SEC Division of Corporation Finance no-action letter: First Trust Exchange-Traded Fund VI

Securities Exchange Act of 1934 Rule 14e-5

January 8, 2014

Response of the Office of Mergers and Acquisitions Division of Corporation Finance

Re:

First Trust Exchange-Traded Fund VI Incoming letter dated January 7, 2014

Via Facsimile and U.S. Mail Suzanne M. Russell, Esq. Chapman and Cutler LLP 111 West Monroe Street Chicago, IL 60603

RE: First Trust Exchange-Traded Fund VI Request for Exemption and No-Action Relief from Rule 14e-5

Dear Ms. Russell:

We are responding to your letter requesting exemptive and no-action relief dated January 7, 2014 and addressed to Michele M. Anderson and Geoff Kruczek, as supplemented by telephone conversations with the staff. To avoid having to recite or summarize the facts set forth in your letter, our response is attached to the enclosed photocopy of your correspondence. Unless otherwise noted, capitalized terms in the letter have the same meaning as in your January 7, 2014 correspondence.

On the basis of the representations made and the facts presented in your January 7, 2014 letter, the United States Securities and Exchange Commission ("Commission") hereby grants an exemption from Rule 14e-5 under the Exchange Act. The exemption from Rule 14e-5 permits any person acting as a dealer manager of a tender offer for a security in which the Requesting Funds invest to either redeem Requesting Fund Shares in "creation unit" size aggregations to the Requesting Funds for a redemption basket that may include a security subject to the tender offer and/or purchase Requesting Fund Shares in the secondary market during such tender offer.

In addition, on the basis of the representations made and the facts presented in your January 7, 2014 letter, the staff of the Division of Corporation Finance will not recommend that the Commission take enforcement action under Rule 14e-5 if a broker-dealer acting as a dealer-manager of a tender offer for any securities in which the Requesting Funds invest purchases such securities in the secondary market for the purpose of tendering them to purchase one or more Creation Units of Requesting Fund Shares, as described in your letter.

In granting this relief, we note in particular that:

any bids, purchases or redemptions by dealer-managers would not be effected for the purpose of facilitating a tender offer;

any purchases of a portfolio security by a dealer-manager during a tender offer will be effected as adjustments to a basket of securities in the ordinary course of business as a result of a change in the composition of a Requesting Fund’s portfolio; and

except for the relief specifically granted herein, any person acting as a dealer-manager of a tender offer will comply with Rule 14e-5.

The foregoing exemptive and no-action relief is based solely on the representations and the facts presented in your letter, as supplemented by telephone conversations with the Commission staff. The relief granted is strictly limited to the application of the rule listed above to the transactions described in your letter. You should discontinue these transactions pending further consultations with the staff if any of the facts or representations set forth in your letter change. In addition, this position is subject to modification or revocation if at any time the Commission or the Division of Corporation Finance determines that such action is necessary or appropriate in furtherance of the purposes of the Exchange Act. We also direct your attention to the anti-fraud and anti-manipulation provisions of the federal securities laws, including Sections 10(b) and 14(e) of the Exchange Act, and Rule 10b-5 thereunder. The participants in transactions contemplated by this grant of exemptive and no-action relief must comply with these and any other applicable provisions of the federal securities laws. The Division of Corporation Finance expresses no view on any other questions that may be raised by these transactions, including but not limited to, the adequacy of disclosure concerning and the applicability of any other federal or state laws to such transactions. Sincerely,

For the Commission, By the Division of Corporation Finance pursuant to delegated authority,

Michele M. Anderson Chief, Office of Mergers and Acquisitions

Incoming Letter:

The Incoming Letter is in Acrobat format.

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Chapman and Cutler LLP Suzanne M. Russell 111 W. Monroe Street Chicago, Illinois 60603.3080 312.845.3446 312516.1446 russell@chapman com Attorneys at Law' Focused or! Fina,-,ce January 7,2014 Ms. Michele M. Anderson, Chief Mr. Geoffrey Kruczek Office of Mergers and Acquisitions Division of Corporation Finance Securities and Exchange Commission 100 F Street, N .E. Washington, DC 20549 Re: Request for Exemptive and No-Action Relief from Rule 14e-5, promulgated under the Securities Exchange Act of 1934, for Two Actively Managed Exchange-Traded Funds Dear Ms. Anderson and Mr. Kruczek:
The First Trust Exchange-Traded Fund VI (the "Trust") was organized as a Massachusetts business trust on June 4, 2012 and is registered with the Securities and Exchange Commission (the "Commission") as an open-end management investment company. The Trust requests relief under the Securities Exchange Act of 1934 (the "Exchange Act") on behalf of itself and the market participants discussed below with respect to two series of the Trust that will operate as exchange-traded funds ("ETFs" and each, an "ETF"). This letter requests relief for two newly-created series of the Trust: the First Trust High Income ETF (the "High Income ETF") and the First Trust Low Beta Income ETF (the "Low Beta ETF") (each of the preceding is referred to as a "Requesting Fund" and, collectively, the "Requesting Funds"). The Requesting Funds were organized on April 30, 2013. The Trust launched the Requesting Funds on January 7, 2014. Shares of the Requesting Funds ("Requesting Fund Shares") are listed on The NASDAQ Stock Market LLC (the "Listing Exchange"). The Trust will issue and redeem Requesting Fund Shares in aggregations of 50,000 Requesting Fund Shares (referred to as "Creation Units"). The Trust is overseen by a board of trustees (the "Board") that will maintain the composition requirements of Section 10 of the Investment Company Act of 1940, as amended (the "1940 Act"). Each Requesting Fund has adopted fundamental policies consistent with the 1940 Act and is classified as "non-diversified" under the 1940 Act. Each Requesting Fund Sciit 'V'¿¡shìnq~_or:, lJC 3468873.0109.doc 1681949

intends to maintain the required level of diversification, and otherwise conduct its operations, so as to meet the regulated investment company diversification requirements of the Internal Revenue Code of 1986, as amended. The Trust, on behalf of itself, each Requesting Fund, the Listing Exchange and any other national securities exchange on or through which the Requesting Fund Shares may subsequently trade, and persons or entities engaging in transactions in Requesting Fund Shares, as the case may be, requests that the Commission grant exemptive and no-action relief from Rule 14e-5 under the Securities Exchange Act of i 934, as amended (the "Exchange Act"). On October 24, 2006, the Commission granted relief to the PowerShares Exchange￾Traded Fund Trust with respect to, among other rules under the Exchange Act, Rule 14e-5.1 ETFs listed and traded on an exchange may rely upon the relief granted in the Class Relief Index ETF Letter without the submission of an Exchange Act exemptive/no-action relief request if such ETFs meet specified conditions, including that each of the ETFs be managed to track a particular index.2 However, since the Requesting Funds are not index-based ETFs, they are not entitled to rely on the Class Relief Index ETF Letter. The Commission staff ("Staff") has previously issued relief substantially similar to that requested herein to actively managed ETFs that are listed and traded on a national securities exchange and satisfy certain conditions.3 In particular, on June 21, 2012, the Staff granted relief See Letter from James A. Brigagliano to Stuart M. Strauss, Esq. regarding Class Relief for Exchange Traded Index Funds, dated October 24, 2006 (the "Class Relief Index ETF Letter"). Relief was granted for the Commission by the Division of Market Regulation (now the Division of Trading and Markets) pursuant to delegated authority. 2 See Class Relief Indcx ETF Letter, supra note I, at 3. 3 See Letter from Josephine J. Tao to Grail Advisors ETF Trust, dated April 30,2009 (revised May 6, 2009) (the "Grail Letter"); and Letter from James A. Brigagliano to PowerShares Actively Managed Exchange-Traded Fund Trust, dated April 4, 2008 (the "PowerShares Letter"). In addition, in the Letter from Josephine .I Tao to WisdomTree Trust, dated May 9, 2008 (the "WisdomTree Letter"), the Staff stated that it had repeatedly cxpressed its views on Exchange Act Section II(d)(l) and Exchange Act Rules 10b-IO, I Idl-2, 15cl-5 and 15cl-6 (the "Other Exchange Act Provisions") with respect to ETFs that are not tied to an index. The Staff stated that it therefore would not respond to requests for relief under the Other Exchange Act Provisions relating to ETFs that are not managed to track a particular index unless they present novel or unusual issues. Because the Trust does not believe that the creation, redemption, listing or trading of Requesting Fund Shares should present any novel or unusual issues, the Trust docs not request relief from the Other
Exchange Act Provisions, but will rely on the applicable precedent in that regard. As indicated below, the Board has adopted a distribution and service plan under Rule 12b-l under the 1940 Act that authorizes each Requesti ng Fund pursuant to Rule i 2b- i under the 1940 Act to pay an annual distribution and service fec pursuant to Rule 12b-1 of up to 25 basis points calculated on the average daily net asset value of each Requesting Fund; however, no such fee is currently being paid by either Requesting Fund and the Board has not approved any such payments for the current fiscal year. We understand that the exemptive and no-action relief under Section i l(d)(I) currently would not be available to any broker-dealer that received 12b-1 fees under such a plan. See Letter from Catherine McGuire, Esq., Chief Counsel, Division of Market Regulation, to the Securities Industry Association Derivative Products Committee, dated November 21,2005. In addition, the Trust notes that on September 10, 2010, the Staff issued the Division of Market Regulation Staff Legal Bulletin NO.9 which stated that, subject to certain

with respect to Rule 14e-5 to another actively managed ETF in the First Trust fund complex (the "Prior First Trust Letter").4 Similar to the ETF in the Prior First Trust Letter, each Requesting Fund's portfolio will be fully transparent and permit arbitrage activity, and will in all material respects operate in a manner similar to index-based ETFs other than being actively managed. The relief requested by the Trust is substantially 'similar to the relief granted in the Prior First Trust Letter and the iShares Letter; therefore, the Trust does not believe that the relief requested raises any significant new regulatory issues. This letter is divided into four parts. Part I describes the relevant parties, including the Requesting Funds; Part II describes transactions in the Requesting Fund Shares; Part II contains the request for relief; and Part IV is the conclusion.
i. PARTIES
A. THE ADVISOR
First Trust Advisors L.P. (the "Advisor") will be the investment advisor to each Requesting Fund. The Advisor is an Illinois limited partnership, with its principal office located at 120 East Liberty Drive, Suite 400, Wheaton, Ilinois 60187. The Advisor is registered as an "investment adviser" under Section 203 of the Investment Advisers Act of 1940 (the "Advisers Act"). B. THE DISTRIBUTOR First Trust Portfolios L.P. (the "Distributor") will act as distributor and principal underwriter of the Creation Units of Requesting Fund Shares of each Requesting Fund. The Distributor is a broker-dealer registered under the Exchange Act and a member in good standing of the Financial Industry Regulatory Authority ("FINRA "). The Distributor will distribute Requesting Fund Shares on an agency basis. The Distributor is an "affiliated person" of the Advisor within the meaning of Section 2(a)(3)(C) of the 1940 Act. The Board has adopted a distribution and service plan for the Requesting Funds under Rule 12b-l under the 1940 Act (a "12b-1 Plan") on behalf of each Requesting Fund that authorizes each Requesting Fund to pay an annual 12b-l fee of up to 25 basis points calculated on the average daily net asset value conditions, actively managed ETFs, such as the Requesting Funds, could rely on the exceptions in Rules 101(c)(4) and 102(d)(4) of Regulation M under the Exchange Act which are only available to open-end investment companies, notwithstanding the fact that shares of actively managed ETFs arc redeemable only in Creation Unit aggregations. Moreover, the Trust notes that on .June 19, 2012, the Commission issued an order granting a limited exemption from Rule i Ob- i 7 under the Exchange Act to any issuer of an actively managed ETF. Exchange Act Release No. 67,21S (.Iune 19,2012). 4 See Letter from Michele M. Anderson, Chief, Office of Mergers and Acquisitions, to Suzanne M. Russell, Esq. (.une 21, 2012). On April 16,2013, the Staff issued substantially similar relief with respect to Rule 14e-S to another actively managed ETF. See Letter from Michele M. Anderson, Chief, Office of Mergers and Acquisitions, to Benjamin .J. Haskin, Esq. (April 16,2013) (citing the Prior First Trust Letter) (the "iShares Letter").

("NAV"); however, no such fee is currently being paid by the Requesting Funds and the Board has not approved any such payments for the current fiscal year.
C. THE REQUESTING FUNDS
The primary investment objective of the High Income ETF is to provide current income and its secondary investment objective is to provide capital appreciation. The High Income ETF will pursue its objectives by investing in large-cap equity securities listed on U.S. exchanges and by utilizing an "option strategy" consisting of writing (selling) U.S. exchange-traded covered call options on the Standard & Poor's 500 Index (the "Index"). The equity securities held by the High Income ETF will be selected using a mathematical optimization process which attempts to favor higher dividend paying common stocks for such Requesting Fund's portfolio. The equity securities held by the High Income ETF may include non-U .S. securities that are either directly listed on a U.S. securities exchange or in the form of American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs") (collectively "Depositary Receipts"). The investment objective of the Low Beta ETF is to provide current income. The Low Beta ETF will pursue its objective by investing in large-cap equity securities listed on U.S. exchanges and by utilizing an "option strategy" consisting of buying U.S. exchange-traded put options on the Index and writing (selling) U.S. exchange-traded covered call options on the Index. The equity securities held by the Low Beta ETF will be selected using a mathematical optimization process which attempts to favor higher dividend paying common stocks for such Requesting Fund's portfolio. The equity securities held by the Low Beta ETF may include non-U.S. securities that are either directly listed on a U.S. securities exchange or in the form of Depositary Receipts. D. OTHER SERVICE PROVIDERS The Trust has appointed entities to provide administrative, custodial, transfer agency, fund accounting and dividend disbursing functions for the Requesting Funds. The entity providing custodial services is hereafter the "Custodian" and the entity serving as transfer agent for the Requesting Funds is hereafter the "Tramfer Agent."
II. TRANSACTIONS IN REQUESTING FUND SHARES
A. REQUESTING FUND SHARES
Each Requesting Fund will issue and redeem Requesting Fund Shares only in Creation Units comprised of 50,000 Requesting Fund Shares. Requesting Fund Shares will be listed on a U.S. national securities exchange as defined in Section 2(a)(26) of the 1940 Act (an "Exchange") and will trade in the secondary market in the same manner as other equity securities. One or more Exchange specialists or market makers, as applicable, will be assigned to the Requesting Fund Shares. Neither the Distributor nor any other affiliated person of the Requesting Funds or the Advisor will maintain a secondary market in Requesting Fund Shares.

Requesting Fund Shares will be registered in book-entry form only; the Requesting Funds will not issue Requesting Fund Shares certificates. The Depository Trust Company, New York, New York, a limited purpose trust company organized under the laws of the State of New York (the "DTC"), or its nominee will be the record or registered owner of all outstanding Requesting Fund Shares. Beneficial ownership of Requesting Fund Shares (owners of such beneficial interests referred to herein as "Beneficial Owners") will be shown on the records of the DTC or DTC participants ("DTC and DTC Participants"). Shareholders will exercise their rights in such securities indirectly through the DTC and DTC Participants. The references herein to owners or holders of such Requesting Fund Shares shall reflect the rights of persons holding an interest in such securities as they may indirectly exercise such rights through the DTC and OTC Participants, except as otherwise specified. No shareholder shall have the right to receive a certificate representing such Requesting Fund Shares. Delivery of all notices, statements, shareholder reports and other communications from the Requesting Funds to Beneficial Owners will be through the customary practices and facilities of the DTC and DTC Participants. B. SALES OF REQUESTING FUND SHARES The Requesting Funds will sell Requesting Fund Shares to investors through Authorized Participants (as defined below) only in Creation Units through the Distributor on a continuous basis at the NA V per share next determined after an order in proper form is received. The consideration for purchase of Creation Units of a Requesting Fund may consist of (i) cash in lieu of all or a portion of the Deposit Securities, as defined below, and/or (ii) a designated portfolio of equity securities (the "Deposit Securities") designated by the Advisor, together with the deposit or refund of a specified cash payment (the "Cash Component"). Together, the Deposit Securities and the Cash Component (including the cash in lieu amount) constitute the "Fund Deposit," which represents the minimum initial and subsequent investment amount for a Creation Unit of a Requesting Fund. The Trust will issue and sell Creation Units of the Requesting Funds on any day that the Trust is open for business, including as required by
Section 22(e) of the 1940 Act (each a "Business Day"). The NAV of the Requesting Funds will
be determined as of the close of the regular trading session on the New York Stock Exchange (ordinarily 4:00 p.m. Eastern time) on each Business Day. Creation Units may be purchased through an "Authorized Participant" which is either (1) a "Participating Party," i.e., a broker-dealer or other participant in the applicable clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation ("NSCC") or (2) a DTC Participant, which in either case has executed an agreement with the Distributor and the Transfer Agent with respect to purchases and redemptions of Creation Units (a "Participant Agreement"). All standard orders to create a Creation Unit must be received by the Transfer Agent no later than the order cut-off time as described in the applicable Participant Agreement (ordinarily, 4:00 p.m. Eastern Time) (the "Order Cut-Off Time") on the date such order is placed, in order for creation of Creation Units to be effected based on the NA V of Requesting Fund Shares as next determined on such date. In the case of

custom orders,5 the purchase order must be received no later than 3:00 p.m. Eastern Time (or such other time as specified in the Participant Agreement). A Creation Unit aggregation will generally not be issued until the transfer of good title to the Trust of the portfolio of Dcposit Securities, the payment of the Cash Component, the payment of the creation transaction fee6 and the payment of any other required cash amounts have been completed.7 The Trust may reject any order not submitted in proper form.
C. REDEMPTIONS OF REQUESTING FUND SHARES
Beneficial Owners of Requesting Fund Shares must accumulate enough Requesting Fund Shares to constitute a Creation Unit in order to redeem through the Trust. Orders to redeem Creation Units must be delivered through an Authorized Participant that has executed a Participant Agreement. Creation Units will be redeemable at the NA V next determined after receipt of a request for redemption by the Trust. Requesting Fund Sharcs will be redeemed in Creation Units in exchange for cash or a particular portfolio of securities ("Fund Securities" and individually, a "Fund Security"). The Trust will redeem Requesting Fund Shares of a Requesting Fund on any Business Day. Redemption requests must be received by the Order Cut-Off Time (ordinarily, 4:00 p.m. Eastern Time) to be redeemed that day. In the case of custom redemptions,S the order must be rcceived no later than 3:00 p.m. Eastern Time (or such other time as specified in the applicable Participant Agreement). The Trust's Custodian, through the NSCC, will make available immediately prior to the opening of business on the Exchange (currently, 9:30 a.m. Eastern Time) on each Business Day, with respect to a Requesting Fund that uses an in-kind redemption process, the list of Deposit Securities (the "Creation List") which will be applicable to a purchase and the list of Fund Securities (the "Redemption List") that will be applicablc to redemption requests received in proper form on that day. 5 A custom order may be placed by an Authorized Participant in the event that the Trust permits or requires the substitution of an amount of cash to be added to the Cash Component to replace any Deposit Security which, for example, may not be available in sufficient quantity for delivery or which may not be eligible for trading by such Authorized Participant or the investor for which it is acting. The Requesting Funds may require custom orders for Creation Units to be placed earlier in the day. 6 Purchasers and redeemers of Creation Units must pay a transaction fcc (the "Transaction Fee"). The Transaction Fee is applicable to each purchase or redemption transaction regardless of the number of Creation Units purchased or redeemed in the transaction. The Transaction Fee may vary and is based on the composition of the securities included in a Requesting Fund's portfolio. 7 To the extent contemplated by the applicable Participant Agreement, Creation Units will be issued to the Authorized Participant notwithstanding the fact that the corresponding Fund Deposit has not been received in part or in whole, in reliance on the undertaking of the Authorized Participant to deliver the missing Deposit Securities or cash, as applicable, as soon as possible, which undertaking shall be secured by the Authorized Participant's delivery and maintenance of collateraL. 8 Custom redemption orders may be placed by an Authorized Participant in the event that the Trust permits or requires the substitution of an amount of cash to replace any Fund
Securities which, for example, may not be eligible for trading by such Authorized Participant or the investor for which it is effecting the transacti on.

Each Requesting Fund will have the right to make redemption payments in cash, in-kind or a combination of each, provided the value of its redemption payments equals the NAV per Requesting Fund Share.9 At the discretion of a Requesting Fund, a Beneficial Owner might also receive the cash equivalent of a Fund Security upon request (for example, if it was restrained by regulation or policy from transacting in the securities, perhaps because of another transaction with or for the issuer of those securities). Unless cash redemptions are available or specified for a Requesting Fund, the redemption proceeds for a Creation Unit will consist of Fund Securities plus or minus a "Cash Redemption Amount" as the case may be (collectively a "Fund Redemption"). The Cash Redemption Amount is cash in an amount equal to the difference between the NA V of the Creation Unit being redeemed and the market value of the Fund Securities. Accordingly, to the extent that the Fund Securities on the Redemption List have a val ue greater than the NA V of the Requesting Fund Shares being redeemed, a cash payment equal to the differential is required to be paid by the redeeming investor to a Requesting Fund. A redeeming investor also will pay a Transaction Fee calculated in the same manner as a Transaction Fee payable in connection with the purchase of a Creation Unit.
III. REQUEST FOR RELIEF FROM RULE 14E-S
Rule 14e-5 prohibits a person who makes a cash tender offer or exchange offer for any equity security from directly or indirectly purchasing such security (or a security immediately convertible into or exchangeable for or exercisable for such security (a "related security")) otherwise than pursuant to such tender offer or exchange offer. The Rule also applies to, among various other persons specified in the Rule and referred to as "Covered Persons," the dealer-manager of a tender or exchange offer. Accordingly, the Rule may pertain to a Covered Person acting as a dealer-manager of a tender or exchange offer for an equity security in which a Requesting Fund invests. The Trust respectfully requests that the Commission grant an exemption from Rule 14e-5 to permit any dealer-manager of a tender or exchange offer for an equity security in which a Requesting Fund invests (including a member or member organization of an Exchange or other market), during the existence of such offer: (l) to redeem Requesting Fund Shares in one or more Creation Units for Fund Securities that may include a security subject to the tender or exchange offer, and (2) to engage in secondary market transactions in Requesting Fund Shares during such offer. The acquisition of individual Fund Securities by means of redemptions of Requesting Fund Shares would be impractical and extremely inefficient in view of the requirement that a minimum of 50,000 Requesting Fund Shares (i.e., a Creation Unit) be redeemed. In addition, 9 To the extent contemplated by the applicable Participant Agreement, in the event the Authorized Participant has submitted a redemption request in proper form and is unable to transfer all or part of the Creation Unit to be redeemed to the Transfer Agent, on behalf of a Requesting Fund, at or prior to the Order Cut-Off Time on the dale such redemption request is submitted, the Transfer Agent may nonetheless accept the redemption request in reliance on the undertaking by the Authorized Participant to deliver the missing Requesting Fund Shares as soon as possi ble, which undertaking shall be secured by the Authorized Participant's delivery and maintenance of collateraL.

application of the Rule's prohibition would impede the valid and useful market and arbitrage activity which would assist secondary market trading and improve Requesting Fund Share pricing efficiency. In no case would redemptions of Requesting Fund Shares or secondary market transactions by dealer-managers relying on the relief be effected for the purpose of facilitating a tender offer. Accordingly, purchases and redemptions of Requesting Fund Shares in the circumstances described would not appear to result in the abuses at which Rule 14e-5 is directed. In addition to the above request for relief, the Trust is requesting no-action relief in connection with purchases of Creation Units of Requesting Fund Shares by a broker-dealer (including a member or member organization of an Exchange or other market) acting as dealer-manager of a tender offer for securities in which a Requesting Fund invests. The Trust acknowledges that Rule l4e-5(b)(5) provides an exception to its prohibition for purchases or arrangements to purchase a basket of securities containing a subject security or a related security if: (i) the purchase or arrangement is made in the ordinary course of business and not to facilitate the tender offer; (ii) the basket contains 20 or more securities; and (iii) covered securities and related securities do not comprise more than 5% of the value of the basket (the "Basket Exception") . As indicated by the Commission in the release adopting Rule 14e-5, 10 transactions in baskets in accordance with the Basket Exception provide little opportunity for a Covered Person to facilitate an offer i 1 or for a security holder to exact a premium from the offeror. Given that the purchases and redemptions of Creation Units of ETFs in general typically involve baskets of securities, broker-dealers acting as dealer-managers of tender offers for securities in which a Requesting Fund invests may, in certain cases, be able to rely on the Basket Exception in purchasing Creation Units of Requesting Fund Shares. From time to time, however, a change in the composition of the portfolio securities of a Requesting Fund may result in a change in the basket that has been established for purposes of purchasing its Creation Units. As a consequence, the basket could contain less than 20 securities and/or covered securities and related securities could comprise more than 5% of the value of the basket. For example, a liquidation of the issuer of one of the securities or a merger involving the acquisition of the issuer of one of the securities could cause the number of securities in the basket to fall below 20 and/or could cause covered securities and related securities to comprise more than 5% of the value of the basket. Additionally, as a result of fluctuations in the market value of the securities held in the basket, covered securities and related securities could, at times, comprise more than 5% of the value of the basket. This would result in the unavailability of the
Basket Exception for a broker-dealer acting as a dealer-manager of a tender offer for securities in which a Requesting Fund invests. 10 See Exchange Act Release No. 42,055 (October 22,1999) (the "Rule 14e-5 Adopting Release"). 11 As discussed in the Rule 14e-5 Adopting Release, "facilitation of an offer" includes purchases intended to bid up the market price of the covered or related security, and i!lcl udes buying a basket to stri p out the covered security in an effort to get the offeror the number of shares it is seeking.

In order to address situations (including but not limited to the foregoing examples) where the basket contains less than 20 securities and/or covered securities and related securities comprise more than 5% of the value of the basket, the Trust respectfully requests that the Staff take a no-action position under Rule 14e-5 if a broker-dealer (including a member or member organization of an Exchange or other market) acting as a dealer-manager of a tender offer for any securities in which a Requesting Fund invests purchases such securities in the secondary market for the purpose of tendering such securities to purchase one or more Creation Units of Requesting Fund Shares, if such purchases are effected as adjustments to the basket in the ordinary course of business as a result of a change in the composition of the Requesting Fund's portfolio and are not effected for the purpose of facilitating such tender offer. Relief would be necessary in order to permit such broker-dealers to effect purchases of Creation Units of Requesting Fund Shares under such circumstances given that the Basket Exception would not be available. This extension of the Basket Exception is consistent with the relief granted in the Prior First Trust Letter and the iShares Letter that accommodated a potential factual circumstance associated with the operation of ETFs and remains consistent with the rationale underlying the adoption of the Basket Exception. Similarly, we note, in particular, that purchases would not be effected for the purpose of facilitating a tender offer and therefore would not appear to result in the abuses at which Rule 14e-5 is directed. Further, we note that the Commission has previously granted similar relief to actively managed ETFs 12 and index-based ETFs.13 The Trust understands that, except as permitted by the relief from Rule 14e-5 requested herein, any person acting as a dealer-manager is required to comply with the requirements of Rule 14e-5.
iv. CONCLUSION
Based on the foregoing, the Trust respectfully requests that the Commission and the Staff grant the relief requested herein. The forms of relief requested are substantially similar to those actions that the Commission and the Staff have taken in similar circumstances. 12 See, e.g., the Prior First Trust Letler and the iShares Letter, supra noLe 4; and the Grail Letter and the PowerS hares Letter, supra note 3. 13 See, e.g., the Class Relief Index ETF Letter, supra note 1. In the case of an index-based ETF, the adjustments to the basket would occur as a result of a change in the composition of the relevant index.

Thank you for your consideration of this request. Should you have any questions or require additional information, please call the undersigned at (312) 845-3446 or Felice Foundos at (312) 845-3864. Very truly yours, CHAPMAN AND CUTLER LLP ßY~z!£