Document ID: SEC-2016-0928-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC
Posted Date: 2016-05-31T04:00Z

[Federal Register Volume 81, Number 104 (Tuesday, May 31, 2016)]
[Notices]
[Pages 34419-34426]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12667]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77890; File No. SR-NASDAQ-2016-072])

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 
Amplify Dow Theory Forecasts Buy List ETF of Amplify ETF Trust

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 in 
Items I and II below, which Items have been prepared by Nasdaq. On May 
20, 2016, the Exchange filed Amendment No. 1 to the proposed rule 
change. The Commission is publishing this notice, as modified by 
Amendment No. 1 thereto, to solicit comments on the proposed rule 
change 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 Amplify Dow 
Theory Forecasts Buy List ETF (the ``Fund'') of Amplify ETF Trust (the 
``Trust'') under Nasdaq Rule 5735 (``Managed Fund Shares'').\3\ The 
shares of the 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); 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 and 
discussed any comments it received on 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.

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 the Fund 
under Nasdaq Rule 5735, which governs the listing and trading of 
Managed Fund Shares \4\ on the Exchange. The 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 
January 6, 2015.\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\ The 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. 31582 (April 28, 2015) (File No. 
812-14423) (the ``Exemptive Relief'').
    \6\ See Post-Effective Amendment No. 2 to Registration Statement 
on Form N 1A for the Trust, dated May 5, 2016 (File Nos. 333 207937 
and 811 23108). The descriptions of the Fund and the Shares 
contained herein are based, in part, on information in the 
Registration Statement.
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    Amplify Investments LLC will be the investment adviser 
(``Adviser'') to the Fund. The following will serve as investment sub-
advisers (each, a ``Sub-Adviser'') to the Fund: Horizon Investment 
Services, LLC (``Horizon'') and Penserra Capital Management LLC 
(``Penserra''). Quasar Distributors LLC

[[Page 34420]]

(the ``Distributor'') will be the principal underwriter and distributor 
of the Fund's Shares. U.S. Bancorp Fund Services LLC will act as the 
administrator, accounting agent, custodian and transfer agent to the 
Fund.
    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, each Sub-Adviser and their 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. Neither the Adviser nor 
any Sub-Adviser is a broker-dealer, although Penserra is affiliated 
with a broker-dealer.\8\ Penserra has implemented and will maintain a 
fire wall with respect to their respective broker-dealer affiliate 
regarding access to information concerning the composition and/or 
changes to the portfolio.
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    \8\ The Adviser and Horizon are not currently affiliated with a 
broker-dealer.
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    In addition, personnel who make decisions on the Fund's portfolio 
composition will be subject to procedures designed to prevent the use 
and dissemination of material non-public information regarding the 
Fund's portfolio. In the event (a) the Adviser or a Sub-Adviser 
registers as a broker-dealer, or becomes 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 the 
portfolio and will be subject to procedures designed to prevent the use 
and dissemination of material non-public information regarding such 
portfolio.
    The Fund intends to qualify each year as a regulated investment 
company (``RIC'') under Subchapter M of the Internal Revenue Code of 
1986, as amended.
Amplify Dow Theory Forecasts Buy List ETF
Principal Investments
    The investment objective of the Fund will be to seek long-term 
capital appreciation. Under normal market conditions,\9\ the Fund will 
seek to achieve its investment objective by investing at least 90% of 
its net assets (including investment borrowings) in companies included 
in the buy list (updated on a semi-weekly basis) (the ``Buy List'') of 
the Dow Theory Forecasts, an investment newsletter of Horizon 
Publishing Company, LLC, an affiliate of Horizon.
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    \9\ 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, the 
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, the Fund may not be able to achieve 
its investment objective. The Fund may adopt a defensive strategy 
when the Adviser or a Sub-Adviser believes securities in which the 
Fund normally invests have elevated risks due to political or 
economic factors and in other extraordinary circumstances.
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    In general, the Buy List includes 25 to 40 U.S. exchange-traded 
stocks. All of such stocks are large-cap or mid-cap and are selected 
based on a proprietary quantitative ranking system known as 
Quadrix[supreg]. Quadrix[supreg] ranks approximately 5,000 stocks and 
scores target stocks based on their operating momentum; valuation; 
long-term term track record and financial strength; earnings-estimate 
trends; and share-price performance.
    The Fund will seek diversification among the ten economic sectors 
of the U.S. stock market, and it is not anticipated that more than 45% 
of the portfolio will be invested in a single sector. Horizon will 
select the Fund's portfolio securities from the Buy List. Penserra will 
be responsible for implementing the Fund's investment program by, among 
other things, trading portfolio securities and performing related 
services, rebalancing the Fund's portfolio, and providing cash 
management services in accordance with the investment advice formulated 
by, and model portfolios delivered by, the Adviser and Horizon.
Other Investments
    The Fund may invest the remaining 10% of its net assets in short-
term debt securities and other short-term debt instruments (described 
below), as well as cash equivalents, or it may hold cash. The 
percentage of the Fund invested in such holdings or held in cash will 
vary and will depend on several factors, including market conditions. 
The Fund may invest in the following short-term debt instruments: \10\ 
(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,\11\ which involve purchases

[[Page 34421]]

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.\12\
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    \10\ Short-term debt instruments are issued by issuers having a 
long-term debt rating of at least A 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 have a maturity of one year or less.
    \11\ The 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.
    \12\ The 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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    The Fund may invest in the securities of other ETFs and non-
exchange listed open-end investment companies (referred to as ``mutual 
funds''), including money market funds,\13\ that, in each case, will be 
investment companies registered under the 1940 Act.
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    \13\ It is expected that any such mutual fund or ETF will invest 
primarily in short-term fixed income securities. 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 the Fund will be listed 
and traded in the U.S. on registered exchanges. The 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. In addition, the Fund may invest 
in the securities of certain other investment companies in excess of 
the limits imposed under the 1940 Act pursuant to an exemptive order 
that the Trust has obtained from the Commission. See Investment 
Company Act Release No. 30377 (February 5, 2013) (File No. 812-
13895). 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 Fund may invest in 
inverse ETFs, the Fund will not invest in leveraged or inverse 
leveraged (e.g., 2X or -3X) ETFs.
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Investment Restrictions
    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including securities deemed illiquid by the Adviser or a Sub-
Adviser.\14\ The 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.\15\
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    \14\ In reaching liquidity decisions, the Adviser and a Sub-
Adviser may consider the following factors: the frequency of trades 
and quotes for the security; the number of dealers wishing to 
purchase or sell the security and the number of other potential 
purchasers; dealer undertakings to make a market in the security; 
and the nature of the security and the nature of the marketplace in 
which it trades (e.g., the time needed to dispose of the security, 
the method of soliciting offers and the mechanics of transfer).
    \15\ 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 Fund may not invest 25% or more of the value of its total 
assets in securities of issuers in any one industry or group of 
industries (other than securities issued or guaranteed by the U.S. 
government, its agencies or instrumentalities, or securities of other 
investment companies), except that the Fund may invest 25% or more of 
the value of its total assets in securities of issuers in a group of 
industries to approximately the same extent that the Buy List includes 
the securities of a particular group of industries.\16\
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    \16\ 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). As indicated above, it is not anticipated 
that more than 45% of the portfolio will be invested in a single 
sector.
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    All of the Fund's net assets that are invested in exchange-traded 
equity securities (including common stocks and ETFs) will be invested 
in securities that are listed on a U.S. exchange.\17\
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    \17\ The Fund will not invest in OTC secondary market 
securities.
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    The Fund will not invest in derivative instruments. The Fund's 
investments will be consistent with its investment objective and will 
not be used to enhance leverage.
Creation and Redemption of Shares
    The Fund will issue and redeem Shares on a continuous basis at net 
asset value (``NAV'') 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.
    As described in the Registration Statement and consistent with the 
Exemptive Relief, the 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''). 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 with the lower value will pay to the 
other an amount in cash equal to the difference (referred to as the 
``Balancing Amount'').
    Creations and redemptions must be made by or through an Authorized 
Participant that has executed an agreement with the Distributor with 
respect to creations and redemptions of Creation Units. All standard 
orders to create Creation Units must be received by the Distributor no 
later than the close of the regular trading session on the New York 
Stock Exchange (``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 the Fund and only on a 
business day.
    Each business day, before the open of trading on the Exchange, the 
Fund will cause to be published through the National Securities 
Clearing Corporation the names and quantities of the instruments 
comprising the Creation Basket, as well as the estimated Balancing 
Amount (if any), for that day. The published Creation Basket will apply 
until a new Creation Basket is announced on the following business day.
Net Asset Value
    The 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 the Fund by taking the 
value of the 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

[[Page 34422]]

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 Fund's 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'').\18\ If, however, valuations for 
any of the Fund's investments cannot be readily obtained as provided in 
the preceding manner, or the Pricing Committee of the Adviser (the 
``Pricing Committee'') \19\ 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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    \18\ 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.
    \19\ The Pricing Committee will be subject to procedures 
designed to prevent the use and dissemination of material non-public 
information regarding the Fund's portfolio.
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    Certain securities in which the 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 (``OTC'') 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.
    Equity securities (including other ETFs) listed on a securities 
exchange, market or automated quotation system for which quotations are 
readily available (except for securities traded on NASDAQ) will be 
valued at the last reported sale price on the primary exchange or 
market on which they are traded on the valuation date (or at 
approximately 4:00 p.m., E.T. if a security's primary exchange is 
normally open at that time). For a security that trades on multiple 
exchanges, the primary exchange will generally be considered to be the 
exchange on which the security generally has the highest volume of 
trading activity. If it is not possible to determine the last reported 
sale price on the relevant exchange or market on the valuation date, 
the value of the security will be taken to be the most recent mean 
between the bid and asked prices on such exchange or market on the 
valuation date. Absent both bid and asked prices on such exchange, the 
bid price may be used. For securities traded on NASDAQ, the official 
closing price will be used. If such prices are not available, the 
security will be valued based on values supplied by independent brokers 
or by fair value pricing, as described below.
    Open-end investment companies other than ETFs will be valued at 
NAV.
    Except as provided below, short-term U.S. government securities, 
commercial paper, and bankers' acceptances, all as set forth under 
``Other Investments'' (collectively, ``Short-Term Debt Instruments'') 
will typically be valued using information provided by a Pricing 
Service. 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.
    Certificates of deposit and bank time deposits will typically be 
valued at cost.
    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.
Availability of Information
    The Fund's Web site, www.amplifyetfs.com, which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund 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 the 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''),\20\ 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 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 \21\ on the 
Exchange, the 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.\22\
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    \20\ The Bid/Ask Price of the 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 the Fund and its service 
providers.
    \21\ 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).
    \22\ Under accounting procedures to be followed by the Fund, 
trades made on the prior business day (``T'') will be booked and 
reflected in NAV on the current business day (``T+1''). Accordingly, 
the 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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[[Page 34423]]

    On a daily basis, the Fund will disclose on the Fund's 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); the identity of the security or other asset or instrument 
underlying the holding, if any; quantity held (as measured by, for 
example, par value, notional value or number of shares, contracts 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 the 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,\23\ 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. The Intraday Indicative 
Value will be based on quotes and closing prices from the securities' 
local market and may not reflect events that occur subsequent to the 
local market's close. 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 the Fund, 
which is calculated only once a day.
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    \23\ Currently, the NASDAQ OMX Global Index Data Service 
(``GIDS'') is the NASDAQ OMX 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 OMX 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 the 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 the Fund's Statement of 
Additional Information (``SAI''), the Fund's annual and semi-annual 
reports (together, ``Shareholder Reports''), and its Form N-CSR and 
Form N-SAR, filed twice a year. The Fund's SAI and Shareholder Reports 
will be available free upon request from the 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 U.S. exchange-traded equity 
securities (including common stocks and ETFs) will be available from 
the exchanges on which they are traded as well as in accordance with 
any applicable CTA plans.
    Open-end investment companies (other than ETFs) 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.
    Pricing information for Short-Term Debt Instruments, repurchase 
agreements, certificates of deposit and bank time deposits will be 
available from major broker-dealer firms and/or major market data 
vendors and/or Pricing Services.
    Additional information regarding the Fund and the Shares, including 
investment strategies, risks, creation and redemption procedures, fees, 
Fund holdings disclosure policies, distributions and taxes will be 
included in the Registration Statement.
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, the Fund must be in compliance with Rule 10A-3 \24\ 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.
---------------------------------------------------------------------------

    \24\ 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 the 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 the 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 the 
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 applicable federal securities laws.\25\ 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.
---------------------------------------------------------------------------

    \25\ 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.
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    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns,

[[Page 34424]]

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 exchange-traded securities and 
instruments held by the Fund (including common stocks and ETFs) with 
other markets and other entities that are members of the Intermarket 
Surveillance Group (``ISG''),\26\ and FINRA may obtain trading 
information regarding trading in the Shares and such exchange-traded 
securities and instruments held by the Fund from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares and the exchange-traded securities and 
instruments held by the Fund 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.
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    \26\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
---------------------------------------------------------------------------

    All of the Fund's net assets that are invested in exchange-traded 
equity securities (including common stocks and ETFs) will be invested 
in securities 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 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 will reference that the Fund 
is subject to various fees and expenses described in the Registration 
Statement. The Information Circular will also disclose the trading 
hours of the Shares of the Fund and the applicable NAV calculation time 
for the Shares. The Information Circular will disclose that information 
about the Shares of the Fund will be publicly available on the Fund's 
Web site.
Continued Listing Representations
    All statements and representations made in this filing regarding 
(a) the description of the portfolio, (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 Fund 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 the 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.
    Neither the Adviser nor any Sub-Adviser is a broker-dealer, 
although Penserra is affiliated with a broker-dealer and is required to 
implement a ``fire wall'' with respect to such broker-dealer affiliate 
regarding access to information concerning the composition and/or 
changes to the Fund's portfolio. The Adviser and Horizon are not 
currently affiliated with a broker-dealer. 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 exchange-traded securities and 
instruments held by the Fund (including common stocks and ETFs) with 
other markets and other entities that are members of ISG, and FINRA may 
obtain trading information regarding trading in the Shares and such 
exchange-traded securities held by the Fund from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares and the exchange-traded securities and 
instruments held by the Fund 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 Fund reported to FINRA's TRACE.
    All of the Fund's net assets that are invested in exchange-traded 
equity securities (including common stocks and ETFs) will be invested 
in securities 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 Fund will be to seek long-term 
capital appreciation. Under normal market conditions, the Fund will 
seek to achieve its investment objective by investing at least 90% of 
its net assets (including investment borrowings) in

[[Page 34425]]

companies included in the Buy List of the Dow Theory Forecasts, an 
investment newsletter of an affiliate of the Horizon. The Fund will not 
invest in derivative instruments. The Fund may hold up to an aggregate 
amount of 15% of its net assets in illiquid assets (calculated at the 
time of investment), including securities deemed illiquid by the 
Adviser or a Sub-Adviser.
    The 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 Fund 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, the 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. Pricing information for exchange-traded common stocks and 
ETFs will be available from the applicable listing exchange and from 
major market data vendors.
    Pricing information for Short-Term Debt Instruments, repurchase 
agreements, certificates of deposit and bank time deposits will be 
available from major broker-dealer firms and/or major market data 
vendors and/or Pricing Services. Open-end investment companies (other 
than ETFs) 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.
    The Fund's Web site will include a form of the prospectus for the 
Fund and additional data relating to NAV and other applicable 
quantitative information. Trading in Shares of the Fund 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 the Fund may be halted. In addition, as noted 
above, investors will have ready access to information regarding the 
Fund's holdings, the Intraday Indicative Value, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.
    In calculating its NAV, the Fund generally will value its 
investment portfolio at market price. If market prices are not readily 
available or the Fund reasonably believes they are unreliable, such as 
in the case of a security value that has been materially affected by 
events occurring after the relevant market closes, the Fund will price 
those securities at fair value as determined using methods approved by 
the Trust Board.
    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 
an additional type of actively-managed exchange-traded product 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 exchange-traded 
securities and instruments held by the Fund (including common stocks 
and ETFs) with other markets and other entities that are members of 
ISG, and FINRA may obtain trading information regarding trading in the 
Shares and such exchange-traded securities held by the Fund from such 
markets and other entities.
    In addition, the Exchange may obtain information regarding trading 
in the Shares and the exchange-traded securities and instruments held 
by the Fund 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 Fund 
reported to FINRA's TRACE. Furthermore, as noted above, investors will 
have ready access to information regarding the Fund's holdings, the 
Intraday Indicative Value, the Disclosed Portfolio, and quotation and 
last sale information for the Shares.
    For the above reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

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 an 
additional type of actively-managed exchange-traded fund 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.

[[Page 34426]]

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 thereto, 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-2016-072 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street NE., Washington, DC 20549-9303.

All submissions should refer to File Number SR-NASDAQ-2016-072. 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-2016-072 and should be submitted 
on or before June 21, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-12667 Filed 5-27-16; 8:45 am]
 BILLING CODE 8011-01-P