Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to Listing and Trading of the Shares of iShares 2020 S&P AMT-Free Municipal Series Under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02, 39016-39019 [2014-15962]
Download as PDF
<![CDATA[
39016
Federal Register / Vol. 79, No. 131 / Wednesday, July 9, 2014 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72523; File No. SR–
NYSEArca–2014–37]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, Relating to
Listing and Trading of the Shares of
iShares 2020 S&P AMT-Free Municipal
Series Under NYSE Arca Equities Rule
5.2(j)(3), Commentary .02
July 2, 2014.
I. Introduction
On May 2, 2014, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’), through
its wholly-owned subsidiary NYSE Arca
Equities, Inc. (‘‘NYSE Arca Equities’’ or
‘‘Corporation’’), filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
list and trade shares (‘‘Shares’’) of the
iShares 2020 S&P AMT-Free Municipal
Series (‘‘Fund’’). On May 14, 2014, the
Exchange filed Amendment No. 1 to the
proposed rule change, which amended
and replaced the proposed rule change
in its entirety.3 The proposed rule
change, as modified by Amendment No.
1 thereto, was published for comment in
the Federal Register on May 21, 2014.4
The Commission received no comments
on the proposed rule change. This order
grants approval of the proposed rule
change.
II. Description of the Proposed Rule
Change
The Exchange proposes to list and
trade Shares of the Fund pursuant to
NYSE Arca Equities Rule 5.2(j)(3),
Commentary .02, which governs the
listing and trading of Investment
Company Units (‘‘Units’’) based on fixed
income securities indexes. The Fund is
a series of the iShares Trust (‘‘Trust’’).5
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 In Amendment No. 1, the Exchange: (a) Clarified
that the net asset value (‘‘NAV’’) of the Fund
normally will be determined once each business
day as of the regularly scheduled close of business
of the New York Stock Exchange (‘‘NYSE’’)
(normally, 4:00 p.m. Eastern time) on each day the
NYSE is open for trading; (b) provided additional
information describing the NAV calculation
pertaining to money market funds; (c) clarified that
a common identifier such as CUSIP or ISIN (if
applicable) will be included in the Disclosed
Portfolio (as defined herein); and (d) made certain
technical edits correcting typographical and other
similar types of clerical errors.
4 See Securities Exchange Act Release No. 72172
(May 15, 2014), 79 FR 29241 (‘‘Notice’’).
5 See Post-Effective Amendment No. 1004 to the
Trust’s registration statement on Form N–1A under
sroberts on DSK5SPTVN1PROD with NOTICES
2 17
VerDate Mar<15>2010
20:08 Jul 08, 2014
Jkt 232001
Blackrock Fund Advisors (‘‘BFA’’) is the
investment adviser for the Fund.6
According to the Exchange, the Fund
will seek investment results that
correspond generally to the price and
yield performance, before fees and
expenses, of the S&P AMT-Free
Municipal Series 2020 IndexTM
(‘‘Index’’).7 The Fund will not seek to
return any pre-determined amount at
maturity.
According to the Exchange, the Index
measures the performance of
investment-grade U.S. municipal bonds
maturing in 2020. As of February 28,
2014, there were 1,427 issues in the
Index. The Index includes municipal
bonds primarily from issuers that are
state or local governments or agencies
such that the interest on the bonds is
exempt from U.S. federal income taxes
and the federal alternative minimum tax
(‘‘AMT’’). Each bond must have a rating
of at least BBB- by S&P, Baa3 by
Moody’s Investors Service, Inc.
(‘‘Moody’s’’), or BBB- by Fitch, Inc. and
must have a minimum maturity par
amount of $2 million to be eligible for
the Securities Act of 1933 and the Investment
Company Act of 1940 (‘‘1940 Act’’), dated
December 16, 2013 (File Nos. 333–92935 and 811–
09729) (‘‘Registration Statement’’). According to the
Exchange, the Trust has obtained certain exemptive
relief from the Commission under the 1940 Act. See
Investment Company Act Release No. 27608
(December 21, 2006) (File No. 812–13208).
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,
BFA and its related personnel are subject to the
provisions of Rule 204A–1 under the Advisers Act,
which requires investment advisers to adopt a code
of ethics that reflects the fiduciary nature of their
relationship with their clients as well as
compliance with other applicable securities laws.
Accordingly, investment advisers must have
procedures designed to prevent the communication
and misuse of non-public information, 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.
7 The Exchange represents that the Index is
sponsored by Standard & Poor’s Financial Services
LLC (‘‘S&P’’ or ‘‘Index Provider’’), which is
independent of the Fund and BFA. The Index
Provider determines the composition and relative
weightings of the securities in the Index and
publishes information regarding the market value of
the Index. The Index Provider is not a broker-dealer
or affiliated with a broker-dealer, and has
implemented procedures designed to prevent the
use and dissemination of material, non-public
information regarding the Index.
PO 00000
Frm 00167
Fmt 4703
Sfmt 4703
inclusion in the Index. To remain in the
Index, bonds must maintain a minimum
par amount greater than or equal to $2
million as of each rebalancing date. All
bonds in the Index will mature between
June 1 and August 31 of 2020. When a
bond matures in the Index, an amount
representing its value at maturity will be
included in the Index throughout the
remaining life of the Index, and any
such amount will be assumed to earn a
rate equal to the performance of the
S&P’s Weekly High Grade Index, which
consists of Moody’s Investment Grade-1
municipal tax-exempt notes that are not
subject to federal AMT. The Exchange
states that, by August 31, 2020, the
Index is expected to consist entirely of
cash carried in this manner. The Index
is a market value weighted index and is
rebalanced after the close on the last
business day of each month.
The Exchange represents that the
Index for the Fund does not meet all of
the ‘‘generic’’ listing requirements of
Commentary .02(a) to NYSE Arca
Equities Rule 5.2(j)(3) applicable to the
listing of Units based on fixed income
securities indexes. Specifically, the
Index does not meet the requirement set
forth in Commentary .02(a)(2), which
provides that components that in the
aggregate account for at least 75% of the
weight of the index or portfolio each
must have a minimum original principal
amount outstanding of $100 million or
more. Contrary to this requirement, as of
February 28, 2014, only 6.25% of the
weight of the Index components has a
minimum original principal amount
outstanding of $100 million or more.
The Exchange represents that the
Fund generally will invest at least 80%
of its assets in the securities of the
Index, except during the last months of
the Fund’s operations. The Fund may at
times invest up to 20% of its assets in
cash and cash equivalents (including
money market funds affiliated with
BFA), as well as in municipal bonds not
included in the Index, but which BFA
believes will help the Fund track the
Index. For example, the Fund may
invest in municipal bonds not included
in the Index in order to reflect
prospective changes in the Index (such
as Index reconstitutions, additions, and
deletions). The Fund will generally hold
municipal bond securities issued by
state and local municipalities whose
interest payments are exempt from U.S.
federal income tax, the federal AMT
and, effective beginning in 2013, a
federal Medicare contribution tax of
3.8% on ‘‘net investment income,’’
including dividends, interest, and
capital gains. In addition, the Fund may
invest any cash assets in one or more
affiliated municipal money market
E:\FR\FM\09JYN1.SGM
09JYN1
Federal Register / Vol. 79, No. 131 / Wednesday, July 9, 2014 / Notices
funds. In the last months of operation,
as the bonds held by the Fund mature,
the proceeds will not be reinvested in
bonds but instead will be held in cash
and cash equivalents, including without
limitation AMT-free tax-exempt
municipal notes, variable rate demand
notes and obligations, tender option
bonds, and municipal commercial
paper. These cash equivalents may not
be included in the Index. According to
the Exchange, on or about August 31,
2020, the Fund will wind up and
terminate, and its net assets will be
distributed to then-current shareholders.
Additional information regarding the
Trust, the Fund, and the Shares,
including investment strategies, risks,
creation and redemption procedures,
fees, portfolio holdings, distributions,
and taxes, among other things, is
included in the Notice and Registration
Statement, as applicable.8
sroberts on DSK5SPTVN1PROD with NOTICES
III. Discussion and Commission’s
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of
Section 6 of the Act 9 and the rules and
regulations thereunder applicable to a
national securities exchange.10 In
particular, the Commission finds that
the proposal is consistent with Section
6(b)(5) of the Act,11 which requires,
among other things, that the Exchange’s
rules be designed to promote just and
equitable principles of trade, 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 Commission notes
that the Fund and the Shares must
comply with the applicable
requirements of NYSE Arca Equities
Rules 5.2(j)(3) and 5.5(g)(2) to be listed
and traded on the Exchange.
The Commission finds that the
proposal to list and trade the Shares on
the Exchange is consistent with Section
11A(a)(1)(C)(iii) of the Act,12 which sets
forth Congress’ finding that it is in the
public interest and appropriate for the
protection of investors and the
maintenance of fair and orderly markets
to assure the availability to brokers,
dealers, and investors of information
with respect to quotations for, and
transactions in, securities. Quotation
8 See Notice and Registration Statement, supra
notes 4 and 5, respectively.
9 15 U.S.C. 78f.
10 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
11 17 U.S.C. 78f(b)(5).
12 15 U.S.C. 78k–1(a)(1)(C)(iii).
VerDate Mar<15>2010
20:08 Jul 08, 2014
Jkt 232001
and last-sale information for the Shares
will be available via the Consolidated
Tape Association (‘‘CTA’’) high-speed
line. The current value of the Index will
be widely disseminated by one or more
major market data vendors 13 at least
once per day, as required by NYSE Arca
Equities Rule 5.2(j)(3), Commentary
.02(b)(ii). In addition, an Intraday
Indicative Value (‘‘IIV’’) for the Shares
of the Fund will be disseminated by one
or more major market data vendors and
updated at least every 15 seconds
during the Core Trading Session (9:30
a.m. to 4:00 p.m. Eastern Time).14
Information regarding market price and
trading volume of the Shares will be
continually available on a real-time
basis throughout the day on brokers’
computer screens and other electronic
services, and information regarding the
previous day’s closing price and trading
volume information for the Shares will
be published daily in the financial
section of newspapers. Quotation
information for investment company
securities (excluding exchange-traded
funds) may be obtained through
nationally recognized pricing services
through subscription agreements or
from brokers and dealers who make
markets in such securities. Price
information regarding municipal bonds,
AMT-free tax-exempt municipal notes,
variable rate demand notes and
obligations, tender option bonds, and
municipal commercial paper is
available from third party pricing
services and major market data vendors.
On each business day, before
commencement of trading in Shares in
the Core Trading Session on the
Exchange, the Fund will disclose on its
Web site the portfolio that will form the
basis for the Fund’s calculation of NAV
at the end of the business day.15 The
Web site for the Fund also will include
the prospectus for the Fund and
additional data relating to NAV and
other applicable quantitative
information. The NAV of the Fund
13 The Exchange further states that the
components of the Index and their percentage
weighting will be available from major market data
vendors.
14 See NYSE Arca Equities Rule 5.2(j)(3),
Commentary .02(c). According to the Exchange,
several major market data vendors display and/or
make widely available IIVs taken from the CTA or
other data feeds. See Notice, supra note 4, at n.13.
15 On a daily basis, the Fund will disclose for
each portfolio security or other financial instrument
of the Fund the following information on the
Fund’s Web site: Ticker symbol (if applicable),
name of security and financial instrument, a
common identifier such as CUSIP or ISIN (if
applicable), number of shares (if applicable), dollar
value of securities and financial instruments held
in the portfolio, and percentage weighting of the
security and financial instrument in the portfolio.
The Web site information will be publicly available
at no charge.
PO 00000
Frm 00168
Fmt 4703
Sfmt 4703
39017
normally will be determined once each
business day as of the regularly
scheduled close of business of the NYSE
(normally, 4:00 p.m. Eastern time) on
each day the NYSE is open for trading.16
The Commission believes that the
proposal to list and trade the Shares is
reasonably designed to promote fair
disclosure of information that may be
necessary to price the Shares
appropriately and to prevent trading
when a reasonable degree of
transparency cannot be assured. The
Exchange states that the Index Provider
is not a broker-dealer or affiliated with
a broker-dealer, and has implemented
procedures designed to prevent the use
and dissemination of material, nonpublic information regarding the
Index.17 Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit Holders in an
Information Bulletin of the special
characteristics and risks associated with
trading the Shares. With respect to
trading halts, if the Exchange becomes
aware that the NAV is not being
disseminated to all market participants
at the same time, it will halt trading in
the Shares until such time as the NAV
is available to all market participants. In
addition, the Exchange may consider all
relevant factors in exercising its
discretion to halt or suspend trading in
the Shares of the Funds. Trading may be
halted because of market conditions or
for reasons that, in the view of the
Exchange, make trading in the Shares
inadvisable. The Exchange represents
that, if the IIV or the Index value is not
being disseminated as required, the
Exchange may halt trading during the
day in which the interruption to the
dissemination of the IIV or Index value
occurs. If the interruption to the
dissemination of the IIV or Index value
persists past the trading day in which it
occurred, the Exchange will halt
trading. Moreover, trading in Shares of
the Funds will be halted if the circuit
breaker parameters in NYSE Arca
Equities Rule 7.12 have been reached or
because of market conditions or for
reasons that, in the view of the
Exchange, make trading in the Shares
inadvisable. Further, trading in the
16 For purposes of calculating NAV of the Shares,
the Fund will value fixed income portfolio
securities, including municipal bonds, AMT-free
tax-exempt municipal notes, variable rate demand
notes and obligations, tender option bonds, and
municipal commercial paper using prices provided
directly from independent third-party pricing
services, which may use matrix pricing and
valuation models to derive values or from one or
more broker-dealers or market makers. Certain
short-term debt securities may be valued on the
basis of amortized cost. Shares of municipal money
market funds will be valued at NAV.
17 See supra note 7 and accompanying text.
E:\FR\FM\09JYN1.SGM
09JYN1
39018
Federal Register / Vol. 79, No. 131 / Wednesday, July 9, 2014 / Notices
sroberts on DSK5SPTVN1PROD with NOTICES
Shares will be subject to NYSE Arca
Equities Rule 7.34, which sets forth
additional circumstances under which
Shares of the Funds may be halted. The
Exchange states that it has in place
surveillance procedures that are
adequate to properly monitor trading in
the Shares in all trading sessions and to
deter and detect violations of Exchange
rules and applicable federal securities
laws. The Exchange may obtain
information via the Intermarket
Surveillance Group (‘‘ISG’’) from other
exchanges that are members of ISG or
with which the Exchange has entered
into a comprehensive surveillance
sharing agreement.
Based on the Exchange’s
representations, the Commission
believes that the Index is sufficiently
broad-based and liquid to deter
potential manipulation. As of February
28, 2014, there were 1,427 issues in the
Index. As of the same date, 76.77% of
the weight of the Index components was
comprised of individual maturities that
were part of an entire municipal bond
offering with a minimum original
principal amount outstanding of $100
million or more for all maturities of the
offering.18 In addition, the total dollar
amount outstanding of issues in the
Index was approximately $12.06 billion,
and the average dollar amount
outstanding of issues in the Index was
approximately $8.46 million. Further,
the most heavily weighted component
represents 1.21% of the weight of the
Index, and the five most heavily
weighted components represent 5.39%
of the weight of the Index.19 In addition,
the average daily notional trading
volume for Index components for the
period December 31, 2012, to December
31, 2013, was $49 million, and the sum
of the notional trading volumes for the
same period was approximately $12.4
billion. As of March 17, 2014, 61.14%
of the Index weight consisted of issues
with a rating of AA/Aa2 or higher. The
Commission notes that the Fund shares
18 According to the Exchange, when bonds are
close substitutes for one another, pricing vendors
can use executed trade information from all similar
bonds as pricing inputs for an individual security.
This can make individual securities more liquid,
because valuations for a single security are better
estimators of actual trading prices when they are
informed by trades in a large group of closely
related securities. As a result, securities are more
likely to trade at prices close to their valuation
when they need to be sold. See Notice, supra note
4, at n.11.
19 Commentary .02(a)(4) to NYSE Arca Equities
Rule 5.2(j)(3) provides that no component fixedincome security (excluding Treasury Securities and
GSE Securities, as defined therein) shall represent
more than 30% of the weight of the index or
portfolio, and the five most heavily weighted
component fixed-income securities in the index or
portfolio shall not in the aggregate account for more
than 65% of the weight of the index or portfolio.
VerDate Mar<15>2010
20:08 Jul 08, 2014
Jkt 232001
similar characteristics of other
exchange-traded funds, the shares of
which are currently listed and trading
on the Exchange.20
In support of this proposal, the
Exchange has made representations,
including:
(1) Except for Commentary .02(a)(2) to
NYSE Arca Equities Rule 5.2(j)(3), the
Shares of the Funds currently satisfy all
of the generic listing standards under
NYSE Arca Equities Rule 5.2(j)(3).
(2) The continued listing standards
under NYSE Arca Equities Rules
5.2(j)(3) and 5.5(g)(2) applicable to Units
shall apply to the Shares.
(3) The Shares will comply with all
other requirements applicable to Units
including, but not limited to,
requirements relating to the
dissemination of key information, such
as the value of the Index and IIV, rules
governing the trading of equity
securities, trading hours, trading halts,
surveillance, and the Information
Bulletin to Equity Trading Permit
Holders (each as described in more
detail in the Notice and Registration
Statement, as applicable), as set forth in
Exchange rules applicable to Units and
prior Commission orders approving the
generic listing rules applicable to the
listing and trading of Units.
(4) The Exchange represents that
trading in the Shares will be subject to
the existing trading surveillances,
administered by the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws.21 The Exchange
represents that these procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and federal
securities laws applicable to trading on
the Exchange.
(5) FINRA, on behalf of the Exchange,
will communicate as needed regarding
trading in the Shares with other markets
or other entities that are members of
ISG, and FINRA may obtain trading
information regarding trading in the
Commission previously has approved a
proposed rule change relating to listing and trading
on the Exchange of Units based on similar
municipal bond indexes. See Securities Exchange
Act Release No. 67985 (October 4, 2012), 77 FR
61804 (October 11, 2012) (SR–NYSEArca–2012–92)
(order approving proposed rule change relating to
the listing and trading of shares of the iShares 2018
S&P AMT-Free Municipal Series and iShares 2019
S&P AMT-Free Municipal Series under NYSE Arca
Equities Rule 5.2(j)(3), Commentary .02).
21 According to the Exchange, FINRA surveils
trading on the Exchange pursuant to a regulatory
services agreement. The Exchange is responsible for
FINRA’s performance under this regulatory services
agreement.
PO 00000
20 The
Frm 00169
Fmt 4703
Sfmt 4703
Shares from such markets or entities.
FINRA also can access data obtained
from the Municipal Securities
Rulemaking Board relating to municipal
bond trading activity for surveillance
purposes in connection with trading in
the Shares. In addition, FINRA, on
behalf of the Exchange, is able to access,
as needed, trade information for certain
fixed income securities held by the
Fund reported to FINRA’s Trade
Reporting and Compliance Engine. The
Exchange also may obtain information
regarding trading in the Shares from
markets or other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.
(6) For initial and continued listing of
the Shares, the Trust is required to
comply with Rule 10A–3 under the
Act.22
(7) The Fund generally will invest at
least 80% of its assets in the securities
of the Index.
(8) Over time the Fund’s tracking
error 23 will not exceed 5%.
(9) The Fund may at times invest up
to 20% of its assets in cash and cash
equivalents (including money market
funds affiliated with BFA), as well as in
municipal bonds not included in the
Index, but which BFA believes will help
the Fund track the Index.
(10) On or about August 31, 2020, the
Fund will wind up and terminate, and
its net assets will be distributed to the
then-current shareholders.
This approval order is based on all of
the Exchange’s representations,
including those set forth above and in
the Notice, and the Exchange’s
description of the Funds.
For the foregoing reasons, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1 thereto, is consistent with Section
6(b)(5) of the Act 24 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,25 that the
proposed rule change (SR–NYSEArca–
2014–37), as modified by Amendment
No. 1 thereto, be, and it hereby is,
approved.
22 See
17 CFR 240.10A–3.
to the Exchange, tracking error is the
difference between the performance (return) of the
Fund’s portfolio and that of the Index.
24 15 U.S.C. 78f(b)(5).
25 15 U.S.C. 78s(b)(2).
23 According
E:\FR\FM\09JYN1.SGM
09JYN1
Federal Register / Vol. 79, No. 131 / Wednesday, July 9, 2014 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014–15962 Filed 7–8–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72534; File No. SR–NYSE–
2014–12]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Order
Approving Proposed Rule Change
Amending Rule 98 To Adopt a
Principles-based Approach To Prohibit
the Misuse of Material Nonpublic
Information and Make Conforming
Changes to Other Exchange Rules
July 3, 2014.
On March 18, 2014, New York Stock
Exchange LLC (‘‘NYSE’’ or the
‘‘Exchange’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 filed with the Securities
and Exchange Commission (the
‘‘Commission’’) a proposed rule change
to amend Rule 98. The proposed rule
change was published for public
comment in the Federal Register on
April 7, 2014.3 On May 21, 2014, the
Commission designated a longer period
for Commission action on the proposed
rule change.4 The Commission received
one comment on the proposal.5 This
order approves the proposed rule
change.
I. Background and Introduction
The Exchange adopted Rule 98 in
1986, when NYSE specialist firms,
which had been independent memberowned entities, increasingly became
affiliates of larger member
organizations. Because of the
specialists’’ position in the market, Rule
98 required an organizational separation
between a specialist and its affiliates.
The purpose of that separation was to
eliminate or control conflicts of interest
between the business activities of
affiliates of the specialist and the
specialist’s responsibilities to the
26 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 71837
(Apr. 1, 2014), 75 FR 19146.
4 See Securities Exchange Act Release No. 72203,
79 FR 30667 (May 28, 2014).
5 See E-mail from Dr. Leee Jackson, Esq. (Apr. 15,
2014) (‘‘Jackson Comment’’). The Commission does
not believe the Jackson Comment raises any
material or substantive issues.
sroberts on DSK5SPTVN1PROD with NOTICES
1 15
VerDate Mar<15>2010
20:08 Jul 08, 2014
Jkt 232001
market and to any customer orders the
specialist represented as agent.6
In 2008, the NYSE amended Rule 98
to adopt a more flexible, principlesbased approach that among other things:
(1) Redefined the persons to whom the
rule applied; (2) allowed DMM
operations to be integrated into bettercapitalized member organizations; (3)
permitted a DMM unit to share nontrading-related services with its parent
member organization or approved
persons; and (4) provided flexibility to
member organizations and their
approved persons in conducting risk
management of DMM operations.7 The
principal effect of the 2008
Amendments was that affiliates of a
DMM unit that were walled-off from the
DMM unit were no longer prohibited
from acting as an options market maker
in a security in which the affiliated
DMM was registered. However, the
amended Rule 98 continued to prohibit
the integrated unit from coordinating
market making between its DMM and its
options market maker.
The Exchange now proposes to
further amend Rule 98 in order to
provide DMM units with greater
flexibility in structuring their operations
and to move further toward a principlesbased approach and away from
prescribing particular structures for
DMM units. Under this proposed rule
change, certain information barriers
would continue to be required (for
example, between a DMM unit and an
affiliated investment-banking desk), and
other required protections, in addition
to information barriers, would address
the role of DMMs and the trading floor
in the NYSE’s market. Proposed Rule 98
would, however, contain fewer
prescriptions relating to the structure of
DMM units, and it would instead—like
similar rules relating to market-making
firms on other exchanges 8—impose a
more general requirement that a member
organization operating a DMM unit
maintain and enforce written policies
and procedures reasonably designed,
taking into consideration the nature of
the member organization’s business, (i)
to prevent the misuse of material, nonpublic information by the member
organization or persons associated with
it and (ii) to ensure compliance with
applicable federal laws and regulations
and with Exchange rules.
6 See Securities Exchange Act Release No. 23768
(Nov. 3, 1986), 51 FR 41183 (Nov. 13, 1986) (SR–
NYSE–85–25).
7 See Securities Exchange Act Release No. 58328
(Aug. 7, 2008), 34 FR 58328 (Aug. 18, 2008) (SR–
NYSE–2008–45) (‘‘2008 Amendments’’).
8 See, e.g., NYSEArca Equities Rule 6.3 and BATS
Rule 5.5.
PO 00000
Frm 00170
Fmt 4703
Sfmt 4703
39019
The Exchange asserts that the instant
proposal should provide member
organizations operating DMM units with
the means to better manage risk across
a firm—for example, by integrating
DMM unit positions and quoting
information with other quotes and
positions by other units within the firm.
The Exchange posits that a member
organization operating a DMM unit, in
the context of risk management 9 and
consistent with protections against the
misuse of material non-public
information,10 should be able to
consider the outstanding quotes of the
DMM unit as well as traded positions
for purposes of calculating net positions
consistent with Rule 200 of Regulation
SHO 11 and calculating intra-day net
capital positions. Further, the Exchange
asserts that a member organization
should be able to integrate its DMM unit
operations with its customer-facing
operations because the instant proposal,
in tandem with existing NYSE conduct
rules,12 FINRA’s ongoing surveillances
for manipulative conduct, and FINRA’s
program to examine member firms that
act as DMMs and to review and approve
their policies and procedures for
complying with Rule 98, should provide
a regulatory framework that guards
customer interests and protects against
the misuse of material non-public
information, while increasing the
operational flexibility of member
organizations.
II. Description of the Proposed
Amendments to Rule 98
Proposed Rule 98(a)(1) provides that
the rule shall apply to all member
organizations seeking to operate a DMM
unit at the Exchange and to any
approved person that may provide
services to a DMM unit.
9 See, e.g., 17 CFR part 240.15c3–5 (Risk
Management Controls for Brokers or Dealers with
Market Access).
10 See, e.g., 15 U.S.C. 78o(g). Section 15(g) of the
Act requires every registered broker or dealer to
‘‘establish, maintain, and enforce written policies
and procedures reasonably designed, taking into
consideration the nature of such broker’s or dealer’s
business, to prevent the misuse . . . of material,
nonpublic information by such broker or dealer or
any person associated with such broker or dealer.’’
11 17 CFR 242.200. Under Regulation SHO,
determination of a seller’s net position is based on
the seller’s positions in the security in all
proprietary accounts. See Exchange Act Release No.
50103 (July 28, 2004), 69 FR 48008, 48010 n.22
(Aug. 6, 2004); see also Exchange Act Release No.
48709 (Oct. 29, 2003), 68 FR 62972, 62991 and
62994 (Nov. 6, 2003); Letter from Richard R.
Lindsey, Director, Division of Market Regulation, to
Roger D. Blanc, Wilkie Farr & Gallagher, SEC NoAction Letter, 1998 SEC No-Act. LEXIS 1038, p. 5
(Nov. 23, 1998); Exchange Act Release No. 30772
(June 3, 1992), 57 FR 24415, 24419 n.47 (June 9,
1992); Exchange Act Release No. 27938 (Apr. 23,
1990), 55 FR 17949, 17950 (Apr. 30, 1990).
12 See, e.g., NYSE Rule 5320 (‘‘Manning Rule’’).
E:\FR\FM\09JYN1.SGM
09JYN1
]]>Agencies
[Federal Register Volume 79, Number 131 (Wednesday, July 9, 2014)]
[Notices]
[Pages 39016-39019]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-15962]
[[Page 39016]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72523; File No. SR-NYSEArca-2014-37]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change, as Modified by Amendment No. 1
Thereto, Relating to Listing and Trading of the Shares of iShares 2020
S&P AMT-Free Municipal Series Under NYSE Arca Equities Rule 5.2(j)(3),
Commentary .02
July 2, 2014.
I. Introduction
On May 2, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca''),
through its wholly-owned subsidiary NYSE Arca Equities, Inc. (``NYSE
Arca Equities'' or ``Corporation''), filed with the Securities and
Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to list and trade shares
(``Shares'') of the iShares 2020 S&P AMT-Free Municipal Series
(``Fund''). On May 14, 2014, the Exchange filed Amendment No. 1 to the
proposed rule change, which amended and replaced the proposed rule
change in its entirety.\3\ The proposed rule change, as modified by
Amendment No. 1 thereto, was published for comment in the Federal
Register on May 21, 2014.\4\ The Commission received no comments on the
proposed rule change. This order grants approval of the proposed rule
change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange: (a) Clarified that the net
asset value (``NAV'') of the Fund normally will be determined once
each business day as of the regularly scheduled close of business of
the New York Stock Exchange (``NYSE'') (normally, 4:00 p.m. Eastern
time) on each day the NYSE is open for trading; (b) provided
additional information describing the NAV calculation pertaining to
money market funds; (c) clarified that a common identifier such as
CUSIP or ISIN (if applicable) will be included in the Disclosed
Portfolio (as defined herein); and (d) made certain technical edits
correcting typographical and other similar types of clerical errors.
\4\ See Securities Exchange Act Release No. 72172 (May 15,
2014), 79 FR 29241 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to list and trade Shares of the Fund pursuant
to NYSE Arca Equities Rule 5.2(j)(3), Commentary .02, which governs the
listing and trading of Investment Company Units (``Units'') based on
fixed income securities indexes. The Fund is a series of the iShares
Trust (``Trust'').\5\ Blackrock Fund Advisors (``BFA'') is the
investment adviser for the Fund.\6\
---------------------------------------------------------------------------
\5\ See Post-Effective Amendment No. 1004 to the Trust's
registration statement on Form N-1A under the Securities Act of 1933
and the Investment Company Act of 1940 (``1940 Act''), dated
December 16, 2013 (File Nos. 333-92935 and 811-09729)
(``Registration Statement''). According to the Exchange, the Trust
has obtained certain exemptive relief from the Commission under the
1940 Act. See Investment Company Act Release No. 27608 (December 21,
2006) (File No. 812-13208).
\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, BFA and its related personnel are subject to
the provisions of Rule 204A-1 under the Advisers Act, which requires
investment advisers to adopt a code of ethics that reflects the
fiduciary nature of their relationship with their clients as well as
compliance with other applicable securities laws. Accordingly,
investment advisers must have procedures designed to prevent the
communication and misuse of non-public information, 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.
---------------------------------------------------------------------------
According to the Exchange, the Fund will seek investment results
that correspond generally to the price and yield performance, before
fees and expenses, of the S&P AMT-Free Municipal Series 2020 Index\TM\
(``Index'').\7\ The Fund will not seek to return any pre-determined
amount at maturity.
---------------------------------------------------------------------------
\7\ The Exchange represents that the Index is sponsored by
Standard & Poor's Financial Services LLC (``S&P'' or ``Index
Provider''), which is independent of the Fund and BFA. The Index
Provider determines the composition and relative weightings of the
securities in the Index and publishes information regarding the
market value of the Index. The Index Provider is not a broker-dealer
or affiliated with a broker-dealer, and has implemented procedures
designed to prevent the use and dissemination of material, non-
public information regarding the Index.
---------------------------------------------------------------------------
According to the Exchange, the Index measures the performance of
investment-grade U.S. municipal bonds maturing in 2020. As of February
28, 2014, there were 1,427 issues in the Index. The Index includes
municipal bonds primarily from issuers that are state or local
governments or agencies such that the interest on the bonds is exempt
from U.S. federal income taxes and the federal alternative minimum tax
(``AMT''). Each bond must have a rating of at least BBB- by S&P, Baa3
by Moody's Investors Service, Inc. (``Moody's''), or BBB- by Fitch,
Inc. and must have a minimum maturity par amount of $2 million to be
eligible for inclusion in the Index. To remain in the Index, bonds must
maintain a minimum par amount greater than or equal to $2 million as of
each rebalancing date. All bonds in the Index will mature between June
1 and August 31 of 2020. When a bond matures in the Index, an amount
representing its value at maturity will be included in the Index
throughout the remaining life of the Index, and any such amount will be
assumed to earn a rate equal to the performance of the S&P's Weekly
High Grade Index, which consists of Moody's Investment Grade-1
municipal tax-exempt notes that are not subject to federal AMT. The
Exchange states that, by August 31, 2020, the Index is expected to
consist entirely of cash carried in this manner. The Index is a market
value weighted index and is rebalanced after the close on the last
business day of each month.
The Exchange represents that the Index for the Fund does not meet
all of the ``generic'' listing requirements of Commentary .02(a) to
NYSE Arca Equities Rule 5.2(j)(3) applicable to the listing of Units
based on fixed income securities indexes. Specifically, the Index does
not meet the requirement set forth in Commentary .02(a)(2), which
provides that components that in the aggregate account for at least 75%
of the weight of the index or portfolio each must have a minimum
original principal amount outstanding of $100 million or more. Contrary
to this requirement, as of February 28, 2014, only 6.25% of the weight
of the Index components has a minimum original principal amount
outstanding of $100 million or more.
The Exchange represents that the Fund generally will invest at
least 80% of its assets in the securities of the Index, except during
the last months of the Fund's operations. The Fund may at times invest
up to 20% of its assets in cash and cash equivalents (including money
market funds affiliated with BFA), as well as in municipal bonds not
included in the Index, but which BFA believes will help the Fund track
the Index. For example, the Fund may invest in municipal bonds not
included in the Index in order to reflect prospective changes in the
Index (such as Index reconstitutions, additions, and deletions). The
Fund will generally hold municipal bond securities issued by state and
local municipalities whose interest payments are exempt from U.S.
federal income tax, the federal AMT and, effective beginning in 2013, a
federal Medicare contribution tax of 3.8% on ``net investment income,''
including dividends, interest, and capital gains. In addition, the Fund
may invest any cash assets in one or more affiliated municipal money
market
[[Page 39017]]
funds. In the last months of operation, as the bonds held by the Fund
mature, the proceeds will not be reinvested in bonds but instead will
be held in cash and cash equivalents, including without limitation AMT-
free tax-exempt municipal notes, variable rate demand notes and
obligations, tender option bonds, and municipal commercial paper. These
cash equivalents may not be included in the Index. According to the
Exchange, on or about August 31, 2020, the Fund will wind up and
terminate, and its net assets will be distributed to then-current
shareholders.
Additional information regarding the Trust, the Fund, and the
Shares, including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings, distributions, and taxes, among
other things, is included in the Notice and Registration Statement, as
applicable.\8\
---------------------------------------------------------------------------
\8\ See Notice and Registration Statement, supra notes 4 and 5,
respectively.
---------------------------------------------------------------------------
III. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of Section 6 of the Act \9\
and the rules and regulations thereunder applicable to a national
securities exchange.\10\ In particular, the Commission finds that the
proposal is consistent with Section 6(b)(5) of the Act,\11\ which
requires, among other things, that the Exchange's rules be designed to
promote just and equitable principles of trade, 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 Commission notes that the Fund and the Shares must comply
with the applicable requirements of NYSE Arca Equities Rules 5.2(j)(3)
and 5.5(g)(2) to be listed and traded on the Exchange.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f.
\10\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\11\ 17 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Act,\12\ which sets forth Congress' finding that it is in the public
interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for, and transactions in, securities. Quotation and last-
sale information for the Shares will be available via the Consolidated
Tape Association (``CTA'') high-speed line. The current value of the
Index will be widely disseminated by one or more major market data
vendors \13\ at least once per day, as required by NYSE Arca Equities
Rule 5.2(j)(3), Commentary .02(b)(ii). In addition, an Intraday
Indicative Value (``IIV'') for the Shares of the Fund will be
disseminated by one or more major market data vendors and updated at
least every 15 seconds during the Core Trading Session (9:30 a.m. to
4:00 p.m. Eastern Time).\14\ Information regarding market price and
trading volume of the Shares will be continually available on a real-
time basis throughout the day on brokers' computer screens and other
electronic services, and information regarding the previous day's
closing price and trading volume information for the Shares will be
published daily in the financial section of newspapers. Quotation
information for investment company securities (excluding exchange-
traded funds) may be obtained through nationally recognized pricing
services through subscription agreements or from brokers and dealers
who make markets in such securities. Price information regarding
municipal bonds, AMT-free tax-exempt municipal notes, variable rate
demand notes and obligations, tender option bonds, and municipal
commercial paper is available from third party pricing services and
major market data vendors. On each business day, before commencement of
trading in Shares in the Core Trading Session on the Exchange, the Fund
will disclose on its Web site the portfolio that will form the basis
for the Fund's calculation of NAV at the end of the business day.\15\
The Web site for the Fund also will include the prospectus for the Fund
and additional data relating to NAV and other applicable quantitative
information. The NAV of the Fund normally will be determined once each
business day as of the regularly scheduled close of business of the
NYSE (normally, 4:00 p.m. Eastern time) on each day the NYSE is open
for trading.\16\
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\13\ The Exchange further states that the components of the
Index and their percentage weighting will be available from major
market data vendors.
\14\ See NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(c).
According to the Exchange, several major market data vendors display
and/or make widely available IIVs taken from the CTA or other data
feeds. See Notice, supra note 4, at n.13.
\15\ On a daily basis, the Fund will disclose for each portfolio
security or other financial instrument of the Fund the following
information on the Fund's Web site: Ticker symbol (if applicable),
name of security and financial instrument, a common identifier such
as CUSIP or ISIN (if applicable), number of shares (if applicable),
dollar value of securities and financial instruments held in the
portfolio, and percentage weighting of the security and financial
instrument in the portfolio. The Web site information will be
publicly available at no charge.
\16\ For purposes of calculating NAV of the Shares, the Fund
will value fixed income portfolio securities, including municipal
bonds, AMT-free tax-exempt municipal notes, variable rate demand
notes and obligations, tender option bonds, and municipal commercial
paper using prices provided directly from independent third-party
pricing services, which may use matrix pricing and valuation models
to derive values or from one or more broker-dealers or market
makers. Certain short-term debt securities may be valued on the
basis of amortized cost. Shares of municipal money market funds will
be valued at NAV.
---------------------------------------------------------------------------
The Commission believes that the proposal to list and trade the
Shares is reasonably designed to promote fair disclosure of information
that may be necessary to price the Shares appropriately and to prevent
trading when a reasonable degree of transparency cannot be assured. The
Exchange states that the Index Provider is not a broker-dealer or
affiliated with a broker-dealer, and has implemented procedures
designed to prevent the use and dissemination of material, non-public
information regarding the Index.\17\ Prior to the commencement of
trading, the Exchange will inform its Equity Trading Permit Holders in
an Information Bulletin of the special characteristics and risks
associated with trading the Shares. With respect to trading halts, if
the Exchange becomes aware that the NAV is not being disseminated to
all market participants at the same time, it will halt trading in the
Shares until such time as the NAV is available to all market
participants. In addition, the Exchange may consider all relevant
factors in exercising its discretion to halt or suspend trading in the
Shares of the Funds. Trading may be halted because of market conditions
or for reasons that, in the view of the Exchange, make trading in the
Shares inadvisable. The Exchange represents that, if the IIV or the
Index value is not being disseminated as required, the Exchange may
halt trading during the day in which the interruption to the
dissemination of the IIV or Index value occurs. If the interruption to
the dissemination of the IIV or Index value persists past the trading
day in which it occurred, the Exchange will halt trading. Moreover,
trading in Shares of the Funds will be halted if the circuit breaker
parameters in NYSE Arca Equities Rule 7.12 have been reached or because
of market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. Further, trading in the
[[Page 39018]]
Shares will be subject to NYSE Arca Equities Rule 7.34, which sets
forth additional circumstances under which Shares of the Funds may be
halted. The Exchange states that it has in place surveillance
procedures that are adequate to properly monitor trading in the Shares
in all trading sessions and to deter and detect violations of Exchange
rules and applicable federal securities laws. The Exchange may obtain
information via the Intermarket Surveillance Group (``ISG'') from other
exchanges that are members of ISG or with which the Exchange has
entered into a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------
\17\ See supra note 7 and accompanying text.
---------------------------------------------------------------------------
Based on the Exchange's representations, the Commission believes
that the Index is sufficiently broad-based and liquid to deter
potential manipulation. As of February 28, 2014, there were 1,427
issues in the Index. As of the same date, 76.77% of the weight of the
Index components was comprised of individual maturities that were part
of an entire municipal bond offering with a minimum original principal
amount outstanding of $100 million or more for all maturities of the
offering.\18\ In addition, the total dollar amount outstanding of
issues in the Index was approximately $12.06 billion, and the average
dollar amount outstanding of issues in the Index was approximately
$8.46 million. Further, the most heavily weighted component represents
1.21% of the weight of the Index, and the five most heavily weighted
components represent 5.39% of the weight of the Index.\19\ In addition,
the average daily notional trading volume for Index components for the
period December 31, 2012, to December 31, 2013, was $49 million, and
the sum of the notional trading volumes for the same period was
approximately $12.4 billion. As of March 17, 2014, 61.14% of the Index
weight consisted of issues with a rating of AA/Aa2 or higher. The
Commission notes that the Fund shares similar characteristics of other
exchange-traded funds, the shares of which are currently listed and
trading on the Exchange.\20\
---------------------------------------------------------------------------
\18\ According to the Exchange, when bonds are close substitutes
for one another, pricing vendors can use executed trade information
from all similar bonds as pricing inputs for an individual security.
This can make individual securities more liquid, because valuations
for a single security are better estimators of actual trading prices
when they are informed by trades in a large group of closely related
securities. As a result, securities are more likely to trade at
prices close to their valuation when they need to be sold. See
Notice, supra note 4, at n.11.
\19\ Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3)
provides that no component fixed-income security (excluding Treasury
Securities and GSE Securities, as defined therein) shall represent
more than 30% of the weight of the index or portfolio, and the five
most heavily weighted component fixed-income securities in the index
or portfolio shall not in the aggregate account for more than 65% of
the weight of the index or portfolio.
\20\ The Commission previously has approved a proposed rule
change relating to listing and trading on the Exchange of Units
based on similar municipal bond indexes. See Securities Exchange Act
Release No. 67985 (October 4, 2012), 77 FR 61804 (October 11, 2012)
(SR-NYSEArca-2012-92) (order approving proposed rule change relating
to the listing and trading of shares of the iShares 2018 S&P AMT-
Free Municipal Series and iShares 2019 S&P AMT-Free Municipal Series
under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02).
---------------------------------------------------------------------------
In support of this proposal, the Exchange has made representations,
including:
(1) Except for Commentary .02(a)(2) to NYSE Arca Equities Rule
5.2(j)(3), the Shares of the Funds currently satisfy all of the generic
listing standards under NYSE Arca Equities Rule 5.2(j)(3).
(2) The continued listing standards under NYSE Arca Equities Rules
5.2(j)(3) and 5.5(g)(2) applicable to Units shall apply to the Shares.
(3) The Shares will comply with all other requirements applicable
to Units including, but not limited to, requirements relating to the
dissemination of key information, such as the value of the Index and
IIV, rules governing the trading of equity securities, trading hours,
trading halts, surveillance, and the Information Bulletin to Equity
Trading Permit Holders (each as described in more detail in the Notice
and Registration Statement, as applicable), as set forth in Exchange
rules applicable to Units and prior Commission orders approving the
generic listing rules applicable to the listing and trading of Units.
(4) The Exchange represents that trading in the Shares will be
subject to the existing trading surveillances, administered by the
Financial Industry Regulatory Authority (``FINRA'') on behalf of the
Exchange, which are designed to detect violations of Exchange rules and
applicable federal securities laws.\21\ The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to deter and detect violations
of Exchange rules and federal securities laws applicable to trading on
the Exchange.
---------------------------------------------------------------------------
\21\ According to the Exchange, FINRA surveils trading on the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
---------------------------------------------------------------------------
(5) FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares with other markets or other entities
that are members of ISG, and FINRA may obtain trading information
regarding trading in the Shares from such markets or entities. FINRA
also can access data obtained from the Municipal Securities Rulemaking
Board relating to municipal bond trading activity for surveillance
purposes in connection with trading in the Shares. In addition, FINRA,
on behalf of the Exchange, is able to access, as needed, trade
information for certain fixed income securities held by the Fund
reported to FINRA's Trade Reporting and Compliance Engine. The Exchange
also may obtain information regarding trading in the Shares from
markets or other entities that are members of ISG or with which the
Exchange has in place a comprehensive surveillance sharing agreement.
(6) For initial and continued listing of the Shares, the Trust is
required to comply with Rule 10A-3 under the Act.\22\
---------------------------------------------------------------------------
\22\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------
(7) The Fund generally will invest at least 80% of its assets in
the securities of the Index.
(8) Over time the Fund's tracking error \23\ will not exceed 5%.
---------------------------------------------------------------------------
\23\ According to the Exchange, tracking error is the difference
between the performance (return) of the Fund's portfolio and that of
the Index.
---------------------------------------------------------------------------
(9) The Fund may at times invest up to 20% of its assets in cash
and cash equivalents (including money market funds affiliated with
BFA), as well as in municipal bonds not included in the Index, but
which BFA believes will help the Fund track the Index.
(10) On or about August 31, 2020, the Fund will wind up and
terminate, and its net assets will be distributed to the then-current
shareholders.
This approval order is based on all of the Exchange's
representations, including those set forth above and in the Notice, and
the Exchange's description of the Funds.
For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 1 thereto, is consistent with
Section 6(b)(5) of the Act \24\ and the rules and regulations
thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\25\ that the proposed rule change (SR-NYSEArca-2014-37), as
modified by Amendment No. 1 thereto, be, and it hereby is, approved.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78s(b)(2).
[[Page 39019]]
---------------------------------------------------------------------------
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
---------------------------------------------------------------------------
\26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-15962 Filed 7-8-14; 8:45 am]
BILLING CODE 8011-01-P
