Interpretive Letter to Sarah A. Bessin, Esq., Shearman & Sterling LLP

September 29, 2003

Sarah A. Bessin, Esq.
Shearman & Sterling LLP
801 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2604

Re: Secondary Market Trading in Fidelity Nasdaq Composite Index Tracking Stock

Dear Ms. Bessin:

I am responding to your letters of August 28, 2003 and September 5, 2003, in which you request that we interpret NASD Rules 2110, 2420, 2830, and Interpretive Material (IM) 2830-2 to permit secondary market trading in shares issued by Fidelity Nasdaq Composite Index Tracking Stock (the "Fund"), an exchange-traded, open-end management investment company that is a newly created series of Fidelity Commonwealth Trust (the "Trust"), an open-end management investment company registered under the Investment Company Act of 1940 ("Investment Company Act"). You have indicated that you are requesting this interpretation on behalf of the Fund, the Trust, Fidelity Distributors Corporation (the "Distributor") (principal underwriter and distributor of the Fund’s shares), and NASD members engaging in transactions in shares of the Fund.

Background

You seek confirmation that, based on the representations contained in your letters, secondary market trading of Fund shares would be consistent with the requirements of NASD Rules 2110, 2420, 2830, and IM-2830-2. Rule 2110 requires that members observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business. Further, a violation of another NASD rule generally constitutes a violation of Rule 2110. Rule 2420, among other things, requires that members deal with any non-member broker/dealer at the same prices, for the same commissions or fees, and on the same terms and conditions as are accorded to the general public. Rule 2830(c) provides, in relevant part, that no member that is an underwriter of investment company securities may sell such securities to any broker or dealer at any price other than the public offering price unless the sale is in conformance with Rule 2420. Rule 2830(g) prohibits a member from purchasing open-end investment company securities from an underwriter (and prohibits a member underwriter from purchasing such securities from the issuer) except (1) for the purpose of covering purchase orders previously received and (2) for its own investment. Rule 2830(i) prohibits a member that is a party to an investment company sales agreement from purchasing, as principal, any open-end investment company or unit investment trust security from a record holder at a price lower than the bid price next quoted by or for the issuer. IM-2830-2 requires members, in their dealings with the public and non-member broker/dealers, to maintain the public offering price of open-end investment companies as described in their prospectuses.

In addition, you seek similar confirmation from NASD with respect to other exchange-traded funds that may be created in the future, are advised by Fidelity Management & Research Company ("FMR") or any entity controlled by or under common control with FMR, are listed on NASDAQ or a national securities exchange, and are organized and operated in a manner substantially similar to the Fund.

You have represented that your request is substantially similar to the interpretive requests submitted to NASD in connection with the secondary market trading in Fresco Index Shares Funds ("Fresco"), ETF Advisors Trust ("ETF Advisors"), streetTRACKS Series Trust ("streetTRACKS"), and Select Sector SPDR Funds ("Select Sector"). The NASD staff issued the interpretation requested in connection with Fresco, ETF Advisors, streetTRACKS, and Select Sector in letters dated February 3, 2003, October 30, 2002, January 16, 2001, and December 7, 1998, respectively.

You have further represented that the Trust, the Distributor, and FMR filed with the Securities and Exchange Commission ("SEC"), on the Fund’s behalf, an application under Sections 6(c) and 17(b) of the Investment Company Act requesting exemptions from, among other things, the provisions of Section 22(d) of the Investment Company Act and Rule 22c-1 thereunder to allow secondary market trading of the Fund shares at negotiated prices. The SEC granted the requested relief by order dated September 12, 2003.¹

Response

Based on the representations in your letters and the SEC’s September 12, 2003 order granting exemptions from, among other things, Section 22(d) of the Investment Company Act and Rule 22c-1 thereunder to permit secondary market trading in the Fund shares, NASD believes that secondary market trading in the Fund shares would be consistent with the requirements of NASD Rules 2830(c), (g), and (i), and IM-2830-2.² This position also extends to secondary market trading in shares of any prospective exchange-traded funds that have been granted exemptions pursuant to the SEC’s September 12, 2003 order.

This position is limited to the factual descriptions and legal representations in your letters and the SEC’s order, and is effective only during such period as the SEC’s exemptions from Section 22(d) of the Investment Company Act and from Rule 22c-1 thereunder remain in effect. Your firm or parties to the transaction should notify NASD of any material change to the facts described herein, including the method of distribution. In this regard, you should be aware that any change in the methodology used to distribute the Fund will require further consideration by NASD and may cause us to reach a different conclusion.

I hope that this letter is responsive to your request. Please note that the opinions expressed herein are staff opinions only and have not been reviewed or endorsed by the NASD Board of Governors. This letter responds only to the issues you have raised based on the facts as you have described them, and does not address any other rule or interpretation of NASD, or all the possible regulatory and legal issues involved.

Very truly yours,

Afshin Atabaki
Attorney

1 See Investment Company Act Release No. 26178 (September 12, 2003).

2 The staff also believes that the secondary market trading of Fund shares as described in your letters and the SEC’s September 12, 2003 order would be consistent with the requirements of NASD Rules 2110 and 2420.