80 FR 22584 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Approving a Proposed Rule Change, as Modified by Amendments No. 1 and No. 2, To List and Trade the Shares of the First Trust Strategic Floating Rate ETF of First Trust Exchange-Traded Fund IV
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 77 (April 22, 2015)
Federal Register Volume 80, Issue 77 (April 22, 2015)
| Page Range | 22584-22587 | |
| FR Document | 2015-09271 |
[Federal Register Volume 80, Number 77 (Wednesday, April 22, 2015)] [Notices] [Pages 22584-22587] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-09271] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-74742; File No. SR-NASDAQ-2015-011] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Approving a Proposed Rule Change, as Modified by Amendments No. 1 and No. 2, To List and Trade the Shares of the First Trust Strategic Floating Rate ETF of First Trust Exchange-Traded Fund IV April 16, 2015. I. Introduction On February 12, 2015, The NASDAQ Stock Market LLC (the ``Exchange'' or ``Nasdaq'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (``Act'' or ``Exchange Act'') \2\ and Rule 19b-4 thereunder,\3\ a proposed rule change to list and trade shares (``Shares'') of the First Trust Strategic Floating Rate ETF (the ``Fund'') of First Trust Exchange-Traded Fund IV (the ``Trust'') under NASDAQ Rule 5735. The proposed rule change was published for comment in the Federal Register on March 3, 2015.\4\ On April 6, 2015, the Exchange filed Amendment No. 1 to the proposed rule change.\5\ On April 15, 2015, the Exchange filed Amendment No. 2 to the proposed rule change.\6\ The Commission received no comments on the proposed rule change. This order approves the proposed rule change, as modified by Amendments No. 1 and No. 2. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. \4\ See Securities Exchange Act Release No. 74378 (February 25, 2015), 80 FR 11509 (``Notice''). \5\ In Amendment No. 1, the Exchange clarified that the quotation and last-sale information will be available via the Options Price Reporting Authority only for U.S. exchange-listed options that the Fund holds. Amendment No. 1 is not subject to notice and comment because it is a technical amendment that does not materially alter the substance of the proposed rule change or raise any novel regulatory issues. \6\ In Amendment No. 2, the Exchange removed exchange-listed options on U.S. Treasury securities from the types of derivative instruments in which the Fund may invest. Amendment No. 2 is not subject to notice and comment because it does not materially alter the substance of the proposed rule change or raise any novel regulatory issues. --------------------------------------------------------------------------- II. Description of the Proposal The Exchange proposes to list and trade the Shares under Nasdaq Rule 5735, which governs the listing and trading of Managed Fund Shares on the Exchange. The Fund will be an actively-managed exchange-traded fund (``ETF''). The Shares will be offered by the Trust.\7\ 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.\8\ The Fund will be a series of the Trust. --------------------------------------------------------------------------- \7\ The Commission has issued an order, upon which the Trust may rely, granting certain exemptive relief under the Investment Company Act of 1940 (``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 that the Fund believes affects its ability to invest in derivatives notwithstanding certain representations in the application for the Exemptive Relief. See Commission No-Action Letter (December 6, 2012). \8\ See Post-Effective Amendment No. 104 to Registration Statement on Form N-1A for the Trust, dated January 29, 2015 (File Nos. 333-174332 and 811-22559). --------------------------------------------------------------------------- First Trust Advisors L.P. will be the investment adviser (``Adviser'') to the Fund. 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 will act as the administrator, accounting agent, custodian and transfer agent to the Fund. The Exchange states that the Adviser is not a broker-dealer, although it is affiliated with the Distributor, a broker-dealer.\9\ In addition, the Exchange states that 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, and that personnel 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.\10\ In the event (a) the 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 [[Page 22585]] portfolio.\11\ The Fund does not currently intend to use a sub-adviser. --------------------------------------------------------------------------- \9\ See Notice, supra note 4, 80 FR at 11510. \10\ See id. \11\ See id. --------------------------------------------------------------------------- The Exchange has made the following representations and statements regarding the Fund.\12\ --------------------------------------------------------------------------- \12\ Additional information regarding, among other things, the Fund, the Shares, the Fund's investment objectives, the Fund's strategies, methodology and restrictions, risks; fees and expenses associated with the Shares, creations and redemptions of Shares, availability of price information, trading rules and halts, and surveillance procedures can be found in the Notice and the Registration Statement. See Notice, supra note 4, and Registration Statement, supra note 7, respectively. --------------------------------------------------------------------------- Principal Investments for the Fund The investment objective of the Fund will be to seek current income. To achieve its objective, the Fund will invest, under normal market conditions,\13\ at least 80% of its net assets in a portfolio of the following types of floating-rate debt instruments issued by U.S. and non-U.S. public- and private-sector entities: Floating-rate corporate \14\ and government bonds and notes; floating-rate agency securities; floating-rate instruments of non-U.S. issuers; floating- rate privately-issued securities; \15\ floating-rate asset-backed securities; floating-rate mortgage-backed securities; floating-rate loans; and investment companies that invest primarily in the foregoing types of debt instruments (collectively, ``Floating Rate Debt Instruments''). --------------------------------------------------------------------------- \13\ The term ``under normal market conditions'' 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. \14\ The Adviser expects that, generally, under normal market conditions, for a corporate bond 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 floating-rate corporate bonds and, as described below, fixed-rate corporate bonds (in the aggregate), will be comprised of corporate bonds that have, at the time of original issuance, $100 million or more par amount outstanding. See Notice, supra note 4, 80 FR at 11511, n.10. \15\ Under normal market conditions, the privately-issued securities in which the Fund will invest will have, at the time of original issuance, $100 million or more principal amount outstanding to be considered eligible investments. See id. at 11511, n.12. --------------------------------------------------------------------------- According to the Exchange, at least 65% of the Fund's net assets will be invested in Floating Rate Debt Instruments that are, at the time of purchase, investment grade. The Exchange represents that to be considered ``investment grade,'' under normal market conditions, rated Floating Rate Debt Instruments will carry, at the time of purchase, a rating in the highest four rating categories of at least one nationally recognized statistical ratings organization (``NRSRO'') (e.g., BBB- or higher by Standard & Poor's Ratings Services, and/or Fitch Ratings, or Baa3 or higher by Moody's Investors Service, Inc).\16\ For unrated securities to be considered ``investment grade,'' under normal market conditions, such securities will be determined, at the time of purchase, to be of comparable quality \17\ by the Adviser. The Exchange states that the Fund may invest up to 35% of its net assets in securities that are, at the time of investment, rated below investment grade by each NRSRO rating such securities (or securities that are unrated and determined by the Adviser to be of comparable quality), commonly referred to as ``high yield'' or ``junk'' bonds. If, subsequent to purchase by the Fund, a security held by the Fund experiences a decline in credit quality and falls below investment grade, the Fund may continue to hold the security, and it will not cause the Fund to violate the 35% investment limitation; however, the security will be taken into account for purposes of determining whether purchases of additional securities will cause the Fund to violate such limitation.\18\ --------------------------------------------------------------------------- \16\ The Exchange states that if a security is rated by multiple NRSROs and receives different ratings, the Fund will treat the security as being rated in the highest rating category received from an NRSRO. See id. at 11511, n.18. \17\ Comparable quality of unrated securities will be determined by the Adviser based on fundamental credit analysis of the unrated security and comparable NRSRO-rated securities. On a best efforts basis, the Adviser will attempt to make a rating determination based on publicly available data. In making a ``comparable quality'' determination, the Adviser may consider, for example, whether the issuer of the security has issued other rated securities, the nature and provisions of the relevant security, whether the obligations under the relevant security are guaranteed by another entity and the rating of such guarantor (if any), relevant cash flows, macroeconomic analysis, and/or sector or industry analysis. See id. at 11511, n.19. \18\ See id. at 11511. --------------------------------------------------------------------------- The Exchange states that the Fund will limit its investments in asset-backed securities (excluding agency mortgage-backed securities) and non-agency mortgage-backed securities (in the aggregate) to 20% of its net assets. In addition, the Fund will limit its investments in junior loans to 20% of its net assets.\19\ --------------------------------------------------------------------------- \19\ See id. --------------------------------------------------------------------------- The Fund will hold debt securities (including, in the aggregate, Floating Rate Debt Instruments and the fixed-rate debt securities described below) of at least 13 non-affiliated issuers. Other Investments Under normal market conditions, the Fund will invest primarily in the Floating Rate Debt Instruments described above to meet its investment objective. In addition, the Fund may invest up to 20% of its net assets in the following types of fixed-rate debt securities: Corporate and government bonds and notes; agency securities; instruments of non-U.S. issuers in developed markets; privately-issued securities; asset-backed securities; mortgage-backed securities; municipal bonds; money market securities; and investment companies (including investment companies advised by the Adviser) that invest primarily in the foregoing types of debt securities. Further, to pursue its investment objective, the Fund may invest up to 20% of the value of its net assets in exchange-listed options on U.S. Treasury futures contracts and exchange-listed U.S. Treasury futures contracts.\20\ The use of these derivative transactions may allow the Fund to obtain net long or short exposures to selected interest rates. These derivatives may also be used to hedge risks, including interest rate risks and credit risks, associated with the Fund's portfolio investments. According to the Exchange, 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. --------------------------------------------------------------------------- \20\ At least 90% of the Fund's net assets that are invested in exchange-traded derivative instruments will be invested in instruments that trade in markets that are members of the Intermarket Surveillance Group (``ISG'') or are parties to a comprehensive surveillance sharing agreement with the Exchange. See id. at 11512, n.28. --------------------------------------------------------------------------- Investment Restrictions The Fund will 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. 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. 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, [[Page 22586]] 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 Fund will not invest in non-U.S. equity securities. III. Discussion and Commission Findings After careful review, the Commission finds that the Exchange's proposal to list and trade the Shares is consistent with the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange.\21\ In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Exchange Act,\22\ which requires, among other things, that the Exchange's rules be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \21\ In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). \22\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Commission finds that the proposal to list and trade the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Exchange Act,\23\ which sets forth Congress' finding that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure the availability to brokers, dealers and investors of information with respect to quotations for and transactions in securities. 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 the other ETFs in which the Fund will invest will be available via the quote and trade services of their respective primary exchanges, as well as in accordance with the Unlisted Trading Privileges and the CTA plans, as applicable. Quotation and last-sale information for U.S. exchange- listed options will be available via the Options Price Reporting Authority.\24\ --------------------------------------------------------------------------- \23\ 15 U.S.C. 78k-1(a)(1)(C)(iii). \24\ See Amendment No. 1, supra note 5. --------------------------------------------------------------------------- Intraday executable price quotations on Floating Rate Debt Instruments and other assets not traded on an exchange will be available from major broker-dealer firms or market data vendors, as well as from automated quotation systems, published or other public sources, or online information services.\25\ Additionally, the Trade Reporting and Compliance Engine (``TRACE'') of the Financial Industry Regulatory Authority (``FINRA'') will be a source of price information for corporate bonds, privately-issued securities, mortgage-backed securities and asset-backed securities to the extent transactions in such securities are reported to TRACE.\26\ For exchange-traded assets, intraday pricing information will be available directly from the applicable listing exchange. 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. --------------------------------------------------------------------------- \25\ See Notice, supra note 4, 80 FR at 11514. \26\ See id. --------------------------------------------------------------------------- The Commission also believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. On each business day, before commencement of trading in Shares in the Regular Market Session (9:30 a.m. to 4:00 p.m. or 4:15 p.m., Eastern Time) 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.\27\ The Fund's disclosure of derivative positions in the Disclosed Portfolio will include information that market participants can use to value these positions intraday. The Web site information will be publicly available at no charge. 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, generally 4:00 p.m., Eastern Time. 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.\28\ The Intraday Indicative Value, available on the NASDAQ OMX Information LLC proprietary index data service,\29\ 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.\30\ 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.\31\ --------------------------------------------------------------------------- \27\ 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. \28\ See id. \29\ Currently, the NASDAQ OMX Global Index Data Service (``GIDS'') is the NASDAQ OMX global index data feed service. The Exchange represents that GIDS offers real-time updates, daily summary messages, and access to widely followed indexes and Intraday Indicative Values for ETFs, and that 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. \30\ See id. \31\ See id. at 11516. --------------------------------------------------------------------------- The Exchange represents that it 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 also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable.\32\ 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. --------------------------------------------------------------------------- \32\ 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. See id. at 11514. --------------------------------------------------------------------------- The Exchange states that it has a general policy prohibiting the distribution of material, non-public information by its employees.\33\ The Exchange states that the Adviser is not a broker-dealer, although it is affiliated with the Distributor, a broker-dealer. In addition, the Exchange states that the Adviser has implemented a fire wall [[Page 22587]] with respect to its broker-dealer affiliate regarding access to information concerning the composition and/or changes to the portfolio, and that personnel 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.\34\ In the event (a) the 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. --------------------------------------------------------------------------- \33\ See id. at 11515. \34\ See id. at 11510. --------------------------------------------------------------------------- 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 with other markets and other entities that are members of ISG,\35\ 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 Floating Rate Debt Instruments and other debt securities held by the Fund reported to FINRA's TRACE. --------------------------------------------------------------------------- \35\ 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. --------------------------------------------------------------------------- The Commission notes that the Fund and the Shares must comply with the requirements of Nasdaq Rule 5735 to be listed and traded on the Exchange. 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. In support of this proposal, the Exchange represented that: (1) The Shares will be subject to Nasdaq Rule 5735, which sets forth the initial and continued listing criteria applicable to Managed Fund Shares. (2) Trading in the Shares will be subject to the existing trading surveillances administered by both Nasdaq and FINRA on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws, and these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to detect and help deter violations of Exchange rules and applicable federal securities laws. (3) The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. (4) 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: (a) The procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (b) Nasdaq Rule 2111A, which imposes suitability obligations on Nasdaq members with respect to recommending transactions in the Shares to customers; (c) how information regarding the Intraday Indicative Value is disseminated; (d) 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; (e) the requirement that members deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (f) trading information. (5) For initial and/or continued listing, the Fund must be in compliance with Rule 10A-3 \36\ under the Act. --------------------------------------------------------------------------- \36\ See 17 CFR 240.10A-3. --------------------------------------------------------------------------- (6) Under normal market conditions, privately-issued securities will have, at the time of original issuance, $100 million or more principal amount outstanding to be considered eligible investments. (7) Not more than 35% of the Fund's net assets will be invested in securities that are, at the time of investment, rated below investment grade by each NRSRO rating such securities (or securities that are unrated and determined by the Adviser to be of comparable quality). (8) Not more than 20% of the Fund's net assets will be invested in asset-backed securities (excluding agency mortgage-backed securities) and non-agency mortgage-backed securities (in the aggregate) to 20% of its net assets. (9) Not more than 20% of the Fund's net assets will be invested in in junior loans. (10) At least 90% of the Fund's net assets that are invested in exchange-traded derivative instruments will be invested in instruments that trade in markets that are members of ISG or are parties to a comprehensive surveillance sharing agreement with the Exchange. (11) The Fund will 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. (12) 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. (13) The Fund will not invest in non-U.S. equity securities. (14) A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange. This approval order is based on all of the Exchange's representations, including those set forth above and in the Notice. For the foregoing reasons, the Commission finds that the proposed rule change, as modified by Amendment No. 1 and No. 2, is consistent with Section 6(b)(5) of the Act \37\ and the rules and regulations thereunder applicable to a national securities exchange. --------------------------------------------------------------------------- \37\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act,\38\ that the proposed rule change (SR-NASDAQ-2015-011), as modified by Amendments No. 1 and No. 2, is hereby approved. --------------------------------------------------------------------------- \38\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\39\ --------------------------------------------------------------------------- \39\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2015-09271 Filed 4-21-15; 8:45 am] BILLING CODE 8011-01-P
![22584 Federal Register / Vol. 80, No. 77 / Wednesday, April 22, 2015 / Notices
under Section 19(b)(2)(B) of the Act 22 to For the Commission, by the Division of II. Description of the Proposal
determine whether the proposed rule Trading and Markets, pursuant to delegated
authority.23 The Exchange proposes to list and
change should be approved or trade the Shares under Nasdaq Rule
disapproved. Brent J. Fields,
5735, which governs the listing and
Secretary. trading of Managed Fund Shares on the
IV. Solicitation of Comments
[FR Doc. 2015–09272 Filed 4–21–15; 8:45 am] Exchange. The Fund will be an actively-
Interested persons are invited to BILLING CODE 8011–01–P managed exchange-traded fund (‘‘ETF’’).
submit written data, views, and
The Shares will be offered by the Trust.7
arguments concerning the foregoing,
The Trust is registered with the
including whether the proposal is SECURITIES AND EXCHANGE Commission as an investment company
consistent with the Act. Comments may COMMISSION and has filed a registration statement on
be submitted by any of the following
[Release No. 34–74742; File No. SR– Form N–1A (‘‘Registration Statement’’)
methods:
NASDAQ–2015–011] with the Commission.8 The Fund will
Electronic Comments be a series of the Trust.
• Use the Commission’s Internet Self-Regulatory Organizations; The First Trust Advisors L.P. will be the
comment form (http://www.sec.gov/ NASDAQ Stock Market LLC; Order investment adviser (‘‘Adviser’’) to the
rules/sro.shtml); or Approving a Proposed Rule Change, Fund. First Trust Portfolios L.P. (the
• Send an email to rule-comments@ as Modified by Amendments No. 1 and ‘‘Distributor’’) will be the principal
sec.gov. Please include File No. SR– No. 2, To List and Trade the Shares of underwriter and distributor of the
BATS–2015–30 on the subject line. the First Trust Strategic Floating Rate Fund’s Shares. The Bank of New York
ETF of First Trust Exchange-Traded Mellon Corporation will act as the
Paper Comments Fund IV administrator, accounting agent,
• Send paper comments in triplicate custodian and transfer agent to the
to Secretary, Securities and Exchange April 16, 2015. Fund. The Exchange states that the
Commission, 100 F Street NE., I. Introduction Adviser is not a broker-dealer, although
Washington, DC 20549–1090. it is affiliated with the Distributor, a
On February 12, 2015, The NASDAQ broker-dealer.9 In addition, the
All submissions should refer to File No. Stock Market LLC (the ‘‘Exchange’’ or
SR–BATS–2015–30. This file number Exchange states that the Adviser has
‘‘Nasdaq’’) filed with the Securities and implemented a fire wall with respect to
should be included on the subject line Exchange Commission (‘‘Commission’’),
if email is used. To help the its broker-dealer affiliate regarding
pursuant to Section 19(b)(1) 1 of the access to information concerning the
Commission process and review your Securities Exchange Act of 1934 (‘‘Act’’
comments more efficiently, please use composition and/or changes to the
or ‘‘Exchange Act’’) 2 and Rule 19b–4 portfolio, and that personnel who make
only one method. The Commission will thereunder,3 a proposed rule change to
post all comments on the Commission’s decisions on the Fund’s portfolio
list and trade shares (‘‘Shares’’) of the composition will be subject to
Internet Web site (http://www.sec.gov/ First Trust Strategic Floating Rate ETF
rules/sro.shtml). Copies of the procedures designed to prevent the use
(the ‘‘Fund’’) of First Trust Exchange- and dissemination of material non-
submission, all subsequent Traded Fund IV (the ‘‘Trust’’) under
amendments, all written statements public information regarding the Fund’s
NASDAQ Rule 5735. The proposed rule portfolio.10 In the event (a) the Adviser
with respect to the proposed rule change was published for comment in
change that are filed with the becomes, or becomes newly affiliated
the Federal Register on March 3, 2015.4 with, a broker-dealer, or (b) any new
Commission, and all written On April 6, 2015, the Exchange filed
communications relating to the adviser or sub-adviser is a registered
Amendment No. 1 to the proposed rule broker-dealer or becomes affiliated with
proposed rule change between the change.5 On April 15, 2015, the
Commission and any person, other than another broker-dealer, it will implement
Exchange filed Amendment No. 2 to the a fire wall with respect to its relevant
those that may be withheld from the proposed rule change.6 The Commission
public in accordance with the personnel and/or such broker-dealer
received no comments on the proposed affiliate, as applicable, regarding access
provisions of 5 U.S.C. 552, will be rule change. This order approves the
available for Web site viewing and to information concerning the
proposed rule change, as modified by composition and/or changes to the
printing in the Commission’s Public Amendments No. 1 and No. 2.
Reference Room, 100 F Street NE., portfolio and will be subject to
Washington, DC 20549, on official 1 15
procedures designed to prevent the use
U.S.C. 78s(b)(1).
business days between the hours of 2 15 U.S.C. 78a.
and dissemination of material non-
10:00 a.m. and 3:00 p.m. Copies of the 3 17 CFR 240.19b–4. public information regarding such
filing will also be available for 4 See Securities Exchange Act Release No. 74378
7 The Commission has issued an order, upon
inspection and copying at the principal (February 25, 2015), 80 FR 11509 (‘‘Notice’’).
5 In Amendment No. 1, the Exchange clarified which the Trust may rely, granting certain
office of the Exchange. All comments exemptive relief under the Investment Company
that the quotation and last-sale information will be
received will be posted without change; available via the Options Price Reporting Authority Act of 1940 (‘‘1940 Act’’). See Investment Company
the Commission does not edit personal only for U.S. exchange-listed options that the Fund Act Release No. 30029 (April 10, 2012) (File No.
identifying information from holds. Amendment No. 1 is not subject to notice 812–13795) (the ‘‘Exemptive Relief ’’). In addition,
and comment because it is a technical amendment the Commission has issued no-action relief that the
asabaliauskas on DSK5VPTVN1PROD with NOTICES
submissions. You should submit only Fund believes affects its ability to invest in
that does not materially alter the substance of the
information that you wish to make proposed rule change or raise any novel regulatory derivatives notwithstanding certain representations
available publicly. All submissions issues. in the application for the Exemptive Relief. See
should refer to File No. SR–BATS– 6 In Amendment No. 2, the Exchange removed Commission No-Action Letter (December 6, 2012).
8 See Post-Effective Amendment No. 104 to
2015–30 and should be submitted on or exchange-listed options on U.S. Treasury securities
from the types of derivative instruments in which Registration Statement on Form N–1A for the Trust,
before May 13, 2015. the Fund may invest. Amendment No. 2 is not dated January 29, 2015 (File Nos. 333–174332 and
subject to notice and comment because it does not 811–22559).
22 15 U.S.C. 78s(b)(2)(B). 9 See Notice, supra note 4, 80 FR at 11510.
materially alter the substance of the proposed rule
23 17 CFR 200.30–3(a)(12). change or raise any novel regulatory issues. 10 See id.
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![Federal Register / Vol. 80, No. 77 / Wednesday, April 22, 2015 / Notices 22587
with respect to its broker-dealer affiliate (1) The Shares will be subject to agency mortgage-backed securities (in
regarding access to information Nasdaq Rule 5735, which sets forth the the aggregate) to 20% of its net assets.
concerning the composition and/or initial and continued listing criteria (9) Not more than 20% of the Fund’s
changes to the portfolio, and that applicable to Managed Fund Shares. net assets will be invested in in junior
personnel who make decisions on the (2) Trading in the Shares will be
subject to the existing trading loans.
Fund’s portfolio composition will be
subject to procedures designed to surveillances administered by both (10) At least 90% of the Fund’s net
prevent the use and dissemination of Nasdaq and FINRA on behalf of the assets that are invested in exchange-
material non-public information Exchange, which are designed to detect traded derivative instruments will be
regarding the Fund’s portfolio.34 In the violations of Exchange rules and invested in instruments that trade in
event (a) the Adviser becomes, or applicable federal securities laws, and markets that are members of ISG or are
becomes newly affiliated with, a broker- these procedures are adequate to parties to a comprehensive surveillance
dealer, or (b) any new adviser or sub- properly monitor Exchange trading of sharing agreement with the Exchange.
adviser is a registered broker-dealer or the Shares in all trading sessions and to
(11) The Fund will not invest 25% or
becomes affiliated with another broker- detect and help deter violations of
Exchange rules and applicable federal more of the value of its total assets in
dealer, it will implement a fire wall securities of issuers in any one industry.
with respect to its relevant personnel securities laws.
(3) The Exchange has appropriate This restriction does not apply to (a)
and/or such broker-dealer affiliate, as
rules to facilitate transactions in the obligations issued or guaranteed by the
applicable, regarding access to
Shares during all trading sessions. U.S. government, its agencies or
information concerning the composition
and/or changes to the portfolio and will (4) Prior to the commencement of instrumentalities or (b) securities of
be subject to procedures designed to trading, the Exchange will inform its other investment companies.
prevent the use and dissemination of members in an Information Circular of (12) The Fund may hold up to an
material non-public information the special characteristics and risks aggregate amount of 15% of its net
regarding such portfolio. associated with trading the Shares. assets in illiquid assets (calculated at
Specifically, the Information Circular
FINRA, on behalf of the Exchange, the time of investment), including Rule
will discuss the following: (a) The
will communicate as needed regarding 144A securities.
procedures for purchases and
trading in the Shares and the exchange- (13) The Fund will not invest in non-
redemptions of Shares in Creation Units
traded securities and instruments held U.S. equity securities.
(and that Shares are not individually
by the Fund with other markets and
redeemable); (b) Nasdaq Rule 2111A, (14) A minimum of 100,000 Shares
other entities that are members of ISG,35
which imposes suitability obligations on will be outstanding at the
and FINRA may obtain trading
Nasdaq members with respect to commencement of trading on the
information regarding trading in the
recommending transactions in the Exchange.
Shares and the exchange-traded
Shares to customers; (c) how
securities and instruments held by the This approval order is based on all of
information regarding the Intraday
Fund from such markets and other the Exchange’s representations,
Indicative Value is disseminated; (d) the
entities. In addition, the Exchange may including those set forth above and in
risks involved in trading the Shares
obtain information regarding trading in the Notice. For the foregoing reasons,
during the Pre-Market and Post-Market
the Shares and the exchange-traded the Commission finds that the proposed
Sessions when an updated Intraday
securities and instruments held by the rule change, as modified by Amendment
Indicative Value will not be calculated
Fund from markets and other entities No. 1 and No. 2, is consistent with
or publicly disseminated; (e) the
that are members of ISG, which includes Section 6(b)(5) of the Act 37 and the
requirement that members deliver a
securities and futures exchanges, or rules and regulations thereunder
prospectus to investors purchasing
with which the Exchange has in place
newly issued Shares prior to or applicable to a national securities
a comprehensive surveillance sharing
concurrently with the confirmation of a exchange.
agreement. Moreover, FINRA, on behalf
transaction; and (f) trading information.
of the Exchange, will be able to access, (5) For initial and/or continued IV. Conclusion
as needed, trade information for certain listing, the Fund must be in compliance
Floating Rate Debt Instruments and It is therefore ordered, pursuant to
with Rule 10A–3 36 under the Act.
other debt securities held by the Fund Section 19(b)(2) of the Exchange Act,38
(6) Under normal market conditions,
reported to FINRA’s TRACE. privately-issued securities will have, at that the proposed rule change (SR–
The Commission notes that the Fund the time of original issuance, $100 NASDAQ–2015–011), as modified by
and the Shares must comply with the million or more principal amount Amendments No. 1 and No. 2, is hereby
requirements of Nasdaq Rule 5735 to be outstanding to be considered eligible approved.
listed and traded on the Exchange. investments. For the Commission, by the Division of
Nasdaq deems the Shares to be equity (7) Not more than 35% of the Fund’s Trading and Markets, pursuant to delegated
securities, thus rendering trading in the net assets will be invested in securities authority.39
Shares subject to Nasdaq’s existing rules that are, at the time of investment, rated Brent J. Fields,
governing the trading of equity below investment grade by each NRSRO
securities. In support of this proposal, Secretary.
asabaliauskas on DSK5VPTVN1PROD with NOTICES
rating such securities (or securities that
the Exchange represented that: [FR Doc. 2015–09271 Filed 4–21–15; 8:45 am]
are unrated and determined by the
Adviser to be of comparable quality). BILLING CODE 8011–01–P
34 See id. at 11510. (8) Not more than 20% of the Fund’s
35 For a list of the current members of ISG, see
net assets will be invested in asset-
www.isgportal.org. The Exchange notes that not all backed securities (excluding agency
components of the Disclosed Portfolio may trade on
markets that are members of ISG or with which the mortgage-backed securities) and non- 37 15 U.S.C. 78f(b)(5).
38 15 U.S.C. 78s(b)(2).
Exchange has in place a comprehensive
surveillance sharing agreement. 36 See 17 CFR 240.10A–3. 39 17 CFR 200.30–3(a)(12).
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Document Created: 2015-12-16 08:27:41
Document Modified: 2015-12-16 08:27:41
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 22584 |
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