00...........  G
RBOB Gasoline......................  NYM                   New York Mercantile      09:00-14:30..........  18:00-17:15...........  RB
                                                            Exchange.
Natural Gas........................  NYM                   New York Mercantile      09:00-14:30..........  18:00-17:15...........  NG
                                                            Exchange.
Copper high grade..................  CMX                   Commodity Exchange.....  08:10-13:00..........  18:00-17:15...........  HG
Copper grade A.....................  LME                   London Metal Exchange..  06:40-12:00*.........  20:00-14:00...........  CA
Zinc high grade....................  LME                   London Metal Exchange..  06:40-12:00*.........  20:00-14:00...........  ZS
Aluminium primary..................  LME                   London Metal Exchange..  06:40-12:00*.........  20:00-14:00...........  AH
Nickel primary.....................  LME                   London Metal Exchange..  06:40-12:00*.........  20:00-14:00...........  NI
Lead standard......................  LME                   London Metal Exchange..  06:40-12:00*.........  20:00-14:00...........  PB
Tin................................  LME                   London Metal Exchange..  06:40-12:00*.........  20:00-14:00...........  SN
Gold...............................  CMX                   Commodity Exchange.....  8:20-13:30...........  18:00-17:15...........  GC
Silver.............................  CMX                   Commodity Exchange.....  08:25-13:25..........  18:00-17:15...........  SI
Platinum...........................  NYM                   New York Mercantile      08:20-13:05..........  18:00-17:15...........  PL
                                                            Exchange.
Palladium..........................  NYM                   New York Mercantile      08:30-13:00..........  18:00-17:15...........  PA
                                                            Exchange.
SRW Wheat..........................  CBT                   Chicago Board of Trade.  09:30-14:15..........  Sun-F 20:00-08:45 M-F   W; ZW
                                                                                                            09:30-14:15.
HRW Wheat..........................  CBT                   Chicago Board of Trade.  09:30-14:15..........  Sun-F 20:00-08:45 M-F   KW; KE
                                                                                                            09:30-14:15.
Euro. Milling Wheat................  EOP                   NYSE LIFFE--Paris......  .....................  04:45-12:30...........  EBM

[[Page 34379]]

 
Corn...............................  CBT                   Chicago Board of Trade.  09:30-14:15..........  Sun-F 20:00-08:45 M-F   C; ZC
                                                                                                            09:30-14:15.
Soybeans...........................  CBT                   Chicago Board of Trade.  09:30-14:15..........  Sun-F 20:00-08:45 M-F   S; ZS
                                                                                                            09:30-14:15.
Soybean Meal.......................  CBT                   Chicago Board of Trade.  09:30-14:15..........  Sun-F 20:00-08:45 M-F   SM; ZM
                                                                                                            09:30-14:15.
Soybean Oil........................  CBT                   Chicago Board of Trade.  09:30-14:15..........  Sun-F 20:00-08:45 M-F   BO; ZL
                                                                                                            09:30-14:15.
Sugar 11..................  NYB                   ICE Futures US.........  .....................  03:30-13:00...........  SB
Sugar 5...................  LIF                   NYSE LIFFE--London.....  .....................  03:45-12:55...........  W
Cocoa..............................  NYB                   ICE Futures US.........  .....................  04:45-13:30...........  CC
Cocoa..............................  LIF                   NYSE LIFFE--London.....  .....................  04:30-11:50...........  C
Coffee ``C'' Arabica...............  NYB                   ICE Futures US.........  .....................  04:15-13:30...........  KC
Coffee Robusta.....................  LIF                   NYSE LIFFE--London.....  .....................  04:00-12:30...........  RC
Cotton.............................  NYB                   ICE Futures US.........  .....................  21:00-14:20...........  CT
Live Cattle........................  CME                   Chicago Mercantile       10:05-14:00..........  M 10:05-F 14:55 (Halts  LC; LE
                                                            Exchange.                                       17:00-18:00).
Feeder Cattle......................  CME                   Chicago Mercantile       10:05-14:00..........  M 10:05-F 14:55 (Halts  FC; GF
                                                            Exchange.                                       17:00-18:00).
Lean Hogs..........................  CME                   Chicago Mercantile       10:05-14:00..........  M 10:05-F 14:55 (Halts  LH; HE
                                                            Exchange.                                       17:00-18:00).
--------------------------------------------------------------------------------------------------------------------------------------------------------
\18\ All of the exchanges are Intermarket Surveillance Group (``ISG'') members except for the London Metal Exchange (``LME''), ICE Futures Europe,
  Commodity Exchange, NYSE LIFFE--Paris and NYSE LIFFE--London. The LME falls under the jurisdiction of the Financial Conduct Authority (``FCA''). The
  FCA is responsible for ensuring the financial stability of the exchange members' businesses, whereas the LME is largely responsible for the oversight
  of day-to-day exchange activity, including conducting the arbitration proceedings under the LME arbitration regulations. With respect to the futures
  contracts in which the Subsidiary invests, not more than 10% of the weight (to be calculated as the value of the contract divided by the total
  absolute notional value of the Subsidiary's futures contracts) of the futures contracts held by the Subsidiary in the aggregate shall consist of
  instruments whose principal trading market is not a member of ISG or is a market with which the Exchange does not have a comprehensive surveillance
  sharing agreement.

    As indicated above, the Benchmark will include and the Subsidiary 
will have holdings in futures contracts that consist of only long 
positions in Commodities. To be ``long'' means to hold or be exposed to 
a security or instrument with the expectation that its value will 
increase over time. Therefore, the Fund, through the Subsidiary, will 
benefit if a security or instrument increases in value. Conversely, the 
Fund, through the Subsidiary, will be adversely impacted if a security 
or instrument declines in value. The Fund through the Subsidiary may 
have a higher or lower exposure to any sector or component within the 
Benchmark at any time.
    The Benchmark does not include, and the Fund and the Subsidiary 
will not invest in, options contracts, swaps or forward investments.
Commodities Regulation
    The Commodity Futures Trading Commission (``CFTC'') has recently 
adopted substantial amendments to CFTC Rule 4.5 relating to the 
permissible exemptions and conditions for reliance on exemptions from 
registration as a commodity pool operator. As a result of the 
instruments that will be indirectly held by the Fund, the Adviser will 
register as a commodity pool operator \19\ and will also be a member of 
the National Futures Association (``NFA''). The Sub-Adviser will 
register as a commodity pool operator or commodity trading adviser, as 
required by CFTC regulations. The Fund and the Subsidiary will be 
subject to regulation by the CFTC and NFA and additional disclosure, 
reporting and recordkeeping rules imposed upon commodity pools.
---------------------------------------------------------------------------

    \19\ As defined in Section 1a(11) of the Commodity Exchange Act.
---------------------------------------------------------------------------

Investment Restrictions
    While the Fund will be permitted to borrow as permitted under the 
1940 Act, the Fund's investments will not be used to seek performance 
that is the multiple or inverse multiple (i.e., 2X and -3X) of the 
Fund's Benchmark.
    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 will not apply to obligations issued or 
guaranteed by the U.S. government, its agencies or instrumentalities, 
or securities of other investment companies.\20\
---------------------------------------------------------------------------

    \20\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
---------------------------------------------------------------------------

    The Subsidiary's shares will be offered only to the Fund and the 
Fund will not sell shares of the Subsidiary to other investors. The 
Fund and the Subsidiary will not invest in any non-U.S. equity 
securities (other than shares of the Subsidiary). The Fund will not 
purchase securities of open-end or closed-end investment companies 
except in compliance with the 1940 Act or any applicable exemptive 
relief.\21\
---------------------------------------------------------------------------

    \21\ See note 15.
---------------------------------------------------------------------------

    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including securities deemed illiquid by the Adviser.\22\ 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

[[Page 34380]]

markets as determined in accordance with Commission staff guidance.\23\
---------------------------------------------------------------------------

    \22\ In reaching liquidity decisions, the Adviser may consider 
the following factors: the frequency of trades and quotes for the 
security; the number of dealers wishing to purchase or sell the 
security and the number of other potential purchasers; dealer 
undertakings to make a market in the security; and the nature of the 
security and the nature of the marketplace trades (e.g., the time 
needed to dispose of the security, the method of soliciting offers, 
and the mechanics of transfer).
    \23\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also Investment Company Act 
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) 
(Statement Regarding ``Restricted Securities''); Investment Company 
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) 
(Revisions of Guidelines to Form N-1A). A fund's portfolio security 
is illiquid if it cannot be disposed of in the ordinary course of 
business within seven days at approximately the value ascribed to it 
by the fund. See Investment Company Act Release No. 14983 (March 12, 
1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7 
under the 1940 Act); Investment Company Act Release No. 17452 (April 
23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under 
the Securities Act of 1933).
---------------------------------------------------------------------------

Net Asset Value
    The Fund's net asset value (``NAV'') will be determined as of the 
close of trading (normally 4:00 p.m., Eastern time (``E.T.'')) on each 
day the New York Stock Exchange (``NYSE'') is open for business. The 
NAV of the Fund will be calculated by dividing the value of the net 
assets of such Fund (i.e., the value of its total assets, less total 
liabilities) by the total number of outstanding Shares, generally 
rounded to the nearest cent.
    The Fund's and the Subsidiary's investments will be generally 
valued using market valuations. A market valuation generally means a 
valuation (i) obtained from an exchange, a pricing service, or a major 
market maker (or dealer), (ii) based on a price quotation or other 
equivalent indication of value supplied by an exchange, a pricing 
service, or a major market maker (or dealer), or (iii) based on 
amortized cost. The Fund and the Subsidiary may use various pricing 
services or discontinue the use of any pricing service. A price 
obtained from a pricing service based on such pricing service's 
valuation matrix may be considered a market valuation.
    If available, debt securities and money market instruments with 
maturities of more than 60 days will typically be priced based on 
valuations provided by independent, third-party pricing agents. Such 
values will generally reflect the last reported sales price if the 
security is actively traded. The third-party pricing agents may also 
value debt securities at an evaluated bid price by employing 
methodologies that utilize actual market transactions, broker-supplied 
valuations, or other methodologies designed to identify the market 
value for such securities. Debt obligations with remaining maturities 
of 60 days or less may be valued on the basis of amortized cost, which 
approximates market value. If such prices are not available, the 
security will be valued based on values supplied by independent brokers 
or by fair value pricing, as described below.
    Futures contracts will be valued at the settlement price 
established each day by the board or exchange on which they are traded.
    Redeemable securities issued by U.S. registered open-end investment 
companies will be valued at the investment company's applicable NAV, 
with the exception of ETFs, which will be priced as described below. In 
the case of shares of funds that are not traded on an exchange, a 
market valuation means such fund's published NAV per share.
    Equity securities (including exchange-traded commodity-linked 
instruments, other ETFs, and closed-end funds) listed on a securities 
exchange, market or automated quotation system for which quotations are 
readily available (except for securities traded on the Exchange) will 
be valued at the last reported sale price on the primary exchange or 
market on which they are traded on the valuation date (or at 
approximately 4:00 p.m., E.T. if a security's primary exchange is 
normally open at that time). For a security that trades on multiple 
exchanges, the primary exchange will generally be considered to be the 
exchange on which the security generally has the highest volume of 
trading activity. If it is not possible to determine the last reported 
sale price on the relevant exchange or market on the valuation date, 
the value of the security will be taken to be the most recent mean 
between the bid and asked prices on such exchange or market on the 
valuation date. Absent both bid and asked prices on such exchange, the 
bid price may be used. For securities traded on the Exchange, the 
Exchange official closing price will be used. If such prices are not 
available, the security will be valued based on values supplied by 
independent brokers or by fair value pricing, as described below.
    The prices for foreign instruments will be reported in local 
currency and converted to U.S. dollars using currency exchange rates. 
Exchange rates will be provided daily by recognized independent pricing 
agents.
    In the event that current market valuations are not readily 
available or such valuations do not reflect current market values, the 
affected investments will be valued using fair value pricing pursuant 
to the pricing policy and procedures approved by the Board in 
accordance with the 1940 Act. The frequency with which the Fund's and 
the Subsidiary's investments are valued using fair value pricing will 
be primarily a function of the types of securities and other assets in 
which they invest pursuant to their respective investment objectives, 
strategies and limitations.
Creation and Redemption of Shares
    The Fund will issue and redeem Shares on a continuous basis at NAV 
\24\ only in large blocks of Shares (``Creation Units'') in 
transactions with authorized participants, generally including broker-
dealers and large institutional investors (``Authorized 
Participants''). Creation Units are not expected to consist of less 
than 25,000 Shares. The Fund will issue and redeem Creation Units in 
exchange for an in-kind portfolio of instruments and/or cash in lieu of 
such instruments (the ``Creation Basket''). In addition, if there is a 
difference between the NAV attributable to a Creation Unit and the 
market value of the Creation Basket exchanged for the Creation Unit, 
the party conveying instruments with the lower value will pay to the 
other an amount in cash equal to the difference (referred to as the 
``Cash Component'').
---------------------------------------------------------------------------

    \24\ The NAV of the Fund's Shares generally will be calculated 
once daily Monday through Friday as of the close of regular trading 
on the New York Stock Exchange, generally 4:00 p.m., E.T. (the ``NAV 
Calculation Time''). NAV per Share will be calculated by dividing 
the Fund's net assets by the number of Fund Shares outstanding.
---------------------------------------------------------------------------

    Creations and redemptions must be made by an Authorized Participant 
or through a firm that is either a member of the National Securities 
Clearing Corporation (``NSCC'') or a Depository Trust Company 
participant, that, in each case, must have executed an agreement that 
has been agreed to by the Distributor and the Fund's transfer agent 
with respect to creations and redemptions of Creation Units. All 
standard orders to create Creation Units must be received by the 
Distributor no later than the closing time of the regular trading 
session on the NYSE (ordinarily 4:00 p.m., E.T.) (the ``Closing Time'') 
in each case on the date such order is placed in order for the creation 
of Creation Units to be effected based on the NAV of Shares as next 
determined on such date after receipt of the order in proper form. 
Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt not later than the Closing Time of a 
redemption request in proper form by the Fund through the Distributor 
and only on a business day.
    The Custodian, through the NSCC, will make available on each 
business day, prior to the opening of business of the Exchange, the 
list of the names and quantities of the instruments comprising

[[Page 34381]]

the Creation Basket, as well as the estimated Cash Component (if any), 
for that day. The published Creation Basket will apply until a new 
Creation Basket is announced on the following business day.
Availability of Information
    The Fund's Web site (www.globalxfunds.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Web site 
will include the Share's ticker, CUSIP and exchange information along 
with additional quantitative information updated on a daily basis, 
including, for the Fund: (1) Daily trading volume, the prior business 
day's reported NAV and closing price, mid-point of the bid/ask spread 
at the time of calculation of such NAV (the ``Bid/Ask Price'') \25\ and 
a calculation of the premium and discount of the Bid/Ask Price against 
the NAV; and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily Bid/Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each business day, before commencement 
of trading in Shares in the Regular Market Session \26\ on the 
Exchange, the Fund will disclose on its Web site the identities and 
quantities of the portfolio of securities, Commodities and other assets 
(the ``Disclosed Portfolio'' as defined in Nasdaq Rule 5735(c)(2)) held 
by the Fund and the Subsidiary that will form the basis for the Fund's 
calculation of NAV at the end of the business day.\27\ On a daily 
basis, the Fund will disclose on the Fund's Web site the following 
information regarding each portfolio holding, as applicable to the type 
of holding: ticker symbol, CUSIP number or other identifier, if any; a 
description of the holding (including the type of holding), the 
identity of the security, commodity or other asset or instrument 
underlying the holding, if any; quantity held (as measured by, for 
example, par value, notional value or number of shares, contracts or 
units); maturity date, if any; coupon rate, if any; effective date, if 
any; market value of the holding; and percentage weighting of the 
holding in the Fund's portfolio. The Web site and information will be 
publicly available at no charge.
---------------------------------------------------------------------------

    \25\ The Bid/Ask Price of the Fund will be determined using the 
mid-point of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and its service 
providers.
    \26\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 4 a.m. to 9:30 
a.m., E.T.; (2) Regular Market Session from 9:30 a.m. to 4 p.m. or 
4:15 p.m., E.T.; and (3) Post-Market Session from 4 p.m. or 4:15 
p.m. to 8 p.m., E.T.).
    \27\ Under accounting procedures to be followed by the Fund, 
trades made on the prior business day (``T'') will be booked and 
reflected in NAV on the current business day (``T+1''). Accordingly, 
the Fund will be able to disclose at the beginning of the business 
day the portfolio that will form the basis for the NAV calculation 
at the end of the business day.
---------------------------------------------------------------------------

    In addition, for the Fund, an estimated value, defined in Rule 
5735(c)(3) as the ``Intraday Indicative Value,'' that reflects an 
estimated intraday value of the Fund's portfolio (including the 
Subsidiary's portfolio), will be disseminated. Moreover, the Intraday 
Indicative Value, available on the NASDAQ OMX Information LLC 
proprietary index data service \28\ will be based upon the current 
value for the components of the Disclosed Portfolio and will be updated 
and widely disseminated by one or more major market data vendors and 
broadly displayed at least every 15 seconds during the Regular Market 
Session.
---------------------------------------------------------------------------

    \28\ Currently, the NASDAQ OMX Global Index Data Service 
(``GIDS'') is the NASDAQ OMX global index data feed service, 
offering real-time updates, daily summary messages, and access to 
widely followed indexes and Intraday Indicative Values for ETFs. 
GIDS provides investment professionals with the daily information 
needed to track or trade NASDAQ OMX indexes, listed ETFs, or third-
party partner indexes and ETFs.
---------------------------------------------------------------------------

    The dissemination of the Intraday Indicative Value, together with 
the Disclosed Portfolio, will allow investors to determine the value of 
the underlying portfolio of the Fund on a daily basis and will provide 
a close estimate of that value throughout the trading day.
    Intra-day executable price quotations on the securities and other 
assets held by the Fund and the Subsidiary will be available from major 
broker-dealer firms or on the exchange on which they are traded, as 
applicable. Intra-day price information on the securities and other 
assets held by the Fund and the Subsidiary will also be available 
through subscription services, such as Bloomberg and Thomson Reuters, 
which can be accessed by Authorized Participants and other investors. 
More specifically, pricing information for Commodities, ETFs other than 
Commodities, and closed-end funds will be available on the exchanges on 
which they are traded and through subscription services. Pricing 
information for fixed income securities and money market instruments 
will be available through subscription services and/or broker-dealer 
firms. Additionally, the Trade Reporting and Compliance Engine 
(``TRACE'') of the Financial Industry Regulatory Authority (``FINRA'') 
will be a source of price information for certain fixed income 
securities held by the Fund.
    Investors will also be able to obtain the Fund's Statement of 
Additional Information (``SAI''), the Fund's annual and semi-annual 
reports (together, ``Shareholder Reports''), and its Form N-CSR and 
Form N-SAR, filed twice a year. The Fund's SAI and Shareholder Reports 
will be available free upon request from the Fund, and those documents 
and the Form N-CSR and Form N-SAR may be viewed on-screen or downloaded 
from the Commission's Web site at www.sec.gov. Information regarding 
market price and trading volume of the Shares will be continually 
available on a real-time basis throughout the day on brokers' computer 
screens and other electronic services. The previous day's closing price 
and trading volume information for the Shares will be published daily 
in the financial section of newspapers. Quotation and last sale 
information for the Shares will be available via Nasdaq proprietary 
quote and trade services, as well as in accordance with the Unlisted 
Trading Privileges and the Consolidated Tape Association plans for the 
Shares.
    Information relating to the Benchmark, including its constituents, 
weightings and changes to its constituents will be available on the Web 
site of CS.
Initial and Continued Listing
    The Shares will be subject to Rule 5735, which sets forth the 
initial and continued listing criteria applicable to Managed Fund 
Shares. The Exchange represents that, for initial and/or continued 
listing, the Fund and the Subsidiary must be in compliance with Rule 
10A-3 \29\ under the Act. A minimum of 100,000 Shares will be 
outstanding at the commencement of trading on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares 
that the NAV per Share will be calculated daily and that the NAV and 
the Disclosed Portfolio will be made available to all market 
participants at the same time.
---------------------------------------------------------------------------

    \29\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Trading Halts
    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 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 may be halted because of

[[Page 34382]]

market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. These may include: (1) The 
extent to which trading is not occurring in the securities, Commodities 
and other assets constituting the Disclosed Portfolio of the Fund and 
the Subsidiary; or (2) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present. Trading in the Shares also will be subject to Rule 
5735(d)(2)(D), which sets forth circumstances under which Shares of the 
Fund may be halted.
Trading Rules
    Nasdaq deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to Nasdaq's existing rules governing the 
trading of equity securities. Nasdaq will allow trading in the Shares 
from 4:00 a.m. until 8:00 p.m., E.T. The Exchange has appropriate rules 
to facilitate transactions in the Shares during all trading sessions. 
As provided in Nasdaq Rule 5735(b)(3), the minimum price variation for 
quoting and entry of orders in Managed Fund Shares traded on the 
Exchange is $0.01.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by both Nasdaq and 
also FINRA on behalf of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities 
laws.\30\ The Exchange represents that 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.
---------------------------------------------------------------------------

    \30\ 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.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares and in the exchange-traded securities, 
commodity-linked instruments and futures contracts held by the Fund and 
the Subsidiary with other markets and other entities that are members 
of the ISG \31\ and FINRA may obtain trading information regarding 
trading in the Shares and in the exchange-traded securities, commodity-
linked instruments and futures contracts held by the Fund and the 
Subsidiary from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in the Shares and in 
the exchange-traded securities, commodity-linked instruments and 
futures contracts held by the Fund and the Subsidiary from markets and 
other entities that are members of ISG, which includes securities and 
futures exchanges, or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. Moreover, FINRA, on 
behalf of the Exchange, will be able to access, as needed, trade 
information for certain fixed income securities held by the Fund 
reported to FINRA's TRACE.
---------------------------------------------------------------------------

    \31\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
---------------------------------------------------------------------------

    With respect to the futures contracts in which the Subsidiary 
invests, not more than 10% of the weight (to be calculated as the value 
of the contract divided by the total absolute notional value of the 
Subsidiary's futures contracts) of the futures contracts held by the 
Subsidiary in the aggregate shall consist of instruments whose 
principal trading market is not a member of ISG or is a market with 
which the Exchange does not have a comprehensive surveillance sharing 
agreement. All commodity-linked instruments in which the Subsidiary 
invests will be traded on ISG member markets
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Circular
    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: (1) The procedures for purchases 
and redemptions of Shares in Creation Units (and that Shares are not 
individually redeemable); (2) Nasdaq Rule 2111A, which imposes 
suitability obligations on Nasdaq members with respect to recommending 
transactions in the Shares to customers; (3) how and by whom 
information regarding the Intraday Indicative Value and the Disclosed 
Portfolio is disseminated; (4) 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; (5) 
the requirement that members deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (6) trading information.
    The Information Circular will also discuss any exemptive, no-action 
and interpretive relief granted by the Commission from any rules under 
the Act.
    Additionally, the Information Circular will reference that the Fund 
is subject to various fees and expenses described in the Registration 
Statement. The Information Circular will also disclose the trading 
hours of the Shares of the Fund and the applicable NAV Calculation Time 
for the Shares. The Information Circular will disclose that information 
about the Shares of the Fund will be publicly available on the Fund's 
Web site.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b) 
of the Act in general and Section 6(b)(5) of the Act in particular in 
that it is 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, and to remove impediments to and perfect 
the mechanism of a free and open market and in general, to protect 
investors and the public interest.
    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Nasdaq Rule 5735. The 
Exchange represents that trading in the Shares will be subject to the 
existing trading surveillances, administered by both Nasdaq and also 
FINRA on behalf of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities laws. 
The Adviser is not registered as a broker-dealer and is not affiliated 
with a broker-dealer.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares and in the exchange-traded securities, 
commodity-linked instruments and futures contracts held by the Fund and 
the Subsidiary with other markets and other entities that are members 
of the ISG and FINRA may obtain trading information

[[Page 34383]]

regarding trading in the Shares and in the exchange-traded securities, 
commodity-linked instruments and futures contracts held by the Fund and 
the Subsidiary from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in the Shares and in 
the exchange-traded securities, commodity-linked instruments and 
futures contracts held by the Fund and the Subsidiary from markets and 
other entities that are members of ISG, which includes securities and 
futures exchanges, or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. Moreover, FINRA, on 
behalf of the Exchange, will be able to access, as needed, trade 
information for certain fixed income securities held by the Fund 
reported to FINRA's TRACE. With respect to the futures contracts in 
which the Subsidiary invests, not more than 10% of the weight (to be 
calculated as the value of the contract divided by the total absolute 
notional value of the Subsidiary's futures contracts) of the futures 
contracts held by the Subsidiary in the aggregate shall consist of 
instruments whose principal trading market is not a member of ISG or is 
a market with which the Exchange does not have a comprehensive 
surveillance sharing agreement. All commodity-linked instruments in 
which the Subsidiary invests will be traded on ISG member markets.
    The Fund's investment objective will be to provide total return 
which exceeds that of the Benchmark, consistent with prudent investment 
management. The Fund will gain access to futures through the 
Subsidiary. The Fund's investment in the Subsidiary may not exceed 25% 
of the Fund's total assets. The Fund will not invest directly in 
Commodities. While the Fund will be permitted to borrow as permitted 
under the 1940 Act, the Fund's investments will not be used to seek 
performance that is the multiple or inverse multiple (i.e., 2X and -3X) 
of the Fund's Benchmark. The Fund may hold up to an aggregate amount of 
15% of its net assets in illiquid assets (calculated at the time of 
investment), including securities deemed illiquid by the Adviser. The 
Fund and the Subsidiary will not invest in any non-U.S. equity 
securities (other than shares of the Subsidiary).
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information will be publicly available regarding the Fund and the 
Shares, thereby promoting market transparency. Moreover, the Intraday 
Indicative Value, available on the NASDAQ OMX Information LLC 
proprietary index data service, will be widely disseminated by one or 
more major market data vendors and broadly disseminated at least every 
15 seconds during the Regular Market Session. On each business day, 
before commencement of trading in Shares in the Regular Market Session 
on the Exchange, the Fund will disclose on its Web site the Disclosed 
Portfolio of the Fund and the Subsidiary that will form the basis for 
the Fund's calculation of NAV at the end of the business day. 
Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services, and 
quotation and last sale information for the Shares will be available 
via Nasdaq proprietary quote and trade services, as well as in 
accordance with the Unlisted Trading Privileges and the Consolidated 
Tape Association plans for the Shares.
    Intra-day executable price quotations on the securities and other 
assets held by the Fund and the Subsidiary will be available from major 
broker-dealer firms or on the exchange on which they are traded, as 
applicable. Intra-day price information on the securities and other 
assets held by the Fund and the Subsidiary will also be available 
through subscription services, such as Bloomberg and Thomson Reuters, 
which can be accessed by Authorized Participants and other investors. 
More specifically, pricing information for Commodities, ETFs other than 
Commodities, and closed-end funds will be available on the exchanges on 
which they are traded and through subscription services. Pricing 
information for fixed income securities and money market instruments 
will be available through subscription services and/or broker-dealer 
firms. Additionally, FINRA's TRACE will be a source of price 
information for certain fixed income securities held by the Fund.
    The Fund's Web site will include a form of the prospectus for the 
Fund and additional data relating to NAV and other applicable 
quantitative information. Trading in Shares of the Fund will be halted 
under the conditions specified in Nasdaq Rules 4120 and 4121 or because 
of market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable, and trading in the Shares will 
be subject to Nasdaq Rule 5735(d)(2)(D), which sets forth circumstances 
under which Shares of the Fund may be halted. In addition, as noted 
above, investors will have ready access to information regarding the 
Fund's holdings, the Intraday Indicative Value, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, FINRA, on behalf of the 
Exchange, will communicate as needed regarding trading in the Shares 
and in the exchange-traded securities, commodity-linked instruments and 
futures contracts held by the Fund and the Subsidiary with other 
markets and other entities that are members of the ISG and FINRA may 
obtain trading information regarding trading in the Shares and in the 
exchange-traded securities, commodity-linked instruments and futures 
contracts held by the Fund and the Subsidiary from such markets and 
other entities. In addition, as noted above, investors will have ready 
access to information regarding the Fund's holdings, the Intraday 
Indicative Value, the Disclosed Portfolio, and quotation and last sale 
information for the Shares.
    For the above reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 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 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that 
the proposed rule change will facilitate the listing and trading of an 
additional type of actively-managed exchange-traded fund that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace.

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.

[[Page 34384]]

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2014-059 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-2014-059. 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 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-2014-059 and should 
be submitted on or before July 7, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13932 Filed 6-13-14; 8:45 am]
BILLING CODE 8011-01-P