CHAPMAN AND CUTLER LLP 111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
April 30, 2014
VIA EDGAR CORRESPONDENCE
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Karen Rossotto
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: First Trust Exchange-Traded Fund (the "Trust")
File Nos. 811-21774 and 333-125751
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Dear Ms. Rossotto:
This letter responds to your comments regarding the registration statement filed
on Form N-1A for First Trust Exchange-Traded Fund (the "Trust") with the
Securities and Exchange Commission (the "Commission") on February 28, 2014 (the
"Registration Statement"). The Registration Statement relates to the First Trust
Capital Strength ETF, First Trust CBOE(R) S&P 500(R) VIX(R) Tail Hedge Fund,
First Trust Dow Jones Internet Index Fund, First Trust Dow Jones Select MicroCap
Index Fund, First Trust ISE Chindia Index Fund, First Trust ISE-Revere Natural
Gas Index Fund, First Trust ISE Water Index Fund, First Trust Morningstar
Dividend Leaders Index Fund, First Trust NASDAQ-100 Equal Weighted Index Fund,
First Trust NASDAQ-100 Ex-Technology Sector Index Fund, First Trust
NASDAQ-100-Technology Sector Index Fund, First Trust NASDAQ(R) ABA Community
Bank Index Fund, First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund,
First Trust NYSE Arca Biotechnology Index Fund, First Trust S&P REIT Index Fund,
First Trust US IPO Index Fund, First Trust Value Line(R) 100 Exchange-Traded
Fund, First Trust Value Line(R) Dividend Index Fund and First Trust Value
Line(R) Equity Allocation Index Fund (each, a "Fund," and collectively, the
"Funds"), each a series of the Trust. Capitalized terms used herein, but not
otherwise defined, have the meanings ascribed to them in the Registration
Statement.
Please also note that to the extent that your previous comments to
recently filed registration statements for the First Trust family of open-end
and exchange-traded funds were applicable, we have made the corresponding
changes to the prospectus and statement of additional information of these
Funds.
Karen Rossotto
April 30, 2014
Page 2
COMMENT 1 - COVER
At the end of the second paragraph on the cover, of the prospectus, add
"and only to and from broker-dealers and large institutional investors that have
entered into participation agreements."
RESPONSE TO COMMENT 1
The disclosure has been revised in accordance with this comment.
COMMENT 2 - FIRST TRUST CAPITAL STRENGTH ETF - INVESTMENT OBJECTIVE
Remove the second sentence in the Investment Objective section and
consider moving this disclosure regarding the Fund's name change to statutory
prospectus or to the statement of additional information.
RESPONSE TO COMMENT 2
The disclosure has been revised in accordance with this comment.
COMMENT 3 - ALL FUNDS - FEES AND EXPENSES OF THE FUND - EXAMPLE
Provide a date in the Example that is at least one year from the date of
the prospectus.
RESPONSE TO COMMENT 3
The disclosure has been revised in accordance with this comment.
COMMENT 4 - APPLICABLE FUNDS - PRINCIPAL INVESTMENT STRATEGIES/PRINCIPAL RISKS
To the extent that a Fund bases its investments on an Index that has an
equity component, provide disclosure regarding the market capitalization ranges
(e.g., "small," "mid" or "large") of the securities in the Index. Then provide
an appropriate risk disclosure accordingly.
RESPONSE TO COMMENT 4
The disclosure has been revised in accordance with this comment, as
appropriate.
Karen Rossotto
April 30, 2014
Page 3
COMMENT 5 - FIRST TRUST CAPITAL STRENGTH ETF - PRINCIPAL INVESTMENT STRATEGIES
The second paragraph of the Principal Investment Strategies section refers
a part of the Index methodology that "selects the top 50 companies." Specify the
criteria that is used to rank the top 50 companies.
RESPONSE TO COMMENT 5
The disclosure has been revised in accordance with this comment to state
that the Index "selects the top 50 companies with the lowest combined volatility
score."
COMMENT 6 - ALL FUNDS - PRINCIPAL INVESTMENT STRATEGIES
Disclose whether any of the Funds will use securities sampling for its
investments.
RESPONSE TO COMMENT 6
None of the Funds currently use securities sampling in its investments.
COMMENT 7 - FIRST TRUST CAPITAL STRENGTH ETF - PRINCIPAL INVESTMENT STRATEGIES
The third paragraph of the Principal Investment Strategies section refers
to instances when the Fund may invest in a "substitute for certain securities in
the Index." What types of securities are used as substitutes and are there
instances in which derivatives are used as substitutes?
RESPONSE TO COMMENT 7
Currently, it is rare for a substitute security to take the place of a
security in an Index. In such an instance, the substitute security would have a
substantially similar profile to the security being substituted. Further, there
are currently no instances in which derivatives are being used as a substitute.
The disclosure has been revised in accordance with this comments.
Karen Rossotto
April 30, 2014
Page 4
COMMENT 8 - ALL FUNDS - PRINCIPAL RISKS
In general, to the extent that there are certain principal risks
disclosed, particularly for sectors and industry investments, there should be a
corresponding investment strategy disclosed in the Principal Investment
Strategies section.
RESPONSE TO COMMENT 8
The disclosure has been revised in accordance with this comment.
COMMENT 9 - ALL FUNDS - ANNUAL TOTAL RETURN
Per Form N-1A, in a parenthetical after an index or a broad-based market
index as set forth in the Average Annual Total Returns table, insert "(reflects
no deduction for fees, expenses or taxes)."
RESPONSE TO COMMENT 9
The disclosure has been revised in accordance with this comment.
COMMENT 10 - APPLICABLE FUNDS - PRINCIPAL RISKS
In the Consumer Discretionary Risk, define "consumer discretionary
companies" in plain English and consider providing an example of such a company.
RESPONSE TO COMMENT 10
The disclosure has been revised in accordance with this comment.
COMMENT 11 - APPLICABLE FUNDS - PRINCIPAL INVESTMENT STRATEGIES
Provide a plain English definition of the term "base value" whenever it is
used in the disclosure. To the extent that you consider the information to not
be relevant to the shareholder, move to the back of the prospectus.
RESPONSE TO COMMENT 11
The disclosure has been revised in accordance with this comment.
Karen Rossotto
April 30, 2014
Page 5
COMMENT 12 - APPLICABLE FUNDS - PRINCIPAL INVESTMENT STRATEGIES/PRINCIPAL RISKS
To the extent that ADRs and other Depositary Receipts are used, disclosure
whether any of the ones in which a Fund invests is unsponsored. Provide adequate
risk disclosure to the extent that any are used.
RESPONSE TO COMMENT 12
Currently, all ADRs in which the Funds invest are sponsored.
COMMENT 13 - FIRST TRUST ISE CHINDIA INDEX FUND - PRINCIPAL INVESTMENT
STRATEGIES/PRINCIPAL RISKS
Move the disclosure regarding H shares and A shares from the China Risk to
the Principal Investment Strategies section.
RESPONSE TO COMMENT 13
The disclosure has been revised in accordance with this comment.
COMMENT 14 - FIRST TRUST ISE-REVERE NATURAL GAS INDEX FUND - PRINCIPAL
INVESTMENT STRATEGIES
Explain the meaning of the "Fund's correlation to the price of natural
gas" as set forth in the Principal Investment Strategies section.
RESPONSE TO COMMENT 14
One of the screens used by the Index is to select securities that have a
correlation to natural has prices. Although the Index and natural gas prices
generally do not have a high correlation, using this screen helps the Index in
being more correlated to the price of natural gas. The disclosure has been
revised to reflect that the screen helps in the Index's correlation to the price
of natural gas.
COMMENT 15 - FIRST TRUST ISE WATER INDEX FUND - PRINCIPAL INVESTMENT STRATEGIES
The second paragraph of the Principal Investment Strategies section
discloses that the Index is a "modified market-capitalization weighted
portfolio." Explain the meaning of the term, "modified market-capitalization
weighted." In what way is the market capitalization weight modified?
RESPONSE TO COMMENT 15
The disclosure has been revised in accordance with this comment to
disclose the weighting methodology of the Index.
Karen Rossotto
April 30, 2014
Page 6
COMMENT 16 - FIRST TRUST ISE WATER INDEX FUND - PRINCIPAL INVESTMENT STRATEGIES
Disclose the types of industries/sectors that are represented by the
securities in this Index. Also include disclosure in the Principal Investment
Strategies that the Fund has investments in emerging market countries.
RESPONSE TO COMMENT 16
The disclosure has been revised in accordance with this comment.
COMMENT 17 - FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND - PRINCIPAL
INVESTMENT STRATEGIES/PRINCIPAL RISKS
The second paragraph of the Principal Investment Strategies section refers
to "international non-financial companies." Does this Fund's summary section
require a Non-U.S. Securities Risk?
RESPONSE TO COMMENT 17
The prospectus does not require a Non-U.S. Securities Risk as non-U.S.
securities do not make up a significant part of the Fund's holdings.
COMMENT 18 - FIRST TRUST S&P REIT INDEX FUND - PRINCIPAL RISKS
Include a Non-U.S. REIT Risk.
RESPONSE TO COMMENT 18
This disclosure was not included because the Fund's disclosure states that
the Fund's "Index contains those constituents of the S&P Developed REIT Index
that are domiciled in the United States."
COMMENT 19 - FIRST TRUST US IPO INDEX FUND - PRINCIPAL INVESTMENT
STRATEGIES/PRINCIPAL RISKS
Define IPO. Also disclose when securities are removed from the Index. The
IPO Risk states that the Fund invests in companies that have "recently conducted
a public offering." State a time frame for "recently."
Karen Rossotto
April 30, 2014
Page 7
RESPONSE TO COMMENT 19
The disclosure has been revised in accordance with this comment. Also, the
following disclosure has been included in the Principal Investment Strategies:
"In general, eligible constituents are added on the sixth day of trading and
remain eligible to be included in the Index for approximately four years."
COMMENT 20 - FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND - PRINCIPAL
INVESTMENT STRATEGIES
What is the Timeliness(TM) rank and what does it measure?
RESPONSE TO COMMENT 20
The disclosure has been revised in accordance with this comment to state
that the Timeliness(TM) rank measures the expected price performance relative to
the other stocks in the universe over the following six to 12 months.
COMMENT 21 - FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND - PRINCIPAL
INVESTMENT STRATEGIES
What is the Safety(TM) rank and what does it measure?
RESPONSE TO COMMENT 21
The disclosure has been revised in accordance with this comment to state
that the Safety(TM) rank measures the total risk of a stock relative to the
other stocks in the Value Line(R) universe.
COMMENT 22 - MANAGEMENT OF THE FUNDS
Update the descriptions of the Investment Committee members to describe
what each member's occupation has been for the last five years.
RESPONSE TO COMMENT 22
The disclosure has been revised in accordance with this comment.
Karen Rossotto
April 30, 2014
Page 8
COMMENT 23 - PORTFOLIO TURNOVER
To the extent that a Fund's portfolio turnover rate is over 100%, include
an active trading or portfolio turnover risk.
RESPONSE TO COMMENT 23
The disclosure has been revised in accordance with this comment.
* * *
TANDY ACKNOWLEDGMENT
In connection with the Trust's Registration Statement, the Trust
acknowledges that;
o should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
o the action of the Commission or the staff, acting pursuant to
delegated authority in declaring the filing effective, does not
relieve the Trust from its full responsibility for the adequacy and
accuracy for the disclosure in the filing; and
o the Trust may not assert this action as a defense in any proceeding
initiated by the Commission or any person under the federal
securities laws of the United States.
Please call me at (312) 845-3484 if you have any questions or issues you
would like to discuss regarding these matters.
Sincerely yours,
CHAPMAN AND CUTLER LLP
By: /s/ Morrison C. Warren
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Morrison C. Warren