CHAPMAN AND CUTLER LLP 111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
September 27, 2016
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 II (the "Trust")
File Nos. 811-21944 and 333-143964
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Dear Ms. Rossotto:
This letter responds to your comments, provided by telephone on August 16,
2016, regarding the registration statement filed on Form N-1A for First Trust
Exchange-Traded Fund II (the "Trust") with the Securities and Exchange
Commission (the "Commission") on June 6, 2016 (the "Registration Statement").
The Registration Statement relates to the First Trust ZyFin India Quality and
Governance ETF, a series of the Trust (the "Fund"). Capitalized terms used
herein, but not otherwise defined, have the meanings ascribed to them in the
Registration Statement.
COMMENT 1 - ANNUAL FUND OPERATING EXPENSES
With respect to footnote 1 to the Annual Fund Operating Expenses table,
confirm that the Fund will not pay 12b-1 fees for at least one year from the
date of this prospectus.
RESPONSE TO COMMENT 1
In accordance with this comment, footnote 1 will reflect a date that is at
least one year from the date of this prospectus.
COMMENT 2 - PRINCIPAL INVESTMENT STRATEGIES
Disclose the types of securities to be included in the Index and 90% test.
Will the Fund invest primarily in equity securities?
Karen Rossotto
September 27, 2016
Page 2
RESPONSE TO COMMENT 2
The Fund will invest primarily in equity securities, and the prospectus
has been revised to reflect this response.
COMMENT 3 - PRINCIPAL INVESTMENT STRATEGIES
The first paragraph of this section lists three characteristics that
qualify a company as "Indian." Explain how meeting only characteristic (i) or
(ii) would be sufficient.
RESPONSE TO COMMENT 3
For a company to qualify as "Indian," its securities must be listed on
the Bombay Stock Exchange (BSE Ltd.) or the National Stock Exchange of India
Ltd. and must either have its principal place of business in India or have at
least 50% of its assets in, or 50% of its revenues or profits from, India. The
prospectus has been revised to reflect these requirements.
COMMENT 4 - PRINCIPAL INVESTMENT STRATEGIES
Revise the fifth sentence of the third paragraph in plain English.
Consider breaking this explanation into more than one long sentence.
RESPONSE TO COMMENT 4
The prospectus has been revised in accordance with this comment to
simplify the referenced sentence.
COMMENT 5 - PRINCIPAL INVESTMENT STRATEGIES
The sixth sentence of the third paragraph refers to "non-executive
directors." Explain the meaning of this term. Is it any different than
independent directors?
RESPONSE TO COMMENT 5
A non-executive director is a board member who is not a member of the
company's executive management. A non-executive director typically does not
engage in the day-to-day management of the company, but is involved in policy
making and strategy.
Karen Rossotto
September 27, 2016
Page 3
An independent director, in addition to satisfying the requirements to be
a non-executive director, also:
o apart from receiving director remuneration, does not have any material
pecuniary relationships or transactions with the company, its
promoters, its senior management or its holding company, its
subsidiaries and associated companies;
o is not related to promoters or management at the board level or at one
level below the board;
o has not been an executive of the company in the immediately preceding
three financial years;
o is not a partner or an executive of the statutory audit firm or the
internal audit firm that is associated with the company, and has not
been a partner or an executive of any such firm for the last three
years. This will also apply to legal firm(s) and consulting firm(s)
that have a material association with the entity;
o is not a supplier, service provider or customer of the company. This
should include lessor-lessee type relationships also; and
o is not a substantial shareholder of the company, i.e. owning two
percent or more of the block of voting shares.
Note that the governance parameters apply differently to executive
directors, non-executive directors and independent directors.
COMMENT 6 - PRINCIPAL INVESTMENT STRATEGIES
The Index methodology refers to a "quality screen" and subsequent
"governance screen." Explain what happens if the quality screen results in only
companies with low governance ratings.
RESPONSE TO COMMENT 6
The governance screen is used to rank companies that pass the quality
screen on a relative basis.
COMMENT 7 - PRINCIPAL INVESTMENT STRATEGIES
The governance rating methodology lists ten parameters on which each
company is measured. How are these parameters ranked among each other? Are any
more or less important than the others? Additionally, how does meeting these
parameters create ties to India?
Karen Rossotto
September 27, 2016
Page 4
RESPONSE TO COMMENT 7
The scoring process is binary with one point given for each best practice
complied with and zero if not complied with or not disclosed. This means all
parameters are equally weighted. Many of the parameters have been recommended by
the Securities & Exchange Board of India as Corporate Governance best practices
and the methodology ranks stocks as per their adherence to these
recommendations. The prospectus has been revised to note that each of the
parameters are equally weighted.
COMMENT 8 - PRINCIPAL INVESTMENT STRATEGIES
The tenth governance parameter is listed as "whether the promoter pledge
in the company is less than 25%." Explain the meaning of this test.
RESPONSE TO COMMENT 8
Promoters of listed companies pledge all or some of their shares in such
companies to lenders as collateral for loans. The Index methodology recognizes
that pledging more than 25% of a promoter's total holdings in a company is a
risk. In addition to this explanation, the prospectus has been revised to
clarify the tenth parameter.
COMMENT 9 - PRINCIPAL INVESTMENT STRATEGIES
The prospectus states that the Index is rebalanced on an annual basis.
Disclose if, and when, the Index is reconstituted.
RESPONSE TO COMMENT 9
The index is rebalanced and reconstituted annually with a selection date
of September 30th of each calendar year (end of day). All changes will be
announced in the first week of October each year, and the changes will be
effected on the adjustment date. The adjustment date will be notified every year
with a minimum seven-day notice period before the changes are made effective.
The prospectus has been revised to reflect this information.
COMMENT 10 - PRINCIPAL INVESTMENT STRATEGIES
The prospectus lists a number of techniques for substituting securities in
the Index. Will this ever include using derivatives?
Karen Rossotto
September 27, 2016
Page 5
RESPONSE TO COMMENT 10
No, the fund will not invest in derivatives.
COMMENT 11 - PRINCIPAL INVESTMENT STRATEGIES
Disclose the market cap range of the securities in the Index and any
industry and/or sector focus.
RESPONSE TO COMMENT 11
The prospectus has been revised to disclose that as of August 31, 2016,
the Index had significant investments in consumer staples companies and
technology companies, and the market capitalization range of securities in the
Index was $1.25 billion to $70.79 billion.
COMMENT 12 - PRINCIPAL RISKS
Revise "Index Constituent Risk" to make clear why the Fund's inclusion in
another Fund's index could result in a significant trading discount.
RESPONSE TO COMMENT 12
The prospectus has been revised in response to this comment.
COMMENT 13 - ADDITIONAL RISKS OF INVESTING IN THE FUND
Move the second sentence of "Currency Risk" to the Principal Risks
section.
RESPONSE TO COMMENT 13
The prospectus has been revised in accordance with this comment.
COMMENT 14 - STATEMENT OF ADDITIONAL INFORMATION
On page six, the statement of additional information makes reference to
investing in depositary receipts. If true, include relevant disclosure in the
prospectus.
Karen Rossotto
September 27, 2016
Page 6
RESPONSE TO COMMENT 14
The referenced disclosure has been removed as the Fund will not invest in
depositary receipts.
COMMENT 15 - STATEMENT OF ADDITIONAL INFORMATION
The "Federal Tax Matters" section refers to futures contracts and options.
Remove this reference if the Fund does not intend to invest in such securities.
RESPONSE TO COMMENT 15
The referenced disclosure has been removed as the Fund will not invest in
futures contracts and options.
COMMENT 16 - STATEMENT OF ADDITIONAL INFORMATION
The "Determination of Net Asset Value" section refers to valuation of a
number of derivative instruments. Remove these references if the Fund does not
intend to invest in such securities.
RESPONSE TO COMMENT 16
The referenced disclosure has been removed as the Fund will not invest in
derivatives.
* * *
TANDY ACKNOWLEDGMENT
In connection with the Trust's Registration Statement, the Trust
acknowledges that;
o it is responsible for the adequacy and accuracy of the disclosure in
the filing;
o staff comments or changes to disclosure in response to staff comments
in the fillings reviewed by the staff do not foreclose the Commission
from taking any action with respect to the filing; and
o the Trust may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
Karen Rossotto
September 27, 2016
Page 7
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