Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendments No. 1 and No. 2 Thereto, 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 Pursuant to BZX Rule 14.11(c)(4), 86044-86048 [2016-28639]

Download as PDF 86044 Federal Register / Vol. 81, No. 229 / Tuesday, November 29, 2016 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–28633 Filed 11–28–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79381; File No. SR– BatsBZX–2016–48] Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendments No. 1 and No. 2 Thereto, 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 Pursuant to BZX Rule 14.11(c)(4) November 22, 2016. On August 9, 2016, Bats BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares of the iShares iBonds Dec 2023 Term Muni Bond ETF and iShares iBonds Dec 2024 Term Muni Bond ETF (each a ‘‘Fund,’’ and together the ‘‘Funds’’) pursuant to BZX Rule 14.11(c)(4). Notice of the proposed rule change was published in the Federal Register on August 30, 2016.3 On October 6, 2016, the Exchange filed Amendment No. 1 to the proposed rule change, which replaced and superseded the proposed rule change as originally filed.4 On October 13, 2016, the 19 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 78666 (Aug. 24, 2016), 81 FR 59700 (‘‘Notice’’). 4 In Amendment No. 1, the Exchange: (1) Clarified that each Fund’s policy to invest at least 80% of its net assets in components of its underlying index is a continued listing requirement; (2) represented that at least 90% of the Funds’ net assets that are invested in listed derivatives will be invested in instruments that trade in markets that are members or affiliates of members of the Intermarket Surveillance Group (‘‘ISG’’) or are parties to a comprehensive surveillance sharing agreement with the Exchange; (3) provided additional detail regarding the short-term instruments that the Funds may hold; (4) stated that price information for exchange-listed options held by the Funds will be available from the Options Price Reporting Authority; and (5) made various other technical changes. The amendment to the proposed rule change is available at: https://www.sec.gov/ comments/sr-batsbzx-2016-48/ batsbzx201648.shtml. asabaliauskas on DSK3SPTVN1PROD with NOTICES 1 15 VerDate Sep<11>2014 17:48 Nov 28, 2016 Jkt 241001 Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 No comments have been received regarding the proposed rule change. On October 26, 2016, the Exchange filed Amendment No. 2 to the proposed rule change.6 This order approves the proposed rule change, as modified by Amendments No. 1 and No. 2, on an accelerated basis. I. The Exchange’s Description of its Proposal 7 The Exchange proposes to list and trade shares (the ‘‘Shares’’) of the Funds under BZX Rule 14.11(c)(4), which governs the listing and trading of Index Fund Shares based on fixed income securities indexes. The Shares will be offered by the Trust, which is a Delaware statutory trust and is registered with the Commission, as an open-end investment company.8 BlackRock Fund Advisors is the investment adviser (‘‘BFA’’ or ‘‘Adviser’’) to the Funds.9 State Street Bank and Trust Company is the administrator, custodian, and transfer agent for the Trust. BlackRock Investments, LLC serves as the distributor for the Trust. The Funds 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’’) and 5 To allow sufficient time to consider the proposed rule change, the Commission designated November 28, 2016, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. See Securities Exchange Act Release No. 79092, 81 FR 72141 (Oct. 19, 2016). 6 In Amendment No. 2, the Exchange clarified that representations regarding adherence to the continued listing requirements and conditions under which the Exchange would delist the Shares apply to both Funds. The amendment to the proposed rule change is available at: https:// www.sec.gov/comments/sr-batsbzx-2016-48/ batsbzx201648.shtml. 7 Additional information regarding the Fund, the Shares, and the Trust (as defined herein) can be found in the Notice, Amendments No. 1 and 2, and the Registration Statement, as applicable. See Notice, supra note 3, and Registration Statement, infra note 8. 8 The Trust has filed a registration statement on behalf of the Funds on Form N–1A (‘‘Registration Statement’’) with the Commission. See Registration Statement on Form N–1A for the Trust, dated October 29, 2015 (File Nos. 333–123257 and 811– 10325). 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’’). See Investment Company Act Release No. 28021 (Oct. 24, 2007) (File No. 812– 13426). 9 BFA is an indirect wholly owned subsidiary of BlackRock, Inc. PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 Municipal Series Dec 2024 Index (the ‘‘2024 Index’’ and, together with the 2023 Index, the ‘‘Indices’’), respectively. The Exchange submitted the proposed rule change because the Shares of the Funds meet all of the ‘‘generic’’ listing requirements of BZX Rule 14.11(c)(4) applicable to the listing of index fund shares based on fixed income securities indexes except for those set forth in BZX Rule 14.11(c)(4)(B)(i)(b). Specifically, for the iShares iBonds Dec 2023 Term Muni Bond ETF, components that comprised only 5.83% of the weight of the 2023 Index have a minimum original principal amount outstanding of $100 million or more. Further, for iShares iBonds Dec 2024 Term Muni Bond ETF, only 5.72% of the weight of the 2024 Index have a minimum original principal amount outstanding of $100 million or more. In contrast, BZX 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. A. iShares iBonds Dec 2023 Term Muni Bond ETF 1. The ‘‘2023 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’’). As of July 18, 2016, there were 4,612 issues in the 2023 Index. 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 of $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.10 48% of the 2023 Index 10 BZX 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. E:\FR\FM\29NON1.SGM 29NON1 Federal Register / Vol. 81, No. 229 / Tuesday, November 29, 2016 / Notices weight consisted of issues with a rating of AA/Aa2 or higher. To be included in the 2023 Index, a bond must have an investment grade rating and must have an outstanding par value of at least $2 million. The bonds included in the 2023 Index 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 and its composition is rebalanced monthly. The 2023 Index value is calculated and disseminated at least once daily. The components of the 2023 Index and their percentage weighting will be available from major market data vendors. asabaliauskas on DSK3SPTVN1PROD with NOTICES 2. The Fund’s Holdings The Fund will generally invest 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.11 From time to time, however, when conditions warrant, the Fund may invest at least 80% of its assets in the component securities of the Fund’s benchmark index. According to the Exchange, the Fund will hold the following types of Municipal Securities: General obligation bonds, limited obligation bonds (or revenue bonds), municipal notes, municipal commercial paper, tender option bonds, variable rate demand obligations (‘‘VRDOs’’), municipal lease obligations, stripped securities, structured securities, and zero coupon securities. Under normal circumstances, the Fund may also to a limited extent (less than 20% of the Fund’s net assets) invest in the following: Certain listed derivatives; 12 repurchase and reverse repurchase agreements for Municipal Securities (collectively, ‘‘Repurchase 11 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. 12 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. VerDate Sep<11>2014 17:48 Nov 28, 2016 Jkt 241001 Agreements’’); short-term instruments (‘‘Short-Term Instruments’’),13 which include exchange traded and nonexchange traded investment companies that invest in money market instruments. The portfolio of securities held by the Fund will be disclosed on the Fund’s Web site at www.iShares.com. B. iShares iBonds Dec 2024 Term Muni Bond ETF 1. The 2024 Index The 2024 Index measures the performance of Municipal Securities. As of July 18, 2016, there were 3,624 issues in the 2024 Index. 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 of $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 was $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.14 47.71% of the 2024 Index weight consisted of issues with a rating of AA/Aa2 or higher. To be included in the 2024 Index, a bond must have an investment grade rating and must have an outstanding par value of at least $2 million. The bonds in the 2024 Index have a maturity range of January 1, 2024, to December 1, 2024. The following types of bonds are excluded from the 2024 Index: Bonds 13 Short-Term Instruments include money market instruments. The Funds will invest only in the following types of money market instruments: (1) Shares of money market funds (including those advised by BFA or otherwise affiliated with BFA); (2) obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities (including government-sponsored enterprises); (3) 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; (4) commercial paper, including asset-backed commercial paper; (5) 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 (6) 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 Funds will be rated investment grade. 14 See supra note 10. PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 86045 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 and its composition is rebalanced monthly. The 2024 Index value is calculated and disseminated at least once daily. The components of the 2024 Index and their percentage weighting will be available from major market data vendors. 2. The Fund’s Holdings The Fund will generally invest 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.15 From time to time, however, when conditions warrant, the Fund may invest at least 80% of its assets in the component securities of the Fund’s benchmark index. According to the Exchange, the Fund will hold the following types of Municipal Securities: General obligation bonds, limited obligation bonds (or revenue bonds), municipal notes, municipal commercial paper, tender option bonds, VRDOs, municipal lease obligations, stripped securities, structured securities, and zero coupon securities. Under normal circumstances, the Fund may also to a limited extent (less than 20% of the Fund’s net assets) invest in the following: Certain listed derivatives; 16 Repurchase Agreements; and Short-Term Instruments.17 The portfolio of securities held by the Fund will be disclosed on the Fund’s Web site at www.iShares.com. II. Discussion and Commission’s Findings After careful review, the Commission finds that the Exchange’s proposal to list and trade the Shares is consistent with the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange.18 In 15 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. 16 See supra note 12. 17 See supra note 13. 18 In approving this proposed rule change, the Commission has considered the proposed rule’s E:\FR\FM\29NON1.SGM Continued 29NON1 86046 Federal Register / Vol. 81, No. 229 / Tuesday, November 29, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES particular, the Commission finds that the proposed rule change, as modified by Amendments No. 1 and No. 2, is consistent with Section 6(b)(5) of the Exchange Act,19 which requires, among other things, that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission also finds that the proposal to list and trade the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Exchange Act,20 which sets forth Congress’s finding that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure the availability to brokers, dealers, and investors of information with respect to quotations for, and transactions in, securities. Quotation and last sale information for the Shares will be available via the CTA high speed line.21 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.22 Additionally, daily trading volume information for the Shares will be available in the financial section of newspapers, through subscription services, as well as through other electronic services, including major public Web sites.23 Further, the Intraday Indicative Values for the Shares, as defined in BZX Rule 14.11(c)(6)(A), 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, which are between 9:30 a.m. and 4:00 p.m. Eastern Time.24 On each business day, before commencement of trading in Shares during Regular Trading Hours 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 impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 19 15 U.S.C. 78f(b)(5). 20 15 U.S.C. 78k–1(a)(1)(C)(iii). 21 See Amendment No. 1, supra note 4, at 28. 22 See id. at 36–37. 23 See id. at 27. 24 The Exchange states that that several major market data vendors display and/or make widely available IIVs published via the CTA or other data feeds. See id. at 28, n.44. VerDate Sep<11>2014 17:48 Nov 28, 2016 Jkt 241001 for each Fund’s calculation of NAV at the end of the previous business day.25 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.26 The Web site and information will be publicly available at no charge.27 Price information regarding Municipal Securities and non-exchange traded assets is available from third party pricing services and major market data vendors.28 For exchange-traded assets, such intraday information is available directly from the applicable listing exchange.29 In addition, price information for U.S. exchange-traded options is available from the Options Price Reporting Authority.30 The Commission believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. The Exchange will obtain a representation from the issuer of the Shares that the NAV will be calculated daily and that the NAV and the disclosed portfolio will be made available to all market participants at the same time.31 Further, trading in the Shares will be subject to BZX Rules 11.18 and 14.11(c)(1)(B)(iv), which set forth circumstances under which trading in Shares of the Fund may be halted.32 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 25 See id. at 27. id. 27 See id. 28 See id. at 28–29. 29 See id. at 29. 30 See id. 31 See id. 32 See id. at 29, 30. maintenance of a fair and orderly market are present.33 Any advisory committee, supervisory board, or similar entity that advises a Reporting Authority, as defined in BZX Rule 14.11(c)(1)(C) or that makes decisions on the index composition, methodology and related matters, must implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material nonpublic information regarding the applicable index.34 The Exchange represents that it prohibits the distribution of material, non-public information by its employees.35 The Exchange also states that 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.36 The index provider has also implemented procedures designed to prevent the use and dissemination of material, nonpublic information regarding the Indices.37 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 and After Hours Trading Sessions 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. The Exchange states 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.38 Trading of the 26 See PO 00000 Frm 00127 Fmt 4703 33 See id. at 29–30. BZX Rule 14.11(c)(4)(C)(iii). 35 See Amendment No. 1, supra note 4, at 31. 36 See id. at 34. 37 See id. 38 See id. at 30. 34 See Sfmt 4703 E:\FR\FM\29NON1.SGM 29NON1 asabaliauskas on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 81, No. 229 / Tuesday, November 29, 2016 / Notices Shares through the Exchange will be subject to the Exchange’s surveillance procedures for derivative products, including Index Fund Shares.39 The Exchange represents that all statements and representations made in the Exchange’s 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 constitute continued listing requirements for listing the Shares on the Exchange.40 The Exchange also states that the issuer has represented that it will advise the Exchange of any failure by either Fund to comply with the continued listing requirements and that, pursuant to its obligations under Section 19(g)(1) of the Exchange Act, the Exchange will surveil for compliance with the continued listing requirements.41 If a Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under BZX Rule 14.12.42 The Exchange may obtain information regarding trading in the Shares and the underlying exchange-traded instruments 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.43 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’’).44 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.45 The Commission notes that the Fund and the Shares must comply with the requirements of BZX Rule 14.11(c)(4) to be initially and continuously listed and traded on the Exchange. The Exchange represents that it deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. In support of this proposal, the Exchange, in addition to the representations as noted above, has made the following representations: • For initial and/or continued listing, the Funds and the Trust must be in 39 See id. 40 See id. at 7, n.7. 41 See Amendment No. 2, supra note 6, at 4. 42 See id. 43 See Amendment No. 1, supra note 4, at 31. 44 See id. 45 See id. VerDate Sep<11>2014 17:48 Nov 28, 2016 Jkt 241001 compliance with Rule 10A–3 under the Act.46 • A minimum of 50,000 Shares of each Fund will be outstanding at the commencement of trading on the Exchange.47 This approval order is based on all of the Exchange’s representations, including those set forth above and in the proposed rule change, as modified by Amendments No. 1 and No. 2. For the foregoing reasons, the Commission finds that the proposed rule change, as modified by Amendments No. 1 and No. 2, is consistent with the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange. III. Solicitation of Comments on Amendments No. 1 and No. 2 Interested persons are invited to submit written data, views, and arguments concerning whether Amendments No. 1 and No. 2 are consistent with the Exchange 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 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– BatsBZX–2016–48 and should be submitted on or before December 20, 2016. IV. Accelerated Approval of Proposed Rule Change as Modified by Amendments No. 1 and No. 2 The Commission finds good cause to approve the proposed rule change, as modified by Amendments No. 1 and No. 2, prior to the thirtieth day after the date of publication of notice of the filing of Amendment No. 1 in the Federal Register. Amendment No. 1 supplements the proposed rule change by, among other things, (1) clarifying that each Fund’s policy to invest at least 80% of its net assets in components of its underlying index is a continued listing requirement; and (2) representing that at least 90% of the Funds’ net assets that are invested in listed derivatives will be invested in instruments that trade in markets that are members or affiliates of members of the ISG or are parties to a comprehensive surveillance sharing agreement with the Exchange. Further, Amendment No. 2 supplements the proposed rule change by strengthening the Exchange’s commitment to enforcing the applicable continued listing requirements. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Exchange Act,48 to approve the proposed rule change, as modified by Amendments No. 1 and No. 2, on an accelerated basis. It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act,49 that the proposed rule change (SR– BatsBZX–2016–48), as modified by Amendments No. 1 and No. 2, be, and it hereby is, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.50 48 15 U.S.C. 78s(b)(2). U.S.C. 78s(b)(2). 50 17 CFR 200.30–3(a)(12). 49 15 46 See id. at 29. 47 See id. PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 86047 E:\FR\FM\29NON1.SGM 29NON1 86048 Federal Register / Vol. 81, No. 229 / Tuesday, November 29, 2016 / Notices SECURITIES AND EXCHANGE COMMISSION Robert W. Errett, Deputy Secretary. [Release No. 34–79375; File No. SR–ICEEU– 2016–013] [FR Doc. 2016–28639 Filed 11–28–16; 8:45 am] BILLING CODE 8011–01–P Self-Regulatory Organizations; ICE Clear Europe Limited; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to the Finance Procedures SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting November 22, 2016. Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold a closed meeting on Thursday, December 1, 2016 at 12 p.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the closed meeting. Certain staff members who have an interest in the matters also may be present. The General Counsel of the Commission, or her designee, has certified that, in her opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (a)(5), (a)(7), (a)(9)(ii) and (a)(10), permit consideration of the scheduled matter at the closed meeting. Chair White, as duty officer, voted to consider the items listed for the closed meeting in closed session, and determined that no earlier notice thereof was possible. The subject matter of the closed meeting will be: asabaliauskas on DSK3SPTVN1PROD with NOTICES Institution and settlement of injunctive actions; Institution and settlement of administrative proceedings; Resolution of litigation claims; and Other matters relating to enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed; please contact Brent J. Fields from the Office of the Secretary at (202) 551–5400. Dated: November 23, 2016. Brent J. Fields, Secretary. [FR Doc. 2016–28772 Filed 11–25–16; 11:15 am] BILLING CODE 8011–01–P VerDate Sep<11>2014 17:48 Nov 28, 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 November 9, 2016, ICE Clear Europe Limited (‘‘ICE Clear Europe’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule changes described in Items I, II and III below, which Items have been primarily prepared by ICE Clear Europe. ICE Clear Europe filed the proposed rule changes pursuant to Section 19(b)(3)(A) of the Act,3 and Rule 19b–4(f)(i) and (ii) 4 thereunder, so that the proposal was effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The principal purpose of the changes is to modify certain aspects of the ICE Clear Europe Finance Procedures. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, ICE Clear Europe included statements concerning the purpose of and basis for the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. ICE Clear Europe has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of such statements. (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change (a) Purpose The purpose of the amendments is to modify certain aspects of the ICE Clear Europe Finance Procedures. In paragraph 2.1 of the Finance 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(i) and (ii). 2 17 Jkt 241001 PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 Procedures, amendments are made to add South African rand (‘‘ZAR’’) as a currency eligible for Variation Margin and settlement payments for financials and softs contracts which settle in such currency. Other conforming changes have been made in the Finance Procedures (including in paragraph 4) to reflect the addition of ZAR as an eligible currency for such purposes. As with the other currencies currently eligible to be used as Variation Margin and settlement payments for financials and softs contracts, ZAR will be subject to haircuts determine [sic] pursuant to the [sic] Finance Procedures and existing ICE Clear Europe haircut policies. [sic] A typographical error and erroneous cross-reference have also been corrected in paragraph 2.2. In paragraph 6.1(e) of the Finance Procedures, the daily deadline for a Clearing Member to provide manual cash settlement instructions for sameday USD payments has been extended from 16:00 to 16:45 (London time). ICE Clear Europe is making this change to accommodate a request of Clearing Members, and does not believe it will adversely affect the Clearing House’s treasury or other operations. In paragraph 6.1(i)(vii), a change has been made to clarify that end-of-day or ad hoc payments by a Clearing Member to the Clearing House may include, in addition to other listed categories of payments, transfers of Surplus Collateral. Amendments have been made to paragraph 8.3 of the Finance Procedures, which generally provides that the Clearing House will not recognize any value for non-cash collateral (such as securities collateral) within a specified period prior to its redemption or maturity. Under the existing rule, this period commences one business day prior to redemption or maturity. The amendments adopt a different approach for UK government bonds, for which the period will commence seven business days prior to redemption or maturity. This approach is designed to reflect limitations imposed by the relevant securities settlement system on the transfer of UK government bonds during the seven business day period prior to redemption or maturity. In paragraph 11.3(b), which addresses procedures for transfer of non-cash permitted cover, an incorrect statement that the Clearing House does not support cross-border or inter-settlement facility settlements, bridge transactions or similar transactions has been removed. In paragraph 11.4, certain account details and matching deadlines for particular securities transfer systems E:\FR\FM\29NON1.SGM 29NON1

Agencies

[Federal Register Volume 81, Number 229 (Tuesday, November 29, 2016)]
[Notices]
[Pages 86044-86048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28639]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79381; File No. SR-BatsBZX-2016-48]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified by 
Amendments No. 1 and No. 2 Thereto, 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 Pursuant to BZX Rule 
14.11(c)(4)

November 22, 2016.
    On August 9, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to list and trade shares of the 
iShares iBonds Dec 2023 Term Muni Bond ETF and iShares iBonds Dec 2024 
Term Muni Bond ETF (each a ``Fund,'' and together the ``Funds'') 
pursuant to BZX Rule 14.11(c)(4). Notice of the proposed rule change 
was published in the Federal Register on August 30, 2016.\3\ On October 
6, 2016, the Exchange filed Amendment No. 1 to the proposed rule 
change, which replaced and superseded the proposed rule change as 
originally filed.\4\ On October 13, 2016, the Commission designated a 
longer period within which to approve the proposed rule change, 
disapprove the proposed rule change, or institute proceedings to 
determine whether to disapprove the proposed rule change.\5\ No 
comments have been received regarding the proposed rule change. On 
October 26, 2016, the Exchange filed Amendment No. 2 to the proposed 
rule change.\6\ This order approves the proposed rule change, as 
modified by Amendments No. 1 and No. 2, on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 78666 (Aug. 24, 
2016), 81 FR 59700 (``Notice'').
    \4\ In Amendment No. 1, the Exchange: (1) Clarified that each 
Fund's policy to invest at least 80% of its net assets in components 
of its underlying index is a continued listing requirement; (2) 
represented that at least 90% of the Funds' net assets that are 
invested in listed derivatives will be invested in instruments that 
trade in markets that are members or affiliates of members of the 
Intermarket Surveillance Group (``ISG'') or are parties to a 
comprehensive surveillance sharing agreement with the Exchange; (3) 
provided additional detail regarding the short-term instruments that 
the Funds may hold; (4) stated that price information for exchange-
listed options held by the Funds will be available from the Options 
Price Reporting Authority; and (5) made various other technical 
changes. The amendment to the proposed rule change is available at: 
https://www.sec.gov/comments/sr-batsbzx-2016-48/batsbzx201648.shtml.
    \5\ To allow sufficient time to consider the proposed rule 
change, the Commission designated November 28, 2016, as the date by 
which the Commission shall either approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change. See Securities Exchange Act Release No. 79092, 
81 FR 72141 (Oct. 19, 2016).
    \6\ In Amendment No. 2, the Exchange clarified that 
representations regarding adherence to the continued listing 
requirements and conditions under which the Exchange would delist 
the Shares apply to both Funds. The amendment to the proposed rule 
change is available at: https://www.sec.gov/comments/sr-batsbzx-2016-48/batsbzx201648.shtml.
---------------------------------------------------------------------------

I. The Exchange's Description of its Proposal \7\
---------------------------------------------------------------------------

    \7\ Additional information regarding the Fund, the Shares, and 
the Trust (as defined herein) can be found in the Notice, Amendments 
No. 1 and 2, and the Registration Statement, as applicable. See 
Notice, supra note 3, and Registration Statement, infra note 8.
---------------------------------------------------------------------------

    The Exchange proposes to list and trade shares (the ``Shares'') of 
the Funds under BZX Rule 14.11(c)(4), which governs the listing and 
trading of Index Fund Shares based on fixed income securities indexes. 
The Shares will be offered by the Trust, which is a Delaware statutory 
trust and is registered with the Commission, as an open-end investment 
company.\8\
---------------------------------------------------------------------------

    \8\ The Trust has filed a registration statement on behalf of 
the Funds on Form N-1A (``Registration Statement'') with the 
Commission. See Registration Statement on Form N-1A for the Trust, 
dated October 29, 2015 (File Nos. 333-123257 and 811-10325). 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''). See Investment Company Act Release No. 28021 (Oct. 
24, 2007) (File No. 812-13426).
---------------------------------------------------------------------------

    BlackRock Fund Advisors is the investment adviser (``BFA'' or 
``Adviser'') to the Funds.\9\ State Street Bank and Trust Company is 
the administrator, custodian, and transfer agent for the Trust. 
BlackRock Investments, LLC serves as the distributor for the Trust.
---------------------------------------------------------------------------

    \9\ BFA is an indirect wholly owned subsidiary of BlackRock, 
Inc.
---------------------------------------------------------------------------

    The Funds 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'') and Municipal Series Dec 
2024 Index (the ``2024 Index'' and, together with the 2023 Index, the 
``Indices''), respectively. The Exchange submitted the proposed rule 
change because the Shares of the Funds meet all of the ``generic'' 
listing requirements of BZX Rule 14.11(c)(4) applicable to the listing 
of index fund shares based on fixed income securities indexes except 
for those set forth in BZX Rule 14.11(c)(4)(B)(i)(b). Specifically, for 
the iShares iBonds Dec 2023 Term Muni Bond ETF, components that 
comprised only 5.83% of the weight of the 2023 Index have a minimum 
original principal amount outstanding of $100 million or more. Further, 
for iShares iBonds Dec 2024 Term Muni Bond ETF, only 5.72% of the 
weight of the 2024 Index have a minimum original principal amount 
outstanding of $100 million or more. In contrast, BZX 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.

A. iShares iBonds Dec 2023 Term Muni Bond ETF

1. The ``2023 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''). As of July 18, 2016, there were 
4,612 issues in the 2023 Index. 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 of $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.\10\ 48% of the 2023 Index

[[Page 86045]]

weight consisted of issues with a rating of AA/Aa2 or higher.
---------------------------------------------------------------------------

    \10\ BZX 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.
---------------------------------------------------------------------------

    To be included in the 2023 Index, a bond must have an investment 
grade rating and must have an outstanding par value of at least $2 
million. The bonds included in the 2023 Index 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 and its composition is rebalanced monthly. The 2023 Index 
value is calculated and disseminated at least once daily. The 
components of the 2023 Index and their percentage weighting will be 
available from major market data vendors.
2. The Fund's Holdings
    The Fund will generally invest 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.\11\ From time to time, however, 
when conditions warrant, the Fund may invest at least 80% of its assets 
in the component securities of the Fund's benchmark index. According to 
the Exchange, the Fund will hold the following types of Municipal 
Securities: General obligation bonds, limited obligation bonds (or 
revenue bonds), municipal notes, municipal commercial paper, tender 
option bonds, variable rate demand obligations (``VRDOs''), municipal 
lease obligations, stripped securities, structured securities, and zero 
coupon securities.
---------------------------------------------------------------------------

    \11\ 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.
---------------------------------------------------------------------------

    Under normal circumstances, the Fund may also to a limited extent 
(less than 20% of the Fund's net assets) invest in the following: 
Certain listed derivatives; \12\ repurchase and reverse repurchase 
agreements for Municipal Securities (collectively, ``Repurchase 
Agreements''); short-term instruments (``Short-Term Instruments''),\13\ 
which include exchange traded and non-exchange traded investment 
companies that invest in money market instruments.
---------------------------------------------------------------------------

    \12\ 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.
    \13\ Short-Term Instruments include money market instruments. 
The Funds will invest only in the following types of money market 
instruments: (1) Shares of money market funds (including those 
advised by BFA or otherwise affiliated with BFA); (2) obligations 
issued or guaranteed by the U.S. government, its agencies or 
instrumentalities (including government-sponsored enterprises); (3) 
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; (4) 
commercial paper, including asset-backed commercial paper; (5) 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 (6) 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 Funds will be rated investment grade.
---------------------------------------------------------------------------

    The portfolio of securities held by the Fund will be disclosed on 
the Fund's Web site at www.iShares.com.

B. iShares iBonds Dec 2024 Term Muni Bond ETF

1. The 2024 Index
    The 2024 Index measures the performance of Municipal Securities. As 
of July 18, 2016, there were 3,624 issues in the 2024 Index. 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 of $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 was $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.\14\ 
47.71% of the 2024 Index weight consisted of issues with a rating of 
AA/Aa2 or higher.
---------------------------------------------------------------------------

    \14\ See supra note 10.
---------------------------------------------------------------------------

    To be included in the 2024 Index, a bond must have an investment 
grade rating and must have an outstanding par value of at least $2 
million. The bonds in the 2024 Index 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 and its composition is rebalanced monthly. The 2024 Index 
value is calculated and disseminated at least once daily. The 
components of the 2024 Index and their percentage weighting will be 
available from major market data vendors.
2. The Fund's Holdings
    The Fund will generally invest 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.\15\ From time to time, however, 
when conditions warrant, the Fund may invest at least 80% of its assets 
in the component securities of the Fund's benchmark index. According to 
the Exchange, the Fund will hold the following types of Municipal 
Securities: General obligation bonds, limited obligation bonds (or 
revenue bonds), municipal notes, municipal commercial paper, tender 
option bonds, VRDOs, municipal lease obligations, stripped securities, 
structured securities, and zero coupon securities.
---------------------------------------------------------------------------

    \15\ 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.
---------------------------------------------------------------------------

    Under normal circumstances, the Fund may also to a limited extent 
(less than 20% of the Fund's net assets) invest in the following: 
Certain listed derivatives; \16\ Repurchase Agreements; and Short-Term 
Instruments.\17\
---------------------------------------------------------------------------

    \16\ See supra note 12.
    \17\ See supra note 13.
---------------------------------------------------------------------------

    The portfolio of securities held by the Fund will be disclosed on 
the Fund's Web site at www.iShares.com.

II. Discussion and Commission's Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\18\ In

[[Page 86046]]

particular, the Commission finds that the proposed rule change, as 
modified by Amendments No. 1 and No. 2, is consistent with Section 
6(b)(5) of the Exchange Act,\19\ which requires, among other things, 
that the Exchange's rules be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system, and, in 
general, to protect investors and the public interest. The Commission 
also finds that the proposal to list and trade the Shares on the 
Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Exchange 
Act,\20\ which sets forth Congress's finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities.
---------------------------------------------------------------------------

    \18\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \19\ 15 U.S.C. 78f(b)(5).
    \20\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    Quotation and last sale information for the Shares will be 
available via the CTA high speed line.\21\ 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.\22\ Additionally, daily trading volume 
information for the Shares will be available in the financial section 
of newspapers, through subscription services, as well as through other 
electronic services, including major public Web sites.\23\ Further, the 
Intraday Indicative Values for the Shares, as defined in BZX Rule 
14.11(c)(6)(A), 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, which are between 9:30 a.m. and 4:00 
p.m. Eastern Time.\24\
---------------------------------------------------------------------------

    \21\ See Amendment No. 1, supra note 4, at 28.
    \22\ See id. at 36-37.
    \23\ See id. at 27.
    \24\ The Exchange states that that several major market data 
vendors display and/or make widely available IIVs published via the 
CTA or other data feeds. See id. at 28, n.44.
---------------------------------------------------------------------------

    On each business day, before commencement of trading in Shares 
during Regular Trading Hours 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.\25\ 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.\26\ The Web site and information will 
be publicly available at no charge.\27\ Price information regarding 
Municipal Securities and non-exchange traded assets is available from 
third party pricing services and major market data vendors.\28\ For 
exchange-traded assets, such intraday information is available directly 
from the applicable listing exchange.\29\ In addition, price 
information for U.S. exchange-traded options is available from the 
Options Price Reporting Authority.\30\
---------------------------------------------------------------------------

    \25\ See id. at 27.
    \26\ See id.
    \27\ See id.
    \28\ See id. at 28-29.
    \29\ See id. at 29.
    \30\ See id.
---------------------------------------------------------------------------

    The Commission believes that the proposal to list and trade the 
Shares is reasonably designed to promote fair disclosure of information 
that may be necessary to price the Shares appropriately and to prevent 
trading when a reasonable degree of transparency cannot be assured. The 
Exchange will obtain a representation from the issuer of the Shares 
that the NAV will be calculated daily and that the NAV and the 
disclosed portfolio will be made available to all market participants 
at the same time.\31\ Further, trading in the Shares will be subject to 
BZX Rules 11.18 and 14.11(c)(1)(B)(iv), which set forth circumstances 
under which trading in Shares of the Fund may be halted.\32\ 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.\33\
---------------------------------------------------------------------------

    \31\ See id.
    \32\ See id. at 29, 30.
    \33\ See id. at 29-30.
---------------------------------------------------------------------------

    Any advisory committee, supervisory board, or similar entity that 
advises a Reporting Authority, as defined in BZX Rule 14.11(c)(1)(C) or 
that makes decisions on the index composition, methodology and related 
matters, must implement and maintain, or be subject to, procedures 
designed to prevent the use and dissemination of material non-public 
information regarding the applicable index.\34\ The Exchange represents 
that it prohibits the distribution of material, non-public information 
by its employees.\35\ The Exchange also states that 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.\36\ The index provider has also implemented 
procedures designed to prevent the use and dissemination of material, 
non-public information regarding the Indices.\37\
---------------------------------------------------------------------------

    \34\ See BZX Rule 14.11(c)(4)(C)(iii).
    \35\ See Amendment No. 1, supra note 4, at 31.
    \36\ See id. at 34.
    \37\ See id.
---------------------------------------------------------------------------

    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 and After Hours Trading 
Sessions 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. The Exchange states 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.\38\ Trading of the

[[Page 86047]]

Shares through the Exchange will be subject to the Exchange's 
surveillance procedures for derivative products, including Index Fund 
Shares.\39\
---------------------------------------------------------------------------

    \38\ See id. at 30.
    \39\ See id.
---------------------------------------------------------------------------

    The Exchange represents that all statements and representations 
made in the Exchange's 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 
constitute continued listing requirements for listing the Shares on the 
Exchange.\40\ The Exchange also states that the issuer has represented 
that it will advise the Exchange of any failure by either Fund to 
comply with the continued listing requirements and that, pursuant to 
its obligations under Section 19(g)(1) of the Exchange Act, the 
Exchange will surveil for compliance with the continued listing 
requirements.\41\ If a Fund is not in compliance with the applicable 
listing requirements, the Exchange will commence delisting procedures 
under BZX Rule 14.12.\42\
---------------------------------------------------------------------------

    \40\ See id. at 7, n.7.
    \41\ See Amendment No. 2, supra note 6, at 4.
    \42\ See id.
---------------------------------------------------------------------------

    The Exchange may obtain information regarding trading in the Shares 
and the underlying exchange-traded instruments 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.\43\ 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'').\44\ 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.\45\
---------------------------------------------------------------------------

    \43\ See Amendment No. 1, supra note 4, at 31.
    \44\ See id.
    \45\ See id.
---------------------------------------------------------------------------

    The Commission notes that the Fund and the Shares must comply with 
the requirements of BZX Rule 14.11(c)(4) to be initially and 
continuously listed and traded on the Exchange. The Exchange represents 
that it deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to the Exchange's existing rules 
governing the trading of equity securities. In support of this 
proposal, the Exchange, in addition to the representations as noted 
above, has made the following representations:
     For initial and/or continued listing, the Funds and the 
Trust must be in compliance with Rule 10A-3 under the Act.\46\
---------------------------------------------------------------------------

    \46\ See id. at 29.
---------------------------------------------------------------------------

     A minimum of 50,000 Shares of each Fund will be 
outstanding at the commencement of trading on the Exchange.\47\
---------------------------------------------------------------------------

    \47\ See id.
---------------------------------------------------------------------------

    This approval order is based on all of the Exchange's 
representations, including those set forth above and in the proposed 
rule change, as modified by Amendments No. 1 and No. 2. For the 
foregoing reasons, the Commission finds that the proposed rule change, 
as modified by Amendments No. 1 and No. 2, is consistent with the 
Exchange Act and the rules and regulations thereunder applicable to a 
national securities exchange.

III. Solicitation of Comments on Amendments No. 1 and No. 2

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendments No. 1 and No. 2 are consistent 
with the Exchange 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 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-BatsBZX-2016-48 and should 
be submitted on or before December 20, 2016.

IV. Accelerated Approval of Proposed Rule Change as Modified by 
Amendments No. 1 and No. 2

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendments No. 1 and No. 2, prior to the 
thirtieth day after the date of publication of notice of the filing of 
Amendment No. 1 in the Federal Register. Amendment No. 1 supplements 
the proposed rule change by, among other things, (1) clarifying that 
each Fund's policy to invest at least 80% of its net assets in 
components of its underlying index is a continued listing requirement; 
and (2) representing that at least 90% of the Funds' net assets that 
are invested in listed derivatives will be invested in instruments that 
trade in markets that are members or affiliates of members of the ISG 
or are parties to a comprehensive surveillance sharing agreement with 
the Exchange. Further, Amendment No. 2 supplements the proposed rule 
change by strengthening the Exchange's commitment to enforcing the 
applicable continued listing requirements. Accordingly, the Commission 
finds good cause, pursuant to Section 19(b)(2) of the Exchange Act,\48\ 
to approve the proposed rule change, as modified by Amendments No. 1 
and No. 2, on an accelerated basis.
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\49\ that the proposed rule change (SR-BatsBZX-2016-48), 
as modified by Amendments No. 1 and No. 2, be, and it hereby is, 
approved on an accelerated basis.
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\50\

[[Page 86048]]


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

    \50\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-28639 Filed 11-28-16; 8:45 am]
 BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.