Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the iShares Liquidity Income Fund, 62791-62798 [2013-24559]
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Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices
The proposed fees for the Rule 144A
Data Set and Historic Rule 144A Data
Set, which are consistent with current
rates for subscriptions to similar TRACE
data sets, are reasonable, equitably
allocated and not unfairly
discriminatory, and will permit a broad
spectrum of members, data vendors and
other market participants, including
qualifying Tax Exempt Organizations, to
obtain and use the data in furtherance
of market integrity and the protection of
investors in such securities. Similarly,
FINRA does not believe that the
proposed amendments to the Level II
Full Service Web Browser subscription,
providing a member access to multiple
data sets as part of such service, will
result in any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the
Exchange Act. Access to the Rule 144A
Data Set and Historic Rule 144A Data
Set as well as the Level II Full Service
Browser subscription may facilitate
competition in the market for such
securities in that access to such data
will assist members and customers in:
(1) Determining the quality of their
executions; (2) price discovery; and (3)
assessing the accuracy and integrity of
the valuation of positions.
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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
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 20 and paragraph (f) of Rule
19b–421 thereunder. 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 will 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:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–70608; File No. SR–BATS–
2013–051]
• 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–
FINRA–2013–043 on the subject line.
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing of
Proposed Rule Change To List and
Trade Shares of the iShares Liquidity
Income Fund
Paper Comments
October 3, 2013.
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
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
September 19, 2013, BATS Exchange,
Inc. (‘‘Exchange’’ or ‘‘BATS’’) 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.
All submissions should refer to File
Number SR–FINRA–2013–043. 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 (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 Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of FINRA. 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–FINRA–
2013–043 and should be submitted on
or before November 12, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Kevin M. O’Neill,
Deputy Secretary.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is proposing to list and
trade shares of the iShares Liquidity
Income Fund (‘‘Fund’’) of the iShares
U.S. ETF Trust (‘‘Trust’’) under BATS
Rule 14.11(i) (‘‘Managed Fund Shares’’).
The shares of the Fund are collectively
referred to herein as the ‘‘Shares.’’
The text of the proposed rule addition
is available at the Exchange’s Web site
at https://www.batstrading.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.
[FR Doc. 2013–24680 Filed 10–21–13; 8:45 am]
BILLING CODE 8011–01–P
1 15
U.S.C. 78s(b)(3)(A).
21 17 CFR 240.19b–4(f).
20 15
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CFR 200.30–3(a)(12).
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 78, No. 204 / Tuesday, October 22, 2013 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade the Shares under BATS Rule
14.11(i), which governs the listing and
trading of Managed Fund Shares on the
Exchange.3 The Fund will be an actively
managed fund. The Shares will be
offered by the Trust, which was
established as a Delaware statutory trust
on June 21, 2011. 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 (‘‘Registration
Statement’’) with the Commission.4
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Description of the Shares and the Fund
BlackRock Fund Advisors is the
investment adviser (‘‘BFA’’ or
‘‘Adviser’’) to the Fund.5 State Street
Bank and Trust Company is the
administrator, custodian, and transfer
agent for the Trust. BlackRock
Investments, LLC (‘‘Distributor’’) serves
as the distributor for the Trust.
BATS Rule 14.11(i)(7) provides that, if
the investment adviser to the
investment company issuing Managed
Fund Shares is affiliated with a brokerdealer, such investment adviser shall
erect a ‘‘fire wall’’ between the
investment adviser and the brokerdealer with respect to access to
information concerning the composition
and/or changes to such investment
company portfolio.6 In addition, Rule
3 The Commission approved BATS Rule 14.11(i)
in Securities Exchange Act Release No. 65225
(August 30, 2011), 76 FR 55148 (September 6, 2011)
(SR–BATS–2011–018).
4 See Registration Statement on Form N–1A for
the Trust, dated February 4, 2013 (File Nos. 333–
179904 and 811–22649). The descriptions of the
Fund and the Shares contained herein are based, in
part, on information in the Registration Statement.
The Commission has issued an order granting
certain exemptive relief to the Company under the
Investment Company Act of 1940 (15 U.S.C.
80a–1) (‘‘1940 Act’’) (‘‘Exemptive Order’’). See
Investment Company Act Release No. 29571
(January 24, 2011) (File No. 812–13601).
5 BlackRock Fund Advisors is an indirect wholly
owned subsidiary of BlackRock, Inc.
6 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (‘‘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 nonpublic information by an investment adviser must
be consistent with Rule 204A–1 under the Advisers
Act. In addition, Rule 206(4)–7 under the Advisers
Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such
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14.11(i)(7) further requires that
personnel who make decisions on the
investment company’s portfolio
composition must be subject to
procedures designed to prevent the use
and dissemination of material nonpublic information regarding the
applicable investment company
portfolio. Rule 14.11(i)(7) is similar to
BATS Rule 14.11(b)(5)(A)(i), however,
Rule 14.11(i)(7) in connection with the
establishment of a ‘‘fire wall’’ between
the investment adviser and the brokerdealer reflects the applicable open-end
fund’s portfolio, not an underlying
benchmark index, as is the case with
index-based funds. The Adviser is not a
registered broker-dealer, but is affiliated
with multiple broker-dealers and has
implemented ‘‘fire walls’’ with respect
to such broker-dealers regarding access
to information concerning the
composition and/or changes to the
Fund’s portfolio. In addition, Adviser
personnel who make decisions
regarding the Fund’s portfolio are
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding the Fund’s portfolio. In the
event that (a) the Adviser becomes a
broker-dealer or newly affiliated with a
broker-dealer, or (b) any new adviser or
sub-adviser is a broker-dealer or
becomes affiliated with a broker-dealer,
it 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 and/or
changes to the portfolio, and will be
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding such portfolio.
iShares Liquidity Income Fund
According to the Registration
Statement, the Fund will seek to
provide current income consistent with
preservation of capital. To achieve its
objective, the Fund will invest, under
normal circumstances,7 at least 80% of
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.
7 The term ‘‘under normal circumstances’’
includes, but is not limited to, the absence of
adverse market, economic, political, or other
conditions, including extreme volatility or trading
halts in the fixed income markets or the financial
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its net assets in a portfolio of U.S.
dollar-denominated investment-grade
fixed and floating-rate debt securities
(‘‘Fixed Income Securities’’). The Fund
will not be a money market fund and
thus will not seek to maintain a stable
net asset value of $1.00 per Share. In the
absence of normal circumstances, the
Fund may temporarily depart from its
normal investment process, provided
that such departure is, in the opinion of
BFA, consistent with the Fund’s
investment objective and in the best
interest of the Fund. For example, the
Fund may hold a higher than normal
proportion of its assets in cash in
response to adverse market, economic,
or political conditions.
The Fund will hold Fixed Income
Securities of at least 13 non-affiliated
issuers. The Fund will not purchase the
securities of issuers conducting their
principal business activity in the same
industry if, immediately after the
purchase and as a result thereof, the
value of the Fund’s investments in that
industry would equal or exceed 25% of
the current value of the Fund’s total
assets, provided that this restriction
does not limit the Fund’s: (i)
Investments in securities of other
investment companies; (ii) investments
in securities issued or guaranteed by the
U.S. government, its agencies or
instrumentalities; or (iii) investments in
repurchase agreements collateralized by
U.S. government securities.8 The Fund
will not invest in non-U.S. equity
securities.
The Fund intends to qualify each year
as a regulated investment company
(‘‘RIC’’) under Subchapter M of the
Internal Revenue Code of 1986, as
amended.9 The Fund will invest its
assets, and otherwise conduct its
operations, in a manner that is intended
to satisfy the qualifying income,
diversification, and distribution
requirements necessary to establish and
maintain RIC qualification under
Subchapter M.
Fixed Income Securities
The Fund intends to achieve its
investment objective by investing, under
normal circumstances, at least 80% of
its net assets in a portfolio of U.S.
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.
8 See Form N–1A, Item 9. The Commission has
taken the position that a fund is concentrated if it
invests in 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).
9 26 U.S.C. 851.
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dollar-denominated investment-grade
Fixed Income Securities, rated BBB- or
higher by Standard & Poor’s Financial
Services LLC and/or Fitch Inc.
(‘‘Fitch’’), or Baa3 or higher by Moody’s
Investors Service, Inc. (‘‘Moody’s’’), or,
if unrated, determined by BFA to be of
equivalent quality.10 Under normal
circumstances, the Fund will invest
primarily in Fixed Income Securities
maturing in three years or less. Under
normal circumstances, short-term
investments (generally, securities with
original maturities of one year or less)
held by the Fund will carry a rating in
the highest two-rating categories of at
least one nationally recognized
statistical ratings organization (e.g.,
A–2, P–2, or F2 or better by Standard &
Poor’s Ratings Services, Moody’s, or
Fitch, respectively), or if such
investments are unrated, determined to
be of comparable quality by BFA, at the
time of investment.
Fixed Income Securities will include
fixed and floating rate debt securities,
such as corporate 11 and government
bonds, agency securities,12 instruments
of non-U.S. issuers, privately-issued
securities,13 structured securities,14
10 According to the Adviser, BFA may determine
that unrated Fixed Income Securities are of
‘‘equivalent quality’’ based on such credit quality
factors that it deems appropriate, which may
include among other things, performing an analysis
similar, to the extent possible, to that performed by
a nationally recognized statistical ratings
organization when rating similar securities and
issuers. In making such a determination, BFA may
consider internal analyses and risk ratings, third
party research and analysis, and other sources of
information, as deemed appropriate by the Adviser.
11 While the Fund is permitted to invest without
restriction in corporate bonds, the Adviser expects
that, under normal circumstances, the Fund will
generally seek to invest in corporate bond issuances
that have at least $100 million par amount
outstanding in developed countries and at least
$200 million par amount outstanding in emerging
market countries.
12 ‘‘Agency securities’’ for these purposes
generally includes securities issued by the
following entities: Government National Mortgage
Association (Ginnie Mae); Federal National
Mortgage Association (Fannie Mae); Federal Home
Loan Banks (FHLBanks); Federal Home Loan
Mortgage Corporation (Freddie Mac); Farm Credit
System (FCS) Farm Credit Banks (FCBanks);
Student Loan Marketing Association (Sallie Mae);
Resolution Funding Corporation (REFCORP);
Financing Corporation (FICO); and the Farm Credit
System (FCS) Financial Assistance Corporation
(FAC). Agency securities can include, but are not
limited to, mortgage-backed securities.
13 ‘‘Privately-issued securities’’ generally includes
Rule 144A securities and, in this context, may
include both mortgage-backed and non-mortgage
144A securities.
14 ‘‘Structured securities’’ generally includes
privately-issued and publicly-issued structured
securities, including certain publicly-issued
structured securities that are not agency securities.
Examples include, but are not limited to: Assetbacked securities backed by assets such as
consumer receivables, credit cards, student loans,
and equipment leases; asset-backed commercial
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municipal bonds, money market
securities,15 and investment companies
(including investment companies
advised by BFA or its affiliates) that
invest in such Fixed Income
Securities.16 The Fund may invest up to
5% of its net assets in Fixed Income
Securities and instruments of issuers
that are domiciled in emerging market
countries.
The Fund will invest in asset-backed
and mortgage-backed Fixed Income
Securities.17 Asset-backed securities are
paper; credit linked notes; and secured funding
notes.
15 The Adviser expects that, under normal
circumstances, the Fund intends to invest in money
market securities (as described below) in a manner
consistent with its investment objective in order to
help manage cash flows in and out of the Fund,
such as in connection with payment of dividends
or expenses, and to satisfy margin requirements, to
provide collateral or to otherwise back investments
in derivative instruments. For these purposes,
money market securities include: Short-term, highquality obligations issued or guaranteed by the U.S.
Treasury or the agencies or instrumentalities of the
U.S. government; short-term, high-quality securities
issued or guaranteed by non-U.S. governments,
agencies and instrumentalities; repurchase
agreements; money market mutual funds;
commercial paper; and deposits and other
obligations of U.S. and non-U.S. banks and
financial institutions. All money market securities
acquired by the Fund will be rated investment
grade. The Fund does not intend to invest in any
unrated money market securities. However, it may
do so, to a limited extent, such as where a rated
money market security becomes unrated, if such
money market security is determined by the
Adviser to be of comparable quality. BFA may
determine that unrated securities are of comparable
quality based on such credit quality factors that it
deems appropriate, which may include, among
other things, performing an analysis similar, to the
extent possible, to that performed by a nationally
recognized statistical rating organization rating
similar securities and issuers.
16 The Fund currently anticipates investing in
only registered open-end investment companies,
including mutual funds and the open-end
investment company funds described in BATS Rule
14.11, but notes that the Exemptive Order allows
the Fund to invest in ‘‘shares of other ETFs, shares
of money market mutual funds, or other investment
companies.’’
17 The Fund has not established a fixed limit to
the amount of asset-backed and/or mortgage-backed
debt securities in which it will invest, which is
consistent with analogous funds. See, e.g., iShares
Short Maturity Bond Fund as described in SR–
BATS–2012–033 (July 27, 2012) and approved by
Securities Exchange Act Release No. 67894
(September 20, 2012), 77 FR 59227 (September 26,
2012) and PIMCO Enhanced Short Maturity
Strategy Fund (‘‘MINT Fund’’) as described in
Amendment 1 to SR–NYSEArca–2009–79
(November 10, 2009) and approved by Securities
Exchange Act Release No. 60981 (November 10,
2009), 74 FR 59594 (November 18, 2009) (SR–
NYSEArca–2009–79). As noted above, at least 80%
of the Fund’s net assets will be, under normal
circumstances, invested in U.S. dollar-denominated
investment grade Fixed Income Securities,
including asset-backed and/or mortgage-backed
debt securities. Neither high-yield asset-backed
securities nor high-yield mortgage-backed securities
are included in the Fund’s principal investment
strategies. The liquidity of a security, especially in
the case of asset-backed and mortgage-backed debt
securities, is a substantial factor in the Fund’s
security selection process.
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62793
fixed-income securities that are backed
by a pool of assets, usually loans such
as installment sale contracts or credit
card receivables. Mortgage-backed
securities are asset-backed securities
based on a particular type of asset, a
mortgage. There are a wide variety of
mortgage-backed securities involving
commercial or residential, fixed-rate or
adjustable rate mortgages, and
mortgages issued by banks or
government agencies.18
The Fund’s investments will be
consistent with the Fund’s investment
objective and will not be used to
enhance leverage. Under normal
circumstances, the dollar-weighted
average life of the Fund’s portfolio is
expected to be one year or less, as
calculated by the Adviser.19 The Fund
will also seek to maintain a dollarweighted average maturity that is less
than 180 days.20
The Fund is an actively-managed
fund that does not seek to replicate the
performance of a specified index. The
Exchange notes, however, that the
Fund’s portfolio will meet certain
criteria for index-based, fixed income
exchange-traded funds contained in
Rule 14.11(c)(4)(B)(i).21
18 See
note 12, supra.
average life is the weighted
average of the times when principal is to be repaid.
20 Dollar-weighted average maturity is calculated
by taking the average length of time to maturity
(fixed-rate) or the next interest rate reset (floatingrate) for each underlying instrument held by the
Fund, weighted according to the relative holdings
per instrument.
21 See BATS Rule 14.11(c)(4)(B)(i) governing fixed
income based Index Fund Shares. The Fund’s
portfolio will meet the following requirements of
Rule 14.11(c)(4)(B)(i): (i) The index or portfolio
must consist of Fixed Income Securities (Rule
14.11(c)(4)(B)(i)(a)); (ii) a component may be a
convertible security, however, once the convertible
security component converts to an underlying
equity security, the component is removed from the
index or portfolio (Rule 14.11(c)(4)(B)(i)(c)); (iii) no
component fixed-income security (excluding
Treasury Securities) will represent more than 30%
of the weight of the index or portfolio, and the five
highest weighted component fixed-income
securities do not in the aggregate account for more
than 65% of the weight of the index or portfolio
(Rule 14.11(c)(4)(B)(i)(d)); (iv) an underlying index
or portfolio (excluding exempted securities) must
include securities from a minimum of 13 nonaffiliated issuers (Rule 14.11(c)(4)(B)(i)(e)); and (v)
component securities that in aggregate account for
at least 90% of the weight of the index or portfolio
must be either: (1) From issuers that are required
to file reports pursuant to Sections 13 and 15(d) of
the Act; (2) from issuers that have a worldwide
market value of its outstanding common equity held
by non-affiliates of $700 million or more; (3) from
issuers that have outstanding securities that are
notes, bonds, debentures, or evidence of
indebtedness having a total remaining principal
amount of at least $1 billion; (4) exempted
securities as defined in Section 3(a)(12) of the Act;
or (5) from issuers that are a government of a foreign
country or a political subdivision of a foreign
country (Rule 14.11(c)(4)(B)(i)(f)).
19 Dollar-weighted
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Other Portfolio Holdings
The Fund may, to a limited extent
(under normal circumstances, less than
20% of the Fund’s net assets), engage in
transactions in futures contracts,
options, and swaps.22
The Fund may hold up to an aggregate
amount of 15% of its net assets in
illiquid securities (calculated at the time
of investment), including Rule 144A
securities deemed illiquid by the
Adviser 23 under the 1940 Act.24 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
22 Derivatives might be included in the Fund’s
investments to serve the investment objectives of
the Fund. Examples include, but are not limited to,
treasury futures to hedge against rising interest
rates, currency futures to hedge against foreign
exchange rates, interest rate swaps, credit default
swaps, total return swaps, and equity index options.
The derivatives will be exchange traded and/or
centrally cleared, and they will be collateralized.
Derivatives are not a principal investment strategy
of the Fund.
23 In reaching liquidity decisions, the Adviser
may consider factors including: The frequency of
trades and quotes for the security; the number of
dealers wishing to purchase or sell the security and
the number of other potential purchasers; dealer
undertakings to make a market in the security; the
nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose
of the security, the method of soliciting offers, and
the mechanics of transfer); any legal or contractual
restrictions on the ability to transfer the security or
asset; significant developments involving the issuer
or counterparty specifically (e.g., default,
bankruptcy, etc.) or the securities markets generally;
and settlement practices, registration procedures,
limitations on currency conversion or repatriation,
and transfer limitations (for foreign securities or
other assets).
24 The Commission has stated that long-standing
Commission guidelines have required open-end
funds to hold no more than 15% of their net assets
in illiquid securities and other illiquid assets. See
Investment Company Act Release No. 28193 (March
11, 2008), 73 FR 14618 (March 18, 2008), footnote
34. See also Investment Company Act Release No.
5847 (October 21, 1969), 35 FR 19989 (December
31, 1970) (Statement Regarding ‘‘Restricted
Securities’’); Investment Company Act Release No.
18612 (March 12, 1992), 57 FR 9828 (March 20,
1992) (Revisions of Guidelines to Form N–1A). A
fund’s portfolio security is illiquid if it cannot be
disposed of in the ordinary course of business
within seven days at approximately the value
ascribed to it by the fund. See Investment Company
Act Release No. 14983 (March 12, 1986), 51 FR
9773 (March 21, 1986) (adopting amendments to
Rule 2a–7 under the 1940 Act); Investment
Company Act Release No. 17452 (April 23, 1990),
55 FR 17933 (April 30, 1990) (adopting Rule 144A
under the Securities Act of 1933).
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markets as determined in accordance
with Commission staff guidance.
Net Asset Value
According to the Registration
Statement, the net asset value (‘‘NAV’’)
of the Fund’s Shares generally will be
calculated once daily Monday through
Friday as of the close of regular trading
on the New York Stock Exchange
(‘‘NYSE’’), generally 4:00 p.m. Eastern
Time (‘‘NAV Calculation Time’’) on
each day that NYSE is open for trading,
based on prices at the NAV Calculation
Time. NAV per Share is calculated by
dividing the Fund’s net assets by the
number of Fund Shares outstanding.
The Fund’s net assets are valued
primarily on the basis of market
quotations.
According to the Registration
Statement, the Fund values Fixed
Income Securities using prices provided
directly from one or more brokerdealers, market makers, or independent
third-party pricing services which may
use matrix pricing and valuation models
to derive values. Swap agreements and
other derivatives are generally valued
based upon quotations from market
makers or by a pricing service in
accordance with valuation procedures
approved by the Fund’s board of
directors. Certain short-term debt
securities may be valued on the basis of
amortized cost. Intraday, executable
price quotations on Fixed Income
Securities and other assets are available
from major broker-dealer firms and for
exchange-traded assets, including
investment companies, futures, and
options, such intraday information is
available directly from the applicable
listing exchange.
According to the Registration
Statement, generally, trading in certain
Fixed Income Securities is substantially
completed each day at various times
prior to the close of business on NYSE.
Generally, trading in certain derivatives
is substantially completed each day at
various times prior to the close of
business on NYSE. The values of such
securities and derivatives used in
computing the NAV of the Fund are
determined at such times.
According to the Registration
Statement, when market quotations are
not readily available or are believed by
BFA to be unreliable, the Fund’s
investments are valued at fair value.
Fair value determinations are made by
BFA in accordance with policies and
procedures approved by the Fund’s
board of directors and in accordance
with the 1940 Act. BFA may conclude
that a market quotation is not readily
available or is unreliable if a security or
other asset or liability is thinly traded,
PO 00000
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or where there is a significant event 25
subsequent to the most recent market
quotation.
According to the Registration
Statement, fair value represents a good
faith approximation of the value of an
asset or liability. The fair value of an
asset or liability held by the Fund is the
amount the Fund might reasonably
expect to receive from the current sale
of that asset or the cost to extinguish
that liability in an arm’s-length
transaction. Valuing the Fund’s
investments using fair value pricing will
result in prices that may differ from
current valuations and that may not be
the prices at which those investments
could have been sold during the period
in which the particular fair values were
used. The value of assets or liabilities
denominated in non-U.S. currencies
will be converted into U.S. dollars using
exchange rates deemed appropriate by
BFA in its role as Adviser.
For more information regarding the
valuation of Fund investments in
calculating the Fund’s NAV, see the
Registration Statement.
The Shares
The Fund will issue and redeem
Shares on a continuous basis at the NAV
per Share only in large blocks of a
specified number of Shares or multiples
thereof (‘‘Creation Units’’) in
transactions with authorized
participants who have entered into
agreements with the Distributor. The
Fund currently anticipates that a
Creation Unit will consist of 50,000
Shares, though this number may change
from time to time, including prior to
listing of the Fund. The exact number of
Shares that will constitute a Creation
Unit will be disclosed in the
Registration Statement of the Fund.
Once created, Shares of the Fund trade
on the secondary market in amounts
less than a Creation Unit.
The consideration for purchase of
Creation Units of the Fund generally
will consist of the in-kind deposit of a
designated portfolio of securities
(including any portion of such securities
for which cash may be substituted) (i.e.,
‘‘Deposit Securities’’) and the ‘‘Cash
Component’’ computed as described
below. Together, the Deposit Securities
and the Cash Component constitute the
‘‘Fund Deposit,’’ which represents the
minimum initial and subsequent
investment amount for a Creation Unit
of the Fund.
The portfolio of securities required for
purchase of a Creation Unit may not be
25 A ‘‘significant event’’ is an event that, in the
judgment of BFA, is likely to cause a material
change to the closing market price of the asset or
liability held by the Fund.
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identical to the portfolio of securities
the Fund will deliver upon redemption
of Fund Shares. The Deposit Securities
and Fund Securities (as defined below),
as the case may be, in connection with
a purchase or redemption of a Creation
Unit, generally will correspond pro rata,
to the extent practicable, to the
securities held by the Fund.
The Cash Component will be an
amount equal to the difference between
the NAV of the Shares (per Creation
Unit) and the ‘‘Deposit Amount,’’ which
will be an amount equal to the market
value of the Deposit Securities, and
serve to compensate for any differences
between the NAV per Creation Unit and
the Deposit Amount. The Fund
generally offers Creation Units partially
for cash. BFA will make available
through the National Securities Clearing
Corporation (‘‘NSCC’’) on each business
day, prior to the opening of business on
the Exchange, the list of names and the
required number or par value of each
Deposit Security and the amount of the
Cash Component to be included in the
current Fund Deposit (based on
information as of the end of the
previous business day) for the Fund.
The identity and number or par value
of the Deposit Securities may change
pursuant to changes in the composition
of the Fund’s portfolio as rebalancing
adjustments and corporate action events
occur from time to time. The
composition of the Deposit Securities
may also change in response to
adjustments to the weighting or
composition of the holdings of the
Fund.
The Fund reserves the right to permit
or require the substitution of a ‘‘cash in
lieu’’ amount to be added to the Cash
Component to replace any Deposit
Security that may not be available in
sufficient quantity for delivery or that
may not be eligible for transfer through
the Depository Trust Company (‘‘DTC’’)
or the clearing process through the
NSCC.
Except as noted below, all creation
orders must be placed for one or more
Creation Units and must be received by
the Distributor in proper form no later
than 4:00 p.m. Eastern Time, in each
case on the date such order is placed in
order for creation of Creation Units to be
effected based on the NAV of Shares of
the Fund as next determined on such
date after receipt of the order in proper
form. Orders requesting substitution of
a ‘‘cash in lieu’’ amount generally must
be received by the Distributor no later
than 2:00 p.m. Eastern Time on the
Settlement Date. The ‘‘Settlement Date’’
is generally the third business day after
the transmittal date. On days when the
Exchange or the bond markets close
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21:08 Oct 21, 2013
Jkt 232001
earlier than normal, the Fund may
require orders to create or to redeem
Creation Units to be placed earlier in the
day.
Fund Deposits must be delivered
through the Federal Reserve System (for
cash and government securities),
through DTC (for corporate and
municipal securities), or through a
central depository account, such as with
Euroclear or DTC, maintained by State
Street or a sub-custodian (‘‘Central
Depository Account’’) by an authorized
participant. Any portion of a Fund
Deposit that may not be delivered
through the Federal Reserve System or
DTC must be delivered through a
Central Depository Account. The Fund
Deposit transfer must be ordered by the
authorized participant in a timely
fashion so as to ensure the delivery of
the requisite number of Deposit
Securities to the account of the Fund by
no later than 3:00 p.m. Eastern Time on
the Settlement Date.
A standard creation transaction fee
will be imposed to offset the transfer
and other transaction costs associated
with the issuance of Creation Units.
Shares of the Fund may be redeemed
only in Creation Units at their NAV next
determined after receipt of a redemption
request in proper form by the
Distributor and only on a business day.
BFA will make available through the
NSCC, prior to the opening of business
on the Exchange on each business day,
the designated portfolio of securities
(including any portion of such securities
for which cash may be substituted) that
will be applicable (subject to possible
amendment or correction) to
redemption requests received in proper
form on that day (‘‘Fund Securities’’).
Fund Securities received on redemption
may not be identical to Deposit
Securities that are applicable to
creations of Creation Units.
Unless cash redemptions are available
or specified for the Fund, the
redemption proceeds for a Creation Unit
generally will consist of a specified
amount of cash, Fund Securities, plus
additional cash in an amount equal to
the difference between the NAV of the
Shares being redeemed, as next
determined after the receipt of a request
in proper form, and the value of the
specified amount of cash and Fund
Securities, less a redemption transaction
fee. The Fund generally redeems
Creation Units partially for cash.
A standard redemption transaction fee
will be imposed to offset transfer and
other transaction costs that may be
incurred by the Fund.
Redemption requests for Creation
Units of the Fund must be submitted to
the Distributor by or through an
PO 00000
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Fmt 4703
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62795
authorized participant no later than 4:00
p.m. Eastern Time on any business day
in order to receive that day’s NAV. The
authorized participant must transmit the
request for redemption in the form
required by the Fund to the Distributor
in accordance with procedures set forth
in the authorized participant agreement.
Additional information regarding the
Shares and the Fund, including
investment strategies, risks, creation and
redemption procedures, fees and
expenses, portfolio holdings disclosure
policies, distributions, taxes, and
reports to be distributed to beneficial
owners of the Shares can be found in
the Registration Statement or on the
Web site for the Fund
(www.iShares.com), as applicable.
Availability of Information
The Fund’s Web site, which will be
publicly available prior to the public
offering of Shares, will include a form
of the prospectus for the Fund that may
be downloaded. The Web site will
include additional quantitative
information updated on a daily basis,
including, for the Fund: (1) The prior
business day’s reported NAV, mid-point
of the bid/ask spread at the time of
calculation of such NAV (‘‘Bid/Ask
Price’’),26 daily trading volume, 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. Daily
trading volume information will be
available in the financial section of
newspapers, through subscription
services such as Bloomberg, Thomson
Reuters, and International Data
Corporation, which can be accessed by
authorized participants and other
investors, as well as through other
electronic services, including major
public Web sites. On each business day,
before commencement of trading in
Shares during Regular Trading Hours 27
on the Exchange, the Fund will disclose
on its Web site the identities and
quantities of the portfolio of securities
and other assets (‘‘Disclosed Portfolio’’)
held by the Fund that will form the
basis for the Fund’s calculation of NAV
26 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.
27 Regular Trading Hours are 9:30 a.m. to 4:00
p.m. Eastern Time.
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at the end of the business day.28 The
Disclosed Portfolio will include, as
applicable, the names, quantity,
percentage weighting and market value
of Fixed Income Securities and other
assets held by the Fund, and the
characteristics of such assets. The Web
site and information will be publicly
available at no charge.
In addition, for the Fund, an
estimated value, defined in BATS Rule
14.11(i)(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 will be based
upon the current value for the
components of the Disclosed Portfolio
and will be updated and widely
disseminated by one or more major
market data vendors at least every 15
seconds during the Exchange’s Regular
Trading Hours.29 In addition, the
quotations of certain of the Fund’s
holdings may not be updated during
U.S. trading hours if such holdings do
not trade in the United States or if
updated prices cannot be ascertained.
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 provide a close estimate of that
value throughout the trading day.
Intraday, executable price quotations
on Fixed Income Securities and other
assets are available from major brokerdealer firms and for exchange-traded
assets, including investment companies,
futures, and options, such intraday
information is available directly from
the applicable listing exchange. All such
intraday price information is available
through subscription services, such as
Bloomberg, Thomson Reuters, and
International Data Corporation, which
can be accessed by authorized
participants and other investors.
Information regarding market price
and volume of the Shares will be
continually available on a real-time
basis throughout the day on brokers’
computer screens and other electronic
services. The previous day’s closing
price and trading volume information
for the Shares will be published daily in
28 Under accounting procedures to be followed by
the Fund, trades made on the prior business day
(‘‘T’’) will be booked and reflected in NAV on the
current business day (‘‘T+1’’). Accordingly, the
Fund will be able to disclose at the beginning of the
business day the portfolio that will form the basis
for the NAV calculation at the end of the business
day.
29 Currently, it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available Intraday Indicative Values
published via the Consolidated Tape Association
(‘‘CTA’’) or other data feeds.
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21:08 Oct 21, 2013
Jkt 232001
the financial section of newspapers.
Quotation and last-sale information for
the Shares will be available on the
facilities of the CTA.
Initial and Continued Listing
The Shares will be subject to BATS
Rule 14.11(i), which sets forth the initial
and continued listing criteria applicable
to Managed Fund Shares. The Exchange
represents that, for initial and/or
continued listing, the Fund must be in
compliance with Rule 10A–3 under the
Act.30 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.
Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
the Fund. The Exchange will halt
trading in the Shares under the
conditions specified in BATS Rule
11.18. 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 composing the
Disclosed Portfolio of the Fund; or (2)
whether other unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market are present. Trading in the
Shares also will be subject to Rule
14.11(i)(4)(B)(iv), which sets forth
circumstances under which Shares of
the Fund may be halted.
Trading Rules
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. BATS will allow
trading in the Shares from 8:00 a.m.
until 5:00 p.m. Eastern Time. The
Exchange has appropriate rules to
facilitate transactions in the Shares
during all trading sessions. As provided
in BATS Rule 11.11(a), the minimum
price variation for quoting and entry of
orders in Managed Fund Shares traded
on the Exchange is $0.01, with the
exception of securities that are priced
less than $1.00, for which the minimum
30 See
PO 00000
17 CFR 240.10A–3.
Frm 00214
Fmt 4703
Sfmt 4703
price variation for order entry is
$0.0001.
Surveillance
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.
Trading of the Shares through the
Exchange will be subject to the
Exchange’s surveillance procedures for
derivative products, including Managed
Fund Shares. The Exchange may obtain
information regarding trading in the
Shares and the underlying shares in
investment companies, futures, and
options via the Intermarket Surveillance
Group (‘‘ISG’’), from other exchanges
who are members or affiliates of the ISG,
or with which the Exchange has entered
into a comprehensive surveillance
sharing agreement.31 The Exchange
prohibits 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) BATS Rule 3.7, which
imposes suitability obligations on
Exchange members with respect to
recommending transactions in the
Shares to customers; (3) how
information regarding the Intraday
Indicative Value is disseminated; (4) the
risks involved in trading the Shares
during the Pre-Opening 32 and After
Hours Trading Sessions 33 when an
updated Intraday Indicative Value will
not be calculated or publicly
disseminated; (5) the requirement that
members deliver a prospectus to
investors purchasing newly issued
31 For a list of the current members and affiliate
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. The Exchange also
notes that all of the investment company securities,
futures, and options will trade on markets that are
a member of ISG or with which the Exchange has
in place a comprehensive surveillance sharing
agreement.
32 The Pre-Opening Session is from 8:00 a.m. to
9:30 a.m. Eastern Time.
33 The After Hours Trading Session is from 4:00
p.m. to 5:00 p.m. Eastern Time.
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Shares prior to or concurrently with the
confirmation of a transaction; and (6)
trading information.
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.
In addition, the Information Circular
will reference that the Fund is subject
to various fees and expenses described
in the Registration Statement. The
Information Circular will also disclose
the trading hours of the Shares of the
Fund and the applicable NAV
Calculation Time for the Shares. The
Information Circular will disclose that
information about the Shares of the
Fund will be publicly available on the
Fund’s Web site. In addition, the
Information Circular will reference that
the Trust is subject to various fees and
expenses described in the Fund’s
Registration Statement.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with Section 6(b)
of the Act 34 in general and Section
6(b)(5) of the Act 35 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.
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 BATS Rule 14.11(i).
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. If the
investment adviser to the investment
company issuing Managed Fund Shares
is affiliated with a broker-dealer, such
34 15
35 15
U.S.C. 78f.
U.S.C. 78f(b)(5).
VerDate Mar<15>2010
21:08 Oct 21, 2013
investment adviser to the investment
adviser shall erect a ‘‘fire wall’’ between
the investment adviser and the brokerdealer with respect to access to
information concerning the composition
and/or changes to such investment
company portfolio. The Adviser is not a
registered broker-dealer, but is affiliated
with multiple broker-dealers and has
implemented ‘‘fire walls’’ with respect
to such broker-dealers regarding access
to information concerning the
composition and/or changes to the
Fund’s portfolio. The Exchange may
obtain information regarding trading in
the Shares and the underlying shares in
investment companies, futures, and
options via the ISG, from other
exchanges who are members or affiliates
of the ISG, or with which the Exchange
has entered into a comprehensive
surveillance sharing agreement.36
According to the Registration
Statement, the Fund expects that it will
have at least 80% of its assets invested
in U.S. dollar-denominated investment
grade Fixed Income Securities. The
Fund’s exposure to any single industry
will generally be limited to 25% of the
Fund’s assets. The Fund’s investments
will be consistent with the Fund’s
investment objective and will not be
used to enhance leverage. The Fund also
may invest its net assets in money
market instruments at the discretion of
the Adviser. The Fund may invest up to
5% of its net assets in Fixed Income
Securities and instruments of issuers
that are domiciled in emerging market
countries. While the Fund is permitted
to invest without restriction in corporate
bonds, the Adviser expects that, under
normal circumstances, the Fund will
generally seek to invest in corporate
bond issuances that have at least $100
million par amount outstanding in
developed countries and at least $200
million par amount outstanding in
emerging market countries. The Fund
will not invest in non-U.S. equity
securities.
Additionally, the Fund may hold up
to an aggregate amount of 15% of its net
assets in illiquid securities (calculated
at the time of investment), including
Rule 144A securities. 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
36 See
Jkt 232001
PO 00000
note 31, supra.
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62797
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 may engage in derivatives
transactions, including transactions in
futures contracts, options, and swaps, to
a limited extent.37 The Fund’s portfolio
will meet certain criteria for indexbased, fixed income exchange-traded
funds contained in Rule
14.11(c)(4)(B)(i).38
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
is publicly available regarding the Fund
and the Shares, thereby promoting
market transparency. Moreover, the
Intraday Indicative Value will be
disseminated by one or more major
market data vendors at least every 15
seconds during Regular Trading Hours.
On each business day, before
commencement of trading in Shares
during Regular Trading Hours, the Fund
will disclose on its Web site the
Disclosed Portfolio that will form the
basis for the Fund’s calculation of NAV
at the end of the business day. Pricing
information will be available on the
Fund’s Web site including: (1) The prior
business day’s reported NAV, the Bid/
Ask Price of the Fund, 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. Additionally, information
regarding market price and trading of
the Shares will be continually available
on a real-time basis throughout the day
on brokers’ computer screens and other
electronic services, and quotation and
last-sale information for the Shares will
be available on the facilities of the CTA.
The Web site for the Fund will include
a form of the prospectus for the Fund
37 Derivatives might be included in the Fund’s
investments to serve the investment objectives of
the Fund. Examples include, but are not limited to,
treasury futures to hedge against rising interest
rates, and currency futures to hedge against foreign
exchange rates. The derivatives will be exchange
traded and/or centrally cleared, and they will be
collateralized. Derivatives are not a principal
investment strategy of the Fund. See note 22, supra.
38 See note 21, supra.
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and additional data relating to NAV and
other applicable quantitative
information. Trading in Shares of the
Fund will be halted under the
conditions specified in BATS Rule
11.18. Trading may also be halted
because of market conditions or for
reasons that, in the view of the
Exchange, make trading in the Shares
inadvisable. Finally, trading in the
Shares will be subject to BATS Rule
14.11(i)(4)(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.
Intraday, executable price quotations
on Fixed Income Securities and other
assets are available from major brokerdealer firms and for exchange-traded
assets, including investment companies,
futures, and options, such intraday
information is available directly from
the applicable listing exchange. Such
intraday price information is available
through subscription services, such as
Bloomberg, Thomson Reuters, and
International Data Corporation, which
can be accessed by authorized
participants and other investors.
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 activelymanaged 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, 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
VerDate Mar<15>2010
21:08 Oct 21, 2013
Jkt 232001
notes that the proposed rule change will
facilitate the listing and trading of an
additional actively-managed exchangetraded product that will enhance
competition among market participants,
to the benefit of investors and the
marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days of publication (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 Exchange
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:
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 Section, 100 F Street NE.,
Washington, DC 20549, on official
business days between 10:00 a.m. and
3:00 p.m. Copies of the 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–BATS–2013–051 and
should be submitted on or before
November 12, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.39
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–24559 Filed 10–21–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70683; File No. SR–CBOE–
2013–087]
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–
BATS–2013–051 on the subject line.
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to Fees for the
Complex Order Book Data Feed for
CBOE Listed Options
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–BATS–2013–051. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
October 15, 2013.
PO 00000
Frm 00216
Fmt 4703
Sfmt 4703
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b-4 thereunder,2
notice is hereby given that on
September 30, 2013, Chicago Board
Options Exchange, Incorporated (the
‘‘Exchange’’ or ‘‘CBOE’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
39 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\22OCN1.SGM
22OCN1
]]>Agencies
[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62791-62798]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24559]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70608; File No. SR-BATS-2013-051]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing of Proposed Rule Change To List and Trade Shares of the iShares
Liquidity Income Fund
October 3, 2013.
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 September 19, 2013, BATS Exchange, Inc. (``Exchange'' or ``BATS'')
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.
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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 is proposing to list and trade shares of the iShares
Liquidity Income Fund (``Fund'') of the iShares U.S. ETF Trust
(``Trust'') under BATS Rule 14.11(i) (``Managed Fund Shares''). The
shares of the Fund are collectively referred to herein as the
``Shares.''
The text of the proposed rule addition is available at the
Exchange's Web site at https://www.batstrading.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.
[[Page 62792]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade the Shares under BATS Rule
14.11(i), which governs the listing and trading of Managed Fund Shares
on the Exchange.\3\ The Fund will be an actively managed fund. The
Shares will be offered by the Trust, which was established as a
Delaware statutory trust on June 21, 2011. 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
(``Registration Statement'') with the Commission.\4\
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\3\ The Commission approved BATS Rule 14.11(i) in Securities
Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148
(September 6, 2011) (SR-BATS-2011-018).
\4\ See Registration Statement on Form N-1A for the Trust, dated
February 4, 2013 (File Nos. 333-179904 and 811-22649). The
descriptions of the Fund and the Shares contained herein are based,
in part, on information in the Registration Statement. The
Commission has issued an order granting certain exemptive relief to
the Company under the Investment Company Act of 1940 (15 U.S.C. 80a-
1) (``1940 Act'') (``Exemptive Order''). See Investment Company Act
Release No. 29571 (January 24, 2011) (File No. 812-13601).
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Description of the Shares and the Fund
BlackRock Fund Advisors is the investment adviser (``BFA'' or
``Adviser'') to the Fund.\5\ State Street Bank and Trust Company is the
administrator, custodian, and transfer agent for the Trust. BlackRock
Investments, LLC (``Distributor'') serves as the distributor for the
Trust.
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\5\ BlackRock Fund Advisors is an indirect wholly owned
subsidiary of BlackRock, Inc.
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BATS Rule 14.11(i)(7) provides that, if the investment adviser to
the investment company issuing Managed Fund Shares is affiliated with a
broker-dealer, such investment adviser shall erect a ``fire wall''
between the investment adviser and the broker-dealer with respect to
access to information concerning the composition and/or changes to such
investment company portfolio.\6\ In addition, Rule 14.11(i)(7) further
requires that personnel who make decisions on the investment company's
portfolio composition must be subject to procedures designed to prevent
the use and dissemination of material non-public information regarding
the applicable investment company portfolio. Rule 14.11(i)(7) is
similar to BATS Rule 14.11(b)(5)(A)(i), however, Rule 14.11(i)(7) in
connection with the establishment of a ``fire wall'' between the
investment adviser and the broker-dealer reflects the applicable open-
end fund's portfolio, not an underlying benchmark index, as is the case
with index-based funds. The Adviser is not a registered broker-dealer,
but is affiliated with multiple broker-dealers and has implemented
``fire walls'' with respect to such broker-dealers regarding access to
information concerning the composition and/or changes to the Fund's
portfolio. In addition, Adviser personnel who make decisions regarding
the Fund's portfolio are subject to procedures designed to prevent the
use and dissemination of material non-public information regarding the
Fund's portfolio. In the event that (a) the Adviser becomes a broker-
dealer or newly affiliated with a broker-dealer, or (b) any new adviser
or sub-adviser is a broker-dealer or becomes affiliated with a broker-
dealer, it 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 and/or changes to the
portfolio, and will be subject to procedures designed to prevent the
use and dissemination of material non-public information regarding such
portfolio.
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\6\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (``Advisers
Act''). As a result, the Adviser and its related personnel are
subject to the provisions of Rule 204A-1 under the Advisers Act
relating to codes of ethics. This Rule requires investment advisers
to adopt a code of ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with other applicable
securities laws. Accordingly, procedures designed to prevent the
communication and misuse of non-public information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless such investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violation, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
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iShares Liquidity Income Fund
According to the Registration Statement, the Fund will seek to
provide current income consistent with preservation of capital. To
achieve its objective, the Fund will invest, under normal
circumstances,\7\ at least 80% of its net assets in a portfolio of U.S.
dollar-denominated investment-grade fixed and floating-rate debt
securities (``Fixed Income Securities''). The Fund will not be a money
market fund and thus will not seek to maintain a stable net asset value
of $1.00 per Share. In the absence of normal circumstances, the Fund
may temporarily depart from its normal investment process, provided
that such departure is, in the opinion of BFA, consistent with the
Fund's investment objective and in the best interest of the Fund. For
example, the Fund may hold a higher than normal proportion of its
assets in cash in response to adverse market, economic, or political
conditions.
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\7\ The term ``under normal circumstances'' includes, but is not
limited to, the absence of adverse market, economic, political, or
other conditions, including extreme volatility or trading halts in
the fixed income 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.
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The Fund will hold Fixed Income Securities of at least 13 non-
affiliated issuers. The Fund will not purchase the securities of
issuers conducting their principal business activity in the same
industry if, immediately after the purchase and as a result thereof,
the value of the Fund's investments in that industry would equal or
exceed 25% of the current value of the Fund's total assets, provided
that this restriction does not limit the Fund's: (i) Investments in
securities of other investment companies; (ii) investments in
securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities; or (iii) investments in repurchase agreements
collateralized by U.S. government securities.\8\ The Fund will not
invest in non-U.S. equity securities.
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\8\ See Form N-1A, Item 9. The Commission has taken the position
that a fund is concentrated if it invests in 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 Fund intends to qualify each year as a regulated investment
company (``RIC'') under Subchapter M of the Internal Revenue Code of
1986, as amended.\9\ The Fund will invest its assets, and otherwise
conduct its operations, in a manner that is intended to satisfy the
qualifying income, diversification, and distribution requirements
necessary to establish and maintain RIC qualification under Subchapter
M.
---------------------------------------------------------------------------
\9\ 26 U.S.C. 851.
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Fixed Income Securities
The Fund intends to achieve its investment objective by investing,
under normal circumstances, at least 80% of its net assets in a
portfolio of U.S.
[[Page 62793]]
dollar-denominated investment-grade Fixed Income Securities, rated BBB-
or higher by Standard & Poor's Financial Services LLC and/or Fitch Inc.
(``Fitch''), or Baa3 or higher by Moody's Investors Service, Inc.
(``Moody's''), or, if unrated, determined by BFA to be of equivalent
quality.\10\ Under normal circumstances, the Fund will invest primarily
in Fixed Income Securities maturing in three years or less. Under
normal circumstances, short-term investments (generally, securities
with original maturities of one year or less) held by the Fund will
carry a rating in the highest two-rating categories of at least one
nationally recognized statistical ratings organization (e.g., A-2, P-2,
or F2 or better by Standard & Poor's Ratings Services, Moody's, or
Fitch, respectively), or if such investments are unrated, determined to
be of comparable quality by BFA, at the time of investment.
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\10\ According to the Adviser, BFA may determine that unrated
Fixed Income Securities are of ``equivalent quality'' based on such
credit quality factors that it deems appropriate, which may include
among other things, performing an analysis similar, to the extent
possible, to that performed by a nationally recognized statistical
ratings organization when rating similar securities and issuers. In
making such a determination, BFA may consider internal analyses and
risk ratings, third party research and analysis, and other sources
of information, as deemed appropriate by the Adviser.
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Fixed Income Securities will include fixed and floating rate debt
securities, such as corporate \11\ and government bonds, agency
securities,\12\ instruments of non-U.S. issuers, privately-issued
securities,\13\ structured securities,\14\ municipal bonds, money
market securities,\15\ and investment companies (including investment
companies advised by BFA or its affiliates) that invest in such Fixed
Income Securities.\16\ The Fund may invest up to 5% of its net assets
in Fixed Income Securities and instruments of issuers that are
domiciled in emerging market countries.
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\11\ While the Fund is permitted to invest without restriction
in corporate bonds, the Adviser expects that, under normal
circumstances, the Fund will generally seek to invest in corporate
bond issuances that have at least $100 million par amount
outstanding in developed countries and at least $200 million par
amount outstanding in emerging market countries.
\12\ ``Agency securities'' for these purposes generally includes
securities issued by the following entities: Government National
Mortgage Association (Ginnie Mae); Federal National Mortgage
Association (Fannie Mae); Federal Home Loan Banks (FHLBanks);
Federal Home Loan Mortgage Corporation (Freddie Mac); Farm Credit
System (FCS) Farm Credit Banks (FCBanks); Student Loan Marketing
Association (Sallie Mae); Resolution Funding Corporation (REFCORP);
Financing Corporation (FICO); and the Farm Credit System (FCS)
Financial Assistance Corporation (FAC). Agency securities can
include, but are not limited to, mortgage-backed securities.
\13\ ``Privately-issued securities'' generally includes Rule
144A securities and, in this context, may include both mortgage-
backed and non-mortgage 144A securities.
\14\ ``Structured securities'' generally includes privately-
issued and publicly-issued structured securities, including certain
publicly-issued structured securities that are not agency
securities. Examples include, but are not limited to: Asset-backed
securities backed by assets such as consumer receivables, credit
cards, student loans, and equipment leases; asset-backed commercial
paper; credit linked notes; and secured funding notes.
\15\ The Adviser expects that, under normal circumstances, the
Fund intends to invest in money market securities (as described
below) in a manner consistent with its investment objective in order
to help manage cash flows in and out of the Fund, such as in
connection with payment of dividends or expenses, and to satisfy
margin requirements, to provide collateral or to otherwise back
investments in derivative instruments. For these purposes, money
market securities include: Short-term, high-quality obligations
issued or guaranteed by the U.S. Treasury or the agencies or
instrumentalities of the U.S. government; short-term, high-quality
securities issued or guaranteed by non-U.S. governments, agencies
and instrumentalities; repurchase agreements; money market mutual
funds; commercial paper; and deposits and other obligations of U.S.
and non-U.S. banks and financial institutions. All money market
securities acquired by the Fund will be rated investment grade. The
Fund does not intend to invest in any unrated money market
securities. However, it may do so, to a limited extent, such as
where a rated money market security becomes unrated, if such money
market security is determined by the Adviser to be of comparable
quality. BFA may determine that unrated securities are of comparable
quality based on such credit quality factors that it deems
appropriate, which may include, among other things, performing an
analysis similar, to the extent possible, to that performed by a
nationally recognized statistical rating organization rating similar
securities and issuers.
\16\ The Fund currently anticipates investing in only registered
open-end investment companies, including mutual funds and the open-
end investment company funds described in BATS Rule 14.11, but notes
that the Exemptive Order allows the Fund to invest in ``shares of
other ETFs, shares of money market mutual funds, or other investment
companies.''
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The Fund will invest in asset-backed and mortgage-backed Fixed
Income Securities.\17\ Asset-backed securities are fixed-income
securities that are backed by a pool of assets, usually loans such as
installment sale contracts or credit card receivables. Mortgage-backed
securities are asset-backed securities based on a particular type of
asset, a mortgage. There are a wide variety of mortgage-backed
securities involving commercial or residential, fixed-rate or
adjustable rate mortgages, and mortgages issued by banks or government
agencies.\18\
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\17\ The Fund has not established a fixed limit to the amount of
asset-backed and/or mortgage-backed debt securities in which it will
invest, which is consistent with analogous funds. See, e.g., iShares
Short Maturity Bond Fund as described in SR-BATS-2012-033 (July 27,
2012) and approved by Securities Exchange Act Release No. 67894
(September 20, 2012), 77 FR 59227 (September 26, 2012) and PIMCO
Enhanced Short Maturity Strategy Fund (``MINT Fund'') as described
in Amendment 1 to SR-NYSEArca-2009-79 (November 10, 2009) and
approved by Securities Exchange Act Release No. 60981 (November 10,
2009), 74 FR 59594 (November 18, 2009) (SR-NYSEArca-2009-79). As
noted above, at least 80% of the Fund's net assets will be, under
normal circumstances, invested in U.S. dollar-denominated investment
grade Fixed Income Securities, including asset-backed and/or
mortgage-backed debt securities. Neither high-yield asset-backed
securities nor high-yield mortgage-backed securities are included in
the Fund's principal investment strategies. The liquidity of a
security, especially in the case of asset-backed and mortgage-backed
debt securities, is a substantial factor in the Fund's security
selection process.
\18\ See note 12, supra.
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The Fund's investments will be consistent with the Fund's
investment objective and will not be used to enhance leverage. Under
normal circumstances, the dollar-weighted average life of the Fund's
portfolio is expected to be one year or less, as calculated by the
Adviser.\19\ The Fund will also seek to maintain a dollar-weighted
average maturity that is less than 180 days.\20\
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\19\ Dollar-weighted average life is the weighted average of the
times when principal is to be repaid.
\20\ Dollar-weighted average maturity is calculated by taking
the average length of time to maturity (fixed-rate) or the next
interest rate reset (floating-rate) for each underlying instrument
held by the Fund, weighted according to the relative holdings per
instrument.
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The Fund is an actively-managed fund that does not seek to
replicate the performance of a specified index. The Exchange notes,
however, that the Fund's portfolio will meet certain criteria for
index-based, fixed income exchange-traded funds contained in Rule
14.11(c)(4)(B)(i).\21\
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\21\ See BATS Rule 14.11(c)(4)(B)(i) governing fixed income
based Index Fund Shares. The Fund's portfolio will meet the
following requirements of Rule 14.11(c)(4)(B)(i): (i) The index or
portfolio must consist of Fixed Income Securities (Rule
14.11(c)(4)(B)(i)(a)); (ii) a component may be a convertible
security, however, once the convertible security component converts
to an underlying equity security, the component is removed from the
index or portfolio (Rule 14.11(c)(4)(B)(i)(c)); (iii) no component
fixed-income security (excluding Treasury Securities) will represent
more than 30% of the weight of the index or portfolio, and the five
highest weighted component fixed-income securities do not in the
aggregate account for more than 65% of the weight of the index or
portfolio (Rule 14.11(c)(4)(B)(i)(d)); (iv) an underlying index or
portfolio (excluding exempted securities) must include securities
from a minimum of 13 non-affiliated issuers (Rule
14.11(c)(4)(B)(i)(e)); and (v) component securities that in
aggregate account for at least 90% of the weight of the index or
portfolio must be either: (1) From issuers that are required to file
reports pursuant to Sections 13 and 15(d) of the Act; (2) from
issuers that have a worldwide market value of its outstanding common
equity held by non-affiliates of $700 million or more; (3) from
issuers that have outstanding securities that are notes, bonds,
debentures, or evidence of indebtedness having a total remaining
principal amount of at least $1 billion; (4) exempted securities as
defined in Section 3(a)(12) of the Act; or (5) from issuers that are
a government of a foreign country or a political subdivision of a
foreign country (Rule 14.11(c)(4)(B)(i)(f)).
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[[Page 62794]]
Other Portfolio Holdings
The Fund may, to a limited extent (under normal circumstances, less
than 20% of the Fund's net assets), engage in transactions in futures
contracts, options, and swaps.\22\
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\22\ Derivatives might be included in the Fund's investments to
serve the investment objectives of the Fund. Examples include, but
are not limited to, treasury futures to hedge against rising
interest rates, currency futures to hedge against foreign exchange
rates, interest rate swaps, credit default swaps, total return
swaps, and equity index options. The derivatives will be exchange
traded and/or centrally cleared, and they will be collateralized.
Derivatives are not a principal investment strategy of the Fund.
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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),
including Rule 144A securities deemed illiquid by the Adviser \23\
under the 1940 Act.\24\ 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.
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\23\ In reaching liquidity decisions, the Adviser may consider
factors including: The frequency of trades and quotes for the
security; the number of dealers wishing to purchase or sell the
security and the number of other potential purchasers; dealer
undertakings to make a market in the security; the nature of the
security and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers,
and the mechanics of transfer); any legal or contractual
restrictions on the ability to transfer the security or asset;
significant developments involving the issuer or counterparty
specifically (e.g., default, bankruptcy, etc.) or the securities
markets generally; and settlement practices, registration
procedures, limitations on currency conversion or repatriation, and
transfer limitations (for foreign securities or other assets).
\24\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR
14618 (March 18, 2008), footnote 34. See also Investment Company Act
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970)
(Statement Regarding ``Restricted Securities''); Investment Company
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992)
(Revisions of Guidelines to Form N-1A). A fund's portfolio security
is illiquid if it cannot be disposed of in the ordinary course of
business within seven days at approximately the value ascribed to it
by the fund. See Investment Company Act Release No. 14983 (March 12,
1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7
under the 1940 Act); Investment Company Act Release No. 17452 (April
23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under
the Securities Act of 1933).
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Net Asset Value
According to the Registration Statement, the net asset value
(``NAV'') of the Fund's Shares generally will be calculated once daily
Monday through Friday as of the close of regular trading on the New
York Stock Exchange (``NYSE''), generally 4:00 p.m. Eastern Time (``NAV
Calculation Time'') on each day that NYSE is open for trading, based on
prices at the NAV Calculation Time. NAV per Share is calculated by
dividing the Fund's net assets by the number of Fund Shares
outstanding. The Fund's net assets are valued primarily on the basis of
market quotations.
According to the Registration Statement, the Fund values Fixed
Income Securities using prices provided directly from one or more
broker-dealers, market makers, or independent third-party pricing
services which may use matrix pricing and valuation models to derive
values. Swap agreements and other derivatives are generally valued
based upon quotations from market makers or by a pricing service in
accordance with valuation procedures approved by the Fund's board of
directors. Certain short-term debt securities may be valued on the
basis of amortized cost. Intraday, executable price quotations on Fixed
Income Securities and other assets are available from major broker-
dealer firms and for exchange-traded assets, including investment
companies, futures, and options, such intraday information is available
directly from the applicable listing exchange.
According to the Registration Statement, generally, trading in
certain Fixed Income Securities is substantially completed each day at
various times prior to the close of business on NYSE. Generally,
trading in certain derivatives is substantially completed each day at
various times prior to the close of business on NYSE. The values of
such securities and derivatives used in computing the NAV of the Fund
are determined at such times.
According to the Registration Statement, when market quotations are
not readily available or are believed by BFA to be unreliable, the
Fund's investments are valued at fair value. Fair value determinations
are made by BFA in accordance with policies and procedures approved by
the Fund's board of directors and in accordance with the 1940 Act. BFA
may conclude that a market quotation is not readily available or is
unreliable if a security or other asset or liability is thinly traded,
or where there is a significant event \25\ subsequent to the most
recent market quotation.
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\25\ A ``significant event'' is an event that, in the judgment
of BFA, is likely to cause a material change to the closing market
price of the asset or liability held by the Fund.
---------------------------------------------------------------------------
According to the Registration Statement, fair value represents a
good faith approximation of the value of an asset or liability. The
fair value of an asset or liability held by the Fund is the amount the
Fund might reasonably expect to receive from the current sale of that
asset or the cost to extinguish that liability in an arm's-length
transaction. Valuing the Fund's investments using fair value pricing
will result in prices that may differ from current valuations and that
may not be the prices at which those investments could have been sold
during the period in which the particular fair values were used. The
value of assets or liabilities denominated in non-U.S. currencies will
be converted into U.S. dollars using exchange rates deemed appropriate
by BFA in its role as Adviser.
For more information regarding the valuation of Fund investments in
calculating the Fund's NAV, see the Registration Statement.
The Shares
The Fund will issue and redeem Shares on a continuous basis at the
NAV per Share only in large blocks of a specified number of Shares or
multiples thereof (``Creation Units'') in transactions with authorized
participants who have entered into agreements with the Distributor. The
Fund currently anticipates that a Creation Unit will consist of 50,000
Shares, though this number may change from time to time, including
prior to listing of the Fund. The exact number of Shares that will
constitute a Creation Unit will be disclosed in the Registration
Statement of the Fund. Once created, Shares of the Fund trade on the
secondary market in amounts less than a Creation Unit.
The consideration for purchase of Creation Units of the Fund
generally will consist of the in-kind deposit of a designated portfolio
of securities (including any portion of such securities for which cash
may be substituted) (i.e., ``Deposit Securities'') and the ``Cash
Component'' computed as described below. Together, the Deposit
Securities and the Cash Component constitute the ``Fund Deposit,''
which represents the minimum initial and subsequent investment amount
for a Creation Unit of the Fund.
The portfolio of securities required for purchase of a Creation
Unit may not be
[[Page 62795]]
identical to the portfolio of securities the Fund will deliver upon
redemption of Fund Shares. The Deposit Securities and Fund Securities
(as defined below), as the case may be, in connection with a purchase
or redemption of a Creation Unit, generally will correspond pro rata,
to the extent practicable, to the securities held by the Fund.
The Cash Component will be an amount equal to the difference
between the NAV of the Shares (per Creation Unit) and the ``Deposit
Amount,'' which will be an amount equal to the market value of the
Deposit Securities, and serve to compensate for any differences between
the NAV per Creation Unit and the Deposit Amount. The Fund generally
offers Creation Units partially for cash. BFA will make available
through the National Securities Clearing Corporation (``NSCC'') on each
business day, prior to the opening of business on the Exchange, the
list of names and the required number or par value of each Deposit
Security and the amount of the Cash Component to be included in the
current Fund Deposit (based on information as of the end of the
previous business day) for the Fund.
The identity and number or par value of the Deposit Securities may
change pursuant to changes in the composition of the Fund's portfolio
as rebalancing adjustments and corporate action events occur from time
to time. The composition of the Deposit Securities may also change in
response to adjustments to the weighting or composition of the holdings
of the Fund.
The Fund reserves the right to permit or require the substitution
of a ``cash in lieu'' amount to be added to the Cash Component to
replace any Deposit Security that may not be available in sufficient
quantity for delivery or that may not be eligible for transfer through
the Depository Trust Company (``DTC'') or the clearing process through
the NSCC.
Except as noted below, all creation orders must be placed for one
or more Creation Units and must be received by the Distributor in
proper form no later than 4:00 p.m. Eastern Time, in each case on the
date such order is placed in order for creation of Creation Units to be
effected based on the NAV of Shares of the Fund as next determined on
such date after receipt of the order in proper form. Orders requesting
substitution of a ``cash in lieu'' amount generally must be received by
the Distributor no later than 2:00 p.m. Eastern Time on the Settlement
Date. The ``Settlement Date'' is generally the third business day after
the transmittal date. On days when the Exchange or the bond markets
close earlier than normal, the Fund may require orders to create or to
redeem Creation Units to be placed earlier in the day.
Fund Deposits must be delivered through the Federal Reserve System
(for cash and government securities), through DTC (for corporate and
municipal securities), or through a central depository account, such as
with Euroclear or DTC, maintained by State Street or a sub-custodian
(``Central Depository Account'') by an authorized participant. Any
portion of a Fund Deposit that may not be delivered through the Federal
Reserve System or DTC must be delivered through a Central Depository
Account. The Fund Deposit transfer must be ordered by the authorized
participant in a timely fashion so as to ensure the delivery of the
requisite number of Deposit Securities to the account of the Fund by no
later than 3:00 p.m. Eastern Time on the Settlement Date.
A standard creation transaction fee will be imposed to offset the
transfer and other transaction costs associated with the issuance of
Creation Units.
Shares of the Fund may be redeemed only in Creation Units at their
NAV next determined after receipt of a redemption request in proper
form by the Distributor and only on a business day. BFA will make
available through the NSCC, prior to the opening of business on the
Exchange on each business day, the designated portfolio of securities
(including any portion of such securities for which cash may be
substituted) that will be applicable (subject to possible amendment or
correction) to redemption requests received in proper form on that day
(``Fund Securities''). Fund Securities received on redemption may not
be identical to Deposit Securities that are applicable to creations of
Creation Units.
Unless cash redemptions are available or specified for the Fund,
the redemption proceeds for a Creation Unit generally will consist of a
specified amount of cash, Fund Securities, plus additional cash in an
amount equal to the difference between the NAV of the Shares being
redeemed, as next determined after the receipt of a request in proper
form, and the value of the specified amount of cash and Fund
Securities, less a redemption transaction fee. The Fund generally
redeems Creation Units partially for cash.
A standard redemption transaction fee will be imposed to offset
transfer and other transaction costs that may be incurred by the Fund.
Redemption requests for Creation Units of the Fund must be
submitted to the Distributor by or through an authorized participant no
later than 4:00 p.m. Eastern Time on any business day in order to
receive that day's NAV. The authorized participant must transmit the
request for redemption in the form required by the Fund to the
Distributor in accordance with procedures set forth in the authorized
participant agreement.
Additional information regarding the Shares and the Fund, including
investment strategies, risks, creation and redemption procedures, fees
and expenses, portfolio holdings disclosure policies, distributions,
taxes, and reports to be distributed to beneficial owners of the Shares
can be found in the Registration Statement or on the Web site for the
Fund (www.iShares.com), as applicable.
Availability of Information
The Fund's Web site, which will be publicly available prior to the
public offering of Shares, will include a form of the prospectus for
the Fund that may be downloaded. The Web site will include additional
quantitative information updated on a daily basis, including, for the
Fund: (1) The prior business day's reported NAV, mid-point of the bid/
ask spread at the time of calculation of such NAV (``Bid/Ask
Price''),\26\ daily trading volume, 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. Daily trading
volume information will be available in the financial section of
newspapers, through subscription services such as Bloomberg, Thomson
Reuters, and International Data Corporation, which can be accessed by
authorized participants and other investors, as well as through other
electronic services, including major public Web sites. On each business
day, before commencement of trading in Shares during Regular Trading
Hours \27\ on the Exchange, the Fund will disclose on its Web site the
identities and quantities of the portfolio of securities and other
assets (``Disclosed Portfolio'') held by the Fund that will form the
basis for the Fund's calculation of NAV
[[Page 62796]]
at the end of the business day.\28\ The Disclosed Portfolio will
include, as applicable, the names, quantity, percentage weighting and
market value of Fixed Income Securities and other assets held by the
Fund, and the characteristics of such assets. The Web site and
information will be publicly available at no charge.
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\26\ 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.
\27\ Regular Trading Hours are 9:30 a.m. to 4:00 p.m. Eastern
Time.
\28\ Under accounting procedures to be followed by the Fund,
trades made on the prior business day (``T'') will be booked and
reflected in NAV on the current business day (``T+1''). Accordingly,
the Fund will be able to disclose at the beginning of the business
day the portfolio that will form the basis for the NAV calculation
at the end of the business day.
---------------------------------------------------------------------------
In addition, for the Fund, an estimated value, defined in BATS Rule
14.11(i)(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 will be based upon the current
value for the components of the Disclosed Portfolio and will be updated
and widely disseminated by one or more major market data vendors at
least every 15 seconds during the Exchange's Regular Trading Hours.\29\
In addition, the quotations of certain of the Fund's holdings may not
be updated during U.S. trading hours if such holdings do not trade in
the United States or if updated prices cannot be ascertained.
---------------------------------------------------------------------------
\29\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available
Intraday Indicative Values published via the Consolidated Tape
Association (``CTA'') or other data feeds.
---------------------------------------------------------------------------
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 provide a
close estimate of that value throughout the trading day.
Intraday, executable price quotations on Fixed Income Securities
and other assets are available from major broker-dealer firms and for
exchange-traded assets, including investment companies, futures, and
options, such intraday information is available directly from the
applicable listing exchange. All such intraday price information is
available through subscription services, such as Bloomberg, Thomson
Reuters, and International Data Corporation, which can be accessed by
authorized participants and other investors.
Information regarding market price and volume of the Shares will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services. The previous
day's closing price and trading volume information for the Shares will
be published daily in the financial section of newspapers. Quotation
and last-sale information for the Shares will be available on the
facilities of the CTA.
Initial and Continued Listing
The Shares will be subject to BATS Rule 14.11(i), which sets forth
the initial and continued listing criteria applicable to Managed Fund
Shares. The Exchange represents that, for initial and/or continued
listing, the Fund must be in compliance with Rule 10A-3 under the
Act.\30\ 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.
---------------------------------------------------------------------------
\30\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund. The Exchange will halt trading in
the Shares under the conditions specified in BATS Rule 11.18. 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 composing the Disclosed
Portfolio of the Fund; or (2) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present. Trading in the Shares also will be subject to Rule
14.11(i)(4)(B)(iv), which sets forth circumstances under which Shares
of the Fund may be halted.
Trading Rules
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. BATS will allow
trading in the Shares from 8:00 a.m. until 5:00 p.m. Eastern Time. The
Exchange has appropriate rules to facilitate transactions in the Shares
during all trading sessions. As provided in BATS Rule 11.11(a), the
minimum price variation for quoting and entry of orders in Managed Fund
Shares traded on the Exchange is $0.01, with the exception of
securities that are priced less than $1.00, for which the minimum price
variation for order entry is $0.0001.
Surveillance
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. Trading of the Shares
through the Exchange will be subject to the Exchange's surveillance
procedures for derivative products, including Managed Fund Shares. The
Exchange may obtain information regarding trading in the Shares and the
underlying shares in investment companies, futures, and options via the
Intermarket Surveillance Group (``ISG''), from other exchanges who are
members or affiliates of the ISG, or with which the Exchange has
entered into a comprehensive surveillance sharing agreement.\31\ The
Exchange prohibits the distribution of material non-public information
by its employees.
---------------------------------------------------------------------------
\31\ For a list of the current members and affiliate 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. The Exchange
also notes that all of the investment company securities, futures,
and options will trade on markets that are a member of ISG or with
which the Exchange has in place a comprehensive surveillance sharing
agreement.
---------------------------------------------------------------------------
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) BATS Rule 3.7, which imposes suitability
obligations on Exchange members with respect to recommending
transactions in the Shares to customers; (3) how information regarding
the Intraday Indicative Value is disseminated; (4) the risks involved
in trading the Shares during the Pre-Opening \32\ and After Hours
Trading Sessions \33\ when an updated Intraday Indicative Value will
not be calculated or publicly disseminated; (5) the requirement that
members deliver a prospectus to investors purchasing newly issued
[[Page 62797]]
Shares prior to or concurrently with the confirmation of a transaction;
and (6) trading information.
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\32\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m.
Eastern Time.
\33\ The After Hours Trading Session is from 4:00 p.m. to 5:00
p.m. Eastern Time.
---------------------------------------------------------------------------
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.
In addition, the Information Circular will reference that the Fund
is subject to various fees and expenses described in the Registration
Statement. The Information Circular will also disclose the trading
hours of the Shares of the Fund and the applicable NAV Calculation Time
for the Shares. The Information Circular will disclose that information
about the Shares of the Fund will be publicly available on the Fund's
Web site. In addition, the Information Circular will reference that the
Trust is subject to various fees and expenses described in the Fund's
Registration Statement.
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act \34\ in general and Section 6(b)(5) of the Act \35\ 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.
---------------------------------------------------------------------------
\34\ 15 U.S.C. 78f.
\35\ 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 BATS Rule 14.11(i). 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. If the investment adviser
to the investment company issuing Managed Fund Shares is affiliated
with a broker-dealer, such investment adviser to the investment adviser
shall erect a ``fire wall'' between the investment adviser and the
broker-dealer with respect to access to information concerning the
composition and/or changes to such investment company portfolio. The
Adviser is not a registered broker-dealer, but is affiliated with
multiple broker-dealers and has implemented ``fire walls'' with respect
to such broker-dealers regarding access to information concerning the
composition and/or changes to the Fund's portfolio. The Exchange may
obtain information regarding trading in the Shares and the underlying
shares in investment companies, futures, and options via the ISG, from
other exchanges who are members or affiliates of the ISG, or with which
the Exchange has entered into a comprehensive surveillance sharing
agreement.\36\
---------------------------------------------------------------------------
\36\ See note 31, supra.
---------------------------------------------------------------------------
According to the Registration Statement, the Fund expects that it
will have at least 80% of its assets invested in U.S. dollar-
denominated investment grade Fixed Income Securities. The Fund's
exposure to any single industry will generally be limited to 25% of the
Fund's assets. The Fund's investments will be consistent with the
Fund's investment objective and will not be used to enhance leverage.
The Fund also may invest its net assets in money market instruments at
the discretion of the Adviser. The Fund may invest up to 5% of its net
assets in Fixed Income Securities and instruments of issuers that are
domiciled in emerging market countries. While the Fund is permitted to
invest without restriction in corporate bonds, the Adviser expects
that, under normal circumstances, the Fund will generally seek to
invest in corporate bond issuances that have at least $100 million par
amount outstanding in developed countries and at least $200 million par
amount outstanding in emerging market countries. The Fund will not
invest in non-U.S. equity securities.
Additionally, the Fund may hold up to an aggregate amount of 15% of
its net assets in illiquid securities (calculated at the time of
investment), including Rule 144A securities. 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 may engage in derivatives
transactions, including transactions in futures contracts, options, and
swaps, to a limited extent.\37\ The Fund's portfolio will meet certain
criteria for index-based, fixed income exchange-traded funds contained
in Rule 14.11(c)(4)(B)(i).\38\
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\37\ Derivatives might be included in the Fund's investments to
serve the investment objectives of the Fund. Examples include, but
are not limited to, treasury futures to hedge against rising
interest rates, and currency futures to hedge against foreign
exchange rates. The derivatives will be exchange traded and/or
centrally cleared, and they will be collateralized. Derivatives are
not a principal investment strategy of the Fund. See note 22, supra.
\38\ See note 21, supra.
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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 is publicly available regarding the Fund and the Shares,
thereby promoting market transparency. Moreover, the Intraday
Indicative Value will be disseminated by one or more major market data
vendors at least every 15 seconds during Regular Trading Hours. On each
business day, before commencement of trading in Shares during Regular
Trading Hours, the Fund will disclose on its Web site the Disclosed
Portfolio that will form the basis for the Fund's calculation of NAV at
the end of the business day. Pricing information will be available on
the Fund's Web site including: (1) The prior business day's reported
NAV, the Bid/Ask Price of the Fund, 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. Additionally,
information regarding market price and trading of the Shares will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services, and quotation
and last-sale information for the Shares will be available on the
facilities of the CTA. The Web site for the Fund will include a form of
the prospectus for the Fund
[[Page 62798]]
and additional data relating to NAV and other applicable quantitative
information. Trading in Shares of the Fund will be halted under the
conditions specified in BATS Rule 11.18. Trading may also be halted
because of market conditions or for reasons that, in the view of the
Exchange, make trading in the Shares inadvisable. Finally, trading in
the Shares will be subject to BATS Rule 14.11(i)(4)(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.
Intraday, executable price quotations on Fixed Income Securities
and other assets are available from major broker-dealer firms and for
exchange-traded assets, including investment companies, futures, and
options, such intraday information is available directly from the
applicable listing exchange. Such intraday price information is
available through subscription services, such as Bloomberg, Thomson
Reuters, and International Data Corporation, which can be accessed by
authorized participants and other investors.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of actively-managed exchange-traded product that
will enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, 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, 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 will facilitate the listing and trading of an
additional actively-managed exchange-traded product that will enhance
competition among market participants, to the benefit of investors and
the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days of
publication (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 Exchange 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BATS-2013-051 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BATS-2013-051. 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 (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 Web site viewing and
printing in the Commission's Public Reference Section, 100 F Street
NE., Washington, DC 20549, on official business days between 10:00 a.m.
and 3:00 p.m. Copies of the 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-BATS-2013-051 and should be
submitted on or before November 12, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
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\39\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24559 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P
