81 FR 59257 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Elkhorn Commodity Rotation Strategy ETF of the Elkhorn ETF Trust

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 167 (August 29, 2016)

[Federal Register Volume 81, Number 167 (Monday, August 29, 2016)]
[Notices]
[Pages 59257-59259]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-20577]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78654; File No. SR-NASDAQ-2016-117]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Elkhorn Commodity Rotation Strategy ETF of the Elkhorn 
ETF Trust

August 23, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 11, 2016, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by Nasdaq. 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).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    Nasdaq proposes a rule change relating to the Elkhorn Commodity 
Rotation Strategy ETF (formerly, the Elkhorn Dorsey Wright Commodity 
Rotation Portfolio) (the ``Fund'') of Elkhorn ETF Trust (the 
``Trust''), the shares of which have been approved by the Commission 
for listing and trading under Nasdaq Rule 5735 (``Managed Fund 
Shares''). The proposed rule change reflects (i) a change to the name 
of the Fund, and (ii) a change to the name and ownership of the 
benchmark index applicable to the Fund. The shares of the Fund are 
collectively referred to herein as the ``Shares.''
    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, and at the 
Commission's Public Reference Room.

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

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

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

1. Purpose
    The Commission previously approved the listing and trading of the 
Shares under Nasdaq Rule 5735, which governs the listing and trading of 
Managed Fund Shares on the Exchange.\3\ However, no Shares are 
currently listed and traded on the Exchange. The Exchange believes the 
proposed rule change reflects no significant issues not previously 
addressed in the Prior Release.
---------------------------------------------------------------------------

    \3\ The Commission approved Nasdaq Rule 5735 (formerly Nasdaq 
Rule 4420(o)) in Securities Exchange Act Release No. 57962 (June 13, 
2008), 73 FR 35175 (June 20, 2008) (SR-NASDAQ-2008-039). The 
Commission previously approved the listing and trading of the Shares 
of the Fund. See Securities Exchange Act Release No. 77688 (April 
22, 2016), 81 FR 25467 (April 28, 2016) (SR-NASDAQ-2016-030) 
(``Prior Order''). See also Securities Exchange Act Release No. 
77338 (March 10, 2016), 81 FR 14142 (March 16, 2016) (SR-NASDAQ-
2016-030) (``Prior Notice,'' and together with the Prior Order, the 
``Prior Release'').
---------------------------------------------------------------------------

    The Fund is an actively managed exchange-traded fund (``ETF''). The 
Shares will be offered by the Trust, which was organized as a 
Massachusetts business trust on December 12, 2013. The Trust, which is 
registered with the Commission as an investment company, has filed a 
registration statement on Form N-1A (``Registration Statement'') 
relating to the Fund with the Commission.\4\
---------------------------------------------------------------------------

    \4\ See Registration Statement on Form N-1A for the Trust, dated 
February 18, 2016 (File Nos. 333-201473 and 811-22926) (the 
``Registration Statement''). The descriptions of the Shares and the 
Fund contained herein are based, in part, on information in the 
Registration Statement. Before Shares are publicly offered, the 
Trust will file a post-effective amendment to its Registration 
Statement that reflects the changes in this proposed rule change. 
The descriptions of the operation of the Trust and the Fund will be 
reflected in any such filing. The changes in this proposed rule 
change will not be implemented for the Fund until the post-effective 
amendment to the Registration Statement becomes effective. The 
Adviser represents that the Adviser will not implement the changes 
described herein until the instant proposed rule change is 
operative.

---------------------------------------------------------------------------

[[Page 59258]]

    As indicated in the Prior Release, Elkhorn Investments, LLC will be 
the investment adviser (the ``Adviser'') to the Fund and will monitor 
the Fund's investment portfolio. It is currently anticipated that day-
to-day portfolio management for the Fund will be provided by the 
Adviser. However, the Fund and the Adviser may contract with an 
investment sub-adviser (a ``Sub-Adviser'') to provide day-to-day 
portfolio management for the Fund. ALPS Distributors, Inc. will be the 
principal underwriter and distributor of the Fund's Shares. The Fund 
will contract with unaffiliated third parties to provide 
administrative, custodial and transfer agency services to the Fund.
    The Prior Release identified the name of the Fund as the Elkhorn 
Dorsey Wright Commodity Rotation Portfolio. Subsequent to the 
Commission's approval of the listing and trading of the Shares, the 
Fund determined to change its name to the Elkhorn Commodity Rotation 
Strategy ETF following the request from the SEC's Division of 
Investment Management to remove the reference to ``Dorsey Wright'' from 
the Fund's name. In this proposed rule change, the Exchange proposes to 
reflect the change to the name of the Fund.
    The Prior Release provided that the Fund's investment objective 
would be to provide total return which exceeds that of the ``DWA 
Commodity Rotation Index'' (the ``Original Benchmark''). The Prior 
Release indicated that the Original Benchmark was developed, maintained 
and sponsored by Dorsey, Wright & Associates, LLC (``Dorsey Wright''). 
In this proposed rule change, the Exchange proposes to reflect a change 
to the name and ownership of the benchmark index applicable to the 
Fund. The new benchmark will be called the ``Elkhorn Dorsey Wright 
Commodity Rotation Index'' (``New Benchmark''). Accordingly, the Fund's 
investment objective will be to provide total return which exceeds that 
of the New Benchmark and, except as provided herein, the term 
``Benchmark,'' as set forth in the Prior Release, will generally be 
deemed to refer to the New Benchmark.
    The New Benchmark is a proprietary index that will be owned by the 
Adviser. Consistent with the Prior Release, the New Benchmark (like the 
Original Benchmark) will track a proprietary model of futures contracts 
on commodities (the ``Benchmark Model'') that is developed, maintained 
and sponsored by Dorsey Wright. The Benchmark Model will be licensed to 
the Adviser.
    In connection with the Benchmark Model, Dorsey Wright applies a 
relative strength methodology to rank twenty-five to thirty single 
commodity futures, each represented by single commodity futures index 
with an embedded dynamic roll strategy, and selects a subset of 
commodity futures that demonstrate relative strength characteristics. 
The methodology takes into account, among other characteristics, the 
performance of a commodity as compared to the broad commodity market, 
the relative performance of each single commodity versus all of the 
other commodities, and the liquidity of the underlying commodities.
    The Fund will not be sponsored, endorsed, sold or promoted by 
Dorsey Wright. Dorsey Wright's only relationship to the Fund will be 
the licensing of certain service marks and service names of Dorsey 
Wright and the licensing of the Benchmark Model to the Adviser. Dorsey 
Wright will have no obligation to take the needs of the Adviser, any 
Sub-Adviser or the Fund into consideration in connection with the 
Benchmark Model or its application of the related methodology.
    Except for the changes noted above, all of the representations made 
in the Prior Release remain unchanged.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \5\ in general and Section 6(b)(5) of the Act \6\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and, in general, to protect investors and the 
public interest.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f.
    \6\ 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 would be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Nasdaq Rule 5735. The 
Exchange notes that Shares have not yet been listed on the Exchange. 
Consistent with the Prior Release, the Exchange represents that trading 
in the Shares would be subject to the existing trading surveillances, 
administered by both Nasdaq and also the Financial Industry Regulatory 
Authority (``FINRA''), on behalf of the Exchange, which are designed to 
detect violations of Exchange rules and applicable federal securities 
laws and that these procedures are adequate to properly monitor 
Exchange trading of the Shares in all trading sessions and to deter and 
detect violations of Exchange rules and applicable federal securities 
laws.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Adviser represents that, other than to change the Original 
Benchmark to the New Benchmark, there is no change to the Fund's 
investment objective. The Adviser represents that the purpose of the 
proposed change is to reflect a change to the name of the Fund and the 
name and ownership of the benchmark index applicable to the Fund. 
Accordingly, the Fund's investment objective will be to provide total 
return which exceeds that of the New Benchmark and, except as provided 
herein, the term ``Benchmark,'' as set forth in the Prior Release, will 
generally be deemed to refer to the New Benchmark. The Adviser 
represents that, other than the changes to the name and ownership of 
the Benchmark, there are no other changes to the Benchmark, including 
to its methodology, as described in the Prior Release. Except as 
provided herein, none of the representations of the Fund or the Adviser 
made in the Prior Release have changed.
    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. As noted above, the proposed rule change is intended 
to reflect a change to the name of the Fund and the name and ownership 
of the benchmark index applicable to the Fund. Further, the Exchange 
notes that the Fund does not yet have publicly offered Shares and does 
not yet have Shares listed and traded on the Exchange. Before Shares 
are publicly offered, the Trust will file a post-effective amendment to 
its Registration Statement that reflects the changes in the proposed 
rule change. The Shares will not be publicly offered until the post-
effective amendment to the Registration Statement becomes effective.

[[Page 59259]]

    For the above reasons, the Exchange believes the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes the 
proposed rule change will accommodate the listing and trading of 
Managed Fund Shares for an additional actively managed exchange-traded 
product, thereby enhancing competition among issues of Managed Fund 
Shares.

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

    Written comments were neither solicited nor received.

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

    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 \7\ and Rule 19b-
4(f)(6) thereunder.\8\
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
---------------------------------------------------------------------------

    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 should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2016-117 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2016-117. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2016-117 and should 
be submitted on or before September 19, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-20577 Filed 8-26-16; 8:45 am]
 BILLING CODE 8011-01-P