Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Proposing To List and Trade Shares of the First Trust Morningstar Futures Strategy Fund Under NYSE Arca Equities Rule 8.600, 32503-32510 [2013-12846]

Download as PDF Federal Register / Vol. 78, No. 104 / Thursday, May 30, 2013 / Notices available publicly. All submissions should refer to File Number SR–Phlx– 2013–56 and should be submitted on or before June 20, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–12794 Filed 5–29–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69636; File No. SR–NYSEArca–2013–52] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Proposing To List and Trade Shares of the First Trust Morningstar Futures Strategy Fund Under NYSE Arca Equities Rule 8.600 May 24, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on May 15, 2013, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) 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 Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. TKELLEY on DSK3SPTVN1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade shares of the following under NYSE Arca Equities Rule 8.600 (‘‘Managed Fund Shares’’): First Trust Morningstar Futures Strategy Fund. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, 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, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 16:25 May 29, 2013 Jkt 229001 on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to list and trade the shares (‘‘Shares’’) of the following under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares on the Exchange: 3 First Trust Morningstar Futures Strategy Fund (the ‘‘Fund’’).4 The Shares will be offered by First Trust Exchange-Traded Fund V (the ‘‘Trust’’), a statutory trust organized under the laws of the State of Massachusetts and registered with the Commission as an open-end management investment company.5 The investment adviser to 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 Investment Company Units, listed and traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(3), 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 NYSE Arca Equities Rule 8.600 and the listing and trading of certain funds of the PowerShares Actively Managed Exchange-Traded Fund Trust on the Exchange pursuant to Rule 8.600 in Securities Exchange Act Release No. 57619 (April 4, 2008), 73 FR 19544 (April 10, 2008) (SR–NYSEArca–2008–25). The Commission also previously approved listing and trading on the Exchange of a number of actively managed funds under Rule 8.600. See, e.g., Securities Exchange Act Release Nos. 62502 (July 15, 2010), 75 FR 42471 (July 21, 2010) (SR– NYSEArca–2010–57) (order approving listing and trading of AdvisorShares WCM/BNY Mellon Focused Growth ADR ETF); 63598 (December 22, 2010), 75 FR 82106 (December 29, 2010) (SR– NYSEArca–2010–98) (order approving listing and trading of WisdomTree Managed Futures Strategy Fund); and 66343 (February 7, 2012), 77 FR 7647 (February 13, 2012) (SR–NYSEArca–2011–85) (order approving listing and trading of five SPDR SSgA ETFs). 5 The Trust is registered under the 1940 Act. On May 18, 2012, the Trust filed with the Commission an initial registration statement on Form N–1A under the Securities Act of 1933 (15 U.S.C. 77a) (the ‘‘1933 Act’’) and under the 1940 Act relating to the Fund (File Nos. 333–181507 and 811–22709) (‘‘Registration Statement’’). The description of the operation of the Trust and the Fund herein is based, in part, on the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. PO 00000 Frm 00139 Fmt 4703 Sfmt 4703 32503 the Fund is First Trust Advisors L.P. (the ‘‘Adviser’’). First Trust Portfolios L.P. (the ‘‘Distributor’’) will be the principal underwriter and distributor of the Fund Shares. The Bank of New York Mellon Corporation (the ‘‘Administrator,’’ ‘‘Transfer Agent’’ or ‘‘Custodian’’) will serve as administrator, custodian and transfer agent for the Fund. Commentary .06 to Rule 8.600 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 brokerdealer with respect to access to information concerning the composition and/or changes to such investment company portfolio. In addition, Commentary .06 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 nonpublic information regarding the open-end fund’s portfolio.6 Commentary .06 to Rule 8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca Equities Rule 5.2(j)(3); however, Commentary .06 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 brokerdealer but is affiliated with a brokerdealer and has implemented a fire wall with respect to its broker-dealer affiliate 30029 (April 10, 2012) (File No. 812–13795) (the ‘‘Exemptive Order’’). 6 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. E:\FR\FM\30MYN1.SGM 30MYN1 32504 Federal Register / Vol. 78, No. 104 / Thursday, May 30, 2013 / Notices TKELLEY on DSK3SPTVN1PROD with NOTICES 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 or its broker-dealer affiliate 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 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 held by the Fund, the Adviser has registered as a Commodity Pool Operator (‘‘CPO’’) and is also a member of the National Futures Association (‘‘NFA’’). The Fund and the Subsidiary (as defined herein) will be subject to regulation by the CFTC and NFA and additional disclosure, reporting and recordkeeping rules imposed upon commodity pools. According to the Registration Statement, the Fund will be an actively managed exchange-traded fund that will seek to provide investors with positive returns. Fund Investments According to the Registration Statement, the Fund will seek to provide investors with positive returns. The Fund will seek to achieve positive total returns that are not directly correlated to broad market equity or fixed income returns. The Fund will seek to track the performance of the Morningstar(R) Diversified Futures Index(SM) (the ‘‘Benchmark’’), which is developed, maintained and sponsored by Morningstar, Inc. (‘‘Morningstar’’).7 The Fund is not sponsored, endorsed, sold or promoted by Morningstar. Morningstar’s only relationship to the Fund is the licensing of certain service marks and service names of Morningstar and of the Benchmark, which is determined, composed and calculated by Morningstar without regard to the Adviser or the Fund. Morningstar has 7 Morningstar is not a broker-dealer but is affiliated with a broker-dealer and, with respect to such broker-dealer affiliate, has implemented a fire wall and procedures designed to prevent the illicit use and dissemination of material, non-public information regarding the Benchmark. VerDate Mar<15>2010 16:25 May 29, 2013 Jkt 229001 no obligation to take the needs of the Adviser or the Fund into consideration in determining, composing or calculating the Benchmark. The Benchmark seeks to reflect trends (in either direction) in the commodity futures, currencies futures and financial futures markets. The Benchmark is a fully collateralized futures index that offers diversified exposure to global markets through highly-liquid, exchange listed futures contracts in commodities, currencies and equity indexes. The Fund will generally seek to hold similar instruments to those included in the Benchmark. In addition, the Fund will generally only seek exposure to commodities included in the Benchmark. However, the Fund is not obligated to invest in the same instruments included in the Benchmark. There can be no assurance that the Fund’s performance will track the Benchmark at all times. Under normal market conditions,8 the Fund, through FT Cayman Subsidiary, a wholly-owned subsidiary of the Fund organized under the laws of the Cayman Islands (the ‘‘Subsidiary’’), will invest in a diversified portfolio of exchange-listed commodity futures, currency futures and equity index futures (collectively, ‘‘Futures Instruments’’) with an aggregate notional value substantially equal to the Fund’s net assets. The Fund will not invest directly in Futures Instruments. The Fund expects to exclusively gain exposure to these investments by investing in the Subsidiary. The Subsidiary will be advised by the Adviser.9 The Fund’s investment in the Subsidiary is intended to provide the Fund with 8 The term ‘‘under normal market conditions’’ includes, but is not limited to, the absence of extreme volatility or trading halts in the fixed income markets, futures 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. 9 The Subsidiary is not registered under the 1940 Act and is not directly subject to its investor protections, except as noted in the Registration Statement. However, the Subsidiary is whollyowned and controlled by the Fund and is advised by the Adviser. Therefore, because of the Fund’s ownership and control of the Subsidiary, the Subsidiary would not take action contrary to the interests of the Fund or its shareholders. The Fund’s Board of Trustees (‘‘Board’’) has oversight responsibility for the investment activities of the Fund, including its expected investment in the Subsidiary, and the Fund’s role as the sole shareholder of the Subsidiary. The Adviser receives no additional compensation for managing the assets of the Subsidiary. The 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. PO 00000 Frm 00140 Fmt 4703 Sfmt 4703 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 Futures Instruments. The Subsidiary will have the same investment objective as the Fund, but unlike the Fund, it may invest without limitation in Futures Instruments. Except as otherwise noted, references to the Fund’s investments may also be deemed to include the Fund’s indirect investments through the Subsidiary. The Fund will invest up to 25% of its total assets in the Subsidiary. Each of the Subsidiary’s investments will generally be positioned long, short or flat based on its price relative to its average price over a recent period, with the ability to change positions as frequently as daily if the Benchmark is so adjusted. The Subsidiary’s investments will provide the Fund with exposure to domestic and international markets. According to the Registration Statement, the Fund will invest a substantial portion of its assets in fixed income securities that include U.S. government and agency securities, money market instruments,10 overnight and fixed-term repurchase agreements, cash and other cash equivalents. The Fund will use the fixed-income securities as investments and to meet asset coverage tests resulting from the Subsidiary’s derivative exposure on a day-to-day basis. The Fund may also invest directly in exchange-traded funds (‘‘ETFs’’) 11 and other investment companies that provide exposure to commodities, equity securities and fixed income securities, to the extent permitted under the 1940 Act. Under the 1940 Act, the Fund’s investment in investment companies is 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% of the Fund’s total assets of investment companies in the aggregate. As a whole, the Fund’s investments are meant to track the investment returns of the Benchmark within the limitations of the federal tax requirements applicable to regulated investment companies. 10 The Fund may invest in shares of money market funds to the extent permitted by the 1940 Act. 11 For purposes of this proposed rule change, ETFs include securities such as those listed and traded under NYSE Arca Equities Rule 5.2(j)(3) (‘‘Investment Company Units’’), 8.100 (‘‘Portfolio Depositary Receipts’’) and 8.600 (‘‘Managed Fund Shares’’). E:\FR\FM\30MYN1.SGM 30MYN1 32505 Federal Register / Vol. 78, No. 104 / Thursday, May 30, 2013 / Notices The Benchmark and the Subsidiary’s holdings in futures contracts will consist of futures contracts providing long, short and flat exposure, which include, but are not limited to, commodities, equity indexes and currencies (Euro, Japanese Yen, British Pound, Canadian Dollar, Australian Dollar and Swiss Franc). The Subsidiary’s exposure will generally be weighted 50% in commodity futures, 25% in equity futures and 25% in currency futures. The base weights typically will be rebalanced quarterly to maintain the 50%/25%/25% allocation. Exchange code TKELLEY on DSK3SPTVN1PROD with NOTICES Commodity: Wheat/No. 2 Hard Winter .............................. Soybean Meal/48% Protein ........................... Cotton/1–1/16‘‘ .............................................. Soybean Oil/Crude ........................................ Wheat/No. 2 Soft Red ................................... Coffee ‘C’/Colombian .................................... Hogs, Lean/Average Iowa/S Minn ................ Copper High Grade/Scrap No. 2 Wir ............ Cattle, Live/Choice Average .......................... Sugar #11/World Raw ................................... Silver .............................................................. Gasoline, Blendstock ..................................... Soybeans/No. 2 Yellow ................................. Corn/No. 2 Yellow ......................................... Heating Oil #2/Fuel Oil .................................. Natural Gas, Henry Hub ................................ Gas-Oil-Petroleum ......................................... Gold ............................................................... Crude Oil, Brent/Global Spot ........................ Crude Oil, WTI/Global Spot .......................... Currency: Swiss Franc/U.S. Dollar ................................ Australian Dollar/U.S. Dollar ......................... Canadian Dollar/U.S. Dollar .......................... Japanese Yen/U.S. Dollar ............................. British Pound/U.S. Dollar .............................. Euro FX ......................................................... Equity Index: Australia 200 S .............................................. MIB SP .......................................................... S&P/TSX 60 .................................................. IBEX 35 Index ............................................... FTSE 100 ...................................................... CAC–40 Index ............................................... DAX ............................................................... Nikkei 225 ...................................................... S&P 500 ........................................................ According to the Registration Statement, the Fund, through the Subsidiary, will attempt to capture the economic benefit derived from rising and declining trends based on the ‘‘moving average’’ price changes of commodity futures, currency futures and equity index futures. In an attempt to capture these trends, the Fund’s investments, through the Subsidiary, will generally be positioned as either VerDate Mar<15>2010 16:25 May 29, 2013 Jkt 229001 a counterparty at an agreed-upon date or upon demand and at a price reflecting a market rate of interest unrelated to the coupon rate or maturity of the purchased obligations. The following table describes each of the commodities, currencies and equity indexes underlying the futures contracts included in the Benchmark as of April 30, 2013. This table is subject to change and the Subsidiary will not in all cases invest in the futures contracts included in the Benchmark. The table also provides each instrument’s trading hours (Eastern time (‘‘E.T.’’), exchange and ticker symbol. The Subsidiary’s commodity- and currency-linked investments generally will be limited to investments in listed futures contracts that provide exposure to commodity and non-U.S. currency returns. The Subsidiary will also invest in exchange-listed equity index futures. The Fund and the Subsidiary also may enter into repurchase agreements with counterparties that are deemed to present acceptable credit risks. A repurchase agreement is a transaction in which the Fund and the Subsidiary purchase securities or other obligations from a bank or securities dealer and simultaneously commit to resell them to Exchange name Trading hours Contract ticker (generic) KCB CBT NYB CBT CBT NYB CME CMX CME NYB CMX NYM CBT CBT NYM NYM ICE CMX ICE NYM Kansas City Board of Trade ................................. Chicago Board of Trade ....................................... ICE Futures U.S. .................................................. Chicago Board of Trade ....................................... Chicago Board of Trade ....................................... ICE Futures U.S. .................................................. Chicago Mercantile Exchange ............................. COMEX ................................................................ Chicago Mercantile Exchange ............................. ICE Futures U.S. .................................................. COMEX ................................................................ New York Mercantile Exchange ........................... Chicago Board of Trade ....................................... Chicago Board of Trade ....................................... New York Mercantile Exchange ........................... New York Mercantile Exchange ........................... ICE Futures U.K. .................................................. COMEX ................................................................ ICE Futures U.K. .................................................. New York Mercantile Exchange ........................... 17:00–14:00 17:00–14:00 20:00–13:30 17:00–14:00 17:00–14:00 02:30–13:00 17:00–16:00 17:00–16:15 17:00–16:00 01:30–13:00 17:00–16:15 17:00–16:15 17:00–14:00 17:00–14:00 17:00–16:15 17:00–16:15 19:00–17:00 17:00–16:15 19:00–17:00 17:00–16:15 KW. SM. CT. BO. W. KC. LH. HG. LC. SB. SI. XB. S. C. HO. NG. QS. GC. CO. CL. CME CME CME CME CME CME Chicago Chicago Chicago Chicago Chicago Chicago ............................. ............................. ............................. ............................. ............................. ............................. 17:00–16:00 17:00–16:00 17:00–16:00 17:00–16:00 17:00–16:00 17:00–16:00 MSS. CRD. MCD. JE. CRP. EE. ASX MIL MSE MFM LIF EOP EUX OSE CME Australian Stock Exchange .................................. Borsa Italiana ....................................................... Montreal Exchange .............................................. Meff Renta Variable (MEFF-Madrid) .................... NYSE LIFFE ......................................................... NYSE LIFFE Paris ............................................... Eurex .................................................................... Osaka Securities Exchange ................................. Chicago Mercantile Exchange ............................. 02:30–05:00 02:00–10:40 05:00–15:15 02:00–13:00 19:00–01:50 01:00–15:00 00:50–15:00 02:30–13:00 17:00–15:15 KF. SW. MPT. ID. Z. CF. GX. NO. ES. Mercantile Mercantile Mercantile Mercantile Mercantile Mercantile Exchange Exchange Exchange Exchange Exchange Exchange ‘‘long,’’ ‘‘short’’ or ‘‘flat.’’ To be ‘‘long’’ means to hold or be exposed to a security or instrument with the expectation that its value will increase over time. To be ‘‘short’’ means to sell or be exposed to a security or instrument with the expectation that it will fall in value. To be ‘‘flat’’ means to move a position to cash if a short signal is triggered in a security or instrument. The Fund, through the Subsidiary, will PO 00000 Frm 00141 Fmt 4703 Sfmt 4703 benefit if it has a long position in a security or instrument that increases in value or a short position in a security or instrument that decreases in value. Conversely, the Fund, through the Subsidiary, will be adversely impacted if it holds a long position in a security or instrument that declines in value and a short position in a security or instrument that increases in value. Although the Fund will seek returns E:\FR\FM\30MYN1.SGM 30MYN1 32506 Federal Register / Vol. 78, No. 104 / Thursday, May 30, 2013 / Notices TKELLEY on DSK3SPTVN1PROD with NOTICES that track the returns of the Benchmark, the Fund, through the Subsidiary, may have a higher or lower exposure to any sector or component within the Benchmark at any time. The Subsidiary’s shares will be offered only to the Fund and the Fund will not sell shares of the Subsidiary to other investors. The Fund will not invest in any non-U.S. equity securities (other than shares of the Subsidiary), and the Subsidiary will not invest in any non-U.S. equity securities. The Fund’s investment in the 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. Other Investments According to the Registration Statement, the Fund may from time to time purchase securities on a ‘‘whenissued’’ or other delayed-delivery basis. The price of securities purchased in such transactions is fixed at the time the commitment to purchase is made, but delivery and payment for the securities take place at a later date. 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 variable rate 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 First Trust to be of comparable quality. The Fund may also invest a portion of its assets in exchange-traded pooled investment vehicles (‘‘Underlying ETPs’’) other than registered investment companies that invest principally in commodities.12 12 The term ‘‘Underlying ETPs’’ includes Trust Issued Receipts (as described in NYSE Arca Equities Rule 8.200); and Commodity-Based Trust Shares (as described in NYSE Arca Equities Rule 8.201); Commodity Index Trust Shares (as described in NYSE Arca Equities Rule 8.203); and Trust Units VerDate Mar<15>2010 16:25 May 29, 2013 Jkt 229001 The Fund or the Subsidiary will not invest in options on commodity futures, structured notes, equity-linked derivatives, forwards or swaps contracts. Investment Restrictions While the Fund will be permitted to borrow as permitted under the 1940 Act, the Fund’s investments will not be used to seek performance that is the multiple or inverse multiple (i.e., 2X and 3X) of the Fund’s Benchmark. 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.13 This restriction does not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities. The Fund will not purchase securities of open-end or closed-end investment companies except in compliance with the 1940 Act. 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 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.14 (as described in NYSE Arca Equities Rule 8.500). The Underlying ETPs all will be listed and traded in the U.S. on registered exchanges. 13 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). 14 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 PO 00000 Frm 00142 Fmt 4703 Sfmt 4703 The Fund intends to qualify for and to elect to be treated as a separate regulated investment company (a ‘‘RIC’’) under Subchapter M of the Internal Revenue Code.15 The Shares will conform to the initial listing criteria under NYSE Arca Equities Rule 8.600. The Exchange represents that, for initial and/or continued listing, the Fund will be in compliance with Rule 10A–3 16 under the Act, as provided by NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares of the Fund 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 net asset value (‘‘NAV’’) per Share will be calculated daily, and that the NAV and the Disclosed Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2) will be made available at the same time to all market participants. The Fund’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 NAV will be determined as of the close of trading (normally 4:00 p.m., E.T.) 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 Fund’s Board or its delegate. The Fund’s and the Subsidiary’s investments will be valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value in accordance with valuation procedures adopted by the Trust’s 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 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 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 1933 Act). 15 26 U.S.C. 851. 16 17 CFR 240.10A–3. E:\FR\FM\30MYN1.SGM 30MYN1 Federal Register / Vol. 78, No. 104 / Thursday, May 30, 2013 / Notices securities traded in the over-the-counter market, will be valued at the closing bid prices. Short-term investments that mature in less than 60 days when purchased will be valued at amortized cost. 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. TKELLEY on DSK3SPTVN1PROD with NOTICES Creation and Redemption of Shares Creation and redemption of Shares will occur in large specified blocks of Shares, referred to as ‘‘Creation Units.’’ A Creation Unit of the Fund currently will be comprised of 50,000 Shares of the Fund. The number of Shares comprising a Creation Unit may change over time. According to the Registration Statement, to purchase or redeem Creation Units directly from the Fund, an investor must be an Authorized Participant, or an investor must purchase the Shares through a financial institution that is an Authorized Participant. An ‘‘Authorized Participant’’ is a participant in the Continuous Net Settlement System of the National Securities Clearing Corporation (‘‘NSCC’’) or the Depository Trust Company that has executed a participant agreement with the Distributor that has been accepted by the Trust’s Custodian. Authorized Participants may purchase Creation Units of a Fund and sell individual Shares on the NYSE Arca. Similarly, Shares can only be redeemed in Creation Units. The process at which creations and redemptions occur will be based on the next calculation of the NAV after an order in proper form is received by the Distributor on any day that the Fund is open for business. Generally, a Creation Unit will be purchased or redeemed from the Fund for a designated portfolio of securities along with cash payment (‘‘Deposit Securities,’’ in the case of purchases, and ‘‘Redemption Securities,’’ in the case of redemption). Generally, the Deposit Securities and the Redemption Securities will correspond pro rata to the portfolio of securities of the Fund. Purchases and redemptions of Creation Units may be made in whole or in part on a cash basis, rather than in-kind, under circumstances set forth in the Registration Statement. VerDate Mar<15>2010 16:25 May 29, 2013 Jkt 229001 Additional information regarding the Trust and the Shares, including investment strategies, risks, creation and redemption procedures, fees, portfolio holdings, disclosure policies, distributions, and taxes is 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. Availability of Information The Fund’s Web site (www.ftportfolios.com) will include a form of the prospectus for the Fund that may be downloaded. The Fund’s Web site will include additional quantitative information updated on a daily basis, including, for the Fund, (1) daily trading volume, the prior business day’s reported closing price, NAV and midpoint of the bid/ask spread at the time of calculation of such NAV (the ‘‘Bid/ Ask Price’’),17 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 Core Trading Session (normally 9:30 a.m. to 4:00 p.m., E.T.) on the Exchange, the Fund will disclose on its Web site the Disclosed Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2) that will form the basis for the Fund’s calculation of NAV at the end of the business day.18 On a daily basis, the Fund will disclose for each portfolio security and other financial instrument of the Fund and of the holdings of the Subsidiary the following information on the Fund’s Web site: ticker symbol (if applicable), name of security, futures contract, and/ or financial instrument, number of shares, if applicable, and dollar value of each security, futures contract, and/or financial instrument held, and percentage weighting of each security, futures contract, and/or financial instrument held. The Web site 17 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. 18 Under accounting procedures 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. PO 00000 Frm 00143 Fmt 4703 Sfmt 4703 32507 information will be publicly available at no charge. In addition, for in-kind creations, a basket composition file, which includes the security names to deliver in exchange for Shares, together with estimates and actual cash components, will be publicly disseminated daily prior to the opening of the Exchange via the NSCC. The basket will represent one Creation Unit of the Fund. Investors can also obtain the Trust’s Statement of Additional Information (‘‘SAI’’), the Fund’s Shareholder Reports, and the Trust’s Form N–CSR and Form N–SAR, filed twice a year. The Trust’s SAI and Shareholder Reports will be available free upon request from the Trust, 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 the Consolidated Tape Association (‘‘CTA’’) high-speed line. In addition, the Portfolio Indicative Value, as defined in NYSE Arca Equities Rule 8.600(c)(3), will be widely disseminated at least every 15 seconds during the Core Trading Session by one or more major market data vendors.19 The dissemination of the Portfolio 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 to provide a close estimate of that value throughout the trading day. The intra-day, closing and settlement prices of the portfolio investments (e.g., Futures Instruments, ETFs, Underlying ETPs and fixed income securities) are also readily available from the national securities and futures exchanges trading such securities and futures, as applicable, automated quotation systems, published or other public sources, or on-line information services such as Bloomberg or Reuters. Additional information regarding the Trust and the Shares, including investment strategies, risks, creation and redemption procedures, fees, portfolio 19 Currently, it is the Exchange’s understanding that several major market data vendors widely disseminate Portfolio Indicative Values taken from CTA or other data feeds. E:\FR\FM\30MYN1.SGM 30MYN1 32508 Federal Register / Vol. 78, No. 104 / Thursday, May 30, 2013 / Notices holdings disclosure policies, distributions and taxes is 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. 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.20 Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached. Trading also 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 financial instruments comprising 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 will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. TKELLEY on DSK3SPTVN1PROD with NOTICES Trading Rules The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. Shares will trade on the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. in accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading Sessions). The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price variation (‘‘MPV’’) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001. Surveillance The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by the Financial Industry Regulatory Authority (‘‘FINRA’’) on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal 20 See NYSE Arca Equities Rule 7.12, Commentary .04. VerDate Mar<15>2010 16:25 May 29, 2013 Jkt 229001 securities laws.21 The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations. FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares with other markets that are members of the Intermarket Surveillance Group (‘‘ISG’’), or with which the Exchange has in place a comprehensive surveillance sharing agreement.22 The Chicago Mercantile Exchange (‘‘CME’’), the Chicago Board of Trade, the New York Mercantile Exchange (‘‘NYMEX’’), and ICE Futures U.S. are members of ISG, and the Exchange may obtain market surveillance information with respect to transactions occurring on the COMEX pursuant to the ISG memberships of CME and NYMEX. The Exchange has in place a comprehensive surveillance sharing agreement with the Kansas City Board of Trade and ICE Futures U.K. relating to trading of applicable components of the Benchmark. In addition, with respect to futures contracts in which the Subsidiary invests, not more than 10% of the weight of such futures contracts in the aggregate shall consist of futures contracts whose principal trading market (a) is not a member of ISG or (b) is a market with which the Exchange does not have a comprehensive surveillance sharing agreement, provided that, so long as the Exchange may obtain market surveillance information with respect to transactions occurring on the COMEX pursuant to the ISG memberships of CME and NYMEX, futures contracts whose principal trading market is COMEX shall not be subject to the prohibition in (a), above. 21 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. 22 For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all components of the Disclosed Portfolio for the Fund may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. PO 00000 Frm 00144 Fmt 4703 Sfmt 4703 In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. Information Bulletin Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit Holders in an Information Bulletin (‘‘Bulletin’’) of the special characteristics and risks associated with trading the Shares. Specifically, the Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its Equity Trading Permit Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated Portfolio Indicative Value will not be calculated or publicly disseminated; (4) how information regarding the Portfolio Indicative Value will be disseminated; (5) the requirement that Equity Trading Permit Holders 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 Bulletin will reference that the Fund is subject to various fees and expenses described in the Registration Statement. The Bulletin will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. The Bulletin will also disclose that the NAV for the Shares will be calculated after 4:00 p.m. E.T. each trading day. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) 23 that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, 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 NYSE Arca Equities Rule 8.600. The Exchange has in place 23 15 E:\FR\FM\30MYN1.SGM U.S.C. 78f(b)(5). 30MYN1 TKELLEY on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 104 / Thursday, May 30, 2013 / Notices surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares with other markets that are members of the ISG, including all U.S. securities exchanges and futures exchanges on which the Benchmark Components are traded, or with which the Exchange has in place a comprehensive surveillance sharing agreement. The Adviser is not a brokerdealer but is affiliated with a brokerdealer, 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 portfolio. The Fund will invest up to 25% of its total assets in the Subsidiary. FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares with other markets that are members of the ISG, or with which the Exchange has in place a comprehensive surveillance sharing agreement. The CME, the Chicago Board of Trade, the NYMEX, and ICE Futures U.S. are members of ISG, and the Exchange may obtain market surveillance information with respect to transactions occurring on the COMEX pursuant to the ISG memberships of CME and NYMEX. The Exchange has in place a comprehensive surveillance sharing agreement with the Kansas City Board of Trade and ICE Futures U.K. relating to trading of applicable components of the Benchmark. In addition, with respect to futures contracts in which the Subsidiary invests, not more than 10% of the weight of such futures contracts in the aggregate shall consist of futures contracts 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, as described above under ‘‘Surveillance.’’ The Fund will limit its investments in illiquid securities, including Rule 144A securities and master demand notes, to 15% of its net assets. The Fund will not invest directly in Futures Instruments and the Fund expects to exclusively gain exposure to these futures investments by investing in the Subsidiary. The Fund will not invest in any non-U.S. equity securities (other than shares of the Subsidiary). The Fund’s investments will not be used to seek performance that is the multiple or inverse multiple (i.e., 2X and 3X) of the Fund’s Benchmark. The Fund’s investments will be consistent with the VerDate Mar<15>2010 16:25 May 29, 2013 Jkt 229001 Fund’s investment objective and will not be used to enhance leverage. 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 Portfolio Indicative Value will be widely disseminated through the facilities of the CTA or by one or more major market data vendors at least every 15 seconds during the Exchange’s Core Trading Session. On each business day, before commencement of trading in Shares in the Core Trading 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 will be available via the CTA high-speed line. The Web site for the Fund will include a form of the prospectus for the Fund and additional data relating to NAV and other applicable quantitative information. Moreover, prior to the commencement of trading, the Exchange will inform its Equity Trading Permit Holders in a Bulletin of the special characteristics and risks associated with trading the Shares. Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached 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 NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which trading in 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 Portfolio Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares. The intraday, closing and settlement prices of the portfolio investments (e.g., Futures Instruments, ETFs, Underlying ETPs and fixed income securities) are also readily available from the national PO 00000 Frm 00145 Fmt 4703 Sfmt 4703 32509 securities and futures exchanges trading such securities and futures, as applicable, automated quotation systems, published or other public sources, or on-line information services such as Bloomberg or Reuters. The Fund will not invest in any non-U.S. equity securities (other than shares of the Subsidiary), and the Subsidiary will not invest in any non-U.S. equity securities. 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 activelymanaged exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares. 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 purpose of the Act. The proposed rule change will facilitate the listing and trading of an additional type of activelymanaged exchange-traded product that invests in exchange-listed futures contracts and 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 No written comments were solicited or received with respect to the proposed rule change. 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 self-regulatory E:\FR\FM\30MYN1.SGM 30MYN1 32510 Federal Register / Vol. 78, No. 104 / Thursday, May 30, 2013 / Notices organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: TKELLEY on DSK3SPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml ); or • Send an email to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2013–52 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–NYSEArca–2013–52. 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 (https://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– VerDate Mar<15>2010 18:28 May 29, 2013 Jkt 229001 NYSEArca–2013–52 and should be submitted on or before June 20, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Jill M. Peterson, Assistant Secretary. [FR Doc. 2013–12846 Filed 5–29–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69622; File No. SR–NYSE– 2013–07] Self-Regulatory Organizations; New York Stock Exchange LLC; Order Instituting Proceedings To Determine Whether To Disapprove Proposed Rule Change Amending NYSE Rules 451 and 465, and the Related Provisions of Section 402.10 of the NYSE Listed Company Manual, Which Provide a Schedule for the Reimbursement of Expenses by Issuers to NYSE Member Organizations for the Processing of Proxy Materials and Other Issuer Communications Provided to Investors Holding Securities in Street Name, and To Establish a Five-Year Fee for the Development of an Enhanced Brokers Internet Platform May 23, 2013. I. Introduction On February 1, 2013, New York Stock Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend the fees set forth in NYSE Rules 451 and 465, and the related provisions of Section 402.10 of the NYSE Listed Company Manual, for the reimbursement of expenses by issuers to NYSE member organizations for the processing of proxy materials and other issuer communications provided to investors holding securities in street name, and to establish a five-year fee for the development of an enhanced brokers internet platform. The proposed rule change was published for comment in the Federal Register on February 22, 2013.3 The Commission received 28 comments on the proposal.4 On April 3, 24 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 68936 (February 15, 2013), 78 FR 12381 (‘‘Notice’’). 4 See letters to Elizabeth M. Murphy, Secretary, Commission from: Charles V. Rossi, President, The 1 15 PO 00000 Frm 00146 Fmt 4703 Sfmt 4703 2013, the Commission designated a longer period for Commission action on the proposed rule change, until May 23, 2013.5 The Exchange submitted a response to the comments on May 17, 2013.6 This order institutes proceedings under Section 19(b)(2)(B) of the Act to determine whether to disapprove the proposed rule change. II. Background NYSE member organizations that hold securities for beneficial owners in street Securities Transfer Association, dated February 20, 2013 (‘‘STA Letter’’) and March 4, 2013 (‘‘STA Letter II’’); Karen V. Danielson, President, Shareholder Services Association, dated March 4, 2013 (‘‘SSA Letter’’); Jeanne M. Shafer, dated March 6, 2013 (‘‘Schafer Letter’’); David W. Lovatt, dated March 6, 2013 (‘‘Lovatt Letter’’); Stephen Norman, Chair, The Independent Steering Committee of Broadridge, dated March 7, 2013 (‘‘Steering Committee Letter’’); Jeffrey D. Morgan, President & CEO, National Investor Relations Institute, dated March 7, 2013 (‘‘NIRI Letter’’); Kenneth Bertsch, President and CEO, Society of Corporate Secretaries & Governance Professionals, dated March 7, 2013 (‘‘SCSGP Letter’’); Niels Holch, Executive Director, Shareholder Communications Coalition, dated March 12, 2013 (‘‘SCC Letter’’); Geoffrey M. Dugan, General Counsel, iStar Financial Inc., dated March 13, 2013 (‘‘iStar Letter’’); Paul E. Martin, Chief Financial Officer, Perficient, Inc., dated March 13, 2013 (‘‘Perficient Letter’’); John Harrington, President, Harrington Investments, Inc., dated March 14, 2013 (‘‘Harrington Letter’’); James McRitchie, Shareowner, Corporate Governance, dated March 14, 2013 (‘‘CG Letter’’); Clare A. Kretzman, General Counsel, Gartner, Inc., dated March 15, 2013 (‘‘Gartner Letter’’); Tom Quaadman, Vice President, Center for Capital Markets Competitiveness, dated March 15, 2013 (‘‘CCMC Letter’’); Dennis E. Nixon, President, International Bancshares Corporation, dated March 15, 2013 (‘‘IBC Letter’’); Argus I. Cunningham, Chief Executive Officer, Sharegate Inc., dated March 15, 2013 (‘‘Sharegate Letter’’); Laura Berry, Executive Director, Interfaith Center on Corporate Responsibility, dated March 15, 2013 (‘‘ICC Letter’’); Dorothy M. Donohue, Deputy General Counsel—Securities Regulation, Investment Company Institute, dated March 15, 2013 (‘‘ICI Letter’’); Charles V. Callan, Senior Vice President— Regulatory Affairs, Broadridge Financial Solutions, Inc., dated March 15, 2013 (‘‘Broadridge Letter’’); Brad Philips, Treasurer, Darling International Inc., dated March 15, 2013 (‘‘Darling Letter’’); John Endean, President, American Business Conference, dated March 18, 2013 (‘‘ABC Letter’); Tom Price, Managing Director, The Securities Industry and Financial Markets Association, dated March 18, 2013 (‘‘SIFMA Letter’’); Michael S. O’Brien, Vice President—Corporate Governance Officer, BNY Mellon, dated March 28, 2013 (‘‘BNY Letter’’); Jeff Mahoney, General Counsel, Council of Institutional Investors, dated April 5, 2013 (‘‘CII Letter’’); Paul Torre, Executive Vice President, AST Fund Solutions, LLC, dated May 16, 2013 (‘‘AST Letter’’); and John M. Payne, Chief Executive Officer, Zumbox, Inc., dated May 20, 2013 (‘‘Zumbox Letter’’); see also letter to the Honorable Mary Jo White, Chair, Commission from Dieter Waizenegger, Executive Director, CtW Investment Goup, dated May 17, 2013 (‘‘CtW Letter’’). 5 See Securities Exchange Act Release No. 69286 (April 3, 2013), 78 FR 21481 (April 10, 2013). 6 See Letter to Elizabeth M. Murphy, Secretary, Commission from Janet McGinnis, EVP & Corporate Secretary, NYSE Euronext, dated May 17, 2013 (‘‘NYSE Letter’’). E:\FR\FM\30MYN1.SGM 30MYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 78, Number 104 (Thursday, May 30, 2013)]
[Notices]
[Pages 32503-32510]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12846]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69636; File No. SR-NYSEArca-2013-52]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Proposing To List and Trade Shares of the First
Trust Morningstar Futures Strategy Fund Under NYSE Arca Equities Rule
8.600

May 24, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that, on May 15, 2013, NYSE Arca, Inc. (``Exchange'' or
``NYSE Arca'') 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 Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to list and trade shares of the following
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''): First
Trust Morningstar Futures Strategy Fund. The text of the proposed rule
change is available on the Exchange's Web site at www.nyse.com, at the
principal office of the Exchange, 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, the self-regulatory organization
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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
The Exchange proposes to list and trade the shares (``Shares'') of
the following under NYSE Arca Equities Rule 8.600, which governs the
listing and trading of Managed Fund Shares on the Exchange: \3\ First
Trust Morningstar Futures Strategy Fund (the ``Fund'').\4\ The Shares
will be offered by First Trust Exchange-Traded Fund V (the ``Trust''),
a statutory trust organized under the laws of the State of
Massachusetts and registered with the Commission as an open-end
management investment company.\5\ The investment adviser to the Fund is
First Trust Advisors L.P. (the ``Adviser''). First Trust Portfolios
L.P. (the ``Distributor'') will be the principal underwriter and
distributor of the Fund Shares. The Bank of New York Mellon Corporation
(the ``Administrator,'' ``Transfer Agent'' or ``Custodian'') will serve
as administrator, custodian and transfer agent for the Fund.
---------------------------------------------------------------------------

\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 Investment Company Units,
listed and traded on the Exchange under NYSE Arca Equities Rule
5.2(j)(3), 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 NYSE Arca Equities Rule 8.600 and
the listing and trading of certain funds of the PowerShares Actively
Managed Exchange-Traded Fund Trust on the Exchange pursuant to Rule
8.600 in Securities Exchange Act Release No. 57619 (April 4, 2008),
73 FR 19544 (April 10, 2008) (SR-NYSEArca-2008-25). The Commission
also previously approved listing and trading on the Exchange of a
number of actively managed funds under Rule 8.600. See, e.g.,
Securities Exchange Act Release Nos. 62502 (July 15, 2010), 75 FR
42471 (July 21, 2010) (SR-NYSEArca-2010-57) (order approving listing
and trading of AdvisorShares WCM/BNY Mellon Focused Growth ADR ETF);
63598 (December 22, 2010), 75 FR 82106 (December 29, 2010) (SR-
NYSEArca-2010-98) (order approving listing and trading of WisdomTree
Managed Futures Strategy Fund); and 66343 (February 7, 2012), 77 FR
7647 (February 13, 2012) (SR-NYSEArca-2011-85) (order approving
listing and trading of five SPDR SSgA ETFs).
\5\ The Trust is registered under the 1940 Act. On May 18, 2012,
the Trust filed with the Commission an initial registration
statement on Form N-1A under the Securities Act of 1933 (15 U.S.C.
77a) (the ``1933 Act'') and under the 1940 Act relating to the Fund
(File Nos. 333-181507 and 811-22709) (``Registration Statement'').
The description of the operation of the Trust and the Fund herein is
based, in part, on the Registration Statement. In addition, the
Commission has issued an order granting certain exemptive relief to
the Trust under the 1940 Act. See Investment Company Act Release No.
30029 (April 10, 2012) (File No. 812-13795) (the ``Exemptive
Order'').
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Commentary .06 to Rule 8.600 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. In addition, Commentary
.06 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 nonpublic information
regarding the open-end fund's portfolio.\6\ Commentary .06 to Rule
8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca
Equities Rule 5.2(j)(3); however, Commentary .06 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 but is affiliated with a broker-dealer
and has implemented a fire wall with respect to its broker-dealer
affiliate

[[Page 32504]]

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 or its broker-dealer affiliate 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.
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\6\ 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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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 held by the Fund, the Adviser has registered
as a Commodity Pool Operator (``CPO'') and is also a member of the
National Futures Association (``NFA''). The Fund and the Subsidiary (as
defined herein) will be subject to regulation by the CFTC and NFA and
additional disclosure, reporting and recordkeeping rules imposed upon
commodity pools.
According to the Registration Statement, the Fund will be an
actively managed exchange-traded fund that will seek to provide
investors with positive returns.
Fund Investments
According to the Registration Statement, the Fund will seek to
provide investors with positive returns. The Fund will seek to achieve
positive total returns that are not directly correlated to broad market
equity or fixed income returns. The Fund will seek to track the
performance of the Morningstar\(R)\ Diversified Futures Index\(SM)\
(the ``Benchmark''), which is developed, maintained and sponsored by
Morningstar, Inc. (``Morningstar'').\7\ The Fund is not sponsored,
endorsed, sold or promoted by Morningstar. Morningstar's only
relationship to the Fund is the licensing of certain service marks and
service names of Morningstar and of the Benchmark, which is determined,
composed and calculated by Morningstar without regard to the Adviser or
the Fund. Morningstar has no obligation to take the needs of the
Adviser or the Fund into consideration in determining, composing or
calculating the Benchmark. The Benchmark seeks to reflect trends (in
either direction) in the commodity futures, currencies futures and
financial futures markets. The Benchmark is a fully collateralized
futures index that offers diversified exposure to global markets
through highly-liquid, exchange listed futures contracts in
commodities, currencies and equity indexes. The Fund will generally
seek to hold similar instruments to those included in the Benchmark. In
addition, the Fund will generally only seek exposure to commodities
included in the Benchmark. However, the Fund is not obligated to invest
in the same instruments included in the Benchmark. There can be no
assurance that the Fund's performance will track the Benchmark at all
times.
---------------------------------------------------------------------------

\7\ Morningstar is not a broker-dealer but is affiliated with a
broker-dealer and, with respect to such broker-dealer affiliate, has
implemented a fire wall and procedures designed to prevent the
illicit use and dissemination of material, non-public information
regarding the Benchmark.
---------------------------------------------------------------------------

Under normal market conditions,\8\ the Fund, through FT Cayman
Subsidiary, a wholly-owned subsidiary of the Fund organized under the
laws of the Cayman Islands (the ``Subsidiary''), will invest in a
diversified portfolio of exchange-listed commodity futures, currency
futures and equity index futures (collectively, ``Futures
Instruments'') with an aggregate notional value substantially equal to
the Fund's net assets.
---------------------------------------------------------------------------

\8\ The term ``under normal market conditions'' includes, but is
not limited to, the absence of extreme volatility or trading halts
in the fixed income markets, futures markets or the financial
markets generally; operational issues causing dissemination of
inaccurate market information; or force majeure type events such as
systems failure, natural or man-made disaster, act of God, armed
conflict, act of terrorism, riot or labor disruption or any similar
intervening circumstance.
---------------------------------------------------------------------------

The Fund will not invest directly in Futures Instruments. The Fund
expects to exclusively gain exposure to these investments by investing
in the Subsidiary. The Subsidiary will be advised by the Adviser.\9\
The Fund's investment in the 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 Futures Instruments. The Subsidiary will have the same investment
objective as the Fund, but unlike the Fund, it may invest without
limitation in Futures Instruments. Except as otherwise noted,
references to the Fund's investments may also be deemed to include the
Fund's indirect investments through the Subsidiary. The Fund will
invest up to 25% of its total assets in the Subsidiary. Each of the
Subsidiary's investments will generally be positioned long, short or
flat based on its price relative to its average price over a recent
period, with the ability to change positions as frequently as daily if
the Benchmark is so adjusted. The Subsidiary's investments will provide
the Fund with exposure to domestic and international markets.
---------------------------------------------------------------------------

\9\ The Subsidiary is not registered under the 1940 Act and is
not directly subject to its investor protections, except as noted in
the Registration Statement. However, the Subsidiary is wholly-owned
and controlled by the Fund and is advised by the Adviser. Therefore,
because of the Fund's ownership and control of the Subsidiary, the
Subsidiary would not take action contrary to the interests of the
Fund or its shareholders. The Fund's Board of Trustees (``Board'')
has oversight responsibility for the investment activities of the
Fund, including its expected investment in the Subsidiary, and the
Fund's role as the sole shareholder of the Subsidiary. The Adviser
receives no additional compensation for managing the assets of the
Subsidiary. The 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.
---------------------------------------------------------------------------

According to the Registration Statement, the Fund will invest a
substantial portion of its assets in fixed income securities that
include U.S. government and agency securities, money market
instruments,\10\ overnight and fixed-term repurchase agreements, cash
and other cash equivalents. The Fund will use the fixed-income
securities as investments and to meet asset coverage tests resulting
from the Subsidiary's derivative exposure on a day-to-day basis. The
Fund may also invest directly in exchange-traded funds (``ETFs'') \11\
and other investment companies that provide exposure to commodities,
equity securities and fixed income securities, to the extent permitted
under the 1940 Act. Under the 1940 Act, the Fund's investment in
investment companies is 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% of the Fund's total assets of investment
companies in the aggregate. As a whole, the Fund's investments are
meant to track the investment returns of the Benchmark within the
limitations of the federal tax requirements applicable to regulated
investment companies.
---------------------------------------------------------------------------

\10\ The Fund may invest in shares of money market funds to the
extent permitted by the 1940 Act.
\11\ For purposes of this proposed rule change, ETFs include
securities such as those listed and traded under NYSE Arca Equities
Rule 5.2(j)(3) (``Investment Company Units''), 8.100 (``Portfolio
Depositary Receipts'') and 8.600 (``Managed Fund Shares'').

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

[[Page 32505]]

The Benchmark and the Subsidiary's holdings in futures contracts
will consist of futures contracts providing long, short and flat
exposure, which include, but are not limited to, commodities, equity
indexes and currencies (Euro, Japanese Yen, British Pound, Canadian
Dollar, Australian Dollar and Swiss Franc). The Subsidiary's exposure
will generally be weighted 50% in commodity futures, 25% in equity
futures and 25% in currency futures. The base weights typically will be
rebalanced quarterly to maintain the 50%/25%/25% allocation.
The Subsidiary's commodity- and currency-linked investments
generally will be limited to investments in listed futures contracts
that provide exposure to commodity and non-U.S. currency returns. The
Subsidiary will also invest in exchange-listed equity index futures.
The Fund and the Subsidiary also may enter into repurchase agreements
with counterparties that are deemed to present acceptable credit risks.
A repurchase agreement is a transaction in which the Fund and the
Subsidiary purchase securities or other obligations from a bank or
securities dealer and simultaneously commit to resell them to a
counterparty at an agreed-upon date or upon demand and at a price
reflecting a market rate of interest unrelated to the coupon rate or
maturity of the purchased obligations.
The following table describes each of the commodities, currencies
and equity indexes underlying the futures contracts included in the
Benchmark as of April 30, 2013. This table is subject to change and the
Subsidiary will not in all cases invest in the futures contracts
included in the Benchmark. The table also provides each instrument's
trading hours (Eastern time (``E.T.''), exchange and ticker symbol.

----------------------------------------------------------------------------------------------------------------
Contract ticker
Exchange code Exchange name Trading hours (generic)
----------------------------------------------------------------------------------------------------------------
Commodity:
Wheat/No. 2 Hard Winter....... KCB Kansas City Board of 17:00-14:00 KW.
Trade.
Soybean Meal/48% Protein...... CBT Chicago Board of 17:00-14:00 SM.
Trade.
Cotton/1-1/16``............... NYB ICE Futures U.S..... 20:00-13:30 CT.
Soybean Oil/Crude............. CBT Chicago Board of 17:00-14:00 BO.
Trade.
Wheat/No. 2 Soft Red.......... CBT Chicago Board of 17:00-14:00 W.
Trade.
Coffee `C'/Colombian.......... NYB ICE Futures U.S..... 02:30-13:00 KC.
Hogs, Lean/Average Iowa/S Minn CME Chicago Mercantile 17:00-16:00 LH.
Exchange.
Copper High Grade/Scrap No. 2 CMX COMEX............... 17:00-16:15 HG.
Wir.
Cattle, Live/Choice Average... CME Chicago Mercantile 17:00-16:00 LC.
Exchange.
Sugar 11/World Raw... NYB ICE Futures U.S..... 01:30-13:00 SB.
Silver........................ CMX COMEX............... 17:00-16:15 SI.
Gasoline, Blendstock.......... NYM New York Mercantile 17:00-16:15 XB.
Exchange.
Soybeans/No. 2 Yellow......... CBT Chicago Board of 17:00-14:00 S.
Trade.
Corn/No. 2 Yellow............. CBT Chicago Board of 17:00-14:00 C.
Trade.
Heating Oil 2/Fuel NYM New York Mercantile 17:00-16:15 HO.
Oil. Exchange.
Natural Gas, Henry Hub........ NYM New York Mercantile 17:00-16:15 NG.
Exchange.
Gas-Oil-Petroleum............. ICE ICE Futures U.K..... 19:00-17:00 QS.
Gold.......................... CMX COMEX............... 17:00-16:15 GC.
Crude Oil, Brent/Global Spot.. ICE ICE Futures U.K..... 19:00-17:00 CO.
Crude Oil, WTI/Global Spot.... NYM New York Mercantile 17:00-16:15 CL.
Exchange.
Currency:
Swiss Franc/U.S. Dollar....... CME Chicago Mercantile 17:00-16:00 MSS.
Exchange.
Australian Dollar/U.S. Dollar. CME Chicago Mercantile 17:00-16:00 CRD.
Exchange.
Canadian Dollar/U.S. Dollar... CME Chicago Mercantile 17:00-16:00 MCD.
Exchange.
Japanese Yen/U.S. Dollar...... CME Chicago Mercantile 17:00-16:00 JE.
Exchange.
British Pound/U.S. Dollar..... CME Chicago Mercantile 17:00-16:00 CRP.
Exchange.
Euro FX....................... CME Chicago Mercantile 17:00-16:00 EE.
Exchange.
Equity Index:
Australia 200 S............... ASX Australian Stock 02:30-05:00 KF.
Exchange.
MIB SP........................ MIL Borsa Italiana...... 02:00-10:40 SW.
S&P/TSX 60.................... MSE Montreal Exchange... 05:00-15:15 MPT.
IBEX 35 Index................. MFM Meff Renta Variable 02:00-13:00 ID.
(MEFF-Madrid).
FTSE 100...................... LIF NYSE LIFFE.......... 19:00-01:50 Z.
CAC-40 Index.................. EOP NYSE LIFFE Paris.... 01:00-15:00 CF.
DAX........................... EUX Eurex............... 00:50-15:00 GX.
Nikkei 225.................... OSE Osaka Securities 02:30-13:00 NO.
Exchange.
S&P 500....................... CME Chicago Mercantile 17:00-15:15 ES.
Exchange.
----------------------------------------------------------------------------------------------------------------

According to the Registration Statement, the Fund, through the
Subsidiary, will attempt to capture the economic benefit derived from
rising and declining trends based on the ``moving average'' price
changes of commodity futures, currency futures and equity index
futures. In an attempt to capture these trends, the Fund's investments,
through the Subsidiary, will generally be positioned as either
``long,'' ``short'' or ``flat.'' To be ``long'' means to hold or be
exposed to a security or instrument with the expectation that its value
will increase over time. To be ``short'' means to sell or be exposed to
a security or instrument with the expectation that it will fall in
value. To be ``flat'' means to move a position to cash if a short
signal is triggered in a security or instrument. The Fund, through the
Subsidiary, will benefit if it has a long position in a security or
instrument that increases in value or a short position in a security or
instrument that decreases in value. Conversely, the Fund, through the
Subsidiary, will be adversely impacted if it holds a long position in a
security or instrument that declines in value and a short position in a
security or instrument that increases in value. Although the Fund will
seek returns

[[Page 32506]]

that track the returns of the Benchmark, the Fund, through the
Subsidiary, may have a higher or lower exposure to any sector or
component within the Benchmark at any time.
The Subsidiary's shares will be offered only to the Fund and the
Fund will not sell shares of the Subsidiary to other investors. The
Fund will not invest in any non-U.S. equity securities (other than
shares of the Subsidiary), and the Subsidiary will not invest in any
non-U.S. equity securities.
The Fund's investment in the 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.
Other Investments
According to the Registration Statement, the Fund may from time to
time purchase securities on a ``when-issued'' or other delayed-delivery
basis. The price of securities purchased in such transactions is fixed
at the time the commitment to purchase is made, but delivery and
payment for the securities take place at a later date.
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 variable rate 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 First Trust to be of comparable quality.
The Fund may also invest a portion of its assets in exchange-traded
pooled investment vehicles (``Underlying ETPs'') other than registered
investment companies that invest principally in commodities.\12\
---------------------------------------------------------------------------

\12\ The term ``Underlying ETPs'' includes Trust Issued Receipts
(as described in NYSE Arca Equities Rule 8.200); and Commodity-Based
Trust Shares (as described in NYSE Arca Equities Rule 8.201);
Commodity Index Trust Shares (as described in NYSE Arca Equities
Rule 8.203); and Trust Units (as described in NYSE Arca Equities
Rule 8.500). The Underlying ETPs all will be listed and traded in
the U.S. on registered exchanges.
---------------------------------------------------------------------------

The Fund or the Subsidiary will not invest in options on commodity
futures, structured notes, equity-linked derivatives, forwards or swaps
contracts.
Investment Restrictions
While the Fund will be permitted to borrow as permitted under the
1940 Act, the Fund's investments will not be used to seek performance
that is the multiple or inverse multiple (i.e., 2X and 3X) of the
Fund's Benchmark.
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.\13\ This restriction does
not apply to obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities.
---------------------------------------------------------------------------

\13\ 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 will not purchase securities of open-end or closed-end
investment companies except in compliance with the 1940 Act.
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
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.\14\
---------------------------------------------------------------------------

\14\ 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 1933 Act).
---------------------------------------------------------------------------

The Fund intends to qualify for and to elect to be treated as a
separate regulated investment company (a ``RIC'') under Subchapter M of
the Internal Revenue Code.\15\
---------------------------------------------------------------------------

\15\ 26 U.S.C. 851.
---------------------------------------------------------------------------

The Shares will conform to the initial listing criteria under NYSE
Arca Equities Rule 8.600. The Exchange represents that, for initial
and/or continued listing, the Fund will be in compliance with Rule 10A-
3 \16\ under the Act, as provided by NYSE Arca Equities Rule 5.3. A
minimum of 100,000 Shares of the Fund 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 net asset value
(``NAV'') per Share will be calculated daily, and that the NAV and the
Disclosed Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2)
will be made available at the same time to all market participants.
---------------------------------------------------------------------------

\16\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

The Fund'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 NAV will be
determined as of the close of trading (normally 4:00 p.m., E.T.) 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
Fund's Board or its delegate.
The Fund's and the Subsidiary's investments will be valued at
market value or, in the absence of market value with respect to any
portfolio securities, at fair value in accordance with valuation
procedures adopted by the Trust's 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 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

[[Page 32507]]

securities traded in the over-the-counter market, will be valued at the
closing bid prices. Short-term investments that mature in less than 60
days when purchased will be valued at amortized cost. 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.
Creation and Redemption of Shares
Creation and redemption of Shares will occur in large specified
blocks of Shares, referred to as ``Creation Units.'' A Creation Unit of
the Fund currently will be comprised of 50,000 Shares of the Fund. The
number of Shares comprising a Creation Unit may change over time.
According to the Registration Statement, to purchase or redeem Creation
Units directly from the Fund, an investor must be an Authorized
Participant, or an investor must purchase the Shares through a
financial institution that is an Authorized Participant. An
``Authorized Participant'' is a participant in the Continuous Net
Settlement System of the National Securities Clearing Corporation
(``NSCC'') or the Depository Trust Company that has executed a
participant agreement with the Distributor that has been accepted by
the Trust's Custodian. Authorized Participants may purchase Creation
Units of a Fund and sell individual Shares on the NYSE Arca. Similarly,
Shares can only be redeemed in Creation Units. The process at which
creations and redemptions occur will be based on the next calculation
of the NAV after an order in proper form is received by the Distributor
on any day that the Fund is open for business. Generally, a Creation
Unit will be purchased or redeemed from the Fund for a designated
portfolio of securities along with cash payment (``Deposit
Securities,'' in the case of purchases, and ``Redemption Securities,''
in the case of redemption). Generally, the Deposit Securities and the
Redemption Securities will correspond pro rata to the portfolio of
securities of the Fund. Purchases and redemptions of Creation Units may
be made in whole or in part on a cash basis, rather than in-kind, under
circumstances set forth in the Registration Statement.
Additional information regarding the Trust and the Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings, disclosure policies,
distributions, and taxes is 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.
Availability of Information
The Fund's Web site (www.ftportfolios.com) will include a form of
the prospectus for the Fund that may be downloaded. The Fund's Web site
will include additional quantitative information updated on a daily
basis, including, for the Fund, (1) daily trading volume, the prior
business day's reported closing price, NAV and mid-point of the bid/ask
spread at the time of calculation of such NAV (the ``Bid/Ask
Price''),\17\ 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 Core Trading Session (normally 9:30 a.m. to
4:00 p.m., E.T.) on the Exchange, the Fund will disclose on its Web
site the Disclosed Portfolio as defined in NYSE Arca Equities Rule
8.600(c)(2) that will form the basis for the Fund's calculation of NAV
at the end of the business day.\18\
---------------------------------------------------------------------------

\17\ 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.
\18\ Under accounting procedures 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.
---------------------------------------------------------------------------

On a daily basis, the Fund will disclose for each portfolio
security and other financial instrument of the Fund and of the holdings
of the Subsidiary the following information on the Fund's Web site:
ticker symbol (if applicable), name of security, futures contract, and/
or financial instrument, number of shares, if applicable, and dollar
value of each security, futures contract, and/or financial instrument
held, and percentage weighting of each security, futures contract, and/
or financial instrument held. The Web site information will be publicly
available at no charge.
In addition, for in-kind creations, a basket composition file,
which includes the security names to deliver in exchange for Shares,
together with estimates and actual cash components, will be publicly
disseminated daily prior to the opening of the Exchange via the NSCC.
The basket will represent one Creation Unit of the Fund.
Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and the Trust's
Form N-CSR and Form N-SAR, filed twice a year. The Trust's SAI and
Shareholder Reports will be available free upon request from the Trust,
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 the Consolidated Tape Association
(``CTA'') high-speed line. In addition, the Portfolio Indicative Value,
as defined in NYSE Arca Equities Rule 8.600(c)(3), will be widely
disseminated at least every 15 seconds during the Core Trading Session
by one or more major market data vendors.\19\ The dissemination of the
Portfolio 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 to provide a close estimate of that value
throughout the trading day. The intra-day, closing and settlement
prices of the portfolio investments (e.g., Futures Instruments, ETFs,
Underlying ETPs and fixed income securities) are also readily available
from the national securities and futures exchanges trading such
securities and futures, as applicable, automated quotation systems,
published or other public sources, or on-line information services such
as Bloomberg or Reuters.
---------------------------------------------------------------------------

\19\ Currently, it is the Exchange's understanding that several
major market data vendors widely disseminate Portfolio Indicative
Values taken from CTA or other data feeds.
---------------------------------------------------------------------------

Additional information regarding the Trust and the Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio

[[Page 32508]]

holdings disclosure policies, distributions and taxes is 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.
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.\20\ Trading in Shares of the Fund
will be halted if the circuit breaker parameters in NYSE Arca Equities
Rule 7.12 have been reached. Trading also 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
financial instruments comprising 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 will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D),
which sets forth circumstances under which Shares of the Fund may be
halted.
---------------------------------------------------------------------------

\20\ See NYSE Arca Equities Rule 7.12, Commentary .04.
---------------------------------------------------------------------------

Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. in
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late
Trading Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. As provided in
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price
variation (``MPV'') for quoting and entry of orders in equity
securities traded on the NYSE Arca Marketplace is $0.01, with the
exception of securities that are priced less than $1.00 for which the
MPV for order entry is $0.0001.
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by 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.\21\ 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.
---------------------------------------------------------------------------

\21\ 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 with other markets that are members of the Intermarket
Surveillance Group (``ISG''), or with which the Exchange has in place a
comprehensive surveillance sharing agreement.\22\ The Chicago
Mercantile Exchange (``CME''), the Chicago Board of Trade, the New York
Mercantile Exchange (``NYMEX''), and ICE Futures U.S. are members of
ISG, and the Exchange may obtain market surveillance information with
respect to transactions occurring on the COMEX pursuant to the ISG
memberships of CME and NYMEX. The Exchange has in place a comprehensive
surveillance sharing agreement with the Kansas City Board of Trade and
ICE Futures U.K. relating to trading of applicable components of the
Benchmark.
---------------------------------------------------------------------------

\22\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for the Fund 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 futures contracts in which the
Subsidiary invests, not more than 10% of the weight of such futures
contracts in the aggregate shall consist of futures contracts whose
principal trading market (a) is not a member of ISG or (b) is a market
with which the Exchange does not have a comprehensive surveillance
sharing agreement, provided that, so long as the Exchange may obtain
market surveillance information with respect to transactions occurring
on the COMEX pursuant to the ISG memberships of CME and NYMEX, futures
contracts whose principal trading market is COMEX shall not be subject
to the prohibition in (a), above.
In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'')
of the special characteristics and risks associated with trading the
Shares. Specifically, the Bulletin will discuss the following: (1) The
procedures for purchases and redemptions of Shares in Creation Units
(and that Shares are not individually redeemable); (2) NYSE Arca
Equities Rule 9.2(a), which imposes a duty of due diligence on its
Equity Trading Permit Holders to learn the essential facts relating to
every customer prior to trading the Shares; (3) the risks involved in
trading the Shares during the Opening and Late Trading Sessions when an
updated Portfolio Indicative Value will not be calculated or publicly
disseminated; (4) how information regarding the Portfolio Indicative
Value will be disseminated; (5) the requirement that Equity Trading
Permit Holders 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 Bulletin will reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Act. The
Bulletin will also disclose that the NAV for the Shares will be
calculated after 4:00 p.m. E.T. each trading day.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \23\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

\23\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 NYSE Arca Equities Rule
8.600. The Exchange has in place

[[Page 32509]]

surveillance procedures that are adequate to properly monitor trading
in the Shares in all trading sessions and to deter and detect
violations of Exchange rules and applicable federal securities laws.
FINRA, on behalf of the Exchange, will communicate as needed regarding
trading in the Shares with other markets that are members of the ISG,
including all U.S. securities exchanges and futures exchanges on which
the Benchmark Components are traded, or with which the Exchange has in
place a comprehensive surveillance sharing agreement. The Adviser is
not a broker-dealer but 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 portfolio. The Fund will invest up to 25% of its total
assets in the Subsidiary. FINRA, on behalf of the Exchange, will
communicate as needed regarding trading in the Shares with other
markets that are members of the ISG, or with which the Exchange has in
place a comprehensive surveillance sharing agreement. The CME, the
Chicago Board of Trade, the NYMEX, and ICE Futures U.S. are members of
ISG, and the Exchange may obtain market surveillance information with
respect to transactions occurring on the COMEX pursuant to the ISG
memberships of CME and NYMEX. The Exchange has in place a comprehensive
surveillance sharing agreement with the Kansas City Board of Trade and
ICE Futures U.K. relating to trading of applicable components of the
Benchmark. In addition, with respect to futures contracts in which the
Subsidiary invests, not more than 10% of the weight of such futures
contracts in the aggregate shall consist of futures contracts 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, as described above under ``Surveillance.'' The Fund will
limit its investments in illiquid securities, including Rule 144A
securities and master demand notes, to 15% of its net assets. The Fund
will not invest directly in Futures Instruments and the Fund expects to
exclusively gain exposure to these futures investments by investing in
the Subsidiary. The Fund will not invest in any non-U.S. equity
securities (other than shares of the Subsidiary). The Fund's
investments will not be used to seek performance that is the multiple
or inverse multiple (i.e., 2X and 3X) of the Fund's Benchmark. The
Fund's investments will be consistent with the Fund's investment
objective and will not be used to enhance leverage.
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 Portfolio
Indicative Value will be widely disseminated through the facilities of
the CTA or by one or more major market data vendors at least every 15
seconds during the Exchange's Core Trading Session. On each business
day, before commencement of trading in Shares in the Core Trading
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 will
be available via the CTA high-speed line. The Web site for the Fund
will include a form of the prospectus for the Fund and additional data
relating to NAV and other applicable quantitative information.
Moreover, prior to the commencement of trading, the Exchange will
inform its Equity Trading Permit Holders in a Bulletin of the special
characteristics and risks associated with trading the Shares. Trading
in Shares of the Fund will be halted if the circuit breaker parameters
in NYSE Arca Equities Rule 7.12 have been reached 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 NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth
circumstances under which trading in 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 Portfolio Indicative
Value, the Disclosed Portfolio, and quotation and last sale information
for the Shares. The intra-day, closing and settlement prices of the
portfolio investments (e.g., Futures Instruments, ETFs, Underlying ETPs
and fixed income securities) are also readily available from the
national securities and futures exchanges trading such securities and
futures, as applicable, automated quotation systems, published or other
public sources, or on-line information services such as Bloomberg or
Reuters. The Fund will not invest in any non-U.S. equity securities
(other than shares of the Subsidiary), and the Subsidiary will not
invest in any non-U.S. equity securities.
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, the Exchange has in
place surveillance procedures relating to trading in the Shares and may
obtain information via ISG from other exchanges that are members of ISG
or with which the Exchange has entered into a comprehensive
surveillance sharing agreement. In addition, as noted above, investors
will have ready access to information regarding the Fund's holdings,
the Portfolio Indicative Value, the Disclosed Portfolio, and quotation
and last sale information for the Shares.

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 purpose of the Act. The proposed rule change will
facilitate the listing and trading of an additional type of actively-
managed exchange-traded product that invests in exchange-listed futures
contracts and 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

No written comments were solicited or received with respect to the
proposed rule change.

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 self-regulatory

[[Page 32510]]

organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml ); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2013-52 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-NYSEArca-2013-52. 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 (https://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-NYSEArca-2013-52 and should
be submitted on or before June 20, 2013.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

\24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2013-12846 Filed 5-29-13; 8:45 am]
BILLING CODE 8011-01-P

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