Document ID: SEC-2018-0351-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The Nasdaq Stock Market LLC
Posted Date: 2018-02-28T05:00Z

[Federal Register Volume 83, Number 40 (Wednesday, February 28, 2018)]
[Notices]
[Pages 8719-8727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-04035]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82761; File No. SR-NASDAQ-2018-012]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change To List and Trade, Under 
Nasdaq Rule 5705, the Shares of the Horizons Russell 2000 Covered Call 
ETF

February 22, 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 February 9, 2018, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II, below, which Items have been prepared by 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\ 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 list and trade, under Nasdaq Rule 5705, 
the shares (``Index Fund Shares'' or ``Shares'') of the Horizons 
Russell 2000 Covered Call ETF (the ``Fund''), a series of the Horizons 
ETF Trust I (the ``Trust'').

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade the Shares of the Fund 
under Rule 5705, which rule governs the listing and trading of Index 
Fund Shares \3\ on the Exchange.\4\ The Shares will be offered by the 
Fund, which will be a passively managed exchange-traded fund (``ETF'') 
that seeks to track the performance of the CBOE Russell 2000 30-Delta 
BuyWrite V2 Index (the ``Benchmark Index'').\5\ The Fund is a series of 
the Trust. The Trust was established as a Delaware statutory trust on 
May 17,

[[Page 8720]]

2012. The Trust is registered with the Commission as an open-end 
management investment company and has filed a post-effective amendment 
to its registration statement on Form N-1A (the ``Registration 
Statement'') with the Commission to register the Fund and its Shares 
under the 1940 Act and the Securities Act of 1933.\6\
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    \3\ Rule 5705(b)(1)(A) provides that an ``Index Fund Share'' is 
a security (i) that is issued by an open-end management investment 
company based on a portfolio of stocks or fixed income securities or 
a combination thereof, that seeks to provide investment results that 
correspond generally to the price and yield performance or total 
return performance of a specified foreign or domestic stock index, 
fixed income securities index or combination thereof; (ii) that is 
issued by such an open-end management investment company in a 
specified aggregate minimum number in return for a deposit of 
specified numbers of shares of stock and/or a cash amount, a 
specified portfolio of fixed income securities and/or a cash amount 
and/or a combination of the above, with a value equal to the next 
determined net asset value; and (iii) that, when aggregated in the 
same specified minimum number, may be redeemed at a holder's request 
by such open-end investment company which will pay to the redeeming 
holder the stock and/or cash, fixed income securities and/or cash 
and/or a combination thereof, with a value equal to the next 
determined net asset value. In contrast, an open-end investment 
company that issues Managed Fund Shares, listed and traded on the 
Exchange under Nasdaq Rule 5735, seeks to provide investment results 
from a portfolio of securities selected by its investment adviser 
consistent with its investment objective and policies.
    \4\ The Commission approved Nasdaq Rule 5705 in Securities 
Exchange Act Release No. 57962 (June 13, 2008), 73 FR 35175 (June 
20, 2008) (SR-NASDAQ-2008-039).
    \5\ The Exchange notes that its proposal to list shares of the 
Fund which tracks the performance of an index of U.S. exchange-
listed options is similar to the proposal and resultant order issued 
to the NYSE ARCA to list and trade under NYSE Arca Equities Rule 
5.2(j)(3) (which is similar to Nasdaq Rule 5705(b)). See Securities 
Exchange Act Release No. 68708 (January 23, 2013) (SR-NYSEArca-2012-
131) (order approving 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). The Exchange believes the proposed rule change does not raise 
any significant issues not previously addressed in this or prior 
Commission orders.
    \6\ See Registration Statement for the Trust, filed on June 22, 
2017 (File No. 333-183155). The descriptions of the Fund and the 
Shares contained herein are based, in part, on information in the 
Registration Statement. In addition, the Commission has issued an 
order granting certain exemptive relief to the Trust under the 1940 
Act. See Investment Company Act Release No. 31961 (Jan. 19, 2016) 
(File No. 812-14461) (``Exemptive Order'').
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    Horizons ETF Management (US), LLC will serve as the investment 
adviser (the ``Adviser'') to the Fund. Foreside Fund Services, LLC will 
serve as the principal underwriter and distributor of the Fund's Shares 
(the ``Distributor''). U.S. Bank National Association will act as the 
custodian for the Fund (the ``Custodian''). U.S. Bancorp Fund Services, 
LLC will serve as the administrator, transfer agent and fund accounting 
agent for the Fund (the ``Administrator'').
    The Benchmark Index was developed by and is maintained by FTSE 
International Limited and Frank Russell Company (the ``Index 
Provider'').\7\ The Index Provider is a global provider of index and 
data services.
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    \7\ The Benchmark Index methodology is available at https://www.cboe.com/products/strategy-benchmark-indexes/buywrite-indexes/cboe-russell-2000-30-delta-buywrite-index-bxrd.
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    Nasdaq Rule 5705(b)(5)(A)(i) provides that, if an index is 
maintained by a broker-dealer or fund adviser, the broker-dealer or 
fund adviser shall erect a ``fire wall'' around the personnel who have 
to access to information concerning changes and adjustments to the 
index. In addition, Nasdaq Rule 5705(b)(5)(A)(iii) further requires 
that any advisory committee, supervisory board, or similar entity that 
advises a Reporting Authority or that makes decisions on index 
composition, methodology and related matters, must implement and 
maintain, or be subject to, procedures designed to prevent the use and 
dissemination of material non-public information regarding the 
applicable index.
    The Adviser is not a broker-dealer; however, it is affiliated with 
two broker-dealers. The Adviser represents that a fire wall exists 
around the respective personnel at the Adviser and affiliated broker-
dealers who have access to information concerning changes and 
adjustments to the composition and/or changes to the Fund's portfolio. 
In addition, and in accordance with Nasdaq Rule 5705(b)(5)(a)(iii), 
such personnel will be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding the 
Fund's portfolio.
    The Index Provider is not a broker-dealer and it is not affiliated 
with a broker-dealer. The Index Provider has represented that a fire 
wall exists around its personnel who have access to information 
concerning changes and adjustments to the Benchmark Index. In addition, 
and in accordance with Nasdaq Rule 5705(b)(5)(A)(iii), such personnel 
will be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding the 
Benchmark Index. The Chicago Board Options Exchange, Incorporated 
(``CBOE'') is the index calculation agent for the Benchmark Index. CBOE 
has represented that a fire wall exists around its personnel who have 
access to information concerning changes and adjustments to the 
Benchmark Index. In addition, such personnel will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding the Benchmark Index.
    The Exchange represents that in the event (a) the Adviser, any sub-
adviser, or the Index Provider becomes registered as a broker-dealer or 
is newly affiliated with a broker dealer, or (b) any new adviser, sub-
adviser, or Index Provider is a registered broker-dealer or becomes 
affiliated with a broker dealer, then the Adviser, sub-adviser or Index 
Provider will implement a fire wall with respect to its relevant 
personnel or such broker dealer affiliate, as applicable, regarding 
access to information concerning the composition or changes to the 
portfolio or concerning changes and adjustments to the Benchmark Index 
and will be subject to procedures designed to prevent the use and 
dissemination of material, nonpublic information regarding the Fund's 
portfolio. The Fund does not currently intend to use a sub-adviser.\8\
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    \8\ 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 the Advisers Act and Rule 204A-1 
thereunder. In addition, Rule 206(4)-7 under the Advisers Act makes 
it unlawful for an investment adviser to provide investment advice 
to clients unless such investment adviser has (i) adopted and 
implemented written policies and procedures reasonably designed to 
prevent violation, by the investment adviser and its supervised 
persons, of the Advisers Act and the Commission rules adopted 
thereunder; (ii) implemented, at a minimum, an annual review 
regarding the adequacy of the policies and procedures established 
pursuant to subparagraph (i) above and the effectiveness of their 
implementation; and (iii) designated an individual (who is a 
supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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Horizons Russell 2000 Covered Call ETF
Principal Investments
    The Fund's investment objective is to seek to track the investment 
results that correspond (before fees and expenses) generally to the 
performance of the Benchmark Index provided by the Index Provider. The 
Fund will pursue its objective by investing at least 80% of its total 
assets in all of the equity securities in the Russell 2000 Index and a 
single written one-month out-of-the-money covered call option on the 
Russell 2000 Index. The market value of the option strategy may be up 
to 20% of the Fund's overall net asset value. The market value of the 
call options included in the Benchmark Index will not represent more 
than 10% of the total weight of the Benchmark Index. The component 
securities of the Benchmark Index meet all requirements of Nasdaq Rule 
5705(b)(3)(A)(i) except that the Benchmark Index includes call options, 
which are not NMS Stocks as defined in Rule 600 of Regulation NMS. In 
pursuing its investment objective, under normal market conditions,\9\ 
the Fund will seek investment results that, before fees and expenses, 
generally correspond to the performance of the Benchmark Index. The 
Fund seeks correlation of 0.90 or better between its performance and 
the performance of the Benchmark Index. A figure of 1.00 would 
represent perfect correlation. The call option written is at the strike 
nearest to the 30 Delta between 10:30 a.m. and 11:00 a.m. CT on the 
roll date (the third Friday of every month).
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    \9\ The term ``under normal market conditions'' as used herein 
includes, but is not limited to, the absence of adverse market, 
economic, political or other conditions, including extreme 
volatility or trading halts in the securities markets or the 
financial markets generally; operational issues causing 
dissemination of inaccurate market information; or force majeure 
type events such as systems failure, natural or man-made disaster, 
act of God, armed conflict, act of terrorism, riot or labor 
disruption or any similar intervening circumstance. In periods of 
extreme market disturbance, the Fund may take temporary defensive 
positions, by overweighting its portfolio in cash/cash-like 
instruments; however, to the extent possible, the Adviser would 
continue to seek to achieve the Fund's investment objective.
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    The Benchmark Index is a benchmark index that measures the 
performance of

[[Page 8721]]

a theoretical portfolio that holds the stocks included in the Russell 
2000 Index and ``writes'' (or sells) a single one-month out-of-the-
money Russell 2000 Index covered call option. The call option written 
for the Benchmark Index is at the strike nearest to the 30 Delta 
between 10:30 a.m. and 11:00 a.m. CT on the roll date (the third Friday 
of every month). The Russell 2000 Index measures the performance of the 
small capitalization sector of the U.S. equity market, as defined by 
the Index Provider. The Russell 2000 Index is a subset of the Russell 
3000 Index, which measures the performance of the broad U.S. equity 
market, as determined by the Index Provider. The Russell 2000 Index is 
a float-adjusted capitalization-weighted index of equity securities 
issued by the approximately 2000 smallest issuers in the Russell 3000 
Index. Preferred and convertible preferred stock, redeemable shares, 
participating preferred stock, warrants, rights, installment receipts 
and trust receipts are not included in the Russell 2000 Index.
    Because a covered call strategy generates income in the form of 
premiums on the written call options, the Benchmark Index is generally 
expected to provide higher total returns with lower volatility than the 
Russell 2000 Index in most market environments, with the exception of 
when the equity market is rallying rapidly. Each single call option in 
the Benchmark Index will be traded on national securities exchanges, 
such as the CBOE. As of October 31, 2017, the Russell 2000 Index 
included common stocks of 1984 companies, with an average market 
capitalization of approximately $2.3 billion.
    The Fund will generally use a replication methodology, meaning it 
will invest in all of the securities and the call option comprising the 
Benchmark Index in proportion to the weightings in Benchmark Index. 
However, the Fund may, from time-to-time, utilize a sampling 
methodology under various circumstances where it may not be possible or 
practicable to purchase all of the equity securities comprising the 
Benchmark Index.
    The equity securities in which the Fund will invest and the option 
that the Fund will write will be limited to U.S. exchange-traded 
securities and call options, respectively. They will trade in markets 
that are members of the Intermarket Surveillance Group (``ISG''), which 
includes all U.S. national securities exchanges and certain foreign 
exchanges, or they will be parties to a comprehensive surveillance 
sharing agreement with the Exchange. A list of ISG members is available 
at www.isgportal.org.
    The equity securities held by the Fund will be rebalanced 
quarterly. The call option portion of the portfolio will consist of a 
single U.S. exchange-traded one-month covered call on the Russell 2000 
Index that is written by the Fund slightly out-of-the-money. A call 
option will give the holder the right to buy the securities underlying 
the call options written at a predetermined strike price from the Fund. 
The notional value of the covered call options written (including 
financial instruments described in Other Investments below) will be 
generally be 100% of the overall Fund.
    The Fund will utilize options in accordance with Rule 4.5 of the 
Commodity Exchange Act (``CEA''). The Trust, on behalf of the Fund, has 
filed a notice of eligibility for exclusion from the definition of the 
term ``commodity pool operator'' in accordance with Rule 4.5 so that 
the Fund is not subject to registration or regulation as a commodity 
pool operator under the CEA.
Other Investments
    The Fund may invest no more than 20% of its net assets in the 
instruments described below.
    The Fund may invest in ETFs, which shall be registered as 
investment companies under the 1940 Act and trade on a U.S. national 
securities exchange. The Fund may also buy and sell individual large 
capitalization equity securities that do not comprise the Russell 2000 
Index and are traded on a U.S. national securities exchange.
    The Fund may invest in U.S. exchange-listed futures contracts based 
on (1) the Benchmark Index or Russell 2000 Index and (2) ETFs designed 
to track the Benchmark Index or Russell 2000 Index. In addition, the 
Fund may invest in forward contracts based on (1) the Benchmark Index 
or Russell 2000 Index and (2) ETFs designed to track the Benchmark 
Index or Russell 2000 Index. The Fund may also buy and sell OTC options 
on (1) the Benchmark Index or Russell 2000 Index and (2) ETFs designed 
to track the Benchmark Index or Russell 2000 Index. Moreover, the Fund 
may enter into dividend and total return swap transactions (including 
equity swap transactions) based on (1) the Benchmark Index or Russell 
2000 Index and (2) ETFs designed to track the Benchmark Index or 
Russell 2000 Index.\10\ In a typical swap transaction, one party agrees 
to make periodic payments to another party (``counterparty'') in an 
amount that equals the change in market value or level of a specified 
rate, index, or asset. In return, the counterparty agrees to make 
periodic payments to the first party in an amount that equals the 
change in market value or level of a specified rate, index, or 
asset.\11\ For example, the Fund enters into a two-year equity swap 
with a counterparty in which the Fund will receive the rate of return 
on the Russell 2000 Index and agree to pay the counterparty a certain 
fixed dollar amount during the two-year period. Swap transactions are 
usually done on a net basis, whereby the Fund would receive or pay only 
the net amount of the two payments. In a typical dividend swap 
transaction, the Fund would pay the swap counterparty a premium and 
would be entitled to receive the value of the actual dividends paid on 
the subject index during the term of the swap contract. In a typical 
total return swap, the Fund might exchange long or short exposures to 
the return of the underlying securities or index to isolate the value 
of the dividends paid on the underlying securities or index 
constituents. The Fund also may engage in interest rate swap 
transactions. In a typical interest rate swap transaction one stream of 
future interest payments is exchanged for another. Such transactions 
often take the form of an exchange of a fixed payment for a variable 
payment based on a future interest rate. The Fund would use interest 
rate swap transactions to manage or hedge exposure to interest rate 
fluctuations.
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    \10\ The Fund will transact only with swap dealers that have in 
place an ISDA agreement with the Fund.
    \11\ Where practicable, the Fund intends to invest in swaps 
cleared through a central clearing house (``Cleared Swaps''). 
Currently, only certain of the interest rate swaps in which the Fund 
intends to invest are Cleared Swaps, while the dividend and total 
return swaps (including equity swaps) in which the Fund may invest 
are currently not Cleared Swaps.
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    The Fund's short positions and its investments in swaps, futures 
contracts, forward contracts and options based on the Benchmark Index 
and Russell 2000 Index and ETFs designed to track the Benchmark Index 
or Russell 2000 Index will be backed by investments in cash, high-
quality short-term debt securities and money-market instruments in an 
amount equal to the Fund's maximum liability under the applicable 
position or contract, or will otherwise be offset in accordance with 
Section 18 of the 1940 Act.\12\
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    \12\ The Fund will seek, where possible, to use counterparties, 
as applicable, whose financial status is such that the risk of 
default is reduced; however, the risk of losses resulting from 
default is still possible. The Adviser will evaluate the 
creditworthiness of counterparties on an ongoing basis. In addition 
to information provided by credit agencies, the Adviser will 
evaluate each approved counterparty using various methods of 
analysis, such as, for example, the counterparty's liquidity in the 
event of default, the counterparty's reputation, the Adviser's past 
experience with the counterparty, and the counterparty's share of 
market participation.

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[[Page 8722]]

    The Fund will attempt to limit counterparty risk in non-cleared 
swaps, forwards, and OTC option contracts by entering into such 
contracts only with counterparties the Adviser believes are 
creditworthy and by limiting the Fund's exposure to each counterparty. 
The Adviser will monitor the creditworthiness of each counterparty and 
the Fund's exposure to each counterparty on an ongoing basis.
    The Fund may invest in short-term debt securities, money market 
instruments and shares of money market funds to the extent permitted 
under the 1940 Act. Short-term debt securities and money market 
instruments include shares of fixed income or money market mutual 
funds, commercial paper, certificates of deposit, bankers' acceptances, 
U.S. government securities (including securities issued or guaranteed 
by the U.S. government or its authorities, agencies, or 
instrumentalities) and, repurchase agreements.\13\ Short-term debt 
securities include bonds that are rated BBB or higher.
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    \13\ The Fund may enter into repurchase agreements with banks 
and broker-dealers. A repurchase agreement is an agreement under 
which securities are acquired by a fund from a securities dealer or 
bank subject to resale at an agreed upon price on a later date. The 
acquiring fund bears a risk of loss in the event that the other 
party to a repurchase agreement defaults on its obligations and the 
fund is delayed or prevented from exercising its rights to dispose 
of the collateral securities.
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    The Fund's investments that it describes above in this section will 
be consistent with the Fund's investment objective and with the 
requirements of the 1940 Act.\14\
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    \14\ To limit the potential risk associated with such 
transactions, the Fund will segregate or ``earmark'' assets 
determined to be liquid by the Adviser in accordance with procedures 
established by the Trust's Board of Trustees and in accordance with 
the 1940 Act (or, as permitted by applicable regulation, enter into 
certain offsetting positions) to cover its obligations arising from 
such transactions. These procedures have been adopted consistent 
with Section 18 of the 1940 Act and related Commission guidance. In 
addition, the Fund will include appropriate risk disclosure in its 
offering documents, including leveraging risk. Leveraging risk is 
the risk that certain transactions of the Fund may give rise to 
leverage, causing the Fund to be more volatile than if it had not 
been leveraged. To mitigate leveraging risk, the Adviser will 
segregate or ``earmark'' liquid assets or otherwise cover the 
transactions that may give rise to such risk the 1940 Act. The Fund 
will not make investments in securities to seek to achieve a 
multiple or inverse multiple of an index and they will not be used 
to enhance leverage.
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    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid securities (calculated at the time of investment). 
The Fund will monitor its portfolio liquidity on an ongoing basis to 
determine whether, in light of current circumstances, an adequate level 
of liquidity is being maintained, and will consider taking appropriate 
steps in order to maintain adequate liquidity if, through a change in 
values, net assets, or other circumstances, more than 15% of the Fund's 
net assets are held in illiquid securities. Illiquid securities include 
securities subject to contractual or other restrictions on resale and 
other instruments that lack readily available markets, as determined in 
accordance with Commission staff guidance.
    The Fund will not invest in assets that are not described in this 
proposed rule change.
    The Fund seeks to track the Benchmark Index, which itself may have 
concentration in certain regions, economies, markets, industries or 
sectors. The Fund may concentrate its investments in a particular 
industry or group of industries to the extent that the Russell 2000 
Index concentrates in an industry or group of industries.\15\ By 
concentrating its investments in an industry or sector, the Fund faces 
more risks than if it were diversified broadly over numerous industries 
or sectors.
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    \15\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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The Shares
    The Fund will issue and redeem Shares only in Creation Units at the 
net asset value (``NAV'') \16\ next determined after receipt of an 
order on a continuous basis every day except weekends and specified 
holidays. The NAV of the Fund will be determined once each business 
day, normally as of the close of trading of the NYSE, which is, 
generally, 4:00 p.m. Eastern Time. Creation Unit sizes will be 50,000 
Shares per Creation Unit. The Trust will issue and sell Shares of the 
Fund only in Creation Units on a continuous basis through the 
Distributor, without a sales load (but subject to transaction fees), at 
their NAV per Share next determined after receipt of an order, on any 
business day, in proper form pursuant to the terms of the applicable 
agreement with an Authorized Participant (as discussed below).
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    \16\ The NAV of the Fund's Shares generally will be calculated 
once daily Monday through Friday as of the close of regular trading 
on the Nasdaq Stock Exchange, generally 4:00 p.m. Eastern time (the 
``NAV Calculation Time''). NAV per Share will be calculated by 
dividing the Fund's net assets by the number of Fund Shares 
outstanding. For more information regarding the valuation of Fund 
investments in calculating the Fund's NAV, see Registration 
Statement.
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    The consideration for purchase of a Creation Unit generally will 
consist of either (i) the in-kind deposit of a designated portfolio of 
securities (the ``Deposit Securities'') per each Creation Unit and the 
Cash Component (defined below), computed as described below or (ii) the 
cash value of all or a portion of the Deposit Securities (``Deposit 
Cash'') and the ``Cash Component,'' computed as described below. The 
Fund may, under certain circumstances, effect a portion of creations 
and redemptions for cash, rather than in-kind securities, particularly 
for the put and call options in which the Fund invests.
    When accepting purchases of Creation Units for cash, the Fund may 
incur additional costs associated with the acquisition of Deposit 
Securities that would otherwise be provided by an in-kind purchaser. 
Together, the Deposit Securities or Deposit Cash, as applicable, and 
the Cash Component will constitute the ``Fund Deposit,'' which 
represents the minimum initial and subsequent investment amount for a 
Creation Unit of the Fund. The ``Cash Component'' will be an amount 
equal to the difference between the NAV of the Shares (per Creation 
Unit) and the market value of the Deposit Securities or Deposit Cash, 
as applicable. If the Cash Component is a positive number (i.e., the 
NAV per Creation Unit exceeds the market value of the Deposit 
Securities or Deposit Cash, as applicable), the Cash Component will be 
such positive amount. If the Cash Component is a negative number (i.e., 
the NAV per Creation Unit is less than the market value of the Deposit 
Securities or Deposit Cash, as applicable), the Cash Component will be 
such negative amount and the creator will be entitled to receive cash 
in an amount equal to the Cash Component. The Cash Component will serve 
the function of compensating for any difference between the NAV per 
Creation Unit and the market value of the Deposit Securities or Deposit 
Cash, as applicable.
    To be eligible to place orders with respect to creations and 
redemptions of Creation Units, an entity must be (i) a ``Participating 
Party,'' i.e., a broker-dealer or other participant in the clearing 
process through the Continuous Net Settlement System of the National 
Securities Clearing Corporation (``NSCC'') or (ii) a Depository Trust 
Company (``DTC'') Participant (a ``DTC Participant''). In addition, 
each

[[Page 8723]]

Participating Party or DTC Participant (each, an ``Authorized 
Participant'') must execute an agreement that has been agreed to by the 
Distributor and the Administrator with respect to purchases and 
redemptions of Creation Units.
    The Administrator, through the NSCC, will make available on each 
business day, immediately prior to the opening of business on the 
Exchange's Regular Market Session (currently 9:30 a.m. Eastern time), 
the list of the names and the required number of shares of each Deposit 
Security and/or the required amount of Deposit Cash, as applicable, to 
be included in the current Fund Deposit (based on information at the 
end of the previous business day). Such Fund Deposit, subject to any 
relevant adjustments, will be applicable in order to effect purchases 
of Creation Units of the Fund until such time as the next announced 
composition of the Deposit Securities and/or the required amount of 
Deposit Cash, as applicable, is made available.
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by the 
Fund through the Administrator and only on a business day.
    With respect to the Fund, the Administrator, through the NSCC, will 
make available immediately prior to the opening of business on the 
Exchange (9:30 a.m. Eastern time) on each business day, the list of the 
names and share quantities of the Fund's portfolio securities (``Fund 
Securities'') and/or, if relevant, the required cash value thereof that 
will be applicable (subject to possible amendment or correction) to 
redemption requests received in proper form on that day. Fund 
Securities received on redemption may not be identical to Deposit 
Securities.
    Redemption proceeds for a Creation Unit will be paid either in-kind 
or in cash or a combination thereof, as determined by the Trust. With 
respect to in-kind redemptions of the Fund, redemption proceeds for a 
Creation Unit will consist of Fund Securities as announced by the 
Administrator on the business day of the request for redemption 
received in proper form plus cash in an amount equal to the difference 
between the NAV of the Shares being redeemed, as next determined after 
a receipt of a request in proper form, and the value of the Fund 
Securities (the ``Cash Redemption Amount''), less a fixed redemption 
transaction fee and any applicable additional variable charge as set 
forth in the Registration Statement. In the event that the Fund 
Securities have a value greater than the NAV of the Shares, a 
compensating cash payment equal to the differential will be required to 
be made by or through an Authorized Participant by the redeeming 
shareholder. Notwithstanding the foregoing, at the Trust's discretion, 
an Authorized Participant may receive the corresponding cash value of 
the securities in lieu of one or more Fund Securities.
    The creation/redemption order cut off time for the Fund is expected 
to be 4:00 p.m. Eastern time for purchases of Shares. On days when the 
Exchange closes earlier than normal and in the case of custom orders, 
the Fund may require orders for Creation Units to be placed earlier in 
the day.
Availability of Information
    The Fund's website (www.us.horizonsetfs.com), which will be 
publicly available prior to the public offering of Shares, will include 
a form of the prospectus for the Fund that may be downloaded. The 
website will include the Shares' ticker, CUSIP and exchange information 
along with additional quantitative information updated on a daily 
basis, including, for the Fund: (1) Daily trading volume, the prior 
business day's reported NAV and closing price, mid-point of the bid/ask 
spread at the time of calculation of such NAV (the ``Bid/Ask 
Price''),\17\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV; and (2) data in chart format displaying the 
frequency distribution of discounts and premiums of the daily Bid/Ask 
Price against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters.
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    \17\ The Bid/Ask Price of the Fund will be determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and its service 
providers.
---------------------------------------------------------------------------

    On each business day, before commencement of trading in Shares in 
the Regular Market Session \18\ on the Exchange, the Fund will disclose 
on its website the identities and quantities of the portfolio of 
securities and other assets (the ``Disclosed Portfolio'') held by the 
Fund that will form the basis for the Fund's calculation of NAV at the 
end of the business day.\19\
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    \18\ See Nasdaq Rule 4120(b)(4) (describing the three trading 
sessions on the Exchange: (1) Pre-Market Session from 4 a.m. to 9:30 
a.m. Eastern time; (2) Regular Market Session from 9:30 a.m. to 4 
p.m. or 4:15 p.m. Eastern time; and (3) Post-Market Session from 4 
p.m. or 4:15 p.m. to 8 p.m. Eastern time).
    \19\ Under accounting procedures to be followed by the Fund, 
trades made on the prior business day (``T'') will be booked and 
reflected in NAV on the current business day (``T+1''). 
Notwithstanding the foregoing, portfolio trades that are executed 
prior to the opening of the Exchange on any business day may be 
booked and reflected in NAV on such business day. Accordingly, the 
Fund will be able to disclose at the beginning of the business day 
the portfolio that will form the basis for the NAV calculation at 
the end of the business day.
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    On a daily basis, the Fund will disclose on the Fund's website the 
following information regarding each portfolio holding, as applicable 
to the type of holding: Ticker symbol; CUSIP number or other 
identifier, if any; a description of the holding (including the type of 
holding); with respect to holdings in derivatives, the identity of the 
security, index, or other asset upon which the derivative is based; for 
options, the option strike price, quantity held (as measured by, for 
example, par value, notional value or number of shares, contracts or 
units), and expiration of call option; maturity date, if any; coupon 
rate; if any; effective date, if any; market value of the holding; 
percentage weighting of the holding in the Fund's portfolio; and cash 
equivalents and the amount of cash held. The website information will 
be publicly available at no charge. In addition, the Disclosed 
Portfolio will be publicly disseminated daily prior to the opening of 
Nasdaq, via NSCC. The basket will represent one Creation Unit of the 
Fund.
    The quotation and last-sale information for the Shares will be 
available via Nasdaq proprietary quote and trade services, as well as 
in accordance with the Unlisted Trading Privileges and the Consolidated 
Tape Association plans for the Shares held by the Fund that will form 
the basis for the Fund's calculation of NAV at the end of the business 
day. The value of the Benchmark Index will be published by one or more 
major market data vendors every 15 seconds during the Regular Market 
Session. Information about the Benchmark Index constituents, the 
weighting of the constituents, the Benchmark Index's methodology, and 
the Benchmark Index's rules will be available at no charge on the Index 
Provider's website at www.ftse.com.
    In addition, for the Fund, an estimated value, defined in Rule 
5705(b)(3)(C) as the ``Intraday Indicative Value,'' that reflects an 
estimated intraday value of the Fund's portfolio, will be disseminated. 
Moreover, the Intraday Indicative Value, available on the NASDAQ 
Information LLC proprietary index data service,\20\ will be

[[Page 8724]]

based upon the current value for the components of the Disclosed 
Portfolio and will be updated and widely disseminated and broadly 
displayed at least every 15 seconds during the Regular Market Session. 
The Intraday Indicative Value will be based on quotes and closing 
prices from the assets' local market and may not reflect events that 
occur subsequent to the local market's close. Premiums and discounts 
between the Intraday Indicative Value and the market price may occur. 
This should not be viewed as a ``real time'' update of the NAV per 
Share of the Fund, which is calculated only once a day.
---------------------------------------------------------------------------

    \20\ Currently, the NASDAQ Global Index Data Service (``GIDS'') 
is the NASDAQ global index data feed service, offering real-time 
updates, daily summary messages, and access to widely followed 
indexes and Intraday Indicative Values for ETFs. GIDS provides 
investment professionals with the daily information needed to track 
or trade NASDAQ indexes, listed ETFs, or third-party partner indexes 
and ETFs.
---------------------------------------------------------------------------

    The dissemination of the Intraday Indicative Value, together with 
the Disclosed Portfolio, will allow investors to determine the value of 
the underlying portfolio of the Fund on a daily basis and will provide 
a close estimate of that value throughout the trading day.
    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers. The Fund's website will include a form of the 
prospectus for the Fund that may be downloaded and additional data 
relating to NAV and other applicable quantitative information.
    Investors will also be able to obtain the Fund's Statement of 
Additional Information (``SAI''), the Fund's annual and semi-annual 
reports (together, ``Shareholder Reports''), and its Form N-CSR and 
Form N-SAR, filed twice a year. The Fund's SAI and Shareholder Reports 
will be available free upon request from the Fund, and those documents 
and the Form N-CSR and Form N-SAR may be viewed on-screen or downloaded 
from the Commission's website at www.sec.gov.
    With respect to the securities and other assets held by the Fund, 
the Intra-day, executable price quotations on such securities will be 
available from major broker-dealer firms or on the exchange on which 
they are traded, as applicable. Intra-day price information will also 
be available through subscription services, such as Bloomberg, Markit 
and Thomson Reuters, which can be accessed by Authorized Participants 
and other investors. Specifically, the intra-day, closing and 
settlement prices of the portfolio securities and other Fund 
investments, including exchange-listed equity securities (which include 
common stocks and ETFs), exchange-listed futures, and exchange-listed 
options, will be readily available from the national securities 
exchanges trading such securities, automated quotation systems, 
published or other public sources, and, with respect to OTC options, 
swaps, and forwards, from third party pricing sources, or on-line 
information services such as Bloomberg or Reuters. Price information 
regarding ETFs will be available from on-line information services and 
from the website for the applicable investment company security. The 
intra-day, closing and settlement prices of short-term debt securities 
and money market instruments will be readily available from published 
and other public sources or on-line information services.
    Money market funds are typically priced once each business day and 
their prices will be available through the applicable fund's website or 
from major market data vendors.
    In addition, a basket composition file, which includes the asset 
names, amounts and share quantities, as applicable, required to be 
delivered in exchange for the Fund's Shares, together with estimates 
and actual cash components, will be publicly disseminated daily prior 
to the opening of Nasdaq, via NSCC. The basket will represent one 
Creation Unit of the Fund.
    Additional information regarding the Fund and the Shares, including 
investment strategies, risks, creation and redemption procedures, fees, 
Fund holdings disclosure policies, distributions and taxes is included 
in the Registration Statement. All terms relating to the Fund that are 
referred to, but not defined in, this proposed rule change are defined 
in the Registration Statement.
Initial and Continued Listing
    The Shares will be subject to Rule 5705, which sets forth the 
initial and continued listing criteria applicable to Index Fund Shares. 
The Exchange represents that, for initial and/or continued listing, the 
Fund must be in compliance with Rule 10A-3 \21\ under the Act. A 
minimum of 100,000 Shares will be outstanding at the commencement of 
trading on the Exchange. The Exchange will obtain a representation from 
the issuer of the Shares that the NAV per Share will be calculated 
daily and that the NAV and the Disclosed Portfolio will be made 
available to all market participants at the same time.
---------------------------------------------------------------------------

    \21\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Trading Halts and Trading Pauses
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. Nasdaq will halt or pause trading in 
the Shares under the conditions specified in Nasdaq Rules 4120 and 
4121, including the trading pauses under Nasdaq Rules 4120(a)(11) and 
(12). Trading may be halted because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) The extent to which trading is not 
occurring in the securities and/or the financial instruments 
constituting the Disclosed Portfolio of the Fund; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present. Trading in the Shares also will be 
subject to Nasdaq Rules 5705(b)(1)(B)(iv), which set forth 
circumstances under which Shares of the Fund may be halted.
    If the Intraday Indicative Value, the Benchmark Index value or the 
value of the Disclosed Portfolio is not being disseminated as required, 
the Exchange may halt trading during the day in which the disruption 
occurs; if the interruption persists past the day in which it occurred, 
the Exchange will halt trading no later than the beginning of the 
trading day following the interruption. The Exchange will obtain a 
representation from the Fund that the NAV for the Fund will be 
calculated daily and will be made available to all market participants 
at the same time.
Trading Rules
    Nasdaq deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to Nasdaq's existing rules governing the 
trading of equity securities. Nasdaq will allow trading in the Shares 
from 4:00 a.m. until 8:00 p.m. Eastern time. The Exchange has 
appropriate rules to facilitate transactions in the Shares during all 
trading sessions As provided in Nasdaq Rule 4613(a)(2)(ii), the minimum 
price variation for quoting and entry of orders in Index Fund Shares 
traded on the Exchange is $0.01.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by both Nasdaq and 
also the Financial Industry Regulatory Authority (``FINRA'') on behalf 
of the Exchange, which are designed to detect

[[Page 8725]]

violations of Exchange rules and applicable federal securities 
laws.\22\ 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.
---------------------------------------------------------------------------

    \22\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares, in the equity securities in which the 
Fund will invest, and in the U.S. exchange-traded options and futures 
which the Fund will buy and write with other markets and other entities 
that are members of the ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.\23\ FINRA may obtain 
trading information regarding trading in the Shares and in such equity 
securities and U.S. exchange-traded options and futures from such 
markets and other entities. In addition, the Exchange may obtain 
information regarding trading in the Shares and in such equity 
securities and U.S. exchange-traded options and futures from markets 
and other entities that are members of the ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement. 
The Exchange may also obtain information from the Trade Reporting and 
Compliance Engine (``TRACE''), which is the FINRA developed vehicle 
that facilitates mandatory reporting of OTC secondary market 
transactions in eligible fixed income securities.
---------------------------------------------------------------------------

    \23\ For a list of the current members of ISG, see 
www.isgportal.org.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. Specifically, the Information 
Circular will discuss the following: (1) The procedures for purchases 
and redemptions of Shares in Creation Units (and that Shares are not 
individually redeemable); (2) Nasdaq Rule 2111A, which imposes 
suitability obligations on Nasdaq members with respect to recommending 
transactions in the Shares to customers; (3) how information regarding 
the Benchmark Index value and Intraday Indicative Value is 
disseminated; (4) the risks involved in trading the Shares during the 
Pre-Market and Post-Market Sessions when an updated Benchmark Index 
value and Intraday Indicative Value will not be calculated or publicly 
disseminated; (5) the requirement that members deliver a prospectus to 
investors purchasing newly issued Shares prior to or concurrently with 
the confirmation of a transaction; and (6) trading information. The 
Information Circular will also discuss any exemptive, no-action and 
interpretive relief granted by the Commission from any rules under the 
Act.
    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Fund. Members purchasing Shares from the Fund for 
resale to investors will deliver a prospectus to such investors. The 
Information Circular will also discuss any exemptive, no-action and 
interpretive relief granted by the Commission from any rules under the 
Act.
    Additionally, the Information Circular will reference that the Fund 
is subject to various fees and expenses described in the Registration 
Statement. The Information Circular will also disclose the trading 
hours of the Shares of the Fund and the applicable NAV Calculation Time 
for the Shares. The Information Circular will disclose that information 
about the Shares of the Fund will be publicly available on the 
Distributor's website.
Continued Listing Representations
    All statements and representations made in this filing regarding 
(a) the description of the portfolio, (b) limitations on portfolio 
holdings or reference assets, (c) dissemination and availability of the 
reference asset or intraday indicative values, or (d) the applicability 
of Exchange listing rules shall constitute continued listing 
requirements for listing the Shares on the Exchange. In addition, the 
issuer has represented to the Exchange that it will advise the Exchange 
of any failure by the Fund to comply with the continued listing 
requirements, and, pursuant to its obligations under Section 19(g)(1) 
of the Act, the Exchange will monitor for compliance with the continued 
listing requirements. If the Fund is not in compliance with the 
applicable listing requirements, the Exchange will commence delisting 
procedures under the Nasdaq 5800 Series.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\24\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\25\ in particular, in that it is designed to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and, in general to protect investors and the 
public interest.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78f(b).
    \25\ 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 be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Nasdaq Rule 5705. The 
Exchange believes that its surveillance procedures are adequate to 
properly monitor the trading of the Shares on Nasdaq during all trading 
sessions and to deter and detect violations of Exchange rules and the 
applicable federal securities laws.
    The Adviser maintains a fire wall around the respective personnel 
at the Adviser and affiliated broker-dealers who have access to 
information concerning changes and adjustments to the composition and/
or changes to the Fund's portfolio. In addition, and in accordance with 
Nasdaq Rule 5705(b)(5)(A)(iii), such personnel will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding the Fund's portfolio.
    The Index Provider maintains a fire wall around its personnel who 
have access to information concerning changes and adjustments to the 
Benchmark Index. In addition, and in accordance with Nasdaq Rule 
5705(b)(5)(A)(ii), such personnel will be subject to procedures 
designed to prevent the use and dissemination of material non-public 
information regarding the Benchmark Index.
    The CBOE is the index calculation agent for the Benchmark Index. 
CBOE has represented that a fire wall exists around its personnel who 
have access to information concerning changes and adjustments to the 
Benchmark Index. In

[[Page 8726]]

addition, such personnel will be subject to procedures designed to 
prevent the use and dissemination of material non-public information 
regarding the Benchmark Index.
    The equity securities in which the Fund may invest and the options 
which the Fund may write will be limited to U.S. exchange-traded 
securities and options, respectively, that trade in markets that are 
members of the ISG, which includes all U.S. national securities 
exchanges and certain foreign exchanges, or are parties to a 
comprehensive surveillance sharing agreement with the Exchange. The 
Exchange may obtain information via ISG from other exchanges that are 
members of ISG or with which the Exchange has entered into a 
comprehensive surveillance sharing agreement. The market value of the 
call options included in the Benchmark Index will not represent more 
than 10% of the total weight of the Benchmark Index. Each call option 
included in the Benchmark Index must meet the criteria of the Benchmark 
Index methodology, which methodology is publicly available. The Fund 
seeks a correlation over time of 0.90 or better between the Fund's 
performance and the performance of its Benchmark Index. A figure of 
1.00 would represent perfect correlation.
    The Fund will pursue its objective by investing in all the equity 
securities in the Russell 2000 Index and each month writing a single 
one-month out-of-the-money covered call option on the Russell 2000 
Index. Under normal circumstances, the Fund will invest primarily in 
U.S. exchange-traded equity securities. The Fund will also utilize an 
option strategy consisting of writing a single U.S. exchange-traded 
covered call option on the Russell 2000 Index. The market value of the 
option strategy may be up to 20% of the Fund's overall net asset value. 
In addition to such option strategy, the Fund may invest no more than 
20% of the market value of its net assets in, as described above, 
futures contracts, options, interest rate swaps, equity swaps, total 
return swaps, dividend swaps, forward contracts, ETFs, individual large 
capitalization equity securities that do not comprise the Russell 2000 
Index, short-term debt securities, money market fund shares, money 
market instruments and repurchase agreements.
    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid securities (calculated at the time of investment). 
The Fund will monitor its portfolio liquidity on an ongoing basis to 
determine whether, in light of current circumstances, an adequate level 
of liquidity is being maintained, and will consider taking appropriate 
steps in order to maintain adequate liquidity if, through a change in 
values, net assets, or other circumstances, more than 15% of the Fund's 
net assets are held in illiquid securities. Illiquid securities include 
securities subject to contractual or other restrictions on resale and 
other instruments that lack readily available markets as determined in 
accordance with Commission staff guidance.
    The Fund's investments will be consistent with the Fund's 
investment objective and will not be used to enhance leverage.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information will be publicly available regarding the Fund and the 
Shares, thereby promoting market transparency. The Intraday Indicative 
Value, available on the NASDAQ Information LLC proprietary index data 
service, will be widely disseminated by one or more major market data 
vendors and broadly displayed at least every 15 seconds during the 
Regular Market Session. On each business day, before commencement of 
trading in Shares in the Regular Market Session on the Exchange, the 
Fund will disclose on its website the Disclosed Portfolio that will 
form the basis for the Fund's calculation of NAV at the end of the 
business day. Information regarding market price and trading volume of 
the Shares will be continually available on a real-time basis 
throughout the day on brokers' computer screens and other electronic 
services, and quotation and last sale information for the Shares will 
also be available via Nasdaq proprietary quote and trade services, as 
well as in accordance with the Unlisted Trading Privileges and the 
Consolidated Tape Association plans for the Shares and any underlying 
exchange-traded products. Intra-day, executable price quotations of the 
securities and other assets held by the Fund will be available from 
major broker-dealer firms or on the exchange on which they are traded, 
if applicable. Intra-day price information will also be available 
through subscription services, such as Bloomberg, Markit and Thomson 
Reuters, which can be accessed by Authorized Participants and other 
investors.
    The Fund's website will include a form of the prospectus for the 
Fund and additional data relating to NAV and other applicable 
quantitative information. Trading in Shares of the Fund will be halted 
or paused under the conditions specified in Nasdaq Rules 4120 and 4121, 
including the trading pauses under Nasdaq Rules 4120(a)(11) and (12). 
Trading may be halted because of market conditions or for reasons that, 
in the view of the Exchange, make trading in the Shares inadvisable, 
and trading in the Shares will be subject to Nasdaq Rule 
5705(b)(1)(B)(iv), which sets forth circumstances under which Shares of 
the Fund may be halted. In addition, as noted above, investors will 
have ready access to information regarding the Fund's holdings, the 
Intraday Indicative Value, the Disclosed Portfolio, and quotation and 
last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of passively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, as noted above, investors 
will have ready access to information regarding the Fund's holdings, 
the Intraday Indicative Value, the Disclosed Portfolio, and quotation 
and last sale information for the Shares.
    For the above reasons, Nasdaq believes the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act.

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

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

[[Page 8727]]

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

    No written comments were either solicited or received.

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

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

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change 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 [email protected]. Please include 
File Number SR-NASDAQ-2018-012 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2018-012. 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 (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 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-NASDAQ-2018-012 and should be submitted 
on or before March 21, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-04035 Filed 2-27-18; 8:45 am]
 BILLING CODE 8011-01-P