[Federal Register: July 3, 2008 (Volume 73, Number 129)]
[Rules and Regulations]
[Page 38109-38110]
[DOCID:fr03jy08-1]

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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 71

[Docket No. FAA-2008-0038; Airspace Docket No. 07-ANM-16]

Establishment of Low Altitude Area Navigation Route (T-Route);
Southwest Oregon

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Final rule.

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SUMMARY: This action establishes a low altitude Area Navigation (RNAV)
route, designated T-274 in the State of Oregon. T-routes are low
altitude Air Traffic Service (ATS) routes, based on RNAV, for use by
aircraft having instrument flight rules (IFR)-approved Global
Positioning System (GPS)/Global Navigation Satellite System (GNSS)
equipment. The FAA is taking this action to enhance safety and improve
the efficient use of the navigable airspace in Oregon.

DATES: Effective Date: 0901UTC, September 25, 2008. The Director of the
Federal Register approves this incorporation by reference action under
1 CFR part 51, subject to the annual revision of FAA Order 7400.9 and
publication of conforming amendments.

FOR FURTHER INFORMATION CONTACT: Ken McElroy, Airspace and Rules Group,
Office of System Operations Airspace and AIM, Federal Aviation
Administration, 800 Independence Avenue, SW., Washington, DC 20591;
telephone:<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

History

    On February 14, 2008, the FAA published in the Federal Register a
notice of proposed rulemaking (NPRM) to establish a low altitude T-
route in southwest Oregon (73 FR 8628). Interested parties were invited
to participate in this rulemaking effort by submitting written comments
on this proposal to the FAA. Four comments were received in response to
the NPRM, each supporting the establishment of the route and
recommending lower minimum en route altitudes (MEA). The Aircraft
Owners and Pilots Association recommended the FAA modify its proposal
to ensure that T-274 has a lower MEA than current Very High Frequency
Omnidirectional Range (VOR) Federal airways. Regarding route altitudes,
the charted depiction will include MEA requirements which are
established in accordance with 14 CFR part 95. The establishment of
MEAs is outside the scope of this rule.
    Low altitude RNAV routes are published in paragraph 6011 of FAA
Order 7400.9R signed August 15, 2007, and effective September 15, 2007,
which is incorporated by reference in 14 CFR 71.1. The low altitude
RNAV routes listed in this document will be published subsequently in
the Order.

The Rule

    This amendment to Title 14 Code of Federal Regulations (14 CFR)
part 71 establishes a low altitude RNAV route in southwest Oregon. The
route is designated T-274, and will be depicted on the appropriate IFR
En Route Low Altitude charts. T-routes are low altitude RNAV ATS
routes, similar to VOR Federal airways, but based on GNSS navigation.
RNAV-equipped aircraft capable of filing flight plan equipment suffix
``G'' may file for these routes.
    The T-route described in this rule will enhance safety, and
facilitate more flexible and efficient use of the navigable airspace
for en route IFR operations transitioning through mountainous terrain
of southwest Oregon.
    The FAA has determined that this regulation only involves an
established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
Therefore, this regulation: (1) Is not a ``significant regulatory
action'' under Executive Order 12866; (2) is not a ``significant rule''
under Department of Transportation (DOT) Regulatory Policies and
Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant
preparation of a regulatory evaluation as the anticipated impact is so
minimal. Since this is a routine matter that will only affect air
traffic procedures and air navigation, it is certified that this rule,
when promulgated, will not have a significant economic impact on a
substantial number of small entities under the criteria of the
Regulatory Flexibility Act.
    The FAA's authority to issue rules regarding aviation safety is
found in Title 49 of the United States Code. Subtitle I, Section 106
describes the authority of the FAA Administrator. Subtitle VII,
Aviation Programs, describes in more detail the scope of the agency's
authority.
    This rulemaking is promulgated under the authority described in
Subtitle VII, Part A, Subpart I, Section 40103. Under that section, the
FAA is charged with prescribing regulations to assign the use of the
airspace necessary to ensure the safety of aircraft and the efficient
use of airspace. This regulation is within the scope of that authority
as it establishes an RNAV T-route in southwest Oregon.

Environmental Review

    The FAA has determined that this action qualifies for categorical
exclusion under the National Environmental Policy Act in accordance
with FAA Order 1050.1E, ``Environmental Impacts: Policies and
Procedures,'' paragraph 311a, 311b, and 311k. This airspace action is
not expected to cause any potentially significant environmental
impacts, and no extraordinary circumstances exist that warrant
preparation of an environmental assessment.

List of Subjects in 14 CFR Part 71

    Airspace, Incorporation by reference, Navigation (air).

Adoption of the Amendment

0
In consideration of the foregoing, the Federal Aviation Administration
amends 14 CFR part 71 as follows:

PART 71--DESIGNATION OF CLASS A, B, C, D, AND E AIRSPACE AREAS; AIR
TRAFFIC SERVICE ROUTES; AND REPORTING POINTS

0
1. The authority citation for part 71 continues to read as follows:

    Authority: 49 U.S.C. 106(g), 40103, 40113, 40120; E.O. 10854, 24
FR 9565, 3 CFR, 1959-1963 Comp., p. 389.

Sec.  71.1  [Amended]

0
2. The incorporation by reference in 14 CFR 71.1 of FAA Order 7400.9R,
Airspace Designations and Reporting Points, signed August 15, 2007, and
effective September 15, 2007, is amended as follows:

Paragraph 6011 Contiguous United States Area Navigation Routes

* * * * *

T-274 CRAAF to Newport, OR (ONP) [New]

CRAAF
    Fix (lat. 44[deg]45'37'' N., long. 123[deg]21'06'' W.)
Newport, OR (ONP)
    VORTAC (lat. 44[deg]34'31'' N., long. 124[deg]03'38'' W.)
* * * * *

    Issued in Washington, DC, on June 23, 2008.
Ellen Crum,
Acting Manager, Airspace and Rules Group.
[FR Doc. E8-15020 Filed 7-2-08; 8:45 am]

BILLING CODE 4910-13-P


[Federal Register Volume 82, Number 105 (Friday, June 2, 2017)]
[Notices]
[Pages 25648-25654]
[FR Doc No: 2017-11402]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80802; File No. SR-NASDAQ-2017-038]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change Relating to the First Trust
Municipal High Income ETF

May 26, 2017.
    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 May 16, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

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

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

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

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

1. Purpose
    The Commission has approved the listing and trading of Shares under
Nasdaq Rule 5735, which governs the listing and trading of Managed Fund
Shares on the Exchange.\3\ However, no Shares are currently listed and
traded on the Exchange. The Exchange believes the proposed rule change
reflects no significant issues not previously addressed in the Prior
Release.
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    \3\ The Commission approved Nasdaq Rule 5735 in Securities
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June
20, 2008) (SR-NASDAQ-2008-039). The Commission previously approved
the listing and trading of the Shares of the Fund. See Securities
Exchange Act Release No. 78913 (September 23, 2016), 81 FR 69109
(October 5, 2016) (SR-NASDAQ-2016-002) (``Prior Release'').
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    The Fund is an actively-managed exchange-traded fund (``ETF''). The
Shares will be offered by the Trust, which was established as a
Massachusetts business trust on January 9, 2008. The Trust, which is
registered with the Commission as an investment company under the
Investment Company Act of 1940 (the ``1940 Act''), has filed a
registration statement on Form N-1A (``Registration Statement'')
relating to the Fund with the Commission.\4\ The Fund is a series of
the Trust.
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    \4\ See Post-Effective Amendment No. 27 to Registration
Statement on Form N-1A for the Trust, dated August 31, 2015 (File
Nos. 333-176976 and 811-22245). The descriptions of the Fund and the
Shares contained herein are based, in part, on information in the
Registration Statement. Before Shares are publicly offered, the
Trust will file a post-effective amendment to its Registration
Statement. The changes in this proposed rule change will not be
implemented for the Fund until the post-effective amendment to the
Registration Statement becomes effective. First Trust Advisors L.P.
(the ``Adviser'') represents that the Adviser will not implement the
changes described herein until the instant proposed rule change is
operative.

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    The primary purpose of this proposed rule change is to modify
certain representations set forth in the Prior Release. Since the Prior
Release, in evaluating its ability to construct a portfolio that would
both enable the Fund to pursue its investment objectives effectively
and satisfy the representations set forth in the Prior Release, the
Adviser determined that, based on certain factors, including regulatory
and market developments with portfolio management implications,
additional flexibility would be needed to launch and operate the Fund.
In particular, in October 2016, the Commission adopted a new rule
(i.e., Rule 22e-4 under the 1940 Act, referred to as the ``Liquidity
Rule'') that will generally require ETFs (as well as mutual funds) to
establish liquidity risk management programs that include a number of
specified elements and may significantly impact funds' investment
activities.\5\ Among other things, funds will generally be required to
(a) assess, manage and periodically review their liquidity risk; \6\
(b) classify each of their portfolio investments into one of four
liquidity categories based on the number of days in which the fund
reasonably expects the investment would be convertible to cash (or sold
or disposed of, as applicable) in current market conditions without
significantly changing the market value of the investment (i.e., highly
liquid investments, moderately liquid investments, less liquid
investments, and illiquid investments); (c) determine a minimum
percentage of net assets that will be invested in ``highly liquid
investments''; \7\ and (d) limit ``illiquid investments'' \8\ to 15% of
net assets. Additionally, the Adviser took into account that recent
increases in interest rates have been accompanied by substantial
outflows from mutual funds and ETFs, and that future interest rate
swings may spark increased market volatility and trigger potentially
dramatic inflows and outflows.\9\ To enable the Fund to operate
effectively (including, in addition to pursuing its investment
objectives, complying with the Liquidity Rule and responding to
potential market volatility), the Adviser believes that additional
portfolio management flexibility is needed and warranted. Additionally,
for the reasons discussed in more detail below, the Exchange believes
that the proposal is consistent with Section 6(b)(5) of the Act.
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    \5\ See Investment Company Act Release No. 32315 (October 13,
2016), 81 FR 82142 (November 18, 2016). Funds (except for smaller
entities) will generally be required to comply with the liquidity
risk management program requirements by December 1, 2018. Although
funds that qualify as ``in-kind ETFs'' will be exempt from certain
of the Liquidity Rule's requirements, as noted in the Prior Release,
the Fund is typically expected to effect creations and redemptions
on a cash basis.
    \6\ ``Liquidity risk'' means the risk that the fund could not
meet requests to redeem shares issued by the fund without
significant dilution of remaining investors' interests in the fund.
See Rule 22e-4(a)(11). Funds will be required to consider various
factors including, for ETFs, (i) the relationship between the ETF's
portfolio liquidity and the way in which, and the prices and spreads
at which, ETF shares trade, including, the efficiency of the
arbitrage function and the level of active participation by market
participants (including authorized participants); and (ii) the
effect of the composition of baskets on the overall liquidity of the
ETF's portfolio. See Rule 22e-4(b)(1)(i)(D).
    \7\ ``Highly liquid investment'' generally means any cash held
by a fund and any investment that the fund reasonably expects to be
convertible into cash in current market conditions in three business
days or less without the conversion to cash significantly changing
the market value of the investment. See Rule 22e-4(a)(6).
    \8\ ``Illiquid investment'' generally means any investment that
the fund reasonably expects cannot be sold or disposed of in current
market conditions in seven calendar days or less without the sale or
disposition significantly changing the market value of the
investment. See Rule 22e-4(a)(8).
    \9\ It should also be noted that the Liquidity Rule requires
that in conjunction with assessing, managing and reviewing liquidity
risk, a fund consider certain factors, including investment strategy
and liquidity of portfolio investments during both normal and
reasonably foreseeable stressed conditions. See Rule 22e-
4(b)(1)(i)(A).
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    As a related matter, the Exchange notes that although the Prior
Release included certain representations that were based on the generic
listing standards for index-based ETFs, the Exchange's ``generic
listing standards'' for actively-managed ETFs (the ``Active ETF Generic
Listing Standards'') \10\ were recently adopted and, with one
exception, the Fund's proposed revised representations would meet or
exceed similar requirements for portfolios of fixed income securities
set forth in Nasdaq Rule 5735(b)(1)(B) under the Active ETF Generic
Listing Standards (``Rule 5735(b)(1)(B)''). In addition, this proposed
rule change would make certain changes to the description of the Fund's
investments to achieve better consistency with the proposed new
representations. Further, to provide the Adviser with greater
flexibility in hedging interest rate risks associated with the Fund's
portfolio investments, this proposed rule change would expand the
Fund's ability to invest in derivatives by permitting it to invest in
over-the-counter (``OTC'') forward contracts and OTC swaps, subject to
a limitation that would be consistent with the limitation on
investments in OTC derivatives set forth in Nasdaq Rule 5735(b)(1)(E)
under the Active ETF Generic Listing Standards (``Rule
5735(b)(1)(E)'').
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    \10\ See Securities Exchange Act Release No. 78918 (September
23, 2016), 81 FR 67033 (September 29, 2016).
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Changes to Representations
    The Prior Release noted that the Fund would be actively managed and
not tied to an index, but that under normal market conditions, on a
continuous basis determined at the time of purchase, its portfolio of
Municipal Securities (as defined in the Prior Release) would generally
meet, as applicable, all except for two of the criteria for non-
actively managed, index-based, fixed income ETFs contained in Nasdaq
Rule 5705(b)(4)(A), as described therein. More specifically, the Prior
Release stated that, under normal market conditions, the Fund's
portfolio of Municipal Securities would meet the requirements of: (i)
Nasdaq Rule 5705(b)(4)(A)(i) (requiring that the index or portfolio
consist of ``Fixed Income Securities''); (ii) Nasdaq Rule
5705(b)(4)(A)(iv) (requiring that no component fixed income security
(excluding Treasury securities) represent more than 30% of the weight
of the index or portfolio, and that the five highest weighted component
fixed income securities do not, in the aggregate, account for more than
65% of the weight of the index or portfolio); and (iii) Nasdaq Rule
5705(b)(4)(A)(v) (requiring that an underlying index or portfolio
(excluding one consisting entirely of exempted securities) include
securities from a minimum of 13 non-affiliated issuers) (collectively,
the ``Rule 5705-Related Representations'').
    Additionally, the Prior Release noted that Nasdaq Rule
5705(b)(4)(A)(iii) (relating to convertible securities) was
inapplicable to the Fund's portfolio of Municipal Securities. Further,
the Prior Release provided that the Fund's portfolio of Municipal
Securities may not satisfy 5705(b)(4)(A)(vi) (requiring that component
securities that in the aggregate account for at least 90% of the weight
of the index or portfolio be either exempted securities or from a
specified type of issuer) and that it would not generally satisfy Rule
5705(b)(4)(A)(ii) (requiring that components that in the aggregate
account for at least 75% of the weight of the index or portfolio have a
minimum original principal amount outstanding of $100 million or more).
However, the Prior Release stated that under normal market conditions,
at least 40% (based on dollar amount invested)

of the Municipal Securities in which the Fund invested would be issued
by issuers with total outstanding debt issuances that, in the
aggregate, have a minimum amount of municipal debt outstanding at the
time of purchase of $75 million or more (the ``40/75
Representation'').\11\
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    \11\ As noted in the Prior Release, the Commission has
previously issued orders approving proposed rule changes relating to
the listing and trading under NYSE Arca Equities Rule 5.2(j)(3),
Commentary .02 (which governs the listing and trading of fixed-
income index ETFs on NYSE Arca, Inc.) to various ETFs that track
indexes comprised of municipal securities (including high-yield
municipal index ETFs) that did not meet the analogous requirement
included in Commentary .02(a)(2) to NYSE Arca Equities Rule
5.2(j)(3), but demonstrated that the portfolio of municipal
securities in which the ETFs would invest would be sufficiently
liquid (including Securities Exchange Act Release Nos. 75376 (July
7, 2015), 80 FR 40113 (July 13, 2015) (SR-NYSEArca-2015-18) (order
approving listing and trading of Vanguard Tax-Exempt Bond Index
Fund); 71232 (January 3, 2014), 79 FR 1662 (January 9, 2014) (SR-
NYSEArca-2013-118) (order approving listing and trading of Market
Vectors Short High-Yield Municipal Index ETF); and 63881 (February
9, 2011), 76 FR 9065 (February 16, 2011) (SR-NYSEArca-2010-120)
(order approving listing and trading of SPDR Nuveen S&P High Yield
Municipal Bond ETF)). See also Securities Exchange Act Release Nos.
67985 (October 4, 2012), 77 FR 61804 (October 11, 2012) (SR-
NYSEArca-2012-92) (order approving listing and trading of iShares
2018 S&P AMT-Free Municipal Series and iShares 2019 S&P AMT-Free
Municipal Series); 72464 (June 25, 2014), 79 FR 37373 (July 1, 2014)
(SR-NYSEArca-2014-45) (order approving continued listing and trading
of PowerShares Insured California Municipal Bond Portfolio,
PowerShares Insured National Municipal Bond Portfolio and
PowerShares Insured New York Municipal Bond Portfolio); 72523 (July
2, 2014), 79 FR 39016 (July 9, 2014) (SR-NYSEArca-2014-37) (order
approving listing and trading of iShares 2020 S&P AMT-Free Municipal
Series); 75468 (July 16, 2015), 80 FR 43500 (July 22, 2015) (SR-
NYSEArca-2015-25) (order approving listing and trading of iShares
iBonds Dec 2021 AMT-Free Muni Bond ETF and iShares iBonds Dec 2022
AMT-Free Muni Bond ETF); 78329 (July 14, 2016), 81 FR 47217 (July
20, 2016) (SR-BatsBZX-2016-01) (order approving listing and trading
of VanEck Vectors AMT-Free 6-8 Year Municipal Index ETF, VanEck
Vectors AMT-Free 8-12 Year Municipal Index ETF, and VanEck Vectors
AMT-Free 12-17 Year Municipal Index ETF); and 79885 (January 26,
2017), 82 FR 8963 (February 1, 2017) (SR-NYSEArca-2016-100) (order
approving listing and trading of Direxion Daily Municipal Bond
Taxable Bear 1X Fund).
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    In addition to the Rule 5705-Related Representations and the 40/75
Representation, the Prior Release provided that under normal market
conditions, except for the initial invest-up period and periods of high
cash inflows or outflows,\12\ the Fund's investments in Municipal
Securities would provide exposure (based on dollar amount invested) to
(a) at least 10 different industries (with no more than 25% of the
value of the Fund's net assets comprised of Municipal Securities that
provide exposure to any single industry) and (b) at least 15 different
states (with no more than 30% of the value of the Fund's net assets
comprised of Municipal Securities that provide exposure to any single
state) (collectively, the ``Industry/State Representations'').
Additionally, the Prior Release stated that under normal market
conditions, except for the initial invest-up period and periods of high
cash inflows or outflows, (a) with respect to 75% of the Fund's net
assets, the Fund's exposure to any single borrower (based on dollar
amount invested) would not exceed 3% of the value of the Fund's net
assets and (b) with respect to 15% of the Fund's net assets, the Fund's
exposure to any single borrower (based on dollar amount invested) would
not exceed 5% of the value of the Fund's net assets (collectively, the
``Borrower Exposure Representations'').
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    \12\ As described in the Prior Release, the term ``initial
invest-up period'' means the six-week period following the
commencement of trading of Shares on the Exchange and the term
``periods of high cash inflows or outflows'' means rolling periods
of seven calendar days during which inflows or outflows of cash, in
the aggregate, exceed 10% of the Fund's net assets as of the opening
of business on the first day of such periods.
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    The Prior Release also provided that under normal market
conditions, except for the initial invest-up period and periods of high
cash inflows or outflows, (a) with respect to the Municipal Securities
in which the Fund invested that were rated investment grade by each
nationally recognized statistical rating organization (``NRSRO'')
rating such securities, at the time of purchase, the applicable
borrower would be obligated to pay debt service on issues of municipal
obligations that have an aggregate principal amount outstanding of $100
million or more and (b) with respect to all other Municipal Securities
in which the Fund invested (referred to as ``Clause B Munis''), at the
time of purchase of a Clause B Muni, the borrowers of all Clause B
Munis held by the Fund, in the aggregate, would have a weighted average
of principal municipal debt outstanding of $50 million or more
(collectively, the ``Borrower Debt Representations'' and, together with
the Borrower Exposure Representations, the Industry/State
Representations, the 40/75 Representation and the Rule 5705-Related
Representations, the ``Prior Representations'').
    As indicated above, the Adviser has reconsidered the Prior
Representations and concluded that additional flexibility will be
needed to launch and operate the Fund. As a result, in this proposed
rule change, the Exchange is proposing that, going forward: (a) The
Prior Representations, except for the Industry/State Representations,
would be deleted and (b) the representations included in the next two
paragraphs (referred to as the ``New Representations'') would be added.
Further, the Exchange notes that the New Representations have been
designed to correspond to the requirements of Rule 5735(b)(1)(B), as
these are more readily adapted to the Fund (as an actively-managed ETF)
than the generic listing standards for index-based ETFs upon which the
Rule 5705-Related Representations were based.
    Although as described below, certain of the New Representations
would meet or exceed similar requirements set forth in Rule
5735(b)(1)(B), it is not anticipated that the Fund would meet the
requirement that components that in the aggregate account for at least
75% of the fixed income weight of the portfolio each have a minimum
original principal amount outstanding of $100 million or more (the
``Generic 100 Requirement'').\13\ In general terms, the Fund would
operate as an actively-managed ETF that normally invests in a portfolio
of Municipal Securities (as defined in the Prior Release, with the
modification described below). The Adviser notes that debt issuance
sizes for municipal obligations are generally smaller than for
corporate obligations.\14\ Furthermore, as a general matter, municipal
borrowers in certain industries in which the Fund currently intends to
invest significantly \15\ tend to have less outstanding debt than
municipal borrowers in other municipal industries. Therefore, under
normal market conditions, except for the initial invest-up period and
periods of high cash inflows or outflows,\16\ at least 40% (based on
dollar amount invested) of the Municipal Securities in which the Fund
invests \17\ would be issued by issuers

with total outstanding debt issuances that, in the aggregate, have a
minimum amount of municipal debt outstanding at the time of purchase of
$50 million or more (the ``40/50 Representation''). Based on its
expertise and understanding of the municipal securities market and the
manner in which municipal securities generally trade, the Adviser
believes that, notwithstanding both the previous more stringent 40/75
Representation and the Generic 100 Requirement, the 40/50
Representation is appropriate in light of the Fund's investment
objectives and the manner in which the Fund intends to pursue them.\18\
Given the nature of the municipal securities market and the manner in
which municipal securities generally trade, the expected availability
of Municipal Securities that would satisfy the Fund's investment
parameters, and the debt issuance profiles of the corresponding issuers
and borrowers, the 40/50 Representation should both provide the Fund
with flexibility to construct its portfolio and, when combined with the
Industry/State Representations and the other New Representations
included in this filing (including certain representations set forth
below pertaining to fixed income securities weightings and number of
non-affiliated issuers that are based on, but more stringent than, as
applicable, the requirements set forth in Rule 5735(b)(1)(B)), should
support the potential for diversity and liquidity, thereby mitigating
the Commission's concerns about manipulation.\19\
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    \13\ See Nasdaq Rule 5735(b)(1)(B)(i).
    \14\ As indicated above in note 11, various ETFs seeking to
track indexes comprised of municipal securities have previously
sought and obtained approval by the Commission of proposed rule
changes because they would not meet the requirement under the
applicable generic listing standards that is similar to the Generic
100 Requirement.
    \15\ These industries include charter schools, senior living
facilities (i.e., continuing care retirement communities
(``CCRCs'')) and special tax districts, among others. As noted in
the Prior Release, in the case of a municipal conduit financing (in
general terms, the issuance of municipal securities by an issuer to
finance a project to be used primarily by a third party (the
``conduit borrower'')), the ``borrower'' is the conduit borrower
(i.e., the party on which a bondholder must rely for repayment) and
in the case of other municipal financings, the ``borrower'' is the
issuer of the municipal securities.
    \16\ See note 12 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \17\ For the avoidance of doubt, in the case of Municipal
Securities that are issued by entities whose underlying assets are
municipal bonds (``Municipal Entities''), the underlying municipal
bonds would be taken into account.
    \18\ The Adviser notes that individual issues of municipal
securities represented by CUSIPs (i.e., the specific identifying
numbers for securities) may be placed into categories according to
common characteristics (such as rating, geographical region,
purpose, and maturity). Municipal securities that share similar
characteristics generally tend to trade similarly to one another;
therefore, within these categories, issues may be considered
somewhat fungible from a portfolio management perspective, allowing
one CUSIP to be represented by another that shares similar
characteristics for purposes of developing an investment strategy.
Moreover, when municipal securities are close substitutes for one
another, pricing vendors may be able to use executed trade
information from similar municipal securities as pricing inputs for
an individual security. This can make individual securities more
liquid because valuations for a single security are generally better
estimators of actual trading prices when they are informed by trades
in a large group of closely related securities.
    \19\ The Exchange notes that, in addition to approving the Fund
in the Prior Release, the Commission has also approved for listing
and trading shares of other actively-managed ETFs that principally
hold municipal securities. See, e.g., Securities Exchange Act
Release Nos. 60981 (November 10, 2009), 74 FR 59594 (November 18,
2009) (SR-NYSEArca-2009-79) (order approving listing and trading of
PIMCO Short Term Municipal Bond Strategy Fund and PIMCO Intermediate
Municipal Bond Strategy Fund); 71617 (February 26, 2014), 79 FR
12257 (March 4, 2014) (SR-NYSEArca-2013-135) (order approving
listing and trading of db-X Managed Municipal Bond Fund); 71913
(April 9, 2014), 79 FR 21333 (April 15, 2014) (SR-NASDAQ-2014-019)
(order approving listing and trading of First Trust Managed
Municipal ETF); and 79293 (November 10, 2016), 81 FR 81189 (November
17, 2016) (SR-NYSEArca-2016-107) (order approving listing and
trading of Cumberland Municipal Bond ETF).
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    Under normal market conditions, except for the initial invest-up
period and periods of high cash inflows or outflows,\20\ no component
fixed income security (excluding the U.S. government securities
described under the heading ``Other Investments'' in the Prior Release)
would represent more than 15% of the Fund's net assets, and the five
most heavily weighted component fixed income securities in the Fund's
portfolio (excluding U.S. government securities) would not, in the
aggregate, account for more than 25% of the Fund's net assets.\21\
Further, under normal market conditions, except for the initial invest-
up period and periods of high cash inflows or outflows,\22\ the Fund's
portfolio of Municipal Securities would include securities from a
minimum of 30 non-affiliated issuers.\23\ Moreover, under normal market
conditions, except for the initial invest-up period and periods of high
cash inflows or outflows,\24\ component securities that in the
aggregate account for at least 90% of the weight of the Fund's
portfolio of Municipal Securities would be exempted securities as
defined in Section 3(a)(12) of the Act (the ``Exempted Securities
Representation'').\25\ Additionally, to the extent the Fund invests in
Municipal Securities that are mortgage-backed or asset-backed
securities, such investments would not account, in the aggregate, for
more than 20% of the weight of the fixed income portion of the Fund's
portfolio.\26\
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    \20\ See note 12 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \21\ See the Active ETF Generic Listing Standards requirement
set forth in Nasdaq Rule 5735(b)(1)(B)(ii), which provides that no
component fixed income security (excluding U.S. Treasury securities
and government-sponsored entity (``GSE'') securities) may represent
more than 30% of the fixed income weight of the portfolio, and that
the five most heavily weighted component fixed income securities in
the portfolio (excluding U.S. Treasury securities and GSE
securities) may not in the aggregate account for more than 65% of
the fixed income weight of the portfolio. For the avoidance of
doubt, in the case of Municipal Securities that are issued by
Municipal Entities, the underlying municipal bonds would be taken
into account.
    \22\ See note 12 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \23\ For the avoidance of doubt, in the case of Municipal
Securities that are issued by Municipal Entities, the underlying
municipal bonds would be taken into account. Additionally, for
purposes of this restriction, each state and each separate political
subdivision, agency, authority, or instrumentality of such state,
each multi-state agency or authority, and each guarantor, if any,
would be treated as separate, non-affiliated issuers of Municipal
Securities. The Active ETF Generic Listing Standards requirement set
forth in Nasdaq Rule 5735(b)(1)(B)(iii) provides that generally, an
underlying portfolio (excluding exempted securities) that includes
fixed income securities must include a minimum of 13 non-affiliated
issuers. Although not required, if the Fund's portfolio of Municipal
Securities is comprised entirely of securities that meet the
definition of ``municipal securities'' set forth in Section 3(a)(29)
of the Act, then such portfolio would also be comprised entirely of
``exempted securities'' as defined in Section 3(a)(12) of the Act
and, therefore, the requirements of Rule 5735(b)(1)(B)(iii) would
not pertain to such portfolio; see the Exempted Securities
Representation below (which refers to 90% of the weight of the
Fund's portfolio of Municipal Securities).
    \24\ See note 12 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \25\ See the Active ETF Generic Listing Standards requirement
set forth in Nasdaq Rule 5735(b)(1)(B)(iv)(d). For the avoidance of
doubt, in the case of Municipal Securities that are issued by
Municipal Entities, the underlying municipal bonds would be taken
into account.
    \26\ See the Active ETF Generic Listing Standards requirement
set forth in Nasdaq Rule 5735(b)(1)(B)(v).
---------------------------------------------------------------------------

    The New Representations differ from the Prior Representations and
do not, in certain respects, comply with Rule 5735(b)(1)(B)
(particularly with respect to the Generic 100 Requirement). However,
taking into account the nature of the municipal securities market and
the manner in which municipal securities generally trade, in light of
the requirements that the New Representations and the Industry/State
Representations would impose (e.g., concerning municipal debt
outstanding, fixed income securities weightings, issuer
diversification, the nature of the securities in which the Fund would
invest (including representations relating to exempted securities and
mortgage-backed and asset-backed securities), and exposure to
industries and states), they should provide support regarding the
anticipated diversity and liquidity of the Fund's Municipal Securities
portfolio and should mitigate the risks associated with manipulation,
while also providing the Adviser with the necessary flexibility to
operate the Fund as intended.
Changes to Description of Certain Fund Investments
    The Prior Release stated that under normal market conditions, the
Fund would seek to achieve its investment objectives by investing at
least 80% of its net assets (including investment borrowings) in
municipal debt securities

that pay interest that is exempt from regular federal income taxes
which are ``exempted securities'' under Section 3(a)(12) of the Act
(collectively, ``Municipal Securities''). In light of the Exempted
Securities Representation, going forward, the Exchange proposes to
revise the foregoing by deleting the phrase ``which are `exempted
securities' under Section 3(a)(12) of the Act.'' In addition, the Prior
Release stated that the Fund ``may invest up to 20% of its net assets
in short-term debt instruments . . ., taxable municipal securities or
tax-exempt municipal securities that are not exempted securities under
Section 3(a)(12) under the Act, or it may hold cash.'' Going forward,
the Exchange proposes to revise the foregoing by replacing the phrase
``taxable municipal securities or tax-exempt municipal securities that
are not exempted securities under Section 3(a)(12) under the Act,''
with the phrase ``and taxable municipal securities and other municipal
securities that are not Municipal Securities,''.
    Additionally, the Prior Release stated that under normal market
conditions, the Fund would invest at least 65% of its net assets in
Municipal Securities that are, at the time of investment, rated below
investment grade (i.e., not rated Baa3/BBB-or above) by at least one
NRSRO rating such securities (or Municipal Securities that are unrated
and determined by the Adviser to be of comparable quality) (the ``65%
Requirement''). The Prior Release also provided that the Fund could
invest up to 35% of its net assets in ``investment grade'' Municipal
Securities (meaning Municipal Securities that are, at the time of
investment, rated investment grade (i.e., rated Baa3/BBB-or above) by
each NRSRO rating such securities (or Municipal Securities that are
unrated and determined by the Adviser to be of comparable quality))
(the ``35% Limitation''). Going forward, for consistency with various
other representations, the Exchange proposes to modify the beginning of
the 65% Requirement by replacing the phrase ``Under normal market
conditions, the Fund will invest at least 65% of its net assets'' with
the following: ``Under normal market conditions, except for the initial
invest-up period and periods of high cash inflows or outflows, the Fund
will invest at least 65% of its net assets''.\27\ Similarly the
Exchange proposes to modify the beginning of the 35% Limitation by
replacing the phrase ``The Fund may invest up to 35% of its net
assets'' with the following: ``Under normal market conditions, except
for the initial invest-up period and periods of high cash inflows or
outflows, the Fund may not invest more than 35% of its net
assets''.\28\
---------------------------------------------------------------------------

    \27\ See note 12 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \28\ Id.
---------------------------------------------------------------------------

Changes To Expand Permitted Derivatives Investments
    As described in the Prior Release, the Fund may (i) invest in
exchange-listed options on U.S. Treasury securities, exchange-listed
options on U.S. Treasury futures contracts, and exchange-listed U.S.
Treasury futures contracts (collectively, the ``Listed Derivatives'')
and (ii) acquire short positions in the Listed Derivatives. No changes
are being proposed with respect to the Fund's investments in the Listed
Derivatives. Going forward, however, the Exchange proposes that the
Fund's ability to invest in derivatives would be expanded to permit it
to also invest in OTC forward contracts and OTC swaps (collectively,
the ``OTC Derivatives'') to hedge interest rate risks associated with
the Fund's portfolio investments.
    On both an initial and continuing basis, no more than 20% of the
assets in the Fund's portfolio would be invested in the OTC Derivatives
and, for purposes of calculating this limitation, the Fund's investment
in the OTC Derivatives would be calculated as the aggregate gross
notional value of the OTC Derivatives.\29\ The Fund would only enter
into transactions in the OTC Derivatives with counterparties that the
Adviser reasonably believes are capable of performing under the
applicable contract or agreement.\30\ The Fund's investments in both
Listed Derivatives and OTC Derivatives would be consistent with the
Fund's investment objectives and the 1940 Act and would not be used to
seek to achieve a multiple or inverse multiple of an index.
---------------------------------------------------------------------------

    \29\ This limitation is consistent with the limitation set forth
in Rule 5735(b)(1)(E).
    \30\ The Fund would 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 would evaluate the
creditworthiness of counterparties on an ongoing basis. In addition
to information provided by credit agencies, the Adviser's analysis
would evaluate each approved counterparty using various methods of
analysis and may consider the Adviser's past experience with the
counterparty, its known disciplinary history and its share of market
participation.
---------------------------------------------------------------------------

    The OTC Derivatives would typically be valued using information
provided by a Pricing Service (as defined in the Prior Release).
Pricing information for the OTC Derivatives would be available from
major broker-dealer firms and/or major market data vendors and/or
Pricing Services (as defined in the Prior Release).
    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 comply with all initial and
continued listing requirements under Nasdaq Rule 5735.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b)
of the Act in general and Section 6(b)(5) of the Act, in particular, in
that it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to and perfect
the mechanism of a free and open market and, in general, to protect
investors and the public interest. Except as provided herein, all other
facts presented and representations made in the Prior Release would
remain unchanged. The Fund would comply with all the initial and
continued listing requirements under Nasdaq Rule 5735.
    The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares would be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in Nasdaq Rule 5735 and, except
as provided herein, all other facts presented and representations made
in the Prior Release would remain unchanged. The Exchange notes that
Shares have not yet been listed on the Exchange. Consistent with the
Prior Release, the Exchange represents that trading in the Shares would
be subject to the existing trading surveillances, administered by both
Nasdaq and also the Financial Industry Regulatory Authority
(``FINRA''), on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities laws.
    The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Adviser represents that taking into account the nature of the
municipal securities market and the manner in which municipal
securities generally trade, in light of the requirements that the New
Representations and the Industry/State Representations would impose
(e.g., concerning municipal debt outstanding,

fixed income securities weightings, issuer diversification, the nature
of the securities in which the Fund would invest (including
representations relating to exempted securities and mortgage-backed and
asset-backed securities), and exposure to industries and states), they
should provide support regarding the anticipated diversity and
liquidity of the Fund's Municipal Securities portfolio and should
mitigate the risks associated with manipulation, while also providing
the Adviser with the necessary flexibility to operate the Fund as
intended.
    With one exception, the New Representations would meet or exceed
similar requirements for portfolios of fixed income securities set
forth in Rule 5735(b)(1)(B). In this regard, it is not anticipated that
the Fund would meet the Generic 100 Requirement. Based on its expertise
and understanding of the municipal securities market and the manner in
which municipal securities generally trade, the Adviser believes that,
notwithstanding both the previous more stringent 40/75 Representation
and the Generic 100 Requirement, the 40/50 Representation is
appropriate in light of the Fund's investment objectives and the manner
in which the Fund intends to pursue them. Further, given the nature of
the municipal securities market and the manner in which municipal
securities generally trade, the expected availability of Municipal
Securities that would satisfy the Fund's investment parameters, and the
debt issuance profiles of the corresponding issuers and borrowers, the
40/50 Representation should both provide the Fund with flexibility to
construct its portfolio and, when combined with the Industry/State
Representations and the other New Representations, should support the
potential for diversity and liquidity, thereby mitigating the
Commission's concerns about manipulation.
    Further, in connection with the proposal to permit the Fund to
invest in the OTC Derivatives, the Exchange notes that the ability to
invest in the OTC Derivatives would provide the Adviser with additional
flexibility in hedging interest rate risks associated with the Fund's
portfolio investments and would be subject to a limitation that is
consistent with the limitation set forth in Rule 5735(b)(1)(E).
Additionally, the Fund would only enter into transactions in the OTC
Derivatives with counterparties that the Adviser reasonably believes
are capable of performing under the applicable contract or agreement.
    In addition, a large amount of information would be publicly
available regarding the Fund and the Shares, thereby promoting market
transparency. Moreover, the Intraday Indicative Value (as described in
the Prior Release), available on the NASDAQ OMX Information LLC
proprietary index data service, would 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 would 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.
    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. The Exchange notes that the Fund does not yet have
publicly offered Shares and does not yet have Shares listed and traded
on the Exchange. Before Shares are publicly offered, the Trust will
file a post-effective amendment to its Registration Statement. The
Shares will not be publicly offered until the post-effective amendment
to the Registration Statement becomes effective.
    For the above reasons, Nasdaq believes the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed rule change would provide the Adviser with the flexibility
needed to proceed with launching the Fund, accommodating the listing
and trading of Managed Fund Shares for an additional actively-managed
exchange-traded product, thereby enhancing competition among market
participants, to the benefit of investors and the marketplace.

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

    No written comments were either solicited or 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_ADDRESS>Please include
File Number SR-NASDAQ-2017-038 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2017-038. 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 the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make

available publicly. All submissions should refer to File Number SR-
NASDAQ-2017-038 and should be submitted on or before June 23, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11402 Filed 6-1-17; 8:45 am]
 BILLING CODE 8011-01-P