Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 19.3(i), 34946-34949 [2015-14971]

Download as PDF tkelley on DSK3SPTVN1PROD with NOTICES 34946 Federal Register / Vol. 80, No. 117 / Thursday, June 18, 2015 / Notices securities of the Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, including any purchases made directly from an Underwriting Affiliate. The Board will review these purchases periodically, but no less frequently than annually, to determine whether the purchases were influenced by the investment by the Investing Fund in the Fund. The Board will consider, among other things: (i) Whether the purchases were consistent with the investment objectives and policies of the Fund; (ii) how the performance of securities purchased in an Affiliated Underwriting compares to the performance of comparable securities purchased during a comparable period of time in underwritings other than Affiliated Underwritings or to a benchmark such as a comparable market index; and (iii) whether the amount of securities purchased by the Fund in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The Board will take any appropriate actions based on its review, including, if appropriate, the institution of procedures designed to assure that purchases of securities in Affiliated Underwritings are in the best interest of shareholders of the Fund. 8. Each Fund will maintain and preserve permanently in an easily accessible place a written copy of the procedures described in the preceding condition, and any modifications to such procedures, and will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase in an Affiliated Underwriting occurred, the first two years in an easily accessible place, a written record of each purchase of securities in Affiliated Underwritings once an investment by an Investing Fund in the securities of the Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth from whom the securities were acquired, the identity of the underwriting syndicate’s members, the terms of the purchase, and the information or materials upon which the Board’s determinations were made. 9. Before investing in a Fund in excess of the limits in section 12(d)(1)(A)(i), an Investing Fund will execute a FOF Participation Agreement with the Fund stating that their respective boards of directors or trustees and their investment advisers, or Trustee and Sponsor, as applicable, understand the terms and conditions of the order, and agree to fulfill their responsibilities under the order. At the time of its investment in Shares of a VerDate Sep<11>2014 16:53 Jun 17, 2015 Jkt 235001 Fund in excess of the limit in section 12(d)(1)(A)(i), an Investing Fund will notify the Fund of the investment. At such time, the Investing Fund will also transmit to the Fund a list of the names of each Investing Fund Affiliate and Underwriting Affiliate. The Investing Fund will notify the Fund of any changes to the list as soon as reasonably practicable after a change occurs. The Fund and the Investing Fund will maintain and preserve a copy of the order, the FOF Participation Agreement, and the list with any updated information for the duration of the investment and for a period of not less than six years thereafter, the first two years in an easily accessible place. 10. Before approving any advisory contract under section 15 of the Act, the board of directors or trustees of each Investing Management Company, including a majority of the independent directors or trustees, will find that the advisory fees charged under such contract are based on services provided that will be in addition to, rather than duplicative of, the services provided under the advisory contract(s) of any Fund in which the Investing Management Company may invest. These findings and their basis will be recorded fully in the minute books of the appropriate Investing Management Company. 11. Any sales charges and/or service fees charged with respect to shares of an Investing Fund will not exceed the limits applicable to a fund of funds as set forth in NASD Conduct Rule 2830. 12. No Fund relying on the section 12(d)(1) relief will acquire securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent permitted by exemptive relief from the Commission permitting the Fund to purchase shares of other investment companies for short-term cash management purposes. For the Commission, by the Division of Investment Management, under delegated authority. Robert W. Errett, Deputy Secretary. [FR Doc. 2015–14969 Filed 6–17–15; 8:45 am] BILLING CODE 8011–01–P PO 00000 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–75166; File No. SR–BATS– 2015–43] Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 19.3(i) June 12, 2015. 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 June 5, 2015, BATS Exchange, Inc. (the ‘‘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 Exchange has designated this proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6) thereunder,4 which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange filed a proposal to allow the listing of options overlying portfolio depositary receipts and index fund shares (collectively, ‘‘ETFs’’) that are listed pursuant to generic listing standards on equities exchanges for series of ETFs based on international or global indexes under which a comprehensive surveillance sharing agreement is not required. The text of the proposed rule change is available at the Exchange’s Web site at 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 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). 2 17 Frm 00068 Fmt 4703 Sfmt 4703 E:\FR\FM\18JNN1.SGM 18JNN1 Federal Register / Vol. 80, No. 117 / Thursday, June 18, 2015 / Notices Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change tkelley on DSK3SPTVN1PROD with NOTICES 1. Purpose The Exchange is proposing to amend Rule 19.3(i) to allow the Exchange’s options platform (‘‘BATS Options’’) to list options overlying ETFs that are listed pursuant to generic listing standards on equities exchanges for series of ETFs based on international or global indexes under which a comprehensive surveillance sharing agreement (‘‘CSSA’’) is not required.5 This proposal will enable the Exchange to list and trade options on ETFs without a CSSA provided that the ETF is listed on an equities exchange pursuant to the generic listing standards that do not require a CSSA pursuant to Rule 19b–4(e) of the Exchange Act.6 Rule 19b–4(e) provides that the listing and trading of a new derivative securities product by a self-regulatory organization (‘‘SRO’’) shall not be deemed a proposed rule change, pursuant to paragraph (c)(1) of Rule 19b–4, if the Commission has approved, pursuant to Section 19(b) of the Exchange Act, the SRO’s trading rules, procedures, and listing standards for the product class that would include the new derivatives securities product and the SRO has a surveillance program for the product class.7 In other words, the proposal will amend the listing standards to allow the Exchange to list and trade options on ETFs based on international or global indexes to a similar degree that they are allowed to be listed on several equities exchanges.8 Currently, BATS Options allows for the listing and trading of options on Fund Shares. Rule 19.3(i)(1)–(3) provide 5 See, e.g., BATS Rule 14.11(b)(3)(A)(ii); NYSE MKT Rule 1000 Commentary .03(a)(B); NYSE Arca Equities Rule 5.2(j)(3) Commentary .01 (a)(B); and NASDAQ Rule 5705(a)(3)(A)(ii). 6 17 CFR 240.19b–4(e). 7 When relying on Rule 19b–4(e), the SRO must submit Form 19b–4(e) to the Commission within five business days after the SRO begins trading the new derivative securities products. See Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998). 8 See BATS Rules 14.11(b)(3)(A)(ii); NYSE MKT Rule 1000 Commentary .03(a)(B); NYSE Arca Equities Rule 5.2(j)(3) Commentary .01 (a)(B); and NASDAQ Rule 5705(a)(3)(A)(ii). See also Securities Exchange Act Release Nos. 54739 (November 9, 2006), 71 FR 66993 (SR–Amex–2006–78); 55269 (February 9, 2007), 72 FR 7490 (February 15, 2007) (SR–NASDAQ–2006–050); 55621 (April 12, 2007), 72 FR 19571 (April 18, 2007) (SR–NYSEArca–2006– 86) VerDate Sep<11>2014 16:53 Jun 17, 2015 Jkt 235001 the listings standards for options on Fund Shares with non-U.S. component stocks, such as Fund Shares based on international or global indexes. Rule 19.3(i)(1) requires that any non-U.S. component stocks of an index or portfolio of stocks on which the Fund Shares are based that are not subject to a CSSA do not in the aggregate represent more than 50% of the weight of the index or portfolio. Rule 19.3(i)(2) requires stocks for which the primary market is in any one country that is not subject to a CSSA do not represent 20% or more of the weight of the index. Rule 19.3(i)(3) requires that stocks for which the primary market is in any two countries that are not subject to a CSSA do not represent 33% or more of the weight of the index. The Exchange notes that the Commission has previously approved generic listing standards pursuant to Rule 19b–4(e) of the Exchange Act for ETFs based on indexes that consist of stocks listed on U.S. exchanges.9 In general, the criteria for the underlying component stocks in the international and global indexes are similar to those for the domestic indexes, but with modifications as appropriate for the issues and risks associated with nonU.S. stocks. In addition, the Commission has previously approved the listing and trading of ETFs based on international indexes—those based on non-U.S. component stocks—as well as global indexes—those based on nonU.S. and U.S. component stocks.10 In approving ETFs for equities exchange trading, the Commission thoroughly considered the structure of the ETFs, their usefulness to investors and to the markets, and SRO rules that govern their trading. The Exchange believes that allowing the listing of options overlying ETFs that are listed pursuant to the generic listing standards on equities exchanges for ETFs based on international and global indexes and applying Rule 19b–4(e) should fulfill the intended objective of that Rule by allowing options on those ETFs that have satisfied the generic listing standards to commence trading, without the need for the public comment period and Commission approval. The proposed rule has the potential to reduce the time frame for bringing 9 See Commentary .03 to Amex Rule 1000 and Commentary .02 to Amex Rule 1000A. See also Securities Exchange Act Release No. 42787 (May 15, 2000), 65 FR 33598 (May 24, 2000). 10 See, e.g., Securities Exchange Act Release Nos. 50189 (August 12, 2004), 69 FR 51723 (August 20, 2004) (approving the listing and trading of certain Vanguard International Equity Index Funds); 44700 (August 14, 2001), 66 FR 43927 (August 21, 2001) (approving the listing and trading of series of the iShares Trust based on certain S&P global indexes). PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 34947 options on ETFs to market, thereby reducing the burdens on issuers and other market participants. The failure of a particular ETF to comply with the generic listing standards under Rule 19b–4(e) would not, however, preclude the Exchange from submitting a separate filing pursuant to Section 19(b)(2),11 requesting Commission approval to list and trade options on a particular ETF. Options on ETFs listed pursuant to these generic standards for international and global indexes would be traded, in all other respects, under the Exchange’s existing trading rules and procedures that apply to options on ETFs and would be covered under the Exchange’s surveillance program for options on ETFs. Pursuant to the proposed rule, the Exchange may list and trade options on an ETF without a CSSA provided that the ETF is listed pursuant to generic listing standards for series of ETFs based on international or global indexes under which a comprehensive surveillance agreement is not required. The Exchange believes that these generic listing standards are intended to ensure that stocks with substantial market capitalization and trading volume account for a substantial portion of the weight of an index or portfolio. The Exchange believes that this proposed listing standard for options on ETFs is reasonable for international and global indexes, and, when applied in conjunction with the other listing requirements,12 will result in options overlying ETFs that are sufficiently broad-based in scope and not readily susceptible to manipulation. The Exchange also believes that allowing the Exchange to list options overlying ETFs that are listed on equities exchanges pursuant to generic standards for series of portfolio depositary receipts or index fund shares 13 based on international or global indexes under which a CSSA is not required, will result in options overlying ETFs that are adequately diversified in weighting for any single security or small group of securities to significantly reduce concerns that trading in options overlying ETFs based on international or global indexes could 11 15 U.S.C. 78s(b)(2). of the other listing criteria under the Exchange’s rules will continue to apply to any options listed pursuant to the proposed rule change. 13 The Exchange notes that the proposed rule text differs slightly from that of other exchanges in order to make clear that the rule applies to ETFs that have been listed on equities exchanges pursuant to generic listing standards for series of ‘‘portfolio depositary receipts or index fund shares’’ rather than ‘‘portfolio depositary receipts and index fund shares.’’ Such difference does not represent a substantive difference from the rules of other Exchanges. See infra note 16. 12 All E:\FR\FM\18JNN1.SGM 18JNN1 34948 Federal Register / Vol. 80, No. 117 / Thursday, June 18, 2015 / Notices tkelley on DSK3SPTVN1PROD with NOTICES become a surrogate for trading in unregistered securities. The Exchange believes that ETFs based on international and global indexes that have been listed pursuant to the generic standards are sufficiently broad-based enough as to make options overlying such ETFs not susceptible instruments for manipulation. The Exchange believes that the threat of manipulation is sufficiently mitigated for underlying ETFs that have been listed on equities exchanges pursuant to generic listing standards for series of portfolio depositary receipts or index fund shares based on international or global indexes under which a comprehensive surveillance agreement is not required and for the overlying options, that the Exchange does not see the need for CSSA to be in place before listing and trading options on such ETFs. The Exchange notes that its proposal does not replace the need for a CSSA as provided in the current rule. The provisions of the current rule, including the need for a CSSA, remain materially unchanged in the proposed rule and will continue to apply to options on ETFs that are not listed on an equities exchange pursuant to generic listing standards for series of portfolio depositary receipts or index fund shares based on international or global indexes under which a comprehensive surveillance agreement is not required. Instead, the proposed rule adds an additional listing mechanism for certain qualifying options on ETFs to be listed on the Exchange. Finally, the Exchange is also proposing to make several nonsubstantive changes to the rule text in order to make it easier to read and understand. Specifically, the Exchange is proposing to move paragraph (4) to become paragraph (1), to renumber each of paragraphs (1), (2), (3), (5), and (6) to (B), (C), (D), (E), and (F), respectively, and to make clear that each of the proposed newly numbered paragraphs (B), (C), (D), (E), and (F) apply to the series of Fund Shares that do not meet the criteria proposed in proposed new paragraph (A). 2. Statutory Basis The Exchange believes that its proposal is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b) of the Act.14 In particular, the proposal is consistent with Section 6(b)(5) of the 14 15 U.S.C. 78f(b). VerDate Sep<11>2014 16:53 Jun 17, 2015 Act 15 because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to, and perfect the mechanism of, a free and open market and a national market system and, in general, to protect investors and the public interest. In particular, the proposed rules have the potential to reduce the time frame for bringing options on ETFs to market, thereby reducing the burdens on issuers and other market participants. The Exchange also believes that enabling the listing and trading of options on ETFs pursuant to this new listing standard will benefit investors by providing them with valuable risk management tools. The Exchange notes that its proposal does not replace the need for a CSSA as provided in the current rule. The provisions of the current rule, including the need for a comprehensive surveillance sharing agreement, remain materially unchanged in the proposed rule and will continue to apply to options on ETFs that are not listed on an equities exchange pursuant to generic listing standards for series of portfolio depositary receipts or index fund shares based on international or global indexes under which a comprehensive surveillance agreement is not required. Instead, the proposed rule adds an additional listing mechanism for certain qualifying options on ETFs to be listed on the Exchange in a manner that 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 mechanisms of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange also believes that the proposed non-substantive organizational changes are reasonable, fair, and equitable because they are designed to make the rule easier to comprehend. As noted above, the proposed non-substantive changes do not change the need for a CSSA as provided in the current rule. The provisions of the current rule, including the need for a CSSA, remain materially unchanged in the proposed rule and will continue to apply to options on ETFs that are not listed on an equities exchange pursuant to generic listing 15 15 Jkt 235001 PO 00000 U.S.C. 78f(b)(5). Frm 00070 Fmt 4703 Sfmt 4703 standards for series of portfolio depositary receipts or index fund shares based on international or global indexes under which a comprehensive surveillance agreement is not required. These non-substantive changes to the rules are intended to make the rules clearer and less confusing for participants and investors and to eliminate potential confusion, thereby removing impediments to and perfecting the mechanism of a free and open market and a national market system, and, in general, protecting investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the proposed rule change is a competitive change that is substantially similar to recent rule changes filed by the MIAX Options Exchange (‘‘MIAX’’), NASDAQ OMX PHLX, LLC (‘‘Phlx’’), and International Stock Exchange LLC (‘‘ISE’’).16 Furthermore, the Exchange believes this proposed rule change will benefit investors by providing additional methods to trade options on ETFs, and by providing them with valuable risk management tools. Specifically, the Exchange believes that market participants on the Exchange would benefit from the introduction and availability of options on ETFs in a manner that is similar to equities exchanges and will provide investors with a venue on which to trade options on these products. For all the reasons stated above, the Exchange does not believe that the proposed rule changes will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act, and believes the proposed change will enhance competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any written comments from members or other interested parties. 16 See Securities Exchange Act Release Nos. 74509 (March 13, 2015), 80 FR 14425 (March 19, 2015) (SR–MIAX–2015–04); 74553 (March 20, 2015), 80 FR 16072 (March 26, 2015) (SR–Phlx– 2015–27); and 74832 (April 29, 2015), 80 FR 25738 (May 5, 2015) (SR–ISE–2015–16). E:\FR\FM\18JNN1.SGM 18JNN1 Federal Register / Vol. 80, No. 117 / Thursday, June 18, 2015 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change does not (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 17 and Rule 19b– 4(f)(6) thereunder.18 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 19 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 20 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Exchange stated that waiver of the operative delay will permit the Exchange to list and trade certain ETF options on the same basis as other options markets.21 The Commission believes the waiver of the operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposal operative upon filing.22 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule change should be approved or disapproved. 17 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). As required under Rule 19b–4(f)(6)(iii), the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. 19 17 CFR 240.19b–4(f)(6). 20 17 CFR 240.19b–4(f)(6)(iii). 21 See supra note 16. 22 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). tkelley on DSK3SPTVN1PROD with NOTICES 18 17 VerDate Sep<11>2014 16:53 Jun 17, 2015 Jkt 235001 IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–14971 Filed 6–17–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 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–2015–43 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BATS–2015–43. 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 such filing also will 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– 2015–43, and should be submitted on or before July 9, 2015. PO 00000 [Release No. 34–75167; File No. SR– NYSEMKT–2015–40] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Sections 401, 402 and 404 of the NYSEMKT Company Guide To (i) Provide That Companies Can Comply With the Exchange’s Immediate Release Policy by Disseminating the Information Required To Be Disseminated Pursuant to This Policy by Any Regulation Fair Disclosure Compliant Method or Combination of Methods, (ii) Clarify the Procedures Taken by the Exchange in the Event of Unusual Market Activity and (iii) Update References to Exchange Departments and Personnel and Make Other NonSubstantive Conforming Updates June 12, 2015. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that on June 3, 2015, NYSE MKT LLC (the ‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Sections 401, 402 and 404 of the Company Guide to provide that companies can comply with the Exchange’s immediate release policy by disseminating the information required to be disseminated pursuant to this policy by any Regulation Fair Disclosure (‘‘Regulation FD’’) compliant method or combination of methods, (ii) clarify the procedures taken by the Exchange in the 23 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 Frm 00071 Fmt 4703 34949 Sfmt 4703 E:\FR\FM\18JNN1.SGM 18JNN1

Agencies

[Federal Register Volume 80, Number 117 (Thursday, June 18, 2015)]
[Notices]
[Pages 34946-34949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-14971]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75166; File No. SR-BATS-2015-43]


Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change to Rule 19.3(i)

June 12, 2015.
    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 June 5, 2015, BATS Exchange, Inc. (the ``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 Exchange 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6) thereunder,\4\ which renders it effective upon filing with the 
Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    The Exchange filed a proposal to allow the listing of options 
overlying portfolio depositary receipts and index fund shares 
(collectively, ``ETFs'') that are listed pursuant to generic listing 
standards on equities exchanges for series of ETFs based on 
international or global indexes under which a comprehensive 
surveillance sharing agreement is not required.
    The text of the proposed rule change is available at the Exchange's 
Web site at 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

[[Page 34947]]

Exchange has prepared summaries, set forth in Sections A, B, and C 
below, of the most significant parts of such statements.

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

1. Purpose
    The Exchange is proposing to amend Rule 19.3(i) to allow the 
Exchange's options platform (``BATS Options'') to list options 
overlying ETFs that are listed pursuant to generic listing standards on 
equities exchanges for series of ETFs based on international or global 
indexes under which a comprehensive surveillance sharing agreement 
(``CSSA'') is not required.\5\ This proposal will enable the Exchange 
to list and trade options on ETFs without a CSSA provided that the ETF 
is listed on an equities exchange pursuant to the generic listing 
standards that do not require a CSSA pursuant to Rule 19b-4(e) of the 
Exchange Act.\6\ Rule 19b-4(e) provides that the listing and trading of 
a new derivative securities product by a self-regulatory organization 
(``SRO'') shall not be deemed a proposed rule change, pursuant to 
paragraph (c)(1) of Rule 19b-4, if the Commission has approved, 
pursuant to Section 19(b) of the Exchange Act, the SRO's trading rules, 
procedures, and listing standards for the product class that would 
include the new derivatives securities product and the SRO has a 
surveillance program for the product class.\7\ In other words, the 
proposal will amend the listing standards to allow the Exchange to list 
and trade options on ETFs based on international or global indexes to a 
similar degree that they are allowed to be listed on several equities 
exchanges.\8\
---------------------------------------------------------------------------

    \5\ See, e.g., BATS Rule 14.11(b)(3)(A)(ii); NYSE MKT Rule 1000 
Commentary .03(a)(B); NYSE Arca Equities Rule 5.2(j)(3) Commentary 
.01 (a)(B); and NASDAQ Rule 5705(a)(3)(A)(ii).
    \6\ 17 CFR 240.19b-4(e).
    \7\ When relying on Rule 19b-4(e), the SRO must submit Form 19b-
4(e) to the Commission within five business days after the SRO 
begins trading the new derivative securities products. See Exchange 
Act Release No. 40761 (December 8, 1998), 63 FR 70952 (December 22, 
1998).
    \8\ See BATS Rules 14.11(b)(3)(A)(ii); NYSE MKT Rule 1000 
Commentary .03(a)(B); NYSE Arca Equities Rule 5.2(j)(3) Commentary 
.01 (a)(B); and NASDAQ Rule 5705(a)(3)(A)(ii). See also Securities 
Exchange Act Release Nos. 54739 (November 9, 2006), 71 FR 66993 (SR-
Amex-2006-78); 55269 (February 9, 2007), 72 FR 7490 (February 15, 
2007) (SR-NASDAQ-2006-050); 55621 (April 12, 2007), 72 FR 19571 
(April 18, 2007) (SR-NYSEArca-2006-86)
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    Currently, BATS Options allows for the listing and trading of 
options on Fund Shares. Rule 19.3(i)(1)-(3) provide the listings 
standards for options on Fund Shares with non-U.S. component stocks, 
such as Fund Shares based on international or global indexes. Rule 
19.3(i)(1) requires that any non-U.S. component stocks of an index or 
portfolio of stocks on which the Fund Shares are based that are not 
subject to a CSSA do not in the aggregate represent more than 50% of 
the weight of the index or portfolio. Rule 19.3(i)(2) requires stocks 
for which the primary market is in any one country that is not subject 
to a CSSA do not represent 20% or more of the weight of the index. Rule 
19.3(i)(3) requires that stocks for which the primary market is in any 
two countries that are not subject to a CSSA do not represent 33% or 
more of the weight of the index.
    The Exchange notes that the Commission has previously approved 
generic listing standards pursuant to Rule 19b-4(e) of the Exchange Act 
for ETFs based on indexes that consist of stocks listed on U.S. 
exchanges.\9\ In general, the criteria for the underlying component 
stocks in the international and global indexes are similar to those for 
the domestic indexes, but with modifications as appropriate for the 
issues and risks associated with non-U.S. stocks. In addition, the 
Commission has previously approved the listing and trading of ETFs 
based on international indexes--those based on non-U.S. component 
stocks--as well as global indexes--those based on non-U.S. and U.S. 
component stocks.\10\
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    \9\ See Commentary .03 to Amex Rule 1000 and Commentary .02 to 
Amex Rule 1000A. See also Securities Exchange Act Release No. 42787 
(May 15, 2000), 65 FR 33598 (May 24, 2000).
    \10\ See, e.g., Securities Exchange Act Release Nos. 50189 
(August 12, 2004), 69 FR 51723 (August 20, 2004) (approving the 
listing and trading of certain Vanguard International Equity Index 
Funds); 44700 (August 14, 2001), 66 FR 43927 (August 21, 2001) 
(approving the listing and trading of series of the iShares Trust 
based on certain S&P global indexes).
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    In approving ETFs for equities exchange trading, the Commission 
thoroughly considered the structure of the ETFs, their usefulness to 
investors and to the markets, and SRO rules that govern their trading. 
The Exchange believes that allowing the listing of options overlying 
ETFs that are listed pursuant to the generic listing standards on 
equities exchanges for ETFs based on international and global indexes 
and applying Rule 19b-4(e) should fulfill the intended objective of 
that Rule by allowing options on those ETFs that have satisfied the 
generic listing standards to commence trading, without the need for the 
public comment period and Commission approval. The proposed rule has 
the potential to reduce the time frame for bringing options on ETFs to 
market, thereby reducing the burdens on issuers and other market 
participants. The failure of a particular ETF to comply with the 
generic listing standards under Rule 19b-4(e) would not, however, 
preclude the Exchange from submitting a separate filing pursuant to 
Section 19(b)(2),\11\ requesting Commission approval to list and trade 
options on a particular ETF.
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    \11\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    Options on ETFs listed pursuant to these generic standards for 
international and global indexes would be traded, in all other 
respects, under the Exchange's existing trading rules and procedures 
that apply to options on ETFs and would be covered under the Exchange's 
surveillance program for options on ETFs.
    Pursuant to the proposed rule, the Exchange may list and trade 
options on an ETF without a CSSA provided that the ETF is listed 
pursuant to generic listing standards for series of ETFs based on 
international or global indexes under which a comprehensive 
surveillance agreement is not required. The Exchange believes that 
these generic listing standards are intended to ensure that stocks with 
substantial market capitalization and trading volume account for a 
substantial portion of the weight of an index or portfolio.
    The Exchange believes that this proposed listing standard for 
options on ETFs is reasonable for international and global indexes, 
and, when applied in conjunction with the other listing 
requirements,\12\ will result in options overlying ETFs that are 
sufficiently broad-based in scope and not readily susceptible to 
manipulation. The Exchange also believes that allowing the Exchange to 
list options overlying ETFs that are listed on equities exchanges 
pursuant to generic standards for series of portfolio depositary 
receipts or index fund shares \13\ based on international or global 
indexes under which a CSSA is not required, will result in options 
overlying ETFs that are adequately diversified in weighting for any 
single security or small group of securities to significantly reduce 
concerns that trading in options overlying ETFs based on international 
or global indexes could

[[Page 34948]]

become a surrogate for trading in unregistered securities.
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    \12\ All of the other listing criteria under the Exchange's 
rules will continue to apply to any options listed pursuant to the 
proposed rule change.
    \13\ The Exchange notes that the proposed rule text differs 
slightly from that of other exchanges in order to make clear that 
the rule applies to ETFs that have been listed on equities exchanges 
pursuant to generic listing standards for series of ``portfolio 
depositary receipts or index fund shares'' rather than ``portfolio 
depositary receipts and index fund shares.'' Such difference does 
not represent a substantive difference from the rules of other 
Exchanges. See infra note 16.
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    The Exchange believes that ETFs based on international and global 
indexes that have been listed pursuant to the generic standards are 
sufficiently broad-based enough as to make options overlying such ETFs 
not susceptible instruments for manipulation. The Exchange believes 
that the threat of manipulation is sufficiently mitigated for 
underlying ETFs that have been listed on equities exchanges pursuant to 
generic listing standards for series of portfolio depositary receipts 
or index fund shares based on international or global indexes under 
which a comprehensive surveillance agreement is not required and for 
the overlying options, that the Exchange does not see the need for CSSA 
to be in place before listing and trading options on such ETFs. The 
Exchange notes that its proposal does not replace the need for a CSSA 
as provided in the current rule. The provisions of the current rule, 
including the need for a CSSA, remain materially unchanged in the 
proposed rule and will continue to apply to options on ETFs that are 
not listed on an equities exchange pursuant to generic listing 
standards for series of portfolio depositary receipts or index fund 
shares based on international or global indexes under which a 
comprehensive surveillance agreement is not required. Instead, the 
proposed rule adds an additional listing mechanism for certain 
qualifying options on ETFs to be listed on the Exchange.
    Finally, the Exchange is also proposing to make several non-
substantive changes to the rule text in order to make it easier to read 
and understand. Specifically, the Exchange is proposing to move 
paragraph (4) to become paragraph (1), to renumber each of paragraphs 
(1), (2), (3), (5), and (6) to (B), (C), (D), (E), and (F), 
respectively, and to make clear that each of the proposed newly 
numbered paragraphs (B), (C), (D), (E), and (F) apply to the series of 
Fund Shares that do not meet the criteria proposed in proposed new 
paragraph (A).
2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder that 
are applicable to a national securities exchange, and, in particular, 
with the requirements of Section 6(b) of the Act.\14\ In particular, 
the proposal is consistent with Section 6(b)(5) of the Act \15\ because 
it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to, and perfect the 
mechanism of, a free and open market and a national market system and, 
in general, to protect investors and the public interest. In 
particular, the proposed rules have the potential to reduce the time 
frame for bringing options on ETFs to market, thereby reducing the 
burdens on issuers and other market participants. The Exchange also 
believes that enabling the listing and trading of options on ETFs 
pursuant to this new listing standard will benefit investors by 
providing them with valuable risk management tools. The Exchange notes 
that its proposal does not replace the need for a CSSA as provided in 
the current rule. The provisions of the current rule, including the 
need for a comprehensive surveillance sharing agreement, remain 
materially unchanged in the proposed rule and will continue to apply to 
options on ETFs that are not listed on an equities exchange pursuant to 
generic listing standards for series of portfolio depositary receipts 
or index fund shares based on international or global indexes under 
which a comprehensive surveillance agreement is not required. Instead, 
the proposed rule adds an additional listing mechanism for certain 
qualifying options on ETFs to be listed on the Exchange in a manner 
that 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 
mechanisms of a free and open market and a national market system and, 
in general, to protect investors and the public interest.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange also believes that the proposed non-substantive 
organizational changes are reasonable, fair, and equitable because they 
are designed to make the rule easier to comprehend. As noted above, the 
proposed non-substantive changes do not change the need for a CSSA as 
provided in the current rule. The provisions of the current rule, 
including the need for a CSSA, remain materially unchanged in the 
proposed rule and will continue to apply to options on ETFs that are 
not listed on an equities exchange pursuant to generic listing 
standards for series of portfolio depositary receipts or index fund 
shares based on international or global indexes under which a 
comprehensive surveillance agreement is not required. These non-
substantive changes to the rules are intended to make the rules clearer 
and less confusing for participants and investors and to eliminate 
potential confusion, thereby removing impediments to and perfecting the 
mechanism of a free and open market and a national market system, and, 
in general, protecting investors and the public interest.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. To the contrary, the 
proposed rule change is a competitive change that is substantially 
similar to recent rule changes filed by the MIAX Options Exchange 
(``MIAX''), NASDAQ OMX PHLX, LLC (``Phlx''), and International Stock 
Exchange LLC (``ISE'').\16\ Furthermore, the Exchange believes this 
proposed rule change will benefit investors by providing additional 
methods to trade options on ETFs, and by providing them with valuable 
risk management tools. Specifically, the Exchange believes that market 
participants on the Exchange would benefit from the introduction and 
availability of options on ETFs in a manner that is similar to equities 
exchanges and will provide investors with a venue on which to trade 
options on these products. For all the reasons stated above, the 
Exchange does not believe that the proposed rule changes will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act, and believes the proposed change will 
enhance competition.
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    \16\ See Securities Exchange Act Release Nos. 74509 (March 13, 
2015), 80 FR 14425 (March 19, 2015) (SR-MIAX-2015-04); 74553 (March 
20, 2015), 80 FR 16072 (March 26, 2015) (SR-Phlx-2015-27); and 74832 
(April 29, 2015), 80 FR 25738 (May 5, 2015) (SR-ISE-2015-16).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

[[Page 34949]]

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

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act \17\ and Rule 19b-4(f)(6) thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \19\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \20\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The Exchange 
stated that waiver of the operative delay will permit the Exchange to 
list and trade certain ETF options on the same basis as other options 
markets.\21\ The Commission believes the waiver of the operative delay 
is consistent with the protection of investors and the public interest. 
Therefore, the Commission hereby waives the operative delay and 
designates the proposal operative upon filing.\22\
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6)(iii).
    \21\ See supra note 16.
    \22\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BATS-2015-43 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BATS-2015-43. 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 such filing also will 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-2015-43, and should be 
submitted on or before July 9, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-14971 Filed 6-17-15; 8:45 am]
BILLING CODE 8011-01-P
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