Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of Amendment No. 1 and Order Approving on an Accelerated Basis a Proposed Rule Change, as Modified by Amendments No. 1, No. 2, and No. 3, To List and Trade Shares of the SPDR DoubleLine Emerging Markets Fixed Income ETF of the SSgA Active Trust, 22143-22148 [2016-08554]

Download as PDF Federal Register / Vol. 81, No. 72 / Thursday, April 14, 2016 / Notices ISEMercury–2016–07 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–ISEMercury–2016–07. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of 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– ISEMercury–2016–07 and should be submitted on or before May 5, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–08556 Filed 4–13–16; 8:45 am] BILLING CODE 8011–01–P mstockstill on DSK4VPTVN1PROD with NOTICES SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 20549–2736. 17 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:56 Apr 13, 2016 Jkt 238001 Extension: Rule 605 of Regulation NMS, SEC File No. 270–488, OMB Control No. 3235–0542 Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) (‘‘PRA’’), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget (‘‘OMB’’) a request for approval of extension of the previously approved collection of information provided for in Rule 605 (17 CFR 242.605) under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) (‘‘Exchange Act’’). Rule 605 of Regulation NMS,1 formerly known as, Rule 11Ac1–5, requires market centers to make available to the public monthly order execution reports in electronic form. The Commission believes that many market centers retain most, if not all, of the underlying raw data necessary to generate these reports in electronic format. Once the necessary data is collected, market centers could either program their systems to generate the statistics and reports, or transfer the data to a service provider (such as an independent company in the business of preparing such reports or a selfregulatory organization) that would generate the statistics and reports. The collection of information obligations of Rule 605 apply to all market centers that receive covered orders in national market system securities. The Commission estimates that approximately 132 market centers are subject to the collection of information obligations of Rule 605. Each of these respondents is required to respond to the collection of information on a monthly basis. The Commission staff estimates that, on average, Rule 605 causes respondents to spend 6 hours per month to collect the data necessary to generate the reports, or 72 hours per year. With an estimated 132 market centers subject to Rule 605, the total data collection time burden to comply with the monthly reporting requirement is estimated to be 9,504 hours per year. Based on discussions with industry sources, the Commission staff estimates that an individual market center could retain a service provider to prepare a monthly report using the data collected for approximately $2,978 per month. 1 Regulation NMS, adopted by the Commission in June 2005, redesignated the national market system rules previously adopted under Section 11A of the Exchange Act. Rule 11Ac1–5 under the Exchange Act was redesignated Rule 605 of Regulation NMS. No substantive amendments were made to Rule 605 of Regulation NMS. See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 22143 This per-respondent estimate is based on the rate that a market center could expect to obtain if it negotiated on an individual basis. Based on the $2,978 estimate, the monthly cost to the 132 market centers to retain service providers to prepare reports would be $393,096, or an annual cost of approximately $4,717,152. The collection of information obligation imposed by Rule 605 is mandatory. The response will be available to the public and will not be kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number. The public may view background documentation for this information collection at the following Web site, www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an email to: Shagufta_ Ahmed@omb.eop.gov; and (ii) Pamela Dyson, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549, or by sending an email to PRA_ Mailbox@sec.gov. Comments must be submitted to OMB within 30 days of this notice. Dated: April 8, 2016. Robert W. Errett, Deputy Secretary. [FR Doc. 2016–08552 Filed 4–13–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77567; File No. SR–BATS– 2015–94] Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of Amendment No. 1 and Order Approving on an Accelerated Basis a Proposed Rule Change, as Modified by Amendments No. 1, No. 2, and No. 3, To List and Trade Shares of the SPDR DoubleLine Emerging Markets Fixed Income ETF of the SSgA Active Trust April 8, 2016. I. Introduction On December 28, 2015, BATS Exchange, Inc. (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant E:\FR\FM\14APN1.SGM 14APN1 22144 Federal Register / Vol. 81, No. 72 / Thursday, April 14, 2016 / Notices to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares of the SPDR® DoubleLine® Emerging Markets Fixed Income ETF of the SSgA Active Trust under BATS Rule 14.11(i). The proposed rule change was published for comment in the Federal Register on January 15, 2016.3 On February 23, 2016, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 On February 26, 2016, the Exchange filed Amendment No. 1 to the proposal.6 On March 24, 2016, the Exchange filed Amendment No. 2 to the proposal.7 On April 7, 2016, Exchange 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 76862 (Jan. 11, 2016), 81 FR 2282. 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 77209, 81 FR 10315 (Feb. 29, 2016). The Commission designated April 14, 2016, as the date by which it should approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule change. 6 Amendment No. 1 replaced and superseded the proposed rule change in its entirety. In Amendment No. 1, the Exchange clarified that: (1) The Fund may invest without limit in investments denominated in any currency, but expects to invest a portion of its assets in U.S.-dollar-denominated investments; (2) the Fund may invest up to 20% of its portfolio in structured securities and junior bank loans; and (3) to limit the potential risk associated with derivative transactions, the Fund will segregate or ‘‘earmark’’ assets determined to be liquid by the Adviser in accordance with procedures established by the Trust’s Board of Trustees and in accordance with the Investment Company Act of 1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) (or, as permitted by applicable regulations, enter into certain offsetting positions) to cover its obligations under derivative instruments, and will include appropriate risk disclosure in its offering documents, including leveraging risk. Amendment No. 1 also adds a representation that the Adviser believes there will be minimal, if any, impact to the arbitrage mechanism as a result of the use of derivatives, and makes changes of a technical nature. The amendments to the proposed rule change are available at: https://www.sec.gov/ comments/sr-bats-2015-94/bats201594.shtml. 7 In Amendment No. 2, the Exchange clarifies that: (1) All statements and representations made in this filing regarding (a) the description of the portfolio, (b) limitations on portfolio holdings or reference assets, or (c) the applicability of Exchange rules and surveillance procedures shall constitute continued listing requirements for listing the Shares on the Exchange; and (2) the issuer has represented to the Exchange that it will advise the Exchange of any failure by the Fund to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Exchange Act, the Exchange will surveil for compliance with the continued listing requirements. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under Exchange Rule 14.12. Because Amendment No. 2 adds clarification to the mstockstill on DSK4VPTVN1PROD with NOTICES 2 17 VerDate Sep<11>2014 17:56 Apr 13, 2016 Jkt 238001 filed Amendment No. 3 to the proposed rule change.8 The Commission has received no comments on the proposal. The Commission is publishing this notice to solicit comments on Amendment No. 1 from interested persons, and is approving the proposed rule change, as modified by Amendments No. 1, No. 2, and No. 3, on an accelerated basis. II. The Exchange’s Description of the Proposal 9 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. The Shares will be offered by SSgA Active Trust (‘‘Trust’’), which is organized as a Massachusetts business trust and is registered with the Commission as an open-end management investment company.10 SSGA Funds Management, Inc. will serve as the investment adviser to the Fund (‘‘Adviser’’) 11 as well as the proposal and does not materially alter the substance of the proposed rule change or raise unique or novel regulatory issues, Amendment No. 2 is not subject to notice and comment. 8 In Amendment No. 3, the Exchange made a conforming change to confirm that the Fund may invest in unsponsored American Depositary Receipts (‘‘ADRs’’), which are not exchange traded. Because Amendment No. 3 clarifies the proposal and does not materially alter the substance of the proposed rule change or raise unique or novel regulatory issues, Amendment No. 3 is not subject to notice and comment. 9 Additional information regarding, among other things, the Shares, the Fund, its investment objective, its investments, its investment strategies, its investment methodology, its investment restrictions, its fees, its creation and redemption procedures, availability of information, trading rules and halts, and surveillance procedures can be found in Amendment No. 1 and in the Registration Statement. See Amendment No. 1, supra note 6, and Registration Statement, infra note 10, respectively. 10 See Registration Statement on Form N–1A for the Trust, dated October 8, 2015 (File Nos. 333– 173276 and 811–22542) (‘‘Registration Statement’’). The Exchange states that the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. 29524 (December 13, 2010) (File No. 812–13487). 11 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (‘‘Advisers Act’’). As a result, the Adviser and its related personnel as well as the Sub-Adviser and its related personnel are subject to the provisions of Rule 204A–1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with other applicable securities laws. Accordingly, procedures designed to prevent the communication and misuse of nonpublic information by an investment adviser must be consistent with Rule 204A–1 under the Advisers Act. In addition, Rule 206(4)–7 under the Advisers Act makes it unlawful for an investment adviser to provide investment advice to clients unless such investment adviser has (i) adopted and implemented written policies and procedures PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 administrator for the Fund. DoubleLine Capital LP will be the Fund’s subadviser (‘‘Sub-Adviser’’). State Street Global Markets, LLC will be the principal underwriter and distributor of the Shares. State Street Bank and Trust Company will serve as the subadministrator, custodian (‘‘Custodian’’), transfer agent, and, where applicable, lending agent (‘‘Lending Agent’’) for the Fund. Neither the Adviser nor the SubAdviser is registered as a broker-dealer, but the Adviser is affiliated with a broker-dealer and has implemented a ‘‘fire wall’’ with respect to that brokerdealer regarding access to information concerning the composition of and changes to the Fund’s portfolio. The Sub-Adviser is not affiliated with a broker-dealer.12 A. Principal Investments of the Fund The Fund is an actively managed fund that does not seek to replicate the performance of a specified index. The Fund will seek to provide high total return from current income and capital appreciation. To achieve its objective, the Fund will invest, under normal circumstances, 13 at least 80% of its net assets (plus the amount of borrowings for investment purposes) in emergingmarket fixed income securities.14 More specifically, the Fund will invest at least 80% of its net assets (plus the amount 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. 12 See Amendment No. 1, supra note 6, at 6. In the event (a) the Adviser or Sub-Adviser becomes registered as a broker-dealer or newly affiliated with a broker-dealer, or (b) any new adviser or subadviser is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement a fire wall with respect to its relevant personnel or broker-dealer affiliate regarding access to information concerning the composition of and 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. See id. 13 The term ‘‘under normal circumstances’’ includes, but is not limited to, the absence of extreme volatility or trading halts in the fixed income markets or the financial markets generally; operational issues causing dissemination of inaccurate market information; or force majeure type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption, or any similar intervening circumstance. 14 Under normal market conditions, the SubAdviser intends to seek to construct an investment portfolio with a weighted average effective duration of no less than two years and no more than eight years. E:\FR\FM\14APN1.SGM 14APN1 Federal Register / Vol. 81, No. 72 / Thursday, April 14, 2016 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES of borrowings for investment purposes) in fixed income instruments (‘‘Fixed Income Securities’’), which are defined as the following instruments: Fixed income securities issued or guaranteed by foreign corporations 15 or foreign governments, including securities issued or guaranteed by companies (including hybrid securities), financial institutions, or government entities in emerging market countries; corporate or government bonds; sovereign debt; structured securities; 16 foreign currency transactions (discussed below); certain derivatives (discussed below); exchange-traded foreign equity securities (described below) and preferred securities; unsponsored ADRs; 17 zero coupon bonds; credit linked notes; pass-through notes; bank loans; and perpetual maturity bonds. Fixed Income Securities may have fixed or variable interest rates and any maturity. The Fund will generally invest in Fixed Income Securities from at least five emerging market countries,18 with no more than 20% allocated to a single country. The Fund may invest in Fixed Income Securities of any credit quality, but seeks to invest no more than 20%, at the time of investment, in Fixed Income Securities that are unrated, rated BB+ or lower by Standard & Poor’s Rating Service or Ba1 or lower by Moody’s Investor Service, Inc. or the equivalent by any other nationally recognized statistical rating organization. The Fund may purchase exchangetraded common stocks and exchangetraded preferred securities of foreign corporations. The Fund’s investments in 15 While the Fund is permitted to invest without restriction in corporate bonds, the Sub-Adviser expects that, under normal circumstances, the Fund will generally seek to invest in corporate bond issuances that have at least $100,000,000 par amount outstanding. Further, component corporate bonds that in the aggregate account for at least 75% of the weight of corporate bonds will have a minimum original principal outstanding of $100 million or more. 16 Structured securities generally include privately issued and publicly issued structured securities, including certain publicly issued structured securities that are not agency securities. The Fund may invest up to 20% of its portfolio in structured securities and junior bank loans. 17 See Amendment No. 3, supra note 8. 18 An ‘‘emerging market country’’ is a country that, at the time the Fund invests in the related fixed income instruments, is classified as an emerging or developing economy by any supranational organization such as the World Bank or the United Nations, or related entities, or is considered an emerging market country for purposes of constructing a major emerging market securities index. A fixed income instrument is considered to be from an emerging market country if the issuer or guarantor of the instrument is either domiciled in an emerging market country or derives a majority of its cash flow or revenue from an emerging market country. VerDate Sep<11>2014 17:56 Apr 13, 2016 Jkt 238001 common stock of foreign corporations may also be in the form of ADRs (sponsored and unsponsored, as noted above),19 Global Depositary Receipts, and European Depositary Receipts (collectively ‘‘Depositary Receipts’’). The Fund may conduct foreign currency transactions on a spot (i.e., cash) or forward basis (i.e., by entering into forward contracts to purchase or sell foreign currencies). The Fund may also invest in the following derivatives: Foreign currency futures; credit default swaps;20 and options, swaps, futures, and forward contracts on Fixed Income Securities. All such derivatives will be exchange traded or centrally cleared.21 B. Non-Principal Investments While the Adviser and Sub-Adviser, under normal circumstances, will invest at least 80% of the Fund’s net assets in the instruments described above, the Adviser and Sub-Adviser may invest up to 20% of the Fund’s net assets in other securities and financial instruments, as described below. The Fund may invest in U.S. Government obligations and U.S. equity securities. The Fund’s investments in such U.S. equity securities may include securities traded over-the-counter (‘‘OTC’’) as well as those traded on a securities exchange. The Fund may invest in convertible securities traded on an exchange or OTC. The Fund may invest in repurchase agreements with commercial banks, brokers or dealers to generate income from its excess cash balances and to invest securities-lending cash collateral. The Fund may also enter into reverse repurchase agreements, which involve 19 The Fund may invest in sponsored or unsponsored ADRs; however, not more than 10% of the net assets of the Fund will be invested in unsponsored ADRs. All exchange-traded equity securities in which the Fund may invest will trade on markets that are members of the Intermarket Surveillance Group (‘‘ISG’’) or that have entered into a comprehensive surveillance agreement with the Exchange. 20 The Fund will enter into CDS agreements only with counterparties that meet certain standards of creditworthiness. The Fund will segregate assets necessary to meet any accrued payment obligations when it is the buyer of CDSs. In cases where the Fund is a seller of a CDS, if the CDS is physically settled or cash settled, the Fund will be required to segregate the full notional amount of the CDS. 21 The Exchange states that the Adviser believes there will be minimal, if any, impact to the arbitrage mechanism as a result of the use of derivatives. Market makers and participants should be able to value derivatives as long as the positions are disclosed with relevant information. The Exchange states that the Adviser believes that the price at which Shares trade will continue to be disciplined by arbitrage opportunities created by the ability to purchase or redeem creation Shares at their net asset value (‘‘NAV’’), which should ensure that Shares will not trade at a material discount or premium in relation to their NAV. PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 22145 the sale of securities with an agreement to repurchase the securities at an agreed-upon price, date, and interest payment and which have the characteristics of borrowing. The Fund’s exposure to reverse repurchase agreements will be covered by securities having a value equal to or greater than such commitments. Although there is no limit on the percentage of Fund assets that can be used in connection with reverse repurchase agreements, the Fund does not expect to engage, under normal circumstances, in reverse repurchase agreements with respect to more than 10% of its net assets. In addition to repurchase agreements, the Fund may invest in short-term instruments, including money market instruments 22 and cash equivalents, and may hold cash. The Fund may lend its portfolio securities in an amount not to exceed 33 1⁄3% of the value of its total assets via a securities lending program through the Lending Agent, to brokers, dealers, and other financial institutions desiring to borrow securities to complete transactions and for other purposes. A securities lending program allows the Fund to receive a portion of the income generated by lending its securities and investing the respective collateral. The Fund will receive collateral for each loaned security that is at least equal to 102% of the market value of that security, marked to market each trading day. The Fund may invest in Restricted Securities. Restricted Securities are securities that are not registered under the Securities Act, but which can be offered and sold to ‘‘qualified institutional buyers’’ under Rule 144A under the Securities Act or securities purchased after the lapse of the appropriate distribution compliance 22 Money market instruments are generally shortterm investments that may include but are not limited to: (i) Shares of money market funds (including those advised by the Adviser); (ii) obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities (including government-sponsored enterprises); (iii) negotiable certificates of deposit (‘‘CDs’’), bankers’ acceptances, fixed time deposits and other obligations of U.S. and foreign banks (including foreign branches) and similar institutions; (iv) commercial paper rated at the date of purchase ‘‘Prime–1’’ by Moody’s or ‘‘A–1’’ by S&P, or if unrated, of comparable quality as determined by the Adviser; (v) non-convertible corporate debt securities (e.g., bonds and debentures) with remaining maturities at the date of purchase of not more than 397 days and that satisfy the rating requirements set forth in Rule 2a–7 under the 1940 Act; and (vi) short-term U.S. dollar-denominated obligations of foreign banks (including U.S. branches) that, in the opinion of the Adviser, are of comparable quality to obligations of U.S. banks that may be purchased by the Fund. Any of these instruments may be purchased on a current or a forward-settled basis. E:\FR\FM\14APN1.SGM 14APN1 22146 Federal Register / Vol. 81, No. 72 / Thursday, April 14, 2016 / Notices period under Regulation S under the Securities Act. The Fund may invest in the securities of other investment companies, including affiliated funds and money market funds, subject to applicable limitations under Section 12(d)(1) of the 1940 Act. mstockstill on DSK4VPTVN1PROD with NOTICES III. Discussion and Commission Findings After careful review, the Commission finds that the Exchange’s proposal to list and trade the Shares is consistent with the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange.23 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Exchange Act,24 which requires, among other things, that the Exchange’s rules be designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission also finds that the proposal to list and trade the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Exchange Act,25 which sets forth Congress’ finding that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities. Quotation and last-sale information for the Shares will be available on the facilities of the Consolidated Tape Association. The Exchange represents that the intraday, closing, and settlement prices of common stocks and other exchangelisted instruments (including Depositary Receipts, preferred securities, convertible securities, common stock, and ETPs) will be readily available from the securities exchanges trading those securities as well as from automated quotation systems, published or other public sources, or online information services. Intraday and closing price information for exchange-traded options and futures will be available from the applicable exchange and from major market data vendors. In addition, price information for U.S. exchange-traded 23 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition and capital formation. See 15 U.S.C. 78c(f). 24 15 U.S.C. 78f(b)(5). 25 15 U.S.C. 78k–1(a)(1)(C)(iii). VerDate Sep<11>2014 17:56 Apr 13, 2016 Jkt 238001 options will be available from the Options Price Reporting Authority. Quotation information from brokers and dealers or pricing services will be available for Fixed Income Securities and U.S. Government obligations. Price information regarding short-term instruments, spot currency transactions, OTC-traded derivative instruments (including options, swaps, and forward currency transactions), and nonexchange-listed equity securities traded in the OTC market (including Restricted Securities, repurchase and reverse repurchase agreements, OTC equity securities, OTC-traded preferred securities, and OTC-traded convertible securities) is available from major market data vendors. The Commission also believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. On each business day, before commencement of trading in Shares during Regular Trading Hours 26 on the Exchange, the Fund will disclose on its Web site the identities and quantities of the portfolio of securities and other assets (the ‘‘Disclosed Portfolio’’) held by the Fund that will form the basis for the Fund’s calculation of NAV at the end of the business day.27 The Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time. In addition, the Intraday Indicative Value will be based upon the current value for the components of the Disclosed Portfolio and will be updated 26 Regular Trading Hours are 9:30 a.m. to 4:00 p.m. Eastern Time. 27 The Fund’s disclosure of derivative positions in the Disclosed Portfolio will include information that market participants can use to value these positions intraday. The Disclosed Portfolio will include, as applicable: The ticker symbol; CUSIP number or other identifier, if any; a description of the holding (including the type of holding, such as the type of swap); the identity of the security, commodity, index or other asset or instrument underlying the holding, if any; for options, the option strike price; quantity held (as measured by, for example, par value, notional value or number of shares, contracts, or units); maturity date, if any; coupon rate, if any; effective date, if any; market value of the holding; and the percentage weighting of the holding in the Fund’s portfolio. The Web site and information will be publicly available at no charge. Under accounting procedures to be followed by the Fund, trades made on the prior business day will be booked and reflected in NAV on the current business day. 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. PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 and widely disseminated by one or more major market data vendors at least every 15 seconds during the Exchange’s Regular Trading Hours. The Custodian, through the National Securities Clearing Corporation, will make available on each business day, prior to the opening of business on the Exchange, the list of the names and the required number of shares of each Deposit Security or the required amount of Deposit Cash, as applicable, to be included in the current Fund Deposit (based on information at the end of the previous business day) for the Fund. The NAV of the Shares generally will be calculated once daily Monday through Friday as of the close of regular trading on the Exchange, generally 4:00 p.m. Eastern Time (the ‘‘NAV Calculation Time’’) on each day that the Exchange is open for trading, based on prices at the NAV Calculation Time. 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 and additional information relating to NAV and other applicable information. The Exchange represents that trading in the Shares will be halted 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.28 Trading in the Shares also will be subject to Rule 14.11(i)(4)(B)(iv), which sets forth circumstances under which trading in the Shares may be halted. The Exchange states that it prohibits the distribution of material non-public information by its employees. The Exchange represents that the Adviser is not registered as a broker-dealer but is affiliated with a broker-dealer and has implemented a ‘‘fire wall’’ with respect to that broker-dealer regarding access to information concerning the composition of and changes to the Fund’s portfolio. Trading of the Shares through the Exchange will be subject to the Exchange’s surveillance procedures for derivative products, including Managed Fund Shares. The Exchange may obtain information regarding trading in the Shares and the underlying shares in exchange-traded investment companies, U.S. equity securities, foreign equity securities, futures, and options via the ISG, from other exchanges who are 28 These may include: (1) The extent to which trading is not occurring in the securities and/or the financial instruments composing the Disclosed Portfolio of the Fund; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. E:\FR\FM\14APN1.SGM 14APN1 Federal Register / Vol. 81, No. 72 / Thursday, April 14, 2016 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES members or affiliates of the ISG, or from other exchanges with which the Exchange has entered into a comprehensive surveillance sharing agreement.29 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. The Exchange represents that it 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. In support of this proposal, the Exchange has also made the following representations: (1) 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.30 (2) All statements and representations made regarding (a) the description of the portfolio, (b) limitations on portfolio holdings or reference assets, or (c) the applicability of Exchange rules and surveillance procedures shall constitute continued listing requirements for listing the Shares on the Exchange.31 (3) The issuer will advise the Exchange of any failure by the Fund to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Exchange Act, the Exchange will surveil for compliance with the continued listing requirements. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under Exchange Rule 14.12.32 (4) The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions.33 (5) Trading of the Shares through the Exchange will be subject to the Exchange’s surveillance procedures for derivative products, including Managed Fund Shares, and these 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.34 29 For a list of the current members and affiliate members of ISG, see www.isgportal.com. The Exchange also notes that all exchange-traded instruments, including investment company securities, futures, and options will trade on markets that are a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. See Amendment No. 1, supra note 6, at 30, n.27. 30 See Amendment No. 1, supra note 6, at 28. 31 See Amendment No. 2, supra note 7, at 3. 32 Id. at 4. 33 See Amendment No. 1, supra note 6, at 29. 34 Id. at 29–30. VerDate Sep<11>2014 17:56 Apr 13, 2016 Jkt 238001 (6) 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: (a) The procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (b) BATS Rule 3.7, which imposes suitability obligations on Exchange members with respect to recommending transactions in the Shares to customers; (c) how information regarding the Intraday Indicative Value and the Disclosed Portfolio is disseminated; (d) the risks involved in trading the Shares during the Pre-Opening and After Hours Trading Sessions when an updated Intraday Indicative Value will not be calculated or publicly disseminated; (e) the requirement that members deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (f) trading information.35 (7) For initial and continued listing, the Fund must be in compliance with Rule 10A–3 under the Act.36 (8) A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange.37 (9) The Fund will enter into CDS agreements only with counterparties that meet certain standards of creditworthiness.38 (10) The Fund may invest up to 20% of its portfolio in structured securities and junior bank loans in the aggregate.39 (11) Under normal circumstances, the Fund will generally seek to invest in corporate bond issuances that have at least $100,000,000 par amount outstanding. Further, component corporate bonds that in the aggregate account for at least 75% of the weight of corporate bonds will have a minimum original principal outstanding of $100 million or more.40 (12) The Fund may invest in sponsored or unsponsored ADRs; however, not more than 10% of the net assets of the Fund will be invested in unsponsored ADRs.41 (13) All exchange-traded instruments, including investment company securities, futures, and options will trade on markets that are a member of 35 Id. at 30–31. at 28. See also 17 CFR 240.10A–3. 37 See Amendment No. 1, supra note 6, at 28. 38 Id. at 12. 39 Id. at 9. 40 Id. 41 Id. at 11. 36 Id. PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 22147 ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.42 This approval order is based on all of the Exchange’s representations, including those set forth above and in Amendments No. 1, No. 2, and No. 3. For the foregoing reasons, the Commission finds that the proposed rule change, as modified by Amendment No. 1, No. 2, and No. 3, is consistent with Section 6(b)(5) of the Act 43 and the rules and regulations thereunder applicable to a national securities exchange. IV. Solicitation of Comments on Amendment No. 1 Interested persons are invited to submit written data, views, and arguments concerning whether Amendment No. 1 is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BATS–2015–94 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–2015–94. 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 42 Id. 43 15 E:\FR\FM\14APN1.SGM at 30, n.27. U.S.C. 78f(b)(5). 14APN1 22148 Federal Register / Vol. 81, No. 72 / Thursday, April 14, 2016 / Notices inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BATS– 2015–94 and should be submitted on or before May 5, 2016. SECURITIES AND EXCHANGE COMMISSION V. Accelerated Approval of Proposed Rule Change as Modified by Amendment Nos. 1, 2, and 3 April 8, 2016. The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 1, No. 2, and No. 3, prior to the 30th day after the date of publication of notice of Amendment No. 1 in the Federal Register. The Exchange submitted Amendment No. 1 to, among other things, provide clarifying details about the investments the Fund would be permitted to hold; to further limit the percentage of the Fund’s portfolio that may be composed of structured securities and junior bank loans; to limit the potential risk associated with derivative transactions; and to represent that the Adviser believes there will be minimal, if any, impact to the arbitrage mechanism as a result of the Fund’s use of derivatives. This information aided the Commission in evaluating the likelihood that market participants may engage in effective arbitrage. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,44 to approve the proposed rule change, as modified by Amendment No. 1, No. 2, and No. 3, on an accelerated basis. VI. Conclusion Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to SPXPM Pilot Program 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 April 7, 2016, Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 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 extend the operation of its SPXPM pilot program through May 3, 2017. The text of the proposed rule change is provided below. (additions are italicized; deletions are [bracketed]) * * * * * Chicago Board Options Exchange, Incorporated Rules IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the Exchange Act, that the proposed rule change (SR–BATS–2015–94), as modified by Amendment No. 1, No. 2, and No. 3, is hereby approved on an accelerated basis. mstockstill on DSK4VPTVN1PROD with NOTICES [Release No. 34–77573; File No. SR–CBOE– 2016–036] For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.45 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–08554 Filed 4–13–16; 8:45 am] BILLING CODE 8011–01–P * * * * * Rule 24.9. Terms of Index Option Contracts No change. . . . Interpretations and Policies: .01–.13 No change. .14 In addition to A.M.-settled Standard & Poor’s 500 Stock Index options approved for trading on the Exchange pursuant to Rule 24.9, the Exchange may also list options on the S&P 500 Index whose exercise settlement value is derived from closing prices on the last trading day prior to 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 2 17 44 15 45 17 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:56 Apr 13, 2016 Jkt 238001 PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 expiration (‘‘SPXPM’’). The Exchange may also list options on the Mini-SPX Index (‘‘XSP’’) whose exercise settlement value is derived from closing prices on the last trading day prior to expiration (‘‘P.M.-settled’’). SPXPM options and P.M.-settled XSP options will be listed for trading for a pilot period ending May 3, 201[6]7. * * * * * The text of the proposed rule change is also available on the Exchange’s Web site (https://www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, 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 aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On February 8, 2013, the Exchange received approval of a rule change that established a Pilot Program that allows the Exchange to list options on the S&P 500 Index whose exercise settlement value is derived from closing prices on the last trading day prior to expiration (‘‘SPXPM’’).5 On July 31, 2013, the Exchange received approval of a rule change that amended the Pilot Program to allow the Exchange to list options on the Mini-SPX Index (‘‘XSP’’) whose exercise settlement value is derived from closing prices on the last trading day prior to expiration (‘‘P.M.-settled’’) 6 (together, SPXPM and P.M.-settled XSP to be referred to herein as the ‘‘Pilot Products’’).7 In January 2014, the 5 See Securities Exchange Act Release No. 68888 (February 8, 2013), 78 FR 10668) (February 14, 2013) (SR–CBOE–2012–120) (the ‘‘SPXPM Approval Order’’). 6 See Securities Exchange Act Release No. 70087 (July 31, 2013), 78 FR 47809 (August 6, 2013) (SR– CBOE–2013–055) (the ‘‘P.M.-settled XSP Approval Order’’). 7 For more information on the Pilot Products or the Pilot Program, see the SPXPM Approval Order and the P.M.-settled XSP Approval Order. E:\FR\FM\14APN1.SGM 14APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 72 (Thursday, April 14, 2016)]
[Notices]
[Pages 22143-22148]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08554]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77567; File No. SR-BATS-2015-94]

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing of Amendment No. 1 and Order Approving on an Accelerated Basis a
Proposed Rule Change, as Modified by Amendments No. 1, No. 2, and No.
3, To List and Trade Shares of the SPDR DoubleLine Emerging Markets
Fixed Income ETF of the SSgA Active Trust

April 8, 2016.

I. Introduction

On December 28, 2015, BATS Exchange, Inc. (``Exchange'') filed with
the Securities and Exchange Commission (``Commission''), pursuant

[[Page 22144]]

to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'')
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to list and
trade shares of the SPDR[supreg] DoubleLine[supreg] Emerging Markets
Fixed Income ETF of the SSgA Active Trust under BATS Rule 14.11(i). The
proposed rule change was published for comment in the Federal Register
on January 15, 2016.\3\ On February 23, 2016, pursuant to Section
19(b)(2) of the Act,\4\ the Commission designated a longer period
within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
disapprove the proposed rule change.\5\ On February 26, 2016, the
Exchange filed Amendment No. 1 to the proposal.\6\ On March 24, 2016,
the Exchange filed Amendment No. 2 to the proposal.\7\ On April 7,
2016, Exchange filed Amendment No. 3 to the proposed rule change.\8\
The Commission has received no comments on the proposal. The Commission
is publishing this notice to solicit comments on Amendment No. 1 from
interested persons, and is approving the proposed rule change, as
modified by Amendments No. 1, No. 2, and No. 3, on an accelerated
basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 76862 (Jan. 11,
2016), 81 FR 2282.
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 77209, 81 FR 10315
(Feb. 29, 2016). The Commission designated April 14, 2016, as the
date by which it should approve, disapprove, or institute
proceedings to determine whether to disapprove the proposed rule
change.
\6\ Amendment No. 1 replaced and superseded the proposed rule
change in its entirety. In Amendment No. 1, the Exchange clarified
that: (1) The Fund may invest without limit in investments
denominated in any currency, but expects to invest a portion of its
assets in U.S.-dollar-denominated investments; (2) the Fund may
invest up to 20% of its portfolio in structured securities and
junior bank loans; and (3) to limit the potential risk associated
with derivative transactions, the Fund will segregate or ``earmark''
assets determined to be liquid by the Adviser in accordance with
procedures established by the Trust's Board of Trustees and in
accordance with the Investment Company Act of 1940 (15 U.S.C. 80a-1)
(``1940 Act'') (or, as permitted by applicable regulations, enter
into certain offsetting positions) to cover its obligations under
derivative instruments, and will include appropriate risk disclosure
in its offering documents, including leveraging risk. Amendment No.
1 also adds a representation that the Adviser believes there will be
minimal, if any, impact to the arbitrage mechanism as a result of
the use of derivatives, and makes changes of a technical nature. The
amendments to the proposed rule change are available at: https://www.sec.gov/comments/sr-bats-2015-94/bats201594.shtml.
\7\ In Amendment No. 2, the Exchange clarifies that: (1) All
statements and representations made in this filing regarding (a) the
description of the portfolio, (b) limitations on portfolio holdings
or reference assets, or (c) the applicability of Exchange rules and
surveillance procedures shall constitute continued listing
requirements for listing the Shares on the Exchange; and (2) the
issuer has represented to the Exchange that it will advise the
Exchange of any failure by the Fund to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Exchange Act, the Exchange will surveil for
compliance with the continued listing requirements. If the Fund is
not in compliance with the applicable listing requirements, the
Exchange will commence delisting procedures under Exchange Rule
14.12. Because Amendment No. 2 adds clarification to the proposal
and does not materially alter the substance of the proposed rule
change or raise unique or novel regulatory issues, Amendment No. 2
is not subject to notice and comment.
\8\ In Amendment No. 3, the Exchange made a conforming change to
confirm that the Fund may invest in unsponsored American Depositary
Receipts (``ADRs''), which are not exchange traded. Because
Amendment No. 3 clarifies the proposal and does not materially alter
the substance of the proposed rule change or raise unique or novel
regulatory issues, Amendment No. 3 is not subject to notice and
comment.
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II. The Exchange's Description of the Proposal \9\
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\9\ Additional information regarding, among other things, the
Shares, the Fund, its investment objective, its investments, its
investment strategies, its investment methodology, its investment
restrictions, its fees, its creation and redemption procedures,
availability of information, trading rules and halts, and
surveillance procedures can be found in Amendment No. 1 and in the
Registration Statement. See Amendment No. 1, supra note 6, and
Registration Statement, infra note 10, respectively.
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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. The Shares will be offered by SSgA Active Trust
(``Trust''), which is organized as a Massachusetts business trust and
is registered with the Commission as an open-end management investment
company.\10\ SSGA Funds Management, Inc. will serve as the investment
adviser to the Fund (``Adviser'') \11\ as well as the administrator for
the Fund. DoubleLine Capital LP will be the Fund's sub-adviser (``Sub-
Adviser''). State Street Global Markets, LLC will be the principal
underwriter and distributor of the Shares. State Street Bank and Trust
Company will serve as the sub-administrator, custodian (``Custodian''),
transfer agent, and, where applicable, lending agent (``Lending
Agent'') for the Fund.
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\10\ See Registration Statement on Form N-1A for the Trust,
dated October 8, 2015 (File Nos. 333-173276 and 811-22542)
(``Registration Statement''). The Exchange states that the
Commission has issued an order granting certain exemptive relief to
the Trust under the 1940 Act. See Investment Company Act Release No.
29524 (December 13, 2010) (File No. 812-13487).
\11\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (``Advisers
Act''). As a result, the Adviser and its related personnel as well
as the Sub-Adviser and its related personnel are subject to the
provisions of Rule 204A-1 under the Advisers Act relating to codes
of ethics. This Rule requires investment advisers to adopt a code of
ethics that reflects the fiduciary nature of the relationship to
clients as well as compliance with other applicable securities laws.
Accordingly, procedures designed to prevent the communication and
misuse of non-public information by an investment adviser must be
consistent with Rule 204A-1 under the Advisers Act. In addition,
Rule 206(4)-7 under the Advisers Act makes it unlawful for an
investment adviser to provide investment advice to clients unless
such investment adviser has (i) adopted and implemented written
policies and procedures reasonably designed to prevent violation, by
the investment adviser and its supervised persons, of the Advisers
Act and the Commission rules adopted thereunder; (ii) implemented,
at a minimum, an annual review regarding the adequacy of the
policies and procedures established pursuant to subparagraph (i)
above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
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Neither the Adviser nor the Sub-Adviser is registered as a broker-
dealer, but the Adviser is affiliated with a broker-dealer and has
implemented a ``fire wall'' with respect to that broker-dealer
regarding access to information concerning the composition of and
changes to the Fund's portfolio. The Sub-Adviser is not affiliated with
a broker-dealer.\12\
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\12\ See Amendment No. 1, supra note 6, at 6. In the event (a)
the Adviser or Sub-Adviser becomes registered as a broker-dealer or
newly affiliated with a broker-dealer, or (b) any new adviser or
sub-adviser is a registered broker-dealer or becomes affiliated with
a broker-dealer, it will implement a fire wall with respect to its
relevant personnel or broker-dealer affiliate regarding access to
information concerning the composition of and 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. See id.
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A. Principal Investments of the Fund

The Fund is an actively managed fund that does not seek to
replicate the performance of a specified index. The Fund will seek to
provide high total return from current income and capital appreciation.
To achieve its objective, the Fund will invest, under normal
circumstances, \13\ at least 80% of its net assets (plus the amount of
borrowings for investment purposes) in emerging-market fixed income
securities.\14\ More specifically, the Fund will invest at least 80% of
its net assets (plus the amount

[[Page 22145]]

of borrowings for investment purposes) in fixed income instruments
(``Fixed Income Securities''), which are defined as the following
instruments: Fixed income securities issued or guaranteed by foreign
corporations \15\ or foreign governments, including securities issued
or guaranteed by companies (including hybrid securities), financial
institutions, or government entities in emerging market countries;
corporate or government bonds; sovereign debt; structured securities;
\16\ foreign currency transactions (discussed below); certain
derivatives (discussed below); exchange-traded foreign equity
securities (described below) and preferred securities; unsponsored
ADRs; \17\ zero coupon bonds; credit linked notes; pass-through notes;
bank loans; and perpetual maturity bonds. Fixed Income Securities may
have fixed or variable interest rates and any maturity. The Fund will
generally invest in Fixed Income Securities from at least five emerging
market countries,\18\ with no more than 20% allocated to a single
country. The Fund may invest in Fixed Income Securities of any credit
quality, but seeks to invest no more than 20%, at the time of
investment, in Fixed Income Securities that are unrated, rated BB+ or
lower by Standard & Poor's Rating Service or Ba1 or lower by Moody's
Investor Service, Inc. or the equivalent by any other nationally
recognized statistical rating organization.
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\13\ The term ``under normal circumstances'' includes, but is
not limited to, the absence of extreme volatility or trading halts
in the fixed income markets or the financial markets generally;
operational issues causing dissemination of inaccurate market
information; or force majeure type events such as systems failure,
natural or man-made disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption, or any similar intervening
circumstance.
\14\ Under normal market conditions, the Sub-Adviser intends to
seek to construct an investment portfolio with a weighted average
effective duration of no less than two years and no more than eight
years.
\15\ While the Fund is permitted to invest without restriction
in corporate bonds, the Sub-Adviser expects that, under normal
circumstances, the Fund will generally seek to invest in corporate
bond issuances that have at least $100,000,000 par amount
outstanding. Further, component corporate bonds that in the
aggregate account for at least 75% of the weight of corporate bonds
will have a minimum original principal outstanding of $100 million
or more.
\16\ Structured securities generally include privately issued
and publicly issued structured securities, including certain
publicly issued structured securities that are not agency
securities. The Fund may invest up to 20% of its portfolio in
structured securities and junior bank loans.
\17\ See Amendment No. 3, supra note 8.
\18\ An ``emerging market country'' is a country that, at the
time the Fund invests in the related fixed income instruments, is
classified as an emerging or developing economy by any supranational
organization such as the World Bank or the United Nations, or
related entities, or is considered an emerging market country for
purposes of constructing a major emerging market securities index. A
fixed income instrument is considered to be from an emerging market
country if the issuer or guarantor of the instrument is either
domiciled in an emerging market country or derives a majority of its
cash flow or revenue from an emerging market country.
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The Fund may purchase exchange-traded common stocks and exchange-
traded preferred securities of foreign corporations. The Fund's
investments in common stock of foreign corporations may also be in the
form of ADRs (sponsored and unsponsored, as noted above),\19\ Global
Depositary Receipts, and European Depositary Receipts (collectively
``Depositary Receipts'').
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\19\ The Fund may invest in sponsored or unsponsored ADRs;
however, not more than 10% of the net assets of the Fund will be
invested in unsponsored ADRs. All exchange-traded equity securities
in which the Fund may invest will trade on markets that are members
of the Intermarket Surveillance Group (``ISG'') or that have entered
into a comprehensive surveillance agreement with the Exchange.
---------------------------------------------------------------------------

The Fund may conduct foreign currency transactions on a spot (i.e.,
cash) or forward basis (i.e., by entering into forward contracts to
purchase or sell foreign currencies). The Fund may also invest in the
following derivatives: Foreign currency futures; credit default
swaps;\20\ and options, swaps, futures, and forward contracts on Fixed
Income Securities. All such derivatives will be exchange traded or
centrally cleared.\21\
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\20\ The Fund will enter into CDS agreements only with
counterparties that meet certain standards of creditworthiness. The
Fund will segregate assets necessary to meet any accrued payment
obligations when it is the buyer of CDSs. In cases where the Fund is
a seller of a CDS, if the CDS is physically settled or cash settled,
the Fund will be required to segregate the full notional amount of
the CDS.
\21\ The Exchange states that the Adviser believes there will be
minimal, if any, impact to the arbitrage mechanism as a result of
the use of derivatives. Market makers and participants should be
able to value derivatives as long as the positions are disclosed
with relevant information. The Exchange states that the Adviser
believes that the price at which Shares trade will continue to be
disciplined by arbitrage opportunities created by the ability to
purchase or redeem creation Shares at their net asset value
(``NAV''), which should ensure that Shares will not trade at a
material discount or premium in relation to their NAV.
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B. Non-Principal Investments

While the Adviser and Sub-Adviser, under normal circumstances, will
invest at least 80% of the Fund's net assets in the instruments
described above, the Adviser and Sub-Adviser may invest up to 20% of
the Fund's net assets in other securities and financial instruments, as
described below.
The Fund may invest in U.S. Government obligations and U.S. equity
securities. The Fund's investments in such U.S. equity securities may
include securities traded over-the-counter (``OTC'') as well as those
traded on a securities exchange. The Fund may invest in convertible
securities traded on an exchange or OTC.
The Fund may invest in repurchase agreements with commercial banks,
brokers or dealers to generate income from its excess cash balances and
to invest securities-lending cash collateral. The Fund may also enter
into reverse repurchase agreements, which involve the sale of
securities with an agreement to repurchase the securities at an agreed-
upon price, date, and interest payment and which have the
characteristics of borrowing. The Fund's exposure to reverse repurchase
agreements will be covered by securities having a value equal to or
greater than such commitments. Although there is no limit on the
percentage of Fund assets that can be used in connection with reverse
repurchase agreements, the Fund does not expect to engage, under normal
circumstances, in reverse repurchase agreements with respect to more
than 10% of its net assets.
In addition to repurchase agreements, the Fund may invest in short-
term instruments, including money market instruments \22\ and cash
equivalents, and may hold cash.
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\22\ Money market instruments are generally short-term
investments that may include but are not limited to: (i) Shares of
money market funds (including those advised by the Adviser); (ii)
obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities (including government-sponsored
enterprises); (iii) negotiable certificates of deposit (``CDs''),
bankers' acceptances, fixed time deposits and other obligations of
U.S. and foreign banks (including foreign branches) and similar
institutions; (iv) commercial paper rated at the date of purchase
``Prime-1'' by Moody's or ``A-1'' by S&P, or if unrated, of
comparable quality as determined by the Adviser; (v) non-convertible
corporate debt securities (e.g., bonds and debentures) with
remaining maturities at the date of purchase of not more than 397
days and that satisfy the rating requirements set forth in Rule 2a-7
under the 1940 Act; and (vi) short-term U.S. dollar-denominated
obligations of foreign banks (including U.S. branches) that, in the
opinion of the Adviser, are of comparable quality to obligations of
U.S. banks that may be purchased by the Fund. Any of these
instruments may be purchased on a current or a forward-settled
basis.
---------------------------------------------------------------------------

The Fund may lend its portfolio securities in an amount not to
exceed 33 \1/3\% of the value of its total assets via a securities
lending program through the Lending Agent, to brokers, dealers, and
other financial institutions desiring to borrow securities to complete
transactions and for other purposes. A securities lending program
allows the Fund to receive a portion of the income generated by lending
its securities and investing the respective collateral. The Fund will
receive collateral for each loaned security that is at least equal to
102% of the market value of that security, marked to market each
trading day.
The Fund may invest in Restricted Securities. Restricted Securities
are securities that are not registered under the Securities Act, but
which can be offered and sold to ``qualified institutional buyers''
under Rule 144A under the Securities Act or securities purchased after
the lapse of the appropriate distribution compliance

[[Page 22146]]

period under Regulation S under the Securities Act.
The Fund may invest in the securities of other investment
companies, including affiliated funds and money market funds, subject
to applicable limitations under Section 12(d)(1) of the 1940 Act.

III. Discussion and Commission Findings

After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act and the rules and regulations thereunder applicable to a national
securities exchange.\23\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Exchange
Act,\24\ which requires, among other things, that the Exchange's rules
be designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest.
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\23\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition and
capital formation. See 15 U.S.C. 78c(f).
\24\ 15 U.S.C. 78f(b)(5).
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The Commission also finds that the proposal to list and trade the
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of
the Exchange Act,\25\ which sets forth Congress' finding that it is in
the public interest and appropriate for the protection of investors and
the maintenance of fair and orderly markets to assure the availability
to brokers, dealers, and investors of information with respect to
quotations for and transactions in securities. Quotation and last-sale
information for the Shares will be available on the facilities of the
Consolidated Tape Association. The Exchange represents that the
intraday, closing, and settlement prices of common stocks and other
exchange-listed instruments (including Depositary Receipts, preferred
securities, convertible securities, common stock, and ETPs) will be
readily available from the securities exchanges trading those
securities as well as from automated quotation systems, published or
other public sources, or online information services. Intraday and
closing price information for exchange-traded options and futures will
be available from the applicable exchange and from major market data
vendors. In addition, price information for U.S. exchange-traded
options will be available from the Options Price Reporting Authority.
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\25\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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Quotation information from brokers and dealers or pricing services
will be available for Fixed Income Securities and U.S. Government
obligations. Price information regarding short-term instruments, spot
currency transactions, OTC-traded derivative instruments (including
options, swaps, and forward currency transactions), and non-exchange-
listed equity securities traded in the OTC market (including Restricted
Securities, repurchase and reverse repurchase agreements, OTC equity
securities, OTC-traded preferred securities, and OTC-traded convertible
securities) is available from major market data vendors.
The Commission also believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. On each business day, before commencement of trading in Shares
during Regular Trading Hours \26\ on the Exchange, the Fund will
disclose on its Web site the identities and quantities of the portfolio
of securities and other assets (the ``Disclosed Portfolio'') held by
the Fund that will form the basis for the Fund's calculation of NAV at
the end of the business day.\27\ The Exchange will obtain a
representation from the issuer of the Shares that the NAV per Share
will be calculated daily and that the NAV and the Disclosed Portfolio
will be made available to all market participants at the same time.
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\26\ Regular Trading Hours are 9:30 a.m. to 4:00 p.m. Eastern
Time.
\27\ The Fund's disclosure of derivative positions in the
Disclosed Portfolio will include information that market
participants can use to value these positions intraday. The
Disclosed Portfolio will include, as applicable: The ticker symbol;
CUSIP number or other identifier, if any; a description of the
holding (including the type of holding, such as the type of swap);
the identity of the security, commodity, index or other asset or
instrument underlying the holding, if any; for options, the option
strike price; quantity held (as measured by, for example, par value,
notional value or number of shares, contracts, or units); maturity
date, if any; coupon rate, if any; effective date, if any; market
value of the holding; and the percentage weighting of the holding in
the Fund's portfolio. The Web site and information will be publicly
available at no charge. Under accounting procedures to be followed
by the Fund, trades made on the prior business day will be booked
and reflected in NAV on the current business day. 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.
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In addition, 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. The Custodian, through the National Securities Clearing
Corporation, will make available on each business day, prior to the
opening of business on the Exchange, the list of the names and the
required number of shares of each Deposit Security or the required
amount of Deposit Cash, as applicable, to be included in the current
Fund Deposit (based on information at the end of the previous business
day) for the Fund.
The NAV of the Shares generally will be calculated once daily
Monday through Friday as of the close of regular trading on the
Exchange, generally 4:00 p.m. Eastern Time (the ``NAV Calculation
Time'') on each day that the Exchange is open for trading, based on
prices at the NAV Calculation Time. 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 and
additional information relating to NAV and other applicable
information.
The Exchange represents that trading in the Shares will be halted
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.\28\ Trading in
the Shares also will be subject to Rule 14.11(i)(4)(B)(iv), which sets
forth circumstances under which trading in the Shares may be halted.
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\28\ These may include: (1) The extent to which trading is not
occurring in the securities and/or the financial instruments
composing the Disclosed Portfolio of the Fund; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance
of a fair and orderly market are present.
---------------------------------------------------------------------------

The Exchange states that it prohibits the distribution of material
non-public information by its employees. The Exchange represents that
the Adviser is not registered as a broker-dealer but is affiliated with
a broker-dealer and has implemented a ``fire wall'' with respect to
that broker-dealer regarding access to information concerning the
composition of and changes to the Fund's portfolio.
Trading of the Shares through the Exchange will be subject to the
Exchange's surveillance procedures for derivative products, including
Managed Fund Shares. The Exchange may obtain information regarding
trading in the Shares and the underlying shares in exchange-traded
investment companies, U.S. equity securities, foreign equity
securities, futures, and options via the ISG, from other exchanges who
are

[[Page 22147]]

members or affiliates of the ISG, or from other exchanges with which
the Exchange has entered into a comprehensive surveillance sharing
agreement.\29\ 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.
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\29\ For a list of the current members and affiliate members of
ISG, see www.isgportal.com. The Exchange also notes that all
exchange-traded instruments, including investment company
securities, futures, and options will trade on markets that are a
member of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement. See Amendment No. 1,
supra note 6, at 30, n.27.
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The Exchange represents that it 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.
In support of this proposal, the Exchange has also made the following
representations:
(1) 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.\30\
---------------------------------------------------------------------------

\30\ See Amendment No. 1, supra note 6, at 28.
---------------------------------------------------------------------------

(2) All statements and representations made regarding (a) the
description of the portfolio, (b) limitations on portfolio holdings or
reference assets, or (c) the applicability of Exchange rules and
surveillance procedures shall constitute continued listing requirements
for listing the Shares on the Exchange.\31\
---------------------------------------------------------------------------

\31\ See Amendment No. 2, supra note 7, at 3.
---------------------------------------------------------------------------

(3) The issuer will advise the Exchange of any failure by the Fund
to comply with the continued listing requirements, and, pursuant to its
obligations under Section 19(g)(1) of the Exchange Act, the Exchange
will surveil for compliance with the continued listing requirements. If
the Fund is not in compliance with the applicable listing requirements,
the Exchange will commence delisting procedures under Exchange Rule
14.12.\32\
---------------------------------------------------------------------------

\32\ Id. at 4.
---------------------------------------------------------------------------

(4) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.\33\
---------------------------------------------------------------------------

\33\ See Amendment No. 1, supra note 6, at 29.
---------------------------------------------------------------------------

(5) Trading of the Shares through the Exchange will be subject to
the Exchange's surveillance procedures for derivative products,
including Managed Fund Shares, and these 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.\34\
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\34\ Id. at 29-30.
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(6) 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: (a) The procedures for
purchases and redemptions of Shares in Creation Units (and that Shares
are not individually redeemable); (b) BATS Rule 3.7, which imposes
suitability obligations on Exchange members with respect to
recommending transactions in the Shares to customers; (c) how
information regarding the Intraday Indicative Value and the Disclosed
Portfolio is disseminated; (d) the risks involved in trading the Shares
during the Pre-Opening and After Hours Trading Sessions when an updated
Intraday Indicative Value will not be calculated or publicly
disseminated; (e) the requirement that members deliver a prospectus to
investors purchasing newly issued Shares prior to or concurrently with
the confirmation of a transaction; and (f) trading information.\35\
---------------------------------------------------------------------------

\35\ Id. at 30-31.
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(7) For initial and continued listing, the Fund must be in
compliance with Rule 10A-3 under the Act.\36\
---------------------------------------------------------------------------

\36\ Id. at 28. See also 17 CFR 240.10A-3.
---------------------------------------------------------------------------

(8) A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange.\37\
---------------------------------------------------------------------------

\37\ See Amendment No. 1, supra note 6, at 28.
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(9) The Fund will enter into CDS agreements only with
counterparties that meet certain standards of creditworthiness.\38\
---------------------------------------------------------------------------

\38\ Id. at 12.
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(10) The Fund may invest up to 20% of its portfolio in structured
securities and junior bank loans in the aggregate.\39\
---------------------------------------------------------------------------

\39\ Id. at 9.
---------------------------------------------------------------------------

(11) Under normal circumstances, the Fund will generally seek to
invest in corporate bond issuances that have at least $100,000,000 par
amount outstanding. Further, component corporate bonds that in the
aggregate account for at least 75% of the weight of corporate bonds
will have a minimum original principal outstanding of $100 million or
more.\40\
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\40\ Id.
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(12) The Fund may invest in sponsored or unsponsored ADRs; however,
not more than 10% of the net assets of the Fund will be invested in
unsponsored ADRs.\41\
---------------------------------------------------------------------------

\41\ Id. at 11.
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(13) All exchange-traded instruments, including investment company
securities, futures, and options will trade on markets that are a
member of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement.\42\
---------------------------------------------------------------------------

\42\ Id. at 30, n.27.
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This approval order is based on all of the Exchange's
representations, including those set forth above and in Amendments No.
1, No. 2, and No. 3.
For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, No. 2, and No. 3, is
consistent with Section 6(b)(5) of the Act \43\ and the rules and
regulations thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

\43\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 1

Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 1 is consistent with the
Act. Comments may be submitted by any of the following methods:

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BATS-2015-94 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-2015-94. 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

[[Page 22148]]

inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BATS-2015-94 and should be
submitted on or before May 5, 2016.

V. Accelerated Approval of Proposed Rule Change as Modified by
Amendment Nos. 1, 2, and 3

The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, No. 2, and No. 3, prior to the
30th day after the date of publication of notice of Amendment No. 1 in
the Federal Register. The Exchange submitted Amendment No. 1 to, among
other things, provide clarifying details about the investments the Fund
would be permitted to hold; to further limit the percentage of the
Fund's portfolio that may be composed of structured securities and
junior bank loans; to limit the potential risk associated with
derivative transactions; and to represent that the Adviser believes
there will be minimal, if any, impact to the arbitrage mechanism as a
result of the Fund's use of derivatives. This information aided the
Commission in evaluating the likelihood that market participants may
engage in effective arbitrage. Accordingly, the Commission finds good
cause, pursuant to Section 19(b)(2) of the Act,\44\ to approve the
proposed rule change, as modified by Amendment No. 1, No. 2, and No. 3,
on an accelerated basis.
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\44\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the
Exchange Act, that the proposed rule change (SR-BATS-2015-94), as
modified by Amendment No. 1, No. 2, and No. 3, is hereby approved on an
accelerated basis.
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\45\ 17 CFR 200.30-3(a)(12).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\45\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08554 Filed 4-13-16; 8:45 am]
BILLING CODE 8011-01-P

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