Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to Listing and Trading Shares of First Trust Long/Short Equity ETF Under NYSE Arca Equities Rule 8.600, 33018-33024 [2014-13311]

Download as PDF 33018 Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) 10 of the Act and subparagraph (f)(2) of Rule 19b–4 11 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 12 of the Act to determine whether the proposed rule change should be approved or 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: ehiers on DSK2VPTVN1PROD with NOTICES 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– NYSE–2014–28 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSE–2014–28. 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 Section, 100 F Street NE., Washington, DC 20549–1090. Copies of the filing will also be available for Web site viewing and printing at the NYSE’s principal office and on its Internet Web site at www.nyse.com. 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–NYSE– 2014–28 and should be submitted on or before June 30, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–13313 Filed 6–6–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72299; File No. SR– NYSEArca–2014–44] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to Listing and Trading Shares of First Trust Long/ Short Equity ETF Under NYSE Arca Equities Rule 8.600 Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on May 21, 2014, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78s(b)(1). 3 17 CFR 240.19b–4. U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b–4(f)(2). 12 15 U.S.C. 78s(b)(2)(B). VerDate Mar<15>2010 15:08 Jun 06, 2014 1 15 Jkt 232001 I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to list and trade shares of the following under NYSE Arca Equities Rule 8.600 (‘‘Managed Fund Shares’’): First Trust Long/Short Equity ETF. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to list and trade shares (‘‘Shares’’) of the First Trust Long/Short Equity ETF (the ‘‘Fund’’) under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares 4 on the Exchange. The Fund will be a series of First Trust Exchange-Traded Fund III June 3, 2014. 13 17 10 15 solicit comments on the proposed rule change from interested persons. PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 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), as amended (‘‘1940 Act’’), organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment adviser consistent with its investment objectives and policies. In contrast, an open-end investment company that issues Investment Company Units, listed and traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(3), seeks to provide investment results that correspond generally to the price and yield performance of a specific foreign or domestic stock index, fixed income securities index or combination thereof. E:\FR\FM\09JNN1.SGM 09JNN1 Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices ehiers on DSK2VPTVN1PROD with NOTICES (the ‘‘Trust’’),5 a registered management investment company.6 The Fund will be an actively-managed exchange-traded fund and will not seek to replicate the performance of a specified index. First Trust Advisors L.P. (the ‘‘Adviser’’) will be the investment adviser for the Fund.7 Brown Brothers Harriman & Co. (‘‘BBH’’) will be the administrator, accounting agent, custodian and transfer agent for the Fund. First Trust Portfolios L.P. (‘‘Distributor’’) will be the principal underwriter and distributor for the Fund. Commentary .06 to Rule 8.600 provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect a ‘‘fire wall’’ between the 5 The Trust is registered under the 1940 Act. On April 1, 2014, the Trust filed with the Commission an amendment to its registration statement on Form N–1A relating to the Fund (File Nos. 333–176976 and 811–22245) (the ‘‘Registration Statement’’). The description of the operation of the Trust and the Fund herein is based, in part, on the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. 28468 (October 27, 2008) (File No. 812–13477) (the ‘‘Exemptive Order’’). 6 The Commission has previously approved the listing and trading on the Exchange of other actively-managed funds under Rule 8.600. See, e.g., Securities Exchange Act Release Nos. 60717 (September 24, 2009), 74 FR 50853 (October 1, 2009) (SR–NYSEArca–2009–74) (order approving listing of four actively-managed exchange-traded funds of the Grail Advisors ETF Trust) and 67320 (June 29, 2012), 77 FR 39763 (July 5, 2012) (SR– NYSEArca–2012–44) (order approving listing of the iShares Strategic Beta U.S. Large Cap Fund and iShares Strategic Beta U.S. Small Cap Fund). 7 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’). The Adviser is registered as an investment adviser under 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, the Adviser and its related personnel are subject to the provisions of Rule 206(4)–7 under the Advisers Act, which 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 15:08 Jun 06, 2014 Jkt 232001 investment adviser and the brokerdealer with respect to access to information concerning the composition and/or changes to such investment company portfolio. In addition, Commentary .06 further requires that personnel who make decisions on the open-end fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the open-end fund’s portfolio. Commentary .06 to Rule 8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the establishment of a ‘‘fire wall’’ between the investment adviser and the broker-dealer reflects the applicable open-end fund’s portfolio, not an underlying benchmark index, as is the case with index-based funds. The Adviser is not registered as 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 Fund’s portfolio. In the event (a) the Adviser or any sub-adviser becomes, or becomes newly affiliated with, a broker-dealer, or (b) any new adviser or sub-adviser is, or becomes affiliated with, a broker-dealer, it will implement a fire wall with respect to its relevant personnel or its broker-dealer affiliate regarding access to information concerning the composition and/or changes to the Fund’s portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. First Trust Long/Short Equity ETF Principal Investments According to the Registration Statement, the Fund will seek to provide investors with long-term total return. The Fund intends to pursue its investment objective by establishing long and short positions in a portfolio of Equity Securities (as defined below). Under normal market conditions,8 at least 80% of the Fund’s net assets will be exposed to U.S. exchange-listed 8 The term ‘‘under normal market conditions’’ or ‘‘under normal circumstances’’ includes, but is not limited to, the absence of adverse market, economic, political or other conditions, including extreme volatility or trading halts in the equities 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 manmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 33019 equity securities of U.S. and foreign companies by investing both in such securities directly and in U.S. exchangetraded funds (‘‘ETFs’’) 9 that provide exposure to such securities. The securities of the companies and ETFs in which the Fund will invest are referred to collectively as ‘‘Equity Securities.’’ The Equity Securities held by the Fund may include U.S. exchange-listed equity securities of foreign issuers as well as investments in the equity securities of foreign issuers that are in the form of U.S. exchange-listed American Depositary Receipts (‘‘ADRs’’) or U.S. exchange-listed Global Depositary Receipts (‘‘GDRs,’’ and together with ADRs, ‘‘Depositary Receipts’’) as well as unsponsored ADRs.10 The Equity Securities in which the Fund may invest (with the exception of unsponsored ADRs) will be listed on a U.S. national securities exchange, all of which are members of the Intermarket Surveillance Group (‘‘ISG’’). As indicated above, the Fund will take long and short positions in Equity Securities. As opposed to taking long positions in which an investor seeks to profit from increases in the price of a security, short selling (or ‘‘selling short’’) is a technique that will be used by the Fund to try and profit from the falling price of a security. Short selling involves selling a security that has been borrowed from a third party with the intention of buying an identical security back at a later date to return to that third party. The Adviser will select Equity Securities using an investment process that analyzes fundamental, marketrelated, technical and statistical attributes of Equity Securities to assess total return potential. The Adviser will then use this analysis as the basis to establish long and short positions within the Fund’s portfolio. According to the Registration Statement, having both long and short positions in an equity security portfolio is a common way to create returns that are independent of market moves. One advantage of a long and short portfolio 9 For purposes of this filing, ETFs include Investment Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); Portfolio Depositary Receipts (as described in NYSE Arca Equities Rule 8.100); and Managed Fund Shares (as described in NYSE Arca Equities Rule 8.600). The ETFs all will be listed and traded in the U.S. on registered exchanges. The ETFs in which the Fund may invest will primarily be equity index-based exchangetraded funds that hold substantially all of their assets in securities representing a specific equity index. While the Fund may invest in inverse ETFs, the Fund will not invest in leveraged (e.g., 2X, –2X, 3X or –3X) ETFs. 10 The Fund will not invest more than 10% of its investments in Equity Securities in unsponsored ADRs. E:\FR\FM\09JNN1.SGM 09JNN1 33020 Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices ehiers on DSK2VPTVN1PROD with NOTICES is that the long and short positions may offset one another in a manner that results in a lower net exposure to the direction of the market. In addition, cash balances arising from the use of short selling typically will be held in money market instruments.11 Other Investments According to the Registration Statement, while the Fund, under normal circumstances,12 will invest at least 80% of the Fund’s net assets as described above, the Fund may also invest in its remaining assets in other investments as described below. According to the Registration Statement, the Fund may invest a portion of its net assets in high-quality money market instruments on an ongoing basis. The instruments in which the Fund may invest include: (1) Short-term obligations issued by the U.S. government; (2) negotiable certificates of deposit (‘‘CDs’’), fixed time deposits and bankers’ acceptances of U.S. and foreign banks and similar institutions; (3) commercial paper rated at the date of purchase ‘‘Prime-1’’ by Moody’s Investors Service, Inc. or ‘‘A– 1+’’ or ‘‘A–1’’ by Standard & Poor’s Ratings Group, Inc., a division of The McGraw-Hill Companies, Inc., or, if unrated, of comparable quality as determined by the Adviser; (4) repurchase agreements (only from or to a commercial bank or a broker-dealer, and only if the purchase is scheduled to occur within seven (7) days or less); and (5) money market mutual funds. CDs are short-term negotiable obligations of commercial banks. Time deposits are non-negotiable deposits maintained in banking institutions for specified periods of time at stated interest rates. Bankers’ acceptances are time drafts drawn on commercial banks by borrowers, usually in connection with international transactions. According to the Registration Statement, the Fund may invest up to 20% of its net assets in U.S. exchangelisted equity index futures contracts. All of such equity index futures contracts will be listed on an exchange that is a member of ISG. In certain situations or market conditions, the Fund may temporarily depart from its normal investment policies and strategies provided that the alternative is consistent with its 11 According to the Registration Statement, money market instruments will generally be shortterm cash instruments that have a remaining maturity of 397 days or less and exhibit high quality credit profiles. These include U.S. Treasury Bills and repurchase agreements. 12 See supra note 8. VerDate Mar<15>2010 15:08 Jun 06, 2014 Jkt 232001 investment objective and is in the best interest of the Fund. For example, the Fund may hold little or no short positions for extended periods, or the Fund may hold a higher than normal proportion of its net assets in cash in times of extreme market stress. Investment Restrictions The Fund will seek to qualify for treatment as a regulated investment company (‘‘RIC’’) under Subchapter M of the Internal Revenue Code of 1986, as amended.13 As part of its non-principal strategy, the Fund may hold up to an aggregate amount of 15% of its net assets in illiquid assets (calculated at the time of investment).14 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 and other illiquid assets. The Fund will not invest 25% or more of the value of its net assets in securities of issuers in any one industry. This restriction will not apply to (a) obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities or (b) securities of other investment companies.15 Net Asset Value The Fund’s net asset value (‘‘NAV’’) will be determined as of the close of trading (normally 4:00 p.m. Eastern time (‘‘E.T.’’)) on each day the New York 13 26 U.S.C. 851. Commission has stated that long-standing Commission guidelines have required open-end funds to hold no more than 15% of their net assets in illiquid securities and other illiquid assets. See Investment Company Act Release No. 8901 (March 11, 2008), 73 FR 14618 (March 18, 2008), footnote 34. See also, Investment Company Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) (Statement Regarding ‘‘Restricted Securities’’); Investment Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) (Revisions of Guidelines to Form N–1A). A fund’s portfolio security is illiquid if it cannot be disposed of in the ordinary course of business within seven days at approximately the value ascribed to it by the fund. See Investment Company Act Release No. 14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a–7 under the 1940 Act); Investment Company Act Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under the Securities Act of 1933). 15 See Form N–1A, Item 9. The Commission has taken the position that a fund is concentrated if it invests more than 25% of the value of its total assets in any one industry. See, e.g., Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 54241 (November 21, 1975). 14 The PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 Stock Exchange (‘‘NYSE’’) is open for business. NAV will be calculated for the Fund by taking the market price of the Fund’s net assets, including interest or dividends accrued but not yet collected, less all liabilities, and dividing such amount by the total number of Shares outstanding. The result, rounded to the nearest cent, will be the NAV per Share. All valuations will be subject to review by the Board of Trustees of the Trust (‘‘Trust Board’’) or its delegate. The Fund’s investments will be valued daily at market value or, in the absence of market value with respect to any investment, at fair value, in each case in accordance with valuation procedures (which may be revised from time to time) adopted by the Trust Board (the ‘‘Valuation Procedures’’) and in accordance with the 1940 Act. A market valuation generally means a valuation (i) obtained from an exchange, an independent pricing service (‘‘Pricing Service’’), or a major market maker (or dealer) or (ii) based on a price quotation or other equivalent indication of value supplied by an exchange, a Pricing Service, or a major market maker (or dealer). The information summarized below is based on the Valuation Procedures as currently in effect; however, as noted above, the Valuation Procedures are amended from time to time and, therefore, such information is subject to change. Equity securities (including ETFs and Depositary Receipts) listed on any exchange other than The NASDAQ Stock Market LLC (‘‘NASDAQ’’) will be valued at the last sale price on the exchange on which they are principally traded on the business day as of which such value is being determined. Equity securities listed on the NASDAQ 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 NASDAQ, the securities will be valued using fair value pricing, as described below. Equity securities traded on more than one securities exchange will be valued at the last sale price or official closing price, as applicable, on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Exchange-traded futures contracts will be valued at the closing price in the market where such contracts are principally traded. Intra-day and closing price information regarding unsponsored ADRs will be available from major market data vendors such as Bloomberg and Reuters. E:\FR\FM\09JNN1.SGM 09JNN1 Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices ehiers on DSK2VPTVN1PROD with NOTICES Repurchase agreements will be valued as follows: Overnight repurchase agreements will be valued at cost. Term repurchase agreements (i.e., those whose maturity exceeds seven days) will be valued at the average of the bid quotations obtained daily from at least two recognized dealers. Certain securities in which the Fund may invest will not be listed on any securities exchange or board of trade. Such securities will typically be bought and sold by institutional investors in individually negotiated private transactions that function in many respects like an over-the-counter secondary market, although typically no formal market makers will exist. Certain securities, particularly debt securities, will have few or no trades, or trade infrequently, and information regarding a specific security may not be widely available or may be incomplete. Accordingly, determinations of the fair value of debt securities may be based on infrequent and dated information. Because there is less reliable, objective data available, elements of judgment may play a greater role in valuation of debt securities than for other types of securities. Typically, debt securities (other than those described in the next sentence) will be valued using information provided by a Pricing Service. Money market instruments having a remaining maturity of 60 days or less when purchased will be valued at cost adjusted for amortization of premiums and accretion of discounts. Certain assets may not be able to be priced by pre-established pricing methods. Such assets may be valued by the Trust Board or its delegate at fair value. The use of fair value pricing by the Fund will be governed by the Valuation Procedures and conducted in accordance with the provisions of the 1940 Act. Valuing the Fund’s assets using fair value pricing will result in using prices for those securities that may differ from current market valuations or official closing prices on the applicable exchange. Creations and Redemptions of Shares The Fund will issue and redeem Shares on a continuous basis at NAV only in large blocks of Shares (‘‘Creation Units’’) in transactions with authorized participants, generally including brokerdealers and large institutional investors (‘‘Authorized Participants’’). Creation Units generally will consist of 50,000 Shares, although this may change from time to time. Creation Units, however, are not expected to consist of less than 50,000 Shares. As described in the Registration Statement and consistent with the Exemptive Order, the Fund VerDate Mar<15>2010 15:08 Jun 06, 2014 Jkt 232001 will issue and redeem Creation Units in exchange for an in-kind portfolio of instruments and/or cash in lieu of such instruments (the ‘‘Creation Basket’’). In addition, if there is a difference between the NAV attributable to a Creation Unit and the market value of the Creation Basket exchanged for the Creation Unit, the party conveying instruments with the lower value will pay to the other an amount in cash equal to the difference (referred to as the ‘‘Cash Component’’). Creations and redemptions must be made by an Authorized Participant or through a firm that is either a member of the National Securities Clearing Corporation (‘‘NSCC’’) or a Depository Trust Company participant that, in each case, must have executed an agreement that has been agreed to by the Distributor and BBH with respect to creations and redemptions of Creation Units. All standard orders to create Creation Units must be received by the transfer agent no later than the closing time of the regular trading session on the NYSE (ordinarily 4:00 p.m. E.T.) (the ‘‘Closing Time’’), in each case on the date such order is placed, in order for the creation of Creation Units to be effected based on the NAV of Shares as next determined on such date after receipt of the order in proper form. The Fund’s custodian, through the NSCC, will make available on each business day, prior to the opening of business on the Exchange, the list of the names and the required number of shares of the securities to be included in the Creation Basket with respect to purchases. In addition, the Fund’s custodian, through the NSCC, will also make available on each business day the estimated Cash Component (if any) for that day. Shares may be redeemed only in Creation Units at their NAV next determined after receipt not later than the Closing Time of a redemption request in proper form by the Fund through the transfer agent and only on a business day. The Fund’s custodian, through the NSCC, will make available on each business day, prior to the opening of business on the Exchange, the identity of the securities that will be applicable to redemption requests received in proper form on that day. Availability of Information The Fund’s Web site, www.ftportfolios.com, which will be publicly available prior to the public offering of Shares, will include a form of the prospectus for the Fund that may be downloaded. The Fund’s Web site will include additional quantitative information updated on a daily basis, including, for the Fund, (1) daily trading PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 33021 volume, the prior business day’s reported closing price, NAV and midpoint of the bid/ask spread at the time of calculation of such NAV (the ‘‘Bid/ Ask Price’’),16 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 a daily basis, the Adviser, on behalf of the Fund, will disclose on the Fund’s Web site the following information regarding each portfolio holding, as applicable to the type of holding: Ticker symbol, CUSIP number or other identifier, if any; a description of the holding; the identity of the security, index, or other asset or instrument underlying the holding, if any; quantity held (as measured by, for example, par value, notional value or number of shares, contracts or units); maturity date, if any; coupon rate, if any; effective date, if any; market value of the holding; and the percentage weighting of the holding in the Fund’s portfolio. The Web site information will be publicly available at no charge. In addition, a basket composition file, which will include the security names and share quantities 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 the NYSE via the NSCC. The basket will represent one Creation Unit of the Fund. Investors can also obtain the Fund’s Statement of Additional Information (‘‘SAI’’), Shareholder Reports and Form N–CSR. The Fund’s SAI and Shareholder Reports will be available free upon request from the Fund, and those documents and the Form N–CSR may be viewed on-screen or downloaded from the Commission’s Web site at www.sec.gov. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Quotation and last sale information for the Shares and the 16 The Bid/Ask Price of the Fund will be determined using the midpoint of the highest bid and the lowest offer on the Exchange as of the time of calculation of the Fund’s NAV. The records relating to Bid/Ask Prices will be retained by the Fund and its service providers. E:\FR\FM\09JNN1.SGM 09JNN1 33022 Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices ehiers on DSK2VPTVN1PROD with NOTICES underlying U.S. exchange-traded Equity Securities will be available via the Consolidated Tape Association (‘‘CTA’’) high-speed line. Information regarding the Equity Securities and U.S. exchangetraded futures contracts held by the Fund will be available from the national exchanges trading such securities and futures contracts, respectively, automated quotation systems, published or other public sources, or on-line information services such as Bloomberg or Reuters or any future such service provider. In addition, quotation information from brokers and dealers or pricing services will be available for fixed income securities, including U.S. government obligations, other money market instruments, and repurchase agreements. Moreover, the Portfolio Indicative Value of the Fund, as defined in NYSE Arca Equities Rule 8.600(c)(3), will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session.17 The dissemination of the Portfolio Indicative Value, together with the Disclosed Portfolio, will allow investors to determine the value of the underlying portfolio of the Fund on a daily basis and to provide a close estimate of that value throughout the trading day. Additional information regarding the Fund and the Shares, including investment strategies, risks, creation and redemption procedures, fees, portfolio holdings disclosure policies, distributions and taxes is included in the Registration Statement. All terms relating to the Fund that are referred to, but not defined in, this proposed rule change are defined in the Registration Statement. Trading Halts With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund.18 Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities and/or the financial instruments comprising the Disclosed Portfolio of the Fund; or (2) whether other unusual conditions or 17 Currently, it is the Exchange’s understanding that several major market data vendors display and/ or make widely available Portfolio Indicative Values taken from CTA or other data feeds. 18 See NYSE Arca Equities Rule 7.12, Commentary .04. VerDate Mar<15>2010 15:08 Jun 06, 2014 Jkt 232001 circumstances detrimental to the maintenance of a fair and orderly market are present. Trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. Trading Rules The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. Shares will trade on the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. in accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading Sessions). The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price variation (‘‘MPV’’) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001. The Shares will be subject to NYSE Arca Equities Rule 8.600, 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 will be in compliance with Rule 10A–3 19 under the Act, as provided by NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange. The Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio, as defined in NYSE Arca Equities Rule 8.600(c)(2), will be made available to all market participants at the same time. Surveillance The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by the Financial Industry Regulatory Authority (‘‘FINRA’’) on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws.20 The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to detect and help deter violations of Exchange rules and 19 17 CFR 240.10A–3. 20 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. PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 applicable federal securities laws applicable to trading on the Exchange. The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations. FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares and underlying Equity Securities and equity index futures contracts with other markets and other entities that are members of ISG and FINRA, on behalf of the Exchange, may obtain trading information regarding trading in the Shares, Equity Securities and equity index futures contracts from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares and underlying Equity Securities and equity index futures contracts from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.21 In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. Information Bulletin Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit (‘‘ETP’’) Holders in an Information Bulletin (‘‘Bulletin’’) of the special characteristics and risks associated with trading the Shares. Specifically, the Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Unit aggregations (and that Shares are not individually redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated Portfolio Indicative Value will not be calculated or publicly disseminated; (4) how information regarding the Portfolio Indicative Value and Disclosed Portfolio is disseminated; (5) the requirement that ETP Holders 21 For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all components of the Disclosed Portfolio for the Fund may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. E:\FR\FM\09JNN1.SGM 09JNN1 Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices ehiers on DSK2VPTVN1PROD with NOTICES deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information. In addition, the Bulletin will reference that the Fund is subject to various fees and expenses described in the Registration Statement. The Bulletin will discuss any exemptive, no-action and interpretive relief granted by the Commission from any rules under the Act. The Bulletin will also disclose that the NAV for the Shares will be calculated after 4:00 p.m. E.T. each trading day. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) 22 that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Equities Rule 8.600. The Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. The Exchange 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. All of the Equity Securities and equity index futures contracts in which the Fund may invest will be listed on a U.S. national exchange that is a member of ISG. The Fund’s investments will, under normal circumstances, be consistent with its investment objective. As part of its nonprincipal strategy, the Fund will not hold more than 15% of its net assets in illiquid securities (calculated at the time of investment). The Adviser is not registered as a broker-dealer, although it is affiliated with the Distributor, a broker-dealer, and has implemented a ‘‘fire wall’’ with respect to its brokerdealer affiliate regarding access to information concerning the composition and/or changes to the Fund’s portfolio. In the event (a) the Adviser or any sub22 15 U.S.C. 78f(b)(5). VerDate Mar<15>2010 15:08 Jun 06, 2014 Jkt 232001 adviser becomes, or becomes newly affiliated with, a broker-dealer, or (b) any new adviser or sub-adviser is, or becomes affiliated with, a broker-dealer, it will implement a fire wall with respect to its relevant personnel or its broker-dealer affiliate regarding access to information concerning the composition and/or changes to the Fund’s portfolio, and will be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding such portfolio. 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 Fund’s portfolio holdings will be disclosed on its Web site daily after the close of trading on the Exchange and prior to the opening of trading on the Exchange the following day. Moreover, the Portfolio Indicative Value will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session. Information regarding market price and trading volume of the Shares will be continually available on a realtime basis throughout the day on brokers’ computer screens and other electronic services, and quotation and last sale information will be available via the CTA high-speed line. The Web site for the Fund will include a form of the prospectus for the Fund and additional data relating to the Fund’s NAV and other applicable quantitative information. Moreover, prior to the commencement of trading, the Exchange will inform its ETP Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable, and trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. In addition, as noted above, investors will have ready access to information regarding the PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 33023 Fund’s holdings, the Portfolio 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 Portfolio Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change 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. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. E:\FR\FM\09JNN1.SGM 09JNN1 33024 Federal Register / Vol. 79, No. 110 / Monday, June 9, 2014 / Notices 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: [FR Doc. 2014–13311 Filed 6–6–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Electronic Comments • Use the Commission’s Internet comment form https://www.sec.gov/ rules/sro.shtml); or • Send an Email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2014–44 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. ehiers on DSK2VPTVN1PROD with NOTICES For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Kevin M. O’Neill, Deputy Secretary. All submissions should refer to File Number SR–NYSEArca–2014–44. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEArca–2014–44 and should be submitted on or before June 30, 2014. [Release No. 34–72298; File No. SR– NYSEArca–2014–59] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of Shares of the AdvisorShares Athena High Dividend ETF Under NYSE Arca Equities Rule 8.600 June 3, 2014. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on May 20, 2014, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade the shares of the following under NYSE Arca Equities Rule 8.600 (‘‘Managed Fund Shares’’): AdvisorShares Athena High Dividend ETF. The text of the proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text 23 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 17:28 Jun 06, 2014 Jkt 232001 PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to list and trade shares (‘‘Shares’’) of the following under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares: 4 AdvisorShares Athena High Dividend ETF (‘‘Fund’’). The Shares will be offered by AdvisorShares Trust (the ‘‘Trust’’),5 a statutory trust organized under the laws of the State of Delaware and registered with the Commission as an open-end management investment company.6 The investment adviser to the Fund will be AdvisorShares Investments, LLC (the ‘‘Adviser’’). AthenaInvest Advisors LLC (‘‘Sub-Adviser’’) will be the Fund’s subadviser and will provide day-to-day 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) (‘‘1940 Act’’) organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment adviser consistent with its investment objectives and policies. In contrast, an open-end investment company that issues Investment Company Units, listed and traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(3), seeks to provide investment results that correspond generally to the price and yield performance of a specific foreign or domestic stock index, fixed income securities index or combination thereof. 5 The Trust is registered under the 1940 Act. On February 18, 2014, the Trust filed with the Commission an amendment to its registration statement on Form N–1A under the Securities Act of 1933 (15 U.S.C. 77a) (‘‘Securities Act’’), and under the 1940 Act relating to the Fund (File Nos. 333–157876 and 811–22110) (‘‘Registration Statement’’). The description of the operation of the Trust and the Fund herein is based, in part, on the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. 29291 (May 28, 2010) (File No. 812–13677) (‘‘Exemptive Order’’). 6 The Commission has approved listing and trading on the Exchange of shares of a number of actively managed funds under Rule 8.600. See, e.g., Securities Exchange Act Release Nos. 63076 (October 12, 2010), 75 FR 63874 (October 18, 2010) (SR–NYSEArca–2010–79) (order approving Exchange listing and trading of Cambria Global Tactical ETF); 63802 (January 31, 2011), 76 FR 6503 (February 4, 2011) (SR–NYSEArca–2010–118) (order approving Exchange listing and trading of the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic Allocation Growth Income ETF); and 65468 (October 3, 2011), 76 FR 62873 (October 11, 2011) (SR–NYSEArca–2011–51) (order approving Exchange listing and trading of TrimTabs Float Shrink ETF). E:\FR\FM\09JNN1.SGM 09JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 110 (Monday, June 9, 2014)]
[Notices]
[Pages 33018-33024]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-13311]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72299; File No. SR-NYSEArca-2014-44]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to Listing and Trading Shares of First
Trust Long/Short Equity ETF Under NYSE Arca Equities Rule 8.600

June 3, 2014.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on May 21, 2014, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78s(b)(1).
\3\ 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

The Exchange proposes to list and trade shares of the following
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''): First
Trust Long/Short Equity ETF. The text of the proposed rule change is
available on the Exchange's Web site at www.nyse.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
The Exchange proposes to list and trade shares (``Shares'') of the
First Trust Long/Short Equity ETF (the ``Fund'') under NYSE Arca
Equities Rule 8.600, which governs the listing and trading of Managed
Fund Shares \4\ on the Exchange. The Fund will be a series of First
Trust Exchange-Traded Fund III

[[Page 33019]]

(the ``Trust''),\5\ a registered management investment company.\6\
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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), as amended (``1940 Act''),
organized as an open-end investment company or similar entity that
invests in a portfolio of securities selected by its investment
adviser consistent with its investment objectives and policies. In
contrast, an open-end investment company that issues Investment
Company Units, listed and traded on the Exchange under NYSE Arca
Equities Rule 5.2(j)(3), seeks to provide investment results that
correspond generally to the price and yield performance of a
specific foreign or domestic stock index, fixed income securities
index or combination thereof.
\5\ The Trust is registered under the 1940 Act. On April 1,
2014, the Trust filed with the Commission an amendment to its
registration statement on Form N-1A relating to the Fund (File Nos.
333-176976 and 811-22245) (the ``Registration Statement''). The
description of the operation of the Trust and the Fund herein is
based, in part, on the Registration Statement. In addition, the
Commission has issued an order granting certain exemptive relief to
the Trust under the 1940 Act. See Investment Company Act Release No.
28468 (October 27, 2008) (File No. 812-13477) (the ``Exemptive
Order'').
\6\ The Commission has previously approved the listing and
trading on the Exchange of other actively-managed funds under Rule
8.600. See, e.g., Securities Exchange Act Release Nos. 60717
(September 24, 2009), 74 FR 50853 (October 1, 2009) (SR-NYSEArca-
2009-74) (order approving listing of four actively-managed exchange-
traded funds of the Grail Advisors ETF Trust) and 67320 (June 29,
2012), 77 FR 39763 (July 5, 2012) (SR-NYSEArca-2012-44) (order
approving listing of the iShares Strategic Beta U.S. Large Cap Fund
and iShares Strategic Beta U.S. Small Cap Fund).
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The Fund will be an actively-managed exchange-traded fund and will
not seek to replicate the performance of a specified index.
First Trust Advisors L.P. (the ``Adviser'') will be the investment
adviser for the Fund.\7\ Brown Brothers Harriman & Co. (``BBH'') will
be the administrator, accounting agent, custodian and transfer agent
for the Fund. First Trust Portfolios L.P. (``Distributor'') will be the
principal underwriter and distributor for the Fund.
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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''). The Adviser is registered as an investment adviser under 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, the Adviser and its related personnel are subject to
the provisions of Rule 206(4)-7 under the Advisers Act, which makes
it unlawful for an investment adviser to provide investment advice
to clients unless such investment adviser has (i) adopted and
implemented written policies and procedures reasonably designed to
prevent violation, by the investment adviser and its supervised
persons, of the Advisers Act and the Commission rules adopted
thereunder; (ii) implemented, at a minimum, an annual review
regarding the adequacy of the policies and procedures established
pursuant to subparagraph (i) above and the effectiveness of their
implementation; and (iii) designated an individual (who is a
supervised person) responsible for administering the policies and
procedures adopted under subparagraph (i) above.
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Commentary .06 to Rule 8.600 provides that, if the investment
adviser to the investment company issuing Managed Fund Shares is
affiliated with a broker-dealer, such investment adviser shall erect a
``fire wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such investment company portfolio. In addition, Commentary
.06 further requires that personnel who make decisions on the open-end
fund's portfolio composition must be subject to procedures designed to
prevent the use and dissemination of material nonpublic information
regarding the open-end fund's portfolio. Commentary .06 to Rule 8.600
is similar to Commentary .03(a)(i) and (iii) to NYSE Arca Equities Rule
5.2(j)(3); however, Commentary .06 in connection with the establishment
of a ``fire wall'' between the investment adviser and the broker-dealer
reflects the applicable open-end fund's portfolio, not an underlying
benchmark index, as is the case with index-based funds.
The Adviser is not registered as 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 Fund's portfolio. In the event (a) the Adviser or any
sub-adviser becomes, or becomes newly affiliated with, a broker-dealer,
or (b) any new adviser or sub-adviser is, or becomes affiliated with, a
broker-dealer, it will implement a fire wall with respect to its
relevant personnel or its broker-dealer affiliate regarding access to
information concerning the composition and/or changes to the Fund's
portfolio, and will be subject to procedures designed to prevent the
use and dissemination of material non-public information regarding such
portfolio.
First Trust Long/Short Equity ETF
Principal Investments
According to the Registration Statement, the Fund will seek to
provide investors with long-term total return.
The Fund intends to pursue its investment objective by establishing
long and short positions in a portfolio of Equity Securities (as
defined below). Under normal market conditions,\8\ at least 80% of the
Fund's net assets will be exposed to U.S. exchange-listed equity
securities of U.S. and foreign companies by investing both in such
securities directly and in U.S. exchange-traded funds (``ETFs'') \9\
that provide exposure to such securities. The securities of the
companies and ETFs in which the Fund will invest are referred to
collectively as ``Equity Securities.'' The Equity Securities held by
the Fund may include U.S. exchange-listed equity securities of foreign
issuers as well as investments in the equity securities of foreign
issuers that are in the form of U.S. exchange-listed American
Depositary Receipts (``ADRs'') or U.S. exchange-listed Global
Depositary Receipts (``GDRs,'' and together with ADRs, ``Depositary
Receipts'') as well as unsponsored ADRs.\10\ The Equity Securities in
which the Fund may invest (with the exception of unsponsored ADRs) will
be listed on a U.S. national securities exchange, all of which are
members of the Intermarket Surveillance Group (``ISG'').
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\8\ The term ``under normal market conditions'' or ``under
normal circumstances'' includes, but is not limited to, the absence
of adverse market, economic, political or other conditions,
including extreme volatility or trading halts in the equities
markets or the financial markets generally; operational issues
causing dissemination of inaccurate market information; or force
majeure type events such as systems failure, natural or man- made
disaster, act of God, armed conflict, act of terrorism, riot or
labor disruption or any similar intervening circumstance.
\9\ For purposes of this filing, ETFs include Investment Company
Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); Portfolio
Depositary Receipts (as described in NYSE Arca Equities Rule 8.100);
and Managed Fund Shares (as described in NYSE Arca Equities Rule
8.600). The ETFs all will be listed and traded in the U.S. on
registered exchanges. The ETFs in which the Fund may invest will
primarily be equity index-based exchange-traded funds that hold
substantially all of their assets in securities representing a
specific equity index. While the Fund may invest in inverse ETFs,
the Fund will not invest in leveraged (e.g., 2X, -2X, 3X or -3X)
ETFs.
\10\ The Fund will not invest more than 10% of its investments
in Equity Securities in unsponsored ADRs.
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As indicated above, the Fund will take long and short positions in
Equity Securities. As opposed to taking long positions in which an
investor seeks to profit from increases in the price of a security,
short selling (or ``selling short'') is a technique that will be used
by the Fund to try and profit from the falling price of a security.
Short selling involves selling a security that has been borrowed from a
third party with the intention of buying an identical security back at
a later date to return to that third party.
The Adviser will select Equity Securities using an investment
process that analyzes fundamental, market-related, technical and
statistical attributes of Equity Securities to assess total return
potential. The Adviser will then use this analysis as the basis to
establish long and short positions within the Fund's portfolio.
According to the Registration Statement, having both long and short
positions in an equity security portfolio is a common way to create
returns that are independent of market moves. One advantage of a long
and short portfolio

[[Page 33020]]

is that the long and short positions may offset one another in a manner
that results in a lower net exposure to the direction of the market.
In addition, cash balances arising from the use of short selling
typically will be held in money market instruments.\11\
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\11\ According to the Registration Statement, money market
instruments will generally be short-term cash instruments that have
a remaining maturity of 397 days or less and exhibit high quality
credit profiles. These include U.S. Treasury Bills and repurchase
agreements.
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Other Investments
According to the Registration Statement, while the Fund, under
normal circumstances,\12\ will invest at least 80% of the Fund's net
assets as described above, the Fund may also invest in its remaining
assets in other investments as described below.
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\12\ See supra note 8.
---------------------------------------------------------------------------

According to the Registration Statement, the Fund may invest a
portion of its net assets in high-quality money market instruments on
an ongoing basis. The instruments in which the Fund may invest include:
(1) Short-term obligations issued by the U.S. government; (2)
negotiable certificates of deposit (``CDs''), fixed time deposits and
bankers' acceptances of U.S. and foreign banks and similar
institutions; (3) commercial paper rated at the date of purchase
``Prime-1'' by Moody's Investors Service, Inc. or ``A-1+'' or ``A-1''
by Standard & Poor's Ratings Group, Inc., a division of The McGraw-Hill
Companies, Inc., or, if unrated, of comparable quality as determined by
the Adviser; (4) repurchase agreements (only from or to a commercial
bank or a broker-dealer, and only if the purchase is scheduled to occur
within seven (7) days or less); and (5) money market mutual funds. CDs
are short-term negotiable obligations of commercial banks. Time
deposits are non-negotiable deposits maintained in banking institutions
for specified periods of time at stated interest rates. Bankers'
acceptances are time drafts drawn on commercial banks by borrowers,
usually in connection with international transactions.
According to the Registration Statement, the Fund may invest up to
20% of its net assets in U.S. exchange-listed equity index futures
contracts. All of such equity index futures contracts will be listed on
an exchange that is a member of ISG.
In certain situations or market conditions, the Fund may
temporarily depart from its normal investment policies and strategies
provided that the alternative is consistent with its investment
objective and is in the best interest of the Fund. For example, the
Fund may hold little or no short positions for extended periods, or the
Fund may hold a higher than normal proportion of its net assets in cash
in times of extreme market stress.
Investment Restrictions
The Fund will seek to qualify for treatment as a regulated
investment company (``RIC'') under Subchapter M of the Internal Revenue
Code of 1986, as amended.\13\
---------------------------------------------------------------------------

\13\ 26 U.S.C. 851.
---------------------------------------------------------------------------

As part of its non-principal strategy, the Fund may hold up to an
aggregate amount of 15% of its net assets in illiquid assets
(calculated at the time of investment).\14\ 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 and other illiquid assets.
---------------------------------------------------------------------------

\14\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 8901 (March 11, 2008), 73 FR
14618 (March 18, 2008), footnote 34. See also, Investment Company
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31,
1970) (Statement Regarding ``Restricted Securities''); Investment
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio
security is illiquid if it cannot be disposed of in the ordinary
course of business within seven days at approximately the value
ascribed to it by the fund. See Investment Company Act Release No.
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990)
(adopting Rule 144A under the Securities Act of 1933).
---------------------------------------------------------------------------

The Fund will not invest 25% or more of the value of its net assets
in securities of issuers in any one industry. This restriction will not
apply to (a) obligations issued or guaranteed by the U.S. government,
its agencies or instrumentalities or (b) securities of other investment
companies.\15\
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\15\ 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).
---------------------------------------------------------------------------

Net Asset Value
The Fund's net asset value (``NAV'') will be determined as of the
close of trading (normally 4:00 p.m. Eastern time (``E.T.'')) on each
day the New York Stock Exchange (``NYSE'') is open for business. NAV
will be calculated for the Fund by taking the market price of the
Fund's net assets, including interest or dividends accrued but not yet
collected, less all liabilities, and dividing such amount by the total
number of Shares outstanding. The result, rounded to the nearest cent,
will be the NAV per Share. All valuations will be subject to review by
the Board of Trustees of the Trust (``Trust Board'') or its delegate.
The Fund's investments will be valued daily at market value or, in
the absence of market value with respect to any investment, at fair
value, in each case in accordance with valuation procedures (which may
be revised from time to time) adopted by the Trust Board (the
``Valuation Procedures'') and in accordance with the 1940 Act. A market
valuation generally means a valuation (i) obtained from an exchange, an
independent pricing service (``Pricing Service''), or a major market
maker (or dealer) or (ii) based on a price quotation or other
equivalent indication of value supplied by an exchange, a Pricing
Service, or a major market maker (or dealer). The information
summarized below is based on the Valuation Procedures as currently in
effect; however, as noted above, the Valuation Procedures are amended
from time to time and, therefore, such information is subject to
change.
Equity securities (including ETFs and Depositary Receipts) listed
on any exchange other than The NASDAQ Stock Market LLC (``NASDAQ'')
will be valued at the last sale price on the exchange on which they are
principally traded on the business day as of which such value is being
determined. Equity securities listed on the NASDAQ 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 NASDAQ,
the securities will be valued using fair value pricing, as described
below. Equity securities traded on more than one securities exchange
will be valued at the last sale price or official closing price, as
applicable, on the business day as of which such value is being
determined at the close of the exchange representing the principal
market for such securities.
Exchange-traded futures contracts will be valued at the closing
price in the market where such contracts are principally traded.
Intra-day and closing price information regarding unsponsored ADRs
will be available from major market data vendors such as Bloomberg and
Reuters.

[[Page 33021]]

Repurchase agreements will be valued as follows: Overnight
repurchase agreements will be valued at cost. Term repurchase
agreements (i.e., those whose maturity exceeds seven days) will be
valued at the average of the bid quotations obtained daily from at
least two recognized dealers.
Certain securities in which the Fund may invest will not be listed
on any securities exchange or board of trade. Such securities will
typically be bought and sold by institutional investors in individually
negotiated private transactions that function in many respects like an
over-the-counter secondary market, although typically no formal market
makers will exist. Certain securities, particularly debt securities,
will have few or no trades, or trade infrequently, and information
regarding a specific security may not be widely available or may be
incomplete. Accordingly, determinations of the fair value of debt
securities may be based on infrequent and dated information. Because
there is less reliable, objective data available, elements of judgment
may play a greater role in valuation of debt securities than for other
types of securities. Typically, debt securities (other than those
described in the next sentence) will be valued using information
provided by a Pricing Service. Money market instruments having a
remaining maturity of 60 days or less when purchased will be valued at
cost adjusted for amortization of premiums and accretion of discounts.
Certain assets may not be able to be priced by pre-established
pricing methods. Such assets may be valued by the Trust Board or its
delegate at fair value. The use of fair value pricing by the Fund will
be governed by the Valuation Procedures and conducted in accordance
with the provisions of the 1940 Act. Valuing the Fund's assets using
fair value pricing will result in using prices for those securities
that may differ from current market valuations or official closing
prices on the applicable exchange.
Creations and Redemptions of Shares
The Fund will issue and redeem Shares on a continuous basis at NAV
only in large blocks of Shares (``Creation Units'') in transactions
with authorized participants, generally including broker-dealers and
large institutional investors (``Authorized Participants''). Creation
Units generally will consist of 50,000 Shares, although this may change
from time to time. Creation Units, however, are not expected to consist
of less than 50,000 Shares. As described in the Registration Statement
and consistent with the Exemptive Order, the Fund will issue and redeem
Creation Units in exchange for an in-kind portfolio of instruments and/
or cash in lieu of such instruments (the ``Creation Basket''). In
addition, if there is a difference between the NAV attributable to a
Creation Unit and the market value of the Creation Basket exchanged for
the Creation Unit, the party conveying instruments with the lower value
will pay to the other an amount in cash equal to the difference
(referred to as the ``Cash Component'').
Creations and redemptions must be made by an Authorized Participant
or through a firm that is either a member of the National Securities
Clearing Corporation (``NSCC'') or a Depository Trust Company
participant that, in each case, must have executed an agreement that
has been agreed to by the Distributor and BBH with respect to creations
and redemptions of Creation Units.
All standard orders to create Creation Units must be received by
the transfer agent no later than the closing time of the regular
trading session on the NYSE (ordinarily 4:00 p.m. E.T.) (the ``Closing
Time''), in each case on the date such order is placed, in order for
the creation of Creation Units to be effected based on the NAV of
Shares as next determined on such date after receipt of the order in
proper form. The Fund's custodian, through the NSCC, will make
available on each business day, prior to the opening of business on the
Exchange, the list of the names and the required number of shares of
the securities to be included in the Creation Basket with respect to
purchases. In addition, the Fund's custodian, through the NSCC, will
also make available on each business day the estimated Cash Component
(if any) for that day.
Shares may be redeemed only in Creation Units at their NAV next
determined after receipt not later than the Closing Time of a
redemption request in proper form by the Fund through the transfer
agent and only on a business day. The Fund's custodian, through the
NSCC, will make available on each business day, prior to the opening of
business on the Exchange, the identity of the securities that will be
applicable to redemption requests received in proper form on that day.
Availability of Information
The Fund's Web site, www.ftportfolios.com, which will be publicly
available prior to the public offering of Shares, will include a form
of the prospectus for the Fund that may be downloaded. The Fund's Web
site will include additional quantitative information updated on a
daily basis, including, for the Fund, (1) daily trading volume, the
prior business day's reported closing price, NAV and mid-point of the
bid/ask spread at the time of calculation of such NAV (the ``Bid/Ask
Price''),\16\ 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.
---------------------------------------------------------------------------

\16\ The Bid/Ask Price of the Fund will be determined using the
midpoint of the highest bid and the lowest offer on the Exchange as
of the time of calculation of the Fund's NAV. The records relating
to Bid/Ask Prices will be retained by the Fund and its service
providers.
---------------------------------------------------------------------------

On a daily basis, the Adviser, on behalf of the Fund, will disclose
on the Fund's Web site the following information regarding each
portfolio holding, as applicable to the type of holding: Ticker symbol,
CUSIP number or other identifier, if any; a description of the holding;
the identity of the security, index, or other asset or instrument
underlying the holding, if any; quantity held (as measured by, for
example, par value, notional value or number of shares, contracts or
units); maturity date, if any; coupon rate, if any; effective date, if
any; market value of the holding; and the percentage weighting of the
holding in the Fund's portfolio. The Web site information will be
publicly available at no charge.
In addition, a basket composition file, which will include the
security names and share quantities 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
the NYSE via the NSCC. The basket will represent one Creation Unit of
the Fund.
Investors can also obtain the Fund's Statement of Additional
Information (``SAI''), Shareholder Reports and Form N-CSR. The Fund's
SAI and Shareholder Reports will be available free upon request from
the Fund, and those documents and the Form N-CSR may be viewed on-
screen or downloaded from the Commission's Web site at www.sec.gov.
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. Information
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers. Quotation and last sale information for the
Shares and the

[[Page 33022]]

underlying U.S. exchange-traded Equity Securities will be available via
the Consolidated Tape Association (``CTA'') high-speed line.
Information regarding the Equity Securities and U.S. exchange-traded
futures contracts held by the Fund will be available from the national
exchanges trading such securities and futures contracts, respectively,
automated quotation systems, published or other public sources, or on-
line information services such as Bloomberg or Reuters or any future
such service provider. In addition, quotation information from brokers
and dealers or pricing services will be available for fixed income
securities, including U.S. government obligations, other money market
instruments, and repurchase agreements. Moreover, the Portfolio
Indicative Value of the Fund, as defined in NYSE Arca Equities Rule
8.600(c)(3), will be widely disseminated by one or more major market
data vendors at least every 15 seconds during the Core Trading
Session.\17\ The dissemination of the Portfolio Indicative Value,
together with the Disclosed Portfolio, will allow investors to
determine the value of the underlying portfolio of the Fund on a daily
basis and to provide a close estimate of that value throughout the
trading day.
---------------------------------------------------------------------------

\17\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available
Portfolio Indicative Values taken from CTA or other data feeds.
---------------------------------------------------------------------------

Additional information regarding the Fund and the Shares, including
investment strategies, risks, creation and redemption procedures, fees,
portfolio holdings disclosure policies, distributions and taxes is
included in the Registration Statement. All terms relating to the Fund
that are referred to, but not defined in, this proposed rule change are
defined in the Registration Statement.
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund.\18\ Trading in Shares of the Fund
will be halted if the circuit breaker parameters in NYSE Arca Equities
Rule 7.12 have been reached. Trading also may be halted because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. These may include: (1) The
extent to which trading is not occurring in the securities and/or the
financial instruments comprising the Disclosed Portfolio of the Fund;
or (2) whether other unusual conditions or circumstances detrimental to
the maintenance of a fair and orderly market are present. Trading in
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D),
which sets forth circumstances under which Shares of the Fund may be
halted.
---------------------------------------------------------------------------

\18\ See NYSE Arca Equities Rule 7.12, Commentary .04.
---------------------------------------------------------------------------

Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. in accordance with
NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading
Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. As provided in
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price
variation (``MPV'') for quoting and entry of orders in equity
securities traded on the NYSE Arca Marketplace is $0.01, with the
exception of securities that are priced less than $1.00 for which the
MPV for order entry is $0.0001.
The Shares will be subject to NYSE Arca Equities Rule 8.600, 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 will be in compliance with Rule 10A-3 \19\
under the Act, as provided by NYSE Arca Equities Rule 5.3. A minimum of
100,000 Shares will be outstanding at the commencement of trading on
the Exchange. The Exchange will obtain a representation from the issuer
of the Shares that the NAV per Share will be calculated daily and that
the NAV and the Disclosed Portfolio, as defined in NYSE Arca Equities
Rule 8.600(c)(2), will be made available to all market participants at
the same time.
---------------------------------------------------------------------------

\19\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws.\20\ The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to detect and help deter
violations of Exchange rules and applicable federal securities laws
applicable to trading on the Exchange.
---------------------------------------------------------------------------

\20\ FINRA surveils trading on the Exchange pursuant to a
regulatory services agreement. The Exchange is responsible for
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------

The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares and underlying Equity Securities and
equity index futures contracts with other markets and other entities
that are members of ISG and FINRA, on behalf of the Exchange, may
obtain trading information regarding trading in the Shares, Equity
Securities and equity index futures contracts from such markets and
other entities. In addition, the Exchange may obtain information
regarding trading in the Shares and underlying Equity Securities and
equity index futures contracts from markets and other entities that are
members of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement.\21\
---------------------------------------------------------------------------

\21\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on markets that are
members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
Equity Trading Permit (``ETP'') Holders in an Information Bulletin
(``Bulletin'') of the special characteristics and risks associated with
trading the Shares. Specifically, the Bulletin will discuss the
following: (1) The procedures for purchases and redemptions of Shares
in Creation Unit aggregations (and that Shares are not individually
redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty
of due diligence on its ETP Holders to learn the essential facts
relating to every customer prior to trading the Shares; (3) the risks
involved in trading the Shares during the Opening and Late Trading
Sessions when an updated Portfolio Indicative Value will not be
calculated or publicly disseminated; (4) how information regarding the
Portfolio Indicative Value and Disclosed Portfolio is disseminated; (5)
the requirement that ETP Holders

[[Page 33023]]

deliver a prospectus to investors purchasing newly issued Shares prior
to or concurrently with the confirmation of a transaction; and (6)
trading information.
In addition, the Bulletin will reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action and interpretive
relief granted by the Commission from any rules under the Act. The
Bulletin will also disclose that the NAV for the Shares will be
calculated after 4:00 p.m. E.T. each trading day.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \22\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

\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 NYSE Arca Equities Rule
8.600. The Exchange has in place surveillance procedures that are
adequate to properly monitor trading in the Shares in all trading
sessions and to deter and detect violations of Exchange rules and
applicable federal securities laws. The Exchange 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. All of the Equity Securities and equity index futures
contracts in which the Fund may invest will be listed on a U.S.
national exchange that is a member of ISG. The Fund's investments will,
under normal circumstances, be consistent with its investment
objective. As part of its non-principal strategy, the Fund will not
hold more than 15% of its net assets in illiquid securities (calculated
at the time of investment). The Adviser is not registered as a broker-
dealer, although it is affiliated with the Distributor, 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 the event (a)
the Adviser or any sub-adviser becomes, or becomes newly affiliated
with, a broker-dealer, or (b) any new adviser or sub-adviser is, or
becomes affiliated with, a broker-dealer, it will implement a fire wall
with respect to its relevant personnel or its broker-dealer affiliate
regarding access to information concerning the composition and/or
changes to the Fund's portfolio, and will be subject to procedures
designed to prevent the use and dissemination of material non-public
information regarding such portfolio.
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 Fund's portfolio
holdings will be disclosed on its Web site daily after the close of
trading on the Exchange and prior to the opening of trading on the
Exchange the following day. Moreover, the Portfolio Indicative Value
will be widely disseminated by one or more major market data vendors at
least every 15 seconds during the Core Trading Session. Information
regarding market price and trading volume of the Shares will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services, and quotation
and last sale information will be available via the CTA high-speed
line. The Web site for the Fund will include a form of the prospectus
for the Fund and additional data relating to the Fund's NAV and other
applicable quantitative information. Moreover, prior to the
commencement of trading, the Exchange will inform its ETP Holders in an
Information Bulletin of the special characteristics and risks
associated with trading the Shares. Trading in Shares of the Fund will
be halted if the circuit breaker parameters in NYSE Arca Equities Rule
7.12 have been reached or because of market conditions or for reasons
that, in the view of the Exchange, make trading in the Shares
inadvisable, and trading in the Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets forth circumstances under
which Shares of the Fund may be halted. In addition, as noted above,
investors will have ready access to information regarding the Fund's
holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and
quotation and last sale information for the Shares.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of actively-managed exchange-traded product that
will enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, the Exchange has in
place surveillance procedures relating to trading in the Shares and may
obtain information via ISG from other exchanges that are members of ISG
or with which the Exchange has entered into a comprehensive
surveillance sharing agreement. In addition, as noted above, investors
will have ready access to information regarding the Fund's holdings,
the Portfolio Indicative Value, the Disclosed Portfolio, and quotation
and last sale information for the Shares.

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

The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change 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.

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

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

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

Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.

[[Page 33024]]

IV. Solicitation of Comments

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

Electronic Comments

Use the Commission's Internet comment form https://www.sec.gov/rules/sro.shtml); or
Send an Email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2014-44 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2014-44. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2014-44 and should
be submitted on or before June 30, 2014.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

\23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13311 Filed 6-6-14; 8:45 am]
BILLING CODE 8011-01-P

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