[Federal Register Volume 82, Number 67 (Monday, April 10, 2017)]
[Notices]
[Pages 17314-17324]
[FR Doc No: 2017-07045]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80369; File No. SR-NASDAQ-2017-033]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change To List and Trade the Shares
of the First Trust California Municipal High Income ETF

April 4, 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 March 24, 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

    The Exchange proposes to list and trade the shares of the First
Trust California Municipal High Income ETF (the ``Fund'') of First
Trust Exchange-Traded Fund III (the ``Trust'') under Nasdaq Rule 5735
(``Managed Fund Shares'').\3\ The shares of the Fund are collectively
referred to herein as the ``Shares.''
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    \3\ The Commission approved Nasdaq Rule 5735 in Securities
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June
20, 2008) (SR-NASDAQ-2008-039). The Exchange notes that the
Commission has previously issued orders with respect to the First
Trust Municipal High Income ETF, Securities Exchange Act Release No.
78913 (September 23, 2016), 81 FR 69109 (October 5, 2016) (SR-
NASDAQ-2016-002); and First Trust Managed Municipal ETF, Securities
Exchange Act Release No. 71913 (April 9, 2014), 79 FR 21333 (April
15, 2014) (SR-NASDAQ-2014-019). The Exchange believes the proposed
rule change raises no significant issues not previously addressed in
those prior Commission orders. In addition, the Exchange notes that
the Commission has approved listing and trading of certain index-
based ETFs that invest in municipal securities. See, e.g.,
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).
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    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 Exchange proposes to list and trade the Shares of the Fund
under Nasdaq Rule 5735, which governs the listing and trading of
Managed Fund Shares \4\ on the Exchange. The Fund will

be an actively-managed exchange-traded fund (``ETF''). The Shares will
be offered by the Trust, which was established as a Massachusetts
business trust on January 9, 2008.\5\ The Trust is registered with the
Commission as an investment company and has filed a registration
statement on Form N-1A (``Registration Statement'') with the
Commission.\6\ The Fund will be a series of the Trust. The Fund intends
to qualify each year as a regulated investment company (``RIC'') under
Subchapter M of the Internal Revenue Code of 1986, as amended.
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    \4\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (the ``1940 Act'') organized
as an open-end investment company or similar entity that invests in
a portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Index Fund Shares, listed
and traded on the Exchange under Nasdaq Rule 5705, seeks to provide
investment results that correspond generally to the price and yield
performance of a specific foreign or domestic stock index, fixed
income securities index or combination thereof.
    \5\ The Commission has issued an order, upon which the Trust may
rely, granting certain exemptive relief under the 1940 Act. See
Investment Company Act Release No. 30029 (April 10, 2012) (File No.
812-13795) (the ``Exemptive Relief''). In addition, on December 6,
2012, the staff of the Commission's Division of Investment
Management (``Division'') issued a no-action letter (``No-Action
Letter'') relating to the use of derivatives by actively-managed
ETFs. See No-Action Letter dated December 6, 2012 from Elizabeth G.
Osterman, Associate Director, Office of Exemptive Applications,
Division of Investment Management. The No-Action Letter stated that
the Division would not recommend enforcement action to the
Commission under applicable provisions of and rules under the 1940
Act if actively-managed ETFs operating in reliance on specified
orders (which include the Exemptive Relief) invest in options
contracts, futures contracts or swap agreements provided that they
comply with certain representations stated in the No-Action Letter.
    \6\ See Post-Effective Amendment No. 65 to Registration
Statement on Form N-1A for the Trust, dated March 23, 2017 (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.
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    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. Brown Brothers Harriman & Co. (``BBH'') will act as
the administrator, accounting agent, custodian, and transfer agent to
the Fund.
    Paragraph (g) of Rule 5735 provides that if the investment adviser
to the investment company issuing Managed Fund Shares is affiliated
with a broker-dealer, such investment adviser shall erect a ``fire
wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such investment company portfolio.\7\ In addition, paragraph
(g) further requires that personnel who make decisions on the open-end
fund's portfolio composition must be subject to procedures designed to
prevent the use and dissemination of material, non-public information
regarding the open-end fund's portfolio.
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    \7\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser and its related personnel are
subject to the provisions of Rule 204A-1 under the Advisers Act
relating to codes of ethics. This Rule requires investment advisers
to adopt a code of ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with other applicable
securities laws. Accordingly, procedures designed to prevent the
communication and misuse of non-public information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless such investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violation, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
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    Rule 5735(g) is similar to Nasdaq Rule 5705(b)(5)(A)(i); however,
paragraph (g) in connection with the establishment of a ``fire wall''
between the investment adviser and the broker-dealer reflects the
applicable open-end fund's portfolio, not an underlying benchmark
index, as is the case with index-based funds. The Adviser is not a
broker-dealer, but it is affiliated with the Distributor, a broker-
dealer, and has implemented and will maintain a fire wall with respect
to its broker-dealer affiliate regarding access to information
concerning the composition and/or changes to the portfolio.
    In addition, personnel who make decisions on the Fund's portfolio
composition will be subject to procedures designed to prevent the use
and dissemination of material non-public information regarding the
Fund's portfolio. In the event (a) the Adviser or any sub-adviser
registers as a broker-dealer 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 and maintain 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. The Fund currently does not intend to use a sub-adviser.
First Trust California Municipal High Income ETF
Principal Investments
    The primary investment objective of the Fund will be to generate
current income that is exempt from regular federal income taxes and
California income taxes and its secondary objective will be long-term
capital appreciation. Under normal market conditions,\8\ the Fund will
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 and California income taxes (collectively, ``Municipal
Securities'').\9\ Municipal Securities will be issued by or on behalf
of the State of California or territories or possessions of the U.S.
(including without limitation Puerto Rico, the U.S. Virgin Islands and
Guam), and/or the political subdivisions, agencies, authorities and
other instrumentalities of such State, territories or possessions.\10\
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    \8\ The term ``under normal market conditions'' as used herein
includes, but is not limited to, the absence of adverse market,
economic, political or other conditions, including extreme
volatility or trading halts in the fixed income markets or the
financial markets generally; operational issues causing
dissemination of inaccurate market information; or force majeure
type events such as systems failure, natural or man-made disaster,
act of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance. On a temporary
basis, including for defensive purposes, during the initial invest-
up period (i.e., the six-week period following the commencement of
trading of Shares on the Exchange) and during periods of high cash
inflows or outflows (i.e., 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), the Fund may depart from its principal
investment strategies; for example, it may hold a higher than normal
proportion of its assets in cash. During such periods, the Fund may
not be able to achieve its investment objectives. The Fund may adopt
a defensive strategy when the Adviser believes securities in which
the Fund normally invests have elevated risks due to political or
economic factors and in other extraordinary circumstances.
    \9\ Assuming compliance with the investment requirements and
limitations described herein, the Fund may invest up to 100% of its
net assets in Municipal Securities that pay interest that generates
income subject to the federal alternative minimum tax.
    \10\ For the avoidance of doubt, Municipal Securities issued by
or on behalf of territories or possessions of the U.S. and/or the
political subdivisions, agencies, authorities and other
instrumentalities of such territories or possessions (collectively,
``Territorial Obligations'') will pay interest that is exempt from
regular federal income taxes and California income taxes. Under
normal market conditions, except for the initial invest-up period
and periods of high cash inflows or outflows, the Fund will limit
its investments in Territorial Obligations to 20% of its net assets.
(See note 8 regarding the meaning of the terms ``initial invest-up
period'' and ``periods of high cash inflows or outflows.'')

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    The types of Municipal Securities in which the Fund may invest
include municipal lease obligations (and certificates of participation
in such obligations), municipal general obligation bonds, municipal
revenue bonds, municipal notes, municipal cash equivalents, private
activity bonds (including without limitation industrial development
bonds), and pre-refunded \11\ and escrowed to maturity bonds. In
addition, Municipal Securities include securities issued by entities
(referred to as ``Municipal Entities'') whose underlying assets are
municipal bonds (i.e., tender option bond (TOB) trusts and custodial
receipts trusts).
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    \11\ A pre-refunded municipal bond is a municipal bond that has
been refunded to a call date on or before the final maturity of
principal and remains outstanding in the municipal market. The
payment of principal and interest of the pre-refunded municipal
bonds held by the Fund will be funded from securities in a
designated escrow account that holds U.S. Treasury securities or
other obligations of the U.S. government (including its agencies and
instrumentalities). As the payment of principal and interest is
generated from securities held in a designated escrow account, the
pledge of the municipality has been fulfilled and the original
pledge of revenue by the municipality is no longer in place. The
escrow account securities pledged to pay the principal and interest
of the pre-refunded municipal bond do not guarantee the price
movement of the bond before maturity. Investment in pre-refunded
municipal bonds held by the Fund may subject the Fund to interest
rate risk, market risk and credit risk. In addition, while a
secondary market exists for pre-refunded municipal bonds, if the
Fund sells pre-refunded municipal bonds prior to maturity, the price
received may be more or less than the original cost, depending on
market conditions at the time of sale.
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    The Fund may invest in Municipal Securities of any maturity.
However, under normal market conditions, except for the initial invest-
up period and periods of high cash inflows or outflows,\12\ the
weighted average maturity of the Fund will be less than or equal to 14
years.
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    \12\ See note 8 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
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    Under normal market conditions, except for the initial invest-up
period and periods of high cash inflows or outflows,\13\ the Fund will
invest at least 50% of its net assets in ``investment grade Municipal
Securities,'' which are Municipal Securities that are, at the time of
investment, rated investment grade (i.e., rated Baa3/BBB-or above) by
at least one nationally recognized statistical rating organization
(``NRSRO'') rating such securities (or Municipal Securities that are
unrated and determined by the Adviser to be of comparable quality \14\)
(the ``Investment Grade Requirement''). The Fund will consider pre-
refunded or escrowed to maturity bonds, regardless of rating, to be
investment grade Municipal Securities. The Fund may invest up to 50% of
its net assets in Municipal Securities that are, at the time of
investment, not investment grade Municipal Securities (commonly
referred to as ``high yield'' or ``junk'' bonds).\15\ If, subsequent to
purchase by the Fund, a Municipal Security held by the Fund experiences
a decrease in credit quality and is no longer an investment grade
Municipal Security, the Fund may continue to hold the Municipal
Security and it will not cause the Fund to violate the Investment Grade
Requirement; however, the Municipal Security will be taken into account
for purposes of determining whether purchases of additional Municipal
Securities will cause the Fund to violate the Investment Grade
Requirement.
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    \13\ Id.
    \14\ Comparable quality of unrated Municipal Securities will be
determined by the Adviser based on fundamental credit analysis of
the unrated security and comparable 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.
    \15\ These Municipal Securities may include Municipal Securities
that are currently in default and not expected to pay the current
coupon (``Distressed Municipal Securities''). The Fund may invest up
to 10% of its net assets in Distressed Municipal Securities. If,
subsequent to purchase by the Fund, a Municipal Security held by the
Fund becomes a Distressed Municipal Security, the Fund may continue
to hold the Distressed Municipal Security and it will not cause the
Fund to violate the 10% limitation; however, the Distressed
Municipal Security will be taken into account for purposes of
determining whether purchases of additional Municipal Securities
will cause the Fund to violate such limitation.
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    Although as described below, certain of the representations
included in this filing will meet or exceed similar requirements set
forth in the generic listing standards for actively-managed ETFs (the
``Generic Listing Standards''), it is not anticipated that the Fund
will 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.\16\ In general terms, as described above, the Fund will operate
as an actively-managed ETF that normally invests in a portfolio of
Municipal Securities and will be subject to the Investment Grade
Requirement (in contrast to, for example, an index-based ETF that
tracks an index comprised of the largest municipal debt issuers). The
Adviser notes that debt issuance sizes for municipal obligations are
generally smaller than for corporate obligations. Furthermore, as a
general matter, municipal borrowers in certain industries with
municipal obligations rated in the ``A'' and ``BBB'' categories (in
which the Fund currently intends to invest significantly) \17\ tend to
have less outstanding debt than municipal borrowers in other municipal
industries.
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    \16\ See Nasdaq Rule 5735(b)(1)(B)(i).
    \17\ These industries include charter schools, senior living
facilities (i.e., continuing care retirement communities (CCRCs))
and special tax districts, among others. See note 35 and
accompanying text regarding the Fund's exposure to different
industries. 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). In the case of
other municipal financings, the ``borrower'' is the issuer of the
municipal securities.
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    Therefore, under normal market conditions, except for the initial
invest-up period and periods of high cash inflows or outflows,\18\ at
least 40% (based on dollar amount invested) of the Municipal Securities
in which the Fund invests \19\ will be issued by issuers with total
outstanding debt issuances that, in the aggregate, have a minimum
amount of municipal debt outstanding at the time of purchase of $50
million or more (the ``40/50 Requirement''). The Adviser believes that
the 40/50 Requirement is appropriate in light of the Fund's investment
objectives and the manner in which the Fund intends to pursue them.
Given the expected availability of Municipal Securities that will
satisfy the Fund's investment parameters and the debt issuance profiles
of the corresponding issuers and borrowers, the 40/50 Requirement
should both provide the Fund with flexibility to construct its
portfolio and, when combined with the other representations 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, the Generic Listing
Standards), should support the potential for diversity and liquidity,
thereby mitigating the Commission's concerns about manipulation.
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    \18\ See note 8 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \19\ For the avoidance of doubt, in the case of Municipal
Securities that are issued by Municipal Entities, the underlying
municipal bonds will be taken into account.
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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 in
``Other Investments'' below) will 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) will 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
will 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
will be exempted securities as defined in Section 3(a)(12) of the
Act.\25\ Additionally, to the extent the Fund invests in Municipal
Securities that are asset-backed securities,\26\ such investments will
not account, in the aggregate, for more than 20% of the weight of the
fixed income portion of the Fund's portfolio.\27\
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    \20\ See note 8 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \21\ See the Generic Listing Standards requirement set forth in
Nasdaq Rule 5735(b)(1)(B)(ii), which provides that 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 will be taken into account.
    \22\ See note 8 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \23\ See the Generic Listing Standards requirement set forth in
Nasdaq Rule 5735(b)(1)(B)(iii), which provides that generally an
underlying portfolio (excluding exempted securities) that includes
fixed income securities must include a minimum of 13 non-affiliated
issuers. For the avoidance of doubt, in the case of Municipal
Securities that are issued by Municipal Entities, the underlying
municipal bonds will be taken into account. Additionally, for
purposes of this restriction, each separate political subdivision,
agency, authority, or instrumentality of the State of California,
and each guarantor, if any, will be treated as separate, non-
affiliated issuers of Municipal Securities.
    \24\ See note 8 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \25\ See the 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 will be taken into account.
    \26\ For the avoidance of doubt, municipal debt securities
backed by mortgages or tax liens will not be considered asset-backed
securities.
    \27\ See the Generic Listing Standards requirement set forth in
Nasdaq Rule 5735(b)(1)(B)(v).
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    Additional representations pertaining to the Fund's portfolio,
including representations relating to exposure to industries, are set
forth below under ``Investment Restrictions'' (such representations
relating to exposure to industries, together with the representations
set forth in the two preceding paragraphs and the Investment Grade
Requirement, are collectively the ``Portfolio Representations''). In
light of the requirements they impose (e.g., concerning credit quality,
municipal debt outstanding, fixed income securities weightings, issuer
diversification, the nature of the securities in which the Fund will
invest (including representations relating to exempted securities and
asset-backed securities), and exposure to industries), the Portfolio
Representations should provide support regarding the anticipated
diversity and liquidity of the Fund's Municipal Securities portfolio
and should mitigate the risks associated with manipulation.
Other Investments
    With respect to up to 20% (in the aggregate) of its net assets, the
Fund may invest in and hold the securities and other instruments
(including cash) described below.
    The Fund may invest in short-term debt instruments (described
below), money market funds and other cash equivalents, and taxable and
other municipal securities that are not Municipal Securities, or it may
hold cash. The percentage of the Fund invested in such holdings or held
in cash will vary and will depend on several factors, including market
conditions. Short-term debt instruments, which do not include Municipal
Securities, are issued by issuers having a long-term debt rating of at
least A-/A3 (as applicable) by S&P Global Ratings (``S&P''), Moody's
Investors Service, Inc. (``Moody's'') or Fitch Ratings (``Fitch'') and
have a maturity of one year or less.
    The Fund may invest in the following short-term debt instruments:
(1)Fixed rate and floating rate U.S. government securities, including
bills, notes and bonds differing as to maturity and rates of interest,
which are either issued or guaranteed by the U.S. Treasury or by U.S.
government agencies or instrumentalities; (2) certificates of deposit
issued against funds deposited in a bank or savings and loan
association; (3) bankers' acceptances, which are short-term credit
instruments used to finance commercial transactions; (4) repurchase
agreements,\28\ which involve purchases of debt securities; (5) bank
time deposits, which are monies kept on deposit with banks or savings
and loan associations for a stated period of time at a fixed rate of
interest; and (6) commercial paper, which is short-term unsecured
promissory notes.\29\
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    \28\ The Fund intends to enter into repurchase agreements only
with financial institutions and dealers believed by the Adviser to
present minimal credit risks in accordance with criteria approved by
the Board of Trustees of the Trust (``Trust Board''). The Adviser
will review and monitor the creditworthiness of such institutions.
The Adviser will monitor the value of the collateral at the time the
transaction is entered into and at all times during the term of the
repurchase agreement.
    \29\ The Fund may only invest in commercial paper rated A-3 or
higher by S&P, Prime-3 or higher by Moody's or F3 or higher by
Fitch.
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    The Fund may (i) invest in the securities of other investment
companies registered under the 1940 Act, including money market funds,
ETFs,\30\ open-end funds (other than money market funds and other
ETFs), and closed-end funds and (ii) acquire short positions in the
securities of the foregoing investment companies.
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    \30\ An ETF is an investment company registered under the 1940
Act that holds a portfolio of securities. Many ETFs are designed to
track the performance of a securities index, including industry,
sector, country and region indexes. ETFs included in the Fund will
be listed and traded in the U.S. on one or more registered
exchanges. The Fund may invest in the securities of certain ETFs in
excess of the limits imposed under the 1940 Act pursuant to
exemptive orders obtained by such ETFs and their sponsors from the
Commission. In addition, the Fund may invest in the securities of
certain other investment companies in excess of the limits imposed
under the 1940 Act pursuant to an exemptive order that the Trust has
obtained from the Commission. See Investment Company Act Release No.
30377 (February 5, 2013) (File No. 812-13895). The ETFs in which the
Fund may invest include Index Fund Shares (as described in Nasdaq
Rule 5705), Portfolio Depository Receipts (as described in Nasdaq
Rule 5705), and Managed Fund Shares (as described in Nasdaq Rule
5735). While the Fund may invest in inverse ETFs, the Fund will not
invest in leveraged or inverse leveraged (e.g., 2X or -3X) ETFs.
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    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 and (ii) acquire
short positions in the foregoing derivatives. Transactions in the
foregoing derivatives 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. The Fund's

investments in derivative instruments will be consistent with the
Fund's investment objectives and the 1940 Act and will not be used to
seek to achieve a multiple or inverse multiple of the Fund's broad-
based securities market index (as defined in Form N-1A).
Investment Restrictions
    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.\31\ The
Fund will monitor its portfolio liquidity on an ongoing basis to
determine whether, in light of current circumstances, an adequate level
of liquidity is being maintained, and will consider taking appropriate
steps in order to maintain adequate liquidity if, through a change in
values, net assets, or other circumstances, more than 15% of the Fund's
net assets are held in illiquid assets. Illiquid assets include
securities subject to contractual or other restrictions on resale and
other instruments that lack readily available markets as determined in
accordance with Commission staff guidance.\32\
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    \31\ In reaching liquidity decisions, the Adviser may consider
the following factors: The frequency of trades and quotes for the
security; the number of dealers wishing to purchase or sell the
security and the number of other potential purchasers; dealer
undertakings to make a market in the security; and the nature of the
security and the nature of the marketplace in which it trades (e.g.,
the time needed to dispose of the security, the method of soliciting
offers and the mechanics of transfer).
    \32\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR
14618 (March 18, 2008), footnote 34. See also Investment Company Act
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970)
(Statement Regarding ``Restricted Securities''); Investment Company
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992)
(Revisions of Guidelines to Form N-1A). A fund's portfolio security
is illiquid if it cannot be disposed of in the ordinary course of
business within seven days at approximately the value ascribed to it
by the fund. See Investment Company Act Release No. 14983 (March 12,
1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7
under the 1940 Act); Investment Company Act Release No. 17452 (April
23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under
the Securities Act of 1933).
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    The Fund may not invest 25% or more of the value of its total
assets in securities of issuers in any one industry. This restriction
does not apply to (a) municipal securities issued by governments or
political subdivisions of governments, (b) obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities,
or (c) securities of other investment companies.\33\ In addition, under
normal market conditions, except for the initial invest-up period and
periods of high cash inflows or outflows,\34\ the Fund's investments in
Municipal Securities will provide exposure (based on dollar amount
invested) to at least 10 different industries \35\ (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).\36\
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    \33\ See Form N-1A, Item 9. The Commission has taken the
position that a fund is concentrated if it invests more than 25% of
the value of its total assets in any one industry. See, e.g.,
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR
54241 (November 21, 1975).
    \34\ See note 8 regarding the meaning of the terms ``initial
invest-up period'' and ``periods of high cash inflows or outflows.''
    \35\ The municipal industry classification system used by the
Fund will divide the municipal securities universe into distinct
categories that are intended to reflect either the use of proceeds
generated by particular subsets of municipal securities or the
collateral/sources of repayment securing/backing such municipal
securities. For example, municipal bonds associated with the airport
industry are issued to construct or expand an airport and/or related
facilities and are secured by revenues generated from the use of the
airport.
    \36\ For the avoidance of doubt, in the case of Municipal
Securities that are issued by Municipal Entities, the underlying
municipal bonds will be taken into account.
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Creation and Redemption of Shares
    The Fund will issue and redeem Shares on a continuous basis at net
asset value (``NAV'') \37\ only in large blocks of Shares (``Creation
Units'') in transactions with authorized participants, generally
including broker-dealers and large institutional investors
(``Authorized Participants''). Creation Units generally will consist of
50,000 Shares, although this may change from time to time. Creation
Units, however, are not expected to consist of less than 50,000 Shares.
As described in the Registration Statement and consistent with the
Exemptive Relief, the Fund will issue and redeem Creation Units in
exchange for an in-kind portfolio of instruments and/or cash in lieu of
such instruments (the ``Creation Basket'').\38\ In addition, if there
is a difference between the NAV attributable to a Creation Unit and the
market value of the Creation Basket exchanged for the Creation Unit,
the party conveying instruments (which may include cash-in-lieu
amounts) with the lower value will pay to the other an amount in cash
equal to the difference (referred to as the ``Cash Component'').
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    \37\ The NAV of the Fund's Shares generally will be calculated
once daily Monday through Friday as of the close of regular trading
on the New York Stock Exchange (``NYSE''), generally 4:00 p.m.,
Eastern Time (the ``NAV Calculation Time''). NAV per Share will be
calculated by dividing the Fund's net assets by the number of Fund
Shares outstanding.
    \38\ Subject to, and in accordance with, the provisions of the
Exemptive Relief, it is expected that the Fund will typically issue
and redeem Creation Units on a cash basis; however, at times, it may
issue and redeem Creation Units on an in-kind (or partially in-kind)
basis.
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    Creations and redemptions must be made by or through an Authorized
Participant that has executed an agreement that has been agreed to by
the Distributor and BBH with respect to creations and redemptions of
Creation Units. All standard orders to create Creation Units must be
received by the transfer agent no later than the closing time of the
regular trading session on the NYSE (ordinarily 4:00 p.m., Eastern
Time) (the ``Closing Time''), in each case on the date such order is
placed in order for the creation of Creation Units to be effected based
on the NAV of Shares as next determined on such date after receipt of
the order in proper form. Shares may be redeemed only in Creation Units
at their NAV next determined after receipt, not later than the Closing
Time, of a redemption request in proper form by the Fund through the
transfer agent and only on a business day.
    The Fund's custodian, through the National Securities Clearing
Corporation, will make available on each business day, prior to the
opening of business of the Exchange, the list of the names and
quantities of the instruments comprising the Creation Basket, as well
as the estimated Cash Component (if any), for that day. The published
Creation Basket will apply until a new Creation Basket is announced on
the following business day prior to commencement of trading in the
Shares.
Net Asset Value
    The Fund's NAV will be determined as of the close of regular
trading on the NYSE on each day the NYSE is open for trading. If the
NYSE closes early on a valuation day, the NAV will be determined as of
that time. NAV per Share will be calculated for the Fund by taking the
value of the Fund's total assets, including interest or dividends
accrued but not yet collected, less all liabilities, including accrued
expenses and dividends declared but unpaid, and dividing such amount by
the total number of Shares outstanding. The result, rounded to the
nearest cent, will be the NAV per Share. All valuations will be subject
to review by the Trust Board or its delegate.
    The Fund's investments will be valued daily. As described more
specifically below, investments traded on an exchange (i.e., a
regulated market), will generally be valued at market value prices that
represent last sale or official closing prices. In

addition, as described more specifically below, non-exchange traded
investments (including Municipal Securities) will generally be valued
using prices obtained from third-party pricing services (each, a
``Pricing Service'').\39\ If, however, valuations for any of the Fund's
investments cannot be readily obtained as provided in the preceding
manner, or the Pricing Committee of the Adviser (the ``Pricing
Committee'') \40\ questions the accuracy or reliability of valuations
that are so obtained, such investments will be valued at fair value, as
determined by the Pricing Committee, in accordance with valuation
procedures (which may be revised from time to time) adopted by the
Trust Board (the ``Valuation Procedures''), and in accordance with
provisions of the 1940 Act. The Pricing Committee's fair value
determinations may require subjective judgments about the value of an
asset. The fair valuations attempt to estimate the value at which an
asset could be sold at the time of pricing, although actual sales could
result in price differences, which could be material.
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    \39\ The Adviser may use various Pricing Services or discontinue
the use of any Pricing Services, as approved by the Trust Board from
time to time.
    \40\ The Pricing Committee will be subject to procedures
designed to prevent the use and dissemination of material non-public
information regarding the Fund's portfolio.
---------------------------------------------------------------------------

    Certain securities, including in particular Municipal Securities,
in which the Fund may invest will not be listed on any securities
exchange or board of trade. Such securities will typically be bought
and sold by institutional investors in individually negotiated private
transactions that function in many respects like an over-the-counter
secondary market, although typically no formal market makers will
exist. Certain securities, particularly debt securities, will have few
or no trades, or trade infrequently, and information regarding a
specific security may not be widely available or may be incomplete.
Accordingly, determinations of the value of debt securities may be
based on infrequent and dated information. Because there is less
reliable, objective data available, elements of judgment may play a
greater role in valuation of debt securities than for other types of
securities.
    The information summarized below is based on the Valuation
Procedures as currently in effect; however, as noted above, the
Valuation Procedures are amended from time to time and, therefore, such
information is subject to change.
    The following investments will typically be valued using
information provided by a Pricing Service: (a) Except as provided
below, Municipal Securities; (b) except as provided below, short-term
U.S. government securities, commercial paper, and bankers' acceptances,
all as set forth under ``Other Investments'' (collectively, ``Short-
Term Debt Instruments''); and (c) except as provided below, taxable and
other municipal securities that are not Municipal Securities. Debt
instruments may be valued at evaluated mean prices, as provided by
Pricing Services. Pricing Services typically value non-exchange-traded
instruments utilizing a range of market-based inputs and assumptions,
including readily available market quotations obtained from broker-
dealers making markets in such instruments, cash flows, and
transactions for comparable instruments. In pricing certain
instruments, the Pricing Services may consider information about an
instrument's issuer or market activity provided by the Adviser.
    Municipal Securities, Short-Term Debt Instruments, and taxable and
other municipal securities having a remaining maturity of 60 days or
less when purchased will typically be valued at cost adjusted for
amortization of premiums and accretion of discounts, provided the
Pricing Committee has determined that the use of amortized cost is an
appropriate reflection of value given market and issuer-specific
conditions existing at the time of the determination.
    Repurchase agreements will typically be valued as follows:
    Overnight repurchase agreements will be valued at amortized cost
when it represents the best estimate of value. Term repurchase
agreements (i.e., those whose maturity exceeds seven days) will be
valued at the average of the bid quotations obtained daily from at
least two recognized dealers.
    Equity securities (including ETFs and closed-end funds) listed on
any exchange other than the Exchange will typically be valued at the
last sale price on the exchange on which they are principally traded on
the business day as of which such value is being determined. Such
equity securities (including ETFs and closed-end funds) listed on the
Exchange will typically be valued at the official closing price on the
business day as of which such value is being determined. If there has
been no sale on such day, or no official closing price in the case of
securities traded on the Exchange, such equity securities will
typically be valued using fair value pricing. Such equity securities
traded on more than one securities exchange will be valued at the last
sale price or official closing price, as applicable, on the business
day as of which such value is being determined at the close of the
exchange representing the principal market for such securities.
    Money market funds and other registered open-end management
investment companies (other than ETFs, which will be valued as
described above) will typically be valued at their net asset values as
reported by such registered open-end management investment companies to
Pricing Services.
    Exchange-listed derivatives (including options on U.S. Treasury
securities, options on U.S. Treasury futures contracts, and U.S.
Treasury futures contracts) will typically be valued at the closing
price in the market where such instruments are principally traded.
Availability of Information
    The Fund's Web site (www.ftportfolios.com), which will be publicly
available prior to the public offering of Shares, will include a form
of the prospectus for the Fund that may be downloaded. The Web site
will include the Shares' ticker, CUSIP and exchange information along
with additional quantitative information updated on a daily basis,
including, for the Fund: (1) Daily trading volume, the prior business
day's reported NAV and closing price, mid-point of the bid/ask spread
at the time of calculation of such NAV (the ``Bid/Ask Price''),\41\ and
a calculation of the premium and discount of the Bid/Ask Price against
the NAV; and (2) data in chart format displaying the frequency
distribution of discounts and premiums of the daily Bid/Ask Price
against the NAV, within appropriate ranges, for each of the four
previous calendar quarters. On each business day, before commencement
of trading in Shares in the Regular Market Session \42\ 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.\43\
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    \41\ The Bid/Ask Price of the Fund will be determined using the
midpoint of the highest bid and the lowest offer on the Exchange as
of the time of calculation of the Fund's NAV. The records relating
to Bid/Ask Prices will be retained by the Fund and its service
providers.
    \42\ See Nasdaq Rule 4120(b)(4) (describing the three trading
sessions on the Exchange: (1) Pre-Market Session from 4 a.m. to 9:30
a.m., Eastern Time; (2) Regular Market Session from 9:30 a.m. to 4
p.m. or 4:15 p.m., Eastern Time; and (3) Post-Market Session from 4
p.m. or 4:15 p.m. to 8 p.m., Eastern Time).
    \43\ 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.
---------------------------------------------------------------------------

    The Fund's disclosure of derivative positions in the Disclosed
Portfolio will include sufficient information for market participants
to use to value these positions intraday. On a daily basis, the Fund
will disclose on the Fund's Web site the following information
regarding each portfolio holding, as applicable to the type of holding:
Ticker symbol, CUSIP number or other identifier, if any; a description
of the holding (including the type of holding); with respect to
holdings in derivatives, the identity of the security, index or other
asset upon which the derivative is based; for options, the option
strike price; quantity held (as measured by, for example, par value,
notional value or number of shares, contracts or units); maturity date,
if any; coupon rate, if any; effective date, if any; market value of
the holding; and percentage weighting of the holding in the Fund's
portfolio. The Web site information will be publicly available at no
charge.
    In addition, for the Fund, an estimated value, defined in Rule
5735(c)(3) as the ``Intraday Indicative Value,'' that reflects an
estimated intraday value of the Fund's Disclosed Portfolio, will be
disseminated. Moreover, the Intraday Indicative Value, available on the
NASDAQ OMX Information LLC proprietary index data service,\44\ will be
based upon the current value for the components of the Disclosed
Portfolio and will be updated and widely disseminated by one or more
major market data vendors and broadly displayed at least every 15
seconds during the Regular Market Session. The Intraday Indicative
Value will be based on quotes and closing prices provided by a dealer
who makes a market in those instruments. Premiums and discounts between
the Intraday Indicative Value and the market price may occur. This
should not be viewed as a ``real time'' update of the NAV per Share of
the Fund, which is calculated only once a day.
---------------------------------------------------------------------------

    \44\ Currently, the NASDAQ OMX Global Index Data Service
(``GIDS'') is the Nasdaq global index data feed service, offering
real-time updates, daily summary messages, and access to widely
followed indexes and Intraday Indicative Values for ETFs. GIDS
provides investment professionals with the daily information needed
to track or trade Nasdaq indexes, listed ETFs, or third-party
partner indexes and ETFs.
---------------------------------------------------------------------------

    The dissemination of the Intraday Indicative Value, together with
the Disclosed Portfolio, will allow investors to determine the value of
the underlying portfolio of the Fund on a daily basis and will provide
a close estimate of that value throughout the trading day.
    Investors will also be able to obtain the Fund's Statement of
Additional Information (``SAI''), the Fund's annual and semi-annual
reports (together, ``Shareholder Reports''), and its Form N-CSR and
Form N-SAR, filed twice a year. The Fund's SAI and Shareholder Reports
will be available free upon request from the Fund, and those documents
and the Form N-CSR and Form N-SAR may be viewed on-screen or downloaded
from the Commission's Web site at www.sec.gov. Information regarding
market price and trading volume of the Shares will be continually
available on a real-time basis throughout the day on brokers' computer
screens and other electronic services.
    Information regarding the previous day's closing price and trading
volume information for the Shares will be published daily in the
financial section of newspapers. Quotation and last sale information
for the Shares will be available via Nasdaq proprietary quote and trade
services, as well as in accordance with the Unlisted Trading Privileges
and the Consolidated Tape Association (``CTA'') plans for the Shares.
Quotation and last sale information for exchange-listed equity
securities (including other ETFs and closed-end funds) will be
available from the exchanges on which they are traded as well as in
accordance with any applicable CTA plans. Quotation and last sale
information for U.S. exchange-listed options will be available via the
Options Price Reporting Authority.
    One source of price information for Municipal Securities and
taxable and other municipal securities will be the Electronic Municipal
Market Access (``EMMA'') of the Municipal Securities Rulemaking Board
(``MSRB'').\45\ Additionally, the MSRB offers trade data subscription
services that permit subscribers to obtain same-day pricing information
about municipal securities transactions. Moreover, pricing information
for Municipal Securities, as well as for taxable and other municipal
securities, Short-Term Debt Instruments (including short-term U.S.
government securities, commercial paper, and bankers' acceptances), and
repurchase agreements will be available from major broker-dealer firms
and/or major market data vendors and/or Pricing Services.
---------------------------------------------------------------------------

    \45\ Information available on EMMA includes next-day information
regarding municipal securities transactions and par amounts traded.
In addition, a source of price information for certain taxable
municipal securities is the Trade Reporting and Compliance Engine
(``TRACE'') of the Financial Industry Regulatory Authority
(``FINRA'').
---------------------------------------------------------------------------

    Pricing information for exchange-listed derivatives (including
options on U.S. Treasury securities, options on U.S. Treasury futures
contracts, and U.S. Treasury futures contracts), ETFs and closed-end
funds will be available from the applicable listing exchange and from
major market data vendors.
    Money market funds and other open-end funds (excluding ETFs) are
typically priced once each business day and their prices will be
available through the applicable fund's Web site or from major market
data vendors.
    Additional information regarding the Fund and the Shares, including
investment strategies, risks, creation and redemption procedures, fees,
Fund holdings disclosure policies, distributions and taxes will be
included in the Registration Statement.
Initial and Continued Listing
    The Shares will be subject to Rule 5735, which sets forth the
initial and continued listing criteria applicable to Managed Fund
Shares. The Exchange represents that, for initial and continued
listing, the Fund must be in compliance with Rule 10A-3 \46\ under the
Act. A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange. The Exchange will obtain a
representation from the issuer of the Shares that the NAV per Share
will be calculated daily and that the NAV and the Disclosed Portfolio
will be made available to all market participants at the same time.
---------------------------------------------------------------------------

    \46\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Trading Halts
    With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund. Nasdaq will halt trading in the
Shares under the conditions specified in Nasdaq Rules 4120 and 4121,
including the trading pauses under Nasdaq Rules 4120(a)(11) and (12).
Trading may be halted because of market conditions or for reasons that,
in the view of the Exchange, make trading in the Shares inadvisable.
These may include: (1) The extent to which trading is not occurring in
the securities and/or the other assets constituting the Disclosed
Portfolio of the Fund; or (2) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present. Trading in the Shares also will be subject to Rule

5735(d)(2)(D), which sets forth circumstances under which Shares of the
Fund may be halted.
Trading Rules
    Nasdaq deems the Shares to be equity securities, thus rendering
trading in the Shares subject to Nasdaq's existing rules governing the
trading of equity securities. Nasdaq will allow trading in the Shares
from 4:00 a.m. until 8:00 p.m., Eastern Time. The Exchange has
appropriate rules to facilitate transactions in the Shares during all
trading sessions. As provided in Nasdaq Rule 5735(b)(3), the minimum
price variation for quoting and entry of orders in Managed Fund Shares
traded on the Exchange is $0.01.
Surveillance
    The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by both Nasdaq and
also FINRA on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities
laws.\47\ 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.
---------------------------------------------------------------------------

    \47\ 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.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
    FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares and the exchange-listed securities and
instruments held by the Fund (including closed-end funds, ETFs,
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) with other markets and other entities that
are members of the Intermarket Surveillance Group (``ISG''),\48\ and
FINRA may obtain trading information regarding trading in the Shares
and such exchange-listed 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-
listed securities and instruments held by the Fund from markets and
other entities that are members of ISG, which includes securities and
futures exchanges, or with which the Exchange has in place a
comprehensive surveillance sharing agreement. Moreover, FINRA, on
behalf of the Exchange, will be able to access, as needed, trade
information for certain fixed income securities held by the Fund
reported to FINRA's TRACE.\49\
---------------------------------------------------------------------------

    \48\ 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.
    \49\ For Municipal Securities, trade information can generally
be found on the MSRB's EMMA.
---------------------------------------------------------------------------

    At least 90% of the Fund's net assets that are invested 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 (in the aggregate) 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. All of the Fund's net assets that are invested in exchange-
listed equity securities (including closed-end funds and ETFs) will be
invested in securities that trade in markets that are members of ISG or
are parties to a comprehensive surveillance sharing agreement with the
Exchange.
    In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares. Specifically, the Information
Circular will discuss the following: (1) The procedures for purchases
and redemptions of Shares in Creation Units (and that Shares are not
individually redeemable); (2) Nasdaq Rule 2111A, which imposes
suitability obligations on Nasdaq members with respect to recommending
transactions in the Shares to customers; (3) how information regarding
the Intraday Indicative Value and the Disclosed Portfolio is
disseminated; (4) the risks involved in trading the Shares during the
Pre-Market and Post-Market Sessions when an updated Intraday Indicative
Value will not be calculated or publicly disseminated; (5) the
requirement that members deliver a prospectus to investors purchasing
newly issued Shares prior to or concurrently with the confirmation of a
transaction; and (6) trading information. The Information Circular will
also discuss any exemptive, no-action and interpretive relief granted
by the Commission from any rules under the Act.
    Additionally, the Information Circular will reference that the Fund
is subject to various fees and expenses described in the Registration
Statement. The Information Circular will also disclose the trading
hours of the Shares of the Fund and the applicable NAV Calculation Time
for the Shares. The Information Circular will disclose that information
about the Shares of the Fund will be publicly available on the Fund's
Web site.
Continued Listing Representations
    All statements and representations made in this filing regarding
(a) the description of the portfolio, (b) limitations on portfolio
holdings or reference assets, or (c) the applicability of Exchange
rules and surveillance procedures shall constitute continued listing
requirements for listing the Shares on the Exchange. In addition, the
issuer has represented to the Exchange that it will advise the Exchange
of any failure by the Fund to comply with the continued listing
requirements, and, pursuant to its obligations under Section 19(g)(1)
of the Act, the Exchange will monitor for compliance with the continued
listing requirements. If the Fund is not in compliance with the
applicable listing requirements, the Exchange will commence delisting
procedures under the Nasdaq 5800 Series.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b)
of the Act in general and Section 6(b)(5) of the Act in particular in
that it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities, and to remove impediments to and perfect
the mechanism of a free and open market and, in general, to protect
investors and the public interest.
    The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in Nasdaq Rule 5735. The

Exchange represents that trading in the Shares will be subject to the
existing trading surveillances, administered by both Nasdaq and also
FINRA on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities laws.
    The Adviser is not a broker-dealer, but it is affiliated with a
broker-dealer and is required to implement and maintain a ``fire wall''
with respect to such broker-dealer affiliate regarding access to
information concerning the composition and/or changes to the Fund's
portfolio. In addition, paragraph (g) of Nasdaq Rule 5735 further
requires that personnel who make decisions on the open-end fund's
portfolio composition must be subject to procedures designed to prevent
the use and dissemination of material non-public information regarding
the open-end fund's portfolio.
    FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares and the exchange-listed securities and
instruments held by the Fund (including closed-end funds, ETFs,
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) with other markets and other entities that
are members of ISG, and FINRA may obtain trading information regarding
trading in the Shares and such exchange-listed 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-listed securities and instruments held
by the Fund from markets and other entities that are members of ISG,
which includes securities and futures exchanges, or with which the
Exchange has in place a comprehensive surveillance sharing agreement.
Moreover, FINRA, on behalf of the Exchange, will be able to access, as
needed, trade information for certain fixed income securities held by
the Fund reported to FINRA's TRACE. At least 90% of the Fund's net
assets that are invested in exchange-listed options on U.S. Treasury
securities, exchange-listed options on U.S. Treasury futures contracts,
and exchange-listed U.S. Treasury futures contracts (in the aggregate)
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. All of the Fund's net assets that are invested in
exchange-listed equity securities (including closed-end funds and ETFs)
will be invested in securities that trade in markets that are members
of ISG or are parties to a comprehensive surveillance sharing agreement
with the Exchange.
    The primary investment objective of the Fund will be to generate
current income that is exempt from regular federal income taxes and
California income taxes, and its secondary objective will be long-term
capital appreciation. Under normal market conditions, the Fund will
seek to achieve its investment objectives by investing at least 80% of
its net assets (including investment borrowings) in Municipal
Securities. Under normal market conditions, except for the initial
invest-up period and periods of high cash inflows or outflows, the Fund
will limit its investments in Territorial Obligations to 20% of its net
assets. The Fund will invest in accordance with the Portfolio
Representations. In light of the requirements they impose (e.g.,
concerning credit quality, municipal debt outstanding, fixed income
securities weightings, issuer diversification, the nature of the
securities in which the Fund will invest (including representations
relating to exempted securities and asset-backed securities), and
exposure to industries), the Exchange believes that the Portfolio
Representations should provide support regarding the anticipated
diversity and liquidity of the Fund's Municipal Securities portfolio
and should mitigate the risks associated with manipulation.
    The Fund may invest up to 20% of its net assets in taxable and
other municipal securities that are not Municipal Securities. In
addition, the Fund may invest up to 10% of its net assets in Distressed
Municipal Securities. With respect to up to 20% of its net assets, 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 and (ii) acquire
short positions in the foregoing derivatives. The Fund's investments in
derivative instruments will be consistent with the Fund's investment
objectives and the 1940 Act and will not be used to seek to achieve a
multiple or inverse multiple of the Fund's broad-based securities
market index (as defined in Form N-1A). Also, 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, 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's investments will be valued daily. Investments traded on
an exchange (i.e., a regulated market), will generally be valued at
market value prices that represent last sale or official closing
prices. Non-exchange traded investments (including Municipal
Securities) will generally be valued using prices obtained from a
Pricing Service. If, however, valuations for any of the Fund's
investments cannot be readily obtained as provided in the preceding
manner, or the Pricing Committee questions the accuracy or reliability
of valuations that are so obtained, such investments will be valued at
fair value, as determined by the Pricing Committee, in accordance with
the Valuation Procedures and in accordance with provisions of the 1940
Act.
    The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Exchange will obtain a representation from the issuer of the
Shares that the NAV per Share will be calculated daily and that the NAV
and the Disclosed Portfolio will be made available to all market
participants at the same time. In addition, a large amount of
information will be publicly available regarding the Fund and the
Shares, thereby promoting market transparency. Moreover, the Intraday
Indicative Value, available on the NASDAQ OMX Information LLC
proprietary index data service, will be widely disseminated by one or
more major market data vendors and broadly displayed at least every 15
seconds during the Regular Market Session.
    On each business day, before commencement of trading in Shares in
the Regular Market Session on the Exchange, the Fund will disclose on
its Web site the Disclosed Portfolio that will form the basis for the
Fund's calculation of NAV at the end of the business day. Information
regarding market price and trading volume of the Shares will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services, and quotation
and last sale information for the Shares will be available via Nasdaq
proprietary

quote and trade services, as well as in accordance with the Unlisted
Trading Privileges and the CTA plans for the Shares. One source of
price information for Municipal Securities and taxable and other
municipal securities will be the MSRB's EMMA.
    Additionally, the MSRB offers trade data subscription services that
permit subscribers to obtain same-day pricing information about
municipal securities transactions. Moreover, pricing information for
Municipal Securities, as well as for taxable and other municipal
securities, Short-Term Debt Instruments (including short-term U.S.
government securities, commercial paper, and bankers' acceptances), and
repurchase agreements will be available from major broker-dealer firms
and/or major market data vendors and/or Pricing Services.
    Pricing information for exchange-listed derivatives (including
options on U.S. Treasury securities, options on U.S. Treasury futures
contracts, and U.S. Treasury futures contracts), ETFs and closed-end
funds will be available from the applicable listing exchange and from
major market data vendors.
    Money market funds and other open-end funds (excluding ETFs) are
typically priced once each business day and their prices will be
available through the applicable fund's Web site or from major market
data vendors.
    The Fund's Web site will include a form of the prospectus for the
Fund and additional data relating to NAV and other applicable
quantitative information. Trading in Shares of the Fund will be halted
under the conditions specified in Nasdaq Rules 4120 and 4121 or because
of market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable, and trading in the Shares will
be subject to Nasdaq Rule 5735(d)(2)(D), which sets forth circumstances
under which Shares of the Fund may be halted. In addition, as noted
above, investors will have ready access to information regarding the
Fund's holdings, the Intraday Indicative Value, the Disclosed
Portfolio, and quotation and last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of actively-managed exchange-traded product that
will enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, FINRA, on behalf of the
Exchange, will communicate as needed regarding trading in the Shares
and the exchange-listed securities and instruments held by the Fund
(including closed-end funds, ETFs, 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) with
other markets and other entities that are members of ISG, and FINRA may
obtain trading information regarding trading in the Shares and such
exchange-listed 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-listed securities and instruments held
by the Fund from markets and other entities that are members of ISG,
which includes securities and futures exchanges, or with which the
Exchange has in place a comprehensive surveillance sharing agreement.
Furthermore, as noted above, investors will have ready access to
information regarding the Fund's holdings, the Intraday Indicative
Value, the Disclosed Portfolio, and quotation and last sale information
for the Shares.
    For the above reasons, Nasdaq believes the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange believes that
the proposed rule change will facilitate the listing and trading of an
additional type of actively-managed exchange-traded fund that will
enhance competition among market participants, to the benefit of
investors and the marketplace.

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

    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-2017-033 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-2017-033. 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-2017-033 and should
be submitted on or before May 1, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\50\
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    \50\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-07045 Filed 4-7-17; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 85, Number 116 (Tuesday, June 16, 2020)]
[Notices]
[Pages 36395-36396]
[FR Doc No: 2020-12927]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Project No. 15010-000]

Renewable Energy Aggregators; Notice of Preliminary Permit
Application Accepted for Filing and Soliciting Comments, Motions To
Intervene, and Competing Applications

    On October 11, 2019, Renewable Energy Aggregators, Inc. filed an
application for a preliminary permit, pursuant to section 4(f) of the
Federal Power Act (FPA), proposing to study the feasibility of the Casa
Grande Pumped Storage Project (Casa Grande Project or project) to be
located in the city of Casa Grande, in Pinal County, Arizona. The sole
purpose of a preliminary permit, if issued, is to grant the permit
holder priority to file a license application during the permit term. A
preliminary permit does not authorize the permit holder to perform any
land-disturbing activities or otherwise enter upon lands or waters
owned by others without the owners' express permission.
    The proposed project would consist of the following: (1) A newly
constructed upper reservoir with an earthen dam and a surface area of
300 acres with a storage capacity of 7,500 acre-feet of water; (2) a
newly constructed roller compacted concrete lower reservoir of 485
acres with a storage capacity of approximately 9,500 acre-feet; (3) two
3,241-foot-long, 19-foot-diameter penstocks; (4) a powerhouse with
dimensions of 750 feet long by 175 feet high by 70 feet wide containing
as many as four ternary style pump/generating units; (5) two 3,000-
foot-long, 21-foot-

diameter tailrace tunnels; and (6) a connection to an existing 137 kV
transmission circuit within the project boundary. The estimated annual
generation of the Casa Grande Project would be 864,000 megawatt-hours.
    Applicant Contact: Mr. Adam Rousselle, Renewable Energy
Aggregators, 2113 Middle Street, Suite 201, Sullivan's Island, South
Carolina 29482; phone:<PHONE_NUMBER>.
    FERC Contact: Rebecca Kipp; phone:<PHONE_NUMBER>.
    Deadline for filing comments, motions to intervene, competing
applications (without notices of intent), or notices of intent to file
competing applications: 60 days from the issuance of this notice.
Competing applications and notices of intent must meet the requirements
of 18 CFR 4.36.
    The Commission strongly encourages electronic filing. Please file
comments, motions to intervene, notices of intent, and competing
applications using the Commission's eFiling system at http://www.ferc.gov/docs-filing/efiling.asp. Commenters can submit brief
comments up to 6,000 characters, without prior registration, using the
eComment system at http://www.ferc.gov/docs-filing/ecomment.asp. You
must include your name and contact information at the end of your
comments. For assistance, please contact FERC Online Support at
<EMAIL_ADDRESS>(866) 208-3676 (toll free), or (202) 502-
8659 (TTY). In lieu of electronic filing, please send a paper copy to:
Secretary, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426. The first page of any filing should include
docket number P-15010-000.
    More information about this project, including a copy of the
application, can be viewed or printed on the ``eLibrary'' link of
Commission's website at http://www.ferc.gov/docs-filing/elibrary.asp.
Enter the docket number (P-15010) in the docket number field to access
the document. For assistance, contact FERC Online Support.

    Dated: June 10, 2020.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2020-12927 Filed 6-15-20; 8:45 am]
BILLING CODE 6717-01-P


[Federal Register Volume 86, Number 112 (Monday, June 14, 2021)]
[Notices]
[Page 31548]
[FR Doc No: 2021-12421]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

Public Notice for Waiver of Aeronautical Land Use Assurance;
Rogue Valley International-Medford Airport, Medford, Oregon

AGENCY: Federal Aviation Administration, (FAA), DOT.

ACTION: Notice.

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SUMMARY: Notice is being given that the FAA is considering a proposal
from the County of Jackson Airport Director to change certain portions
of the airport from aeronautical use to non-aeronautical use at Rogue
Valley International-Medford Airport, Medford, Oregon. The proposal
consists of portions of certain parcels located northwest and southwest
of the airfield.

DATES: Comments are due within 30 days of the date of the publication
of this notice in the Federal Register. Emailed comments can be
provided to Ms. Mandi M. Lesauis, Program Specialist, Seattle Airports
District Office<EMAIL_ADDRESS>
FOR FURTHER INFORMATION CONTACT: Mr. Jerry Brienza, Airport Director,
County of 1000 Terminal Loop Parkway, Medford, OR 97504; or Mandi M.
Lesauis, Program Specialist, Seattle Airports District Office, 2200 S
216 St., Des Moines, WA, 98198<EMAIL_ADDRESS>(206) 231-4140.
Documents reflecting this FAA action may be reviewed at the above
locations.

SUPPLEMENTARY INFORMATION: Under the provisions of Title 49, U.S.C.
47153(c), and 47107(h)(2), the FAA is considering a proposal from the
Airport Director, County of Jackson, to change a portion of the Rogue
Valley International-Medford Airport from aeronautical use to non-
aeronautical use. The proposal consists of 8.1 acres of Parcel APE 2-
01, 1.5 acres of Parcel 2-02 and 1.6 acres of Parcel 2-03 located off
of Lawnsdale and Bullock Roads and 6 acres of Parcel 3-01 and 2.3 acres
of Parcel 3-02 located off of Biddle Road. The partial parcels are
vacant, landlocked and do not have airfield access. The proposed
property will be developed for commercial purposes. The FAA concurs
that the parcels are no longer needed for aeronautical purposes. The
proposed use of this property is compatible with other airport
operations in accordance with FAA's Policy and Procedures Concerning
the Use of Airport Revenue, published in Federal Register on February
16, 1999.

    Issued in Des Moines, Washington, on June 9, 2021.
Warren D. Ferrell,
Acting Manager, Seattle Airports District Office.
[FR Doc. 2021-12421 Filed 6-11-21; 8:45 am]
BILLING CODE 4910-13-P