Federal Register / Vol. 83, No. 137 / Tuesday, July 17, 2018 / Notices 33277 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The 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 Commission previously 

approved the listing and trading of the Shares of the 

Fund. See Securities Exchange Act Release Nos. 

69072 (March 7, 2013), 78 FR 16006 (March 13, 

2013) (‘‘Prior Notice’’) and 69464 (April 26, 2013), 

78 FR 25774 (May 2, 2013) (‘‘Prior Order’’ and, 

together with the Prior Notice, the ‘‘Prior Release’’) 

(SR–NASDAQ–2013–036). 

4See Post-Effective Amendment No. 150 to 

Registration Statement on Form N–1A for the Trust, 

dated February 28, 2018 (File Nos. 333–174332 and 

811–22559). The descriptions of the Fund and the 

Shares contained herein are based, in part, on 

information in the Registration Statement, as 

amended. First Trust Advisors L.P. (the ‘‘Adviser’’) 

represents that the Adviser will not implement the 

changes described herein until the instant proposed 

rule change is operative. 

5For purposes of this filing, consistent with the 

description included in the Prior Notice, the 

Adviser considers ‘‘Senior Loans’’ to be first lien 

senior secured floating rate bank loans. 

6As a conforming change, the reference to the 

index that was defined as the Secondary Index in 

the Prior Notice has been updated to include 

‘‘Liquid’’ in the name, which is consistent with 

footnote 9 (and accompanying text) of this filing 

and footnote 34 (and accompanying text) of the 

Prior Notice. 

PLACE: Closed Commission Hearing 

Room 10800. 

STATUS: This meeting will be closed to 

the public. 

MATTERS TO BE CONSIDERED: 

Commissioners, Counsel to the 

Commissioners, the Secretary to the 

Commission, and recording secretaries 

will attend the closed meeting. Certain 

staff members who have an interest in 

the matters also may be present. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemptions set forth in 5 

U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) 

and (10) and 17 CFR 200.402(a)(3), 

(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and 

(a)(10), permit consideration of the 

scheduled matters at the closed meeting. 

Commissioner Stein, as duty officer, 

voted to consider the items listed for the 

closed meeting in closed session. 

The subject matters of the closed 

meeting will be: 

Institution and settlement of 

injunctive actions; 

Institution and settlement of 

administrative proceedings; and 

Other matters relating to enforcement 

proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

CONTACT PERSON FOR MORE INFORMATION: 

For further information and to ascertain 

what, if any, matters have been added, 

deleted or postponed; please contact 

Brent J. Fields from the Office of the 

Secretary at (202) 551–5400. 

Dated: July 12, 2018. 

Lynn M. Powalski, 

Deputy Secretary. 

[FR Doc. 2018–15292 Filed 7–13–18; 11:15 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83618; File No. SR– 

NASDAQ–2018–050] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing of Proposed Rule Change 

Relating to the First Trust Senior Loan 

Fund of First Trust Exchange Traded 

Fund IV 

July 11, 2018. 

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 June 27, 

2018, The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

[sic] Exchange’s proposed rule change 

relating to the First Trust Senior Loan 

Fund (the ‘‘Fund’’) of First Trust 

Exchange-Traded Fund IV (the ‘‘Trust’’), 

the shares of which have been approved 

by the Commission for listing and 

trading under Nasdaq Rule 5735 

(‘‘Managed Fund Shares’’). The shares of 

the Fund are collectively referred to 

herein as the ‘‘Shares.’’ 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Commission has approved the 

listing and trading of Shares under 

Nasdaq Rule 5735, which governs the 

listing and trading of Managed Fund 

Shares on the Exchange.3 The Exchange 

believes the proposed rule change 

reflects no significant issues not 

previously addressed in the Prior 

Release. 

The Fund is an actively-managed 

exchange-traded fund (‘‘ETF’’). The 

Shares are offered by the Trust, which 

was established as a Massachusetts 

business trust on September 15, 2010. 

The Trust, which is registered with the 

Commission as an investment company 

under the Investment Company Act of 

1940 (the ‘‘1940 Act’’), has filed a 

registration statement on Form N–1A 

(‘‘Registration Statement’’) relating to 

the Fund with the Commission.4 The 

Fund is a series of the Trust. The 

Adviser is the investment adviser to the 

Fund. First Trust Portfolios L.P. is the 

principal underwriter and distributor of 

the Fund’s Shares. The Bank of New 

York Mellon acts as the administrator, 

custodian and fund accounting and 

transfer agent to the Fund. 

(1) Introduction 

The purpose of this proposed rule 

change is to modify certain provisions 

set forth in the Prior Notice pertaining 

to (1) the meaning of the term ‘‘under 

normal market conditions’’; (2) the 

Fund’s investments in Senior Loans 5

and other debt, including, in particular, 

its investments in Senior Loans and 

other floating rate loans that are in 

default; and (3) the Fund’s ability to 

retain various instruments that, 

although not specifically selected by the 

Adviser, may be received by the Fund 

under certain circumstances. 

It is important to note that 

notwithstanding the proposed changes, 

consistent with the Prior Notice, it is 

anticipated that the Fund, in accordance 

with its principal investment strategy, 

would continue to invest approximately 

50% to 75% of its net assets in Senior 

Loans that are eligible for inclusion in 

and meet the liquidity thresholds of the 

S&P/LSTA U.S. Leveraged Loan 100 

Index (the ‘‘Primary Index’’) and/or the 

Markit iBoxx USD Liquid Leveraged 

Loan Index (the ‘‘Secondary Index’’ 6). 

Brief descriptions of the eligibility 

criteria (including those relating to 


daltland on DSKBBV9HB2PROD with NOTICES
33278 Federal Register / Vol. 83, No. 137 / Tuesday, July 17, 2018 / Notices 

7The Prior Notice included descriptions of, and 

information relating to, the Primary Index and the 

Secondary Index. However, except to the extent 

provided below, such descriptions and information 

have not been updated for purposes of this filing. 8The following information regarding the 

Primary Index is based on information in ‘‘S&P/ 

LSTA U.S. Leveraged Loan 100 Index Methodology 

(February 2018)’’. Information on the Primary Index 

is available at www.spindices.com. 

9The following information regarding the 

Secondary Index is based on ‘‘Markit iBoxx USD 

Liquid Leveraged Loan Index—Index Guide 

(November 2014)’’ (the ‘‘Secondary Index 

Description’’). Information on the Secondary Index 

is available at www.markit.com. 

10See Securities Exchange Act Release No. 80745 

(May 23, 2017), 82 FR 24755 (May 30, 2017) (SR– 

liquidity) for the Primary Index and the 

Secondary Index are set forth below.7

Primary Index: 8 The Primary Index 

measures the performance of 100 large 

loan facilities meeting specific inclusion 

criteria. All syndicated leveraged loans 

covered by the S&P/LSTA Leveraged 

Loan Index (‘‘LLI’’) universe are eligible 

for inclusion in the Primary Index. Term 

loans from syndicated credits must meet 

the following criteria at issuance in 

order to be eligible for inclusion in the 

LLI: (i) Senior secured; (ii) U.S. dollar 

denominated; (iii) minimum initial term 

of one year; (iv) minimum initial spread 

of LIBOR + 125 basis points (LIBOR is 

calculated as the average rate for US 

Loans in Markit’s WSO Database); (v) 

US$ 50 million initially funded loans; 

and (vi) the loan must have been bought 

by an institutional investor, and must 

currently be in their portfolio. All 

constituents of the Primary Index (the 

index loans) must have a publicly 

assigned CUSIP. There is no minimum 

size requirement on individual facilities 

in the Primary Index, but the LLI 

universe minimum is US$ 50 million. 

Only the 100 largest facilities from the 

LLI that meet all eligibility requirements 

are considered for inclusion. The 

Primary Index covers all issuers 

regardless of origin; however, all 

facilities must be denominated in U.S. 

dollars. 

Secondary Index: 9 The Secondary 

Index is a subset of the benchmark 

Markit iBoxx USD Leveraged Loan 

Index (‘‘USD LLI’’). The Secondary 

Index limits the number of constituent 

loans in the index by selecting larger 

and more liquid loans from the USD LLI 

index universe as determined by a 

liquidity ranking procedure. As 

described further below, the procedure 

utilizes daily liquidity scores from the 

Markit Loan Pricing Service, which is a 

broader measure of liquidity, 

summarizing the performance of each 

loan across several liquidity metrics, 

such as number of quotes, or bid-offer 

sizes. 

The following selection criteria are 

used to derive the eligible universe from 

the Markit/WSO USD-denominated loan 

universe: (i) Loan type (only USDdenominated loans are eligible, and the 

Secondary Index Description includes a 

list of eligible loan types and ineligible 

loan types); (ii) minimum size (a 

minimum facility size of USD $500 

million nominal is required); (iii) 

liquidity/depth of market (described 

below); (iv) credit rating (only subinvestment grade loans are eligible, 

defaulted loans are eligible provided 

they meet all other criteria, and loans 

designated as ‘‘Not Rated’’ by both 

Moody’s Investors Service, Inc., and 

Standard & Poor’s must have a 

minimum current spread of 125 basis 

points over LIBOR); (v) spread (rated 

loans must have a minimum current 

spread of 125 basis points over LIBOR); 

and (vi) minimum time to maturity (a 

minimum initial time to maturity of one 

year is required). 

According to the Secondary Index 

Description, liquidity/depth of the 

market can be measured by the number 

of prices available for a particular loan 

and the length of time prices have been 

provided by the minimum required 

number of price contributors. The 

liquidity check is based on the 3-month 

period prior to the rebalancing cut-off 

date (liquidity test period). Only loans 

with a minimum liquidity/depth of 2 for 

at least 50% of trading days of the 

liquidity test period are eligible. Loans 

issued less than three months prior to 

the rebalancing cut-off date require a 

minimum liquidity/depth of 3 for at 

least 50% of trading days in the period 

from the issue date to the rebalancing 

cut-off date. 

In conjunction with the liquidity 

ranking procedure referenced above, in 

order to determine the final Secondary 

Index constituents, the loans in the 

eligible universe are ranked according to 

their liquidity scores, as provided by the 

Markit Loan Pricing Service. Each loan 

in the MarkitWSO database is assigned 

a daily score based on the loan’s 

performance on the following liquidity 

metrics: 

—Sources Quote: The number of dealers 

sending out runs. 

—Frequency of Quotes: Total number of 

dealer runs. 

—Number of Sources With Size: The 

number of dealer runs with associated 

size. 

—Bid-Offer Spreads: The average bidoffer spread in dealer runs. 

—Average Quote Size: The average size 

parsed from quotes. 

—Movers Count: The end of the day 

composite contributions which have 

moved on that day. 

Each loan carries a score ranging from 

1 to 5 in ascending order of liquidity, 

depending on the daily values for the 

above components. A loan with a score 

of 1 will have the best performance in 

each of the categories above. In the 

liquidity ranking procedure (described 

in detail in the Secondary Index 

Description), average liquidity scores 

are calculated for each loan, over a 

calendar one- or three-month period 

immediately preceding each rebalancing 

date. 

In addition, consistent with the Prior 

Notice, the aggregate amount of the 

Fund’s net assets permitted to be held 

in illiquid securities (calculated at the 

time of investment), including Rule 

144A securities, junior subordinated 

loans and unsecured loans deemed 

illiquid by the Adviser, would continue 

to be limited to 15%. 

(2) Proposed Changes to the Term 

‘‘Under Normal Market Conditions’’ 

The Prior Notice stated that according 

to the Fund’s Registration Statement, in 

pursuing its investment objective, the 

Fund, under normal market conditions, 

would seek to outperform a primary and 

secondary loan index by investing at 

least 80% of its net assets (plus any 

borrowings for investment purposes) in 

‘‘Senior Loans’’ (the ‘‘80% 

Requirement’’). In conjunction with 

describing and defining the term ‘‘under 

normal market conditions,’’ footnote 10 

of the Prior Notice provided the 

following (the ‘‘Normal Market 

Conditions Definition’’): 

The term ‘‘under normal market 

conditions’’ as used herein includes, but is 

not limited to, the absence of adverse market, 

economic, political or other conditions, 

including extreme volatility or trading halts 

in the fixed income markets or the financial 

markets generally; operational issues causing 

dissemination of inaccurate market 

information; or force majeure type events 

such as systems failure, natural or man-made 

disaster, act of God, armed conflict, act of 

terrorism, riot or labor disruption or any 

similar intervening circumstance. In periods 

of extreme market disturbance, the Fund may 

take temporary defensive positions, by 

overweighting its portfolio in cash/cash-like 

instruments; however, to the extent possible, 

the Adviser would continue to seek to 

achieve the Fund’s investment objective. 

Specifically, the Fund would continue to 

invest in Senior Loans (as defined herein). In 

response to prolonged periods of constrained 

or difficult market conditions the Adviser 

will likely focus on investing in the largest 

and most liquid loans available in the 

market. 

To provide additional flexibility and 

greater consistency with more recent 

proposed rule change filings relating to 

other ETFs advised by the Adviser,10 the 


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 137 / Tuesday, July 17, 2018 / Notices 33279 

NASDAQ–2017–033) (order approving listing and 

trading of First Trust California Municipal High 

Income ETF); and Securities Exchange Act Release 

No. 78913 (September 23, 2016), 81 FR 69109 

(October 5, 2016) (SR–NASDAQ–2016–002) (order 

approving listing and trading of First Trust 

Municipal High Income ETF). 

11As a conforming matter, the representation set 

forth in footnote 37 of the Prior Notice, which 

indicated that the Adviser does not intend to invest 

in defaulted Senior Loans, would be deleted. 

12For the avoidance of doubt, Defaulted Loans 

that are Senior Loans would be taken into account 

for purposes of compliance with the 80% 

Requirement. In addition, for the avoidance of 

doubt, the 15% Limitation would not restrict the 

Fund’s ability to invest in loans of companies that 

have defaulted only on other debt obligations. 

13Currently, the Prior Notice does not limit the 

Fund’s ability to hold Senior Loans that have 

defaulted subsequent to being purchased by the 

Fund. In addition, the Commission has previously 

approved other proposed rule change filings 

involving actively-managed ETFs that incorporated 

the ability to invest a certain portion of their 

respective assets in defaulted securities. See, e.g., 

Securities Exchange Act Release No. 80946 (June 

15, 2017), 82 FR 28126 (June 20, 2017) (SR– 

NASDAQ–2017–039) (order approving listing and 

trading of Guggenheim Limited Duration ETF); 

Securities Exchange Act Release No. 80865 (June 6, 

2017), 82 FR 26970 (June 12, 2017) (SR–NYSEArca– 

2017–48) (order approving listing and trading of 

Franklin Liberty Intermediate Municipal 

Opportunities ETF); Securities Exchange Act 

Release No. 80745 (May 23, 2017), 82 FR 24755 

Continued 

Exchange is proposing that, going 

forward, the Normal Market Conditions 

Definition be replaced with the 

following: 

The term ‘‘under normal market 

conditions’’ as used herein includes, but is 

not limited to, the absence of adverse market, 

economic, political or other conditions, 

including extreme volatility or trading halts 

in the fixed income 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. The Fund 

may adopt a defensive strategy (and depart 

from its principal investment strategies) 

when the Adviser believes securities in 

which the Fund normally invests have 

elevated risks due to political or economic 

factors and in other extraordinary 

circumstances. In addition, on a temporary 

basis, including for defensive purposes, 

during periods of extreme market disturbance 

and during periods of high cash inflows or 

outflows (i.e., rolling periods of seven 

calendar days during which inflows or 

outflows of cash, in the aggregate, exceed 

10% of the Fund’s net assets as of the 

opening of business on the first day of such 

periods), the Fund may depart from its 

principal investment strategies; for example, 

it may hold a higher than normal proportion 

of its assets in cash. Under the circumstances 

described in the prior two sentences, the 

Fund may not be able to achieve its 

investment objectives; however, to the extent 

possible, the Adviser would continue to seek 

to achieve the Fund’s investment objectives 

by continuing to invest in Senior Loans (as 

defined herein). In response to prolonged 

periods of constrained or difficult market 

conditions the Adviser will likely focus on 

investing in the largest and most liquid loans 

available in the market. 

The proposed new Normal Market 

Conditions Definition reflects additional 

situations where it would be 

appropriate for the Fund to have the 

ability to depart from its principal 

investment strategies, including 

‘‘periods of high cash inflows or 

outflows’’ and times when the Adviser 

believes that securities in which the 

Fund normally invests ‘‘have elevated 

risks due to political or economic 

factors and in other extraordinary 

circumstances.’’ The Exchange does not 

believe that the proposed changes to the 

Normal Market Conditions Definition 

raise concerns. Rather, the Exchange 

believes that the changes would provide 

the Fund with appropriate flexibility to 

adapt to challenging conditions. In 

particular, the Exchange notes that the 

term ‘‘periods of high cash inflows or 

outflows’’ is specifically and narrowly 

defined, and the proposed modifications 

would potentially help the Fund 

mitigate risks that may accompany 

adverse political or economic factors 

and other extraordinary circumstances. 

(3) Proposed Changes to Provisions 

Pertaining to the Fund’s Investments in 

Senior Loans and Other Debt 

Under the heading ‘‘Principal 

Investments’’ (and in certain other 

provisions of the Prior Notice), the Prior 

Notice included various representations 

that were applicable to Senior Loans 

and, in certain cases, to other debt in 

which the Fund may invest. As 

described below, the Adviser is seeking 

to modify certain of these 

representations to permit the Fund to 

invest a limited portion of its net assets 

in Senior Loans and other floating rate 

loans that are in default. The Adviser 

believes that while the proposed 

changes would provide additional 

flexibility, the changes would not 

conflict with the Fund’s investment 

objectives or overall investment 

strategies or be inconsistent with the 

Adviser’s overall approach to managing 

the Fund. Rather, the proposed changes 

would enhance the Adviser’s 

investment opportunities in managing 

the Fund. In this regard, as stated in the 

Prior Notice, in selecting securities for 

the Fund, the Adviser would continue 

to seek to construct a portfolio of loans 

that it believes is less volatile than the 

general loan market. In addition, as 

stated in the Prior Notice, when making 

investments, the Adviser would 

continue to seek to maintain appropriate 

liquidity and price transparency for the 

Fund, and the key considerations of 

portfolio construction would continue 

to include liquidity, diversification and 

relative value. The Exchange believes 

that concerns related to manipulation 

should be mitigated given that the 

proposed changes (a) would be limited 

in scope, and (b) would be subject to the 

provisions set forth below, which 

should provide support regarding the 

Fund’s anticipated liquidity profile 

going forward. 

The discussion set forth in the Prior 

Notice under the heading ‘‘Principal 

Investments’’ included the following 

‘‘Defaulted Senior Loan 

Representation’’: ‘‘The Adviser does not 

intend to purchase Senior Loans that are 

in default. However, the Fund may hold 

a Senior Loan that has defaulted 

subsequent to its purchase by the 

Fund.’’ In addition, the discussion 

under the heading ‘‘Other Investments’’ 

(pursuant to which the Fund may invest 

a portion of its assets in, among other 

things, floating rate loans) included the 

following ‘‘Floating Rate Loan 

Representation’’: ‘‘The Fund will not 

invest in floating rate loans of 

companies whose financial condition is 

troubled or uncertain and that have 

defaulted on current debt obligations, as 

measured at the time of investment.’’ 

The Adviser believes that there may 

be situations where it would be 

desirable for the Fund, in pursuing its 

investment objectives, to have the 

ability to invest a limited portion of its 

net assets in Senior Loans and/or other 

floating rate loans that are in default 

(collectively, ‘‘Defaulted Loans’’). 

Therefore, to provide the Adviser with 

additional flexibility in managing the 

Fund, the Exchange is proposing that, 

going forward, the Defaulted Senior 

Loan Representation and the Floating 

Rate Loan Representation would be 

deleted and the Fund would be 

specifically permitted to purchase 

Defaulted Loans.11 However, Defaulted 

Loans would comprise no more than 

15% of the Fund’s net assets, as 

determined at the time of purchase (the 

‘‘15% Limitation’’).12 If, subsequent to 

being purchased or otherwise obtained 

by the Fund, a Senior Loan or other 

floating rate loan defaults, the Fund may 

continue to hold such Senior Loan or 

other floating rate loan without regard to 

the 15% Limitation; however, such 

Senior Loan or other floating rate loan 

would be considered a Defaulted Loan 

for purposes of determining whether the 

Fund’s purchase of additional Defaulted 

Loans would comply with the 15% 

Limitation.13


daltland on DSKBBV9HB2PROD with NOTICES
33280 Federal Register / Vol. 83, No. 137 / Tuesday, July 17, 2018 / Notices 

(May 30, 2017) (SR–NASDAQ–2017–033) (order 

approving listing and trading of First Trust 

California Municipal High Income ETF); Securities 

Exchange Act Release No. 78913 (September 23, 

2016), 81 FR 69109 (October 5, 2016) (SR– 

NASDAQ–2016–002) (order approving listing and 

trading of First Trust Municipal High Income ETF); 

and Securities Exchange Act Release No. 68972 

(February 22, 2013), 78 FR 13721 (February 28, 

2013) (SR–NASDAQ–2012–147) (order approving 

listing and trading of First Trust High Yield Long/ 

Short ETF). 

14 In conjunction with the Adviser’s confirmation 

of this representation, the Exchange believes that is 

appropriate to retain the phrase ‘‘at the time of 

purchase’’ in order to be consistent with the Prior 

Notice and to avoid causing the representation to 

become more burdensome than originally approved. 

The Exchange also notes that the Fund is subject 

to extensive representations, set forth both in the 

Prior Notice and in this filing, that were specifically 

tailored for the Fund and are not included in 

Nasdaq Rule 5705(b)(4) or Nasdaq Rule 

5735(b)(1)(B). 

15See infra the discussions relating to the 

proposed changes regarding the ‘‘Convertible 

Securities Restriction’’ (referencing Nasdaq Rule 

5705(b)(4)(A)(iii)) and the ‘‘Par Amount 

Representation’’ (referencing Nasdaq Rule 

5705(b)(4)(A)(vi)). 

16See the discussion under ‘‘Introduction,’’ 

supra. Further, based on data available from the 

Loan Syndications and Trading Association 

(‘‘LSTA’’), the average monthly market breadth (i.e., 

the number of unique loans traded monthly) 

reached a record 1,472 loans during the first quarter 

of 2018, with March 2018 being the fifth 

consecutive month during which more than 1,450 

unique loans traded. Further, secondary loan 

trading volume totaled $54.6 billion in March 2018, 

bringing first quarter 2018 volumes to $164 billion. 

Trade activity increased 10% quarter-over-quarter, 

but fell 11% year-over-year. However, a recordbreaking $181.6 billion of secondary trading volume 

occurred during the first quarter of 2017. 

For consistency with the above 

proposed changes, the Exchange is 

proposing that certain other 

representations that are set forth under 

the heading ‘‘Principal Investments’’, 

but that apply to both Senior Loans and 

other debt, be modified. First, the 

discussion set forth under the heading 

‘‘Principal Investments’’ included the 

following statement (the ‘‘Credit Metrics 

Representation’’): ‘‘The Fund will 

include borrowers that the Adviser 

believes have strong credit metrics, 

based on its evaluation of cash flows, 

collateral coverage and management 

teams.’’ In light of the proposed changes 

described above, the Exchange is 

proposing that the Credit Metrics 

Representation be modified to read as 

follows: ‘‘As a general matter, the Fund 

will include borrowers that the Adviser 

believes have strong credit metrics, 

based on its evaluation of cash flows, 

collateral coverage and management 

teams.’’ 

Additionally, to enhance consistency 

with the above proposed changes, the 

Exchange is proposing that the three 

paragraphs set forth in the Prior Notice 

immediately below the Defaulted Senior 

Loan Representation (which related to 

certain attributes that the Adviser 

intended to seek in selecting 

investments for the Fund) (the ‘‘Senior 

Loan/Other Debt Representations’’) be 

replaced with the following: 

‘‘As a general matter, the Adviser 

intends to invest in Senior Loans or 

other debt of companies that it believes 

have developed strong positions within 

their respective markets and exhibit the 

potential to maintain sufficient cash 

flows and profitability to service their 

obligations in a range of economic 

environments. The Adviser will 

generally seek to invest in Senior Loans 

or other debt of companies that it 

believes possess advantages in scale, 

scope, customer loyalty, product 

pricing, or product quality versus their 

competitors, thereby minimizing 

business risk and protecting 

profitability. 

As a general matter, the Adviser will 

seek to invest in Senior Loans or other 

debt of established companies it 

believes have demonstrated a record of 

profitability and cash flows over several 

economic cycles. The Adviser does not 

generally intend to invest in Senior 

Loans or other debt of primarily start-up 

companies, companies in turnaround 

situations or companies with 

speculative business plans; however, it 

may invest in such companies from time 

to time. 

As a general matter, the Adviser 

intends to focus on investments in 

which the Senior Loans or other debt of 

a target company has an experienced 

management team with an established 

track record of success. The Adviser 

will generally require companies to 

have in place proper incentives to align 

management’s goals with the Fund’s 

goals.’’ 

The discussion set forth in the Prior 

Notice under the heading ‘‘Criteria to Be 

Applied to the Fund’’ included a 

representation by the Adviser that under 

normal market conditions, the Fund 

would generally satisfy the generic fixed 

income initial listing requirements in 

Nasdaq Rule 5705(b)(4) on a continuous 

basis measured at the time of purchase, 

as described in the discussion under 

such heading. The Adviser confirms 

that going forward, the Fund would 

generally satisfy the generic fixed 

income listing requirements in Nasdaq 

Rule 5705(b)(4) (as such requirements 

have been modified since the issuance 

of the Prior Order) on a continuous basis 

measured at the time of purchase,14 as 

described in the discussion under such 

heading, subject to the exceptions and 

modifications described in the Prior 

Notice and in this filing.15

Additionally, the discussion set forth 

in the Prior Notice under the heading 

‘‘Description of Senior Loans and the 

Senior Loan Market’’ (the ‘‘Senior Loan 

Discussion’’) included certain 

representations as well as information 

pertaining to the Senior Loan market as 

it existed at or close to the time of the 

Prior Notice. Given the time that has 

elapsed, the Adviser believes that 

although certain provisions of the 

Senior Loan Discussion continue to be 

relevant, much of such discussion is no 

longer particularly useful. Therefore, the 

Exchange is proposing that the Senior 

Loan Discussion and accompanying 

heading be deleted in their entirety and, 

for purposes of this filing, replaced with 

the following: 

Additional Information About the Fund’s 

Investments in Senior Loans 

The Fund will primarily invest in the more 

liquid and higher rated segment of the Senior 

Loan market. In this regard, the average 

credit rating of the Senior Loans that the 

Fund typically will hold will be rated 

between the categories of BB and B as rated 

by S&P. Further, the most actively traded 

loans in the Senior Loan market will 

generally have a tranche size outstanding (or 

total float of the issue) in excess of $250 

million. The borrowers of these broadly 

syndicated bank loans will typically be 

followed by many ‘‘buy-side’’ and ‘‘sell-side’’ 

credit analysts who will in turn rely on the 

borrower to provide transparent financial 

information concerning its business 

performance and operating results. The 

Adviser represents that such borrowers 

typically provide significant financial 

transparency to the market through the 

delivery of financial statements on at least a 

quarterly basis as required by the executed 

credit agreements. Additionally, bids and 

offers in the Senior Loans are available 

throughout the trading day on larger Senior 

Loans issues with multiple dealer quotes 

available. 

The Adviser represents that the 

underwriters, or agent banks, which 

distribute, syndicate and trade Senior Loans 

are among the largest global financial 

institutions. It is common for multiple firms 

to act as underwriters and market makers for 

a specific Senior Loan issue. 

The Adviser represents that the segment of 

the Senior Loan market that the Fund will 

focus on is highly liquid.16

(4) Proposed Changes to Provisions 

Pertaining to ‘‘Received Instruments’’ 

(as defined below) 

As described in the Prior Notice, 

under normal market conditions, the 

Fund invests at least 80% of its net 

assets (plus any borrowings for 

investment purposes) in Senior Loans. 

Additionally, under the heading ‘‘Other 

Investments’’, the Prior Notice stated 

that the Fund ‘‘may receive equity, 

warrants, corporate bonds and other 

such securities’’ (collectively, ‘‘Received 


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17For example, a situation may arise where in 

lieu of a Senior Loan, bond, or other debt 

instrument that the Adviser originally selected, the 

Fund would be presented with new equity of or 

relating to the applicable issuer, but, in light of 

certain restrictions and representations in the Prior 

Notice, would be precluded from retaining the 

instrument and would therefore be required to 

dispose of the instrument despite its perceived 

benefit to shareholders of the Fund, in order to 

maintain compliance with the continued listing 

standards of the Exchange. 

18For example, incidental to the Fund’s purchase 

of a Senior Loan, the Fund may from time to time 

receive warrants and/or other equity securities as 

part of a unit or package combining a Senior Loan 

and such warrants and/or other equity securities. 

19The Fund may be entitled to acquire additional 

Equity-Based Received Instruments by exercising 

warrants (included in clause (iii)) and/or rights 

(included in clause (ix)). For the avoidance of 

doubt, the Fund’s ability to retain Equity-Based 

Received Instruments that it acquires by exercising 

such warrants and/or rights will be the same as its 

ability to retain Equity-Based Received Instruments 

that it otherwise receives. 

20 In this regard, however, the Adviser expects 

that, generally, over time, significantly less than 

20% of the Fund’s net assets would be comprised 

of Equity-Based Received Instruments. In addition, 

for the avoidance of doubt, Equity-Based Received 

Instruments would not be taken into account for 

purposes of compliance with the 80% Requirement. 

21The Par Amount Representation is also deemed 

to include the similar representation set forth under 

‘‘Criteria to Be Applied to the Fund’’ which 

provided that the Fund may invest in Senior Loans 

borrowed by entities that would not meet the 

criteria set forth in Nasdaq Rule 5705(b)(4)(A)(vi) 

provided the borrower has at least $250 million 

outstanding in Senior Loans. 

Instruments’’) as a result of the 

restructuring of the debt of an issuer, or 

a reorganization of a senior loan or 

bond, or acquired together with a high 

yield bond or senior loan(s) of an issuer 

(collectively, the ‘‘Received Instruments 

Triggers’’). Further, the Prior Notice 

stated that such investments (i.e., the 

Received Instruments) would be subject 

to the Fund’s investment objectives, 

restrictions and strategies, as described 

therein. 

Although the Adviser’s overall 

approach to managing the Fund would 

not change, the Adviser believes that 

under certain circumstances, a limited 

ability to retain Received Instruments 

beyond the parameters set forth in the 

Prior Notice may serve to benefit 

shareholders to the extent it helps the 

Fund to pursue its investment objectives 

by retaining an investment interest, 

which the Adviser believes has merit, 

relating to a particular issuer.17

Accordingly, to provide the Fund with 

additional flexibility with respect to its 

ability to retain Received Instruments, 

going forward, the Exchange is 

proposing that the Received Instruments 

Triggers and certain other restrictions 

and representations set forth in the Prior 

Notice be modified, as described below. 

The Exchange believes that concerns 

related to manipulation should be 

mitigated given that the proposed 

changes (a) would be limited in scope, 

and (b) would be subject to the limits 

described below, which should provide 

support regarding the Fund’s 

anticipated liquidity profile going 

forward. Additionally, in this regard, 

the Exchange believes that the Adviser’s 

expectation that generally, over time, 

significantly less than 20% of the 

Fund’s net assets would be comprised of 

Equity-Based Received Instruments 

(which means that significantly less 

than 20% of the Fund’s net assets are 

expected to be comprised of instruments 

that do not satisfy the ‘‘ISG Restriction’’ 

(as defined below)) should help to 

alleviate manipulation concerns. 

Received Instruments Triggers. Going 

forward, the Exchange is proposing that 

the Received Instruments Triggers be 

modified to provide that the Fund may 

receive Received Instruments (a) in 

conjunction with the restructuring or 

reorganization, as applicable, of an 

issuer or any debt issued by an issuer, 

whether accomplished within or outside 

of a bankruptcy proceeding under 11 

U.S.C. 101 et seq. (or any other similar 

statutory restructuring or reorganization 

proceeding) or (b) together with one or 

more Senior Loans (or other debt 

instruments) of an issuer.18 The Fund’s 

ability to retain Received Instruments 

would be subject to the Fund’s 

investment objectives, restrictions and 

strategies, as described in the Prior 

Notice, subject to the modifications set 

forth in this filing. The Fund’s aggregate 

holdings in (1) Received Instruments 

that are not Senior Loans and (2) 

Received Instruments that are Senior 

Loans and do not satisfy the Par 

Amount Representation (as defined 

below) would be limited to 20% of the 

Fund’s net assets. 

Equity and Equity-Like Instruments 

and Interests. Under the heading ‘‘Other 

Investments,’’ the Prior Notice stated 

that except for investments in ETFs that 

may hold non-U.S. issues, the Fund 

would not otherwise invest in non-U.S. 

equity issues (the ‘‘Non-U.S. Equity 

Restriction’’). The Prior Notice also 

stated that the equity securities in 

which the Fund may invest would be 

limited to securities that trade in 

markets that are members of the 

Intermarket Surveillance Group (‘‘ISG’’), 

which includes all U.S. national 

securities exchanges and certain foreign 

exchanges, or are parties to a 

comprehensive surveillance sharing 

agreement with the Exchange (the ‘‘ISG 

Restriction’’). In light of the many types 

of interests that may be received under 

the circumstances described above in 

the proposed Received Instruments 

Triggers and variations in nomenclature, 

the Exchange is proposing that, going 

forward, the Fund may retain, without 

regard to the Non-U.S. Equity 

Restriction or the ISG Restriction, 

Received Instruments that would 

encompass a broad range of U.S. and 

non-U.S. equity and equity-like 

positions and interests (‘‘Equity-Based 

Received Instruments’’). For the 

avoidance of doubt, for purposes of this 

filing, such Equity-Based Received 

Instruments shall mean any one or more 

of the following (whether received 

individually or as part of a unit or 

package of securities and/or other 

instruments): (i) Common and preferred 

equity interests in corporations; (ii) 

membership interests (e.g., in limited 

liability companies), partnership 

interests, and interests in other types of 

entities (e.g., state law business trusts 

and real estate investment companies); 

(iii) warrants; (iv) Tax Receivable 

Agreement (TRA) rights; (v) claims 

(generally, rights to payment, which can 

come in various forms, including 

without limitation claims units and 

claims trusts); (vi) trust certificates 

representing an interest in a trust 

established under a confirmed plan of 

reorganization; (vii) interests in 

liquidating, avoidance or other types of 

trusts; (viii) interests in joint ventures; 

and (ix) rights to acquire any of the 

Equity-Based Received Instruments 

described in clauses (i) through (viii).19

Except as described in this filing, the 

Fund’s ability to retain Equity-Based 

Received Instruments would continue to 

be subject to the Fund’s investment 

objectives, restrictions and strategies, as 

described in the Prior Notice. As 

indicated above, the Fund would not 

hold more than 20% of its net assets in 

Equity-Based Received Instruments.20

Convertible Securities/Debt 

Instruments. Under the heading 

‘‘Principal Investments’’, the Prior 

Notice included a representation that 

each of the Fund’s Senior Loan 

investments was expected to have no 

less than $250 million USD par 

outstanding (the ‘‘Par Amount 

Representation’’).21 Further, under the 

heading ‘‘Criteria to Be Applied to the 

Fund,’’ in connection with certain 

criteria to be applied to the Fund based 

on the generic listing standards for 

Index Fund Shares set forth under 

Nasdaq Rule 5705(b)(4), the Prior Notice 

included a representation by the 

Adviser that the Fund would not 

typically invest in convertible 

securities, but that should the Fund 

make such investments, the Adviser 

would direct the Fund to divest any 


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22This is consistent with the terms of the Prior 

Release, which, as set forth under the heading 

‘‘Principal Investments’’ in the Prior Notice, stated 

that the Fund would invest in Senior Loans that are 

made predominantly to businesses operating in 

North America, but may also invest in Senior Loans 

made to businesses operating outside of North 

America, and, as set forth under the heading ‘‘Other 

Investments’’ in the Prior Notice, permits the Fund 

to invest in debt securities issued by non-U.S. 

companies that are traded over-the-counter or listed 

on an exchange. 

23 In conjunction with the information provided 

in this paragraph, the Exchange is proposing that 

the second sentence of footnote 40 of the Prior 

Notice (which provided that International Data 

Corporation (‘‘IDC’’) is the primary price source for 

‘‘Other Investments’’) be deleted. 24FINRA surveils trading on the Exchange 

pursuant to a regulatory services agreement. The 

Exchange is responsible for FINRA’s performance 

under this regulatory services agreement. 

25For 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. 

26Certain provisions of the Prior Notice, however, 

were based on information as of a particular date 

and there has not been an undertaking to update 

such information for purposes of this filing. 

27 In particular, consistent with the statements in 

the Prior Notice to the effect that the Fund may not 

meet the criteria set forth in Nasdaq Rule 

converted equity security as soon as 

practicable (the ‘‘Convertible Securities 

Restriction’’). 

Going forward, the Exchange is 

proposing that the Fund may retain in 

its portfolio, without regard to the 

Credit Metrics Representation (modified 

as described above), the Senior Loan/ 

Other Debt Representations (modified as 

described above), the Par Amount 

Representation or the Convertible 

Securities Restriction, Received 

Instruments. Further, the Exchange is 

proposing that the Fund would be 

permitted to continue to retain in its 

portfolio Received Instruments that are 

convertible securities after such 

securities have converted (i.e., as 

Equity-Based Received Instruments, 

which would not be taken into account 

for purposes of compliance with the 

80% Requirement) without regard to the 

Convertible Securities Restriction, the 

Non-U.S. Equity Restriction or the ISG 

Restriction. In addition, for the 

avoidance of doubt, Received 

Instruments that are convertible 

securities, bonds, loans or other debt 

instruments of any type may be issued 

by U.S. and/or non-U.S. issuers.22

Except as described in this filing, the 

Fund’s investments in, and ability to 

hold, Senior Loans, convertible 

securities and other debt instruments 

would continue to be subject to the 

Fund’s investment objectives, 

restrictions and strategies, as described 

in the Prior Notice. As indicated above, 

the Fund would not hold more than 

20% of its net assets, in the aggregate, 

in (1) Received Instruments that are not 

Senior Loans and (2) Received 

Instruments that are Senior Loans and 

do not satisfy the Par Amount 

Representation. Although it is possible 

that the Fund’s holdings may include 

certain Received Instruments that are 

Senior Loans that do not satisfy the Par 

Amount Representation, at least 80% of 

the Fund’s net assets would be 

comprised of Senior Loans that do 

satisfy the Par Amount Representation. 

Availability of Information 

Intra-day executable price quotations 

for the Senior Loans, fixed income 

securities and other assets (including 

any Received Instruments and Defaulted 

Loans) held by the Fund would be 

available from major broker-dealer firms 

and/or market data vendors (and/or, if 

applicable, on the exchange on which 

they are traded). Intra-day price 

information for the holdings of the Fund 

would be available through subscription 

services, such as Markit, Bloomberg and 

Thomson Reuters, which can be 

accessed by authorized participants and 

other investors, and/or from 

independent pricing services.23 In 

addition, the Fund’s Disclosed Portfolio, 

as defined in Nasdaq Rule 5735(c)(2), 

would include the Received Instruments 

and Defaulted Loans held by the Fund. 

Further, for the Fund, an estimated 

value, defined in Nasdaq Rule 

5735(c)(3) as the ‘‘Intraday Indicative 

Value’’ that reflects an estimated 

intraday value of the Fund’s portfolio, 

would continue to be disseminated. 

Surveillance 

The Exchange represents that trading 

in the Shares would be subject to the 

existing trading surveillances, 

administered by both Nasdaq and also 

the Financial Industry Regulatory 

Authority (‘‘FINRA’’), on behalf of the 

Exchange, which are designed to detect 

violations of Exchange rules and 

applicable federal securities laws.24 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. 

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, 

would communicate as needed 

regarding trading in the Shares and the 

exchange-listed instruments held by the 

Fund (including exchange-listed EquityBased Received Instruments (if any) and 

any other exchange-listed equity 

securities) with other markets and other 

entities that are members of ISG or 

exchanges with which the Exchange has 

a comprehensive surveillance sharing 

agreement 25 and FINRA and the 

Exchange both may obtain trading 

information regarding trading in the 

Shares and such exchange-listed 

instruments held by the Fund from 

markets and other entities that are 

members of ISG, which include 

securities exchanges, or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement. 

Moreover, FINRA, on behalf of the 

Exchange, would be able to access, as 

needed, trade information for certain 

fixed income securities held by the 

Fund reported to FINRA’s Trade 

Reporting and Compliance Engine 

(‘‘TRACE’’). 

In addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

Continued Listing Representations 

All statements and representations 

made in this filing regarding (a) the 

description of the portfolio or reference 

assets, (b) limitations on portfolio 

holdings or reference assets, (c) 

dissemination and availability of the 

reference asset or intraday indicative 

values, or (d) the applicability of 

Exchange listing rules shall constitute 

continued listing requirements for 

listing the Shares on the Exchange. In 

addition, the issuer has represented to 

the Exchange that it will advise the 

Exchange of any failure by the Fund to 

comply with the continued listing 

requirements, and, pursuant to its 

obligations under Section 19(g)(1) of the 

Act, the Exchange will monitor for 

compliance with the continued listing 

requirements. If the Fund is not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures under 

the Nasdaq 5800 Series. 

The Adviser represents that there 

would be no change to the Fund’s 

investment objectives. Except as 

provided herein, all other 

representations made in the Prior Notice 

would remain unchanged.26 Except for 

the generic listing provisions of Nasdaq 

Rule 5735(b)(1) (the ‘‘generic listing 

standards’’) 27 and as otherwise 


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5705(b)(4)(A)(vi), the Fund may not meet the 

similar criteria of Nasdaq Rule 5735(b)(1)(B)(iv); 

however, under normal market conditions, the 

Fund would generally be expected to meet the other 

criteria set forth in Nasdaq Rule 5735(b)(1)(B). 

Additionally, the Fund’s investments in equity 

securities are not generally expected to meet the 

criteria set forth in Nasdaq Rule 5735(b)(1)(A) and, 

to the extent the Fund invests in cash equivalents, 

such investments may not necessarily satisfy the 

criteria set forth in Nasdaq Rule 5735(b)(1)(C) (for 

example, the requirement that maturities be less 

than three months). The criteria set forth in Nasdaq 

Rules 5735(b)(1)(D), (E) and (F) are irrelevant given 

that the Fund does not and will not invest in listed 

or over-the-counter derivatives (and, for the 

avoidance of doubt, Equity-Based Received 

Instruments (including without limitation warrants 

and rights referenced above in footnote 19 and the 

accompanying text) will not be considered to be 

options or any other type of derivative). 

28See supra footnotes 6–9 and accompanying 

text. 

provided in this filing, the Fund and the 

Shares would continue to comply with 

the requirements applicable to Managed 

Fund Shares under Nasdaq Rule 5735. 

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 purpose of the 

proposed rule change is to modify 

certain provisions set forth in the Prior 

Notice pertaining to (1) the Normal 

Market Conditions Definition; (2) the 

Fund’s investments in Senior Loans and 

other debt, including, in particular, its 

investments in Defaulted Loans; and (3) 

the Fund’s ability to retain Received 

Instruments. Except as provided herein, 

all other representations made in the 

Prior Notice would remain unchanged. 

Except for the generic listing standards 

and as otherwise provided in this filing, 

the Fund and the Shares would 

continue to comply with the 

requirements applicable to Managed 

Fund Shares under Nasdaq Rule 5735. 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices in that the Shares 

would continue to be listed and traded 

on the Exchange pursuant to Nasdaq 

Rule 5735. The Exchange also notes the 

continued listing representations set 

forth above and that except as provided 

herein, all other representations made in 

the Prior Notice would remain 

unchanged. The Exchange represents 

that trading in the Shares would 

continue to 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. 

FINRA, on behalf of the Exchange, 

would communicate as needed 

regarding trading in the Shares and the 

exchange-listed instruments held by the 

Fund (including exchange-listed EquityBased Received Instruments (if any) and 

any other exchange-listed equity 

securities) with other markets and other 

entities that are members of ISG or 

exchanges with which the Exchange has 

a comprehensive surveillance sharing 

agreement and FINRA and the Exchange 

both may obtain information regarding 

trading in the Shares and such 

exchange-listed instruments held by the 

Fund from markets and other entities 

that are members of ISG, which include 

securities exchanges, or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement. 

Moreover, FINRA, on behalf of the 

Exchange, would be able to access, as 

needed, trade information for certain 

fixed income securities held by the 

Fund reported to FINRA’s TRACE. The 

Exchange notes that although the 

proposed changes in this filing would 

permit the Fund to retain, without 

regard to the ISG Restriction and the 

Non-U.S. Equity Restriction, EquityBased Received Instruments, the Fund 

would not hold more than 20% of its 

net assets in Equity-Based Received 

Instruments (which would not be taken 

into account for purposes of compliance 

with the 80% Requirement), and the 

Adviser expects that generally, over 

time, significantly less than 20% of the 

Fund’s net assets would be comprised of 

Equity-Based Received Instruments, 

which, together, should mitigate the 

risks associated with manipulation. 

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 Adviser 

represents that the purpose of the 

proposed changes is to provide it with 

greater flexibility in meeting the Fund’s 

investment objectives by modifying 

certain provisions in the Prior Notice. 

Notwithstanding the proposed changes, 

however, consistent with the Prior 

Notice, it is anticipated that the Fund, 

in accordance with its principal 

investment strategy, would continue to 

invest approximately 50% to 75% of its 

net assets in Senior Loans that are 

eligible for inclusion in and meet the 

liquidity thresholds of the Primary 

Index and/or the Secondary Index.28

Additionally, consistent with the Prior 

Notice, the aggregate amount of the 

Fund’s net assets permitted to be held 

in illiquid securities (calculated at the 

time of investment), including Rule 

144A securities, junior subordinated 

loans and unsecured loans deemed 

illiquid by the Adviser, would continue 

to be limited to 15%. 

With respect to the proposed changes 

relating to the Normal Market 

Conditions Definition, the Exchange 

does not believe that the proposed 

changes raise concerns. Rather, the 

Exchange believes that the proposed 

changes would provide the Fund with 

appropriate flexibility to adapt to 

challenging conditions and would 

potentially help the Fund mitigate risks 

that may accompany adverse political or 

economic factors and other 

extraordinary circumstances. Moreover, 

the proposed changes are consistent 

with prior Commission approvals of 

proposed rule changes relating to other 

ETFs advised by the Adviser. 

With respect to the proposed changes 

relating to Defaulted Loans, the 

Exchange notes that the Adviser 

believes that while the proposed 

changes would provide additional 

flexibility, the changes would not 

conflict with the Fund’s investment 

objectives or overall investment 

strategies or be inconsistent with the 

Adviser’s overall approach to managing 

the Fund. Rather, the proposed changes 

would enhance the Adviser’s 

investment opportunities in managing 

the Fund. In this regard, as stated in the 

Prior Notice, in selecting securities for 

the Fund, the Adviser would continue 

to seek to construct a portfolio of loans 

that it believes is less volatile than the 

general loan market. 

In addition, when making 

investments, the Adviser would 

continue to seek to maintain appropriate 

liquidity and price transparency for the 

Fund, and the key considerations of 

portfolio construction would continue 

to include liquidity, diversification and 

relative value. The Exchange believes 

that concerns related to manipulation 

should be mitigated given that the 

proposed changes (a) would be limited 

in scope, and (b) would be subject to the 

provisions described above, which 

should provide support regarding the 

Fund’s anticipated liquidity profile 

going forward. In particular, pursuant to 

the 15% Limitation, Defaulted Loans 

would comprise no more than 15% of 

the Fund’s net assets, as determined at 

the time of purchase. If, subsequent to 

being purchased or otherwise obtained 

by the Fund, a Senior Loan or other 

floating rate loan defaulted, the Fund 

could continue to hold such Senior 


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33284 Federal Register / Vol. 83, No. 137 / Tuesday, July 17, 2018 / Notices 

29www.ftportfolios.com. 

Loan or other floating rate loan without 

regard to the 15% Limitation; however, 

such Senior Loan or other floating rate 

loan would be considered a Defaulted 

Loan for purposes of determining 

whether the Fund’s purchase of 

additional Defaulted Loans would 

comply with the 15% Limitation. Based 

on the foregoing, the Exchange does not 

believe that the proposed changes will 

adversely affect investors or Exchange 

trading. 

With respect to the proposed changes 

relating to Received Instruments, 

although the Adviser’s overall approach 

to managing the Fund would not 

change, the Adviser believes that under 

certain circumstances, a limited ability 

to retain Received Instruments beyond 

the parameters set forth in the Prior 

Notice may serve to benefit shareholders 

to the extent it helps the Fund to pursue 

its investment objectives by retaining an 

investment interest, which the Adviser 

believes has merit, relating to a 

particular issuer. The Exchange believes 

that concerns related to manipulation 

should be mitigated given that the 

proposed changes (a) would be limited 

in scope, and (b) would be subject to the 

limits described above, which should 

provide support regarding the Fund’s 

anticipated liquidity profile going 

forward. As indicated above, the Fund 

would not hold more than 20% of its 

net assets, in the aggregate, in (1) 

Received Instruments that are not 

Senior Loans and (2) Received 

Instruments that are Senior Loans and 

do not satisfy the Par Amount 

Representation. Further, although it is 

possible that the Fund’s holdings may 

include certain Received Instruments 

that are Senior Loans that do not satisfy 

the Par Amount Representation, at least 

80% of the Fund’s net assets would be 

comprised of Senior Loans that do 

satisfy the Par Amount Representation. 

Additionally, the Exchange believes 

that the Adviser’s expectation that 

generally, over time, significantly less 

than 20% of the Fund’s net assets would 

be comprised of Equity-Based Received 

Instruments (which means that 

significantly less than 20% of the 

Fund’s net assets are expected to be 

comprised of instruments that do not 

satisfy the ISG Restriction) should help 

to alleviate manipulation concerns. 

Further, Equity-Based Received 

Instruments would not be taken into 

account for purposes of compliance 

with the 80% Requirement. Based on 

the foregoing, the Exchange does not 

believe that the proposed changes will 

adversely affect investors or Exchange 

trading. 

In addition, a large amount of 

information would continue to be 

publicly available regarding the Fund 

and the Shares, thereby promoting 

market transparency. For example, the 

Intraday Indicative Value, available on 

the Nasdaq Information LLC proprietary 

index data service, would continue to be 

widely disseminated by one or more 

major market data vendors and broadly 

displayed 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 would continue to 

disclose on the applicable website 29 the 

Disclosed Portfolio that will form the 

basis for the Fund’s calculation of net 

asset value (‘‘NAV’’) at the end of the 

business day. Intra-day executable price 

quotations for the Senior Loans, fixed 

income securities and other assets 

(including any Received Instruments 

and Defaulted Loans) held by the Fund 

would be available from major brokerdealer firms and/or market data vendors 

(and/or, if applicable, on the exchange 

on which they are traded). Intra-day 

price information for the holdings of the 

Fund would be available through 

subscription services, such as Markit, 

Bloomberg and Thomson Reuters, 

which can be accessed by authorized 

participants and other investors, and/or 

from independent pricing services. In 

addition, the Fund’s Disclosed Portfolio 

would include the Received Instruments 

and Defaulted Loans held by the Fund. 

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 

the additional flexibility to be afforded 

to the Adviser under the proposed rule 

change is intended to enhance its ability 

to meet the Fund’s investment 

objectives, to the benefit of investors. In 

addition, consistent with the Prior 

Notice, NAV per Share would continue 

to be calculated daily, and NAV and the 

Disclosed Portfolio would continue to 

be made available to all market 

participants at the same time. Further, 

as noted above and/or in the Prior 

Notice, investors would continue to 

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 would provide the Adviser 

with additional flexibility, thereby 

helping the Fund to achieve its 

investment objectives. As such, it is 

expected that the Fund may become a 

more attractive investment product in 

the marketplace and, therefore, that the 

proposed rule change would not impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

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 rule-comments@

sec.gov. Please include File Number SR– 

NASDAQ–2018–050 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–2018–050. This 


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 137 / Tuesday, July 17, 2018 / Notices 33285 

30 17 CFR 200.30–3(a)(12). 

1Applicants request relief with respect to the 

Initial Fund, as well as to any future series of the 

Trust and any other existing or future registered 

open-end management investment company or 

series thereof that, in each case, is advised by the 

Initial Adviser or any entity controlling, controlled 

by, or under common control with, the Initial 

Adviser or its successors (each, also an ‘‘Adviser’’), 

uses the multi-manager structure described in the 

application, and complies with the terms and 

conditions set forth in the application (each, a 

‘‘Subadvised Fund’’). For purposes of the requested 

order, ‘‘successor’’ is limited to an entity that 

results from a reorganization into another 

jurisdiction or a change in the type of business 

organization. Future Subadvised Funds may be 

operated as a master-feeder structure pursuant to 

section 12(d)(1)(E) of the Act. In such a structure, 

certain series of the Trust (each, a ‘‘Feeder Fund’’) 

may invest substantially all of their assets in a 

Subadvised Fund (a ‘‘Master Fund’’) pursuant to 

section 12(d)(1)(E) of the Act. No Feeder Fund will 

engage any sub-advisers other than through 

approving the engagement of one or more of the 

Master Fund’s sub-advisers. 

2As used herein, a ‘‘Sub-Adviser’’ for a 

Subadvised Fund is (1) an indirect or direct 

‘‘wholly owned subsidiary’’ (as such term is defined 

in the Act) of the Adviser for that Subadvised Fund, 

or (2) a sister company of the Adviser for that 

Subadvised Fund that is an indirect or direct 

‘‘wholly-owned subsidiary’’ of the same company 

that, indirectly or directly, wholly owns the Adviser 

(each of (1) and (2) a ‘‘Wholly-Owned Sub-Adviser’’ 

and collectively, the ‘‘Wholly-Owned SubAdvisers’’), or (3) not an ‘‘affiliated person’’ (as such 

term is defined in section 2(a)(3) of the Act) of the 

Subadvised Fund, any Feeder Fund invested in a 

Master Fund, the Trust, or the Adviser, except to 

the extent that an affiliation arises solely because 

the Sub-Adviser serves as a sub-adviser to a 

Subadvised Fund (‘‘Non-Affiliated Sub-Advisers’’). 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NASDAQ–2018–050 and 

should be submitted on or before 

August 7, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–15177 Filed 7–16–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

33159; 812–14829] 

TriLine Index Solutions, LLC and ETF 

Series Solutions 

July 11, 2018. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice. 

Notice of an application under section 

6(c) of the Investment Company Act of 

1940 (‘‘Act’’) for an exemption from 

section 15(a) of the Act and rule 18f–2 

under the Act, as well as from certain 

disclosure requirements in rule 20a–1 

under the Act, Item 19(a)(3) of Form 

N–1A, Items 22(c)(1)(ii), 22(c)(1)(iii), 

22(c)(8) and 22(c)(9) of Schedule 14A 

under the Securities Exchange Act of 

1934, and Sections 6–07(2)(a), (b), and 

(c) of Regulation S–X (‘‘Disclosure 

Requirements’’). The requested 

exemption would permit an investment 

adviser to hire and replace certain subadvisers without shareholder approval 

and grant relief from the Disclosure 

Requirements as they relate to fees paid 

to the sub-advisers. 

APPLICANTS: ETF Series Solutions (the 

‘‘Trust’’), a Delaware statutory trust 

registered under the Act as an open-end 

management investment company with 

multiple series, and TriLine Index 

Solutions, LLC (the ‘‘Initial Adviser’’), a 

Delaware limited liability company 

registered as an investment adviser 

under the Investment Advisers Act of 

1940. 

FILING DATES: The application was filed 

on October 4, 2017 and amended on 

May 2, 2018. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the application will be 

issued unless the Commission orders a 

hearing. Interested persons may request 

a hearing by writing to the 

Commission’s Secretary and serving 

applicants with a copy of the request, 

personally or by mail. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on August 3, 2018, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Pursuant to rule 0–5 under the 

Act, hearing requests should state the 

nature of the writer’s interest, any facts 

bearing upon the desirability of a 

hearing on the matter, the reason for the 

request, and the issues contested. 

Persons who wish to be notified of a 

hearing may request notification by 

writing to the Commission’s Secretary. 

ADDRESSES: Secretary, U.S. Securities 

and Exchange Commission, 100 F Street 

NE, Washington, DC 20549–1090. 

Applicants: ETF Series Solutions, 615 E 

Michigan Street, Milwaukee, WI 53202, 

and TriLine Index Solutions, LLC, 8117 

Preston Road, Suite 260, Dallas, TX 

75225. 

FOR FURTHER INFORMATION CONTACT: 

Bruce R. MacNeil, Senior Counsel, at 

(202) 551–6817, or Kaitlin C. Bottock, 

Branch Chief, at (202) 551–6825 

(Division of Investment Management, 

Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 

application. The complete application 

may be obtained via the Commission’s 

website by searching for the file 

number, or for an applicant using the 

Company name box, at http://

www.sec.gov/search/search.htm or by 

calling (202) 551–8090. 

Summary of the Application 

1. The Initial Adviser is the 

investment adviser to the Trust’s 

Pickens Oil Response ETF (‘‘Initial 

Fund’’) pursuant to an investment 

management agreement with the Trust 

(‘‘Investment Management 

Agreement’’).1 Under the terms of the 

Investment Management Agreement, the 

Adviser, subject to the supervision of 

the board of trustees of the Trust 

(‘‘Board’’), provides continuous 

investment management of the assets of 

each Subadvised Fund. Consistent with 

the terms of the Investment 

Management Agreement, the Adviser 

may, subject to the approval of the 

Board, delegate portfolio management 

responsibilities of all or a portion of the 

assets of a Subadvised Fund to one or 

more Sub-Advisers.2 The Adviser will 

continue to have overall responsibility 

for the management and investment of 

the assets of each Subadvised Fund. The 

Adviser will evaluate, select, and 

recommend Sub-Advisers to manage the 

assets of a Subadvised Fund and will 

oversee, monitor and review the SubAdvisers and their performance and 


daltland on DSKBBV9HB2PROD with NOTICES