Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to the First Trust California Municipal High Income ETF and the First Trust Municipal High Income ETF, 16739-16743 [2019-07992]

Download as PDF Federal Register / Vol. 84, No. 77 / Monday, April 22, 2019 / Notices amozie on DSK9F9SC42PROD with NOTICES collection of information requirements of Rule 31: 22 National securities exchanges, one security futures exchange, one national securities association, and two registered clearing agencies that are required to provide certain data in their possession needed by the SROs to complete Form R31, although these two clearing agencies are not themselves required to complete and submit Form R31. The Commission estimates that the total burden for all 26 respondents is 390 hours per year. The Commission estimates that, based on previous and current experience, three additional national securities exchanges will become registered and subject to the reporting requirements of Rule 31 over the course of the authorization period and collectively incur a burden of 18 hours per year. Thus, the Commission estimates the total burden for the existing and expected new respondents to be 408 hours per year. Written comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission’s estimate of the burden of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number. Please direct your written comments to: Charles Riddle, Acting Director/Chief Information Officer, Securities and Exchange Commission, c/o Candace Kenner, 100 F Street NE, Washington, DC 20549 or send an email to: PRA_ Mailbox@sec.gov. Dated: April 17, 2019. Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–08034 Filed 4–19–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–85666; File No. SR– NASDAQ–2019–021] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to the First Trust California Municipal High Income ETF and the First Trust Municipal High Income ETF April 16, 2019. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 2, 2019, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes a rule change relating to the First Trust California Municipal High Income ETF (the ‘‘California Fund’’) and the First Trust Municipal High Income ETF (the ‘‘Municipal Fund’’), each a series of First Trust Exchange-Traded Fund III (the ‘‘Trust’’), the shares of which have been approved by the Commission for listing and trading under Nasdaq Rule 5735 (‘‘Managed Fund Shares’’). The California Fund and the Municipal Fund are each, a ‘‘Fund’’ and collectively, the ‘‘Funds.’’ The shares of the Funds are collectively referred to herein as the ‘‘Shares.’’ The text of the proposed rule change is available on the Exchange’s website at https://nasdaq.cchwallstreet.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 Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the 1 15 2 17 VerDate Sep<11>2014 17:22 Apr 19, 2019 Jkt 247001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00103 Fmt 4703 Sfmt 4703 16739 places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Commission has approved the listing and trading of Shares under Nasdaq Rule 5735, which governs the listing and trading of Managed Fund Shares on the Exchange.3 The Exchange believes the proposed rule change reflects no significant issues not previously addressed in the Prior Releases. Each Fund is an actively-managed exchange-traded fund (‘‘ETF’’). The Shares of each Fund are offered by the Trust, which was established as a Massachusetts business trust on January 9, 2008. The Trust, which is registered with the Commission as an investment company under the Investment Company Act of 1940 (the ‘‘1940 Act’’), has, with respect to each Fund, filed a post-effective amendment to its registration statement on Form N–1A (‘‘Registration Statement’’) with the 3 The Commission approved Nasdaq Rule 5735 in Securities Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June 20, 2008) (SR– NASDAQ–2008–039). The Commission previously approved the listing and trading of the Shares of each Fund. With respect to the California Fund, see Securities Exchange Act Release No. 80745 (May 23, 2017), 82 FR 24755 (May 30, 2017) (SR– NASDAQ–2017–033) (Order Granting Approval of a Proposed Rule Change, as Modified by Amendments No. 1 and 2 (each, a ‘‘California Filing Amendment’’), To List and Trade Shares of the First Trust California Municipal High Income ETF) (the ‘‘California Prior Release’’). With respect to the Municipal Fund, see Securities Exchange Act Release No. 78913 (September 23, 2016), 81 FR 69109 (October 5, 2016) (SR–NASDAQ–2016–002) (Notice of Filing of Amendment No. 3, and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 3, To List and Trade Shares of the First Trust Municipal High Income ETF of First Trust Exchange-Traded Fund III) (the ‘‘Municipal 2016 Release’’). Subsequently, the Commission approved a proposed rule change relating to the Municipal Fund, the primary purpose of which was to modify certain representations included in the Municipal 2016 Release. See Securities Exchange Act Release No. 81265 (July 31, 2017), 82 FR 36460 (August 4, 2017) (SR–NASDAQ–2017–038) (Notice of Filing of Amendment No. 1, and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendments No. 1 and 2 (each, a ‘‘Municipal Filing Amendment’’), Relating to the First Trust Municipal High Income ETF) (the ‘‘Municipal 2017 Release’’). The Municipal 2016 Release, together with the Municipal 2017 Release, are referred to collectively as the ‘‘Municipal Prior Release.’’ The California Prior Release and the Municipal Prior Release are each, a ‘‘Prior Release’’ and collectively, the ‘‘Prior Releases.’’ E:\FR\FM\22APN1.SGM 22APN1 16740 Federal Register / Vol. 84, No. 77 / Monday, April 22, 2019 / Notices amozie on DSK9F9SC42PROD with NOTICES Commission.4 Each Fund is a series of the Trust. As described below, the purpose of this proposed rule change is to delete a representation set forth in each Fund’s Prior Release (i.e., the ‘‘40/50 Requirement,’’ as defined below) in order to provide the Adviser with additional flexibility in managing such Fund’s portfolio. The Exchange believes that the proposed modification would provide each Fund with greater ability to select from a broad range of ‘‘Municipal Securities’’ (as defined below) that would support such Fund’s investment goals. Further, the Exchange notes that other recently approved proposed rule changes involving ETFs investing in municipal securities did not include a representation comparable to the 40/50 Requirement.5 As described in the California Prior Release, the primary investment objective of the California Fund is to seek to provide current income that is exempt from regular federal income taxes and California income taxes, and its secondary objective is long-term capital appreciation. As described in the Municipal 2016 Release, the primary investment objective of the Municipal Fund is to generate current income that is exempt from regular federal income taxes, and its secondary objective is 4 See, with respect to each Fund, Post-Effective Amendment No. 98 to Registration Statement on Form N–1A for the Trust, dated November 28, 2018 (File Nos. 333–176976 and 811–22245). The descriptions of the Funds and the Shares contained herein are based, in part, on information in the Registration Statement. First Trust Advisors L.P. (the ‘‘Adviser’’) represents that the Adviser will not implement the changes described herein until the instant proposed rule change is operative. 5 See, e.g., Securities Exchange Act Release Nos. 84381 (October 5, 2018), 83 FR 51752 (October 12, 2018) (SR–NYSEArca–2018–72) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Listing and Trading of Shares of the First Trust Ultra Short Duration Municipal ETF Under NYSE Arca Rule 8.600–E); 84379 (October 5, 2018), 83 FR 51724 (October 12, 2018) (SR– NYSEArca–2018–73) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Listing and Trading of Shares of the First Trust Short Duration Managed Municipal ETF Under NYSE Arca Rule 8.600–E); 83982 (August 29, 2018), 83 FR 45168 (September 5, 2018) (SR– NYSEArca–2018–62) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Listing and Trading of Shares of the American Century Diversified Municipal Bond ETF Under NYSE Arca Rule 8.600–E); 82973 (March 30, 2018), 83 FR 14698 (April 5, 2018) (SR–NYSEArca– 2017–99) (Notice of Filing of Amendment No. 3 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 3, To List and Trade Shares of the Hartford Schroders Tax-Aware Bond ETF Under NYSE Arca Rule 8.600–E); and 82166 (November 29, 2017), 82 FR 57497 (December 5, 2017) (SR–NYSEArca 2017–90) (Order Approving a Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade Shares of the Hartford Municipal Opportunities ETF Under NYSE Arca Rule 8.600–E) (collectively, the ‘‘Recent Approvals’’). VerDate Sep<11>2014 17:22 Apr 19, 2019 Jkt 247001 long-term capital appreciation. Under normal market conditions, each Fund seeks to achieve its investment objectives by investing at least 80% of its net assets (including investment borrowings) in municipal debt securities (referred to as ‘‘Municipal Securities’’) that pay interest that is exempt from regular federal income taxes (and, in the case of the California Fund, California income taxes). As discussed in the Prior Release for each Fund,6 although certain representations included therein met or exceeded similar requirements set forth in the generic listing standards for actively-managed ETFs (‘‘Generic Listing Standards’’), it was not anticipated that either Fund would meet the requirement that components that in the aggregate account for at least 75% of the fixed income weight of the portfolio each have a minimum original principal amount outstanding of $100 million or more (the ‘‘75/100 Requirement’’).7 However, the Prior Releases each included a representation that under normal market conditions, except for the initial invest-up period and periods of high cash inflows or outflows, at least 40% (based on dollar amount invested) of the Municipal Securities in which the applicable Fund invests would be issued by issuers with total outstanding debt issuances that, in the aggregate, have a minimum amount of municipal debt outstanding at the time of purchase of $50 million or more (the ‘‘40/50 Requirement’’).8 In addition to the 40/50 Requirement, the Prior Releases also included certain other representations. In this regard, the Prior Releases provided that under normal market conditions, except for the initial invest-up period and periods of high cash inflows or outflows: 9 • Solely with respect to the California Prior Release and the California Fund, such Fund would invest at least 50% of its net assets in ‘‘investment grade Municipal Securities’’ as described in the California Prior Release; • No component fixed income security (excluding specified U.S. 6 See, with respect to the California Fund, the California Prior Release and with respect to the Municipal Fund, the Municipal 2017 Release. 7 See Nasdaq Rule 5735(b)(1)(B)(i). Similarly, each of the Recent Approvals stated that the applicable ETF would not meet the comparable requirement set forth in Commentary .01(b)(1) to NYSE Arca Rule 8.600–E. 8 See, with respect to the California Fund, the California Prior Release and with respect to the Municipal Fund, the Municipal 2017 Release. (The California Prior Release used the defined term ‘‘40/ 50 Requirement’’ while the Municipal 2017 Release used the defined term ‘‘40/50 Representation.’’) 9 See, with respect to the California Fund, the California Prior Release and with respect to the Municipal Fund, the Municipal 2017 Release. PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 government securities) would represent more than 15% of the applicable Fund’s net assets, and the five most heavily weighted component fixed income securities in such Fund’s portfolio (excluding U.S. government securities) would not, in the aggregate, account for more than 25% of such Fund’s net assets; • The applicable Fund’s portfolio of Municipal Securities would include securities from a minimum of 30 nonaffiliated issuers; and • Component securities that in the aggregate account for at least 90% of the weight of the applicable Fund’s portfolio of Municipal Securities would be exempted securities as defined in Section 3(a)(12) of the Act. Additionally, the Prior Releases referenced in the preceding paragraph stated that to the extent the applicable Fund invests in Municipal Securities that are mortgage-backed or assetbacked securities, such investments would not account, in the aggregate, for more than 20% of the weight of the fixed income portion of such Fund’s portfolio. In addition to the above, the Prior Releases: 10 • Limited the applicable Fund’s investments in illiquid assets (calculated at the time of investment), including Rule 144A securities deemed illiquid by the Adviser, to 15% of such Fund’s net assets; • Provided that subject to certain exceptions, the applicable Fund would not invest 25% or more of the value of its total assets in securities of issuers in any one industry; and • Provided that under normal market conditions, except for the initial investup period and periods of high cash inflows or outflows, the applicable Fund’s investments in Municipal Securities would provide exposure (based on dollar amount invested) to (a) at least 10 different industries (with no more than 25% of the value of such Fund’s net assets comprised of Municipal Securities that provide exposure to any single industry) and (b) solely with respect to the Municipal Prior Release and the Municipal Fund, at least 15 different states (with no more than 30% of the value of the Municipal Fund’s net assets comprised of Municipal Securities that provide exposure to any single state). (For purposes of this filing, the 40/50 Requirement and the representations described in the three immediately 10 See, with respect to the California Fund, the California Prior Release and with respect to the Municipal Fund, the Municipal 2016 Release and the Municipal 2017 Release. E:\FR\FM\22APN1.SGM 22APN1 Federal Register / Vol. 84, No. 77 / Monday, April 22, 2019 / Notices amozie on DSK9F9SC42PROD with NOTICES preceding paragraphs are collectively referred to as the ‘‘Representations.’’) In order to provide each Fund with greater ability to select from a broad range of Municipal Securities that would support such Fund’s investment goals, the Exchange is proposing that, going forward, the 40/50 Requirement be deleted.11 As noted above, the Recent Approvals did not include a comparable representation. Further, except for the deletion of the 40/50 Requirement, the Representations would not change. The Exchange believes that notwithstanding the deletion of the 40/50 Requirement, in light of the requirements that would continue to be imposed on each Fund’s portfolio, as described herein, the remaining Representations should continue to provide diversity and liquidity and should continue to mitigate the risks associated with manipulation. In particular, as noted above, under normal market conditions, except for the initial invest-up period and periods of high cash inflows or outflows, (a) for each Fund, no component fixed income security (excluding specified U.S. government securities) would represent more than 15% of such Fund’s net assets, and the five most heavily weighted component fixed income securities in each Fund’s portfolio (excluding U.S. government securities) would not, in the aggregate, account for more than 25% of such Fund’s net assets; (b) each Fund’s portfolio of Municipal Securities would continue to be diversified among a minimum of 30 non-affiliated issuers; (c) component securities that in the aggregate account for at least 90% of the weight of each Fund’s portfolio of Municipal Securities would continue to be exempted securities as defined in Section 3(a)(12) of the Act; and (d) each Fund’s investments in Municipal Securities would continue to provide exposure (based on dollar amount invested) to at least 10 different industries (with no more than 25% of the value of such Fund’s net assets comprised of Municipal Securities that provide exposure to any single industry). In addition, each Fund’s investments in illiquid assets (calculated at the time of investment), including Rule 144A securities deemed illiquid by the Adviser, would continue to be limited to 15% of such Fund’s net assets and, 11 As a related matter, going forward, the 40/50 Requirement would not be included within the meaning of the terms (i) ‘‘Portfolio Representations’’ set forth in California Filing Amendment No. 1 and (ii) ‘‘New Representations’’ set forth in Municipal Filing Amendment No. 1 and the Municipal 2017 Release. Further, going forward, neither Fund is expected to meet the 75/100 Requirement. VerDate Sep<11>2014 17:22 Apr 19, 2019 Jkt 247001 subject to certain exceptions, each Fund would not invest 25% or more of the value of its total assets in securities of issuers in any one industry. Further, with respect to the Municipal Fund, under normal market conditions, except for the initial invest-up period and periods of high cash inflows or outflows, such Fund’s investments in Municipal Securities would continue to provide exposure (based on dollar amount invested) to at least 15 different states (with no more than 30% of the value of such Fund’s net assets comprised of Municipal Securities that provide exposure to any single state). Continued Listing Representations For each Fund, all statements and representations made in this filing regarding (a) the description of the portfolio or reference assets, (b) limitations on portfolio holdings or reference assets, (c) dissemination and availability of the reference asset or intraday indicative values, or (d) the applicability of Exchange listing rules shall constitute continued listing requirements for listing the applicable Shares on the Exchange. In addition, the issuer has represented to the Exchange that it will advise the Exchange of any failure by a Fund to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. If a Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures with respect to such Fund under the Nasdaq 5800 Series. The Adviser represents that there would be no change to either Fund’s investment objectives. Except as provided herein, with respect to each Fund, all representations made in the applicable Prior Release regarding (a) the description of the portfolio or reference assets, (b) limitations on portfolio holdings or reference assets, (c) dissemination and availability of the reference asset or intraday indicative values, or (d) the applicability of Exchange listing rules (collectively, ‘‘Prior Release Continued Listing Representations’’) would remain unchanged. Except for the generic listing provisions of Nasdaq Rule 5735(b)(1) (the ‘‘generic listing standards’’) and as otherwise provided in this filing, the Funds and the Shares would continue to comply with the requirements applicable to Managed Fund Shares under Nasdaq Rule 5735. PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 16741 2. Statutory Basis Nasdaq believes that the proposal is consistent with Section 6(b) of the Act in general and Section 6(b)(5) of the Act, in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest. The purpose of this proposed rule change is to delete the 40/50 Requirement in order to provide the Adviser with additional flexibility in managing each Fund’s portfolio. The Exchange believes that the proposed modification would provide each Fund with greater ability to select from a broad range of Municipal Securities that would support such Fund’s investment goals. Except as provided herein, the Prior Release Continued Listing Representations for each Fund would remain unchanged. Except for the generic listing standards and as otherwise provided in this filing, the Funds and the Shares would continue to comply with the requirements applicable to Managed Fund Shares under Nasdaq Rule 5735. The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares would continue to be listed and traded on the Exchange pursuant to Nasdaq Rule 5735. The Exchange also notes the continued listing representations set forth above. The Exchange represents that trading in the Shares would continue to be subject to the existing trading surveillances, administered by both Nasdaq and also the Financial Industry Regulatory Authority (‘‘FINRA’’), on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws. 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 deletion of the 40/50 Requirement is intended to provide each Fund with greater ability to select from a broad range of Municipal Securities that would support such Fund’s investment goals. Except for the deletion of the 40/50 Requirement, the Representations would not change. The Exchange believes that notwithstanding the deletion of the 40/50 Requirement, in light of the requirements that would E:\FR\FM\22APN1.SGM 22APN1 amozie on DSK9F9SC42PROD with NOTICES 16742 Federal Register / Vol. 84, No. 77 / Monday, April 22, 2019 / Notices continue to be imposed on each Fund’s portfolio, as described herein, the remaining Representations should continue to provide diversity and liquidity and should continue to mitigate the risks associated with manipulation. In particular, as noted above, under normal market conditions, except for the initial invest-up period and periods of high cash inflows or outflows, (a) for each Fund, no component fixed income security (excluding specified U.S. government securities) would represent more than 15% of such Fund’s net assets, and the five most heavily weighted component fixed income securities in each Fund’s portfolio (excluding U.S. government securities) would not, in the aggregate, account for more than 25% of such Fund’s net assets; (b) each Fund’s portfolio of Municipal Securities would continue to be diversified among a minimum of 30 non-affiliated issuers; (c) component securities that in the aggregate account for at least 90% of the weight of each Fund’s portfolio of Municipal Securities would continue to be exempted securities as defined in Section 3(a)(12) of the Act; and (d) each Fund’s investments in Municipal Securities would continue to provide exposure (based on dollar amount invested) to at least 10 different industries (with no more than 25% of the value of such Fund’s net assets comprised of Municipal Securities that provide exposure to any single industry). In addition, each Fund’s investments in illiquid assets (calculated at the time of investment), including Rule 144A securities deemed illiquid by the Adviser, would continue to be limited to 15% of such Fund’s net assets and, subject to certain exceptions, each Fund would not invest 25% or more of the value of its total assets in securities of issuers in any one industry. Further, with respect to the Municipal Fund, under normal market conditions, except for the initial invest-up period and periods of high cash inflows or outflows, such Fund’s investments in Municipal Securities would continue to provide exposure (based on dollar amount invested) to at least 15 different states (with no more than 30% of the value of such Fund’s net assets comprised of Municipal Securities that provide exposure to any single state). The Exchange also notes that the Recent Approvals did not include a representation comparable to the 40/50 Requirement. In addition, a large amount of information would continue to be publicly available regarding the Funds and the Shares, thereby promoting VerDate Sep<11>2014 17:22 Apr 19, 2019 Jkt 247001 market transparency. For example, the Intraday Indicative Value (as described in the Prior Releases), available on the Nasdaq Information LLC proprietary index data service, would continue to be widely disseminated by one or more major market data vendors and broadly displayed at least every 15 seconds during the Regular Market Session. On each business day, before commencement of trading in Shares in the Regular Market Session on the Exchange, each Fund would continue to disclose on its website the Disclosed Portfolio (as defined in Nasdaq Rule 5735(c)(2)) that will form the basis for such Fund’s calculation of net asset value (‘‘NAV’’) at the end of the business day. 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 the additional flexibility to be afforded to the Adviser under the proposed rule change is intended to enhance each Fund’s ability to meet its investment goals, to the benefit of investors. In addition, consistent with the Prior Releases, NAV per Share would continue to be calculated daily and each Fund’s Disclosed Portfolio would continue to be made available to all market participants at the same time. Further, investors would continue to have ready access to information regarding each Fund’s holdings, the Intraday Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares. For the above reasons, Nasdaq believes the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes that the proposed rule change would provide the Adviser with additional flexibility in managing the Funds, thereby helping each Fund to achieve its investment goals. As such, it is expected that each Fund may become a more attractive investment product in the marketplace and, therefore, that the proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 12 and subparagraph (f)(6) of Rule 19b–4 thereunder.13 At any time within 60 days of the filing of the 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 to determine whether the proposed rule 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: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2019–021 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2019–021. This 12 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 13 17 E:\FR\FM\22APN1.SGM 22APN1 Federal Register / Vol. 84, No. 77 / Monday, April 22, 2019 / Notices 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 website (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 website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NASDAQ–2019–021, and should be submitted on or before May 13, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–07992 Filed 4–19–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION amozie on DSK9F9SC42PROD with NOTICES [Release No. 34–85668; File No. SR– CboeEDGA–2019–006] Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Pilot Program Related to EDGA Rule 11.16, Trading Halts Due to Extraordinary Market Volatility, to the Close of Business on October 18, 2019 April 16, 2019. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the 14 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:22 Apr 19, 2019 Jkt 247001 ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 12, 2019, Cboe EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 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 Cboe EDGA Exchange, Inc. (‘‘EDGA’’ or the ‘‘Exchange’’) is filing with the Securities and Exchange Commission (the ‘‘Commission’’) a proposed rule change to extend the pilot program related to EDGA Rule 11.16, Trading Halts Due to Extraordinary Market Volatility, to the close of business on October 18, 2019. The text of the proposed rule change is attached as Exhibit 5[sic]. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/edga/), at the Exchange’s Office of the Secretary, 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 Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose EDGA Rules 11.16(a) through (d), (f) and (g) describe the methodology for determining when to halt trading in all stocks due to extraordinary market 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 2 17 PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 16743 volatility, i.e., market-wide circuit breakers. The market-wide circuit breaker mechanism was approved by the Commission to operate on a pilot basis, the term of which is to coincide with the pilot period for the Plan to Address Extraordinary Market Volatility Pursuant to Rule 608 of Regulation NMS (the ‘‘LULD Plan’’ or ‘‘Plan’’),5 including any extensions to the pilot period for the Plan. The Commission published an amendment to the LULD Plan for it to operate on a permanent, rather than pilot, basis on December 18, 2018,6 and the Commission approved that amendment on April 11, 2019.7 Market-wide circuit breakers provide an important, automatic mechanism that is invoked to promote stability and investor confidence during a period of significant stress when securities markets experience extreme broad-based declines. All U.S. equities exchanges have similar rules related to marketwide circuit breakers, which are designed to slow the effects of extreme price movement through coordinated trading halts across securities markets when severe price declines reach levels that may exhaust market liquidity. Market-wide circuit breakers provide for trading halts in all equities markets during a severe market decline as measured by a single-day decline in the S&P 500 Index. Pursuant to EDGA Rule 11.16, a market-wide trading halt will be triggered if the S&P 500 Index declines in price by specified percentages from the prior day’s closing price of that index. Currently, the triggers are set at three circuit breaker thresholds: 7% (Level 1), 13% (Level 2) and 20% (Level 3). A market decline that triggers a Level 1 or Level 2 circuit breaker after 9:30 a.m. ET and before 3:25 p.m. ET would halt market-wide trading for 15 minutes, while a similar market decline at or after 3:25 p.m. ET would not halt marketwide trading. A market decline that triggers a Level 3 circuit breaker, at any time during the trading day, would halt market-wide trading for the remainder of the trading day. The Exchange proposes to amend EDGA Rule 11.16 to untie the market-wide circuit breaker pilot program’s effectiveness from that of the LULD Plan and to extend pilot’s effectiveness to the close of business on October 18, 2019. 5 See Securities Exchange Act Release No. 67091 (May 31, 2012), 77 FR 33498 (June 6, 2012) (the ‘‘Limit Up-Limit Down Release’’). 6 See Securities Exchange Act Release No. 84843 (December 18, 2018), 83 FR 66464 (December 26, 2018) (Amendment No. 18 Proposing Release). 7 See Securities Exchange Act Release No. 85623 (April 11, 2018) (Federal Register publication pending) (Amendment No. 18 Approval Order). E:\FR\FM\22APN1.SGM 22APN1

Agencies

[Federal Register Volume 84, Number 77 (Monday, April 22, 2019)]
[Notices]
[Pages 16739-16743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-07992]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85666; File No. SR-NASDAQ-2019-021]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
the First Trust California Municipal High Income ETF and the First 
Trust Municipal High Income ETF

April 16, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 2, 2019, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III, below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes a rule change relating to the First Trust 
California Municipal High Income ETF (the ``California Fund'') and the 
First Trust Municipal High Income ETF (the ``Municipal Fund''), each a 
series of First Trust Exchange-Traded Fund III (the ``Trust''), the 
shares of which have been approved by the Commission for listing and 
trading under Nasdaq Rule 5735 (``Managed Fund Shares''). The 
California Fund and the Municipal Fund are each, a ``Fund'' and 
collectively, the ``Funds.'' The shares of the Funds are collectively 
referred to herein as the ``Shares.''
    The text of the proposed rule change is available on the Exchange's 
website at https://nasdaq.cchwallstreet.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 Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Commission has approved the listing and trading of Shares under 
Nasdaq Rule 5735, which governs the listing and trading of Managed Fund 
Shares on the Exchange.\3\ The Exchange believes the proposed rule 
change reflects no significant issues not previously addressed in the 
Prior Releases.
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    \3\ The Commission approved Nasdaq Rule 5735 in Securities 
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June 
20, 2008) (SR-NASDAQ-2008-039). The Commission previously approved 
the listing and trading of the Shares of each Fund. With respect to 
the California Fund, see Securities Exchange Act Release No. 80745 
(May 23, 2017), 82 FR 24755 (May 30, 2017) (SR-NASDAQ-2017-033) 
(Order Granting Approval of a Proposed Rule Change, as Modified by 
Amendments No. 1 and 2 (each, a ``California Filing Amendment''), To 
List and Trade Shares of the First Trust California Municipal High 
Income ETF) (the ``California Prior Release''). With respect to the 
Municipal Fund, see Securities Exchange Act Release No. 78913 
(September 23, 2016), 81 FR 69109 (October 5, 2016) (SR-NASDAQ-2016-
002) (Notice of Filing of Amendment No. 3, and Order Granting 
Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 3, To List and Trade Shares of the First Trust 
Municipal High Income ETF of First Trust Exchange-Traded Fund III) 
(the ``Municipal 2016 Release''). Subsequently, the Commission 
approved a proposed rule change relating to the Municipal Fund, the 
primary purpose of which was to modify certain representations 
included in the Municipal 2016 Release. See Securities Exchange Act 
Release No. 81265 (July 31, 2017), 82 FR 36460 (August 4, 2017) (SR-
NASDAQ-2017-038) (Notice of Filing of Amendment No. 1, and Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified 
by Amendments No. 1 and 2 (each, a ``Municipal Filing Amendment''), 
Relating to the First Trust Municipal High Income ETF) (the 
``Municipal 2017 Release''). The Municipal 2016 Release, together 
with the Municipal 2017 Release, are referred to collectively as the 
``Municipal Prior Release.'' The California Prior Release and the 
Municipal Prior Release are each, a ``Prior Release'' and 
collectively, the ``Prior Releases.''
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    Each Fund is an actively-managed exchange-traded fund (``ETF''). 
The Shares of each Fund are offered by the Trust, which was established 
as a Massachusetts business trust on January 9, 2008. The Trust, which 
is registered with the Commission as an investment company under the 
Investment Company Act of 1940 (the ``1940 Act''), has, with respect to 
each Fund, filed a post-effective amendment to its registration 
statement on Form N-1A (``Registration Statement'') with the

[[Page 16740]]

Commission.\4\ Each Fund is a series of the Trust.
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    \4\ See, with respect to each Fund, Post-Effective Amendment No. 
98 to Registration Statement on Form N-1A for the Trust, dated 
November 28, 2018 (File Nos. 333-176976 and 811-22245). The 
descriptions of the Funds and the Shares contained herein are based, 
in part, on information in the Registration Statement. First Trust 
Advisors L.P. (the ``Adviser'') represents that the Adviser will not 
implement the changes described herein until the instant proposed 
rule change is operative.
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    As described below, the purpose of this proposed rule change is to 
delete a representation set forth in each Fund's Prior Release (i.e., 
the ``40/50 Requirement,'' as defined below) in order to provide the 
Adviser with additional flexibility in managing such Fund's portfolio. 
The Exchange believes that the proposed modification would provide each 
Fund with greater ability to select from a broad range of ``Municipal 
Securities'' (as defined below) that would support such Fund's 
investment goals. Further, the Exchange notes that other recently 
approved proposed rule changes involving ETFs investing in municipal 
securities did not include a representation comparable to the 40/50 
Requirement.\5\
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    \5\ See, e.g., Securities Exchange Act Release Nos. 84381 
(October 5, 2018), 83 FR 51752 (October 12, 2018) (SR-NYSEArca-2018-
72) (Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Relating to Listing and Trading of Shares of the First Trust 
Ultra Short Duration Municipal ETF Under NYSE Arca Rule 8.600-E); 
84379 (October 5, 2018), 83 FR 51724 (October 12, 2018) (SR-
NYSEArca-2018-73) (Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change Relating to Listing and Trading of Shares of 
the First Trust Short Duration Managed Municipal ETF Under NYSE Arca 
Rule 8.600-E); 83982 (August 29, 2018), 83 FR 45168 (September 5, 
2018) (SR-NYSEArca-2018-62) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change Relating to Listing and 
Trading of Shares of the American Century Diversified Municipal Bond 
ETF Under NYSE Arca Rule 8.600-E); 82973 (March 30, 2018), 83 FR 
14698 (April 5, 2018) (SR-NYSEArca-2017-99) (Notice of Filing of 
Amendment No. 3 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 3, To List and 
Trade Shares of the Hartford Schroders Tax-Aware Bond ETF Under NYSE 
Arca Rule 8.600-E); and 82166 (November 29, 2017), 82 FR 57497 
(December 5, 2017) (SR-NYSEArca 2017-90) (Order Approving a Proposed 
Rule Change, as Modified by Amendment No. 2, To List and Trade 
Shares of the Hartford Municipal Opportunities ETF Under NYSE Arca 
Rule 8.600-E) (collectively, the ``Recent Approvals'').
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    As described in the California Prior Release, the primary 
investment objective of the California Fund is to seek to provide 
current income that is exempt from regular federal income taxes and 
California income taxes, and its secondary objective is long-term 
capital appreciation. As described in the Municipal 2016 Release, the 
primary investment objective of the Municipal Fund is to generate 
current income that is exempt from regular federal income taxes, and 
its secondary objective is long-term capital appreciation. Under normal 
market conditions, each Fund seeks to achieve its investment objectives 
by investing at least 80% of its net assets (including investment 
borrowings) in municipal debt securities (referred to as ``Municipal 
Securities'') that pay interest that is exempt from regular federal 
income taxes (and, in the case of the California Fund, California 
income taxes).
    As discussed in the Prior Release for each Fund,\6\ although 
certain representations included therein met or exceeded similar 
requirements set forth in the generic listing standards for actively-
managed ETFs (``Generic Listing Standards''), it was not anticipated 
that either Fund would meet the requirement that components that in the 
aggregate account for at least 75% of the fixed income weight of the 
portfolio each have a minimum original principal amount outstanding of 
$100 million or more (the ``75/100 Requirement'').\7\ However, the 
Prior Releases each included a representation that under normal market 
conditions, except for the initial invest-up period and periods of high 
cash inflows or outflows, at least 40% (based on dollar amount 
invested) of the Municipal Securities in which the applicable Fund 
invests would be issued by issuers with total outstanding debt 
issuances that, in the aggregate, have a minimum amount of municipal 
debt outstanding at the time of purchase of $50 million or more (the 
``40/50 Requirement'').\8\
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    \6\ See, with respect to the California Fund, the California 
Prior Release and with respect to the Municipal Fund, the Municipal 
2017 Release.
    \7\ See Nasdaq Rule 5735(b)(1)(B)(i). Similarly, each of the 
Recent Approvals stated that the applicable ETF would not meet the 
comparable requirement set forth in Commentary .01(b)(1) to NYSE 
Arca Rule 8.600-E.
    \8\ See, with respect to the California Fund, the California 
Prior Release and with respect to the Municipal Fund, the Municipal 
2017 Release. (The California Prior Release used the defined term 
``40/50 Requirement'' while the Municipal 2017 Release used the 
defined term ``40/50 Representation.'')
---------------------------------------------------------------------------

    In addition to the 40/50 Requirement, the Prior Releases also 
included certain other representations. In this regard, the Prior 
Releases provided that under normal market conditions, except for the 
initial invest-up period and periods of high cash inflows or outflows: 
\9\
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    \9\ See, with respect to the California Fund, the California 
Prior Release and with respect to the Municipal Fund, the Municipal 
2017 Release.
---------------------------------------------------------------------------

     Solely with respect to the California Prior Release and 
the California Fund, such Fund would invest at least 50% of its net 
assets in ``investment grade Municipal Securities'' as described in the 
California Prior Release;
     No component fixed income security (excluding specified 
U.S. government securities) would represent more than 15% of the 
applicable Fund's net assets, and the five most heavily weighted 
component fixed income securities in such Fund's portfolio (excluding 
U.S. government securities) would not, in the aggregate, account for 
more than 25% of such Fund's net assets;
     The applicable Fund's portfolio of Municipal Securities 
would include securities from a minimum of 30 non-affiliated issuers; 
and
     Component securities that in the aggregate account for at 
least 90% of the weight of the applicable Fund's portfolio of Municipal 
Securities would be exempted securities as defined in Section 3(a)(12) 
of the Act.
    Additionally, the Prior Releases referenced in the preceding 
paragraph stated that to the extent the applicable Fund invests in 
Municipal Securities that are mortgage-backed or asset-backed 
securities, such investments would not account, in the aggregate, for 
more than 20% of the weight of the fixed income portion of such Fund's 
portfolio.
    In addition to the above, the Prior Releases: \10\
---------------------------------------------------------------------------

    \10\ See, with respect to the California Fund, the California 
Prior Release and with respect to the Municipal Fund, the Municipal 
2016 Release and the Municipal 2017 Release.
---------------------------------------------------------------------------

     Limited the applicable Fund's investments in illiquid 
assets (calculated at the time of investment), including Rule 144A 
securities deemed illiquid by the Adviser, to 15% of such Fund's net 
assets;
     Provided that subject to certain exceptions, the 
applicable Fund would not invest 25% or more of the value of its total 
assets in securities of issuers in any one industry; and
     Provided that under normal market conditions, except for 
the initial invest-up period and periods of high cash inflows or 
outflows, the applicable Fund's investments in Municipal Securities 
would provide exposure (based on dollar amount invested) to (a) at 
least 10 different industries (with no more than 25% of the value of 
such Fund's net assets comprised of Municipal Securities that provide 
exposure to any single industry) and (b) solely with respect to the 
Municipal Prior Release and the Municipal Fund, at least 15 different 
states (with no more than 30% of the value of the Municipal Fund's net 
assets comprised of Municipal Securities that provide exposure to any 
single state).

(For purposes of this filing, the 40/50 Requirement and the 
representations described in the three immediately

[[Page 16741]]

preceding paragraphs are collectively referred to as the 
``Representations.'')
    In order to provide each Fund with greater ability to select from a 
broad range of Municipal Securities that would support such Fund's 
investment goals, the Exchange is proposing that, going forward, the 
40/50 Requirement be deleted.\11\ As noted above, the Recent Approvals 
did not include a comparable representation. Further, except for the 
deletion of the 40/50 Requirement, the Representations would not 
change. The Exchange believes that notwithstanding the deletion of the 
40/50 Requirement, in light of the requirements that would continue to 
be imposed on each Fund's portfolio, as described herein, the remaining 
Representations should continue to provide diversity and liquidity and 
should continue to mitigate the risks associated with manipulation.
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    \11\ As a related matter, going forward, the 40/50 Requirement 
would not be included within the meaning of the terms (i) 
``Portfolio Representations'' set forth in California Filing 
Amendment No. 1 and (ii) ``New Representations'' set forth in 
Municipal Filing Amendment No. 1 and the Municipal 2017 Release. 
Further, going forward, neither Fund is expected to meet the 75/100 
Requirement.
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    In particular, as noted above, under normal market conditions, 
except for the initial invest-up period and periods of high cash 
inflows or outflows, (a) for each Fund, no component fixed income 
security (excluding specified U.S. government securities) would 
represent more than 15% of such Fund's net assets, and the five most 
heavily weighted component fixed income securities in each Fund's 
portfolio (excluding U.S. government securities) would not, in the 
aggregate, account for more than 25% of such Fund's net assets; (b) 
each Fund's portfolio of Municipal Securities would continue to be 
diversified among a minimum of 30 non-affiliated issuers; (c) component 
securities that in the aggregate account for at least 90% of the weight 
of each Fund's portfolio of Municipal Securities would continue to be 
exempted securities as defined in Section 3(a)(12) of the Act; and (d) 
each Fund's investments in Municipal Securities would continue to 
provide exposure (based on dollar amount invested) to at least 10 
different industries (with no more than 25% of the value of such Fund's 
net assets comprised of Municipal Securities that provide exposure to 
any single industry). In addition, each Fund's investments in illiquid 
assets (calculated at the time of investment), including Rule 144A 
securities deemed illiquid by the Adviser, would continue to be limited 
to 15% of such Fund's net assets and, subject to certain exceptions, 
each Fund would not invest 25% or more of the value of its total assets 
in securities of issuers in any one industry. Further, with respect to 
the Municipal Fund, under normal market conditions, except for the 
initial invest-up period and periods of high cash inflows or outflows, 
such Fund's investments in Municipal Securities would continue to 
provide exposure (based on dollar amount invested) to at least 15 
different states (with no more than 30% of the value of such Fund's net 
assets comprised of Municipal Securities that provide exposure to any 
single state).
Continued Listing Representations
    For each Fund, all statements and representations made in this 
filing regarding (a) the description of the portfolio or reference 
assets, (b) limitations on portfolio holdings or reference assets, (c) 
dissemination and availability of the reference asset or intraday 
indicative values, or (d) the applicability of Exchange listing rules 
shall constitute continued listing requirements for listing the 
applicable Shares on the Exchange. In addition, the issuer has 
represented to the Exchange that it will advise the Exchange of any 
failure by a Fund to comply with the continued listing requirements, 
and, pursuant to its obligations under Section 19(g)(1) of the Act, the 
Exchange will monitor for compliance with the continued listing 
requirements. If a Fund is not in compliance with the applicable 
listing requirements, the Exchange will commence delisting procedures 
with respect to such Fund under the Nasdaq 5800 Series.
    The Adviser represents that there would be no change to either 
Fund's investment objectives. Except as provided herein, with respect 
to each Fund, all representations made in the applicable Prior Release 
regarding (a) the description of the portfolio or reference assets, (b) 
limitations on portfolio holdings or reference assets, (c) 
dissemination and availability of the reference asset or intraday 
indicative values, or (d) the applicability of Exchange listing rules 
(collectively, ``Prior Release Continued Listing Representations'') 
would remain unchanged. Except for the generic listing provisions of 
Nasdaq Rule 5735(b)(1) (the ``generic listing standards'') and as 
otherwise provided in this filing, the Funds and the Shares would 
continue to comply with the requirements applicable to Managed Fund 
Shares under Nasdaq Rule 5735.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b) 
of the Act in general and Section 6(b)(5) of the Act, in particular, in 
that it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and, in general, to protect 
investors and the public interest.
    The purpose of this proposed rule change is to delete the 40/50 
Requirement in order to provide the Adviser with additional flexibility 
in managing each Fund's portfolio. The Exchange believes that the 
proposed modification would provide each Fund with greater ability to 
select from a broad range of Municipal Securities that would support 
such Fund's investment goals. Except as provided herein, the Prior 
Release Continued Listing Representations for each Fund would remain 
unchanged. Except for the generic listing standards and as otherwise 
provided in this filing, the Funds and the Shares would continue to 
comply with the requirements applicable to Managed Fund Shares under 
Nasdaq Rule 5735.
    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares would continue to be listed and traded on the Exchange pursuant 
to Nasdaq Rule 5735. The Exchange also notes the continued listing 
representations set forth above. The Exchange represents that trading 
in the Shares would continue to be subject to the existing trading 
surveillances, administered by both Nasdaq and also the Financial 
Industry Regulatory Authority (``FINRA''), on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws.
    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 deletion of the 40/50 Requirement is intended to provide each 
Fund with greater ability to select from a broad range of Municipal 
Securities that would support such Fund's investment goals. Except for 
the deletion of the 40/50 Requirement, the Representations would not 
change. The Exchange believes that notwithstanding the deletion of the 
40/50 Requirement, in light of the requirements that would

[[Page 16742]]

continue to be imposed on each Fund's portfolio, as described herein, 
the remaining Representations should continue to provide diversity and 
liquidity and should continue to mitigate the risks associated with 
manipulation.
    In particular, as noted above, under normal market conditions, 
except for the initial invest-up period and periods of high cash 
inflows or outflows, (a) for each Fund, no component fixed income 
security (excluding specified U.S. government securities) would 
represent more than 15% of such Fund's net assets, and the five most 
heavily weighted component fixed income securities in each Fund's 
portfolio (excluding U.S. government securities) would not, in the 
aggregate, account for more than 25% of such Fund's net assets; (b) 
each Fund's portfolio of Municipal Securities would continue to be 
diversified among a minimum of 30 non-affiliated issuers; (c) component 
securities that in the aggregate account for at least 90% of the weight 
of each Fund's portfolio of Municipal Securities would continue to be 
exempted securities as defined in Section 3(a)(12) of the Act; and (d) 
each Fund's investments in Municipal Securities would continue to 
provide exposure (based on dollar amount invested) to at least 10 
different industries (with no more than 25% of the value of such Fund's 
net assets comprised of Municipal Securities that provide exposure to 
any single industry). In addition, each Fund's investments in illiquid 
assets (calculated at the time of investment), including Rule 144A 
securities deemed illiquid by the Adviser, would continue to be limited 
to 15% of such Fund's net assets and, subject to certain exceptions, 
each Fund would not invest 25% or more of the value of its total assets 
in securities of issuers in any one industry. Further, with respect to 
the Municipal Fund, under normal market conditions, except for the 
initial invest-up period and periods of high cash inflows or outflows, 
such Fund's investments in Municipal Securities would continue to 
provide exposure (based on dollar amount invested) to at least 15 
different states (with no more than 30% of the value of such Fund's net 
assets comprised of Municipal Securities that provide exposure to any 
single state). The Exchange also notes that the Recent Approvals did 
not include a representation comparable to the 40/50 Requirement.
    In addition, a large amount of information would continue to be 
publicly available regarding the Funds and the Shares, thereby 
promoting market transparency. For example, the Intraday Indicative 
Value (as described in the Prior Releases), available on the Nasdaq 
Information LLC proprietary index data service, would continue to be 
widely disseminated by one or more major market data vendors and 
broadly displayed at least every 15 seconds during the Regular Market 
Session. On each business day, before commencement of trading in Shares 
in the Regular Market Session on the Exchange, each Fund would continue 
to disclose on its website the Disclosed Portfolio (as defined in 
Nasdaq Rule 5735(c)(2)) that will form the basis for such Fund's 
calculation of net asset value (``NAV'') at the end of the business 
day.
    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 the additional flexibility to be afforded to 
the Adviser under the proposed rule change is intended to enhance each 
Fund's ability to meet its investment goals, to the benefit of 
investors. In addition, consistent with the Prior Releases, NAV per 
Share would continue to be calculated daily and each Fund's Disclosed 
Portfolio would continue to be made available to all market 
participants at the same time. Further, investors would continue to 
have ready access to information regarding each Fund's holdings, the 
Intraday Indicative Value, the Disclosed Portfolio, and quotation and 
last sale information for the Shares.
    For the above reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that 
the proposed rule change would provide the Adviser with additional 
flexibility in managing the Funds, thereby helping each Fund to achieve 
its investment goals. As such, it is expected that each Fund may become 
a more attractive investment product in the marketplace and, therefore, 
that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the 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 to 
determine whether the proposed rule 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:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2019-021 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2019-021. This

[[Page 16743]]

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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2019-021, and should be submitted 
on or before May 13, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-07992 Filed 4-19-19; 8:45 am]
 BILLING CODE 8011-01-P
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