[Federal Register Volume 80, Number 41 (Tuesday, March 3, 2015)]
[Notices]
[Pages 11502-11509]
[FR Doc No: 2015-04333]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74377; File No. SR-NASDAQ-2015-013]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change Relating to the Listing and
Trading of the Shares of the AlphaMark Actively Managed Small Cap ETF
of ETF Series Solutions

February 25, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 17, 2015, The NASDAQ Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by Nasdaq. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    Nasdaq proposes to list and trade the shares of the AlphaMark
Actively

Managed Small Cap ETF (the ``Fund'') of ETF Series Solutions (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). There are already multiple
actively-managed funds listed on the Exchange; see e.g., Securities
Exchange Act Release No. 72411 (June 17, 2014), 79 FR 35598 (June
23, 2014) (SR-NASDAQ-2014-40) (order approving listing and trading
of Calamos Focus Growth ETF). The Exchange believes the proposed
rule change raises no significant issues not previously addressed in
those prior Commission orders.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

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

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

1. Purpose
    The Exchange proposes to list and trade the Shares of the Fund
under Nasdaq Rule 5735, which governs the listing and trading of
Managed Fund Shares \4\ on the Exchange. The Fund will be an actively-
managed exchange-traded fund (``ETF''). The Shares will be offered by
the Trust, which was established as a Delaware statutory trust on
February 9, 2012.\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 is a
series of the Trust.
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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, as amended (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 Trust has obtained, or will obtain prior to listing
Shares of the Fund on the Exchange, from the Commission an order
(the ``Exemptive Order'') on which the Trust may rely, granting
certain exemptive relief to the Trust under the 1940 Act. See
Investment Company Act Release No. 31430 (January 28, 2015) (notice)
(File No. 812-14402).
    \6\ See Post-Effective Amendment No. 43 to the Registration
Statement on Form N-1A for the Trust, dated February 4, 2015 (File
Nos. 333-179562 and 811-22668). The descriptions of the Fund and the
Shares contained herein are based, in part, on information in the
Registration Statement.
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    AlphaMark Advisors, LLC will be the investment adviser
(``Adviser'') to the Fund. Quasar Distributors, LLC (the
``Distributor'') will be the principal underwriter and distributor of
the Fund's Shares. U.S. Bancorp Fund Services, LLC (``USBFS'') will act
as the administrator, accounting agent, and transfer agent to the Fund.
U.S. Bank National Association will act as the custodian 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, nonpublic information
regarding the open-end fund's portfolio. Rule 5735(g) is similar to
Nasdaq Rule 5705(b)(5)(A)(i); however, paragraph (g) in connection with
the establishment of a ``fire wall'' between the investment adviser and
the broker-dealer reflects the applicable open-end fund's portfolio,
not an underlying benchmark index, as is the case with index-based
funds. The Adviser is not a broker-dealer, and is not affiliated with
any broker-dealer. In the event (a) the Adviser becomes affiliated with
a broker-dealer or registers as a broker-dealer, or (b) any new adviser
or sub-adviser is a registered broker-dealer or becomes affiliated with
a broker-dealer, it will implement a fire wall with respect to its
relevant personnel and/or such broker-dealer affiliate, as applicable,
regarding access to information concerning the composition and/or
changes to the portfolio and will be subject to procedures designed to
prevent the use and dissemination of material nonpublic information
regarding such portfolio. The Adviser has no present intent or
arrangement to become affiliated with any broker-dealer, and the Fund
does not currently intend to use a sub-adviser.
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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 applicable
federal securities laws as defined in Rule 204A-1(e)(4).
Accordingly, procedures designed to prevent the communication and
misuse of nonpublic 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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AlphaMark Actively Managed Small Cap ETF
Principal Investments
    The Fund is a non-diversified, actively-managed ETF that intends to
qualify each year as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended.
    The Fund's primary investment objective is to seek long-term growth
of capital. The Fund will pursue its objectives by investing primarily,
i.e. at least 80% of its assets under normal market conditions,\8\ in a
portfolio of equity securities of small cap companies listed on a U.S.
exchange. The Fund defines ``small cap'' companies as companies with a
total market capitalization of less than $5 billion at the time of
purchase, although the Adviser expects to generally focus on companies
with market capitalizations of between $150 million and $2 billion at
the time of purchase.
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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 securities markets or the
financial markets generally; operational issues causing
dissemination of inaccurate market information; or force majeure
type events such as systems failure, natural or man-made disaster,
act of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance. In periods of
extreme market disturbance, the Fund may take temporary defensive
positions, by overweighting its portfolio in cash/cash-like
instruments; however, to the extent possible, the Adviser would
continue to seek to achieve the Fund's investment objectives.
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    The Fund defines ``equity securities'' to include common and
preferred stock,

American Depositary Receipts \9\ (``ADRs''), real estate investment
trusts (``REITs''), and ETFs. Investments in ETFs that, under normal
circumstances, invest at least 80% of their net assets (plus any
borrowings for investment purposes) in equity securities of small cap
companies (``Small Cap ETFs'') will count toward the Fund's 80%
investment policy. The Fund may invest up to 30% of its net assets in
foreign equity securities of small cap companies traded on a U.S.
exchange as ADRs, which may include companies in emerging markets.
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    \9\ ADRs are receipts, typically issued by a bank or trust
issuer, which evidence ownership of underlying securities issued by
a non-U.S. issuer. For ADRs, the depository is typically a U.S.
financial institution and the underlying securities are issued by a
non-U.S. issuer. ADRs are not necessarily denominated in the same
currency as their underlying securities.
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    The Adviser seeks to invest in companies with a proven history of
consistent growth, sustainable earnings momentum and the ability to
produce a reliable stream of cash flow during all economic cycles. The
Adviser uses a ``bottom-up'' internal stock screening process designed
to identify companies that produce reliable cash flow streams and are
priced at a level that provides for growth opportunity. An assessment
of secular trends in the markets and the economy will exert some
influence on the economic sector weightings of the Fund's portfolio.
    The Adviser's screening process narrows the small cap growth
universe to approximately 150 stocks. These companies are then
subjected to further fundamental analysis, including the following:

 Market return on equity
 Sufficiency of cash flow to cover capital spending
 Operating margin relative to price/sales
 Financial statement review, focusing on true equity value
 Enterprise value review and management review, including
factors such as insider trading, stock option distribution and share
buy backs.

    The Adviser expects that there will generally be between 25 and 40
stocks in the Fund's portfolio. The Fund is non-diversified and
therefore may invest a larger percentage of its assets in the
securities of a single company than diversified funds. The portion of
the Fund's net assets invested at any given time in securities of
issuers engaged in industries within a particular sector is affected by
valuation considerations and other investment characteristics of that
sector. As a result, the Fund's investment in various sectors may
change significantly over time.
    The Fund may invest in Small Cap ETFs to gain market exposure while
the Fund builds a position in one or more specific stocks.
Additionally, the Fund may invest a significant portion or all of its
assets in Small Cap ETFs during periods when the Adviser believes that
the stocks identified by the Adviser's analysis are likely to
underperform the broader small cap market. The Adviser will sell a
security from the Fund's portfolio under one or more of the following
circumstances:
     A material change in the company's structure or
management;
     A material change in the industry or economic factors
affecting that industry;
     A position has grown to an unacceptable weight;
     Earnings momentum has decreased from previous estimates;
or
     The security's price has become overvalued by 20% or more
based on the Adviser's proprietary cash flow models.
    The Fund's investment in foreign equity securities will be in the
form of ADRs and may include ADRs representing companies in emerging
markets. With respect to its investments as part of its principal
investment strategies in exchange-listed securities, the Fund will
invest in such securities that trade in markets that are members of the
Intermarket Surveillance Group (``ISG'').
Other Investments
    The Fund will invest in sponsored ADRs that are listed on ISG
member exchanges and that the Adviser deems as liquid at time of
purchase. In certain limited circumstances, the Fund may invest in ADRs
that the Adviser deems illiquid at the time of purchase or for which
pricing information is not readily available.
    The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities or other illiquid assets (calculated at
the time of investment). 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.\10\
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    \10\ 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), FN 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 more than 25% of the value of its total
assets in securities of issuers in any one industry or group of
industries. This restriction does not apply to obligations issued or
guaranteed by the U.S. government, its agencies or instrumentalities,
or securities of other registered investment companies.\11\
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    \11\ See Form N-1A, Item 9. The Commission has taken the
position that a fund is concentrated if it invests more than 25% of
the value of its total assets in any one industry. See, e.g.,
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR
54241 (November 21, 1975).
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    While the Fund under normal circumstances will invest at least 80%
of its assets in U.S. exchange-listed equity securities, the Fund may
invest the remaining assets in equity securities traded over-the-
counter,\12\ money market instruments,\13\ and equity securities of
open-end mutual funds, money market mutual funds and ETFs other than
Small Cap ETFs.
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    \12\ Not more than 10% of the net assets of the Fund, in the
aggregate, will be invested in unlisted equity securities or equity
securities not listed on an exchange that is a member of the ISG or
a party to a comprehensive surveillance sharing agreement with the
Exchange.
    \13\ The term ``money market instruments,'' as used herein,
means (i) short-term obligations issued by the U.S. Government; (ii)
short term negotiable obligations of commercial banks, fixed time
deposits and bankers' acceptances of U.S. and foreign banks and
similar institutions; (iii) commercial paper rated at the date of
purchase ``Prime-1'' by Moody's Investors Service, Inc. or ``A-1+''
or ``A-1'' by Standard & Poor's or, if unrated, of comparable
quality, as the Adviser of the Fund determines; and (iv) money
market mutual funds.
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The Shares
    The Fund will issue and redeem Shares only in Creation Units at the
net asset value (``NAV'') \14\ next determined

after receipt of an order on a continuous basis every day except
weekends and specified holidays. The NAV of the Fund will be determined
once each business day, normally as of the close of trading of the
NYSE, generally, 4:00 p.m. Eastern time. Creation Unit sizes will be at
least 25,000 Shares per Creation Unit. The Trust will issue and sell
Shares of the Fund only in Creation Units on a continuous basis through
the Distributor, without a sales load (but subject to transaction
fees), at their NAV per Share next determined after receipt of an
order, on any business day, in proper form pursuant to the terms of the
agreement executed with each Authorized Participant (as defined below).
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    \14\ The NAV of the Fund's Shares generally will be calculated
once daily Monday through Friday as of the close of regular trading
on the New York Stock Exchange (``NYSE''), generally 4:00 p.m.
Eastern time (the ``NAV Calculation Time''). NAV per Share will be
calculated by dividing the Fund's net assets by the number of Fund
Shares outstanding. For more information regarding the valuation of
Fund investments in calculating the Fund's NAV, see Registration
Statement.
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    The consideration for purchase of a Creation Unit will consist of
either (i) the in-kind deposit of a designated portfolio of securities
(the ``Deposit Securities'') per each Creation Unit and the Cash
Component (as defined below), computed as described below or (ii) the
cash value of all or a portion of the Deposit Securities (``Deposit
Cash'') and the ``Cash Component,'' computed as described below. The
Fund may, under certain circumstances, effect a portion of creations
and redemptions for cash, rather than in-kind securities, in accordance
with the Exemptive Order. The Fund expects that the consideration for
purchase of a Creation Unit will primarily consist of the in-kind
deposit of the Deposit Securities.
    When accepting purchases of Creation Units for cash, the Fund may
incur additional costs associated with the acquisition of Deposit
Securities that would otherwise be provided by an in-kind purchaser.
Together, the Deposit Securities or Deposit Cash, as applicable, and
the Cash Component will constitute the ``Fund Deposit,'' which
represents the minimum initial and subsequent investment amount for a
Creation Unit of the Fund. The ``Cash Component'' will be an amount
equal to the difference between the NAV of the Shares (per Creation
Unit) and the market value of the Deposit Securities or Deposit Cash,
as applicable. If the Cash Component is a positive number (i.e., the
NAV per Creation Unit exceeds the market value of the Deposit
Securities or Deposit Cash, as applicable), the Cash Component will be
such positive amount. If the Cash Component is a negative number (i.e.,
the NAV per Creation Unit is less than the market value of the Deposit
Securities or Deposit Cash, as applicable), the Cash Component will be
such negative amount and the creator will be entitled to receive cash
in an amount equal to the Cash Component. The Cash Component will serve
the function of compensating for any difference between the NAV per
Creation Unit and the market value of the Deposit Securities or Deposit
Cash, as applicable.
    To be eligible to place orders with respect to creations and
redemptions of Creation Units, an entity must be (i) a ``Participating
Party,'' i.e., a broker-dealer or other participant in the clearing
process through the Continuous Net Settlement System of the National
Securities Clearing Corporation (``NSCC'') or (ii) a Depository Trust
Company (``DTC'') Participant (a ``DTC Participant''). In addition,
each Participating Party or DTC Participant (each, an ``Authorized
Participant'') must execute an agreement that has been agreed to by the
Distributor and USBFS with respect to purchases and redemptions of
Creation Units.
    USBFS, through the NSCC, will make available on each business day,
immediately prior to the opening of business on the Exchange's Regular
Market Session (currently 9:30 a.m. Eastern time), the list of the
names and the required number of shares of each Deposit Security and/or
the required amount of Deposit Cash, as applicable, to be included in
the current Fund Deposit (based on information at the end of the
previous business day) for the Fund. Such Fund Deposit, subject to any
relevant adjustments, will be applicable in order to effect purchases
of Creation Units of the Fund until such time as the next announced
composition of the Deposit Securities and/or the required amount of
Deposit Cash, as applicable, is made available.
    Shares may be redeemed only in Creation Units at their NAV next
determined after receipt of a redemption request in proper form by the
Fund through USBFS and only on a business day.
    With respect to the Fund, USBFS, through the NSCC, will make
available immediately prior to the opening of business on the Exchange
(9:30 a.m. Eastern time) on each business day, the list of the names
and share quantities of the Fund's portfolio securities (``Fund
Securities'') and/or, if relevant, the required cash value thereof that
will be applicable (subject to possible amendment or correction) to
redemption requests received in proper form on that day. Fund
Securities received on redemption may not be identical to Deposit
Securities.
    Redemption proceeds for a Creation Unit will be paid either in kind
or in cash or a combination thereof, as determined by the Trust. With
respect to in kind redemptions of the Fund, redemption proceeds for a
Creation Unit will consist of Fund Securities as announced by USBFS on
the business day of the request for redemption received in proper form
plus cash in an amount equal to the difference between the NAV of the
Shares being redeemed, as next determined after a receipt of a request
in proper form, and the value of the Fund Securities (the ``Cash
Redemption Amount''), less a fixed redemption transaction fee and any
applicable additional variable charge as set forth in the Registration
Statement. In the event that the Fund Securities have a value greater
than the NAV of the Shares, a compensating cash payment equal to the
differential will be required to be made by or through an Authorized
Participant by the redeeming shareholder. Notwithstanding the
foregoing, at the Trust's discretion, an Authorized Participant may
receive the corresponding cash value of the securities in lieu of one
or more Fund Securities.
    The creation/redemption order cut off time for the Fund is expected
to be 4:00 p.m. Eastern time for purchases of Shares. On days when the
Exchange closes earlier than normal and in the case of custom orders,
the Fund may require orders for Creation Units to be placed earlier in
the day.
Net Asset Value
    The NAV per Share for the Fund will be computed by dividing the
value of the net assets of the Fund (i.e., the value of its total
assets less total liabilities) by the total number of Shares
outstanding, rounded to the nearest cent. Expenses and fees, including
the management fees, will be accrued daily and taken into account for
purposes of determining NAV. The NAV of the Fund will be calculated by
USBFS and determined at the close of the regular trading session on the
NYSE (ordinarily 4:00 p.m. Eastern time) on each day that such exchange
is open. In calculating the Fund's NAV per Share, investments will
generally be valued by using market valuations. A market valuation
generally means a valuation (i) obtained from an exchange, a pricing
service, or a major market maker (or dealer) or (ii) based on a price
quotation or other equivalent indication of value supplied by an
exchange, a pricing service, or a major

market maker (or dealer).\15\ Exchange-traded equities; exchange-traded
ADRs and other exchange-traded securities will be valued at the
official closing price on their principal exchange or board of trade,
or lacking any current reported sale at the time of valuation, at the
mean between the most recent bid and ask quotations on its principal
exchange or board of trade. Portfolio 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. Equity
securities traded over-the-counter will be valued at the mean between
the most recent bid and ask quotations received from pricing services;
if recent bid and ask quotations are not available, these securities
will be valued in accordance with the Fund's fair valuation procedures.
Money market instruments with maturities of less than 60 days will be
valued at amortized cost; money market instruments with longer
maturities will be valued at the mid-point of the bid-ask prices.
Investment company shares will be valued at NAV, unless the shares are
exchange-traded, in which case they will be valued at the last sale or
official closing price on the market on which they primarily trade.
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    \15\ Under normal market conditions, the Fund will obtain
pricing information on all of its assets from these sources.
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    Notwithstanding the foregoing, in determining the value of any
security or asset, the Fund may use a valuation provided by a pricing
vendor employed by the Trust and approved by the Board of Trustees of
the Trust (the ``Trust Board''). The pricing vendor may base such
valuations upon dealer quotes, by analyzing the listed market, by
utilizing matrix pricing, by analyzing market correlations and pricing
and/or employing sensitivity analysis.
    The Adviser may use various pricing services, or discontinue the
use of any pricing service, as approved by the Trust Board from time to
time. A price obtained from a pricing service based on such pricing
service's valuation matrix may be considered a market valuation. Any
assets or liabilities denominated in currencies other than the U.S.
dollar will be converted into U.S. dollars at the current market rates
on the date of valuation as quoted by one or more sources.
    In the event that current market valuations are not readily
available or such valuations do not reflect current market value, the
Trust's procedures require the Trust's Valuation Committee to determine
a security's fair value if a market price is not readily available in
accordance with the 1940 Act.\16\ In determining such value the Trust's
Valuation Committee may consider, among other things, (i) price
comparisons among multiple sources, (ii) a review of corporate actions
and news events, and (iii) a review of relevant financial indicators.
In these cases, the Fund's NAV may reflect certain portfolio
securities' fair values rather than their market prices. Fair value
pricing may involve subjective judgments and it is possible that the
fair value determination for a security is materially different than
the value that could be realized upon the sale of the security.
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    \16\ The Valuation Committee of the Trust Board will be
responsible for the oversight of the pricing procedures of the Fund
and the valuation of the Fund's portfolio. The Fund has implemented
procedures designed to prevent the use and dissemination of
material, nonpublic information regarding valuation and revaluation
of any portfolio investments.
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Availability of Information
    The Fund's Web site (www.alphamarkadvisors.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 additional quantitative information updated on a
daily basis, including, for the Fund: (1) The prior business day's
reported NAV, mid-point of the bid/ask spread at the time of
calculation of such NAV (the ``Bid/Ask Price''),\17\ 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 \18\ 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'')
held by the Fund that will form the basis for the Fund's calculation of
NAV at the end of the business day.\19\ On a daily basis, the Disclosed
Portfolio will include each portfolio security and other financial
instruments of the Fund with the following information on the Fund's
Web site: Ticker symbol, CUSIP number or other identifier, if any; a
description of the holding (including the type of holding); the
identity of the security, index, or other asset or instrument
underlying the holding, if any; quantity held (as measured by, for
example, number of shares); maturity date, if any; coupon rate, if any;
effective date, if any; market value of the holding; and the percentage
weighting of the holdings in the Fund's portfolio. The Web site
information will be publicly available at no charge.
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    \17\ 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 such Fund's NAV. The records relating
to Bid/Ask Prices will be retained by the Fund and its service
providers.
    \18\ 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).
    \19\ 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'').
Notwithstanding the foregoing, portfolio trades that are executed
prior to the opening of the Exchange on any business day may be
booked and reflected in NAV on such business day. Accordingly, the
Fund will be able to disclose at the beginning of the business day
the portfolio that will form the basis for the NAV calculation at
the end of the business day.
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    In addition, for the Fund, an estimated value, defined in Rule
5735(c)(3) as the ``Intraday Indicative Value,'' that reflects an
estimated intraday value of the Fund's portfolio, will be disseminated.
Moreover, the Intraday Indicative Value, available on the NASDAQ OMX
Information LLC proprietary index data service,\20\ will be based upon
the current value for the components of the Disclosed Portfolio and
will be updated and widely disseminated and broadly displayed at least
every 15 seconds during the Regular Market Session. The Intraday
Indicative Value will be based on quotes and closing prices from the
securities' local market and may not reflect events that occur
subsequent to the local market's close. Intra-day, executable price
quotations on the securities and other assets held by the Fund, other
than investment company securities that are not exchange-listed, will
be available from major broker-dealer firms. Intra-day price
information on the securities and other assets held by the Fund, other
than investment company securities that are not exchange-listed, will
also be available through subscription or free services that can be
accessed by Authorized Participants and

other investors. Intra-day price information for exchange-traded equity
securities; exchange-listed investment company securities; exchange-
traded ADRs; or other exchange-traded securities will be publicly
available from the Web sites of the exchanges on which they trade, on
public financial Web sites, and through subscription services such as
Bloomberg and Thompson Reuters. Intra-day price information regarding
over-the-counter equities (including certain investment company
securities) and money market instruments, will be available through
subscription services such as Markit, Bloomberg and Thompson Reuters.
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    \20\ Currently, the NASDAQ OMX Global Index Data Service
(``GIDS'') is the NASDAQ OMX global index data feed service,
offering real-time updates, daily summary messages, and access to
widely followed indexes and Intraday Indicative Values for ETFs.
GIDS provides investment professionals with the daily information
needed to track or trade NASDAQ OMX indexes, listed ETFs, or third-
party partner indexes and ETFs.
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    Premiums and discounts between the Intraday Indicative Value and
the market price of the Fund's shares 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.
    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.
    In addition, a basket composition file, which includes the security
names, amounts and share quantities, as applicable, required to be
delivered in exchange for the Fund's Shares, together with estimates
and actual cash components, will be publicly disseminated daily prior
to the opening of Nasdaq via NSCC. The basket will represent one
Creation Unit of the Fund.
    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. 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 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 and via the Consolidated Tape Association
plans for the Shares. Similarly, quotation and last sale information
for any underlying exchange-traded products will also be available via
the quote and trade services of their respective primary exchanges, as
well as in accordance with the Unlisted Trading Privileges and the
Consolidated Tape Association plans, as applicable.
    Additional information regarding the Fund and the Shares, including
investment strategies, risks, creation and redemption procedures, fees,
Fund holdings disclosure policies, distributions and taxes is included
in the Registration Statement.
Initial and Continued Listing
    The Shares will be subject to Rule 5735, which sets forth the
initial and continued listing criteria applicable to Managed Fund
Shares. The Exchange represents that, for initial and/or continued
listing, the Fund must be in compliance with Rule 10A-3 \21\ 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.
---------------------------------------------------------------------------

    \21\ See 17 CFR 240.10A-3.
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Trading Halts and Trading Pauses
    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 or pause 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 financial instruments
constituting the Disclosed Portfolio of the Fund; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present. Trading in the Shares also will be
subject to Rule 5735(d)(2)(D), which sets forth circumstances under
which Shares of the Fund may be halted.
Trading Rules
    Nasdaq deems the Shares to be equity securities, thus rendering
trading in the Shares subject to Nasdaq's existing rules governing the
trading of equity securities. Nasdaq will allow trading in the Shares
from 4:00 a.m. until 8:00 p.m. Eastern time. The Exchange has
appropriate rules to facilitate transactions in the Shares during all
trading sessions. As provided in Nasdaq Rule 5735(b)(3), the minimum
price variation for quoting and entry of orders in Managed Fund Shares
traded on the Exchange is $0.01.
Surveillance
    The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by both Nasdaq and
also the Financial Industry Regulatory Authority (``FINRA'') on behalf
of the Exchange, which are designed to detect violations of Exchange
rules and applicable federal securities laws.\22\ 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.
---------------------------------------------------------------------------

    \22\ 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; exchange-traded equities, including
ADRs; exchange-listed investment companies; or other exchange-traded
securities with other markets and other entities that are ISG members,
and FINRA, on behalf of the Exchange, may obtain trading information
regarding trading in the Shares, exchange-traded equities, including
ADRs, exchange-listed investment companies, or other exchange-traded
securities from such markets and other entities. In addition, the
Exchange may obtain information regarding trading in the Shares;
exchange-traded equities, including ADRs; exchange-listed investment
companies; or other exchange-traded securities from markets and other
entities that are members of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement.\23\
---------------------------------------------------------------------------

    \23\ For a list of the current members of ISG, see
www.isgportal.org.

---------------------------------------------------------------------------

    Not more than 10% of the net assets of the Fund, in the aggregate,
will be invested in unlisted common stocks or common stocks not listed
on an exchange that is a member of the ISG or a party to a
comprehensive surveillance sharing agreement with the Exchange.
    In addition, the Exchange also has a general policy prohibiting the
distribution of material, nonpublic 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) the dissemination of
information regarding the Intraday Indicative Value through major index
service providers such as NASDAQ OMX proprietary index data services or
other major market proprietary index services; (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; (6) trading
information; and (7) the dissemination of the Disclosed Portfolio
through the Fund's Web site.
    In addition, the Information Circular will advise members, prior to
the commencement of trading, of the prospectus delivery requirements
applicable to the Fund. Members purchasing Shares from the Fund for
resale to investors will deliver a prospectus to such investors. The
Information Circular will also discuss any exemptive, no-action and
interpretive relief granted by the Commission from any rules under the
Act.
    Additionally, the Information Circular will reference that the Fund
is subject to various fees and expenses described in the Registration
Statement. The Information Circular will also disclose the trading
hours of the Shares of the Fund and the applicable NAV Calculation Time
for the Shares. The Information Circular will disclose that information
about the Shares of the Fund will be publicly available on the Fund's
Web site.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b)
of the Act \24\ in general and Section 6(b)(5) of the Act \25\ 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 a national market system.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78f.
    \25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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 believes that its surveillance procedures are adequate to
properly monitor the trading of the Shares on Nasdaq during all trading
sessions and to deter and detect violations of Exchange rules and the
applicable federal securities laws.
    The exchange-traded equities; exchange-listed investment companies;
or other exchange-traded securities in which the Fund may invest will
be limited to U.S. exchanges that are members of the ISG or are parties
to a comprehensive surveillance sharing agreement with the Exchange.
The Exchange may obtain information via ISG from other exchanges that
are members of ISG or with which the Exchange has entered into a
comprehensive surveillance sharing agreement.
    The Fund will pursue its objectives by investing primarily, i.e.,
at least 80% of its assets under normal market conditions, in a
portfolio of equity securities of small cap companies listed on a U.S.
exchange. The equity securities held by the Fund may also include
publicly-traded exchange-listed common stocks of non-U.S. issuers in
the form of ADRs.
    The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities or other illiquid assets (calculated at
the time of investment). The Fund may not invest 25% or more of the
value of its total assets in securities of issuers in any one industry
or group of industries.
    Not more than 10% of the net assets of the Fund, in the aggregate,
will be invested in unlisted common stocks or common stocks not listed
on an exchange that is a member of the ISG or a party to a
comprehensive surveillance sharing agreement with the Exchange. The
Adviser is not a broker-dealer, and is not affiliated with any broker-
dealer. In the event (a) the Adviser becomes affiliated with a broker-
dealer or registers as a broker-dealer, or (b) any new adviser or sub-
adviser is a registered broker-dealer or becomes affiliated with a
broker-dealer, it will implement a fire wall with respect to its
relevant personnel and/or such broker-dealer affiliate, as applicable,
regarding access to information concerning the composition and/or
changes to the 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 nonpublic
information regarding the open-end fund's portfolio.
    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 Fund 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. 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 also be
available via Nasdaq proprietary quote and trade services and via the
Consolidated Tape Association plans for the Shares. Similarly,
quotation and last sale information for any underlying exchange-traded
products will also be available via the quote and trade services of
their respective primary

exchanges, as well as in accordance with the Unlisted Trading
Privileges and the Consolidated Tape Association plans, as applicable.
Intra-day, executable price quotations on the securities and other
assets held by the Fund, other than investment company securities that
are not exchange-listed will be available from major broker-dealer
firms or on the exchange on which they are traded, if applicable.
Intra-day price information will also be available through subscription
services, such as Bloomberg, Markit and Thomson Reuters, which can be
accessed by Authorized Participants and other investors.
    The Web site for the Fund will include 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 or paused
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, 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, the Exchange has in
place surveillance procedures relating to trading in the Shares and may
obtain information via ISG from other exchanges that are members of ISG
or with which the Exchange has entered into a comprehensive
surveillance sharing agreement. 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.
    For the above reasons, Nasdaq believes the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act.

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

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

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

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate up if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (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-2015-013 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2015-013. 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 such 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-2015-013, and should
be submitted on or before March 24, 2015.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
Jill M. Peterson,
Assistant Secretary.
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2015-04333 Filed 3-2-15; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register: March 4, 2010 (Volume 75, Number 42)]
[Notices]
[Page 9960-9964]
[DOCID:fr04mr10-114]

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SECURITIES AND EXCHANGE COMMISSION

Investment Company Act Release No. 29163; 812-13161-01]

First Trust/Aberdeen Global Opportunity Income Fund, et al.;
Notice of Application

February 26, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application under section 6(c) of the Investment
Company Act of 1940 (``Act'') for an exemption from section 19(b) of
the Act and rule 19b-1 under the Act.

-----------------------------------------------------------------------

 Summary of Application: Applicants request an order to permit certain
closed-end investment companies to make periodic distributions of long-
term capital gains with respect to their outstanding common stock as
frequently as twelve times each year, and as frequently as
distributions are specified by or in accordance with the terms of any
outstanding preferred stock that such investment companies may issue.

 Applicants: First Trust/Aberdeen Global Opportunity Income Fund, First
Trust Enhanced Equity Income Fund, First Trust/Four Corners Senior
Floating Rate Income Fund, First Trust/Four Corners Senior Floating
Rate Income Fund II, Macquarie/First Trust Global Infrastructure/
Utilities Dividend & Income Fund, First Trust/FIDAC Mortgage Income
Fund, First Trust Strategic High Income Fund, First Trust Strategic
High Income Fund II, First Trust Strategic High Income Fund III, First
Trust/Aberdeen Emerging Opportunity Fund, First Trust Specialty Finance
and Financial Opportunities Fund, First Trust Active Dividend Income
Fund, First Trust Municipal Target Term Trust, First Trust/StoneCastle
Bank Select Income Fund, First Trust Income Fund, First Trust/Chartwell
Total Return Equity Income Fund, First Trust/Aberdeen Global Credit
Strategies Fund (collectively, the ``Current Funds''), First Trust
Advisors L.P. (the ``Adviser'') and First Trust Portfolios, L.P. (the
``Broker-Dealer'').

 Filing Dates: January 26, 2005, August 9, 2007, September 9, 2008,
December 12, 2008, April 20, 2009 and August 11, 2009.

 Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. Interested
persons may request a hearing by writing to the Commission's Secretary
and serving applicants with a copy of the request, personally or by
mail. Hearing requests should be received by the Commission by 5:30
p.m. on March 23, 2010, and should be accompanied by proof of service
on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 100 F Street,
NE., Washington, DC 20549-1090; Applicants, Chapman and Cutler LLP, 111
West Monroe St., Chicago, Illinois 60603, attention: Eric F. Fess, Esq.
and Suzanne M. Russell, Esq.

FOR FURTHER INFORMATION CONTACT: Wendy Friedlander, Senior Counsel, at
(202) 551-6837, or James M. Curtis, Branch Chief, at<PHONE_NUMBER>
(Division of Investment Management, Office of Chief Counsel).

SUPPLEMENTARY INFORMATION: The following is a summary of the

application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling<PHONE_NUMBER>.
    Applicants' Representations:
    1. Each Current Fund and any future fund that may rely on the
requested order (each a ``Fund'' and collectively the ``Funds'') is or
will be registered under the Act as a closed-end management investment
company.\1\ Each Fund's common stock is or will be listed and traded on
a ``national securities exchange,'' as defined in section 2(a)(26) of
the Act. Any preferred stock that has been or may be issued by a Fund
is not and will not be listed or traded on any exchange. Applicants
believe that the common stockholders of the Funds are or will be
generally conservative, dividend- and income-sensitive investors who
desire current income periodically.
---------------------------------------------------------------------------

    \1\ Applicants request that any order issued granting the relief
requested in the application also apply to any closed-end investment
company that in the future: (a) is advised by the Adviser (including
any successor in interest) or by any entity controlling, controlled
by, or under common control (within the meaning of section 2(a)(9)
of the Act) with the Adviser; and (b) complies with the terms and
conditions of the requested order. A successor in interest is
limited to entities that result from a reorganization into another
jurisdiction or a change in the type of business organization.
---------------------------------------------------------------------------

    2. The Adviser is an Illinois limited partnership and is registered
under the Investment Advisers Act of 1940. The Adviser is or will be
responsible for implementing each Fund's overall investment strategy.
The Adviser is controlled by Grace Partners of DuPage L.P. (``Grace'')
and The Charger Corporation (``Charger''). Grace's general partner is
Charger, which is controlled by the Robert Donald Van Kampen family.
    3. The Broker-Dealer is registered under the Securities Exchange
Act of 1934 as a broker-dealer and is an ``affiliated person'' of the
Adviser as defined in section 2(a)(3) of the Act. Applicants represent
that the Broker-Dealer maintains a Web site that includes information
on financial products that it offers or distributes, including
information about the Current Funds that have issued publicly-offered
stock.
    4. Applicants represent that, before any Fund will implement a
policy to make level, periodic distributions with respect to its common
stock, the board of trustees (the ``Board'') of such Fund, including a
majority of the trustees who are not ``interested persons'' as defined
in Section 2(a)(19) of the Act (each an ``Independent Trustee'') of the
respective Fund will approve the Fund's adoption of such policy.
Applicants represent that the Board will request, and the Adviser will
provide, such information as is reasonably necessary for the Board to
make an informed determination of whether the Fund should adopt the
proposed distribution policy. Applicants represent that, in particular,
the Board, including the Independent Trustees, will review information
regarding the purpose and terms of the proposed distribution policy,
the likely effects of such policy on the Fund's long-term total return
(in relation to market price and net asset value (``NAV'') per common
share) and the relationship between the Fund's distribution rate on its
common stock under the policy and the Fund's total return (in relation
to NAV per common share). Applicants represent that the Independent
Trustees also will consider what conflicts of interest the Adviser and
the affiliated persons of the Adviser and the Fund might have with
respect to the adoption or implementation of such policy. Applicants
represent that after considering such information the Board, including
the Independent Trustees, will approve the distribution policy with
respect to the Fund's common stock (the ``Plan''), provided that the
Board, including the Independent Trustees, determines that the Plan is
consistent with the Fund's investment objective(s) and in the best
interests of the Fund's common stockholders.
    5. Applicants represent that the purpose of any Plan will be to
permit a Fund to provide its common stockholders with level, periodic
distributions. Applicants represent that, under the Plan of a Fund,
such Fund would distribute to its respective common stockholders a
fixed percentage of the market price of the Fund's common stock at a
particular point in time or a fixed percentage of NAV per common share
at a particular point in time or a fixed amount per common share, any
of which may be adjusted from time to time. Applicants state that the
minimum annual distribution rate with respect to a Fund's common stock
under its respective Plan would be independent of the Fund's
performance during any particular period but would be expected to
correlate with the Fund's performance over time. Applicants explain
that each distribution on the common stock would be at the stated rate
then in effect except for extraordinary distributions and potential
increases or decreases in the final dividend periods in light of the
Fund's performance for the entire calendar or taxable year and to
enable the Fund to comply with the distribution requirements of
Subchapter M of the Internal Revenue Code of 1986 (the ``Code'') for
the calendar or taxable year.
    6. Applicants represent that the Board of each Fund that relies on
the order also will approve the Fund's adoption of policies and
procedures under rule 38a-1 under the Act that are reasonably designed
to ensure that all notices sent to stockholders with distributions
under the Plan (``Notices'') comply with condition II.A below, and that
all other written communications by any such Fund or its agents
regarding distributions under the Plan include the disclosure required
by condition III.A below. Applicants state that the Board of each Fund
also will approve the Fund's adoption of policies and procedures that
require such Fund to keep records that demonstrate the Fund's
compliance with all of the conditions of the requested order and that
are necessary for the Fund to form the basis for, or demonstrate the
calculation of, the amounts disclosed in its Notices.
    Applicants' Legal Analysis:
    1. Section 19(b) generally makes it unlawful for any registered
investment company to make long-term capital gains distributions more
than once each year. Rule 19b-1 limits the number of capital gains
dividends, as defined in section 852(b)(3)(C) of the Code
(``distributions''), that a fund may make with respect to any one
taxable year to one, plus a supplemental ``clean up'' distribution made
pursuant to section 855 of the Code not exceeding 10% of the total
amount distributed for the year, plus one additional capital gain
dividend made in whole or in part to avoid the excise tax under section
4982 of the Code.
    2. Section 6(c) provides that the Commission may, by order upon
application, conditionally or unconditionally exempt any person,
security, or transaction, or any class or classes of persons,
securities or transactions, from any provision of the Act, if and to
the extent that the exemption is necessary or appropriate in the public
interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the Act.
    3. Applicants state that the one of the concerns underlying section
19(b) and rule 19b-1 is that shareholders might be unable to
differentiate between regular distributions of capital gains and
distributions of investment income.

Applicants state, however, that rule 19a-1 effectively addresses this
concern by requiring that a separate statement showing the sources of a
distribution (e.g., estimated net income, net short-term capital gains,
net long-term capital gains and/or return of capital) accompany any
distributions (or the confirmation of the reinvestment of
distributions) estimated to be sourced in part from capital gains or
capital. Applicants state that the same information also is included in
each fund's reports to shareholders and on its IRS Form 1099-DIV, which
is sent to each common and preferred shareholder who received
distributions during the year.
    4. Applicants further state that each Fund will make the additional
disclosures required by the conditions set forth below, and each of
them will adopt compliance policies and procedures in accordance with
rule 38a-1 to ensure that all required Notices and disclosures are sent
to shareholders. Applicants argue that by providing the information
required by section 19(a) and rule 19a-1, and by complying with the
procedures adopted under each Plan and the conditions listed below, the
Funds would ensure that each Fund's shareholders are provided
sufficient information to understand that their periodic distributions
are not tied to the Fund's net investment income (which for this
purpose is the Fund's taxable income other than from capital gains) and
realized capital gains to date, and may not represent yield or
investment return. Applicants also state that compliance with each
Fund's compliance procedures and condition III set forth below will
ensure that prospective shareholders and third parties are provided
with the same information. Accordingly, applicants assert that
continuing to subject the Funds to section 19(b) and rule 19b-1 would
afford shareholders no extra protection.
    5. Applicants note that section 19(b) and rule 19b-1 also were
intended to prevent certain improper sales practices, including, in
particular, the practice of urging an investor to purchase shares of a
fund on the basis of an upcoming capital gains dividend (``selling the
dividend''), where the dividend would result in an immediate
corresponding reduction in NAV and would be in effect a taxable return
of the investor's capital. Applicants assert that the ``selling the
dividend'' concern should not apply to closed-end investment companies
which do not continuously distribute shares. According to Applicants,
if the underlying concern extends to secondary market purchases of
shares of closed-end funds that are subject to a large upcoming capital
gains dividend, adoption of a Plan actually helps minimize the concern
by avoiding, through periodic distributions, any buildup of large end-
of-the-year distributions.
    6. Applicants also note that common shares of closed-end funds that
invest primarily in equity securities often trade in the marketplace at
a discount to their NAV. Applicants believe that this discount may be
reduced for closed-end funds that pay relatively frequent dividends on
their common shares at a consistent rate, whether or not those
dividends contain an element of long-term capital gain.
    7. Applicants assert that the application of rule 19b-1 to a Plan
actually could have an undesirable influence on portfolio management
decisions. Applicants state that, in the absence of an exemption from
rule 19b-1, the implementation of a Plan imposes pressure on management
(i) not to realize any net long-term capital gains until the point in
the year that the fund can pay all of its remaining distributions in
accordance with rule 19b-1, and (ii) not to realize any long-term
capital gains during any particular year in excess of the amount of the
aggregate pay-out for the year (since as a practical matter excess
gains must be distributed and accordingly would not be available to
satisfy pay-out requirements in following years), notwithstanding that
purely investment considerations might favor realization of long-term
gains at different times or in different amounts. Applicants thus
assert that the limitation on the number of capital gains distributions
that a fund may make with respect to any one year imposed by rule 19b-1
may prevent the efficient operation of a Plan whenever that fund's
realized net long-term capital gains in any year exceed the total of
the periodic distributions that may include such capital gains under
the rule.
    8. In addition, Applicants assert that rule 19b-1 may cause fixed
regular periodic distributions under a Plan to be funded with returns
of capital \2\ (to the extent net investment income and realized short-
term capital gains are insufficient to fund the distribution), even
though realized net long-term capital gains otherwise could be
available. To distribute all of a fund's long-term capital gains within
the limits in rule 19b-1, a fund may be required to make total
distributions in excess of the annual amount called for by its Plan, or
to retain and pay taxes on the excess amount. Applicants thus assert
that the requested order would minimize these effects of rule 19b-1 by
enabling the funds to realize long-term capital gains as often as
investment considerations dictate without fear of violating rule 19b-1.
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    \2\ Returns of capital as used in the application means return
of capital for financial accounting purposes and not for tax
accounting purposes.
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    9. Applicants state that Revenue Ruling 89-81 under the Code
requires that a fund that has both common stock and preferred stock
outstanding designate the types of income, e.g., investment income and
capital gains, in the same proportion as the total distributions
distributed to each class for the tax year. To satisfy the
proportionate designation requirements of Revenue Ruling 89-81,
whenever a fund has realized a long-term capital gain with respect to a
given tax year, the fund must designate the required proportionate
share of such capital gain to be included in common and preferred stock
dividends. Applicants state that although rule 19b-1 allows a fund some
flexibility with respect to the frequency of capital gains
distributions, a fund might use all of the exceptions available under
the rule for a tax year and still need to distribute additional capital
gains allocated to the preferred stock to comply with Revenue Ruling
89-81.
    10. Applicants assert that the potential abuses addressed by
section 19(b) and rule 19b-1 do not arise with respect to preferred
stock issued by a closed-end fund. Applicants assert that such
distributions are fixed or determined in periodic auctions by reference
to short-term interest rates rather than by reference to performance of
the issuer and Revenue Ruling 89-81 determines the proportion of such
distributions that are comprised of the long-term capital gains.
    11. Applicants also submit that the ``selling the dividend''
concern is not applicable to preferred stock, which entitles a holder
to no more than a periodic dividend at a fixed rate or the rate
determined by the market, and, like a debt security, is priced based
upon its liquidation value, credit quality, and frequency of payment.
Applicants state that investors buy preferred shares for the purpose of
receiving payments at the frequency bargained for, and do not expect
the liquidation value of their shares to change.
    12. Applicants request an order under section 6(c) granting an
exemption from the provisions of section 19(b) and rule 19b-1 to permit
each Fund to distribute periodic capital gains dividends (as defined in
section 852(b)(3)(C) of the Code) as often as monthly in any one
taxable year in respect of its common

stock and as often as specified by or determined in accordance with the
terms thereof in respect of its preferred stock.\3\
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    \3\ Applicants state that a future fund that relies on the
requested order will satisfy each of the representations in the
application except that such representations will be made in respect
of actions by the board of trustees of such future fund and will be
made at a future time.
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    Applicants' Conditions:
    Applicants agree that, with respect to each Fund seeking to rely on
the order, the order will be subject to the following conditions:
    I. Compliance Review and Reporting. The fund's chief compliance
officer will: (a) Report to the fund Board, no less frequently than
once every three months or at the next regularly scheduled quarterly
board meeting, whether (i) the fund and the Adviser have complied with
the conditions to the requested order, and (ii) a Material Compliance
Matter, as defined in rule 38a-1(e)(2), has occurred with respect to
compliance with such conditions; and (b) review the adequacy of the
policies and procedures adopted by the fund no less frequently than
annually.
    II. Disclosures to Fund Shareholders:
    A. Each Notice to The holders of the fund's common stock, in
addition to the information required by section 19(a) and rule 19a-1:
    1. Will provide, in a tabular or graphical format:
    (a) The amount of the distribution, on a per common share basis,
together with the amounts of such distribution amount, on a per common
share basis and as a percentage of such distribution amount, from
estimated: (A) Net investment income; (B) net realized short-term
capital gains; (C) net realized long-term capital gains; and (D) return
of capital or other capital source;
    (b) The fiscal year-to-date cumulative amount of distributions, on
a per common share basis, together with the amounts of such cumulative
amount, on a per common share basis and as a percentage of such
cumulative amount of distributions, from estimated: (A) Net investment
income; (B) net realized short-term capital gains; (C) net realized
long-term capital gains; and (D) return of capital or other capital
source;
    (c) The average annual total return in relation to the change in
NAV for the 5-year period (or, if the fund's history of operations is
less than five years, the time period commencing immediately following
the fund's first public offering) ending on the last day of the month
prior to the most recent distribution record date compared to the
current fiscal period's annualized distribution rate expressed as a
percentage of NAV as of the last day of the month prior to the most
recent distribution record date; and
    (d) The cumulative total return in relation to the change in NAV
from the last completed fiscal year to the last day of the month prior
to the most recent distribution record date compared to the fiscal
year-to-date cumulative distribution rate expressed as a percentage of
NAV as of the last day of the month prior to the most recent
distribution record date.
    Such disclosure shall be made in a type size at least as large and
as prominent as the estimate of the sources of the current
distribution; and
    2. will include the following disclosure:
    (a) ``You should not draw any conclusions about the fund's
investment performance from the amount of this distribution or from the
terms of the fund's Plan'';
    (b) ``The fund estimates that it has distributed more than its
income and net realized capital gains; therefore, a portion of your
distribution may be a return of capital. A return of capital may occur
for example, when some or all of the money that you invested in the
fund is paid back to you. A return of capital distribution does not
necessarily reflect the fund's investment performance and should not be
confused with `yield' or `income' '';\4\ and
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    \4\ This disclosure will be included only if the current
distribution or the fiscal year-to-date cumulative distributions are
estimated to include a return of capital.
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    (c) ``The amounts and sources of distributions reported in this
Notice are only estimates and are not being provided for tax reporting
purposes. The actual amounts and sources of the amounts for tax
reporting purposes will depend upon the fund's investment experience
during the remainder of its fiscal year and may be subject to changes
based on tax regulations. The fund will send you a Form 1099-DIV for
the calendar year that will tell you how to report these distributions
for federal income tax purposes.''
    Such disclosure shall be made in a type size at least as large as
and as prominent as any other information in the Notice and placed on
the same page in close proximity to the amount and the sources of the
distribution.
    B. On the inside front cover of each report to shareholders under
rule 30e-1 under the Act, the fund will:
    1. Describe the terms of the Plan (including the fixed amount or
fixed percentage of the distributions and the frequency of the
distributions);
    2. Include the disclosure required by condition II.A.2.a above;
    3. State, if applicable, that the Plan provides that the Board may
amend or terminate the Plan at any time without prior notice to fund
shareholders; and
    4. Describe any reasonably foreseeable circumstances that might
cause the fund to terminate the Plan and any reasonably foreseeable
consequences of such termination.
    C. Each report provided to shareholders under rule 30e-1 and each
prospectus filed with the Commission on Form N-2 under the Act, will
provide the fund's total return in relation to changes in NAV in the
financial highlights table and in any discussion about the fund's total
return.
    III. Disclosure to Shareholders, Prospective Shareholders and Third
Parties:
    A. The fund will include the information contained in the relevant
Notice, including the disclosure required by condition II.A.2 above, in
any written communication (other than a Form 1099) about the Plan or
distributions under the Plan by the fund, or agents that the fund has
authorized to make such communication on the fund's behalf, to any fund
common shareholder, prospective common shareholder or third-party
information provider;
    B. The fund will issue, contemporaneously with the issuance of any
Notice, a press release containing the information in the Notice and
will file with the Commission the information contained in such Notice,
including the disclosure required by condition II.A.2 above, as an
exhibit to its next filed Form N-CSR; and
    C. The fund will post prominently on the Web site maintained by the
Broker-Dealer, an affiliated person of the Adviser, a statement
containing the information in each Notice, including the disclosure
required by condition II.A.2 above, and will maintain such information
on such Web site for at least 24 months.\5\
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    \5\ None of the funds nor the Adviser maintains a Web site.
First Trust Portfolios, a registered broker-dealer and an affiliate
of the Adviser, maintains a Web site that is used by the Adviser and
the funds.
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    IV. Delivery of Notices to Beneficial Owners: If a broker, dealer,
bank or other person (``financial intermediary'') holds common stock
issued by the fund in nominee name, or otherwise, on behalf of a
beneficial owner, the fund: (a) Will request that the financial
intermediary, or its agent, forward the Notice to all beneficial owners
of the fund's stock held through such financial intermediary; (b) will
provide, in a timely manner, to the financial intermediary, or its
agent, enough

copies of the Notice assembled in the form and at the place that the
financial intermediary, or its agent, reasonably requests to facilitate
the financial intermediary's sending of the Notice to each beneficial
owner of the fund's stock; and (c) upon the request of any financial
intermediary, or its agent, that receives copies of the Notice, will
pay the financial intermediary, or its agent, the reasonable expenses
of sending the Notice to such beneficial owners.
    V. Additional Board Determinations for Funds Whose Shares Trade at
a Premium: If:
    A. The fund's common stock has traded on the exchange that it
primarily trades on at the time in question at an average premium to
NAV equal to or greater than 10%, as determined on the basis of the
average of the discount or premium to NAV of the fund's common stock as
of the close of each trading day over a 12-week rolling period (each
such 12-week rolling period ending on the last trading day of each
week); and
    B. The fund's annualized distribution rate for such 12-week rolling
period, expressed as a percentage of NAV as of the ending date of such
12-week rolling period, is greater than the fund's average annual total
return in relation to the change in NAV over the 2-year period ending
on the last day of such 12-week rolling period; then:
    1. At the earlier of the next regularly scheduled meeting or within
four months of the last day of such 12-week rolling period the Board,
including a majority of the Independent Trustees:
    (a) Will request and evaluate, and the Adviser will furnish, such
information as may be reasonably necessary to make an informed
determination of whether the Plan should be continued or continued
after amendment;
    (b) Will determine whether continuation, or continuation after
amendment, of the Plan is consistent with the fund's investment
objective(s) and policies and in the best interests of the fund and its
stockholders, after considering the information in condition V.B.1.a
above; including, without limitation:
    (1) Whether the Plan is accomplishing its purpose(s);
    (2) The reasonably foreseeable effects of the Plan on the fund's
long-term total return in relation to the market price and NAV of the
fund's common stock; and
    (3) The fund's current distribution rate, as described in condition
V.B above, compared to with the fund's average annual total return over
the 2-year period, as described in condition V.B, or such longer period
as the board deems appropriate; and
    (c) Based upon that determination, will approve or disapprove the
continuation, or continuation after amendment, of the Plan; and
    2. The Board will record the information considered by it and the
basis for its approval or disapproval of the continuation, or
continuation after amendment, of the Plan in its meeting minutes, which
must be made and preserved for a period of not less than six years from
the date of such meeting, the first two years in an easily accessible
place.
    VI. Public Offerings: The fund will not make a public offering of
the fund's common stock other than:
    A. A rights offering below NAV to holders of the fund's common
stock;
    B. An offering in connection with a dividend reinvestment plan,
merger, consolidation, acquisition, spin-off or reorganization of the
fund; or
    C. An offering other than an offering described in conditions VI.A
and VI.B above, unless, with respect to such other offering:
    1. the fund's annualized distribution rate for the six months
ending on the last day of the month ended immediately prior to the most
recent distribution declaration date,\6\ expressed as a percentage of
NAV per share as of such date, is no more than 1 percentage point
greater than the fund's average annual total return for the 5-year
period ending on such date; \7\ and
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    \6\ If the fund has been in operation fewer than six months, the
measured period will begin immediately following the fund's first
public offering.
    \7\ If the fund has been in operation fewer than five years, the
measured period will begin immediately following the fund's first
public offering.
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    2. the transmittal letter accompanying any registration statement
filed with the Commission in connection with such offering discloses
that the fund has received an order under section 19(b) to permit it to
make periodic distributions of long-term capital gains with respect to
its common stock as frequently as twelve times each year, and as
frequently as distributions are specified in accordance with the terms
of any outstanding preferred stock that such fund may issue.
    VII. Amendments to Rule 19b-1. The requested relief will expire on
the effective date of any amendment to rule 19b-1 that provides relief
permitting certain closed-end investment companies to make periodic
distributions of long-term capital gains with respect to their
outstanding common stock as frequently as twelve times each year.

    For the Commission, by the Division of Investment Management,
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-4516 Filed 3-3-10; 8:45 am]
BILLING CODE 8011-01-P