80 FR 26970 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Listing and Trading of the Shares of the First Trust High Income ETF, a Series of First Trust Exchange-Traded Fund VI

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 90 (May 11, 2015)

[Federal Register Volume 80, Number 90 (Monday, May 11, 2015)]
[Notices]
[Pages 26970-26972]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-11272]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74873; File No. SR-NASDAQ-2015-044]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Listing and Trading of the Shares of the First Trust 
High Income ETF, a Series of First Trust Exchange-Traded Fund VI

May 5, 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 April 24, 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 Exchange has 
designated the proposed rule change as constituting a non-controversial 
rule change under Rule 19b-4(f)(6) under the Act,\3\ which renders the 
proposal effective upon filing with the Commission. 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.
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes a rule change with respect to the First Trust High 
Income ETF (the ``Fund'') of First Trust Exchange-Traded Fund VI (the 
``Trust''), the shares of which have been approved by the Commission 
for listing and trading under NASDAQ Rule 5735 (``Managed Fund 
Shares''). The shares of the Fund are collectively referred to herein 
as the ``Shares.''
    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, and at the 
Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to reflect changes to the means of achieving 
the Fund's investment objectives. The Commission has approved the 
listing and trading of Shares under NASDAQ Rule 5735, which governs the 
listing and trading of Managed Fund Shares on the Exchange.\4\ The 
Exchange believes the proposed rule change reflects no significant 
issues not previously addressed in the Prior Release. The Fund is an 
actively managed exchange-traded fund (``ETF''). The Shares are offered 
by the Trust, which was organized as a Massachusetts business trust on 
June 4, 2012. The Trust, which is registered with the Commission as an 
investment company, has filed a registration statement on Form N-1A 
(``Registration Statement'') relating to the Fund with the 
Commission.\5\ First Trust Advisors L.P. (``First Trust Advisors'') is 
the investment adviser (``Adviser'') to the Fund.
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    \4\ The Commission approved NASDAQ Rule 5735 (formerly NASDAQ 
Rule 4420(o)) in Securities Exchange Act Release No. 57962 (June 13, 
2008), 73 FR 35175 (June 20, 2008) (SR-NASDAQ-2008-039). The 
Commission previously approved the listing and trading of the Shares 
of the Fund. See Securities Exchange Act Release No. 70829 (November 
7, 2013), 78 FR 68482 (November 14, 2013) (SR-NASDAQ-2013-122) 
(``Prior Order''). See also Securities Exchange Act Release No. 
70460 (September 20, 2013), 78 FR 59402 (September 26, 2013) (SR-
NASDAQ-2013-122) (``Prior Notice,'' and together with the Prior 
Order, the ``Prior Release''). The Fund and the Shares are currently 
in compliance with the requirements set forth in the Prior Release.
    \5\ See Post-Effective Amendment No. 51 to Registration 
Statement on Form N-1A for the Trust, dated January 21, 2015 (File 
Nos. 333-182308 and 811-22717). The descriptions of the Shares and 
the Fund contained herein are based, in part, on information in the 
Registration Statement. In addition, the Commission has issued an 
order, upon which the Trust may rely, granting certain exemptive 
relief under the Investment Company Act of 1940 (the ``1940 Act''). 
See Investment Company Act Release No. 28468 (October 27, 2008) 
(File No. 812-13477).
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    The Prior Release provided that the Fund's primary investment 
objective would be to provide current income and that its secondary 
investment objective would be to provide capital appreciation. Further, 
the Prior Notice provided that the Fund would pursue its objectives by 
investing in large-cap U.S. exchange-traded equity securities and by 
utilizing an ``option strategy'' consisting of writing (selling) 
exchange-traded covered call options on the Standard & Poor's 500 Index 
(the ``Index'').
    The Exchange now proposes two modifications to the description of 
the measures utilized by the Adviser to implement the Fund's investment 
objectives. As described in further detail below, these pertain to the 
following: (1) The Fund's investment primarily in large-cap U.S. 
exchange-traded equity securities; and (2) the permissible terms to 
expiration for the U.S. exchange-traded covered call options written 
(sold) by the Fund. These modifications are being proposed to enhance 
the Adviser's flexibility in pursuing the Fund's investment objectives. 
However, the equity securities in which the Fund would invest and the 
options which the Fund would write would continue to be limited to U.S. 
exchange-traded securities and options, respectively. The Adviser 
represents that there would be no change to the Fund's investment 
objectives. Except as provided herein, all other facts presented and 
representations made in the Prior Release would remain unchanged. The 
Fund and the Shares would continue to comply with all initial and 
continued listing requirements under NASDAQ Rule 5735.
The Fund's Investments Primarily in Large-Cap U.S. Exchange-Traded 
Equity Securities
    The Prior Release stated that in pursuing its investment 
objectives, under normal market conditions,\6\ the

[[Page 26971]]

Fund would invest primarily in large-cap U.S. exchange-traded equity 
securities. The Exchange proposes to amend this statement in the Prior 
Release by deleting the term ``large-cap.'' \7\ Therefore, going 
forward, in pursuing its investment objectives, under normal market 
conditions, while the Fund would continue to invest primarily in U.S. 
exchange-traded equity securities, it would not be required to invest 
primarily in ``large-cap'' U.S. exchange-traded equity securities. The 
Adviser believes that the ability to invest primarily in U.S. exchange-
traded equity securities of any market capitalization would, by 
expanding the range of potential investments, provide it with 
additional flexibility to pursue, and enhance its ability to achieve, 
the Fund's investment objectives.
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    \6\ According to the Prior Release, the term ``under normal 
market conditions'' as used therein included, but was not limited 
to, the absence of adverse market, economic, political or other 
conditions, including extreme volatility or trading halts in the 
securities markets or the financial markets generally; operational 
issues causing dissemination of inaccurate market information; or 
force majeure type events such as systems failure, natural or man-
made disaster, act of God, armed conflict, act of terrorism, riot or 
labor disruption or any similar intervening circumstance. The Prior 
Release also provided that in periods of extreme market disturbance, 
the Fund may take temporary defensive positions, by overweighting 
its portfolio in cash/cash-like instruments; however, to the extent 
possible, the Adviser would continue to seek to achieve the Fund's 
investment objectives.
    \7\ To the extent necessary to make them consistent, additional 
statements and representations included in the Prior Release would 
also be deemed to be similarly modified.
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Permissible Terms to Expiration for Call Options
    As provided in the Prior Release, the option portion of the Fund's 
portfolio generally consists of U.S. exchange-traded covered calls or 
covered call spreads on the Index that are written by the Fund. The 
Prior Release provided that the call options written by the Fund would 
typically be a laddered portfolio of one week, one month, two months 
and three months and would typically be written at-the-money to 
slightly out-of-the-money. The Exchange is now proposing a change that 
would increase flexibility with respect to the permissible term for 
call option expirations. In this regard, the Exchange proposes to 
modify the foregoing to provide that, going forward, the call options 
written by the Fund would be a laddered portfolio of call options with 
expirations of less than one year, written at-the-money to slightly 
out-of-the-money.
Surveillance
    The Exchange represents that trading in the Shares would continue 
to be subject to the existing trading surveillances, administered by 
both NASDAQ and also the Financial Industry Regulatory Authority 
(``FINRA'') on behalf of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities laws.\8\ 
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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    \8\ 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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    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares, in the U.S. exchange-traded equity 
securities in which the Fund invests, and in the U.S. exchange-traded 
options which the Fund writes with other markets or other entities that 
are members of the Intermarket Surveillance Group (``ISG'') or with 
which the Exchange has in place a comprehensive surveillance sharing 
agreement,\9\ and FINRA may obtain trading information regarding 
trading in the Shares and such equity securities and options from such 
markets and other entities. In addition, the Exchange may obtain 
information regarding trading in the Shares and in such equity 
securities and options from markets and other entities that are members 
of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.
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    \9\ For a list of the current members of ISG, see 
www.isgportal.org.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \10\ in general and Section 6(b)(5) of the Act \11\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and, in general, to protect investors and the 
public interest.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares would continue to be listed and traded on the Exchange pursuant 
to the initial and continued listing criteria in NASDAQ Rule 5735. 
Consistent with the Prior Release, the Exchange represents that trading 
in the Shares would continue 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 and 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. In addition, the equity 
securities in which the Fund would invest and the options which the 
Fund would write would continue to be limited to U.S. exchange-traded 
securities and options, respectively, that trade in markets that are 
members of ISG or are parties to a comprehensive surveillance sharing 
agreement with the Exchange. The Exchange would continue to be able to 
obtain information regarding trading in the Shares and in such equity 
securities and options from markets and other entities that are members 
of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.
    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 Adviser represents that there is no change to the Fund's 
investment objectives. The Adviser represents that the purpose of the 
proposed changes is to provide it with greater flexibility in meeting 
the Fund's investment objectives by permitting: (1) The Fund to invest 
primarily in U.S. exchange-traded equity securities of any market 
capitalization; and (2) the covered call options written by the Fund to 
be a laddered portfolio of call options with expirations of less than 
one year, written at-the-money to slightly out-of-the-money. In 
addition, consistent with the Prior Release, net asset value (``NAV'') 
per Share would continue to be calculated daily and the NAV and 
Disclosed Portfolio (as defined in the Prior Release) would continue to 
be made available to all market participants at the same time. Further, 
a large amount of information would continue to be publicly available 
regarding the Fund and the Shares, thereby promoting market 
transparency. The Intraday indicative Value (as defined in the Prior 
Release), available on NASDAQ OMX Information LLC proprietary index 
data service, would continue to be updated and widely disseminated and 
broadly displayed at least every 15 seconds during the Regular Market 
Session.\12\ Moreover, on each business day, before commencement of 
trading on the Shares in the Regular Market Session on the Exchange, 
the Fund would continue to disclose on the Distributor's Web site the 
Disclosed Portfolio that will form the basis for the Fund's calculation 
of NAV at the end of the business day.
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    \12\ 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. E.T.; (2) Regular Market Session from 9:30 a.m. to 4 p.m. or 
4:15 p.m. E.T.; and (3) Post-Market Session from 4 p.m. or 4:15 p.m. 
to 8 p.m. E.T.).

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[[Page 26972]]

    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. As noted above, the additional flexibility to be 
afforded to the Adviser under the proposed rule change is intended to 
enhance the Adviser's ability to meet the Fund's investment objectives. 
Further, as noted above, the Exchange represents that trading in the 
Shares would continue to be subject to the existing trading 
surveillances, administered by both NASDAQ and also FINRA on behalf of 
the Exchange, which are designed to detect violations of Exchange rules 
and applicable federal securities laws. In addition, as indicated in 
the Prior Release, investors would continue to 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 Adviser represents that the proposed rule change, 
as described above, is consistent with the Fund's investment 
objectives, and would further assist the Adviser in achieving such 
investment objectives.
    For the above reasons, the Exchange 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 the 
proposed rule change will permit the Adviser additional flexibility, 
thereby helping the Fund to achieve its investment objectives and 
enhancing competition among issues of Managed Fund Shares.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \13\ and Rule 19b-4(f)(6) \14\ thereunder in 
that it effects a change that: (i) Does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) by its terms, does not 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate if consistent with the 
protection of investors and the public interest.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2015-044 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 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2015-044. 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-2015-044 and 
should be submitted on or before June 1, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-11272 Filed 5-8-15; 8:45 am]
 BILLING CODE 8011-01-P