Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of the Shares of the First Trust Low Beta Income Fund of First Trust Exchange-Traded Fund VI, 59394-59401 [2013-23420]

Download as PDF 59394 Federal Register / Vol. 78, No. 187 / Thursday, September 26, 2013 / Notices investors, or otherwise in furtherance of the purposes of the Act. 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: • 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– NASDAQ–2013–119 on the subject line. Paper Comments tkelley on DSK3SPTVN1PROD with NOTICES • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2013–119. 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– NASDAQ–2013–119 and should be submitted on or before October 17, 2013. 18:19 Sep 25, 2013 [FR Doc. 2013–23425 Filed 9–25–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–70459; File No. SR– NASDAQ–2013–121] Electronic Comments VerDate Mar<15>2010 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Kevin M. O’Neill, Deputy Secretary. Jkt 229001 Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of the Shares of the First Trust Low Beta Income Fund of First Trust ExchangeTraded Fund VI September 20, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on September 12, 2013, The NASDAQ Stock Market LLC (‘‘Nasdaq’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in in Items I, II, and III below, which Items have been prepared by Nasdaq. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change Nasdaq proposes to list and trade the shares of the First Trust Low Beta Income ETF (the ‘‘Fund’’) of First Trust Exchange-Traded Fund VI (the ‘‘Trust’’) under Nasdaq Rule 5735 (‘‘Managed Fund Shares’’).3 The shares of the Fund 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The Commission approved Nasdaq Rule 5735 in Securities Exchange Act Release No. 57962 (June 13, 2008) 73 FR 35175 (June 20, 2008) (SR– NASDAQ–2008–039). There are already multiple actively-managed funds listed on the Exchange; see Securities Exchange Act Release No. 66175 (February 29, 2012), 77 FR 13379 (March 6, 2012) (SR–NASDAQ–2012–004) (order approving listing and trading of WisdomTree Emerging Markets Corporate Bond Fund). Additionally, the Commission has previously approved the listing and trading of a number of actively-managed WisdomTree funds on NYSE Arca, Inc. pursuant to Rule 8.600 of that exchange. See, e.g., Securities Exchange Act Release No. 64643 (June 10, 2011), 76 FR 35062 (June 15, 2011) (SR–NYSEArca–2011–21) (order approving listing and trading of WisdomTree Global Real Return Fund). The Exchange believes the proposed rule change raises no significant issues not previously addressed in those prior Commission orders. 1 15 PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 are collectively referred to herein as the ‘‘Shares.’’ The text of the proposed rule change is available at https:// nasdaq.cchwallstreet.com/, at Nasdaq’s principal office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of, and basis for, the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to list and trade the Shares of the Fund under Nasdaq Rule 5735, which governs the listing and trading of Managed Fund Shares 4 on the Exchange. The Fund will be an actively-managed exchange-traded fund (‘‘ETF’’). The Shares will be offered by the Trust, which was established as a Massachusetts business trust on June 4, 2012.5 The Trust is registered with the Commission as an investment company and has filed a registration statement on Form N–1A (‘‘Registration Statement’’) with the Commission.6 The Fund is a series of the Trust. First Trust Advisors L.P. will be the investment adviser (‘‘Adviser’’) to the 4 A Managed Fund Share is a security that represents an interest in an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1) (the ‘‘1940 Act’’) organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment adviser consistent with its investment objectives and policies. In contrast, an open-end investment company that issues Index Fund Shares, listed and traded on the Exchange under Nasdaq Rule 5705, seeks to provide investment results that correspond generally to the price and yield performance of a specific foreign or domestic stock index, fixed income securities index or combination thereof. 5 The Commission has issued an order, upon which the Trust may rely, granting certain exemptive relief under the 1940 Act. See Investment Company Act Release No. 28468 (October 27, 2008) (File No. 812–13477). 6 See Post-Effective Amendment No. 4 to Registration Statement on Form N–1A for the Trust, dated January 16, 2013 (File Nos. 333–182308 and 811–22717). The descriptions of the Fund and the Shares contained herein are based, in part, on information in the Registration Statement. E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 78, No. 187 / Thursday, September 26, 2013 / Notices tkelley on DSK3SPTVN1PROD with NOTICES Fund. First Trust Portfolios L.P. (the ‘‘Distributor’’) will be the principal underwriter and distributor of the Fund’s Shares. Brown Brothers Harriman & Co. (‘‘BBH’’) will act as the administrator, accounting agent, custodian and transfer agent to the Fund. Paragraph (g) of Rule 5735 provides that if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a brokerdealer, 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.7 In addition, paragraph (g) further requires that personnel who make decisions on the open-end fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material, non-public information regarding the open-end fund’s portfolio. Rule 5735(g) is similar to Nasdaq Rule 5705(b)(5)(A)(i); however, paragraph (g) in connection with the establishment of a ‘‘fire wall’’ between the investment adviser and the broker-dealer reflects the applicable open-end fund’s portfolio, not an underlying benchmark index, as is the case with index-based funds. The Adviser is not a brokerdealer, although it is affiliated with the Distributor, a broker-dealer. The Adviser has implemented a fire wall with respect to its broker-dealer affiliate regarding access to information concerning the composition and/or changes to the portfolio. In the event (a) the Adviser becomes newly affiliated with a broker-dealer, or (b) any new 7 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’). As a result, the Adviser and its related personnel are subject to the provisions of Rule 204A–1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with other applicable securities laws. Accordingly, procedures designed to prevent the communication and misuse of non-public information by an investment adviser must be consistent with Rule 204A–1 under the Advisers Act. In addition, Rule 206(4)–7 under the Advisers Act makes it unlawful for an investment adviser to provide investment advice to clients unless such investment adviser has (i) adopted and implemented written policies and procedures reasonably designed to prevent violation, by the investment adviser and its supervised persons, of the Advisers Act and the Commission rules adopted thereunder; (ii) implemented, at a minimum, an annual review regarding the adequacy of the policies and procedures established pursuant to subparagraph (i) above and the effectiveness of their implementation; and (iii) designated an individual (who is a supervised person) responsible for administering the policies and procedures adopted under subparagraph (i) above. VerDate Mar<15>2010 18:19 Sep 25, 2013 Jkt 229001 adviser or sub-adviser is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement a fire wall with respect to its relevant personnel and/or such broker-dealer affiliate, as applicable, regarding access to information concerning the composition and/or changes to the portfolio and will be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding such portfolio. The Fund does not currently intend to use a sub-adviser. First Trust Low Beta Income ETF Principal Investments The Fund’s investment objective is to provide current income. The Fund will pursue its objective by investing in large-cap U.S. exchange-traded equity securities and by utilizing an ‘‘option strategy’’ consisting of buying U.S. exchange-traded put options on the Standard & Poor’s 500 Index (the ‘‘Index’’) and writing (selling) U.S. exchange-traded covered call options on the Index. In pursuing its investment objective, under normal market conditions,8 the Fund will invest primarily in large-cap U.S. exchange-traded equity securities. The Fund will also employ an option strategy in which it will write U.S. exchange-traded covered call options on the Index in order to seek additional cash flow in the form of premiums on the options. Those premiums may be distributed to shareholders on a monthly basis or used to purchase U.S. exchange-traded put options on the Index that seek to provide the Fund with downside protection and which are expected to reduce the Fund’s price sensitivity to declining markets. The market value of the option strategy may be up to 20% of the Fund’s overall net asset value. The equity securities in which the Fund will invest and the options which the Fund will buy and write will be limited to U.S. exchange-traded securities and options, respectively, that trade in markets that are members of the 8 The term ‘‘under normal market conditions’’ as used herein includes, but is not limited to, the absence of adverse market, economic, political or other conditions, including extreme volatility or trading halts in the securities markets or the financial markets generally; operational issues causing dissemination of inaccurate market information; or force majeure type events such as systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. In periods of extreme market disturbance, the Fund may take temporary defensive positions, by overweighting its portfolio in cash/cash-like instruments; however, to the extent possible, the Adviser would continue to seek to achieve the Fund’s investment objective. PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 59395 Intermarket Surveillance Group (‘‘ISG’’), which includes all U.S. national securities exchanges and certain foreign exchanges, or are parties to a comprehensive surveillance sharing agreement with the Exchange. A list of ISG members is available at www.isgportal.org. The equity securities held by the Fund will be selected using a mathematical optimization process which attempts to tilt the Fund’s common stock portfolio toward higher dividend paying stocks. The equity securities held by the Fund may include non-U.S. securities that are listed on a U.S. securities exchange in the form of American Depositary Receipts (‘‘ADRs’’) and Global Depositary Receipts (‘‘GDRs’’) (collectively ‘‘Depositary Receipts’’). The equity securities will be periodically rebalanced. The option portion of the portfolio will generally consist of (i) U.S. exchange-traded covered calls or covered call spreads on the Index that are written by the Fund and (ii) U.S. exchange-traded puts on the Index that are bought by the Fund. The call options written by the Fund will typically be a laddered portfolio of one-week, onemonth, two-month and three-month call options written at-the-money to slightly out-of-the-money. A call option will give the holder the right to buy the Index at a predetermined strike price from the Fund. The notional value of calls written (including calls and call spreads on the Index and/or other indexes as described in Other Investments below) will be generally between 25% and 75% of the overall Fund. The put positions held by the Fund will generally average two to three months to expiration (calculated at the time of purchase) and will consist of out-of-the-money Index put options. A put option will give the Fund the right to sell the Index at a predetermined strike price to the writer of the put. The notional value of the put portfolio (including puts written on the Index and/or other indexes as described in Other Investments below) will be generally between 10% and 75% of the overall Fund. Other Investments In addition to the option strategy described in Principal Investments, the Fund may invest up to 10% of the market value of its net assets in futures, options, options on futures, total return swaps, credit default swaps 9 and 9 To the extent practicable, the Fund will invest in swaps cleared through the facilities of a centralized clearing house. E:\FR\FM\26SEN1.SGM 26SEN1 tkelley on DSK3SPTVN1PROD with NOTICES 59396 Federal Register / Vol. 78, No. 187 / Thursday, September 26, 2013 / Notices forward contracts. The Fund may utilize such derivatives to enhance return, to hedge some of the risks of its investments in securities, as a substitute for a position in the underlying asset, to reduce transaction costs, to maintain full market exposure (which means to adjust the characteristics of its investments to more closely approximate those of the markets in which it invests), to manage cash flows or to preserve capital. In attempting to enhance returns and/or hedge risks, the Fund may buy and write U.S. exchangetraded options on single stocks included in the portfolio and/or on the Index and/or other equity indexes. The Fund may also write covered call spreads on the Index and/or other equity indexes. Under normal market conditions, the Fund may invest up to 10% of its net assets in short-term debt securities and cash equivalents, or it may hold cash. The percentage of the Fund invested in such holdings will vary and will depend on several factors, including market conditions. For temporary defensive purposes and during periods of high cash inflows or outflows, the Fund may depart from its principal investment strategies and invest part or all of its assets in short-term debt securities or cash equivalents or it may hold cash. During such periods, the Fund may not be able to achieve its investment objective. The Fund may adopt a defensive strategy when the Adviser believes securities in which the Fund normally invests have elevated risks due to political or economic factors and in other extraordinary circumstances. Short-term debt securities are securities from issuers having a longterm debt rating of at least A by Standard & Poor’s Ratings Group (‘‘S&P Ratings’’), Moody’s Investors Service, Inc. (‘‘Moody’s’’) or Fitch, Inc. (‘‘Fitch’’) and having a maturity of one year or less. The use of temporary investments will not be a part of a principal investment strategy of the Fund. Short-term debt securities are defined to include, without limitation, the following: (1) U.S. government securities, including bills, notes and bonds differing as to maturity and rates of interest, which are either issued or guaranteed by the U.S. Treasury or by U.S. government agencies or instrumentalities; (2) certificates of deposit issued against funds deposited in a bank or savings and loan association; (3) bankers’ acceptances, which are short-term credit instruments used to finance commercial transactions; (4) repurchase VerDate Mar<15>2010 18:19 Sep 25, 2013 Jkt 229001 agreements,10 which involve purchases of debt securities; (5) 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; and (6) commercial paper, which is short-term unsecured promissory notes. The Fund may only invest in commercial paper rated A–1 or higher by S&P Ratings, Prime-1 or higher by Moody’s or F2 or higher by Fitch. The Fund intends to qualify each year as a regulated investment company (‘‘RIC’’) under Subchapter M of the Internal Revenue Code of 1986, as amended. The Fund may hold up to an aggregate amount of 15% of its net assets in illiquid securities (calculated at the time of investment). 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. The Fund may not invest 25% or more of the value of its total assets in securities of issuers in any one industry or group of industries. This restriction does not apply to obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities, or securities of other investment companies.11 The Fund’s investments will be consistent with the Fund’s investment objective and will not be used to enhance leverage. The Shares The Fund will issue and redeem Shares only in Creation Units at the net 10 According to the Registration Statement, the Fund intends to enter into repurchase agreements only with financial institutions and dealers believed by the Adviser to present minimal credit risks in accordance with criteria approved by the Board of Trustees of the Trust (‘‘Trust Board’’). The Adviser will review and monitor the creditworthiness of such institutions. The Adviser will monitor the value of the collateral at the time the transaction is entered into and at all times during the term of the repurchase agreement. 11 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). PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 asset value (‘‘NAV’’) 12 next determined after receipt of an order on a continuous basis every day except weekends and specified holidays. The NAV of the Fund will be determined once each business day, normally as of the close of trading of the NYSE, generally, 4:00 p.m. Eastern Time. Creation Unit sizes will be 50,000 Shares per Creation Unit. The Trust will issue and sell Shares of the Fund only in Creation Units on a continuous basis through the Distributor, without a sales load (but subject to transaction fees), at their NAV per Share next determined after receipt of an order, on any business day, in proper form pursuant to the terms of the Authorized Participant agreement (as referred to below). The consideration for purchase of a Creation Unit generally will consist of either (i) the in-kind deposit of a designated portfolio of securities (the ‘‘Deposit Securities’’) per each Creation Unit and the Cash Component (defined below), computed as described below or (ii) the cash value of all or a portion of the Deposit Securities (‘‘Deposit Cash’’) and the ‘‘Cash Component,’’ computed as described below. The Fund may, under certain circumstances, effect a portion of creations and redemptions for cash, rather than in-kind securities, particularly for the put and call options in which the Fund invests. When accepting purchases of Creation Units for cash, the Fund may incur additional costs associated with the acquisition of Deposit Securities that would otherwise be provided by an inkind purchaser. Together, the Deposit Securities or Deposit Cash, as applicable, and the Cash Component will constitute the ‘‘Fund Deposit,’’ which represents the minimum initial and subsequent investment amount for a Creation Unit of the Fund. The ‘‘Cash Component’’ will be an amount equal to the difference between the NAV of the Shares (per Creation Unit) and the market value of the Deposit Securities or Deposit Cash, as applicable. If the Cash Component is a positive number (i.e., the NAV per Creation Unit exceeds the market value of the Deposit Securities or Deposit Cash, as applicable), the Cash Component will be such positive amount. If the Cash Component is a negative number (i.e., the NAV per Creation Unit is less than the market 12 The NAV of the Fund’s Shares generally will be calculated once daily Monday through Friday as of the close of regular trading on the New York Stock Exchange (‘‘NYSE’’), generally 4:00 p.m. Eastern time (the ‘‘NAV Calculation Time’’). NAV per Share will be calculated by dividing the Fund’s net assets by the number of Fund Shares outstanding. For more information regarding the valuation of Fund investments in calculating the Fund’s NAV, see Registration Statement. E:\FR\FM\26SEN1.SGM 26SEN1 tkelley on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 78, No. 187 / Thursday, September 26, 2013 / Notices value of the Deposit Securities or Deposit Cash, as applicable), the Cash Component will be such negative amount and the creator will be entitled to receive cash in an amount equal to the Cash Component. The Cash Component will serve the function of compensating for any difference between the NAV per Creation Unit and the market value of the Deposit Securities or Deposit Cash, as applicable. To be eligible to place orders with respect to creations and redemptions of Creation Units, an entity must be (i) a ‘‘Participating Party,’’ i.e., a brokerdealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation (‘‘NSCC’’) or (ii) a Depository Trust Company (‘‘DTC’’) Participant (a ‘‘DTC Participant’’). In addition, each Participating Party or DTC Participant (each, an ‘‘Authorized Participant’’) must execute an agreement that has been agreed to by the Distributor and BBH with respect to purchases and redemptions of Creation Units. BBH, through the NSCC, will make available on each business day, immediately prior to the opening of business on the Exchange’s Regular Market Session (currently 9:30 a.m. Eastern time), the list of the names and the required number of shares of each Deposit Security and/or the required amount of Deposit Cash, as applicable, to be included in the current Fund Deposit (based on information at the end of the previous business day) for the Fund. Such Fund Deposit, subject to any relevant adjustments, will be applicable in order to effect purchases of Creation Units of the Fund until such time as the next announced composition of the Deposit Securities and/or the required amount of Deposit Cash, as applicable, is made available. Shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by the Fund through BBH and only on a business day. With respect to the Fund, BBH, through the NSCC, will make available immediately prior to the opening of business on the Exchange (9:30 a.m. Eastern time) on each business day, the list of the names and share quantities of the Fund’s portfolio securities (‘‘Fund Securities’’) and/or, if relevant, the required cash value thereof that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form on that day. Fund Securities VerDate Mar<15>2010 18:19 Sep 25, 2013 Jkt 229001 received on redemption may not be identical to Deposit Securities. Redemption proceeds for a Creation Unit will be paid either in kind or in cash or a combination thereof, as determined by the Trust. With respect to in kind redemptions of the Fund, redemption proceeds for a Creation Unit will consist of Fund Securities as announced by BBH on the business day of the request for redemption received in proper form plus cash in an amount equal to the difference between the NAV of the Shares being redeemed, as next determined after a receipt of a request in proper form, and the value of the Fund Securities (the ‘‘Cash Redemption Amount’’), less a fixed redemption transaction fee and any applicable additional variable charge as set forth in the Registration Statement. In the event that the Fund Securities have a value greater than the NAV of the Shares, a compensating cash payment equal to the differential will be required to be made by or through an Authorized Participant by the redeeming shareholder. Notwithstanding the foregoing, at the Trust’s discretion, an Authorized Participant may receive the corresponding cash value of the securities in lieu of one or more Fund Securities. The creation/redemption order cut off time for the Fund is expected to be 4:00 p.m. Eastern time for purchases of Shares. On days when the Exchange closes earlier than normal and in the case of custom orders, the Fund may require orders for Creation Units to be placed earlier in the day. Net Asset Value The NAV per Share for the Fund will be computed by dividing the value of the net assets of the Fund (i.e., the value of its total assets less total liabilities) by the total number of Shares outstanding, rounded to the nearest cent. Expenses and fees, including the management fees, will be accrued daily and taken into account for purposes of determining NAV. The NAV of the Fund will be calculated by BBH and determined at the close of the regular trading session on the NYSE (ordinarily 4:00 p.m. Eastern time) on each day that such exchange is open. In calculating the Fund’s NAV per Share, investments will generally be valued by using market valuations. A market valuation generally means a valuation (i) obtained from an exchange, a pricing service, or a major market maker (or dealer) or (ii) based on a price quotation or other equivalent indication of value supplied by an exchange, a pricing service, or a major market maker (or dealer). Portfolio securities listed on any exchange other PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 59397 than the Exchange will be valued at the last sale price on the business day as of which such value is being determined. Securities listed on the Exchange will be valued at the official closing price on the business day as of which such value is being determined. If there has been no sale on such day, or no official closing price in the case of securities traded on the Exchange, the securities will be valued at the mean of the most recent bid and ask prices on such day. 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. U.S. exchange-traded options and futures contracts will be valued at the closing price in the market where such contracts are principally traded. Credit default swaps will be valued using a pricing service or, if the pricing service does not provide a value, the Adviser’s Pricing Committee will attempt to obtain one or more quotes provided by the selling dealer or financial institution and will value the swaps accordingly. Except as otherwise provided herein, portfolio instruments traded in the overthe-counter market will be valued at their closing bid prices. The Adviser may use various pricing services, or discontinue the use of any pricing service, as approved by the Trust Board from time to time. A price obtained from a pricing service based on such pricing service’s valuation matrix may be considered a market valuation. Any assets or liabilities denominated in currencies other than the U.S. dollar will be converted into U.S. dollars at the current market rates on the date of valuation as quoted by one or more sources. In the event that current market valuations are not readily available or such valuations do not reflect current market value, the Trust’s procedures require the Adviser’s Pricing Committee to determine a security’s fair value if a market price is not readily available.13 13 The Valuation Committee of the Trust Board will be responsible for the oversight of the pricing procedures of the Fund and the valuation of the Fund’s portfolio. The Valuation Committee has delegated day-to-day pricing responsibilities to the Adviser’s Pricing Committee, which will be composed of officers of the Adviser. The Pricing Committee will be responsible for the valuation and revaluation of any portfolio investments for which market quotations or prices are not readily available. The Fund has implemented procedures designed to prevent the use and dissemination of material, non-public information regarding valuation and revaluation of any portfolio investments. E:\FR\FM\26SEN1.SGM 26SEN1 59398 Federal Register / Vol. 78, No. 187 / Thursday, September 26, 2013 / Notices In determining such value the Adviser’s Pricing Committee may consider, among other things, (i) price comparisons among multiple sources, (ii) a review of corporate actions and news events, and (iii) a review of relevant financial indicators. In these cases, the Fund’s NAV may reflect certain portfolio securities’ fair values rather than their market prices. Fair value pricing involves subjective judgments and it is possible that the fair value determination for a security is materially different than the value that could be realized upon the sale of the security. tkelley on DSK3SPTVN1PROD with NOTICES Availability of Information The Distributor’s Web site (www.ftportfolios.com), which will be publicly available prior to the public offering of Shares, will include a form of the prospectus for the Fund that may be downloaded. The Web site will include additional quantitative information updated on a daily basis, including, for the Fund: (1) The prior business day’s reported NAV, mid-point of the bid/ask spread at the time of calculation of such NAV (the ‘‘Bid/Ask Price’’),14 and a calculation of the premium and discount of the Bid/Ask Price against the NAV; and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. On each business day, before commencement of trading in Shares in the Regular Market Session 15 on the Exchange, the Fund will disclose on its Web site the identities and quantities of the portfolio of securities and other assets (the ‘‘Disclosed Portfolio’’) held by the Fund that will form the basis for the Fund’s calculation of NAV at the end of the business day.16 On a daily 14 The Bid/Ask Price of the Fund will be determined using the midpoint of the highest bid and the lowest offer on the Exchange as of the time of calculation of such Fund’s NAV. The records relating to Bid/Ask Prices will be retained by the Fund and its service providers. 15 See Nasdaq Rule 4120(b)(4) (describing the three trading sessions on the Exchange: (1) PreMarket Session from 4 a.m. to 9:30 a.m. Eastern time; (2) Regular Market Session from 9:30 a.m. to 4 p.m. or 4:15 p.m. Eastern time; and (3) PostMarket Session from 4 p.m. or 4:15 p.m. to 8 p.m. Eastern time). 16 Under accounting procedures to be followed by the Fund, trades made on the prior business day (‘‘T’’) will be booked and reflected in NAV on the current business day (‘‘T + 1’’). Notwithstanding the foregoing, portfolio trades that are executed prior to the opening of the Exchange on any business day may be booked and reflected in NAV on such business day. Accordingly, the Fund will be able to disclose at the beginning of the business day the portfolio that will form the basis for the NAV calculation at the end of the business day. VerDate Mar<15>2010 18:19 Sep 25, 2013 Jkt 229001 basis, the Disclosed Portfolio will include each portfolio security and other financial instruments of the Fund with the following information on the Fund’s Web site: Ticker symbol (if applicable), name of security and financial instrument, number of shares (if applicable) and dollar value of securities and financial instruments held in the Fund, and percentage weighting of the security and financial instrument in the Fund. The Web site information will be publicly available at no charge. In addition, for the Fund, an estimated value, defined in Rule 5735(c)(3) as the ‘‘Intraday Indicative Value,’’ that reflects an estimated intraday value of the Fund’s portfolio, will be disseminated. Moreover, the Intraday Indicative Value, available on the NASDAQ OMX Information LLC proprietary index data service,17 will be based upon the current value for the components of the Disclosed Portfolio and will be updated and widely disseminated and broadly displayed at least every 15 seconds during the Regular Market Session. The Intraday Indicative Value will be based on quotes and closing prices from the securities’ local market and may not reflect events that occur subsequent to the local market’s close. Premiums and discounts between the Intraday Indicative Value and the market price may occur. This should not be viewed as a ‘‘real time’’ update of the NAV per Share of the Fund, which is calculated only once a day. The dissemination of the Intraday Indicative Value, together with the Disclosed Portfolio, will allow investors to determine the value of the underlying portfolio of the Fund on a daily basis and will provide a close estimate of that value throughout the trading day. Intra-day, executable price quotations on the securities and other assets held by the Fund will be available from major broker-dealer firms or on the exchange on which they are traded, as applicable. Intra-day price information will also be available through subscription services, such as Bloomberg, Markit and Thomson Reuters, which can be accessed by Authorized Participants and other investors. 17 Currently, the NASDAQ OMX Global Index Data Service (‘‘GIDS’’) is the NASDAQ OMX global index data feed service, offering real-time updates, daily summary messages, and access to widely followed indexes and Intraday Indicative Values for ETFs. GIDS provides investment professionals with the daily information needed to track or trade NASDAQ OMX indexes, listed ETFs, or third-party partner indexes and ETFs. PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 In addition, a basket composition file, which includes the security names, amounts and share quantities, as applicable, required to be delivered in exchange for the Fund’s Shares, together with estimates and actual cash components, will be publicly disseminated daily prior to the opening of Nasdaq via NSCC. The basket will represent one Creation Unit of the Fund. Investors will also be able to obtain the Fund’s Statement of Additional Information (‘‘SAI’’), the Fund’s annual and semi-annual reports (together, ‘‘Shareholder Reports’’), and its Form N–CSR and Form N–SAR, filed twice a year. The Fund’s SAI and Shareholder Reports will be available free upon request from the Fund, and those documents and the Form N–CSR and Form N–SAR may be viewed on-screen or downloaded from the Commission’s Web site at www.sec.gov. Information regarding market price and volume of the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Quotation and last sale information for the Shares will be available via Nasdaq proprietary quote and trade services, as well as in accordance with the Unlisted Trading Privileges and the Consolidated Tape Association plans for the Shares and any underlying exchange-traded products. Additional information regarding the Fund and the Shares, including investment strategies, risks, creation and redemption procedures, fees, Fund holdings disclosure policies, distributions and taxes 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. Initial and Continued Listing. The Shares will be subject to Rule 5735, which sets forth the initial and continued listing criteria applicable to Managed Fund Shares. The Exchange represents that, for initial and/or continued listing, the Fund must be in compliance with Rule 10A–3 18 under the Act. A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange. The Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and 18 See E:\FR\FM\26SEN1.SGM 17 CFR 240.10A–3. 26SEN1 Federal Register / Vol. 78, No. 187 / Thursday, September 26, 2013 / Notices the Disclosed Portfolio will be made available to all market participants at the same time. Trading Halts and Trading Pauses With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund. Nasdaq will halt or pause trading in the Shares under the conditions specified in Nasdaq Rules 4120 and 4121, including the trading pauses under Nasdaq Rules 4120(a)(11) and (12). Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities and/or the financial instruments constituting the Disclosed Portfolio of the Fund; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. Trading in the Shares also will be subject to Rule 5735(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. tkelley on DSK3SPTVN1PROD with NOTICES Trading Rules Nasdaq deems the Shares to be equity securities, thus rendering trading in the Shares subject to Nasdaq’s existing rules governing the trading of equity securities. Nasdaq will allow trading in the Shares from 4:00 a.m. until 8:00 p.m. Eastern time. The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in Nasdaq Rule 5735(b)(3), the minimum price variation for quoting and entry of orders in Managed Fund Shares traded on the Exchange is $0.01. Surveillance The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by both Nasdaq and also 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.19 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 19 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. VerDate Mar<15>2010 18:19 Sep 25, 2013 Jkt 229001 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, in the equity securities in which the Fund will invest, and in the U.S. exchange-traded options which the Fund will buy and write with other markets and other entities that are members of the ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.20 FINRA may obtain trading information regarding trading in the Shares and in such equity securities and U.S. exchange-traded options from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares and in such equity securities and U.S. exchange-traded options from markets and other entities that are members of the ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. Information Circular Prior to the commencement of trading, the Exchange will inform its members in an Information Circular of the special characteristics and risks associated with trading the Shares. Specifically, the Information Circular will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (2) Nasdaq Rule 2111A, which imposes suitability obligations on Nasdaq members with respect to recommending transactions in the Shares to customers; (3) how information regarding the Intraday Indicative Value is disseminated; (4) the risks involved in trading the Shares during the Pre-Market and Post-Market Sessions when an updated Intraday Indicative Value will not be calculated or publicly disseminated; (5) the requirement that members deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information. 20 For a list of the current members of ISG, see www.isgportal.org. PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 59399 In addition, the Information Circular will advise members, prior to the commencement of trading, of the prospectus delivery requirements applicable to the Fund. Members purchasing Shares from the Fund for resale to investors will deliver a prospectus to such investors. The Information Circular will also discuss any exemptive, no-action and interpretive relief granted by the Commission from any rules under the Act. Additionally, the Information Circular will reference that the Fund is subject to various fees and expenses described in the Registration Statement. The Information Circular will also disclose the trading hours of the Shares of the Fund and the applicable NAV Calculation Time for the Shares. The Information Circular will disclose that information about the Shares of the Fund will be publicly available on the Distributor’s Web site. 2. Statutory Basis Nasdaq believes that the proposal is consistent with Section 6(b) of the Act 21 in general and Section 6(b)(5) of the Act 22 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in Nasdaq Rule 5735. The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of the Shares on Nasdaq during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws. The equity securities in which the Fund may invest and the options which the Fund may buy and write will be limited to U.S. exchange-traded securities and options, respectively, that trade in markets that are members of the ISG, which includes all U.S. national securities exchanges and certain foreign exchanges, or are parties to a comprehensive surveillance sharing agreement with the Exchange. The Exchange may obtain information via 21 22 15 U.S.C. 78f. 15 U.S.C. 78f(b)(5). E:\FR\FM\26SEN1.SGM 26SEN1 tkelley on DSK3SPTVN1PROD with NOTICES 59400 Federal Register / Vol. 78, No. 187 / Thursday, September 26, 2013 / Notices ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. Under normal circumstances, the Fund will invest primarily in large-cap U.S. exchange-traded equity securities. The Fund will also utilize an option strategy consisting of buying U.S. exchange-traded put options on the Index and writing U.S. exchange-traded covered call options on the Index. The market value of the option strategy may be up to 20% of the Fund’s overall net asset value. In addition to such option strategy, the Fund may invest no more than 10% of the market value of its net assets in futures, options, options on futures, total return swaps, credit default swaps and forward contracts. In attempting to enhance returns and/or hedge risks, the Fund may buy and write U.S. exchange-traded options on single stocks included in the portfolio and/or on the Index and/or other equity indexes. The Fund may also write covered call spreads on the Index and/ or other equity indexes. The Fund may hold up to an aggregate amount of 15% of its net assets in illiquid securities (calculated at the time of investment). 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. 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 Fund’s portfolio. In addition, paragraph (g) of Nasdaq Rule 5735 further requires that personnel who make decisions on the open-end fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material non-public information regarding the open-end fund’s portfolio. The Fund’s investments will be consistent with the Fund’s investment objective and will not be used to enhance leverage. VerDate Mar<15>2010 18:19 Sep 25, 2013 Jkt 229001 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. The Intraday Indicative Value, available on the NASDAQ OMX Information LLC proprietary index data service, will be widely disseminated by one or more major market data vendors and broadly displayed at least every 15 seconds during the Regular Market Session. On each business day, before commencement of trading in Shares in the Regular Market Session on the Exchange, the Fund will disclose on the Distributor’s Web site the Disclosed Portfolio that will form the basis for the Fund’s calculation of NAV at the end of the business day. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services, and quotation and last sale information for the Shares will also be available via Nasdaq proprietary quote and trade services, as well as in accordance with the Unlisted Trading Privileges and the Consolidated Tape Association plans for the Shares and any underlying exchange-traded products. Intra-day, executable price quotations of the securities and other assets held by the Fund will be available from major broker-dealer firms or on the exchange on which they are traded, if applicable. Intra-day price information will also be available through subscription services, such as Bloomberg, Markit and Thomson Reuters, which can be accessed by Authorized Participants and other investors. The Distributor’s 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. Trading in Shares of the Fund will be halted or paused under the conditions specified in Nasdaq Rules 4120 and 4121, including the trading pauses under Nasdaq Rules 4120(a)(11) and (12). Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable, and trading in the Shares will be subject to Nasdaq PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 Rule 5735(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the Intraday Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of an additional type of 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 Intraday Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares. For the above reasons, Nasdaq believes the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed rule change will facilitate the listing and trading of an additional type of activelymanaged exchange-traded fund that will enhance competition among market participants, to the benefit of investors and the marketplace. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 78, No. 187 / Thursday, September 26, 2013 / Notices (ii) as to which the Exchange consents, the Commission shall: (a) By order approve or disapprove such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: submitted on or before October 17, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–23420 Filed 9–25–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–70464; File No. SR–ICEEU– 2013–11] • 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– NASDAQ–2013–121 on the subject line. Self-Regulatory Organizations; ICE Clear Europe Limited; Order Approving Proposed Rule Change Related To Enhanced Margin and Guaranty Fund Methodology September 20, 2013. tkelley on DSK3SPTVN1PROD with NOTICES Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2013–121. 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NASDAQ–2013–121, and should be VerDate Mar<15>2010 18:19 Sep 25, 2013 Jkt 229001 I. Introduction On August 14, 2013, ICE Clear Europe Limited (‘‘ICE Clear Europe’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change SR–ICEEU–2013– 11 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder.2 The proposed rule change was published for comment in the Federal Register on August 20, 2013.3 The Commission did not receive any comments on the proposed rule change. This order approves the proposed rule change. II. Description of the Proposed Rule Change ICE Clear Europe proposes to adopt changes to its enhanced margin and guaranty fund methodology (‘‘Decomp Model’’) for cleared credit default swaps (‘‘CDS’) that address the additional risk arising from the fact that certain cleared index CDS contracts include as reference entities Clearing Members or affiliates of Clearing Members (‘‘selfreferencing CDS’’) (such additional risk is hereinafter referred to as ‘‘Specific Wrong-Way Risk’’). ICE Clear Europe also proposes to adopt changes to the liquidation period used in determining the initial margin requirement for customer CDS positions. ICE Clear Europe has developed its Decomp Model, as previously approved by the 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Securities Exchange Act Release No. 34–70201 (Aug. 14, 2013), 78 FR 51248 (Aug. 20, 2013) (SR– ICEEU–2013–11). 59401 Commission,4 to permit appropriate portfolio margining between related index and single-name CDS positions by recognizing that index CDS instruments are, for risk management purposes, essentially a composition of specific single-name CDS. In anticipation of the launch of customer clearing in CDS, and in furtherance of the ongoing European regulatory reform program designed to improve the safety and soundness of the European derivatives markets, ICE Clear Europe proposes to adopt certain enhancements to the Decomp Model to address Specific Wrong-Way Risk. Although ICE Clear Europe does not permit a Clearing Member to enter into or maintain a single-name CDS referencing itself or an affiliate, a selfreferencing CDS position may arise through an index CDS where the Clearing Member or an affiliate is a component of the index. Under the enhancements to the Decomp Model, ICE Clear Europe will require an additional contribution to the CDS Guaranty Fund from those Clearing Members that present Specific WrongWay Risk, up to a defined threshold. The additional guaranty fund contribution amount is calculated based on the highest uncollateralized lossgiven-default exposure arising from any of the self-referencing CDS positions of Clearing Members. In addition, each such Clearing Member will be required to provide additional initial margin to collateralize any Specific Wrong-Way Risk presented by its positions in excess of the defined threshold. The proposed amendments also would enhance the CDS Guaranty Fund calculation methodology to cover the uncollateralized losses that would result from up to five single names—including two Clearing Members and three other single names—that would cause the greatest losses upon default. Consequently, the proposed amendments to the guaranty fund calculation account for the potential increased amount of uncollateralized loss in cases where the Clearing Members are reference entities in cleared index CDS contracts. Additionally, ICE Clear Europe proposes to change the liquidation period for calculation of initial margin for customer CDS positions. Currently, the Decomp Model provides portfolio risk coverage against at least 5-day market realizations. ICE Clear Europe intends to facilitate porting of client 23 1 15 PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 4 See Order Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to Enhanced Margin Methodology, Securities Exchange Act Release No. 34–68955 (Feb. 20, 2013), 78 FR 13130 (Feb. 26, 2013) (SR–ICEEU–2012–11). E:\FR\FM\26SEN1.SGM 26SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 78, Number 187 (Thursday, September 26, 2013)]
[Notices]
[Pages 59394-59401]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-23420]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70459; File No. SR-NASDAQ-2013-121]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change Relating to the Listing and
Trading of the Shares of the First Trust Low Beta Income Fund of First
Trust Exchange-Traded Fund VI

September 20, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 12, 2013, The NASDAQ Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in in Items I,
II, and III below, which Items have been prepared by Nasdaq. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

Nasdaq proposes to list and trade the shares of the First Trust Low
Beta Income ETF (the ``Fund'') of First Trust Exchange-Traded Fund VI
(the ``Trust'') under Nasdaq Rule 5735 (``Managed Fund Shares'').\3\
The shares of the Fund are collectively referred to herein as the
``Shares.''
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\3\ The Commission approved Nasdaq Rule 5735 in Securities
Exchange Act Release No. 57962 (June 13, 2008) 73 FR 35175 (June 20,
2008) (SR-NASDAQ-2008-039). There are already multiple actively-
managed funds listed on the Exchange; see Securities Exchange Act
Release No. 66175 (February 29, 2012), 77 FR 13379 (March 6, 2012)
(SR-NASDAQ-2012-004) (order approving listing and trading of
WisdomTree Emerging Markets Corporate Bond Fund). Additionally, the
Commission has previously approved the listing and trading of a
number of actively-managed WisdomTree funds on NYSE Arca, Inc.
pursuant to Rule 8.600 of that exchange. See, e.g., Securities
Exchange Act Release No. 64643 (June 10, 2011), 76 FR 35062 (June
15, 2011) (SR-NYSEArca-2011-21) (order approving listing and trading
of WisdomTree Global Real Return Fund). The Exchange believes the
proposed rule change raises no significant issues not previously
addressed in those prior Commission orders.
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The text of the proposed rule change is available at https://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, and at the
Commission's Public Reference Room.

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

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

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

1. Purpose
The Exchange proposes to list and trade the Shares of the Fund
under Nasdaq Rule 5735, which governs the listing and trading of
Managed Fund Shares \4\ on the Exchange. The Fund will be an actively-
managed exchange-traded fund (``ETF''). The Shares will be offered by
the Trust, which was established as a Massachusetts business trust on
June 4, 2012.\5\ The Trust is registered with the Commission as an
investment company and has filed a registration statement on Form N-1A
(``Registration Statement'') with the Commission.\6\ The Fund is a
series of the Trust.
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\4\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (the ``1940 Act'') organized
as an open-end investment company or similar entity that invests in
a portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Index Fund Shares, listed
and traded on the Exchange under Nasdaq Rule 5705, seeks to provide
investment results that correspond generally to the price and yield
performance of a specific foreign or domestic stock index, fixed
income securities index or combination thereof.
\5\ The Commission has issued an order, upon which the Trust may
rely, granting certain exemptive relief under the 1940 Act. See
Investment Company Act Release No. 28468 (October 27, 2008) (File
No. 812-13477).
\6\ See Post-Effective Amendment No. 4 to Registration Statement
on Form N-1A for the Trust, dated January 16, 2013 (File Nos. 333-
182308 and 811-22717). The descriptions of the Fund and the Shares
contained herein are based, in part, on information in the
Registration Statement.
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First Trust Advisors L.P. will be the investment adviser
(``Adviser'') to the

[[Page 59395]]

Fund. First Trust Portfolios L.P. (the ``Distributor'') will be the
principal underwriter and distributor of the Fund's Shares. Brown
Brothers Harriman & Co. (``BBH'') will act as the administrator,
accounting agent, custodian and transfer agent to the Fund.
Paragraph (g) of Rule 5735 provides that if the investment adviser
to the investment company issuing Managed Fund Shares is affiliated
with a broker-dealer, such investment adviser shall erect a ``fire
wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such investment company portfolio.\7\ In addition, paragraph
(g) further requires that personnel who make decisions on the open-end
fund's portfolio composition must be subject to procedures designed to
prevent the use and dissemination of material, non-public information
regarding the open-end fund's portfolio. Rule 5735(g) is similar to
Nasdaq Rule 5705(b)(5)(A)(i); however, paragraph (g) in connection with
the establishment of a ``fire wall'' between the investment adviser and
the broker-dealer reflects the applicable open-end fund's portfolio,
not an underlying benchmark index, as is the case with index-based
funds. The Adviser is not a broker-dealer, although it is affiliated
with the Distributor, a broker-dealer. The Adviser has implemented a
fire wall with respect to its broker-dealer affiliate regarding access
to information concerning the composition and/or changes to the
portfolio. In the event (a) the Adviser becomes newly affiliated with a
broker-dealer, or (b) any new adviser or sub-adviser is a registered
broker-dealer or becomes affiliated with a broker-dealer, it will
implement a fire wall with respect to its relevant personnel and/or
such broker-dealer affiliate, as applicable, regarding access to
information concerning the composition and/or changes to the portfolio
and will be subject to procedures designed to prevent the use and
dissemination of material non-public information regarding such
portfolio. The Fund does not currently intend to use a sub-adviser.
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\7\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser and its related personnel are
subject to the provisions of Rule 204A-1 under the Advisers Act
relating to codes of ethics. This Rule requires investment advisers
to adopt a code of ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with other applicable
securities laws. Accordingly, procedures designed to prevent the
communication and misuse of non-public information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless such investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violation, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
---------------------------------------------------------------------------

First Trust Low Beta Income ETF
Principal Investments
The Fund's investment objective is to provide current income. The
Fund will pursue its objective by investing in large-cap U.S. exchange-
traded equity securities and by utilizing an ``option strategy''
consisting of buying U.S. exchange-traded put options on the Standard &
Poor's 500 Index (the ``Index'') and writing (selling) U.S. exchange-
traded covered call options on the Index.
In pursuing its investment objective, under normal market
conditions,\8\ the Fund will invest primarily in large-cap U.S.
exchange-traded equity securities. The Fund will also employ an option
strategy in which it will write U.S. exchange-traded covered call
options on the Index in order to seek additional cash flow in the form
of premiums on the options. Those premiums may be distributed to
shareholders on a monthly basis or used to purchase U.S. exchange-
traded put options on the Index that seek to provide the Fund with
downside protection and which are expected to reduce the Fund's price
sensitivity to declining markets. The market value of the option
strategy may be up to 20% of the Fund's overall net asset value.
---------------------------------------------------------------------------

\8\ The term ``under normal market conditions'' as used herein
includes, but is not limited to, the absence of adverse market,
economic, political or other conditions, including extreme
volatility or trading halts in the securities markets or the
financial markets generally; operational issues causing
dissemination of inaccurate market information; or force majeure
type events such as systems failure, natural or man-made disaster,
act of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance. In periods of
extreme market disturbance, the Fund may take temporary defensive
positions, by overweighting its portfolio in cash/cash-like
instruments; however, to the extent possible, the Adviser would
continue to seek to achieve the Fund's investment objective.
---------------------------------------------------------------------------

The equity securities in which the Fund will invest and the options
which the Fund will buy and write will be limited to U.S. exchange-
traded securities and options, respectively, that trade in markets that
are members of the Intermarket Surveillance Group (``ISG''), which
includes all U.S. national securities exchanges and certain foreign
exchanges, or are parties to a comprehensive surveillance sharing
agreement with the Exchange. A list of ISG members is available at
www.isgportal.org.
The equity securities held by the Fund will be selected using a
mathematical optimization process which attempts to tilt the Fund's
common stock portfolio toward higher dividend paying stocks. The equity
securities held by the Fund may include non-U.S. securities that are
listed on a U.S. securities exchange in the form of American Depositary
Receipts (``ADRs'') and Global Depositary Receipts (``GDRs'')
(collectively ``Depositary Receipts''). The equity securities will be
periodically rebalanced.
The option portion of the portfolio will generally consist of (i)
U.S. exchange-traded covered calls or covered call spreads on the Index
that are written by the Fund and (ii) U.S. exchange-traded puts on the
Index that are bought by the Fund. The call options written by the Fund
will typically be a laddered portfolio of one-week, one-month, two-
month and three-month call options written at-the-money to slightly
out-of-the-money. A call option will give the holder the right to buy
the Index at a predetermined strike price from the Fund. The notional
value of calls written (including calls and call spreads on the Index
and/or other indexes as described in Other Investments below) will be
generally between 25% and 75% of the overall Fund.
The put positions held by the Fund will generally average two to
three months to expiration (calculated at the time of purchase) and
will consist of out-of-the-money Index put options. A put option will
give the Fund the right to sell the Index at a predetermined strike
price to the writer of the put. The notional value of the put portfolio
(including puts written on the Index and/or other indexes as described
in Other Investments below) will be generally between 10% and 75% of
the overall Fund.
Other Investments
In addition to the option strategy described in Principal
Investments, the Fund may invest up to 10% of the market value of its
net assets in futures, options, options on futures, total return swaps,
credit default swaps \9\ and

[[Page 59396]]

forward contracts. The Fund may utilize such derivatives to enhance
return, to hedge some of the risks of its investments in securities, as
a substitute for a position in the underlying asset, to reduce
transaction costs, to maintain full market exposure (which means to
adjust the characteristics of its investments to more closely
approximate those of the markets in which it invests), to manage cash
flows or to preserve capital. In attempting to enhance returns and/or
hedge risks, the Fund may buy and write U.S. exchange-traded options on
single stocks included in the portfolio and/or on the Index and/or
other equity indexes. The Fund may also write covered call spreads on
the Index and/or other equity indexes.
---------------------------------------------------------------------------

\9\ To the extent practicable, the Fund will invest in swaps
cleared through the facilities of a centralized clearing house.
---------------------------------------------------------------------------

Under normal market conditions, the Fund may invest up to 10% of
its net assets in short-term debt securities and cash equivalents, or
it may hold cash. The percentage of the Fund invested in such holdings
will vary and will depend on several factors, including market
conditions. For temporary defensive purposes and during periods of high
cash inflows or outflows, the Fund may depart from its principal
investment strategies and invest part or all of its assets in short-
term debt securities or cash equivalents or it may hold cash. During
such periods, the Fund may not be able to achieve its investment
objective. The Fund may adopt a defensive strategy when the Adviser
believes securities in which the Fund normally invests have elevated
risks due to political or economic factors and in other extraordinary
circumstances.
Short-term debt securities are securities from issuers having a
long-term debt rating of at least A by Standard & Poor's Ratings Group
(``S&P Ratings''), Moody's Investors Service, Inc. (``Moody's'') or
Fitch, Inc. (``Fitch'') and having a maturity of one year or less. The
use of temporary investments will not be a part of a principal
investment strategy of the Fund.
Short-term debt securities are defined to include, without
limitation, the following: (1) U.S. government securities, including
bills, notes and bonds differing as to maturity and rates of interest,
which are either issued or guaranteed by the U.S. Treasury or by U.S.
government agencies or instrumentalities; (2) certificates of deposit
issued against funds deposited in a bank or savings and loan
association; (3) bankers' acceptances, which are short-term credit
instruments used to finance commercial transactions; (4) repurchase
agreements,\10\ which involve purchases of debt securities; (5) 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; and (6) commercial paper, which is short-term unsecured
promissory notes. The Fund may only invest in commercial paper rated A-
1 or higher by S&P Ratings, Prime-1 or higher by Moody's or F2 or
higher by Fitch.
---------------------------------------------------------------------------

\10\ According to the Registration Statement, the Fund intends
to enter into repurchase agreements only with financial institutions
and dealers believed by the Adviser to present minimal credit risks
in accordance with criteria approved by the Board of Trustees of the
Trust (``Trust Board''). The Adviser will review and monitor the
creditworthiness of such institutions. The Adviser will monitor the
value of the collateral at the time the transaction is entered into
and at all times during the term of the repurchase agreement.
---------------------------------------------------------------------------

The Fund intends to qualify each year as a regulated investment
company (``RIC'') under Subchapter M of the Internal Revenue Code of
1986, as amended.
The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment).
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. The Fund may not invest 25%
or more of the value of its total assets in securities of issuers in
any one industry or group of industries. This restriction does not
apply to obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities, or securities of other investment
companies.\11\
---------------------------------------------------------------------------

\11\ 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's investments will be consistent with the Fund's
investment objective and will not be used to enhance leverage.
The Shares
The Fund will issue and redeem Shares only in Creation Units at the
net asset value (``NAV'') \12\ next determined after receipt of an
order on a continuous basis every day except weekends and specified
holidays. The NAV of the Fund will be determined once each business
day, normally as of the close of trading of the NYSE, generally, 4:00
p.m. Eastern Time. Creation Unit sizes will be 50,000 Shares per
Creation Unit. The Trust will issue and sell Shares of the Fund only in
Creation Units on a continuous basis through the Distributor, without a
sales load (but subject to transaction fees), at their NAV per Share
next determined after receipt of an order, on any business day, in
proper form pursuant to the terms of the Authorized Participant
agreement (as referred to below).
---------------------------------------------------------------------------

\12\ The NAV of the Fund's Shares generally will be calculated
once daily Monday through Friday as of the close of regular trading
on the New York Stock Exchange (``NYSE''), generally 4:00 p.m.
Eastern time (the ``NAV Calculation Time''). NAV per Share will be
calculated by dividing the Fund's net assets by the number of Fund
Shares outstanding. For more information regarding the valuation of
Fund investments in calculating the Fund's NAV, see Registration
Statement.
---------------------------------------------------------------------------

The consideration for purchase of a Creation Unit generally will
consist of either (i) the in-kind deposit of a designated portfolio of
securities (the ``Deposit Securities'') per each Creation Unit and the
Cash Component (defined below), computed as described below or (ii) the
cash value of all or a portion of the Deposit Securities (``Deposit
Cash'') and the ``Cash Component,'' computed as described below. The
Fund may, under certain circumstances, effect a portion of creations
and redemptions for cash, rather than in-kind securities, particularly
for the put and call options in which the Fund invests.
When accepting purchases of Creation Units for cash, the Fund may
incur additional costs associated with the acquisition of Deposit
Securities that would otherwise be provided by an in-kind purchaser.
Together, the Deposit Securities or Deposit Cash, as applicable, and
the Cash Component will constitute the ``Fund Deposit,'' which
represents the minimum initial and subsequent investment amount for a
Creation Unit of the Fund. The ``Cash Component'' will be an amount
equal to the difference between the NAV of the Shares (per Creation
Unit) and the market value of the Deposit Securities or Deposit Cash,
as applicable. If the Cash Component is a positive number (i.e., the
NAV per Creation Unit exceeds the market value of the Deposit
Securities or Deposit Cash, as applicable), the Cash Component will be
such positive amount. If the Cash Component is a negative number (i.e.,
the NAV per Creation Unit is less than the market

[[Page 59397]]

value of the Deposit Securities or Deposit Cash, as applicable), the
Cash Component will be such negative amount and the creator will be
entitled to receive cash in an amount equal to the Cash Component. The
Cash Component will serve the function of compensating for any
difference between the NAV per Creation Unit and the market value of
the Deposit Securities or Deposit Cash, as applicable.
To be eligible to place orders with respect to creations and
redemptions of Creation Units, an entity must be (i) a ``Participating
Party,'' i.e., a broker-dealer or other participant in the clearing
process through the Continuous Net Settlement System of the National
Securities Clearing Corporation (``NSCC'') or (ii) a Depository Trust
Company (``DTC'') Participant (a ``DTC Participant''). In addition,
each Participating Party or DTC Participant (each, an ``Authorized
Participant'') must execute an agreement that has been agreed to by the
Distributor and BBH with respect to purchases and redemptions of
Creation Units.
BBH, through the NSCC, will make available on each business day,
immediately prior to the opening of business on the Exchange's Regular
Market Session (currently 9:30 a.m. Eastern time), the list of the
names and the required number of shares of each Deposit Security and/or
the required amount of Deposit Cash, as applicable, to be included in
the current Fund Deposit (based on information at the end of the
previous business day) for the Fund. Such Fund Deposit, subject to any
relevant adjustments, will be applicable in order to effect purchases
of Creation Units of the Fund until such time as the next announced
composition of the Deposit Securities and/or the required amount of
Deposit Cash, as applicable, is made available.
Shares may be redeemed only in Creation Units at their NAV next
determined after receipt of a redemption request in proper form by the
Fund through BBH and only on a business day.
With respect to the Fund, BBH, through the NSCC, will make
available immediately prior to the opening of business on the Exchange
(9:30 a.m. Eastern time) on each business day, the list of the names
and share quantities of the Fund's portfolio securities (``Fund
Securities'') and/or, if relevant, the required cash value thereof that
will be applicable (subject to possible amendment or correction) to
redemption requests received in proper form on that day. Fund
Securities received on redemption may not be identical to Deposit
Securities.
Redemption proceeds for a Creation Unit will be paid either in kind
or in cash or a combination thereof, as determined by the Trust. With
respect to in kind redemptions of the Fund, redemption proceeds for a
Creation Unit will consist of Fund Securities as announced by BBH on
the business day of the request for redemption received in proper form
plus cash in an amount equal to the difference between the NAV of the
Shares being redeemed, as next determined after a receipt of a request
in proper form, and the value of the Fund Securities (the ``Cash
Redemption Amount''), less a fixed redemption transaction fee and any
applicable additional variable charge as set forth in the Registration
Statement. In the event that the Fund Securities have a value greater
than the NAV of the Shares, a compensating cash payment equal to the
differential will be required to be made by or through an Authorized
Participant by the redeeming shareholder. Notwithstanding the
foregoing, at the Trust's discretion, an Authorized Participant may
receive the corresponding cash value of the securities in lieu of one
or more Fund Securities.
The creation/redemption order cut off time for the Fund is expected
to be 4:00 p.m. Eastern time for purchases of Shares. On days when the
Exchange closes earlier than normal and in the case of custom orders,
the Fund may require orders for Creation Units to be placed earlier in
the day.
Net Asset Value
The NAV per Share for the Fund will be computed by dividing the
value of the net assets of the Fund (i.e., the value of its total
assets less total liabilities) by the total number of Shares
outstanding, rounded to the nearest cent. Expenses and fees, including
the management fees, will be accrued daily and taken into account for
purposes of determining NAV. The NAV of the Fund will be calculated by
BBH and determined at the close of the regular trading session on the
NYSE (ordinarily 4:00 p.m. Eastern time) on each day that such exchange
is open. In calculating the Fund's NAV per Share, investments will
generally be valued by using market valuations. A market valuation
generally means a valuation (i) obtained from an exchange, a pricing
service, or a major market maker (or dealer) or (ii) based on a price
quotation or other equivalent indication of value supplied by an
exchange, a pricing service, or a major market maker (or dealer).
Portfolio securities listed on any exchange other than the Exchange
will be valued at the last sale price on the business day as of which
such value is being determined. Securities listed on the Exchange will
be valued at the official closing price on the business day as of which
such value is being determined. If there has been no sale on such day,
or no official closing price in the case of securities traded on the
Exchange, the securities will be valued at the mean of the most recent
bid and ask prices on such day. 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.
U.S. exchange-traded options and futures contracts will be valued
at the closing price in the market where such contracts are principally
traded. Credit default swaps will be valued using a pricing service or,
if the pricing service does not provide a value, the Adviser's Pricing
Committee will attempt to obtain one or more quotes provided by the
selling dealer or financial institution and will value the swaps
accordingly. Except as otherwise provided herein, portfolio instruments
traded in the over-the-counter market will be valued at their closing
bid prices.
The Adviser may use various pricing services, or discontinue the
use of any pricing service, as approved by the Trust Board from time to
time. A price obtained from a pricing service based on such pricing
service's valuation matrix may be considered a market valuation. Any
assets or liabilities denominated in currencies other than the U.S.
dollar will be converted into U.S. dollars at the current market rates
on the date of valuation as quoted by one or more sources.
In the event that current market valuations are not readily
available or such valuations do not reflect current market value, the
Trust's procedures require the Adviser's Pricing Committee to determine
a security's fair value if a market price is not readily available.\13\

[[Page 59398]]

In determining such value the Adviser's Pricing Committee may consider,
among other things, (i) price comparisons among multiple sources, (ii)
a review of corporate actions and news events, and (iii) a review of
relevant financial indicators. In these cases, the Fund's NAV may
reflect certain portfolio securities' fair values rather than their
market prices. Fair value pricing involves subjective judgments and it
is possible that the fair value determination for a security is
materially different than the value that could be realized upon the
sale of the security.
---------------------------------------------------------------------------

\13\ The Valuation Committee of the Trust Board will be
responsible for the oversight of the pricing procedures of the Fund
and the valuation of the Fund's portfolio. The Valuation Committee
has delegated day-to-day pricing responsibilities to the Adviser's
Pricing Committee, which will be composed of officers of the
Adviser. The Pricing Committee will be responsible for the valuation
and revaluation of any portfolio investments for which market
quotations or prices are not readily available. The Fund has
implemented procedures designed to prevent the use and dissemination
of material, non-public information regarding valuation and
revaluation of any portfolio investments.
---------------------------------------------------------------------------

Availability of Information
The Distributor's Web site (www.ftportfolios.com), which will be
publicly available prior to the public offering of Shares, will include
a form of the prospectus for the Fund that may be downloaded. The Web
site will include additional quantitative information updated on a
daily basis, including, for the Fund: (1) The prior business day's
reported NAV, mid-point of the bid/ask spread at the time of
calculation of such NAV (the ``Bid/Ask Price''),\14\ and a calculation
of the premium and discount of the Bid/Ask Price against the NAV; and
(2) data in chart format displaying the frequency distribution of
discounts and premiums of the daily Bid/Ask Price against the NAV,
within appropriate ranges, for each of the four previous calendar
quarters. On each business day, before commencement of trading in
Shares in the Regular Market Session \15\ on the Exchange, the Fund
will disclose on its Web site the identities and quantities of the
portfolio of securities and other assets (the ``Disclosed Portfolio'')
held by the Fund that will form the basis for the Fund's calculation of
NAV at the end of the business day.\16\ On a daily basis, the Disclosed
Portfolio will include each portfolio security and other financial
instruments of the Fund with the following information on the Fund's
Web site: Ticker symbol (if applicable), name of security and financial
instrument, number of shares (if applicable) and dollar value of
securities and financial instruments held in the Fund, and percentage
weighting of the security and financial instrument in the Fund. The Web
site information will be publicly available at no charge.
---------------------------------------------------------------------------

\14\ The Bid/Ask Price of the Fund will be determined using the
midpoint of the highest bid and the lowest offer on the Exchange as
of the time of calculation of such Fund's NAV. The records relating
to Bid/Ask Prices will be retained by the Fund and its service
providers.
\15\ See Nasdaq Rule 4120(b)(4) (describing the three trading
sessions on the Exchange: (1) Pre-Market Session from 4 a.m. to 9:30
a.m. Eastern time; (2) Regular Market Session from 9:30 a.m. to 4
p.m. or 4:15 p.m. Eastern time; and (3) Post-Market Session from 4
p.m. or 4:15 p.m. to 8 p.m. Eastern time).
\16\ Under accounting procedures to be followed by the Fund,
trades made on the prior business day (``T'') will be booked and
reflected in NAV on the current business day (``T + 1'').
Notwithstanding the foregoing, portfolio trades that are executed
prior to the opening of the Exchange on any business day may be
booked and reflected in NAV on such business day. Accordingly, the
Fund will be able to disclose at the beginning of the business day
the portfolio that will form the basis for the NAV calculation at
the end of the business day.
---------------------------------------------------------------------------

In addition, for the Fund, an estimated value, defined in Rule
5735(c)(3) as the ``Intraday Indicative Value,'' that reflects an
estimated intraday value of the Fund's portfolio, will be disseminated.
Moreover, the Intraday Indicative Value, available on the NASDAQ OMX
Information LLC proprietary index data service,\17\ will be based upon
the current value for the components of the Disclosed Portfolio and
will be updated and widely disseminated and broadly displayed at least
every 15 seconds during the Regular Market Session. The Intraday
Indicative Value will be based on quotes and closing prices from the
securities' local market and may not reflect events that occur
subsequent to the local market's close. Premiums and discounts between
the Intraday Indicative Value and the market price may occur. This
should not be viewed as a ``real time'' update of the NAV per Share of
the Fund, which is calculated only once a day.
---------------------------------------------------------------------------

\17\ Currently, the NASDAQ OMX Global Index Data Service
(``GIDS'') is the NASDAQ OMX global index data feed service,
offering real-time updates, daily summary messages, and access to
widely followed indexes and Intraday Indicative Values for ETFs.
GIDS provides investment professionals with the daily information
needed to track or trade NASDAQ OMX indexes, listed ETFs, or third-
party partner indexes and ETFs.
---------------------------------------------------------------------------

The dissemination of the Intraday Indicative Value, together with
the Disclosed Portfolio, will allow investors to determine the value of
the underlying portfolio of the Fund on a daily basis and will provide
a close estimate of that value throughout the trading day.
Intra-day, executable price quotations on the securities and other
assets held by the Fund will be available from major broker-dealer
firms or on the exchange on which they are traded, as applicable.
Intra-day price information will also be available through subscription
services, such as Bloomberg, Markit and Thomson Reuters, which can be
accessed by Authorized Participants and other investors.
In addition, a basket composition file, which includes the security
names, amounts and share quantities, as applicable, required to be
delivered in exchange for the Fund's Shares, together with estimates
and actual cash components, will be publicly disseminated daily prior
to the opening of Nasdaq via NSCC. The basket will represent one
Creation Unit of the Fund.
Investors will also be able to obtain the Fund's Statement of
Additional Information (``SAI''), the Fund's annual and semi-annual
reports (together, ``Shareholder Reports''), and its Form N-CSR and
Form N-SAR, filed twice a year. The Fund's SAI and Shareholder Reports
will be available free upon request from the Fund, and those documents
and the Form N-CSR and Form N-SAR may be viewed on-screen or downloaded
from the Commission's Web site at www.sec.gov. Information regarding
market price and volume of the Shares will be continually available on
a real-time basis throughout the day on brokers' computer screens and
other electronic services. Information regarding the previous day's
closing price and trading volume information for the Shares will be
published daily in the financial section of newspapers. Quotation and
last sale information for the Shares will be available via Nasdaq
proprietary quote and trade services, as well as in accordance with the
Unlisted Trading Privileges and the Consolidated Tape Association plans
for the Shares and any underlying exchange-traded products.
Additional information regarding the Fund and the Shares, including
investment strategies, risks, creation and redemption procedures, fees,
Fund holdings disclosure policies, distributions and taxes 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.
Initial and Continued Listing.
The Shares will be subject to Rule 5735, which sets forth the
initial and continued listing criteria applicable to Managed Fund
Shares. The Exchange represents that, for initial and/or continued
listing, the Fund must be in compliance with Rule 10A-3 \18\ under the
Act. A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange. The Exchange will obtain a
representation from the issuer of the Shares that the NAV per Share
will be calculated daily and that the NAV and

[[Page 59399]]

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

\18\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Trading Halts and Trading Pauses
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund. Nasdaq will halt or pause trading in
the Shares under the conditions specified in Nasdaq Rules 4120 and
4121, including the trading pauses under Nasdaq Rules 4120(a)(11) and
(12). Trading may be halted because of market conditions or for reasons
that, in the view of the Exchange, make trading in the Shares
inadvisable. These may include: (1) The extent to which trading is not
occurring in the securities and/or the financial instruments
constituting the Disclosed Portfolio of the Fund; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present. Trading in the Shares also will be
subject to Rule 5735(d)(2)(D), which sets forth circumstances under
which Shares of the Fund may be halted.
Trading Rules
Nasdaq deems the Shares to be equity securities, thus rendering
trading in the Shares subject to Nasdaq's existing rules governing the
trading of equity securities. Nasdaq will allow trading in the Shares
from 4:00 a.m. until 8:00 p.m. Eastern time. The Exchange has
appropriate rules to facilitate transactions in the Shares during all
trading sessions. As provided in Nasdaq Rule 5735(b)(3), the minimum
price variation for quoting and entry of orders in Managed Fund Shares
traded on the Exchange is $0.01.
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by both Nasdaq and
also 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.\19\ 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.
---------------------------------------------------------------------------

\19\ 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, in the equity securities in which the
Fund will invest, and in the U.S. exchange-traded options which the
Fund will buy and write with other markets and other entities that are
members of the ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.\20\ FINRA may obtain
trading information regarding trading in the Shares and in such equity
securities and U.S. exchange-traded options from such markets and other
entities. In addition, the Exchange may obtain information regarding
trading in the Shares and in such equity securities and U.S. exchange-
traded options from markets and other entities that are members of the
ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement. In addition, the Exchange also has a
general policy prohibiting the distribution of material, non-public
information by its employees.
---------------------------------------------------------------------------

\20\ For a list of the current members of ISG, see
www.isgportal.org.
---------------------------------------------------------------------------

Information Circular
Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares. Specifically, the Information
Circular will discuss the following: (1) The procedures for purchases
and redemptions of Shares in Creation Units (and that Shares are not
individually redeemable); (2) Nasdaq Rule 2111A, which imposes
suitability obligations on Nasdaq members with respect to recommending
transactions in the Shares to customers; (3) how information regarding
the Intraday Indicative Value is disseminated; (4) the risks involved
in trading the Shares during the Pre-Market and Post-Market Sessions
when an updated Intraday Indicative Value will not be calculated or
publicly disseminated; (5) the requirement that members deliver a
prospectus to investors purchasing newly issued Shares prior to or
concurrently with the confirmation of a transaction; and (6) trading
information.
In addition, the Information Circular will advise members, prior to
the commencement of trading, of the prospectus delivery requirements
applicable to the Fund. Members purchasing Shares from the Fund for
resale to investors will deliver a prospectus to such investors. The
Information Circular will also discuss any exemptive, no-action and
interpretive relief granted by the Commission from any rules under the
Act.
Additionally, the Information Circular will reference that the Fund
is subject to various fees and expenses described in the Registration
Statement. The Information Circular will also disclose the trading
hours of the Shares of the Fund and the applicable NAV Calculation Time
for the Shares. The Information Circular will disclose that information
about the Shares of the Fund will be publicly available on the
Distributor's Web site.
2. Statutory Basis
Nasdaq believes that the proposal is consistent with Section 6(b)
of the Act \21\ in general and Section 6(b)(5) of the Act \22\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
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\21\ 15 U.S.C. 78f.
\22\ 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 Nasdaq Rule 5735. The
Exchange believes that its surveillance procedures are adequate to
properly monitor the trading of the Shares on Nasdaq during all trading
sessions and to deter and detect violations of Exchange rules and the
applicable federal securities laws.
The equity securities in which the Fund may invest and the options
which the Fund may buy and write will be limited to U.S. exchange-
traded securities and options, respectively, that trade in markets that
are members of the ISG, which includes all U.S. national securities
exchanges and certain foreign exchanges, or are parties to a
comprehensive surveillance sharing agreement with the Exchange. The
Exchange may obtain information via

[[Page 59400]]

ISG from other exchanges that are members of ISG or with which the
Exchange has entered into a comprehensive surveillance sharing
agreement.
Under normal circumstances, the Fund will invest primarily in
large-cap U.S. exchange-traded equity securities. The Fund will also
utilize an option strategy consisting of buying U.S. exchange-traded
put options on the Index and writing U.S. exchange-traded covered call
options on the Index. The market value of the option strategy may be up
to 20% of the Fund's overall net asset value. In addition to such
option strategy, the Fund may invest no more than 10% of the market
value of its net assets in futures, options, options on futures, total
return swaps, credit default swaps and forward contracts. In attempting
to enhance returns and/or hedge risks, the Fund may buy and write U.S.
exchange-traded options on single stocks included in the portfolio and/
or on the Index and/or other equity indexes. The Fund may also write
covered call spreads on the Index and/or other equity indexes.
The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment).
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.
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 Fund's portfolio. In addition,
paragraph (g) of Nasdaq Rule 5735 further requires that personnel who
make decisions on the open-end fund's portfolio composition must be
subject to procedures designed to prevent the use and dissemination of
material non-public information regarding the open-end fund's
portfolio. The Fund's 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. The Intraday Indicative
Value, available on the NASDAQ OMX Information LLC proprietary index
data service, will be widely disseminated by one or more major market
data vendors and broadly displayed at least every 15 seconds during the
Regular Market Session. On each business day, before commencement of
trading in Shares in the Regular Market Session on the Exchange, the
Fund will disclose on the Distributor's Web site the Disclosed
Portfolio that will form the basis for the Fund's calculation of NAV at
the end of the business day. Information regarding market price and
trading volume of the Shares will be continually available on a real-
time basis throughout the day on brokers' computer screens and other
electronic services, and quotation and last sale information for the
Shares will also be available via Nasdaq proprietary quote and trade
services, as well as in accordance with the Unlisted Trading Privileges
and the Consolidated Tape Association plans for the Shares and any
underlying exchange-traded products. Intra-day, executable price
quotations of the securities and other assets held by the Fund will be
available from major broker-dealer firms or on the exchange on which
they are traded, if applicable. Intra-day price information will also
be available through subscription services, such as Bloomberg, Markit
and Thomson Reuters, which can be accessed by Authorized Participants
and other investors.
The Distributor's 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. Trading in Shares of the Fund will
be halted or paused under the conditions specified in Nasdaq Rules 4120
and 4121, including the trading pauses under Nasdaq Rules 4120(a)(11)
and (12). Trading may be halted because of market conditions or for
reasons that, in the view of the Exchange, make trading in the Shares
inadvisable, and trading in the Shares will be subject to Nasdaq Rule
5735(d)(2)(D), which sets forth circumstances under which Shares of the
Fund may be halted. In addition, as noted above, investors will have
ready access to information regarding the Fund's holdings, the Intraday
Indicative Value, the Disclosed Portfolio, and quotation and last sale
information for the Shares.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of actively-managed exchange-traded product that
will enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, 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 Intraday Indicative Value, the Disclosed Portfolio, and quotation
and last sale information for the Shares.
For the above reasons, Nasdaq believes the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act.

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

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

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

Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or

[[Page 59401]]

(ii) as to which the Exchange consents, the Commission shall: (a) By
order approve or disapprove such proposed rule change, or (b) institute
proceedings to determine whether the proposed rule change should be
disapproved.

IV. Solicitation of Comments

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

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2013-121 on the subject line.

Paper Comments

Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2013-121. 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 such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2013-121, and should
be submitted on or before October 17, 2013.
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\23\ 17 CFR 200.30-3(a)(12).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-23420 Filed 9-25-13; 8:45 am]
BILLING CODE 8011-01-P

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