Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of the Pointbreak Diversified Commodity Fund of the Pointbreak ETF Trust Under BATS Rule 14.11(i), Managed Fund Shares, 15387-15394 [2016-06339]
Download as PDF
<![CDATA[
Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices
4. Applicants also assert that the
Substitutions do not entail any of the
abuses that Section 26(c) was designed
to prevent. Each Affected Contract
Owner has been advised of his right,
any time prior to the Substitution Date,
and for at least 30 days after the
Substitution Date, to reallocate account
value under the affected Contract
without any cost or limitation, or
otherwise withdraw or terminate his
interest in accordance with the terms
and conditions of his Contract.
Furthermore, Contract Owners will not
incur any additional tax liability or any
additional fees or expenses as a result of
the Substitutions.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Applicants’ Conditions
Applicants agree that any order
granting the requested relief will be
subject to the following conditions:
1. The Substitutions will not be
effected unless the Applicants
determine that: (a) The Contracts allow
the substitution of shares of registered
open-end investment companies in the
manner contemplated by the
application; (b) the Substitutions can be
consummated as described in the
application under applicable insurance
laws; and (c) any regulatory
requirements in each jurisdiction where
the Contracts are qualified for sale have
been complied with to the extent
necessary to complete the proposed
Substitutions.
2. Applicants or their affiliates will
pay all expenses and transaction costs of
the proposed Substitutions, including
legal and accounting expenses, any
applicable brokerage expenses and other
fees and expenses. No fees or charges
will be assessed to the Affected Contract
Owners to effect the proposed
Substitutions.
3. The Substitutions will be effected
at the relative net asset values of the
respective shares in conformity with
Section 22(c) of the Act and Rule 22c–
1 thereunder without the imposition of
any transfer or similar charges by
Applicants. The Substitutions will be
effected without change in the amount
or value of any Contracts held by
Affected Contract Owners.
4. The Substitutions will in no way
alter the tax treatment of Affected
Contract Owners in connection with
their Contracts, and no tax liability will
arise for Affected Contract Owners as a
result of the proposed Substitutions.
5. The rights or obligations of the
PLIC under the Contracts of Affected
Contract Owners will not be altered in
any way. The Substitutions will not
adversely affect any riders under the
Contracts.
VerDate Sep<11>2014
17:34 Mar 21, 2016
Jkt 238001
6. Affected Contract Owners will be
permitted to make at least one transfer
of Contract value from the subaccount
investing in the Existing Fund (before
the Substitution Date) or the
Replacement Fund (after the
Substitution Date) to any other available
investment option under the Contract
without charge for a period beginning at
least 30 days before the Substitution
Date through at least 30 days following
the Substitution Date. Except as
described in any market timing/shortterm trading provisions of the relevant
prospectus, PLIC will not exercise any
right they may have under the Contracts
to impose restrictions on transfers
between the subaccounts under the
Contracts, including limitations on the
future number of transfers, for a period
beginning at least 30 days before the
Substitution Date through at least 30
days following the Substitution Date.
7. All Affected Contract Owners will
be notified, at least 30 days before the
Substitution Date about: (a) The
intended substitution of the Existing
Fund with the Replacement Fund; (b)
the intended Substitution Date; and (c)
information with respect to transfers as
set forth in Condition 6 above. In
addition, the Applicants will deliver to
all Affected Contract Owners, at least 30
days before the Substitution Date, a
prospectus for the Replacement Fund.
8. Applicants will deliver to each
Affected Contract Owner within five (5)
business days of the Substitution Date a
written confirmation which will
include: (a) A confirmation that the
proposed Substitutions were carried out
as previously notified; (b) a restatement
of the information set forth in the PreSubstitution Notice; and (c) before and
after account values.
9. Applicants will not receive, for
three years from the Substitution Date,
any direct or indirect benefits from the
Replacement Fund, its adviser or
underwriter (or their affiliates), in
connection with assets attributable to
Contracts affected by the Substitutions,
at a higher rate than they had received
from the Existing Fund, its adviser or
underwriter (or their affiliates),
including without limitation 12b–1 fees,
shareholder service, administrative or
other service fees, revenue sharing, or
other arrangements.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–06410 Filed 3–21–16; 8:45 am]
PO 00000
Frm 00168
Fmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77379; File No. SR–BATS–
2016–16]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing of a
Proposed Rule Change To List and
Trade Shares of the Pointbreak
Diversified Commodity Fund of the
Pointbreak ETF Trust Under BATS
Rule 14.11(i), Managed Fund Shares
March 16, 2016.
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 March 7,
2016, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to 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 filed a proposal to list
and trade shares of the Pointbreak
Diversified Commodity Fund (the
‘‘Fund’’) of the Pointbreak ETF Trust
(the ‘‘Trust’’) under BATS Rule 14.11(i)
(‘‘Managed Fund Shares’’). The shares of
the Fund are referred to herein as the
‘‘Shares’’.
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
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant parts of such
statements.
1 15
2 17
BILLING CODE 8011–01–P
Sfmt 4703
15387
U.S.C. 78s(b)(1).
CFR 240.19b–4.
E:\FR\FM\22MRN1.SGM
22MRN1
15388
Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
asabaliauskas on DSK3SPTVN1PROD with NOTICES
The Exchange proposes to list and
trade the Shares under BATS Rule
14.11(i), which governs the listing and
trading of Managed Fund Shares on the
Exchange.3 The Fund will be an actively
managed fund that seeks to provide long
term capital appreciation, primarily
through exposure to the commodity
futures markets.
The Shares will be offered by the
Trust, which was organized as a
Delaware statutory trust on June 18,
2015. The Trust is registered with the
Commission as an open-end investment
company and has filed a registration
statement on behalf of the Fund on
Form N–1A (‘‘Registration Statement’’)
with the Commission.4 The Commodity
Futures Trading Commission (‘‘CFTC’’)
has recently adopted substantial
amendments to CFTC Rule 4.5 relating
to the permissible exemptions and
conditions for reliance on exemptions
from registration as a commodity pool
operator. As a result of the instruments
that will be held by the Fund, prior to
listing on the Exchange, the Adviser
will be registered as a Commodity Pool
Operator (‘‘CPO’’) and will become a
member of the National Futures
Association (‘‘NFA’’). The Fund and a
wholly-owned subsidiary of the Fund
organized under the laws of the Cayman
Islands (the ‘‘Subsidiary’’) will be
subject to regulation by the CFTC and
NFA and additional disclosure,
reporting and recordkeeping rules
imposed upon commodity pools. The
Fund will generally obtain its exposure
to commodity markets via investments
in the Subsidiary. These investments are
intended to provide the Fund with
exposure to commodity markets in
accordance with applicable rules and
regulations. Henceforth, references to
the investments of the Fund include
investments of the Subsidiary to which
the Fund gains indirect exposure
through investment in the Subsidiary.
3 The Commission approved BATS Rule 14.11(i)
in Securities Exchange Act Release No. 65225
(August 30, 2011), 76 FR 55148 (September 6, 2011)
(SR–BATS–2011–018).
4 See Registration Statement on Form N–1A for
the Trust, dated December 4, 2015 [sic] (File Nos.
333–205324 and 811–23068). The descriptions of
the Fund and the Shares contained herein are
based, in part, on information in the Registration
Statement. The Commission has issued an order
granting certain exemptive relief to the Trust under
the Investment Company Act of 1940 (15 U.S.C.
80a–1) (‘‘1940 Act’’) (the ‘‘Exemptive Order’’). See
Investment Company Act Release No. 30562 (June
18, 2013) (File No. 812–14041) [sic].
VerDate Sep<11>2014
17:34 Mar 21, 2016
Jkt 238001
Description of the Shares and the Fund
Pointbreak Advisers LLC is the
investment adviser (‘‘Adviser’’) to the
Fund. Brown Brothers Harriman & Co.
(‘‘BBH’’) is the administrator, custodian
and transfer agent for the Trust. ALPS
Distributors, Inc. (‘‘Distributor’’) serves
as the distributor for the Trust. The
Adviser is not affiliated with either BBH
or the Distributor.
BATS Rule 14.11(i)(7) provides that, if
the investment adviser to the
investment company issuing Managed
Fund Shares is affiliated with a brokerdealer, such investment adviser shall
erect a ‘‘fire wall’’ between the
investment adviser and the brokerdealer with respect to access to
information concerning the composition
and/or changes to such investment
company portfolio.5 In addition, Rule
14.11(i)(7) further requires that
personnel who make decisions on the
investment company’s portfolio
composition must be subject to
procedures designed to prevent the use
and dissemination of material
nonpublic information regarding the
applicable investment company
portfolio. Rule 14.11(i)(7) is similar to
BATS Rule 14.11(b)(5)(A)(i), however,
Rule 14.11(i)(7) in connection with the
establishment of a ‘‘fire wall’’ between
the investment adviser and the brokerdealer reflects the applicable open-end
fund’s portfolio, not an underlying
benchmark index, as is the case with
index-based funds. The Adviser is not a
registered broker-dealer and is not
affiliated with a broker-dealer. The
Adviser personnel who make decisions
regarding the Fund’s portfolio are
subject to procedures designed to
5 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (the ‘‘Advisers Act’’). As a
result, the Adviser and its related personnel are
subject to the provisions of Rule 204A–1 under the
Advisers Act relating to codes of ethics. This Rule
requires investment advisers to adopt a code of
ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with
other applicable securities laws. Accordingly,
procedures designed to prevent the communication
and misuse of non-public information by an
investment adviser must be consistent with 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.
PO 00000
Frm 00169
Fmt 4703
Sfmt 4703
prevent the use and dissemination of
material nonpublic information
regarding the Fund’s portfolio. In the
event that (a) the Adviser becomes a
broker-dealer or newly affiliated with a
broker-dealer, or (b) any new adviser or
sub-adviser is a broker-dealer or
becomes affiliated with a broker-dealer,
it will implement a fire wall with
respect to its relevant personnel or such
broker-dealer affiliate, as applicable,
regarding access to information
concerning the composition and/or
changes to the portfolio, and will be
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding such portfolio.
Pointbreak Diversified Commodity Fund
According to the Registration
Statement, the Fund is an actively
managed exchange-traded fund (‘‘ETF’’)
that seeks to provide total return that
exceeds that of a benchmark, the
Solactive Diversified Commodity Index
(the ‘‘Benchmark’’) over time. The Fund
is not an index tracking exchange-traded
fund and is not required to invest in the
specific components of the Benchmark.
However, the Fund will generally seek
to maintain a portfolio of instruments
similar to those included in the
Benchmark and will seek exposure to
commodities included in the
Benchmark. The Benchmark is a rulesbased index composed of futures
contracts on 16 heavily traded
commodities across the energy, precious
metals, industrial metals and agriculture
sectors: Aluminum, Brent crude oil,
cocoa, copper, corn, gold, heating oil,
live cattle, natural gas, Reformulated
Gasoline Blendstock for Oxygen
Blending (‘‘RBOB’’) gasoline, silver,
soybeans, sugar #11, wheat, WTI light
crude oil, and zinc. The allocation
among the Fund’s investments generally
approximates the allocation among the
components of the Benchmark. The
Benchmark will further seek to select
the contract month, for each specific
commodity, among the next 13 months
that display the most backwardation, or
the least contango, and does not attempt
to always own those contracts that are
closest to expiration. Although the Fund
seeks returns comparable to the returns
of the Benchmark, the Fund can have a
higher or lower exposure to any
component within the Benchmark at
any time and may invest in other
commodity-linked instruments as well,
as described below.
Principal Holdings
According to the Registration
Statement, under normal
E:\FR\FM\22MRN1.SGM
22MRN1
Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices
asabaliauskas on DSK3SPTVN1PROD with NOTICES
circumstances,6 the Fund will invest,
either directly or through the
Subsidiary, in a combination of
Commodity Futures, as defined below,
and cash and cash-like instruments
(‘‘Cash Instruments’’). Commodity
Futures include only the following
instruments: Exchange-traded futures on
commodities; and exchange-traded
futures contracts on commodity indices.
These instruments provide exposure to
the investment returns of the
commodities markets, without investing
directly in physical commodities.
Under normal circumstances, in
addition to investing in Commodity
Futures through the Subsidiary, the
Fund will invest its remaining assets in
Cash Instruments, including cash, cashlike instruments or high-quality
collateral securities that provide
liquidity, serve as margin, or
collateralize the Subsidiary’s
investments in Commodity Futures.
Such Cash Instruments include only the
following instruments: (i) Short-term
obligations issued by the U.S.
Government; (ii) cash and cash-like
instruments; (iii) money market mutual
funds, including affiliated money
market mutual funds; and (iv)
repurchase agreements.7 The Fund will
not invest in Cash Instruments that are
below investment grade.
The Fund generally will not invest
directly in Commodity Futures. The
Fund expects to gain exposure to
Commodity Futures by investing a
portion of its assets in the Subsidiary,
which will invest in Commodity
Futures.8 The Subsidiary is also advised
6 The term ‘‘under normal circumstances’’
includes, but is not limited to, the absence of
extreme volatility or trading halts in the futures
markets or the financial markets generally;
operational issues causing dissemination of
inaccurate market information; or force majeure
type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption or any similar
intervening circumstance.
7 The Fund follows certain procedures designed
to minimize the risks inherent in repurchase
agreements. Such procedures include effecting
repurchase transactions only with large, wellcapitalized, and well-established financial
institutions whose condition will be continually
monitored by the Sub-Adviser [sic]. It is the current
policy of the Fund not to invest in repurchase
agreements that do not mature within seven days
if any such investment, together with any other
illiquid assets held by the Fund, amount to more
than 15% of the Fund’s net assets. The investments
of the Fund in repurchase agreements, at times, may
be substantial when, in the view of the Sub-Adviser
[sic], liquidity or other considerations so warrant.
8 The Subsidiary is not registered under the 1940
Act and is not directly subject to its investor
protections, except as noted in the Registration
Statement. However, the Subsidiary is whollyowned and controlled by the Fund and is advised
by the Adviser. Therefore, because of the Fund’s
ownership and control of the Subsidiary, the
Subsidiary would not take action contrary to the
VerDate Sep<11>2014
17:34 Mar 21, 2016
Jkt 238001
by the Adviser. Unlike the Fund, the
Subsidiary is not an investment
company registered under the 1940 Act.
The Fund’s investment in the
Subsidiary is intended to provide the
Fund with exposure to commodity
markets in accordance with applicable
rules and regulations. The Subsidiary
has the same investment objective and
investment restrictions as the Fund. The
Fund will generally invest up to 25% of
its total assets in the Subsidiary.
During times of adverse market,
economic, political or other conditions,
the Fund may depart temporarily from
its principal investment strategies (such
as by maintaining a significant
uninvested cash position) for defensive
purposes. Doing so could help the Fund
avoid losses, but may mean lost
investment opportunities. During these
periods, the Fund may not achieve its
investment objective.
The Fund intends to qualify each year
as a regulated investment company (a
‘‘RIC’’) under Subchapter M of the
Internal Revenue Code of 1986, as
amended.9 The Fund will invest its
assets (including via the Subsidiary),
and otherwise conduct its operations, in
a manner that is intended to satisfy the
qualifying income, diversification and
distribution requirements necessary to
establish and maintain RIC qualification
under Subchapter M.
Investment Restrictions
The Fund may hold up to an aggregate
amount of 15% of its net assets in
illiquid assets (calculated at the time of
investment) deemed illiquid by the
Adviser 10 under the 1940 Act.11 The
interests of the Fund or its shareholders. The
Fund’s Board of Trustees (‘‘Board’’) has oversight
responsibility for the investment activities of the
Fund, including its expected investment in the
Subsidiary, and the Fund’s role as the sole
shareholder of the Subsidiary. The Adviser receives
no additional compensation for managing the assets
of the Subsidiary. The Subsidiary will also enter
into separate contracts for the provision of custody,
transfer agency, and accounting agent services with
the same or with affiliates of the same service
providers that provide those services to the Fund.
9 26 U.S.C. 851.
10 In reaching liquidity decisions, the Adviser
may consider the following factors: The frequency
of trades and quotes for the security; the number of
dealers wishing to purchase or sell the security and
the number of other potential purchasers; dealer
undertakings to make a market in the security; and
the nature of the security and the nature of the
marketplace in which it trades (e.g., the time
needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer).
11 The Commission has stated that long-standing
Commission guidelines have required open-end
funds to hold no more than 15% of their net assets
in illiquid securities and other illiquid assets. See
Investment Company Act Release No. 28193 (March
11, 2008), 73 FR 14618 (March 18, 2008), footnote
34. See also, Investment Company Act Release No.
5847 (October 21, 1969), 35 FR 19989 (December
31, 1970) (Statement Regarding ‘‘Restricted
PO 00000
Frm 00170
Fmt 4703
Sfmt 4703
15389
Fund will monitor its portfolio liquidity
on an ongoing basis to determine
whether, in light of current
circumstances, an adequate level of
liquidity is being maintained, and will
consider taking appropriate steps in
order to maintain adequate liquidity if,
through a change in values, net assets,
or other circumstances, more than 15%
of the Fund’s net assets are held in
illiquid assets. Illiquid assets include
assets subject to contractual or other
restrictions on resale and other
instruments that lack readily available
markets as determined in accordance
with Commission staff guidance. Aside
from the Fund’s investments in the
Subsidiary, neither the Fund nor the
Subsidiary will invest in non-U.S.
equity securities or options.
The Fund’s investments will be
consistent with the Fund’s investment
objective and will not be used to
achieve leveraged or inverse leveraged
returns (e.g. two times or three times the
Fund’s benchmark).
Net Asset Value
According to the Registration
Statement, the net asset value (‘‘NAV’’)
of the Shares of the Fund will be
calculated by dividing the value of the
net assets of the Fund (i.e., the value of
its total assets less total liabilities) by
the total number of Shares outstanding.
Expenses and fees, including the
management and administration fees,
are accrued daily and taken into account
for purposes of determining NAV. The
NAV of the Fund is generally
determined at 4:00 p.m. Eastern Time
each business day when the Exchange is
open for trading. If the Exchange or
market on which the Fund’s
investments are primarily traded closes
early, the NAV may be calculated prior
to its normal calculation time. Creation/
redemption transaction order time
cutoffs (as further described below)
would also be accelerated.
Securities and other assets held by
both the Fund and the Subsidiary are
generally valued at their market price
using market quotations or information
provided by a pricing service. Certain
short-term debt securities are valued on
the basis of amortized cost. Commodity
Securities’’); Investment Company Act Release No.
18612 (March 12, 1992), 57 FR 9828 (March 20,
1992) (Revisions of Guidelines to Form N–1A). A
fund’s portfolio security is illiquid if it cannot be
disposed of in the ordinary course of business
within seven days at approximately the value
ascribed to it by the fund. See Investment Company
Act Release No. 14983 (March 12, 1986), 51 FR
9773 (March 21, 1986) (adopting amendments to
Rule 2a–7 under the 1940 Act); Investment
Company Act Release No. 17452 (April 23, 1990),
55 FR 17933 (April 30, 1990) (adopting Rule 144A
under the Securities Act of 1933).
E:\FR\FM\22MRN1.SGM
22MRN1
15390
Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Futures are generally valued at their
settlement price as determined by the
relevant exchange. Repurchase
agreements will generally be valued at
bid prices received from independent
pricing services as of the announced
closing time for trading in such
instruments. Cash and cash equivalents
(other than money market mutual funds)
also may be valued on the basis of
information furnished by an
independent pricing service that uses a
valuation matrix which incorporates
both dealer-supplied valuations and
electronic data processing techniques.
Short-term debt securities with
remaining maturities of sixty days or
less for which market quotations and
information furnished by an
independent pricing service are not
readily available will be valued at
amortized cost. Shares of money market
mutual funds will be valued at their
current Net Asset Value per share.
For more information regarding the
valuation of Fund investments in
calculating the Fund’s NAV, see the
Registration Statement.
The Shares
The Fund will issue and redeem
Shares on a continuous basis at the NAV
per Share only in large blocks of a
specified number of Shares or multiples
thereof (‘‘Creation Units’’) in
transactions with authorized
participants who have entered into
agreements with the Distributor. The
Adviser currently anticipates that a
Creation Unit will consist of 50,000
Shares, though this number may change
from time to time, including prior to
listing of the Shares. The exact number
of Shares that will constitute a Creation
Unit will be disclosed in the
Registration Statement. Once created,
Shares of the Fund may trade on the
secondary market in amounts less than
a Creation Unit.
Although the Adviser anticipates that
purchases and redemptions for Creation
Units will generally be executed on an
all-cash basis, the consideration for
purchase of Creation Units of the Fund
may consist of an in-kind deposit of a
designated portfolio of assets (including
any portion of such assets for which
cash may be substituted) (i.e., the
‘‘Deposit Assets’’), and the ‘‘Cash
Component’’ computed as described
below. Together, the Deposit Assets and
the Cash Component constitute the
‘‘Fund Deposit,’’ which represents the
minimum initial and subsequent
investment amount for a Creation Unit
of the Fund. The specific terms
surrounding the creation and
redemption of shares are at the
discretion of the Adviser.
VerDate Sep<11>2014
17:34 Mar 21, 2016
Jkt 238001
The Deposit Assets and Fund
Securities (as defined below), as the
case may be, in connection with a
purchase or redemption of a Creation
Unit, generally will correspond pro rata,
to the extent practicable, to the assets
held by the Fund.
The Cash Component will be an
amount equal to the difference between
the NAV of the Shares (per Creation
Unit) and the ‘‘Deposit Amount,’’ which
will be an amount equal to the market
value of the Deposit Assets, and serve to
compensate for any differences between
the NAV per Creation Unit and the
Deposit Amount. The Adviser will make
available through the National
Securities Clearing Corporation
(‘‘NSCC’’) on each business day, prior to
the opening of business on the
Exchange, the list of names and the
required number or par value of each
Deposit Asset and the amount of the
Cash Component to be included in the
current Fund Deposit (based on
information as of the end of the
previous business day) for the Fund.
The identity and number or par value
of the Deposit Assets may change
pursuant to changes in the composition
of the Fund’s portfolio as rebalancing
adjustments and corporate action events
occur from time to time. The
composition of the Deposit Assets may
also change in response to adjustments
to the weighting or composition of the
holdings of the Fund.
The Fund reserves the right to permit
or require the substitution of a ‘‘cash in
lieu’’ amount to be added to the Cash
Component to replace any Deposit Asset
that may not be available in sufficient
quantity for delivery or that may not be
eligible for transfer through the
Depository Trust Company (‘‘DTC’’) or
the clearing process through the
NSCC.12
Except as noted below, all creation
orders must be placed for one or more
Creation Units and must be received by
the Distributor at a time specified by the
Adviser. The Fund currently intends
that such orders must be received in
proper form no later than 10:30 a.m.
Eastern Time on the date such order is
placed in order for creation of Creation
Units to be effected based on the NAV
of Shares of the Fund as next
determined on such date after receipt of
the order in proper form. The
‘‘Settlement Date’’ is generally the third
business day after the transmittal date.
On days when the Exchange or the
futures markets close earlier than
12 The Adviser represents that, to the extent the
Trust permits or requires a ‘‘cash in lieu’’ amount,
such transactions will be effected in the same or
equitable manner for all authorized participants.
PO 00000
Frm 00171
Fmt 4703
Sfmt 4703
normal, the Fund may require orders to
create or to redeem Creation Units to be
placed earlier in the day.
A standard creation transaction fee
may be imposed to offset the transfer
and other transaction costs associated
with the issuance of Creation Units.
Shares of the Fund may be redeemed
only in Creation Units at their NAV next
determined after receipt of a redemption
request in proper form by the
Distributor and only on a business day.
Adviser will make available through the
NSCC, prior to the opening of business
on the Exchange on each business day,
the designated portfolio of assets
(including any portion of such assets for
which cash may be substituted) that will
be applicable (subject to possible
amendment or correction) to
redemption requests received in proper
form on that day (‘‘Fund Securities’’).
The redemption proceeds for a Creation
Unit generally will consist of a specified
amount of cash less a redemption
transaction fee. The Fund generally will
redeem Creation Units entirely for cash.
A standard redemption transaction
fee, in an amount disclosed in the
current prospectus for the Fund, may be
imposed to offset transfer and other
transaction costs that may be incurred
by the Fund.
Redemption requests for Creation
Units of the Fund must be submitted to
the Distributor by or through an
authorized participant by a time
specified by the Adviser. The Fund
currently intends that such requests
must be received no later than 10:30
a.m. Eastern Time on any business day,
in order to receive that day’s NAV. The
authorized participant must transmit the
request for redemption in the form
required by the Fund to the Distributor
in accordance with procedures set forth
in the authorized participant agreement.
Additional information regarding the
Shares and the Fund, including
investment strategies, risks, creation and
redemption procedures, fees and
expenses, portfolio holdings disclosure
policies, distributions, taxes and reports
to be distributed to beneficial owners of
the Shares can be found in the
Registration Statement or on the Web
site for the Fund
(www.pointbreakETFs.com), as
applicable.
Availability of Information
The Fund’s Web site, which will be
publicly available prior to the public
offering of Shares, will include a form
of the prospectus for the Fund that may
be downloaded. The Web site will
include additional quantitative
information updated on a daily basis,
including, for the Fund: (1) The prior
E:\FR\FM\22MRN1.SGM
22MRN1
Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices
asabaliauskas on DSK3SPTVN1PROD with NOTICES
business day’s reported NAV, the
closing market price or the midpoint of
the bid/ask spread at the time of
calculation of such NAV (the ‘‘Bid/Ask
Price’’),13 daily trading volume, and a
calculation of the premium and
discount of the closing market price or
Bid/Ask Price against the NAV; and (2)
data in chart format displaying the
frequency distribution of discounts and
premiums of the daily closing market
price or Bid/Ask Price against the NAV,
within appropriate ranges, for each of
the four previous calendar quarters.
Daily trading volume information for
the Fund will be available in the
financial section of newspapers, through
subscription services such as
Bloomberg, Thomson Reuters, and
International Data Corporation, which
can be accessed by authorized
participants and other investors, as well
as through other electronic services,
including major public Web sites. On
each business day, before
commencement of trading in Shares
during Regular Trading Hours 14 on the
Exchange, the Fund will disclose on its
Web site the identities and quantities of
the portfolio Commodity Futures and
other assets (the ‘‘Disclosed Portfolio’’)
held by the Fund and the Subsidiary
that will form the basis for the Fund’s
calculation of NAV at the end of the
business day.15 The Disclosed Portfolio
will include, as applicable: Ticker
symbol or other identifier, a description
of the holding, identity of the asset upon
which the derivative is based, the
quantity of each security or other asset
held as measured by select metrics,
maturity date, coupon rate, effective
date, market value and percentage
weight of the holding in the portfolio.
The Web site and information will be
publicly available at no charge.
In addition, for the Fund, an
estimated value, defined in BATS Rule
14.11(i)(3)(C) as the ‘‘Intraday Indicative
Value,’’ that reflects an estimated
intraday value of the Fund’s portfolio,
will be disseminated. Moreover, the
Intraday Indicative Value will be based
upon the current value for the
components of the Disclosed Portfolio
13 The Bid/Ask Price of the Fund will be
determined using the midpoint of the highest bid
and the lowest offer on the Exchange as of the time
of calculation of the Fund’s NAV. The records
relating to Bid/Ask Prices will be retained by the
Fund and its service providers.
14 Regular Trading Hours are 9:30 a.m. to 4:00
p.m. Eastern Time.
15 Under accounting procedures to be followed by
the Fund, trades made on the prior business day
(‘‘T’’) will be booked and reflected in NAV on the
current business day (‘‘T+1’’). Accordingly, the
Fund will be able to disclose at the beginning of the
business day the portfolio that will form the basis
for the NAV calculation at the end of the business
day.
VerDate Sep<11>2014
17:34 Mar 21, 2016
Jkt 238001
and will be updated and widely
disseminated by one or more major
market data vendors at least every 15
seconds during the Exchange’s Regular
Trading Hours.16 In addition, the
quotations of certain of the Fund’s
holdings may not be updated for
purposes of calculating Intraday
Indicative Value during U.S. trading
hours where the market on which the
underlying asset is traded settles prior
to the end of the Exchange’s Regular
Trading Hours.
The dissemination of the Intraday
Indicative Value, together with the
Disclosed Portfolio, will allow investors
to determine the value of the underlying
portfolio of the Fund on a daily basis
and provide an estimate of that value
throughout the trading day.
Intraday price quotations on U.S.
government securities, debt securities,
and repurchase agreements of the type
held by the Fund are available from
major broker-dealer firms and from
third-parties, which may provide prices
free with a time delay, or ‘‘live’’ with a
paid fee. For futures, such intraday
information is available directly from
the applicable listing exchange. Intraday
price information is also available
through subscription services, such as
Bloomberg and Thomson Reuters,
which can be accessed by authorized
participants and other investors.
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. The previous day’s closing
price and trading volume information
for the Shares will be generally available
daily in the print and online financial
press. Quotation and last sale
information for the Shares will be
available on the facilities of the CTA.
Initial and Continued Listing
The Shares will be subject to BATS
Rule 14.11(i), which sets forth the initial
and continued listing criteria applicable
to Managed Fund Shares. The Exchange
represents that, for initial and/or
continued listing, the Fund must be in
compliance with Rule 10A–3 under the
Act.17 A minimum of 100,000 Shares
will be outstanding at the
commencement of trading on the
Exchange. The Exchange will obtain a
representation from the issuer of the
Shares that the NAV will be calculated
daily and that the NAV and the
16 Currently, it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available Intraday Indicative Values
published via the Consolidated Tape Association
(‘‘CTA’’) or other data feeds.
17 See 17 CFR 240.10A–3.
PO 00000
Frm 00172
Fmt 4703
Sfmt 4703
15391
Disclosed Portfolio will be made
available to all market participants at
the same time.
Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
the Fund. The Exchange will halt
trading in the Shares under the
conditions specified in BATS Rule
11.18. Trading may be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable. These may
include: (1) The extent to which trading
is not occurring in the Commodity
Futures and other assets composing the
Disclosed Portfolio of the Fund; or (2)
whether other unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market are present. Trading in the
Shares also will be subject to Rule
14.11(i)(4)(B)(iv), which sets forth
circumstances under which Shares of
the Fund may be halted.
Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. BATS will allow
trading in the Shares from 8:00 a.m.
until 5:00 p.m. Eastern Time. The
Exchange has appropriate rules to
facilitate transactions in the Shares
during all trading sessions. As provided
in BATS Rule 14.11(i)(2)(C), the
minimum price variation for quoting
and entry of orders in Managed Fund
Shares traded on the Exchange is $0.01.
Surveillance
The Exchange believes that its
surveillance procedures are adequate to
properly monitor the trading of the
Shares on the Exchange during all
trading sessions and to deter and detect
violations of Exchange rules and the
applicable federal securities laws.
Trading of the Shares through the
Exchange will be subject to the
Exchange’s surveillance procedures for
derivative products, including Managed
Fund Shares. The Exchange may obtain
information regarding trading in the
Shares and the underlying futures,
including futures contracts held by the
Subsidiary, via the Intermarket
Surveillance Group (‘‘ISG’’) from other
exchanges who are members or affiliates
of the ISG or with which the Exchange
has entered into a comprehensive
E:\FR\FM\22MRN1.SGM
22MRN1
15392
Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices
surveillance sharing agreement.18 In
addition, the Exchange is able to access,
as needed, trade information for certain
fixed income instruments reported to
FINRA’s Trade Reporting and
Compliance Engine (‘‘TRACE’’). The
Exchange prohibits the distribution of
material non-public information by its
employees.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Information Circular
Prior to the commencement of
trading, the Exchange will inform its
members in an Information Circular of
the special characteristics and risks
associated with trading the Shares.
Specifically, the Information Circular
will discuss the following: (1) The
procedures for purchases and
redemptions of Shares in Creation Units
(and that Shares are not individually
redeemable); (2) BATS Rule 3.7, which
imposes suitability obligations on
Exchange members with respect to
recommending transactions in the
Shares to customers; (3) how
information regarding the Intraday
Indicative Value and Disclosed Portfolio
are disseminated; (4) the risks involved
in trading the Shares during the PreOpening 19 and After Hours Trading
Sessions 20 when an updated Intraday
Indicative Value will not be calculated
or publicly disseminated; (5) the
requirement that members deliver a
prospectus to investors purchasing
newly issued Shares prior to or
concurrently with the confirmation of a
transaction; and (6) trading information.
In addition, the Information Circular
will advise members, prior to the
commencement of trading, of the
prospectus delivery requirements
applicable to the Fund. Members
purchasing Shares from the Fund for
resale to investors will deliver a
prospectus to such investors. The
Information Circular will also discuss
any exemptive, no-action, and
interpretive relief granted by the
Commission from any rules under the
Act.
In addition, the Information Circular
will reference that the Fund is subject
to various fees and expenses described
18 For a list of the current members and affiliate
members of ISG, see www.isgportal.com. The
Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on
markets that are members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement. The Exchange also
notes that all of the futures contracts in the
Disclosed Portfolio for the Fund will trade on
markets that are a member of ISG or affiliate or with
which the Exchange has in place a comprehensive
surveillance sharing agreement.
19 The Pre-Opening Session is from 8:00 a.m. to
9:30 a.m. Eastern Time.
20 The After Hours Trading Session is from 4:00
p.m. to 5:00 p.m. Eastern Time.
VerDate Sep<11>2014
17:34 Mar 21, 2016
Jkt 238001
in the Registration Statement. The
Information Circular will also disclose
the trading hours of the Shares of the
Fund and the applicable NAV
calculation time for the Shares. The
Information Circular will disclose that
information about the Shares of the
Fund will be publicly available on the
Fund’s Web site. In addition, the
Information Circular will reference that
the Trust is subject to various fees and
expenses described in the Registration
Statement.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with section 6(b)
of the Act 21 in general and section
6(b)(5) of the Act 22 in particular in that
it is designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares will
be listed and traded on the Exchange
pursuant to the initial and continued
listing criteria in BATS Rule 14.11(i).
The Exchange believes that its
surveillance procedures are adequate to
properly monitor the trading of the
Shares on the Exchange during all
trading sessions and to deter and detect
violations of Exchange rules and the
applicable federal securities laws. If the
investment adviser to the investment
company issuing Managed Fund Shares
is affiliated with a broker-dealer, such
investment adviser to the investment
company shall erect a ‘‘fire wall’’
between the investment adviser and the
broker-dealer with respect to access to
information concerning the composition
and/or changes to such investment
company portfolio. The Adviser is not a
registered broker-dealer and is not
affiliated with a broker-dealer. The
Exchange may obtain information
regarding trading in the Shares and the
underlying futures, including those held
by the Subsidiary, via the ISG from
other exchanges who are members or
affiliates of the ISG or with which the
Exchange has entered into a
comprehensive surveillance sharing
agreement.23 In addition, the Exchange
21 15
U.S.C. 78f.
U.S.C. 78f(b)(5).
23 See note 21, supra.
22 15
PO 00000
Frm 00173
Fmt 4703
Sfmt 4703
is able to access, as needed, trade
information for certain fixed income
instruments reported to FINRA’s
TRACE.
Under normal circumstances, the
Fund will invest, either directly or
through the Subsidiary, in a
combination of Commodity Futures and
Cash Instruments. Commodity Futures
provide exposure to the investment
returns of the commodities markets,
without investing directly in physical
commodities. The Fund generally will
not invest directly in Commodity
Futures. The Fund expects to gain
exposure to these investments by
investing a portion of its assets in the
Subsidiary. Cash Instruments include
only the following instruments: (i)
Short-term obligations issued by the
U.S. Government; (ii) cash and cash-like
instruments; and (iii) money market
mutual funds, including affiliated
money market mutual funds. The Fund
will not invest in Cash Instruments that
are below investment grade.
During times of adverse market,
economic, political or other conditions,
the Fund may depart temporarily from
its principal investment strategies (such
as by maintaining a significant
uninvested cash position) for defensive
purposes. Doing so could help the Fund
avoid losses, but may mean lost
investment opportunities. During these
periods, the Fund may not achieve its
investment objective.
Additionally, the Fund may hold up
to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at
the time of investment). The Fund will
monitor its portfolio liquidity on an
ongoing basis to determine whether, in
light of current circumstances, an
adequate level of liquidity is being
maintained, and will consider taking
appropriate steps in order to maintain
adequate liquidity if, through a change
in values, net assets, or other
circumstances, more than 15% of the
Fund’s net assets are held in illiquid
assets. Illiquid assets include assets
subject to contractual or other
restrictions on resale and other
instruments that lack readily available
markets as determined in accordance
with Commission staff guidance.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest in that the Exchange will
obtain a representation from the issuer
of the Shares that the NAV will be
calculated daily and that the NAV and
the Disclosed Portfolio will be made
available to all market participants at
the same time. In addition, a large
amount of information is publicly
available regarding the Fund and the
E:\FR\FM\22MRN1.SGM
22MRN1
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices
Shares, thereby promoting market
transparency. Moreover, the Intraday
Indicative Value will be disseminated
by one or more major market data
vendors at least every 15 seconds during
Regular Trading Hours. On each
business day, before commencement of
trading in Shares during Regular
Trading Hours, the Fund will disclose
on its Web site the Disclosed Portfolio
that will form the basis for the Fund’s
calculation of NAV at the end of the
business day. Pricing information will
be available on the Fund’s Web site
including: (1) The prior business day’s
reported NAV, the Bid/Ask Price of the
Fund, and a calculation of the premium
and discount of the Bid/Ask Price
against the NAV; and (2) data in chart
format displaying the frequency
distribution of discounts and premiums
of the daily closing market price or Bid/
Ask Price against the NAV, within
appropriate ranges, for each of the four
previous calendar quarters.
Additionally, information regarding
market price and trading of the Shares
will be continually available on a realtime basis throughout the day on
brokers’ computer screens and other
electronic services, and quotation and
last sale information for the Shares will
be available on the facilities of the CTA.
The Web site for the Fund will include
a form of the prospectus for the Fund
and additional data relating to NAV and
other applicable quantitative
information. Trading in Shares of the
Fund will be halted under the
conditions specified in BATS Rule
11.18. Trading may also be halted
because of market conditions or for
reasons that, in the view of the
Exchange, make trading in the Shares
inadvisable. Finally, trading in the
Shares will be subject to BATS Rule
14.11(i)(4)(B)(iv), which sets forth
circumstances under which Shares of
the Fund may be halted. In addition, as
noted above, investors will have ready
access to information regarding the
Fund’s holdings, the Intraday Indicative
Value, the Disclosed Portfolio, and
quotation and last sale information for
the Shares.
Intraday price quotations on U.S.
government securities, debt securities,
and repurchase agreements of the type
held by the Fund are available from
major broker-dealer firms and from
third-parties, which may provide prices
free with a time delay, or ‘‘live’’ with a
paid fee. For futures, such intraday
information is available directly from
the applicable listing exchange. Intraday
price information is also available
through subscription services, such as
Bloomberg and Thomson Reuters,
VerDate Sep<11>2014
17:34 Mar 21, 2016
Jkt 238001
which can be accessed by authorized
participants and other investors.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of additional types of actively-managed
exchange-traded product that will
enhance competition among market
participants, to the benefit of investors
and the marketplace. As noted above,
the Exchange has in place surveillance
procedures relating to trading in the
Shares and may obtain information via
ISG from other exchanges that are
members of ISG or with which the
Exchange has entered into a
comprehensive surveillance sharing
agreement as well as trade information
for certain fixed income instruments as
reported to FINRA’s TRACE. In
addition, as noted above, investors will
have ready access to information
regarding the Fund’s holdings, the
Intraday Indicative Value, the Disclosed
Portfolio, and quotation and last sale
information for the Shares.
For the above reasons, the Exchange
believes that the proposed rule change
is consistent with the requirements of
section 6(b)(5) of the Act.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purpose of the Act. The Exchange
notes that the proposed rule change,
rather will facilitate the listing and
trading of additional actively-managed
exchange-traded products that will
enhance competition among both
market participants and listing venues,
to the benefit of investors and the
marketplace.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission will: (a) by order
PO 00000
Frm 00174
Fmt 4703
Sfmt 4703
15393
approve or disapprove such proposed
rule change, or (b) institute proceedings
to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BATS–2016–16 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BATS–2016–16. 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 will also be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–BATS–
2016–16 and should be submitted on or
before April 12, 2016.
E:\FR\FM\22MRN1.SGM
22MRN1
15394
Federal Register / Vol. 81, No. 55 / Tuesday, March 22, 2016 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–06339 Filed 3–21–16; 8:45 am]
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77381; File No. SR–
NASDAQ–2016–033]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Offer Remote ITCH to Trade Options
Wave Ports
March 16, 2016.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b-4 thereunder,2
notice is hereby given that on March 2,
2016, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to establish a
fee for a new optional wireless
connectivity service, Remote ITCH to
Trade Options Wave Ports.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaq.cchwallstreet.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
17:34 Mar 21, 2016
Jkt 238001
1. Purpose
Nasdaq is proposing to amend Nasdaq
Options Market (‘‘NOM’’) Rules chapter
XV, section 3, to establish fees for
Remote ITCH to Trade Options
(‘‘ITTO’’) Wave Ports for clients colocated at other third-party data centers
located in Mahwah, N.J. (‘‘Mahwah’’)
and Secaucus, N.J. (‘‘Secaucus’’),
through which Nasdaq ITTO market
data will be distributed after delivery to
those data centers via a wireless
network. Nasdaq ITTO is a data feed
that provides quotation information for
individual orders on the NOM book, last
sale information for trades executed on
NOM, and Order Imbalance Information
as set forth in NOM Rules chapter VI,
section 8.3 Nasdaq ITTO market data is
subscribed to under NOM Rules chapter
XV, section 4.
Nasdaq provides market data via two
connectivity mediums: Fiber optic
networks, and/or wireless networks,
(aka, Remote Wave Ports). ITTO market
data is currently provided only by
Nasdaq through fiber optic networks.
Nasdaq is now proposing to provide
ITTO market data through Remote Wave
Ports. A Remote Wave Port is a physical
port located in Nasdaq’s space within a
third-party’s (remote) data center that
receives market data delivered by
Nasdaq via a wireless network,4 which
is then simultaneously distributed to
Wave Ports within that location. Clients
must separately subscribe to the data
received by the Remote Wave Port
service.
Nasdaq offers TotalView ITCH
equities market data through Remote
MITCH Wave Ports for clients colocated at third-party data centers in
Mahwah and Secaucus.5 Nasdaq has
3 See Nasdaq Options Rules chapter VI, section
1(a)(3)(A).
4 Wireless technology has been in existence for
many years, used primarily by the defense, retail,
and telecommunications industries. Wireless
connectivity involves the beaming of signals
through the air between towers that are within sight
of one another. Because the signals travel a straight,
unimpeded line, and because light waves travel
faster through air than through glass (fiber optics),
message latency is reduced. The continued use of
this technology by the defense industry and
regulation of the spectrum by the FCC demonstrates
the secure nature of wireless networks.
5 Nasdaq assesses a MITCH Wave Port installation
fee of $5,000 for Mahwah installations and an
ongoing monthly fee of $12,500. See Nasdaq Rule
7015(g)(1). Nasdaq assesses a MITCH Wave Port
installation fee of $2,500 for Secaucus installations
and an ongoing monthly fee of $7,500. Id. Nasdaq
PO 00000
Frm 00175
Fmt 4703
Sfmt 4703
recently increased the capacity of its
wireless networks connecting Nasdaq’s
Carteret data center to those third-party
data centers, so that they may now
support delivery of ITTO market data.
Nasdaq is proposing to deliver ITTO
market data to Nasdaq-owned cabinets
at the third-party data centers located in
Mahwah and Secaucus via a wireless
network, as is currently done for
TotalView ITCH market data. This
offering, which is entirely optional, will
enable delivery of Nasdaq ITTO market
data to the third-party data centers at
the same low latency.6 Clients will have
the option of cross-connecting to their
subscribed ITTO Wave Ports in those
data centers to receive the ITTO data
feed.
Nasdaq is proposing to assess an
installation charge for a Remote Wave
Port in Mahwah of $5,000 and a charge
of $2,500 for a Remote Wave Port in
Secaucus. Nasdaq is also proposing a
monthly recurring fee of $10,000 for a
Remote Wave Port in Mahwah and
$7,500 for a Remote Wave Port in
Secaucus. Clients opting to subscribe to
a Remote ITTO Wave Port will continue
to be fee liable for the applicable market
data fees as described in NOM Rules
chapter XV, section 4(a).
Competition for market data
distribution is considerable and the
Exchange believes that this proposal
clearly evidences such competition.
Nasdaq is offering a new data delivery
option via Remote Wave Ports to keep
pace with changes in the industry and
evolving customer needs as new
technologies emerge and products
continue to develop and change. The
new delivery option is similar to
existing offerings, entirely optional, and
is geared towards attracting new
customers, as well as retaining existing
customers.
The proposed fees are based on the
cost to Nasdaq and its vendors of
installing and maintaining the wireless
connectivity and on the value provided
to the customer, which receives low
latency delivery of data feeds. The costs
associated with the wireless
connectivity system are incrementally
higher than fiber optics-based solutions
due to the expense of the wireless
equipment, cost of installation, and
notes that the higher ongoing fee for Mahwah is
reflective of the longer distance from Carteret to
Mahwah requiring greater investment in
infrastructure to connect the two locations.
6 Nasdaq cannot preclude minor latency variances
in delivery of Nasdaq ITTO in the third-party data
centers to individual clients because it does not
control the cross-connects in those centers;
however, the microwave connectivity will provide
the same latency to all clients’ Remote ITTO Wave
Ports and offers an improvement in latency over
fiber optic network connectivity.
E:\FR\FM\22MRN1.SGM
22MRN1
]]>Agencies
[Federal Register Volume 81, Number 55 (Tuesday, March 22, 2016)]
[Notices]
[Pages 15387-15394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06339]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77379; File No. SR-BATS-2016-16]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To List and Trade Shares of the
Pointbreak Diversified Commodity Fund of the Pointbreak ETF Trust Under
BATS Rule 14.11(i), Managed Fund Shares
March 16, 2016.
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 March 7, 2016, BATS Exchange, Inc. (the ``Exchange'' or
``BATS'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to list and trade shares of the
Pointbreak Diversified Commodity Fund (the ``Fund'') of the Pointbreak
ETF Trust (the ``Trust'') under BATS Rule 14.11(i) (``Managed Fund
Shares''). The shares of the Fund are referred to herein as the
``Shares''.
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 Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant parts of such
statements.
[[Page 15388]]
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade the Shares under BATS Rule
14.11(i), which governs the listing and trading of Managed Fund Shares
on the Exchange.\3\ The Fund will be an actively managed fund that
seeks to provide long term capital appreciation, primarily through
exposure to the commodity futures markets.
---------------------------------------------------------------------------
\3\ The Commission approved BATS Rule 14.11(i) in Securities
Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148
(September 6, 2011) (SR-BATS-2011-018).
---------------------------------------------------------------------------
The Shares will be offered by the Trust, which was organized as a
Delaware statutory trust on June 18, 2015. The Trust is registered with
the Commission as an open-end investment company and has filed a
registration statement on behalf of the Fund on Form N-1A
(``Registration Statement'') with the Commission.\4\ The Commodity
Futures Trading Commission (``CFTC'') has recently adopted substantial
amendments to CFTC Rule 4.5 relating to the permissible exemptions and
conditions for reliance on exemptions from registration as a commodity
pool operator. As a result of the instruments that will be held by the
Fund, prior to listing on the Exchange, the Adviser will be registered
as a Commodity Pool Operator (``CPO'') and will become a member of the
National Futures Association (``NFA''). The Fund and a wholly-owned
subsidiary of the Fund organized under the laws of the Cayman Islands
(the ``Subsidiary'') will be subject to regulation by the CFTC and NFA
and additional disclosure, reporting and recordkeeping rules imposed
upon commodity pools. The Fund will generally obtain its exposure to
commodity markets via investments in the Subsidiary. These investments
are intended to provide the Fund with exposure to commodity markets in
accordance with applicable rules and regulations. Henceforth,
references to the investments of the Fund include investments of the
Subsidiary to which the Fund gains indirect exposure through investment
in the Subsidiary.
---------------------------------------------------------------------------
\4\ See Registration Statement on Form N-1A for the Trust, dated
December 4, 2015 [sic] (File Nos. 333-205324 and 811-23068). The
descriptions of the Fund and the Shares contained herein are based,
in part, on information in the Registration Statement. The
Commission has issued an order granting certain exemptive relief to
the Trust under the Investment Company Act of 1940 (15 U.S.C. 80a-1)
(``1940 Act'') (the ``Exemptive Order''). See Investment Company Act
Release No. 30562 (June 18, 2013) (File No. 812-14041) [sic].
---------------------------------------------------------------------------
Description of the Shares and the Fund
Pointbreak Advisers LLC is the investment adviser (``Adviser'') to
the Fund. Brown Brothers Harriman & Co. (``BBH'') is the administrator,
custodian and transfer agent for the Trust. ALPS Distributors, Inc.
(``Distributor'') serves as the distributor for the Trust. The Adviser
is not affiliated with either BBH or the Distributor.
BATS Rule 14.11(i)(7) provides that, if the investment adviser to
the investment company issuing Managed Fund Shares is affiliated with a
broker-dealer, such investment adviser shall erect a ``fire wall''
between the investment adviser and the broker-dealer with respect to
access to information concerning the composition and/or changes to such
investment company portfolio.\5\ In addition, Rule 14.11(i)(7) further
requires that personnel who make decisions on the investment company's
portfolio composition must be subject to procedures designed to prevent
the use and dissemination of material nonpublic information regarding
the applicable investment company portfolio. Rule 14.11(i)(7) is
similar to BATS Rule 14.11(b)(5)(A)(i), however, Rule 14.11(i)(7) in
connection with the establishment of a ``fire wall'' between the
investment adviser and the broker-dealer reflects the applicable open-
end fund's portfolio, not an underlying benchmark index, as is the case
with index-based funds. The Adviser is not a registered broker-dealer
and is not affiliated with a broker-dealer. The Adviser personnel who
make decisions regarding the Fund's portfolio are subject to procedures
designed to prevent the use and dissemination of material nonpublic
information regarding the Fund's portfolio. In the event that (a) the
Adviser becomes a broker-dealer or newly affiliated with a broker-
dealer, or (b) any new adviser or sub-adviser is a broker-dealer or
becomes affiliated with a broker-dealer, it will implement a fire wall
with respect to its relevant personnel or such broker-dealer affiliate,
as applicable, regarding access to information concerning the
composition and/or changes to the portfolio, and will be subject to
procedures designed to prevent the use and dissemination of material
non-public information regarding such portfolio.
---------------------------------------------------------------------------
\5\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser and its related personnel are
subject to the provisions of Rule 204A-1 under the Advisers Act
relating to codes of ethics. This Rule requires investment advisers
to adopt a code of ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with other applicable
securities laws. Accordingly, procedures designed to prevent the
communication and misuse of non-public information by an investment
adviser must be consistent with 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.
---------------------------------------------------------------------------
Pointbreak Diversified Commodity Fund
According to the Registration Statement, the Fund is an actively
managed exchange-traded fund (``ETF'') that seeks to provide total
return that exceeds that of a benchmark, the Solactive Diversified
Commodity Index (the ``Benchmark'') over time. The Fund is not an index
tracking exchange-traded fund and is not required to invest in the
specific components of the Benchmark. However, the Fund will generally
seek to maintain a portfolio of instruments similar to those included
in the Benchmark and will seek exposure to commodities included in the
Benchmark. The Benchmark is a rules-based index composed of futures
contracts on 16 heavily traded commodities across the energy, precious
metals, industrial metals and agriculture sectors: Aluminum, Brent
crude oil, cocoa, copper, corn, gold, heating oil, live cattle, natural
gas, Reformulated Gasoline Blendstock for Oxygen Blending (``RBOB'')
gasoline, silver, soybeans, sugar #11, wheat, WTI light crude oil, and
zinc. The allocation among the Fund's investments generally
approximates the allocation among the components of the Benchmark. The
Benchmark will further seek to select the contract month, for each
specific commodity, among the next 13 months that display the most
backwardation, or the least contango, and does not attempt to always
own those contracts that are closest to expiration. Although the Fund
seeks returns comparable to the returns of the Benchmark, the Fund can
have a higher or lower exposure to any component within the Benchmark
at any time and may invest in other commodity-linked instruments as
well, as described below.
Principal Holdings
According to the Registration Statement, under normal
[[Page 15389]]
circumstances,\6\ the Fund will invest, either directly or through the
Subsidiary, in a combination of Commodity Futures, as defined below,
and cash and cash-like instruments (``Cash Instruments''). Commodity
Futures include only the following instruments: Exchange-traded futures
on commodities; and exchange-traded futures contracts on commodity
indices. These instruments provide exposure to the investment returns
of the commodities markets, without investing directly in physical
commodities.
---------------------------------------------------------------------------
\6\ The term ``under normal circumstances'' includes, but is not
limited to, the absence of extreme volatility or trading halts in
the futures markets or the financial markets generally; operational
issues causing dissemination of inaccurate market information; or
force majeure type events such as systems failure, natural or man-
made disaster, act of God, armed conflict, act of terrorism, riot or
labor disruption or any similar intervening circumstance.
---------------------------------------------------------------------------
Under normal circumstances, in addition to investing in Commodity
Futures through the Subsidiary, the Fund will invest its remaining
assets in Cash Instruments, including cash, cash-like instruments or
high-quality collateral securities that provide liquidity, serve as
margin, or collateralize the Subsidiary's investments in Commodity
Futures. Such Cash Instruments include only the following instruments:
(i) Short-term obligations issued by the U.S. Government; (ii) cash and
cash-like instruments; (iii) money market mutual funds, including
affiliated money market mutual funds; and (iv) repurchase
agreements.\7\ The Fund will not invest in Cash Instruments that are
below investment grade.
---------------------------------------------------------------------------
\7\ The Fund follows certain procedures designed to minimize the
risks inherent in repurchase agreements. Such procedures include
effecting repurchase transactions only with large, well-capitalized,
and well-established financial institutions whose condition will be
continually monitored by the Sub-Adviser [sic]. It is the current
policy of the Fund not to invest in repurchase agreements that do
not mature within seven days if any such investment, together with
any other illiquid assets held by the Fund, amount to more than 15%
of the Fund's net assets. The investments of the Fund in repurchase
agreements, at times, may be substantial when, in the view of the
Sub-Adviser [sic], liquidity or other considerations so warrant.
---------------------------------------------------------------------------
The Fund generally will not invest directly in Commodity Futures.
The Fund expects to gain exposure to Commodity Futures by investing a
portion of its assets in the Subsidiary, which will invest in Commodity
Futures.\8\ The Subsidiary is also advised by the Adviser. Unlike the
Fund, the Subsidiary is not an investment company registered under the
1940 Act. The Fund's investment in the Subsidiary is intended to
provide the Fund with exposure to commodity markets in accordance with
applicable rules and regulations. The Subsidiary has the same
investment objective and investment restrictions as the Fund. The Fund
will generally invest up to 25% of its total assets in the Subsidiary.
---------------------------------------------------------------------------
\8\ The Subsidiary is not registered under the 1940 Act and is
not directly subject to its investor protections, except as noted in
the Registration Statement. However, the Subsidiary is wholly-owned
and controlled by the Fund and is advised by the Adviser. Therefore,
because of the Fund's ownership and control of the Subsidiary, the
Subsidiary would not take action contrary to the interests of the
Fund or its shareholders. The Fund's Board of Trustees (``Board'')
has oversight responsibility for the investment activities of the
Fund, including its expected investment in the Subsidiary, and the
Fund's role as the sole shareholder of the Subsidiary. The Adviser
receives no additional compensation for managing the assets of the
Subsidiary. The Subsidiary will also enter into separate contracts
for the provision of custody, transfer agency, and accounting agent
services with the same or with affiliates of the same service
providers that provide those services to the Fund.
---------------------------------------------------------------------------
During times of adverse market, economic, political or other
conditions, the Fund may depart temporarily from its principal
investment strategies (such as by maintaining a significant uninvested
cash position) for defensive purposes. Doing so could help the Fund
avoid losses, but may mean lost investment opportunities. During these
periods, the Fund may not achieve its investment objective.
The Fund intends to qualify each year as a regulated investment
company (a ``RIC'') under Subchapter M of the Internal Revenue Code of
1986, as amended.\9\ The Fund will invest its assets (including via the
Subsidiary), and otherwise conduct its operations, in a manner that is
intended to satisfy the qualifying income, diversification and
distribution requirements necessary to establish and maintain RIC
qualification under Subchapter M.
---------------------------------------------------------------------------
\9\ 26 U.S.C. 851.
---------------------------------------------------------------------------
Investment Restrictions
The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment) deemed
illiquid by the Adviser \10\ under the 1940 Act.\11\ The Fund will
monitor its portfolio liquidity on an ongoing basis to determine
whether, in light of current circumstances, an adequate level of
liquidity is being maintained, and will consider taking appropriate
steps in order to maintain adequate liquidity if, through a change in
values, net assets, or other circumstances, more than 15% of the Fund's
net assets are held in illiquid assets. Illiquid assets include assets
subject to contractual or other restrictions on resale and other
instruments that lack readily available markets as determined in
accordance with Commission staff guidance. Aside from the Fund's
investments in the Subsidiary, neither the Fund nor the Subsidiary will
invest in non-U.S. equity securities or options.
---------------------------------------------------------------------------
\10\ In reaching liquidity decisions, the Adviser may consider
the following factors: The frequency of trades and quotes for the
security; the number of dealers wishing to purchase or sell the
security and the number of other potential purchasers; dealer
undertakings to make a market in the security; and the nature of the
security and the nature of the marketplace in which it trades (e.g.,
the time needed to dispose of the security, the method of soliciting
offers, and the mechanics of transfer).
\11\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR
14618 (March 18, 2008), footnote 34. See also, Investment Company
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31,
1970) (Statement Regarding ``Restricted Securities''); Investment
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio
security is illiquid if it cannot be disposed of in the ordinary
course of business within seven days at approximately the value
ascribed to it by the fund. See Investment Company Act Release No.
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990)
(adopting Rule 144A under the Securities Act of 1933).
---------------------------------------------------------------------------
The Fund's investments will be consistent with the Fund's
investment objective and will not be used to achieve leveraged or
inverse leveraged returns (e.g. two times or three times the Fund's
benchmark).
Net Asset Value
According to the Registration Statement, the net asset value
(``NAV'') of the Shares of the Fund will be calculated by dividing the
value of the net assets of the Fund (i.e., the value of its total
assets less total liabilities) by the total number of Shares
outstanding. Expenses and fees, including the management and
administration fees, are accrued daily and taken into account for
purposes of determining NAV. The NAV of the Fund is generally
determined at 4:00 p.m. Eastern Time each business day when the
Exchange is open for trading. If the Exchange or market on which the
Fund's investments are primarily traded closes early, the NAV may be
calculated prior to its normal calculation time. Creation/redemption
transaction order time cutoffs (as further described below) would also
be accelerated.
Securities and other assets held by both the Fund and the
Subsidiary are generally valued at their market price using market
quotations or information provided by a pricing service. Certain short-
term debt securities are valued on the basis of amortized cost.
Commodity
[[Page 15390]]
Futures are generally valued at their settlement price as determined by
the relevant exchange. Repurchase agreements will generally be valued
at bid prices received from independent pricing services as of the
announced closing time for trading in such instruments. Cash and cash
equivalents (other than money market mutual funds) also may be valued
on the basis of information furnished by an independent pricing service
that uses a valuation matrix which incorporates both dealer-supplied
valuations and electronic data processing techniques. Short-term debt
securities with remaining maturities of sixty days or less for which
market quotations and information furnished by an independent pricing
service are not readily available will be valued at amortized cost.
Shares of money market mutual funds will be valued at their current Net
Asset Value per share.
For more information regarding the valuation of Fund investments in
calculating the Fund's NAV, see the Registration Statement.
The Shares
The Fund will issue and redeem Shares on a continuous basis at the
NAV per Share only in large blocks of a specified number of Shares or
multiples thereof (``Creation Units'') in transactions with authorized
participants who have entered into agreements with the Distributor. The
Adviser currently anticipates that a Creation Unit will consist of
50,000 Shares, though this number may change from time to time,
including prior to listing of the Shares. The exact number of Shares
that will constitute a Creation Unit will be disclosed in the
Registration Statement. Once created, Shares of the Fund may trade on
the secondary market in amounts less than a Creation Unit.
Although the Adviser anticipates that purchases and redemptions for
Creation Units will generally be executed on an all-cash basis, the
consideration for purchase of Creation Units of the Fund may consist of
an in-kind deposit of a designated portfolio of assets (including any
portion of such assets for which cash may be substituted) (i.e., the
``Deposit Assets''), and the ``Cash Component'' computed as described
below. Together, the Deposit Assets and the Cash Component constitute
the ``Fund Deposit,'' which represents the minimum initial and
subsequent investment amount for a Creation Unit of the Fund. The
specific terms surrounding the creation and redemption of shares are at
the discretion of the Adviser.
The Deposit Assets and Fund Securities (as defined below), as the
case may be, in connection with a purchase or redemption of a Creation
Unit, generally will correspond pro rata, to the extent practicable, to
the assets held by the Fund.
The Cash Component will be an amount equal to the difference
between the NAV of the Shares (per Creation Unit) and the ``Deposit
Amount,'' which will be an amount equal to the market value of the
Deposit Assets, and serve to compensate for any differences between the
NAV per Creation Unit and the Deposit Amount. The Adviser will make
available through the National Securities Clearing Corporation
(``NSCC'') on each business day, prior to the opening of business on
the Exchange, the list of names and the required number or par value of
each Deposit Asset and the amount of the Cash Component to be included
in the current Fund Deposit (based on information as of the end of the
previous business day) for the Fund.
The identity and number or par value of the Deposit Assets may
change pursuant to changes in the composition of the Fund's portfolio
as rebalancing adjustments and corporate action events occur from time
to time. The composition of the Deposit Assets may also change in
response to adjustments to the weighting or composition of the holdings
of the Fund.
The Fund reserves the right to permit or require the substitution
of a ``cash in lieu'' amount to be added to the Cash Component to
replace any Deposit Asset that may not be available in sufficient
quantity for delivery or that may not be eligible for transfer through
the Depository Trust Company (``DTC'') or the clearing process through
the NSCC.\12\
---------------------------------------------------------------------------
\12\ The Adviser represents that, to the extent the Trust
permits or requires a ``cash in lieu'' amount, such transactions
will be effected in the same or equitable manner for all authorized
participants.
---------------------------------------------------------------------------
Except as noted below, all creation orders must be placed for one
or more Creation Units and must be received by the Distributor at a
time specified by the Adviser. The Fund currently intends that such
orders must be received in proper form no later than 10:30 a.m. Eastern
Time on the date such order is placed in order for creation of Creation
Units to be effected based on the NAV of Shares of the Fund as next
determined on such date after receipt of the order in proper form. The
``Settlement Date'' is generally the third business day after the
transmittal date. On days when the Exchange or the futures markets
close earlier than normal, the Fund may require orders to create or to
redeem Creation Units to be placed earlier in the day.
A standard creation transaction fee may be imposed to offset the
transfer and other transaction costs associated with the issuance of
Creation Units.
Shares of the Fund may be redeemed only in Creation Units at their
NAV next determined after receipt of a redemption request in proper
form by the Distributor and only on a business day. Adviser will make
available through the NSCC, prior to the opening of business on the
Exchange on each business day, the designated portfolio of assets
(including any portion of such assets for which cash may be
substituted) that will be applicable (subject to possible amendment or
correction) to redemption requests received in proper form on that day
(``Fund Securities''). The redemption proceeds for a Creation Unit
generally will consist of a specified amount of cash less a redemption
transaction fee. The Fund generally will redeem Creation Units entirely
for cash.
A standard redemption transaction fee, in an amount disclosed in
the current prospectus for the Fund, may be imposed to offset transfer
and other transaction costs that may be incurred by the Fund.
Redemption requests for Creation Units of the Fund must be
submitted to the Distributor by or through an authorized participant by
a time specified by the Adviser. The Fund currently intends that such
requests must be received no later than 10:30 a.m. Eastern Time on any
business day, in order to receive that day's NAV. The authorized
participant must transmit the request for redemption in the form
required by the Fund to the Distributor in accordance with procedures
set forth in the authorized participant agreement.
Additional information regarding the Shares and the Fund, including
investment strategies, risks, creation and redemption procedures, fees
and expenses, portfolio holdings disclosure policies, distributions,
taxes and reports to be distributed to beneficial owners of the Shares
can be found in the Registration Statement or on the Web site for the
Fund (www.pointbreakETFs.com), as applicable.
Availability of Information
The Fund's Web site, which will be publicly available prior to the
public offering of Shares, will include a form of the prospectus for
the Fund that may be downloaded. The Web site will include additional
quantitative information updated on a daily basis, including, for the
Fund: (1) The prior
[[Page 15391]]
business day's reported NAV, the closing market price or the midpoint
of the bid/ask spread at the time of calculation of such NAV (the
``Bid/Ask Price''),\13\ daily trading volume, and a calculation of the
premium and discount of the closing market price or Bid/Ask Price
against the NAV; and (2) data in chart format displaying the frequency
distribution of discounts and premiums of the daily closing market
price or Bid/Ask Price against the NAV, within appropriate ranges, for
each of the four previous calendar quarters. Daily trading volume
information for the Fund will be available in the financial section of
newspapers, through subscription services such as Bloomberg, Thomson
Reuters, and International Data Corporation, which can be accessed by
authorized participants and other investors, as well as through other
electronic services, including major public Web sites. On each business
day, before commencement of trading in Shares during Regular Trading
Hours \14\ on the Exchange, the Fund will disclose on its Web site the
identities and quantities of the portfolio Commodity Futures and other
assets (the ``Disclosed Portfolio'') held by the Fund and the
Subsidiary that will form the basis for the Fund's calculation of NAV
at the end of the business day.\15\ The Disclosed Portfolio will
include, as applicable: Ticker symbol or other identifier, a
description of the holding, identity of the asset upon which the
derivative is based, the quantity of each security or other asset held
as measured by select metrics, maturity date, coupon rate, effective
date, market value and percentage weight of the holding in the
portfolio. The Web site and information will be publicly available at
no charge.
---------------------------------------------------------------------------
\13\ The Bid/Ask Price of the Fund will be determined using the
midpoint of the highest bid and the lowest offer on the Exchange as
of the time of calculation of the Fund's NAV. The records relating
to Bid/Ask Prices will be retained by the Fund and its service
providers.
\14\ Regular Trading Hours are 9:30 a.m. to 4:00 p.m. Eastern
Time.
\15\ Under accounting procedures to be followed by the Fund,
trades made on the prior business day (``T'') will be booked and
reflected in NAV on the current business day (``T+1''). Accordingly,
the Fund will be able to disclose at the beginning of the business
day the portfolio that will form the basis for the NAV calculation
at the end of the business day.
---------------------------------------------------------------------------
In addition, for the Fund, an estimated value, defined in BATS Rule
14.11(i)(3)(C) as the ``Intraday Indicative Value,'' that reflects an
estimated intraday value of the Fund's portfolio, will be disseminated.
Moreover, the Intraday Indicative Value will be based upon the current
value for the components of the Disclosed Portfolio and will be updated
and widely disseminated by one or more major market data vendors at
least every 15 seconds during the Exchange's Regular Trading Hours.\16\
In addition, the quotations of certain of the Fund's holdings may not
be updated for purposes of calculating Intraday Indicative Value during
U.S. trading hours where the market on which the underlying asset is
traded settles prior to the end of the Exchange's Regular Trading
Hours.
---------------------------------------------------------------------------
\16\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available
Intraday Indicative Values published via the Consolidated Tape
Association (``CTA'') or other data feeds.
---------------------------------------------------------------------------
The dissemination of the Intraday Indicative Value, together with
the Disclosed Portfolio, will allow investors to determine the value of
the underlying portfolio of the Fund on a daily basis and provide an
estimate of that value throughout the trading day.
Intraday price quotations on U.S. government securities, debt
securities, and repurchase agreements of the type held by the Fund are
available from major broker-dealer firms and from third-parties, which
may provide prices free with a time delay, or ``live'' with a paid fee.
For futures, such intraday information is available directly from the
applicable listing exchange. Intraday price information is also
available through subscription services, such as Bloomberg and Thomson
Reuters, which can be accessed by authorized participants and other
investors.
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. The
previous day's closing price and trading volume information for the
Shares will be generally available daily in the print and online
financial press. Quotation and last sale information for the Shares
will be available on the facilities of the CTA.
Initial and Continued Listing
The Shares will be subject to BATS Rule 14.11(i), which sets forth
the initial and continued listing criteria applicable to Managed Fund
Shares. The Exchange represents that, for initial and/or continued
listing, the Fund must be in compliance with Rule 10A-3 under the
Act.\17\ A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange. The Exchange will obtain a
representation from the issuer of the Shares that the NAV will be
calculated daily and that the NAV and the Disclosed Portfolio will be
made available to all market participants at the same time.
---------------------------------------------------------------------------
\17\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund. The Exchange will halt trading in
the Shares under the conditions specified in BATS Rule 11.18. Trading
may be halted because of market conditions or for reasons that, in the
view of the Exchange, make trading in the Shares inadvisable. These may
include: (1) The extent to which trading is not occurring in the
Commodity Futures and other assets composing the Disclosed Portfolio of
the Fund; or (2) whether other unusual conditions or circumstances
detrimental to the maintenance of a fair and orderly market are
present. Trading in the Shares also will be subject to Rule
14.11(i)(4)(B)(iv), which sets forth circumstances under which Shares
of the Fund may be halted.
Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. BATS will allow
trading in the Shares from 8:00 a.m. until 5:00 p.m. Eastern Time. The
Exchange has appropriate rules to facilitate transactions in the Shares
during all trading sessions. As provided in BATS Rule 14.11(i)(2)(C),
the minimum price variation for quoting and entry of orders in Managed
Fund Shares traded on the Exchange is $0.01.
Surveillance
The Exchange believes that its surveillance procedures are adequate
to properly monitor the trading of the Shares on the Exchange during
all trading sessions and to deter and detect violations of Exchange
rules and the applicable federal securities laws. Trading of the Shares
through the Exchange will be subject to the Exchange's surveillance
procedures for derivative products, including Managed Fund Shares. The
Exchange may obtain information regarding trading in the Shares and the
underlying futures, including futures contracts held by the Subsidiary,
via the Intermarket Surveillance Group (``ISG'') from other exchanges
who are members or affiliates of the ISG or with which the Exchange has
entered into a comprehensive
[[Page 15392]]
surveillance sharing agreement.\18\ In addition, the Exchange is able
to access, as needed, trade information for certain fixed income
instruments reported to FINRA's Trade Reporting and Compliance Engine
(``TRACE''). The Exchange prohibits the distribution of material non-
public information by its employees.
---------------------------------------------------------------------------
\18\ For a list of the current members and affiliate members of
ISG, see www.isgportal.com. The Exchange notes that not all
components of the Disclosed Portfolio for the Fund may trade on
markets that are members of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement. The Exchange
also notes that all of the futures contracts in the Disclosed
Portfolio for the Fund will trade on markets that are a member of
ISG or affiliate or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------
Information Circular
Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares. Specifically, the Information
Circular will discuss the following: (1) The procedures for purchases
and redemptions of Shares in Creation Units (and that Shares are not
individually redeemable); (2) BATS Rule 3.7, which imposes suitability
obligations on Exchange members with respect to recommending
transactions in the Shares to customers; (3) how information regarding
the Intraday Indicative Value and Disclosed Portfolio are disseminated;
(4) the risks involved in trading the Shares during the Pre-Opening
\19\ and After Hours Trading Sessions \20\ when an updated Intraday
Indicative Value will not be calculated or publicly disseminated; (5)
the requirement that members deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; and (6) trading information.
---------------------------------------------------------------------------
\19\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m.
Eastern Time.
\20\ The After Hours Trading Session is from 4:00 p.m. to 5:00
p.m. Eastern Time.
---------------------------------------------------------------------------
In addition, the Information Circular will advise members, prior to
the commencement of trading, of the prospectus delivery requirements
applicable to the Fund. Members purchasing Shares from the Fund for
resale to investors will deliver a prospectus to such investors. The
Information Circular will also discuss any exemptive, no-action, and
interpretive relief granted by the Commission from any rules under the
Act.
In addition, the Information Circular will reference that the Fund
is subject to various fees and expenses described in the Registration
Statement. The Information Circular will also disclose the trading
hours of the Shares of the Fund and the applicable NAV calculation time
for the Shares. The Information Circular will disclose that information
about the Shares of the Fund will be publicly available on the Fund's
Web site. In addition, the Information Circular will reference that the
Trust is subject to various fees and expenses described in the
Registration Statement.
2. Statutory Basis
The Exchange believes that the proposal is consistent with section
6(b) of the Act \21\ in general and section 6(b)(5) of the Act \22\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78f.
\22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in BATS Rule 14.11(i). The
Exchange believes that its surveillance procedures are adequate to
properly monitor the trading of the Shares on the Exchange during all
trading sessions and to deter and detect violations of Exchange rules
and the applicable federal securities laws. If the investment adviser
to the investment company issuing Managed Fund Shares is affiliated
with a broker-dealer, such investment adviser to the investment company
shall erect a ``fire wall'' between the investment adviser and the
broker-dealer with respect to access to information concerning the
composition and/or changes to such investment company portfolio. The
Adviser is not a registered broker-dealer and is not affiliated with a
broker-dealer. The Exchange may obtain information regarding trading in
the Shares and the underlying futures, including those held by the
Subsidiary, via the ISG from other exchanges who are members or
affiliates of the ISG or with which the Exchange has entered into a
comprehensive surveillance sharing agreement.\23\ In addition, the
Exchange is able to access, as needed, trade information for certain
fixed income instruments reported to FINRA's TRACE.
---------------------------------------------------------------------------
\23\ See note 21, supra.
---------------------------------------------------------------------------
Under normal circumstances, the Fund will invest, either directly
or through the Subsidiary, in a combination of Commodity Futures and
Cash Instruments. Commodity Futures provide exposure to the investment
returns of the commodities markets, without investing directly in
physical commodities. The Fund generally will not invest directly in
Commodity Futures. The Fund expects to gain exposure to these
investments by investing a portion of its assets in the Subsidiary.
Cash Instruments include only the following instruments: (i) Short-term
obligations issued by the U.S. Government; (ii) cash and cash-like
instruments; and (iii) money market mutual funds, including affiliated
money market mutual funds. The Fund will not invest in Cash Instruments
that are below investment grade.
During times of adverse market, economic, political or other
conditions, the Fund may depart temporarily from its principal
investment strategies (such as by maintaining a significant uninvested
cash position) for defensive purposes. Doing so could help the Fund
avoid losses, but may mean lost investment opportunities. During these
periods, the Fund may not achieve its investment objective.
Additionally, the Fund may hold up to an aggregate amount of 15% of
its net assets in illiquid assets (calculated at the time of
investment). The Fund will monitor its portfolio liquidity on an
ongoing basis to determine whether, in light of current circumstances,
an adequate level of liquidity is being maintained, and will consider
taking appropriate steps in order to maintain adequate liquidity if,
through a change in values, net assets, or other circumstances, more
than 15% of the Fund's net assets are held in illiquid assets. Illiquid
assets include assets subject to contractual or other restrictions on
resale and other instruments that lack readily available markets as
determined in accordance with Commission staff guidance.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Exchange will obtain a representation from the issuer of the
Shares that the NAV will be calculated daily and that the NAV and the
Disclosed Portfolio will be made available to all market participants
at the same time. In addition, a large amount of information is
publicly available regarding the Fund and the
[[Page 15393]]
Shares, thereby promoting market transparency. Moreover, the Intraday
Indicative Value will be disseminated by one or more major market data
vendors at least every 15 seconds during Regular Trading Hours. On each
business day, before commencement of trading in Shares during Regular
Trading Hours, the Fund will disclose on its Web site the Disclosed
Portfolio that will form the basis for the Fund's calculation of NAV at
the end of the business day. Pricing information will be available on
the Fund's Web site including: (1) The prior business day's reported
NAV, the Bid/Ask Price of the Fund, and a calculation of the premium
and discount of the Bid/Ask Price against the NAV; and (2) data in
chart format displaying the frequency distribution of discounts and
premiums of the daily closing market price or Bid/Ask Price against the
NAV, within appropriate ranges, for each of the four previous calendar
quarters. Additionally, information regarding market price and trading
of the Shares will be continually available on a real-time basis
throughout the day on brokers' computer screens and other electronic
services, and quotation and last sale information for the Shares will
be available on the facilities of the CTA. The Web site for the Fund
will include a form of the prospectus for the Fund and additional data
relating to NAV and other applicable quantitative information. Trading
in Shares of the Fund will be halted under the conditions specified in
BATS Rule 11.18. Trading may also be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. Finally, trading in the Shares will
be subject to BATS Rule 14.11(i)(4)(B)(iv), which sets forth
circumstances under which Shares of the Fund may be halted. In
addition, as noted above, investors will have ready access to
information regarding the Fund's holdings, the Intraday Indicative
Value, the Disclosed Portfolio, and quotation and last sale information
for the Shares.
Intraday price quotations on U.S. government securities, debt
securities, and repurchase agreements of the type held by the Fund are
available from major broker-dealer firms and from third-parties, which
may provide prices free with a time delay, or ``live'' with a paid fee.
For futures, such intraday information is available directly from the
applicable listing exchange. Intraday price information is also
available through subscription services, such as Bloomberg and Thomson
Reuters, which can be accessed by authorized participants and other
investors.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
additional types of actively-managed exchange-traded product that will
enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, the Exchange has in
place surveillance procedures relating to trading in the Shares and may
obtain information via ISG from other exchanges that are members of ISG
or with which the Exchange has entered into a comprehensive
surveillance sharing agreement as well as trade information for certain
fixed income instruments as reported to FINRA's TRACE. In addition, as
noted above, investors will have ready access to information regarding
the Fund's holdings, the Intraday Indicative Value, the Disclosed
Portfolio, and quotation and last sale information for the Shares.
For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of section 6(b)(5) of the
Act.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change, rather will facilitate the listing and trading of
additional actively-managed exchange-traded products that will enhance
competition among both market participants and listing venues, to the
benefit of investors and the marketplace.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will: (a) by order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BATS-2016-16 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BATS-2016-16. 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 will also be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BATS-2016-16 and should be
submitted on or before April 12, 2016.
[[Page 15394]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------
\24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-06339 Filed 3-21-16; 8:45 am]
BILLING CODE 8011-01-P
