Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of Specified Series of the Innovator Shield Strategy S&P 500 Monthly Index Series and Innovator Ultra Shield Strategy S&P 500 Monthly Index Series Under Rule 14.11(c)(3), 42003-42008 [2017-18660]

Download as PDF Federal Register / Vol. 82, No. 170 / Tuesday, September 5, 2017 / Notices Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or 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: mstockstill on DSK30JT082PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2017–085 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–NASDAQ–2017–085. 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 (http://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 VerDate Sep<11>2014 17:43 Sep 01, 2017 Jkt 241001 available publicly. All submissions should refer to File Number SR– NASDAQ–2017–085 and should be submitted on or before September 26, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–18658 Filed 9–1–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81495; File No. SR– BatsBZX–2017–56] Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of Specified Series of the Innovator Shield Strategy S&P 500 Monthly Index Series and Innovator Ultra Shield Strategy S&P 500 Monthly Index Series Under Rule 14.11(c)(3) August 29, 2017. 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 22, 2017, 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to list and trade shares of series of the Innovator Shield Strategy S&P 500 Monthly Index Series and Innovator Ultra Shield Strategy S&P 500 Monthly Index Series under the Academy Funds Trust, under Rule 14.11(c)(3) (‘‘Index Fund Shares’’). The text of the proposed rule change is available at the Exchange’s Web site at www.bats.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 12 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 42003 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 shares (‘‘Shares’’) of each series of the Innovator Shield Strategy S&P 500 ETF (collectively, the ‘‘Shield Funds’’) and Innovator Ultra Shield Strategy S&P 500 ETF (collectively, the ‘‘Ultra Shield Funds’’) (each a ‘‘Fund’’ and, collectively, the ‘‘Funds’’) under Rule 14.11(c)(3), which governs the listing and trading of Index Fund Shares on the Exchange. In total, the Exchange is proposing to list and trade Shares of twelve monthly series of the Innovator Shield Strategy S&P 500 Monthly Index Series and twelve monthly series of the Innovator Ultra Shield Strategy S&P 500 Monthly Index Series. Each Fund will be an index-based exchange traded fund (‘‘ETF’’). The Shares will be offered by Academy Funds Trust (the ‘‘Trust’’), which was established as a Delaware statutory trust on October 17, 2007. The Trust is registered with the Commission as an investment company and has filed a registration statement on Form N–1A (‘‘Registration Statement’’) with the Commission on behalf of the Funds.3 Each Fund intends to qualify each year as a regulated investment company (a ‘‘RIC’’) under Subchapter M of the Internal Revenue Code of 1986, as amended.4 Each Shield Fund’s investment objective is to track, before fees and expenses, the performance of its respective index (the ‘‘Shield Index’’). Each Ultra Shield Fund’s investment objective is to track, before fees and 3 See Post-Effective Amendment Nos. 45 and 46 to Registration Statement on Form N–1A for the Trust, dated May 15, 2017 (File Nos. 333–146827 and 811–22135). The descriptions of the Fund and the Shares contained herein are based on information in the Registration Statement. 4 26 U.S.C. 851. E:\FR\FM\05SEN1.SGM 05SEN1 42004 Federal Register / Vol. 82, No. 170 / Tuesday, September 5, 2017 / Notices mstockstill on DSK30JT082PROD with NOTICES expenses, the performance of its respective index (the ‘‘Ultra Shield Index’’). Innovator Capital Management LLC (the ‘‘Advisor’’) will act as adviser to the Funds. Both the Shield Index and the Ultra Shield Index (collectively, the ‘‘Indexes’’) are owned and operated by S&P Dow Jones Indices, and were developed by the Chicago Board Options Exchange (‘‘CBOE’’ or ‘‘Index Provider’’) in coordination with Milliman Financial Risk Management LLC. The value of each Index is calculated daily as of the close of trading hours on the New York Stock Exchange by CBOE utilizing an option valuation model and data provided by CBOE. Milliman Financial Risk Management LLC will act as sub-adviser for the Funds (the ‘‘Sub-Adviser’’). The Indexes employ a ‘‘defined outcome strategy’’ that seeks to provide investment returns that deliver one-toone exposure to any gains of the S&P 500 Price Return Index (‘‘S&P 500’’), up to a capped amount, while protecting investors from S&P 500 losses of up to a capped amount, as further described below. The Indexes will be composed exclusively of FLexible EXchange Options (‘‘FLEX Options’’) linked to the S&P 500. Defined outcome strategies are designed to participate in market gains and losses within pre-determined ranges over a specified period (i.e. point to point). These outcomes are predicated on the assumption that an investment vehicle employing the strategy is held for the designated outcome periods. As such, the Exchange is proposing to list up to twelve monthly series of each of the Shield Funds and Ultra Shield Funds. The Exchange is submitting this proposed rule change because the Indexes do not meet all of the ‘‘generic’’ listing requirements of Rule 14.11(c)(3)(A)(i), applicable to the listing of Index Fund Shares based upon an index of ‘‘U.S. Component Stocks.’’ 5 Specifically, Rule 14.11(c)(3)(A)(i) sets forth the requirements to be met by components of an index or portfolio of U.S. Component Stocks. Because the Index consists of FLEX Options, rather than ‘‘U.S. Component Stocks’’ as defined in Rule 14.11(c)(1)(D), the Index does not satisfy the requirements of Rule 14.11(c)(3)(A)(i).6 5 As defined in Rule 14.11(c)(1)(D), the term ‘‘U.S. Component Stock’’ shall mean an equity security that is registered under Sections 12(b) or 12(g) of the Act, or an American Depositary Receipt, the underlying equity security of which is registered under Sections 12(b) or 12(g) of the Act. 6 Rule 14.11(c)(3)(A)(i)(e) provides that all securities in the applicable index or portfolio shall be U.S. Component Stocks listed on a national securities exchange and shall be NMS Stocks as VerDate Sep<11>2014 17:43 Sep 01, 2017 Jkt 241001 The Shares will conform to the initial and continued listing criteria under Rule 14.11(c), except that the Indexes will not meet the requirements of Rule 14.11(c)(3)(A)(i)(a)–(e) in that the Indexes will consist of options based on U.S. Component Stocks (i.e., FLEX Options that reference the S&P 500), rather than U.S. Component Stocks. Innovator Shield S&P 500 ETF Under Normal Market Conditions,7 each Shield Fund will attempt to achieve its investment objective of tracking, before fees and expenses, the performance of its respective Shield Index. Each Shield Index employs a ‘‘defined outcome strategy’’ that seeks to provide investment returns that deliver one to one exposure to any gains of the S&P 500, up to a capped amount, while protecting investors from S&P 500 losses of up to 15%. Each Index will be composed exclusively of FLEX Options that reference the S&P 500. Defined outcome strategies are designed to participate in market gains and losses within pre-determined ranges over a specified period (i.e., point to point). These outcomes are predicated on the assumption that an investment vehicle employing the strategy is held for the designated outcome periods. The Shield Indexes will be composed of a portfolio of FLEX Options linked to an underlying asset, the S&P 500, that, when held for the specified period, seeks to produce returns that, over a period of approximately one year, provide one to one returns on the price appreciation of the S&P 500 up to a capped maximum annualized return (the ‘‘Cap Level’’), while protecting investors from the first 15% of S&P 500 losses. The FLEX Options comprising the Shield Indexes will first be entered into on approximately the date of the Shield Fund’s inception and will automatically reset on approximately the one year defined in Rule 600 under Regulation NMS of the Act. Each component stock of the S&P 500 is a U.S. Component Stock that is listed on a national securities exchange and is an NMS Stock. Options are excluded from the definition of NMS Stock. The Funds and the Indexes meet all of the requirements of the listing standards for Index Fund Shares in Rule 14.11(c)(3), except the requirements in Rule 14.11(c)(3)(A)(i)(a)–(e), as the Index consists of options on U.S. Component Stocks. The S&P 500 consists of U.S. Component Stocks and satisfies the requirements of Rule 14.11(c)(3)(A)(i)(a)–(e). 7 As defined in Rule 14.11(i)(3)(E), the term ‘‘Normal Market Conditions’’ includes, but is not limited to, the absence of trading halts in the applicable financial markets generally; operational issues causing dissemination of inaccurate market information or system failures; or force majeure type events such as natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption, or any similar intervening circumstance. PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 anniversary thereafter (each, an ‘‘outcome period’’). These FLEX Options have been chosen to seek to provide investors, before fees and expenses, with the following outcomes: • If the S&P 500 appreciates over the outcome period: The Shield Index seeks to provide a total return that matches the percentage increase of the S&P 500, up to the Cap Level; • If the S&P 500 decreases over the outcome period by 15% or less: The Shield Index seeks to provide a total return of zero; and • If the S&P 500 decreases over the outcome period by more than 15%: The Shield Index seeks to provide a total return loss that is 15% less than the percentage loss on the S&P 500 with a maximum loss of approximately 85%. These outcomes are sought through the effect of layering purchased and written FLEX Options that comprise the Shield Index. Any FLEX Options that are written by a Shield Fund pursuant to its respective Shield Index that create an obligation to sell or buy an asset will be offset with a position in FLEX Options purchased by the Shield Fund pursuant to the Shield Index to create the right to buy or sell the same asset such that the Shield Fund will always be in a net long position. That is, any obligations of a Shield Fund created by its writing of FLEX Options will be covered by offsetting positions in other purchased FLEX Options. As the FLEX Options mature at the end of each outcome period, they are replaced. By replacing FLEX Options annually, each Shield Index seeks to ensure that investments made in a given month during the current year buffer against negative returns of the S&P 500 up to pre-determined levels in that same month of the following year. The Shield Funds do not offer any protection against declines in the S&P 500 exceeding 15% on an annualized basis. Shareholders will bear all S&P 500 losses exceeding 15% on a one-to-one basis. The value of the FLEX Options purchased by a Shield Fund in accordance with the Index on any given day will be reflected in the Shield Fund’s net asset value (‘‘NAV’’). The FLEX Options owned by the Shield Funds will have the same terms (i.e. same strike price and expiration) for all investors of the Shield Fund within an outcome period. The Cap Level is determined with respect to the applicable Shield Index on the inception date of the Shield Fund and at the beginning of each outcome period. E:\FR\FM\05SEN1.SGM 05SEN1 mstockstill on DSK30JT082PROD with NOTICES Federal Register / Vol. 82, No. 170 / Tuesday, September 5, 2017 / Notices Innovator Ultra Shield Strategy S&P 500 ETF Under Normal Market Conditions, each Ultra Shield Fund will attempt to achieve its investment objective of tracking, before fees and expenses, the performance of its respective Ultra Shield Index. Each Ultra Shield Index employs a ‘‘defined outcome strategy’’ that seeks to provide investment returns that deliver one to one exposure to any gains of the S&P 500, up to a capped amount, while protecting investors from S&P 500 losses of between 5% and 35%. Each Index will be composed exclusively of FLEX Options that reference the S&P 500. Defined outcome strategies are designed to participate in market gains and losses within pre-determined ranges over a specified period (i.e., point to point). These outcomes are predicated on the assumption that an investment vehicle employing the strategy is held for the designated outcome periods. The Ultra Shield Indexes will be composed of a portfolio of FLEX Options linked to an underlying asset, the S&P 500, that, when held for the specified period, seeks to produce returns that, over a period of approximately one year, provide one to one returns on the price appreciation of the S&P 500 up to the Cap Level, while protecting investors from between 5% and 35% of S&P 500 losses. The FLEX Options comprising the Ultra Shield Indexes will first be entered into on approximately the date of the Shield Fund’s inception and will automatically reset on approximately the one year anniversary thereafter (each, an ‘‘outcome period’’). These FLEX Options have been chosen to seek to provide investors, before fees and expenses, with the following outcomes: • If the S&P 500 appreciates over the outcome period: The Ultra Shield Index seeks to provide a total return that matches the percentage increase of the S&P 500, up to the Cap Level; • If the S&P 500 decreases over the outcome period by 5% or less: The Ultra Shield Index seeks to provide a total return loss that is equal to the percentage loss on the S&P 500; • If the S&P 500 decreases over the outcome period by 5%–35%: The Ultra Shield Index seeks to provide a total return loss of 5%; and • If the S&P If the S&P 500 decreases over the outcome period by more than 35%: The Ultra Shield Index seeks to provide a total return loss that is 30% less than the percentage loss on the S&P 500 with a maximum loss of approximately 70%. These outcomes are sought through the effect of layering purchased and VerDate Sep<11>2014 17:43 Sep 01, 2017 Jkt 241001 written FLEX Options that comprise an Ultra Shield Index. Any FLEX Options that are written by an Ultra Shield Fund pursuant to its respective Ultra Shield Index that create an obligation to sell or buy an asset will be offset with a position in FLEX Options purchased by the Ultra Shield Fund pursuant to the Ultra Shield Index to create the right to buy or sell the same asset such that the Ultra Shield Fund will always be in a net long position. That is, any obligations of an Ultra Shield Fund created by its writing of FLEX Options will be covered by offsetting positions in other purchased FLEX Options. As the FLEX Options mature at the end of each outcome period, they are replaced. By replacing FLEX Options annually, each Ultra Shield Index seeks to ensure that investments made in a given month during the current year buffer against negative returns of the S&P 500 up to pre-determined levels in that same month of the following year. The Ultra Shield Fund does not offer any protection against declines in the S&P 500 of less than 5% or exceeding 35% on an annualized basis thereafter. Shareholders will bear all S&P 500 losses less than 5% and exceeding 35% on a one-to-one basis. The value of the FLEX Options purchased by the Ultra Shield Fund in accordance with the Index on any given day will be reflected in the Ultra Shield Fund’s NAV. The FLEX Options owned by an Ultra Shield Fund will have the same terms (i.e., same strike price and expiration) for all investors of the Ultra Shield Fund within an outcome period. The Cap Level is determined with respect to the Index on the inception date of the Ultra Shield Fund and at the beginning of each outcome period. Investment Methodology for the Funds Under Normal Market Conditions, each of the Funds will invest not less than 80% of its assets in the FLEX Options that comprise their respective Index. Each of the Funds may invest up to 20% of its net assets (in the aggregate) in other investments that are not included in the Fund’s respective Index, but which the Adviser or Sub-Adviser believes will help the Fund to track its Index and that will be disclosed at the end of each trading day (‘‘Other Assets’’). Other Assets include only cash or cash equivalents, as defined in Rule 14.11(i)(4)(C)(iii),8 and traditional U.S. 8 As defined in Rule 14.11(i)(4)(C)(iii), cash equivalents include short-term instruments with maturities of less than three months, including: (i) U.S. Government securities, including bills, notes, and bonds differing as to maturity and rates of interest, which are either issued or guaranteed by the U.S. Treasury or by U.S. Government agencies PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 42005 exchange-traded options contracts that reference either the S&P 500 or ETFs that track the S&P 500 (‘‘Reference ETFs’’). S&P 500 FLEX Options The market for options contracts on the S&P 500 traded on CBOE, including FLEX Options, is among the most liquid markets in the world [sic] S&P 500 FLEX Options are a subset of S&P 500 options traded on the CBOE.9 In 2016, 1,023,623 options contracts on the S&P 500 were traded per day on CBOE, which is more than $200 billion in notional volume traded on a daily basis.10 While, as described below, FLEX Options are traded differently than traditional options contracts, the Exchange believes that the liquidity and arbitrage opportunities of the S&P 500 bolsters the market for FLEX Options, as described below. FLEX Options on the S&P 500 are quoted by the same market makers that trade traditional options contracts. Every FLEX Option order submitted to CBOE is exposed to a competitive auction process for price discovery. The process begins with a request for quote (‘‘RFQ’’) in which the interested party establishes the terms of the FLEX Options contract. The RFQ solicits interested market participants, including on-floor market makers, remote market makers trading electronically, and member firm traders, to respond to the RFQ with bids or offers through a competitive process. This solicitation contains all of the contract specifications-underlying, size, type of option, expiration date, strike price, exercise style and settlement basis. During a specified amount of time, responses to the RFQ are received and at the end of that time period, the initiator can decide whether to accept the best bid or offer. The process occurs under the rules of CBOE which means that customer transactions are effected according to the principles of a fair and orderly market following trading procedures and policies developed by or instrumentalities; (ii) certificates of deposit issued against funds deposited in a bank or savings and loan association; (iii) bankers acceptances, which are short-term credit instruments used to finance commercial transactions; (iv) repurchase agreements and reverse repurchase agreements; (v) bank time deposits, which are monies kept on deposit with banks or savings and loan associations for a stated period of time at a fixed rate of interest; (vi) commercial paper, which are short-term unsecured promissory notes; and (vii) money market funds. 9 See https://www.theocc.com/webapps/flexreports. Unless otherwise noted, all statistics provided herein are based on information from the Options Clearing Corporation. 10 As of July 24, 2017, FLEX Options on the S&P 500 had open interest of 349,596 contracts. E:\FR\FM\05SEN1.SGM 05SEN1 42006 Federal Register / Vol. 82, No. 170 / Tuesday, September 5, 2017 / Notices mstockstill on DSK30JT082PROD with NOTICES CBOE. By way of example, during June and July 2017, the Sub-Adviser traded 2,500 FLEX Option S&P 500 contracts with a notional exposure of $626 million. The trades were executed at approximately .25% from the midmarket mark, which is similar to the transaction costs of exchange traded funds of similar size. The Exchange believes that sufficient protections are in place to protect against market manipulation of the Funds’ Shares and FLEX Options on the S&P 500 for several reasons: (i) The liquidity in the market for options on the S&P 500; (ii) the competitive quoting process for FLEX Options; (iii) the diversity, liquidity, and market cap of the securities underlying the S&P 500; and (iv) surveillance by the Exchange, CBOE and the Financial Industry Regulatory Authority (‘‘FINRA’’) designed to detect violations of the federal securities laws and selfregulatory organization (‘‘SRO’’) rules; [sic]. Trading in the Shares and the underlying investments will be subject to the federal securities laws and Exchange, CBOE and FINRA rules and surveillance programs.11 In this regard, the Exchange has in place a surveillance program for transactions in ETFs to ensure the availability of information necessary to detect and deter potential manipulations and other trading abuses, thereby making the Shares less readily susceptible to manipulation as assets in the portfolio—comprised primarily of FLEX Options on the S&P 500—will be acquired in extremely liquid and highly regulated markets. As noted above, options on the S&P 500 are among the most liquid options in the world and derive their value from the actively traded S&P 500 Index components. The contracts are cashsettled with no delivery of stocks or ETFs, and trade in competitive auction markets with price and quote transparency. The Exchange believes the highly regulated options markets and the broad base and scope of the S&P 500 Index make securities that derive their value from the index less susceptible to market manipulation in view of market capitalization and liquidity of the S&P 500 components, price and quote transparency, and arbitrage opportunities. 11 The Exchange notes that CBOE is a member of the Option Price Regulatory Surveillance Authority, which was established in 2006, to provide efficiencies in looking for insider trading and serves as a central organization to facilitate collaboration in insider trading and investigations for the U.S. options exchanges. For more information, see http://www.cboe.com/aboutcboe/legal/ departments/orsareg.aspx. VerDate Sep<11>2014 17:43 Sep 01, 2017 Jkt 241001 The Exchange believes that the efficiency and liquidity of the markets for S&P 500 securities, options on the S&P 500, including FLEX Options, and other related derivatives are sufficiently great to deter fraudulent or manipulative acts associated with the Funds’ Shares price. The Exchange also believes that such efficiency and liquidity are sufficient to support the creation and redemption mechanism. Coupled with the extensive surveillance programs of the SROs described above, the Exchange does not believe that trading in the Fund’s Shares would present manipulation concerns. The Exchange represents that, except as described above, the Funds will meet each of the initial and continued listing criteria in BZX Rule 14.11(c) with the exception Rule 14.11(c)(3)(A)(i), applicable to the listing of Index Fund Shares based upon an index of ‘‘U.S. Component Stocks.’’ The Trust is required to comply with Rule 10A–3 under the Act for the initial and continued listing of the Shares of the Fund. In addition, the Exchange represents that the Shares of the Funds will comply with all other requirements applicable to Index Fund Shares including, but not limited to, requirements relating to the dissemination of key information such as the Disclosed Portfolio, Net Asset Value, and the Intraday Indicative Value, rules governing the trading of equity securities, trading hours, trading halts, surveillance, and the information circular, as set forth in Exchange rules applicable to Index Fund Shares and the orders approving such rules. Moreover, all of the options contracts held by the Funds will trade on markets that are a member of Intermarket Surveillance Group (‘‘ISG’’) or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.12 All statements and representations made in this filing regarding the index composition, the description of the portfolio or reference assets, limitations on portfolio holdings or reference assets, dissemination and availability of index, reference asset, and intraday indicative values, and the applicability of Exchange rules specified in this filing shall constitute continued listing requirements for the Funds. The issuer has represented to the Exchange that it will advise the Exchange of any failure 12 For a list of the current members and affiliate members of ISG, see www.isgportal.com. The Exchange notes that not all components of the Disclosed Portfolio for the Fund may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 by the Fund or the Shares to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will surveil for compliance with the continued listing requirements. If the Fund or the Shares are not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under Exchange Rule 14.12. 2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6(b) of the Act 13 in general and Section 6(b)(5) of the Act 14 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, 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 in that the Shares of each Fund will meet each of the initial and continued listing criteria in BZX Rule 14.11(c) with the exception Rule 14.11(c)(3)(A)(i), applicable to the listing of Index Fund Shares based upon an index of ‘‘U.S. Component Stocks.’’ Specifically, Rule 14.11(c)(3)(A)(i) sets forth the requirements to be met by components of an index or portfolio of U.S. Component Stocks. Because the Index consists of FLEX Options, rather than ‘‘U.S. Component Stocks’’ as defined in Rule 14.11(c)(1)(D), the Index does not satisfy the requirements of Rule 14.11(c)(3)(A)(i).15 The Exchange 13 15 U.S.C. 78f. U.S.C. 78f(b)(5). 15 Rule 14.11(c)(3)(A)(i)(e) provides that all securities in the applicable index or portfolio shall be U.S. Component Stocks listed on a national securities exchange and shall be NMS Stocks as defined in Rule 600 under Regulation NMS of the Act. Each component stock of the S&P 500 is a U.S. Component Stock that is listed on a national securities exchange and is an NMS Stock. Options are excluded from the definition of NMS Stock. The Funds and the Indexes meet all of the requirements of the listing standards for Index Fund Shares in Rule 14.11(c)(3), except the requirements in Rule 14 15 E:\FR\FM\05SEN1.SGM 05SEN1 Federal Register / Vol. 82, No. 170 / Tuesday, September 5, 2017 / Notices mstockstill on DSK30JT082PROD with NOTICES believes that the concerns that Rule 14.11(c)(3)(A)(i) are intended to address are mitigated by: (i) The liquidity in the market for options on the S&P 500; 16 (ii) the competitive quoting process for FLEX Options; and (iii) the diversity, liquidity, and market cap of the securities underlying the S&P 500. Further, trading in the Shares and the underlying Fund investments will be subject to the federal securities laws and Exchange, CBOE and FINRA rules and surveillance programs.17 In this regard, the Exchange has in place a surveillance program for transactions in ETFs to ensure the availability of information necessary to detect and deter potential manipulations and other trading abuses, thereby making the Shares less readily susceptible to manipulation as assets in the portfolio—comprised primarily of FLEX Options on the S&P 500—will be acquired in extremely liquid and highly regulated markets. As noted above, options on the S&P 500 are among the most liquid options in the world and derive their value from the actively traded S&P 500 Index components. The contracts are cashsettled with no delivery of stocks or ETFs, and trade in competitive auction markets with price and quote transparency. The Exchange believes the highly regulated options markets and the broad base and scope of the S&P 500 Index make securities that derive their value from the index less susceptible to market manipulation in view of market capitalization and liquidity of the S&P 500 components, price and quote transparency, and arbitrage opportunities. The Exchange believes that the efficiency and liquidity of the markets for S&P 500 securities, options on the S&P 500, and other related derivatives are sufficiently great to deter fraudulent or manipulative acts associated with the Funds’ Shares price. The Exchange also believes that such efficiency and liquidity are sufficient to support the creation and redemption mechanism. Coupled with the extensive surveillance programs of the SROs described above, 14.11(c)(3)(A)(i)(a)–(e), as the Index consists of options on U.S. Component Stocks. The S&P 500 consists of U.S. Component Stocks and satisfies the requirements of Rule 14.11(c)(3)(A)(i)(a)–(e). 16 In 2016, 1,023,623 options contracts on the S&P 500 were traded per day on CBOE, which is more than $200 billion in notional volume traded on a daily basis. 17 The Exchange notes that CBOE is a member of the Option Price Regulatory Surveillance Authority, which was established in 2006, to provide efficiencies in looking for insider trading and serves as a central organization to facilitate collaboration in insider trading and investigations for the U.S. options exchanges. For more information, see http://www.cboe.com/aboutcboe/legal/ departments/orsareg.aspx. VerDate Sep<11>2014 17:43 Sep 01, 2017 Jkt 241001 the Exchange does not believe that trading in the Fund’s Shares would present manipulation concerns. The Exchange represents that, except as described above, the Funds will satisfy, on an initial and continued listing basis, all of the generic listing standards under BZX Rule 14.11(c)(3)(A)(i) and all other applicable requirements for Index Fund Shares under Rule 14.11(c). The Trust is required to comply with Rule 10A–3 under the Act for the initial and continued listing of the Shares of the Fund. In addition, the Exchange represents that the Shares of the Funds will comply with all other requirements applicable to Index Fund Shares including, but not limited to, requirements relating to the dissemination of key information such as the Disclosed Portfolio, Net Asset Value, and the Intraday Indicative Value, rules governing the trading of equity securities, trading hours, trading halts, surveillance, and the information circular, as set forth in Exchange rules applicable to Index Fund Shares and the orders approving such rules. Moreover, all of the options contracts held by the Funds will trade on markets that are a member of ISG or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.18 All statements and representations made in this filing regarding the index composition, the description of the portfolio or reference assets, limitations on portfolio holdings or reference assets, dissemination and availability of index, reference asset, and intraday indicative values, and the applicability of Exchange rules specified in this filing shall constitute continued listing requirements for the Fund. The issuer has represented to the Exchange that it will advise the Exchange of any failure by the Fund or the Shares to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will surveil for compliance with the continued listing requirements. If the Fund or the Shares are not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under Exchange Rule 14.12. For the above reasons, the Exchange believes that the proposed rule change 18 For a list of the current members and affiliate members of ISG, see www.isgportal.com. The Exchange notes that not all components of the Disclosed Portfolio for the Fund may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 42007 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 an additional type of Index Fund Shares 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 up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BatsBZX–2017–56 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–2017–56. This file number should be included on the subject line if email is used. To help the E:\FR\FM\05SEN1.SGM 05SEN1 42008 Federal Register / Vol. 82, No. 170 / Tuesday, September 5, 2017 / Notices 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 (http://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–2017–56 and should be submitted on or before September 26, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–18660 Filed 9–1–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION mstockstill on DSK30JT082PROD with NOTICES Sunshine Act Meeting 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 Wednesday, September 6, 2017 at 2 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 his designee, has certified that, in his 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 matters at the closed meeting. Commissioner Stein, as duty officer, voted to consider the items listed for the closed meeting in closed session. The subject matters of the closed meeting will be: Institution and settlement of injunctive actions; Institution and settlement of administrative proceedings; Adjudicatory matters; 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: August 30, 2017. Brent J. Fields, Secretary. [FR Doc. 2017–18807 Filed 8–31–17; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81494; File No. SR–NYSE– 2017–32] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Proposed Rule Change To Amend Section 202.06 of the NYSE Listed Company Manual To Prohibit Listed Companies From Issuing Material News After the Official Closing Time for the Exchange’s Trading Session Until the Earlier of Publication of Such Company’s Official Closing Price on the Exchange or Five Minutes After the Official Closing Time August 29, 2017. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on August 17, 2017, New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the selfregulatory organization. The 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 19 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:43 Sep 01, 2017 Jkt 241001 PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Section 202.06 of the NYSE Listed Company Manual (the ‘‘Manual’’) to limit the issuance of material news by listed companies in the period immediately after the official closing time for the Exchange’s trading session. The proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Section 202.06 of the Manual to limit the issuance of material news by listed companies in the period immediately after the official closing time for the Exchange’s trading session. Continuous trading on the Exchange ends at the Exchange’s official closing time of 4:00 p.m. Eastern Time (except that on certain days the official closing time occurs early at 1:00 p.m. Eastern Time), which is when the Exchange stops accepting new orders, including orders designated for the closing auction, and requests to cancel orders.4 The Designated Market Maker (‘‘DMM’’) registered in a security facilitates the close of trading after continuous trading ends at the official closing time of 4:00 4 Pursuant to NYSE Rule 123C(2), orders designated for the close, including Market on Close (‘‘MOC’’) and Limit on Close (‘‘LOC’’) Orders can be entered after 3:45 p.m. to offset a published Mandatory MOC/LOC Imbalance Publication. Closing Offset (‘‘CO’’) Orders can be entered on both sides of the market up to 4:00 p.m. regardless of whether there is a published imbalance. E:\FR\FM\05SEN1.SGM 05SEN1

Agencies

[Federal Register Volume 82, Number 170 (Tuesday, September 5, 2017)]
[Notices]
[Pages 42003-42008]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-18660]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81495; File No. SR-BatsBZX-2017-56]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To List and Trade Shares of Specified 
Series of the Innovator Shield Strategy S&P 500 Monthly Index Series 
and Innovator Ultra Shield Strategy S&P 500 Monthly Index Series Under 
Rule 14.11(c)(3)

August 29, 2017.
    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 22, 2017, 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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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to list and trade shares of series of 
the Innovator Shield Strategy S&P 500 Monthly Index Series and 
Innovator Ultra Shield Strategy S&P 500 Monthly Index Series under the 
Academy Funds Trust, under Rule 14.11(c)(3) (``Index Fund Shares'').
    The text of the proposed rule change is available at the Exchange's 
Web site at www.bats.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 shares (``Shares'') of each 
series of the Innovator Shield Strategy S&P 500 ETF (collectively, the 
``Shield Funds'') and Innovator Ultra Shield Strategy S&P 500 ETF 
(collectively, the ``Ultra Shield Funds'') (each a ``Fund'' and, 
collectively, the ``Funds'') under Rule 14.11(c)(3), which governs the 
listing and trading of Index Fund Shares on the Exchange. In total, the 
Exchange is proposing to list and trade Shares of twelve monthly series 
of the Innovator Shield Strategy S&P 500 Monthly Index Series and 
twelve monthly series of the Innovator Ultra Shield Strategy S&P 500 
Monthly Index Series. Each Fund will be an index-based exchange traded 
fund (``ETF'').
    The Shares will be offered by Academy Funds Trust (the ``Trust''), 
which was established as a Delaware statutory trust on October 17, 
2007. The Trust is registered with the Commission as an investment 
company and has filed a registration statement on Form N-1A 
(``Registration Statement'') with the Commission on behalf of the 
Funds.\3\ Each Fund intends to qualify each year as a regulated 
investment company (a ``RIC'') under Subchapter M of the Internal 
Revenue Code of 1986, as amended.\4\
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    \3\ See Post-Effective Amendment Nos. 45 and 46 to Registration 
Statement on Form N-1A for the Trust, dated May 15, 2017 (File Nos. 
333-146827 and 811-22135). The descriptions of the Fund and the 
Shares contained herein are based on information in the Registration 
Statement.
    \4\ 26 U.S.C. 851.
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    Each Shield Fund's investment objective is to track, before fees 
and expenses, the performance of its respective index (the ``Shield 
Index''). Each Ultra Shield Fund's investment objective is to track, 
before fees and

[[Page 42004]]

expenses, the performance of its respective index (the ``Ultra Shield 
Index''). Innovator Capital Management LLC (the ``Advisor'') will act 
as adviser to the Funds. Both the Shield Index and the Ultra Shield 
Index (collectively, the ``Indexes'') are owned and operated by S&P Dow 
Jones Indices, and were developed by the Chicago Board Options Exchange 
(``CBOE'' or ``Index Provider'') in coordination with Milliman 
Financial Risk Management LLC. The value of each Index is calculated 
daily as of the close of trading hours on the New York Stock Exchange 
by CBOE utilizing an option valuation model and data provided by CBOE. 
Milliman Financial Risk Management LLC will act as sub-adviser for the 
Funds (the ``Sub-Adviser'').
    The Indexes employ a ``defined outcome strategy'' that seeks to 
provide investment returns that deliver one-to-one exposure to any 
gains of the S&P 500 Price Return Index (``S&P 500''), up to a capped 
amount, while protecting investors from S&P 500 losses of up to a 
capped amount, as further described below. The Indexes will be composed 
exclusively of FLexible EXchange Options (``FLEX Options'') linked to 
the S&P 500. Defined outcome strategies are designed to participate in 
market gains and losses within pre-determined ranges over a specified 
period (i.e. point to point). These outcomes are predicated on the 
assumption that an investment vehicle employing the strategy is held 
for the designated outcome periods. As such, the Exchange is proposing 
to list up to twelve monthly series of each of the Shield Funds and 
Ultra Shield Funds.
    The Exchange is submitting this proposed rule change because the 
Indexes do not meet all of the ``generic'' listing requirements of Rule 
14.11(c)(3)(A)(i), applicable to the listing of Index Fund Shares based 
upon an index of ``U.S. Component Stocks.'' \5\ Specifically, Rule 
14.11(c)(3)(A)(i) sets forth the requirements to be met by components 
of an index or portfolio of U.S. Component Stocks. Because the Index 
consists of FLEX Options, rather than ``U.S. Component Stocks'' as 
defined in Rule 14.11(c)(1)(D), the Index does not satisfy the 
requirements of Rule 14.11(c)(3)(A)(i).\6\
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    \5\ As defined in Rule 14.11(c)(1)(D), the term ``U.S. Component 
Stock'' shall mean an equity security that is registered under 
Sections 12(b) or 12(g) of the Act, or an American Depositary 
Receipt, the underlying equity security of which is registered under 
Sections 12(b) or 12(g) of the Act.
    \6\ Rule 14.11(c)(3)(A)(i)(e) provides that all securities in 
the applicable index or portfolio shall be U.S. Component Stocks 
listed on a national securities exchange and shall be NMS Stocks as 
defined in Rule 600 under Regulation NMS of the Act. Each component 
stock of the S&P 500 is a U.S. Component Stock that is listed on a 
national securities exchange and is an NMS Stock. Options are 
excluded from the definition of NMS Stock. The Funds and the Indexes 
meet all of the requirements of the listing standards for Index Fund 
Shares in Rule 14.11(c)(3), except the requirements in Rule 
14.11(c)(3)(A)(i)(a)-(e), as the Index consists of options on U.S. 
Component Stocks. The S&P 500 consists of U.S. Component Stocks and 
satisfies the requirements of Rule 14.11(c)(3)(A)(i)(a)-(e).
---------------------------------------------------------------------------

    The Shares will conform to the initial and continued listing 
criteria under Rule 14.11(c), except that the Indexes will not meet the 
requirements of Rule 14.11(c)(3)(A)(i)(a)-(e) in that the Indexes will 
consist of options based on U.S. Component Stocks (i.e., FLEX Options 
that reference the S&P 500), rather than U.S. Component Stocks.
Innovator Shield S&P 500 ETF
    Under Normal Market Conditions,\7\ each Shield Fund will attempt to 
achieve its investment objective of tracking, before fees and expenses, 
the performance of its respective Shield Index. Each Shield Index 
employs a ``defined outcome strategy'' that seeks to provide investment 
returns that deliver one to one exposure to any gains of the S&P 500, 
up to a capped amount, while protecting investors from S&P 500 losses 
of up to 15%. Each Index will be composed exclusively of FLEX Options 
that reference the S&P 500.
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    \7\ As defined in Rule 14.11(i)(3)(E), the term ``Normal Market 
Conditions'' includes, but is not limited to, the absence of trading 
halts in the applicable financial markets generally; operational 
issues causing dissemination of inaccurate market information or 
system failures; or force majeure type events such as natural or 
man-made disaster, act of God, armed conflict, act of terrorism, 
riot or labor disruption, or any similar intervening circumstance.
---------------------------------------------------------------------------

    Defined outcome strategies are designed to participate in market 
gains and losses within pre-determined ranges over a specified period 
(i.e., point to point). These outcomes are predicated on the assumption 
that an investment vehicle employing the strategy is held for the 
designated outcome periods. The Shield Indexes will be composed of a 
portfolio of FLEX Options linked to an underlying asset, the S&P 500, 
that, when held for the specified period, seeks to produce returns 
that, over a period of approximately one year, provide one to one 
returns on the price appreciation of the S&P 500 up to a capped maximum 
annualized return (the ``Cap Level''), while protecting investors from 
the first 15% of S&P 500 losses.
    The FLEX Options comprising the Shield Indexes will first be 
entered into on approximately the date of the Shield Fund's inception 
and will automatically reset on approximately the one year anniversary 
thereafter (each, an ``outcome period''). These FLEX Options have been 
chosen to seek to provide investors, before fees and expenses, with the 
following outcomes:
     If the S&P 500 appreciates over the outcome period: The 
Shield Index seeks to provide a total return that matches the 
percentage increase of the S&P 500, up to the Cap Level;
     If the S&P 500 decreases over the outcome period by 15% or 
less: The Shield Index seeks to provide a total return of zero; and
     If the S&P 500 decreases over the outcome period by more 
than 15%: The Shield Index seeks to provide a total return loss that is 
15% less than the percentage loss on the S&P 500 with a maximum loss of 
approximately 85%.
    These outcomes are sought through the effect of layering purchased 
and written FLEX Options that comprise the Shield Index. Any FLEX 
Options that are written by a Shield Fund pursuant to its respective 
Shield Index that create an obligation to sell or buy an asset will be 
offset with a position in FLEX Options purchased by the Shield Fund 
pursuant to the Shield Index to create the right to buy or sell the 
same asset such that the Shield Fund will always be in a net long 
position. That is, any obligations of a Shield Fund created by its 
writing of FLEX Options will be covered by offsetting positions in 
other purchased FLEX Options. As the FLEX Options mature at the end of 
each outcome period, they are replaced. By replacing FLEX Options 
annually, each Shield Index seeks to ensure that investments made in a 
given month during the current year buffer against negative returns of 
the S&P 500 up to pre-determined levels in that same month of the 
following year. The Shield Funds do not offer any protection against 
declines in the S&P 500 exceeding 15% on an annualized basis. 
Shareholders will bear all S&P 500 losses exceeding 15% on a one-to-one 
basis.
    The value of the FLEX Options purchased by a Shield Fund in 
accordance with the Index on any given day will be reflected in the 
Shield Fund's net asset value (``NAV''). The FLEX Options owned by the 
Shield Funds will have the same terms (i.e. same strike price and 
expiration) for all investors of the Shield Fund within an outcome 
period. The Cap Level is determined with respect to the applicable 
Shield Index on the inception date of the Shield Fund and at the 
beginning of each outcome period.

[[Page 42005]]

Innovator Ultra Shield Strategy S&P 500 ETF
    Under Normal Market Conditions, each Ultra Shield Fund will attempt 
to achieve its investment objective of tracking, before fees and 
expenses, the performance of its respective Ultra Shield Index. Each 
Ultra Shield Index employs a ``defined outcome strategy'' that seeks to 
provide investment returns that deliver one to one exposure to any 
gains of the S&P 500, up to a capped amount, while protecting investors 
from S&P 500 losses of between 5% and 35%. Each Index will be composed 
exclusively of FLEX Options that reference the S&P 500.
    Defined outcome strategies are designed to participate in market 
gains and losses within pre-determined ranges over a specified period 
(i.e., point to point). These outcomes are predicated on the assumption 
that an investment vehicle employing the strategy is held for the 
designated outcome periods. The Ultra Shield Indexes will be composed 
of a portfolio of FLEX Options linked to an underlying asset, the S&P 
500, that, when held for the specified period, seeks to produce returns 
that, over a period of approximately one year, provide one to one 
returns on the price appreciation of the S&P 500 up to the Cap Level, 
while protecting investors from between 5% and 35% of S&P 500 losses.
    The FLEX Options comprising the Ultra Shield Indexes will first be 
entered into on approximately the date of the Shield Fund's inception 
and will automatically reset on approximately the one year anniversary 
thereafter (each, an ``outcome period''). These FLEX Options have been 
chosen to seek to provide investors, before fees and expenses, with the 
following outcomes:
     If the S&P 500 appreciates over the outcome period: The 
Ultra Shield Index seeks to provide a total return that matches the 
percentage increase of the S&P 500, up to the Cap Level;
     If the S&P 500 decreases over the outcome period by 5% or 
less: The Ultra Shield Index seeks to provide a total return loss that 
is equal to the percentage loss on the S&P 500;
     If the S&P 500 decreases over the outcome period by 5%-
35%: The Ultra Shield Index seeks to provide a total return loss of 5%; 
and
     If the S&P If the S&P 500 decreases over the outcome 
period by more than 35%: The Ultra Shield Index seeks to provide a 
total return loss that is 30% less than the percentage loss on the S&P 
500 with a maximum loss of approximately 70%.
    These outcomes are sought through the effect of layering purchased 
and written FLEX Options that comprise an Ultra Shield Index. Any FLEX 
Options that are written by an Ultra Shield Fund pursuant to its 
respective Ultra Shield Index that create an obligation to sell or buy 
an asset will be offset with a position in FLEX Options purchased by 
the Ultra Shield Fund pursuant to the Ultra Shield Index to create the 
right to buy or sell the same asset such that the Ultra Shield Fund 
will always be in a net long position. That is, any obligations of an 
Ultra Shield Fund created by its writing of FLEX Options will be 
covered by offsetting positions in other purchased FLEX Options. As the 
FLEX Options mature at the end of each outcome period, they are 
replaced. By replacing FLEX Options annually, each Ultra Shield Index 
seeks to ensure that investments made in a given month during the 
current year buffer against negative returns of the S&P 500 up to pre-
determined levels in that same month of the following year. The Ultra 
Shield Fund does not offer any protection against declines in the S&P 
500 of less than 5% or exceeding 35% on an annualized basis thereafter. 
Shareholders will bear all S&P 500 losses less than 5% and exceeding 
35% on a one-to-one basis.
    The value of the FLEX Options purchased by the Ultra Shield Fund in 
accordance with the Index on any given day will be reflected in the 
Ultra Shield Fund's NAV. The FLEX Options owned by an Ultra Shield Fund 
will have the same terms (i.e., same strike price and expiration) for 
all investors of the Ultra Shield Fund within an outcome period. The 
Cap Level is determined with respect to the Index on the inception date 
of the Ultra Shield Fund and at the beginning of each outcome period.
Investment Methodology for the Funds
    Under Normal Market Conditions, each of the Funds will invest not 
less than 80% of its assets in the FLEX Options that comprise their 
respective Index. Each of the Funds may invest up to 20% of its net 
assets (in the aggregate) in other investments that are not included in 
the Fund's respective Index, but which the Adviser or Sub-Adviser 
believes will help the Fund to track its Index and that will be 
disclosed at the end of each trading day (``Other Assets''). Other 
Assets include only cash or cash equivalents, as defined in Rule 
14.11(i)(4)(C)(iii),\8\ and traditional U.S. exchange-traded options 
contracts that reference either the S&P 500 or ETFs that track the S&P 
500 (``Reference ETFs'').
---------------------------------------------------------------------------

    \8\ As defined in Rule 14.11(i)(4)(C)(iii), cash equivalents 
include short-term instruments with maturities of less than three 
months, including: (i) U.S. Government securities, including bills, 
notes, and bonds differing as to maturity and rates of interest, 
which are either issued or guaranteed by the U.S. Treasury or by 
U.S. Government agencies or instrumentalities; (ii) certificates of 
deposit issued against funds deposited in a bank or savings and loan 
association; (iii) bankers acceptances, which are short-term credit 
instruments used to finance commercial transactions; (iv) repurchase 
agreements and reverse repurchase agreements; (v) bank time 
deposits, which are monies kept on deposit with banks or savings and 
loan associations for a stated period of time at a fixed rate of 
interest; (vi) commercial paper, which are short-term unsecured 
promissory notes; and (vii) money market funds.
---------------------------------------------------------------------------

S&P 500 FLEX Options
    The market for options contracts on the S&P 500 traded on CBOE, 
including FLEX Options, is among the most liquid markets in the world 
[sic] S&P 500 FLEX Options are a subset of S&P 500 options traded on 
the CBOE.\9\ In 2016, 1,023,623 options contracts on the S&P 500 were 
traded per day on CBOE, which is more than $200 billion in notional 
volume traded on a daily basis.\10\ While, as described below, FLEX 
Options are traded differently than traditional options contracts, the 
Exchange believes that the liquidity and arbitrage opportunities of the 
S&P 500 bolsters the market for FLEX Options, as described below.
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    \9\ See https://www.theocc.com/webapps/flex-reports. Unless 
otherwise noted, all statistics provided herein are based on 
information from the Options Clearing Corporation.
    \10\ As of July 24, 2017, FLEX Options on the S&P 500 had open 
interest of 349,596 contracts.
---------------------------------------------------------------------------

    FLEX Options on the S&P 500 are quoted by the same market makers 
that trade traditional options contracts. Every FLEX Option order 
submitted to CBOE is exposed to a competitive auction process for price 
discovery. The process begins with a request for quote (``RFQ'') in 
which the interested party establishes the terms of the FLEX Options 
contract. The RFQ solicits interested market participants, including 
on-floor market makers, remote market makers trading electronically, 
and member firm traders, to respond to the RFQ with bids or offers 
through a competitive process. This solicitation contains all of the 
contract specifications-underlying, size, type of option, expiration 
date, strike price, exercise style and settlement basis. During a 
specified amount of time, responses to the RFQ are received and at the 
end of that time period, the initiator can decide whether to accept the 
best bid or offer. The process occurs under the rules of CBOE which 
means that customer transactions are effected according to the 
principles of a fair and orderly market following trading procedures 
and policies developed by

[[Page 42006]]

CBOE. By way of example, during June and July 2017, the Sub-Adviser 
traded 2,500 FLEX Option S&P 500 contracts with a notional exposure of 
$626 million. The trades were executed at approximately .25% from the 
mid-market mark, which is similar to the transaction costs of exchange 
traded funds of similar size.
    The Exchange believes that sufficient protections are in place to 
protect against market manipulation of the Funds' Shares and FLEX 
Options on the S&P 500 for several reasons: (i) The liquidity in the 
market for options on the S&P 500; (ii) the competitive quoting process 
for FLEX Options; (iii) the diversity, liquidity, and market cap of the 
securities underlying the S&P 500; and (iv) surveillance by the 
Exchange, CBOE and the Financial Industry Regulatory Authority 
(``FINRA'') designed to detect violations of the federal securities 
laws and self-regulatory organization (``SRO'') rules; [sic].
    Trading in the Shares and the underlying investments will be 
subject to the federal securities laws and Exchange, CBOE and FINRA 
rules and surveillance programs.\11\ In this regard, the Exchange has 
in place a surveillance program for transactions in ETFs to ensure the 
availability of information necessary to detect and deter potential 
manipulations and other trading abuses, thereby making the Shares less 
readily susceptible to manipulation as assets in the portfolio--
comprised primarily of FLEX Options on the S&P 500--will be acquired in 
extremely liquid and highly regulated markets.
---------------------------------------------------------------------------

    \11\ The Exchange notes that CBOE is a member of the Option 
Price Regulatory Surveillance Authority, which was established in 
2006, to provide efficiencies in looking for insider trading and 
serves as a central organization to facilitate collaboration in 
insider trading and investigations for the U.S. options exchanges. 
For more information, see http://www.cboe.com/aboutcboe/legal/departments/orsareg.aspx.
---------------------------------------------------------------------------

    As noted above, options on the S&P 500 are among the most liquid 
options in the world and derive their value from the actively traded 
S&P 500 Index components. The contracts are cash-settled with no 
delivery of stocks or ETFs, and trade in competitive auction markets 
with price and quote transparency. The Exchange believes the highly 
regulated options markets and the broad base and scope of the S&P 500 
Index make securities that derive their value from the index less 
susceptible to market manipulation in view of market capitalization and 
liquidity of the S&P 500 components, price and quote transparency, and 
arbitrage opportunities.
    The Exchange believes that the efficiency and liquidity of the 
markets for S&P 500 securities, options on the S&P 500, including FLEX 
Options, and other related derivatives are sufficiently great to deter 
fraudulent or manipulative acts associated with the Funds' Shares 
price. The Exchange also believes that such efficiency and liquidity 
are sufficient to support the creation and redemption mechanism. 
Coupled with the extensive surveillance programs of the SROs described 
above, the Exchange does not believe that trading in the Fund's Shares 
would present manipulation concerns.
    The Exchange represents that, except as described above, the Funds 
will meet each of the initial and continued listing criteria in BZX 
Rule 14.11(c) with the exception Rule 14.11(c)(3)(A)(i), applicable to 
the listing of Index Fund Shares based upon an index of ``U.S. 
Component Stocks.'' The Trust is required to comply with Rule 10A-3 
under the Act for the initial and continued listing of the Shares of 
the Fund. In addition, the Exchange represents that the Shares of the 
Funds will comply with all other requirements applicable to Index Fund 
Shares including, but not limited to, requirements relating to the 
dissemination of key information such as the Disclosed Portfolio, Net 
Asset Value, and the Intraday Indicative Value, rules governing the 
trading of equity securities, trading hours, trading halts, 
surveillance, and the information circular, as set forth in Exchange 
rules applicable to Index Fund Shares and the orders approving such 
rules. Moreover, all of the options contracts held by the Funds will 
trade on markets that are a member of Intermarket Surveillance Group 
(``ISG'') or affiliated with a member of ISG or with which the Exchange 
has in place a comprehensive surveillance sharing agreement.\12\ All 
statements and representations made in this filing regarding the index 
composition, the description of the portfolio or reference assets, 
limitations on portfolio holdings or reference assets, dissemination 
and availability of index, reference asset, and intraday indicative 
values, and the applicability of Exchange rules specified in this 
filing shall constitute continued listing requirements for the Funds. 
The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund or the Shares to comply with the 
continued listing requirements, and, pursuant to its obligations under 
Section 19(g)(1) of the Act, the Exchange will surveil for compliance 
with the continued listing requirements. If the Fund or the Shares are 
not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under Exchange Rule 14.12.
---------------------------------------------------------------------------

    \12\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com. The Exchange notes that not all 
components of the Disclosed Portfolio for the Fund may trade on 
markets that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \13\ in general and Section 6(b)(5) of the Act \14\ 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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f.
    \14\ 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, 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 in that the Shares of each 
Fund will meet each of the initial and continued listing criteria in 
BZX Rule 14.11(c) with the exception Rule 14.11(c)(3)(A)(i), applicable 
to the listing of Index Fund Shares based upon an index of ``U.S. 
Component Stocks.'' Specifically, Rule 14.11(c)(3)(A)(i) sets forth the 
requirements to be met by components of an index or portfolio of U.S. 
Component Stocks. Because the Index consists of FLEX Options, rather 
than ``U.S. Component Stocks'' as defined in Rule 14.11(c)(1)(D), the 
Index does not satisfy the requirements of Rule 14.11(c)(3)(A)(i).\15\ 
The Exchange

[[Page 42007]]

believes that the concerns that Rule 14.11(c)(3)(A)(i) are intended to 
address are mitigated by: (i) The liquidity in the market for options 
on the S&P 500; \16\ (ii) the competitive quoting process for FLEX 
Options; and (iii) the diversity, liquidity, and market cap of the 
securities underlying the S&P 500.
---------------------------------------------------------------------------

    \15\ Rule 14.11(c)(3)(A)(i)(e) provides that all securities in 
the applicable index or portfolio shall be U.S. Component Stocks 
listed on a national securities exchange and shall be NMS Stocks as 
defined in Rule 600 under Regulation NMS of the Act. Each component 
stock of the S&P 500 is a U.S. Component Stock that is listed on a 
national securities exchange and is an NMS Stock. Options are 
excluded from the definition of NMS Stock. The Funds and the Indexes 
meet all of the requirements of the listing standards for Index Fund 
Shares in Rule 14.11(c)(3), except the requirements in Rule 
14.11(c)(3)(A)(i)(a)-(e), as the Index consists of options on U.S. 
Component Stocks. The S&P 500 consists of U.S. Component Stocks and 
satisfies the requirements of Rule 14.11(c)(3)(A)(i)(a)-(e).
    \16\ In 2016, 1,023,623 options contracts on the S&P 500 were 
traded per day on CBOE, which is more than $200 billion in notional 
volume traded on a daily basis.
---------------------------------------------------------------------------

    Further, trading in the Shares and the underlying Fund investments 
will be subject to the federal securities laws and Exchange, CBOE and 
FINRA rules and surveillance programs.\17\ In this regard, the Exchange 
has in place a surveillance program for transactions in ETFs to ensure 
the availability of information necessary to detect and deter potential 
manipulations and other trading abuses, thereby making the Shares less 
readily susceptible to manipulation as assets in the portfolio--
comprised primarily of FLEX Options on the S&P 500--will be acquired in 
extremely liquid and highly regulated markets.
---------------------------------------------------------------------------

    \17\ The Exchange notes that CBOE is a member of the Option 
Price Regulatory Surveillance Authority, which was established in 
2006, to provide efficiencies in looking for insider trading and 
serves as a central organization to facilitate collaboration in 
insider trading and investigations for the U.S. options exchanges. 
For more information, see http://www.cboe.com/aboutcboe/legal/departments/orsareg.aspx.
---------------------------------------------------------------------------

    As noted above, options on the S&P 500 are among the most liquid 
options in the world and derive their value from the actively traded 
S&P 500 Index components. The contracts are cash-settled with no 
delivery of stocks or ETFs, and trade in competitive auction markets 
with price and quote transparency. The Exchange believes the highly 
regulated options markets and the broad base and scope of the S&P 500 
Index make securities that derive their value from the index less 
susceptible to market manipulation in view of market capitalization and 
liquidity of the S&P 500 components, price and quote transparency, and 
arbitrage opportunities.
    The Exchange believes that the efficiency and liquidity of the 
markets for S&P 500 securities, options on the S&P 500, and other 
related derivatives are sufficiently great to deter fraudulent or 
manipulative acts associated with the Funds' Shares price. The Exchange 
also believes that such efficiency and liquidity are sufficient to 
support the creation and redemption mechanism. Coupled with the 
extensive surveillance programs of the SROs described above, the 
Exchange does not believe that trading in the Fund's Shares would 
present manipulation concerns.
    The Exchange represents that, except as described above, the Funds 
will satisfy, on an initial and continued listing basis, all of the 
generic listing standards under BZX Rule 14.11(c)(3)(A)(i) and all 
other applicable requirements for Index Fund Shares under Rule 
14.11(c). The Trust is required to comply with Rule 10A-3 under the Act 
for the initial and continued listing of the Shares of the Fund. In 
addition, the Exchange represents that the Shares of the Funds will 
comply with all other requirements applicable to Index Fund Shares 
including, but not limited to, requirements relating to the 
dissemination of key information such as the Disclosed Portfolio, Net 
Asset Value, and the Intraday Indicative Value, rules governing the 
trading of equity securities, trading hours, trading halts, 
surveillance, and the information circular, as set forth in Exchange 
rules applicable to Index Fund Shares and the orders approving such 
rules. Moreover, all of the options contracts held by the Funds will 
trade on markets that are a member of ISG or affiliated with a member 
of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.\18\ All statements and representations 
made in this filing regarding the index composition, the description of 
the portfolio or reference assets, limitations on portfolio holdings or 
reference assets, dissemination and availability of index, reference 
asset, and intraday indicative values, and the applicability of 
Exchange rules specified in this filing shall constitute continued 
listing requirements for the Fund. The issuer has represented to the 
Exchange that it will advise the Exchange of any failure by the Fund or 
the Shares to comply with the continued listing requirements, and, 
pursuant to its obligations under Section 19(g)(1) of the Act, the 
Exchange will surveil for compliance with the continued listing 
requirements. If the Fund or the Shares are not in compliance with the 
applicable listing requirements, the Exchange will commence delisting 
procedures under Exchange Rule 14.12.
---------------------------------------------------------------------------

    \18\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com. The Exchange notes that not all 
components of the Disclosed Portfolio for the Fund may trade on 
markets that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    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 an 
additional type of Index Fund Shares 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 up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Exchange Act. Comments may be submitted 
by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BatsBZX-2017-56 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-2017-56. This 
file number should be included on the subject line if email is used. To 
help the

[[Page 42008]]

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 (http://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-2017-56 and should 
be submitted on or before September 26, 2017.
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-18660 Filed 9-1-17; 8:45 am]
 BILLING CODE 8011-01-P