[Federal Register Volume 80, Number 138 (Monday, July 20, 2015)]
[Notices]
[Pages 42847-42855]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17658]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75447; File No. SR-NASDAQ-2015-075]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change Relating to the Listing and
Trading of Shares of the First Trust SSI Strategic Convertible
Securities ETF of First Trust Exchange-Traded Fund IV
July 14, 2015.
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 July 2, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by Nasdaq. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq proposes to list and trade the shares of the First Trust SSI
Strategic Convertible Securities ETF (the ``Fund'') of First Trust
Exchange-Traded Fund IV (the ``Trust'') under Nasdaq Rule 5735
(``Managed Fund Shares'').\3\ The shares
[[Page 42848]]
of the Fund are collectively referred to herein as the ``Shares.''
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\3\ The Commission approved Nasdaq Rule 5735 in Securities
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June
20, 2008) (SR-NASDAQ-2008-039). There are already multiple actively-
managed funds listed on the Exchange; see, e.g., Securities Exchange
Act Release Nos. 72506 (July 1, 2014), 79 FR 38631 (July 8, 2014)
(SR-NASDAQ-2014-050) (order approving listing and trading of First
Trust Strategic Income ETF); 69464 (April 26, 2013), 78 FR 25774
(May 2, 2013) (SR-NASDAQ-2013-036) (order approving listing and
trading of First Trust Senior Loan Fund); and 66489 (February 29,
2012), 77 FR 13379 (March 6, 2012) (SR-NASDAQ-2012-004) (order
approving listing and trading of WisdomTree Emerging Markets
Corporate Bond Fund). The Exchange believes the proposed rule change
raises no significant issues not previously addressed in those prior
Commission orders.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, Nasdaq included statements
concerning the purpose of, and basis for, the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. Nasdaq has prepared summaries, set forth in Sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade the Shares of the Fund
under Nasdaq Rule 5735, which governs the listing and trading of
Managed Fund Shares \4\ on the Exchange. The Fund will be an actively-
managed exchange-traded fund (``ETF''). The Shares will be offered by
the Trust, which was established as a Massachusetts business trust on
September 15, 2010.\5\ The Trust is registered with the Commission as
an investment company and has filed a registration statement on Form N-
1A (``Registration Statement'') with the Commission.\6\ The Fund will
be a series of the Trust. The Fund intends to qualify each year as a
regulated investment company (``RIC'') under Subchapter M of the
Internal Revenue Code of 1986, as amended.
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\4\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (the ``1940 Act'') organized
as an open-end investment company or similar entity that invests in
a portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Index Fund Shares, listed
and traded on the Exchange under Nasdaq Rule 5705, seeks to provide
investment results that correspond generally to the price and yield
performance of a specific foreign or domestic stock index, fixed
income securities index or combination thereof.
\5\ The Commission has issued an order, upon which the Trust may
rely, granting certain exemptive relief under the 1940 Act. See
Investment Company Act Release No. 30029 (April 10, 2012) (File No.
812-13795) (the ``Exemptive Relief''). In addition, the Commission
has issued no-action relief, upon which the Trust may rely,
pertaining to the Fund's ability to invest in options contracts,
futures contracts and swap agreements notwithstanding certain
representations in the application for the Exemptive Relief. See
Commission No-Action Letter (December 6, 2012).
\6\ See Post-Effective Amendment No. 120 to Registration
Statement on Form N-1A for the Trust, dated June 25, 2015 (File Nos.
333-174332 and 811-22559). The descriptions of the Fund and the
Shares contained herein are based, in part, on information in the
Registration Statement.
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First Trust Advisors L.P. will be the investment adviser
(``Adviser'') to the Fund. SSI Investment Management Inc. will serve as
investment sub-adviser (``Sub-Adviser'') to the Fund and provide day-
to-day portfolio management. First Trust Portfolios L.P. (the
``Distributor'') will be the principal underwriter and distributor of
the Fund's Shares. The Bank of New York Mellon Corporation (``BNY'')
will act as the administrator, accounting agent, custodian and transfer
agent to the Fund.
Paragraph (g) of Rule 5735 provides that if the investment adviser
to the investment company issuing Managed Fund Shares is affiliated
with a broker-dealer, such investment adviser shall erect a ``fire
wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such investment company portfolio.\7\ In addition, paragraph
(g) further requires that personnel who make decisions on the open-end
fund's portfolio composition must be subject to procedures designed to
prevent the use and dissemination of material non-public information
regarding the open-end fund's portfolio. Rule 5735(g) is similar to
Nasdaq Rule 5705(b)(5)(A)(i); however, paragraph (g) in connection with
the establishment of a ``fire wall'' between the investment adviser and
the broker-dealer reflects the applicable open-end fund's portfolio,
not an underlying benchmark index, as is the case with index-based
funds. Neither the Adviser nor the Sub-Adviser is a broker-dealer,
although the Adviser is affiliated with the Distributor, a broker-
dealer. The Sub-Adviser is not affiliated with a broker-dealer. The
Adviser has implemented a fire wall with respect to its broker-dealer
affiliate regarding access to information concerning the composition
and/or changes to the portfolio. In addition, personnel of the Adviser
who make decisions on the Fund's portfolio composition will be subject
to procedures designed to prevent the use and dissemination of material
non-public information regarding the Fund's portfolio. In the event (a)
the Adviser or the Sub-Adviser becomes, or becomes newly affiliated
with, a broker-dealer, or (b) any new adviser or sub-adviser is a
registered broker-dealer or becomes affiliated with another broker-
dealer, it will implement a fire wall with respect to its relevant
personnel and/or such broker-dealer affiliate, as applicable, regarding
access to information concerning the composition and/or changes to the
portfolio and will be subject to procedures designed to prevent the use
and dissemination of material non-public information regarding such
portfolio.
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\7\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser, the Sub-Adviser and their related
personnel are subject to the provisions of Rule 204A-1 under the
Advisers Act relating to codes of ethics. This Rule requires
investment advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as well as
compliance with other applicable securities laws. Accordingly,
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under
the Advisers Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such investment adviser
has (i) adopted and implemented written policies and procedures
reasonably designed to prevent violation, by the investment adviser
and its supervised persons, of the Advisers Act and the Commission
rules adopted thereunder; (ii) implemented, at a minimum, an annual
review regarding the adequacy of the policies and procedures
established pursuant to subparagraph (i) above and the effectiveness
of their implementation; and (iii) designated an individual (who is
a supervised person) responsible for administering the policies and
procedures adopted under subparagraph (i) above.
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First Trust SSI Strategic Convertible Securities ETF
The investment objective of the Fund will be to seek total return.
To achieve its objective, the Fund will invest, under normal market
conditions,\8\ at least 80% of its net assets (including investment
[[Page 42849]]
borrowings) in the following convertible securities: \9\ convertible
notes, bonds and debentures; convertible preferred securities;
mandatory convertible securities; \10\ contingent convertible
securities; \11\ synthetic convertible securities; \12\ corporate bonds
and preferred securities with attached warrants; \13\ and convertible
Rule 144A securities \14\ (collectively, ``Convertible
Securities'').\15\
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\8\ The term ``under normal market conditions'' as used herein
includes, but is not limited to, the absence of adverse market,
economic, political or other conditions, including extreme
volatility or trading halts in the fixed income 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. On a temporary
basis, including for defensive purposes, during the initial invest-
up period and during periods of high cash inflows or outflows, the
Fund may depart from its principal investment strategies; for
example, it may hold a higher than normal proportion of its assets
in cash. During such periods, the Fund may not be able to achieve
its investment objective. The Fund may adopt a defensive strategy
when the Adviser believes securities in which the Fund normally
invests have elevated risks due to political or economic factors and
in other extraordinary circumstances.
\9\ Convertible securities are investment instruments that are
normally convertible or exchangeable into equity securities (such
equity securities are referred to as ``Underlying Securities'') and/
or the cash equivalent thereof. These equity-linked instruments
offer the potential for equity market participation with potential
mitigated downside risk in periods of equity market declines.
\10\ Mandatory convertible securities are distinguished as a
subset of convertible securities because the conversion is not
optional and the conversion price is based solely upon the market
price of the underlying equity security. Mandatory convertible
securities automatically convert on maturity.
\11\ Contingent convertible securities (which generally provide
for conversion under certain circumstances) are distinguished as a
subset of convertible securities. Similar to mandatory convertible
securities (and unlike traditional convertible securities), some
contingent convertible securities provide for mandatory conversion
under certain circumstances. In addition, various contingent
convertible securities may contain features that limit an investor's
ability to convert the security unless certain conditions are met.
\12\ A synthetic convertible security will (i) consist of two or
more distinct securities whose economic characteristics, when taken
together, resemble those of traditional convertible securities
(i.e., an income-producing security and the right to acquire an
equity security through, for example, an option or a warrant) or
(ii) be an exchangeable or equity-linked security issued by a
broker-dealer, investment bank or other financial institution with
proceeds going directly to the broker-dealer, investment bank or
other financial institution, as applicable, that has economic
characteristics similar to those of traditional convertible
securities.
\13\ Other than warrants that represent a component of a
synthetic convertible security, the Fund's investments in warrants
will be limited to such attached warrants, and such attached
warrants will be exchange-listed.
\14\ Under normal market conditions, convertible Rule 144A
securities will have, at the time of original issuance, $100 million
or more principal amount outstanding to be considered eligible
investments.
\15\ The Adviser expects that, under normal market conditions,
generally, for a Convertible Security to be considered as an
eligible investment, after taking into account such an investment,
at least 75% of the Fund's net assets that are invested in
Convertible Securities will be comprised of Convertible Securities
that will have, at the time of original issuance, $200 million or
more par amount outstanding.
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Through its investment process, the Sub-Adviser will attempt to
identify attractive Convertible Securities based on its positive view
of the Underlying Security or its view of the company's potential for
credit improvement. The Sub-Adviser will begin its investment process
by evaluating a large universe of available Convertible Securities and
screening for liquidity and convexity. Convexity is the ratio of upside
move in the Convertible Security in conjunction with appreciation of
the Underlying Security relative to the downside move in the
Convertible Security in conjunction with depreciation of the Underlying
Security. The screening process will rely on the Sub-Adviser's
fundamental credit evaluation of the issuers. This credit analysis will
allow the Sub-Adviser to attempt to identify the downside risk of the
Convertible Security, assess the value of the embedded equity and
understand the amount of participation expected with a change in the
price of the Underlying Security. Once attractive Convertible
Securities (i.e., Convertible Securities that are most highly ranked,
based on a ranking system incorporating target characteristics) have
been identified, the Sub-Adviser will use fundamental equity analysis
to determine which of the attractive Convertible Securities it believes
have a sound Underlying Security with potential for increase in value.
In conjunction with its analysis, the Sub-Adviser will review the
overall economic situation. In this regard, the Fund will be actively
managed, whereby, the Sub-Adviser will assess the position of the
economic cycle and the performance outlook for certain economic
sectors. The Sub-Adviser will, at times, overweight or underweight
different economic sectors, market capitalizations, and credit quality
exposures relative to the available universe of Convertible Securities.
The Sub-Adviser may also adjust the sensitivity of the portfolio to
movements in the equity market and to interest rates based on the
macroeconomic outlook. The Fund may manage the market exposure
defensively during periods of market distress.
The Fund will invest in Convertible Securities of any credit
quality, including unrated securities, and with effective or final
maturities of any length. Convertible Securities may be issued by
domestic or foreign entities.
The Fund will hold debt securities (including, in the aggregate,
Convertible Securities and the debt securities described below) of at
least 13 non-affiliated issuers.
Other Investments of the Fund
The Fund may invest up to 20% of its net assets in short-term debt
securities and other short-term debt instruments (described below), as
well as cash equivalents, or it may hold cash. The percentage of the
Fund invested in such holdings will vary and will depend on several
factors, including market conditions.
Short-term debt instruments are issued by issuers having a long-
term debt rating of at least A by Standard & Poor's Ratings Services
(``S&P Ratings''), Moody's Investors Service, Inc. (``Moody's'') or
Fitch Ratings (``Fitch'') and have a maturity of one year or less. The
Fund may invest in the following short-term debt instruments: (1) Fixed
rate and floating rate U.S. government securities, including bills,
notes and bonds differing as to maturity and rates of interest, which
are either issued or guaranteed by the U.S. Treasury or by U.S.
government agencies or instrumentalities; (2) certificates of deposit
issued against funds deposited in a bank or savings and loan
association; (3) bankers' acceptances, which are short-term credit
instruments used to finance commercial transactions; (4) repurchase
agreements,\16\ which involve purchases of debt securities; (5) bank
time deposits, which are monies kept on deposit with banks or savings
and loan associations for a stated period of time at a fixed rate of
interest; (6) commercial paper, which is short-term unsecured
promissory notes; \17\ and (7) corporate debt obligations.
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\16\ The Fund intends to enter into repurchase agreements only
with financial institutions and dealers believed by the Adviser and/
or the Sub-Adviser to present minimal credit risks in accordance
with criteria approved by the Board of Trustees of the Trust
(``Trust Board''). The Adviser and/or the Sub-Adviser will review
and monitor the creditworthiness of such institutions. The Adviser
and/or the Sub-Adviser will monitor the value of the collateral at
the time the transaction is entered into and at all times during the
term of the repurchase agreement.
\17\ The Fund may only invest in commercial paper rated A-1 or
higher by S&P Ratings, Prime-1 or higher by Moody's or F1 or higher
by Fitch.
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The Fund may invest up to 20% of its net assets in exchange-traded
notes (``ETNs'').
The Fund may invest up to 20% of its net assets in exchange-listed
equity securities (referred to collectively as ``Equity
Securities'').\18\ In addition to U.S. exchange-listed equity
securities of domestic issuers, Equity Securities may include
securities of foreign issuers that are listed on U.S. or foreign
exchanges as well as investments in equity securities that are in the
form of American Depositary Receipts (``ADRs'') or Global Depositary
Receipts (``GDRs'', and together with ADRs, ``Depositary
Receipts'').\19\
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\18\ The Fund may hold Equity Securities either through direct
investment or upon conversion of a Convertible Security into its
corresponding Underlying Security (referred to as a ``Post-
Conversion Underlying Security'').
\19\ The Fund will not invest in any unsponsored Depositary
Receipts. In addition, for the avoidance of doubt, the term ``Equity
Securities'' may include exchange-listed equity securities of
business development companies (``BDCs'').
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[[Page 42850]]
The Fund may invest up to 20% of its net assets in exchange-listed
equity index futures contracts, in exchange-listed and over-the-counter
(``OTC'') index credit default swaps, and in forward foreign currency
exchange contracts. The use of futures contracts may allow the Fund to
obtain net long or short exposures to selected equity indexes. Index
credit default swaps may be used to gain exposure to a basket of credit
risk by ``selling protection'' against default or other credit events,
or to hedge a broad market credit risk by ``buying protection.''
Forward foreign currency exchange contracts may be used to protect the
value of the Fund's portfolio against uncertainty in the level of
future currency exchange rates.\20\ The Fund's investments in
derivative instruments will be consistent with the Fund's investment
objective and the 1940 Act and will not be used to seek to achieve a
multiple or inverse multiple of an index. The Fund will only enter into
transactions in OTC index credit default swaps and forward foreign
currency exchange contracts with counterparties that the Adviser and/or
the Sub-Adviser reasonably believes are capable of performing under the
applicable agreement.\21\
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\20\ The Fund may also enter into foreign currency transactions
on a spot (i.e., cash) basis.
\21\ The Fund will seek, where possible, to use counterparties,
as applicable, whose financial status is such that the risk of
default is reduced; however, the risk of losses resulting from
default is still possible. The Adviser and/or the Sub-Adviser will
evaluate the creditworthiness of counterparties on an ongoing basis.
In addition to information provided by credit agencies, the
Adviser's and/or Sub-Adviser's analysis will evaluate each approved
counterparty using various methods of analysis and may consider the
Adviser's and/or Sub-Adviser's past experience with the
counterparty, its known disciplinary history and its share of market
participation.
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Investment Restrictions
The Fund may not invest 25% or more of the value of its total
assets in securities of issuers in any one industry. This restriction
does not apply to (a) obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities or (b) securities of
other investment companies.\22\
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\22\ See Form N-1A, Item 9. The Commission has taken the
position that a fund is concentrated if it invests more than 25% of
the value of its total assets in any one industry. See, e.g.,
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR
54241 (November 21, 1975).
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The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including Rule 144A securities deemed illiquid by the Adviser and/or
the Sub-Adviser.\23\ 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 assets. Illiquid assets include securities subject to
contractual or other restrictions on resale and other instruments that
lack readily available markets as determined in accordance with
Commission staff guidance.\24\
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\23\ In reaching liquidity decisions, the Adviser and the Sub-
Adviser may consider the following factors: the frequency of trades
and quotes for the security; the number of dealers wishing to
purchase or sell the security and the number of other potential
purchasers; dealer undertakings to make a market in the security;
and the nature of the security and the nature of the marketplace in
which it trades (e.g., the time needed to dispose of the security,
the method of soliciting offers and the mechanics of transfer).
\24\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR
14618 (March 18, 2008), footnote 34. See also Investment Company Act
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970)
(Statement Regarding ``Restricted Securities''); Investment Company
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992)
(Revisions of Guidelines to Form N-1A). A fund's portfolio security
is illiquid if it cannot be disposed of in the ordinary course of
business within seven days at approximately the value ascribed to it
by the fund. See Investment Company Act Release No. 14983 (March 12,
1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7
under the 1940 Act); Investment Company Act Release No. 17452 (April
23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under
the Securities Act of 1933).
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Creation and Redemption of Shares
The Fund will issue and redeem Shares on a continuous basis at net
asset value (``NAV'') \25\ 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 Relief, 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'').
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\25\ The NAV of the Fund's Shares generally will be calculated
once daily Monday through Friday as of the close of regular trading
on the New York Stock Exchange (``NYSE''), generally 4:00 p.m.,
Eastern Time (the ``NAV Calculation Time''). NAV per Share will be
calculated by dividing the Fund's net assets by the number of Fund
Shares outstanding. For more information regarding the valuation of
Fund investments in calculating the Fund's NAV, see the Registration
Statement.
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Creations and redemptions must be made by or through an Authorized
Participant that has executed an agreement that has been agreed to by
the Distributor and BNY 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., Eastern
Time) (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. 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 National Securities Clearing
Corporation, will make available on each business day, prior to the
opening of business of the Exchange, the list of the names and
quantities of the instruments comprising the Creation Basket, as well
as the estimated Cash Component (if any), for that day. The published
Creation Basket will apply until a new Creation Basket is announced on
the following business day prior to commencement of trading in the
Shares.
Net Asset Value
The Fund's NAV will be determined as of the close of regular
trading on the NYSE on each day the NYSE is open for trading. If the
NYSE closes early on a valuation day, the NAV will be determined as of
that time. NAV per Share will be calculated for the Fund by taking the
market price of the Fund's total assets, including interest or
dividends accrued but not yet collected, less all liabilities, and
dividing such amount by the total number of Shares outstanding. The
result, rounded to the nearest cent, will be the NAV per Share. All
valuations will be subject to review by the Trust Board or its
delegate.
[[Page 42851]]
The Fund's investments will be valued daily at market value or, in
the absence of market value with respect to any investments, at fair
value. Market value prices represent last sale or official closing
prices from a national or foreign exchange (i.e., a regulated market)
and will primarily be obtained from third party pricing services (each,
a ``Pricing Service''). Fair value prices represent any prices not
considered market value prices and will either be obtained from a
Pricing Service or determined by the pricing committee of the Adviser
(the ``Pricing Committee''),\26\ 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
provisions of the 1940 Act. 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.
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\26\ The Pricing Committee will be subject to procedures
designed to prevent the use and dissemination of material non-public
information regarding the Fund's portfolio.
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Certain securities, including in particular Convertible 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 OTC 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.
The following investments will typically be fair valued using
information provided by a Pricing Service or obtained from broker-
dealer quotations: (a) Convertible Securities (including convertible
notes, bonds and debentures; convertible preferred securities;
mandatory convertible securities; contingent convertible securities;
synthetic convertible securities; corporate bonds and preferred
securities with attached warrants; \27\ and convertible Rule 144A
securities); \28\ (b) except as provided below, short-term U.S.
government securities, commercial paper, bankers' acceptances and
short-term corporate debt obligations, all as set forth under ``Other
Investments of the Fund'' (collectively, ``Short-Term Debt
Instruments''); and (c) OTC index credit default swaps. Debt
instruments may be valued at evaluated bid prices, as provided by
Pricing Services. Pricing Services typically value non-exchange-traded
instruments utilizing a range of market-based inputs and assumptions,
including readily available market quotations obtained from broker-
dealers making markets in such instruments, cash flows, and
transactions for comparable instruments. In pricing certain
instruments, the Pricing Services may consider information about an
instrument's issuer or market activity provided by the Adviser or the
Sub-Adviser.
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\27\ Although the attached warrants will be exchange-listed, for
purposes of valuation, these Convertible Securities will typically
be treated as single non-exchange-listed instruments.
\28\ Convertible Securities are generally not expected to be
exchange-listed. However, to the extent the Fund invests in any
Convertible Securities that are exchange-listed (referred to as
``Exchange-Listed Convertible Securities''), they will be valued as
provided below.
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Short-Term Debt Instruments having a remaining maturity of 60 days
or less when purchased will typically be valued at cost adjusted for
amortization of premiums and accretion of discounts, provided the
Pricing Committee has determined that the use of amortized cost is an
appropriate reflection of fair value given market and issuer-specific
conditions existing at the time of the determination.
Repurchase agreements will typically be fair valued as follows:
Overnight repurchase agreements will be fair valued at cost. Term
repurchase agreements (i.e., those whose maturity exceeds seven days)
will be fair valued at the average of the bid quotations obtained daily
from at least two recognized dealers.
Common stocks and other equity securities (including Depositary
Receipts, BDCs, Post-Conversion Underlying Securities, and other Equity
Securities), as well as ETNs, listed on any exchange other than the
Exchange and the London Stock Exchange Alternative Investment Market
(``AIM'') will typically 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. Such equity securities and ETNs
listed on the Exchange or the AIM will typically be valued at the
official closing price on the business day as of which such value is
being determined. If there has been no sale on such day, or no official
closing price in the case of securities traded on the Exchange or the
AIM, such equity securities and ETNs will typically be valued using
fair value pricing. Such equity securities and ETNs 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-Listed Convertible Securities, exchange-listed equity
index futures contracts and exchange-listed index credit default swaps
will typically be valued at the closing price in the market where such
instruments are principally traded. If no official closing price is
available, such instruments will be fair valued at the mean of their
most recent bid and asked price on the exchange on which they are
principally traded, if available, and otherwise at their closing bid
price.
Forward foreign currency exchange contracts will typically be fair
valued at the current day's interpolated foreign exchange rate, as
calculated using the current day's spot rate, and the thirty, sixty,
ninety and one-hundred-eighty day forward rates provided by a Pricing
Service or by certain independent dealers in such contracts.
Because foreign exchanges may be open on different days than the
days during which an investor may purchase or sell Shares, the value of
the Fund's assets may change on days when investors are not able to
purchase or sell Shares. Assets denominated in foreign currencies will
be translated into U.S. dollars at the exchange rate of such currencies
against the U.S. dollar as provided by a Pricing Service. The value of
assets denominated in foreign currencies will be converted into U.S.
dollars at the exchange rates in effect at the time of valuation.
Valuing the Fund's assets using fair value pricing can result in
using prices for those assets (particularly assets that trade in
foreign markets) that may differ from current market valuations.
Availability of Information
The Fund's Web site (www.ftportfolios.com), which will be publicly
available prior to the public offering of Shares, will include a form
of the prospectus for the Fund that may be downloaded. The Web site
will include the Shares' ticker, CUSIP and exchange information along
with additional quantitative information
[[Page 42852]]
updated on a daily basis, including, for the Fund: (1) Daily trading
volume, the prior business day's reported NAV and closing price, mid-
point of the bid/ask spread at the time of calculation of such NAV (the
``Bid/Ask Price''),\29\ and a calculation of the premium and discount
of the Bid/Ask Price against the NAV; and (2) data in chart format
displaying the frequency distribution of discounts and premiums of the
daily Bid/Ask Price against the NAV, within appropriate ranges, for
each of the four previous calendar quarters. On each business day,
before commencement of trading in Shares in the Regular Market Session
\30\ on the Exchange, the Fund will disclose on its Web site the
identities and quantities of the portfolio of securities, and other
assets (the ``Disclosed Portfolio'' as defined in Nasdaq Rule
5735(c)(2)) held by the Fund that will form the basis for the Fund's
calculation of NAV at the end of the business day.\31\ The Fund's
disclosure of derivative positions in the Disclosed Portfolio will
include information that market participants can use to value these
positions intraday. On a daily basis, 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
(including the type of holding, such as the type of swap), the identity
of the security 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 percentage weighting of the holding in the Fund's
portfolio. The Web site information will be publicly available at no
charge.
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\29\ The Bid/Ask Price of the Fund will be determined using the
mid-point of the highest bid and the lowest offer on the Exchange as
of the time of calculation of the Fund's NAV. The records relating
to Bid/Ask Prices will be retained by the Fund and its service
providers.
\30\ See Nasdaq Rule 4120(b)(4) (describing the three trading
sessions on the Exchange: (1) Pre-Market Session from 4 a.m. to 9:30
a.m., Eastern Time; (2) Regular Market Session from 9:30 a.m. to 4
p.m. or 4:15 p.m., Eastern Time; and (3) Post-Market Session from 4
p.m. or 4:15 p.m. to 8 p.m., Eastern Time).
\31\ Under accounting procedures to be followed by the Fund,
trades made on the prior business day (``T'') will be booked and
reflected in NAV on the current business day (``T+1''). Accordingly,
the Fund will be able to disclose at the beginning of the business
day the portfolio that will form the basis for the NAV calculation
at the end of the business day.
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In addition, for the Fund, an estimated value, defined in Rule
5735(c)(3) as the ``Intraday Indicative Value,'' that reflects an
estimated intraday value of the Fund's Disclosed Portfolio, will be
disseminated. Moreover, the Intraday Indicative Value, available on the
NASDAQ OMX Information LLC proprietary index data service,\32\ will be
based upon the current value for the components of the Disclosed
Portfolio and will be updated and widely disseminated by one or more
major market data vendors and broadly displayed at least every 15
seconds during the Regular Market Session. The Intraday Indicative
Value will be based on quotes and closing prices from the securities'
local market and may not reflect events that occur subsequent to the
local market's close. Premiums and discounts between the Intraday
Indicative Value and the market price may occur. This should not be
viewed as a ``real time'' update of the NAV per Share of the Fund,
which is calculated only once a day.
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\32\ Currently, the NASDAQ OMX Global Index Data Service
(``GIDS'') is the NASDAQ OMX global index data feed service,
offering real-time updates, daily summary messages, and access to
widely followed indexes and Intraday Indicative Values for ETFs.
GIDS provides investment professionals with the daily information
needed to track or trade NASDAQ OMX indexes, listed ETFs, or third-
party partner indexes and ETFs.
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The dissemination of the Intraday Indicative Value, together with
the Disclosed Portfolio, will allow investors to determine the value of
the underlying portfolio of the Fund on a daily basis and will provide
a close estimate of that value throughout the trading day.
Investors will also be able to obtain the Fund's Statement of
Additional Information (``SAI''), the Fund's annual and semi-annual
reports (together, ``Shareholder Reports''), and its Form N-CSR and
Form N-SAR, filed twice a year. The Fund's SAI and Shareholder Reports
will be available free upon request from the Fund, and those documents
and the Form N-CSR and Form N-SAR may be viewed on-screen or downloaded
from the Commission's Web site at www.sec.gov. Information regarding
market price and trading volume of the Shares will be continually
available on a real-time basis throughout the day on brokers' computer
screens and other electronic services. Information regarding the
previous day's closing price and trading volume information for the
Shares will be published daily in the financial section of newspapers.
Quotation and last sale information for the Shares will be available
via Nasdaq proprietary quote and trade services, as well as in
accordance with the Unlisted Trading Privileges and the Consolidated
Tape Association (``CTA'') plans for the Shares. Quotation and last
sale information for U.S. exchange-listed equity securities will be
available from the exchanges on which they are traded as well as in
accordance with any applicable CTA plans. Pricing information for
Exchange-Listed Convertible Securities; ETNs; Depositary Receipts,
BDCs, Post-Conversion Underlying Securities, and other Equity
Securities; exchange-listed equity index futures contracts; and
exchange-listed index credit default swaps will be available from the
applicable listing exchange and from major market data vendors. Pricing
information for OTC Convertible Securities (including convertible
notes, bonds and debentures; convertible preferred securities;
mandatory convertible securities; contingent convertible securities;
synthetic convertible securities; corporate bonds and preferred
securities with attached warrants; \33\ and convertible Rule 144A
securities); Short-Term Debt Instruments (including short-term U.S.
government securities, commercial paper, bankers' acceptances and
short-term corporate debt obligations, all as set forth under ``Other
Investments of the Fund''); repurchase agreements; OTC index credit
default swaps; and forward foreign currency exchange contracts will be
available from major broker-dealer firms and/or major market data
vendors and/or Pricing Services.
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\33\ Although the attached warrants will be exchange-listed, for
purposes of obtaining pricing information, these Convertible
Securities will typically be treated as single non-exchange-listed
instruments.
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Additional information regarding the Fund and the Shares, including
investment strategies, risks, creation and redemption procedures, fees,
Fund holdings disclosure policies, distributions and taxes will be
included in the Registration Statement.
Initial and Continued Listing
The Shares will be subject to Rule 5735, which sets forth the
initial and continued listing criteria applicable to Managed Fund
Shares. The Exchange represents that, for initial and/or continued
listing, the Fund must be in compliance with Rule 10A-3 \34\ under the
Act. A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange. The Exchange will obtain a
representation from the issuer of the Shares that the NAV per Share
will be calculated daily and that the NAV and the Disclosed Portfolio
will be made
[[Page 42853]]
available to all market participants at the same time.
---------------------------------------------------------------------------
\34\ See 17 CFR 240.10A-3.
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Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund. Nasdaq will halt trading in the
Shares under the conditions specified in Nasdaq Rules 4120 and 4121,
including the trading pauses under Nasdaq Rules 4120(a)(11) and (12).
Trading may be halted because of market conditions or for reasons that,
in the view of the Exchange, make trading in the Shares inadvisable.
These may include: (1) The extent to which trading is not occurring in
the securities and/or the other assets constituting the Disclosed
Portfolio of the Fund; or (2) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present. Trading in the Shares also will be subject to Rule
5735(d)(2)(D), which sets forth circumstances under which Shares of the
Fund may be halted.
Trading Rules
Nasdaq deems the Shares to be equity securities, thus rendering
trading in the Shares subject to Nasdaq's existing rules governing the
trading of equity securities. Nasdaq will allow trading in the Shares
from 4:00 a.m. until 8:00 p.m., Eastern Time. The Exchange has
appropriate rules to facilitate transactions in the Shares during all
trading sessions. As provided in Nasdaq Rule 5735(b)(3), the minimum
price variation for quoting and entry of orders in Managed Fund Shares
traded on the Exchange is $0.01.
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by both Nasdaq and
also the Financial Industry Regulatory Authority (``FINRA'') on behalf
of the Exchange, which are designed to detect violations of Exchange
rules and applicable federal securities laws.\35\ The Exchange
represents that these procedures are adequate to properly monitor
Exchange trading of the Shares in all trading sessions and to deter and
detect violations of Exchange rules and applicable federal securities
laws.
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\35\ 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.
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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 the exchange-traded securities and
instruments held by the Fund (including Exchange-Listed Convertible
Securities; ETNs; Depositary Receipts, BDCs, Post-Conversion Underlying
Securities, and other Equity Securities; exchange-listed equity index
futures contracts; and exchange-listed index credit default swaps) with
other markets and other entities that are members of the Intermarket
Surveillance Group (``ISG''),\36\ and FINRA may obtain trading
information regarding trading in the Shares and the exchange-traded
securities and instruments held by the Fund from such markets and other
entities. In addition, the Exchange may obtain information regarding
trading in the Shares and the exchange-traded securities and
instruments held by the Fund from markets and other entities that are
members of ISG, which includes securities and futures exchanges, or
with which the Exchange has in place a comprehensive surveillance
sharing agreement. Moreover, FINRA, on behalf of the Exchange, will be
able to access, as needed, trade information for certain fixed income
securities held by the Fund reported to FINRA's Trade Reporting and
Compliance Engine (``TRACE'').
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\36\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio may trade on markets that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement.
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At least 90% of the Fund's net assets that are invested in
Exchange-Listed Convertible Securities; ETNs; Depositary Receipts,
BDCs, Post-Conversion Underlying Securities, and other Equity
Securities; exchange-listed equity index futures contracts; and
exchange-listed index credit default swaps (in the aggregate) will be
invested in investments that trade in markets that are members of ISG
or are parties to a comprehensive surveillance sharing agreement with
the Exchange. Further, at least 90% of the Underlying Securities
corresponding to the pre-conversion Convertible Securities held by the
Fund (measured by par value) will trade in markets that are members of
ISG or are parties to a comprehensive surveillance sharing agreement
with the Exchange.
In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Circular
Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares. Specifically, the Information
Circular will discuss the following: (1) The procedures for purchases
and redemptions of Shares in Creation Units (and that Shares are not
individually redeemable); (2) Nasdaq Rule 2111A, which imposes
suitability obligations on Nasdaq members with respect to recommending
transactions in the Shares to customers; (3) how information regarding
the Intraday Indicative Value and the Disclosed Portfolio is
disseminated; (4) the risks involved in trading the Shares during the
Pre-Market and Post-Market Sessions when an updated Intraday Indicative
Value will not be calculated or publicly disseminated; (5) the
requirement that members deliver a prospectus to investors purchasing
newly issued Shares prior to or concurrently with the confirmation of a
transaction; and (6) trading information. The Information Circular will
also discuss any exemptive, no-action and interpretive relief granted
by the Commission from any rules under the Act.
Additionally, the Information Circular will reference that the Fund
is subject to various fees and expenses described in the Registration
Statement. The Information Circular will also disclose the trading
hours of the Shares of the Fund and the applicable NAV Calculation Time
for the Shares. The Information Circular will disclose that information
about the Shares of the Fund will be publicly available on the Fund's
Web site.
2. Statutory Basis
Nasdaq believes that the proposal is consistent with Section 6(b)
of the Act in general and Section 6(b)(5) of the Act in particular in
that it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to and perfect
the mechanism of a free and open market and, in general, to protect
investors and the public interest.
[[Page 42854]]
The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in Nasdaq Rule 5735. The
Exchange represents that trading in the Shares will be subject to the
existing trading surveillances, administered by both Nasdaq and also
FINRA on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities laws.
Neither the Adviser nor the Sub-Adviser is a broker-dealer,
although the Adviser is affiliated with the Distributor, a broker-
dealer. The Sub-Adviser is not affiliated with a broker-dealer. The
Adviser has implemented a fire wall with respect to its broker-dealer
affiliate regarding access to information concerning the composition
and/or changes to the portfolio. In addition, paragraph (g) of Nasdaq
Rule 5735 further requires that personnel of the Adviser who make
decisions on the open-end fund's portfolio composition must be subject
to procedures designed to prevent the use and dissemination of material
non-public information regarding the open-end fund's portfolio.
FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares and the exchange-traded securities and
instruments held by the Fund (including Exchange-Listed Convertible
Securities; ETNs; Depositary Receipts, BDCs, Post-Conversion Underlying
Securities, and other Equity Securities; exchange-listed equity index
futures contracts; and exchange-listed index credit default swaps) with
other markets and other entities that are members of ISG, and FINRA may
obtain trading information regarding trading in the Shares and the
exchange-traded securities and instruments held by the Fund from such
markets and other entities. In addition, the Exchange may obtain
information regarding trading in the Shares and the exchange-traded
securities and instruments held by the Fund from markets and other
entities that are members of ISG, which includes securities and futures
exchanges, or with which the Exchange has in place a comprehensive
surveillance sharing agreement. Moreover, FINRA, on behalf of the
Exchange, will be able to access, as needed, trade information for
certain fixed income securities held by the Fund reported to FINRA's
TRACE.
At least 90% of the Fund's net assets that are invested in
Exchange-Listed Convertible Securities; ETNs; Depositary Receipts,
BDCs, Post-Conversion Underlying Securities, and other Equity
Securities; exchange-listed equity index futures contracts; and
exchange-listed index credit default swaps (in the aggregate) will be
invested in investments that trade in markets that are members of ISG
or are parties to a comprehensive surveillance sharing agreement with
the Exchange. Further, at least 90% of the Underlying Securities
corresponding to the pre-conversion Convertible Securities held by the
Fund (measured by par value) will trade in markets that are members of
ISG or are parties to a comprehensive surveillance sharing agreement
with the Exchange.
The investment objective of the Fund will be to seek total return.
To achieve its objective, the Fund will invest, under normal market
conditions, at least 80% of its net assets (including investment
borrowings) in a portfolio of Convertible Securities. The Fund may
invest up to 20% of its net assets in exchange-listed equity index
futures contracts, in exchange-listed and OTC index credit default
swaps, and in forward foreign currency exchange contracts. The Fund's
investments in derivative instruments will be consistent with the
Fund's investment objective and the 1940 Act and will not be used to
seek to achieve a multiple or inverse multiple of an index. The Fund
may hold up to an aggregate amount of 15% of its net assets in illiquid
assets (calculated at the time of investment), including Rule 144A
securities deemed illiquid by the Adviser and/or the Sub-Adviser. 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 assets. Illiquid assets include
securities subject to contractual or other restrictions on resale and
other instruments that lack readily available markets as determined in
accordance with Commission staff guidance.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Exchange will obtain a representation from the issuer of the
Shares that the NAV per Share will be calculated daily and that the NAV
and the Disclosed Portfolio will be made available to all market
participants at the same time. In addition, a large amount of
information will be publicly available regarding the Fund and the
Shares, thereby promoting market transparency. Moreover, the Intraday
Indicative Value, available on the NASDAQ OMX Information LLC
proprietary index data service, will be widely disseminated by one or
more major market data vendors and broadly displayed at least every 15
seconds during the Regular Market Session. On each business day, before
commencement of trading in Shares in the Regular Market Session on the
Exchange, the Fund will disclose on its Web site the Disclosed
Portfolio that will form the basis for the Fund's calculation of NAV at
the end of the business day. Information regarding market price and
trading volume of the Shares will be continually available on a real-
time basis throughout the day on brokers' computer screens and other
electronic services, and quotation and last sale information for the
Shares will be available via Nasdaq proprietary quote and trade
services, as well as in accordance with the Unlisted Trading Privileges
and the CTA plans for the Shares. Quotation and last sale information
for U.S. exchange-listed equity securities will be available from the
exchanges on which they are traded as well as in accordance with any
applicable CTA plans. Pricing information for Exchange-Listed
Convertible Securities; ETNs; Depositary Receipts, BDCs, Post-
Conversion Underlying Securities, and other Equity Securities;
exchange-listed equity index futures contracts; and exchange-listed
index credit default swaps will be available from the applicable
listing exchange and from major market data vendors. Pricing
information for OTC Convertible Securities (including convertible
notes, bonds and debentures; convertible preferred securities;
mandatory convertible securities; contingent convertible securities;
synthetic convertible securities; corporate bonds and preferred
securities with attached warrants; and convertible Rule 144A
securities); Short-Term Debt Instruments (including short-term U.S.
government securities, commercial paper, bankers' acceptances and
short-term corporate debt obligations, all as set forth under ``Other
Investments of the Fund''); repurchase agreements; OTC index credit
default swaps; and forward foreign currency exchange contracts will be
available from major broker-dealer firms and/or major market data
vendors and/or Pricing Services.
The Fund's Web site will include a form of the prospectus for the
Fund and additional data relating to NAV and other applicable
quantitative information. Trading in Shares of the Fund will be halted
under the
[[Page 42855]]
conditions specified in Nasdaq Rules 4120 and 4121 or because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable, and trading in the Shares will be
subject to Nasdaq Rule 5735(d)(2)(D), which sets forth circumstances
under which Shares of the Fund may be halted. In addition, as noted
above, investors will have ready access to information regarding the
Fund's holdings, the Intraday Indicative Value, the Disclosed
Portfolio, and quotation and last sale information for the Shares.
The Fund's investments will be valued daily at market value or, in
the absence of market value with respect to any investments, at fair
value. Market value prices represent last sale or official closing
prices from a national or foreign exchange (i.e., a regulated market)
and will primarily be obtained from Pricing Services. Fair value prices
represent any prices not considered market value prices and will either
be obtained from a Pricing Service or determined by the Pricing
Committee, in accordance with the Valuation Procedures and in
accordance with provisions of the 1940 Act. The Pricing Committee will
be subject to procedures designed to prevent the use and dissemination
of material non-public information regarding the Fund's portfolio.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of actively-managed exchange-traded product that
will enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, FINRA, on behalf of the
Exchange, will communicate as needed regarding trading in the Shares
and the exchange-traded securities and instruments held by the Fund
(including Exchange-Listed Convertible Securities; ETNs; Depositary
Receipts, BDCs, Post-Conversion Underlying Securities, and other Equity
Securities; exchange-listed equity index futures contracts; and
exchange-listed index credit default swaps) with other markets and
other entities that are members of ISG, and FINRA may obtain trading
information regarding trading in the Shares and the exchange-traded
securities and instruments held by the Fund from such markets and other
entities. In addition, the Exchange may obtain information regarding
trading in the Shares and in the exchange-traded securities and
instruments held by the Fund from markets and other entities that are
members of ISG, which includes securities and futures exchanges, or
with which the Exchange has in place a comprehensive surveillance
sharing agreement. Furthermore, as noted above, investors will have
ready access to information regarding the Fund's holdings, the Intraday
Indicative Value, the Disclosed Portfolio, and quotation and last sale
information for the Shares.
For the above reasons, Nasdaq believes the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed rule change will facilitate the listing and trading of an
additional type of actively-managed exchange-traded fund that will
enhance competition among market participants, to the benefit of
investors and the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period 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 such proposed rule change; or (b)
institute proceedings to determine whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number
SR-NASDAQ-2015-075 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street NE., Washington, DC 20549.
All submissions should refer to File Number SR-NASDAQ-2015-075. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site http://www.sec.gov/rules/sro.shtml.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of Nasdaq. All comments received
will be posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2015-075 and should be submitted
on or before August 10, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-17658 Filed 7-17-15; 8:45 am]
BILLING CODE 8011-01-P