[Federal Register Volume 80, Number 41 (Tuesday, March 3, 2015)]
[Notices]
[Pages 11509-11517]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-04334]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74378; File No. SR-NASDAQ-2015-011]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change Relating to the Listing and 
Trading of the Shares of the First Trust Strategic Floating Rate ETF of 
First Trust Exchange-Traded Fund IV

February 25, 2015.
    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 February 12, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by Nasdaq. The

[[Page 11510]]

Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq proposes to list and trade the shares of the First Trust 
Strategic Floating Rate ETF (the ``Fund'') of the First Trust Strategic 
Floating Rate ETF (the ``Fund'') of First Trust Exchange-Traded Fund IV 
(the ``Trust'') under Nasdaq Rule 5735 (``Managed Fund Shares'').\3\ 
The shares of the Fund are collectively referred to herein as the 
``Shares.''
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    \3\ The Commission approved Nasdaq Rule 5735 in Securities 
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June 
20, 2008) (SR-NASDAQ-2008-039). There are already multiple actively-
managed funds listed on the Exchange; see, e.g., Securities Exchange 
Act Release Nos. 69464 (April 26, 2013), 78 FR 25774 (May 2, 2013) 
(SR-NASDAQ-2013-036) (order approving listing and trading of First 
Trust Senior Loan Fund); 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); 66489 
(February 29, 2012), 77 FR 13379 (March 6, 2012) (SR-NASDAQ-2012-
004) (order approving listing and trading of WisdomTree Emerging 
Markets Corporate Bond Fund). The Exchange believes the proposed 
rule change raises no significant issues not previously addressed in 
those prior Commission orders.
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    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, and at the 
Commission's Public Reference Room.

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

    In its filing with the Commission, Nasdaq included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. Nasdaq has prepared summaries, set forth in Sections A, 
B, and C below, of the most significant aspects of such statements.

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

1. Purpose
    The Exchange proposes to list and trade the Shares of the Fund 
under Nasdaq Rule 5735, which governs the listing and trading of 
Managed Fund Shares\4\ on the Exchange. The Fund will be an actively-
managed exchange-traded fund (``ETF''). The Shares will be offered by 
the Trust, which was established as a Massachusetts business trust on 
September 15, 2010.\5\ The Trust is registered with the Commission as 
an investment company and has filed a registration statement on Form N-
1A (``Registration Statement'') with the Commission.\6\ The Fund will 
be a series of the Trust. The Fund intends to qualify each year as a 
regulated investment company (``RIC'') under Subchapter M of the 
Internal Revenue Code of 1986, as amended.
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    \4\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (the ``1940 Act'') organized 
as an open-end investment company or similar entity that invests in 
a portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Index Fund Shares, listed 
and traded on the Exchange under Nasdaq Rule 5705, seeks to provide 
investment results that correspond generally to the price and yield 
performance of a specific foreign or domestic stock index, fixed 
income securities index or combination thereof.
    \5\ The Commission has issued an order, upon which the Trust may 
rely, granting certain exemptive relief under the 1940 Act. See 
Investment Company Act Release No. 30029 (April 10, 2012) (File No. 
812-13795) (the ``Exemptive Relief''). In addition, the Commission 
has issued no-action relief, upon which the Trust may rely, 
pertaining to the Fund's ability to invest in derivatives 
notwithstanding certain representations in the application for the 
Exemptive Relief. See Commission No-Action Letter (December 6, 
2012).
    \6\ See Post-Effective Amendment No. 104 to Registration 
Statement on Form N-1A for the Trust, dated January 29, 2015 (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.
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    First Trust Advisors L.P. will be the investment adviser 
(``Adviser'') to the Fund. First Trust Portfolios L.P. (the 
``Distributor'') will be the principal underwriter and distributor of 
the Fund's Shares. The Bank of New York Mellon Corporation (``BNY'') 
will act as the administrator, accounting agent, custodian and transfer 
agent to the Fund.
    Paragraph (g) of Rule 5735 provides that if the investment adviser 
to the investment company issuing Managed Fund Shares is affiliated 
with a broker-dealer, such investment adviser shall erect a ``fire 
wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio.\7\ In addition, paragraph 
(g) further requires that personnel who make decisions on the open-end 
fund's portfolio composition must be subject to procedures designed to 
prevent the use and dissemination of material, non-public information 
regarding the open-end fund's portfolio. Rule 5735(g) is similar to 
Nasdaq Rule 5705(b)(5)(A)(i); however, paragraph (g) in connection with 
the establishment of a ``fire wall'' between the investment adviser and 
the broker-dealer reflects the applicable open-end fund's portfolio, 
not an underlying benchmark index, as is the case with index-based 
funds. The Adviser is not a broker-dealer, although it is affiliated 
with the Distributor, a broker-dealer. The Adviser has implemented a 
fire wall with respect to its broker-dealer affiliate regarding access 
to information concerning the composition and/or changes to the 
portfolio. In addition, personnel who make decisions on the Fund's 
portfolio composition will be subject to procedures designed to prevent 
the use and dissemination of material non-public information regarding 
the Fund's portfolio. In the event (a) the Adviser becomes, or becomes 
newly affiliated with, a broker-dealer, or (b) any new adviser or sub-
adviser is a registered broker-dealer or becomes affiliated with 
another broker-dealer, it will implement a fire wall with respect to 
its relevant personnel and/or such broker-dealer affiliate, as 
applicable, regarding access to information concerning the composition 
and/or changes to the portfolio and will be subject to procedures 
designed to prevent the use and dissemination of material non-public 
information regarding such portfolio. The Fund does not currently 
intend to use a sub-adviser.
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    \7\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and its related personnel are 
subject to the provisions of Rule 204A-1 under the Advisers Act 
relating to codes of ethics. This Rule requires investment advisers 
to adopt a code of ethics that reflects the fiduciary nature of the 
relationship to clients as well as compliance with other applicable 
securities laws. Accordingly, procedures designed to prevent the 
communication and misuse of non-public information by an investment 
adviser must be consistent with Rule 204A-1 under the Advisers Act. 
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful 
for an investment adviser to provide investment advice to clients 
unless such investment adviser has (i) adopted and implemented 
written policies and procedures reasonably designed to prevent 
violation, by the investment adviser and its supervised persons, of 
the Advisers Act and the Commission rules adopted thereunder; (ii) 
implemented, at a minimum, an annual review regarding the adequacy 
of the policies and procedures established pursuant to subparagraph 
(i) above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
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First Trust Strategic Floating Rate ETF
    The investment objective of the Fund will be to seek current 
income. To achieve its objective, the Fund will invest, under normal 
market

[[Page 11511]]

conditions,\8\ at least 80% of its net assets in a portfolio of the 
following types of floating-rate\9\ debt instruments issued by U.S. and 
non-U.S. public- and private-sector entities: floating-rate 
corporate\10\ and government bonds and notes; floating-rate agency 
securities;\11\ floating-rate instruments of non-U.S. issuers; 
floating-rate privately-issued securities;\12\ floating-rate asset-
backed securities;\13\ floating-rate mortgage-backed securities;\14\ 
floating-rate loans;\15\ and investment companies\16\ (including 
investment companies advised by the Adviser) that invest primarily in 
the foregoing types of debt instruments\17\ (collectively, ``Floating 
Rate Debt Instruments'').
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    \8\ 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. For temporary 
defensive purposes, during the initial invest-up period and during 
periods of high cash inflows or outflows, the Fund may depart from 
its principal investment strategies; for example, it may hold a 
higher than normal proportion of its assets in cash. During such 
periods, the Fund may not be able to achieve its investment 
objective. The Fund may adopt a defensive strategy 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.
    \9\ For the avoidance of doubt, the term ``floating-rate'' shall 
also include similar terms, such as ``variable-rate'' and 
``adjustable-rate.''
    \10\ The Adviser expects that, under normal market conditions, 
generally, for a corporate bond to be considered as an eligible 
investment, after taking into account such an investment, at least 
75% of the Fund's net assets that are invested in floating-rate 
corporate bonds and, as described below, fixed-rate corporate bonds 
(in the aggregate), will be comprised of corporate bonds that have, 
at the time of original issuance, $100 million or more par amount 
outstanding.
    \11\ ``Agency securities'' for these purposes generally includes 
securities issued by the following entities: Government National 
Mortgage Association (Ginnie Mae), Federal National Mortgage 
Association (Fannie Mae), Federal Home Loan Banks (FHLBanks), 
Federal Home Loan Mortgage Corporation (Freddie Mac), Farm Credit 
System (FCS) Farm Credit Banks (FCBanks), Student Loan Marketing 
Association (Sallie Mae), Resolution Funding Corporation (REFCORP), 
Financing Corporation (FICO), and the Farm Credit System (FCS) 
Financial Assistance Corporation (FAC). Agency securities can 
include, but are not limited to, mortgage-backed securities.
    \12\ ``Privately-issued securities'' for these purposes 
generally includes Rule 144A securities other than mortgage-backed 
Rule 144A securities. Under normal market conditions, privately-
issued securities will have, at the time of original issuance, $100 
million or more principal amount outstanding to be considered 
eligible investments.
    \13\ Asset-backed securities are securities that are backed by a 
pool of assets. The Fund currently intends to invest in asset-backed 
securities that are consumer asset-backed securities.
    \14\ Mortgage-backed securities, which are securities that 
directly or indirectly represent a participation in, or are secured 
by and payable from, mortgage loans on real property, will consist 
of: (1) residential mortgage-backed securities (``RMBS''); (2) 
commercial mortgage-backed securities (``CMBS''); (3) stripped 
mortgage-backed securities (``SMBS''), which are mortgage-backed 
securities where mortgage payments are divided between paying the 
loan's principal and paying the loan's interest; (4) collateralized 
mortgage obligations (``CMOs'') and real estate mortgage investment 
conduits (``REMICs''), which are mortgage-backed securities that are 
divided into multiple classes, with each class being entitled to a 
different share of the principal and interest payments received from 
the pool of underlying assets.
    \15\ The floating-rate loans in which the Fund will invest will 
represent amounts borrowed by companies or other entities from banks 
and other lenders and a significant portion of such floating-rate 
loans may be rated below investment grade or unrated. Floating-rate 
loans held by the Fund may be senior or subordinate obligations of 
the borrower and may or may not be secured by collateral. First lien 
senior secured floating-rate loans are referred to herein as 
``senior loans.'' Floating-rate loans that are not senior loans 
(i.e., unsecured floating-rate loans and secured floating-rate loans 
that are not first lien floating-rate loans) are referred to herein 
as ``junior loans.'' The Fund will generally invest in floating-rate 
loans that the Adviser deems to be liquid with readily available 
prices; notwithstanding the foregoing, the Fund may invest in 
floating-rate loans that are deemed illiquid so long as the Fund 
complies with the 15% limitation on investments of its net assets in 
illiquid assets described below under ``Investment Restrictions.''
    \16\ The Fund currently anticipates investing only in registered 
open-end investment companies that are listed and traded in the U.S. 
on registered exchanges (i.e., other ETFs). An ETF is an investment 
company registered under the 1940 Act that holds a portfolio of 
securities. Many ETFs are designed to track the performance of a 
securities index, including industry, sector, country and region 
indexes. The Fund may invest in the securities of ETFs in excess of 
the limits imposed under the 1940 Act pursuant to exemptive orders 
obtained by other ETFs and their sponsors from the Commission. In 
addition, the Fund may invest in the securities of certain 
investment companies in excess of the limits imposed under the 1940 
Act pursuant to an exemptive order obtained by the Trust and the 
Adviser from the Commission. See Investment Company Act Release No. 
30377 (February 5, 2013) (File No. 812-13895). The ETFs in which the 
Fund may invest include Index Fund Shares (as described in Nasdaq 
Rule 5705), Portfolio Depository Receipts (as described in Nasdaq 
Rule 5705), and Managed Fund Shares (as described in Nasdaq Rule 
5735). While the Fund may invest in inverse ETFs, the Fund will not 
invest in leveraged or inverse leveraged (e.g., 2X or -3X) ETFs.
    \17\ The liquidity of a security, especially in the case of 
asset-backed and mortgage-backed securities, will be a substantial 
factor in the Fund's security selection process. Consistent with the 
discussion below under ``Investment Restrictions,'' the Fund will 
not purchase any Floating Rate Debt Instruments (including asset-
backed securities and mortgage-backed securities) that, in the 
Adviser's opinion, are illiquid if, as a result, more than 15% of 
the value of the Fund's net assets will be invested in illiquid 
assets.
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    At least 65% of the Fund's net assets will be invested in Floating 
Rate Debt Instruments that are, at the time of purchase, investment 
grade. To be considered ``investment grade,'' under normal market 
conditions, rated Floating Rate Debt Instruments will carry, at the 
time of purchase, a rating in the highest four rating categories of at 
least one nationally recognized statistical ratings organization 
(``NRSRO'') (e.g., BBB- or higher by Standard & Poor's Ratings Services 
(``S&P''), and/or Fitch Ratings (``Fitch''), or Baa3 or higher by 
Moody's Investors Service, Inc. (``Moody's'').\18\ For unrated 
securities to be considered ``investment grade,'' under normal market 
conditions, such securities will be determined, at the time of 
purchase, to be of comparable quality\19\ by the Adviser. The Fund may 
invest up to 35% of its net assets in securities that are, at the time 
of investment, rated below investment grade by each NRSRO rating such 
securities (or securities that are unrated and determined by the 
Adviser to be of comparable quality), commonly referred to as ``high 
yield'' or ``junk'' bonds. If, subsequent to purchase by the Fund, a 
security held by the Fund experiences a decline in credit quality and 
falls below investment grade, the Fund may continue to hold the 
security, and it will not cause the Fund to violate the 35% investment 
limitation; however, the security will be taken into account for 
purposes of determining whether purchases of additional securities will 
cause the Fund to violate such limitation.
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    \18\ For the avoidance of doubt, if a security is rated by 
multiple NRSROs and receives different ratings, the Fund will treat 
the security as being rated in the highest rating category received 
from an NRSRO.
    \19\ Comparable quality of unrated securities will be determined 
by the Adviser based on fundamental credit analysis of the unrated 
security and comparable NRSRO-rated securities. On a best efforts 
basis, the Adviser will attempt to make a rating determination based 
on publicly available data. In making a ``comparable quality'' 
determination, the Adviser may consider, for example, whether the 
issuer of the security has issued other rated securities, the nature 
and provisions of the relevant security, whether the obligations 
under the relevant security are guaranteed by another entity and the 
rating of such guarantor (if any), relevant cash flows, 
macroeconomic analysis, and/or sector or industry analysis.
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    The Fund will limit its investments in asset-backed securities 
(excluding agency mortgage-backed securities) and non-agency mortgage-
backed securities (in the aggregate) to 20% of its net assets.\20\ In 
addition, the Fund will limit its investments in junior loans to 20% of 
its net assets.
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    \20\ For the avoidance of doubt, there is no limitation on the 
Fund's investments in agency mortgage-backed securities.
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    The Fund will hold debt securities (including, in the aggregate, 
Floating Rate Debt Instruments and the fixed-rate debt securities 
described below) of at least 13 non-affiliated issuers.

[[Page 11512]]

Other Investments
    Under normal market conditions, the Fund will invest primarily in 
the Floating Rate Debt Instruments described above to meet its 
investment objective. In addition, the Fund may invest up to 20% of its 
net assets in the following types of fixed-rate debt securities: 
corporate\21\ and government bonds and notes; agency securities;\22\ 
instruments of non-U.S. issuers in developed markets; privately-issued 
securities;\23\ asset-backed securities;\24\ mortgage-backed 
securities;\25\ municipal bonds; money market securities;\26\ and 
investment companies\27\ (including investment companies advised by the 
Adviser) that invest primarily in the foregoing types of debt 
securities.
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    \21\ See footnote 10 above.
    \22\ See footnote 11 above.
    \23\ See footnote 12 above.
    \24\ See footnote 13 above.
    \25\ See footnote 14 above.
    \26\ ``Money market securities'' for these purposes generally 
includes: short-term high-quality obligations issued or guaranteed 
by the U.S. Treasury or the agencies or instrumentalities of the 
U.S. government; short-term high-quality securities issued or 
guaranteed by non-U.S. governments, agencies and instrumentalities; 
repurchase agreements; commercial paper (both asset-backed and non-
asset-backed); and deposits and other obligations of U.S. and non-
U.S. banks and financial institutions.
    \27\ See footnote 16 above.
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    Further, to pursue its investment objective, the Fund may invest up 
to 20% of the value of its net assets in exchange-listed options on 
U.S. Treasury securities, exchange-listed options on U.S. Treasury 
futures contracts and exchange-listed U.S. Treasury futures 
contracts.\28\ The use of these derivative transactions may allow the 
Fund to obtain net long or short exposures to selected interest rates. 
These derivatives may also be used to hedge risks, including interest 
rate risks and credit risks, associated with the Fund's portfolio 
investments. The Fund's investments in derivative instruments will be 
consistent with the Fund's investment objective and the 1940 Act and 
will not be used to seek to achieve a multiple or inverse multiple of 
an index.
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    \28\ At least 90% of the Fund's net assets that are invested in 
exchange-traded derivative instruments will be invested in 
instruments that trade in markets that are members of the 
Intermarket Surveillance Group (``ISG'') (see footnote 40 below) or 
are parties to a comprehensive surveillance sharing agreement with 
the Exchange.
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Investment Restrictions
    The Fund will not invest 25% or more of the value of its total 
assets in securities of issuers in any one industry. This restriction 
does not apply to (a) obligations issued or guaranteed by the U.S. 
government, its agencies or instrumentalities or (b) securities of 
other investment companies.\29\
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    \29\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Adviser.\30\ The 
Fund will monitor its portfolio liquidity on an ongoing basis to 
determine whether, in light of current circumstances, an adequate level 
of liquidity is being maintained, and will consider taking appropriate 
steps in order to maintain adequate liquidity if, through a change in 
values, net assets, or other circumstances, more than 15% of the Fund's 
net assets are held in illiquid assets. Illiquid assets include 
securities subject to contractual or other restrictions on resale and 
other instruments that lack readily available markets as determined in 
accordance with Commission staff guidance.\31\
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    \30\ In reaching liquidity decisions, the Adviser may consider 
the following factors: the frequency of trades and quotes for the 
security; the number of dealers wishing to purchase or sell the 
security and the number of other potential purchasers; dealer 
undertakings to make a market in the security; and the nature of the 
security and the nature of the marketplace in which it trades (e.g., 
the time needed to dispose of the security, the method of soliciting 
offers and the mechanics of transfer).
    \31\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also Investment Company Act 
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) 
(Statement Regarding ``Restricted Securities''); Investment Company 
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) 
(Revisions of Guidelines to Form N-1A). A fund's portfolio security 
is illiquid if it cannot be disposed of in the ordinary course of 
business within seven days at approximately the value ascribed to it 
by the fund. See Investment Company Act Release No. 14983 (March 12, 
1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7 
under the 1940 Act); Investment Company Act Release No. 17452 (April 
23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under 
the Securities Act of 1933).
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    The Fund will not invest in non-U.S. equity securities.
Creation and Redemption of Shares
    The Fund will issue and redeem Shares on a continuous basis at net 
asset value (``NAV'') \32\ only in large blocks of Shares (``Creation 
Units'') in transactions with authorized participants, generally 
including broker-dealers and large institutional investors 
(``Authorized Participants''). Creation Units generally will consist of 
50,000 Shares, although this may change from time to time. Creation 
Units, however, are not expected to consist of less than 50,000 Shares. 
As described in the Registration Statement and consistent with the 
Exemptive Relief, the Fund will issue and redeem Creation Units in 
exchange for an in-kind portfolio of instruments and/or cash in lieu of 
such instruments (the ``Creation Basket''). In addition, if there is a 
difference between the NAV attributable to a Creation Unit and the 
market value of the Creation Basket exchanged for the Creation Unit, 
the party conveying instruments with the lower value will pay to the 
other an amount in cash equal to the difference (referred to as the 
``Cash Component'').
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    \32\ The NAV of the Fund's Shares generally will be calculated 
once daily Monday through Friday as of the close of regular trading 
on the New York Stock Exchange, generally 4:00 p.m., Eastern Time 
(the ``NAV Calculation Time''). NAV per Share will be calculated by 
dividing the Fund's net assets by the number of Fund Shares 
outstanding. For more information regarding the valuation of Fund 
investments in calculating the Fund's NAV, see the Registration 
Statement.
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    Creations and redemptions must be made by or through an Authorized 
Participant that has executed an agreement that has been agreed to by 
the Distributor and BNY with respect to creations and redemptions of 
Creation Units. All standard orders to create Creation Units must be 
received by the transfer agent no later than the closing time of the 
regular trading session on the New York Stock Exchange (ordinarily 4:00 
p.m., Eastern Time) (the ``Closing Time'') in each case on the date 
such order is placed in order for the creation of Creation Units to be 
effected based on the NAV of Shares as next determined on such date 
after receipt of the order in proper form. Shares may be redeemed only 
in Creation Units at their NAV next determined after receipt not later 
than the Closing Time of a redemption request in proper form by the 
Fund through the transfer agent and only on a business day.
    The Fund's custodian, through the National Securities Clearing 
Corporation, will make available on each business day, prior to the 
opening of business of the Exchange, the list of the names and 
quantities of the instruments comprising the Creation Basket, as well 
as the estimated Cash Component (if any), for that day. The published 
Creation Basket will apply until a new Creation Basket is announced on 
the following business day prior to commencement of trading in the 
Shares.

[[Page 11513]]

Net Asset Value
    The Fund's NAV will be determined as of the close of trading 
(normally 4:00 p.m., Eastern Time) on each day the New York Stock 
Exchange is open for business. NAV will be calculated for the Fund by 
taking the market price of the Fund's total assets, including interest 
or dividends accrued but not yet collected, less all liabilities, and 
dividing such amount by the total number of Shares outstanding. The 
result, rounded to the nearest cent, will be the NAV per Share. All 
valuations will be subject to review by the Board of Trustees of the 
Trust (``Trust Board'') or its delegate.
    The Fund's investments will be valued daily at market value or, in 
the absence of market value with respect to any investment, at fair 
value, in each case in accordance with valuation procedures (which may 
be revised from time to time) adopted by the Trust Board (the 
``Valuation Procedures'') and in accordance with the 1940 Act. A market 
valuation generally means a valuation (i) obtained from an exchange, an 
independent pricing service (``Pricing Service''), or a major market 
maker (or dealer) or (ii) based on a price quotation or other 
equivalent indication of value supplied by an exchange, a Pricing 
Service, or a major market maker (or dealer). The information 
summarized below is based on the Valuation Procedures as currently in 
effect; however, as noted above, the Valuation Procedures are amended 
from time to time and, therefore, such information is subject to 
change.
    Certain securities, including Floating Rate Debt Instruments, in 
which the Fund may invest will not be listed on any securities exchange 
or board of trade. Such securities will typically be bought and sold by 
institutional investors in individually negotiated private transactions 
that function in many respects like an over-the-counter secondary 
market, although typically no formal market makers will exist. Certain 
securities, particularly debt securities, will have few or no trades, 
or trade infrequently, and information regarding a specific security 
may not be widely available or may be incomplete. Accordingly, 
determinations of the fair value of debt securities may be based on 
infrequent and dated information. Because there is less reliable, 
objective data available, elements of judgment may play a greater role 
in valuation of debt securities than for other types of securities. 
Typically, Floating Rate Debt Instruments and other debt securities in 
which the Fund may invest (other than those described below) will be 
valued using information provided by a Pricing Service. Debt securities 
having a remaining maturity of 60 days or less when purchased will be 
valued at cost adjusted for amortization of premiums and accretion of 
discounts, provided the Adviser's pricing committee (the ``Pricing 
Committee'') has determined that the use of amortized cost is an 
appropriate reflection of fair value given market and issuer-specific 
conditions existing at the time of the determination. Overnight 
repurchase agreements will be valued at cost and term repurchase 
agreements (i.e., those whose maturity exceeds seven days) will be 
valued at the average of the bid quotations obtained daily from at 
least two recognized dealers.
    Asset-backed and mortgage-backed securities will generally be 
valued by using a Pricing Service. If a Pricing Service does not cover 
a particular asset-backed or mortgage-backed security, or discontinues 
covering a particular asset-backed or mortgage-backed security, the 
security will be priced using broker quotes generally provided by 
brokers that make or participate in markets in the security. To derive 
values, Pricing Services and broker-dealers may use matrix pricing and 
valuation models, as well as recent market transactions for the same or 
similar assets. As it deems appropriate, the Pricing Committee may 
determine that a Pricing Service price does not represent an accurate 
value of an asset-backed or mortgage-backed security, based on broker 
quotes it receives, a recent trade in the security by the Fund, 
information from a portfolio manager, or other market information. In 
the event that the Pricing Committee determines that the Pricing 
Service price is unreliable or inaccurate based on such other 
information, broker quotes may be used. Additionally, if the Pricing 
Committee determines that the price of an asset-backed or mortgage-
backed security obtained from a Pricing Service and available broker 
quotes is unreliable or inaccurate due to market conditions or other 
reasons, or if a Pricing Service price or broker quote is unavailable, 
the security will be valued using fair value pricing, as described 
below.
    Equity securities listed on any exchange other than the Exchange 
will be valued at the last sale price on the exchange on which they are 
principally traded on the business day as of which such value is being 
determined. Equity securities listed on the Exchange will be valued at 
the official closing price on the business day as of which such value 
is being determined. If there has been no sale on such day, or no 
official closing price in the case of securities traded on the 
Exchange, the securities will be valued using fair value pricing, as 
described below. Equity securities traded on more than one securities 
exchange will be valued at the last sale price or official closing 
price, as applicable, on the business day as of which such value is 
being determined at the close of the exchange representing the 
principal market for such securities.
    Exchange-traded options and futures contracts will be valued at the 
closing price in the market where such contracts are principally 
traded.
    Certain securities, including Floating Rate Debt Instruments, in 
which the Fund will invest will not be able to be priced by pre-
established pricing methods. Such securities may be valued by the Trust 
Board or its delegate at fair value. The use of fair value pricing by 
the Fund will be governed by the Valuation Procedures and conducted in 
accordance with the provisions of the 1940 Act. Valuing the Fund's 
securities using fair value pricing will result in using prices for 
those securities that may differ from current market valuations or 
official closing prices on the applicable exchange.
Availability of Information
    The Fund's Web site (www.ftportfolios.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Web site 
will include the Shares' ticker, CUSIP and exchange information along 
with additional quantitative information updated on a daily basis, 
including, for the Fund: (1) Daily trading volume, the prior business 
day's reported NAV and closing price, mid-point of the bid/ask spread 
at the time of calculation of such NAV (the ``Bid/Ask Price''),\33\ and 
a calculation of the premium and discount of the Bid/Ask Price against 
the NAV; and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily Bid/Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each business day, before commencement 
of trading in Shares in the Regular Market Session \34\ on the 
Exchange, the Fund

[[Page 11514]]

will disclose on its Web site the identities and quantities of the 
portfolio of securities, and other assets (the ``Disclosed Portfolio'' 
as defined in Nasdaq Rule 5735(c)(2)) held by the Fund that will form 
the basis for the Fund's calculation of NAV at the end of the business 
day.\35\ The Fund's disclosure of derivative positions in the Disclosed 
Portfolio will include information that market participants can use to 
value these positions intraday. On a daily basis, the Fund will 
disclose on the Fund's Web site the following information regarding 
each portfolio holding, as applicable to the type of holding: Ticker 
symbol, CUSIP number or other identifier, if any; a description of the 
holding (including the type of holding), the identity of the security 
or other asset or instrument underlying the holding, if any; for 
options, the option strike price; quantity held (as measured by, for 
example, par value, notional value or number of shares, contracts or 
units); maturity date, if any; coupon rate, if any; effective date, if 
any; market value of the holding; and percentage weighting of the 
holding in the Fund's portfolio. The Web site information will be 
publicly available at no charge.
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    \33\ The Bid/Ask Price of the Fund will be determined using the 
mid-point of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and its service 
providers.
    \34\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 4 a.m. to 9:30 
a.m., Eastern Time; (2) Regular Market Session from 9:30 a.m. to 4 
p.m. or 4:15 p.m., Eastern Time; and (3) Post-Market Session from 4 
p.m. or 4:15 p.m. to 8 p.m., Eastern Time).
    \35\ Under accounting procedures to be followed by the Fund, 
trades made on the prior business day (``T'') will be booked and 
reflected in NAV on the current business day (``T+1''). Accordingly, 
the Fund will be able to disclose at the beginning of the business 
day the portfolio that will form the basis for the NAV calculation 
at the end of the business day.
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    In addition, for the Fund, an estimated value, defined in Rule 
5735(c)(3) as the ``Intraday Indicative Value,'' that reflects an 
estimated intraday value of the Fund's Disclosed Portfolio, will be 
disseminated. Moreover, the Intraday Indicative Value, available on the 
NASDAQ OMX Information LLC proprietary index data service,\36\ will be 
based upon the current value for the components of the Disclosed 
Portfolio and will be updated and widely disseminated by one or more 
major market data vendors and broadly displayed at least every 15 
seconds during the Regular Market Session. The Intraday Indicative 
Value will be based on quotes and closing prices from the securities' 
local market and may not reflect events that occur subsequent to the 
local market's close. Premiums and discounts between the Intraday 
Indicative Value and the market price may occur. This should not be 
viewed as a ``real time'' update of the NAV per Share of the Fund, 
which is calculated only once a day.
---------------------------------------------------------------------------

    \36\ Currently, the NASDAQ OMX Global Index Data Service 
(``GIDS'') is the NASDAQ OMX global index data feed service, 
offering real-time updates, daily summary messages, and access to 
widely followed indexes and Intraday Indicative Values for ETFs. 
GIDS provides investment professionals with the daily information 
needed to track or trade NASDAQ OMX indexes, listed ETFs, or third-
party partner indexes and ETFs.
---------------------------------------------------------------------------

    The dissemination of the Intraday Indicative Value, together with 
the Disclosed Portfolio, will allow investors to determine the value of 
the underlying portfolio of the Fund on a daily basis and will provide 
a close estimate of that value throughout the trading day.
    Investors will also be able to obtain the Fund's Statement of 
Additional Information (``SAI''), the Fund's annual and semi-annual 
reports (together, ``Shareholder Reports''), and its Form N-CSR and 
Form N-SAR, filed twice a year. The Fund's SAI and Shareholder Reports 
will be available free upon request from the Fund, and those documents 
and the Form N-CSR and Form N-SAR may be viewed on-screen or downloaded 
from the Commission's Web site at www.sec.gov. Information regarding 
market price and trading volume of the Shares will be continually 
available on a real-time basis throughout the day on brokers' computer 
screens and other electronic services. Information regarding the 
previous day's closing price and trading volume information for the 
Shares will be published daily in the financial section of newspapers. 
Quotation and last sale information for the Shares will be available 
via Nasdaq proprietary quote and trade services, as well as in 
accordance with the Unlisted Trading Privileges and the Consolidated 
Tape Association (``CTA'') plans for the Shares. Quotation and last 
sale information for the other ETFs in which the Fund will invest will 
be available via the quote and trade services of their respective 
primary exchanges, as well as in accordance with the Unlisted Trading 
Privileges and the CTA plans, as applicable. Quotation and last sale 
information for exchange-traded options will be available via the 
Options Price Reporting Authority. Intraday executable price quotations 
on Floating Rate Debt Instruments and other assets not traded on an 
exchange will be available from major broker-dealer firms or market 
data vendors, as well as from automated quotation systems, published or 
other public sources, or online information services. Additionally, the 
Trade Reporting and Compliance Engine (``TRACE'') of the Financial 
Industry Regulatory Authority (``FINRA'') will be a source of price 
information for corporate bonds, privately-issued securities, mortgage-
backed securities and asset-backed securities to the extent 
transactions in such securities are reported to TRACE.\37\ For 
exchange-traded assets, intraday pricing information will be available 
directly from the applicable listing exchange.
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    \37\ Broker-dealers that are FINRA member firms have an 
obligation to report transactions in specified debt securities to 
TRACE to the extent required under applicable FINRA rules. 
Generally, such debt securities will have at issuance a maturity 
that exceeds one calendar year.
---------------------------------------------------------------------------

    Additional information regarding the Fund and the Shares, including 
investment strategies, risks, creation and redemption procedures, fees, 
Fund holdings disclosure policies, distributions and taxes will be 
included in the Registration Statement.
Initial and Continued Listing
    The Shares will be subject to Rule 5735, which sets forth the 
initial and continued listing criteria applicable to Managed Fund 
Shares. The Exchange represents that, for initial and/or continued 
listing, the Fund must be in compliance with Rule 10A-3 \38\ under the 
Act. A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange. The Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily and that the NAV and the Disclosed Portfolio 
will be made available to all market participants at the same time.
---------------------------------------------------------------------------

    \38\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. Nasdaq will halt trading in the 
Shares under the conditions specified in Nasdaq Rules 4120 and 4121, 
including the trading pauses under Nasdaq Rules 4120(a)(11) and (12). 
Trading may be halted because of market conditions or for reasons that, 
in the view of the Exchange, make trading in the Shares inadvisable. 
These may include: (1) The extent to which trading is not occurring in 
the securities and/or the other assets constituting the Disclosed 
Portfolio of the Fund; or (2) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present. Trading in the Shares also will be subject to Rule 
5735(d)(2)(D), which sets forth circumstances under which Shares of the 
Fund may be halted.
Trading Rules
    Nasdaq deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to Nasdaq's existing rules

[[Page 11515]]

governing the trading of equity securities. Nasdaq will allow trading 
in the Shares from 4:00 a.m. until 8:00 p.m., Eastern Time. The 
Exchange has appropriate rules to facilitate transactions in the Shares 
during all trading sessions. As provided in Nasdaq Rule 5735(b)(3), the 
minimum price variation for quoting and entry of orders in Managed Fund 
Shares traded on the Exchange is $0.01.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by both Nasdaq and 
also FINRA on behalf of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities 
laws.\39\ 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.
---------------------------------------------------------------------------

    \39\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares and the exchange-traded securities and 
instruments held by the Fund with other markets and other entities that 
are members of ISG,\40\ and FINRA may obtain trading information 
regarding trading in the Shares and the exchange-traded securities and 
instruments held by the Fund from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares and the exchange-traded securities and instruments held by the 
Fund from markets and other entities that are members of ISG, which 
includes securities and futures exchanges, or with which the Exchange 
has in place a comprehensive surveillance sharing agreement. Moreover, 
FINRA, on behalf of the Exchange, will be able to access, as needed, 
trade information for certain Floating Rate Debt Instruments and other 
debt securities held by the Fund reported to FINRA's TRACE.
---------------------------------------------------------------------------

    \40\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
---------------------------------------------------------------------------

    All of the Fund's net assets that are invested in exchange-traded 
equity securities will be invested in securities that trade in markets 
that are members of ISG or are parties to a comprehensive surveillance 
sharing agreement with the Exchange. At least 90% of the Fund's net 
assets that are invested in exchange-traded derivative instruments will 
be invested in instruments that trade in markets that are members of 
ISG or are parties to a comprehensive surveillance sharing agreement 
with the Exchange.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. Specifically, the Information 
Circular will discuss the following: (1) The procedures for purchases 
and redemptions of Shares in Creation Units (and that Shares are not 
individually redeemable); (2) Nasdaq Rule 2111A, which imposes 
suitability obligations on Nasdaq members with respect to recommending 
transactions in the Shares to customers; (3) how information regarding 
the Intraday Indicative Value is disseminated; (4) the risks involved 
in trading the Shares during the Pre-Market and Post-Market Sessions 
when an updated Intraday Indicative Value will not be calculated or 
publicly disseminated; (5) the requirement that members deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (6) trading 
information. The Information Circular will also discuss any exemptive, 
no-action and interpretive relief granted by the Commission from any 
rules under the Act.
    Additionally, the Information Circular will reference that the Fund 
is subject to various fees and expenses described in the Registration 
Statement. The Information Circular will also disclose the trading 
hours of the Shares of the Fund and the applicable NAV Calculation Time 
for the Shares. The Information Circular will disclose that information 
about the Shares of the Fund will be publicly available on the Fund's 
Web site.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b) 
of the Act in general and Section 6(b)(5) of the Act in particular in 
that it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and, in general, to protect 
investors and the public interest.
    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Nasdaq Rule 5735. The 
Exchange represents that trading in the Shares will be subject to the 
existing trading surveillances, administered by both Nasdaq and also 
FINRA on behalf of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities laws.
    The Adviser is not a broker-dealer, although it is affiliated with 
the Distributor, a broker-dealer, and is required to implement a ``fire 
wall'' with respect to such broker-dealer affiliate regarding access to 
information concerning the composition and/or changes to the Fund's 
portfolio. In addition, paragraph (g) of Nasdaq Rule 5735 further 
requires that personnel who make decisions on the open-end fund's 
portfolio composition must be subject to procedures designed to prevent 
the use and dissemination of material non-public information regarding 
the open-end fund's portfolio.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares and the exchange-traded securities and 
instruments held by the Fund with other markets and other entities that 
are members of ISG, and FINRA may obtain trading information regarding 
trading in the Shares and the exchange-traded securities and 
instruments held by the Fund from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares and the exchange-traded securities and instruments held by the 
Fund from markets and other entities that are members of ISG, which 
includes securities and futures exchanges, or with which the Exchange 
has in place a comprehensive surveillance sharing agreement. Moreover, 
FINRA, on behalf of the Exchange, will be able to access, as needed, 
trade information for certain

[[Page 11516]]

Floating Rate Debt Instruments and other debt securities held by the 
Fund reported to FINRA's TRACE.
    All of the Fund's net assets that are invested in exchange-traded 
equity securities will be invested in securities that trade in markets 
that are members of ISG or are parties to a comprehensive surveillance 
sharing agreement with the Exchange. At least 90% of the Fund's net 
assets that are invested in exchange-traded derivative instruments will 
be invested in instruments that trade in markets that are members of 
ISG or are parties to a comprehensive surveillance sharing agreement 
with the Exchange.
    The investment objective of the Fund will be to seek current 
income. To achieve its objective, the Fund will invest, under normal 
market conditions, at least 80% of its net assets in a portfolio of 
Floating Rate Debt Instruments. In addition, the Fund may invest up to 
20% of its net assets in certain fixed-rate debt securities. The Fund 
may invest up to 20% of the value of its net assets in exchange-listed 
options on U.S. Treasury securities, exchange-listed options on U.S. 
Treasury futures contracts and exchange-listed U.S. Treasury futures 
contracts. The Fund's investments in derivative instruments will be 
consistent with the Fund's investment objective and the 1940 Act and 
will not be used to seek to achieve a multiple or inverse multiple of 
an index. At least 65% of the Fund's net assets will be invested in 
Floating Rate Debt Instruments that are, at the time of purchase, 
investment grade. The Fund will limit its investments in asset-backed 
securities (excluding agency mortgage-backed securities) and non-agency 
mortgage-backed securities (in the aggregate) to 20% of its net assets. 
In addition, the Fund will limit its investments in junior loans to 20% 
of its net assets. The Fund may hold up to an aggregate amount of 15% 
of its net assets in illiquid assets (calculated at the time of 
investment), including Rule 144A securities deemed illiquid by the 
Adviser. The Fund will monitor its portfolio liquidity on an ongoing 
basis to determine whether, in light of current circumstances, an 
adequate level of liquidity is being maintained, and will consider 
taking appropriate steps in order to maintain adequate liquidity if, 
through a change in values, net assets, or other circumstances, more 
than 15% of the Fund's net assets are held in illiquid assets. Illiquid 
assets include securities subject to contractual or other restrictions 
on resale and other instruments that lack readily available markets as 
determined in accordance with Commission staff guidance.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information will be publicly available regarding the Fund and the 
Shares, thereby promoting market transparency. Moreover, the Intraday 
Indicative Value, available on the NASDAQ OMX Information LLC 
proprietary index data service, will be widely disseminated by one or 
more major market data vendors and broadly 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 will disclose on its Web site the Disclosed 
Portfolio that will form the basis for the Fund's calculation of NAV at 
the end of the business day. Information regarding market price and 
trading volume of the Shares will be continually available on a real-
time basis throughout the day on brokers' computer screens and other 
electronic services, and quotation and last sale information for the 
Shares will be available via Nasdaq proprietary quote and trade 
services, as well as in accordance with the Unlisted Trading Privileges 
and the CTA plans for the Shares. Quotation and last sale information 
for the other ETFs in which the Fund will invest will be available via 
the quote and trade services of their respective primary exchanges, as 
well as in accordance with the Unlisted Trading Privileges and the CTA 
plans, as applicable. Quotation and last sale information for exchange-
traded options will be available via the Options Price Reporting 
Authority. Intraday executable price quotations on Floating Rate Debt 
Instruments and other assets not traded on an exchange will be 
available from major broker-dealer firms or market data vendors, as 
well as from automated quotation systems, published or other public 
sources, or online information services. Additionally, FINRA's TRACE 
will be a source of price information for corporate bonds, privately-
issued securities, mortgage-backed securities and asset-backed 
securities to the extent transactions in such securities are reported 
to TRACE. For exchange-traded assets, intraday pricing information will 
be available directly from the applicable listing exchange.
    The Fund's Web site will include a form of the prospectus for the 
Fund and additional data relating to NAV and other applicable 
quantitative information. Trading in Shares of the Fund will be halted 
under the conditions specified in Nasdaq Rules 4120 and 4121 or because 
of market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable, and trading in the Shares will 
be subject to Nasdaq Rule 5735(d)(2)(D), which sets forth circumstances 
under which Shares of the Fund may be halted. In addition, as noted 
above, investors will have ready access to information regarding the 
Fund's holdings, the Intraday Indicative Value, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.
    The Fund's investments will be valued daily at market value or, in 
the absence of market value with respect to any investment, at fair 
value, in each case in accordance with the Valuation Procedures and the 
1940 Act.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, FINRA, on behalf of the 
Exchange, will communicate as needed regarding trading in the Shares 
and the exchange-traded securities and instruments held by the Fund 
with other markets and other entities that are members of ISG, and 
FINRA may obtain trading information regarding trading in the Shares 
and the exchange-traded securities and instruments held by the Fund 
from such markets and other entities. In addition, the Exchange may 
obtain information regarding trading in the Shares and in the exchange-
traded securities and instruments held by the Fund from markets and 
other entities that are members of ISG, which includes securities and 
futures exchanges, or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. Furthermore, as noted 
above, investors will have ready access to information regarding the 
Fund's holdings, the Intraday Indicative Value, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.
    For the above reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

[[Page 11517]]

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that 
the proposed rule change will facilitate the listing and trading of an 
additional type of actively-managed exchange-traded fund that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace.

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

    Written comments were neither solicited nor received.

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 Exchange consents, the Commission shall: (a) By order approve 
or disapprove such 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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#ccbeb9a0a9e1afa3a1a1a9a2b8bf8cbfa9afe2aba3ba"><span class="__cf_email__" data-cfemail="82f0f7eee7afe1edefefe7ecf6f1c2f1e7e1ace5edf4">[email protected]</span></a>. Please include 
File Number SR-NASDAQ-2015-011 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2015-011. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2015-011, and should 
be submitted on or before March 24, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\41\
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    \41\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-04334 Filed 3-2-15; 8:45 am]
BILLING CODE 8011-01-P


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