Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Allow the Horizons Cadence Hedged U.S. Dividend Yield ETF, a Series of the Horizons ETF Trust I, To Hold Listed Options Contracts in a Manner That Does Not Comply With Rule 14.11(i), Managed Fund Shares, 20103-20107 [2018-09576]

Download as PDF Federal Register / Vol. 83, No. 88 / Monday, May 7, 2018 / Notices 3. Is there a way to enhance the quality, utility, and clarity of the information to be collected? 4. How can the burden of the information collection on respondents be minimized, including the use of automated collection techniques or other forms of information technology? Dated at Rockville, Maryland, this 1st day of May, 2018. For the Nuclear Regulatory Commission. David Cullison, NRC Clearance Officer, Office of the Chief Information Officer. [FR Doc. 2018–09555 Filed 5–4–18; 8:45 am] BILLING CODE 7590–01–P NUCLEAR REGULATORY COMMISSION [NRC–2018–0089] Acceptance Sampling Procedures for Exempted and Generally Licensed Items Containing Byproduct Material Nuclear Regulatory Commission. ACTION: Regulatory guide; withdrawal. AGENCY: The U.S. Nuclear Regulatory Commission (NRC) is withdrawing Regulatory Guide (RG) 6.6, ‘‘Acceptance Sampling Procedures for Exempted and Generally Licensed Items Containing Byproduct Material.’’ RG 6.6 is being withdrawn because the NRC amended its regulations regarding acceptance sampling procedures for exempted and generally licensed items containing byproduct material. DATES: The effective date of the withdrawal of RG 6.6 is May 7, 2018. ADDRESSES: Please refer to Docket ID NRC–2018–0089 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this document using any of the following methods: • Federal Rulemaking website: Go to https://www.regulations.gov and search for Docket ID NRC–2018–0089. Address questions about NRC dockets to Jennifer Borges; telephone: 301–287–9127; email: Jennifer.Borges@nrc.gov. For technical questions, contact the individuals listed in the FOR FURTHER INFORMATION CONTACT section of this document. • NRC’s Agencywide Documents Access and Management System (ADAMS): You may obtain publiclyavailable documents online in the ADAMS Public Documents collection at NRC Library at https://www.nrc.gov/ reading-rm/adams.html. To begin the search, select ‘‘ADAMS Public daltland on DSKBBV9HB2PROD with NOTICES SUMMARY: VerDate Sep<11>2014 17:38 May 04, 2018 Jkt 244001 Documents’’ and then select ‘‘Begin Web-based ADAMS Search.’’ For problems with ADAMS, please contact the NRC’s Public Document Room (PDR) reference staff at 1–800–397–4209, 301– 415–4737, or by email to pdr.resource@ nrc.gov. The ADAMS accession number for each document referenced (if it is available in ADAMS) is provided the first time that it is mentioned in this document. The basis for withdrawal is located at ADAMS Accession No. ML18057A304. • NRC’s PDR: You may examine and purchase copies of public documents at the NRC’s PDR, Room O1–F21, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852. FOR FURTHER INFORMATION CONTACT: Harriet Karagiannis, Office of Nuclear Regulatory Research, telephone: 301– 415–2493: email: Harriet.Karagiannis@ nrc.gov or Richard Struckmeyer, Office of Nuclear Material Safety and Safeguards, telephone: (301) 415–5477: email: Richard.Struckmeyer@nrc.gov. Both are staff of the U.S. Nuclear Regulatory Commission, Washington, DC 20555–0001. SUPPLEMENTARY INFORMATION: I. Background Regulatory Guide 6.6 was published in June 1974 to provide guidance on meeting the requirements in § 32.110 of title 10 of the Code of Federal Regulations (10 CFR). The RG 6.6 describes a prescriptive methodology for determining whether a product should be accepted or rejected based on statistical sampling methods. The NRC is withdrawing RG 6.6 because in 2012, the regulations in part 32 of 10 CFR were amended to remove § 32.110 of 10 CFR (77 FR 43673; July 25, 2012). The amendment occurred because the Commission determined that the requirements for manufacturers or initial distributors of exempt and generally licensed products were in some cases overly prescriptive, particularly in the areas of prototype testing and acceptance sampling/quality control procedures. The new rule was intended to focus the regulations on performance rather than procedures. Therefore, the guidance contained in RG 6.6 became obsolete and RG 6.6 needs to be withdrawn. II. General Considerations The NRC is withdrawing RG 6.6 because it is no longer needed. Withdrawal of an RG means that the guide no longer provides useful information or has been superseded by other guidance, technological innovations, Congressional actions, or PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 20103 other events. The withdrawal of RG 6.6 does not alter any prior or existing NRC licensing approval or the acceptability of licensee commitments to RG 6.6. Although RG 6.6 is withdrawn, current licensees may continue to use it, and withdrawal does not affect any existing licenses or agreements. However, RG. 6.6 should not be used in future requests or applications for NRC licensing actions. Dated at Rockville, Maryland, this 1st day of May, 2018. For the Nuclear Regulatory Commission. Thomas H. Boyce, Chief, Regulatory Guidance and Generic Issues Branch, Division of Engineering, Office of Nuclear Regulatory Research. [FR Doc. 2018–09591 Filed 5–4–18; 8:45 am] BILLING CODE 7590–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83146; File No. SR– CboeBZX–2018–029] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Allow the Horizons Cadence Hedged U.S. Dividend Yield ETF, a Series of the Horizons ETF Trust I, To Hold Listed Options Contracts in a Manner That Does Not Comply With Rule 14.11(i), Managed Fund Shares May 1, 2018. 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 April 17, 2018, Cboe BZX Exchange, Inc. (‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated this proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6)(iii) thereunder,4 which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6)(iii). 2 17 E:\FR\FM\07MYN1.SGM 07MYN1 20104 Federal Register / Vol. 83, No. 88 / Monday, May 7, 2018 / Notices I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to allow the Horizons Cadence Hedged US Dividend Yield ETF (the ‘‘Fund’’), a series of the Horizons ETF Trust I (the ‘‘Trust’’), to hold listed options contracts in a manner that does not comply with Rule 14.11(i) (‘‘Managed Fund Shares’’). The shares of the Fund are referred to herein as the ‘‘Shares.’’ The text of the proposed rule change is available at the Exchange’s website at www.markets.cboe.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 Exchange 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. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. (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 Fund is currently listed on the Exchange pursuant to the generic listing standards under Rule 14.11(i) governing Managed Fund Shares.5 The Exchange proposes to continue listing and trading the Shares. The Shares would continue to comply with all of the generic listing standards with the exception of the requirement of Rule 14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross notional value of listed derivatives based on any single underlying reference asset from exceeding 30% of the weight of the portfolio (including gross notional exposures) (the ‘‘30% Restriction’’).6 7 5 The Commission originally approved BZX Rule 14.11(i) in Securities Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148 (September 6, 2011) (SR–BATS–2011–018) and subsequently approved generic listing standards for Managed Fund Shares under Rule 14.11(i) in Securities Exchange Act Release No. 78396 (July 22, 2016), 81 FR 49698 (July 28, 2016) (SR–BATS–2015–100). 6 Rule 14.11(i)(4)(C)(iv)(b) provides that ‘‘the aggregate gross notional value of listed derivatives based on any five or fewer underlying reference assets shall not exceed 65% of the weight of the portfolio (including gross notional exposures), and VerDate Sep<11>2014 17:38 May 04, 2018 Jkt 244001 The Shares are offered by the Trust, which was established as a Delaware statutory trust on May 17, 2012. The Trust is registered with the Commission as an open-end investment company and has filed a registration statement on behalf of the Fund on Form N–1A with the Commission.8 The Fund’s adviser, Horizons ETFs Management (US) LLC (the ‘‘Adviser’’), is not registered as a broker-dealer, but is affiliated with two broker-dealers. The Adviser represents that a fire wall exists and will be maintained between the respective personnel at the Adviser and affiliated broker-dealers with respect to access to information concerning the composition and/or changes to the Fund’s portfolio. Personnel who make decisions on the Fund’s portfolio composition are currently and shall continue to be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. The Fund’s sub-adviser, Cadence Capital Management LLC (the ‘‘Sub-Adviser’’), is not registered as a broker-dealer and is not affiliated with a broker-dealer. Sub-Adviser personnel who make decisions on the Fund’s portfolio composition are currently and shall continue to be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. In the event that (a) the Adviser or SubAdviser becomes registered as a brokerthe aggregate gross notional value of listed derivatives based on any single underlying reference asset shall not exceed 30% of the weight of the portfolio (including gross notional exposures).’’ The Exchange is proposing that the Fund be exempt only from the requirement of Rule 14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross notional value of listed derivatives based on any single underlying reference asset from exceeding 30% of the weight of the portfolio (including gross notional exposures). The Fund will meet the requirement that the aggregate gross notional value of listed derivatives based on any five or fewer underlying reference assets shall not exceed 65% of the weight of the portfolio (including gross notional exposures). 7 The Exchange notes that this proposal is very similar to a previously approved proposal to list and trade a series of Managed Fund Shares on the Exchange with similar exposures to a single underlying reference asset and U.S. exchange-listed equity securities. See Securities Exchange Act Release No. 80529 (April 26, 2017), 82 FR 20506 (May 2, 2017) (SR–BatsBZX–2017–14). 8 The Trust filed a post-effective amendment to the Registration Statement on February 9, 2018 (the ‘‘Registration Statement’’). See Registration Statement on Form N–1A for the Trust (File Nos. 333–183155 and 811–22732). The descriptions of the Fund and the Shares contained herein are based, in part, on information included in the Registration Statement. The Commission has issued an order granting certain exemptive relief to the Trust and affiliated persons under the Investment Company Act of 1940 (15 U.S.C. 80a-1). See Investment Company Act Release No. 30695 (September 24, 2013) (File No. 812–14178). PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 dealer or newly affiliated with a brokerdealer; or (b) any new adviser or subadviser is a registered broker-dealer or becomes affiliated with a broker-dealer; the Adviser, Sub-Adviser, or such new adviser or sub-adviser will implement and maintain a fire wall with respect to its relevant personnel or such brokerdealer affiliate, as applicable, regarding access to information concerning the composition and/or changes to the Fund’s portfolio, and will be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding such portfolio. The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. Horizons Cadence Hedged US Dividend Yield ETF The Fund seeks income and long-term growth of capital. In order to achieve its investment objective, under Normal Market Conditions,9 the Fund will invest at least 80% of its assets in equity securities of U.S. exchange-listed companies that pay regular dividends (‘‘U.S. Equities’’). The Fund’s holdings in U.S. Equities currently meet and will continue to meet the generic listing standards for U.S. Component Stocks in Rule 14.11(i)(4)(C)(i)(a). The Fund has the ability to buy and sell call and put options on the S&P 500 Index (‘‘S&P 500 Index Options’’). The S&P 500 Index is the index most correlated to the Fund’s underlying equity holdings. The options overlay seeks to potentially provide a measure of downside protection and an additional component to the Fund’s risk management. The options overlay is actively managed by the Adviser and will adapt to both changing market environments and shifts in the underlying equity holdings of the Fund, but is currently limited by the requirement under Rule 14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross notional exposure of listed derivatives based on any single underlying reference asset from exceeding 30% of the weight of the portfolio (including gross notional exposures). As noted above, Rule 14.11(i)(4)(C)(iv)(b) prevents the Fund from holding listed derivatives based on 9 The term ‘‘Normal Market Conditions’’ includes, but is not limited to, the absence of trading halts in the applicable financial markets generally; operational issues causing dissemination of inaccurate market information or system failures; or force majeure type events such as natural or manmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption, or any similar intervening circumstance. E:\FR\FM\07MYN1.SGM 07MYN1 Federal Register / Vol. 83, No. 88 / Monday, May 7, 2018 / Notices daltland on DSKBBV9HB2PROD with NOTICES any single underlying reference asset in excess of 30% of the weight of its portfolio (including gross notional exposures). As proposed, the Fund would hold up to 50% of the weight of its portfolio (including gross notional exposures) in S&P 500 Index Options, which are traded on Cboe Exchange, Inc. (‘‘Cboe Options’’).10 The Fund will utilize S&P 500 Index Options to create a collar strategy through selling call options and buying protective put options. This may serve as a buffer to market selloffs, which may lower the volatility of the portfolio. Greater exposure to the S&P 500 through the options would allow the Fund the flexibility to fully implement its risk mitigation strategy. The Exchange notes that the Fund may also hold cash and Cash Equivalents 11 in compliance with Rule 14.11(i)(4)(C)(iii). As noted above, the Fund’s investment in U.S. Equities under Normal Market Conditions constitutes at least 80% of the Fund’s assets and such holdings will meet the requirements for U.S. Component Stocks in Rule 14.11(i)(4)(C)(i)(a). In addition to such U.S. Equities holdings, the Fund may hold up to 20% of its assets in cash, Cash Equivalents, and the value of S&P 500 Index Options positions under Normal Market Conditions. The combination of U.S. Equities, cash, Cash Equivalents, and the cash value of S&P 500 Index Options will constitute the entirety of the Fund’s holdings and the cash value of these holdings will be used to form the basis for these calculations. The Exchange notes that this is different than the calculation used to measure the Fund’s holdings in S&P 500 Index Options as it relates to 10 The Commission has previously approved a series of Managed Fund Shares that can hold up to 60% of the weight of its portfolio in listed derivatives based on the S&P 500 Index as the only underlying reference asset. See Securities Exchange Act Release No. 82906 (March 20, 2018), 83 FR 12992 (March 26, 2018) (SR–CboeBZX–2017–012) (order approving the listing and trading of the LHA Market State Tactical U.S. Equity ETF). 11 As defined in Exchange Rule 14.11(i)(4)(C)(iii)(b), Cash Equivalents are shortterm instruments with maturities of less than three months, which includes only the following: (i) 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; (ii) certificates of deposit issued against funds deposited in a bank or savings and loan association; (iii) bankers acceptances, which are short-term credit instruments used to finance commercial transactions; (iv) repurchase agreements and reverse repurchase agreements; (v) 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; (vi) commercial paper, which are short-term unsecured promissory notes; and (vii) money market funds. VerDate Sep<11>2014 17:38 May 04, 2018 Jkt 244001 the Fund holding up to 50% of the weight of its portfolio, which, as noted above, is calculated using gross notional exposures gained through the S&P 500 Index Options in both the numerator and denominator, which is consistent with the derivatives exposure calculation under Rule 14.11(i)(4)(C)(iv). The Exchange represents that, except for the 30% Restriction in Rule 14.11(i)(4)(C)(iv)(b), the Fund’s investments will continue to satisfy all of the generic listing standards under BZX Rule 14.11(i)(4)(C) and all other applicable requirements for Managed Fund Shares under Rule 14.11(i). The Trust is required to comply with Rule 10A–3 under the Act for the initial and continued listing of the Shares of the Fund. In addition, the Exchange represents that the Shares of the Fund will continue to comply with all other requirements applicable to Managed Fund Shares, which include the dissemination of key information such as the Disclosed Portfolio,12 Net Asset Value,13 and the Intraday Indicative Value,14 suspension of trading or removal,15 trading halts,16 surveillance,17 minimum price variation for quoting and order entry,18 the information circular,19 and firewalls 20 as set forth in Exchange rules applicable to Managed Fund Shares and the orders approving such rules. Moreover, all of the U.S. Equities and S&P 500 Index Options held by the Fund will trade on markets that are a member of Intermarket Surveillance Group (‘‘ISG’’) or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.21 All statements and representations made in this filing regarding the description of the portfolio or reference assets, limitations on portfolio holdings or reference assets, dissemination and availability of reference asset and intraday indicative values (as applicable), or the applicability of Exchange listing rules specified in this filing shall constitute continued listing requirements for the Shares. The Fund has represented to the Exchange that it will advise the 12 See Rule 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii). Rule 14.11(i)(4)(A)(ii). 14 See Rule 14.11(i)(4)(B)(i). 15 See Rule 14.11(i)(4)(B)(iii). 16 See Rule 14.11(i)(4)(B)(iv). 17 See Rule 14.11(i)(2)(C). 18 See Rule 14.11(i)(2)(B). 19 See Rule 14.11(i)(6). 20 See Rule 14.11(i)(7). 21 For a list of the current members of ISG, see www.isgportal.com. The Exchange notes that not all components of the Disclosed Portfolio for the Fund may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. 13 See PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 20105 Exchange of any failure by the Fund or Shares to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will surveil for compliance with the continued listing requirements. FINRA conducts certain 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. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures with respect to such Fund under Exchange Rule 14.12. Availability of Information As noted above, the Fund will comply with the requirements under the Rule 14.11(i) related to Disclosed Portfolio, NAV, and the intraday indicative value. Additionally, the intra-day, closing and settlement prices of exchange-traded portfolio assets, specifically the U.S. Equities and S&P 500 Index Options, will be readily available from the exchanges trading such securities or derivatives, as the case may be, automated quotation systems, published or other public sources, or online information services such as Bloomberg or Reuters. Quotation and last sale information for S&P 500 Index Options will be available via the Options Price Reporting Authority. Price information for Cash Equivalents will be available from major market data vendors. The Disclosed Portfolio will be available on the Fund’s website (www.horizonsetfs.com) free of charge. The Fund’s website will include a form of the prospectus for the Fund and additional information related to NAV and other applicable quantitative information. Information regarding market price and trading volume of the Shares will be continuously available throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume for the Shares will be published daily in the financial section of newspapers. Trading in the Shares may be halted for market conditions or for reasons that, in the view of the Exchange, make trading inadvisable. The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. The Exchange has appropriate rules to facilitate trading in the Shares during all trading sessions. The Exchange prohibits the distribution of material non-public information by E:\FR\FM\07MYN1.SGM 07MYN1 20106 Federal Register / Vol. 83, No. 88 / Monday, May 7, 2018 / Notices its employees. Quotation and last sale information for the Shares and U.S. Equities will be available via the CTA high-speed line. 2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6(b) of the Act 22 in general and Section 6(b)(5) of the Act 23 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, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest in that the Shares will meet each of the continued listing criteria in BZX Rule 14.11(i) with the exception of the 30% Restriction in Rule 14.11(i)(4)(C)(iv)(b), which requires that the aggregate gross notional value of listed derivatives based on any five or fewer underlying reference assets shall not exceed 65% of the weight of the portfolio (including gross notional exposures), and the aggregate gross notional value of listed derivatives based on any single underlying reference asset shall not exceed 30% of the weight of the portfolio (including gross notional exposures).24 The Exchange believes that the liquidity in the S&P 500 Index Options markets mitigates the concerns that Rule 14.11(i)(4)(C)(iv)(b) is intended to address and that such liquidity would prevent the Shares from being susceptible to manipulation.25 Further, allowing the Fund to hold a greater portion of its portfolio in S&P 500 Index Options would mean that the Fund would not be required to use over-thecounter (‘‘OTC’’) derivatives if the Adviser deemed it necessary to get exposure in excess of the 30% Restriction in Rule 14.11(i)(4)(C)(iv)(b), which would reduce the Fund’s operational burden by allowing the Fund to use listed options contracts to 22 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 24 As noted above, the Exchange is proposing that the Fund be exempt only from the 30% Restriction of Rule 14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross notional value of listed derivatives based on any single underlying reference asset from exceeding 30% of the weight of the portfolio (including gross notional exposures). The Fund will continue to meet the requirement that the aggregate gross notional value of listed derivatives based on any five or fewer underlying reference assets shall not exceed 65% of the weight of the portfolio (including gross notional exposures). 25 In February 2018, the total notional volume traded was approximately $9.4 trillion in S&P 500 Index Options. daltland on DSKBBV9HB2PROD with NOTICES 23 15 VerDate Sep<11>2014 17:38 May 04, 2018 Jkt 244001 achieve its investment objective and would eliminate the counter-party risk associated with holding OTC derivative instruments. The Exchange further believes that the diversity, liquidity, and market cap of the securities underlying the S&P 500 Index are sufficient to protect against market manipulation of both the Fund’s holdings and the Shares as it relates to the S&P 500 Index Options holdings. The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of the Shares on the Exchange during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws. All of the U.S. Equities and S&P 500 Index Options contracts held by the Fund will trade on markets that are a member of ISG or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. The Exchange may obtain information regarding trading in the Shares, U.S. Equities, and the S&P 500 Index Options held by the Fund via the ISG from other exchanges who are a member of ISG or affiliated with a member of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement.26 The Exchange further notes that the Fund will meet and be subject to all other requirements of the generic listing rules and other applicable continued listing requirements for Managed Fund Shares under Rule 14.11(i), including those requirements regarding the dissemination of key information such as the Disclosed Portfolio, Net Asset Value, and the Intraday Indicative Value, suspension of trading or removal, trading halts, surveillance, minimum price variation for quoting and order entry, the information circular, and firewalls as set forth in Exchange rules applicable to Managed Fund Shares. For the above reasons, the Exchange believes that 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 purpose of the Act. The Exchange notes that the proposed rule change, rather will facilitate the options strategy of an actively-managed exchange-traded product that will allow the Fund to better compete in the marketplace, thus 26 See PO 00000 note 21, supra. Frm 00075 Fmt 4703 Sfmt 4703 enhancing competition among both market participants and listing venues, 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 The Exchange has neither solicited nor received written comments on 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, it has become effective pursuant to Section 19(b)(3)(A) of the Act 27 and Rule 19b– 4(f)(6) thereunder.28 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 29 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 30 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 requested that the Commission waive the 30-day operative delay so that the proposed rule change may become operative upon filing. The Commission notes that waiver of the operative delay would allow the Fund to hold up to 50% of the weight of its portfolio (including gross notional exposures) in S&P 500 Index Options without delay, and thus allow the Fund to fully implement its risk mitigation strategy without delay. The Commission notes that, other than the 30% Restriction with respect to S&P 500 Index Options, the Fund would continue to satisfy all of the generic listing standards under BZX Rule 14.11(i)(4)(C) and all other requirements applicable to Managed Fund Shares. The Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. 27 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 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. 29 17 CFR 240.19b–4(f)(6). 30 17 CFR 240.19b–4(f)(6)(iii). 28 17 E:\FR\FM\07MYN1.SGM 07MYN1 Federal Register / Vol. 83, No. 88 / Monday, May 7, 2018 / Notices 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–CboeBZX–2018–029 and should be submitted on or before May 29, 2018. 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.32 Eduardo A. Aleman, Assistant Secretary. Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CboeBZX–2018–029 on the subject line. daltland on DSKBBV9HB2PROD with NOTICES Accordingly, the Commission hereby waives the 30-day operative delay and designates the proposed rule change operative upon filing.31 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such 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. SECURITIES AND EXCHANGE COMMISSION 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-CboeBZX–2018–029. 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 website (https://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 website viewing and printing in the Commission’s Public 31 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 17:38 May 04, 2018 Jkt 244001 [FR Doc. 2018–09576 Filed 5–4–18; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–83144; File No. SR–ISE– 2018–38] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Add Pricing for P.M. Settled Options on Broad-Based Indexes With Nonstandard Expiration Dates May 1, 2018. 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 April 17, 2018, Nasdaq ISE, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘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 amend the Exchange’s Schedule of Fees to add pricing for P.M. settled options on broad-based indexes with nonstandard expiration dates, as described further below. 32 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 20107 The text of the proposed rule change is available on the Exchange’s website at https://ise.cchwallstreet.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 Exchange 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. The Exchange 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 recently received approval to list P.M. settled options on broad-based indexes with nonstandard expiration dates on a twelve month pilot basis, beginning on February 1, 2018.3 This pilot permits both Weekly Expirations and End of Month expirations similar to those of A.M. settled broad-based index options, except that the exercise settlement value will be based on the index value derived from the closing prices of component stocks.4 The Exchange proposes to list these aforementioned options, commencing on April 19, 2018, with the symbol ‘‘NDXP.’’ The Exchange now proposes to adopt the index pricing applicable to NDX 5 today to NDXP. Accordingly, the Exchange proposes to add the following definition in its Schedule of Fees: ‘‘‘NDX’ will mean A.M. or P.M settled options on the full value of the Nasdaq 100® Index.’’ Therefore, each reference to NDX pricing currently in the Schedule of Fees will likewise apply to NDXP under this proposal, as further discussed below. The Exchange initially filed the proposed pricing changes on April 9, 2018 (SR–ISE–2018–33). On April 17, 2018, the Exchange withdrew that filing and submitted this filing. 3 See Securities Exchange Act Release No. 82612 (February 1, 2018), 83 FR 5470 (February 7, 2018) (SR–ISE–2017–111). 4 Id. 5 NDX represents A.M. settled options on the full value of the Nasdaq 100® Index and is traded under the symbol NDX. E:\FR\FM\07MYN1.SGM 07MYN1

Agencies

[Federal Register Volume 83, Number 88 (Monday, May 7, 2018)]
[Notices]
[Pages 20103-20107]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-09576]


=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83146; File No. SR-CboeBZX-2018-029]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Allow 
the Horizons Cadence Hedged U.S. Dividend Yield ETF, a Series of the 
Horizons ETF Trust I, To Hold Listed Options Contracts in a Manner That 
Does Not Comply With Rule 14.11(i), Managed Fund Shares

May 1, 2018.
    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 April 17, 2018, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Exchange has designated this 
proposal as a ``non-controversial'' proposed rule change pursuant to 
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)(iii) 
thereunder,\4\ which renders it effective upon filing with the 
Commission. 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\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).

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[[Page 20104]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to allow the Horizons Cadence Hedged 
US Dividend Yield ETF (the ``Fund''), a series of the Horizons ETF 
Trust I (the ``Trust''), to hold listed options contracts in a manner 
that does not comply with Rule 14.11(i) (``Managed Fund Shares''). The 
shares of the Fund are referred to herein as the ``Shares.''
    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.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 Exchange 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. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant parts of such 
statements.

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

1. Purpose
    The Fund is currently listed on the Exchange pursuant to the 
generic listing standards under Rule 14.11(i) governing Managed Fund 
Shares.\5\ The Exchange proposes to continue listing and trading the 
Shares. The Shares would continue to comply with all of the generic 
listing standards with the exception of the requirement of Rule 
14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross notional value 
of listed derivatives based on any single underlying reference asset 
from exceeding 30% of the weight of the portfolio (including gross 
notional exposures) (the ``30% Restriction'').6 7
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    \5\ The Commission originally approved BZX Rule 14.11(i) in 
Securities Exchange Act Release No. 65225 (August 30, 2011), 76 FR 
55148 (September 6, 2011) (SR-BATS-2011-018) and subsequently 
approved generic listing standards for Managed Fund Shares under 
Rule 14.11(i) in Securities Exchange Act Release No. 78396 (July 22, 
2016), 81 FR 49698 (July 28, 2016) (SR-BATS-2015-100).
    \6\ Rule 14.11(i)(4)(C)(iv)(b) provides that ``the aggregate 
gross notional value of listed derivatives based on any five or 
fewer underlying reference assets shall not exceed 65% of the weight 
of the portfolio (including gross notional exposures), and the 
aggregate gross notional value of listed derivatives based on any 
single underlying reference asset shall not exceed 30% of the weight 
of the portfolio (including gross notional exposures).'' The 
Exchange is proposing that the Fund be exempt only from the 
requirement of Rule 14.11(i)(4)(C)(iv)(b) that prevents the 
aggregate gross notional value of listed derivatives based on any 
single underlying reference asset from exceeding 30% of the weight 
of the portfolio (including gross notional exposures). The Fund will 
meet the requirement that the aggregate gross notional value of 
listed derivatives based on any five or fewer underlying reference 
assets shall not exceed 65% of the weight of the portfolio 
(including gross notional exposures).
    \7\ The Exchange notes that this proposal is very similar to a 
previously approved proposal to list and trade a series of Managed 
Fund Shares on the Exchange with similar exposures to a single 
underlying reference asset and U.S. exchange-listed equity 
securities. See Securities Exchange Act Release No. 80529 (April 26, 
2017), 82 FR 20506 (May 2, 2017) (SR-BatsBZX-2017-14).
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    The Shares are offered by the Trust, which was established as a 
Delaware statutory trust on May 17, 2012. The Trust is registered with 
the Commission as an open-end investment company and has filed a 
registration statement on behalf of the Fund on Form N-1A with the 
Commission.\8\ The Fund's adviser, Horizons ETFs Management (US) LLC 
(the ``Adviser''), is not registered as a broker-dealer, but is 
affiliated with two broker-dealers. The Adviser represents that a fire 
wall exists and will be maintained between the respective personnel at 
the Adviser and affiliated broker-dealers with respect to access to 
information concerning the composition and/or changes to the Fund's 
portfolio. Personnel who make decisions on the Fund's portfolio 
composition are currently and shall continue to be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding such portfolio. The Fund's sub-
adviser, Cadence Capital Management LLC (the ``Sub-Adviser''), is not 
registered as a broker-dealer and is not affiliated with a broker-
dealer. Sub-Adviser personnel who make decisions on the Fund's 
portfolio composition are currently and shall continue to be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding such portfolio. In the event that (a) 
the Adviser or Sub-Adviser becomes registered as a broker-dealer or 
newly affiliated with a broker-dealer; or (b) any new adviser or sub-
adviser is a registered broker-dealer or becomes affiliated with a 
broker-dealer; the Adviser, Sub-Adviser, or such new adviser or sub-
adviser will implement and maintain a fire wall with respect to its 
relevant personnel or such broker-dealer affiliate, as applicable, 
regarding access to information concerning the composition and/or 
changes to the Fund's portfolio, and will be subject to procedures 
designed to prevent the use and dissemination of material non-public 
information regarding such portfolio.
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    \8\ The Trust filed a post-effective amendment to the 
Registration Statement on February 9, 2018 (the ``Registration 
Statement''). See Registration Statement on Form N-1A for the Trust 
(File Nos. 333-183155 and 811-22732). The descriptions of the Fund 
and the Shares contained herein are based, in part, on information 
included in the Registration Statement. The Commission has issued an 
order granting certain exemptive relief to the Trust and affiliated 
persons under the Investment Company Act of 1940 (15 U.S.C. 80a-1). 
See Investment Company Act Release No. 30695 (September 24, 2013) 
(File No. 812-14178).
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    The Fund intends to qualify each year as a regulated investment 
company under Subchapter M of the Internal Revenue Code of 1986, as 
amended.
Horizons Cadence Hedged US Dividend Yield ETF
    The Fund seeks income and long-term growth of capital. In order to 
achieve its investment objective, under Normal Market Conditions,\9\ 
the Fund will invest at least 80% of its assets in equity securities of 
U.S. exchange-listed companies that pay regular dividends (``U.S. 
Equities''). The Fund's holdings in U.S. Equities currently meet and 
will continue to meet the generic listing standards for U.S. Component 
Stocks in Rule 14.11(i)(4)(C)(i)(a). The Fund has the ability to buy 
and sell call and put options on the S&P 500 Index (``S&P 500 Index 
Options''). The S&P 500 Index is the index most correlated to the 
Fund's underlying equity holdings. The options overlay seeks to 
potentially provide a measure of downside protection and an additional 
component to the Fund's risk management. The options overlay is 
actively managed by the Adviser and will adapt to both changing market 
environments and shifts in the underlying equity holdings of the Fund, 
but is currently limited by the requirement under Rule 
14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross notional 
exposure of listed derivatives based on any single underlying reference 
asset from exceeding 30% of the weight of the portfolio (including 
gross notional exposures).
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    \9\ The term ``Normal Market Conditions'' includes, but is not 
limited to, the absence of trading halts in the applicable financial 
markets generally; operational issues causing dissemination of 
inaccurate market information or system failures; or force majeure 
type events such as natural or man-made disaster, act of God, armed 
conflict, act of terrorism, riot or labor disruption, or any similar 
intervening circumstance.
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    As noted above, Rule 14.11(i)(4)(C)(iv)(b) prevents the Fund from 
holding listed derivatives based on

[[Page 20105]]

any single underlying reference asset in excess of 30% of the weight of 
its portfolio (including gross notional exposures). As proposed, the 
Fund would hold up to 50% of the weight of its portfolio (including 
gross notional exposures) in S&P 500 Index Options, which are traded on 
Cboe Exchange, Inc. (``Cboe Options'').\10\ The Fund will utilize S&P 
500 Index Options to create a collar strategy through selling call 
options and buying protective put options. This may serve as a buffer 
to market selloffs, which may lower the volatility of the portfolio. 
Greater exposure to the S&P 500 through the options would allow the 
Fund the flexibility to fully implement its risk mitigation strategy. 
The Exchange notes that the Fund may also hold cash and Cash 
Equivalents \11\ in compliance with Rule 14.11(i)(4)(C)(iii).
---------------------------------------------------------------------------

    \10\ The Commission has previously approved a series of Managed 
Fund Shares that can hold up to 60% of the weight of its portfolio 
in listed derivatives based on the S&P 500 Index as the only 
underlying reference asset. See Securities Exchange Act Release No. 
82906 (March 20, 2018), 83 FR 12992 (March 26, 2018) (SR-CboeBZX-
2017-012) (order approving the listing and trading of the LHA Market 
State Tactical U.S. Equity ETF).
    \11\ As defined in Exchange Rule 14.11(i)(4)(C)(iii)(b), Cash 
Equivalents are short-term instruments with maturities of less than 
three months, which includes only the following: (i) 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; (ii) certificates of deposit issued against funds 
deposited in a bank or savings and loan association; (iii) bankers 
acceptances, which are short-term credit instruments used to finance 
commercial transactions; (iv) repurchase agreements and reverse 
repurchase agreements; (v) 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; (vi) commercial paper, 
which are short-term unsecured promissory notes; and (vii) money 
market funds.
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    As noted above, the Fund's investment in U.S. Equities under Normal 
Market Conditions constitutes at least 80% of the Fund's assets and 
such holdings will meet the requirements for U.S. Component Stocks in 
Rule 14.11(i)(4)(C)(i)(a). In addition to such U.S. Equities holdings, 
the Fund may hold up to 20% of its assets in cash, Cash Equivalents, 
and the value of S&P 500 Index Options positions under Normal Market 
Conditions. The combination of U.S. Equities, cash, Cash Equivalents, 
and the cash value of S&P 500 Index Options will constitute the 
entirety of the Fund's holdings and the cash value of these holdings 
will be used to form the basis for these calculations. The Exchange 
notes that this is different than the calculation used to measure the 
Fund's holdings in S&P 500 Index Options as it relates to the Fund 
holding up to 50% of the weight of its portfolio, which, as noted 
above, is calculated using gross notional exposures gained through the 
S&P 500 Index Options in both the numerator and denominator, which is 
consistent with the derivatives exposure calculation under Rule 
14.11(i)(4)(C)(iv). The Exchange represents that, except for the 30% 
Restriction in Rule 14.11(i)(4)(C)(iv)(b), the Fund's investments will 
continue to satisfy all of the generic listing standards under BZX Rule 
14.11(i)(4)(C) and all other applicable requirements for Managed Fund 
Shares under Rule 14.11(i).
    The Trust is required to comply with Rule 10A-3 under the Act for 
the initial and continued listing of the Shares of the Fund. In 
addition, the Exchange represents that the Shares of the Fund will 
continue to comply with all other requirements applicable to Managed 
Fund Shares, which include the dissemination of key information such as 
the Disclosed Portfolio,\12\ Net Asset Value,\13\ and the Intraday 
Indicative Value,\14\ suspension of trading or removal,\15\ trading 
halts,\16\ surveillance,\17\ minimum price variation for quoting and 
order entry,\18\ the information circular,\19\ and firewalls \20\ as 
set forth in Exchange rules applicable to Managed Fund Shares and the 
orders approving such rules. Moreover, all of the U.S. Equities and S&P 
500 Index Options held by the Fund will trade on markets that are a 
member of Intermarket Surveillance Group (``ISG'') or affiliated with a 
member of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.\21\ All statements and representations 
made in this filing regarding the description of the portfolio or 
reference assets, limitations on portfolio holdings or reference 
assets, dissemination and availability of reference asset and intraday 
indicative values (as applicable), or the applicability of Exchange 
listing rules specified in this filing shall constitute continued 
listing requirements for the Shares. The Fund has represented to the 
Exchange that it will advise the Exchange of any failure by the Fund or 
Shares to comply with the continued listing requirements, and, pursuant 
to its obligations under Section 19(g)(1) of the Act, the Exchange will 
surveil for compliance with the continued listing requirements. FINRA 
conducts certain 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. If the Fund is not in compliance with the applicable listing 
requirements, the Exchange will commence delisting procedures with 
respect to such Fund under Exchange Rule 14.12.
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    \12\ See Rule 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii).
    \13\ See Rule 14.11(i)(4)(A)(ii).
    \14\ See Rule 14.11(i)(4)(B)(i).
    \15\ See Rule 14.11(i)(4)(B)(iii).
    \16\ See Rule 14.11(i)(4)(B)(iv).
    \17\ See Rule 14.11(i)(2)(C).
    \18\ See Rule 14.11(i)(2)(B).
    \19\ See Rule 14.11(i)(6).
    \20\ See Rule 14.11(i)(7).
    \21\ For a list of the current members of ISG, see 
www.isgportal.com. The Exchange notes that not all components of the 
Disclosed Portfolio for 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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Availability of Information
    As noted above, the Fund will comply with the requirements under 
the Rule 14.11(i) related to Disclosed Portfolio, NAV, and the intraday 
indicative value. Additionally, the intra-day, closing and settlement 
prices of exchange-traded portfolio assets, specifically the U.S. 
Equities and S&P 500 Index Options, will be readily available from the 
exchanges trading such securities or derivatives, as the case may be, 
automated quotation systems, published or other public sources, or 
online information services such as Bloomberg or Reuters. Quotation and 
last sale information for S&P 500 Index Options will be available via 
the Options Price Reporting Authority. Price information for Cash 
Equivalents will be available from major market data vendors. The 
Disclosed Portfolio will be available on the Fund's website 
(www.horizonsetfs.com) free of charge. The Fund's website will include 
a form of the prospectus for the Fund and additional information 
related to NAV and other applicable quantitative information. 
Information regarding market price and trading volume of the Shares 
will be continuously available throughout the day on brokers' computer 
screens and other electronic services. Information regarding the 
previous day's closing price and trading volume for the Shares will be 
published daily in the financial section of newspapers. Trading in the 
Shares may be halted for market conditions or for reasons that, in the 
view of the Exchange, make trading inadvisable. The Exchange deems the 
Shares to be equity securities, thus rendering trading in the Shares 
subject to the Exchange's existing rules governing the trading of 
equity securities. The Exchange has appropriate rules to facilitate 
trading in the Shares during all trading sessions. The Exchange 
prohibits the distribution of material non-public information by

[[Page 20106]]

its employees. Quotation and last sale information for the Shares and 
U.S. Equities will be available via the CTA high-speed line.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \22\ in general and Section 6(b)(5) of the Act \23\ 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, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest in that the Shares will meet each of the continued 
listing criteria in BZX Rule 14.11(i) with the exception of the 30% 
Restriction in Rule 14.11(i)(4)(C)(iv)(b), which requires that the 
aggregate gross notional value of listed derivatives based on any five 
or fewer underlying reference assets shall not exceed 65% of the weight 
of the portfolio (including gross notional exposures), and the 
aggregate gross notional value of listed derivatives based on any 
single underlying reference asset shall not exceed 30% of the weight of 
the portfolio (including gross notional exposures).\24\ The Exchange 
believes that the liquidity in the S&P 500 Index Options markets 
mitigates the concerns that Rule 14.11(i)(4)(C)(iv)(b) is intended to 
address and that such liquidity would prevent the Shares from being 
susceptible to manipulation.\25\ Further, allowing the Fund to hold a 
greater portion of its portfolio in S&P 500 Index Options would mean 
that the Fund would not be required to use over-the-counter (``OTC'') 
derivatives if the Adviser deemed it necessary to get exposure in 
excess of the 30% Restriction in Rule 14.11(i)(4)(C)(iv)(b), which 
would reduce the Fund's operational burden by allowing the Fund to use 
listed options contracts to achieve its investment objective and would 
eliminate the counter-party risk associated with holding OTC derivative 
instruments. The Exchange further believes that the diversity, 
liquidity, and market cap of the securities underlying the S&P 500 
Index are sufficient to protect against market manipulation of both the 
Fund's holdings and the Shares as it relates to the S&P 500 Index 
Options holdings.
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    \22\ 15 U.S.C. 78f(b).
    \23\ 15 U.S.C. 78f(b)(5).
    \24\ As noted above, the Exchange is proposing that the Fund be 
exempt only from the 30% Restriction of Rule 14.11(i)(4)(C)(iv)(b) 
that prevents the aggregate gross notional value of listed 
derivatives based on any single underlying reference asset from 
exceeding 30% of the weight of the portfolio (including gross 
notional exposures). The Fund will continue to meet the requirement 
that the aggregate gross notional value of listed derivatives based 
on any five or fewer underlying reference assets shall not exceed 
65% of the weight of the portfolio (including gross notional 
exposures).
    \25\ In February 2018, the total notional volume traded was 
approximately $9.4 trillion in S&P 500 Index Options.
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    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the Shares on the Exchange during 
all trading sessions and to deter and detect violations of Exchange 
rules and the applicable federal securities laws. All of the U.S. 
Equities and S&P 500 Index Options contracts held by the Fund will 
trade on markets that are a member of ISG or affiliated with a member 
of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement. The Exchange may obtain information 
regarding trading in the Shares, U.S. Equities, and the S&P 500 Index 
Options held by the Fund via the ISG from other exchanges who are a 
member of ISG or affiliated with a member of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement.\26\ The Exchange further notes that the Fund will meet and 
be subject to all other requirements of the generic listing rules and 
other applicable continued listing requirements for Managed Fund Shares 
under Rule 14.11(i), including those requirements regarding the 
dissemination of key information such as the Disclosed Portfolio, Net 
Asset Value, and the Intraday Indicative Value, suspension of trading 
or removal, trading halts, surveillance, minimum price variation for 
quoting and order entry, the information circular, and firewalls as set 
forth in Exchange rules applicable to Managed Fund Shares.
---------------------------------------------------------------------------

    \26\ See note 21, supra.
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    For the above reasons, the Exchange believes that 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 purpose of the Act. The Exchange notes that the 
proposed rule change, rather will facilitate the options strategy of an 
actively-managed exchange-traded product that will allow the Fund to 
better compete in the marketplace, thus enhancing competition among 
both market participants and listing venues, 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

    The Exchange has neither solicited nor received written comments on 
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, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \27\ and Rule 19b-
4(f)(6) thereunder.\28\
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(A).
    \28\ 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 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.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \29\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \30\ 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 requested that the Commission waive the 30-day operative delay so 
that the proposed rule change may become operative upon filing. The 
Commission notes that waiver of the operative delay would allow the 
Fund to hold up to 50% of the weight of its portfolio (including gross 
notional exposures) in S&P 500 Index Options without delay, and thus 
allow the Fund to fully implement its risk mitigation strategy without 
delay. The Commission notes that, other than the 30% Restriction with 
respect to S&P 500 Index Options, the Fund would continue to satisfy 
all of the generic listing standards under BZX Rule 14.11(i)(4)(C) and 
all other requirements applicable to Managed Fund Shares. The 
Commission believes that waiver of the 30-day operative delay is 
consistent with the protection of investors and the public interest.

[[Page 20107]]

Accordingly, the Commission hereby waives the 30-day operative delay 
and designates the proposed rule change operative upon filing.\31\
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    \29\ 17 CFR 240.19b-4(f)(6).
    \30\ 17 CFR 240.19b-4(f)(6)(iii).
    \31\ 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 such 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeBZX-2018-029 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-CboeBZX-2018-029. 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 website (https://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 website 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-CboeBZX-2018-029 and should be submitted 
on or before May 29, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-09576 Filed 5-4-18; 8:45 am]
 BILLING CODE 8011-01-P
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