of emission source and activity specific exemptions in other SIPs, EPA
proposes to approve Paragraph A of Section 202 into the New Mexico SIP.
---------------------------------------------------------------------------

    \26\ Supporting documentation contained in May 29, 1998 SIP
submittal, specifically the direct testimony and public hearing
transcript documents. Additional clarification also provided via
Clarification of Exemptions in Section 202 of 20.2.72 NMAC--
Construction Permits letter dated September 19, 2012 from Richard L.
Goodyear, PE, Bureau Chief, NMED to Mr. Thomas Diggs, Associate
Director for Air Programs, EPA, Region 6.
    \27\ Information regarding the portion of current active
emission sources that qualify for the source and activity specific
exemptions under Section 202 was provided via electronic mail dated
September 18, 2012, from Kerwin Singleton, NMED, to Ashley Mohr,
EPA, Region 6.
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c. Paragraph B Exemptions
    Paragraph B of Section 202 includes the addition of a second list
of source and activity specific permit exemptions for the Minor NSR
permitting program. Like the Paragraph A emission sources, the
Paragraph B sources and activities are exempted from the Minor NSR
permitting requirements. However, facilities are required to include a
listing of all Paragraph B exempt sources in their permit application.
This inclusion in the permit application serves as a notification to
NMED that a Paragraph B exempt source is located at a facility. NMED
can then, based on the notification, verify that the source qualifies
for the permit exemption. For cases where a Paragraph B source is being
added to a permitted facility, the owner or operator is required to
submit a request to NMED requesting an Administrative revision to the
permit. This revision request also serves as a

notification that a Paragraph B source is located at a facility and
provides NMED an opportunity to verify that the source qualifies for
the claimed exemption. Administrative revisions are subject to the
revised requirements under Section 219 and were further discussed in
Subsection III.B.6.a of this preamble.
    The list of exempt sources and activities included in Paragraph B
also includes operational limitations for most of the emission sources,
which serve to minimize the potential impacts from these sources and
activities on ambient air quality. The following is a listing of the
Paragraph B exemptions, including any operational limitations contained
in the Section 202 provisions:
    1. Fuel burning equipment which is used solely for heating
buildings for personal comfort or for producing hot water for personal
use and which:
    a. Uses gaseous fuel and has a design rate less than or equal to
five (5) million BTU per hour; or
    b. Uses distillate oil (not including waste oil) and has a design
rate less than or equal to one (1) million BTU per hour; \28\
---------------------------------------------------------------------------

    \28\ This activity generally is not considered construction or a
modification by EPA and not required to obtain a minor NSR permit.
---------------------------------------------------------------------------

    2. VOC emissions resulting from the handling or storing of any VOC
if:
    a. Such VOC has a vapor pressure of less than two tenths (0.2) PSI
at temperatures at which the compound is stored and handled; and
    b. The owner or operator maintains sufficient record keeping to
verify that the requirements of Sub-paragraph (a) of this paragraph are
met;
    3. Standby generators which are:
    a. Operated only during the unavoidable loss of commercial utility
power;
    b. Operated less than 500 hours per year; and
    c. Either are:
    i. The only source of air emissions at the site; or
    ii. Accompanied by sufficient record keeping to verify that the
standby generator is operated less than 500 hours per year;
    4. The act of repositioning or relocating sources of air emissions
or emissions points within the plant site, but only when such change in
physical configuration does not increase air emissions or the ambient
impacts of such emissions; \29\
---------------------------------------------------------------------------

    \29\ This activity does not increase emissions and therefore
generally is not considered construction or modification by EPA,
requiring a minor NSR permit.
---------------------------------------------------------------------------

    5. Any emissions unit, operation, or activity that has a potential
emission rate of no more than one-half (\1/2\) ton per year of any
pollutant for which a National or New Mexico Ambient Air Quality
Standard has been set or one-half (\1/2\) ton per year of any VOC.
Multiple emissions units, operations, and activities that perform
identical or similar functions shall be combined in determining the
applicability of this exemption;
    6. Surface coating of equipment, including spray painting, roll
coating, and painting with aerosol spray cans, if:
    a. The potential emission rate of VOCs do not exceed ten (10)
pounds per hour;
    b. The facility-wide total VOC content of all coating and clean-up
solvent use is less than two (2) tons per year; and
    c. The owner or operator maintains sufficient record keeping to
verify that the requirements in Sub-paragraphs (a) and (b) of this
paragraph are met;
    7. Particulate emissions resulting from abrasive blasting
operations, if:
    a. Blasting operations are entirely enclosed in a building; and
    b. No visible particulate emissions are released from the building.
d. 110(l) Analysis for Paragraph B Exemptions
    Similar to that of the analysis provided for Paragraph A sources,
NMED provided an analysis of the anticipated impacts on ambient air
quality for the sources contained in Paragraph B of Section 202.
Emissions estimates were provided for sources excluded under Paragraph
B, Sub-paragraphs 1, 2, 4, 5, 6 and 7. All of the emissions estimates
provided for the Paragraph B sources in the SIP submittal are less than
5.5 tons per year. NMED did not provide specific emissions information
for standby generators, which are found under Sub-paragraph 3 of the
Paragraph B exemptions in Section 202. However, standby generators only
qualify for the Paragraph B exemptions if they are operated only during
periods of unavoidable loss of commercial utility power and operate
less than 500 hours per year. Paragraph B also requires that for those
sources located at a site with other air emission sources, the facility
must maintain records to verify operating hours below 500 hours. Based
on the limitations on the annual hours of operation for the exempt
standby generators, the expected annual emissions from these types of
sources is expected to be of similar magnitude as those emissions
resulting from the other Paragraph B exempted sources, i.e., less than
5.5 tons per year. The provisions under Section 202 also include
similar operational restrictions for other exempted sources under
Paragraph B that minimize the potential impacts from these exempted
emission sources. As indicated in the state's analysis, the emissions
resulting from the Paragraph B exempted sources are not expected to
have adverse impacts on air quality. Furthermore, Section 202 requires
that applicants report the presence of the Paragraph B exempted sources
on permit applications so that the Department can verify that the
sources meet the requirements under this Paragraph and qualify as a
Paragraph B exempted sources, and thus will not adversely impact air
quality.
    In addition to the emissions estimates information provided by New
Mexico, NMED has been carrying out the Minor NSR permitting program
allowing for sources and activities listed in Paragraph B to be exempt
from a portion of the preconstruction permitting requirements since the
adoption of the permit exemptions in 1998 without any indication that
these permit exemptions have interfered with attainment or reasonable
further progress. As previously stated, NMED has reviewed the currently
active emission sources contained in the state's permitting database to
determine the number of documented sources that qualify for exemptions
under Section 202. NMED has determined that Section 202 exempted
sources, including Paragraph B sources, account for less than 10
percent of the total number of currently active emission sources. Based
on the supporting information and historical look back data regarding
these emission source and activity specific exemptions, EPA proposes to
approve Paragraph B of Section 202 into the New Mexico SIP.
e. Paragraph C Exemptions
    <IP_ADDRESS>(A)(3) NMAC of the current SIP requires sources that are
subject to the applicable requirements of NSPS, NESHAP, or other
emission limitation related requirements of another Part under Chapter
2 of NMAC to obtain a preconstruction permit under Part 72, regardless
of the source's potential to emit. The submitted Paragraph C exemption
under Section 202 exempts from Minor NSR permitting requirements under
Part 72 these sources with potential emission rates less than 25 tons
per year or 10 lb per hour if the only reason permitting under Part 72
is triggered is by the fact the source is subject to NSPS, NESHAP, or
another Part under Chapter 2 of NMAC.30 31 This exemption
only applies

to the permitting applicability requirement found in <IP_ADDRESS>(A)(3)
NMAC. Therefore, in the event a source subject to NSPS, NESHAP, or
other Part exceeds the permitting applicability thresholds, such as the
thresholds for new Minor NSR sources found in <IP_ADDRESS>(A)(1) NMAC or
Minor NSR modifications found <IP_ADDRESS>(A)(2) NMAC, then the source
would be required to be subject to the Minor NSR permitting
requirements under Part 72. New Mexico has also explicitly excluded the
following NSPS and NESHAP sources from claiming the exemption under
Paragraph C of Section 202: NSPS Subparts I and OOO and NESHAP Subparts
C and D.
---------------------------------------------------------------------------

    \30\ The applicability test requiring the source to obtain a
permit due to applicable emission limits under NSPS, NESHAP, or
other Part under NMAC Chapter 2 is found in 20.2.200(A)(3) NMAC.
    \31\ To qualify for the Paragraph C exemptions, sources are also
required to be included in a Notice of Intent filed under 20.2.73
NMAC (Notice of Intent and Emissions Inventory); or to have met the
notification requirements to which they are subject under NSPS or
NESHAP.
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f. 110(l) Analysis for Paragraph C Exemptions
    Under the current SIP at <IP_ADDRESS>(A)(3) NMAC, sources subject to
NSPS, NESHAP, or any other New Mexico Air Quality Control Regulation
which contains emission limitations for any regulated air contaminant
are subject to the Minor NSR permitting requirements in Part 72
regardless of whether their potential to emit is less than the 25 tons
per year or 10 lb per hour permitting threshold in <IP_ADDRESS>(A)(1)
NMAC. The submitted Paragraph C of Section 202 includes an exemption
for these sources from <IP_ADDRESS>(A)(3) NMAC, and thus an exemption
from the Minor NSR permitting requirements in Part 72, if they are
included in a Notice of Intent under Part 73 or have met all applicable
NSPS and NESHAP requirements, and have a potential to emit under 25
tons per year or 10 lb per hour. This exemption thus is less stringent
than the requirements of the currently approved SIP, and must be
evaluated to determine whether it would cause interference with
attainment or reasonable further progress.
    NMED indicated in testimony before the state Environmental
Improvement Board that the intent of the current SIP approved rule was
to use the Part 72 permit process as a mechanism for receiving
notification of NSPS, NESHAP, or other regulated sources. NMED
indicated in hearing testimony that it is unnecessary for such a
source, as long as its potential to emit is under the 25 tons per year
or 10 lb per hour Minor NSR permitting thresholds, to undergo the
entire Part 72 permitting program if the Department's intent--
notification--is achieved in another way. Based on the implementation
of this preconstruction permitting requirement along with the other
state and federal notification requirements applicable to these
sources, the Department determined that the notification requirements
found in Part 73, NSPS, or NESHAP are sufficient for these sources with
potential emission rates less than 25 tons per year or 10 lb per hour.
Therefore, requiring these sources to undergo the entire Part 72
preconstruction permitting process merely to obtain notification of the
sources' existence is not necessary, as long as, the source complies
with the Part 73, NSPS, or NESHAP notification requirements. EPA finds
from NMED's supporting documentation nothing indicating these sources
with potential emission rates less than 25 tons per year or 10 lb per
hour were permitted for any reason other than notification.
    Under the proposed Paragraph C exemption, these sources are only
exempted from the Minor NSR permitting requirements in Part 72 and are
still required to meet all other applicable requirements, including
emissions limitations, testing, recordkeeping, and reporting
requirements. Additionally, this exemption only applies to the
<IP_ADDRESS>(A)(3) NMAC applicability test, and the source must evaluate
the permitting applicability requirements found in Sub-paragraphs (1),
(2), (4), (5), and (6) under Paragraph A of Section 200. Based on
NMED's testimony, EPA finds the Paragraph C exemption for these sources
if their potential to emit is under Part 72's permitting thresholds for
new Minor NSR sources and Minor NSR modifications codifies NMED's
original primary purpose behind the current SIP--notification--without
unnecessarily requiring these sources to undergo the full Minor NSR
permitting requirements of Part 72 in order to meet that purpose.
Because this exemption would apply only for those sources with a
potential to emit below the currently SIP approved 25 tons per year or
10 lb per hour minor NSR permitting thresholds in Part 72, EPA proposes
to find Paragraph C of Section 202 does not interfere with attainment
or reasonable further progress and approve it into the New Mexico SIP.
g. Portable Source Relocation
    The submitted Section 202 also contains provisions related to
applicable permitting requirements for portable sources that are being
relocated. These provisions were previously contained in Paragraph B of
Section 202, but were moved to Paragraph D based on the additions of
the source specific exemptions in the previous paragraphs. As part of
the May 29, 1998 SIP revisions, clarifying language was added to
provisions in Paragraph D regarding the requirements applicants must
meet in order to relocate a permitted portable source without obtaining
a permit revision. This SIP revision submittal also included the
incorporation of additional recordkeeping and notification requirements
that must be met in order for the portable source to relocate without
obtaining a permit revision. As compared with the current SIP, EPA is
proposing to approve these revised provisions as they include more
stringent requirements for portable source relocation to meet and
qualify for an exemption from preconstruction permitting.
h. Additional 110(l) Analysis--Historical Look Back
    In addition to the referenced supporting documentation regarding
the Section 202 exemptions included in the May 29, 1998 SIP revision
submittal, NMED also provided data as part of a historical look back to
document how many active emission sources have been reported as
exempted sources, as well as how may active emission sources throughout
the state may have qualified for exemptions from preconstruction
permitting under Section 202 of Part 72. Within the current database of
active emission sources, there are 493 subject items listed as
``Exempt'' within the database. These subject items may represent more
than one emission source at a facility, if the facility has multiple
units that are the same. In addition, the current active emission
source database included additional emission units that may have
qualified for a permit exemption under Section 202 and are not listed
specifically as ``Exempt.'' NMED estimates that the total number of
emission sources that may have qualified for exemptions from
preconstruction permitting requirements is currently more than
2,000.\32\ NMED has indicated that over the course of a decade since
the state adopted the Permit Exemptions provisions in Section 202, the
implementation of the Permit Exemptions provisions have not resulted in
a measured exceedance of

the NAAQS. EPA finds this data is consistent with the supporting
documentation provided by New Mexico in the SIP submittal that stated
that the anticipated impacts on air quality from the sources qualifying
for exemptions from preconstruction permitting requirements under
Section 202 are expected to be insignificant.
---------------------------------------------------------------------------

    \32\ Information regarding active emission sources and the
current number of active sources that have claimed and/or may have
qualified for exemptions under Section 202 was provided via
Clarification of Exemptions in Section 202 of 20.2.72 NMAC--
Construction Permits letter dated September 19, 2012 from Richard L.
Goodyear, PE, Bureau Chief, NMED to Mr. Thomas Diggs, Associate
Director for Air Programs, EPA, Region 6 letter dated September 19,
2012, from Mr. Richard Goodyear, NMED, to Mr. Thomas Diggs, EPA.
---------------------------------------------------------------------------

    Based on the reasons discussed above, we do not believe that the
addition of the permit exemptions contained in Section 202 for minor
permit modifications will interfere with attainment or reasonable
further progress or any other applicable requirement of the Act.
Furthermore, it is important to note that all of the permit exemptions
contained in Section 202 are limited only to the Minor NSR permitting
requirements contained in Sections 200-299 of Part 72. These exemptions
would not apply to any other applicable state or federal requirements.
The source would still be required to meet all other applicable state
and federal requirements, including major NSR permitting requirements,
NSPS, NESHAPS or MACT requirements, and state toxics permitting
requirements, if applicable. The source would also have to comply with
any control requirements developed as part of a SIP control strategy,
like the control requirements applicable to the PM10
nonattainment area in Anthony. Our evaluation of the SIP revision
submittals related to Section 202, which are under review in this
action, demonstrates compliance with section 110(l) of the CAA and
provides further basis for proposing approval of this SIP revision.

IV. Proposed Action

    EPA is proposing an approval of the SIP revisions to the
Construction Permits regulation found in Part 72 that were submitted by
New Mexico on May 29, 1998, November 6, 1998, April 11, 2002, April 25,
2005, and November 2, 2006, and the letter dated November 7, 2012 from
the Secretary. EPA is proposing this action in accordance with section
110 of the Act.

A. What are we not addressing in this proposed action?

    EPA is only taking proposed action on the severable revisions to
Part 72 contained in the five SIP revision submittals listed above that
were submitted to us for review and incorporation into the New Mexico
SIP. By severable, we mean that the portions of the SIP revision
submittals relating to Part 72 can be implemented independently of the
remaining portions of the submittal, without affecting the stringency
of the submitted rules. In addition, the remaining portions of the
submittal are not necessary for approval of the provisions addressing
Part 72. The following is a list of other revisions contained in the
May 29, 1998, November 6, 1998, April 11, 2002, April 25, 2005, and
November 2, 2006 submittals that are not being addressed in this
proposed action:
     The November 6, 1998 submittal from New Mexico also
contained revisions to correct errors in 20.2.70 NMAC--Operating
Permits. Because 20.2.70 NMAC is outside the scope of the New Mexico
SIP, the revisions to the Operating Permits provisions were not
submitted as revisions to the state's SIP.
     The April 11, 2002 submittal from New Mexico also
contained revisions to 20.2.73 NMAC--Notice of Intent and Emissions
Inventory Requirements, 20.2.74 NMAC--Permits--Prevention of
Significant Deterioration, 20.2.75 NMAC--Construction Permit Fees, and
20.2.79 NMAC--Permits--Nonattainment Areas. Portions of the submittal
related to Parts 73, 74, 75, and 79 have been or will be addressed in
separate SIP revisions reviews and rule actions, as necessary.
     The April 11, 2002 submittal also included documentation
related to an additional revision to 20.2.72 NMAC (filed with the State
Records Center on February 28, 2001, effective March 30, 2001), which
was submitted to EPA for informational purposes only and was not
submitted for approval under the SIP. Therefore, the February 28, 2001
state adopted revisions to Part 72 are not included in this proposed
action.
     The April 25, 2005 submittal from New Mexico also
contained revisions to 20.2.66 NMAC--Cotton Gins, 20.2.73 NMAC--Notice
of Intent and Emissions Inventory Requirements, and 20.2.75 NMAC--
Construction Permit Fees. Portions of the submittal related to Parts
66, 73, and 75 have been or will be addressed in separate SIP revisions
reviews and rule actions, as necessary.
     The November 2, 2006 submittal from New Mexico also
contained revisions to 20.2.3 NMAC--Ambient Air Quality Standards,
20.2.70 NMAC--Operating Permits, and 20.2.99 NMAC--Conformity to the
State Implementation Plan of Transportation Plans, Programs and
Projects. Portions of the submittal related to Parts 3, 70, and 99 have
been or will be addressed in separate SIP revisions reviews and rule
actions, as necessary.

V. Statutory and Executive Order Reviews

    Under the Clean Air Act, the Administrator is required to approve a
SIP submission that complies with the provisions of the Act and
applicable Federal regulations. See 42 U.S.C. 7410(k); 40 CFR 52.02(a).
Thus, in reviewing SIP submissions, EPA's role is to approve state
choices, provided that they meet the criteria of the Clean Air Act.
Accordingly, this notice merely proposes to approve state law as
meeting Federal requirements and does not impose additional
requirements beyond those imposed by state law. For that reason, this
proposed action:
     Is not a ``significant regulatory action'' subject to
review by the Office of Management and Budget under Executive Order
12866 (58 FR 51735, October 4, 1993);
     Does not impose an information collection burden under the
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     Is certified as not having a significant economic impact
on a substantial number of small entities under the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.);
     Does not contain any unfunded mandate or significantly or
uniquely affect small governments, as described in the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4);
     Does not have federalism implications as specified in
Executive Order 13132 (64 FR 43255, August 10, 1999);
     Is not an economically significant regulatory action based
on health or safety risks subject to Executive Order 13045 (62 FR
19885, April 23, 1997);
     Is not a significant regulatory action subject to
Executive Order 13211 (66 FR 28355, May 22, 2001);
     Is not subject to requirements of section 12(d) of the
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272
note) because application of those requirements would be inconsistent
with the Clean Air Act; and
     Does not provide EPA with the discretionary authority to
address, as appropriate, disproportionate human health or environmental
effects, using practicable and legally permissible methods, under
Executive Order 12898 (59 FR 7629, February 16, 1994).
    In addition, this rule does not have tribal implications as
specified by Executive Order 13175 (65 FR 67249, November 9, 2000),
because the SIP is not approved to apply in Indian country located in
the state, and EPA notes that it will not impose substantial direct
costs on tribal governments or preempt tribal law.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Carbon monoxide,
Incorporation by reference, Intergovernmental relations, Lead, Nitrogen
dioxide, Ozone, Particulate matter, Reporting and recordkeeping
requirements, Sulfur oxides, Volatile organic compounds.

    Authority:  42 U.S.C. 7401 et seq.

    Dated: November 13, 2012.
Ron Curry,
Regional Administrator, Region 6.
[FR Doc. 2012-28910 Filed 11-28-12; 8:45 am]
BILLING CODE 6560-50-P


[Federal Register Volume 79, Number 94 (Thursday, May 15, 2014)]
[Notices]
[Pages 27944-27950]
[FR Doc No: 2014-11158]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72141; File No. SR-NASDAQ-2014-009]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Amendment Nos. 2 and 3 and Order Granting
Accelerated Approval of Proposed Rule Change, as Modified by Amendment
Nos. 1, 2, and 3 Thereto, Relating to the Means of Achieving the
Investment Objectives of the First Trust Tactical High Yield ETF of
First Trust Exchange-Traded Fund IV

May 9, 2014.

I. Introduction

    On January 22, 2014, The NASDAQ Stock Market LLC (``Exchange'' or
``NASDAQ'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change relating to the First Trust Tactical High Yield
ETF (``Fund'') of First Trust Exchange-Traded Fund IV (``Trust''). The
proposed rule change was published for comment in the Federal Register
on February 10, 2014.\3\ On March 11, 2014, the Exchange filed
Amendment No. 1 to the proposed rule change, which amended and replaced
the proposed rule change in its entirety.\4\ On April 1, 2014, the
Commission published notice to solicit comments from interested persons
on the proposed rule change, as modified by Amendment No. 1 thereto,
and to designate a longer period for Commission action on the proposed
rule change, as modified by Amendment No. 1 thereto.\5\ On May 7, 2014,
the Exchange filed Amendment No. 2 to the proposed rule change, which
amended and replaced the proposed rule change in its entirety.\6\ On
May 8, 2014, the Exchange filed Amendment No. 3 to the proposed rule
change, which amended and replaced the proposed rule change in its
entirety.\7\ The Commission has received no comments on the proposal.
The Commission is publishing this notice to solicit comments on
Amendment Nos. 2 and 3 from interested persons, and is approving the
proposed rule change, as modified by Amendment Nos. 1, 2, and 3
thereto, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 71473 (Feb. 4,
2014), 79 FR 7728 (``Notice'').
    \4\ In Amendment No. 1, the Exchange: (a) Clarified the types of
Derivative Instruments (as defined herein) as proposed to be used by
the Fund; (b) provided specific representations relating the use of
these Derivative Instruments; (c) provided additional information as
to the valuation of these Derivative Instruments for purposes of
determining NAV (as defined herein); (d) provided additional
information as to the availability of pricing for the Derivative
Instruments to market participants, as well as information relating
to the Derivative Instruments as part of the Disclosed Portfolio (as
defined herein); and (e) provided additional details as to the
Exchange's surveillance procedures with respect to the Derivative
Instruments.
    \5\ See Securities Exchange Act Release No. 71813 (March 26,
2014), 79 FR 18378. Pursuant to Section 19(b)(2) of the Act, the
Commission determined that it was appropriate to designate a longer
period within which to take action on the proposed rule change.
Accordingly, the Commission designated May 9, 2014, as the date by
which the Commission should either approve or disapprove or
institute proceedings to determine whether to disapprove the
proposed rule change.
    \6\ In Amendment No. 2, the Exchange: (a) Provided additional
information regarding the bank loans in which the Fund would invest,
including information relating to the senior loan market and
valuation and price availability of bank loans; (b) noted that
liquidity determinations would be made in accordance with Commission
guidance; (c) clarified that the Fund's investments in Derivative
Instruments would be limited in all cases to 30% of the Fund's net
assets, regardless of whether Derivative Instruments would be used
solely for hedging purposes; (d) represented that at least 90% of
the Fund's net assets invested in Derivative Instruments would trade
in markets that are members of the ISG (as defined herein) or are
parties to a comprehensive surveillance sharing agreement with the
Exchange; (e) provided additional information relating to valuation
and price availability of Derivative Instruments; and (f) clarified
in detail what information the Disclosed Portfolio (as defined
herein) would provide as a result of the Fund's investments in bank
loans and Derivative Instruments.
    \7\ In Amendment No. 3, the Exchange: (a) Clarified that at
least 75% of the Fund's net assets that are invested in bank loans
would be invested in tranches that have a minimum principal amount
outstanding of $100 million or more with respect to U.S. borrowers
and $200 million or more with respect to non-U.S. borrowers; (b)
clarified that at least 90% of the Fund's net assets in Derivative
Instruments would be invested in Derivative Instruments that trade
in markets that are members of the ISG (as defined herein), which
includes, among others, certain U.S. futures exchanges; and (c)
replaced certain references to ``securities'' with ``assets'' for
purposes of describing NAV valuation.
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange has made the following representations and statements
in describing the Fund's investments, including information relating to
certain proposed portfolio holdings, investment restrictions, valuation
and price availability, portfolio disclosure, and surveillance, as well
as other information.\8\
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    \8\ The Commission approved the listing and trading of shares
(``Shares'') of the Fund under NASDAQ Rule 5735, which governs the
listing and trading of Managed Fund Shares on the Exchange. See
Securities Exchange Act Release No. 68972 (Feb. 22, 2013), 78 FR
13721 (Feb. 28, 2013) (SR-NASDAQ-2012-147) (``Prior Order''). See
also Securities Exchange Act Release No. 68581 (Jan. 4, 2013), 78 FR
2295 (Jan. 10, 2013) (SR-NASDAQ-2012-147) (``Prior Notice,'' and
together with the Prior Order, collectively, ``Prior Release''). The
Commission notes that additional information regarding the Trust,
Fund, Shares, investment strategies, risks, net asset value
(``NAV'') calculation, creation and redemption procedures, fees,
portfolio holdings, disclosure policies, distributions, and taxes,
among other information, is included in the Prior Release and the
Registration Statement (as defined herein), as applicable. See id.;
see also Registration Statement, infra note 10.
---------------------------------------------------------------------------

The Fund

    The Fund (formerly known as the First Trust High Yield Long/Short
ETF) is an actively managed exchange-traded fund (``ETF''). The Shares
are offered by the Trust, which was organized as a Massachusetts
business trust on September 15, 2010. The Trust, which is registered
with the Commission as an investment company, has filed a registration
statement on Form N-1A (``Registration Statement'') relating to the
Fund.\9\ First Trust Advisors L.P. is the investment adviser
(``Adviser'') to the Fund.
---------------------------------------------------------------------------

    \9\ See Post-Effective Amendment No. 60 to Registration
Statement on Form N-1A for the Trust, dated February 28, 2014 (File
Nos. 333-174332 and 811-22559). In addition, according to the
Exchange, the Trust has obtained certain exemptive relief under the
Investment Company Act of 1940 (``1940 Act''). See Investment
Company Act Release No. 30029 (Apr. 10, 2012) (File No. 812-13795)
(``Exemptive Order'').
---------------------------------------------------------------------------

    The Exchange proposes to reflect changes to the means of achieving
the

investment objectives of the Fund. Specifically, the Exchange proposes
two modifications to the description of the measures the Adviser would
utilize to implement the Fund's investment objectives.\10\ The Adviser
also seeks to make the modifications described below to certain
representations in the Prior Release. The Adviser represents that there
is no change to the Fund's investment objectives. Except for the
changes proposed herein, all other facts presented and representations
made in the Prior Release remain unchanged. The Fund would continue to
comply with all initial and continued listing requirements under NASDAQ
Rule 5735.
---------------------------------------------------------------------------

    \10\ According to the Exchange, the Adviser represents that it
has managed and will continue to manage the Fund in the manner
described in the Prior Release, and will not implement the changes,
as described herein, until the instant proposed rule change is
operative.
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The Fund's Investments in Bank Loans

    The Exchange proposes to modify a representation reflected in the
Prior Release by increasing the percentage of the Fund's net assets
that may be invested in bank loans. In accordance with the Prior
Release, the Fund may invest up to 15% of its net assets in ``bank
loans,'' which, as described in the Prior Release, may include loan
interests that are not secured by any specific collateral of the
borrower, loan interests that have a lower than first lien priority on
collateral of the borrower, loans to foreign borrowers, loans in
foreign currencies, and other loans with characteristics that the
Adviser believes qualify as bank loans. The Fund may invest in bank
loans by purchasing assignments or all or a portion of loans or loan
participations from third parties. Bank loans are made by or issued to
corporations primarily to finance acquisitions, refinance existing
debt, support organic growth, or pay out dividends, and are typically
originated by large banks and then syndicated out to institutional
investors as well as to other banks. Bank loans typically bear interest
at a floating rate, although some loans pay a fixed rate.
    Going forward, the Exchange proposes that the Fund be permitted to
invest up to 40% of its net assets in bank loans, provided that the
Fund invest no more than 15% of its net assets in ``junior loans'' (as
defined and described below), and all other bank loans in which the
Fund would invest would be ``senior loans'' (as defined and described
below). In addition, at least 75% of the Fund's net assets that are
invested in bank loans would be invested in tranches that have a
minimum principal amount outstanding of $100 million or more with
respect to U.S. borrowers and $200 million or more with respect to non-
U.S. borrowers.
    The term ``senior loans,'' as used with respect to the Fund, refers
to first lien, senior, secured, floating rate bank loans. The Fund
generally invests, and will continue to invest, in senior loans that
the Adviser deems to be liquid with readily available prices. Although
similar to high yield bonds in that they represent debt obligations of
sub-investment grade corporate borrowers, senior loans differ from
traditional high yield bonds in several important respects. First,
senior loans are typically senior to other obligations of the borrower
and secured by the assets of the borrower. Senior loans rank at the top
of a borrower's capital structure in terms of priority of payment,
ahead of any subordinated debt (high yield) or the borrower's common
equity. Senior loans are also secured, as the holders of these loans
have a lien on most, if not all, of the corporate borrower's plant,
property, equipment, receivables, cash balances, licenses, trademarks,
etc. Furthermore, the corporate borrower of senior loans executes a
credit agreement that typically restricts what it can do (debt
incurrence, asset dispositions, etc.) without the lenders' approval,
and, in addition, may require the borrower to meet certain ongoing
financial covenants (EBITDA, leverage tests, etc.). Finally, as noted
above, senior loans are generally floating rate obligations.
    Institutional investors in senior loans access the market today
primarily through commingled funds or separately managed accounts.
Individual investors have gained exposure to senior loans primarily
through registered open-end or closed-end funds and business
development companies or occasionally through limited partnerships.\11\
According to the Exchange, the broad senior loan market--U.S. dollar-
denominated non-investment grade bank debt, including both non-
institutional (revolvers and pro-rata tranches) and institutional
facilities, as measured by Credit Cuisse--in terms of total outstanding
loans by dollar volume, is approximately $1.5 trillion (March 31,
2014), nearly equal in size to the high yield corporate bond market in
the U.S., also as measured by Credit Suisse, at $1.4 trillion (March
31, 2014). The institutional leveraged loan market (which includes U.S.
dollar-denominated non-investment grade fully-drawn institutional term
loans and is a subset of the overall leveraged loan market) is
approximately $819 billion (March 31, 2014). The market for senior
loans is almost exclusively comprised of non-investment grade corporate
borrowers. The Loan Syndication and Trading Association (``LSTA''), a
trade group sponsored by both underwriters of and institutional
investors in senior bank loans, has been tracking trading volumes and
bid-offer spreads for the asset class since 2007. For the month ended
February 28, 2014--a representative period--$41 billion of senior loans
changed hands representing 1,350 individual transactions. (Source:
LSTA.)
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    \11\ The Adviser believes that there are currently approximately
28 closed-end funds and 60 open-end funds that invest primarily in
the senior loan market, with many other funds allocating a portion
of their investments to such market.
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    The Fund currently invests, and would continue to invest, primarily
in the more liquid segment of the senior loan market. The most actively
traded loans generally have a tranche size outstanding (or total float
of the issue) in excess of $250 million. The borrowers of these broadly
syndicated loans are typically followed by many ``buy-side'' and
``sell-side'' credit analysts who, in turn, rely on the borrower to
provide transparent financial information concerning its business
performance and operating results. The Adviser represents that such
borrowers typically provide significant financial transparency to the
market through the delivery of financial statements on at least a
quarterly basis as required by the executed credit agreements.
Additionally, bids and offers in the senior loans are available
throughout the trading day on larger issues of senior loans with
multiple dealer quotes available. Dealers also update their ``trading
runs'' of senior loans throughout the day and distribute these via
electronic messaging to the institutional investor community. In
addition, senior loan investors can obtain information on senior loans
and their borrowers from numerous public sources, including Bloomberg,
FactSet, public financial statement filings (Forms 10-K and 10-Q), and
sell side research analysts.
    The Adviser has represented to the Exchange that the underwriters,
or agent banks, that distribute, syndicate and trade senior loans are
among the largest global financial institutions, including JPMorgan,
Bank of America, Citigroup, Goldman Sachs, Morgan Stanley, Wells Fargo,
Deutsche Bank, Barclays, Credit Suisse, and others. According to the
Exchange, it is common for multiple firms to act as underwriters and
market makers for a specific senior loan issue. For example, two
underwriters may co-underwrite and fund a senior loan that

has a $1 billion institutional tranche. One of the underwriters, acting
as syndication agent for the financing, will then draft an offering
memorandum (similar to a prospectus for an initial public offering of
equity securities), distribute it to potential investors, schedule
management meetings with the largest loan investors and arrange a bank
meeting that includes management presentations along with a question
and answer session. The investor audience attends in person as well as
via telephone with both live and recorded conference call options.
After a syndication process, which is often two weeks in length, where
investors can complete their due diligence work with access to company
management and underwriter bankers to answer credit questions,
investors' commitments are collected by the underwriter. The
underwriter will typically allocate the loan to 80-120 investors within
the following week, with the largest position representing 3-5% of the
tranche size in a successful syndication. Banks also have senior loan
trading desks that make secondary bid/ask markets in the loans after
they are allocated.
    Under the proposed rule change, the Fund would be permitted to
invest up to 15% of its net assets (in the aggregate) in loan interests
that are not secured by any specific collateral of the borrower and
loan interests that have a lower than first lien priority on collateral
of the borrower (collectively, ``junior loans'').\12\ Junior loans have
the same characteristics as senior loans except that junior loans are
not first in priority of repayment and/or may not be secured by
collateral. In this respect, they are similar to a high yield bond.
Accordingly, due to their subordination in the borrower's capital
structure, junior loans involve a higher degree of overall risk than
senior loans of the same borrower.
---------------------------------------------------------------------------

    \12\ As a point of clarification, under its current investment
restrictions, the Fund may invest up to 15% of its net assets in
junior loans; however, if the Fund invested 15% of its net assets in
junior loans, it would not be able to invest in any additional bank
loans.
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    According to the Exchange, this proposed change is intended to
provide greater flexibility to the Adviser as it tactically allocates
proceeds across the high yield debt market and across the debt capital
structure of select companies. Additionally, this proposed change would
provide the Adviser with increased flexibility to manage the Fund's
duration in periods of rising rates. The Adviser represents that the
Fund would continue to invest 85% or more of the portfolio in
securities that the Adviser deems to be sufficiently liquid at the time
of investment in accordance with Commission guidance. In addition,
consistent with the Prior Release, the Adviser would continue to
monitor its portfolio liquidity on an ongoing basis to determine
whether, in light of current circumstances, an adequate level of
liquidity is being maintained.

The Fund's Use of Derivative Instruments

    The Exchange also proposes to delete a representation reflected in
the Prior Release, which states that, consistent with the Exemptive
Order, the Fund would not invest in options contracts, futures
contracts, or swap agreements (``Derivatives Representation'').
    According to the Exchange, in view of the no-action letter issued
by the Commission's Division of Investment Management on December 6,
2012,\13\ the Exchange is proposing to delete the Derivatives
Representation. The Exchange proposes that, to pursue its investment
objectives, the Fund be permitted to invest in U.S. exchange-traded
options on futures contracts and U.S. exchange-traded futures contracts
(collectively, ``Derivative Instruments''). According to the Exchange,
the use of Derivative Instruments may allow the Fund to seek to enhance
return, to hedge some of the risks of its investments in securities, to
substitute Derivative Instruments for a position in an underlying
asset, to reduce transaction costs, to maintain full market exposure
(which means to adjust the characteristics of its investments to more
closely approximate those of the markets in which it invests), to
manage cash flows, to preserve capital, or to manage its foreign
currency exposures.\14\ Under normal market conditions, no more than
30% of the value of the Fund's net assets would be invested in
Derivative Instruments.\15\ In addition, at least 90% of the Fund's net
assets that would be invested in Derivative Instruments would be
invested in Derivative Instruments that trade in markets that are
members of the Intermarket Surveillance Group (``ISG''), which includes
all U.S. national securities exchanges, certain U.S. futures exchanges,
and certain foreign exchanges, or that are parties to a comprehensive
surveillance sharing agreement with the Exchange.\16\
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    \13\ See No-Action Letter dated December 6, 2012 from Elizabeth
G. Osterman, Associate Director, Office of Exemptive Applications,
Division, Commission.
    \14\ According to the Exchange, the Adviser currently expects
that, initially, all of the futures contracts and options on futures
contracts that the Fund buys or sells would be futures and options
on futures, respectively, on U.S. Treasury obligations. In
particular, the Adviser contemplates that the Fund would sell
futures on U.S. Treasury obligations as an alternative to engaging
in short sales to gain short exposure to the U.S. Treasury market.
    \15\ According to the Exchange, the Fund would limit its direct
investments in futures and options on futures to the extent
necessary for the Adviser to claim the exclusion from regulation as
a ``commodity pool operator'' with respect to the Fund under Rule
4.5 promulgated by the Commodity Futures Trading Commission
(``CFTC''), as such rule may be amended from time to time. Under
Rule 4.5 as currently in effect, the Fund would limit its trading
activity in futures and options on futures (excluding activity for
``bona fide hedging purposes,'' as defined by the CFTC) such that it
will meet one of the following tests: (i) Aggregate initial margin
and premiums required to establish its futures and options on
futures positions will not exceed 5% of the liquidation value of the
Fund's portfolio, after taking into account unrealized profits and
losses on such positions; or (ii) aggregate net notional value of
its futures and options on futures positions will not exceed 100% of
the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and losses on such positions.
    \16\ See infra note 20.
---------------------------------------------------------------------------

    The Prior Release stated that the Fund's investments would not be
used to enhance leverage. In view of the Exchange's proposal to permit
the Fund to use Derivative Instruments, the Fund's investments in
Derivative Instruments could potentially be used to enhance leverage.
However, according to the Exchange, the Fund's investments in
Derivative Instruments would be consistent with the Fund's investment
objectives and would not be used to seek to achieve a multiple or
inverse multiple of an index.
    Investments in Derivative Instruments would be made in accordance
with the 1940 Act and consistent with the Fund's investment objectives
and policies. The Fund would comply with the regulatory requirements of
the Commission to maintain assets as ``cover,'' maintain segregated
accounts, and/or make margin payments when it takes positions in
Derivative Instruments involving obligations to third parties (i.e.,
instruments other than purchase options). If the applicable guidelines
prescribed under the 1940 Act so require, the Fund would earmark or set
aside cash, U.S. government securities, high-grade liquid debt
securities, and/or other liquid assets in a segregated custodial
account in the amount prescribed. The Fund would include appropriate
risk disclosure in its offering documents, including leveraging risk.
Leveraging risk is the risk that certain transactions of the Fund,
including the Fund's use of Derivative Instruments, may give rise to
leverage, causing the Fund to be more

volatile than if it had not been leveraged.\17\
---------------------------------------------------------------------------

    \17\ To mitigate leveraging risk, the Fund would segregate or
``earmark'' liquid assets or otherwise cover the transactions that
may give rise to such risk.
---------------------------------------------------------------------------

    Based on the representations above, the Exchange seeks to modify
the current restriction on the Fund's use of Derivative Instruments.
According to the Exchange, the Adviser believes that the ability to
invest in U.S. exchange-traded options on futures contracts and U.S.
exchange-traded futures contracts would provide it with additional
flexibility to meet the Fund's investment objectives.

Valuation for Purposes of Calculating Net Asset Value

    As indicated in the Prior Release, the NAV of the Fund's Shares
generally is calculated once daily Monday through Friday as of the
close of regular trading on the New York Stock Exchange, generally 4
p.m. Eastern time. The NAV per Share is calculated by dividing the
Fund's net assets by the number of Shares outstanding.
    For purposes of calculating NAV, the Fund's investments are valued
daily at market value or, in the absence of market value with respect
to any such investment, at fair value, in each case in accordance with
valuation procedures (which may be revised from time to time) adopted
by the Trust Board (``Valuation Procedures'') and in accordance with
the 1940 Act. All valuations are subject to review by the Trust Board
or its delegate. A market valuation generally means a valuation (i)
obtained from an exchange, an independent pricing service (``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). 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 Derivative Instruments held by the Fund would consist of U.S.
exchange-traded futures contracts and U.S. exchange-traded options on
futures contracts and, as such, would typically be valued at the
closing price in the market where such instruments are principally
traded.
    Typically, bank loans are valued using information provided by a
Pricing Service. The Pricing Service primarily uses over-the-counter
pricing from dealer runs and broker quotes from indicative sheets to
value the bank loans. In addition, with respect to the valuation of
bank loans, as part of its review, the Adviser's pricing committee
(``Pricing Committee'') may, in certain limited circumstances, override
a value provided by the Pricing Service. If the Pricing Service does
not provide a valuation for a particular bank loan, or if the Pricing
Committee overrides a value of the bank loan, the bank loan is valued
using fair value pricing, as described below.
    Certain assets may not be able to be priced by pre-established
pricing methods. Such assets may be valued by the Trust Board or its
delegate at fair value. The use of fair value pricing by the Fund is
governed by the Valuation Procedures and conducted in accordance with
the provisions of the 1940 Act. As a general principle, the current
``fair value'' of an asset is the amount that the owner might
reasonably expect to receive for the asset upon its current sale. The
use of fair value prices by the Fund generally results in prices used
by the Fund that may differ from current market valuations or official
closing prices on the applicable exchange. A variety of factors may be
considered in determining the fair value of such assets.
    Because foreign securities exchanges may be open on different days
than the days during which an investor may purchase or sell Shares, the
value of the Fund's securities may change on days when investors are
not able to purchase or sell Shares. The valuations of bank loans
denominated in foreign currencies are converted into U.S. dollars at
the exchange rate of those currencies against the U.S. dollar as
provided by a Pricing Service. The value of bank loans denominated in
foreign currencies is converted into U.S. dollars at the exchange rates
in effect at the time of valuation.

Availability of Information

    As described in the Prior Release, the ``Intraday Indicative
Value'' (defined in NASDAQ Rule 5735(c)(3)), based on the current value
for the components of the Disclosed Portfolio, is updated and widely
disseminated and broadly displayed at least every 15 seconds during the
Regular Market session. For the purposes of determining the Intraday
Indicative Value, the Fund's holdings in Derivative Instruments, which
would be exchange-traded derivatives, would be valued intraday using
the relevant exchange data.
    The Prior Release stated that intraday, executable price quotations
of the fixed income securities and other assets held by the Fund would
be available from major broker-dealer firms or on the exchange on which
they are traded, if applicable. The Prior Release also stated that
intra-day price information would be available through subscription
services, such as Bloomberg and Thomson Reuters, which can be accessed
by authorized participants and other investors.
    The Derivative Instruments in which the Fund proposes to invest
would be U.S. exchange-traded. Accordingly, pricing information for the
Derivative Instruments would be available from major broker-dealer
firms, on the exchanges on which they are traded, and through
subscription services. Further, pricing information for the bank loans
in which the Fund invests would continue to be available from major
broker-dealer firms and subscription services.

Disclosed Portfolio

    As described in the Prior Release, on each business day, before
commencement of trading in the Regular Market Session on the Exchange,
the Trust discloses on its Web site \18\ the identities and quantities
of the portfolio of securities and other assets (``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. The Fund's
disclosure of derivative positions in the Disclosed Portfolio would
include information that market participants can use to value these
positions intraday. On a daily basis, the Fund would 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); the identity of the security or other
asset or instrument underlying the holding, if any; 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 the percentage weighting of the
holding in the Fund's portfolio.
---------------------------------------------------------------------------

    \18\ The Trust and the Fund have the same Web site
(www.ftportfolios.com).
---------------------------------------------------------------------------

Surveillance

    The Exchange represents that trading in the Shares would continue
to be subject to the existing trading surveillances, administered by
both NASDAQ and also the Financial Industry Regulatory Authority

(``FINRA'') on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities
laws.\19\ 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.
---------------------------------------------------------------------------

    \19\ 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 Derivative Instruments with
other markets or other entities that are members of ISG, and FINRA may
obtain trading information regarding trading in the Shares and the
Derivative Instruments from such markets and other entities. In
addition, the Exchange may obtain information regarding trading in the
Shares and the Derivative Instruments from markets and other entities
that are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.\20\ Moreover, FINRA, on
behalf of the Exchange, is able to access, as needed, trade information
for certain fixed income securities held by the Fund reported to
FINRA's Trade Reporting and Compliance Engine (``TRACE''). In addition,
the Exchange also has a general policy prohibiting the distribution of
material, non-public information by its employees.
---------------------------------------------------------------------------

    \20\ See www.isgportal.org (providing a list of the current
members of ISG). As stated in the Prior Release, 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.
---------------------------------------------------------------------------

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the Exchange's
proposal is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange.\21\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\22\ which requires, among
other things, that the Exchange's rules be designed to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. The
Commission notes that the Fund and the Shares must comply with the
requirements of NASDAQ Rule 5735 for the Shares to continue to be
listed and traded on the Exchange.
---------------------------------------------------------------------------

    \21\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange proposes that the Fund be permitted to invest up to
40% of its net assets in bank loans. The Exchange represents that the
bank loans would primarily be senior loans, which, for purposes of the
Fund, refers to first lien, senior, secured, floating rate bank loans.
The Fund would be permitted to invest up to 25% of its assets in these
senior loans. The Commission notes that it has approved the listing and
trading of shares of certain actively managed ETFs investing primarily
in these senior loans.\23\
---------------------------------------------------------------------------

    \23\ The Commission previously has approved listing and trading
of Managed Fund Shares that primarily hold senior loans. See, e.g.,
Securities Exchange Act Release Nos. 69464 (Apr. 26, 2013), 78 FR
25774 (May 2, 2013) (SR-NASDAQ-2013-036) (order approving listing
and trading of shares of the First Trust Senior Loan Fund under
NASDAQ Rule 5735); and 69244 (Mar. 27, 2013), 78 FR 19766 (Apr. 2,
2013) (SR-NYSEArca-2013-08) (order approving listing and trading of
shares of the SPDR Blackstone/GSO Senior Loan ETF under NYSE Arca
Equities Rule 8.600).
---------------------------------------------------------------------------

    The Exchange further proposes that the Fund be able to invest up to
15% of its net assets in bank loans that are ``junior loans,'' which,
for purposes of the Fund, refers to loan interests that are not secured
by any specific collateral of the borrower and loan interests that have
a lower than first lien priority on collateral of the borrower. While
having many of the same characteristics as senior loans, junior loans
are not first in priority of repayment and/or may not be secured by
collateral. Accordingly, the Exchange states that junior loans involve
a higher degree of overall risk than senior loans of the same borrower,
due to their subordination in the borrower's capital structure. The
Commission notes, however, that the Fund's investments in junior loans
would be limited to 15% of its net assets.
    In addition, the Exchange represents that at least 75% of the
Fund's net assets that are invested in bank loans would be invested in
tranches that have a minimum principal amount outstanding of $100
million or more with respect to U.S. borrowers and $200 million or more
with respect to non-U.S. borrowers. The Commission notes that ETFs
based on fixed income component indexes are subject to a minimum
principal amount outstanding that is set at the same dollar amount.\24\
The Commission further notes that, as stated in the Prior Release,
pursuant to the 1940 Act and rules thereunder, the Fund will monitor
its portfolio's 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 securities.\25\
---------------------------------------------------------------------------

    \24\ See NASDAQ Rule 5705(b)(4)(A)(i) (with respect to an index
or portfolio consisting of Fixed Income Securities (as such term is
defined therein) underlying an ETF, components that in the aggregate
account for at least 75% of the weight of the index or portfolio
must have a minimum original principal amount outstanding of $100
million or more).
    \25\ According to the Exchange, the Adviser represents that the
Fund would continue to invest 85% or more of the portfolio in
securities that the Adviser deems to be sufficiently liquid at the
time of investment in accordance with Commission guidance. See Prior
Release, supra note 8.
---------------------------------------------------------------------------

    The Commission believes that the restrictions placed on junior
loans would not only help to mitigate the credit risks associated with
junior loans, but would also help to mitigate liquidity risk associated
with these loans by requiring that at least 75% of the Fund's net
assets in bank loans would be invested in tranches that have a minimum
principal amount outstanding of $100 million or more with respect to
U.S. borrowers and $200 million or more with respect to non-U.S.
borrowers. As a result, the Commission finds that the Exchange's
proposal to permit the Fund to invest up to 40% of its assets in bank
loans, including up to 15% of its assets in junior loans, is consistent
with the Act.
    The Exchange also proposes that the Fund, to pursue its investment
objectives, be permitted to invest in Derivative Instruments. According
to the Exchange, the Adviser currently expects that, initially, all of
the futures contracts and options on futures contracts that the Fund
buys and/or sells would be futures and options on futures,
respectively, on U.S. Treasury obligations. In particular, the Adviser
contemplates that the Fund would sell futures on U.S. Treasury
obligations as an alternative to engaging in short sales to gain short
exposure to the U.S. Treasury market. Under normal market

conditions, no more than 30% of the value of the Fund's net assets
would be invested in Derivative Instruments. The Exchange further
represents that at least 90% of the Fund's net assets that would be
invested in Derivative Instruments would be invested in Derivative
Instruments that trade in markets that are members of ISG, which
includes all U.S. national securities exchanges, certain U.S. futures
exchanges, and certain foreign exchanges, or are parties to a
comprehensive surveillance sharing agreement with the Exchange. The
Commission notes that all Derivative Instruments would be U.S.
exchange-traded. The Commission finds that this aspect of the proposal
is also consistent with the Act.
    The Commission further notes that, with respect to information
relating to bank loans and Derivative Instruments, the Exchange has
made the following additional representations:
    (1) As described in the Prior Release, on each business day, before
commencement of trading in the Regular Market Session on the Exchange,
the Trust discloses on its Web site the Disclosed Portfolio that will
form the basis for the Fund's calculation of NAV at the end of the
business day. The Fund's disclosure of derivative positions in the
Disclosed Portfolio would include information that market participants
can use to value these positions intraday. On a daily basis, the Fund
would 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); the identity of the
security or other asset or instrument underlying the holding, if any;
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 the percentage weighting of
the holding in the Fund's portfolio.
    (2) In addition, as described in the Prior Release, the ``Intraday
Indicative Value'' (defined in NASDAQ Rule 5735(c)(3)), based on the
current value for the components of the Disclosed Portfolio, is updated
and widely disseminated and broadly displayed at least every 15 seconds
during the Regular Market session. For the purposes of determining the
Intraday Indicative Value, the Fund's holdings in Derivative
Instruments, which would be exchange-traded derivatives, would be
valued intraday using the relevant exchange data.
    (3) The Prior Release states that intraday, executable price
quotations of the fixed income securities and other assets held by the
Fund would be available from major broker-dealer firms or on the
exchange on which they are traded, if applicable. The Prior Release
also states that intraday price information would be available through
subscription services, such as Bloomberg and Thomson Reuters, which can
be accessed by authorized participants and other investors. Pricing
information for the Derivative Instruments would be available from
major broker-dealer firms, on the exchanges on which they are traded,
and through subscription services. Further, pricing information for the
bank loans in which the Fund invests would continue to be available
from major broker-dealer firms and subscription services.
    (4) The Exchange represents that trading in the Shares would
continue to be subject to the existing trading surveillances,
administered by both NASDAQ and FINRA, on behalf of the Exchange, which
are designed to detect violations of Exchange rules and applicable
federal securities laws. 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.
    FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares and the Derivative Instruments with
other markets or other entities that are members of ISG, and FINRA may
obtain trading information regarding trading in the Shares and the
Derivative Instruments from such markets and other entities. In
addition, the Exchange may obtain information regarding trading in the
Shares and the Derivative Instruments from markets and other entities
that are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement. Moreover, FINRA, on
behalf of the Exchange, is able to access, as needed, trade information
for certain fixed income securities held by the Fund reported to
FINRA's TRACE.
    In conclusion, the Commission notes that, according to the
Exchange: There is no change to the Fund's investment objectives;
except for the changes proposed herein, all other facts presented and
representations made in the Prior Release remain unchanged; and the
Fund would continue to comply with all initial and continued listing
requirements under NASDAQ Rule 5735.
    For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment Nos. 1, 2, and 3 thereto, is
consistent with Section 6(b)(5) of the Act \26\ and the rules and
regulations thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment Nos. 2 and 3

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment Nos. 2
and 3 are consistent with the Act.\27\ Comments may be submitted by any
of the following methods:
---------------------------------------------------------------------------

    \27\ On April 1, 2014, the Commission published notice to
solicit comments from interested persons on the proposed rule
change, as modified by Amendment No. 1 thereto, and to designate a
longer period for Commission action on the proposed rule change, as
modified by Amendment No. 1 thereto. The Commission received no
comments on the proposed rule change, as modified by Amendment No. 1
thereto. See supra notes 4 and 5 and accompanying text.
---------------------------------------------------------------------------

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-2014-009 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2014-009. 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-2014-009 and
should be submitted on or before June 5, 2014.

V. Accelerated Approval of Proposed Rule Change, As Modified by
Amendment Nos. 1, 2, and 3

    The Commission finds good cause to approve the proposed rule
change, as modified by Amendment Nos. 1, 2, and 3 thereto, prior to the
thirtieth day after the date of publication of notice in the Federal
Register. The proposed Amendment No. 1 amended and replaced the
proposed rule change in its entirety and supplemented the proposed rule
change by: (a) Clarifying the types of Derivative Instruments (as
defined above) proposed to be used by the Fund; (b) providing specific
representations relating the use of these Derivative Instruments; (c)
providing additional information as to the valuation of these
Derivative Instruments for purposes of determining NAV (as defined
herein); (d) providing additional information as to the availability of
pricing for the Derivative Instruments to market participants, as well
as information relating to the Derivative Instruments as part of the
Disclosed Portfolio (as defined herein); and (e) providing additional
details as to the Exchange's surveillance procedures with respect to
the Derivative Instruments.\28\
---------------------------------------------------------------------------

    \28\ See supra note 4 and accompanying text.
---------------------------------------------------------------------------

    The proposed Amendment No. 2 amended and replaced the proposed rule
change, as modified by Amendment No. 1 thereto, in its entirety, and
supplemented the proposed rule change by: (a) Providing additional
information regarding the bank loans in which the Fund would invest,
including information relating to the senior loan market and valuation
and price availability of bank loans; (b) noting that liquidity
determinations would be made in accordance with Commission guidance;
(c) clarifying that the Fund's investments in Derivative Instruments
would be limited in all cases to 30% of the Fund's net assets,
regardless of whether Derivative Instruments would be used solely for
hedging purposes; (d) representing that at least 90% of the Fund's net
assets invested in Derivative Instruments would trade in markets that
are members of the ISG (as defined herein) or are parties to a
comprehensive surveillance sharing agreement with the Exchange; (e)
providing additional information relating to valuation and price
availability of Derivative Instruments; and (f) clarifying in detail
what information the Disclosed Portfolio (as defined herein) would
provide as a result of the Fund's investments in bank loans and
Derivative Instruments.\29\
---------------------------------------------------------------------------

    \29\ See supra note 6 and accompanying text.
---------------------------------------------------------------------------

    The proposed Amendment No. 3 amended and replaced the proposed rule
change, as modified by Amendment No. 2 thereto, in its entirety, and
supplemented the proposed rule change by: (a) Clarifying that at least
75% of the Fund's net assets that are invested in bank loans would be
invested in tranches that have a minimum principal amount outstanding
of $100 million or more with respect to U.S. borrowers and $200 million
or more with respect to non-U.S. borrowers; (b) clarifying that at
least 90% of the Fund's net assets in Derivative Instruments would be
invested in Derivative Instruments that trade in markets that are
members of the ISG (as defined herein), which includes, among others,
certain U.S. futures exchanges; and (c) replacing certain references to
``securities'' with ``assets'' for purposes of describing NAV
valuation.\30\
---------------------------------------------------------------------------

    \30\ See supra note 7 and accompanying text.
---------------------------------------------------------------------------

    The Commission believes that the additional information and
clarifications reflected in the proposed rule change, as modified by
Amendment Nos. 1, 2 and 3 thereto, regarding the Fund's investments in
bank loans and Derivative Instruments, will benefit investors and other
market participants. Accordingly, the Commission finds good cause,
pursuant to Section 19(b)(2) of the Act,\31\ to approve the proposed
rule change, as modified by Amendment Nos. 1, 2, and 3, on an
accelerated basis.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\32\ that the proposed rule change (SR-NASDAQ-2014-009), as
modified by Amendment Nos. 1, 2, and 3 thereto, be, and it hereby is,
approved on an accelerated basis.
---------------------------------------------------------------------------

    \32\ Id.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-11158 Filed 5-14-14; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 79, Number 150 (Tuesday, August 5, 2014)]
[Notices]
[Pages 45501-45502]
[FR Doc No: 2014-18438]

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SECURITIES AND EXCHANGE COMMISSION

Proposed Collection; Comment Request

Upon Written Request Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE., Washington, DC
20549-2736.

Extension: Form S-3, SEC File No. 270-61, OMB Control No. 3235-0073.

    Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``Commission'') is soliciting comments on the collection of
information summarized below. The Commission plans to submit this
existing collection of information to the Office of Management and
Budget for extension and approval.
    Form S-3 (17 CFR 239.13) is a short form registration statement
used by domestic issuers to register a public offering of their
securities under the Securities Act of 1933 (15 U.S.C. 77a et seq.).
Form S-3 takes approximately 472.49 hours per response and is filed by
approximately 1,153 issuers annually. We estimate that 25% of the
472.49 hours per response (118.12 hours) is prepared by the issuer for
a total annual reporting burden of 136,192 hours (118.12 hours per
response x 1,153 responses).
    Written comments are invited on: (a) Whether this proposed
collection of information is necessary for the proper performance of
the functions of the agency, including whether the information will
have practical utility; (b) the accuracy of the agency's estimate of
the burden imposed by the collection of information; (c) ways to
enhance the quality, utility, and clarity of the information collected;
and (d) ways to minimize the burden of the collection of information on
respondents, including through the use of automated collection
techniques or other forms of information technology. Consideration will
be given to comments and suggestions submitted in writing within 60
days of this publication.
    An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless it displays a
currently valid control number.

    Please direct your written comment to Thomas Bayer, Director/Chief
Information Officer, Securities and Exchange Commission, c/o Remi
Pavlik-Simon, 100 F Street NE., Washington, DC 20549 or send an email
to<EMAIL_ADDRESS>
    Dated: July 30, 2014.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18438 Filed 8-4-14; 8:45 am]
BILLING CODE 8011-01-P


July 2, 2015

MEMORANDUM

SUBJECT:	Files on CD for EPA-HQ-OAR-2014-0827-DRAFT-0418

FROM:	Christine Brunner
		Assessment and Standards Division
		Office of Transportation and Air Quality

TO:	Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles - Phase 2 - Docket EPA-HQ-OAR-2014-0827

The enclosed CD contains the following files associated with docket item EPA-HQ-OAR-201-0827-DRAFT-0418.

1) cafe_model_2015-03-16.zip
2) cafe_source-code_2015-03-16.zip
3) Central Analysis.7z
4) EIS Analysis.7z
5) Notice.txt
6) Sensitivity Analysis.7z
7) Uncertainty Analysis.7z

There are no restrictions on any of these files.