Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of Shares of BlackRock Government Collateral Pledge Unit Under NYSE Arca Equities Rule 8.600, 35425-35432 [2016-13040]

Download as PDF Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices adopting Rule 10b–17 will not be implicated.6 asabaliauskas on DSK3SPTVN1PROD with NOTICES Conclusion It is hereby ordered, pursuant to Rule 101(d) of Regulation M, that the Trust, based on the representations and the facts presented in the Letter, is exempt from the requirements of Rule 101 with respect to the Fund, thus permitting persons who may be deemed to be participating in a distribution of Shares of the Fund to bid for or purchase such Shares during their participation in such distribution. It is further ordered, pursuant to Rule 102(e) of Regulation M, that the Trust, based on the representations and the facts presented in the Letter, is exempt from the requirements of Rule 102 with respect to the Fund, thus permitting the Fund to redeem Shares of the Fund during the continuous offering of such Shares. It is further ordered, pursuant to Rule 10b–17(b)(2), that the Trust, based on the representations and the facts presented in the Letter, and subject to the conditions below, is exempt from the requirements of Rule 10b–17 with respect to transactions in the Shares of the Fund. This exemptive relief is subject to the following conditions: • The Trust will comply with Rule 10b–17 except for Rule 10b– 17(b)(1)(v)(a) and (b); and • The Trust will provide the information required by Rule 10b– 17(b)(1)(v)(a) and (b) to the Listing Exchange as soon as practicable before trading begins on the ex-dividend date, but in no event later than the time when the Listing Exchange last accepts information relating to distributions on the day before the ex-dividend date. This exemptive relief is subject to modification or revocation at any time the Commission determines that such action is necessary or appropriate in furtherance of the purposes of the Exchange Act. Persons relying upon this exemptive relief shall discontinue transactions involving the Shares of the Fund, pending presentation of the facts for the Commission’s consideration, in the event that any material change occurs with respect to any of the facts or representations made by the 6 We also note that timely compliance with Rule 10b–17(b)(1)(v)(a) and (b) would be impractical because it is not possible for the Fund to accurately project ten days in advance what dividend, if any, would be paid on a particular record date. Further, the Commission finds, based upon the representations in the Letter, that the provision of the notices as described in the Letter would not constitute a manipulative or deceptive device or contrivance comprehended within the purpose of Rule 10b–17. VerDate Sep<11>2014 18:30 Jun 01, 2016 Jkt 238001 Requestors and, consistent with all preceding letters, particularly with respect to the close alignment between the market price of Shares and the Fund’s NAV. In addition, persons relying on this exemptive relief are directed to the antifraud and antimanipulation provisions of the Exchange Act, particularly Sections 9(a) and 10(b), and Rule 10b–5 thereunder. Responsibility for compliance with these and any other applicable provisions of the federal securities laws must rest with the persons relying on this exemptive relief. This order should not be considered a view with respect to any other question that the proposed transactions may raise, including, but not limited to the adequacy of the disclosure concerning, and the applicability of other federal or state laws to, the proposed transactions. 35425 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade shares of the following under NYSE Arca Equities Rule 8.600 (‘‘Managed Fund Shares’’): BlackRock Government Collateral Pledge Unit under NYSE Arca Equities Rule 8.600 [sic]. The proposed rule change is available on the Exchange’s Web site at www.nyse.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 BILLING CODE 8011–01–P In its filing with the Commission, the self-regulatory organization 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 those 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. SECURITIES AND EXCHANGE COMMISSION A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–13041 Filed 6–1–16; 8:45 am] [Release No. 34–77941; File No. SR– NYSEArca–2016–63] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of Shares of BlackRock Government Collateral Pledge Unit Under NYSE Arca Equities Rule 8.600 May 27, 2016. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on May 19, 2016, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 7 17 CFR 200.30–3(a)(6) and (9). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00133 Fmt 4703 Sfmt 4703 1. Purpose The Exchange proposes to list and trade shares (‘‘Shares’’) of the following under NYSE Arca Equities Rule 8.600,4 which governs the listing and trading of Managed Fund Shares: 5 BlackRock 4 The Commission has previously approved listing and trading on the Exchange of actively managed funds under Rule 8.600. See, e.g., Securities Exchange Act Release Nos. 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008) (SR– NYSEArca–2008–31) (order approving Exchange listing and trading of twelve actively-managed funds of the WisdomTree Trust); 66321 (February 3, 2012), 77 FR 6850 (February 9, 2012) (SR– NYSEArca–2011–95) (order approving listing and trading of PIMCO Total Return Exchange Traded Fund); 66670 (March 28, 2012), 77 FR 20087 (April 3, 2012) (SR–NYSEArca–2012–09) (order approving listing and trading of PIMCO Global Advantage Inflation-Linked Bond Strategy Fund). 5 A Managed Fund Share is a security that represents an interest in an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment adviser consistent with its investment objectives and policies. In contrast, an open-end investment company that issues Investment Company Units, listed and traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(3), seeks to provide investment results that correspond generally to the price and yield performance of a specific foreign or domestic stock Continued E:\FR\FM\02JNN1.SGM 02JNN1 35426 Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES Government Collateral Pledge Unit (‘‘Fund’’). The Fund is a series of the BlackRock Collateral Trust (the ‘‘Trust’’), a Delaware statutory trust.6 BlackRock Fund Advisors is the investment advisor for the Fund (‘‘Adviser’’). State Street Bank and Trust Company (‘‘State Street’’) is the administrator, custodian and transfer agent for the Fund. BlackRock Investments, LLC will be the Fund’s distributor (‘‘Distributor’’). Commentary .06 to Rule 8.600 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 brokerdealer with respect to access to information concerning the composition and/or changes to such investment company portfolio.7 In addition, Commentary .06 further requires that personnel who make decisions on the open-end fund’s portfolio composition must be subject to procedures designed index, fixed income securities index or combination thereof. 6 The Trust is registered under the 1940 Act. On April 7, 2016, the Trust filed with the Commission its registration statement on Form N–1A under the Securities Act of 1933 (15 U.S.C. 77a) (‘‘Securities Act’’) and the 1940 Act relating to the Fund (File Nos. 333–210648 and 811–23154) (the ‘‘Registration Statement’’). The description of the operation of the Trust and the Fund herein is based, in part, on the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Trust and the Adviser (as defined below) under the 1940 Act. See Investment Company Act Release No. 29571 (January 24, 2011) (File No. 812–13601) (‘‘Exemptive Order’’). The Fund will be offered in reliance upon the Exemptive Order issued to the Trust and the Adviser. 7 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. The Exchange represents that the Adviser and its related personnel are subject to Investment Advisers Act Rule 204A–1. 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. VerDate Sep<11>2014 18:30 Jun 01, 2016 Jkt 238001 to prevent the use and dissemination of material nonpublic information regarding the open-end fund’s portfolio. The Adviser is not registered as a broker-dealer but is affiliated with two broker-dealers. The Adviser has implemented and will maintain a fire wall with respect to its affiliated brokerdealers regarding access to information concerning the composition and/or changes to the Fund’s portfolio. In the event (a) the Adviser becomes registered as a broker-dealer or newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser becomes registered as a broker-dealer or newly affiliated with a broker-dealer, it will implement a fire wall with respect to its relevant personnel or such broker-dealer affiliate 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. BlackRock Government Collateral Pledge Unit Principal Investments According to the Registration Statement, the Fund’s investment objective will be to seek to provide as high a level of current income as is consistent with liquidity and minimum volatility of principal. The Fund will seek to achieve its investment objective by investing, under normal circumstances,8 at least 80% of its net assets in a portfolio of U.S. dollardenominated short-term government securities and other money market securities eligible for investment by U.S. government money market funds that seek to maintain a stable net asset value (including indirect investments through the ‘‘Underlying Funds’’, as defined below). Under normal circumstances, the Fund intends to invest a substantial portion of its assets in the following government money market funds (each, an ‘‘Underlying Fund’’ and collectively, the ‘‘Underlying Funds’’), which principally invest in short-term U.S. Treasury bills, notes and other obligations issued or guaranteed as to principal and interest by the U.S. 8 The term ‘‘under normal circumstances’’ includes, but is not limited to, the absence of extreme volatility or trading halts in the fixed income securities markets or the financial markets generally; circumstances under which the Fund’s investments are made for temporary defensive purposes; 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. PO 00000 Frm 00134 Fmt 4703 Sfmt 4703 Government or its agencies or instrumentalities, and repurchase agreements secured by such obligations or cash: 9 FedFund and T-Fund (each, a series of BlackRock Liquidity Funds); and BlackRock Premier Government Institutional Fund and BlackRock Select Treasury Strategies Institutional Fund (each, a series of Funds For Institutions Series). The Adviser may add, eliminate or replace any or all Underlying Funds at any time. Any additions to or replacements for the Underlying Funds will also be government money market funds with substantially similar investment characteristics as those described herein applicable to the Underlying Funds. The Adviser or its affiliates may advise the Underlying Funds. The Fund generally will allocate and reallocate its assets among the Underlying Funds on a monthly basis on an approximate pro rata basis based on the amount of net assets of each Underlying Fund, subject to minimum investment amounts or other constraints on the Underlying Funds. According to the Registration Statement, the Underlying Funds invest in securities maturing in 397 days (13 months) or less (with certain exceptions) and their portfolios will have a dollar-weighted average maturity of 60 days or less and a dollar-weighted average life of 120 days or less. The Fund and certain Underlying Funds may invest in various types of U.S. government obligations. U.S. government obligations are a type of bond and include securities issued or guaranteed as to principal and interest by the U.S. government, its agencies or instrumentalities. Payment of principal and interest on U.S. government obligations (i) may be backed by the full faith and credit of the United States or (ii) may be backed solely by the issuing or guaranteeing agency or instrumentality itself (as with Federal National Mortgage Association (‘‘Fannie Mae’’), Federal Home Loan Mortgage Corporation (‘‘Freddie Mac’’) and Federal Home Loan Bank (‘‘FHLB’’) notes). In the latter case, the Fund or an Underlying Fund must look principally to the agency or instrumentality issuing or guaranteeing the obligation for ultimate repayment, which agency or instrumentality may be privately owned. The Fund and the Underlying Funds may invest in variable and floating rate instruments. 9 Each Underlying Fund is a ‘‘government money market fund,’’ as defined in Rule 2a–7 under the 1940 Act and seeks to maintain a stable NAV of $1.00. The Fund, however, will not be a money market fund and will not seek to maintain a stable NAV of $1.00. E:\FR\FM\02JNN1.SGM 02JNN1 Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES The Fund and the Underlying Funds may transact in securities on a whenissued, delayed delivery or forward commitment basis. The purchase or sale of securities on a when-issued or delayed delivery basis or through a forward commitment involves the purchase or sale of securities at an established price with payment and delivery taking place in the future. The Fund and the Underlying Funds may invest in repurchase agreements that are secured by either obligations issued or guaranteed as to principal and interest by the U.S. government or agencies or instrumentalities, or by cash. The securities purchased by the Fund will comply with the quality and eligibility requirements of Rule 2a–7 under the 1940 Act. The securities purchased by the Underlying Funds will comply with all requirements of Rule 2a–7 and other rules of the Commission applicable to money market funds that seek to maintain a stable net asset value per share (‘‘NAV’’). The Fund itself will invest only in money market securities eligible for investment for funds that comply with Rule 2a–7 but will not be subject to other requirements of Rule 2a–7 applicable to money market funds that seek to maintain a stable NAV. Other Investments While the Fund, under normal circumstances, will invest at least 80% of its net assets in the securities and financial instruments described above, the Fund may invest its remaining assets in other assets and financial instruments, as described below. The Fund and the Underlying Funds may also invest in certain U.S. government obligations other than those referenced in Principal Investments above, namely Treasury receipts where the principal and interest components are traded separately under the Separate Trading of Registered Interest and Principal of Securities (STRIPS) program. The Fund and certain Underlying Funds may invest in reverse repurchase agreements. The Fund may invest in the securities of other investment companies (including money market funds) to the extent permitted by law, regulation, exemptive order or Commission staff guidance. Investment Restrictions The Fund will be classified as ‘‘diversified.’’ 10 With respect to 75% of the Fund’s total assets, a ‘‘diversified’’ 10 The diversification standard is set forth in Section 5(b)(1) of the 1940 Act. VerDate Sep<11>2014 18:30 Jun 01, 2016 Jkt 238001 fund is limited by the 1940 Act such that it does not invest more than 5% of its total assets in securities of any one issuer and does not acquire more than 10% of the outstanding voting securities of any one issuer (excluding cash and cash items, government securities, and securities of other investment companies). The remaining 25% of the Fund’s total assets may be invested in a single issuer or a number of issuers. The Fund intends to maintain the required level of diversification and otherwise conduct its operations so as to qualify as a regulated investment company for purposes of the U.S. Internal Revenue Code of 1986, as amended.11 The Fund may invest up to an aggregate amount of 15% of its net assets in illiquid assets (calculated at the time of investment). Each Underlying Fund may invest up to an aggregate amount of 5% of its net assets in illiquid securities. The Fund will monitor its portfolio liquidity on an ongoing basis to determine whether, in light of current circumstances, an adequate level of liquidity is being maintained, and will consider taking appropriate steps in order to maintain adequate liquidity if, through a change in values, net assets, or other circumstances, more than 15% of the Fund’s net assets are held in illiquid assets. Illiquid assets include securities subject to contractual or other restrictions on resale and other instruments that lack readily available markets as determined in accordance with Commission staff guidance.12 The Fund will not invest in futures, options, swaps or forward contracts. The Fund’s investments will be consistent with the Fund’s investment objective and will not be used to enhance leverage. That is, while the Fund will be permitted to borrow as permitted under the 1940 Act, the 11 26 U.S.C. 851. 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). 12 The PO 00000 Frm 00135 Fmt 4703 Sfmt 4703 35427 Fund’s investments will not be used to seek performance that is the multiple or inverse multiple (e.g., 2Xs and 3Xs) of the Fund’s primary broad-based securities benchmark index (as defined in Form N–1A).13 Net Asset Value According to the Registration Statement, the NAV for the Fund’s Shares will generally be calculated as of 12:00 p.m., Eastern time, on each day the New York Stock Exchange (‘‘NYSE’’) is open for trading. Valuation of securities held by the Fund will be as follows. Shares of the Underlying Funds normally will be valued at fair value based on their NAV from the prior business day, which is the most recent observable valuation of the Underlying Funds as of the time the NAV for the Fund’s Shares is determined [sic] Fixed-income securities normally will be valued based on current bid-side market quotations (if readily available), last available bid prices, or evaluated prices as of 12:00 p.m., Eastern time supplied by the Fund’s approved independent third-party pricing services, each in accordance with policies and procedures approved by the Board (the ‘‘Valuation Procedures’’). The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless BlackRock determines in good faith that such method does not represent fair value. Certain fixed-income investments may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche-specific spread to the benchmark yield based on the unique attributes of the tranche. Variable and floating rate instruments, repurchase agreements and reverse repurchase agreements will be valued at prices supplied by approved pricing services which is generally based on bid-side quotations. Prices obtained from independent third-party pricing services, brokerdealers or market makers to value the Fund’s securities and other assets and liabilities will be based on information available at the time the Fund values its assets and liabilities. In the event that application of the methods of valuation discussed above result in a price for a security which is deemed not to be representative of the 13 The Fund’s broad-based securities benchmark index will be identified in a future amendment to the Registration Statement following the Fund’s first full calendar year of performance. E:\FR\FM\02JNN1.SGM 02JNN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES 35428 Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices fair market value of such security, the security will be valued by, under the direction of or in accordance with a method approved by the Board, and in accordance with the 1940 Act, as reflecting fair value. When market quotations are not readily available or are believed in good faith by BlackRock to be unreliable, the Fund’s investments will be valued at fair value (‘‘Fair Value Assets’’). Fair Value Assets will be valued by BlackRock in accordance with the Valuation Procedures. BlackRock may reasonably conclude that a market quotation is not readily available or is unreliable if, among other things, a security or other asset or liability does not have a price source due to its complete lack of trading, if BlackRock believes in good faith that a market quotation from a broker-dealer or other source is unreliable (e.g., where it varies significantly from a recent trade, or no longer reflects the fair value of the security or other asset or liability subsequent to the most recent market quotation), or where the security or other asset or liability is only thinly traded or due to the occurrence of a significant event subsequent to the most recent market quotation. For this purpose, a ‘‘significant event’’ is deemed to occur if BlackRock determines, in its reasonable business judgment, that an event has occurred after the close of trading for an asset or liability but prior to or at the time of pricing the Fund’s assets or liabilities, and that the event is likely to cause a material change to the closing market price of the assets or liabilities held by the Fund. BlackRock, with input from the BlackRock Investment Strategy Group, will submit its recommendations regarding the valuation and/or valuation methodologies for Fair Value Assets to BlackRock’s Valuation Committee. The BlackRock Valuation Committee may accept, modify or reject any recommendations. In addition, the Fund’s accounting agent periodically endeavors to confirm the prices it receives from all third-party pricing services, index providers and brokerdealers, and, with the assistance of BlackRock, to regularly evaluate the values assigned to the securities and other assets and liabilities of the Fund. The pricing of all Fair Value Assets is subsequently reported to and, where appropriate, ratified by the Board. When determining the price for a Fair Value Asset, the BlackRock Valuation Committee (or BlackRock’s Pricing Group) will seek to determine the price that the Fund might reasonably expect to receive upon the current sale of that VerDate Sep<11>2014 18:30 Jun 01, 2016 Jkt 238001 asset or liability in an arm’s-length transaction on the date on which the assets or liabilities are being valued, and does not seek to determine the price that the Fund might expect to receive for selling the asset, or the cost of extinguishing a liability, at a later time or if it holds the asset or liability to maturity. Fair value determinations will be based upon all available factors that the BlackRock Valuation Committee (or BlackRock’s Pricing Group) deems relevant at the time of the determination, and may be based on analytical values determined by BlackRock using proprietary or thirdparty valuation models. Fair value represents a good faith approximation of the value of an asset or liability. When determining the fair value of an asset, one or more of a variety of fair valuation methodologies may be used (depending on certain factors, including the asset type). For example, the asset may be priced on the basis of the original cost of the investment or, alternatively, using proprietary or third-party models (including models that rely upon direct portfolio management pricing inputs and which reflect the significance attributed to the various factors and assumptions being considered). Prices of actual, executed or historical transactions in the relevant asset and/or liability (or related or comparable assets and/or liabilities) or, where appropriate, an appraisal by a third-party experienced in the valuation of similar assets and/or liabilities, may also be used as a basis for establishing the fair value of an asset or liability. Creation and Redemption of Shares According to the Registration Statement, the Trust will issue and sell Shares of the Fund only in Creation Units of 50,000 Shares (though this number may change from time to time, including prior to the listing of the Fund) on a continuous basis through the Distributor or its agent, without a sales load, at a price based on the Fund’s NAV next determined after receipt, on any business day, of an order received by the Distributor or its agent in proper form. On days when the Exchange or the bond markets close earlier than normal, the Fund may require orders to be placed earlier in the day. The consideration for purchase of Creation Units of the Fund will generally be cash. However, in some cases the consideration consists of an in-kind deposit of a designated portfolio of securities (including any portion of such securities for which cash may be substituted) (‘‘Deposit Securities’’) and the Cash Component computed as PO 00000 Frm 00136 Fmt 4703 Sfmt 4703 described below. Together, the Deposit Securities and the Cash Component will constitute the ‘‘Fund Deposit,’’ which will be applicable (subject to possible amendment or correction) to creation requests received in proper form. The Fund Deposit represents the minimum initial and subsequent investment amount for a Creation Unit of the Fund. The ‘‘Cash Component’’ will be an amount equal to the difference between the NAV of the Shares (per Creation Unit) and the ‘‘Deposit Amount,’’ which will be an amount equal to the market value of the Deposit Securities, and serve to compensate for any differences between the NAV per Creation Unit and the Deposit Amount. The Adviser will make available through the NSCC on each business day prior to the opening of business on the Exchange, the list of names and the required number or par value of each Deposit Security and the amount of the Cash Component to be included in the current Fund Deposit (based on information as of the end of the previous business day for the Fund). Such Fund Deposit will be applicable, subject to any adjustments as described below, to purchases of Creation Units of Shares of the Fund until the Fund’s deadline for the submission of purchase orders (the Fund’s ‘‘Cutoff Time’’). The Fund reserves the right to permit or require the substitution of a ‘‘cash in lieu’’ amount to be added to the Cash Component to replace any Deposit Security that may not be available in sufficient quantity for delivery or that may not be eligible for transfer through the Depository Trust Company (‘‘DTC’’) or the clearing process (as discussed below) or that the Authorized Participant is not able to trade due to a trading restriction. The Fund also reserves the right to permit or require a ‘‘cash in lieu’’ amount in certain circumstances, including circumstances in which the delivery of the Deposit Security by the ‘‘Authorized Participant’’ (as defined below) would be restricted under applicable securities or other local laws or in certain other situations. As noted above, Creation Units currently will be available only for cash purchases. To be eligible to place orders with the Distributor and to create a Creation Unit of the Fund, an entity must be: (i) A ‘‘Participating Party,’’ i.e., a brokerdealer or other participant in the clearing process through the Continuous Net Settlement System of the NSCC (the ‘‘Clearing Process’’), a clearing agency that is registered with the Commission, or (ii) a DTC Participant, and must have executed an agreement with the Distributor, with respect to creations E:\FR\FM\02JNN1.SGM 02JNN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices and redemptions of Creation Units (‘‘Authorized Participant Agreement’’). A Participating Party or DTC Participant who has executed an Authorized Participant Agreement is referred to as an ‘‘Authorized Participant.’’ Creation Units may be purchased only by or through an Authorized Participant. To initiate an order for a Creation Unit, an Authorized Participant must submit to the Distributor or its agent an irrevocable order to purchase Shares of the Fund, in proper form, generally before 12:00 p.m., Eastern time on any business day to receive that day’s NAV. Shares of the Fund may be redeemed by Authorized Participants only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by the Distributor or its agent and only on a business day. The Fund generally will redeem Creation Units solely for cash; however, the Fund reserves the right to distribute securities in-kind as payment for Creation Units being redeemed. Redemption requests for Creation Units of the Fund must be submitted to the Distributor by or through an Authorized Participant. An Authorized Participant must submit an irrevocable request to redeem shares of the Fund generally before 12:00 p.m., Eastern time on any business day in order to receive that day’s NAV. The Adviser will make available through the NSCC, prior to the opening of business on the Exchange on each business day, the designated portfolio of securities (including any portion of such securities for which cash may be substituted) that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form on that day (‘‘Fund Securities’’), and an amount of cash (the ‘‘Cash Amount’’). Such Fund Securities and the corresponding Cash Amount (each subject to possible amendment or correction) are applicable in order to effect redemptions of Creation Units of the Fund until the Fund’s Cutoff Time. Fund Securities received on redemption may not be identical to Deposit Securities that are applicable to creations of Creation Units. If redemptions are not paid in cash, the redemption proceeds for a Creation Unit generally will consist of Fund Securities, plus the Cash Amount, which is an amount equal to the difference between the NAV of the Shares being redeemed, as next determined after the receipt of a redemption request in proper form, and VerDate Sep<11>2014 18:30 Jun 01, 2016 Jkt 238001 the value of Fund Securities, less a redemption transaction fee. The right of redemption may be suspended or the date of payment postponed with respect to the Fund: (i) For any period during which the Exchange is closed (other than customary weekend and holiday closings); (ii) for any period during which trading on the Exchange is suspended or restricted; (iii) for any period during which an emergency exists as a result of which disposal of the shares of the Fund’s portfolio securities or determination of its net asset value is not reasonably practicable; or (iv) in such other circumstance as is permitted by the Commission. Availability of Information The Fund’s Web site (www.blackrock.com), 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 Fund’s Web site will include additional quantitative information updated on a daily basis, including, for the Fund, (1) daily trading volume, the prior business day’s reported closing price, NAV and midpoint of the bid/ask spread at the time of calculation of such NAV (the ‘‘Bid/ Ask Price’’),14 and a calculation of the premium and discount of the Bid/Ask Price against the NAV, and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. On each business day, before commencement of trading in Shares in the Core Trading Session on the Exchange, the Fund will disclose on its Web site the Disclosed Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2) that will form the basis for the Fund’s calculation of NAV at the end of the business day.15 On a daily basis, the Adviser will disclose on the Fund’s Web site the following information regarding each portfolio holding of the Fund and the Underlying Funds, as applicable to the type of holding: Ticker symbol, CUSIP 14 The Bid/Ask Price of the Fund’s Shares will be determined using the mid-point 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. 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. PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 35429 number or other identifier, if any; a description of the holding (including the type of holding); the identity of the security or other asset or instrument underlying the holding, if any; 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 or Underlying Fund’s portfolio. The Web site information will be publicly available at no charge. Investors can also obtain the Trust’s Statement of Additional Information (‘‘SAI’’), the Fund’s Shareholder Reports, and Form N–CSR and Form N– SAR, filed twice a year. The Trust’s SAI and Shareholder Reports will be available free upon request from the Trust, and those documents and the Form N–CSR and Form N–SAR may be viewed on-screen or downloaded from the Commission’s Web site at www.sec.gov. Information regarding market price and trading volume for the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Quotation and last sale information for the Shares will be available via the Consolidated Tape Association (‘‘CTA’’) high-speed line. Price information for the Underlying Funds, other money market funds, STRIPS, U.S. government obligations, variable and floating rate instruments, repurchase agreements and reverse repurchase agreements will be available from major market data vendors. In addition, the Portfolio Indicative Value (‘‘PIV’’), as defined in NYSE Arca Equities Rule 8.600 (c)(3), will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session.16 The dissemination of the PIV, together with the Disclosed Portfolio, will allow investors to determine the value of the underlying portfolio of the Fund on a daily basis and provide a close estimate of that value throughout the trading day. Trading Halts With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to 16 Currently, it is the Exchange’s understanding that several major market data vendors display and/ or make widely available PIVs taken from CTA or other data feeds. E:\FR\FM\02JNN1.SGM 02JNN1 35430 Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES halt or suspend trading in the Shares of the Fund. Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached.17 Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities and/or the financial instruments comprising 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 will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted [sic] 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. Shares will trade on the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading Sessions). The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in NYSE Arca Equities Rule 7.6, the minimum price variation (‘‘MPV’’) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001. The Shares will conform to the initial and continued listing criteria under NYSE Arca Equities Rule 8.600. The Exchange represents that, for initial and/or continued listing, the Fund will be in compliance with Rule 10A–3 18 under the Act, as provided by NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares of the Fund will be outstanding at the commencement of trading on the Exchange. The Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio of the Fund will be made available to all market participants at the same time. Surveillance The Exchange represents that trading in the Shares will be subject to the existing trading surveillances administered by the Exchange, as well 17 See 18 17 NYSE Arca Equities Rule 7.12. CFR 240.10A–3. VerDate Sep<11>2014 18:30 Jun 01, 2016 Jkt 238001 as cross-market surveillances administered by the Financial Industry Regulatory Authority (‘‘FINRA’’) on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws. The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange.19 The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares with other markets or other entities that are members of the Intermarket Surveillance Group (‘‘ISG’’),20 and the Exchange or FINRA, on behalf of the Exchange, or both, may obtain trading information regarding trading in the Shares from such markets or entities. In addition, the Exchange may obtain information regarding trading in the Shares from markets or other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities held by the Fund reported to FINRA’s Trade Reporting and Compliance Engine (‘‘TRACE’’). In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. 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 19 FINRA conducts cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. 20 For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all components of the Disclosed Portfolio may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 listing requirements for listing the Shares of the Fund on the Exchange. 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 Act, the Exchange will monitor 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 NYSE Arca Equities Rule 5.5(m). Information Bulletin Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit (‘‘ETP’’) Holders in an Information Bulletin (‘‘Bulletin’’) of the special characteristics and risks associated with trading the Shares. Specifically, the Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated PIV will not be calculated or publicly disseminated; (4) how information regarding the PIV and the Disclosed Portfolio is disseminated; (5) the requirement that ETP Holders 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 Bulletin will reference that the Fund is subject to various fees and expenses described in the Registration Statement. The Bulletin will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. The Bulletin will also disclose that the NAV for the Shares will generally be calculated as of 12:00 p.m., Eastern time, on each day the NYSE is open for trading. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) 21 that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the 21 15 E:\FR\FM\02JNN1.SGM U.S.C. 78f(b)(5). 02JNN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices mechanism of a free and open market 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 NYSE Arca Equities Rule 8.600. The Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest. The Adviser is not registered as a broker-dealer but is affiliated with a broker-dealer. The Adviser has implemented and will maintain a fire wall with respect to its affiliated broker-dealers regarding access to information concerning the composition and/or changes to the Fund’s portfolio. 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. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares with other markets or other entities that are members of the ISG, and the Exchange or FINRA, on behalf of the Exchange, or both, may obtain trading information regarding trading in the Shares from such markets or entities. In addition, the Exchange may obtain information regarding trading in the Shares from markets or other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities held by the Fund reported to FINRA’s TRACE. Information regarding market price and trading volume for the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Quotation and last sale information for the Shares will be available via the CTA high-speed line. Price information for the Underlying Funds, investment company VerDate Sep<11>2014 18:30 Jun 01, 2016 Jkt 238001 securities, STRIPS, U.S. government obligations, variable and floating rate instruments, repurchase agreements, and reverse repurchase agreements will be available from major market data vendors. In addition, the PIV, as defined in NYSE Arca Equities Rule 8.600 (c)(3), will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session. Moreover, prior to the commencement of trading, the Exchange will inform its ETP Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable, and trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), 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 PIV, the Disclosed Portfolio, and quotation and last sale information for the Shares. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of an additional type of activelymanaged exchange-traded product that principally holds U.S. government securities and other money market securities that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the PIV, the Disclosed Portfolio, and quotation and last sale information for the Shares. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of an additional type of actively-managed exchange-traded product that PO 00000 Frm 00139 Fmt 4703 Sfmt 4703 35431 principally holds U.S. government securities and other money market securities as discussed above, which will enhance competition among market participants, to the benefit of investors and the marketplace. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to 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 up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) by order approve or disapprove the 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– NYSEArca–2016–63 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2016–63. 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 E:\FR\FM\02JNN1.SGM 02JNN1 35432 Federal Register / Vol. 81, No. 106 / Thursday, June 2, 2016 / Notices 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– NYSEArca–2016–63 and should be submitted on or before June 23, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–13040 Filed 6–1–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77923; File No. SR–FINRA– 2016–016] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend the Tier Size Pilot of FINRA Rule 6433 (Minimum Quotation Size Requirements for OTC Equity Securities) asabaliauskas on DSK3SPTVN1PROD with NOTICES May 26, 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 May 19, 2016, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II, below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as constituting a ‘‘non-controversial’’ rule change under paragraph (f)(6) of Rule 19b–4 under the Act,3 which renders 22 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 17 CFR 240.19b–4(f)(6). 1 15 VerDate Sep<11>2014 18:30 Jun 01, 2016 Jkt 238001 the proposal effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to amend FINRA Rule 6433 (Minimum Quotation Size Requirements for OTC Equity Securities) to extend the Tier Size Pilot, which currently is scheduled to expire on June 10, 2016, until December 9, 2016. The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA 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 FINRA proposes to amend FINRA Rule 6433 (Minimum Quotation Size Requirements for OTC Equity Securities) (the ‘‘Rule’’) to extend, until December 9, 2016, the amendments set forth in File No. SR–FINRA–2011–058 (‘‘Tier Size Pilot’’ or ‘‘Pilot’’), which currently are scheduled to expire on June 10, 2016.4 The Tier Size Pilot was filed with the SEC on October 6, 2011,5 to amend the minimum quotation sizes (or ‘‘tier sizes’’) for OTC Equity Securities.6 The 4 See Securities Exchange Act Release No. 76519 (November 24, 2015), 80 FR 75155 (December 1, 2015) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA–2015–051); see also Securities Exchange Act Release No. 67208 (June 15, 2012), 77 FR 37458 (June 21, 2012) (Order Approving File No. SR–FINRA–2011–058, as amended). 5 See Securities Exchange Act Release No. 65568 (October 14, 2011), 76 FR 65307 (October 20, 2011) (Notice of Filing of File No. SR–FINRA–2011–058). 6 ‘‘OTC Equity Security’’ means any equity security that is not an ‘‘NMS stock’’ as that term is defined in Rule 600(b)(47) of SEC Regulation NMS; PO 00000 Frm 00140 Fmt 4703 Sfmt 4703 goals of the Pilot were to simplify the tier structure, facilitate the display of customer limit orders, and expand the scope of the Rule to apply to additional quoting participants. During the course of the pilot, FINRA collected and provided to the SEC specified data with which to assess the impact of the Pilot tiers on market quality and limit order display.7 On September 13, 2013, FINRA provided to the Commission an assessment on the operation of the Tier Size Pilot utilizing data covering the period from November 12, 2012 through June 30, 2013.8 As noted in the 2013 Assessment, FINRA believed that the analysis of the data generally showed that the Tier Size Pilot had a neutral to positive impact on OTC market quality for the majority of OTC Equity Securities and tiers; and that there was an overall increase of 13% in the number of customer limit orders that met the minimum quotation sizes to be eligible for display under the Pilot tiers. In the 2013 Assessment, FINRA recommended adopting the tiers as permanent, but extended the pilot period to allow more time to gather and analyze data after the November 12, 2012 through June 30, 2013 assessment period.9 FINRA reviewed the post-June 30, 2013 data, and believes that the impact described in the 2013 Assessment has continued to hold (and has improved in certain areas). FINRA further extended the Pilot period until June 10, 2016.10 The purpose of this filing is to extend the operation of the Tier Size Pilot until December 9, 2016, to provide FINRA with additional time to finalize its provided, however, that the term OTC Equity Security shall not include any Restricted Equity Security. See FINRA Rule 6420. 7 FINRA ceased collecting Pilot data for submission to the Commission on February 13, 2015. 8 The assessment is part of the SEC’s comment file for SR–FINRA–2011–058 and also is available on FINRA’s Web site at: https://www.finra.org/Industry/ Regulation/RuleFilings/2011/P124615 (‘‘Pilot Assessment’’). 9 See Securities Exchange Act Release No. 70839 (November 8, 2013), 78 FR 68893 (November 15, 2013) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA–2013–049). 10 See Securities Exchange Act Release No. 74251 (February 11, 2015), 80 FR 8741 (February 18, 2015) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA–2015–002); Securities Exchange Act Release No. 74927 (May 12, 2015), 80 FR 28327 (May 18, 2015) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA– 2015–010); Securities Exchange Act Release No. 75639 (August 7, 2015), 80 FR 48615 (August 13, 2015) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA–2015–028); and Securities Exchange Act Release No. 76519 (November 24, 2015), 80 FR 75155 (December 1, 2015) (Notice of Filing and Immediate Effectiveness of File No. SR– FINRA–2015–051). E:\FR\FM\02JNN1.SGM 02JNN1

Agencies

[Federal Register Volume 81, Number 106 (Thursday, June 2, 2016)]
[Notices]
[Pages 35425-35432]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-13040]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77941; File No. SR-NYSEArca-2016-63]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Listing and Trading of Shares 
of BlackRock Government Collateral Pledge Unit Under NYSE Arca Equities 
Rule 8.600

May 27, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on May 19, 2016, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to list and trade shares of the following 
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''): 
BlackRock Government Collateral Pledge Unit under NYSE Arca Equities 
Rule 8.600 [sic]. The proposed rule change is available on the 
Exchange's Web site at www.nyse.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 self-regulatory organization 
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 those 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.

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

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
following under NYSE Arca Equities Rule 8.600,\4\ which governs the 
listing and trading of Managed Fund Shares: \5\ BlackRock

[[Page 35426]]

Government Collateral Pledge Unit (``Fund''). The Fund is a series of 
the BlackRock Collateral Trust (the ``Trust''), a Delaware statutory 
trust.\6\ BlackRock Fund Advisors is the investment advisor for the 
Fund (``Adviser''). State Street Bank and Trust Company (``State 
Street'') is the administrator, custodian and transfer agent for the 
Fund. BlackRock Investments, LLC will be the Fund's distributor 
(``Distributor'').
---------------------------------------------------------------------------

    \4\ The Commission has previously approved listing and trading 
on the Exchange of actively managed funds under Rule 8.600. See, 
e.g., Securities Exchange Act Release Nos. 57801 (May 8, 2008), 73 
FR 27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order approving 
Exchange listing and trading of twelve actively-managed funds of the 
WisdomTree Trust); 66321 (February 3, 2012), 77 FR 6850 (February 9, 
2012) (SR-NYSEArca-2011-95) (order approving listing and trading of 
PIMCO Total Return Exchange Traded Fund); 66670 (March 28, 2012), 77 
FR 20087 (April 3, 2012) (SR-NYSEArca-2012-09) (order approving 
listing and trading of PIMCO Global Advantage Inflation-Linked Bond 
Strategy Fund).
    \5\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an 
open-end investment company or similar entity that invests in a 
portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Equities Rule 
5.2(j)(3), seeks to provide investment results that correspond 
generally to the price and yield performance of a specific foreign 
or domestic stock index, fixed income securities index or 
combination thereof.
    \6\ The Trust is registered under the 1940 Act. On April 7, 
2016, the Trust filed with the Commission its registration statement 
on Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a) 
(``Securities Act'') and the 1940 Act relating to the Fund (File 
Nos. 333-210648 and 811-23154) (the ``Registration Statement''). The 
description of the operation of the Trust and the Fund herein is 
based, in part, on the Registration Statement. In addition, the 
Commission has issued an order granting certain exemptive relief to 
the Trust and the Adviser (as defined below) under the 1940 Act. See 
Investment Company Act Release No. 29571 (January 24, 2011) (File 
No. 812-13601) (``Exemptive Order''). The Fund will be offered in 
reliance upon the Exemptive Order issued to the Trust and the 
Adviser.
---------------------------------------------------------------------------

    Commentary .06 to Rule 8.600 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.\7\ In addition, 
Commentary .06 further requires that personnel who make decisions on 
the open-end fund's portfolio composition must be subject to procedures 
designed to prevent the use and dissemination of material nonpublic 
information regarding the open-end fund's portfolio. The Adviser is not 
registered as a broker-dealer but is affiliated with two broker-
dealers. The Adviser has implemented and will maintain a fire wall with 
respect to its affiliated broker-dealers regarding access to 
information concerning the composition and/or changes to the Fund's 
portfolio. In the event (a) the Adviser becomes registered as a broker-
dealer or newly affiliated with a broker-dealer, or (b) any new adviser 
or sub-adviser becomes registered as a broker-dealer or newly 
affiliated with a broker-dealer, it will implement a fire wall with 
respect to its relevant personnel or such broker-dealer affiliate 
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.
---------------------------------------------------------------------------

    \7\ 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. 
The Exchange represents that the Adviser and its related personnel 
are subject to Investment Advisers Act Rule 204A-1. 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.
---------------------------------------------------------------------------

BlackRock Government Collateral Pledge Unit
Principal Investments
    According to the Registration Statement, the Fund's investment 
objective will be to seek to provide as high a level of current income 
as is consistent with liquidity and minimum volatility of principal. 
The Fund will seek to achieve its investment objective by investing, 
under normal circumstances,\8\ at least 80% of its net assets in a 
portfolio of U.S. dollar-denominated short-term government securities 
and other money market securities eligible for investment by U.S. 
government money market funds that seek to maintain a stable net asset 
value (including indirect investments through the ``Underlying Funds'', 
as defined below).
---------------------------------------------------------------------------

    \8\ The term ``under normal circumstances'' includes, but is not 
limited to, the absence of extreme volatility or trading halts in 
the fixed income securities markets or the financial markets 
generally; circumstances under which the Fund's investments are made 
for temporary defensive purposes; 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, the Fund intends to invest a 
substantial portion of its assets in the following government money 
market funds (each, an ``Underlying Fund'' and collectively, the 
``Underlying Funds''), which principally invest in short-term U.S. 
Treasury bills, notes and other obligations issued or guaranteed as to 
principal and interest by the U.S. Government or its agencies or 
instrumentalities, and repurchase agreements secured by such 
obligations or cash: \9\ FedFund and T-Fund (each, a series of 
BlackRock Liquidity Funds); and BlackRock Premier Government 
Institutional Fund and BlackRock Select Treasury Strategies 
Institutional Fund (each, a series of Funds For Institutions Series). 
The Adviser may add, eliminate or replace any or all Underlying Funds 
at any time. Any additions to or replacements for the Underlying Funds 
will also be government money market funds with substantially similar 
investment characteristics as those described herein applicable to the 
Underlying Funds. The Adviser or its affiliates may advise the 
Underlying Funds. The Fund generally will allocate and reallocate its 
assets among the Underlying Funds on a monthly basis on an approximate 
pro rata basis based on the amount of net assets of each Underlying 
Fund, subject to minimum investment amounts or other constraints on the 
Underlying Funds.
---------------------------------------------------------------------------

    \9\ Each Underlying Fund is a ``government money market fund,'' 
as defined in Rule 2a-7 under the 1940 Act and seeks to maintain a 
stable NAV of $1.00. The Fund, however, will not be a money market 
fund and will not seek to maintain a stable NAV of $1.00.
---------------------------------------------------------------------------

    According to the Registration Statement, the Underlying Funds 
invest in securities maturing in 397 days (13 months) or less (with 
certain exceptions) and their portfolios will have a dollar-weighted 
average maturity of 60 days or less and a dollar-weighted average life 
of 120 days or less.
    The Fund and certain Underlying Funds may invest in various types 
of U.S. government obligations. U.S. government obligations are a type 
of bond and include securities issued or guaranteed as to principal and 
interest by the U.S. government, its agencies or instrumentalities. 
Payment of principal and interest on U.S. government obligations (i) 
may be backed by the full faith and credit of the United States or (ii) 
may be backed solely by the issuing or guaranteeing agency or 
instrumentality itself (as with Federal National Mortgage Association 
(``Fannie Mae''), Federal Home Loan Mortgage Corporation (``Freddie 
Mac'') and Federal Home Loan Bank (``FHLB'') notes). In the latter 
case, the Fund or an Underlying Fund must look principally to the 
agency or instrumentality issuing or guaranteeing the obligation for 
ultimate repayment, which agency or instrumentality may be privately 
owned.
    The Fund and the Underlying Funds may invest in variable and 
floating rate instruments.

[[Page 35427]]

    The Fund and the Underlying Funds may transact in securities on a 
when-issued, delayed delivery or forward commitment basis. The purchase 
or sale of securities on a when-issued or delayed delivery basis or 
through a forward commitment involves the purchase or sale of 
securities at an established price with payment and delivery taking 
place in the future.
    The Fund and the Underlying Funds may invest in repurchase 
agreements that are secured by either obligations issued or guaranteed 
as to principal and interest by the U.S. government or agencies or 
instrumentalities, or by cash.
    The securities purchased by the Fund will comply with the quality 
and eligibility requirements of Rule 2a-7 under the 1940 Act. The 
securities purchased by the Underlying Funds will comply with all 
requirements of Rule 2a-7 and other rules of the Commission applicable 
to money market funds that seek to maintain a stable net asset value 
per share (``NAV''). The Fund itself will invest only in money market 
securities eligible for investment for funds that comply with Rule 2a-7 
but will not be subject to other requirements of Rule 2a-7 applicable 
to money market funds that seek to maintain a stable NAV.
Other Investments
    While the Fund, under normal circumstances, will invest at least 
80% of its net assets in the securities and financial instruments 
described above, the Fund may invest its remaining assets in other 
assets and financial instruments, as described below.
    The Fund and the Underlying Funds may also invest in certain U.S. 
government obligations other than those referenced in Principal 
Investments above, namely Treasury receipts where the principal and 
interest components are traded separately under the Separate Trading of 
Registered Interest and Principal of Securities (STRIPS) program.
    The Fund and certain Underlying Funds may invest in reverse 
repurchase agreements.
    The Fund may invest in the securities of other investment companies 
(including money market funds) to the extent permitted by law, 
regulation, exemptive order or Commission staff guidance.
Investment Restrictions
    The Fund will be classified as ``diversified.'' \10\ With respect 
to 75% of the Fund's total assets, a ``diversified'' fund is limited by 
the 1940 Act such that it does not invest more than 5% of its total 
assets in securities of any one issuer and does not acquire more than 
10% of the outstanding voting securities of any one issuer (excluding 
cash and cash items, government securities, and securities of other 
investment companies). The remaining 25% of the Fund's total assets may 
be invested in a single issuer or a number of issuers.
---------------------------------------------------------------------------

    \10\ The diversification standard is set forth in Section 
5(b)(1) of the 1940 Act.
---------------------------------------------------------------------------

    The Fund intends to maintain the required level of diversification 
and otherwise conduct its operations so as to qualify as a regulated 
investment company for purposes of the U.S. Internal Revenue Code of 
1986, as amended.\11\
---------------------------------------------------------------------------

    \11\ 26 U.S.C. 851.
---------------------------------------------------------------------------

    The Fund may invest up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment). Each 
Underlying Fund may invest up to an aggregate amount of 5% of its net 
assets in illiquid securities. The Fund will monitor its portfolio 
liquidity on an ongoing basis to determine whether, in light of current 
circumstances, an adequate level of liquidity is being maintained, and 
will consider taking appropriate steps in order to maintain adequate 
liquidity if, through a change in values, net assets, or other 
circumstances, more than 15% of the Fund's net assets are held in 
illiquid assets. Illiquid assets include securities subject to 
contractual or other restrictions on resale and other instruments that 
lack readily available markets as determined in accordance with 
Commission staff guidance.\12\
---------------------------------------------------------------------------

    \12\ 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).
---------------------------------------------------------------------------

    The Fund will not invest in futures, options, swaps or forward 
contracts.
    The Fund's investments will be consistent with the Fund's 
investment objective and will not be used to enhance leverage. That is, 
while the Fund will be permitted to borrow as permitted under the 1940 
Act, the Fund's investments will not be used to seek performance that 
is the multiple or inverse multiple (e.g., 2Xs and 3Xs) of the Fund's 
primary broad-based securities benchmark index (as defined in Form N-
1A).\13\
---------------------------------------------------------------------------

    \13\ The Fund's broad-based securities benchmark index will be 
identified in a future amendment to the Registration Statement 
following the Fund's first full calendar year of performance.
---------------------------------------------------------------------------

Net Asset Value
    According to the Registration Statement, the NAV for the Fund's 
Shares will generally be calculated as of 12:00 p.m., Eastern time, on 
each day the New York Stock Exchange (``NYSE'') is open for trading. 
Valuation of securities held by the Fund will be as follows.
    Shares of the Underlying Funds normally will be valued at fair 
value based on their NAV from the prior business day, which is the most 
recent observable valuation of the Underlying Funds as of the time the 
NAV for the Fund's Shares is determined [sic]
    Fixed-income securities normally will be valued based on current 
bid-side market quotations (if readily available), last available bid 
prices, or evaluated prices as of 12:00 p.m., Eastern time supplied by 
the Fund's approved independent third-party pricing services, each in 
accordance with policies and procedures approved by the Board (the 
``Valuation Procedures''). The amortized cost method of valuation may 
be used with respect to debt obligations with sixty days or less 
remaining to maturity unless BlackRock determines in good faith that 
such method does not represent fair value. Certain fixed-income 
investments may be valued based on valuation models that consider the 
estimated cash flows of each tranche of the entity, establish a 
benchmark yield and develop an estimated tranche-specific spread to the 
benchmark yield based on the unique attributes of the tranche.
    Variable and floating rate instruments, repurchase agreements and 
reverse repurchase agreements will be valued at prices supplied by 
approved pricing services which is generally based on bid-side 
quotations.
    Prices obtained from independent third-party pricing services, 
broker-dealers or market makers to value the Fund's securities and 
other assets and liabilities will be based on information available at 
the time the Fund values its assets and liabilities.
    In the event that application of the methods of valuation discussed 
above result in a price for a security which is deemed not to be 
representative of the

[[Page 35428]]

fair market value of such security, the security will be valued by, 
under the direction of or in accordance with a method approved by the 
Board, and in accordance with the 1940 Act, as reflecting fair value.
    When market quotations are not readily available or are believed in 
good faith by BlackRock to be unreliable, the Fund's investments will 
be valued at fair value (``Fair Value Assets''). Fair Value Assets will 
be valued by BlackRock in accordance with the Valuation Procedures. 
BlackRock may reasonably conclude that a market quotation is not 
readily available or is unreliable if, among other things, a security 
or other asset or liability does not have a price source due to its 
complete lack of trading, if BlackRock believes in good faith that a 
market quotation from a broker-dealer or other source is unreliable 
(e.g., where it varies significantly from a recent trade, or no longer 
reflects the fair value of the security or other asset or liability 
subsequent to the most recent market quotation), or where the security 
or other asset or liability is only thinly traded or due to the 
occurrence of a significant event subsequent to the most recent market 
quotation. For this purpose, a ``significant event'' is deemed to occur 
if BlackRock determines, in its reasonable business judgment, that an 
event has occurred after the close of trading for an asset or liability 
but prior to or at the time of pricing the Fund's assets or 
liabilities, and that the event is likely to cause a material change to 
the closing market price of the assets or liabilities held by the Fund.
    BlackRock, with input from the BlackRock Investment Strategy Group, 
will submit its recommendations regarding the valuation and/or 
valuation methodologies for Fair Value Assets to BlackRock's Valuation 
Committee. The BlackRock Valuation Committee may accept, modify or 
reject any recommendations. In addition, the Fund's accounting agent 
periodically endeavors to confirm the prices it receives from all 
third-party pricing services, index providers and broker-dealers, and, 
with the assistance of BlackRock, to regularly evaluate the values 
assigned to the securities and other assets and liabilities of the 
Fund. The pricing of all Fair Value Assets is subsequently reported to 
and, where appropriate, ratified by the Board. When determining the 
price for a Fair Value Asset, the BlackRock Valuation Committee (or 
BlackRock's Pricing Group) will seek to determine the price that the 
Fund might reasonably expect to receive upon the current sale of that 
asset or liability in an arm's-length transaction on the date on which 
the assets or liabilities are being valued, and does not seek to 
determine the price that the Fund might expect to receive for selling 
the asset, or the cost of extinguishing a liability, at a later time or 
if it holds the asset or liability to maturity. Fair value 
determinations will be based upon all available factors that the 
BlackRock Valuation Committee (or BlackRock's Pricing Group) deems 
relevant at the time of the determination, and may be based on 
analytical values determined by BlackRock using proprietary or third-
party valuation models.
    Fair value represents a good faith approximation of the value of an 
asset or liability. When determining the fair value of an asset, one or 
more of a variety of fair valuation methodologies may be used 
(depending on certain factors, including the asset type). For example, 
the asset may be priced on the basis of the original cost of the 
investment or, alternatively, using proprietary or third-party models 
(including models that rely upon direct portfolio management pricing 
inputs and which reflect the significance attributed to the various 
factors and assumptions being considered). Prices of actual, executed 
or historical transactions in the relevant asset and/or liability (or 
related or comparable assets and/or liabilities) or, where appropriate, 
an appraisal by a third-party experienced in the valuation of similar 
assets and/or liabilities, may also be used as a basis for establishing 
the fair value of an asset or liability.
Creation and Redemption of Shares
    According to the Registration Statement, the Trust will issue and 
sell Shares of the Fund only in Creation Units of 50,000 Shares (though 
this number may change from time to time, including prior to the 
listing of the Fund) on a continuous basis through the Distributor or 
its agent, without a sales load, at a price based on the Fund's NAV 
next determined after receipt, on any business day, of an order 
received by the Distributor or its agent in proper form. On days when 
the Exchange or the bond markets close earlier than normal, the Fund 
may require orders to be placed earlier in the day.
    The consideration for purchase of Creation Units of the Fund will 
generally be cash. However, in some cases the consideration consists of 
an in-kind deposit of a designated portfolio of securities (including 
any portion of such securities for which cash may be substituted) 
(``Deposit Securities'') and the Cash Component computed as described 
below. Together, the Deposit Securities and the Cash Component will 
constitute the ``Fund Deposit,'' which will be applicable (subject to 
possible amendment or correction) to creation requests received in 
proper form. The Fund Deposit represents the minimum initial and 
subsequent investment amount for a Creation Unit of the Fund.
    The ``Cash Component'' will be an amount equal to the difference 
between the NAV of the Shares (per Creation Unit) and the ``Deposit 
Amount,'' which will be an amount equal to the market value of the 
Deposit Securities, and serve to compensate for any differences between 
the NAV per Creation Unit and the Deposit Amount.
    The Adviser will make available through the NSCC on each business 
day prior to the opening of business on the Exchange, the list of names 
and the required number or par value of each Deposit Security and the 
amount of the Cash Component to be included in the current Fund Deposit 
(based on information as of the end of the previous business day for 
the Fund). Such Fund Deposit will be applicable, subject to any 
adjustments as described below, to purchases of Creation Units of 
Shares of the Fund until the Fund's deadline for the submission of 
purchase orders (the Fund's ``Cutoff Time'').
    The Fund reserves the right to permit or require the substitution 
of a ``cash in lieu'' amount to be added to the Cash Component to 
replace any Deposit Security that may not be available in sufficient 
quantity for delivery or that may not be eligible for transfer through 
the Depository Trust Company (``DTC'') or the clearing process (as 
discussed below) or that the Authorized Participant is not able to 
trade due to a trading restriction. The Fund also reserves the right to 
permit or require a ``cash in lieu'' amount in certain circumstances, 
including circumstances in which the delivery of the Deposit Security 
by the ``Authorized Participant'' (as defined below) would be 
restricted under applicable securities or other local laws or in 
certain other situations. As noted above, Creation Units currently will 
be available only for cash purchases.
    To be eligible to place orders with the Distributor and to create a 
Creation Unit of the Fund, an entity must be: (i) A ``Participating 
Party,'' i.e., a broker-dealer or other participant in the clearing 
process through the Continuous Net Settlement System of the NSCC (the 
``Clearing Process''), a clearing agency that is registered with the 
Commission, or (ii) a DTC Participant, and must have executed an 
agreement with the Distributor, with respect to creations

[[Page 35429]]

and redemptions of Creation Units (``Authorized Participant 
Agreement''). A Participating Party or DTC Participant who has executed 
an Authorized Participant Agreement is referred to as an ``Authorized 
Participant.''
    Creation Units may be purchased only by or through an Authorized 
Participant.
    To initiate an order for a Creation Unit, an Authorized Participant 
must submit to the Distributor or its agent an irrevocable order to 
purchase Shares of the Fund, in proper form, generally before 12:00 
p.m., Eastern time on any business day to receive that day's NAV.
    Shares of the Fund may be redeemed by Authorized Participants only 
in Creation Units at their NAV next determined after receipt of a 
redemption request in proper form by the Distributor or its agent and 
only on a business day.
    The Fund generally will redeem Creation Units solely for cash; 
however, the Fund reserves the right to distribute securities in-kind 
as payment for Creation Units being redeemed.
    Redemption requests for Creation Units of the Fund must be 
submitted to the Distributor by or through an Authorized Participant. 
An Authorized Participant must submit an irrevocable request to redeem 
shares of the Fund generally before 12:00 p.m., Eastern time on any 
business day in order to receive that day's NAV.
    The Adviser will make available through the NSCC, prior to the 
opening of business on the Exchange on each business day, the 
designated portfolio of securities (including any portion of such 
securities for which cash may be substituted) that will be applicable 
(subject to possible amendment or correction) to redemption requests 
received in proper form on that day (``Fund Securities''), and an 
amount of cash (the ``Cash Amount''). Such Fund Securities and the 
corresponding Cash Amount (each subject to possible amendment or 
correction) are applicable in order to effect redemptions of Creation 
Units of the Fund until the Fund's Cutoff Time. Fund Securities 
received on redemption may not be identical to Deposit Securities that 
are applicable to creations of Creation Units.
    If redemptions are not paid in cash, the redemption proceeds for a 
Creation Unit generally will consist of Fund Securities, plus the Cash 
Amount, which is an amount equal to the difference between the NAV of 
the Shares being redeemed, as next determined after the receipt of a 
redemption request in proper form, and the value of Fund Securities, 
less a redemption transaction fee.
    The right of redemption may be suspended or the date of payment 
postponed with respect to the Fund: (i) For any period during which the 
Exchange is closed (other than customary weekend and holiday closings); 
(ii) for any period during which trading on the Exchange is suspended 
or restricted; (iii) for any period during which an emergency exists as 
a result of which disposal of the shares of the Fund's portfolio 
securities or determination of its net asset value is not reasonably 
practicable; or (iv) in such other circumstance as is permitted by the 
Commission.
Availability of Information
    The Fund's Web site (www.blackrock.com), 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 Fund's Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Fund, (1) daily trading volume, the 
prior business day's reported closing price, NAV and mid-point of the 
bid/ask spread at the time of calculation of such NAV (the ``Bid/Ask 
Price''),\14\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV, and (2) data in chart format displaying the 
frequency distribution of discounts and premiums of the daily Bid/Ask 
Price against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each business day, before commencement 
of trading in Shares in the Core Trading Session on the Exchange, the 
Fund will disclose on its Web site the Disclosed Portfolio as defined 
in NYSE Arca Equities Rule 8.600(c)(2) that will form the basis for the 
Fund's calculation of NAV at the end of the business day.\15\
---------------------------------------------------------------------------

    \14\ The Bid/Ask Price of the Fund's Shares will be determined 
using the mid-point 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.
    \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.
---------------------------------------------------------------------------

    On a daily basis, the Adviser will disclose on the Fund's Web site 
the following information regarding each portfolio holding of the Fund 
and the Underlying Funds, as applicable to the type of holding: Ticker 
symbol, CUSIP number or other identifier, if any; a description of the 
holding (including the type of holding); the identity of the security 
or other asset or instrument underlying the holding, if any; 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 or Underlying Fund's 
portfolio. The Web site information will be publicly available at no 
charge.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and Form N-CSR 
and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports will be available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at www.sec.gov. Information 
regarding market price and trading volume for the Shares will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers. Quotation and last sale information for the 
Shares will be available via the Consolidated Tape Association 
(``CTA'') high-speed line. Price information for the Underlying Funds, 
other money market funds, STRIPS, U.S. government obligations, variable 
and floating rate instruments, repurchase agreements and reverse 
repurchase agreements will be available from major market data vendors. 
In addition, the Portfolio Indicative Value (``PIV''), as defined in 
NYSE Arca Equities Rule 8.600 (c)(3), will be widely disseminated by 
one or more major market data vendors at least every 15 seconds during 
the Core Trading Session.\16\ The dissemination of the PIV, together 
with the Disclosed Portfolio, will allow investors to determine the 
value of the underlying portfolio of the Fund on a daily basis and 
provide a close estimate of that value throughout the trading day.
---------------------------------------------------------------------------

    \16\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available PIVs 
taken from CTA or other data feeds.
---------------------------------------------------------------------------

Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to

[[Page 35430]]

halt or suspend trading in the Shares of the Fund. Trading in Shares of 
the Fund will be halted if the circuit breaker parameters in NYSE Arca 
Equities Rule 7.12 have been reached.\17\ Trading also may be halted 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Shares inadvisable. These may include: 
(1) The extent to which trading is not occurring in the securities and/
or the financial instruments comprising 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 will be subject to NYSE Arca Equities 
Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares 
of the Fund may be halted [sic]
---------------------------------------------------------------------------

    \17\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------

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. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, the minimum price variation (``MPV'') for 
quoting and entry of orders in equity securities traded on the NYSE 
Arca Marketplace is $0.01, with the exception of securities that are 
priced less than $1.00 for which the MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents 
that, for initial and/or continued listing, the Fund will be in 
compliance with Rule 10A-3 \18\ under the Act, as provided by NYSE Arca 
Equities Rule 5.3. A minimum of 100,000 Shares of the Fund will be 
outstanding at the commencement of trading on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares 
that the NAV per Share will be calculated daily and that the NAV and 
the Disclosed Portfolio of the Fund will be made available to all 
market participants at the same time.
---------------------------------------------------------------------------

    \18\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances administered by the Exchange, as 
well as cross-market surveillances administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws. The Exchange represents that these 
procedures are adequate to properly monitor Exchange trading of the 
Shares in all trading sessions and to deter and detect violations of 
Exchange rules and federal securities laws applicable to trading on the 
Exchange.\19\
---------------------------------------------------------------------------

    \19\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares with other 
markets or other entities that are members of the Intermarket 
Surveillance Group (``ISG''),\20\ and the Exchange or FINRA, on behalf 
of the Exchange, or both, may obtain trading information regarding 
trading in the Shares from such markets or entities. In addition, the 
Exchange may obtain information regarding trading in the Shares from 
markets or other entities that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement. 
FINRA, on behalf of the Exchange, is able to access, as needed, trade 
information for certain fixed income securities held by the Fund 
reported to FINRA's Trade Reporting and Compliance Engine (``TRACE'').
---------------------------------------------------------------------------

    \20\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    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 of the Fund on the Exchange.
    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 Act, the Exchange will monitor 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 NYSE Arca Equities Rule 5.5(m).
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit (``ETP'') Holders in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares. Specifically, the Bulletin will discuss the 
following: (1) The procedures for purchases and redemptions of Shares 
in Creation Units (and that Shares are not individually redeemable); 
(2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due 
diligence on its ETP Holders to learn the essential facts relating to 
every customer prior to trading the Shares; (3) the risks involved in 
trading the Shares during the Opening and Late Trading Sessions when an 
updated PIV will not be calculated or publicly disseminated; (4) how 
information regarding the PIV and the Disclosed Portfolio is 
disseminated; (5) the requirement that ETP Holders 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 Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will generally 
be calculated as of 12:00 p.m., Eastern time, on each day the NYSE is 
open for trading.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \21\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the

[[Page 35431]]

mechanism of a free and open market and, in general, to protect 
investors and the public interest.
---------------------------------------------------------------------------

    \21\ 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 NYSE Arca Equities Rule 
8.600. The Exchange has in place surveillance procedures that are 
adequate to properly monitor trading in the Shares in all trading 
sessions and to deter and detect violations of Exchange rules and 
federal securities laws applicable to trading on the Exchange.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest. 
The Adviser is not registered as a broker-dealer but is affiliated with 
a broker-dealer. The Adviser has implemented and will maintain a fire 
wall with respect to its affiliated broker-dealers regarding access to 
information concerning the composition and/or changes to the Fund's 
portfolio. 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.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares with other 
markets or other entities that are members of the ISG, and the Exchange 
or FINRA, on behalf of the Exchange, or both, may obtain trading 
information regarding trading in the Shares from such markets or 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares from markets or other entities that are members 
of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement. FINRA, on behalf of the Exchange, is 
able to access, as needed, trade information for certain fixed income 
securities held by the Fund reported to FINRA's TRACE.
    Information regarding market price and trading volume for the 
Shares will be continually available on a real-time basis throughout 
the day on brokers' computer screens and other electronic services. 
Information regarding the previous day's closing price and trading 
volume information for the Shares will be published daily in the 
financial section of newspapers. Quotation and last sale information 
for the Shares will be available via the CTA high-speed line. Price 
information for the Underlying Funds, investment company securities, 
STRIPS, U.S. government obligations, variable and floating rate 
instruments, repurchase agreements, and reverse repurchase agreements 
will be available from major market data vendors. In addition, the PIV, 
as defined in NYSE Arca Equities Rule 8.600 (c)(3), will be widely 
disseminated by one or more major market data vendors at least every 15 
seconds during the Core Trading Session. Moreover, prior to the 
commencement of trading, the Exchange will inform its ETP Holders in an 
Information Bulletin of the special characteristics and risks 
associated with trading the Shares. Trading in Shares of the Fund will 
be halted if the circuit breaker parameters in NYSE Arca Equities Rule 
7.12 have been reached or because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable, and trading in the Shares will be subject to NYSE Arca 
Equities Rule 8.600(d)(2)(D), 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 PIV, the Disclosed Portfolio, and quotation and last sale 
information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
principally holds U.S. government securities and other money market 
securities that will enhance competition among market participants, to 
the benefit of investors and the marketplace. As noted above, the 
Exchange has in place surveillance procedures relating to trading in 
the Shares and may obtain information via ISG from other exchanges that 
are members of ISG or with which the Exchange has entered into a 
comprehensive surveillance sharing agreement. In addition, as noted 
above, investors will have ready access to information regarding the 
Fund's holdings, the PIV, the Disclosed Portfolio, and quotation and 
last sale information for the Shares.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of an 
additional type of actively-managed exchange-traded product that 
principally holds U.S. government securities and other money market 
securities as discussed above, which will enhance competition among 
market participants, to the benefit of investors and the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to 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 up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) by order approve or disapprove the 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-NYSEArca-2016-63 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2016-63. 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

[[Page 35432]]

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-NYSEArca-2016-63 and should 
be submitted on or before June 23, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
---------------------------------------------------------------------------

    \22\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-13040 Filed 6-1-16; 8:45 am]
 BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.