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Notice

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Amendment No. 1 and Designation of a Longer Period for Commission Action on Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to the Listing and Trading of the Shares of the First Trust Tactical High Yield ETF of First Trust Exchange-Traded Fund IV

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Information about this document as published in the Federal Register.

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Start Preamble March 26, 2014.

On January 22, 2014, The NASDAQ Stock Market LLC (“Nasdaq” or “Exchange”) 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 to modify the description of certain investments for the First Trust Tactical High Yield ETF (formerly known as the First Trust High Yield Long/Short ETF) (“Fund”). The proposed rule change was published for comment in the Federal Register on February 10, 2014.[3] The Commission has received no comments on the proposal. On March 11, 2014, the Exchange filed Amendment No. 1 to the proposed rule change.[4] The Commission is publishing this 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.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

Nasdaq proposes to list and trade the shares of the First Trust Tactical High Yield ETF (formerly known as the First Trust High Yield Long/Short ETF) of First Trust Exchange-Traded Fund IV (the “Trust”) under Nasdaq Rule 5735 (“Managed Fund Shares”). The shares of the Fund are collectively referred to herein as the “Shares.”

The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/​, at Nasdaq's principal office, and at the Commission's Public Reference Room.

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

In its filing with the Commission, Nasdaq included statements concerning the purpose of, and basis for, the proposed rule change. The text of these statements may be examined at the places specified in Item III below, and is set forth in Sections A, B, and C below.

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

1. Purpose

The Exchange proposes to reflect changes to the means of achieving the investment objectives of the Fund.[5] The Commission has approved the listing and trading of Shares under NASDAQ Start Printed Page 18379Rule 5735, which governs the listing and trading of Managed Fund Shares on the Exchange.[6] The Exchange believes the proposed rule change reflects no significant issues not previously addressed in the Prior Release. The Fund is an actively managed exchange-traded fund (“ETF”). The Shares are offered by the Trust, which was organized as a Massachusetts business trust on 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 with the Commission.[7] First Trust Advisors L.P. (“First Trust Advisors”) is the investment adviser (“Adviser”) to the Fund.

The Exchange now proposes two modifications to the description of the measures the Adviser would utilize to implement the Fund's investment objectives.[8] The Adviser 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 Rule 19b-4 [9] filings underlying the Prior Release remain unchanged. The Fund would continue to comply with all initial and continued listing requirements under NASDAQ Rule 5735.

The Fund's Investments in Bank Loans

First, 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. Going forward, the Exchange proposes that the Fund would be permitted to invest up to 40% of its net assets in bank loans.

The 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 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

Second, the Exchange 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 (the “Derivatives Representation”).

On December 6, 2012, the staff of the Commission's Division of Investment Management (“Division”) issued a no-action letter (“No-Action Letter”) relating to the use of derivatives by actively-managed ETFs.[10] The No-Action Letter noted that, in March of 2010, the Commission announced in a press release that the staff was conducting a review to evaluate the use of derivatives by mutual funds, ETFs, and other investment companies and that, pending completion of this review, the staff would defer consideration of exemptive requests under the 1940 Act relating to, among others, actively-managed ETFs that would make significant investments in derivatives.

The No-Action Letter stated that the Division staff will no longer defer consideration of exemptive requests under the 1940 Act relating to actively-managed ETFs that make use of derivatives provided that they include representations to address some of the concerns expressed in the Commission's March 2010 press release. These representations are: (i) That the ETF's board periodically will review and approve the ETF's use of derivatives and how the ETF's investment adviser assesses and manages risk with respect to the ETF's use of derivatives; and (ii) that the ETF's disclosure of its use of derivatives in its offering documents and periodic reports is consistent with relevant Commission and staff guidance (together, the “No-Action Letter Representations”). The No-Action Letter stated that the Division would not recommend enforcement action to the Commission under sections 2(a)(32), 5(a)(1), 17(a), 22(d), and 22(e) of the 1940 Act, or rule 22c-1 under the 1940 Act if actively-managed ETFs operating in reliance on specified orders (which include the Trust's Exemptive Order [11] ) invest in options contracts, futures contracts or swap agreements provided that they comply with the No-Action Letter Representations.[12]

In view of the No-Action Letter, the Exchange is proposing to delete the Derivatives Representation. The Exchange now 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”). 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, as a substitute 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 Start Printed Page 18380approximate those of the markets in which it invests), to manage cash flows, to preserve capital or to manage its foreign currency exposures.[13]

Under normal market conditions, the Fund expects that, not including Derivative Instruments used solely for hedging purposes, no more than 30% of the value of the Fund's net assets would be invested in Derivative Instruments; however, there would be no limitation on the Fund's investments in Derivative Instruments to be used by the Fund solely for hedging purposes.[14]

To the extent applicable, the Fund would seek, where possible, to use counterparties whose financial status is such that the risk of default is reduced; however, the risk of losses resulting from default is still possible. As applicable, the Adviser would evaluate the creditworthiness of counterparties on an ongoing basis. In addition to utilizing information provided by credit agencies, the Adviser's analysis would be based on various methods of analysis and may consider the Adviser's past experience with the counterparty, its known disciplinary history and its share of market participation.

The 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, 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 permitted by the Commission in a segregated custodial account in the amount prescribed.[15]

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.[16]

Based on the above, the Exchange seeks this modification regarding the Fund's use of Derivative Instruments. 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 of Derivative Instruments for Purposes of Calculating Net Asset Value

As indicated in the Prior Release, the net asset value (“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 4:00 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 (the “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. Certain Derivative Instruments, however, may not be able to be priced by pre-established pricing methods. Such Derivative Instruments may be valued by the Trust Board or its delegate at fair value. The use of fair value pricing by the Fund would be governed by the Valuation Procedures and conducted in accordance with the provisions of the 1940 Act. Valuing the Fund's Derivative Instruments using fair value pricing would result in using prices for those Derivative Instruments that may differ from official closing prices on the applicable exchange.

Availability of Information for Derivative Instruments

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 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.

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 Start Printed Page 18381intraday using the relevant exchange data.

Disclosed Portfolio

The Fund's disclosure of derivative positions in the Disclosed Portfolio would include information that market participants can use to value these positions intraday. This information would vary by line item, and, as applicable, may include tickers or other identifiers which would identify the listing exchange, strike price(s), underlying asset, and quantities or exposure. For example, a Treasury future would require only a ticker/identifier and quantity.

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.[17] 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.

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 the Intermarket Surveillance Group (“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.[18] 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.

2. Statutory Basis

The Exchange believes that the proposal is consistent with Section 6(b) of the Act [19] in general and Section 6(b)(5) of the Act [20] 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.

The Exchange believes that the proposed rule changes are designed to prevent fraudulent and manipulative acts and practices in that the Shares would continue to be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NASDAQ Rule 5735. The first proposed rule change would permit the Fund to invest up to 40% (rather than up to 15%) of its net assets in bank loans; however, the Adviser represents that the Fund would continue to invest 85% or more of its portfolio in securities that the Adviser deems to be sufficiently liquid at the time of investment and would continue to monitor portfolio liquidity on an ongoing basis.

The second proposed rule change is consistent with the No-Action Letter and, provided that the Fund satisfy the No-Action Letter Representations, would permit the Fund to invest in U.S. exchange-traded options on futures contracts and U.S. exchange-traded futures contracts. Under normal market conditions, the Fund expects that, not including Derivative Instruments used solely for hedging purposes, no more than 30% of the value of the Fund's net assets would be invested in Derivative Instruments; however, there would be no limitation on the Fund's investments in Derivative Instruments to be used by the Fund solely for hedging purposes. 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 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. Certain Derivative Instruments, however, may not be able to be priced by pre-established pricing methods. Such Derivative Instruments may be valued by the Trust Board or its delegate at fair value. The use of fair value pricing by the Fund would be governed by the Valuation Procedures and conducted in accordance with the provisions of the 1940 Act.

The proposed rule changes are designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Adviser represents that there is no change to the Fund's investment objectives. The Adviser represents that the purpose of the proposed changes is to provide it with greater flexibility in meeting the Fund's investment objectives by permitting (1) the Fund to invest a greater portion of its net assets in bank loans and (2) the Fund to invest a portion of its net assets in Derivative Instruments. In addition, consistent with the Prior Release, NAV per Share would continue to be calculated daily and the NAV and Disclosed Portfolio would be made available to all market participants at the same time.

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 actively managed exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the additional flexibility to be afforded to the Adviser under the proposed rule change is intended to enhance the Adviser's ability to meet the Fund's investment objectives. Further, as noted in the Prior Release and in the proposed rule change 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 indicated in Start Printed Page 18382the Prior Release and in the proposed rule change, investors would have ready access to information regarding the Fund's holdings (including Derivative Instruments), the Intraday Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares.

For the above reasons, the Exchange believes the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act.

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

The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange believes the proposed rule change will permit the Adviser additional flexibility in achieving the Fund's investment objectives, thereby offering investors additional investment options.

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. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as modified by Amendment No. 1 thereto, is consistent with the Act. Comments may be submitted by any of the following methods:

Electronic Comments

Paper Comments

  • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, Station Place, 100 F Street NE., Washington, DC 20549-9303.

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 Nasdaq. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASDAQ-2014-009 and should be submitted on or before April 22, 2014.

IV. Designation of a Longer Period for Commission Action

Section 19(b)(2) of the Act [21] provides that, within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The Commission is extending this 45-day time period.

The proposed rule change, as modified by Amendment No. 1 thereto, would permit the Fund to invest up to 40% of its net assets in bank loans and up to 30% of its net assets in Derivative Instruments (excluding Derivative Instruments used solely for hedging purposes). The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change, as modified by Amendment No. 1 thereto, so that it has sufficient time to consider the proposed rule change and Amendment No. 1.

Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,[22] designates 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 (File Number SR-NASDAQ-2014-009), as modified by Amendment No. 1 thereto.

Start Signature

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23

Kevin M. O'Neill,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  See Securities Exchange Act Release No. 71473 (Feb. 4, 2014), 79 FR 7728 (“Notice”).

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4.  In Amendment No. 1, which amended and replaced the proposed rule change in its entirety, 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.

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5.  See Securities Exchange Act Release No. 68972 (February 22, 2013), 78 FR 13721 (February 28, 2013) (SR-NASDAQ-2012-147) (order approving listing and trading of First Trust High Yield Long/Short ETF).

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6.  The Commission approved NASDAQ Rule 5735 (formerly Nasdaq Rule 4420(o)) in Securities Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June 20, 2008) (SR-NASDAQ-2008-039). The Commission previously approved the listing and trading of the Shares of the Fund. See Securities Exchange Act Release No. 68972 (February 22, 2013), 78 FR 13721 (February 28, 2013) (SR-NASDAQ-2012-147) (“Prior Order”). See also Securities Exchange Act Release No. 68581 (January 4, 2013), 78 FR 2295 (January 10, 2013) (SR-NASDAQ-2012-147) (“Prior Notice,” and together with the Prior Order, the “Prior Release”).

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7.  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). The descriptions of the Shares and the Fund contained herein are based, in part, on information in the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the Investment Company Act of 1940 (the “1940 Act”). See Investment Company Act Release No. 30029 (April 10, 2012) (File No. 812-13795) (the “Exemptive Order”).

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8.  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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10.  See No-Action Letter dated December 6, 2012 from Elizabeth G. Osterman, Associate Director, Office of Exemptive Applications, Division of Investment Management.

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11.  See footnote 7.

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12.  The Adviser acknowledges that for the Fund to rely on the No-Action Letter, the Fund must comply with the No-Action Letter Representations. In this regard, the Adviser represents that (i) it would request that the Board of Trustees of the Trust (the “Trust Board”) periodically review and approve the Fund's use of derivatives and how the Adviser assesses and manages risk with respect to the Fund's use of derivatives and (ii) the Fund's disclosure of its use of derivatives in its offering documents and periodic reports would be consistent with relevant Commission and staff guidance.

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13.  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.

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14.  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.

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15.  With respect to guidance under the 1940 Act, see 15 U.S.C. 80a-18; Investment Company Act Release No. 10666 (April 18, 1979), 44 FR 25128 (April 27, 1979); Dreyfus Strategic Investing, Commission No-Action Letter (June 22, 1987); Merrill Lynch Asset Management, L.P., Commission No-Action Letter (July 2, 1996).

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16.  To mitigate leveraging risk, the Fund would segregate or “earmark” liquid assets or otherwise cover the transactions that may give rise to such risk.

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17.  FINRA surveils trading on the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA's performance under this regulatory services agreement.

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18.  For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all components of the Disclosed Portfolio may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.

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[FR Doc. 2014-07232 Filed 3-31-14; 8:45 am]

BILLING CODE 8011-01-P