
[Federal Register Volume 81, Number 104 (Tuesday, May 31, 2016)]
[Notices]
[Pages 34407-34414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12670]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77895; File No. SR-NASDAQ-2016-071]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 
1 Thereto, Relating to the Listing and Trading of the Shares of the 
First Trust CEF Income Opportunity ETF and the First Trust Municipal 
CEF Income Opportunity ETF of First Trust Exchange-Traded Fund VIII

May 24, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 10, 2016, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by Nasdaq. On May 
20, 2016, the Exchange submitted Amendment No. 1 to the proposed rule 
change. The Commission is publishing this notice to solicit comments on 
the proposed rule change, as modified by Amendment No. 1 thereto, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to list and trade the shares of the following under 
Nasdaq Rule 5735 (``Managed Fund Shares''): \3\ First Trust CEF Income 
Opportunity ETF (the ``CEF Income Opportunity Fund'') and First Trust 
Municipal CEF Income Opportunity ETF (the ``Municipal CEF Income 
Opportunity Fund''). The CEF Income Opportunity Fund and the Municipal 
CEF Income Opportunity Fund are each a ``Fund'' and collectively, the 
``Funds.'' Each Fund is a series of First Trust Exchange-Traded Fund 
VIII (the ``Trust''). The shares of each Fund are collectively referred 
to herein as the ``Shares.''
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    \3\ The Commission approved Nasdaq Rule 5735 in Securities 
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June 
20, 2008) (SR-NASDAQ-2008-039). There are already multiple actively 
managed funds listed on the Exchange; see, e.g., Securities Exchange 
Act Release Nos. 72506 (July 1, 2014), 79 FR 38631 (July 8, 2014) 
(SR-NASDAQ-2014-050) (order approving listing and trading of First 
Trust Strategic Income ETF); 69464 (April 26, 2013), 78 FR 25774 
(May 2, 2013) (SR-NASDAQ-2013-036) (order approving listing and 
trading of First Trust Senior Loan Fund); and 66489 (February 29, 
2012), 77 FR 13379 (March 6, 2012) (SR-NASDAQ-2012-004) (order 
approving listing and trading of WisdomTree Emerging Markets 
Corporate Bond Fund). The Exchange believes the proposed rule change 
raises no significant issues not previously addressed in those prior 
Commission orders.
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    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, Nasdaq included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. Nasdaq has prepared summaries, set forth in Sections A, 
B, and C below, of the most significant aspects of such statements.

[[Page 34408]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade the Shares of each Fund 
under Nasdaq Rule 5735, which governs the listing and trading of 
Managed Fund Shares \4\ on the Exchange. Each Fund will be an actively 
managed exchange-traded fund (``ETF''). The Shares will be offered by 
the Trust, which was established as a Massachusetts business trust on 
February 22, 2016.\5\ The Trust is registered with the Commission as an 
investment company and has filed a registration statement on Form N-1A 
(``Registration Statement'') with the Commission.\6\ Each Fund will be 
a series of the Trust.
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    \4\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (the ``1940 Act'') organized 
as an open-end investment company or similar entity that invests in 
a portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Index Fund Shares, listed 
and traded on the Exchange under Nasdaq Rule 5705, seeks to provide 
investment results that correspond generally to the price and yield 
performance of a specific foreign or domestic stock index, fixed 
income securities index or combination thereof.
    \5\ The Commission has issued an order, upon which the Trust may 
rely, granting certain exemptive relief under the 1940 Act. See 
Investment Company Act Release No. 28468 (October 27, 2008) (File 
No. 812-13477).
    \6\ See Registration Statement on Form N-1A for the Trust, dated 
March 14, 2016 (File Nos. 333-210186 and 811-23147). The 
descriptions of the Funds and the Shares contained herein are based, 
in part, on information in the Registration Statement.
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    First Trust Advisors L.P. will be the investment adviser 
(``Adviser'') to the Funds. The Funds do not currently intend to use a 
sub-adviser. First Trust Portfolios L.P. (the ``Distributor'') will be 
the principal underwriter and distributor of each Fund's Shares. The 
Bank of New York Mellon Corporation (``BNY'') will act as the 
administrator, accounting agent, custodian and transfer agent to the 
Funds.
    Paragraph (g) of Rule 5735 provides that if the investment adviser 
to the investment company issuing Managed Fund Shares is affiliated 
with a broker-dealer, such investment adviser shall erect a ``fire 
wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio.\7\ In addition, paragraph 
(g) further requires that personnel who make decisions on the open-end 
fund's portfolio composition must be subject to procedures designed to 
prevent the use and dissemination of material, non-public information 
regarding the open-end fund's portfolio.
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    \7\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and its related personnel are 
subject to the provisions of Rule 204A-1 under the Advisers Act 
relating to codes of ethics. This Rule requires investment advisers 
to adopt a code of ethics that reflects the fiduciary nature of the 
relationship to clients as well as compliance with other applicable 
securities laws. Accordingly, procedures designed to prevent the 
communication and misuse of non-public information by an investment 
adviser must be consistent with Rule 204A-1 under the Advisers Act. 
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful 
for an investment adviser to provide investment advice to clients 
unless such investment adviser has (i) adopted and implemented 
written policies and procedures reasonably designed to prevent 
violation, by the investment adviser and its supervised persons, of 
the Advisers Act and the Commission rules adopted thereunder; (ii) 
implemented, at a minimum, an annual review regarding the adequacy 
of the policies and procedures established pursuant to subparagraph 
(i) above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
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    Rule 5735(g) is similar to Nasdaq Rule 5705(b)(5)(A)(i); however, 
paragraph (g) in connection with the establishment of a ``fire wall'' 
between the investment adviser and the broker-dealer reflects the 
applicable open-end fund's portfolio, not an underlying benchmark 
index, as is the case with index-based funds. The Adviser is not a 
broker-dealer, but it is affiliated with the Distributor, a broker-
dealer, and has implemented and will maintain a fire wall with respect 
to its broker-dealer affiliate regarding access to information 
concerning the composition and/or changes to a portfolio.
    In addition, personnel who make decisions on each Fund's portfolio 
composition will be subject to procedures designed to prevent the use 
and dissemination of material non-public information regarding such 
Fund's portfolio. In the event (a) the Adviser or any sub-adviser 
registers as a broker-dealer, or becomes newly affiliated with a 
broker-dealer, or (b) any new adviser or sub-adviser is a registered 
broker-dealer or becomes affiliated with another broker-dealer, it will 
implement and will maintain a fire wall with respect to its relevant 
personnel and/or such broker-dealer affiliate, as applicable, regarding 
access to information concerning the composition and/or changes to a 
portfolio and will be subject to procedures designed to prevent the use 
and dissemination of material non-public information regarding such 
portfolio.
    Each Fund intends to qualify each year as a regulated investment 
company under Subchapter M of the Internal Revenue Code of 1986, as 
amended.
The Funds' Principal Investment Strategies
    The investment objective of the CEF Income Opportunity Fund will be 
to seek to provide current income with a secondary emphasis on total 
return. The investment objective of the Municipal CEF Income 
Opportunity Fund will be to seek to provide current income. Under 
normal market conditions,\8\ (a) the CEF Income Opportunity Fund will 
seek to achieve its investment objective by investing at least 80% of 
its net assets (including investment borrowings) in a portfolio of 
closed-end funds and (b) the Municipal CEF Income Opportunity Fund will 
seek to achieve its investment objective by investing at least 80% of 
its net assets (including investment borrowings) in a portfolio of 
municipal closed-end funds.\9\ In selecting the Closed-End Funds in 
which each Fund will invest, the Adviser will utilize a range of 
investment approaches and will take into account various market metrics 
and economic factors, as well as market conditions.
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    \8\ The term ``under normal market conditions'' as used herein 
includes, but is not limited to, the absence of adverse market, 
economic, political, or other conditions, including extreme 
volatility or trading halts in the securities markets or the 
financial markets generally; operational issues causing 
dissemination of inaccurate market information; or force majeure 
type events such as systems failure, natural or man-made disaster, 
act of God, armed conflict, act of terrorism, riot or labor 
disruption or any similar intervening circumstance. On a temporary 
basis, including for defensive purposes, during the initial invest-
up period and during periods of high cash inflows or outflows, a 
Fund may depart from its principal investment strategies; for 
example, it may hold a higher than normal proportion of its assets 
in cash. During such periods, a Fund may not be able to achieve its 
investment objective. A Fund may adopt a defensive strategy when the 
Adviser believes securities in which such Fund normally invests have 
elevated risks due to political or economic factors and in other 
extraordinary circumstances.
    \9\ The closed-end funds in which each Fund invests (``Closed-
End Funds'') will be registered under the 1940 Act and listed and 
traded in the U.S. on registered exchanges. Each Fund may invest in 
the securities of Closed-End Funds (as well as certain other 
investment companies) in excess of the limits imposed under the 1940 
Act pursuant to an exemptive order on which the Trust may rely. See 
Investment Company Act Release No. 30377 (February 5, 2013) (File 
No. 812-13895) (the ``Fund of Funds Order'').
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Other Investments for the Funds
    Each Fund may invest (in the aggregate) up to 20% of its net assets 
in the following securities and instruments:

[[Page 34409]]

    Each Fund may invest in the following exchange-traded products: (i) 
ETFs; \10\ and (ii) exchange-traded notes (``ETNs'').\11\
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    \10\ An ETF is an investment company registered under the 1940 
Act that holds a portfolio of securities. Many ETFs are designed to 
track the performance of a securities index, including industry, 
sector, country and region indexes. ETFs included in a Fund will be 
listed and traded in the U.S. on registered exchanges. Each Fund may 
invest in the securities of ETFs in excess of the limits imposed 
under the 1940 Act pursuant to exemptive orders obtained by other 
ETFs and their sponsors from the Commission or the Fund of Funds 
Order. The ETFs in which the Fund may invest include Index Fund 
Shares (as described in Nasdaq Rule 5705), Portfolio Depository 
Receipts (as described in Nasdaq Rule 5705), and Managed Fund Shares 
(as described in Nasdaq Rule 5735). While the Funds may invest in 
inverse ETFs, the Funds will not invest in leveraged or inverse 
leveraged (e.g., 2X or -3X) ETFs.
    \11\ While the Funds may invest in inverse ETNs, the Funds will 
not invest in leveraged or inverse leveraged (e.g., 2X or -3X) ETNs.
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    Each Fund may invest in money market mutual funds that will be 
investment companies registered under the 1940 Act.
    Each Fund may invest in short-term debt instruments (described 
below) or it may hold cash. The percentage of each Fund invested in 
such instruments or held in cash will vary and will depend on several 
factors, including market conditions. Each Fund may invest in the 
following short-term debt instruments: \12\ (1) Fixed rate and floating 
rate U.S. government securities, including bills, notes and bonds 
differing as to maturity and rates of interest, which are either issued 
or guaranteed by the U.S. Treasury or by U.S. government agencies or 
instrumentalities; (2) certificates of deposit issued against funds 
deposited in a bank or savings and loan association; (3) bankers' 
acceptances, which are short-term credit instruments used to finance 
commercial transactions; (4) repurchase agreements,\13\ which involve 
purchases of debt securities; (5) bank time deposits, which are monies 
kept on deposit with banks or savings and loan associations for a 
stated period of time at a fixed rate of interest; and (6) commercial 
paper, which is short-term unsecured promissory notes.\14\
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    \12\ Short-term debt instruments will be issued by issuers 
having a long-term debt rating of at least BBB-/Baa3 by Standard & 
Poor's Ratings Services, a Division of The McGraw-Hill Companies, 
Inc. (``S&P Ratings''), Moody's Investors Service, Inc. 
(``Moody's'') or Fitch Ratings (``Fitch'') and will have a maturity 
of one year or less.
    \13\ Each Fund intends to enter into repurchase agreements only 
with financial institutions and dealers believed by the Adviser to 
present minimal credit risks in accordance with criteria approved by 
the Board of Trustees of the Trust (``Trust Board''). The Adviser 
will review and monitor the creditworthiness of such institutions. 
The Adviser will monitor the value of the collateral at the time the 
transaction is entered into and at all times during the term of the 
repurchase agreement.
    \14\ Each Fund may only invest in commercial paper rated A-1 or 
higher by S&P Ratings, Prime-1 or higher by Moody's or F1 or higher 
by Fitch.
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Investment Restrictions
    The Funds will not invest in derivative instruments.
    Each Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
deemed illiquid by the Adviser.\15\ Each Fund will monitor its 
portfolio liquidity on an ongoing basis to determine whether, in light 
of current circumstances, an adequate level of liquidity is being 
maintained, and will consider taking appropriate steps in order to 
maintain adequate liquidity if, through a change in values, net assets, 
or other circumstances, more than 15% of such Fund's net assets are 
held in illiquid assets. Illiquid assets include securities subject to 
contractual or other restrictions on resale and other instruments that 
lack readily available markets as determined in accordance with 
Commission staff guidance.\16\
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    \15\ In reaching liquidity decisions, the Adviser may consider 
the following factors: The frequency of trades and quotes for the 
security or other instrument; the number of dealers wishing to 
purchase or sell the security or other instrument and the number of 
other potential purchasers; dealer undertakings to make a market in 
the security or other instrument; and the nature of the security or 
other instrument and the nature of the marketplace in which it 
trades (e.g., the time needed to dispose of the security or other 
instrument, the method of soliciting offers and the mechanics of 
transfer).
    \16\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also Investment Company Act 
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) 
(Statement Regarding ``Restricted Securities''); Investment Company 
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) 
(Revisions of Guidelines to Form N-1A). A fund's portfolio security 
is illiquid if it cannot be disposed of in the ordinary course of 
business within seven days at approximately the value ascribed to it 
by the fund. See Investment Company Act Release No. 14983 (March 12, 
1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7 
under the 1940 Act); Investment Company Act Release No. 17452 (April 
23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under 
the Securities Act of 1933).
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    The Funds may not invest 25% or more of the value of their 
respective total assets in securities of issuers in any one industry. 
This restriction does not apply to (a) obligations issued or guaranteed 
by the U.S. government, its agencies or instrumentalities or (b) 
securities of other investment companies.\17\
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    \17\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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Creation and Redemption of Shares
    Each Fund will issue and redeem Shares on a continuous basis at net 
asset value (``NAV'') \18\ only in large blocks of Shares (``Creation 
Units'') in transactions with authorized participants, generally 
including broker-dealers and large institutional investors 
(``Authorized Participants''). Creation Units generally will consist of 
50,000 Shares, although this may change from time to time. Creation 
Units, however, are not expected to consist of less than 50,000 Shares. 
Each Fund will issue and redeem Creation Units in exchange for an in-
kind portfolio of instruments and/or cash in lieu of such instruments 
(the ``Creation Basket'').\19\ In addition, if there is a difference 
between the NAV attributable to a Creation Unit and the market value of 
the Creation Basket exchanged for the Creation Unit, the party 
conveying instruments (which may include cash-in-lieu amounts) with the 
lower value will pay to the other an amount in cash equal to the 
difference (referred to as the ``Cash Component'').
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    \18\ The NAV of each Fund's Shares generally will be calculated 
once daily Monday through Friday as of the close of regular trading 
on the New York Stock Exchange (``NYSE''), generally 4:00 p.m., 
Eastern Time (the ``NAV Calculation Time''). NAV per Share will be 
calculated by dividing a Fund's net assets by the number of Fund 
Shares outstanding.
    \19\ It is expected that each Fund will typically issue and 
redeem Creation Units on a cash basis; however, a Fund may, at 
times, issue and redeem Creation Units on an in-kind (or partially 
in-kind) basis.
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    Creations and redemptions must be made by or through an Authorized 
Participant that has executed an agreement that has been agreed to by 
the Distributor and BNY with respect to creations and redemptions of 
Creation Units. All standard orders to create Creation Units must be 
received by the transfer agent no later than the closing time of the 
regular trading session on the NYSE (ordinarily 4:00 p.m., Eastern 
Time) (the ``Closing Time'') in each case on the date such order is 
placed in order for the creation of Creation Units to be effected based 
on the NAV of Shares as next determined on such date after receipt of 
the order in proper form. Shares may be redeemed only in Creation Units 
at their NAV next determined after receipt not later than the Closing 
Time of a redemption request in proper form by a Fund through the 
transfer agent and only on a business day.
    The Funds' custodian, through the National Securities Clearing

[[Page 34410]]

Corporation, will make available on each business day, prior to the 
opening of business of the Exchange, the list of the names and 
quantities of the instruments comprising the Creation Basket, as well 
as the estimated Cash Component (if any), for that day. The published 
Creation Basket will apply until a new Creation Basket is announced on 
the following business day prior to commencement of trading in the 
Shares.
Net Asset Value
    Each Fund's NAV will be determined as of the close of regular 
trading on the NYSE on each day the NYSE is open for trading. If the 
NYSE closes early on a valuation day, the NAV will be determined as of 
that time. NAV per Share will be calculated for each Fund by taking the 
value of such Fund's total assets, including interest or dividends 
accrued but not yet collected, less all liabilities, including accrued 
expenses and dividends declared but unpaid, and dividing such amount by 
the total number of Shares outstanding. The result, rounded to the 
nearest cent, will be the NAV per Share. All valuations will be subject 
to review by the Trust Board or its delegate.
    The Funds' investments will be valued daily. As described more 
specifically below, investments traded on an exchange (i.e., a 
regulated market), will generally be valued at market value prices that 
represent last sale or official closing prices. In addition, as 
described more specifically below, non-exchange traded investments will 
generally be valued using prices obtained from third-party pricing 
services (each, a ``Pricing Service'').\20\
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    \20\ The Adviser may use various Pricing Services or discontinue 
the use of any Pricing Services, as approved by the Trust Board from 
time to time.
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    If, however, valuations for any of the Funds' investments cannot be 
readily obtained as provided in the preceding manner, or the Pricing 
Committee of the Adviser (the ``Pricing Committee'') \21\ questions the 
accuracy or reliability of valuations that are so obtained, such 
investments will be valued at fair value, as determined by the Pricing 
Committee, in accordance with valuation procedures (which may be 
revised from time to time) adopted by the Trust Board (the ``Valuation 
Procedures''), and in accordance with provisions of the 1940 Act. The 
Pricing Committee's fair value determinations may require subjective 
judgments about the value of an investment. The fair valuations attempt 
to estimate the value at which an investment could be sold at the time 
of pricing, although actual sales could result in price differences, 
which could be material.
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    \21\ The Pricing Committee will be subject to procedures 
designed to prevent the use and dissemination of material non-public 
information regarding each Fund's portfolio.
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    Certain securities in which a Fund may invest will not be listed on 
any securities exchange or board of trade. Such securities will 
typically be bought and sold by institutional investors in individually 
negotiated private transactions that function in many respects like an 
over-the-counter secondary market, although typically no formal market 
makers will exist. Certain securities, particularly debt securities, 
will have few or no trades, or trade infrequently, and information 
regarding a specific security may not be widely available or may be 
incomplete. Accordingly, determinations of the value of debt securities 
may be based on infrequent and dated information. Because there is less 
reliable, objective data available, elements of judgment may play a 
greater role in valuation of debt securities than for other types of 
securities.
    The information summarized below is based on the Valuation 
Procedures as currently in effect; however, as noted above, the 
Valuation Procedures are amended from time to time and, therefore, such 
information is subject to change.
    The following investments will typically be valued using 
information provided by a Pricing Service: Except as provided below, 
short-term U.S. government securities, commercial paper, and bankers' 
acceptances, all as set forth under ``Other Investments for the Funds'' 
(collectively, ``Short-Term Debt Instruments''). Debt instruments may 
be valued at evaluated mean prices, as provided by Pricing Services. 
Pricing Services typically value non-exchange-traded instruments 
utilizing a range of market-based inputs and assumptions, including 
readily available market quotations obtained from broker-dealers making 
markets in such instruments, cash flows, and transactions for 
comparable instruments. In pricing certain instruments, the Pricing 
Services may consider information about an instrument's issuer or 
market activity provided by the Adviser.
    Short-Term Debt Instruments having a remaining maturity of 60 days 
or less when purchased will typically be valued at cost adjusted for 
amortization of premiums and accretion of discounts, provided the 
Pricing Committee has determined that the use of amortized cost is an 
appropriate reflection of value given market and issuer-specific 
conditions existing at the time of the determination.
    Repurchase agreements will typically be valued as follows:
    Overnight repurchase agreements will be valued at amortized cost 
when it represents the best estimate of value. Term repurchase 
agreements (i.e., those whose maturity exceeds seven days) will be 
valued at the average of the bid quotations obtained daily from at 
least two recognized dealers.
    Certificates of deposit and bank time deposits will typically be 
valued at cost.
    Closed-End Funds, ETFs and ETNs that are listed on any exchange 
other than the Exchange will typically be valued at the last sale price 
on the exchange on which they are principally traded on the business 
day as of which such value is being determined. Closed-End Funds, ETFs 
and ETNs listed on the Exchange will typically be valued at the 
official closing price on the business day as of which such value is 
being determined. If there has been no sale on such day, or no official 
closing price in the case of securities traded on the Exchange, such 
securities will typically be valued using fair value pricing. Closed-
End Funds, ETFs and ETNs traded on more than one securities exchange 
will be valued at the last sale price or official closing price, as 
applicable, on the business day as of which such value is being 
determined at the close of the exchange representing the principal 
market for such securities.
    Money market mutual funds typically will be valued at their NAVs as 
reported by such funds' Pricing Services.
Availability of Information
    The Funds' Web site (www.ftportfolios.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Funds that may be downloaded. The Web site 
will include the Shares' ticker, CUSIP and exchange information along 
with additional quantitative information updated on a daily basis, 
including, for each Fund: (1) Daily trading volume, the prior business 
day's reported NAV and closing price, mid-point of the bid/ask spread 
at the time of calculation of such NAV (the ``Bid/Ask Price''),\22\ and 
a calculation of the premium and discount of the Bid/Ask Price against 
the NAV; and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily

[[Page 34411]]

Bid/Ask Price against the NAV, within appropriate ranges, for each of 
the four previous calendar quarters. On each business day, before 
commencement of trading in Shares in the Regular Market Session \23\ on 
the Exchange, each Fund will disclose on its Web site the identities 
and quantities of the portfolio of securities and other assets (the 
``Disclosed Portfolio'' as defined in Nasdaq Rule 5735(c)(2)) held by 
the Fund that will form the basis for the Fund's calculation of NAV at 
the end of the business day.\24\
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    \22\ The Bid/Ask Price of each Fund will be determined using the 
mid-point of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by each Fund and its service 
providers.
    \23\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 4 a.m. to 9:30 
a.m., Eastern Time; (2) Regular Market Session from 9:30 a.m. to 4 
p.m. or 4:15 p.m., Eastern Time; and (3) Post-Market Session from 4 
p.m. or 4:15 p.m. to 8 p.m., Eastern Time).
    \24\ Under accounting procedures to be followed by the Funds, 
trades made on the prior business day (``T'') will be booked and 
reflected in NAV on the current business day (``T+1''). Accordingly, 
a Fund will be able to disclose at the beginning of the business day 
the portfolio that will form the basis for the NAV calculation at 
the end of the business day.
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    On a daily basis, each Fund will disclose on its Web site the 
following information regarding each portfolio holding, as applicable 
to the type of holding: Ticker symbol, CUSIP number or other 
identifier, if any; a description of the holding (including the type of 
holding); quantity held (as measured by, for example, par value or 
number of shares or units); maturity date, if any; coupon rate, if any; 
effective date, if any; market value of the holding; and percentage 
weighting of the holding in the Fund's portfolio. The Web site 
information will be publicly available at no charge.
    In addition, for each Fund, an estimated value, defined in Rule 
5735(c)(3) as the ``Intraday Indicative Value,'' that reflects an 
estimated intraday value of the Fund's Disclosed Portfolio, will be 
disseminated. Moreover, the Intraday Indicative Value, available on the 
NASDAQ OMX Information LLC proprietary index data service,\25\ will be 
based upon the current value for the components of the Disclosed 
Portfolio and will be updated and widely disseminated by one or more 
major market data vendors and broadly displayed at least every 15 
seconds during the Regular Market Session. Premiums and discounts 
between the Intraday Indicative Value and the market price may occur. 
This should not be viewed as a ``real time'' update of the NAV per 
Share of a Fund, which is calculated only once a day.
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    \25\ Currently, the NASDAQ OMX Global Index Data Service 
(``GIDS'') is the Nasdaq global index data feed service, offering 
real-time updates, daily summary messages, and access to widely 
followed indexes and Intraday Indicative Values for ETFs. GIDS 
provides investment professionals with the daily information needed 
to track or trade Nasdaq indexes, listed ETFs, or third-party 
partner indexes and ETFs.
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    The dissemination of the Intraday Indicative Value, together with 
the Disclosed Portfolio, will allow investors to determine the value of 
the underlying portfolio of a Fund on a daily basis and will provide a 
close estimate of that value throughout the trading day.
    Investors will also be able to obtain each Fund's Statement of 
Additional Information (``SAI''), annual and semi-annual reports 
(together, ``Shareholder Reports''), and Form N-CSR and Form N-SAR, 
filed twice a year. Each Fund's SAI and Shareholder Reports will be 
available free upon request from such Fund, and those documents and the 
Form N-CSR and Form N-SAR may be viewed on-screen or downloaded from 
the Commission's Web site at www.sec.gov.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers. Quotation and last sale information for the 
Shares will be available via Nasdaq proprietary quote and trade 
services, as well as in accordance with the Unlisted Trading Privileges 
and the Consolidated Tape Association (``CTA'') plans for the Shares. 
Quotation and last sale information for the Closed-End Funds, ETFs and 
ETNs will be available from the exchanges on which they are traded as 
well as in accordance with any applicable CTA plans.
    Pricing information for Short-Term Debt Instruments, repurchase 
agreements, bank time deposits and certificates of deposit will be 
available from major broker-dealer firms and/or major market data 
vendors and/or Pricing Services. Pricing information for Closed-End 
Funds, ETFs and ETNs will be available from the applicable listing 
exchange (as indicated above) and from major market data vendors.
    Money market mutual funds are typically priced once each business 
day and their prices will be available through the applicable fund's 
Web site or from major market data vendors.
Initial and Continued Listing
    The Shares will be subject to Rule 5735, which sets forth the 
initial and continued listing criteria applicable to Managed Fund 
Shares. The Exchange represents that, for initial and continued 
listing, each Fund must be in compliance with Rule 10A-3 \26\ under the 
Act. A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange. The Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily and that the NAV and the Disclosed Portfolio 
will be made available to all market participants at the same time.
---------------------------------------------------------------------------

    \26\ See 17 CFR 240.10A-3.
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Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of a Fund. Nasdaq will halt trading in the Shares 
under the conditions specified in Nasdaq Rules 4120 and 4121, including 
the trading pauses under Nasdaq Rules 4120(a)(11) and (12).
    Trading may be halted because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) The extent to which trading is not 
occurring in the securities and/or the other assets constituting the 
Disclosed Portfolio of a Fund; or (2) whether other unusual conditions 
or circumstances detrimental to the maintenance of a fair and orderly 
market are present. Trading in the Shares also will be subject to Rule 
5735(d)(2)(D), which sets forth circumstances under which Shares of a 
Fund may be halted.
Trading Rules
    Nasdaq deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to Nasdaq's existing rules governing the 
trading of equity securities. Nasdaq will allow trading in the Shares 
from 4:00 a.m. until 8:00 p.m., Eastern Time. The Exchange has 
appropriate rules to facilitate transactions in the Shares during all 
trading sessions. As provided in Nasdaq Rule 5735(b)(3), the minimum 
price variation for quoting and entry of orders in Managed Fund Shares 
traded on the Exchange is $0.01.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by both Nasdaq and 
also the Financial Industry Regulatory Authority (``FINRA'') on behalf 
of the Exchange, which are designed to detect violations of Exchange 
rules and

[[Page 34412]]

applicable federal securities laws.\27\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and applicable federal securities laws.
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    \27\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares and the Closed-End Funds, ETFs and ETNs 
held by the Funds with other markets and other entities that are 
members of the Intermarket Surveillance Group (``ISG''),\28\ and FINRA 
may obtain trading information regarding trading in the Shares and such 
securities held by the Funds from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares and the Closed-End Funds, ETFs and ETNs held by the Funds from 
markets and other entities that are members of ISG, which includes 
securities exchanges, or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. Moreover, FINRA, on 
behalf of the Exchange, will be able to access, as needed, trade 
information for certain fixed income securities held by the Funds 
reported to FINRA's Trade Reporting and Compliance Engine (``TRACE'').
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    \28\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for a Fund may trade on markets that are members 
of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.
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    For each Fund, all of such Fund's net assets that are invested in 
Closed-End Funds, ETFs and ETNs will be invested in instruments that 
trade in markets that are members of ISG or are parties to a 
comprehensive surveillance sharing agreement with the Exchange.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. Specifically, the Information 
Circular for each Fund will discuss the following: (1) The procedures 
for purchases and redemptions of Shares in Creation Units (and that 
Shares are not individually redeemable); (2) Nasdaq Rule 2111A, which 
imposes suitability obligations on Nasdaq members with respect to 
recommending transactions in the Shares to customers; (3) how 
information regarding the Intraday Indicative Value and the Disclosed 
Portfolio is disseminated; (4) the risks involved in trading the Shares 
during the Pre-Market and Post-Market Sessions when an updated Intraday 
Indicative Value will not be calculated or publicly disseminated; (5) 
the requirement that members deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (6) trading information. The 
Information Circular will also discuss any exemptive, no-action and 
interpretive relief granted by the Commission from any rules under the 
Act.
    Additionally, the Information Circular for each Fund will reference 
that such Fund is subject to various fees and expenses described in the 
Registration Statement. The Information Circular for each Fund will 
also disclose the trading hours of the Shares of such Fund and the 
applicable NAV Calculation Time for the Shares. The Information 
Circular for each Fund will disclose that information about the Shares 
of such Fund will be publicly available on such Fund's Web site.
Continued Listing Representations
    All statements and representations made in this filing regarding 
(a) the description of the portfolios, (b) limitations on portfolio 
holdings or reference assets, or (c) the applicability of Exchange 
rules and surveillance procedures shall constitute continued listing 
requirements for listing the Shares on the Exchange.
    In addition, the issuer has represented to the Exchange that it 
will advise the Exchange of any failure by the Funds to comply with the 
continued listing requirements, and, pursuant to its obligations under 
Section 19(g)(1) of the Act, the Exchange will monitor for compliance 
with the continued listing requirements. If a Fund is not in compliance 
with the applicable listing requirements, the Exchange will commence 
delisting procedures under the Nasdaq 5800 Series.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b) 
of the Act, in general, and Section 6(b)(5) of the Act, in particular, 
in that it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and, in general, to protect 
investors and the public interest.
    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Nasdaq Rule 5735. The 
Exchange represents that trading in the Shares will be subject to the 
existing trading surveillances, administered by both Nasdaq and also 
FINRA on behalf of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities laws.
    The Adviser is not a broker-dealer, but it is affiliated with a 
broker-dealer, and is required to implement a ``fire wall'' with 
respect to its broker-dealer affiliate regarding access to information 
concerning the composition and/or changes to each Fund's portfolio. In 
addition, paragraph (g) of Nasdaq Rule 5735 further requires that 
personnel who make decisions on the open-end fund's portfolio 
composition must be subject to procedures designed to prevent the use 
and dissemination of material non-public information regarding the 
open-end fund's portfolio.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares and the Closed-End Funds, ETFs and ETNs 
held by the Funds with other markets and other entities that are 
members of ISG, and FINRA may obtain trading information regarding 
trading in the Shares and such securities held by the Funds from such 
markets and other entities.
    In addition, the Exchange may obtain information regarding trading 
in the Shares and the Closed-End Funds, ETFs and ETNs held by the Funds 
from markets and other entities that are members of ISG, which includes 
securities exchanges, or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. Moreover, FINRA, on 
behalf of the Exchange, will be able to access, as needed, trade 
information for certain fixed income securities held by the Funds 
reported to FINRA's TRACE. For

[[Page 34413]]

each Fund, all of such Fund's net assets that are invested in Closed-
End Funds, ETFs and ETNs will be invested in instruments that trade in 
markets that are members of ISG or are parties to a comprehensive 
surveillance sharing agreement with the Exchange.
    The investment objective of the CEF Income Opportunity Fund will be 
to seek to provide current income with a secondary emphasis on total 
return. The investment objective of the Municipal CEF Income 
Opportunity Fund will be to seek to provide current income. Under 
normal market conditions, (a) the CEF Income Opportunity Fund will seek 
to achieve its investment objective by investing at least 80% of its 
net assets (including investment borrowings) in a portfolio of Closed-
End Funds and (b) the Municipal CEF Income Opportunity Fund will seek 
to achieve its investment objective by investing at least 80% of its 
net assets (including investment borrowings) in a portfolio of 
municipal Closed-End Funds.
    The Funds will not invest in derivative instruments. Each Fund may 
hold up to an aggregate amount of 15% of its net assets in illiquid 
assets (calculated at the time of investment), deemed illiquid by the 
Adviser. Each Fund will monitor its portfolio liquidity on an ongoing 
basis to determine whether, in light of current circumstances, an 
adequate level of liquidity is being maintained, and will consider 
taking appropriate steps in order to maintain adequate liquidity if, 
through a change in values, net assets, or other circumstances, more 
than 15% of the Fund's net assets are held in illiquid assets. Illiquid 
assets include securities subject to contractual or other restrictions 
on resale and other instruments that lack readily available markets as 
determined in accordance with Commission staff guidance.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time.
    In addition, a large amount of information will be publicly 
available regarding the Funds and the Shares, thereby promoting market 
transparency. Moreover, the Intraday Indicative Value, available on the 
NASDAQ OMX Information LLC proprietary index data service, will be 
widely disseminated by one or more major market data vendors and 
broadly displayed at least every 15 seconds during the Regular Market 
Session. On each business day, before commencement of trading in Shares 
in the Regular Market Session on the Exchange, each Fund will disclose 
on its Web site the Disclosed Portfolio that will form the basis for 
the Fund's calculation of NAV at the end of the business day.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services, and 
quotation and last sale information for the Shares will be available 
via Nasdaq proprietary quote and trade services, as well as in 
accordance with the Unlisted Trading Privileges and the CTA plans for 
the Shares. Quotation and last sale information for the Closed-End 
Funds, ETFs and ETNs will be available from the exchanges on which they 
are traded as well as in accordance with any applicable CTA plans.
    Pricing information for Short-Term Debt Instruments, repurchase 
agreements, bank time deposits and certificates of deposit will be 
available from major broker-dealer firms and/or major market data 
vendors and/or Pricing Services. Pricing information for Closed-End 
Funds, ETFs and ETNs will be available from the applicable listing 
exchange (as indicated above) and from major market data vendors. Money 
market mutual funds are typically priced once each business day and 
their prices will be available through the applicable fund's Web site 
or from major market data vendors.
    Each Fund's Web site will include a form of the prospectus for such 
Fund and additional data relating to NAV and other applicable 
quantitative information. Trading in Shares of the Funds will be halted 
under the conditions specified in Nasdaq Rules 4120 and 4121 or because 
of market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable, and trading in the Shares will 
be subject to Nasdaq Rule 5735(d)(2)(D), which sets forth circumstances 
under which Shares of a Fund may be halted. In addition, as noted 
above, investors will have ready access to information regarding each 
Fund's holdings, the Intraday Indicative Value, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.
    Each Fund's investments will be valued daily. Investments traded on 
an exchange (i.e., a regulated market), will generally be valued at 
market value prices that represent last sale or official closing 
prices. Non-exchange traded investments will generally be valued using 
prices obtained from a Pricing Service. If, however, valuations for any 
of the Funds' investments cannot be readily obtained as provided in the 
preceding manner, or the Pricing Committee questions the accuracy or 
reliability of valuations that are so obtained, such investments will 
be valued at fair value, as determined by the Pricing Committee, in 
accordance with the Valuation Procedures and in accordance with 
provisions of the 1940 Act.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of actively managed exchange-traded products that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace.
    As noted above, FINRA, on behalf of the Exchange, will communicate 
as needed regarding trading in the Shares and the Closed-End Funds, 
ETFs and ETNs held by the Funds with other markets and other entities 
that are members of ISG, and FINRA may obtain trading information 
regarding trading in the Shares and such securities held by the Funds 
from such markets and other entities.
    In addition, the Exchange may obtain information regarding trading 
in the Shares and the Closed-End Funds, ETFs and ETNs held by the Funds 
from markets and other entities that are members of ISG, which includes 
securities exchanges, or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. Moreover, FINRA, on 
behalf of the Exchange, will be able to access, as needed, trade 
information for certain fixed income securities held by the Funds 
reported to FINRA's TRACE.
    Furthermore, as noted above, investors will have ready access to 
information regarding the Funds' holdings, the Intraday Indicative 
Value, the Disclosed Portfolio, and quotation and last sale information 
for the Shares. For each Fund, all of such Fund's net assets that are 
invested in Closed-End Funds, ETFs and ETNs will be invested in 
instruments that trade in markets that are members of ISG or are 
parties to a comprehensive surveillance sharing agreement with the 
Exchange.
    For the above reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

[[Page 34414]]

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that 
the proposed rule change will facilitate the listing and trading of 
additional types of actively managed exchange-traded funds that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as modified by Amendment No. 1, is consistent with the Act. 
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2016-071 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2016-071. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of Nasdaq. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2016-071 and should 
be submitted on or before June 21, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-12670 Filed 5-27-16; 8:45 am]
 BILLING CODE 8011-01-P


