CHAPMAN AND CUTLER LLP 111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
December 20, 2017
VIA EDGAR CORRESPONDENCE
Alison White
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: First Trust Exchange-Traded Fund VI (the "Trust")
File Nos. 811-22717 and 333-182308
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Dear Ms. White:
This letter responds to your comments, provided by telephone, regarding
Post-Effective Amendment No. 85 under the Investment Company Act of 1940 (the
"1940 Act") and Amendment No. 87 under the Securities Act of 1933 (the "1933
Act") to the registration statement of First Trust Exchange-Traded Fund VI (the
"Trust") filed on Form N-1A with the U.S. Securities and Exchange Commission
(the "Commission") on November 13, 2017 (the "Registration Statement"). The
Registration Statement relates to the First Trust Indxx Blockchain & Process
Efficiency Leaders ETF (formerly the First Trust Indxx Blockchain ETF) (the
"Fund"), a series of the Trust. Capitalized terms used herein, but not otherwise
defined, have the meanings ascribed to them in the Registration Statement.
Attached hereto as EXHIBIT A and EXHIBIT B, respectively, are the revised
"Principal Investment Strategies" and "Index Information" sections of the Fund's
prospectus. These sections have been revised in accordance with the staff's
comments and the Fund's updated Index methodology. Other disclosure in the
prospectus and statement of additional information has been revised in
accordance with the staff's comments, as discussed below.
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 this Fund.
Alison White
December 20, 2017
Page 2
COMMENT 1 - GENERAL
Please explain whether the Fund intends to seek a Rule 19b-4 order and, if
so, please confirm that effectiveness of the Fund will be delayed until such an
order is obtained.
RESPONSE TO COMMENT 1
The national securities exchange on which the Fund intends to list its
shares expects that such listing will comply with the generic listing standards
and, therefore, will not seek to obtain a Rule 19b-4 order for a unique listing
rule for the Fund's shares.
COMMENT 2 - GENERAL
Please represent that the Fund will delay its effectiveness until such
time that all comments received from the staff of the Commission are resolved.
RESPONSE TO COMMENT 2
As always, the Trust and its counsel intend to work with Commission staff
to resolve on a timely basis all comments received from the staff. However, we
note that the Trust has filed the Registration Statement pursuant to Rule
485(a)(2) under the 1933 Act, which provides in pertinent part, that: "A
post-effective amendment filed by a registered open-end management investment
company for the purpose of adding a series shall become effective on the
seventy-fifth day after the filing thereof .... "
Alison White
December 20, 2017
Page 3
COMMENT 3 - GENERAL
Under Rule 35d-1(a)(2), a fund with the term "blockchain" in its name must
have a policy to invest, under normal circumstances, at least 80% of its net
assets, plus the amount of any borrowing for investment purposes, in companies
whose economic fortunes are significantly tied to blockchain technology. Please
revise the Fund's current investment policy to specify the criteria it will use
to determine whether a particular company's economic fortunes are tied to
blockchain technology. For example, the Fund could specify that at least 80% of
its assets will be invested in companies that either (1) receive 50% of their
revenues or profits from blockchain technology or (2) devote 50% of their assets
to blockchain technology.
RESPONSE TO COMMENT 3
Rule 35d-1(a)(2) under the 1940 Act requires that a fund with a name
suggesting that the Fund focuses its investments in a particular industry or
group of industries adopt a policy to invest at least 80% of its net assets in
such industry or group of industries. Because the Fund does not believe that
"blockchain" constitutes an "industry or group of industries" as used in Rule
35d-1, but rather a technology that has the potential to benefit companies
across various industries, the Fund does not believe that the name "First Trust
Indxx Blockchain ETF" implicates Rule 35d-1. In addition, the Fund notes that of
the 11 sectors, 24 industry groups, 68 industries and 157 sub-industries
identified in the Global Industry Classification Standard (GICS(R)), there is no
designation for "blockchain" companies.
In order to better reflect the contents of the Fund's portfolio, however,
the Fund's name has been changed to the "First Trust Indxx Blockchain & Process
Efficiency Leaders ETF." The new name is designed to more accurately describe
the Fund's intent to invest in companies that are poised to benefit from
blockchain technology and/or the potential for increased efficiency that it
provides to various business processes.
For examples of previous funds with similar names that did not have a Rule
35d-1 policy, see e.g.: First Trust Cloud Computing ETF, First Trust Nasdaq
Cybersecurity ETF and First Trust Nasdaq Smartphone Index Fund, each a series of
First Trust Exchange-Traded Fund II; and PureFunds ISE Big Data ETF, PureFunds
ISE Mobile Payments ETF, PureFunds Drone Economy Strategy ETF and PureFunds
Video Game Tech ETF, each a series of FactorShares Trust.
COMMENT 4 - GENERAL
Please include the Fund's ticker symbol in the Registration Statement and
series and class identifiers, when available.
RESPONSE TO COMMENT 4
The Fund currently intends to trade under the ticker symbol "LEGR." The
Registration Statement has been revised accordingly.
COMMENT 5 - FEES AND EXPENSES OF THE FUND
Please complete the Fund's fee table and expense example prior to
effectiveness.
Alison White
December 20, 2017
Page 4
RESPONSE TO COMMENT 5
In accordance with this comment, the Fund's fee table and expense example
will be completed prior to effectiveness.
COMMENT 6 - FEES AND EXPENSES OF THE FUND
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 the prospectus.
RESPONSE TO COMMENT 6
In accordance with this comment, footnote 1 will reflect a date that is at
least one year from the date of the prospectus.
COMMENT 7 - PRINCIPAL INVESTMENT STRATEGIES
In step 2 of the Index methodology, the disclosure states that the Index
removes securities with market capitalizations of less than $200 million. Does
the Index have an upper limit on market capitalization? If so, disclose it here.
RESPONSE TO COMMENT 7
The Index does not have an upper limit on market capitalization; however,
the prospectus has been revised to reflect a higher minimum market
capitalization of $250 million, per the Fund's updated Index methodology. See
EXHIBIT A.
COMMENT 8 - PRINCIPAL INVESTMENT STRATEGIES
Please disclose the number of securities included in the Index.
RESPONSE TO COMMENT 8
In accordance with this comment, the disclosure will be revised to
disclose the number of securities included in the Index prior to effectiveness.
This number may change over time, but will be included as of a given date.
Alison White
December 20, 2017
Page 5
COMMENT 9 - PRINCIPAL INVESTMENT STRATEGIES
Disclose whether the Fund will be rebalanced and reconstituted at the same
intervals as the Index. Also, please clarify the difference between
"reconstitute" and "rebalance."
RESPONSE TO COMMENT 9
The prospectus has been revised to state that the Fund expects to
rebalance the weighting of its components and reconstitute (i.e., add or delete)
its components within a short period of time after the Index publicly announces
any such rebalancing or reconstitution. See EXHIBIT A.
COMMENT 10 - PRINCIPAL INVESTMENT STRATEGIES
Please state in this section that the Fund is non-diversified.
RESPONSE TO COMMENT 10
The prospectus has been revised in accordance with this comment. See
EXHIBIT A.
COMMENT 11 - PRINCIPAL INVESTMENT STRATEGIES
Please explain how Tier 2 and Tier 3 companies in step 6 of the Index
methodology are blockchain companies for purposes of Rule 35d-1 and revise the
Registration Statement accordingly.
RESPONSE TO COMMENT 11
See Response to Comment 3 above and EXHIBIT A. Per the Fund's updated
Index Methodology, Tier 3 companies are now excluded from the Index. Tier 2
companies, or Active Users, are limited to companies that are using blockchain
technology or companies that have at least one use or test case in implementing
blockchain technology. Please see below for examples of both Tier 2 and Tier 3
companies:
Tier 2 - Active Users - Barclays and an Israel-based start-up company have
carried out a trade transaction using blockchain technology, cutting a process
that normally takes between seven and ten days to less than four hours.
Alison White
December 20, 2017
Page 6
Tier 3 - Active Explorers - Fujitsu, a Japanese IT giant, and three major
banks have announced plans to pilot a peer-to-peer money transfer system built
with blockchain technology.
COMMENT 12 - PRINCIPAL INVESTMENT STRATEGIES
Please revise the Registration Statement throughout to clarify whether the
Fund will replicate or sample the Index. If the Fund intends to sample the
Index, include management risk disclosure.
RESPONSE TO COMMENT 12
Under normal market conditions, the Fund intends to replicate the Index in
its entirety. The prospectus has been revised in accordance with this comment.
COMMENT 13 - PRINCIPAL RISKS
Consider moving "Concentration Risk" to the summary section of the
prospectus.
RESPONSE TO COMMENT 13
The prospectus has been revised in accordance with this comment.
COMMENT 14 - PRINCIPAL RISKS
If the Fund intends to invest in unsponsored depositary receipts as a part
of its principal investment strategies, disclose this in the "Principal
Investment Strategies" section.
Response to Comment 14
The Fund does not intend to invest in unsponsored depositary receipts as a
part of its principal investment strategies.
COMMENT 15 - PRINCIPAL RISKS
Please explain supplementally how an industrial company could use
blockchain technology and provide examples.
Alison White
December 20, 2017
Page 7
RESPONSE TO COMMENT 15
Industrial companies have used blockchain for various purposes such as
making their supply chains more secure, streamlined and robust. For example, BHP
Billiton Ltd. uses blockchain to improve its supply chain processes by recording
the "movements of wellbore rock and fluid samples and better secure the
real-time data that is generated during delivery." The new system will improve
its internal efficiency while allowing it to work more effectively with
suppliers, vendors and partners via a more secure and streamlined approach.
Additionally, the Blockchain in Trucking Alliance (or BiTA) is a
consortium of companies in the trucking industry assisting members with the
implementation of blockchain technology for tracking performance history,
vehicle maintenance and quality assurance, among other things.
COMMENT 16 - PRINCIPAL RISKS
"Replication Management Risk" states that the Fund will invest
"principally in the securities included in the Index." See comment 12 and revise
accordingly.
RESPONSE TO COMMENT 16
Under normal market conditions, the Fund intends to replicate the Index in
its entirety. The prospectus has been revised in accordance with this comment.
COMMENT 17 - ADDITIONAL INFORMATION ON THE FUND'S INVESTMENT OBJECTIVE AND
STRATEGIES
If the Fund intends to invest in derivatives as a part of its principal
investment strategies, disclose this in the "Principal Investment Strategies"
section. If so, please confirm that such derivatives will not be counted toward
the Fund's investment in the Index.
RESPONSE TO COMMENT 17
The Fund does not intend to invest in derivatives as a part of its
principal investment strategies.
Alison White
December 20, 2017
Page 8
COMMENT 18 - ADDITIONAL INFORMATION ON THE FUND'S INVESTMENT OBJECTIVE AND
STRATEGIES
Remove the word "both" from the final sentence of the penultimate
paragraph as there are three examples listed.
RESPONSE TO COMMENT 18
The prospectus has been revised in accordance with this comment.
COMMENT 19 - ADDITIONAL INFORMATION ON THE FUND'S INVESTMENT OBJECTIVE AND
STRATEGIES
The final paragraph states that blockchain technology "is increasingly
being used to support any transaction of goods or information that has required
a centralized third party in the past." Please explain where it is being used.
RESPONSE TO COMMENT 19
See Response to Comment 15 above. For an additional example, with
blockchain, Wal-Mart Stores, Inc. obtains crucial data from a single receipt,
including suppliers, details on how and where food was grown and who inspected
it. The database extends information from the pallet to the individual package.
This has numerous benefits, for example, including simpler supplier tracking for
food safety and quality will allow them to identify the source of food-borne
illnesses in seconds rather than the days or weeks that it currently takes.
COMMENT 20 - ADDITIONAL INFORMATION ON THE FUND'S INVESTMENT OBJECTIVE AND
STRATEGIES
The final two sentences of the final paragraph read more like an
advertisement for blockchain technology than an investment strategy. Please
remove or make relevant to the strategy discussion.
RESPONSE TO COMMENT 20
In accordance with this comment, the relevant disclosure has been removed
from the prospectus.
Alison White
December 20, 2017
Page 9
COMMENT 21 - FUND INVESTMENTS
The disclosure states that "for temporary defensive purposes and during
periods of high cash inflows or outflows, the Fund may depart from its principal
investment strategies and invest part or all of its assets in these securities,
or it may hold cash." Please explain how this is consistent with a passive
investment strategy and revise accordingly.
RESPONSE TO COMMENT 21
The Fund believes that this type of temporary defensive position may be
appropriate in times of non-normal market conditions, or other extraordinary
circumstances. Under normal market conditions, the Fund will invest at least 90%
of its net assets (including investment borrowings) in securities that comprise
the Index.
COMMENT 22 - INDEX INFORMATION
Please revise this section in accordance with the staff's comments to the
Index methodology in the "Principal Investment Strategies" section.
RESPONSE TO COMMENT 22
The prospectus has been revised in accordance with this comment. See
EXHIBIT B.
COMMENT 23 - STATEMENT OF ADDITIONAL INFORMATION
Please change "are" to "is" in the first sentence of the "Exchange Listing
and Trading" section.
RESPONSE TO COMMENT 23
The statement of additional information has been revised in accordance
with this comment.
COMMENT 24 - STATEMENT OF ADDITIONAL INFORMATION
On page 7, there is a reference to emerging markets. Please disclose how
emerging markets are defined by the Fund.
Alison White
December 20, 2017
Page 10
RESPONSE TO COMMENT 24
The following disclosure has been added to the statement of additional
information:
"Emerging markets are generally characterized by progression toward
becoming an advanced market, as shown by some liquidity in local
debt and equity markets and the existence of some form of market
exchange and regulatory body."
COMMENT 25 - STATEMENT OF ADDITIONAL INFORMATION
On page 7, there is a reference to frontier countries. This concept is not
disclosed anywhere else in the Registration Statement. Please reconcile with the
prior disclosure or remove.
RESPONSE TO COMMENT 25
This disclosure should state "foreign countries." The statement of
additional information has been revised accordingly.
* * *
Please call me at (312) 845-3721 if you have any questions or issues you
would like to discuss regarding these matters.
Sincerely yours,
CHAPMAN AND CUTLER LLP
By: /s/ Daniel J. Fallon
--------------------------
Daniel J. Fallon
EXHIBIT A
PRINCIPAL INVESTMENT STRATEGIES
The Fund will normally invest at least 90% of its net assets (including
investment borrowings) in common stocks and depositary receipts that comprise
the Index. The Index is designed track the performance of companies that are
either actively using, investing in, developing, or have products that are
poised to benefit from blockchain technology and/or the potential for increased
efficiency that it provides to various business processes. The Index is owned
and is developed, maintained and sponsored by Indxx, LLC (the "Index Provider").
The Fund, using an indexing investment approach, attempts to replicate, before
fees and expenses, the performance of the Index. First Trust Advisors L.P., the
Fund's investment advisor, seeks a correlation of 0.95 or better (before fees
and expenses) between the Fund's performance and the performance of the Index; a
figure of 1.00 would represent perfect correlation.
Blockchain is a type of distributed ledger, or decentralized database that keeps
continuously updated digital records of who owns a particular asset (e.g.,
cryptocurrency, contracts, information, etc.). It is kept and validated
simultaneously by a network of computers, similar to a shared spreadsheet that
no one person can change without the agreement of the others. A blockchain is
comprised of unchangeable, digitally recorded data in packages called "blocks."
These digitally recorded blocks of data are stored in a linear "chain." Each
block in the chain contains data (e.g., a transaction), that is
cryptographically connected to the previous-block in the chain, ensuring all
data in the overall "blockchain" has not been tampered with and remains
unchanged. Blockchain networks can be private with restricted membership similar
to an intranet, or public like the Internet, accessible to any person in the
world. The entire chain is continually updated so that every ledger in the
network is the same, giving each member the ability to prove who owns what at
any given time. Blockchain technology has the potential to increase efficiency
for various business processes, including recordkeeping, payment processing and
inventory management, among others. See "Additional Information on the Fund's
Investment Objective and Strategies" for an additional discussion of blockchain
technology.
The securities included in the Index are selected in the following manner:
1. the Index begins with a global universe of equity securities in both
developed and emerging markets;
2. companies with market capitalizations of less than $250 million are
removed;
3. companies with an average daily trading volume of less than $1
million over the last three months are removed;
4. companies that have not traded on at least 90% of the eligible
trading days in the last six months (three months for securities
with less than six months of trading history) are removed;
5. companies with a free float of less than 20% of outstanding shares
are removed;
6. companies trading at a price of $10,000 or above per share are
removed;
7. the universe is then narrowed to companies with exposure to
blockchain technology and/or the potential to benefit from the
increased process efficiency it could provide (as discussed above),
as identified by the Index Provider;
8. from the eligible universe, each company is assigned to a tier based
on three categories of exposure (see "Index Information" for
additional information);
i. Tier 1 - Active Enablers - companies that are actively
developing blockchain technology products or systems for their
own use and for sale and support to other companies; companies
that are direct service providers for blockchain technology;
or, companies that have business models that rely on
delivering products or services that utilize blockchain
technology;
ii. Tier 2 - Active Users - companies that are using blockchain
technology which is generally supported by an Active Enabler;
or, companies that have at least one use or test case
implementing blockchain technology;
iii. Tier 3 - Active Explorers - companies that have been publicly
disclosed as being active in exploring the incorporation of
blockchain technology into their business; or, companies that
have a press release on their website or a news article
stating that they have started working in the blockchain
technology space;
9. companies assigned to Tiers 1 and 2 are eligible for inclusion in
the Index;
10. the top 100 companies, ranked by exposure to blockchain technology,
are included in the Index;
11. companies from Tier 1 and Tier 2 will each make up 50% of the Index,
with companies equally-weighted within each tier (see "Index
Information" for weighting restrictions).
As of _____, 201_, the Index was comprised of ___ common stocks traded on U.S.
and non-U.S. exchanges, including American Depositary Receipts ("ADRs") and
Global Depositary Receipts ("GDRs"), with market capitalizations ranging from
$___ million to $____ billion. As of _____, 201_, the Fund had significant
investments in industrial, financial and information technology companies.
The Index Provider rebalances and reconstitutes the Index components
semi-annually in March and September of each year for eligibility. The Fund
expects to rebalance the weighting of its components and reconstitute (i.e., add
or delete) its components within a short period of time after the Index publicly
announces any such rebalancing or reconstitution. The Index Provider may adjust
the rebalance/reconstitution schedule in the future to accommodate the evolution
of the target universe.
The Fund is classified as "non-diversified" under the Investment Company Act of
1940, as amended (the "1940 Act").
EXHIBIT B
INDEX INFORMATION
First Trust Indxx Blockchain & Process Efficiency Leaders ETF
INDEX DESCRIPTION
The Indxx Global Blockchain Index is designed to track the performance of
companies that are either actively investing in, exploring, developing, or have
products based on, blockchain technology.
The Index began on _______________ at a base value of 1,000.
INDEX METHODOLOGY
1. the Index begins with a global universe of equity securities in both
developed and emerging markets; 2. companies with market
capitalizations of less than $250 million are removed;
3. companies with an average daily trading volume of less than $1
million over the last three months are removed;
4. companies that have not traded on at least 90% of the eligible
trading days in the last six months (three months for securities
with less than six months of trading history) are removed;
5. companies with a free float of less than 20% of outstanding shares
are removed;
6. companies trading at a price of $10,000 or above per share are
removed;
7. the universe is then narrowed to companies with exposure to
blockchain technology and/or the potential to benefit from the
increased process efficiency it could provide, as identified by the
Index Provider;
8. from the eligible universe, each company is assigned to a tier based
on three categories of exposure (see below for additional
information);
i. Tier 1 - Active Enablers - companies that are actively
developing blockchain technology products or systems for their
own use and for sale and support to other companies; companies
that are direct service providers for blockchain technology;
or, companies that have business models that rely on
delivering products or services that utilize blockchain
technology;
ii. Tier 2 - Active Users - companies that are using blockchain
technology which is generally supported by an Active Enabler;
or, companies that have at least one use or test case
implementing blockchain technology;
iii. Tier 3 - Active Explorers - companies that have been publicly
disclosed as being active in exploring the incorporation of
blockchain technology into their business; or, companies that
have a press release on their website or a news article
stating that they have started working in the blockchain
technology space;
9. companies assigned to Tiers 1 and 2 are eligible for inclusion in
the Index;
10. the top 100 companies, ranked by exposure to blockchain technology,
are included in the Index;
11. companies from Tier 1 and Tier 2 will each make up 50% of the Index,
with companies equally-weighted within each tier (see below for
weighting restrictions).
If a company in the Active Enabler tier has a market capitalization of less than
$500 million as well as 20-day and 3-month average daily trading volume of less
than $3 million, then the company's weight within the Index is capped at 0.50%.
ADDITIONAL INFORMATION ON TIERS 1, 2 AND 3
Active Enablers are companies that stand to benefit from blockchain technology
via multiple avenues. These benefits include the efficiencies and revenues from
their own development and adoption of blockchain technology and also through the
commercialization and support of blockchain related systems to other companies.
Companies that fall under this category are the most likely to benefit from
blockchain technology.
Active Users are companies that stand to benefit from the reduction in cost or
improved efficiency from using blockchain technology. While potentially
significant, the direct revenue impact may currently still be limited.
Active Explorers are companies that have expressed interest in blockchain
technology, but are not currently directly incorporating blockchain technology
into their business. These companies are excluded from the Index.
INDEX REBALANCING
The Index is rebalanced and reconstituted semi-annually in March and September
of each year for eligibility. The Index Provider may adjust the
rebalance/reconstitution schedule in the future to accommodate the evolution of
the target universe. During Index reconstitution, an existing Index constituent
shall remain in the Index if its market capitalization does not meet the
criteria above, but remains within +/- 20% of the limit. Additionally, an
existing Index constituent shall remain in the Index if its liquidity does not
meet the criteria above, but remains within +/- 30% of the limit.