Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Reflect a Change to the Investment Objective and the Underlying Index for the Horizons S&P 500 Covered Call ETF, 57635-57639 [2017-26223]

Download as PDF Federal Register / Vol. 82, No. 233 / Wednesday, December 6, 2017 / Notices immediately to demonstrate their qualification for initial listing. The proposed 30 day period will relate only to a company’s ability to demonstrate its compliance with the holders requirement, as a company’s compliance with the earnings or global market capitalization and stock price requirements will be apparent at the time of consummation of the Business Combination. This proposed change is consistent with the protection of investors and the public interest, as it does not alter the substantive quantitative requirements a company must meet to remain listed. 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 purpose of the proposed rule is to adopt initial and continued listing standards for Acquisition Companies that better reflect the characteristics and trading market for Acquisition Companies. While the rule may permit more Acquisition Companies to list, or remain listed, on the Exchange, other exchanges could adopt similar rules to compete for such listings. As such, the Exchange does not believe it imposes any burden on competition. daltland on DSKBBV9HB2PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. 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 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 the 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 is consistent with the Act. VerDate Sep<11>2014 18:07 Dec 05, 2017 Jkt 244001 Comments may be submitted by any of the following methods: 57635 SECURITIES AND EXCHANGE COMMISSION 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– NYSE–2017–53 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSE–2017–53. 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 the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSE–2017–53 and should be submitted on or before December 27, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Eduardo A. Aleman, Assistant Secretary. [Release No. 34–82190; File No. SR– NYSEArca–2017–123] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Reflect a Change to the Investment Objective and the Underlying Index for the Horizons S&P 500 Covered Call ETF November 30, 2017. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on November 22, 2017, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to reflect a change to the investment objective and the underlying index for the Horizons S&P 500® Covered Call ETF, shares of which are currently listed and trading on the Exchange under NYSE Arca Rule 5.2–E(j)(3). The proposed change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, 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, the self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. [FR Doc. 2017–26220 Filed 12–5–17; 8:45 am] BILLING CODE 8011–01–P 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 18 17 PO 00000 CFR 200.30–3(a)(12). Frm 00067 Fmt 4703 Sfmt 4703 E:\FR\FM\06DEN1.SGM 06DEN1 57636 Federal Register / Vol. 82, No. 233 / Wednesday, December 6, 2017 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose daltland on DSKBBV9HB2PROD with NOTICES The Exchange proposes to make certain changes relating to the investment objective, the underlying index and the investments of the Horizons S&P 500 Covered Call ETF (the ‘‘Fund’’), shares (‘‘Shares’’) of which are currently listed and trading on the Exchange under NYSE Arca Rule 5.2– E(j)(3) (Investment Company Units or ‘‘Units’’).4 Shares of the Fund currently are listed and traded on the Exchange.5 The Shares are offered by Horizons ETF Trust I (the ‘‘Trust’’), which is organized as a Delaware statutory trust and is registered with the Commission as an open-end management investment company.6 The investment adviser to the Fund is Horizons ETFs Management (US) LLC (‘‘Adviser’’).7 Foreside Fund Services, 4 An Investment Company Unit is a security that represents an interest in a registered investment company that holds securities comprising, or otherwise based on or representing an interest in, an index or portfolio of securities (or holds securities in another registered investment company that holds securities comprising, or otherwise based on or representing an interest in, an index or portfolio of securities). See NYSE Arca Rule 5.2–E(j)(3)(A). 5 The Commission issued notice of a proposed rule change to permit listing and trading of Shares of the Fund in Securities Exchange Act Release Nos. 68351 (December 4, 2012), 77 FR 73500 (December 10, 2012) (SR–NYSEArca–2012–131) (Notice of Filing of Proposed Rule Change Relating to Listing and Trading of Shares of the Horizons S&P 500 Covered Call ETF, Horizons S&P Financial Select Sector Covered Call ETF, and Horizons S&P Energy Select Sector Covered Call ETF under NYSE Arca Equities Rule 5.2(j)(3)) (‘‘Prior Notice’’); 68708 (January 23, 2013), 78 FR 6161 (January 29, 2013) (SR–NYSEArca–2012–131) (Order Approving Proposed Rule Change Relating to Listing and Trading of Shares of the Horizons S&P 500 Covered Call ETF, Horizons S&P Financial Select Sector Covered Call ETF, and Horizons S&P Energy Select Sector Covered Call ETF under NYSE Arca Equities Rule 5.2(j)(3)) (‘‘Prior Order’’ and, together with the Prior Notice, the ‘‘Prior Release’’). 6 The Trust is registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’). On September 25, 2017, the Trust filed with the Commission an amendment to its Form N–1A under the Securities Act of 1933 (15 U.S.C. 77a), and under the 1940 Act relating to the Fund (File Nos. 333–183155 and 811–22732) (‘‘Registration Statement’’). The description of the operation of the Trust and the Fund herein is based, in part, on the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Recon Capital Series Trust (subsequently renamed Horizons ETF Trust I), et al, under the 1940 Act. See Investment Company Act Release No. 31961 (February 9 [sic], 2016) (File No. 812–14461) (‘‘Exemptive Order’’). 7 The Adviser is not registered as a broker-dealer and is affiliated with two broker-dealers and has implemented and will maintain a fire wall with respect to its broker-dealer affiliates regarding VerDate Sep<11>2014 18:07 Dec 05, 2017 Jkt 244001 LLC (the ‘‘Distributor’’) is the principal underwriter and distributor of the Fund’s Shares. U.S. Bank, N.A. serves as custodian for the Fund. The Bank of New York Mellon serves as subcustodian for the Fund. U.S. Bancorp Fund Services, LLC serves as the transfer agent and administrator for the Fund.8 As described in the Prior Notice, the Fund seeks investment results that, before fees and expenses, generally correspond to the performance of the S&P 500 Stock Covered Call Index (‘‘Underlying Index’’) provided by S&P Dow Jones Indices LLC (the ‘‘Index Provider’’).9 The Underlying Index is access to information concerning the portfolio holdings of the Fund. In the event (a) the Adviser becomes registered as a broker-dealer or newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser is or becomes affiliated with a broker-dealer, it will implement and maintain a fire wall with respect to its relevant personnel or its broker-dealer affiliate regarding access to information concerning the portfolio holdings of the Fund, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. 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. 8 The entities serving as the Trust, custodian and transfer agent for the Fund have changed from those identified in the Prior Release. The investment adviser to the Fund, Horizons ETFs Management (US) LLC, also has changed from the adviser identified in the Prior Release. The Adviser previously served as sub-adviser to the Fund, as stated in the Prior Release. The services provided by these entities are not changing from those described in the Prior Release. 9 The Underlying Index and ‘‘New Underlying Index’’ (as defined below) are provided by the Index Provider, which is unaffiliated with the Fund or the Adviser. The Index Provider maintains, calculates and publishes information regarding the Underlying Index and New Underlying Index. The Index Provider is not a broker-dealer and is not affiliated with a broker-dealer and has implemented procedures designed to prevent the use and dissemination of material, non-public information regarding the Underlying Index and New Underlying Index. PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 comprised of all the equity securities in the S&P 500 Index (the ‘‘Reference Index’’) and a short (written) call option on each of the options-eligible securities in the Reference Index that meet, among others, stock and option price criteria of the Underlying Index methodology.10 The Exchange proposes to reflect a change to the investment objective and the underlying index for the Fund. Going forward, the Fund will seek investment results that, before fees and expenses, generally correspond to the performance of the CBOE S&P 500 2% OTM BuyWrite Index (‘‘New Underlying Index’’). The New Underlying Index does not meet the ‘‘generic’’ listing requirements of Commentary .01(a)(A) to NYSE Arca Rule 5.2–E(j)(3) applicable to the listing of Units based upon an index of US Component Stocks. Specifically, NYSE Arca Rule 5.2–E(j)(3) provides that the term ‘‘US Component Stock’’ shall mean an equity security that is registered under Sections 12(b) or 12(g) of the Act or an American Depositary Receipt, the underlying equity security of which is registered under Sections 12(b) or 12(g) of the Act. Commentary .01(a)(A) to NYSE Arca Rule 5.2–E(j)(3) sets forth the requirements to be met by components of an index or portfolio of US Component Stocks.11 The New Underlying Index consists of the constituent securities of the S&P 500 Index. The New Underlying Index meets and will continue to meet all requirements of NYSE Arca Rule 5.2– E(j)(3) and Commentary .01(a)(A) thereto except that the New Underlying Index includes a call option, which is not an NMS Stock as defined in Rule 600 of Regulation NMS. As described below, the New Underlying Index consists of long positions in securities in the Reference Index and a single out10 The Underlying Index and New Underlying Index methodologies are available at http:// us.spindices.com/indices/strategy/sp-500-stockcovered-call-index and https://www.cboe.com/ products/strategy-benchmark-indexes/buywriteindexes/cboe-s-p-500-2-otm-buywrite-index-bxy, respectively. The New Underlying Index uses the same methodology as the widely accepted CBOE S&P 500 BuyWrite Index (BXM) but the New Underlying Index is calculated using out-of-themoney S&P 500 Index (SPX) call options, rather than at-the-money SPX call options. For additional information regarding the Underlying Index, see the Prior Release. 11 Commentary .01(a)(A) to NYSE Arca Rule 5.2– E(j)(3) provides that components of an index or portfolio of U.S. Component Stocks underlying a series of Units listed pursuant to Rule 19b–4(e) under the Act must meet specified criteria on an initial and continued listing basis. Commentary .01(a)(A)(5) to NYSE Arca Rule 5.2–E(j)(3) states that all securities in the index or portfolio shall be U.S. Component Stocks listed on a national securities exchange and shall be NMS Stocks as defined in Rule 600 of Regulation NMS under the Act. E:\FR\FM\06DEN1.SGM 06DEN1 Federal Register / Vol. 82, No. 233 / Wednesday, December 6, 2017 / Notices of-the-money call option written on the S&P 500 Index.12 All securities in the Reference Index are listed and traded on a U.S. national securities exchange. The option on the Reference Index is traded on a U.S. national options exchange. Notwithstanding that the New Underlying Index does not meet the requirement of Commentary .01(a)(A)(5) to NYSE Arca Rule 5.2–E(j)(3), the Exchange believes that the New Underlying Index is sufficiently broadbased to deter potential manipulation in that the Reference Index stocks are among the most actively traded, highly capitalized stocks traded in the U.S. The market value of the call option will not represent more than 10% of the total weight of the New Underlying Index. Horizons S&P 500 Covered Call ETF According to the Registration Statement, the Fund is an index fund that will employ a ‘‘passive management’’ investment strategy in seeking to achieve its objective of providing investment results that generally correspond to the performance of the New Underlying Index. The New Underlying Index is comprised of two parts: (1) All the equity securities in the Reference Index (i.e., the S&P 500 Index) in substantially similar weight as the Reference Index 13; and (2) a single short (written) call option on the S&P 500 Index. The Fund will invest at least 80% of its total assets in securities that comprise its New Underlying Index. daltland on DSKBBV9HB2PROD with NOTICES The New Underlying Index The New Underlying Index measures the performance of a hypothetical portfolio that employs a covered call strategy.14 A covered call strategy is generally considered to be an investment strategy in which an investor buys a security, and sells (or ‘‘writes’’) a call option on that security in an attempt to generate more income. The ‘‘premium’’ paid by the buyer of the option provides income in addition to the security’s dividends or other 12 An ‘‘out-of-the-money’’ call option is one in which the exercise (or ‘‘strike’’) price of the option is above the market price of the security. 13 The Reference Index is a float-adjusted market capitalization weighted index containing equity securities of 500 industrial, information technology, utility and financial companies among other Global Industry Classification Standard (‘‘GICS®’’) sectors, regarded as generally representative of the U.S. stock market. A float-adjusted market capitalization weighted index weights each index component according to its market capitalization, using the number of shares that are readily available for purchase on the open market. 14 Information regarding the New Underlying Index is available at the new Web site identified in note 9, supra, [sic] which is different than the Web site for the Underlying Index methodology identified in the Prior Release. VerDate Sep<11>2014 18:07 Dec 05, 2017 Jkt 244001 distributions. The New Underlying Index consists of long positions in securities in the Reference Index and an out-of-the-money call option written on the S&P 500 Index. This option is written (sold) systematically on the monthly option writing date of the New Underlying Index. The Operation of the Fund The Fund, in return for the option premium, will write call options that give the purchaser the right to receive a cash payment equal to any positive difference between the value of the security and the exercise (or ‘‘strike’’) price on the expiration date of the option. Each month the Fund will write a single out-of-the-money call option on the Reference Index as determined on the monthly option writing date of the New Underlying Index in accordance with the New Underlying Index methodology. Such short option position would be reflected in the Fund’s portfolio as a negative cash balance. The Fund generally will use a replication methodology, meaning it will invest in all of the securities comprising the New Underlying Index in proportion to the weightings in the New Underlying Index. The Fund will seek correlation between the Fund’s performance, before fees and expenses, and that of the New Underlying Index of 0.95 or better. A figure of 1.00 would represent perfect correlation. Under normal market conditions,15 the Fund will invest at least 80% of its total assets in the securities included in the New Underlying Index. The Adviser anticipates that, generally, the Fund will hold all of the securities that comprise the New Underlying Index in proportion to their weightings in such index. However, from time to time, the Fund may utilize a sampling methodology under various circumstances where it may not be possible or practicable to purchase all of the equity securities and write (sell) the call option comprising the New Underlying Index. The option in the New Underlying Index will be traded on national securities exchanges. Purely for informational purposes, as of September 29, 2017, the Reference Index and New Underlying Index included common stocks of 505 companies, with a market capitalization range of between approximately $2.7 billion and $796.1 billion. As of that date, the New Underlying Index also included a single 15 The term ‘‘normal market conditions’’ for these purposes will have the same meaning as the term defined in NYSE Arca Rule 8.600–E(c)(5). PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 57637 short (written) call option on the Reference Index. The Exchange represents that the listing standards under NYSE Arca Rules 5.2–E(j)(3) and 5.5–E(g)(2) applicable to Units shall apply to the Shares. In addition, the Exchange represents that the Fund and the Shares will comply with all other requirements applicable to Units including, but not limited to, requirements relating to the dissemination of key information such as the value of the New Underlying Index, IIV, and NAV, rules governing the trading of equity securities, trading hours, trading halts, surveillance, information barriers and Information Bulletin to Equity Trading Permit Holders (‘‘ETP Holders’’), as set forth in Exchange rules applicable to Units and prior Commission orders approving the generic listing rules applicable to the listing and trading of Units.16 Surveillance The Exchange represents that trading in the Shares will be subject to the existing trading surveillances administered by the Exchange, as well as cross-market surveillances administered by 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.17 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. 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. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares, equity securities 16 See, e.g., Securities Exchange Act Release No. 44551 (July 12, 2001), 66 FR 37716 (July 19, 2001) (SR–PCX–2001–14) (order approving generic listing standards for ICUs and Portfolio Depositary Receipts); Securities Exchange Act Release No. 41983 (October 6, 1999), 64 FR 56008 (October 15, 1999) (SR–PCX–98–29) (order approving rules for listing and trading of ICUs). 17 FINRA conducts cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. E:\FR\FM\06DEN1.SGM 06DEN1 57638 Federal Register / Vol. 82, No. 233 / Wednesday, December 6, 2017 / Notices daltland on DSKBBV9HB2PROD with NOTICES and options with other markets and other entities that are members of the Intermarket Surveillance Group (‘‘ISG’’), and the Exchange or FINRA, on behalf of the Exchange, or both, may obtain trading information regarding trading such securities and financial instruments from such markets and other entities. In addition, the Exchange may obtain information regarding trading in such securities from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.18 In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. All statements or representations contained in this filing regarding (a) the description of the New Underlying Index, portfolio or reference asset, (b) limitations on the New Underlying Index or portfolio holdings or reference assets, or (c) the applicability of Exchange listing rules specified in such rule filing will constitute continued listing requirements for listing the Shares on the Exchange. The issuer must notify 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 NYSE Arca Rule 5.5– E(m). Pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. Except for the changes noted above, all other representations made in the Prior Release remain unchanged. Except as otherwise referenced in this proposed rule change, all representations made in the Prior Release pertaining to the Underlying Index shall continue to apply to the New Underlying Index. 2. Statutory Basis The basis under the Exchange Act for this proposed rule change is the requirement under Section 6(b)(5) 19 that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of 18 For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all holdings of the Fund may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. 19 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 18:07 Dec 05, 2017 Jkt 244001 trade, 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 continue to be listed and traded on the Exchange pursuant to the listing criteria in NYSE Arca Rule 5.2–E(j)(3). The Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. The Adviser is not registered as a brokerdealer and is affiliated with two brokerdealers and has implemented and will maintain a fire wall with respect to its broker-dealer affiliates regarding access to information concerning the portfolio holdings of the Fund. In the event (a) the Adviser becomes registered as or newly affiliated with a broker-dealer, or (b) any new adviser becomes registered as or newly affiliated with a brokerdealer, it will implement and maintain a fire wall with respect to such brokerdealer regarding access to information concerning the portfolio holdings of the Fund, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. The Index Provider is not a brokerdealer and is not affiliated with a broker-dealer and has implemented procedures designed to prevent the use and dissemination of material, nonpublic information regarding the New Underlying Index. All securities in the Reference Index are listed and traded on a U.S. national securities exchange. The option on the Reference Index is traded on a U.S. national options exchange. The Reference Index’s stocks are among the most actively traded, highly capitalized stocks traded in the U.S. The market value of the call option will not represent more than 10% of the total weight of the New Underlying Index. The New Underlying Index is similar to the Underlying Index, the difference being that the Underlying Index includes a short (written) call option on each of the options-eligible securities in the Reference Index as described above, whereas the New Underlying Index includes a single short (written) call option on the S&P 500 Index. The Exchange does not view the proposed index change as providing a material change to the Fund’s investment objective or to the investment strategies, risks or returns of the Fund. Except for the changes noted above, all other PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 representations made in the Prior Release remain unchanged. Except as otherwise referenced in this proposed rule change, all representations made in the Prior Release pertaining to the Underlying Index shall continue to apply to the New Underlying Index. 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 purpose of the Act. The proposed rule change will enhance competition among exchange-traded fund issuers by permitting trading of shares of Units based on another underlying index that is not currently the underlying index for a series of Units. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 20 and Rule 19b–4(f)(6) thereunder.21 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 22 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 23 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission believes that 20 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 22 17 CFR 240.19b–4(f)(6). 23 17 CFR 240.19b–4(f)(6)(iii). 21 17 E:\FR\FM\06DEN1.SGM 06DEN1 Federal Register / Vol. 82, No. 233 / Wednesday, December 6, 2017 / Notices waiving the 30-day operative delay is consistent with the protection of investors and the public interest. According to the Exchange, waiver of the 30-day operative delay would permit the timely implementation of Fund efficiencies resulting from tracking an index that requires the writing of a single option on the Reference Index, instead of writing options on multiple options-eligible securities in the Reference Index. In addition, the Commission believes that the proposal does not raise unique or novel regulatory issues. Therefore, the Commission hereby waives the 30-day operative delay and designates the proposal operative upon filing.24 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or 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 is consistent with the Act. Comments may be submitted by any of the following methods: daltland on DSKBBV9HB2PROD with NOTICES 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– NYSEArca–2017–123 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–NYSEArca–2017–123. 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 24 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). VerDate Sep<11>2014 18:07 Dec 05, 2017 Jkt 244001 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 the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSEArca–2017–123 and should be submitted on or before December 27, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Eduardo A. Aleman Assistant Secretary. [FR Doc. 2017–26223 Filed 12–5–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82189; File No. SR–FINRA– 2017–034] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Trade Reporting Facility Limited Liability Company Agreements November 30, 2017. 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 November 21, 2017, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and 25 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 57639 III below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as concerned solely with the administration of the self-regulatory organization under Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(3) thereunder,4 which renders the proposal effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change FINRA is proposing to make technical changes to FINRA’s Trade Reporting Facility limited liability company agreements, as they appear in the FINRA Manual, to reflect the second amendment and restatement of such agreements. The text of the proposed rule change is available on FINRA’s Web site at http://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA 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 FINRA Trade Reporting Facilities (‘‘TRFs’’) are facilities that FINRA members use to report over-the-counter (‘‘OTC’’) transactions in NMS stocks in accordance with FINRA rules. There currently are two TRFs: The FINRA/ Nasdaq TRF and the FINRA/NYSE TRF.5 The operation of each TRF is 3 15 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(3). 5 The establishment of each TRF was subject to a proposed rule change filed with the Commission. See Securities Exchange Act Release No. 54084 (June 30, 2006), 71 FR 38935 (July 10, 2006) (Order Approving File No. SR–NASD–2005–087); and Securities Exchange Act Release No. 55325 (February 21, 2007), 72 FR 8820 (February 27, 2007) 4 17 Continued E:\FR\FM\06DEN1.SGM 06DEN1

Agencies

[Federal Register Volume 82, Number 233 (Wednesday, December 6, 2017)]
[Notices]
[Pages 57635-57639]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26223]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82190; File No. SR-NYSEArca-2017-123]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Reflect a Change 
to the Investment Objective and the Underlying Index for the Horizons 
S&P 500 Covered Call ETF

November 30, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on November 22, 2017, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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

    The Exchange proposes to reflect a change to the investment 
objective and the underlying index for the Horizons S&P 500[supreg] 
Covered Call ETF, shares of which are currently listed and trading on 
the Exchange under NYSE Arca Rule 5.2-E(j)(3). The proposed change is 
available on the Exchange's Web site at www.nyse.com, at the principal 
office of the Exchange, 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, the self-regulatory organization 
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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

[[Page 57636]]

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

1. Purpose
    The Exchange proposes to make certain changes relating to the 
investment objective, the underlying index and the investments of the 
Horizons S&P 500 Covered Call ETF (the ``Fund''), shares (``Shares'') 
of which are currently listed and trading on the Exchange under NYSE 
Arca Rule 5.2-E(j)(3) (Investment Company Units or ``Units'').\4\
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    \4\ An Investment Company Unit is a security that represents an 
interest in a registered investment company that holds securities 
comprising, or otherwise based on or representing an interest in, an 
index or portfolio of securities (or holds securities in another 
registered investment company that holds securities comprising, or 
otherwise based on or representing an interest in, an index or 
portfolio of securities). See NYSE Arca Rule 5.2-E(j)(3)(A).
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    Shares of the Fund currently are listed and traded on the 
Exchange.\5\ The Shares are offered by Horizons ETF Trust I (the 
``Trust''), which is organized as a Delaware statutory trust and is 
registered with the Commission as an open-end management investment 
company.\6\
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    \5\ The Commission issued notice of a proposed rule change to 
permit listing and trading of Shares of the Fund in Securities 
Exchange Act Release Nos. 68351 (December 4, 2012), 77 FR 73500 
(December 10, 2012) (SR-NYSEArca-2012-131) (Notice of Filing of 
Proposed Rule Change Relating to Listing and Trading of Shares of 
the Horizons S&P 500 Covered Call ETF, Horizons S&P Financial Select 
Sector Covered Call ETF, and Horizons S&P Energy Select Sector 
Covered Call ETF under NYSE Arca Equities Rule 5.2(j)(3)) (``Prior 
Notice''); 68708 (January 23, 2013), 78 FR 6161 (January 29, 2013) 
(SR-NYSEArca-2012-131) (Order Approving Proposed Rule Change 
Relating to Listing and Trading of Shares of the Horizons S&P 500 
Covered Call ETF, Horizons S&P Financial Select Sector Covered Call 
ETF, and Horizons S&P Energy Select Sector Covered Call ETF under 
NYSE Arca Equities Rule 5.2(j)(3)) (``Prior Order'' and, together 
with the Prior Notice, the ``Prior Release'').
    \6\ The Trust is registered under the Investment Company Act of 
1940 (15 U.S.C. 80a-1) (``1940 Act''). On September 25, 2017, the 
Trust filed with the Commission an amendment to its Form N-1A under 
the Securities Act of 1933 (15 U.S.C. 77a), and under the 1940 Act 
relating to the Fund (File Nos. 333-183155 and 811-22732) 
(``Registration Statement''). The description of the operation of 
the Trust and the Fund herein is based, in part, on the Registration 
Statement. In addition, the Commission has issued an order granting 
certain exemptive relief to the Recon Capital Series Trust 
(subsequently renamed Horizons ETF Trust I), et al, under the 1940 
Act. See Investment Company Act Release No. 31961 (February 9 [sic], 
2016) (File No. 812-14461) (``Exemptive Order'').
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    The investment adviser to the Fund is Horizons ETFs Management (US) 
LLC (``Adviser'').\7\ Foreside Fund Services, LLC (the ``Distributor'') 
is the principal underwriter and distributor of the Fund's Shares. U.S. 
Bank, N.A. serves as custodian for the Fund. The Bank of New York 
Mellon serves as sub- custodian for the Fund. U.S. Bancorp Fund 
Services, LLC serves as the transfer agent and administrator for the 
Fund.\8\
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    \7\ The Adviser is not registered as a broker-dealer and is 
affiliated with two broker-dealers and has implemented and will 
maintain a fire wall with respect to its broker-dealer affiliates 
regarding access to information concerning the portfolio holdings of 
the Fund. In the event (a) the Adviser becomes registered as a 
broker-dealer or newly affiliated with a broker-dealer, or (b) any 
new adviser or sub-adviser is or becomes affiliated with a broker-
dealer, it will implement and maintain a fire wall with respect to 
its relevant personnel or its broker-dealer affiliate regarding 
access to information concerning the portfolio holdings of the Fund, 
and will be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio. 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.
    \8\ The entities serving as the Trust, custodian and transfer 
agent for the Fund have changed from those identified in the Prior 
Release. The investment adviser to the Fund, Horizons ETFs 
Management (US) LLC, also has changed from the adviser identified in 
the Prior Release. The Adviser previously served as sub-adviser to 
the Fund, as stated in the Prior Release. The services provided by 
these entities are not changing from those described in the Prior 
Release.
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    As described in the Prior Notice, the Fund seeks investment results 
that, before fees and expenses, generally correspond to the performance 
of the S&P 500 Stock Covered Call Index (``Underlying Index'') provided 
by S&P Dow Jones Indices LLC (the ``Index Provider'').\9\ The 
Underlying Index is comprised of all the equity securities in the S&P 
500 Index (the ``Reference Index'') and a short (written) call option 
on each of the options-eligible securities in the Reference Index that 
meet, among others, stock and option price criteria of the Underlying 
Index methodology.\10\
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    \9\ The Underlying Index and ``New Underlying Index'' (as 
defined below) are provided by the Index Provider, which is 
unaffiliated with the Fund or the Adviser. The Index Provider 
maintains, calculates and publishes information regarding the 
Underlying Index and New Underlying Index. The Index Provider is not 
a broker-dealer and is not affiliated with a broker-dealer and has 
implemented procedures designed to prevent the use and dissemination 
of material, non-public information regarding the Underlying Index 
and New Underlying Index.
    \10\ The Underlying Index and New Underlying Index methodologies 
are available at http://us.spindices.com/indices/strategy/sp-500-stock-covered-call-index and https://www.cboe.com/products/strategy-benchmark-indexes/buywrite-indexes/cboe-s-p-500-2-otm-buywrite-index-bxy, respectively. The New Underlying Index uses the same 
methodology as the widely accepted CBOE S&P 500 BuyWrite Index (BXM) 
but the New Underlying Index is calculated using out-of-the-money 
S&P 500 Index (SPX) call options, rather than at-the-money SPX call 
options. For additional information regarding the Underlying Index, 
see the Prior Release.
---------------------------------------------------------------------------

    The Exchange proposes to reflect a change to the investment 
objective and the underlying index for the Fund. Going forward, the 
Fund will seek investment results that, before fees and expenses, 
generally correspond to the performance of the CBOE S&P 500 2% OTM 
BuyWrite Index (``New Underlying Index''). The New Underlying Index 
does not meet the ``generic'' listing requirements of Commentary 
.01(a)(A) to NYSE Arca Rule 5.2-E(j)(3) applicable to the listing of 
Units based upon an index of US Component Stocks. Specifically, NYSE 
Arca Rule 5.2-E(j)(3) provides that the term ``US Component Stock'' 
shall mean an equity security that is registered under Sections 12(b) 
or 12(g) of the Act or an American Depositary Receipt, the underlying 
equity security of which is registered under Sections 12(b) or 12(g) of 
the Act. Commentary .01(a)(A) to NYSE Arca Rule 5.2-E(j)(3) sets forth 
the requirements to be met by components of an index or portfolio of US 
Component Stocks.\11\ The New Underlying Index consists of the 
constituent securities of the S&P 500 Index. The New Underlying Index 
meets and will continue to meet all requirements of NYSE Arca Rule 5.2-
E(j)(3) and Commentary .01(a)(A) thereto except that the New Underlying 
Index includes a call option, which is not an NMS Stock as defined in 
Rule 600 of Regulation NMS. As described below, the New Underlying 
Index consists of long positions in securities in the Reference Index 
and a single out-

[[Page 57637]]

of-the-money call option written on the S&P 500 Index.\12\ All 
securities in the Reference Index are listed and traded on a U.S. 
national securities exchange. The option on the Reference Index is 
traded on a U.S. national options exchange. Notwithstanding that the 
New Underlying Index does not meet the requirement of Commentary 
.01(a)(A)(5) to NYSE Arca Rule 5.2-E(j)(3), the Exchange believes that 
the New Underlying Index is sufficiently broad-based to deter potential 
manipulation in that the Reference Index stocks are among the most 
actively traded, highly capitalized stocks traded in the U.S. The 
market value of the call option will not represent more than 10% of the 
total weight of the New Underlying Index.
---------------------------------------------------------------------------

    \11\ Commentary .01(a)(A) to NYSE Arca Rule 5.2-E(j)(3) provides 
that components of an index or portfolio of U.S. Component Stocks 
underlying a series of Units listed pursuant to Rule 19b-4(e) under 
the Act must meet specified criteria on an initial and continued 
listing basis. Commentary .01(a)(A)(5) to NYSE Arca Rule 5.2-E(j)(3) 
states that all securities in the index or portfolio shall be U.S. 
Component Stocks listed on a national securities exchange and shall 
be NMS Stocks as defined in Rule 600 of Regulation NMS under the 
Act.
    \12\ An ``out-of-the-money'' call option is one in which the 
exercise (or ``strike'') price of the option is above the market 
price of the security.
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Horizons S&P 500 Covered Call ETF

    According to the Registration Statement, the Fund is an index fund 
that will employ a ``passive management'' investment strategy in 
seeking to achieve its objective of providing investment results that 
generally correspond to the performance of the New Underlying Index. 
The New Underlying Index is comprised of two parts: (1) All the equity 
securities in the Reference Index (i.e., the S&P 500 Index) in 
substantially similar weight as the Reference Index \13\; and (2) a 
single short (written) call option on the S&P 500 Index. The Fund will 
invest at least 80% of its total assets in securities that comprise its 
New Underlying Index.
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    \13\ The Reference Index is a float-adjusted market 
capitalization weighted index containing equity securities of 500 
industrial, information technology, utility and financial companies 
among other Global Industry Classification Standard 
(``GICS[supreg]'') sectors, regarded as generally representative of 
the U.S. stock market. A float-adjusted market capitalization 
weighted index weights each index component according to its market 
capitalization, using the number of shares that are readily 
available for purchase on the open market.
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The New Underlying Index
    The New Underlying Index measures the performance of a hypothetical 
portfolio that employs a covered call strategy.\14\ A covered call 
strategy is generally considered to be an investment strategy in which 
an investor buys a security, and sells (or ``writes'') a call option on 
that security in an attempt to generate more income. The ``premium'' 
paid by the buyer of the option provides income in addition to the 
security's dividends or other distributions. The New Underlying Index 
consists of long positions in securities in the Reference Index and an 
out-of-the-money call option written on the S&P 500 Index. This option 
is written (sold) systematically on the monthly option writing date of 
the New Underlying Index.
---------------------------------------------------------------------------

    \14\ Information regarding the New Underlying Index is available 
at the new Web site identified in note 9, supra, [sic] which is 
different than the Web site for the Underlying Index methodology 
identified in the Prior Release.
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The Operation of the Fund
    The Fund, in return for the option premium, will write call options 
that give the purchaser the right to receive a cash payment equal to 
any positive difference between the value of the security and the 
exercise (or ``strike'') price on the expiration date of the option. 
Each month the Fund will write a single out-of-the-money call option on 
the Reference Index as determined on the monthly option writing date of 
the New Underlying Index in accordance with the New Underlying Index 
methodology. Such short option position would be reflected in the 
Fund's portfolio as a negative cash balance.
    The Fund generally will use a replication methodology, meaning it 
will invest in all of the securities comprising the New Underlying 
Index in proportion to the weightings in the New Underlying Index. The 
Fund will seek correlation between the Fund's performance, before fees 
and expenses, and that of the New Underlying Index of 0.95 or better. A 
figure of 1.00 would represent perfect correlation.
    Under normal market conditions,\15\ the Fund will invest at least 
80% of its total assets in the securities included in the New 
Underlying Index. The Adviser anticipates that, generally, the Fund 
will hold all of the securities that comprise the New Underlying Index 
in proportion to their weightings in such index. However, from time to 
time, the Fund may utilize a sampling methodology under various 
circumstances where it may not be possible or practicable to purchase 
all of the equity securities and write (sell) the call option 
comprising the New Underlying Index.
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    \15\ The term ``normal market conditions'' for these purposes 
will have the same meaning as the term defined in NYSE Arca Rule 
8.600-E(c)(5).
---------------------------------------------------------------------------

    The option in the New Underlying Index will be traded on national 
securities exchanges. Purely for informational purposes, as of 
September 29, 2017, the Reference Index and New Underlying Index 
included common stocks of 505 companies, with a market capitalization 
range of between approximately $2.7 billion and $796.1 billion. As of 
that date, the New Underlying Index also included a single short 
(written) call option on the Reference Index.
    The Exchange represents that the listing standards under NYSE Arca 
Rules 5.2-E(j)(3) and 5.5-E(g)(2) applicable to Units shall apply to 
the Shares. In addition, the Exchange represents that the Fund and the 
Shares will comply with all other requirements applicable to Units 
including, but not limited to, requirements relating to the 
dissemination of key information such as the value of the New 
Underlying Index, IIV, and NAV, rules governing the trading of equity 
securities, trading hours, trading halts, surveillance, information 
barriers and Information Bulletin to Equity Trading Permit Holders 
(``ETP Holders''), as set forth in Exchange rules applicable to Units 
and prior Commission orders approving the generic listing rules 
applicable to the listing and trading of Units.\16\
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    \16\ See, e.g., Securities Exchange Act Release No. 44551 (July 
12, 2001), 66 FR 37716 (July 19, 2001) (SR-PCX-2001-14) (order 
approving generic listing standards for ICUs and Portfolio 
Depositary Receipts); Securities Exchange Act Release No. 41983 
(October 6, 1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) 
(order approving rules for listing and trading of ICUs).
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances administered by the Exchange, as 
well as cross-market surveillances administered by 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.\17\ 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.
---------------------------------------------------------------------------

    \17\ FINRA conducts cross-market surveillances on behalf of 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.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, equity 
securities

[[Page 57638]]

and options with other markets and other entities that are members of 
the Intermarket Surveillance Group (``ISG''), and the Exchange or 
FINRA, on behalf of the Exchange, or both, may obtain trading 
information regarding trading such securities and financial instruments 
from such markets and other entities. In addition, the Exchange may 
obtain information regarding trading in such securities from markets 
and other entities that are members of ISG or with which the Exchange 
has in place a comprehensive surveillance sharing agreement.\18\
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    \18\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all holdings of the 
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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    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    All statements or representations contained in this filing 
regarding (a) the description of the New Underlying Index, portfolio or 
reference asset, (b) limitations on the New Underlying Index or 
portfolio holdings or reference assets, or (c) the applicability of 
Exchange listing rules specified in such rule filing will constitute 
continued listing requirements for listing the Shares on the Exchange.
    The issuer must notify 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 NYSE Arca Rule 5.5-
E(m). Pursuant to its obligations under Section 19(g)(1) of the Act, 
the Exchange will monitor for compliance with the continued listing 
requirements.
    Except for the changes noted above, all other representations made 
in the Prior Release remain unchanged. Except as otherwise referenced 
in this proposed rule change, all representations made in the Prior 
Release pertaining to the Underlying Index shall continue to apply to 
the New Underlying Index.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \19\ that an exchange have rules 
that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will continue to be listed and traded on the Exchange pursuant 
to the listing criteria in NYSE Arca Rule 5.2-E(j)(3). The Exchange has 
in place surveillance procedures that are adequate to properly monitor 
trading in the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and applicable federal securities laws. 
The Adviser is not registered as a broker-dealer and is affiliated with 
two broker-dealers and has implemented and will maintain a fire wall 
with respect to its broker-dealer affiliates regarding access to 
information concerning the portfolio holdings of the Fund. In the event 
(a) the Adviser becomes registered as or newly affiliated with a 
broker-dealer, or (b) any new adviser becomes registered as or newly 
affiliated with a broker-dealer, it will implement and maintain a fire 
wall with respect to such broker-dealer regarding access to information 
concerning the portfolio holdings of the Fund, and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding such portfolio. The Index Provider is 
not a broker-dealer and is not affiliated with a broker-dealer and has 
implemented procedures designed to prevent the use and dissemination of 
material, non-public information regarding the New Underlying Index. 
All securities in the Reference Index are listed and traded on a U.S. 
national securities exchange. The option on the Reference Index is 
traded on a U.S. national options exchange. The Reference Index's 
stocks are among the most actively traded, highly capitalized stocks 
traded in the U.S. The market value of the call option will not 
represent more than 10% of the total weight of the New Underlying 
Index. The New Underlying Index is similar to the Underlying Index, the 
difference being that the Underlying Index includes a short (written) 
call option on each of the options-eligible securities in the Reference 
Index as described above, whereas the New Underlying Index includes a 
single short (written) call option on the S&P 500 Index. The Exchange 
does not view the proposed index change as providing a material change 
to the Fund's investment objective or to the investment strategies, 
risks or returns of the Fund. Except for the changes noted above, all 
other representations made in the Prior Release remain unchanged. 
Except as otherwise referenced in this proposed rule change, all 
representations made in the Prior Release pertaining to the Underlying 
Index shall continue to apply to the New Underlying Index.

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 purpose of the Act. The proposed rule change will 
enhance competition among exchange-traded fund issuers by permitting 
trading of shares of Units based on another underlying index that is 
not currently the underlying index for a series of Units.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\20\ and Rule 19b-4(f)(6) thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and the text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \22\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \23\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The 
Commission believes that

[[Page 57639]]

waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest. According to the Exchange, waiver of 
the 30-day operative delay would permit the timely implementation of 
Fund efficiencies resulting from tracking an index that requires the 
writing of a single option on the Reference Index, instead of writing 
options on multiple options-eligible securities in the Reference Index. 
In addition, the Commission believes that the proposal does not raise 
unique or novel regulatory issues. Therefore, the Commission hereby 
waives the 30-day operative delay and designates the proposal operative 
upon filing.\24\
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    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
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 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-NYSEArca-2017-123 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-NYSEArca-2017-123. 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 the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2017-123 and should 
be submitted on or before December 27, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman
Assistant Secretary.
[FR Doc. 2017-26223 Filed 12-5-17; 8:45 am]
BILLING CODE 8011-01-P