Document ID: SEC-2014-0719-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2014-05-01T04:00Z

[Federal Register Volume 79, Number 84 (Thursday, May 1, 2014)]
[Notices]
[Pages 24765-24773]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-09926]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72030; File No. SR-NASDAQ-2014-041]

Self-Regulatory Organizations; the NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 
1, Relating to the Listing and Trading of Shares of the First Trust 
Enhanced Short Maturity ETF of First Trust Exchange-Traded Fund IV

April 25, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934

[[Page 24766]]

(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 11, 2014, The NASDAQ Stock Market LLC (``Nasdaq'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in in Items I, 
II, and III below, which Items have been prepared by Nasdaq. On April 
24, 2014, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ The Commission is publishing this notice to solicit comments 
on the proposed rule change, as modified by Amendment No. 1, from 
interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ By Amendment No. 1, the Exchange: (1) Clarifies that the 
Fund (defined below) will limit its investments in asset-backed 
securities and non-agency mortgage-backed securities (in the 
aggregate) to 20% of its net assets; (2) modifies its description of 
how asset-backed or mortgage-backed securities will be priced in 
certain circumstances; and (3) makes certain grammatical 
corrections.
---------------------------------------------------------------------------

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 
Enhanced Short Maturity ETF (the ``Fund'') of First Trust Exchange-
Traded Fund IV (the ``Trust'') under Nasdaq Rule 5735 (``Managed Fund 
Shares'').\4\ The shares of the Fund are collectively referred to 
herein as the ``Shares.''
---------------------------------------------------------------------------

    \4\ The Commission approved Nasdaq Rule 5735 in Securities 
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June 
20, 2008) (SR-NASDAQ-2008-039). 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). Additionally, the Commission has 
previously approved the listing and trading of a number of actively-
managed funds on NYSE Arca, Inc. pursuant to Rule 8.600 of that 
exchange. See, e.g., Securities Exchange Act Release Nos. 68870 
(February 8, 2013), 78 FR 11245 (February 15, 2013) (SR-NYSEArca-
2012-139) (order approving listing and trading of First Trust 
Preferred Securities and Income ETF); 64643 (June 10, 2011), 76 FR 
35062 (June 15, 2011) (SR-NYSEArca-2011-21) (order approving listing 
and trading of WisdomTree Global Real Return Fund). The Exchange 
believes the proposed rule change raises no significant issues not 
previously addressed in those prior Commission orders.
---------------------------------------------------------------------------

    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 \5\ 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.\6\ 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.\7\ 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.
---------------------------------------------------------------------------

    \5\ 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.
    \6\ 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, on December 6, 
2012, the staff of the Commission's Division of Investment 
Management (``Division'') issued a no-action letter (``No-Action 
Letter'') relating to the use of derivatives by actively-managed 
ETFs. See No-Action Letter dated December 6, 2012 from Elizabeth G. 
Osterman, Associate Director, Office of Exemptive Applications, 
Division of Investment Management. The No-Action Letter stated that 
the Division would not recommend enforcement action to the 
Commission under applicable provisions of and rules under the 1940 
Act if actively-managed ETFs operating in reliance on specified 
orders (which include the Exemptive Relief) invest in options 
contracts, futures contracts or swap agreements provided that they 
comply with certain representations stated in the No-Action Letter. 
However, the Fund does not intend to invest in derivatives.
    \7\ See Post-Effective Amendment No. 66 to Registration 
Statement on Form N-1A for the Trust, dated April 10, 2014 (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.
---------------------------------------------------------------------------

    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.\8\ 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

[[Page 24767]]

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 or any sub-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 a broker-dealer, it 
will implement a fire wall with respect to its relevant personnel and/
or such broker-dealer affiliate, as applicable, regarding access to 
information concerning the composition and/or changes to the portfolio 
and will be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio. The Fund does not currently intend to use a sub-adviser.
---------------------------------------------------------------------------

    \8\ 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.
---------------------------------------------------------------------------

First Trust Enhanced Short Maturity ETF
    The investment objective of the Fund will be to seek current 
income, consistent with preservation of capital and daily liquidity. 
Under normal market conditions,\9\ the Fund will seek to achieve its 
investment objective by investing in a portfolio of U.S. dollar-
denominated fixed- and variable-rate \10\ instruments (collectively, 
``Fixed Income Securities'') issued by U.S. and non-U.S. public- and 
private-sector entities. The Fund will hold Fixed Income Securities of 
at least 13 non-affiliated issuers.
---------------------------------------------------------------------------

    \9\ 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.
    \10\ For these purposes, the term ``variable-rate'' also 
includes similar terms such as ``floating-rate'' and ``adjustable-
rate.''
---------------------------------------------------------------------------

    At least 80% of the Fund's net assets will be invested in Fixed 
Income Securities that are, at the time of purchase, investment grade. 
To be considered ``investment grade,'' under normal market conditions, 
short-term securities (generally securities with original maturities of 
one year or less) held by the Fund and rated by at least one nationally 
recognized statistical ratings organization (``NRSRO'') will carry, at 
the time of purchase, a short-term rating in the highest three rating 
categories of at least one NRSRO (e.g., A-3, P-3 or F-3 or better by 
Standard & Poor's Ratings Services, a division of the McGraw-Hill 
Companies, Inc. (``S&P''), Moody's Investors Service, Inc. 
(``Moody's'') or Fitch Ratings (``Fitch''), respectively), and other 
rated securities will carry, at the time of purchase, a rating in the 
highest four rating categories of at least one NRSRO (e.g., BBB- or 
higher by S&P and/or Fitch or Baa3 or higher by Moody's).\11\ 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 \12\ by the Adviser.
---------------------------------------------------------------------------

    \11\ 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.
    \12\ 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.
---------------------------------------------------------------------------

Principal Investments
    The Fund intends to achieve its investment objective by investing, 
under normal market conditions, at least 80% of its net assets in a 
portfolio of U.S. dollar-denominated Fixed Income Securities issued by 
U.S. and non-U.S. public- and private-sector entities. Fixed Income 
Securities will include the following types of fixed- and variable-rate 
debt securities: corporate \13\ and government bonds and notes; agency 
securities; \14\ instruments of non-U.S. issuers in developed markets; 
privately-issued securities; \15\ asset-backed securities; \16\ 
mortgage-backed securities; \17\ municipal bonds; money market 
securities; \18\ and investment companies \19\ (including investment 
companies advised by the Adviser) that invest primarily in the 
foregoing types

[[Page 24768]]

of Fixed Income Securities.\20\ The Fund will limit its investments in 
asset-backed securities and non-agency mortgage-backed securities (in 
the aggregate) to 20% of its net assets.\21\
---------------------------------------------------------------------------

    \13\ While the Fund is permitted to invest without restriction 
in corporate bonds, the Adviser expects that, under normal market 
conditions, generally, with respect to at least 75% of the Fund's 
portfolio, a corporate bond will have, at the time of original 
issuance, $100 million or more par amount outstanding to be 
considered as an eligible investment.
    \14\ ``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.
    \15\ ``Privately-issued securities'' for these purposes 
generally includes Rule 144A securities and, in this context, may 
include both mortgage-backed and non-mortgage Rule 144A securities.
    \16\ Asset-backed securities are Fixed Income 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.
    \17\ Mortgage-backed securities are Fixed Income Securities that 
are backed by a pool of mortgage loans. There are a wide variety of 
mortgage-backed securities involving commercial or residential, 
fixed-rate or adjustable-rate mortgages and mortgages issued by 
banks or government agencies.
    \18\ ``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.
    \19\ 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.
    \20\ The liquidity of a security, especially in the case of 
asset-backed and mortgage-backed securities, is a substantial factor 
in the Fund's security selection process. Consistent with the 
discussion below under ``Investment Restrictions,'' the Fund will 
not purchase any Fixed Income Securities (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.
    \21\ See Amendment No. 1, supra note 3. For the avoidance of 
doubt, there is no limitation on the Fund's investments in agency 
mortgage-backed securities.
---------------------------------------------------------------------------

    Under normal market conditions, the Fund's duration \22\ is 
expected to be below one year and the maturity \23\ of the Fund's 
portfolio is expected to be below three years.
---------------------------------------------------------------------------

    \22\ Duration is a measure of the expected price volatility of a 
debt instrument as a result of changes in market rates of interest, 
based on, among other factors, the weighted average timing of the 
instrument's expected principal and interest payments. Duration 
differs from maturity in that it considers a security's yield, 
coupon payments, principal payments, call features and coupon 
adjustments in addition to the amount of time until the security 
finally matures.
    \23\ Maturity is measured relative to the type of security. For 
Fixed Income Securities (exclusive of asset-backed securities and 
mortgage-backed securities), maturity shall be calculated using 
dollar-weighted average maturity, which is calculated by taking the 
average length of time to maturity. For asset-backed securities and 
mortgage-backed securities, maturity shall be calculated using 
weighted average life, which is the estimated time to principal 
paydown for each underlying instrument held by the Fund, weighted 
according to the relative holdings per instrument.
---------------------------------------------------------------------------

Other Investments
    Under normal market conditions, the Fund will invest primarily in 
the Fixed Income Securities described above to meet its investment 
objective. In addition, the Fund may invest up to 20% of its net assets 
in floating rate loans. 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. 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''.
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.\24\
---------------------------------------------------------------------------

    \24\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
---------------------------------------------------------------------------

    The 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.\25\ 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.\26\
---------------------------------------------------------------------------

    \25\ 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).
    \26\ 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).
---------------------------------------------------------------------------

    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'') \27\ 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'').
---------------------------------------------------------------------------

    \27\ 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.
---------------------------------------------------------------------------

    Creations and redemptions must be made by an Authorized Participant 
or through a firm that is either a member of the National Securities 
Clearing Corporation (``NSCC'') or a Depository Trust Company 
participant that, in each case, must have executed an agreement that 
has been agreed to by the Distributor and 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 NSCC, will make available on each

[[Page 24769]]

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.
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 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, debt securities (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. 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.\28\ 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. Occasionally, the Adviser's pricing 
committee (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 the 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, the 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 the available broker quotes are 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.
---------------------------------------------------------------------------

    \28\ See Amendment No. 1, supra note 3.
---------------------------------------------------------------------------

    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.
    Certain securities may 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''),\29\ 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 \30\ on the 
Exchange, the Fund will disclose on its Web site the identities and 
quantities of the portfolio

[[Page 24770]]

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.\31\ 
The Disclosed Portfolio will include, as applicable, the names, 
quantities, percentage weightings and market values of the portfolio 
securities, and other assets held by the Fund. The Web site information 
will be publicly available at no charge.
---------------------------------------------------------------------------

    \29\ 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.
    \30\ 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).
    \31\ Under accounting procedures to be followed by the Fund, 
trades made on the prior business day (``T'') will be booked and 
reflected in NAV on the current business day (``T+1''). Accordingly, 
the Fund will be able to disclose at the beginning of the business 
day the portfolio that will form the basis for the NAV calculation 
at the end of the business day.
---------------------------------------------------------------------------

    In addition, for the Fund, an estimated value, defined in Rule 
5735(c)(3) as the ``Intraday Indicative Value,'' that reflects an 
estimated intraday value of the Fund's Disclosed Portfolio, will be 
disseminated. Moreover, the Intraday Indicative Value, available on the 
NASDAQ OMX Information LLC proprietary index data service,\32\ 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.
---------------------------------------------------------------------------

    \32\ 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. Intraday executable 
price quotations on Fixed Income Securities 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 certain Fixed Income Securities held by 
the Fund, including mortgage-backed securities and asset-backed 
securities. For exchange-traded assets, intraday pricing information 
will be available directly from the applicable listing exchange.
    [sic] and, for exchange-traded assets, such intraday information 
will be available directly from the applicable listing exchange. 
Intraday price information will also be available through subscription 
services, such as Bloomberg, Markit, and Thomson Reuters, which can be 
accessed by Authorized Participants and other investors.
    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. All terms relating to the Fund 
that are referred to, but not defined in, this proposed rule change 
will be defined 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 \33\ 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.
---------------------------------------------------------------------------

    \33\ 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 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

[[Page 24771]]

securities laws.\34\ 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.
---------------------------------------------------------------------------

    \34\ 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 held 
by the Fund with other markets and other entities that are members of 
the Intermarket Surveillance Group (``ISG'') \35\ and FINRA may obtain 
trading information regarding trading in the Shares and the exchange-
traded securities 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 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 Fixed Income Securities held by the Fund 
reported to FINRA's TRACE.
---------------------------------------------------------------------------

    \35\ 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.
    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 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 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 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 Fixed Income 
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.
    The investment objective of the Fund will be to seek current 
income, consistent with preservation of capital and daily liquidity. 
Under normal market conditions, the Fund will seek to achieve its 
investment objective by investing in a portfolio of U.S. dollar-
denominated Fixed Income Securities. At least 80% of the Fund's net 
assets will be invested in Fixed Income Securities that are, at the 
time of purchase, investment grade. The Fund intends to limit its 
investments in asset-backed securities and non-agency mortgage-backed 
securities (in the aggregate) to 20% of its net assets and does not 
intend to invest in derivatives. 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

[[Page 24772]]

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. Intraday executable price quotations 
on Fixed Income Securities 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 certain Fixed 
Income Securities held by the Fund, including mortgage-backed 
securities and asset-backed securities. 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 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 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 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.

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 (i) as the Commission may 
designate up to 90 days of such date 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

     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-2014-041 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2014-041. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your

[[Page 24773]]

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-2014-041, and should be submitted on or before 
May 22, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
Kevin M. O'Neill,
Deputy Secretary.
---------------------------------------------------------------------------

    \36\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2014-09926 Filed 4-30-14; 8:45 am]
BILLING CODE 8011-01-P