Document ID: SEC-2013-1536-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market, LLC
Posted Date: 2013-08-30T04:00Z

[Federal Register Volume 78, Number 169 (Friday, August 30, 2013)]
[Notices]
[Pages 53799-53807]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-21184]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70253; File No. SR-NASDAQ-2013-107]

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 Global Tactical Commodity 
Strategy Fund of First Trust Exchange-Traded Fund VII

August 26, 2013.
    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 August 16, 2013, The NASDAQ Stock Market LLC (``Exchange'' or 
``Nasdaq'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The 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 Substance 
of the Proposed Rule Change

    Nasdaq proposes to list and trade the shares of the First Trust 
Global Tactical Commodity Strategy Fund (the ``Fund'') of First Trust 
Exchange-Traded Fund VII (the ``Trust'') under Nasdaq Rule 5735 
(``Managed Fund Shares''). The shares of the Fund are collectively 
referred to herein as the ``Shares.''
    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, and at the 
Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to list and trade the Shares of the Fund 
under Nasdaq Rule 5735, which governs the listing and trading of 
Managed Fund Shares \3\ on the Exchange.\4\ The Fund will be an 
actively managed exchange-traded fund (``ETF''). The Shares will be

[[Page 53800]]

offered by the Trust, which was established as a Massachusetts business 
trust on November 6, 2012.\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 is a series of the Trust. With respect to the 
futures contracts held indirectly through a wholly-owned subsidiary 
controlled by the Fund and organized under the laws of the Cayman 
Islands (referred to herein as the ``First Trust Subsidiary''), not 
more than 10% of the weight \7\ of such futures contracts in the 
aggregate shall consist of instruments whose principal trading market 
is not a member of the Intermarket Surveillance Group (``ISG'') or is a 
market with which the Exchange does not have a comprehensive 
surveillance sharing agreement.
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    \3\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (the ``1940 Act'') organized 
as an open-end investment company or similar entity that invests in 
a portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Index Fund Shares, listed 
and traded on the Exchange under Nasdaq Rule 5705, seeks to provide 
investment results that correspond generally to the price and yield 
performance of a specific foreign or domestic stock index, fixed 
income securities index or combination thereof.
    \4\ The Commission approved Nasdaq Rule 5735 in Securities 
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June 
20, 2008) (SR-NASDAQ-2008-039). The Fund would not be the first 
actively-managed fund listed on the Exchange; see Securities 
Exchange Act Release No. 66489 (February 29, 2012), 77 FR 13379 
(March 6, 2012) (SR-NASDAQ-2012-004) (order approving listing and 
trading of WisdomTree Emerging Markets Corporate Bond Fund). 
Additionally, the Commission has previously approved the listing and 
trading of a number of actively managed WisdomTree funds on NYSE 
Arca, Inc. pursuant to Rule 8.600 of that exchange. See, e.g., 
Securities Exchange Act Release No. 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.
    \5\ The Commission has issued an order granting certain 
exemptive relief to the Trust under the 1940 Act (the ``Exemptive 
Order''). See Investment Company Act Release No. 30029 (April 10, 
2012) (File No. 812-13795). In compliance with Nasdaq Rule 
5735(b)(5), which applies to Managed Fund Shares based on an 
international or global portfolio, the Trust's application for 
exemptive relief under the 1940 Act states that the Fund will comply 
with the federal securities laws in accepting securities for 
deposits and satisfying redemptions with redemption securities, 
including that the securities accepted for deposits and the 
securities used to satisfy redemption requests are sold in 
transactions that would be exempt from registration under the 
Securities Act of 1933 (15 U.S.C. 77a).
    \6\ See Registration Statement on Form N-1A for the Trust, dated 
November 13, 2012 (File Nos. 333-184918 and 811-22767). The 
descriptions of the Fund and the Shares contained herein are based, 
in part, on information in the Registration Statement.
    \7\ To be calculated as the value of the contract divided by the 
total absolute notional value of the First Trust Subsidiary's 
futures contracts.
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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. Brown Brothers Harriman & Co. (``BBH'') will act as 
the administrator, accounting agent, custodian (``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 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 the event (a) the Adviser 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, if 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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    \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.
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First Trust Global Tactical Commodity Strategy Fund
    According to the Registration Statement, the Fund's investment 
objective will be to provide total return by providing investors with 
commodity exposure while seeking a relatively stable risk profile. The 
Fund will pursue its objective by seeking to invest through a wholly-
owned subsidiary in a broadly diversified portfolio comprised 
principally of commodity futures contracts.
Principal Investments
Fund's Investments
    The Fund will be an actively managed ETF that will seek to achieve 
attractive risk adjusted returns by investing in exchange-traded 
commodity futures contracts and exchange-traded commodity linked 
instruments \9\ (collectively, ``Commodities'') through the First Trust 
Subsidiary. The Fund will seek to gain exposure to the futures markets 
through investments in the First Trust Subsidiary. The Fund's 
investment in the First Trust Subsidiary may not exceed 25% of the 
Fund's total assets. The remainder of the Fund's assets will primarily 
be invested in: (1) Short-term investment grade fixed income securities 
that include U.S. government and agency securities,\10\ sovereign debt 
obligations of non-U.S. countries, and repurchase agreements; \11\ (2) 
money market instruments; \12\ (3) ETFs and other investment companies

[[Page 53801]]

registered under the 1940 Act; and (4) cash and other cash equivalents.
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    \9\ Exchange-traded commodity linked instruments include: (1) 
ETFs that provide exposure to commodities as would be listed under 
Nasdaq Rules 5705 and 5735; and (2) pooled investment vehicles that 
invest primarily in commodities and commodity-related instruments as 
would be listed under Nasdaq Rules 5710 and 5711. Such pooled 
investment vehicles are commonly referred to as ``exchange traded 
funds'' but they are not registered as investment companies because 
of the nature of their underlying investments.
    \10\ Such securities will include securities that are issued or 
guaranteed by the U.S. Treasury, by various agencies of the U.S. 
government, or by various instrumentalities, which have been 
established or sponsored by the U.S. government. U.S. Treasury 
obligations are backed by the ``full faith and credit'' of the U.S. 
government. Securities issued or guaranteed by federal agencies and 
U.S. government-sponsored instrumentalities may or may not be backed 
by the full faith and credit of the U.S. government.
    \11\ According to the Registration Statement, the Fund intends 
to enter into repurchase agreements only with financial institutions 
and dealers believed by the Adviser to present minimal credit risks 
in accordance with criteria approved by the Fund's Board of Trustees 
(the ``Board''). The Adviser will review and monitor the 
creditworthiness of such institutions. The Adviser will monitor the 
value of the collateral at the time the transaction is entered into 
and at all times during the term of the repurchase agreement.
    \12\ For the Fund's purposes, money market instruments will 
include: Short-term, high-quality securities issued or guaranteed by 
non-U.S. governments, agencies and instrumentalities; non-
convertible corporate debt securities with remaining maturities of 
not more than 397 days that satisfy ratings requirements under Rule 
2a-7 of the 1940 Act; money market mutual funds; and deposits and 
other obligations of U.S. and non-U.S. banks and financial 
institutions. As a related matter, according to the Registration 
Statement, the Fund may invest in shares of money market mutual 
funds to the extent permitted by the 1940 Act.
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    The Fund will not invest directly in Commodities. The Fund expects 
to exclusively gain exposure to these investments by investing in the 
First Trust Subsidiary.
    The Fund will use the fixed-income securities as investments and to 
collateralize the First Trust Subsidiary's commodity exposure on a day-
to-day basis. The Fund may also invest directly in ETFs \13\ and other 
investment companies, including exchange-traded closed-end funds that 
provide exposure to commodities, equity securities and fixed income 
securities to the extent permitted under the 1940 Act.\14\
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    \13\ As described in the Registration Statement, an ETF is an 
investment company registered under the 1940 Act that holds a 
portfolio of securities. Many ETFs are designed to track the 
performance of a securities index, including industry, sector, 
country and region indexes. ETFs included in the Fund will be listed 
and traded in the U.S. on registered exchanges. The Fund may invest 
in the securities of ETFs in excess of the limits imposed under the 
1940 Act pursuant to exemptive orders obtained by other ETFs and 
their sponsors from the Commission. The ETFs in which the Fund may 
invest include Index Fund Shares (as described in Nasdaq Rule 5705), 
Portfolio Depositary 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.
    \14\ The equity securities (including shares of ETFs and closed-
end funds) in which the Fund may invest will be limited to 
securities that trade in markets that are members of the ISG, which 
includes all U.S. national securities exchanges, or are parties to a 
comprehensive surveillance sharing agreement with the Exchange.
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    The Fund's investment in the First Trust Subsidiary will be 
designed to help the Fund achieve exposure to commodity returns in a 
manner consistent with the federal tax requirements applicable to the 
Fund and other regulated investment companies.
First Trust Subsidiary's Investments
    The First Trust Subsidiary will seek to make investments generally 
in Commodities while managing volatility, as measured by annualized 
standard deviation, to a more consistent range than statistically 
weighted commodity indices. The investment weightings of the underlying 
Commodities held by the First Trust Subsidiary will be rebalanced in an 
attempt to stabilize risk levels. The dynamic weighting process will 
result in a disciplined, systematic investment process which will be 
keyed off of the Adviser's volatility forecasting process.
    The First Trust Subsidiary will be advised by the Adviser.\15\ The 
Fund's investment in the First Trust Subsidiary is intended to provide 
the Fund with exposure to commodity markets within the limits of 
current federal income tax laws applicable to investment companies such 
as the Fund, which limit the ability of investment companies to invest 
directly in the derivative instruments. The First Trust Subsidiary will 
have the same investment objective as the Fund, but unlike the Fund, it 
may invest without limitation in Commodities. The First Trust 
Subsidiary's investments will provide the Fund with exposure to 
domestic and international markets.
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    \15\ The First Trust Subsidiary will not be registered under the 
1940 Act and will not be directly subject to its investor 
protections, except as noted in the Registration Statement. However, 
the First Trust Subsidiary will be wholly-owned and controlled by 
the Fund and will be advised by the Adviser. Therefore, the Fund's 
ownership and control of the First Trust Subsidiary will prevent the 
First Trust Subsidiary from taking action contrary to the interests 
of the Fund or its shareholders. The Board will have oversight 
responsibility for the investment activities of the Fund, including 
its expected investment in the First Trust Subsidiary, and the 
Fund's role as the sole shareholder of the First Trust Subsidiary. 
The Adviser will receive no additional compensation for managing the 
assets of the First Trust Subsidiary. The First Trust Subsidiary 
will also enter into separate contracts for the provision of 
custody, transfer agency, and accounting agent services with the 
same or with affiliates of the same service providers that provide 
those services to the Fund.
    \16\ The exchange codes listed are Bloomberg shorthand codes for 
the corresponding exchanges. The New York Board of Trade is 
currently owned by the ICE Futures Exchange; Bloomberg continues to 
use NYB as its shorthand code for certain contracts formerly traded 
on the New York Board of Trade.
    \17\ All of the exchanges are ISG members except for the London 
Metal Exchange (``LME''). The LME falls under the jurisdiction of 
the United Kingdom Financial Conduct Authority (``FCA''). The FCA is 
responsible for ensuring the financial stability of the exchange 
members' businesses, whereas the LME is largely responsible for the 
oversight of day-to-day exchange activity, including conducting the 
arbitration proceedings under the LME arbitration regulations.
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    The First Trust Subsidiary may have both long and short positions 
in Commodities. However, for a given Commodity the First Trust 
Subsidiary will have a net long exposure. The First Trust Subsidiary 
will initially consider investing in futures contracts set forth in the 
following table. The table also provides each instrument's trading 
hours, exchange and ticker symbol. The table is subject to change.

----------------------------------------------------------------------------------------------------------------
                                   Bloomberg
          Commodity              exchange code     Exchange name    Trading hours     Contract ticker (generic
                                      \16\              \17\            (E.T.)            Bloomberg ticker)
----------------------------------------------------------------------------------------------------------------
Cattle, Live/Choice Average..  CME                Chicago          18:00-17:00....  LC
                                                   Mercantile
                                                   Exchange.
Cocoa........................  NYB                ICE Futures      04:00-14:00....  CC
                                                   Exchange.
Cotton/1-1/16''..............  NYB                ICE Futures      21:00-14:30....  CT
                                                   Exchange.
Feeder Cattle................  CME                Chicago          18:00-17:00....  FC
                                                   Mercantile
                                                   Exchange.
Coffee `C'/Colombian.........  NYB                ICE Futures      03:30-14:00....  KC
                                                   Exchange.
Soybeans/No. 2 Yellow........  CBT                Chicago Board    20:00-14:15....  S
                                                   of Trade.
Soybean Meal/48% Protein.....  CBT                Chicago Board    20:00-14:15....  SM
                                                   of Trade.
Soybean Oil/Crude............  CBT                Chicago Board    20:00-14:15....  BO
                                                   of Trade.
Corn/No. 2 Yellow............  CBT                Chicago Board    20:00-14:15....  C
                                                   of Trade.
Wheat/No. 2 Hard Winter......  KCB                Kansas City      20:00-14:15....  KW
                                                   Board of Trade.
Wheat/No. 2 Soft Red.........  CBT                Chicago Board    20:00-14:15....  W
                                                   of Trade.
Sugar 11/World Raw..  NYB                ICE Futures      02:30-14:00....  SB
                                                   Exchange.
Hogs, Lean/Average Iowa/S      CME                Chicago          18:00-17:00....  LH
 Minn.                                             Mercantile
                                                   Exchange.
Crude Oil, WTI/Global Spot...  NYM                New York         18:00-17:15....  CL
                                                   Mercantile
                                                   Exchange.
Crude Oil, Brent/Global Spot.  ICE                ICE Futures      20:00-18:00....  CO
                                                   Exchange.
NY Harb ULSD.................  NYM                New York         18:00-17:15....  HO
                                                   Mercantile
                                                   Exchange.
Gas-Oil-Petroleum............  ICE                ICE Futures      20:00-18:00....  QS
                                                   Exchange.
Natural Gas, Henry Hub.......  NYM                New York         18:00-17:15....  NG
                                                   Mercantile
                                                   Exchange.
Gasoline, Blendstock (RBOB)..  NYM                New York         18:00-17:15....  XB
                                                   Mercantile
                                                   Exchange.
Gold.........................  CMX                COMEX..........  18:00-17:15....  GC
Silver.......................  CMX                COMEX..........  18:00-17:15....  SI
Platinum.....................  NYM                New York         18:00-17:15....  PL
                                                   Mercantile
                                                   Exchange.
Copper High Grade/Scrap No. 2  CMX                COMEX..........  18:00-17:15....  HG
 Wire.
Aluminum, LME Primary 3 Month  LME                London Metal     15:00-14:45....  LA
 Rolling Forward.                                  Exchange.

[[Page 53802]]

 
Lead, LME Primary 3 Month      LME                London Metal     15:00-14:45....  LL
 Rolling Forward.                                  Exchange.
Nickel, LME Primary 3 Month    LME                London Metal     15:00-14:45....  LN
 Rolling Forward.                                  Exchange.
Tin, LME Primary 3 Month       LME                London Metal     15:00-14:45....  LT
 Rolling Forward.                                  Exchange.
Zinc, LME Primary 3 Month      LME                London Metal     15:00-14:45....  LX
 Rolling Forward.                                  Exchange.
----------------------------------------------------------------------------------------------------------------

    As U.S. and London exchanges list additional contracts, as 
currently listed contracts on those exchanges gain sufficient liquidity 
or as other exchanges list sufficiently liquid contracts, the Adviser 
will include those contracts in the list of possible investments of the 
First Trust Subsidiary. The list of commodities futures and commodities 
markets considered for investment can and will change over time.
Commodities Regulation
    The Commodity Futures Trading Commission (``CFTC'') has recently 
adopted substantial amendments to CFTC Rule 4.5 relating to the 
permissible exemptions and conditions for reliance on exemptions from 
registration as a commodity pool operator. As a result of the 
instruments that will be indirectly held by the Fund, the Adviser has 
registered as a commodity pool operator \18\ and is also a member of 
the National Futures Association (``NFA''). The Fund and the First 
Trust Subsidiary are subject to regulation by the CFTC and NFA and 
additional disclosure, reporting and recordkeeping rules imposed upon 
commodity pools.
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    \18\ As defined in Section 1a(11) of the Commodity Exchange Act.
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Other Investments
    The Fund may invest in certificates of deposit issued against funds 
deposited in a bank or savings and loan association. In addition, the 
Fund may invest in bankers' acceptances, which are short-term credit 
instruments used to finance commercial transactions.
    The Fund may invest in bank time deposits, which are monies kept on 
deposit with banks or savings and loan associations for a stated period 
of time at a fixed rate of interest. In addition, the Fund may invest 
in commercial paper, which are short-term unsecured promissory notes, 
including master demand notes issued by corporations to finance their 
current operations. Master demand notes are direct lending arrangements 
between the Fund and a corporation. The Fund may invest in commercial 
paper only if it has received the highest rating from at least one 
nationally recognized statistical rating organization or, if unrated, 
judged by the Adviser to be of comparable quality.
Investment Restrictions
    According to the Registration Statement, the Fund may not invest 
more than 25% of the value of its total assets in securities of issuers 
in any one industry or group of industries. This restriction will not 
apply to obligations issued or guaranteed by the U.S. government, its 
agencies or instrumentalities, or securities of other investment 
companies.\19\
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    \19\ 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 First Trust Subsidiary's shares will be offered only to the 
Fund and the Fund will not sell shares of the First Trust Subsidiary to 
other investors. The Fund and the First Trust Subsidiary will not 
invest in any non-U.S. equity securities (other than shares of the 
First Trust Subsidiary). The Fund will not purchase securities of open-
end or closed-end investment companies except in compliance with the 
1940 Act.
    Pursuant to the Exemptive Order, the Fund will not invest directly 
in options contracts, futures contracts or swap agreements, however, 
this restriction will not apply to the First Trust Subsidiary.
    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid securities (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Adviser and 
master demand notes.\20\ 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 securities. Illiquid securities 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.\21\
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    \20\ In reaching liquidity decisions, the Adviser may consider 
the following factors: The frequency of trades and quotes for the 
security; the number of dealers wishing to purchase or sell the 
security and the number of other potential purchasers; dealer 
undertakings to make a market in the security; and the nature of the 
security and the nature of the marketplace trades (e.g., the time 
needed to dispose of the security, the method of soliciting offers, 
and the mechanics of transfer).
    \21\ 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), FN 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 intends to qualify for and to elect to be treated as a 
separate regulated investment company under SubChapter M of the 
Internal Revenue Code.\22\
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    \22\ 26 U.S.C. 851.
---------------------------------------------------------------------------

    Under the 1940 Act, the Fund's investment in investment companies 
will be limited to, subject to certain exceptions: (i) 3% of the total 
outstanding voting stock of any one investment company, (ii) 5% of the 
Fund's total assets with respect to any one investment company, and 
(iii) 10%

[[Page 53803]]

of the Fund's total assets with respect to investment companies in the 
aggregate.
    The Fund's and the First Trust Subsidiary's investments will be 
consistent with the Fund's investment objective and will not be used to 
enhance leverage.
Net Asset Value
    According to the Registration Statement, the Fund's net asset value 
(``NAV'') will be determined as of the close of trading (normally 4:00 
p.m., Eastern time (``E.T.'')) on each day the New York Stock Exchange 
(``NYSE'') is open for business. 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 or its delegate.
    The Fund's and the First Trust Subsidiary's investments will be 
valued at market value or, in the absence of market value with respect 
to any investment, at fair value in accordance with valuation 
procedures adopted by the Board and in accordance with the 1940 Act. 
Portfolio securities traded on more than one securities exchange will 
be valued at the last sale price or, if so disseminated by an exchange, 
the 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. Portfolio 
securities traded in the over-the-counter market will be valued at 
their closing bid prices. Short-term investments that mature in less 
than 60 days when purchased will be valued at cost adjusted for 
amortization of premiums and accretion of discounts.
    Exchange-traded futures contracts will be valued at the closing 
price in the market where such contracts are principally traded.
    Certain securities may not be able to be priced by pre-established 
pricing methods. Such securities may be valued by the Board or its 
delegate at fair value. The use of fair value pricing by the Fund will 
be governed by valuation procedures adopted by the Board and in 
accordance with the provisions of the 1940 Act. These securities 
generally include, but are not limited to, restricted securities 
(securities which may not be publicly sold without registration under 
the Securities Act of 1933) for which a pricing service is unable to 
provide a market price; securities whose trading has been formally 
suspended; a security whose market price is not available from a pre-
established pricing source; a security with respect to which an event 
has occurred that is likely to materially affect the value of the 
security after the market has closed but before the calculation of the 
Fund's net asset value or make it difficult or impossible to obtain a 
reliable market quotation; and a security whose price, as provided by 
the pricing service, does not reflect the security's ``fair value.'' As 
a general principle, the current ``fair value'' of a security would 
appear to be the amount which the owner might reasonably expect to 
receive for the security upon its current sale. The use of fair value 
prices by the Fund generally results in the prices used by the Fund 
that may differ from current market quotations or official closing 
prices on the applicable exchange. A variety of factors may be 
considered in determining the fair value of such securities.
Creation and Redemption of Shares
    The Trust will issue and sell Shares of the Fund only in Creation 
Unit aggregations, and only in aggregations of 50,000 Shares, on a 
continuous basis through the Distributor, without a sales load, at the 
NAV next determined after receipt, on any business day, of an order in 
proper form.
    The consideration for purchase of Creation Unit aggregations of the 
Fund may consist of (i) cash in lieu of all or a portion of the Deposit 
Securities, as defined below, and/or (ii) a designated portfolio of 
securities determined by the Adviser that generally will conform to the 
holdings of the Fund consistent with its investment objective (the 
``Deposit Securities'') per each Creation Unit aggregation and 
generally an amount of cash (the ``Cash Component'') computed as 
described below. Together, the Deposit Securities and the Cash 
Component (including the cash in lieu amount) will constitute the 
``Fund Deposit,'' which will represent the minimum initial and 
subsequent investment amount for a Creation Unit aggregation of the 
Fund.
    The consideration for redemption of Creation Unit aggregations of 
the Fund may consist of (i) cash in lieu of all or a portion of the 
Fund Securities as defined below, and/or (ii) a designated portfolio of 
securities determined by the Adviser that generally will conform to the 
holdings of the Fund consistent with its investment objective per each 
Creation Unit aggregation (``Fund Securities'') and generally a Cash 
Component, as described below.
    The Cash Component is sometimes also referred to as the Balancing 
Amount. The Cash Component will serve the function of compensating for 
any differences between the NAV per Creation Unit aggregation and the 
Deposit Amount (as defined below). For example, for a creation the Cash 
Component will be an amount equal to the difference between the NAV of 
Fund Shares (per Creation Unit aggregation) and the ``Deposit 
Amount''--an amount equal to the market value of the Deposit Securities 
and/or cash in lieu of all or a portion of the Deposit Securities. If 
the Cash Component is a positive number (i.e., the NAV per Creation 
Unit aggregation exceeds the Deposit Amount), the Authorized 
Participant (defined below) will deliver the Cash Component. If the 
Cash Component is a negative number (i.e., the NAV per Creation Unit 
aggregation is less than the Deposit Amount), the Authorized 
Participant will receive the Cash Component.
    The Custodian, through the National Securities Clearing Corporation 
(``NSCC''), will make available on each business day, prior to the 
opening of business of the NYSE (currently 9:30 a.m., E.T.), the list 
of the names and the quantity of each Deposit Security to be included 
in the current Fund Deposit (based on information at the end of the 
previous business day). Such Fund Deposit will be applicable, subject 
to any adjustments as described below, in order to effect creations of 
Creation Unit aggregations of the Fund until such time as the next-
announced composition of the Deposit Securities is made available.
    The identity and quantity of the Deposit Securities required for a 
Fund Deposit for the Shares may change as rebalancing adjustments and 
corporate action events are reflected within the Fund from time to time 
by the Adviser consistent with the investment objective of the Fund. In 
addition, the Trust will reserve the right to permit or require the 
substitution of an amount of cash, i.e., a ``cash in lieu'' amount, to 
be added to the Cash Component to replace any Deposit Security that may 
not be available in sufficient quantity for delivery or which might not 
be eligible for trading by an Authorized Participant or the investor 
for which it is acting or other relevant reason.
    In addition to the list of names and numbers of securities 
constituting the current Deposit Securities of a Fund Deposit, the 
Custodian, through the NSCC, will also make available on each business 
day, the estimated Cash Component, effective through and including the 
previous business day, per Creation Unit aggregation of the Fund.
    According to the Registration Statement, to be eligible to place 
orders with respect to creations and

[[Page 53804]]

redemptions of Creation Units, an entity must be (i) a ``Participating 
Party,'' i.e., a broker-dealer or other participant in the clearing 
process through the continuous net settlement system of the NSCC or 
(ii) a Depository Trust Company (``DTC'') Participant (a ``DTC 
Participant''). In addition, each Participating Party or DTC 
Participant (each, an ``Authorized Participant'') must execute an 
agreement that has been agreed to by the Distributor and the Custodian 
with respect to purchases and redemptions of Creation Units.
    All orders to create Creation Unit aggregations must be received by 
the transfer agent no later than the closing time of the regular 
trading session on the NYSE (ordinarily 4:00 p.m., E.T.) in each case 
on the date such order is placed in order for creations of Creation 
Unit aggregations to be effected based on the NAV of Shares of the Fund 
as next determined on such date after receipt of the order in proper 
form.
    In order to redeem Creation Units of the Fund, an Authorized 
Participant must submit an order to redeem for one or more Creation 
Units. All such orders must be received by the Fund's transfer agent in 
proper form no later than the close of regular trading on the NYSE 
(ordinarily 4:00 p.m. E.T.) in order to receive that day's closing NAV 
per Share.
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 Share's ticker, Cusip and exchange information along 
with additional quantitative information updated on a daily basis, 
including, for the Fund: (1) Daily trading value, 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'') \23\ 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 \24\ on the 
Exchange, the Fund will disclose on its Web site the identities and 
quantities of the portfolio of securities, Commodities and other assets 
(the ``Disclosed Portfolio'' as defined in Nasdaq Rule 5735(c)(2)) held 
by the Fund and the First Trust Subsidiary that will form the basis for 
the Fund's calculation of NAV at the end of the business day.\25\ The 
Disclosed Portfolio will include, as applicable, the names, quantity, 
percentage weighting and market value of securities, Commodities and 
other assets held by the Fund and the First Trust Subsidiary and the 
characteristics of such assets. The Web site and information will be 
publicly available at no charge.
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    \23\ The Bid/Ask Price of the Fund will be determined using the 
midpoint 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.
    \24\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 4 a.m. to 9:30 
a.m. E.T.; (2) Regular Market Session from 9:30 a.m. to 4 p.m. or 
4:15 p.m. E.T.; and (3) Post-Market Session from 4 p.m. or 4:15 p.m. 
to 8 p.m. E.T.).
    \25\ 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''). 
Notwithstanding the foregoing, portfolio trades that are executed 
prior to the opening of the Exchange on any business day may be 
booked and reflected in NAV on such business day. 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 portfolio (including the First 
Trust Subsidiary's portfolio), will be disseminated. Moreover, the 
Intraday Indicative Value, available on the NASDAQ OMX Information LLC 
proprietary index data service \26\ 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.
---------------------------------------------------------------------------

    \26\ Currently, the NASDAQ OMX Global Index Data Service 
(``GIDS'') is the NASDAQ OMX global index data feed service, 
offering real-time updates, daily summary messages, and access to 
widely followed indexes and Intraday Indicative Values for ETFs. 
GIDS provides investment professionals with the daily information 
needed to track or trade NASDAQ OMX indexes, listed ETFs, or third-
party partner indexes and ETFs.
---------------------------------------------------------------------------

    The dissemination of the Intraday Indicative Value, together with 
the Disclosed Portfolio, will allow investors to determine the value of 
the underlying portfolio of the Fund on a daily basis and will provide 
a close estimate of that value throughout the trading day.
    Intra-day, executable price quotations on the securities, 
Commodities and other assets held by the Fund and the First Trust 
Subsidiary, will be available from major broker-dealer firms or on the 
exchange on which they are traded, as applicable. Intra-day 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.
    Investors will also be able to obtain the Fund's Statement of 
Additional Information (``SAI''), the Fund's 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 volume of the Shares will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services. The previous 
day's closing price and trading volume information for the Shares will 
be published daily in the financial section of newspapers. Quotation 
and last sale information for the Shares will be available via Nasdaq 
proprietary quote and trade services, as well as in accordance with the 
Unlisted Trading Privileges and the Consolidated Tape Association plans 
for the Shares and any underlying exchange-traded products.
    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 are 
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 and the First Trust Subsidiary must be in compliance 
with Rule 10A-3 \27\ 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

[[Page 53805]]

will be made available to all market participants at the same time.
---------------------------------------------------------------------------

    \27\ 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, Commodities and other assets constituting the Disclosed 
Portfolio of the Fund and the First Trust Subsidiary; or (2) whether 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. Trading in the 
Shares also will be subject to Rule 5735(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted.
Trading Rules
    Nasdaq deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to Nasdaq's existing rules governing the 
trading of equity securities. Nasdaq will allow trading in the Shares 
from 4:00 a.m. until 8:00 p.m. E.T. The Exchange has appropriate rules 
to facilitate transactions in the Shares during all trading sessions. 
As provided in Nasdaq Rule 5735(b)(3), the minimum price variation for 
quoting and entry of orders in Managed Fund Shares traded on the 
Exchange is $0.01.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by both Nasdaq and 
also the Financial Industry Regulatory Authority (``FINRA'') on behalf 
of the Exchange, which are designed to detect violations of Exchange 
rules and applicable federal securities laws.\28\ 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.
---------------------------------------------------------------------------

    \28\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares and in the Commodities and other 
exchange-traded securities and instruments held by the Fund and the 
First Trust Subsidiary with other markets and other entities that are 
members of the ISG \29\ and FINRA may obtain trading information 
regarding trading in the Shares and in the Commodities and other 
exchange-traded securities and instruments held by the Fund and the 
First Trust Subsidiary from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares and in the Commodities and other exchange-traded securities and 
instruments held by the Fund and the First Trust Subsidiary from 
markets and other entities that are members of ISG, which includes 
securities and futures exchanges, or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    \29\ 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.
---------------------------------------------------------------------------

    In addition, with respect to the futures contracts held indirectly 
through the First Trust Subsidiary, not more than 10% of the weight 
\30\ of such futures contracts in the aggregate shall consist of 
instruments whose principal trading market is not a member of ISG or is 
a market with which the Exchange does not have a comprehensive 
surveillance sharing agreement. In addition, the Exchange also has a 
general policy prohibiting the distribution of material, non-public 
information by its employees.
---------------------------------------------------------------------------

    \30\ To be calculated as the value of the contract divided by 
the total absolute notional value of the First Trust Subsidiary's 
futures contracts.
---------------------------------------------------------------------------

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.
    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Fund. Members purchasing Shares from the Fund for 
resale to investors will deliver a prospectus to such investors. 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

[[Page 53806]]

detect violations of Exchange rules and applicable federal securities 
laws. The Adviser is affiliated with a broker-dealer and has 
implemented a fire wall with respect to its 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. The Fund's and the 
First Trust Subsidiary's investments will be consistent with the Fund's 
investment objective and will not be used to enhance leverage. FINRA 
may obtain information via ISG from other exchanges that are members of 
ISG. In addition, the Exchange may obtain information regarding trading 
in the Shares and in the Commodities and other exchange-traded 
securities and instruments held by the Fund and the First Trust 
Subsidiary from markets and other entities that are members of ISG, 
which includes securities and futures exchanges, or with which the 
Exchange has in place a comprehensive surveillance sharing agreement. 
With respect to the futures contracts held indirectly through the First 
Trust Subsidiary, not more than 10% of the weight \31\ of such futures 
contracts in the aggregate shall consist of instruments whose principal 
trading market is not a member of the ISG or is a market with which the 
Exchange does not have a comprehensive surveillance sharing agreement. 
The Fund will invest up to 25% of its total assets in the First Trust 
Subsidiary. The Fund may hold up to an aggregate amount of 15% of its 
net assets in illiquid securities (calculated at the time of 
investment), including Rule 144A securities and master demand notes. 
The Fund will not invest directly in Commodities and the Fund expects 
to exclusively gain exposure to these investments by investing in the 
First Trust Subsidiary. The Fund will use the fixed-income securities 
as investments and to collateralize the First Trust Subsidiary's 
commodity exposure on a day-to-day basis. The Fund may also invest 
directly in ETFs and other investment companies, including exchange-
traded closed-end funds, that provide exposure to commodities, equity 
securities and fixed income securities to the extent permitted under 
the 1940 Act. The Fund and the First Trust Subsidiary will not invest 
in any non-U.S. equity securities (other than shares of the First Trust 
Subsidiary).
---------------------------------------------------------------------------

    \31\ To be calculated as the value of the contract divided by 
the total absolute notional value of the First Trust Subsidiary's 
futures contracts.
---------------------------------------------------------------------------

    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 at least every 15 seconds during the 
Regular Market Session. On each business day, before commencement of 
trading in Shares in the Regular Market Session on the Exchange, the 
Fund will disclose on its Web site the Disclosed Portfolio of the Fund 
and the First Trust Subsidiary that will form the basis for the Fund's 
calculation of NAV at the end of the business day. Information 
regarding market price and trading volume of the Shares will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services, and quotation 
and last sale information for the Shares will be available via Nasdaq 
proprietary quote and trade services, as well as in accordance with the 
Unlisted Trading Privileges and the Consolidated Tape Association plans 
for the Shares and any underlying exchange-traded products. Intra-day 
price information will be available through subscription services, such 
as Bloomberg, Markit and Thomson Reuters, which can be accessed by 
Authorized Participants and other investors.
    The Fund's Web site will include a form of the prospectus for the 
Fund and additional data relating to NAV and other applicable 
quantitative information. Trading in Shares of the Fund will be halted 
under the conditions specified in Nasdaq Rules 4120 and 4121 or because 
of market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable, and trading in the Shares will 
be subject to Nasdaq Rule 5735(d)(2)(D), which sets forth circumstances 
under which Shares of the Fund may be halted. In addition, as noted 
above, investors will have ready access to information regarding the 
Fund's holdings, the Intraday Indicative Value, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, FINRA, on behalf of the 
Exchange, will communicate as needed regarding trading in the Shares 
and in the Commodities and other exchange-traded securities and 
instruments held by the Fund and the First Trust Subsidiary with other 
markets and other entities that are members of the ISG and FINRA may 
obtain trading information regarding trading in the Shares and in the 
Commodities and other exchange-traded securities and instruments held 
by the Fund and the First Trust Subsidiary from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares and in the Commodities and other exchange-traded 
securities and instruments held by the Fund and the First Trust 
Subsidiary from markets and other entities that are members of ISG, 
which includes securities and futures exchanges, or with which the 
Exchange has in place a comprehensive surveillance sharing agreement. 
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.

[[Page 53807]]

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-2013-107 on the subject line.

Paper Comments:

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

All submissions should refer to File Number SR-NASDAQ-2013-107. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2013-107 and should 
be submitted on or before September 20, 2013.

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

    \32\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-21184 Filed 8-29-13; 8:45 am]
BILLING CODE 8011-01-P