Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of the WisdomTree CBOE Russell 2000 PutWrite Strategy Fund, a Series of the WisdomTree Trust, Under Rule 14.11(c)(3), Index Fund Shares, 42399-42407 [2017-18935]

Download as PDF Federal Register / Vol. 82, No. 172 / Thursday, September 7, 2017 / Notices consequences. By doing so, the proposed rule change would provide for the public disclosure of the rules and procedures through which FICC assesses, collects and withholds certain margin charges, credits and/or entitlements from members on the Watch List. By providing information regarding the assessment, collection and withholding of certain margin charges and other consequences of the Watch List, the proposed rule change would also enable FICC’s members to identify and evaluate the risks and material costs they incur by participating in FICC. As such, FICC believes the proposed rule change is consistent with Rule 17Ad– 22(e)(23)(i) and (ii) under the Act.23 (B) Clearing Agency’s Statement on Burden on Competition FICC does not believe that the proposed rule change would impact competition.24 The proposed rule change provides interpretive guidance with respect to existing Rules and would increase the transparency of the Rules regarding the Watch List and its impact on FICC members’ respective Clearing Fund deposits and other consequences by clarifying FICC’s current practices with respect to the assessment, collection and withholding of certain margin charges, credits and/ or entitlements from members on the Watch List. The proposed rule change would not change such current practices. As such, FICC believes that the proposed rule change will not impact FICC members or have any impact on competition. mstockstill on DSK30JT082PROD with NOTICES (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments relating to this proposed rule change have not been solicited or received. FICC will notify the Commission of any written comments received by FICC. III. Date of Effectiveness of the Proposed Rule Change, and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 25 and paragraph (f) of Rule 19b–4 thereunder.26 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the 23 17 CFR 240.17Ad–22(e)(23)(i), (ii). U.S.C. 78q–1(b)(3)(I). 25 15 U.S.C. 78s(b)(3)(A). 26 17 CFR 240.19b–4(f). 24 15 VerDate Sep<11>2014 17:42 Sep 06, 2017 Jkt 241001 public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– FICC–2017–019 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. All submissions should refer to File Number SR–FICC–2017–019. 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 FICC and on DTCC’s Web site (http://dtcc.com/legal/sec-rulefilings.aspx). 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–FICC– 2017–019 and should be submitted on or before September 28, 2017. PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 42399 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–18936 Filed 9–6–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81510; File No. SR– BatsBZX–2017–53] Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of the WisdomTree CBOE Russell 2000 PutWrite Strategy Fund, a Series of the WisdomTree Trust, Under Rule 14.11(c)(3), Index Fund Shares August 31, 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 18, 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 the WisdomTree CBOE Russell 2000 PutWrite Strategy Fund, a series of the WisdomTree 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 27 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\07SEN1.SGM 07SEN1 42400 Federal Register / Vol. 82, No. 172 / Thursday, September 7, 2017 / Notices places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change mstockstill on DSK30JT082PROD with NOTICES 1. Purpose The Exchange proposes to list and trade shares (‘‘Shares’’) of the WisdomTree CBOE Russell 2000 PutWrite Strategy Fund (‘‘Fund’’) under Rule 14.11(c)(3), which governs the listing and trading of Index Fund Shares on the Exchange. The Fund will be an index-based exchange traded fund (‘‘ETF’’). The Shares will be offered by the WisdomTree Trust (‘‘Trust’’), which was established as a Delaware statutory trust on December 15, 2005. 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 Fund.3 The Fund’s investment objective is to seek investment results that track the price and yield performance, before fees and expenses, of the CBOE Russell 2000 PutWrite Index (‘‘Index’’). The Index was developed and is maintained by the Chicago Board Options Exchange, Inc. (‘‘CBOE’’ or the ‘‘Index Provider’’), used under license from The Frank Russell Company. None of the Trust, WisdomTree Asset Management, Inc. (the ‘‘Adviser’’), Mellon Capital Management (the ‘‘Sub-Adviser’’), State Street Bank and Trust Company (the ‘‘Administrator, ‘‘Custodian,’’ and ‘‘Transfer Agent’’), or Foreside Fund Services, LLC (the ‘‘Distributor’’) is affiliated with the Index Provider. The Index tracks the value of a passive investment strategy, which consists of selling (or ‘‘writing’’) Russell 2000 Index put options (‘‘RUT Puts’’) and investing the sale proceeds in onemonth Treasury bills (‘‘RUT Strategy’’). The RUT Puts are struck at-the-money and are sold on a monthly basis, usually the third Friday of the month (i.e., the ‘‘Roll Date’’), which matches the expiration date of the RUT Puts. All RUT Puts are standardized options traded on the CBOE. The Index consists of only two components: RUT Puts and one-month Treasury bills. 3 See Post-Effective Amendment No. 595 to Registration Statement on Form N–1A for the Trust, dated July 27, 2017 (File Nos. 333–132380 and 811– 21864). The descriptions of the Fund and the Shares contained herein are based on information in the Registration Statement. VerDate Sep<11>2014 17:42 Sep 06, 2017 Jkt 241001 The Exchange is submitting this proposed rule change because the Index for the Fund does not meet the listing requirements of Rule 14.11(c)(5) applicable to an Index that consists of both U.S. Component Stocks 4 and Fixed Income Securities,5 which requires that the equity and fixed income component securities separately meet the criteria set forth in Rule 14.11(c)(3)(A)(i) and 14.11(c)(4), respectively. Specifically, the Fund does 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. 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 primarily of RUT Puts, 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 The Fixed Income Security component of the Index, which consists of only onemonth Treasury bills, meets the ‘‘generic’’ listing requirements of Rule 14.11(c)(4). The Shares will conform to the initial and continued listing criteria under Rule 14.11(c), except that the Index will 4 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. 5 As defined in Rule 14.11(c)(4), the term ‘‘Fixed Income Security’’ shall mean debt securities that are notes, bonds, debentures or evidence of indebtedness that include, but are not limited to, U.S. Department of Treasury securities (‘‘Treasury Securities’’), government-sponsored entity securities (‘‘GSE Securities’’), municipal securities, trust preferred securities supranational debt and debt of a foreign country or subdivision thereof. 6 The Exchange notes that the Russell 2000 Index has been previously approved by the Commission under Section 19(b)(2) of the Act in connection with the listing and trading of FLEX Options and Quarterly Index Options, as well as other securities. See, e.g., Securities Exchange Act Release Nos. 32694 (July 29, 1993), 58 FR 41814 (July 5, 1993) (approving the listing and trading of FLEX Options based on the Russell 2000 Index); 32693 (July 29, 1993), 58 FR 41817 (August 5, 1993) (approving the listing and trading of Quarterly Index Option based on the Russell 2000 Index). 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 Russell 2000 Index 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 Fund and the Index 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 Russell 2000 Index consists of U.S. Component Stocks and satisfies the requirements of Rule 14.11(c)(3)(A)(i)(a)–(e). PO 00000 Frm 00132 Fmt 4703 Sfmt 4703 not meet the requirements of Rule 14.11(c)(3)(A)(i)(a)–(e) in that the Index will consist of one series of options based on U.S. Component Stocks (i.e., RUT Puts), rather than U.S. Component Stocks. The Exchange notes that the Commission has previously approved a fund that employs a very similar strategy.7 WisdomTree CBOE Russell 2000 PutWrite Strategy Fund Index Methodology The Fund seeks to track the performance of an underlying index, the CBOE Russell 2000 PutWrite Index (‘‘Index’’). The Index is based on a passive investment strategy which consists of overlapping hypothetical investments in a single series of exchange-listed Russell 2000 Index options (‘‘RUT Puts’’) over a money market account hypothetically invested in one-month Treasury bills. Specifically, the Index hypothetically writes at-the-money RUT Puts on a monthly basis, usually on the third Friday of the month (i.e., the Roll Date), which matches the expiration date of the hypothetical RUT Puts. All RUT Puts hypothetically invested in by the Index are standardized options traded on the CBOE. At each Roll Date, any settlement loss in the Index based on the expiring RUT Puts is financed by the Treasury bill account and a new batch of hypothetical at-the-money RUT Puts is sold. Revenue from their sale is added to the Index’s hypothetical Treasury bill account. On each Roll Date, the revenue from the hypothetical sale of RUT Puts is hypothetically invested separately at the one-month Treasury bill rate, and where applicable, any one-month Treasury bills purchased in the prior month are deemed to mature and hypothetically invested in new onemonth Treasury bills at the one-month Treasury bill rate. As stated above, all investments used to determine Index value are hypothetical. Fund’s Investment Methodology Under Normal Market Conditions,8 the Fund will invest not less than 80% 7 See Securities Exchange Act Release Nos. 74675 (April 8, 2015), 80 FR 20038 (April 14, 2015) (order approving proposed rule change to list shares of the Wisdom Tree Put Write Strategy Fund) and 77045 (February 3, 2016), 81 FR 6916 (February 9, 2016) (order approving a proposed rule change relating to the index underlying the WisdomTree Put Write Strategy Fund). 8 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 manmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption, or any similar E:\FR\FM\07SEN1.SGM 07SEN1 Federal Register / Vol. 82, No. 172 / Thursday, September 7, 2017 / Notices mstockstill on DSK30JT082PROD with NOTICES of its assets in RUT Puts and one month or three-month U.S. Treasury bills. The Fund may invest up to 20% of its net assets (in the aggregate) in other investments, that are not included in the Index, but which the Adviser or the Sub-Adviser believes will help the Fund to track the Index and that will be disclosed daily (‘‘Other Assets’’). The Fund’s investment strategy will be designed to write a sequence of onemonth, at-the-money, RUT Puts and invest cash and Other Assets targeted to achieve one-month Treasury bill rates. The number of RUT Puts written will vary from month to month, but will be limited to permit the amount held in the Fund’s investment in Treasury bills to finance the maximum possible loss from final settlement of the RUT Puts. According to the Registration Statement, the Fund will generally use a sampling strategy in seeking to track the Index. The new RUT Puts will be struck and sold on a monthly basis on the Roll Date, (i.e., the same Roll Date at that used by the Index), which matches the expiration date of the current RUT Puts. The strike price of the new RUT Puts will be based on the strike price of Russell 2000 Index put options listed on the CBOE with the closest strike price below the last value of the Russell 2000 Index reported before 11:00 a.m. ET. For example, if the last Russell 2000 Index value reported before 11:00 a.m. ET is 1,137.02 and the closest listed Russell 2000 Index put option with a strike price below 1,137.02 is 1,130, then the 1,130 strike RUT put option will be sold by the Fund. Russell 2000 Index options traded on CBOE are highly liquid, with average daily trading volume in 2016 of 71,365 contracts, with a notional size per contract of $117,169. The Exchange represents that the daily trading volume of at-the-money 30-day RUT Puts on each of the three recent Roll Dates was as follows: For Roll Date of April 21, 2017 (expiry May 19, 2017), strike price of 1375, 315 contracts on Roll Date, 209 average contracts per day through expiration; for Roll Date of May 19, 2017 (expiry June 16, 2017), strike price of 1370, 1,133 contracts on Roll Date, 701 average contracts per day through expiration; and for Roll Date of June 16, 2017 (expiry July 21, 2017), strike price of 1400, 545 contracts on Roll Date, 527 intervening circumstance. In response to adverse market, economic, political, or other conditions, the Fund reserves the right to invest in U.S. government securities, other money market instruments (as defined below), and cash, without limitation, as determined by the Adviser or Sub-Adviser. In the event the Fund engages in these temporary defensive strategies that are inconsistent with its investment strategies, the Fund’s ability to achieve its investment objectives may be limited. VerDate Sep<11>2014 17:42 Sep 06, 2017 Jkt 241001 average contracts per day through expiration.9 Moreover, the proceeds of the sales of the RUT Puts will be invested in U.S. Treasury bills, which are also highly liquid instruments. The daily high, low and last reported sales prices on each of the Roll Dates for RUT Puts at-the-money are as follows: Roll Date of April 21, 2017 (expiry May 19, 2017, strike price of 1375, daily high: $23.54, low: $21.88, last: $22.40; Roll Date of May 19, 2017 (expiry June 16, 2017), strike price of 1370, daily high: $27.39, low: $20.15, last: $23.97; and Roll Date of June 16, 2017 (expiry July 21, 2017), strike price of 1400, daily high: $24.90, low: $18.46, last: $18.67.10 The Exchange estimates that on launch date, the Fund would hold approximately $2.5–$5.0 million in cash and cash equivalents (e.g., one-month Treasury bills). This estimate is based on a minimum of 100,000–200,000 Shares being created at an estimated initial offering price of $25 per Share. The Exchange believes that sufficient protections are in place to protect against market manipulation of the Fund’s Shares and RUT Puts for several reasons: (i) Surveillance by the Exchange, CBOE 11 and the Financial Industry Regulatory Authority (‘‘FINRA’’) designed to detect violations of the federal securities laws and selfregulatory organization (‘‘SRO’’) rules; (ii) the large number of financial instruments tied to the specified securities; and (iii) the ETF creation/ redemption arbitrage mechanism tied to the large pool of liquidity of the Fund’s underlying investments, as more fully described below. 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.12 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 RUT Puts and U.S. Treasury bills—will 9 Source: CBOE. CBOE. 11 The Exchange notes that CBOE is a member of the Intermarket Surveillance Group (‘‘ISG’’). 12 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. 10 Source: PO 00000 Frm 00133 Fmt 4703 Sfmt 4703 42401 be acquired in extremely liquid and highly regulated markets. Russell 2000 index options are among the most liquid options in the U.S. and derive their value from the actively traded Russell 2000 Index components. RUT Puts 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 Russell 2000 Index options markets and the broad base and scope of the Russell 2000 Index make securities that derive their value from the index, including RUT Puts, less susceptible to market manipulation in view of market capitalization and liquidity of the Russell 2000 Index components, price and quote transparency, and arbitrage opportunities. Because the pricing of the Shares is tied to the Fund’s underlying assets (RUT Puts and U.S. Treasury bills), all of which are traded in efficient, diversified and liquid markets, the Exchange also expects the liquidity in the congruent creation/redemption arbitrage mechanism to keep the Shares’ market pricing in line such that the Shares’ pricing would not materially differ from their net asset value. The Exchange believes that the efficiency and liquidity of the markets for RUT Puts, related derivatives, and U.S. Treasury bills are sufficiently great to deter fraudulent or manipulative acts associated with the Fund’s Shares price. 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. Other Assets The Fund may invest up to 20% of its net assets (in the aggregate) in Other Assets. Other Assets includes only the following: Short-term, high quality securities issued or guaranteed by the U.S. government and non-U.S. governments,13 and each of their agencies and instrumentalities; U.S. government sponsored enterprises; repurchase agreements backed by U.S. government and non-U.S. government securities; money market mutual funds; deposit and other obligations of U.S. and non-U.S. banks and financial institutions (‘‘money market 13 The Treasury securities in which the Fund may invest will include variable rate Treasury securities, whose rates are adjusted daily (or at such other increment as may later be determined by the Department of the Treasury) to generally correspond with the rate paid on one-month Treasury securities. E:\FR\FM\07SEN1.SGM 07SEN1 42402 Federal Register / Vol. 82, No. 172 / Thursday, September 7, 2017 / Notices mstockstill on DSK30JT082PROD with NOTICES instruments’’); 14 Russell 2000 ETF put options,15 Russell 2000 Index futures and/or options on Russell 2000 Index futures; 16 total return swaps; 17 other exchange traded products (‘‘ETPs’’); 18 non-exchange-traded registered openend investment companies (i.e., mutual 14 All money market instruments acquired by the Fund will be rated investment grade, except that a Fund may invest in unrated money market instruments that are deemed by the Adviser or SubAdviser to be of comparable quality to money market securities rated investment grade. The term ‘‘investment grade,’’ for purposes of money market instruments only, is intended to mean securities rated A1 or A2 by one or more nationally recognized statistical rating organizations. 15 The Fund may invest up to 10% of its assets in over-the-counter Russell 2000 put options (‘‘OTC Russell 2000 Index put options’’). 16 The Fund will limit its direct investments in futures and options on futures to the extent necessary for the Adviser to claim the exclusion from regulation as a ‘‘commodity pool operator’’ with respect to the Fund under Rule 4.5 promulgated by the Commodity Futures Trading Commission (‘‘CFTC’’), as such rule may be amended from time to time. Under Rule 4.5 as currently in effect, the Fund would limit its trading activity in futures and options on futures (excluding activity for ‘‘bona fide hedging purposes,’’ as defined by the CFTC) such that it will meet one of the following tests: (i) Aggregate initial margin and premiums required to establish its futures and options on futures positions will not exceed 5% of the liquidation value of the Fund’s portfolio, after taking into account unrealized profits and losses on such positions; or (ii) aggregate net notional value of its futures and options on futures positions will not exceed 100% of the liquidation value of the Fund’s portfolio, after taking into account unrealized profits and losses on such positions. The exchange-listed futures contracts in which the Fund may invest will be listed on exchanges in the U.S. Each of the exchange-listed futures contracts in which the Fund may invest will be listed on exchanges that are members of ISG. 17 The Fund may use total return swaps to create positions equivalent to investments in RUT Puts and the component securities underlying the Russell 2000 Index. The Fund’s investments in total return swap agreements will be backed by investments in U.S. government securities in an amount equal to the exposure of such contracts. 18 The Fund may invest in shares of both taxable and tax-exempted money market funds. When used herein, ETPs may include, without limitation, Index Fund Shares (as described in Rule 14.11(c)); Linked Securities (as described in Rule 14.11(d)); Portfolio Depositary Receipts (as described in Rule 14.11(b)); Trust-Issued Receipts (as described in Rule 14.11(f)); Commodity-Based Trust Shares (as described in Rule 14.11(e)(4)); Currency Trust Shares (as described in Rule 14.11(e)(5)); Commodity Index Trust Shares (as described in Rule 14.11(e)(6)); Trust Units (as described in Rule 14.11(e)(9)); Managed Fund Shares (as described in Rule 14.11(i)), and closed-end funds. The ETPs in which the Fund may invest all will be listed and traded on U.S. exchanges. The Fund may invest in the securities of ETPs registered under the 1940 Act consistent with the requirements of Section 12(d)(1) of the 1940 Act or any rule, regulation or order of the Commission or interpretation thereof. The Fund will only make such investments in conformity with the requirements of Section 817 of the Internal Revenue Code of 1986. The ETPs in which the Fund may invest will primarily be index-based ETFs that hold substantially all of their assets in securities representing a specific index. The Fund will not invest in leveraged (e.g., 2X, ¥2X, 3X, or ¥3X) ETPs. VerDate Sep<11>2014 17:42 Sep 06, 2017 Jkt 241001 funds); and variable or floating interest rate securities.19 The foregoing investments shall include buying the applicable derivative instrument or selling the applicable derivative instrument (i.e., writing the applicable put option) and investing the proceeds. Investment Restrictions The Fund may hold up to an aggregate of 15% of its net assets in illiquid assets (calculated at the time of investment). The Fund will monitor its portfolio liquidity on an ongoing basis to determine whether, in light of current circumstances, an adequate level of liquidity is being maintained, and will consider taking appropriate steps in order to maintain adequate liquidity if through a change in values, net assets, or other circumstances, more than 15% of the Fund’s net assets are held in illiquid assets. Illiquid assets include securities subject to contractual or other restrictions on resale and other instruments that lack readily available markets as determined in accordance with Commission staff guidance.20 The Fund will not invest in any nonU.S. equity securities. The Fund’s investments will be consistent with the Fund’s investment objective and will not be used to enhance leverage.21 19 The Fund may invest in securities (in addition to U.S. Treasury securities, described above) that have variable or floating interest rates which are readjusted on set dates (such as the last day of the month) in the case of variable rates or whenever a specified interest rate change occurs in the case of a floating rate instrument. Variable or floating interest rates generally reduce changes in the market price of securities from their original purchase price because, upon readjustment, such rates approximate market rates. Accordingly, as interest rates decrease or increase, the potential for capital appreciation or depreciation is less for variable or floating rate securities than for fixed rate obligations. 20 The Commission has stated that long-standing Commission guidelines have required open-end funds to hold no more than 15% of their net assets in illiquid securities and other illiquid assets. See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 14618 (March 18, 2008), footnote 34. See also, Investment Company Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) (Statement Regarding ‘‘Restricted Securities’’); Investment Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) (Revisions of Guidelines to Form N–1A). A fund’s portfolio security is illiquid if it cannot be disposed of in the ordinary course of business within seven days at approximately the value ascribed to it by the fund. See Investment Company Act Release No. 14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a–7 under the 1940 Act); Investment Company Act Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under the Securities Act of 1933 (15 U.S.C. 77a). 21 The Fund will include appropriate risk disclosure in its offering documents, including leveraging risk. Leveraging risk is the risk that certain transactions of a fund, including a fund’s use of derivatives, may give rise to leverage, causing a fund to be more volatile than if it had not been PO 00000 Frm 00134 Fmt 4703 Sfmt 4703 In order to reduce interest rate risk, the Fund will generally maintain a weighted average portfolio maturity of 180 days or less on average (not to exceed 18 months) and will not purchase any money market instrument with a remaining maturity of more than 397 calendar days. The ‘‘average portfolio maturity’’ of a Fund is the average of all current maturities of the individual securities in the Fund’s portfolio. The Fund’s actual portfolio duration may be longer or shorter depending on market conditions. The 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.22 The Fund will invest its respective assets, and otherwise conduct its operations, in a manner that is intended to satisfy the qualifying income, diversification and distribution requirements necessary to establish and maintain RIC qualification under Subchapter M. The Fund is to be considered ‘‘non-diversified.’’ A nondiversified classification means that the Fund is not limited by the 1940 Act with regard to the percentage of total assets that be invested in the securities of a single issuer. As a result, the Fund may invest more of its total assets in the securities of a single issuer or a smaller number of issuers than if it were classified as a diversified fund. Creation and Redemption of Shares According to the Registration Statement, the Fund will issue and redeem Shares on a continuous basis at net asset value (‘‘NAV’’),23 only in large blocks of shares (‘‘Creation Units’’), in transactions with Authorized Participants. Creation Units generally will consist of 50,000 Shares, though this may change from time to time. Creation Units are not expected to consist of less than 25,000 Shares. The consideration for purchase of a Creation Unit of the Fund generally will consist of either (i) the in-kind deposit of a designated portfolio of securities (the ‘‘Deposit Securities’’) per Creation leveraged. To mitigate leveraging risk, the Adviser will segregate or earmark liquid assets or otherwise cover the transactions that give rise to such risk. See 15 U.S.C. 80a–18; Investment Company Act Release No. 10666 (April 18, 1979), 44 FR 25128 (April 27, 1979); Dreyfus Strategic Investing, Commission NoAction Letter (June 22, 1987); Merrill Lynch Asset Management, L.P., Commission No-Action Letter (July 2, 1996). 22 26 U.S.C. 851. 23 The NAV of the Fund’s Shares generally will be calculated once daily Monday through Friday as of the close of regular trading on the New York Stock Exchange (NYSE’’), generally 4:00 p.m. ET (the ‘‘NAV Calculation Time’’). NAV per Share will be calculated by dividing the Fund’s net assets by the number of Fund shares outstanding. E:\FR\FM\07SEN1.SGM 07SEN1 mstockstill on DSK30JT082PROD with NOTICES Federal Register / Vol. 82, No. 172 / Thursday, September 7, 2017 / Notices Unit and the ‘‘Cash Component’’ (defined below), computed as described below or (ii) the cash value of the Deposit Securities (‘‘Deposit Cash’’) and the ‘‘Cash Component,’’ computed as described below. Because non-exchange traded derivatives and certain listed derivatives are not currently eligible for in-kind transfer, they will be substituted with an amount of cash of equal value (i.e., Deposit Cash) when the Fund processes purchases of Creation Units in-kind. Specifically, the Fund will not accept exchange-traded or over-thecounter options, exchange traded futures (or options on futures), and total return swaps as Deposit Securities. When accepting purchases of Creation Units for cash, the Fund may incur additional costs associated with the acquisition of Deposit Securities that would otherwise be provided by an inkind purchase. Together, the Deposit Securities or Deposit Cash, as applicable, and the Cash Component constitute the ‘‘Fund Deposit,’’ which represents the minimum initial and subsequent investment amount for a Creation Unit of the Fund. The Cash Component is an amount equal to the difference between the NAV of the Shares (per Creation Unit) and the market value of the Deposit Securities or Deposit Cash, as applicable. The Cash Component serves the function of compensating for any difference between the NAV per Creation Unit and the market value of the Deposit Securities or Deposit Cash, as applicable. A portfolio composition file, to be sent via the National Securities Clearing Corporation (‘‘NSCC’’), will be made available on each business day, prior to the opening of business on the Exchange (currently 9:30 a.m. ET) containing a list of the names and the required amount of each security in the Deposit Securities to be included in the current Fund Deposit for the Fund (based on information about the Fund’s portfolio at the end of the previous business day). In addition, on each business day, the estimated Cash Component, effective through and including the previous business day, will be made available through NSCC. The Fund Deposit is subject to any applicable adjustments as described in the Registration Statement. All purchase orders must be placed by an ‘‘Authorized Participant.’’ An Authorized Participant must be either a broker-dealer or other participant in the Continuous Net Settlement System (‘‘Clearing Process’’) of the NSCC or a participant in The Depository Trust Company (‘‘DTC’’) with access to the DTC system, and must execute an agreement with the Distributor that VerDate Sep<11>2014 17:42 Sep 06, 2017 Jkt 241001 governs transactions in the Fund’s Creation Units. In-kind portions of purchase orders will be processed though the Clearing Process when it is available. Shares of the Fund may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by the Fund through the Distributor and only on a business day. The Fund, through the NSCC, will make available immediately prior to the opening of business on each business day, the list of the names and quantities of the Fund’s portfolio securities that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form on that day (‘‘Fund Securities’’). Redemption proceeds for a Creation Unit will be paid either in-kind or in cash or a combination thereof, and Fund Securities and Deposit Securities may differ. With respect to in-kind redemptions of the Fund, redemption proceeds for a Creation Unit will consist of Fund Securities plus cash in an amount equal to the difference between the NAV of the Shares being redeemed, as next determined after a receipt of a request in proper form, and the value of the Fund Securities (the ‘‘Cash Redemption Amount’’). In the event that the Fund Securities have a value greater than the NAV of the Shares, a compensating cash payment equal to the differential will be required to be made by or through an Authorized Participant by the redeeming shareholder. Notwithstanding the foregoing, at the Trust’s discretion, an Authorized Participant may receive the corresponding cash value of the securities in lieu of the in-kind securities representing one or more Fund Securities.24 Because nonexchange traded derivatives and certain listed derivatives are not eligible for inkind transfer, they will be substituted with an amount of cash of equal value when the Fund processes redemptions of Creation Units in-kind. Specifically, the Fund will transfer the corresponding cash value of exchange-traded options, exchange-traded futures, exchangetraded options on futures contracts, and total return swap agreements in lieu of in-kind securities. For an order involving a Creation Unit to be effectuated at the Fund’s NAV on a particular day, it must be received by the Distributor by or before the deadline for such order (‘‘Order Cut-Off Time’’). 24 The Adviser represents that, to the extent the Trust effects the redemption of Shares in cash, the value of the redemption payment will equal the NAV per share. PO 00000 Frm 00135 Fmt 4703 Sfmt 4703 42403 The Order Cut-Off Time for creation and redemption orders for the Fund will be as described in the Registration Statement, but not later than 4:00 p.m. ET. A standard creation or redemption transaction fee (as applicable) will be imposed to offset transfer and other transaction costs that may be incurred by the Fund. Availability of Information The Trust’s Web site (www.wisdomtree.com), which will be publicly available prior to the public offering of Shares, will include a form of the prospectus for the Fund that may be downloaded. The Web site will include additional quantitative information updated on a daily basis, including, for the Fund: (1) The most recently reported NAV, mid-point of the bid/ask spread at the time of calculation of such NAV (the ‘‘Bid/Ask Price’’),25 and a calculation of the premium and discount of the Bid/Ask Price against the NAV; and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. On each business day, before commencement of trading in Shares during Regular Trading Hours on the Exchange, the Trust will disclose on its Web site the following information regarding each portfolio holding, as applicable to the type of holding: Ticker symbol, CUSIP number or other identifier, if any; a description of the holding (including the type of holding, 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; effective date, if any; coupon rate, if any; market value of the holding; and the percentage weighting of the holding in the Fund’s portfolio. The Web site information will be publicly available at no charge. In addition, a portfolio composition file, which will include the security names and quantities of securities and other assets required to be delivered in exchange for the Fund’s Shares, together with estimates and actual cash components, will be publicly disseminated prior to the opening of the Exchange via the NSCC. The portfolio 25 The Bid/Ask Price of the Fund will be determined using the midpoint of the highest bid and the lowest offer on the Exchange as of the time of calculation of the Fund’s NAV. The records relating to Bid/Ask Prices will be retained by the Fund and its service providers. E:\FR\FM\07SEN1.SGM 07SEN1 mstockstill on DSK30JT082PROD with NOTICES 42404 Federal Register / Vol. 82, No. 172 / Thursday, September 7, 2017 / Notices will represent one Creation Unit of the Fund. Authorized Participants may refer to the portfolio composition file for information regarding RUT Puts, shortterm U.S. Treasury Securities, money market instruments, and any other instrument that may comprise the Fund’s portfolio on a given day. Investors can also obtain the Trust’s Statement of Additional Information (‘‘SAI’’), the Fund’s Shareholder Reports, and its Form N–CSR and Form N–SAR, filed twice a year. The Trust’s SAI and Shareholder Reports will be available free upon request from the Trust, and those documents and the Form N–CSR may be viewed on screen or downloaded from the Commission’s Web site at www.sec.gov. Information regarding market price and trading volume for the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Quotation and last sale information for the Shares and any ETPs it which it invests will be available via the Consolidated Tape Association (‘‘CTA’’) high-speed line. Quotation and last sale information for U.S. exchange-listed options contracts cleared by The Options Clearing Corporation will be available via the Options Price Reporting Authority. The intra-day, closing and settlement prices of exchange-traded portfolio assets, including ETPs, futures and options will be readily available from the securities exchanges and futures exchanges trading such securities and futures, as the case may be, automated quotation systems, published or other public sources, or online information services such as Bloomberg or Reuters. Price information on fixed income portfolio securities, including money market instruments, and other Fund assets traded in the over-the-counter markets, is available from major broker-dealer firms or market data vendors, as well as from automated quotation systems, published or other public sources, or online information services. In addition, the value of the Index will be published by one or more major market data vendors every 15 seconds during Regular Trading Hours 26 on the Exchange. Information about the Index constituents, the weighting of the constituents, the Index’s methodology and the Index’s rules will be available 26 As defined in Rule 1.5(w), the term ‘‘Regular Trading Hours’’ means the time between 9:30 a.m. and 4:00 p.m. Eastern Time. VerDate Sep<11>2014 17:42 Sep 06, 2017 Jkt 241001 at no charge on the Index Provider’s Web site at www.CBOE.com. In addition, the Intraday Indicative Value (‘‘IIV’’), as defined in Rule 14.11(c)(3)(C), will be widely disseminated at least every 15 seconds during Regular Trading Hours by one or more major market vendors.27 All Fund holdings will be included in calculating the IIV. The dissemination of the IIV is intended to allow investors to determine the value of the underlying portfolio of the Fund on a daily basis and to approximate that value throughout the trading day. The intra-day, closing and settlement prices of debt securities and money market instruments will be readily available from published and other public sources or on-line information services. Price information regarding investment company securities, including ETFs, will be available from on-line information services and from the Web site for the applicable investment company security. Additional information regarding the Trust and the Shares, including investment strategies, risks, creation and redemption procedures, fees, portfolio holdings disclosures policies, distributions and taxes is included in the Registration Statement. All terms relating to the Fund that are referred to, but not defined in, this proposed rule change are defined in the Registration Statement. Initial and Continued Listing The Shares will conform to the initial and continued listing criteria under Bats Rule 14.11(c)(3), except that the Index will not meet the requirements of Rule 14.11(c)(3)(A)(i)(a)–(e) in that the Index will consist of one series of options based on U.S. Component Stocks (i.e., RUT Puts), rather than U.S. Component Stocks. The Exchange represents that, for initial and/or continued listing, the Fund will be in compliance with Rule 10A–3 28 under the Act, as provided by Rule 14.10. A minimum of 100,000 Shares for the Fund will be outstanding at the commencement of trading on the Exchange. The Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and will be made available to all market participants at the same time. 27 Currently, it is the Exchange’s understanding that several major market data vendors display and/ or make widely available IIV’s taken from the CTA or other data feeds. 28 See 17 CFR 240.10A–3. PO 00000 Frm 00136 Fmt 4703 Sfmt 4703 Trading Halts With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Funds. The Exchange will halt trading in the Shares under the conditions specified in BZX Rule 11.18. Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities and/or the financial instruments composing the daily disclosed portfolio of the Funds; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. Trading in the Shares also will be subject to Rule 14.11(c)(1)(B)(iv), which sets forth circumstances under which Shares of a Fund may be halted. Trading Rules The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. The Exchange will allow trading in the Shares from 8:00 a.m. until 5:00 p.m. Eastern Time and has the appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in BZX Rule 11.11(a), the minimum price variation for quoting and entry of orders in securities traded on the Exchange is $0.01, with the exception of securities that are priced less than $1.00, for which the minimum price variation for order entry is $0.0001. Surveillance The Exchange believes that its surveillance procedures are adequate to properly monitor the trading of the Shares on the Exchange during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws. Trading of the Shares through the Exchange will be subject to the Exchange’s surveillance procedures for derivative products, including Index Fund Shares. The issuer has represented to the Exchange that it will advise the Exchange of any failure by the Fund to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Exchange Act, the Exchange will surveil for compliance with the continued listing requirements. FINRA conducts certain cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The E:\FR\FM\07SEN1.SGM 07SEN1 Federal Register / Vol. 82, No. 172 / Thursday, September 7, 2017 / Notices mstockstill on DSK30JT082PROD with NOTICES Exchange is responsible for FINRA’s performance under this regulatory services agreement. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under Exchange Rule 14.12. The Exchange or FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares, futures contracts, ETPs, and exchangetraded options contracts with other markets and other entities that are members of the ISG and may obtain trading information regarding trading in the Shares, futures contracts, exchangetraded options contracts and ETPs from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares, futures contracts, exchangetraded options contracts, and ETPs from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.29 All futures contracts (and options on futures), listed options and ETPs held by the Fund will be traded on U.S. exchanges, all of which are members of ISG or are exchanges with which the Exchange has in place a comprehensive surveillance sharing agreement. In addition, the Exchange is able to access, as needed, trade information for certain fixed income securities held by the Fund reported to FINRA’s Trade Reporting and Compliance Engine (‘‘TRACE’’). In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. Information Circular Prior to the commencement of trading, the Exchange will inform its members in an Information Circular of the special characteristics and risks associated with trading the Shares. Specifically, the Information Circular will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (2) BZX Rule 3.7, which imposes suitability obligations on Exchange members with respect to recommending transactions in the Shares to customers; (3) how information regarding the IIV and Index value is disseminated; (4) the risks involved in trading the Shares during 29 For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all of the components of the portfolio for the Fund may trade on exchanges that are members of the ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. VerDate Sep<11>2014 17:42 Sep 06, 2017 Jkt 241001 the Pre-Opening 30 and After Hours Trading Sessions 31 when an updated Intraday Indicative Value will not be calculated or publicly disseminated; (5) the requirement that members deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information. In addition, the Information Circular will advise members, prior to the commencement of trading, of the prospectus delivery requirements applicable to the Funds. Members purchasing Shares from the Funds for resale to investors will deliver a prospectus to such investors. The Information Circular will also discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. In addition, the Information Circular will reference that each Fund is subject to various fees and expenses described in the Registration Statement. The Information Circular will also disclose the trading hours of the Shares of the Funds and the applicable NAV calculation time for the Shares. The Information Circular will disclose that information about the Shares of the Funds will be publicly available on the Funds’ Web site. In addition, the Information Circular will reference that the Trust is subject to various fees and expenses described in each Fund’s Registration Statement. 2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6(b) of the Act 32 in general and Section 6(b)(5) of the Act 33 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed on the Exchange pursuant to the initial and continued listing criteria in Bats Rule 14.11(c)(3), except that the Index will consist solely of RUT Puts 30 The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m. Eastern Time. 31 The After Hours Trading Session is from 4:00 p.m. to 5:00 p.m. Eastern Time. 32 15 U.S.C. 78f. 33 15 U.S.C. 78f(b)(5). PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 42405 and Treasury bills, rather than U.S. Component Stocks. The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the listing criteria in Bats Rule 14.11(c). The Exchange believes that its surveillances, which generally focus on detecting securities trading outside of their normal patterns which could be indicative of manipulative or other violative activity, and associated surveillance procedures are adequate to properly monitor the trading of the Shares on the Exchange during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws. FINRA and the Exchange, as applicable, may each obtain information via ISG from other exchanges that are members of ISG, and in the case of the Exchange, from other market or entities with which the Exchange has entered into a comprehensive surveillance sharing agreement. The Index Provider is not registered as an investment adviser or brokerdealer and is not affiliated with any broker-dealers. The Adviser is not registered as, or affiliated with, any broker-dealer. The Sub-Adviser is affiliated with multiple broker-dealers and has implemented a ‘‘fire wall’’ with respect to such broker-dealers and their personnel regarding access to information concerning the composition and/or changes to the Index. In addition, Sub-Adviser personnel who make decisions regarding the Fund’s portfolio are subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the Fund’s portfolio. The Adviser and the Index Provider have represented that a fire wall exists around the respective personnel who have access to information concerning changes and adjustments to the Index. All exchangelisted options, futures contracts and ETPs held by the Fund will be traded on U.S. exchanges, all of which are members of ISG or are exchanges with which the Exchange has in place a comprehensive surveillance sharing agreement. Under Normal Market Conditions, not less than 80% of the Fund’s total assets will be comprised of RUT Puts and U.S. Treasury bills, although the Fund may also invest up to 20% of its total assets in Other Assets. Other Assets includes only the following: short-term, high quality securities issued or guaranteed by the U.S. government and non-U.S. governments, and each of their agencies E:\FR\FM\07SEN1.SGM 07SEN1 42406 Federal Register / Vol. 82, No. 172 / Thursday, September 7, 2017 / Notices mstockstill on DSK30JT082PROD with NOTICES and instrumentalities; U.S. government sponsored enterprises; repurchase agreements backed by U.S. government and non-U.S. government securities; money market mutual funds; money market instruments; Russell 2000 ETF put options,34 Russell 2000 Index futures and/or options on Russell 2000 Index futures; 35 total return swaps; 36 other ETPs; non-exchange-traded registered open-end investment companies (i.e., mutual funds); and variable or floating interest rate securities. The Fund may hold up to an aggregate amount of 15% of its net assets in illiquid assets (calculated at the time of investment), consistent with Commission guidance. The Fund therefore will not use derivative instruments to enhance leverage. The Fund will not invest in non-U.S. equity securities. 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 to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. FINRA conducts certain cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under Bats Rule 14.12. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily every day the 34 The Fund may invest up to 10% of its net assets in OTC Russell 2000 Index put options. 35 The Fund’s investments in listed futures contracts will be backed by investments in U.S. government securities in an amount equal to the exposure of such contracts. 36 The Fund’s investments in total return swap agreements will be backed by investments in U.S. government securities in an amount equal to the exposure of such contracts. VerDate Sep<11>2014 17:42 Sep 06, 2017 Jkt 241001 NYSE is open, and that the NAV will be made available to all market participants at the same time. In addition, a large amount of information will be publicly available regarding the Fund and the Shares, thereby promoting market transparency. Moreover, the IIV will be widely disseminated by one or more major market data vendors at least every 15 seconds during Regular Trading Hours. On each business day, before commencement of trading in the Shares on the Exchange during Regular Trading Hours, the Fund will disclose on its Web site the portfolio that will form the basis for the Fund’s calculation of NAV at the end of the business day. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services, and quotations and last sale information will be available via the CTA high-speed line. Information relating to U.S. exchange-listed options is available via the Options Price Reporting Authority. Quotation and last sale information for the Shares and any ETPs it which it invests will be available via the CTA high-speed line. Quotation and last sale information for U.S. exchange-listed options contracts cleared by The Options Clearing Corporation will be available via the Options Price Reporting Authority. The intra-day, closing and settlement prices of exchange-traded portfolio assets, including ETPs, futures and exchangetraded options contracts will be readily available from the securities exchanges and futures exchange trading such securities and futures, as the case may be, automated quotation systems, published or other public sources, or online information services such as Bloomberg or Reuters. Such price information on fixed income portfolio securities, including money market instruments, and other Fund assets traded in the over-the-counter markets, including bonds and money market instruments is available from major broker-dealer firms or market data vendors, as well as from automated quotation systems, published or other public sources, or online information services. The Web site for the Fund will include the prospectus for the Fund and additional data relating to NAV and other applicable quantitative information. Moreover, prior to commencement of trading, the Exchange will inform its Members in an Information Circular of the special characteristics and risks associated with trading the Shares. If the Exchange PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 becomes aware that the NAV is not being disseminated to all market participants at the same time, it will halt trading in the Shares until such time as the NAV is available to all market participants. With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Funds. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities and/or the financial instruments composing the daily disclosed portfolio of each Fund; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. Trading in the Shares also will be subject to Rule 14.11(c)(1)(B)(iv), which sets forth circumstances under which Shares of a Fund may be halted. If the IIV of any of [sic] the Fund or value of the Index are [sic] not being disseminated as required, the Exchange may halt trading during the day in which the interruption to the dissemination of the IIV or index value occurs. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the IIV, the Fund’s portfolio, and quotation and last sale information for the Shares. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of an additional type of exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Shares will be subject to the existing trading surveillances, which are designed to detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange. The Exchange or FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares, ETPs, futures contracts, and exchange-traded options contracts with other market and other entities that are members of ISG and may obtain trading information in the Shares, futures contracts, exchangetraded options contracts, and ETPs from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares, futures contracts, exchangetraded options contracts, and ETPs from markets and other entities that are members of ISG or with which the E:\FR\FM\07SEN1.SGM 07SEN1 Federal Register / Vol. 82, No. 172 / Thursday, September 7, 2017 / Notices Exchange has in place a comprehensive surveillance sharing agreement. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the IIV, and quotation and last sale information for the Shares. For the above reasons, the Exchange believes that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act. (B) Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of 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 within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding, or (ii) as to which the 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 mstockstill on DSK30JT082PROD with NOTICES Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Comments may be submitted by any of the following methods: 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 No. SR-BatsBZX–2017–53. 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 such filing will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–BatsBZX– 2017–53 and should be submitted on or before September 28, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.37 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–18935 Filed 9–6–17; 8:45 am] BILLING CODE 8011–01–P 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 No. SR– BatsBZX–2017–53 on the subject line. VerDate Sep<11>2014 17:42 Sep 06, 2017 Jkt 241001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81512; File No. SR–BX– 2017–039] Self-Regulatory Organizations; NASDAQ BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Address the Application of Exchange Rule 11140 (Transactions in Securities ‘‘ExDividend,’’ ‘‘Ex-Rights’’ or ‘‘ExWarrants’’) as it Relates to Establishing Ex-Dividend Dates in connection With the Implementation of the T+2 Settlement Cycle on September 5, 2017 August 31, 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 29, 2017, NASDAQ BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by 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 proposes to address the application of Exchange Rule 11140 (Transactions in Securities ‘‘ExDividend,’’ ‘‘Ex-Rights’’ or ‘‘ExWarrants’’) as it relates to establishing ex-dividend dates in connection with the implementation of the T+2 settlement cycle on September 5, 2017. No change to the text of Rule 11140(b)(1) is required by this proposal. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 1 15 37 17 PO 00000 CFR 200.30–3(a)(12). Frm 00139 Fmt 4703 Sfmt 4703 42407 2 17 E:\FR\FM\07SEN1.SGM U.S.C. 78s(b)(1). CFR 240.19b-4. 07SEN1

Agencies

[Federal Register Volume 82, Number 172 (Thursday, September 7, 2017)]
[Notices]
[Pages 42399-42407]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-18935]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81510; File No. SR-BatsBZX-2017-53]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To List and Trade Shares of the 
WisdomTree CBOE Russell 2000 PutWrite Strategy Fund, a Series of the 
WisdomTree Trust, Under Rule 14.11(c)(3), Index Fund Shares

August 31, 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 18, 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.
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    \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 the 
WisdomTree CBOE Russell 2000 PutWrite Strategy Fund, a series of the 
WisdomTree 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

[[Page 42400]]

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 the 
WisdomTree CBOE Russell 2000 PutWrite Strategy Fund (``Fund'') under 
Rule 14.11(c)(3), which governs the listing and trading of Index Fund 
Shares on the Exchange. The Fund will be an index-based exchange traded 
fund (``ETF'').
    The Shares will be offered by the WisdomTree Trust (``Trust''), 
which was established as a Delaware statutory trust on December 15, 
2005. 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 
Fund.\3\
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    \3\ See Post-Effective Amendment No. 595 to Registration 
Statement on Form N-1A for the Trust, dated July 27, 2017 (File Nos. 
333-132380 and 811-21864). The descriptions of the Fund and the 
Shares contained herein are based on information in the Registration 
Statement.
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    The Fund's investment objective is to seek investment results that 
track the price and yield performance, before fees and expenses, of the 
CBOE Russell 2000 PutWrite Index (``Index''). The Index was developed 
and is maintained by the Chicago Board Options Exchange, Inc. (``CBOE'' 
or the ``Index Provider''), used under license from The Frank Russell 
Company. None of the Trust, WisdomTree Asset Management, Inc. (the 
``Adviser''), Mellon Capital Management (the ``Sub-Adviser''), State 
Street Bank and Trust Company (the ``Administrator, ``Custodian,'' and 
``Transfer Agent''), or Foreside Fund Services, LLC (the 
``Distributor'') is affiliated with the Index Provider.
    The Index tracks the value of a passive investment strategy, which 
consists of selling (or ``writing'') Russell 2000 Index put options 
(``RUT Puts'') and investing the sale proceeds in one-month Treasury 
bills (``RUT Strategy''). The RUT Puts are struck at-the-money and are 
sold on a monthly basis, usually the third Friday of the month (i.e., 
the ``Roll Date''), which matches the expiration date of the RUT Puts. 
All RUT Puts are standardized options traded on the CBOE. The Index 
consists of only two components: RUT Puts and one-month Treasury bills.
    The Exchange is submitting this proposed rule change because the 
Index for the Fund does not meet the listing requirements of Rule 
14.11(c)(5) applicable to an Index that consists of both U.S. Component 
Stocks \4\ and Fixed Income Securities,\5\ which requires that the 
equity and fixed income component securities separately meet the 
criteria set forth in Rule 14.11(c)(3)(A)(i) and 14.11(c)(4), 
respectively. Specifically, the Fund does 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. 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 primarily of RUT Puts, 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\ The Fixed 
Income Security component of the Index, which consists of only one-
month Treasury bills, meets the ``generic'' listing requirements of 
Rule 14.11(c)(4).
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    \4\ 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.
    \5\ As defined in Rule 14.11(c)(4), the term ``Fixed Income 
Security'' shall mean debt securities that are notes, bonds, 
debentures or evidence of indebtedness that include, but are not 
limited to, U.S. Department of Treasury securities (``Treasury 
Securities''), government-sponsored entity securities (``GSE 
Securities''), municipal securities, trust preferred securities 
supranational debt and debt of a foreign country or subdivision 
thereof.
    \6\ The Exchange notes that the Russell 2000 Index has been 
previously approved by the Commission under Section 19(b)(2) of the 
Act in connection with the listing and trading of FLEX Options and 
Quarterly Index Options, as well as other securities. See, e.g., 
Securities Exchange Act Release Nos. 32694 (July 29, 1993), 58 FR 
41814 (July 5, 1993) (approving the listing and trading of FLEX 
Options based on the Russell 2000 Index); 32693 (July 29, 1993), 58 
FR 41817 (August 5, 1993) (approving the listing and trading of 
Quarterly Index Option based on the Russell 2000 Index). 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 Russell 2000 Index 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 Fund and the Index 
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 Russell 2000 Index consists of U.S. Component 
Stocks and satisfies the requirements of Rule 14.11(c)(3)(A)(i)(a)-
(e).
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    The Shares will conform to the initial and continued listing 
criteria under Rule 14.11(c), except that the Index will not meet the 
requirements of Rule 14.11(c)(3)(A)(i)(a)-(e) in that the Index will 
consist of one series of options based on U.S. Component Stocks (i.e., 
RUT Puts), rather than U.S. Component Stocks. The Exchange notes that 
the Commission has previously approved a fund that employs a very 
similar strategy.\7\
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    \7\ See Securities Exchange Act Release Nos. 74675 (April 8, 
2015), 80 FR 20038 (April 14, 2015) (order approving proposed rule 
change to list shares of the Wisdom Tree Put Write Strategy Fund) 
and 77045 (February 3, 2016), 81 FR 6916 (February 9, 2016) (order 
approving a proposed rule change relating to the index underlying 
the WisdomTree Put Write Strategy Fund).
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WisdomTree CBOE Russell 2000 PutWrite Strategy Fund Index Methodology
    The Fund seeks to track the performance of an underlying index, the 
CBOE Russell 2000 PutWrite Index (``Index''). The Index is based on a 
passive investment strategy which consists of overlapping hypothetical 
investments in a single series of exchange-listed Russell 2000 Index 
options (``RUT Puts'') over a money market account hypothetically 
invested in one-month Treasury bills. Specifically, the Index 
hypothetically writes at-the-money RUT Puts on a monthly basis, usually 
on the third Friday of the month (i.e., the Roll Date), which matches 
the expiration date of the hypothetical RUT Puts. All RUT Puts 
hypothetically invested in by the Index are standardized options traded 
on the CBOE. At each Roll Date, any settlement loss in the Index based 
on the expiring RUT Puts is financed by the Treasury bill account and a 
new batch of hypothetical at-the-money RUT Puts is sold. Revenue from 
their sale is added to the Index's hypothetical Treasury bill account. 
On each Roll Date, the revenue from the hypothetical sale of RUT Puts 
is hypothetically invested separately at the one-month Treasury bill 
rate, and where applicable, any one-month Treasury bills purchased in 
the prior month are deemed to mature and hypothetically invested in new 
one-month Treasury bills at the one-month Treasury bill rate. As stated 
above, all investments used to determine Index value are hypothetical.
Fund's Investment Methodology
    Under Normal Market Conditions,\8\ the Fund will invest not less 
than 80%

[[Page 42401]]

of its assets in RUT Puts and one month or three-month U.S. Treasury 
bills. The Fund may invest up to 20% of its net assets (in the 
aggregate) in other investments, that are not included in the Index, 
but which the Adviser or the Sub-Adviser believes will help the Fund to 
track the Index and that will be disclosed daily (``Other Assets''). 
The Fund's investment strategy will be designed to write a sequence of 
one-month, at-the-money, RUT Puts and invest cash and Other Assets 
targeted to achieve one-month Treasury bill rates. The number of RUT 
Puts written will vary from month to month, but will be limited to 
permit the amount held in the Fund's investment in Treasury bills to 
finance the maximum possible loss from final settlement of the RUT 
Puts. According to the Registration Statement, the Fund will generally 
use a sampling strategy in seeking to track the Index.
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    \8\ 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. In response to adverse market, economic, 
political, or other conditions, the Fund reserves the right to 
invest in U.S. government securities, other money market instruments 
(as defined below), and cash, without limitation, as determined by 
the Adviser or Sub-Adviser. In the event the Fund engages in these 
temporary defensive strategies that are inconsistent with its 
investment strategies, the Fund's ability to achieve its investment 
objectives may be limited.
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    The new RUT Puts will be struck and sold on a monthly basis on the 
Roll Date, (i.e., the same Roll Date at that used by the Index), which 
matches the expiration date of the current RUT Puts. The strike price 
of the new RUT Puts will be based on the strike price of Russell 2000 
Index put options listed on the CBOE with the closest strike price 
below the last value of the Russell 2000 Index reported before 11:00 
a.m. ET. For example, if the last Russell 2000 Index value reported 
before 11:00 a.m. ET is 1,137.02 and the closest listed Russell 2000 
Index put option with a strike price below 1,137.02 is 1,130, then the 
1,130 strike RUT put option will be sold by the Fund.
    Russell 2000 Index options traded on CBOE are highly liquid, with 
average daily trading volume in 2016 of 71,365 contracts, with a 
notional size per contract of $117,169. The Exchange represents that 
the daily trading volume of at-the-money 30-day RUT Puts on each of the 
three recent Roll Dates was as follows: For Roll Date of April 21, 2017 
(expiry May 19, 2017), strike price of 1375, 315 contracts on Roll 
Date, 209 average contracts per day through expiration; for Roll Date 
of May 19, 2017 (expiry June 16, 2017), strike price of 1370, 1,133 
contracts on Roll Date, 701 average contracts per day through 
expiration; and for Roll Date of June 16, 2017 (expiry July 21, 2017), 
strike price of 1400, 545 contracts on Roll Date, 527 average contracts 
per day through expiration.\9\ Moreover, the proceeds of the sales of 
the RUT Puts will be invested in U.S. Treasury bills, which are also 
highly liquid instruments.
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    \9\ Source: CBOE.
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    The daily high, low and last reported sales prices on each of the 
Roll Dates for RUT Puts at-the-money are as follows: Roll Date of April 
21, 2017 (expiry May 19, 2017, strike price of 1375, daily high: 
$23.54, low: $21.88, last: $22.40; Roll Date of May 19, 2017 (expiry 
June 16, 2017), strike price of 1370, daily high: $27.39, low: $20.15, 
last: $23.97; and Roll Date of June 16, 2017 (expiry July 21, 2017), 
strike price of 1400, daily high: $24.90, low: $18.46, last: 
$18.67.\10\
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    \10\ Source: CBOE.
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    The Exchange estimates that on launch date, the Fund would hold 
approximately $2.5-$5.0 million in cash and cash equivalents (e.g., 
one-month Treasury bills). This estimate is based on a minimum of 
100,000-200,000 Shares being created at an estimated initial offering 
price of $25 per Share.
    The Exchange believes that sufficient protections are in place to 
protect against market manipulation of the Fund's Shares and RUT Puts 
for several reasons: (i) Surveillance by the Exchange, CBOE \11\ and 
the Financial Industry Regulatory Authority (``FINRA'') designed to 
detect violations of the federal securities laws and self-regulatory 
organization (``SRO'') rules; (ii) the large number of financial 
instruments tied to the specified securities; and (iii) the ETF 
creation/redemption arbitrage mechanism tied to the large pool of 
liquidity of the Fund's underlying investments, as more fully described 
below.
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    \11\ The Exchange notes that CBOE is a member of the Intermarket 
Surveillance Group (``ISG'').
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    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.\12\ 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 RUT Puts and U.S. Treasury bills--will be 
acquired in extremely liquid and highly regulated markets.
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    \12\ 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.
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    Russell 2000 index options are among the most liquid options in the 
U.S. and derive their value from the actively traded Russell 2000 Index 
components. RUT Puts 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 Russell 2000 
Index options markets and the broad base and scope of the Russell 2000 
Index make securities that derive their value from the index, including 
RUT Puts, less susceptible to market manipulation in view of market 
capitalization and liquidity of the Russell 2000 Index components, 
price and quote transparency, and arbitrage opportunities.
    Because the pricing of the Shares is tied to the Fund's underlying 
assets (RUT Puts and U.S. Treasury bills), all of which are traded in 
efficient, diversified and liquid markets, the Exchange also expects 
the liquidity in the congruent creation/redemption arbitrage mechanism 
to keep the Shares' market pricing in line such that the Shares' 
pricing would not materially differ from their net asset value. The 
Exchange believes that the efficiency and liquidity of the markets for 
RUT Puts, related derivatives, and U.S. Treasury bills are sufficiently 
great to deter fraudulent or manipulative acts associated with the 
Fund's Shares price. 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.
Other Assets
    The Fund may invest up to 20% of its net assets (in the aggregate) 
in Other Assets. Other Assets includes only the following: Short-term, 
high quality securities issued or guaranteed by the U.S. government and 
non-U.S. governments,\13\ and each of their agencies and 
instrumentalities; U.S. government sponsored enterprises; repurchase 
agreements backed by U.S. government and non-U.S. government 
securities; money market mutual funds; deposit and other obligations of 
U.S. and non-U.S. banks and financial institutions (``money market

[[Page 42402]]

instruments''); \14\ Russell 2000 ETF put options,\15\ Russell 2000 
Index futures and/or options on Russell 2000 Index futures; \16\ total 
return swaps; \17\ other exchange traded products (``ETPs''); \18\ non-
exchange-traded registered open-end investment companies (i.e., mutual 
funds); and variable or floating interest rate securities.\19\ The 
foregoing investments shall include buying the applicable derivative 
instrument or selling the applicable derivative instrument (i.e., 
writing the applicable put option) and investing the proceeds.
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    \13\ The Treasury securities in which the Fund may invest will 
include variable rate Treasury securities, whose rates are adjusted 
daily (or at such other increment as may later be determined by the 
Department of the Treasury) to generally correspond with the rate 
paid on one-month Treasury securities.
    \14\ All money market instruments acquired by the Fund will be 
rated investment grade, except that a Fund may invest in unrated 
money market instruments that are deemed by the Adviser or Sub-
Adviser to be of comparable quality to money market securities rated 
investment grade. The term ``investment grade,'' for purposes of 
money market instruments only, is intended to mean securities rated 
A1 or A2 by one or more nationally recognized statistical rating 
organizations.
    \15\ The Fund may invest up to 10% of its assets in over-the-
counter Russell 2000 put options (``OTC Russell 2000 Index put 
options'').
    \16\ The Fund will limit its direct investments in futures and 
options on futures to the extent necessary for the Adviser to claim 
the exclusion from regulation as a ``commodity pool operator'' with 
respect to the Fund under Rule 4.5 promulgated by the Commodity 
Futures Trading Commission (``CFTC''), as such rule may be amended 
from time to time. Under Rule 4.5 as currently in effect, the Fund 
would limit its trading activity in futures and options on futures 
(excluding activity for ``bona fide hedging purposes,'' as defined 
by the CFTC) such that it will meet one of the following tests: (i) 
Aggregate initial margin and premiums required to establish its 
futures and options on futures positions will not exceed 5% of the 
liquidation value of the Fund's portfolio, after taking into account 
unrealized profits and losses on such positions; or (ii) aggregate 
net notional value of its futures and options on futures positions 
will not exceed 100% of the liquidation value of the Fund's 
portfolio, after taking into account unrealized profits and losses 
on such positions. The exchange-listed futures contracts in which 
the Fund may invest will be listed on exchanges in the U.S. Each of 
the exchange-listed futures contracts in which the Fund may invest 
will be listed on exchanges that are members of ISG.
    \17\ The Fund may use total return swaps to create positions 
equivalent to investments in RUT Puts and the component securities 
underlying the Russell 2000 Index. The Fund's investments in total 
return swap agreements will be backed by investments in U.S. 
government securities in an amount equal to the exposure of such 
contracts.
    \18\ The Fund may invest in shares of both taxable and tax-
exempted money market funds. When used herein, ETPs may include, 
without limitation, Index Fund Shares (as described in Rule 
14.11(c)); Linked Securities (as described in Rule 14.11(d)); 
Portfolio Depositary Receipts (as described in Rule 14.11(b)); 
Trust-Issued Receipts (as described in Rule 14.11(f)); Commodity-
Based Trust Shares (as described in Rule 14.11(e)(4)); Currency 
Trust Shares (as described in Rule 14.11(e)(5)); Commodity Index 
Trust Shares (as described in Rule 14.11(e)(6)); Trust Units (as 
described in Rule 14.11(e)(9)); Managed Fund Shares (as described in 
Rule 14.11(i)), and closed-end funds. The ETPs in which the Fund may 
invest all will be listed and traded on U.S. exchanges. The Fund may 
invest in the securities of ETPs registered under the 1940 Act 
consistent with the requirements of Section 12(d)(1) of the 1940 Act 
or any rule, regulation or order of the Commission or interpretation 
thereof. The Fund will only make such investments in conformity with 
the requirements of Section 817 of the Internal Revenue Code of 
1986. The ETPs in which the Fund may invest will primarily be index-
based ETFs that hold substantially all of their assets in securities 
representing a specific index. The Fund will not invest in leveraged 
(e.g., 2X, -2X, 3X, or -3X) ETPs.
    \19\ The Fund may invest in securities (in addition to U.S. 
Treasury securities, described above) that have variable or floating 
interest rates which are readjusted on set dates (such as the last 
day of the month) in the case of variable rates or whenever a 
specified interest rate change occurs in the case of a floating rate 
instrument. Variable or floating interest rates generally reduce 
changes in the market price of securities from their original 
purchase price because, upon readjustment, such rates approximate 
market rates. Accordingly, as interest rates decrease or increase, 
the potential for capital appreciation or depreciation is less for 
variable or floating rate securities than for fixed rate 
obligations.
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Investment Restrictions
    The Fund may hold up to an aggregate of 15% of its net assets in 
illiquid assets (calculated at the time of investment). The Fund will 
monitor its portfolio liquidity on an ongoing basis to determine 
whether, in light of current circumstances, an adequate level of 
liquidity is being maintained, and will consider taking appropriate 
steps in order to maintain adequate liquidity if through a change in 
values, net assets, or other circumstances, more than 15% of the Fund's 
net assets are held in illiquid assets. Illiquid assets include 
securities subject to contractual or other restrictions on resale and 
other instruments that lack readily available markets as determined in 
accordance with Commission staff guidance.\20\
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    \20\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also, Investment Company 
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 
1970) (Statement Regarding ``Restricted Securities''); Investment 
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio 
security is illiquid if it cannot be disposed of in the ordinary 
course of business within seven days at approximately the value 
ascribed to it by the fund. See Investment Company Act Release No. 
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting 
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act 
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) 
(adopting Rule 144A under the Securities Act of 1933 (15 U.S.C. 
77a).
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    The Fund will not invest in any non-U.S. equity securities. The 
Fund's investments will be consistent with the Fund's investment 
objective and will not be used to enhance leverage.\21\
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    \21\ The Fund will include appropriate risk disclosure in its 
offering documents, including leveraging risk. Leveraging risk is 
the risk that certain transactions of a fund, including a fund's use 
of derivatives, may give rise to leverage, causing a fund to be more 
volatile than if it had not been leveraged. To mitigate leveraging 
risk, the Adviser will segregate or earmark liquid assets or 
otherwise cover the transactions that give rise to such risk. See 15 
U.S.C. 80a-18; Investment Company Act Release No. 10666 (April 18, 
1979), 44 FR 25128 (April 27, 1979); Dreyfus Strategic Investing, 
Commission No-Action Letter (June 22, 1987); Merrill Lynch Asset 
Management, L.P., Commission No-Action Letter (July 2, 1996).
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    In order to reduce interest rate risk, the Fund will generally 
maintain a weighted average portfolio maturity of 180 days or less on 
average (not to exceed 18 months) and will not purchase any money 
market instrument with a remaining maturity of more than 397 calendar 
days. The ``average portfolio maturity'' of a Fund is the average of 
all current maturities of the individual securities in the Fund's 
portfolio. The Fund's actual portfolio duration may be longer or 
shorter depending on market conditions.
    The 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.\22\ The Fund will invest its respective assets, and 
otherwise conduct its operations, in a manner that is intended to 
satisfy the qualifying income, diversification and distribution 
requirements necessary to establish and maintain RIC qualification 
under Subchapter M. The Fund is to be considered ``non-diversified.'' A 
non-diversified classification means that the Fund is not limited by 
the 1940 Act with regard to the percentage of total assets that be 
invested in the securities of a single issuer. As a result, the Fund 
may invest more of its total assets in the securities of a single 
issuer or a smaller number of issuers than if it were classified as a 
diversified fund.
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    \22\ 26 U.S.C. 851.
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Creation and Redemption of Shares
    According to the Registration Statement, the Fund will issue and 
redeem Shares on a continuous basis at net asset value (``NAV''),\23\ 
only in large blocks of shares (``Creation Units''), in transactions 
with Authorized Participants. Creation Units generally will consist of 
50,000 Shares, though this may change from time to time. Creation Units 
are not expected to consist of less than 25,000 Shares.
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    \23\ The NAV of the Fund's Shares generally will be calculated 
once daily Monday through Friday as of the close of regular trading 
on the New York Stock Exchange (NYSE''), generally 4:00 p.m. ET (the 
``NAV Calculation Time''). NAV per Share will be calculated by 
dividing the Fund's net assets by the number of Fund shares 
outstanding.
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    The consideration for purchase of a Creation Unit of the Fund 
generally will consist of either (i) the in-kind deposit of a 
designated portfolio of securities (the ``Deposit Securities'') per 
Creation

[[Page 42403]]

Unit and the ``Cash Component'' (defined below), computed as described 
below or (ii) the cash value of the Deposit Securities (``Deposit 
Cash'') and the ``Cash Component,'' computed as described below. 
Because non-exchange traded derivatives and certain listed derivatives 
are not currently eligible for in-kind transfer, they will be 
substituted with an amount of cash of equal value (i.e., Deposit Cash) 
when the Fund processes purchases of Creation Units in-kind. 
Specifically, the Fund will not accept exchange-traded or over-the-
counter options, exchange traded futures (or options on futures), and 
total return swaps as Deposit Securities.
    When accepting purchases of Creation Units for cash, the Fund may 
incur additional costs associated with the acquisition of Deposit 
Securities that would otherwise be provided by an in-kind purchase. 
Together, the Deposit Securities or Deposit Cash, as applicable, and 
the Cash Component constitute the ``Fund Deposit,'' which represents 
the minimum initial and subsequent investment amount for a Creation 
Unit of the Fund. The Cash Component is an amount equal to the 
difference between the NAV of the Shares (per Creation Unit) and the 
market value of the Deposit Securities or Deposit Cash, as applicable. 
The Cash Component serves the function of compensating for any 
difference between the NAV per Creation Unit and the market value of 
the Deposit Securities or Deposit Cash, as applicable.
    A portfolio composition file, to be sent via the National 
Securities Clearing Corporation (``NSCC''), will be made available on 
each business day, prior to the opening of business on the Exchange 
(currently 9:30 a.m. ET) containing a list of the names and the 
required amount of each security in the Deposit Securities to be 
included in the current Fund Deposit for the Fund (based on information 
about the Fund's portfolio at the end of the previous business day). In 
addition, on each business day, the estimated Cash Component, effective 
through and including the previous business day, will be made available 
through NSCC. The Fund Deposit is subject to any applicable adjustments 
as described in the Registration Statement.
    All purchase orders must be placed by an ``Authorized 
Participant.'' An Authorized Participant must be either a broker-dealer 
or other participant in the Continuous Net Settlement System 
(``Clearing Process'') of the NSCC or a participant in The Depository 
Trust Company (``DTC'') with access to the DTC system, and must execute 
an agreement with the Distributor that governs transactions in the 
Fund's Creation Units. In-kind portions of purchase orders will be 
processed though the Clearing Process when it is available.
    Shares of the Fund may be redeemed only in Creation Units at their 
NAV next determined after receipt of a redemption request in proper 
form by the Fund through the Distributor and only on a business day. 
The Fund, through the NSCC, will make available immediately prior to 
the opening of business on each business day, the list of the names and 
quantities of the Fund's portfolio securities that will be applicable 
(subject to possible amendment or correction) to redemption requests 
received in proper form on that day (``Fund Securities''). Redemption 
proceeds for a Creation Unit will be paid either in-kind or in cash or 
a combination thereof, and Fund Securities and Deposit Securities may 
differ. With respect to in-kind redemptions of the Fund, redemption 
proceeds for a Creation Unit will consist of Fund Securities plus cash 
in an amount equal to the difference between the NAV of the Shares 
being redeemed, as next determined after a receipt of a request in 
proper form, and the value of the Fund Securities (the ``Cash 
Redemption Amount''). In the event that the Fund Securities have a 
value greater than the NAV of the Shares, a compensating cash payment 
equal to the differential will be required to be made by or through an 
Authorized Participant by the redeeming shareholder. Notwithstanding 
the foregoing, at the Trust's discretion, an Authorized Participant may 
receive the corresponding cash value of the securities in lieu of the 
in-kind securities representing one or more Fund Securities.\24\ 
Because non-exchange traded derivatives and certain listed derivatives 
are not eligible for in-kind transfer, they will be substituted with an 
amount of cash of equal value when the Fund processes redemptions of 
Creation Units in-kind. Specifically, the Fund will transfer the 
corresponding cash value of exchange-traded options, exchange-traded 
futures, exchange-traded options on futures contracts, and total return 
swap agreements in lieu of in-kind securities.
---------------------------------------------------------------------------

    \24\ The Adviser represents that, to the extent the Trust 
effects the redemption of Shares in cash, the value of the 
redemption payment will equal the NAV per share.
---------------------------------------------------------------------------

    For an order involving a Creation Unit to be effectuated at the 
Fund's NAV on a particular day, it must be received by the Distributor 
by or before the deadline for such order (``Order Cut-Off Time''). The 
Order Cut-Off Time for creation and redemption orders for the Fund will 
be as described in the Registration Statement, but not later than 4:00 
p.m. ET. A standard creation or redemption transaction fee (as 
applicable) will be imposed to offset transfer and other transaction 
costs that may be incurred by the Fund.
Availability of Information
    The Trust's Web site (www.wisdomtree.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Web site 
will include additional quantitative information updated on a daily 
basis, including, for the Fund: (1) The most recently reported NAV, 
mid-point of the bid/ask spread at the time of calculation of such NAV 
(the ``Bid/Ask Price''),\25\ and a calculation of the premium and 
discount of the Bid/Ask Price against the NAV; and (2) data in chart 
format displaying the frequency distribution of discounts and premiums 
of the daily Bid/Ask Price against the NAV, within appropriate ranges, 
for each of the four previous calendar quarters.
---------------------------------------------------------------------------

    \25\ The Bid/Ask Price of the Fund will be determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and its service 
providers.
---------------------------------------------------------------------------

    On each business day, before commencement of trading in Shares 
during Regular Trading Hours on the Exchange, the Trust will disclose 
on its Web site the following information regarding each portfolio 
holding, as applicable to the type of holding: Ticker symbol, CUSIP 
number or other identifier, if any; a description of the holding 
(including the type of holding, 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; effective date, if 
any; coupon rate, if any; market value of the holding; and the 
percentage weighting of the holding in the Fund's portfolio. The Web 
site information will be publicly available at no charge.
    In addition, a portfolio composition file, which will include the 
security names and quantities of securities and other assets required 
to be delivered in exchange for the Fund's Shares, together with 
estimates and actual cash components, will be publicly disseminated 
prior to the opening of the Exchange via the NSCC. The portfolio

[[Page 42404]]

will represent one Creation Unit of the Fund. Authorized Participants 
may refer to the portfolio composition file for information regarding 
RUT Puts, short-term U.S. Treasury Securities, money market 
instruments, and any other instrument that may comprise the Fund's 
portfolio on a given day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports will be available free upon request from the Trust, and those 
documents and the Form N-CSR may be viewed on screen or downloaded from 
the Commission's Web site at www.sec.gov. Information regarding market 
price and trading volume for the Shares will be continually available 
on a real-time basis throughout the day on brokers' computer screens 
and other electronic services. Information regarding the previous day's 
closing price and trading volume information for the Shares will be 
published daily in the financial section of newspapers. Quotation and 
last sale information for the Shares and any ETPs it which it invests 
will be available via the Consolidated Tape Association (``CTA'') high-
speed line. Quotation and last sale information for U.S. exchange-
listed options contracts cleared by The Options Clearing Corporation 
will be available via the Options Price Reporting Authority. The intra-
day, closing and settlement prices of exchange-traded portfolio assets, 
including ETPs, futures and options will be readily available from the 
securities exchanges and futures exchanges trading such securities and 
futures, as the case may be, automated quotation systems, published or 
other public sources, or online information services such as Bloomberg 
or Reuters. Price information on fixed income portfolio securities, 
including money market instruments, and other Fund assets traded in the 
over-the-counter markets, is available from major broker-dealer firms 
or market data vendors, as well as from automated quotation systems, 
published or other public sources, or online information services. In 
addition, the value of the Index will be published by one or more major 
market data vendors every 15 seconds during Regular Trading Hours \26\ 
on the Exchange. Information about the Index constituents, the 
weighting of the constituents, the Index's methodology and the Index's 
rules will be available at no charge on the Index Provider's Web site 
at www.CBOE.com.
---------------------------------------------------------------------------

    \26\ As defined in Rule 1.5(w), the term ``Regular Trading 
Hours'' means the time between 9:30 a.m. and 4:00 p.m. Eastern Time.
---------------------------------------------------------------------------

    In addition, the Intraday Indicative Value (``IIV''), as defined in 
Rule 14.11(c)(3)(C), will be widely disseminated at least every 15 
seconds during Regular Trading Hours by one or more major market 
vendors.\27\ All Fund holdings will be included in calculating the IIV.
---------------------------------------------------------------------------

    \27\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available IIV's 
taken from the CTA or other data feeds.
---------------------------------------------------------------------------

    The dissemination of the IIV is intended to allow investors to 
determine the value of the underlying portfolio of the Fund on a daily 
basis and to approximate that value throughout the trading day. The 
intra-day, closing and settlement prices of debt securities and money 
market instruments will be readily available from published and other 
public sources or on-line information services. Price information 
regarding investment company securities, including ETFs, will be 
available from on-line information services and from the Web site for 
the applicable investment company security.
    Additional information regarding the Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosures policies, 
distributions and taxes is included in the Registration Statement. All 
terms relating to the Fund that are referred to, but not defined in, 
this proposed rule change are defined in the Registration Statement.
Initial and Continued Listing
    The Shares will conform to the initial and continued listing 
criteria under Bats Rule 14.11(c)(3), except that the Index will not 
meet the requirements of Rule 14.11(c)(3)(A)(i)(a)-(e) in that the 
Index will consist of one series of options based on U.S. Component 
Stocks (i.e., RUT Puts), rather than U.S. Component Stocks. The 
Exchange represents that, for initial and/or continued listing, the 
Fund will be in compliance with Rule 10A-3 \28\ under the Act, as 
provided by Rule 14.10. A minimum of 100,000 Shares for the Fund will 
be outstanding at the commencement of trading on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares 
that the NAV per Share will be calculated daily and that the NAV and 
will be made available to all market participants at the same time.
---------------------------------------------------------------------------

    \28\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Funds. The Exchange will halt trading in 
the Shares under the conditions specified in BZX Rule 11.18. Trading 
may be halted because of market conditions or for reasons that, in the 
view of the Exchange, make trading in the Shares inadvisable. These may 
include: (1) The extent to which trading is not occurring in the 
securities and/or the financial instruments composing the daily 
disclosed portfolio of the Funds; or (2) whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present. Trading in the Shares also will be 
subject to Rule 14.11(c)(1)(B)(iv), which sets forth circumstances 
under which Shares of a Fund may be halted.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. The Exchange will 
allow trading in the Shares from 8:00 a.m. until 5:00 p.m. Eastern Time 
and has the appropriate rules to facilitate transactions in the Shares 
during all trading sessions. As provided in BZX Rule 11.11(a), the 
minimum price variation for quoting and entry of orders in securities 
traded on the Exchange is $0.01, with the exception of securities that 
are priced less than $1.00, for which the minimum price variation for 
order entry is $0.0001.
Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the Shares on the Exchange during 
all trading sessions and to deter and detect violations of Exchange 
rules and the applicable federal securities laws. Trading of the Shares 
through the Exchange will be subject to the Exchange's surveillance 
procedures for derivative products, including Index Fund Shares. The 
issuer has represented to the Exchange that it will advise the Exchange 
of any failure by the Fund to comply with the continued listing 
requirements, and, pursuant to its obligations under Section 19(g)(1) 
of the Exchange Act, the Exchange will surveil for compliance with the 
continued listing requirements. FINRA conducts certain cross-market 
surveillances on behalf of the Exchange pursuant to a regulatory 
services agreement. The

[[Page 42405]]

Exchange is responsible for FINRA's performance under this regulatory 
services agreement. If the Fund is not in compliance with the 
applicable listing requirements, the Exchange will commence delisting 
procedures under Exchange Rule 14.12.
    The Exchange or FINRA, on behalf of the Exchange, will communicate 
as needed regarding trading in the Shares, futures contracts, ETPs, and 
exchange-traded options contracts with other markets and other entities 
that are members of the ISG and may obtain trading information 
regarding trading in the Shares, futures contracts, exchange-traded 
options contracts and ETPs from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares, futures contracts, exchange-traded options contracts, and ETPs 
from markets and other entities that are members of ISG or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement.\29\ All futures contracts (and options on futures), listed 
options and ETPs held by the Fund will be traded on U.S. exchanges, all 
of which are members of ISG or are exchanges with which the Exchange 
has in place a comprehensive surveillance sharing agreement. In 
addition, the Exchange is able to access, as needed, trade information 
for certain fixed income securities held by the Fund reported to 
FINRA's Trade Reporting and Compliance Engine (``TRACE'').
---------------------------------------------------------------------------

    \29\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all of the components 
of the portfolio for the Fund may trade on exchanges that are 
members of the ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. Specifically, the Information 
Circular will discuss the following: (1) The procedures for purchases 
and redemptions of Shares in Creation Units (and that Shares are not 
individually redeemable); (2) BZX Rule 3.7, which imposes suitability 
obligations on Exchange members with respect to recommending 
transactions in the Shares to customers; (3) how information regarding 
the IIV and Index value is disseminated; (4) the risks involved in 
trading the Shares during the Pre-Opening \30\ and After Hours Trading 
Sessions \31\ 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.
---------------------------------------------------------------------------

    \30\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m. 
Eastern Time.
    \31\ The After Hours Trading Session is from 4:00 p.m. to 5:00 
p.m. Eastern Time.
---------------------------------------------------------------------------

    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Funds. Members purchasing Shares from the Funds for 
resale to investors will deliver a prospectus to such investors. The 
Information Circular will also discuss any exemptive, no-action, and 
interpretive relief granted by the Commission from any rules under the 
Act.
    In addition, the Information Circular will reference that each Fund 
is subject to various fees and expenses described in the Registration 
Statement. The Information Circular will also disclose the trading 
hours of the Shares of the Funds and the applicable NAV calculation 
time for the Shares. The Information Circular will disclose that 
information about the Shares of the Funds will be publicly available on 
the Funds' Web site. In addition, the Information Circular will 
reference that the Trust is subject to various fees and expenses 
described in each Fund's Registration Statement.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \32\ in general and Section 6(b)(5) of the Act \33\ 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.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f.
    \33\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed on the Exchange pursuant to the initial and 
continued listing criteria in Bats Rule 14.11(c)(3), except that the 
Index will consist solely of RUT Puts and Treasury bills, rather than 
U.S. Component Stocks. The Exchange believes that the proposed rule 
change is designed to prevent fraudulent and manipulative acts and 
practices in that the Shares will be listed and traded on the Exchange 
pursuant to the listing criteria in Bats Rule 14.11(c). The Exchange 
believes that its surveillances, which generally focus on detecting 
securities trading outside of their normal patterns which could be 
indicative of manipulative or other violative activity, and associated 
surveillance procedures are adequate to properly monitor the trading of 
the Shares on the Exchange during all trading sessions and to deter and 
detect violations of Exchange rules and the applicable federal 
securities laws. FINRA and the Exchange, as applicable, may each obtain 
information via ISG from other exchanges that are members of ISG, and 
in the case of the Exchange, from other market or entities with which 
the Exchange has entered into a comprehensive surveillance sharing 
agreement.
    The Index Provider is not registered as an investment adviser or 
broker-dealer and is not affiliated with any broker-dealers. The 
Adviser is not registered as, or affiliated with, any broker-dealer. 
The Sub-Adviser is affiliated with multiple broker-dealers and has 
implemented a ``fire wall'' with respect to such broker-dealers and 
their personnel regarding access to information concerning the 
composition and/or changes to the Index. In addition, Sub-Adviser 
personnel who make decisions regarding the Fund's portfolio are subject 
to procedures designed to prevent the use and dissemination of material 
nonpublic information regarding the Fund's portfolio. The Adviser and 
the Index Provider have represented that a fire wall exists around the 
respective personnel who have access to information concerning changes 
and adjustments to the Index. All exchange-listed options, futures 
contracts and ETPs held by the Fund will be traded on U.S. exchanges, 
all of which are members of ISG or are exchanges with which the 
Exchange has in place a comprehensive surveillance sharing agreement.
    Under Normal Market Conditions, not less than 80% of the Fund's 
total assets will be comprised of RUT Puts and U.S. Treasury bills, 
although the Fund may also invest up to 20% of its total assets in 
Other Assets. Other Assets includes only the following: short-term, 
high quality securities issued or guaranteed by the U.S. government and 
non-U.S. governments, and each of their agencies

[[Page 42406]]

and instrumentalities; U.S. government sponsored enterprises; 
repurchase agreements backed by U.S. government and non-U.S. government 
securities; money market mutual funds; money market instruments; 
Russell 2000 ETF put options,\34\ Russell 2000 Index futures and/or 
options on Russell 2000 Index futures; \35\ total return swaps; \36\ 
other ETPs; non-exchange-traded registered open-end investment 
companies (i.e., mutual funds); and variable or floating interest rate 
securities.
---------------------------------------------------------------------------

    \34\ The Fund may invest up to 10% of its net assets in OTC 
Russell 2000 Index put options.
    \35\ The Fund's investments in listed futures contracts will be 
backed by investments in U.S. government securities in an amount 
equal to the exposure of such contracts.
    \36\ The Fund's investments in total return swap agreements will 
be backed by investments in U.S. government securities in an amount 
equal to the exposure of such contracts.
---------------------------------------------------------------------------

    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
consistent with Commission guidance. The Fund therefore will not use 
derivative instruments to enhance leverage. The Fund will not invest in 
non-U.S. equity securities.
    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 to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. FINRA conducts certain cross-market 
surveillances on behalf of the Exchange pursuant to a regulatory 
services agreement. The Exchange is responsible for FINRA's performance 
under this regulatory services agreement. If the Fund is not in 
compliance with the applicable listing requirements, the Exchange will 
commence delisting procedures under Bats Rule 14.12.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily every day the 
NYSE is open, and that the NAV will be made available to all market 
participants at the same time. In addition, a large amount of 
information will be publicly available regarding the Fund and the 
Shares, thereby promoting market transparency.
    Moreover, the IIV will be widely disseminated by one or more major 
market data vendors at least every 15 seconds during Regular Trading 
Hours. On each business day, before commencement of trading in the 
Shares on the Exchange during Regular Trading Hours, the Fund will 
disclose on its Web site the portfolio that will form the basis for the 
Fund's calculation of NAV at the end of the business day. Information 
regarding market price and trading volume of the Shares will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services, and quotations 
and last sale information will be available via the CTA high-speed 
line. Information relating to U.S. exchange-listed options is available 
via the Options Price Reporting Authority. Quotation and last sale 
information for the Shares and any ETPs it which it invests will be 
available via the CTA high-speed line. Quotation and last sale 
information for U.S. exchange-listed options contracts cleared by The 
Options Clearing Corporation will be available via the Options Price 
Reporting Authority. The intra-day, closing and settlement prices of 
exchange-traded portfolio assets, including ETPs, futures and exchange-
traded options contracts will be readily available from the securities 
exchanges and futures exchange trading such securities and futures, as 
the case may be, automated quotation systems, published or other public 
sources, or online information services such as Bloomberg or Reuters. 
Such price information on fixed income portfolio securities, including 
money market instruments, and other Fund assets traded in the over-the-
counter markets, including bonds and money market instruments is 
available from major broker-dealer firms or market data vendors, as 
well as from automated quotation systems, published or other public 
sources, or online information services. The Web site for the Fund will 
include the prospectus for the Fund and additional data relating to NAV 
and other applicable quantitative information. Moreover, prior to 
commencement of trading, the Exchange will inform its Members in an 
Information Circular of the special characteristics and risks 
associated with trading the Shares. If the Exchange becomes aware that 
the NAV is not being disseminated to all market participants at the 
same time, it will halt trading in the Shares until such time as the 
NAV is available to all market participants. With respect to trading 
halts, the Exchange may consider all relevant factors in exercising its 
discretion to halt or suspend trading in the Shares of the Funds. 
Trading also may be halted because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) The extent to which trading is not 
occurring in the securities and/or the financial instruments composing 
the daily disclosed portfolio of each Fund; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present. Trading in the Shares also will be 
subject to Rule 14.11(c)(1)(B)(iv), which sets forth circumstances 
under which Shares of a Fund may be halted. If the IIV of any of [sic] 
the Fund or value of the Index are [sic] not being disseminated as 
required, the Exchange may halt trading during the day in which the 
interruption to the dissemination of the IIV or index value occurs. In 
addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, the IIV, the Fund's 
portfolio, and quotation and last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of exchange-traded product that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Shares will be subject to the 
existing trading surveillances, which are designed to detect violations 
of Exchange rules and federal securities laws applicable to trading on 
the Exchange. The Exchange or FINRA, on behalf of the Exchange, will 
communicate as needed regarding trading in the Shares, ETPs, futures 
contracts, and exchange-traded options contracts with other market and 
other entities that are members of ISG and may obtain trading 
information in the Shares, futures contracts, exchange-traded options 
contracts, and ETPs from such markets and other entities. In addition, 
the Exchange may obtain information regarding trading in the Shares, 
futures contracts, exchange-traded options contracts, and ETPs from 
markets and other entities that are members of ISG or with which the

[[Page 42407]]

Exchange has in place a comprehensive surveillance sharing agreement. 
In addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, the IIV, and quotation and 
last sale information for the Shares.
    For the above reasons, the Exchange believes that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of 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 within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding, or (ii) as to 
which the 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 proposal is 
consistent with the 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 No. SR-BatsBZX-2017-53 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 No. SR-BatsBZX-2017-53. 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 such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-BatsBZX-2017-53 and should be 
submitted on or before September 28, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\37\
---------------------------------------------------------------------------

    \37\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-18935 Filed 9-6-17; 8:45 am]
 BILLING CODE 8011-01-P