Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change to Rule 14.11(c)(4) To List and Trade Shares of the iShares iBonds Dec 2023 Term Muni Bond ETF and iShares iBonds Dec 2024 Term Muni Bond ETF of the iShares U.S. ETF Trust, 59700-59709 [2016-20735]
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Federal Register / Vol. 81, No. 168 / Tuesday, August 30, 2016 / Notices
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allow ICE to effectuate the Stock
Dividend would not impact the
Exchange’s ability to be so organized as
to have the capacity to be able to carry
out the purposes of the Exchange Act.
In particular, the proposed changes
would not alter the limitations on voting
and ownership set forth in Section V of
the ICE Certificate, and so the proposed
changes would not enable a person to
‘‘improperly interfere with or restrict
the ability of the Commission, the
Exchange, or its subsidiaries to
effectively carry out their regulatory
oversight responsibilities under the
Act.’’ 9
For similar reasons, the proposal is
consistent with Section 6(b)(5) of the
Exchange Act,10 because it would not
impact the Exchange’s governance or
regulatory structure, which would
continue to be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to,
and perfect the mechanism of a free and
open market and a national market
system and, in general, to protect
investors and the public interest.
The Exchange believes that approval
of the proposal would remove
impediments to, and perfect the
mechanism of a free and open market
and a national market system and, in
general, protect investors and the public
interest, because by increasing ICE’s
authorized shares of Common Stock and
shares of capital stock sufficient to
allow ICE to effectuate the Stock
Dividend, the proposed rule change will
facilitate broader ownership of ICE.
The Exchange believes that amending
Article V, Section A.5, to correct the
reference to ‘‘this Section A of ARTICLE
VI’’ to refer to ‘‘this Section A of
ARTICLE V’’ would reduce potential
confusion that may result from having
an incorrect reference in the ICE
Certificate. Replacing such incorrect
reference would further the goal of
transparency and add clarity to the ICE
Certificate.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Exchange Act.
9 See Securities Exchange Act Release No. 70210,
supra note 6, at 51760.
10 15 U.S.C. 78f(b)(5).
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The proposed rule change is not
designed to address any competitive
issue but rather is concerned solely with
the number of authorized shares of
Common Stock and shares of capital
stock of the Exchange’s ultimate parent.
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 within such longer period
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 Exchange consents, the Commission
will:
A. By order approve or disapprove
such proposed rule change, or
B. institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2016–57 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2016–57. 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
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Sfmt 4703
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–NYSE–
2016–57, and should be submitted on or
before September 20, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–20742 Filed 8–29–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78666; File No. SR–
BatsBZX–2016–48]
Self-Regulatory Organizations; Bats
BZX Exchange, Inc.; Notice of Filing of
a Proposed Rule Change to Rule
14.11(c)(4) To List and Trade Shares of
the iShares iBonds Dec 2023 Term
Muni Bond ETF and iShares iBonds
Dec 2024 Term Muni Bond ETF of the
iShares U.S. ETF Trust
August 24, 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 August 9,
2016, Bats BZX Exchange, Inc.
(‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 81, No. 168 / Tuesday, August 30, 2016 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange filed a proposal to list
and trade under BZX Rule 14.11(c)(4)
shares of the iShares iBonds Dec 2023
Term Muni Bond ETF and iShares
iBonds Dec 2024 Term Muni Bond ETF
(each a ‘‘Fund’’ or, collectively, the
‘‘Funds’’) of the iShares U.S. ETF Trust
(the ‘‘Trust’’). The shares of the Funds
are referred to herein as the ‘‘Shares.’’
The text of the proposed rule change
is available at the Exchange’s Web site
at www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
mstockstill on DSK3G9T082PROD with NOTICES
1. Purpose
The Exchange proposes to list and
trade the Shares of the following series
of the Trust under BZX Rule
14.11(c)(4),3 which governs the listing
and trading of index fund shares based
on fixed income securities indexes.4
3 The Commission approved BZX Rule 14.11(c) in
Securities Exchange Act Release No. 65225 (August
30, 2011), 76 FR 55148 (September 6, 2011) (SR–
BATS–2011–018).
4 The Commission previously has approved a
proposed rule change relating to listing and trading
of funds based on municipal bond indexes. See
Securities Exchange Act Release Nos. 78329 (July
14, 2016), 81 FR 47217 (July 20, 2016) (SR–
BatsBZX–2016–01) (order approving proposed rule
change relating to the listing and trading of VanEck
Vectors AMT-Free 6–8 Year Municipal Index ETF,
VanEck Vectors AMT-Free 8–12 Year Municipal
Index ETF, and VanEck Vectors AMT-Free 12–17
Year Municipal Index ETF); 67985 (October 4,
2012), 77 FR 61804 (October 11, 2012) (SR–
NYSEArca–2012–92) (order approving proposed
rule change relating to the listing and trading of
iShares 2018 S&P AMT-Free Municipal Series and
iShares 2019 S&P AMT-Free Municipal Series
under NYSE Arca, Inc. (‘‘NYSE Arca’’) Rule
5.2(j)(3), Commentary .02); 72523 (July 2, 2014), 79
FR 39016 (July 9, 2014) (SR–NYSEArca–2014–37)
(order approving proposed rule change relating to
the listing and trading of iShares 2020 S&P AMT-
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20:04 Aug 29, 2016
Jkt 238001
The Shares will be offered by the Trust,
which was established as a Delaware
statutory trust on March 15, 2001. The
Trust is registered with the Commission
as an open-end investment company
and has filed a registration statement on
behalf of the Funds on Form N–1A
(‘‘Registration Statement’’) with the
Commission.5 All statements and
representations made in this filing
regarding (a) the description of the
portfolio, (b) limitations on portfolio
holdings or reference assets, or (c) the
applicability of Exchange rules and
surveillance procedures shall constitute
continued listing requirements for
listing the Shares on the Exchange.
Description of the Shares and the Funds
BlackRock Fund Advisors is the
investment adviser (‘‘BFA’’ or
‘‘Adviser’’) to the Funds.6 State Street
Bank and Trust Company is the
administrator, custodian, and transfer
agent (‘‘Administrator,’’ ‘‘Custodian,’’
and ‘‘Transfer Agent,’’ respectively) for
the Trust. BlackRock Investments, LLC
serves as the distributor (‘‘Distributor’’)
for the Trust.
iShares iBonds Dec 2023 Term Muni
Bond ETF
According to the Registration
Statement, the Fund will seek to
Free Municipal Series under NYSE Arca Rule
5.2(j)(3), Commentary .02); and 75468 (July 16,
2015), 80 FR 43500 (July 22, 2015) (SR–NYSEArca–
2015–25) (order approving proposed rule change
relating to the listing and trading of the iShares
iBonds Dec 2021 AMT-Free Muni Bond ETF and
iShares iBonds Dec 2022 AMT-Free Muni Bond
ETF under NYSE Arca Rule 5.2(j)(3), Commentary
.02). The Commission also has issued a notice of
filing and immediate effectiveness of a proposed
rule change relating to listing and trading on the
Exchange of the iShares Taxable Municipal Bond
Fund. See Securities Exchange Act Release No.
63176 (October 25, 2010), 75 FR 66815 (October 29,
2010) (SR–NYSEArca–2010–94). The Commission
has approved two actively managed funds of the
PIMCO ETF Trust that hold municipal bonds. See
Securities Exchange Act Release No. 60981
(November 10, 2009), 74 FR 59594 (November 18,
2009) (SR–NYSEArca–2009–79) (order approving
listing and trading of PIMCO ShortTerm Municipal
Bond Strategy Fund and PIMCO Intermediate
Municipal Bond Strategy Fund, among others). The
Commission also has approved listing and trading
on the Exchange of the SPDR Nuveen S&P High
Yield Municipal Bond Fund. See Securities
Exchange Act Release No. 63881 (February 9, 2011),
76 FR 9065 (February 16, 2011) (SR–NYSEArca–
2010–120).
5 See Registration Statement on Form N–1A for
the Trust, dated October 29, 2015 (File Nos. 333–
123257 and 811–10325). The descriptions of the
Funds and the Shares contained herein are based,
in part, on information in the Registration
Statement. The Commission has issued an order
granting certain exemptive relief to the Trust under
the Investment Company Act of 1940 (15 U.S.C.
80a–1) (‘‘1940 Act’’) (the ‘‘Exemptive Order’’). See
Investment Company Act Release No. 28021
(October 24, 2007) (File No. 812–13426).
6 BFA is an indirect wholly owned subsidiary of
BlackRock, Inc.
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59701
replicate as closely as possible, before
fees and expenses, the price and yield
performance of the S&P AMT-Free
Municipal Series Dec 2023 Index (the
‘‘2023 Index’’). As of July 18, 2016, there
were 4,612 issues in the 2023 Index.
Unless otherwise noted, all statistics
related to the 2023 Index presented
hereafter were accurate as of July 18,
2016.
To be included in the 2023 Index, a
bond must have a rating of at least BBBby S&P, Baa3 by Moody’s, or BBB- by
Fitch (except in the case of a prerefunded/escrowed to maturity bond). A
bond must be rated by at least one of the
three rating agencies in order to qualify
for index inclusion. For the avoidance
of doubt, the lowest rating is used in
determining if a bond is investment
grade. Potential constituents must have
an outstanding par value of at least $2
million. The bonds will have a maturity
range of January 1, 2023 to December 1,
2023. The following types of bonds are
excluded from the 2023 Index: Bonds
subject to the alternative minimum tax,
bonds with early redemption dates
(callable provisions), bonds with
sinking fund provisions, commercial
paper, conduit bonds where the obligor
is a for-profit institution, derivative
securities, non-rated bonds (except prerefunded/escrowed to maturity bonds),
notes, taxable municipals, tobacco
bonds, and variable rate debt (except for
known step-up/down coupon schedule
bonds). The 2023 Index is calculated
using a market value weighting
methodology. The composition of the
2023 Index is rebalanced monthly.
The Fund generally invests at least
90% of its assets in the component
securities of the Fund’s benchmark
index, except during the last months of
the Fund’s operations. From time to
time when conditions warrant, however,
the Fund may invest at least 80% of its
assets in the component securities of the
Fund’s benchmark index. The 2023
Index measures the performance of the
non-callable investment-grade, taxexempt U.S. municipal bonds with
specific annual maturities (‘‘Municipal
Securities’’). The Fund has adopted a
non-fundamental investment policy to
invest at least 80% of its net assets, plus
the amount of any borrowings for
investment purposes, in securities in the
Fund’s benchmark index. This policy
may be changed without shareholder
approval upon 60 days’ prior written
notice to shareholders.7 Municipal
7 As noted herein, each Fund’s policy to invest
80% of its total assets in securities that comprise
the Fund’s benchmark index (the ‘‘80% Investment
Policy’’) is non-fundamental and may be changed
without shareholder approval upon 60 days’ prior
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Federal Register / Vol. 81, No. 168 / Tuesday, August 30, 2016 / Notices
mstockstill on DSK3G9T082PROD with NOTICES
Securities are fixed and variable rate
securities issued in the U.S. by U.S.
states and territories, municipalities and
other political subdivisions, agencies,
authorities, and instrumentalities of
states and multi-state agencies and
authorities and will include only the
following instruments: General
obligation bonds,8 limited obligation
bonds (or revenue bonds),9 municipal
notes,10 municipal commercial paper,11
tender option bonds,12 variable rate
demand obligations (‘‘VRDOs’’),13
municipal lease obligations,14 stripped
written notice to shareholders. The Exchange notes
that, notwithstanding the foregoing, all statements
and representations made in this filing regarding (a)
the description of the portfolios, (b) limitations on
portfolio holdings or reference assets (including, for
example, each Fund’s 80% Investment Policy), or
(c) the applicability of Exchange rules and
surveillance procedures shall constitute continued
listing requirements for listing the Shares on the
Exchange. As noted below, the issuer has
represented to the Exchange that it will advise the
Exchange of any failure by a Fund to comply with
the continued listing requirements (or any changes
made with respect to a Fund’s 80% Investment
Policy), and, pursuant to its obligations under
Section 19(g)(1) of the Exchange Act, the Exchange
will surveil for compliance with the continued
listing requirements. If the Fund is not in
compliance with the applicable listing
requirements, the Exchange will commence
delisting procedures under Exchange Rule 14.12.
8 General obligation bonds are obligations
involving the credit of an issuer possessing taxing
power and are payable from such issuer’s general
revenues and not from any particular source.
9 Limited obligation bonds are payable only from
the revenues derived from a particular facility or
class of facilities or, in some cases, from the
proceeds of a special excise or other specific
revenue source, and also include industrial
development bonds issued pursuant to former U.S.
federal tax law. Industrial development bonds
generally are also revenue bonds and thus are not
payable from the issuer’s general revenues. The
credit and quality of industrial development bonds
are usually related to the credit of the corporate
user of the facilities. Payment of interest on and
repayment of principal of such bonds is the
responsibility of the corporate user (and/or any
guarantor).
10 Municipal notes are shorter-term municipal
debt obligations that may provide interim financing
in anticipation of tax collection, receipt of grants,
bond sales, or revenue receipts.
11 Municipal commercial paper is generally
unsecured debt that is issued to meet short-term
financing needs.
12 Tender option bonds are synthetic floating-rate
or variable-rate securities issued when long-term
bonds are purchased in the primary or secondary
market and then deposited into a trust. Custodial
receipts are then issued to investors, such as the
Fund, evidencing ownership interests in the trust.
13 VRDOs are tax-exempt obligations that contain
a floating or variable interest rate adjustment
formula and a right of demand on the part of the
holder thereof to receive payment of the unpaid
principal balance plus accrued interest upon a short
notice period not to exceed seven days.
14 Municipal lease obligations include certificates
of participation issued by government authorities or
entities to finance the acquisition or construction of
equipment, land, and/or facilities.
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20:04 Aug 29, 2016
Jkt 238001
securities,15 structured securities,16 and
zero coupon securities.17
In the last months of operation, as the
bonds held by the Fund mature, the
proceeds will not be reinvested in bonds
but instead will be held in cash and
cash equivalents, including, without
limitation, shares of money market
funds advised by BFA or its affiliates
(‘‘BlackRock Cash Funds’’), AMT-free
tax-exempt municipal notes, variable
rate demand notes and obligations,
tender option bonds and municipal
commercial paper. These cash
equivalents may not be included in the
Underlying Index. By December 2, 2023,
the Underlying Index is expected to
consist entirely of cash earned in this
manner. Around the same time, the
Fund will wind up and terminate, and
its net assets will be distributed to thencurrent shareholders.
The Fund intends to qualify for and
to elect treatment as a regulated
investment company (a ‘‘RIC’’) under
Subchapter M of the Internal Revenue
Code of 1986, as amended. The Fund
will invest its assets, and otherwise
conduct its operations, in a manner that
is intended to satisfy the qualifying
income, diversification and distribution
requirements necessary to establish and
maintain RIC qualification under
Subchapter M.
Other Portfolio Holdings
The Fund may also, to a limited
extent (under normal circumstances,
less than 20% of the Fund’s net assets),
engage in transactions in futures
contracts, options, or swaps in order to
facilitate trading or to reduce
transaction costs.18 The Fund’s
15 Stripped securities are created when an issuer
separates the interest and principal components of
an instrument and sells them as separate securities.
In general, one security is entitled to receive the
interest payments on the underlying assets and the
other to receive the principal payments.
16 Structured securities are privately negotiated
debt obligations where the principal and/or interest
is determined by reference to the performance of an
underlying investment, index, or reference
obligation, and may be issued by governmental
agencies. While structured securities are part of the
principal holdings of the Fund, the Issuer
represents that such securities, when combined
with those instruments held as part of the other
portfolio holdings described below, will not exceed
20% of the Fund’s net assets.
17 Zero coupon securities are securities that are
sold at a discount to par value and do not pay
interest during the life of the security. The discount
approximates the total amount of interest the
security will accrue and compound over the period
until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance.
Upon maturity, the holder of a zero coupon security
is entitled to receive the par value of the security.
18 Derivatives might be included in the Fund’s
investments to serve the investment objectives of
the Fund. Such derivatives include only the
following: Interest rate futures, interest rate options,
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Fmt 4703
Sfmt 4703
investments will be consistent with its
investment objective and will not be
used to achieve leveraged returns (i.e.
two times or three times the Fund’s
benchmark, as described in the
Registration Statement).
The Fund may also enter into
repurchase and reverse repurchase
agreements for Municipal Securities
(collectively, ‘‘Repurchase
Agreements’’). Repurchase Agreements
involve the sale of securities with an
agreement to repurchase the securities
at an agreed-upon price, date and
interest payment and have the
characteristics of borrowing as part of
the Fund’s principal holdings.19
The Fund may also invest in shortterm instruments (‘‘Short-Term
Instruments’’),20 which include
exchange traded and non-exchange
traded investment companies (including
investment companies advised by BFA
interest rate swaps, and swaps on Municipal
Securities indexes. The derivatives will be centrally
cleared and they will be collateralized. Derivatives
are not a principal investment strategy of the Fund.
19 The Fund’s exposure to reverse repurchase
agreements will be covered by liquid assets having
a value equal to or greater than such commitments.
The use of reverse repurchase agreements is a form
of leverage because the proceeds derived from
reverse repurchase agreements may be invested in
additional securities. As further stated below, the
Fund’s investments will be consistent with its
investment objective and will not be used to
achieve leveraged returns.
20 The Fund may invest in Short-Term
Instruments, including money market instruments,
on an ongoing basis to provide liquidity or for other
reasons. Money market instruments are generally
short-term investments that include only the
following: (i) Shares of money market funds
(including those advised by BFA or otherwise
affiliated with BFA); (ii) obligations issued or
guaranteed by the U.S. government, its agencies or
instrumentalities (including government-sponsored
enterprises); (iii) negotiable certificates of deposit
(‘‘CDs’’), bankers’ acceptances, fixed-time deposits
and other obligations of U.S. and non-U.S. banks
(including non-U.S. branches) and similar
institutions; (iv) commercial paper, including assetbacked commercial paper; (v) non-convertible
corporate debt securities (e.g., bonds and
debentures) with remaining maturities at the date
of purchase of not more than 397 days and that
satisfy the rating requirements set forth in Rule 2a–
7 under the 1940 Act; and (vi) short-term U.S.
dollar-denominated obligations of non-U.S. banks
(including U.S. branches) that, in the opinion of
BFA, are of comparable quality to obligations of
U.S. banks which may be purchased by the Fund.
All money market securities acquired by the Fund
will be rated investment grade. The Fund does not
intend to invest in any unrated money market
securities. However, it may do so, to a limited
extent, such as where a rated money market
security becomes unrated, if such money market
security is determined by the Adviser to be of
comparable quality. BFA may determine that
unrated securities are of comparable quality based
on such credit quality factors that it deems
appropriate, which may include, among other
things, performing an analysis similar, to the extent
possible, to that performed by a nationally
recognized statistical rating organization rating
similar securities and issuers.
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Federal Register / Vol. 81, No. 168 / Tuesday, August 30, 2016 / Notices
or its affiliates) that invest in money
market instruments.
mstockstill on DSK3G9T082PROD with NOTICES
Index Overview
The Exchange is submitting this
proposed rule change because the 2023
Index for the Fund does not meet all of
the ‘‘generic’’ listing requirements of
Rule 14.11(c)(4) applicable to the listing
of index fund shares based on fixed
income securities indexes. The 2023
Index meets all such requirements
except for those set forth in Rule
14.11(c)(4)(B)(i)(b).21 Specifically, as of
July 18, 2016, 5.83% of the weight of the
2023 Index components have a
minimum original principal amount
outstanding of $100 million or more.
As of July 18, 2016, 73.56% of the
weight of the 2023 Index components
was comprised of individual maturities
that were part of an entire municipal
bond offering with a minimum original
principal amount outstanding $100
million or more for all maturities of the
offering. In addition, the total face
amount outstanding of issues in the
2023 Index was approximately $38.5
billion, the market value was $46.4
billion, and the average dollar amount
outstanding of issues in the 2023 Index
was approximately $8.3 million.
Further, the most heavily weighted
component represented 1.61% of the
weight of the 2023 Index and the five
most heavily weighted components
represented 3.66% of the weight of the
2023 Index.22 Therefore, the Exchange
believes that, notwithstanding that the
2023 Index does not satisfy the criterion
in Rule 14.11(c)(4)(B)(i)(b), the 2023
Index is sufficiently broad-based to
deter potential manipulation, given that
it is comprised of approximately 4,612
issues. In addition, the 2023 Index
securities are sufficiently liquid to deter
potential manipulation in that a
substantial portion (73.56%) of the 2023
Index weight is comprised of maturities
that are part of a minimum original
principal amount outstanding of $100
million or more, and in view of the
substantial total dollar amount
outstanding and the average dollar
amount outstanding of the 2023 Index
issues, as referenced above.23 48% of
21 Rule 14.11(c)(4)(B)(i)(b) provides that
components that in the aggregate account for at
least 75% of the weight of the index or portfolio
each shall have a minimum original principal
amount outstanding of $100 million or more.
22 Rule 14.11(c)(4)(B)(i)(d) provides that no
component fixed-income security (excluding
Treasury Securities, as defined therein) shall
represent more than 30% of the weight of the index
or portfolio, and the five most heavily weighted
component fixed-income securities in the index or
portfolio shall not in the aggregate account for more
than 65% of the weight of the index or portfolio.
23 The Adviser represents that when bonds are
close substitutes for one another, pricing vendors
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20:04 Aug 29, 2016
Jkt 238001
the 2023 Index weight consisted of
issues with a rating of AA/Aa2 or
higher.
The 2023 Index value, calculated and
disseminated at least once daily, as well
as the components of the 2023 Index
and their percentage weighting, will be
available from major market data
vendors. In addition, the portfolio of
securities held by the Fund will be
disclosed on the Fund’s Web site at
www.iShares.com.
iShares iBonds Dec 2024 Term Muni
Bond ETF
According to the Registration
Statement, the Fund will seek to
replicate as closely as possible, before
fees and expenses, the price and yield
performance of the S&P AMT-Free
Municipal Series Dec 2024 Index (the
‘‘2024 Index’’). As of July 18, 2016, there
were 3,624 issues in the 2024 Index.
Unless otherwise noted, all statistics
related to the 2024 Index presented
hereafter were accurate as of July 18,
2016.
To be included in the 2024 Index, a
bond must have a rating of at least BBBby S&P, Baa3 by Moody’s, or BBB- by
Fitch (except in the case of a prerefunded/escrowed to maturity bond). A
bond must be rated by at least one of the
three rating agencies in order to qualify
for index inclusion. For the avoidance
of doubt, the lowest rating is used in
determining if a bond is investment
grade. Potential constituents must have
an outstanding par value of at least $2
million. The bonds will have a maturity
range of January 1, 2024 to December 1,
2024. The following types of bonds are
excluded from the 2024 Index: Bonds
subject to the alternative minimum tax,
bonds with early redemption dates
(callable provisions), bonds with
sinking fund provisions, commercial
paper, conduit bonds where the obligor
is a for-profit institution, derivative
securities, non-rated bonds (except prerefunded/escrowed to maturity bonds),
notes, taxable municipals, tobacco
bonds, and variable rate debt (except for
known step-up/down coupon schedule
bonds). The 2024 Index is calculated
using a market value weighting
methodology. The composition of the
2024 Index is rebalanced monthly.
The Fund generally invests at least
90% of its assets in the component
securities of the Fund’s benchmark
index, except during the last months of
the Fund’s operations. From time to
time when conditions warrant, however,
the Fund may invest at least 80% of its
can use executed trade information from all similar
bonds as pricing inputs for an individual security.
This can make individual securities more liquid.
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59703
assets in the component securities of the
Fund’s benchmark index. The 2024
Index measures the performance of the
non-callable investment-grade, taxexempt U.S. municipal bonds with
specific annual maturities (‘‘Municipal
Securities’’). The Fund has adopted a
non-fundamental investment policy to
invest at least 80% of its net assets, plus
the amount of any borrowings for
investment purposes, in securities in the
Fund’s benchmark index. This policy
may be changed without shareholder
approval upon 60 days’ prior written
notice to shareholders.24 Municipal
Securities are fixed and variable rate
securities issued in the U.S. by U.S.
states and territories, municipalities and
other political subdivisions, agencies,
authorities, and instrumentalities of
states and multi-state agencies and
authorities and will include only the
following instruments: General
obligation bonds,25 limited obligation
bonds (or revenue bonds),26 municipal
24 As noted herein, each Fund’s policy to invest
80% of its total assets in securities that comprise
the Fund’s benchmark index (the ‘‘80% Investment
Policy’’) is non-fundamental and may be changed
without shareholder approval upon 60 days’ prior
written notice to shareholders. The Exchange notes
that, notwithstanding the foregoing, all statements
and representations made in this filing regarding (a)
the description of the portfolios, (b) limitations on
portfolio holdings or reference assets (including, for
example, each Fund’s 80% Investment Policy), or
(c) the applicability of Exchange rules and
surveillance procedures shall constitute continued
listing requirements for listing the Shares on the
Exchange. As noted below, the issuer has
represented to the Exchange that it will advise the
Exchange of any failure by a Fund to comply with
the continued listing requirements (or any changes
made with respect to a Fund’s 80% Investment
Policy), and, pursuant to its obligations under
Section 19(g)(1) of the Exchange Act, the Exchange
will surveil for compliance with the continued
listing requirements. If the Fund is not in
compliance with the applicable listing
requirements, the Exchange will commence
delisting procedures under Exchange Rule 14.12.
25 General obligation bonds are obligations
involving the credit of an issuer possessing taxing
power and are payable from such issuer’s general
revenues and not from any particular source.
26 Limited obligation bonds are payable only from
the revenues derived from a particular facility or
class of facilities or, in some cases, from the
proceeds of a special excise or other specific
revenue source, and also include industrial
development bonds issued pursuant to former U.S.
federal tax law. Industrial development bonds
generally are also revenue bonds and thus are not
payable from the issuer’s general revenues. The
credit and quality of industrial development bonds
are usually related to the credit of the corporate
user of the facilities. Payment of interest on and
repayment of principal of such bonds is the
responsibility of the corporate user (and/or any
guarantor).
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notes,27 municipal commercial paper,28
tender option bonds,29 variable rate
demand obligations (‘‘VRDOs’’),30
municipal lease obligations,31 stripped
securities,32 structured securities,33 and
zero coupon securities.34
In the last months of operation, as the
bonds held by the Fund mature, the
proceeds will not be reinvested in bonds
but instead will be held in cash and
cash equivalents, including, without
limitation, shares of BlackRock Cash
Funds, AMT-free tax-exempt municipal
notes, variable rate demand notes and
obligations, tender option bonds and
municipal commercial paper. These
cash equivalents may not be included in
the Underlying Index. By December 2,
2023, the Underlying Index is expected
to consist entirely of cash earned in this
manner. Around the same time, the
Fund will wind up and terminate, and
its net assets will be distributed to thencurrent shareholders.
The Fund intends to qualify for and
to elect treatment as a RIC under
Subchapter M of the Internal Revenue
Code of 1986, as amended. The Fund
27 Municipal notes are shorter-term municipal
debt obligations that may provide interim financing
in anticipation of tax collection, receipt of grants,
bond sales, or revenue receipts.
28 Municipal commercial paper is generally
unsecured debt that is issued to meet short-term
financing needs.
29 Tender option bonds are synthetic floating-rate
or variable-rate securities issued when long-term
bonds are purchased in the primary or secondary
market and then deposited into a trust. Custodial
receipts are then issued to investors, such as the
Fund, evidencing ownership interests in the trust.
30 VRDOs are tax-exempt obligations that contain
a floating or variable interest rate adjustment
formula and a right of demand on the part of the
holder thereof to receive payment of the unpaid
principal balance plus accrued interest upon a short
notice period not to exceed seven days.
31 Municipal lease obligations include certificates
of participation issued by government authorities or
entities to finance the acquisition or construction of
equipment, land, and/or facilities.
32 Stripped securities are created when an issuer
separates the interest and principal components of
an instrument and sells them as separate securities.
In general, one security is entitled to receive the
interest payments on the underlying assets and the
other to receive the principal payments.
33 Structured securities are privately negotiated
debt obligations where the principal and/or interest
is determined by reference to the performance of an
underlying investment, index, or reference
obligation, and may be issued by governmental
agencies. While structured securities are part of the
principal holdings of the Fund, the Issuer
represents that such securities, when combined
with those instruments held as part of the other
portfolio holdings described below, will not exceed
20% of the Fund’s net assets.
34 Zero coupon securities are securities that are
sold at a discount to par value and do not pay
interest during the life of the security. The discount
approximates the total amount of interest the
security will accrue and compound over the period
until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance.
Upon maturity, the holder of a zero coupon security
is entitled to receive the par value of the security.
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will invest its assets, and otherwise
conduct its operations, in a manner that
is intended to satisfy the qualifying
income, diversification and distribution
requirements necessary to establish and
maintain RIC qualification under
Subchapter M.
Other Portfolio Holdings
The Fund may also, to a limited
extent (under normal circumstances,
less than 20% of the Fund’s net assets),
engage in transactions in futures
contracts, options, or swaps in order to
facilitate trading or to reduce
transaction costs.35 The Fund’s
investments will be consistent with its
investment objective and will not be
used to achieve leveraged returns (i.e.
two times or three times the Fund’s
benchmark, as described in the
Registration Statement).
The Fund may also enter into
repurchase and reverse repurchase
agreements for Municipal Securities
(collectively, ‘‘Repurchase
Agreements’’). Repurchase Agreements
involve the sale of securities with an
agreement to repurchase the securities
at an agreed-upon price, date and
interest payment and have the
characteristics of borrowing as part of
the Fund’s principal holdings.36
The Fund may also invest in shortterm instruments (‘‘Short-Term
Instruments’’),37 which include
35 Derivatives might be included in the Fund’s
investments to serve the investment objectives of
the Fund. Such derivatives include only the
following: Interest rate futures, interest rate options,
interest rate swaps, and swaps on Municipal
Securities indexes. The derivatives will be centrally
cleared and they will be collateralized. Derivatives
are not a principal investment strategy of the Fund.
36 The Fund’s exposure to reverse repurchase
agreements will be covered by liquid assets having
a value equal to or greater than such commitments.
The use of reverse repurchase agreements is a form
of leverage because the proceeds derived from
reverse repurchase agreements may be invested in
additional securities. As further stated below, the
Fund’s investments will be consistent with its
investment objective and will not be used to
achieve leveraged returns.
37 The Fund may invest in Short-Term
Instruments, including money market instruments,
on an ongoing basis to provide liquidity or for other
reasons. Money market instruments are generally
short-term investments that include only the
following: (i) Shares of money market funds
(including those advised by BFA or otherwise
affiliated with BFA); (ii) obligations issued or
guaranteed by the U.S. government, its agencies or
instrumentalities (including government-sponsored
enterprises); (iii) negotiable certificates of deposit
(‘‘CDs’’), bankers’ acceptances, fixed-time deposits
and other obligations of U.S. and non-U.S. banks
(including non-U.S. branches) and similar
institutions; (iv) commercial paper, including assetbacked commercial paper; (v) non-convertible
corporate debt securities (e.g., bonds and
debentures) with remaining maturities at the date
of purchase of not more than 397 days and that
satisfy the rating requirements set forth in Rule 2a–
7 under the 1940 Act; and (vi) short-term U.S.
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exchange traded and non-exchange
traded investment companies (including
investment companies advised by BFA
or its affiliates) that invest in money
market instruments.
Index Overview
The Exchange is submitting this
proposed rule change because the 2024
Index for the Fund does not meet all of
the ‘‘generic’’ listing requirements of
Rule 14.11(c)(4) applicable to the listing
of index fund shares based on fixed
income securities indexes. The 2024
Index meets all such requirements
except for those set forth in Rule
14.11(c)(4)(B)(i)(b).38 Specifically, as of
July 18, 2016, 5.72% of the weight of the
2024 Index components have a
minimum original principal amount
outstanding of $100 million or more.
As of July 18, 2016, 72.27% of the
weight of the 2024 Index components
was comprised of individual maturities
that were part of an entire municipal
bond offering with a minimum original
principal amount outstanding $100
million or more for all maturities of the
offering. In addition, the total face
amount outstanding of issues in the
2024 Index was approximately $29.9
billion, the market value is $36.4
billion, and the average dollar amount
outstanding of issues in the 2024 Index
was approximately $8.3 million.
Further, the most heavily weighted
component represented 0.72% of the
weight of the 2024 Index and the five
most heavily weighted components
represented 2.74% of the weight of the
2024 Index.39 Therefore, the Exchange
believes that, notwithstanding that the
dollar-denominated obligations of non-U.S. banks
(including U.S. branches) that, in the opinion of
BFA, are of comparable quality to obligations of
U.S. banks which may be purchased by the Fund.
All money market securities acquired by the Fund
will be rated investment grade. The Fund does not
intend to invest in any unrated money market
securities. However, it may do so, to a limited
extent, such as where a rated money market
security becomes unrated, if such money market
security is determined by the Adviser to be of
comparable quality. BFA may determine that
unrated securities are of comparable quality based
on such credit quality factors that it deems
appropriate, which may include, among other
things, performing an analysis similar, to the extent
possible, to that performed by a nationally
recognized statistical rating organization rating
similar securities and issuers.
38 Rule 14.11(c)(4)(B)(i)(b) provides that
components that in the aggregate account for at
least 75% of the weight of the index or portfolio
each shall have a minimum original principal
amount outstanding of $100 million or more.
39 Rule 14.11(c)(4)(B)(i)(d) provides that no
component fixed-income security (excluding
Treasury Securities, as defined therein) shall
represent more than 30% of the weight of the index
or portfolio, and the five most heavily weighted
component fixed-income securities in the index or
portfolio shall not in the aggregate account for more
than 65% of the weight of the index or portfolio.
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2024 Index does not satisfy the criterion
in Rule 14.11(c)(4)(B)(i)(b), the 2024
Index is sufficiently broad-based to
deter potential manipulation, given that
it is comprised of approximately 3,624
issues. In addition, the 2024 Index
securities are sufficiently liquid to deter
potential manipulation in that a
substantial portion (72.27%) of the 2024
Index weight is comprised of maturities
that are part of a minimum original
principal amount outstanding of $100
million or more, and in view of the
substantial total dollar amount
outstanding and the average dollar
amount outstanding of the 2024 Index
issues, as referenced above.40 47.71% of
the 2024 Index weight consisted of
issues with a rating of AA/Aa2 or
higher.
The 2024 Index value, calculated and
disseminated at least once daily, as well
as the components of the 2024 Index
and their percentage weighting, will be
available from major market data
vendors. In addition, the portfolio of
securities held by the Fund will be
disclosed on the Fund’s Web site at
www.iShares.com.
Correlation Among Municipal Bond
Instruments With Common
Characteristics
With respect to the Funds, the
Adviser represents that the nature of the
municipal bond market and municipal
bond instruments makes it feasible to
categorize individual issues represented
by CUSIPs (i.e., the specific identifying
number for a security) into categories
according to common characteristics,
specifically, rating, geographical region,
purpose, and maturity. Bonds that share
similar characteristics tend to trade
similarly to one another; therefore,
within these categories, the issues may
be considered fungible from a portfolio
management perspective, allowing one
CUSIP to be represented by another that
shares similar characteristics for
purposes of developing an investment
strategy. Therefore, while 5.83% of the
weight of the 2023 Index and 5.72% of
the 2024 Index components have a
minimum original principal amount
outstanding of $100 million or more, the
nature of the municipal bond market
makes the issues relatively fungible for
investment purposes when aggregated
into categories such as ratings,
geographical region, purpose and
maturity. In addition, within a single
municipal bond issuer, there are often
multiple contemporaneous or sequential
40 The Adviser represents that when bonds are
close substitutes for one another, pricing vendors
can use executed trade information from all similar
bonds as pricing inputs for an individual security.
This can make individual securities more liquid.
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issuances that have the same rating,
structure and maturity, but have
different CUSIPs; these separate issues
by the same issuer are also likely to
trade similarly to one another.
The Adviser represents that the Funds
are managed utilizing the principle that
municipal bond issues are generally
fungible in nature when sharing
common characteristics, and
specifically make use of the four
categories referred to above. In addition,
this principle is used in, and consistent
with, the portfolio construction process
in order to facilitate the creation and
redemption process, and to enhance
liquidity (among other benefits, such as
reducing transaction costs), while still
allowing each Fund to closely track its
reference index.
Net Asset Value
According to the Registration
Statement, the net asset value (‘‘NAV’’)
of each Fund will be determined each
business day as of the close of trading
(ordinarily 4:00 p.m. Eastern time) on
the Exchange. Any assets or liabilities
denominated in currencies other than
the U.S. dollar are converted into U.S.
dollars at the current market rates on the
date of valuation as quoted by one or
more sources.
The values of each Fund’s portfolio
securities are based on the securities’
closing prices, when available. In the
absence of a last reported sales price, or
if no sales were reported, and for other
assets for which market quotes are not
readily available, values may be based
on quotes obtained from a quotation
reporting system, established market
makers or by an outside independent
pricing service. Municipal Securities,
repurchase agreements, reverse
repurchase agreements, and money
market instruments with maturities of
more than 60 days are normally valued
on the basis of quotes from brokers or
dealers, established market makers or an
outside independent pricing service.
Prices obtained by an outside
independent pricing service may use
information provided by market makers
or estimates of market values obtained
from yield data related to investments or
securities with similar characteristics
and may use a computerized grid matrix
of securities and its evaluations in
determining what it believes is the fair
value of the portfolio securities. Shortterm investments, including money
market instruments having a maturity of
60 days or less, are valued at amortized
cost. Futures contracts will be valued at
the settlement price established each
day by the board or exchange on which
they are traded. Exchange-traded
options will be valued at the closing
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59705
price in the market where such
contracts are principally traded. Swaps
will be valued based on valuations
provided by independent, third-party
pricing agents. Securities of nonexchange-traded investment companies
will be valued at NAV. Exchange-traded
investment companies will be valued at
the last reported sale price on the
primary exchange on which they are
traded.
Creation and Redemption of Shares
The NAV of the Funds will be
determined each business day as of the
close of trading, (normally 4:00 p.m.
Eastern time) on the exchange. The
Funds currently anticipate that a
‘‘Creation Unit’’ will consist of 50,000
Shares, though this number may change
from time to time, including prior to the
listing of a Fund. The exact number of
Shares that will comprise a Creation
Unit will be disclosed in the
Registration Statement of each Fund.
The Trust will issue and sell Shares of
the Funds only in Creation Units on a
continuous basis through the
Distributor, without an initial sales load
(but subject to transaction fees), at their
NAV per Share next determined after
receipt, on any business day, of an order
in proper form.
The consideration for purchase of a
Creation Unit of a Fund generally will
consist of either (i) the in-kind deposit
of a designated portfolio of fixed income
securities (the ‘‘Deposit Securities’’) per
each Creation Unit and the Cash
Component (defined below), computed
as described below, or (ii) as permitted
or required by the Funds, of cash. The
Cash Component together with the
Deposit Securities, as applicable, are
referred to as the ‘‘Fund Deposit,’’
which represents the minimum initial
and subsequent investment amount for
Shares. The Cash Component represents
the difference between the NAV of a
Creation Unit and the market value of
Deposit Securities and may include a
Dividend Equivalent Payment. The
‘‘Dividend Equivalent Payment’’ enables
the Funds to make a complete
distribution of dividends on the next
dividend payment date, and is an
amount equal, on a per Creation Unit
basis, to the dividends on all the
securities held by each of the Funds
(‘‘Fund Securities’’) with ex-dividend
dates within the accumulation period
for such distribution (the
‘‘Accumulation Period’’), net of
expenses and liabilities for such period,
as if all of the Fund Securities had been
held by the Trust for the entire
Accumulation Period. The
Accumulation Period begins on the ex-
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dividend date for each Fund and ends
on the next ex-dividend date.
The Administrator, through the
National Securities Clearing Corporation
(‘‘NSCC’’), makes available on each
business day, immediately prior to the
opening of business on the Exchange
(currently 9:30 a.m. Eastern time), the
list of the names and the required
number of shares of each Deposit
Security to be included in the current
Fund Deposit (based on information at
the end of the previous business day) as
well as the Cash Component for each
Fund. Such Fund Deposit is applicable,
subject to any adjustments as described
below, in order to effect creations of
Creation Units of each Fund until such
time as the next-announced Fund
Deposit composition is made available.
Shares may be redeemed only in
Creation Units at their NAV next
determined after receipt of a redemption
request in proper form by the
Distributor,41 only on a business day
and only through a Participating Party
or DTC Participant who has executed a
Participation Agreement.
The Administrator, through NSCC,
makes available immediately prior to
the opening of business on the Exchange
(currently 9:30 a.m. Eastern time) on
each day that the Exchange is open for
business, the Fund Securities that will
be applicable (subject to possible
amendment or correction) to
redemption requests received in proper
form (as defined below) on that day.
Unless cash redemptions are
permitted or required for the Fund, the
redemption proceeds for a Creation Unit
generally consist of Fund Securities as
announced by the Administrator on the
business day of the request for
redemption, plus cash in an amount
equal to the difference between the NAV
of the Shares being redeemed, as next
determined after a receipt of a request
in proper form, and the value of the
Fund Securities, less the redemption
transaction fee and variable fees
described below. Should the Fund
Securities have a value greater than the
NAV of the Shares being redeemed, a
compensating cash payment to the Trust
41 To be eligible to place orders with the
Distributor to create Creation Units of the Funds, an
entity or person either must be: (1) a ‘‘Participating
Party,’’ i.e., a broker-dealer or other participant in
the Clearing Process through the Continuous Net
Settlement System of the NSCC; or (2) a DTC
Participant (as defined below); and, in either case,
must have executed an agreement with the
Distributor and the Transfer Agent (as it may be
amended from time to time in accordance with its
terms) (‘‘Participant Agreement’’). DTC Participants
are participants of the Depository Trust Company
(‘‘DTC’’) that acts as securities depositary for Index
Fund Shares. A Participating Party and DTC
Participant are collectively referred to as an
‘‘Authorized Participant.’’
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equal to the differential plus the
applicable redemption transaction fee
will be required to be arranged for by or
on behalf of the redeeming shareholder.
Each Fund reserves the right to honor a
redemption request by delivering a
basket of securities or cash that differs
from the Fund Securities.42
Orders to redeem Creation Units of
the Funds must be delivered through a
DTC Participant that has executed the
Participant Agreement with the
Distributor and with the Trust. A DTC
Participant who wishes to place an
order for redemption of Creation Units
of a Fund to be effected need not be a
Participating Party, but such orders
must state that redemption of Creation
Units of the Fund will instead be
effected through transfer of Creation
Units of the Fund directly through DTC.
An order to redeem Creation Units of a
Fund is deemed received by the
Administrator on the transmittal date if
(i) such order is received by the
Administrator not later than 4:00 p.m.
Eastern time on such transmittal date;
(ii) such order is preceded or
accompanied by the requisite number of
Shares of Creation Units specified in
such order, which delivery must be
made through DTC to the Administrator
no later than 11:00 a.m. Eastern time, on
such transmittal date (the ‘‘DTC Cut-OffTime’’); and (iii) all other procedures set
forth in the Participant Agreement are
properly followed.
After the Administrator has deemed
an order for redemption received, the
Administrator will initiate procedures
to transfer the requisite Fund Securities
(or contracts to purchase such Fund
Securities) which are expected to be
delivered within three business days
and the cash redemption payment to the
redeeming beneficial owner by the third
business day following the transmittal
date on which such redemption order is
deemed received by the Administrator.
Availability of Information
Each Fund’s Web site, which will be
publicly available prior to the public
offering of Shares, will include a form
of the prospectus for the Fund that may
be downloaded. The Web site will
include additional quantitative
information updated on a daily basis,
including, for the Fund: (1) the prior
business day’s reported NAV, daily
trading volume, 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
42 The Adviser represents that, to the extent that
the Trust permits or requires a ‘‘cash in lieu’’
amount, such transactions will be effected in the
same or equitable manner for all Authorized
Participants.
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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. Daily trading volume
information for the Funds will also be
available in the financial section of
newspapers, through subscription
services such as Bloomberg, Thomson
Reuters, and International Data
Corporation, which can be accessed by
authorized participants and other
investors, as well as through other
electronic services, including major
public Web sites. On each business day,
before commencement of trading in
Shares during Regular Trading Hours 43
on the Exchange, each Fund will
disclose on its Web site the identities
and quantities of the portfolio of
securities and other assets in the daily
disclosed portfolio held by the Funds
that formed the basis for each Fund’s
calculation of NAV at the end of the
previous business day. The daily
disclosed portfolio will include, as
applicable: the ticker symbol; CUSIP
number or other identifier, if any; a
description of the holding (including
the type of holding, such as the type of
swap); the identity of the security, index
or other asset or instrument underlying
the holding, if any; for options, the
option strike price; quantity held (as
measured by, for example, par value,
notional value or number of shares,
contracts, or units); maturity date, if
any; coupon rate, if any; effective date,
if any; market value of the holding; and
the percentage weighting of the holding
in each Fund’s portfolio. The Web site
and information will be publicly
available at no charge. The value,
components, and percentage weightings
of each of the Indices will be calculated
and disseminated at least once daily and
will be available from major market data
vendors. Rules governing the Indices are
available on Barclays’ Web site and in
each respective Fund’s prospectus.
In addition, for each Fund, an
estimated value, defined in BZX Rule
14.11(c)(6)(A) as the ‘‘Intraday
Indicative Value,’’ that reflects an
estimated intraday value of each Fund’s
portfolio, will be disseminated.
Moreover, the Intraday Indicative Value
will be based upon the current value for
the components of the daily disclosed
portfolio and will be updated and
widely disseminated by one or more
major market data vendors at least every
15 seconds during the Exchange’s
Regular Trading Hours.44 In addition,
43 Regular Trading Hours are 9:30 a.m. to 4:00
p.m. Eastern Time.
44 Currently, it is the Exchange’s understanding
that several major market data vendors display and/
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the quotations of certain of each Fund’s
holdings may not be updated during
U.S. trading hours if updated prices
cannot be ascertained.
The dissemination of the Intraday
Indicative Value, together with the daily
disclosed portfolio, will allow investors
to determine the value of the underlying
portfolio of the Funds on a daily basis
and provide a close estimate of that
value throughout the trading day.
Quotation and last sale information
for the Shares of each Fund will be
available via the CTA high speed line.
Quotation information for investment
company securities (excluding ETFs)
may be obtained through nationally
recognized pricing services through
subscription agreements or from brokers
and dealers who make markets in such
securities. Price information regarding
Municipal Securities and non-exchange
traded assets, including investment
companies, derivatives, money market
instruments, repurchase agreements,
and reverse repurchase agreements is
available from third party pricing
services and major market data vendors.
For exchange-traded assets, including
investment companies, futures, and
options, such intraday information is
available directly from the applicable
listing exchange.
Initial and Continued Listing
The Shares of each Fund will conform
to the initial and continued listing
criteria under BZX Rule 14.11(c)(4),
except for those set forth in
14.11(c)(4)(B)(i)(b). The Exchange
represents that, for initial and/or
continued listing, the Funds and the
Trust must be in compliance with Rule
10A–3 under the Act.45 A minimum of
50,000 Shares of each 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 for each Fund will be calculated
daily and will be made available to all
market participants at the same time.
mstockstill on DSK3G9T082PROD with NOTICES
Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
the Funds. The Exchange will halt
trading in the Shares under the
conditions specified in BZX Rule 11.18.
Trading may be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable. These may
or make widely available Intraday Indicative Values
published via the Consolidated Tape Association
(‘‘CTA’’) or other data feeds.
45 See 17 CFR 240.10A–3.
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include: (1) the extent to which trading
is not occurring in the securities and/or
the financial instruments composing the
daily disclosed portfolio of the Funds;
or (2) whether other unusual conditions
or circumstances detrimental to the
maintenance of a fair and orderly
market are present. Trading in the
Shares also will be subject to Rule
14.11(c)(1)(B)(iv), which sets forth
circumstances under which Shares of a
Fund may be halted.
Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. The Exchange will
allow trading in the Shares from 8:00
a.m. until 5:00 p.m. Eastern Time and
has the appropriate rules to facilitate
transactions in the Shares during all
trading sessions. As provided in BZX
Rule 11.11(a), the minimum price
variation for quoting and entry of orders
in securities traded on the Exchange is
$0.01, with the exception of securities
that are priced less than $1.00, for
which the minimum price variation for
order entry is $0.0001.
Surveillance
The Exchange believes that its
surveillance procedures are adequate to
properly monitor the trading of the
Shares on the Exchange during all
trading sessions and to deter and detect
violations of Exchange rules and the
applicable federal securities laws.
Trading of the Shares through the
Exchange will be subject to the
Exchange’s surveillance procedures for
derivative products, including Index
Fund Shares. The issuer has represented
to the Exchange that it will advise the
Exchange of any failure by the Fund to
comply with the continued listing
requirements, and, pursuant to its
obligations under Section 19(g)(1) of the
Exchange Act, the Exchange will surveil
for compliance with the continued
listing requirements. If the Fund is not
in compliance with the applicable
listing requirements, the Exchange will
commence delisting procedures under
Exchange Rule 14.12. The Exchange
may obtain information regarding
trading in the Shares and the underlying
shares in exchange traded equity
securities via the ISG, from other
exchanges that are members or affiliates
of the ISG, or with which the Exchange
has entered into a comprehensive
surveillance sharing agreement.46 In
46 For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all
components of the Disclosed Portfolio for the Fund
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Sfmt 4703
59707
addition, the Exchange is able to access,
as needed, trade information for certain
fixed income instruments reported to
FINRA’s Trade Reporting and
Compliance Engine (‘‘TRACE’’). FINRA
also can access data obtained from the
Municipal Securities Rulemaking Board
(‘‘MSRB’’) relating to municipal bond
trading activity for surveillance
purposes in connection with trading in
the Shares. In addition, the Exchange
may obtain information regarding
trading in the Shares and the underlying
shares in exchange-traded investment
companies, futures, and options from
markets or other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement. The
Exchange prohibits the distribution of
material non-public information by its
employees.
Information Circular
Prior to the commencement of
trading, the Exchange will inform its
members in an Information Circular of
the special characteristics and risks
associated with trading the Shares.
Specifically, the Information Circular
will discuss the following: (1) the
procedures for purchases and
redemptions of Shares in Creation Units
(and that Shares are not individually
redeemable); (2) BZX Rule 3.7, which
imposes suitability obligations on
Exchange members with respect to
recommending transactions in the
Shares to customers; (3) how
information regarding the Intraday
Indicative Value is disseminated; (4) the
risks involved in trading the Shares
during the Pre-Opening 47 and After
Hours Trading Sessions 48 when an
updated Intraday Indicative Value will
not be calculated or publicly
disseminated; (5) the requirement that
members deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; and (6)
trading information.
In addition, the Information Circular
will advise members, prior to the
commencement of trading, of the
prospectus delivery requirements
applicable to the Funds. Members
purchasing Shares from the Funds for
resale to investors will deliver a
prospectus to such investors. The
Information Circular will also discuss
any exemptive, no-action, and
may trade on markets that are members of ISG or
with which the Exchange has in place a
comprehensive surveillance sharing agreement.
47 The Pre-Opening Session is from 8:00 a.m. to
9:30 a.m. Eastern Time.
48 The After Hours Trading Session is from 4:00
p.m. to 5:00 p.m. Eastern Time.
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mstockstill on DSK3G9T082PROD with NOTICES
interpretive relief granted by the
Commission from any rules under the
Act.
In addition, the Information Circular
will reference that each Fund is subject
to various fees and expenses described
in the Registration Statement. The
Information Circular will also disclose
the trading hours of the Shares of the
Funds and the applicable NAV
calculation time for the Shares. The
Information Circular will disclose that
information about the Shares of the
Funds will be publicly available on the
Funds’ Web site. In addition, the
Information Circular will reference that
the Trust is subject to various fees and
expenses described in each Fund’s
Registration Statement.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with Section 6(b)
of the Act 49 in general and Section
6(b)(5) of the Act 50 in particular in that
it is designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares will
be listed and traded on the Exchange
pursuant to the listing criteria in BZX
Rule 14.11(c). The Exchange believes
that its surveillances, which generally
focus on detecting securities trading
outside of their normal patterns which
could be indicative of manipulative or
other violative activity, and associated
surveillance procedures are adequate to
properly monitor the trading of the
Shares on the Exchange during all
trading sessions and to deter and detect
violations of Exchange rules and the
applicable federal securities laws. The
Exchange will communicate as needed
regarding trading in the Shares with
other markets or other entities that are
members of the Intermarket
Surveillance group (‘‘ISG’’), and may
obtain trading information regarding
trading in the Shares from such markets
or entities. The Exchange can also
access data obtained from the Municipal
Securities Rulemaking Board relating to
municipal bond trading activity for
surveillance purposes in connection
49 15
50 15
U.S.C. 78f.
U.S.C. 78f(b)(5).
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20:04 Aug 29, 2016
Jkt 238001
with trading in the Shares. The
Exchange is able to access, as needed,
trade information for certain fixed
income securities held by a Fund
reported to FINRA’s TRACE. FINRA
also can access data obtained from the
Municipal Securities Rulemaking Board
(‘‘MSRB’’) relating to municipal bond
trading activity for surveillance
purposes in connection with trading in
the Shares. In addition, the Exchange
may obtain information regarding
trading in the Shares and the underlying
shares in exchange-traded investment
companies, futures, and options from
markets or other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.
The Index Provider is not a brokerdealer, but is affiliated with a brokerdealer and has implemented a ‘‘fire
wall’’ with respect to such broker-dealer
regarding access to information
concerning the composition and/or
changes to the Indices. The Index
Provider has also implemented
procedures designed to prevent the use
and dissemination of material, nonpublic information regarding the
Indices.
As of July 18, 2016, the 2023 Index
had the following characteristics: there
were 4,612 issues; 5.83% of the weight
of components had a minimum original
principal amount outstanding of $100
million or more; 73.56% of the weight
of components was comprised of
individual maturities that were part of
an entire municipal bond offering with
a minimum original principal amount
outstanding of $100 million or more for
all maturities of the offering; total face
amount outstanding of issues in the
2023 Index was approximately $38.5
billion, the market value is $46.4
billion, and the average dollar amount
outstanding per issue was
approximately $8.3 million; the most
heavily weighted component
represented 1.61% of the 2023 Index
and the five most heavily weighted
components represented 3.66% of the
2023 Index. Therefore, the Exchange
believes that, notwithstanding that the
2023 Index does not satisfy the criterion
in BZX Rule 14.11(c)(4)(B)(i), the 2023
Index is sufficiently broad-based to
deter potential manipulation in that a
substantial portion (73.56%) of the 2023
Index weight is comprised of maturities
that are part of a minimum original
principal amount outstanding of $100
million or more, and in view of the
substantial total dollar amount
outstanding and the average dollar
amount outstanding of index issues.
As of July 18, 2016, the 2024 Index
had the following characteristics: there
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Fmt 4703
Sfmt 4703
were 3,624 issues; 5.72% of the weight
of components had a minimum original
principal amount outstanding of $100
million or more; 72.27% of the weight
of components was comprised of
individual maturities that were part of
an entire municipal bond offering with
a minimum original principal amount
outstanding of $100 million or more for
all maturities of the offering; the total
face amount outstanding of issues in the
2024 Index was approximately $29.9
billion, the market value is $36.4
billion, and the average dollar amount
outstanding of issues in the 2024 Index
was approximately $8.3 million; the
most heavily weighted component
represented 0.72% of the 2024 Index
and the five most heavily weighted
components represented 2.74% of the
2024 Index. Therefore, the Exchange
believes that, notwithstanding that the
2024 Index does not satisfy the criterion
in BZX Rule 14.11(c)(4)(B)(i), the 2024
Index is sufficiently broad-based to
deter potential manipulation in that a
substantial portion (72.27%) of the 2024
Index weight is comprised of maturities
that are part of a minimum original
principal amount outstanding of $100
million or more, and in view of the
substantial total dollar amount
outstanding and the average dollar
amount outstanding of index issues.
The value, components, and
percentage weightings of each of the
Indices will be calculated and
disseminated at least once daily and
will be available from major market data
vendors. In addition, the portfolio of
securities held by the Funds will be
disclosed on the Funds’ Web site at
www.iShares.com. The intraday
indicative value for Shares of the Funds
will be disseminated by one or more
major market data vendors, updated at
least every 15 seconds during Regular
Trading Hours. The Adviser represents
that bonds that share similar
characteristics, as described above, tend
to trade similarly to one another;
therefore, within these categories, the
issues may be considered fungible from
a portfolio management perspective.
Within a single municipal bond issuer,
[sic] Adviser represents that separate
issues by the same issuer are also likely
to trade similarly to one another.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest in that a large amount of
information will be publicly available
regarding the Funds and the Shares,
thereby promoting market transparency.
The Funds’ portfolio holdings will be
disclosed on the Funds’ Web site daily
after the close of trading on the
Exchange and prior to the opening of
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trading on the Exchange the following
day. Moreover, the IIV will be widely
disseminated by one or more major
market data vendors at least every 15
seconds during Regular Trading Hours.
The current value of each of the Indices
will be disseminated by one or more
major market data vendors at least once
per day. Information regarding market
price and trading volume of the Shares
will be continually available on a realtime basis throughout the day on
brokers’ computer screens and other
electronic services, and quotation and
last sale information will be available
via the CTA high-speed line. The Web
site for the Funds will include the
prospectus for the Funds and additional
data relating to NAV and other
applicable quantitative information.
Moreover, prior to the commencement
of trading, the Exchange will inform its
Members in an information circular of
the special characteristics and risks
associated with trading the Shares. If the
Exchange becomes aware that the NAV
is not being disseminated to all market
participants at the same time, it will halt
trading in the Shares until such time as
the NAV is available to all market
participants. With respect to trading
halts, the Exchange may consider all
relevant factors in exercising its
discretion to halt or suspend trading in
the Shares of the Funds. 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 composing the
daily disclosed portfolio of each Fund;
or (2) whether other unusual conditions
or circumstances detrimental to the
maintenance of a fair and orderly
market are present. Trading in the
Shares also will be subject to Rule
14.11(c)(1)(B)(iv), which sets forth
circumstances under which Shares of a
Fund may be halted. If the IIV of any of
the Funds or value of the Indices are not
being disseminated as required, the
Exchange may halt trading during the
day in which the interruption to the
dissemination of the IIV or index value
occurs.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of additional types of exchange-traded
funds that holds municipal bonds and
that will enhance competition among
market participants, to the benefit of
investors and the marketplace. As noted
above, the Exchange has in place
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20:04 Aug 29, 2016
Jkt 238001
surveillance procedures relating to
trading in the Shares and may obtain
information in the Shares and the
underlying shares in exchange-traded
investment companies, futures, and
options 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, investors will
have ready access to information
regarding the IIV and quotation and last
sale information for the Shares.
For the above reasons, the Exchange
believes that the proposed rule change
is consistent with the requirements of
Section 6(b)(5) of the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purpose of the Act. The Exchange
notes that the proposed rule change will
facilitate the listing and trading of
additional exchange-traded products
that 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
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
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 Exchange consents, the Commission
will:
(a) by order approve or disapprove
such proposed rule change, or
(b) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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Sfmt 9990
59709
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–BatsBZX–2016–48 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR-BatsBZX–2016–48. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing will also be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
BatsBZX–2016–48 and should be
submitted on or before September 20,
2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.51
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–20735 Filed 8–29–16; 8:45 am]
BILLING CODE 8011–01–P
51 17
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]]>Agencies
[Federal Register Volume 81, Number 168 (Tuesday, August 30, 2016)]
[Notices]
[Pages 59700-59709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20735]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78666; File No. SR-BatsBZX-2016-48]
Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change to Rule 14.11(c)(4) To List and Trade
Shares of the iShares iBonds Dec 2023 Term Muni Bond ETF and iShares
iBonds Dec 2024 Term Muni Bond ETF of the iShares U.S. ETF Trust
August 24, 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 August 9, 2016, Bats BZX Exchange, Inc. (``Exchange'' or ``BZX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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[[Page 59701]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to list and trade under BZX Rule
14.11(c)(4) shares of the iShares iBonds Dec 2023 Term Muni Bond ETF
and iShares iBonds Dec 2024 Term Muni Bond ETF (each a ``Fund'' or,
collectively, the ``Funds'') of the iShares U.S. ETF Trust (the
``Trust''). The shares of the Funds are referred to herein as the
``Shares.''
The text of the proposed rule change is available at the Exchange's
Web site at www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade the Shares of the following
series of the Trust under BZX Rule 14.11(c)(4),\3\ which governs the
listing and trading of index fund shares based on fixed income
securities indexes.\4\ The Shares will be offered by the Trust, which
was established as a Delaware statutory trust on March 15, 2001. The
Trust is registered with the Commission as an open-end investment
company and has filed a registration statement on behalf of the Funds
on Form N-1A (``Registration Statement'') with the Commission.\5\ All
statements and representations made in this filing regarding (a) the
description of the portfolio, (b) limitations on portfolio holdings or
reference assets, or (c) the applicability of Exchange rules and
surveillance procedures shall constitute continued listing requirements
for listing the Shares on the Exchange.
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\3\ The Commission approved BZX Rule 14.11(c) in Securities
Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148
(September 6, 2011) (SR-BATS-2011-018).
\4\ The Commission previously has approved a proposed rule
change relating to listing and trading of funds based on municipal
bond indexes. See Securities Exchange Act Release Nos. 78329 (July
14, 2016), 81 FR 47217 (July 20, 2016) (SR-BatsBZX-2016-01) (order
approving proposed rule change relating to the listing and trading
of VanEck Vectors AMT-Free 6-8 Year Municipal Index ETF, VanEck
Vectors AMT-Free 8-12 Year Municipal Index ETF, and VanEck Vectors
AMT-Free 12-17 Year Municipal Index ETF); 67985 (October 4, 2012),
77 FR 61804 (October 11, 2012) (SR-NYSEArca-2012-92) (order
approving proposed rule change relating to the listing and trading
of iShares 2018 S&P AMT-Free Municipal Series and iShares 2019 S&P
AMT-Free Municipal Series under NYSE Arca, Inc. (``NYSE Arca'') Rule
5.2(j)(3), Commentary .02); 72523 (July 2, 2014), 79 FR 39016 (July
9, 2014) (SR-NYSEArca-2014-37) (order approving proposed rule change
relating to the listing and trading of iShares 2020 S&P AMT-Free
Municipal Series under NYSE Arca Rule 5.2(j)(3), Commentary .02);
and 75468 (July 16, 2015), 80 FR 43500 (July 22, 2015) (SR-NYSEArca-
2015-25) (order approving proposed rule change relating to the
listing and trading of the iShares iBonds Dec 2021 AMT-Free Muni
Bond ETF and iShares iBonds Dec 2022 AMT-Free Muni Bond ETF under
NYSE Arca Rule 5.2(j)(3), Commentary .02). The Commission also has
issued a notice of filing and immediate effectiveness of a proposed
rule change relating to listing and trading on the Exchange of the
iShares Taxable Municipal Bond Fund. See Securities Exchange Act
Release No. 63176 (October 25, 2010), 75 FR 66815 (October 29, 2010)
(SR-NYSEArca-2010-94). The Commission has approved two actively
managed funds of the PIMCO ETF Trust that hold municipal bonds. See
Securities Exchange Act Release No. 60981 (November 10, 2009), 74 FR
59594 (November 18, 2009) (SR-NYSEArca-2009-79) (order approving
listing and trading of PIMCO ShortTerm Municipal Bond Strategy Fund
and PIMCO Intermediate Municipal Bond Strategy Fund, among others).
The Commission also has approved listing and trading on the Exchange
of the SPDR Nuveen S&P High Yield Municipal Bond Fund. See
Securities Exchange Act Release No. 63881 (February 9, 2011), 76 FR
9065 (February 16, 2011) (SR-NYSEArca-2010-120).
\5\ See Registration Statement on Form N-1A for the Trust, dated
October 29, 2015 (File Nos. 333-123257 and 811-10325). The
descriptions of the Funds and the Shares contained herein are based,
in part, on information in the Registration Statement. The
Commission has issued an order granting certain exemptive relief to
the Trust under the Investment Company Act of 1940 (15 U.S.C. 80a-1)
(``1940 Act'') (the ``Exemptive Order''). See Investment Company Act
Release No. 28021 (October 24, 2007) (File No. 812-13426).
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Description of the Shares and the Funds
BlackRock Fund Advisors is the investment adviser (``BFA'' or
``Adviser'') to the Funds.\6\ State Street Bank and Trust Company is
the administrator, custodian, and transfer agent (``Administrator,''
``Custodian,'' and ``Transfer Agent,'' respectively) for the Trust.
BlackRock Investments, LLC serves as the distributor (``Distributor'')
for the Trust.
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\6\ BFA is an indirect wholly owned subsidiary of BlackRock,
Inc.
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iShares iBonds Dec 2023 Term Muni Bond ETF
According to the Registration Statement, the Fund will seek to
replicate as closely as possible, before fees and expenses, the price
and yield performance of the S&P AMT-Free Municipal Series Dec 2023
Index (the ``2023 Index''). As of July 18, 2016, there were 4,612
issues in the 2023 Index. Unless otherwise noted, all statistics
related to the 2023 Index presented hereafter were accurate as of July
18, 2016.
To be included in the 2023 Index, a bond must have a rating of at
least BBB- by S&P, Baa3 by Moody's, or BBB- by Fitch (except in the
case of a pre-refunded/escrowed to maturity bond). A bond must be rated
by at least one of the three rating agencies in order to qualify for
index inclusion. For the avoidance of doubt, the lowest rating is used
in determining if a bond is investment grade. Potential constituents
must have an outstanding par value of at least $2 million. The bonds
will have a maturity range of January 1, 2023 to December 1, 2023. The
following types of bonds are excluded from the 2023 Index: Bonds
subject to the alternative minimum tax, bonds with early redemption
dates (callable provisions), bonds with sinking fund provisions,
commercial paper, conduit bonds where the obligor is a for-profit
institution, derivative securities, non-rated bonds (except pre-
refunded/escrowed to maturity bonds), notes, taxable municipals,
tobacco bonds, and variable rate debt (except for known step-up/down
coupon schedule bonds). The 2023 Index is calculated using a market
value weighting methodology. The composition of the 2023 Index is
rebalanced monthly.
The Fund generally invests at least 90% of its assets in the
component securities of the Fund's benchmark index, except during the
last months of the Fund's operations. From time to time when conditions
warrant, however, the Fund may invest at least 80% of its assets in the
component securities of the Fund's benchmark index. The 2023 Index
measures the performance of the non-callable investment-grade, tax-
exempt U.S. municipal bonds with specific annual maturities
(``Municipal Securities''). The Fund has adopted a non-fundamental
investment policy to invest at least 80% of its net assets, plus the
amount of any borrowings for investment purposes, in securities in the
Fund's benchmark index. This policy may be changed without shareholder
approval upon 60 days' prior written notice to shareholders.\7\
Municipal
[[Page 59702]]
Securities are fixed and variable rate securities issued in the U.S. by
U.S. states and territories, municipalities and other political
subdivisions, agencies, authorities, and instrumentalities of states
and multi-state agencies and authorities and will include only the
following instruments: General obligation bonds,\8\ limited obligation
bonds (or revenue bonds),\9\ municipal notes,\10\ municipal commercial
paper,\11\ tender option bonds,\12\ variable rate demand obligations
(``VRDOs''),\13\ municipal lease obligations,\14\ stripped
securities,\15\ structured securities,\16\ and zero coupon
securities.\17\
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\7\ As noted herein, each Fund's policy to invest 80% of its
total assets in securities that comprise the Fund's benchmark index
(the ``80% Investment Policy'') is non-fundamental and may be
changed without shareholder approval upon 60 days' prior written
notice to shareholders. The Exchange notes that, notwithstanding the
foregoing, all statements and representations made in this filing
regarding (a) the description of the portfolios, (b) limitations on
portfolio holdings or reference assets (including, for example, each
Fund's 80% Investment Policy), or (c) the applicability of Exchange
rules and surveillance procedures shall constitute continued listing
requirements for listing the Shares on the Exchange. As noted below,
the issuer has represented to the Exchange that it will advise the
Exchange of any failure by a Fund to comply with the continued
listing requirements (or any changes made with respect to a Fund's
80% Investment Policy), and, pursuant to its obligations under
Section 19(g)(1) of the Exchange Act, the Exchange will surveil for
compliance with the continued listing requirements. If the Fund is
not in compliance with the applicable listing requirements, the
Exchange will commence delisting procedures under Exchange Rule
14.12.
\8\ General obligation bonds are obligations involving the
credit of an issuer possessing taxing power and are payable from
such issuer's general revenues and not from any particular source.
\9\ Limited obligation bonds are payable only from the revenues
derived from a particular facility or class of facilities or, in
some cases, from the proceeds of a special excise or other specific
revenue source, and also include industrial development bonds issued
pursuant to former U.S. federal tax law. Industrial development
bonds generally are also revenue bonds and thus are not payable from
the issuer's general revenues. The credit and quality of industrial
development bonds are usually related to the credit of the corporate
user of the facilities. Payment of interest on and repayment of
principal of such bonds is the responsibility of the corporate user
(and/or any guarantor).
\10\ Municipal notes are shorter-term municipal debt obligations
that may provide interim financing in anticipation of tax
collection, receipt of grants, bond sales, or revenue receipts.
\11\ Municipal commercial paper is generally unsecured debt that
is issued to meet short-term financing needs.
\12\ Tender option bonds are synthetic floating-rate or
variable-rate securities issued when long-term bonds are purchased
in the primary or secondary market and then deposited into a trust.
Custodial receipts are then issued to investors, such as the Fund,
evidencing ownership interests in the trust.
\13\ VRDOs are tax-exempt obligations that contain a floating or
variable interest rate adjustment formula and a right of demand on
the part of the holder thereof to receive payment of the unpaid
principal balance plus accrued interest upon a short notice period
not to exceed seven days.
\14\ Municipal lease obligations include certificates of
participation issued by government authorities or entities to
finance the acquisition or construction of equipment, land, and/or
facilities.
\15\ Stripped securities are created when an issuer separates
the interest and principal components of an instrument and sells
them as separate securities. In general, one security is entitled to
receive the interest payments on the underlying assets and the other
to receive the principal payments.
\16\ Structured securities are privately negotiated debt
obligations where the principal and/or interest is determined by
reference to the performance of an underlying investment, index, or
reference obligation, and may be issued by governmental agencies.
While structured securities are part of the principal holdings of
the Fund, the Issuer represents that such securities, when combined
with those instruments held as part of the other portfolio holdings
described below, will not exceed 20% of the Fund's net assets.
\17\ Zero coupon securities are securities that are sold at a
discount to par value and do not pay interest during the life of the
security. The discount approximates the total amount of interest the
security will accrue and compound over the period until maturity at
a rate of interest reflecting the market rate of the security at the
time of issuance. Upon maturity, the holder of a zero coupon
security is entitled to receive the par value of the security.
---------------------------------------------------------------------------
In the last months of operation, as the bonds held by the Fund
mature, the proceeds will not be reinvested in bonds but instead will
be held in cash and cash equivalents, including, without limitation,
shares of money market funds advised by BFA or its affiliates
(``BlackRock Cash Funds''), AMT-free tax-exempt municipal notes,
variable rate demand notes and obligations, tender option bonds and
municipal commercial paper. These cash equivalents may not be included
in the Underlying Index. By December 2, 2023, the Underlying Index is
expected to consist entirely of cash earned in this manner. Around the
same time, the Fund will wind up and terminate, and its net assets will
be distributed to then-current shareholders.
The Fund intends to qualify for and to elect treatment as a
regulated investment company (a ``RIC'') under Subchapter M of the
Internal Revenue Code of 1986, as amended. The Fund will invest its
assets, and otherwise conduct its operations, in a manner that is
intended to satisfy the qualifying income, diversification and
distribution requirements necessary to establish and maintain RIC
qualification under Subchapter M.
Other Portfolio Holdings
The Fund may also, to a limited extent (under normal circumstances,
less than 20% of the Fund's net assets), engage in transactions in
futures contracts, options, or swaps in order to facilitate trading or
to reduce transaction costs.\18\ The Fund's investments will be
consistent with its investment objective and will not be used to
achieve leveraged returns (i.e. two times or three times the Fund's
benchmark, as described in the Registration Statement).
---------------------------------------------------------------------------
\18\ Derivatives might be included in the Fund's investments to
serve the investment objectives of the Fund. Such derivatives
include only the following: Interest rate futures, interest rate
options, interest rate swaps, and swaps on Municipal Securities
indexes. The derivatives will be centrally cleared and they will be
collateralized. Derivatives are not a principal investment strategy
of the Fund.
---------------------------------------------------------------------------
The Fund may also enter into repurchase and reverse repurchase
agreements for Municipal Securities (collectively, ``Repurchase
Agreements''). Repurchase Agreements involve the sale of securities
with an agreement to repurchase the securities at an agreed-upon price,
date and interest payment and have the characteristics of borrowing as
part of the Fund's principal holdings.\19\
---------------------------------------------------------------------------
\19\ The Fund's exposure to reverse repurchase agreements will
be covered by liquid assets having a value equal to or greater than
such commitments. The use of reverse repurchase agreements is a form
of leverage because the proceeds derived from reverse repurchase
agreements may be invested in additional securities. As further
stated below, the Fund's investments will be consistent with its
investment objective and will not be used to achieve leveraged
returns.
---------------------------------------------------------------------------
The Fund may also invest in short-term instruments (``Short-Term
Instruments''),\20\ which include exchange traded and non-exchange
traded investment companies (including investment companies advised by
BFA
[[Page 59703]]
or its affiliates) that invest in money market instruments.
---------------------------------------------------------------------------
\20\ The Fund may invest in Short-Term Instruments, including
money market instruments, on an ongoing basis to provide liquidity
or for other reasons. Money market instruments are generally short-
term investments that include only the following: (i) Shares of
money market funds (including those advised by BFA or otherwise
affiliated with BFA); (ii) obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities (including
government-sponsored enterprises); (iii) negotiable certificates of
deposit (``CDs''), bankers' acceptances, fixed-time deposits and
other obligations of U.S. and non-U.S. banks (including non-U.S.
branches) and similar institutions; (iv) commercial paper, including
asset-backed commercial paper; (v) non-convertible corporate debt
securities (e.g., bonds and debentures) with remaining maturities at
the date of purchase of not more than 397 days and that satisfy the
rating requirements set forth in Rule 2a-7 under the 1940 Act; and
(vi) short-term U.S. dollar-denominated obligations of non-U.S.
banks (including U.S. branches) that, in the opinion of BFA, are of
comparable quality to obligations of U.S. banks which may be
purchased by the Fund. All money market securities acquired by the
Fund will be rated investment grade. The Fund does not intend to
invest in any unrated money market securities. However, it may do
so, to a limited extent, such as where a rated money market security
becomes unrated, if such money market security is determined by the
Adviser to be of comparable quality. BFA may determine that unrated
securities are of comparable quality based on such credit quality
factors that it deems appropriate, which may include, among other
things, performing an analysis similar, to the extent possible, to
that performed by a nationally recognized statistical rating
organization rating similar securities and issuers.
---------------------------------------------------------------------------
Index Overview
The Exchange is submitting this proposed rule change because the
2023 Index for the Fund does not meet all of the ``generic'' listing
requirements of Rule 14.11(c)(4) applicable to the listing of index
fund shares based on fixed income securities indexes. The 2023 Index
meets all such requirements except for those set forth in Rule
14.11(c)(4)(B)(i)(b).\21\ Specifically, as of July 18, 2016, 5.83% of
the weight of the 2023 Index components have a minimum original
principal amount outstanding of $100 million or more.
---------------------------------------------------------------------------
\21\ Rule 14.11(c)(4)(B)(i)(b) provides that components that in
the aggregate account for at least 75% of the weight of the index or
portfolio each shall have a minimum original principal amount
outstanding of $100 million or more.
---------------------------------------------------------------------------
As of July 18, 2016, 73.56% of the weight of the 2023 Index
components was comprised of individual maturities that were part of an
entire municipal bond offering with a minimum original principal amount
outstanding $100 million or more for all maturities of the offering. In
addition, the total face amount outstanding of issues in the 2023 Index
was approximately $38.5 billion, the market value was $46.4 billion,
and the average dollar amount outstanding of issues in the 2023 Index
was approximately $8.3 million. Further, the most heavily weighted
component represented 1.61% of the weight of the 2023 Index and the
five most heavily weighted components represented 3.66% of the weight
of the 2023 Index.\22\ Therefore, the Exchange believes that,
notwithstanding that the 2023 Index does not satisfy the criterion in
Rule 14.11(c)(4)(B)(i)(b), the 2023 Index is sufficiently broad-based
to deter potential manipulation, given that it is comprised of
approximately 4,612 issues. In addition, the 2023 Index securities are
sufficiently liquid to deter potential manipulation in that a
substantial portion (73.56%) of the 2023 Index weight is comprised of
maturities that are part of a minimum original principal amount
outstanding of $100 million or more, and in view of the substantial
total dollar amount outstanding and the average dollar amount
outstanding of the 2023 Index issues, as referenced above.\23\ 48% of
the 2023 Index weight consisted of issues with a rating of AA/Aa2 or
higher.
---------------------------------------------------------------------------
\22\ Rule 14.11(c)(4)(B)(i)(d) provides that no component fixed-
income security (excluding Treasury Securities, as defined therein)
shall represent more than 30% of the weight of the index or
portfolio, and the five most heavily weighted component fixed-income
securities in the index or portfolio shall not in the aggregate
account for more than 65% of the weight of the index or portfolio.
\23\ The Adviser represents that when bonds are close
substitutes for one another, pricing vendors can use executed trade
information from all similar bonds as pricing inputs for an
individual security. This can make individual securities more
liquid.
---------------------------------------------------------------------------
The 2023 Index value, calculated and disseminated at least once
daily, as well as the components of the 2023 Index and their percentage
weighting, will be available from major market data vendors. In
addition, the portfolio of securities held by the Fund will be
disclosed on the Fund's Web site at www.iShares.com.
iShares iBonds Dec 2024 Term Muni Bond ETF
According to the Registration Statement, the Fund will seek to
replicate as closely as possible, before fees and expenses, the price
and yield performance of the S&P AMT-Free Municipal Series Dec 2024
Index (the ``2024 Index''). As of July 18, 2016, there were 3,624
issues in the 2024 Index. Unless otherwise noted, all statistics
related to the 2024 Index presented hereafter were accurate as of July
18, 2016.
To be included in the 2024 Index, a bond must have a rating of at
least BBB- by S&P, Baa3 by Moody's, or BBB- by Fitch (except in the
case of a pre-refunded/escrowed to maturity bond). A bond must be rated
by at least one of the three rating agencies in order to qualify for
index inclusion. For the avoidance of doubt, the lowest rating is used
in determining if a bond is investment grade. Potential constituents
must have an outstanding par value of at least $2 million. The bonds
will have a maturity range of January 1, 2024 to December 1, 2024. The
following types of bonds are excluded from the 2024 Index: Bonds
subject to the alternative minimum tax, bonds with early redemption
dates (callable provisions), bonds with sinking fund provisions,
commercial paper, conduit bonds where the obligor is a for-profit
institution, derivative securities, non-rated bonds (except pre-
refunded/escrowed to maturity bonds), notes, taxable municipals,
tobacco bonds, and variable rate debt (except for known step-up/down
coupon schedule bonds). The 2024 Index is calculated using a market
value weighting methodology. The composition of the 2024 Index is
rebalanced monthly.
The Fund generally invests at least 90% of its assets in the
component securities of the Fund's benchmark index, except during the
last months of the Fund's operations. From time to time when conditions
warrant, however, the Fund may invest at least 80% of its assets in the
component securities of the Fund's benchmark index. The 2024 Index
measures the performance of the non-callable investment-grade, tax-
exempt U.S. municipal bonds with specific annual maturities
(``Municipal Securities''). The Fund has adopted a non-fundamental
investment policy to invest at least 80% of its net assets, plus the
amount of any borrowings for investment purposes, in securities in the
Fund's benchmark index. This policy may be changed without shareholder
approval upon 60 days' prior written notice to shareholders.\24\
Municipal Securities are fixed and variable rate securities issued in
the U.S. by U.S. states and territories, municipalities and other
political subdivisions, agencies, authorities, and instrumentalities of
states and multi-state agencies and authorities and will include only
the following instruments: General obligation bonds,\25\ limited
obligation bonds (or revenue bonds),\26\ municipal
[[Page 59704]]
notes,\27\ municipal commercial paper,\28\ tender option bonds,\29\
variable rate demand obligations (``VRDOs''),\30\ municipal lease
obligations,\31\ stripped securities,\32\ structured securities,\33\
and zero coupon securities.\34\
---------------------------------------------------------------------------
\24\ As noted herein, each Fund's policy to invest 80% of its
total assets in securities that comprise the Fund's benchmark index
(the ``80% Investment Policy'') is non-fundamental and may be
changed without shareholder approval upon 60 days' prior written
notice to shareholders. The Exchange notes that, notwithstanding the
foregoing, all statements and representations made in this filing
regarding (a) the description of the portfolios, (b) limitations on
portfolio holdings or reference assets (including, for example, each
Fund's 80% Investment Policy), or (c) the applicability of Exchange
rules and surveillance procedures shall constitute continued listing
requirements for listing the Shares on the Exchange. As noted below,
the issuer has represented to the Exchange that it will advise the
Exchange of any failure by a Fund to comply with the continued
listing requirements (or any changes made with respect to a Fund's
80% Investment Policy), and, pursuant to its obligations under
Section 19(g)(1) of the Exchange Act, the Exchange will surveil for
compliance with the continued listing requirements. If the Fund is
not in compliance with the applicable listing requirements, the
Exchange will commence delisting procedures under Exchange Rule
14.12.
\25\ General obligation bonds are obligations involving the
credit of an issuer possessing taxing power and are payable from
such issuer's general revenues and not from any particular source.
\26\ Limited obligation bonds are payable only from the revenues
derived from a particular facility or class of facilities or, in
some cases, from the proceeds of a special excise or other specific
revenue source, and also include industrial development bonds issued
pursuant to former U.S. federal tax law. Industrial development
bonds generally are also revenue bonds and thus are not payable from
the issuer's general revenues. The credit and quality of industrial
development bonds are usually related to the credit of the corporate
user of the facilities. Payment of interest on and repayment of
principal of such bonds is the responsibility of the corporate user
(and/or any guarantor).
\27\ Municipal notes are shorter-term municipal debt obligations
that may provide interim financing in anticipation of tax
collection, receipt of grants, bond sales, or revenue receipts.
\28\ Municipal commercial paper is generally unsecured debt that
is issued to meet short-term financing needs.
\29\ Tender option bonds are synthetic floating-rate or
variable-rate securities issued when long-term bonds are purchased
in the primary or secondary market and then deposited into a trust.
Custodial receipts are then issued to investors, such as the Fund,
evidencing ownership interests in the trust.
\30\ VRDOs are tax-exempt obligations that contain a floating or
variable interest rate adjustment formula and a right of demand on
the part of the holder thereof to receive payment of the unpaid
principal balance plus accrued interest upon a short notice period
not to exceed seven days.
\31\ Municipal lease obligations include certificates of
participation issued by government authorities or entities to
finance the acquisition or construction of equipment, land, and/or
facilities.
\32\ Stripped securities are created when an issuer separates
the interest and principal components of an instrument and sells
them as separate securities. In general, one security is entitled to
receive the interest payments on the underlying assets and the other
to receive the principal payments.
\33\ Structured securities are privately negotiated debt
obligations where the principal and/or interest is determined by
reference to the performance of an underlying investment, index, or
reference obligation, and may be issued by governmental agencies.
While structured securities are part of the principal holdings of
the Fund, the Issuer represents that such securities, when combined
with those instruments held as part of the other portfolio holdings
described below, will not exceed 20% of the Fund's net assets.
\34\ Zero coupon securities are securities that are sold at a
discount to par value and do not pay interest during the life of the
security. The discount approximates the total amount of interest the
security will accrue and compound over the period until maturity at
a rate of interest reflecting the market rate of the security at the
time of issuance. Upon maturity, the holder of a zero coupon
security is entitled to receive the par value of the security.
---------------------------------------------------------------------------
In the last months of operation, as the bonds held by the Fund
mature, the proceeds will not be reinvested in bonds but instead will
be held in cash and cash equivalents, including, without limitation,
shares of BlackRock Cash Funds, AMT-free tax-exempt municipal notes,
variable rate demand notes and obligations, tender option bonds and
municipal commercial paper. These cash equivalents may not be included
in the Underlying Index. By December 2, 2023, the Underlying Index is
expected to consist entirely of cash earned in this manner. Around the
same time, the Fund will wind up and terminate, and its net assets will
be distributed to then-current shareholders.
The Fund intends to qualify for and to elect treatment as a RIC
under Subchapter M of the Internal Revenue Code of 1986, as amended.
The Fund will invest its assets, and otherwise conduct its operations,
in a manner that is intended to satisfy the qualifying income,
diversification and distribution requirements necessary to establish
and maintain RIC qualification under Subchapter M.
Other Portfolio Holdings
The Fund may also, to a limited extent (under normal circumstances,
less than 20% of the Fund's net assets), engage in transactions in
futures contracts, options, or swaps in order to facilitate trading or
to reduce transaction costs.\35\ The Fund's investments will be
consistent with its investment objective and will not be used to
achieve leveraged returns (i.e. two times or three times the Fund's
benchmark, as described in the Registration Statement).
---------------------------------------------------------------------------
\35\ Derivatives might be included in the Fund's investments to
serve the investment objectives of the Fund. Such derivatives
include only the following: Interest rate futures, interest rate
options, interest rate swaps, and swaps on Municipal Securities
indexes. The derivatives will be centrally cleared and they will be
collateralized. Derivatives are not a principal investment strategy
of the Fund.
---------------------------------------------------------------------------
The Fund may also enter into repurchase and reverse repurchase
agreements for Municipal Securities (collectively, ``Repurchase
Agreements''). Repurchase Agreements involve the sale of securities
with an agreement to repurchase the securities at an agreed-upon price,
date and interest payment and have the characteristics of borrowing as
part of the Fund's principal holdings.\36\
---------------------------------------------------------------------------
\36\ The Fund's exposure to reverse repurchase agreements will
be covered by liquid assets having a value equal to or greater than
such commitments. The use of reverse repurchase agreements is a form
of leverage because the proceeds derived from reverse repurchase
agreements may be invested in additional securities. As further
stated below, the Fund's investments will be consistent with its
investment objective and will not be used to achieve leveraged
returns.
---------------------------------------------------------------------------
The Fund may also invest in short-term instruments (``Short-Term
Instruments''),\37\ which include exchange traded and non-exchange
traded investment companies (including investment companies advised by
BFA or its affiliates) that invest in money market instruments.
---------------------------------------------------------------------------
\37\ The Fund may invest in Short-Term Instruments, including
money market instruments, on an ongoing basis to provide liquidity
or for other reasons. Money market instruments are generally short-
term investments that include only the following: (i) Shares of
money market funds (including those advised by BFA or otherwise
affiliated with BFA); (ii) obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities (including
government-sponsored enterprises); (iii) negotiable certificates of
deposit (``CDs''), bankers' acceptances, fixed-time deposits and
other obligations of U.S. and non-U.S. banks (including non-U.S.
branches) and similar institutions; (iv) commercial paper, including
asset-backed commercial paper; (v) non-convertible corporate debt
securities (e.g., bonds and debentures) with remaining maturities at
the date of purchase of not more than 397 days and that satisfy the
rating requirements set forth in Rule 2a-7 under the 1940 Act; and
(vi) short-term U.S. dollar-denominated obligations of non-U.S.
banks (including U.S. branches) that, in the opinion of BFA, are of
comparable quality to obligations of U.S. banks which may be
purchased by the Fund. All money market securities acquired by the
Fund will be rated investment grade. The Fund does not intend to
invest in any unrated money market securities. However, it may do
so, to a limited extent, such as where a rated money market security
becomes unrated, if such money market security is determined by the
Adviser to be of comparable quality. BFA may determine that unrated
securities are of comparable quality based on such credit quality
factors that it deems appropriate, which may include, among other
things, performing an analysis similar, to the extent possible, to
that performed by a nationally recognized statistical rating
organization rating similar securities and issuers.
---------------------------------------------------------------------------
Index Overview
The Exchange is submitting this proposed rule change because the
2024 Index for the Fund does not meet all of the ``generic'' listing
requirements of Rule 14.11(c)(4) applicable to the listing of index
fund shares based on fixed income securities indexes. The 2024 Index
meets all such requirements except for those set forth in Rule
14.11(c)(4)(B)(i)(b).\38\ Specifically, as of July 18, 2016, 5.72% of
the weight of the 2024 Index components have a minimum original
principal amount outstanding of $100 million or more.
---------------------------------------------------------------------------
\38\ Rule 14.11(c)(4)(B)(i)(b) provides that components that in
the aggregate account for at least 75% of the weight of the index or
portfolio each shall have a minimum original principal amount
outstanding of $100 million or more.
---------------------------------------------------------------------------
As of July 18, 2016, 72.27% of the weight of the 2024 Index
components was comprised of individual maturities that were part of an
entire municipal bond offering with a minimum original principal amount
outstanding $100 million or more for all maturities of the offering. In
addition, the total face amount outstanding of issues in the 2024 Index
was approximately $29.9 billion, the market value is $36.4 billion, and
the average dollar amount outstanding of issues in the 2024 Index was
approximately $8.3 million. Further, the most heavily weighted
component represented 0.72% of the weight of the 2024 Index and the
five most heavily weighted components represented 2.74% of the weight
of the 2024 Index.\39\ Therefore, the Exchange believes that,
notwithstanding that the
[[Page 59705]]
2024 Index does not satisfy the criterion in Rule 14.11(c)(4)(B)(i)(b),
the 2024 Index is sufficiently broad-based to deter potential
manipulation, given that it is comprised of approximately 3,624 issues.
In addition, the 2024 Index securities are sufficiently liquid to deter
potential manipulation in that a substantial portion (72.27%) of the
2024 Index weight is comprised of maturities that are part of a minimum
original principal amount outstanding of $100 million or more, and in
view of the substantial total dollar amount outstanding and the average
dollar amount outstanding of the 2024 Index issues, as referenced
above.\40\ 47.71% of the 2024 Index weight consisted of issues with a
rating of AA/Aa2 or higher.
---------------------------------------------------------------------------
\39\ Rule 14.11(c)(4)(B)(i)(d) provides that no component fixed-
income security (excluding Treasury Securities, as defined therein)
shall represent more than 30% of the weight of the index or
portfolio, and the five most heavily weighted component fixed-income
securities in the index or portfolio shall not in the aggregate
account for more than 65% of the weight of the index or portfolio.
\40\ The Adviser represents that when bonds are close
substitutes for one another, pricing vendors can use executed trade
information from all similar bonds as pricing inputs for an
individual security. This can make individual securities more
liquid.
---------------------------------------------------------------------------
The 2024 Index value, calculated and disseminated at least once
daily, as well as the components of the 2024 Index and their percentage
weighting, will be available from major market data vendors. In
addition, the portfolio of securities held by the Fund will be
disclosed on the Fund's Web site at www.iShares.com.
Correlation Among Municipal Bond Instruments With Common
Characteristics
With respect to the Funds, the Adviser represents that the nature
of the municipal bond market and municipal bond instruments makes it
feasible to categorize individual issues represented by CUSIPs (i.e.,
the specific identifying number for a security) into categories
according to common characteristics, specifically, rating, geographical
region, purpose, and maturity. Bonds that share similar characteristics
tend to trade similarly to one another; therefore, within these
categories, the issues may be considered fungible from a portfolio
management perspective, allowing one CUSIP to be represented by another
that shares similar characteristics for purposes of developing an
investment strategy. Therefore, while 5.83% of the weight of the 2023
Index and 5.72% of the 2024 Index components have a minimum original
principal amount outstanding of $100 million or more, the nature of the
municipal bond market makes the issues relatively fungible for
investment purposes when aggregated into categories such as ratings,
geographical region, purpose and maturity. In addition, within a single
municipal bond issuer, there are often multiple contemporaneous or
sequential issuances that have the same rating, structure and maturity,
but have different CUSIPs; these separate issues by the same issuer are
also likely to trade similarly to one another.
The Adviser represents that the Funds are managed utilizing the
principle that municipal bond issues are generally fungible in nature
when sharing common characteristics, and specifically make use of the
four categories referred to above. In addition, this principle is used
in, and consistent with, the portfolio construction process in order to
facilitate the creation and redemption process, and to enhance
liquidity (among other benefits, such as reducing transaction costs),
while still allowing each Fund to closely track its reference index.
Net Asset Value
According to the Registration Statement, the net asset value
(``NAV'') of each Fund will be determined each business day as of the
close of trading (ordinarily 4:00 p.m. Eastern time) on the Exchange.
Any assets or liabilities denominated in currencies other than the U.S.
dollar are converted into U.S. dollars at the current market rates on
the date of valuation as quoted by one or more sources.
The values of each Fund's portfolio securities are based on the
securities' closing prices, when available. In the absence of a last
reported sales price, or if no sales were reported, and for other
assets for which market quotes are not readily available, values may be
based on quotes obtained from a quotation reporting system, established
market makers or by an outside independent pricing service. Municipal
Securities, repurchase agreements, reverse repurchase agreements, and
money market instruments with maturities of more than 60 days are
normally valued on the basis of quotes from brokers or dealers,
established market makers or an outside independent pricing service.
Prices obtained by an outside independent pricing service may use
information provided by market makers or estimates of market values
obtained from yield data related to investments or securities with
similar characteristics and may use a computerized grid matrix of
securities and its evaluations in determining what it believes is the
fair value of the portfolio securities. Short-term investments,
including money market instruments having a maturity of 60 days or
less, are valued at amortized cost. Futures contracts will be valued at
the settlement price established each day by the board or exchange on
which they are traded. Exchange-traded options will be valued at the
closing price in the market where such contracts are principally
traded. Swaps will be valued based on valuations provided by
independent, third-party pricing agents. Securities of non-exchange-
traded investment companies will be valued at NAV. Exchange-traded
investment companies will be valued at the last reported sale price on
the primary exchange on which they are traded.
Creation and Redemption of Shares
The NAV of the Funds will be determined each business day as of the
close of trading, (normally 4:00 p.m. Eastern time) on the exchange.
The Funds currently anticipate that a ``Creation Unit'' will consist of
50,000 Shares, though this number may change from time to time,
including prior to the listing of a Fund. The exact number of Shares
that will comprise a Creation Unit will be disclosed in the
Registration Statement of each Fund. The Trust will issue and sell
Shares of the Funds only in Creation Units on a continuous basis
through the Distributor, without an initial sales load (but subject to
transaction fees), at their NAV per Share next determined after
receipt, on any business day, of an order in proper form.
The consideration for purchase of a Creation Unit of a Fund
generally will consist of either (i) the in-kind deposit of a
designated portfolio of fixed income securities (the ``Deposit
Securities'') per each Creation Unit and the Cash Component (defined
below), computed as described below, or (ii) as permitted or required
by the Funds, of cash. The Cash Component together with the Deposit
Securities, as applicable, are referred to as the ``Fund Deposit,''
which represents the minimum initial and subsequent investment amount
for Shares. The Cash Component represents the difference between the
NAV of a Creation Unit and the market value of Deposit Securities and
may include a Dividend Equivalent Payment. The ``Dividend Equivalent
Payment'' enables the Funds to make a complete distribution of
dividends on the next dividend payment date, and is an amount equal, on
a per Creation Unit basis, to the dividends on all the securities held
by each of the Funds (``Fund Securities'') with ex-dividend dates
within the accumulation period for such distribution (the
``Accumulation Period''), net of expenses and liabilities for such
period, as if all of the Fund Securities had been held by the Trust for
the entire Accumulation Period. The Accumulation Period begins on the
ex-
[[Page 59706]]
dividend date for each Fund and ends on the next ex-dividend date.
The Administrator, through the National Securities Clearing
Corporation (``NSCC''), makes available on each business day,
immediately prior to the opening of business on the Exchange (currently
9:30 a.m. Eastern time), the list of the names and the required number
of shares of each Deposit Security to be included in the current Fund
Deposit (based on information at the end of the previous business day)
as well as the Cash Component for each Fund. Such Fund Deposit is
applicable, subject to any adjustments as described below, in order to
effect creations of Creation Units of each Fund until such time as the
next-announced Fund Deposit composition is made available.
Shares may be redeemed only in Creation Units at their NAV next
determined after receipt of a redemption request in proper form by the
Distributor,\41\ only on a business day and only through a
Participating Party or DTC Participant who has executed a Participation
Agreement.
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\41\ To be eligible to place orders with the Distributor to
create Creation Units of the Funds, an entity or person either must
be: (1) a ``Participating Party,'' i.e., a broker-dealer or other
participant in the Clearing Process through the Continuous Net
Settlement System of the NSCC; or (2) a DTC Participant (as defined
below); and, in either case, must have executed an agreement with
the Distributor and the Transfer Agent (as it may be amended from
time to time in accordance with its terms) (``Participant
Agreement''). DTC Participants are participants of the Depository
Trust Company (``DTC'') that acts as securities depositary for Index
Fund Shares. A Participating Party and DTC Participant are
collectively referred to as an ``Authorized Participant.''
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The Administrator, through NSCC, makes available immediately prior
to the opening of business on the Exchange (currently 9:30 a.m. Eastern
time) on each day that the Exchange is open for business, the Fund
Securities that will be applicable (subject to possible amendment or
correction) to redemption requests received in proper form (as defined
below) on that day.
Unless cash redemptions are permitted or required for the Fund, the
redemption proceeds for a Creation Unit generally consist of Fund
Securities as announced by the Administrator on the business day of the
request for redemption, plus cash in an amount equal to the difference
between the NAV of the Shares being redeemed, as next determined after
a receipt of a request in proper form, and the value of the Fund
Securities, less the redemption transaction fee and variable fees
described below. Should the Fund Securities have a value greater than
the NAV of the Shares being redeemed, a compensating cash payment to
the Trust equal to the differential plus the applicable redemption
transaction fee will be required to be arranged for by or on behalf of
the redeeming shareholder. Each Fund reserves the right to honor a
redemption request by delivering a basket of securities or cash that
differs from the Fund Securities.\42\
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\42\ The Adviser represents that, to the extent that the Trust
permits or requires a ``cash in lieu'' amount, such transactions
will be effected in the same or equitable manner for all Authorized
Participants.
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Orders to redeem Creation Units of the Funds must be delivered
through a DTC Participant that has executed the Participant Agreement
with the Distributor and with the Trust. A DTC Participant who wishes
to place an order for redemption of Creation Units of a Fund to be
effected need not be a Participating Party, but such orders must state
that redemption of Creation Units of the Fund will instead be effected
through transfer of Creation Units of the Fund directly through DTC. An
order to redeem Creation Units of a Fund is deemed received by the
Administrator on the transmittal date if (i) such order is received by
the Administrator not later than 4:00 p.m. Eastern time on such
transmittal date; (ii) such order is preceded or accompanied by the
requisite number of Shares of Creation Units specified in such order,
which delivery must be made through DTC to the Administrator no later
than 11:00 a.m. Eastern time, on such transmittal date (the ``DTC Cut-
Off-Time''); and (iii) all other procedures set forth in the
Participant Agreement are properly followed.
After the Administrator has deemed an order for redemption
received, the Administrator will initiate procedures to transfer the
requisite Fund Securities (or contracts to purchase such Fund
Securities) which are expected to be delivered within three business
days and the cash redemption payment to the redeeming beneficial owner
by the third business day following the transmittal date on which such
redemption order is deemed received by the Administrator.
Availability of Information
Each Fund's Web site, which will be publicly available prior to the
public offering of Shares, will include a form of the prospectus for
the Fund that may be downloaded. The Web site will include additional
quantitative information updated on a daily basis, including, for the
Fund: (1) the prior business day's reported NAV, daily trading volume,
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. Daily trading volume information for the
Funds will also be available in the financial section of newspapers,
through subscription services such as Bloomberg, Thomson Reuters, and
International Data Corporation, which can be accessed by authorized
participants and other investors, as well as through other electronic
services, including major public Web sites. On each business day,
before commencement of trading in Shares during Regular Trading Hours
\43\ on the Exchange, each Fund will disclose on its Web site the
identities and quantities of the portfolio of securities and other
assets in the daily disclosed portfolio held by the Funds that formed
the basis for each Fund's calculation of NAV at the end of the previous
business day. The daily disclosed portfolio will include, as
applicable: the ticker symbol; CUSIP number or other identifier, if
any; a description of the holding (including the type of holding, such
as the type of swap); the identity of the security, index or other
asset or instrument underlying the holding, if any; for options, the
option strike price; quantity held (as measured by, for example, par
value, notional value or number of shares, contracts, or units);
maturity date, if any; coupon rate, if any; effective date, if any;
market value of the holding; and the percentage weighting of the
holding in each Fund's portfolio. The Web site and information will be
publicly available at no charge. The value, components, and percentage
weightings of each of the Indices will be calculated and disseminated
at least once daily and will be available from major market data
vendors. Rules governing the Indices are available on Barclays' Web
site and in each respective Fund's prospectus.
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\43\ Regular Trading Hours are 9:30 a.m. to 4:00 p.m. Eastern
Time.
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In addition, for each Fund, an estimated value, defined in BZX Rule
14.11(c)(6)(A) as the ``Intraday Indicative Value,'' that reflects an
estimated intraday value of each Fund's portfolio, will be
disseminated. Moreover, the Intraday Indicative Value will be based
upon the current value for the components of the daily disclosed
portfolio and will be updated and widely disseminated by one or more
major market data vendors at least every 15 seconds during the
Exchange's Regular Trading Hours.\44\ In addition,
[[Page 59707]]
the quotations of certain of each Fund's holdings may not be updated
during U.S. trading hours if updated prices cannot be ascertained.
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\44\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available
Intraday Indicative Values published via the Consolidated Tape
Association (``CTA'') or other data feeds.
---------------------------------------------------------------------------
The dissemination of the Intraday Indicative Value, together with
the daily disclosed portfolio, will allow investors to determine the
value of the underlying portfolio of the Funds on a daily basis and
provide a close estimate of that value throughout the trading day.
Quotation and last sale information for the Shares of each Fund
will be available via the CTA high speed line. Quotation information
for investment company securities (excluding ETFs) may be obtained
through nationally recognized pricing services through subscription
agreements or from brokers and dealers who make markets in such
securities. Price information regarding Municipal Securities and non-
exchange traded assets, including investment companies, derivatives,
money market instruments, repurchase agreements, and reverse repurchase
agreements is available from third party pricing services and major
market data vendors. For exchange-traded assets, including investment
companies, futures, and options, such intraday information is available
directly from the applicable listing exchange.
Initial and Continued Listing
The Shares of each Fund will conform to the initial and continued
listing criteria under BZX Rule 14.11(c)(4), except for those set forth
in 14.11(c)(4)(B)(i)(b). The Exchange represents that, for initial and/
or continued listing, the Funds and the Trust must be in compliance
with Rule 10A-3 under the Act.\45\ A minimum of 50,000 Shares of each
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 for each Fund will be calculated
daily and will be made available to all market participants at the same
time.
---------------------------------------------------------------------------
\45\ See 17 CFR 240.10A-3.
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Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Funds. The Exchange will halt trading in
the Shares under the conditions specified in BZX Rule 11.18. Trading
may be halted because of market conditions or for reasons that, in the
view of the Exchange, make trading in the Shares inadvisable. These may
include: (1) the extent to which trading is not occurring in the
securities and/or the financial instruments composing the daily
disclosed portfolio of the Funds; or (2) whether other unusual
conditions or circumstances detrimental to the maintenance of a fair
and orderly market are present. Trading in the Shares also will be
subject to Rule 14.11(c)(1)(B)(iv), which sets forth circumstances
under which Shares of a Fund may be halted.
Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. The Exchange will
allow trading in the Shares from 8:00 a.m. until 5:00 p.m. Eastern Time
and has the appropriate rules to facilitate transactions in the Shares
during all trading sessions. As provided in BZX Rule 11.11(a), the
minimum price variation for quoting and entry of orders in securities
traded on the Exchange is $0.01, with the exception of securities that
are priced less than $1.00, for which the minimum price variation for
order entry is $0.0001.
Surveillance
The Exchange believes that its surveillance procedures are adequate
to properly monitor the trading of the Shares on the Exchange during
all trading sessions and to deter and detect violations of Exchange
rules and the applicable federal securities laws. Trading of the Shares
through the Exchange will be subject to the Exchange's surveillance
procedures for derivative products, including Index Fund Shares. The
issuer has represented to the Exchange that it will advise the Exchange
of any failure by the Fund to comply with the continued listing
requirements, and, pursuant to its obligations under Section 19(g)(1)
of the Exchange Act, the Exchange will surveil for compliance with the
continued listing requirements. If the Fund is not in compliance with
the applicable listing requirements, the Exchange will commence
delisting procedures under Exchange Rule 14.12. The Exchange may obtain
information regarding trading in the Shares and the underlying shares
in exchange traded equity securities via the ISG, from other exchanges
that are members or affiliates of the ISG, or with which the Exchange
has entered into a comprehensive surveillance sharing agreement.\46\ In
addition, the Exchange is able to access, as needed, trade information
for certain fixed income instruments reported to FINRA's Trade
Reporting and Compliance Engine (``TRACE''). FINRA also can access data
obtained from the Municipal Securities Rulemaking Board (``MSRB'')
relating to municipal bond trading activity for surveillance purposes
in connection with trading in the Shares. In addition, the Exchange may
obtain information regarding trading in the Shares and the underlying
shares in exchange-traded investment companies, futures, and options
from markets or other entities that are members of ISG or with which
the Exchange has in place a comprehensive surveillance sharing
agreement. The Exchange prohibits the distribution of material non-
public information by its employees.
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\46\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on markets that are
members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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Information Circular
Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares. Specifically, the Information
Circular will discuss the following: (1) the procedures for purchases
and redemptions of Shares in Creation Units (and that Shares are not
individually redeemable); (2) BZX Rule 3.7, which imposes suitability
obligations on Exchange members with respect to recommending
transactions in the Shares to customers; (3) how information regarding
the Intraday Indicative Value is disseminated; (4) the risks involved
in trading the Shares during the Pre-Opening \47\ and After Hours
Trading Sessions \48\ when an updated Intraday Indicative Value will
not be calculated or publicly disseminated; (5) the requirement that
members deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
and (6) trading information.
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\47\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m.
Eastern Time.
\48\ The After Hours Trading Session is from 4:00 p.m. to 5:00
p.m. Eastern Time.
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In addition, the Information Circular will advise members, prior to
the commencement of trading, of the prospectus delivery requirements
applicable to the Funds. Members purchasing Shares from the Funds for
resale to investors will deliver a prospectus to such investors. The
Information Circular will also discuss any exemptive, no-action, and
[[Page 59708]]
interpretive relief granted by the Commission from any rules under the
Act.
In addition, the Information Circular will reference that each Fund
is subject to various fees and expenses described in the Registration
Statement. The Information Circular will also disclose the trading
hours of the Shares of the Funds and the applicable NAV calculation
time for the Shares. The Information Circular will disclose that
information about the Shares of the Funds will be publicly available on
the Funds' Web site. In addition, the Information Circular will
reference that the Trust is subject to various fees and expenses
described in each Fund's Registration Statement.
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act \49\ in general and Section 6(b)(5) of the Act \50\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
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\49\ 15 U.S.C. 78f.
\50\ 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
listing criteria in BZX Rule 14.11(c). The Exchange believes that its
surveillances, which generally focus on detecting securities trading
outside of their normal patterns which could be indicative of
manipulative or other violative activity, and associated surveillance
procedures are adequate to properly monitor the trading of the Shares
on the Exchange during all trading sessions and to deter and detect
violations of Exchange rules and the applicable federal securities
laws. The Exchange will communicate as needed regarding trading in the
Shares with other markets or other entities that are members of the
Intermarket Surveillance group (``ISG''), and may obtain trading
information regarding trading in the Shares from such markets or
entities. The Exchange can also access data obtained from the Municipal
Securities Rulemaking Board relating to municipal bond trading activity
for surveillance purposes in connection with trading in the Shares. The
Exchange is able to access, as needed, trade information for certain
fixed income securities held by a Fund reported to FINRA's TRACE. FINRA
also can access data obtained from the Municipal Securities Rulemaking
Board (``MSRB'') relating to municipal bond trading activity for
surveillance purposes in connection with trading in the Shares. In
addition, the Exchange may obtain information regarding trading in the
Shares and the underlying shares in exchange-traded investment
companies, futures, and options from markets or other entities that are
members of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement.
The Index Provider is not a broker-dealer, but is affiliated with a
broker-dealer and has implemented a ``fire wall'' with respect to such
broker-dealer regarding access to information concerning the
composition and/or changes to the Indices. The Index Provider has also
implemented procedures designed to prevent the use and dissemination of
material, non-public information regarding the Indices.
As of July 18, 2016, the 2023 Index had the following
characteristics: there were 4,612 issues; 5.83% of the weight of
components had a minimum original principal amount outstanding of $100
million or more; 73.56% of the weight of components was comprised of
individual maturities that were part of an entire municipal bond
offering with a minimum original principal amount outstanding of $100
million or more for all maturities of the offering; total face amount
outstanding of issues in the 2023 Index was approximately $38.5
billion, the market value is $46.4 billion, and the average dollar
amount outstanding per issue was approximately $8.3 million; the most
heavily weighted component represented 1.61% of the 2023 Index and the
five most heavily weighted components represented 3.66% of the 2023
Index. Therefore, the Exchange believes that, notwithstanding that the
2023 Index does not satisfy the criterion in BZX Rule
14.11(c)(4)(B)(i), the 2023 Index is sufficiently broad-based to deter
potential manipulation in that a substantial portion (73.56%) of the
2023 Index weight is comprised of maturities that are part of a minimum
original principal amount outstanding of $100 million or more, and in
view of the substantial total dollar amount outstanding and the average
dollar amount outstanding of index issues.
As of July 18, 2016, the 2024 Index had the following
characteristics: there were 3,624 issues; 5.72% of the weight of
components had a minimum original principal amount outstanding of $100
million or more; 72.27% of the weight of components was comprised of
individual maturities that were part of an entire municipal bond
offering with a minimum original principal amount outstanding of $100
million or more for all maturities of the offering; the total face
amount outstanding of issues in the 2024 Index was approximately $29.9
billion, the market value is $36.4 billion, and the average dollar
amount outstanding of issues in the 2024 Index was approximately $8.3
million; the most heavily weighted component represented 0.72% of the
2024 Index and the five most heavily weighted components represented
2.74% of the 2024 Index. Therefore, the Exchange believes that,
notwithstanding that the 2024 Index does not satisfy the criterion in
BZX Rule 14.11(c)(4)(B)(i), the 2024 Index is sufficiently broad-based
to deter potential manipulation in that a substantial portion (72.27%)
of the 2024 Index weight is comprised of maturities that are part of a
minimum original principal amount outstanding of $100 million or more,
and in view of the substantial total dollar amount outstanding and the
average dollar amount outstanding of index issues.
The value, components, and percentage weightings of each of the
Indices will be calculated and disseminated at least once daily and
will be available from major market data vendors. In addition, the
portfolio of securities held by the Funds will be disclosed on the
Funds' Web site at www.iShares.com. The intraday indicative value for
Shares of the Funds will be disseminated by one or more major market
data vendors, updated at least every 15 seconds during Regular Trading
Hours. The Adviser represents that bonds that share similar
characteristics, as described above, tend to trade similarly to one
another; therefore, within these categories, the issues may be
considered fungible from a portfolio management perspective. Within a
single municipal bond issuer, [sic] Adviser represents that separate
issues by the same issuer are also likely to trade similarly to one
another.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that a large amount of information will be publicly available regarding
the Funds and the Shares, thereby promoting market transparency. The
Funds' portfolio holdings will be disclosed on the Funds' Web site
daily after the close of trading on the Exchange and prior to the
opening of
[[Page 59709]]
trading on the Exchange the following day. Moreover, the IIV will be
widely disseminated by one or more major market data vendors at least
every 15 seconds during Regular Trading Hours. The current value of
each of the Indices will be disseminated by one or more major market
data vendors at least once per day. Information regarding market price
and trading volume of the Shares will be continually available on a
real-time basis throughout the day on brokers' computer screens and
other electronic services, and quotation and last sale information will
be available via the CTA high-speed line. The Web site for the Funds
will include the prospectus for the Funds and additional data relating
to NAV and other applicable quantitative information. Moreover, prior
to the commencement of trading, the Exchange will inform its Members in
an information circular of the special characteristics and risks
associated with trading the Shares. If the Exchange becomes aware that
the NAV is not being disseminated to all market participants at the
same time, it will halt trading in the Shares until such time as the
NAV is available to all market participants. With respect to trading
halts, the Exchange may consider all relevant factors in exercising its
discretion to halt or suspend trading in the Shares of the Funds.
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 composing
the daily disclosed portfolio of each Fund; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present. Trading in the Shares also will be
subject to Rule 14.11(c)(1)(B)(iv), which sets forth circumstances
under which Shares of a Fund may be halted. If the IIV of any of the
Funds or value of the Indices are not being disseminated as required,
the Exchange may halt trading during the day in which the interruption
to the dissemination of the IIV or index value occurs.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
additional types of exchange-traded funds that holds municipal bonds
and 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 in the Shares and the underlying shares in
exchange-traded investment companies, futures, and options 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, investors will have ready access to information regarding the
IIV and quotation and last sale information for the Shares.
For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of
additional exchange-traded products that 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
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period 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 Exchange consents, the Commission will:
(a) by order approve or disapprove such proposed rule change, or
(b) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BatsBZX-2016-48 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BatsBZX-2016-48. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BatsBZX-2016-48 and should
be submitted on or before September 20, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\51\
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\51\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-20735 Filed 8-29-16; 8:45 am]
BILLING CODE 8011-01-P
