SEC Division of Corporation Finance no-action letter: Ivy NextShares

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE
October 20, 2016
Response of the Office of Mergers and Acquisitions

Division of Corporation Finance

Philip A. Shipp, Esq.
Ivy NextShares

6300 Lamar A venue

Overland Park, KS 66202

Re: Ivy NextShares
Request for Exemption from Exchange Act Rule 14e-5 Dear Mr. Shipp:
We are responding to your letter dated October 20, 2016, addressed to Ted Yu and David
L. Orlic, as supplemented by telephone conversations with the staff, with regard to your request
for an exemption from Exchange Act Rule 14e-5. To avoid having to recite or summarize the facts set forth in your letter, we attach the enclosed copy of your letter. Unless otherwise noted, capitalized terms in this response letter have the same meaning as in your letter dated October 20, 2016. On the basis ofthe representations and the facts presented in your letter, the Division of Corporation Finance, acting for the Commission pursuant to delegated authority, by separate order is granting you an exemption from Rule 14e-5. The exemption operates to permit any broker-dealer acting as a dealer manager of a tender offer for a security in which any ofthe NextShares Funds invests to redeem Shares in Creation Unit size aggregations for a redemption Basket that may include a subject security or related security as defined under Rule 14e-5(c). The exemption also operates to permit such persons, described in your letter as covered persons within the meaning of Rule 14e-5( c )(3)(ii), to engage in secondary market transactions with respect to Shares after the first public announcement of and during such tender offer, given that such transactions could include, or be deemed to include, purchases of, or arrangements to purchase, subject securities or related securities. In addition, the exemption permits such covered persons to make purchases of, or arrangements to purchase, subject securities or related securities in the secondary market for the purpose oftransferring such securities to purchase one or more Creation Units of Shares. To the extent that the Trust or any ofthe NextShares Funds constitute a covered person within the meaning of Rule 14e-5(c)(3)(iv), each also may rely upon the exemption granted. We note in particular that our grant of an exemption is conditioned upon the following:

Philip A. Shipp, Esq.
Ivy NextShares
October 20, 2016

• no purchases ofsubject securities or related securities made by broker-dealers acting
  as dealer-managers of a tender offer would be effected for the purpose of facilitating a tender offer;
• any purchases of a portfolio security by a dealer-manager during a tender offer will be
  effected as adjustments to a basket of securities in the ordinary course of business as a result of a change in the composition of the NextShares Fund's portfolio; and
• except for the relief specifically granted herein, any broker-dealer acting as a dealer￾manager of a tender offer will comply with Rule 14e-5.
  The foregoing exemption is based solely on the representations and the facts presented in your letter dated October 20, 2016 and does not represent a legal conclusion with respect to the applicability of the statutory or regulatory provisions of the federal securities laws. The relief is strictly limited to the application to this transaction of Rule 14e-5. You should discontinue this transaction pending further consultations with the staff if any of the representations or facts set forth in your letter change. In addition, this exemption is subject to modification or revocation if at any time the Commission or the Division of Corporation Finance determines that such action is necessary or appropriate in furtherance of the purposes of the Exchange Act. We also direct your attention to the anti-fraud and anti-manipulation provisions of the federal securities laws, including Sections 1 O(b) and 14( e) of the Exchange Act and Rule 1 Ob-5 thereunder. Responsibility for compliance with these and any other applicable provisions of the federal securities laws rests with the participants in this transaction. The Division of Corporation Finance expresses no view with respect to any other questions that this transaction may raise, including, but not limited to, the adequacy of the disclosure concerning, and the applicability of any other federal or state laws to, this transaction. Sincerely, Ted Yu Chief, Office of Mergers & Acquisitions Division of Corporation Finance

UNITED STATES OF AMERICA

BEFORE THE

SECURITIES AND EXCHANGE COMMISSION

October 20, 2016
ORDER GRANTING EXEMPTION FROM
In the Matter oflvy NextShares SECURITIES EXCHANGE ACT RULE 14E-5 Ivy NextShares submitted a letter dated October 20, 2016 requesting that the Securities and Exchange Commission ("Commission") grant an exemption from Securities Exchange Act Rule 14e-5 for the transactions described in its letter ("Request"). Based on the representations and the facts presented in the Request, and subject to the terms and conditions described in the letter from the Division of Corporation Finance dated October 20, 2016, it is ORDERED that the request for an exemption from Securities Exchange Act Rule 14e-5 is hereby granted. For the Commission, by the Division ofCorporation Finance, pursuant to delegated authority. Brent J. Fields Secretary Action as set forth or recommended herein APPROVED pursuant to authority delegated by the Commission under Public Law 87-592. For: Division of Corporation Finance ~ _j By: I ed. I J Date: I 0 I -z_,c, Ir-z 0 t i ( (

lvy NextShares
6300 Lamar Avenue . Ivy Overland Park, KS 66202 TOLL FREE 800 532 2780 INVESTMENTS"' ivyinvestmcnts.com October 20, 2016 Mr. Ted Yu, Chief Mr. David L. Orlic, Special Counsel Office of Mergers and Acquisitions Division of Corporation finance 100 F Street, NE Washington, DC 20549-2000 Re: Request for Exemptive Relief from Rule l4e-5 under the Securities Excha nge Act of 1934 Dear Sirs:
Ivy NextShares (the "Trust") is a Delaware statuto1y trust registered as an open-end management investment company under the Investment Company Act of 1940 (" 1940 Act"). The Trust requests exemptive relief under the SecuJities Exchange Act of 1934 (the "Exchange Act") on behalf of itself, the market part icipants discussed below, and the following series of the Trust (each such series, a ''NextShares Fund"): Ivy Focused Growth NextShares, l vy Focused Value NextShares and lvy Energy NextShares. Each NextShares Fund will operate as an exchange-traded managed fund ("ETMF"), as described below. Each NextShar cs Fund will continuous ly issue and redeem shares ("Shares") in specified aggregations (each aggregation of Shares, a "Creation Unit") at net asset value ("NAV"). The Trust has tiled a registration statement on Form N-l A, and Shares of each NextShares Fund will be listed on a nati onal securiti es exchange or national securities association (an "Exchange") and will trade in the secondary rnarket. 1 The trading price of Shares will be directly linked to the NextShares Fund ' s end-of-day NAV.2 Tn connection with this "NAY-Based Trading," all bids, offers and execution prices will be expressed as a market-deter mined premium or discount (e.g., +$0.0 1, The Comm iss ion has approved Nasdaq Rule 5745 governing the listing and LTading of Shares . See Exchange Act Release No. 73562 (Nov. 7, 2014). Aspects ofNAV-Based Trading are protected intellectua l property described in one or more of U.S. Patent Nos. 7,444,300, 7,496,53 1, 7,689,501, 8,131,621, 8,306,90 1, 8,332,307 and 8,452,682 and in pending patent applications. The methodology for calcu lat ing NA V will be fully d isclosed in the prospectus. Addjtionally, any mod ification to the methodology used to calculate NA V will be fully disc losed to current and prospective investors prior to implementation.

U.S. Securities and Exchange Comm iss ion
October 20, 2016
$0.02) to that day's NAV.3 For each lrnde, the premi um or di scount to NAV (which may be zero) is locked in at trade execution and tbe fma l transaction price (i.e., NAV plus or minus the market-detennined premium/discount to NAV) is determined at the end of the day when the NextSh ares Fund's NAV is computed. Because all transaction prices are based on an end-of-day NAV, NextShares Funds will not need to d isclose po1tfolio holdings on a daily basis in order to maintain a close relationship between Share trading prices and NAY. The Trust, on behalf of itself, each NextShares Fund, and Authorized Paiticipants (as defined below) that act as dealer-managers of tender offers, as applicable, req uests that the U.S. Securities and Exchange Commission (the "Commission" or the "SEC") grant exemptive relief from Rule 14e-5 under the Exchange Act in connection with transactions that involve "subject securities" and "related sectrrities" (as defmed ii1 Rule 14e-5(c)(6) and (7)) that are il1cluded in a "Basket," as described below. The SEC staff ("SEC Staff') has previou sly issued relief substantially similar to that requested herein to other ETMFs li sted and traded on an Exchange that meet certain conditions. 4 ln addition, the SEC Staff has previously issued reliefsimi lar to that requested herein to certain actively managed exch ange-traded funds ("ETFs") listed and traded on an Exchange th at meet certain cond itions.5 The Trust does not believe that the relief requested raises any significant new regulatory issues.
I. The NextShares Funds
The Trust intends to offer the following NextShares Funds that would be subj ect to the requested relief:6 Tw focused Growth NextShares: The investment objective ofthis NextShares Fund is to seek to provide growth of capital. Thi s NextShares F und normally will invest primarily in a portfolio of common stocks issued by large-capitalization, growth-oriented companies. Market data feeds underlying qu otation and transactio n systems may report bids, offers and execution prices in NAV-Based Tradli1g with reference to a nwneric base value (e.g., 100), depending upon system parameters. 4 See Letter from Ted Yu to Eaton Vance Management regarding Eaton Vance ETMF Trust, dated February 26, 2016 ("Eaton Vance Letter"). 5 See, e.g., Letter from Ted Yu to Chapman and Cutler LLP regarding First Trust Exchange-Traded Fund Ill, dated April 27, 2016. The Trust will operate pursuant to an exemptive order issued by the Commission under the 1940 Act. See Investmen t Company Act Rel. No. 318 16 (Sept. 9, 2 015).

October 20, 2016
Ivv Focused Value NextShares: The investment objective ofthis NextShares Fund is to seek to provid e capital appreciation with a secondary objective ofproviding current income. This NextShares Fund normally will invest primarily in common stocks issued by compan ies ofany size and market capitalization. Ivy Energy NextShares: The investment objective ofthis NextShares Fund is to seek to provide capital growth and appreciation. This NextShares Fund nonnally wi ll invest primarily in securities of companies within the energy sector.
11. NextShares Funds Operations
Sales and Redemptions of Creation Units
Each NextShares Fund wi ll issue and redeem Shares in Creation Un its through a broker-dealer registered under the Exchange Act (the "Distributor") acting on an agency basis and serving as each NextShares Fund's " principal underwriter" as defined in Sect ion 2(a)(29) of the 1940 Act. 7 Subject to certain exceptions described below, Creation Units of a NextShares Fund will be purchased by making a deposit of the instruments specified by the NextShares Fund for making a purchase ("Deposit Instruments"), and shareho lders redeeming Creation Units will receive a transfer of instruments specified by the NextShares Fund for meeting a redemption ("Redemption lnstruments").8 On any given business day, the names and quantities of the instruments that constitute the Deposit lnstnunents and the names and quantities of the instruments that constitute the Redemption Instruments are expected to be identical and are referred to herein as the "Basket." Deposit Instruments and Redemption Instruments may include cash, securities and/or other transferab le investment assets. To the extent there is a difference betwee n the NAV of a Creation Unit and the aggregate market value of the Basket exchanged for the Creation Un it, the party conveying the lower value will pay to the other an amount in cash equal to that difference (the "Balancing Amount"). To preserve the confidentiality of a NextShares Fund's trading activities, the Trust anticipates that the Basket will normally not be a pro rata slice of the positions in the NextShares Fund's portfolio ("Portfo lio Positions"). Rather, instruments being acquired by the Adviser for the NextShares Fund's portfolio will generally be The number of Shares constitutin g a Creation Unit will be set by the investment adviser to the Trust ("Adviser"). The Trust expects a Creation Unit to consist of a specified number of Shares between 5,000 and 50,000 Shares. The anticipated Creation Unit size is somewhat smaller than customary for ETFs and should support seco ndary market trading efficiency by faci litating tighter market maker inventory management. Creation Units of Shares will be redeemable at the next determined NAV of each NextS hares fund on each business day in accordance with the 1940 Act.

October 20, 2016 excluded fro m the Basket until their purchase is completed, and instruments being sold may not be removed from the Basket until the sale program is comp leted. Further, when deemed by the Adviser to be in the best interest of a NextShares Fund and its shareholders, other Portfolio Positions may be excluded from the Basket. Whenever Po1t folio Positions a.re excluded from the Basket, the Basket may i11clude proportionately more cash than is in the portfolio, with such additional cash substituting for the excluded Portfo lio Positions. A NextShares Fund may permit an Authorized Participant (as defined below) to deposit or receive, as applicable, cash in lieu of some or all of the Basket instrnments, solely because: (a) such instruments are, in the case of the purchase of a Creation Unit, not available in sufficient quantity; (b) such instruments ru·e not eligible for trading by the Authorized Participant or the investor on whose behalf the Authorized Pruticipant is acting; or (c) a holder of Shares of a NextShares Fund investing in foreign instruments would be subject to unfavorable income tax treatment ifthe holder received redemption proceeds in kind. No other Basket substitution s will be permitted. In addition, a NextShares Fund that normally issues and redeems Creation Uni ts .in kind may require purchases and redemptions to be made entirely on a cash basis. In such an instance, the NextShares Fund will announce, before the open of trading on a given business day, that all purchases, all redemptions or all purchases and redemptions on that day will be made entirely in cash. A NextShares Fund may also determine, upon receiving a purchase or redemption order from an Authorized Pa1ticipant, to require the purchase or redemption, as applicable, to be made entirely in cash. Each business day, before the open of trading on the listing Exchange, the Adviser will cause the Basket, including the names and quantities of the securities and other instruments in the Basket and the estimated Balancing Amount, for that day to be disseminated through the National Securities Clearing Corporation ("NSCC"), a clearing agency registered with the Commission and affiliated with the Depository Trust Company ("DTC"). The published Basket will apply unti l a new Basket is announced, and there will be no intra-day changes to the Basket except to COJTect errors in the publ ished Basket. The Adviser will also make available on a daily basis information about the previous day's Balancing Am ount. All orders to purchase or redeem Creation Units must be placed with the DistributoI" by or through an "Authorized Pruticipant," which is either: (a) a "participating party" (i. e., a broker or other participant in the Continuous Net Sett lement ("CNS") System of the NSCC) or (b) a DTC participant ("DTC Participant"), which in any case has executed an agreement with the Distributor ("Participant Agreement"). An investor does not have to be

U.S. Securities and Exchange Commiss ion
October 20, 20 16 an Authorized Participant to transact in Creation Units, but must place an order through and make appropriate arrangements with an Authorized Part icipan t. lntraday Indicative Values The Trust will arrange for the continuous calculat ion by an independent third party and publication through the NASDAQ OMX Global Index Data Service throughout the regular trading sess ion of the listing Exchange (genera lly 9:30 a. m. to 4:00 p.m. ET) each business day of an intraday indicative val ue ("I IV") of each NextShares Fund 's Shares. 9 lJ Vs will be dissem inated by one or more major market data vendors at interva ls of not more than 15 minutes during trading on an Exchange. 10 The so le purpose of IIVs in the context ofNextShares Funds is to help investors determi ne the number of Shares to buy or sell if they want to transact in an approximate dollar amount (i. e., if an investor wants to acquire approx imately $5,000 of a NextS hares Fund, how many Shares should the investor buy?). 11 Portfolio Holdings Disclosure NextShares Funds will not make their full Portfo lio Positions available on a daily basis. ln stead, NextShares Funds will disclo se their holdings only at periodic inter vals, and with a lag. All NextS hares Funds will disclose their holdings in full at least once quarterly, with a lag of not more than 60 days, in compliance with the req uirements appl icab le to open-end investment companies. As a matter of practice, many mutual funds provide public disclosure of their holdings more frequently, and on a more timely basis (such as monthly with a 30-day lag). 9 Neither the Trust nor any NcxtShares fund will be involved in, or responsible for, the calculation or dissemination of any such UV and will make no warranty as to its accuracy. 10 Un like for ETFs, which arrange for HVs to be disseminated every 15 seconds, l!Ys for NcxtShares Funds will not provide pric ing s ignals for market intermediaries or other buyers and sellers of Shares seek ing to estimate the differe nce between the value of the NextShares Fund's portfo lio and the pri ce at which Shares are cun-ently trading. In NAY-Based Trading, the secondary market premium/discoun t that applies to a NextShares Fund is a lways fu lly transparent and does not depend on disseminat ion of IIVs. 11 Because IIVs will generally differ from end-of-day NAV, they cannot be used to calculate with precision the dollar value of a prescribed number of Shares to be bought or sold. Especially during periods of vo latile market conditions and for transactions executed early in the trading day, buyers and sellers of NextShares Funds face the r isk that the value oftheir purchases and sales may differ materially from intended levels. To seek to ensure that NextShares Fund investors understand the risk that the value of their purchases and sales may differ from intended leve ls, each NextShares Fund's registration statement, website, and advertising and marketing materia ls will incl
ude prominent disclosure of this risk. ln additi on, when a retai l NextShares Fund order is submitted electronica lly, the investor will rece ive a prompt reminding the investor of the continge nt pricing nature of Shares and the other principa l distinctions of investing in NextShares Funds, and wi ll be required to acknowledge that he or she has read and understood this informat ion before the order is finalized.

October 20, 20 16
The disclosure practices of NextShares Funds are expected to be similar to those of mutua l funds holding simi lar types of investments. The mechanism that connects trading prices of Shares to NAV in NAV-Based Trading does not require contemporaneous disc losure of Portfolio Positions to function effectively, as described below. Because disc losing holdings in real-t ime can fac ilitate front-running of portfolio trades and enable copycat .investors to replicate a fu nd's portfo lio positioning, active managers have to date largely avoided the tra nsparent active ETF model. By removing the requirement for portfo lio transparency, NextShares Funds have the potentia l to provide investors with access to a broad range of active strategies. Buying and Sellin g Shares on the Excha nge Shares will be purchased and so ld in the secondary market at prices based on the next-determined NAY. All bids, offers and execution pri ces will be expressed as a premium/ discount (which may be zero) to the NextShares Fund's next-determined NAY (e.g., NAV-$0.01, NAV+$0.01). A NextShares Fund's NAY will be detennined each business day, normally as of4:00 p.m. Eastern Time. Trade executions will be bind ing at the time orders are matched on the Excbange's facilities, with the transaction prices contingent upon the determination of NAY. Trading Premiums and D iscounts: Bid and offer prices for Shares will be quoted throughout the day relative to NAY. The premium or discount to NAY at which Share prices are quoted and transactions are exec uted will vary depending on market facto rs, including the balance ofsupply and demand for Shares among investors, transaction fees and other costs in connectio n with creating and redeeming Creation Un its ofShares, the cost and avail ability of borrowing Shares, competition among market makers, the Share inventory positions and inventory strategies of market makers and other market part icipants, the profitabi lity requirements and business objecti ves of market makers, and the volume of Share trading. Reflecting such market factors, prices for Shares in the secondary marke t may be above, at or below NAY. Transm itting and Processing Orders: Member firms wi ll uti lize existing order types and interfaces to transmit Shar e bids and offers to the Exchange, wh ich wi ll process Share trades like trades in shares of conventional ETFs and other listed securities. In the systems used to transmit and process transactions in Shares, a NextShares Fund's next-determined NAV will be represented by a proxy price (e.g., 100.00) and a premium/d iscount of a stated amount to the next-determined NAV to be represented by the same increment/decrement from the proxy price used

October 20, 2016 to denote NAY (e.g., NAV-$0.01 would be represented as 99.99; NA V+$0.01 as 100.0 l). At the start ofeach trading day, the price will be reset to the proxy price. To avoid potential investor confusion, the listing Exchange will work with member firms and providers of market data services to seek to ensure that representations of intraday bids, offers and execution prices for NextShares Funds that are made available to the investin g public fo llow the "NA V-$0.01/NA V+ $0.0 I" (or similar) d isplay format, rather than displaying proxy prices. All NextShares Funds listed on the Exchange w ill have a un ique identifier associated with their ticker symbols, which will indicate that their Shares are traded using NAY-Based Trading. The listing Exchange makes available to member firms and market data services certain proprietary data feeds ("Exchange Data Feeds") that are designed to supplement the market infornrntion disseminated through the consolidated tape ("Consolidated Tape"). The Exchange will use an Exchange Data Feed to disseminate intraday price and quote data for NextShares Funds in real time in the "NAV-$0.0I/NAY+ $0.0 l " (or simi lar) display format. Member firms could use the Exchange Data Feed to source intraday NextShares Fund prices for presentation to the investing public in the "NA V-$0.01/NA V+$0.0 l " (or simi lar) display format. Alternatively, member firms could sour ce intraday NextShares Fund prices in proxy price format from the Consolidated Tape and use a simple algorithm to convert prices into the "NAV-$0.01/NAV+$0.0l" (or similar) display format. Tntraday Reporting ofQuotes and Trades: All bids and offers for Shares and all Share trade executions will be repo1ted in traday in real time by the Exchange to the Consol idated Tape12 and separately disseminated to member fams and market data services through an Exchange Data Feed. The Exchange wi ll also provide the member furns participatiJ.1g in each Share trade with a contemporaneous notice oftrade execution, indicating the number ofShares bought or sold and the executed premium/discount to NAV. 13 Final Trade Pric ing, Repo1ting and Settlement: All executed Share trades will be recorded and stored intraday by the Exchange to await the calculation of the NextShares Fund's end-of-day NAV and the determination of frna l trade pricing. After a NextShares Fund's NAV is calculated and provided to the Exchange, the Exchange 12 Due to systems limitations, the Consolidated Tape w ill report intraday execution prices and quotes for NextShares Funds using a proxy price for mat. As noted, the listing Exchange will separately report real-time execution prices and quotes to member firms and providers of market data services in the "NAV $0.01/NAV+$0.0l" (or s imilar) display format, and otherwise seek to ensure that representations of Lntraday bids, offers and execution prices for NextShares Funds that are made available to the investing public follow the same display
fonnat. 13 All orders to buy or sell Shares that are not executed on the day the order is submitted will be automatically cancelled as ofthe close oftrading on such day.

October 20, 20 16 will price each Share trade entered into during the day at the NextShares Fund's NAV plus/minus the trade's executed premium/discount. Using the final trade price, each executed Share trade will then be disseminated to member firms and market data services through the Exchange Data Feed used to repott Share trades, and confinned to the member firms participating in the trade to supplement the previously provided information to include final pricing. After the pr icing is fina lized, the Exchange will deliver the Share trading data to NSCC for clearance and settlement, following the same processes used for the clearance and settlement of trades in conventional ETFs and other exchange-traded securiti es. Trading Efficiency ln NAY-Based Trading, a market maker assumes no intraday market risk in connection with its Share inventory positions because all Share transact ion prices are based on the next-determined NAV. Whether a NextShares Fund's underlying value goes up or down over the cow·se of a trading day will not affect how much a market maker eams by selling (or buying) Shares in the market at a net premium (discount) to NAY, and then purchasing (redeeming) an offsetting number of Shares at the end ofthe day in transactions with the NcxtShares Fund. No intraday market risk means no requirement for intraday hedging, and therefore no associated requirement for portfolio holdings disclosure to maintain a tight relationship between Share trading prices and NAV. A market maker that purchases (or redeems) a Creation Unit at the end of a trading day to offset its net intra day sales (purchases) of a Creation 'Unit quantity of Shares wil I earn profits to the extent that it either sells (buys) Shares at an aggregate premium (discount) to NAV or buys (sells) a Creation Unit-equ ivalent quantity of Basket instru ments at an aggregate discount (prem ium) to their end-of-day values, and the net amount ofShar e premium (discount) plus Basket discount (prem ium) exceeds the transaction fee that applies to a purchase (redemption) ofa Creation Unit. 14 Different from conventionally traded ETFs, trading in Shares offers market makers a profit opportunity that is not based on the abi lity to arbitrage differences between share trading prices and underlying portfolio values or The market maker profit equation is simplifi ed for cash creations and redemptions. A market maker who purchases (or redeems) a Creation Unit in cash to offset its net intraday sales (purchases) ofa Creation Unit quantity ofShares will earn profits to the extent that it sells (buys) Shares in the secondary market at an aggregate premium (discount) to NAV that exceeds the transaction fee that applies to a cash creation (redemption) of a Creation Unit. 14

October 20, 2016 requiring the management of intraday market risk. 15 To real ize profits from market making in Shares, a market maker holding short (or long) positions in Shares accwnulated intraday need only transact with the NextShares Fund to purchase (redeem) a correspondi ng number of Creation Units of Shares, buy (sell) the equivalent quantities of Basket instrum ents at market-closing or better prices, and offload any remaining sub-Creation Unit Share invento ry through secondary market transactions prior to the close. 16 Because making markets in Shares will be simple to manage and low risk, competition among market makers seek ing to earn reliable, low-risk profits should enable NcxtShares Funds to routinely trade at tight bid-ask spreads and narrow premiums/discounts to NAY. Further, because the mechanism that underlies efficient trading of Shares does not involve arbitrage or trading in portfolio positions that are not included in the Basket, the need for dai ly portfolio holdings disclosure to achieve tight markets in Shares is eliminated. The mechanisms supporting effic ient trading of Shares are equally applicab le across different asset classes and investment strategies. A NextShares Fund can hold relatively illi quid assets and still trade with tight bid-offer spread s and mu.Tow premiums/discounts to NAV by creating and redeeming Shares in cash. Unlike for ETFs, portfo lio holdings that are not included in a Basket will not influenc e how tightly the Shares wi ll trade. TU. Lega l Analysis Under Rule 14e-5 Rule l 4e-5 was originally promulgated as Ru le 1 Ob-13 under the Exchange Act to safeguard the interests of persons who sell their securities in response to a tender offer. 17 Rule J4e-5 prohibits a "covered person" from directly or indirectly purchasing or atTanging to purchase any equity securities that are the subject of a tender offer IS In a typical ETF, intermediaries enter into arbi trage transactions to take advantage of deviations between market price and NAV, and that arbitrage is the mechani sm that is understood to keep the market price and the NA V of ETFs aligned. 16 Market makers in Shares are expected generally to seek to minimize the ir exposure to price risk by holding little or no overnight Share inventory. By estab lishing Creation Unit sizes that arc somewhat smaller (i.e., in a range of 5,000 to 50,000 Shares) than is customary for ETFs, NextShares Funds will suppo1t secondary market trading efficiency by facilitating tighter market maker inventory management because it faci litates closing out positions at the end of each trading day. To the extent that market makers hold small positions in Shares overnight, they are expected to aggrega te such holdings with other risk positions and transact at or near the market close to buy or sell offsetting positions in appropriate, broad-based hedging instruments, such as S&P 500 and other index future s and ETFs. Such hedging of overnight inventory risk on a macro
basis does not require disclosure ofportfolio positions that are not included in the daily Basket. 17 Exchange Act Release No. 8712 (Oct. 8, 1969) (the " 1969 Adopti ng Release"). In this regard, the 1969 Adopting Release noted that "[w]hen securities are purchased for a considerat ion greater than that of the tender offer price, this operates to the disadvantage of the security holders who have already deposited their securities and who are unable to withdraw them in order to obtain the advantage of possible resulting higher market prices."

October 20, 2016
("subject securities") or any securities immediately convertible into, exchangeable for, or exercisable for subject securiti es ("related securities") except as part of such tender offer. The term "covered person" includes, among others, a dealer-roan ager ofa tender offer. The fact that most Authorized Partic ipants are broker-dealers implicates Rule 14e-5 because the term "covered person" includes a dealer-manager ofa tender offer. The term "covered person" also includes any person acting, directly or indirectly, in concert with other covered persons in connection with any purchase or arrangement to purchase any subject securities or any related securities. Therefore, the Trust also is seeking re lie f in the event it or the NextShares Fund may be deemed to be a "covered person" by virtue ofthe Pa1ticipant Agreements pe1taining to the Trust and the NextSbares Fund. 1n order to address situations in which an Authorized Patticipant acts as a dealer-manager of a tender offer, and a subject security or a related security is pa1t ofa group of secur ities that is received by the NextShares Fund when it issues a Creation Unit or part ofa group of securities that the NextShares Fund distributes when it redeems a Creati on Unit (i.e., Deposit Instrum ents or Redemption Instruments in the Basket), the Trust respectfully requests that the Commission grant an exemption from Rule 14e-5 as it applies to such Authorized Participants. The exemption would permit any such Author ized Participant to exec ute transactions that include, or are deemed to include, pw-chases of, or arrangements to purchase, subject securities or related securities, but that are not effected for the purposes of facilitating a tender offer and that are conducted in the ordina1y course of business (in each case, from the time ofthe public announcement of the tender offer until the tender offer expires). In this regard, an Authorized Participant's ordinary course ofbusiness includes: (l) redeeming Shares oftbe NextShares Fund in Creation Un it size aggregations for Redemption Instruments in the Basket that may includ e a subject security or a related security; and (2) engaging in secondary market transactions in Shares. With respect to redemptions, the Trust notes that the acquisition ofindividual securities held by the NextS hares Fund by means ofredemptions of Shares would be impract ical and extremely inefficient in view ofthe relative ly small number of shares ofany one security included in a Basket and the requirement that a minimum number of Shares (i. e., a Creation Unit) be redeemed. Redemptions ofand secondary mar ket transactions in Shares under the circumstances described would not appear to result in the abuses at which Rule 14e-5 is directed. In addition to the above request for relief, the Trust also is requesting exempt ive relief in connection with purchases ofCreation Units of Shares by an Authorized Part icipant acting as a dealer-manager ofa tender offer. ln this
regard, in connection with purchasing Creation Units pursuant to the tem1s of its Parti cipant Agreement, an

October 20, 20 J6
Authorized Participant may seek to purchase in the secondary market securities comprising a Basket that includes, with respect to a tender offer for which it acts as a dealer-manager, subject securities or related securi ties. The Trust acknowledges that Rule I 4e-5(b )(5) provides an exception to its prohibition for purchases or arrangements to purchase a basket of securities containing a subject security or a related securi ty if: (i) the purchase or arrangement is made in the ordinary course ofbusiness and not to facilitate the tender offer; ( ii) the basket contains 20 or more securities; and (iii) covered securities and related securit ies do not comprise more than 5% oft.h e value of the basket (the " Basket Exception"). As indicated by the Commiss ion in the release replacing former Rule I Ob-13 with Rule I 4e-5 , 18 transactions in baskets in accordance with the Basket Exception provide little opportu nity for a covered person to fac ilitate an offer 19 or for a security holder to exact a premium from the offerer. Given that the purchases and redemptions of Creation Units ofNextShares Funds in general involve baskets of securities, Authorized Participants acting as dealer-managers of tender offers for relevant secur ities may, in certain cases, be able to rely on the Basket Exception in purchasing Creation U nits of Shares. From time to time, however, a change in the compos ition of the portfo lio securities of the NextShares Fund may result in a change in the basket t hat has been established for purposes of purchasing its Creation Un its. As a consequence, th e basket could contain less than 20 securit ies and/or covered secur ities and related securities could comprise more than 5% of the value ofthe basket. For examp le, a liqu idation of the issuer ofone of the securities or a merger involving the acquisition of the issuer of one of the securities coul d cause the number ofsecurities in the basket to fall below 20 and/or could cause covered securities and related securities to comprise more than 5% of the value ofthe basket. Additiona lly, as a resu lt of fluctuations in the market value of the securi ties held in the basket, covered secur ities and related secur it ies could, at times, comprise more than 5% of the value of the basket. This compos ition would result in the unavailabil ity of the Basket Except ion for an Authorized Part ic ipant act ing as a dea ler-manager ofa tender offer for the app licab le secu rities and, in particular, may preclude an Authorized Participant from being able to rely on the Basket Exception. 18 See Exchange Act Release No. 42055 (Oct. 22, 1999) (the"1999 Release"). 19 As discussed in the 1999 Release, "facilitat ion of an offer" includes purchases intended to bid up the market price of the covered or related security, and includes buying a basket to strip out the covered security in an effort to get the offerer the number of shares it is seeking. In th is regard, the Trust believes that it would
be ineffic ient to facilitate a tender offer in a particu lar securi ty by means of purchasing a ll of the secur ities in a Basket.

October 20, 20 16 ln order to add ress si tuations (includ ing but not lim ited to the fo regoing examples) where the basket contai ns less than 20 securities and/or covered securities and related securities comprise more than 5% of the value of the basket, the Trust respectfully requests that the Commiss ion provide an exemption under Ru le 14e-5 ifan Authorized Participant acting as a dealer-ma nager of a tender offer pW"chases or arranges to purchase subject securities or related securities in the secondary market for the purpose of transfening such securities to purchase one or more Creation Un its ofShares, ifsuch purchases are not effected for the purpose offacilitat ing such tender offer and are made in the ordinary course of business. Relief would be necessary in order to pennit such Author ized Participants to effect purchases of subject and related secW"ities under such circumstances given that the Basket Exception would not be avai lable. Th is extension of the Basket Exception would accommodate a potential factual circumstance associated with the operation ofNextShares Funds and would be consistent with the rationale underlying the adoption of the Basket Exception. The Trust notes, in particular, that pW"chases would not be effected for the purpose offac ilitating a tender offer. The Trust understands that, except as permitted by the relief from Rule 14e-5 requested herein, any Authori zed Pa1ticipant act ing as a dealer-manager is required to comply with the requirements of Rule 14e-5. Conclusion Based on the foregoi ng, we respectfu lly request that the Commission and the SEC Staff grant the requested relief. The fonn of relief requested is identical to the Eaton Vance Letter and is similar to those actions that the Commission and the SEC Staff have taken in similar circumstances for ETFs.20 Tfthe Commission or the SEC Staff believes that a different format is appropriate (for example, a no-action position rathe r than an exemption), we would appreciate the opportunity to revise this request for relief accordingly. Should you have any questions please call me at (9 13) 236-2227. Sincerely, Philip A. Shipp 20 See supra, notes 4 and 5.