Self-Regulatory Organizations; CboeBZX Exchange, Inc.; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade Shares of the iShares Gold Strategy ETF Under Exchange Rule 14.11(i), 16150-16157 [2018-07670]

Download as PDF 16150 Federal Register / Vol. 83, No. 72 / Friday, April 13, 2018 / Notices Commission, 100 F Street NE, Washington, DC 20549–1090. SECURITIES AND EXCHANGE COMMISSION All submissions should refer to File No. SR–CboeBZX–2018–025. 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 website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–CboeBZX–2018–025 and should be submitted on or before May 4, 2018. [Release No. 34–83014; File No. SR– CboeBZX–2017–023] For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.38 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–07673 Filed 4–12–18; 8:45 am] daltland on DSKBBV9HB2PROD with NOTICES BILLING CODE 8011–01–P 38 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:41 Apr 12, 2018 Jkt 244001 Self-Regulatory Organizations; CboeBZX Exchange, Inc.; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade Shares of the iShares Gold Strategy ETF Under Exchange Rule 14.11(i) April 9, 2018. I. Introduction On December 21, 2017, CboeBZX Exchange, Inc. (‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the iShares Gold Strategy ETF (‘‘Fund’’), a series of the iShares U.S. ETF Trust (‘‘Trust’’), under Exchange Rule 14.11(i) (‘‘Managed Fund Shares’’). The proposed rule change was published for comment in the Federal Register on January 11, 2018.3 On February 22, 2018, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 On February 28, 2018, the Exchange filed Amendment No. 1 to the proposed rule change, which replaced and superseded the proposed rule change as originally filed. On April 4, 2018, the Exchange filed Amendment No. 2 to the proposed rule change, which replaced and superseded the proposed rule change as modified by Amendment No. 1.6 The Commission 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 82444 (Jan. 5, 2018), 83 FR 1438. 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 82758, 83 FR 8717 (Feb. 28, 2018). The Commission designated April 11, 2018, as the date by which it should approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. 6 In Amendment No. 2, the Exchange: (1) Made changes to reflect that the Fund’s name changed; (2) represented that the Adviser (as defined below) will erect and maintain fire walls with respect to its current and future broker-dealer affiliates; (3) stated that the Fund’s investments in fixed income instruments may not comply with Exchange Rule 14.11(i)(4)(C)(ii); (4) modified and clarified the Fund’s permitted investments, including with respect to the listed and over-the-counter derivatives and the fixed income instruments that the Fund may invest in; (5) represented that at least 2 17 PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 has received no comments on the proposal. The Commission is publishing this notice to solicit comments on Amendment No. 2 from interested persons and is approving the proposed rule change, as modified by Amendment No. 2, on an accelerated basis. II. Exchange’s Description of the Proposal, as Modified by Amendment No. 2 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose This Amendment No. 2 to SR– CboeBZX–2017–023 amends and replaces in its entirety Amendment No. 80% of the Fund’s investments in Gold Futures (as defined below), as calculated using gross notional exposure, will be in CME-listed or LME-listed gold futures or other exchange-traded gold futures with a similar liquidity profile; (6) represented that all of the Listed Gold Derivatives (as defined below) held by the Fund will trade on markets that are a member of, or affiliated with a member of, the Intermarket Surveillance Group, or with which the Exchange has in place a comprehensive surveillance sharing agreement; (7) represented that all exchange-traded products held by the Fund will be listed on U.S. national securities exchanges; (8) stated that the Fund’s investments in derivatives will primarily consist of Gold Futures and clarified the circumstances under which the Fund may invest in other specified derivatives; (9) represented that the Fund will not hold mortgage-backed or other asset-backed government obligations; (10) clarified that the Fund will not invest in sovereign debt obligations of emerging market countries; (11) represented that all Fixed Income Investments (as defined below) held by the Fund will be investment grade and will not include instruments with a maturity longer than 397 days; (12) clarified the Cash Equivalents (as defined below) in which the Fund may invest; (13) stated that up to 25% of the total assets of the Fund may be indirectly held through the Subsidiary (as defined below); (14) made representations relating to the Fund’s investments in derivatives, including that such investments will be made consistent with the Investment Company Act of 1940 and the Fund’s objective and policies, that the Fund does not intend to make investments for the purposes of enhancing leverage, and that the Fund will take certain actions to mitigate and disclose leveraging risk; (15) stated where pricing information for the Fund’s permitted investments will be publicly available; (16) made additional representations regarding the Fund, including where information relating to the Fund and the Shares will be made available; (17) provided additional justification for why the Fund’s proposed investments are consistent with the Act, including why it is consistent with the Act for the Fund to hold fixed income instruments in a manner that may not comply with Exchange Rule 14.11(i)(4)(C)(ii); (18) represented that the Fixed Income Investments of the Fund will meet the requirements of Exchange Rule 14.11(i)(4)(C)(ii)(e); (19) made additional representations regarding the ability of the Exchange and the Financial Industry Regulatory Authority, on behalf of the Exchange, to surveil trading in the Shares and certain of the underlying investments; and (20) made other clarifications, corrections, and technical changes. Amendment No. 2 is available at: https://www.sec.gov/comments/srcboebzx-2017-023/cboebzx2017023-3383514162149.pdf. E:\FR\FM\13APN1.SGM 13APN1 Federal Register / Vol. 83, No. 72 / Friday, April 13, 2018 / Notices daltland on DSKBBV9HB2PROD with NOTICES 1 to the proposal, which was submitted on February 28, 2018, which amended and replaced in its entirety the proposal as originally submitted on December 23, 2017. The Exchange submits this Amendment No. 2 in order to clarify certain points and add additional details about the Fund. The Exchange proposes to list and trade the Shares under Exchange Rule 14.11(i), which governs the listing and trading of Managed Fund Shares on the Exchange.7 The Fund is a series of, and the Shares will be offered by, the Trust, which was established as a Delaware statutory trust on June 21, 2011. BlackRock Fund Advisors (the ‘‘Adviser’’) will serve as the investment adviser to the Fund. The Trust is registered with the Commission as an open-end management investment company and has filed a registration statement on behalf of the Fund on Form N–1A (‘‘Registration Statement’’) with the Commission.8 As a result of the instruments that will be indirectly held by the Fund, the Adviser, which is a member of the National Futures Association (‘‘NFA’’), will register as a commodity pool operator 9 with respect to the Fund. If the Fund retains any sub-adviser in the future, such sub-adviser will register as a commodity pool operator or commodity trading adviser, if required by Commodity Futures Trading Commission (‘‘CFTC’’) regulations. The Fund will be subject to regulation by the CFTC and NFA and applicable disclosure, reporting and recordkeeping rules imposed upon commodity pools. Exchange Rule 14.11(i)(7) provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a brokerdealer, such investment adviser shall erect and maintain a ‘‘fire wall’’ between the investment adviser and the 7 The Commission originally approved Exchange Rule 14.11(i) in Securities Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148 (September 6, 2011) (SR–BATS–2011–018) and subsequently approved generic listing standards for Managed Fund Shares under Exchange Rule 14.11(i)(4)(C) in Securities Exchange Act Release No. 78396 (July 22, 2016), 81 FR 49698 (July 28, 2016) (SR–BATS–2015–100) (‘‘Generic Listing Rules’’). 8 See Registration Statement on Form N–1A for the Trust, filed with the Commission on November 1, 2017 (File Nos. 333–179904 and 811–22649). The descriptions of the Fund and the Shares contained herein are based, in part, on information in the Registration Statement. The Commission has issued an order granting certain exemptive relief to the Adviser and open-end management companies advised by the Adviser under the Investment Company Act of 1940 (15 U.S.C. 80a–1). See Investment Company Act Release No. 29571 (January 24, 2011) (File No. 812–13601). 9 As defined in Section 1a(11) of the Commodity Exchange Act. VerDate Sep<11>2014 17:41 Apr 12, 2018 Jkt 244001 broker-dealer with respect to access to information concerning the composition and/or changes to such investment company portfolio.10 In addition, Exchange Rule 14.11(i)(7) further requires that personnel who make decisions on the investment company’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the applicable investment company portfolio. Exchange Rule 14.11(i)(7) is similar to Exchange Rule 14.11(b)(5)(A)(i) (which applies to index-based funds); however, Exchange Rule 14.11(i)(7) in connection with the establishment of a ‘‘fire wall’’ between the investment adviser and the brokerdealer reflects the applicable open-end fund’s portfolio, not an underlying benchmark index, as is the case with index-based funds. The Adviser is not a registered broker-dealer, but is affiliated with multiple broker-dealers and has implemented and will maintain ‘‘fire walls’’ with respect to such brokerdealers regarding access to information concerning the composition and/or changes to the Fund’s portfolio. In addition, 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. In the event that (a) the Adviser becomes registered as a broker-dealer or newly affiliated with another broker-dealer, or (b) any new adviser or sub-adviser is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement and maintain a fire wall with respect to its relevant personnel or such 10 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’). As a result, the Adviser and its related personnel are subject to the provisions of Rule 204A–1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with other applicable securities laws. Accordingly, procedures designed to prevent the communication and misuse of non-public information by an investment adviser must be consistent with Rule 204A–1 under the Advisers Act. In addition, Rule 206(4)–7 under the Advisers Act makes it unlawful for an investment adviser to provide investment advice to clients unless such investment adviser has (i) adopted and implemented written policies and procedures reasonably designed to prevent violation, by the investment adviser and its supervised persons, of the Advisers Act and the Commission rules adopted thereunder; (ii) implemented, at a minimum, an annual review regarding the adequacy of the policies and procedures established pursuant to subparagraph (i) above and the effectiveness of their implementation; and (iii) designated an individual (who is a supervised person) responsible for administering the policies and procedures adopted under subparagraph (i) above. PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 16151 broker-dealer affiliate, as applicable, regarding access to information concerning the composition and/or changes to the portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. The Exchange submits this proposal in order to allow the Fund to hold listed derivatives (i.e., Listed Gold Derivatives, as defined below) in a manner that does not comply with Exchange Rule 14.11(i)(4)(C)(iv)(b) 11 and to employ a cash management strategy which include fixed income instruments that do not necessarily comply with Exchange Rule 14.11(i)(4)(C)(ii). Otherwise, the Fund will comply with all other listing requirements on an initial and continued listing basis under Exchange Rule 14.11(i) for Managed Fund Shares. iShares Gold Strategy ETF The Fund will seek to provide exposure, on a total return basis, to the price performance of gold. The Fund will seek to achieve its investment objective by investing primarily in a combination of (i) exchange-traded gold futures contracts (‘‘Gold Futures’’) 12 and exchange-listed options or listed swaps that correlate to the investment returns of physical gold (such other listed derivatives together with Gold Futures, ‘‘Listed Gold Derivatives’’),13 based on the notional value of such derivative instruments; (ii) over-thecounter (‘‘OTC’’) derivatives that correlate to the investment returns of physical gold (‘‘OTC Gold Derivatives’’),14 based on the notional value of such derivative instruments; and (iii) exchange-traded products 11 Exchange Rule 14.11(i)(4)(C)(iv)(b) provides that ‘‘the aggregate gross notional value of listed derivatives based on any five or fewer underlying reference assets shall not exceed 65% of the weight of the portfolio (including gross notional exposures), and the aggregate gross notional value of listed derivatives based on any single underlying reference asset shall not exceed 30% of the weight of the portfolio (including gross notional exposures).’’ 12 At least 80% of the Fund’s Gold Futures investment, as calculated using gross notional exposure, will be in CME-listed gold futures, LMElisted gold futures, or other exchange-traded gold futures with a similar liquidity profile. 13 All of the Listed Gold Derivatives held by the Fund will trade on markets that are a member of the Intermarket Surveillance Group (‘‘ISG’’) or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. 14 OTC Gold Derivatives include only OTC forwards, options, and swaps. E:\FR\FM\13APN1.SGM 13APN1 16152 Federal Register / Vol. 83, No. 72 / Friday, April 13, 2018 / Notices daltland on DSKBBV9HB2PROD with NOTICES (‘‘ETPs’’) 15 backed by or linked to physical gold (‘‘Gold ETPs,’’ and collectively with Listed Gold Derivatives and OTC Gold Derivatives, the ‘‘Gold Investments’’). While the Fund may invest in Gold Futures, Listed Gold Derivatives, or OTC Gold Derivatives, the Fund’s investments in derivatives will primarily consist of Gold Futures. Should Gold Futures become unavailable or illiquid or under such other circumstances the Adviser deems to be in the best interest of shareholders of the Fund, however, the Fund may invest in other Listed Gold Derivatives or OTC Gold Derivatives. In seeking total return, the Fund will additionally aim to generate interest income and capital appreciation through a cash management strategy consisting of repurchase agreements, reverse repurchase agreements, money market instruments, certificates of deposit issued against funds deposited in a bank or savings and loan association, bankers acceptances, bank time deposits, commercial paper, investments in government obligations, including U.S. government and agency securities,16 treasury inflation-protected securities, and sovereign debt obligations of non-U.S. countries excluding emerging market countries (‘‘Non-U.S. Sovereign Debt’’) 17 (collectively, ‘‘Fixed Income Investments’’) 18 and cash and Cash Equivalents19 (collectively, with Fixed Income Investments, ‘‘Cash 15 As defined in Exchange Rule 11.8(e)(1)(A), ETP means any security listed pursuant to Exchange Rule 14.11. All ETPs will be listed on a U.S. national securities exchange. 16 The Fund will not hold mortgage-backed or other asset-backed government obligations. 17 An ‘‘emerging market country’’ is a country that, at the time of investment, is considered an emerging market country for purposes of constructing a major emerging market securities index. 18 All of the Fixed Income Investments held by the Fund will be investment grade and will not include instruments with a maturity longer than 397 days. 19 As defined in Exchange Rule 14.11(i)(4)(C)(iii)(b), Cash Equivalents are shortterm instruments with maturities of less than three months, which includes only the following: (i) U.S. Government securities, including bills, notes, and bonds differing as to maturity and rates of interest, which are either issued or guaranteed by the U.S. Treasury or by U.S. Government agencies or instrumentalities; (ii) certificates of deposit issued against funds deposited in a bank or savings and loan association; (iii) bankers acceptances, which are short-term credit instruments used to finance commercial transactions; (iv) repurchase agreements and reverse repurchase agreements; (v) bank time deposits, which are monies kept on deposit with banks or savings and loan associations for a stated period of time at a fixed rate of interest; (vi) commercial paper, which are short-term unsecured promissory notes; and (vii) money market funds. VerDate Sep<11>2014 17:41 Apr 12, 2018 Jkt 244001 Management Holdings’’).20 The Fund will be an actively managed exchangetraded fund and will not seek to replicate the performance of a specified index. The Fund’s investment strategy related to the Gold Investments will seek to maximize correlation with the Bloomberg Composite Gold Index (the ‘‘Bloomberg Benchmark’’), which is comprised of exchange-traded gold futures contracts and one or more ETPs backed by or linked to physical gold. The Bloomberg Benchmark is designed to track the price performance of gold. Although the Fund generally will hold, among other instruments, the same futures contracts under the same futures rolling schedule, and the same ETPs backed by or linked to physical gold, as those included in the Bloomberg Benchmark, the Fund is not obligated to invest in any such futures contracts or ETPs included in, and does not seek to track the performance of, the Bloomberg Benchmark. The Fund expects to seek to gain exposure to Gold Investments by investing through a wholly-owned subsidiary organized in the Cayman Islands (the ‘‘Subsidiary’’). The Subsidiary is advised by the Adviser. Unlike the Fund, the Subsidiary is not an investment company registered under the Investment Company Act of 1940 (the ‘‘1940 Act’’). The Subsidiary has the same investment objective as the Fund. References below to the holdings of the Fund, including any restrictions thereon that are described within this proposal, are inclusive of the direct holdings of the Fund as well as the indirect holdings of the Fund through the Subsidiary, which may constitute up to 25% of the total assets of the Fund. In order to achieve its investment objective, under Normal Market Conditions,21 the aggregate gross 20 The Fund’s Cash Management Holdings will consist of both fixed income securities, as described in Exchange Rule 14.11(i)(4)(C)(ii), and Cash Equivalents, as described in Exchange Rule 14.11(i)(4)(C)(iii). The Exchange is proposing to allow the Fund to hold such fixed income instruments in a manner that may not meet the requirements of Exchange Rule 14.11(i)(4)(C)(ii). The Fixed Income Investments portion of the Fund’s Cash Management Holdings will be only those instruments that are included in Cash Equivalents (with the exception of Non-U.S. Sovereign Debt), but are not considered Cash Equivalents because they have maturities of three months or longer. The Exchange believes, however, that because these instruments, including Non-U.S. Sovereign Debt, are highly liquid and of high credit quality, they are less susceptible than other types of fixed income instruments both to price manipulation and volatility and that the holdings as proposed are generally consistent with the policy concerns which Rule 14.11(i)(4)(C)(ii) is intended to address. 21 As defined in Exchange Rule 14.11(i)(3)(E), the term ‘‘Normal Market Conditions’’ includes, but is PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 notional value of Listed Gold Derivatives is generally not expected to exceed 75%, but may, in certain circumstances, approach 100%, of the Fund (including gross notional values). As noted above, Exchange Rule 14.11(i)(4)(C)(iv)(b) prohibits the Fund from holding listed derivatives based on any five or fewer underlying reference assets in excess of 65% of the weight of the portfolio (including gross notional exposures) and from holding listed derivatives based on any single underlying reference asset in excess of 30% of the weight of its portfolio (including gross notional exposures). The Exchange is proposing to allow the Fund to hold up to 100% of the weight of its portfolio (including gross notional exposures) in listed derivatives based on a single underlying reference asset (physical gold) through its investment in Listed Gold Derivatives. Allowing the Fund to hold a greater portion of its portfolio in Listed Gold Derivatives than permitted by the Generic Listing Rules would mitigate the Fund’s dependency on holding OTC derivative instruments, which would reduce the Fund’s operational burden by allowing the Fund to primarily use listed futures contracts and other listed derivatives to achieve its investment objective and would also reduce counter-party risk associated with holding OTC instruments. The Exchange also notes that holding listed derivatives instead of OTC derivatives would reduce the risk of manipulation because all of the Listed Gold Derivatives the Fund may invest in will trade on markets that are a member of ISG or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. Under Normal Market Conditions, the Fund generally will hold Gold Investments (which include Listed Gold Derivatives, OTC Gold Derivatives,22 and Gold ETPs 23) and Cash Management Holdings. The Exchange represents that, except for the 65% and 30% limitations in Exchange Rule 14.11(i)(4)(C)(iv)(b) and except for the Cash Management Holdings that may 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. 22 The aggregate gross notional value of the Fund’s holdings in OTC Gold Derivatives will not exceed 20% of the weight of the portfolio (including gross notional exposures) in compliance with Exchange Rule 14.11(i)(4)(C)(v). 23 The Fund’s holdings in Gold ETPs will comply with the requirements of Exchange Rule 14.11(i)(4)(C)(i)(a). E:\FR\FM\13APN1.SGM 13APN1 Federal Register / Vol. 83, No. 72 / Friday, April 13, 2018 / Notices not meet the requirements of Exchange Rule 14.11(i)(4)(C)(ii), the Fund’s proposed investments will satisfy, on an initial and continued listing basis, all of the Generic Listing Rules and all other applicable requirements for Managed Fund Shares under Exchange Rule 14.11(i). The Fund’s investments, including derivatives, will be made consistent with the 1940 Act and the Fund’s investment objective and policies, and the Fund does not intend to make investments for the purposes of enhancing leverage (although certain derivatives and other investments may have a leveraging effect).24 That is, while the Fund will be permitted to borrow as permitted under the 1940 Act, the Fund’s investments will not be used to seek performance that is the multiple or inverse multiple (e.g., 2Xs and 3Xs) of the Fund’s ‘‘appropriate broad-based securities market index’’ (as defined in Form N–1A). The Trust is required to comply with Rule 10A–3 under the Act 25 for the initial and continued listing of the Shares of the Fund. In addition, the Exchange represents that the Shares of the Fund will meet and be subject to all other requirements of the Generic Listing Rules and other applicable continued listing requirements for Managed Fund Shares under Exchange Rule 14.11(i), including those requirements regarding the Disclosed Portfolio (as defined in the Exchange rules) and the requirement that the Disclosed Portfolio and the net asset value (‘‘NAV’’) will be made available to all market participants at the same time,26 intraday indicative value,27 daltland on DSKBBV9HB2PROD with NOTICES 24 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. The Fund’s investments in derivative instruments will be made in accordance with the 1940 Act and consistent with the Fund’s investment objective and policies. To mitigate leveraging risk, the Fund will segregate or earmark liquid assets determined to be liquid by the Adviser in accordance with procedures established by the Trust’s Board of Trustees and in accordance with the 1940 Act (or, as permitted by applicable regulations, enter into certain offsetting positions) to cover its obligations under derivative instruments. These procedures have been adopted consistent with Section 18 of the 1940 Act and related Commission guidance. 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). 25 17 CFR 240.10A–3. 26 See Exchange Rules 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii). 27 See Exchange Rule 14.11(i)(4)(B)(i). VerDate Sep<11>2014 17:41 Apr 12, 2018 Jkt 244001 16153 suspension of trading or removal,28 trading halts,29 disclosure,30 and firewalls.31 Further, at least 100,000 Shares will be outstanding upon the commencement of trading.32 Moreover, all of the Listed Gold Derivatives and Gold ETPs the Fund may invest in will trade on markets that are a member of ISG or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.33 Additionally, the Exchange or Financial Industry Regulatory Authority (‘‘FINRA’’), on behalf of the Exchange, are able to access, as needed, trade information for certain fixed income instruments reported to FINRA’s Trade Reporting and Compliance Engine (‘‘TRACE’’). All statements and representations made in this filing regarding the description of the portfolio or reference assets, limitations on portfolio holdings or reference assets, dissemination and availability of reference assets and intraday indicative values, and the applicability of Exchange listing rules specified in this filing shall constitute continued listing requirements for the Fund. The Trust, on behalf of the Fund, has represented to the Exchange that it will advise the Exchange of any failure by the Fund or the Shares to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will surveil for compliance with the continued listing requirements. If the Fund or the Shares are not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under Exchange Rule 14.12. sources, or online information services such as Bloomberg or Reuters. Intraday price quotations on OTC Gold Derivatives and Fixed Income Investments are available from major broker-dealer firms and from thirdparties, which may provide prices free with a time delay or in real-time for a paid fee. Price information for Cash Equivalents will be available from major market data vendors. The Disclosed Portfolio will be available on the Fund’s website (www.ishares.com) free of charge. The Fund’s website will include a form of the prospectus for the Fund and additional information related to NAV and other applicable quantitative information. Information regarding market price and trading volume of the Shares will be continuously available throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume for the Shares will be published daily in the financial section of newspapers. Trading in the Shares may be halted for market conditions or for reasons that, in the view of the Exchange, make trading inadvisable. 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 has appropriate rules to facilitate trading in the Shares during all trading sessions. The Exchange prohibits the distribution of material non-public information by its employees. Quotation and last sale information for the Shares will be available via the CTA high-speed line. Availability of Information As noted above, the Fund will comply with the requirements under the Generic Listing Rules for Managed Fund Shares related to Disclosed Portfolio, NAV, and the intraday indicative value. Additionally, the intra-day, closing and settlement prices of exchange-traded portfolio assets, including the Gold ETPs and Listed Gold Derivatives, will be readily available from the exchanges trading such securities or derivatives, as the case may be, automated quotation systems, published or other public Information Circular 28 See Exchange Rule 14.11(i)(4)(B)(iii). Exchange Rule 14.11(i)(4)(B)(iv). Exchange Rule 14.11(i)(6). 31 See Exchange Rule 14.11(i)(7). 32 See Exchange Rule 14.11(i)(4)(A)(i). 33 For a list of the current members and affiliate members of ISG, see www.isgportal.com. The Exchange notes that not all components of the Disclosed Portfolio for the Fund may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. 29 See 30 See PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 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) Exchange Rule 3.7, which imposes suitability obligations on Exchange members with respect to recommending transactions in the Shares to customers; (3) how information regarding the intraday indicative value and the Disclosed Portfolio will be disseminated; (4) the risks involved in trading the Shares during the Pre-Opening 34 and After 34 The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m. Eastern Time. E:\FR\FM\13APN1.SGM 13APN1 16154 Federal Register / Vol. 83, No. 72 / Friday, April 13, 2018 / Notices underlying derivatives markets, in particular the market for Gold Futures,39 minimize the risk for manipulation in the underlying gold market, which mitigates the risk of manipulation in Listed Gold Derivatives and the concerns related to the susceptibility to manipulation of an underlying reference asset that Exchange Rule 14.11(i)(4)(C)(iv)(b) is intended to address. Further, at least 80% of the Fund’s Gold Futures investment, as calculated using gross notional exposure, will be in CME-listed gold futures, LME-listed gold futures, or other exchange-traded gold futures with a similar liquidity profile. As such, the Exchange believes that the liquidity in the spot gold and Gold Futures markets acts to prevent manipulation in Listed Gold Derivatives and will act to prevent manipulation in the Shares. Further, allowing the Fund to hold a greater portion of its portfolio in Listed Gold Derivatives would mitigate the Fund’s dependency on holding OTC 2. Statutory Basis instruments, which would reduce the The Exchange believes that the Fund’s operational burden by allowing proposal is consistent with Section 6(b) the Fund to primarily use listed futures of the Act 36 in general and Section contracts and other listed derivatives to 37 in particular because 6(b)(5) of the Act achieve its investment objective and the Exchange believes that the proposed would also reduce counter-party risk rule change is designed to prevent associated with holding OTC fraudulent and manipulative acts and instruments. The Exchange also notes practices, to promote just and equitable that Listed Gold Derivatives are traded principles of trade, to foster cooperation on markets with surveillance and coordination with persons engaged procedures and price transparency. in facilitating transactions in securities, Trading in the Shares is subject to the to remove impediments to and perfect Exchange’s surveillance procedures for the mechanism of a free and open derivative securities products. The market and a national market system Exchange believes that its surveillance and, in general, to protect investors and procedures are adequate to properly the public interest given that the Shares monitor the trading of the Shares on the will meet each of the initial and Exchange during all trading sessions continued listing criteria in Exchange and to deter and detect violations of Rule 14.11(i) with the exception of (a) Exchange rules and the applicable Exchange Rule 14.11(i)(4)(C)(iv)(b), federal securities laws. which requires that the aggregate gross While Exchange Rule 14.11(i)(4)(C)(ii) notional value of listed derivatives includes rules intended to ensure that based on any five or fewer underlying the fixed income securities included in reference assets shall not exceed 65% of a fund’s portfolio are sufficiently large, the weight of the portfolio (including diverse, and have sufficient publicly gross notional exposures), and the available information regarding the aggregate gross notional value of listed issuances, the Exchange believes that derivatives based on any single such concerns are mitigated by the types underlying reference asset shall not of instruments that the Fund would exceed 30% of the weight of the hold. The Fixed Income Investments portfolio (including gross notional portion of the Fund’s Cash Management exposures), and (b) Exchange Rule Holdings includes only those 14.11(i)(4)(C)(ii) related to fixed income instruments that are included in Cash securities. The Exchange believes that 38 and the the liquidity in the spot gold daltland on DSKBBV9HB2PROD with NOTICES Hours Trading Sessions 35 when an updated intraday indicative value will not be calculated or publicly disseminated; (5) the requirement that Exchange members deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction in Shares; and (6) trading information. The Information Circular will also discuss any exemptive, no-action and interpretive relief granted by the Commission from any rules under the Act. The Information Circular will also reference that the Fund will be 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 Fund and the applicable NAV calculation time for the Shares. The Information Circular will disclose that information about the Shares of the Fund will be publicly available on the Fund’s website. 35 The After Hours Trading Session is from 4:00 p.m. to 5:00 p.m. Eastern Time. 36 15 U.S.C. 78f. 37 15 U.S.C. 78f(b)(5). 38 According to the London Precious Metals Clearing Limited, there was an average of $29.8 billion and $25.3 billion cleared daily by its five VerDate Sep<11>2014 17:41 Apr 12, 2018 Jkt 244001 member firms in January and February of 2018, respectively, which represents only a part of the total spot gold trading volumes. See https:// www.lbma.org.uk/clearing-statistics. 39 For the months of February and March of 2018, CME-listed gold futures traded an average of approximately $40 billion in daily notional value, while LME-listed gold futures traded an average of approximately $280 million in daily notional value. PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 Equivalents (with the exception of NonU.S. Sovereign Debt), but are not considered Cash Equivalents because they have maturities of three months or longer.40 The Exchange believes, however, that because these instruments, including Non-U.S. Sovereign Debt, are highly liquid and investment grade, they are less susceptible than other types of fixed income instruments both to price manipulation and volatility and that the holdings as proposed are generally consistent with the policy concerns which Rule 14.11(i)(4)(C)(ii) is intended to address. The Cash Equivalents portion of the Cash Management Holdings will meet Exchange Rule 14.11(i)(4)(C)(iii), which allows a fund to hold Cash Equivalents without limitation. Because the Cash Management Holdings will consist of both high-quality fixed income securities described above and other instruments that meet the definition of Cash Equivalents, the Exchange believes that the policy concerns that Exchange Rule 14.11(i)(4)(C)(ii) is intended to address are otherwise mitigated and that the Fund should be permitted to hold its Cash Management Holdings in a manner that may not comply with Exchange Rule 14.11(i)(4)(C)(ii).41 All of the Listed Gold Derivatives and Gold ETPs the Fund may invest in will trade on markets that are a member of ISG or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. The Exchange, or FINRA, on behalf of the Exchange, or both, will communicate with ISG, other markets or entities who are members or affiliates of the ISG, or other markets or entities with which the Exchange has entered into a comprehensive surveillance sharing agreement regarding trading in the Shares and the underlying Listed Gold Derivatives and Gold ETPs held by the Fund.42 The Exchange, FINRA, on behalf of the Exchange, or both, may obtain information regarding trading in the Shares and the Listed Gold Derivatives and Gold ETPs via the ISG from other markets or entities who are members or affiliates of the ISG or with which the Exchange has entered into a comprehensive surveillance sharing 40 The Fixed Income Investments will not include instruments with a maturity longer than 397 days. 41 The Exchange notes that the Fixed Income Investments portion of the Fund will meet the requirement of Rule 14.11(i)(4)(C)(ii)(e). 42 FINRA conducts cross-market surveillances on behalf of the exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. E:\FR\FM\13APN1.SGM 13APN1 Federal Register / Vol. 83, No. 72 / Friday, April 13, 2018 / Notices agreement.43 Additionally, the Exchange or FINRA, on behalf of the Exchange, are able to access, as needed, trade information for certain fixed income instruments reported to TRACE. The Exchange further notes that other than Rule 14.11(i)(4)(C)(ii) and Rule 14.11(i)(4)(C)(iv)(b), the Fund will meet and be subject to all other requirements of the Generic Listing Rules and other applicable continued listing requirements for Managed Fund Shares under Exchange Rule 14.11(i), including those requirements regarding the Disclosed Portfolio and the requirement that the Disclosed Portfolio and the NAV will be made available to all market participants at the same time, intraday indicative value, suspension of trading or removal, trading halts, disclosure, and firewalls. Further, at least 100,000 Shares will be outstanding upon the commencement of trading. 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 rather will facilitate the listing and trading of an additional activelymanaged exchange-traded fund that will enhance competition among both market participants and listing venues, to the benefit of investors and the marketplace. daltland on DSKBBV9HB2PROD with NOTICES 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. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change, as modified by Amendment No. 2, is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange.44 In particular, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act,45 which requires, 43 See note 33, supra. approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 45 15 U.S.C. 78f(b)(5). 44 In VerDate Sep<11>2014 17:41 Apr 12, 2018 Jkt 244001 among other things, that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. As noted above, the Fund’s investments in listed derivatives will not comply with Rule 14.11(i)(4)(C)(iv)(b). Under the proposal, the Fund could hold up to 100% of the weight of its portfolio (including gross notional exposures) in listed derivatives based on a single underlying reference asset (physical gold) through its investment in Listed Gold Derivatives. According to the Exchange, the liquidity in the spot gold market and the underlying derivatives markets, and in particular the market for Gold Futures,46 minimizes the risk for manipulation in the underlying gold market, which in turn mitigates the risk of manipulation in Listed Gold Derivatives and the concerns that Rule 14.11(i)(4)(C)(iv)(b) is intended to address. The Commission notes that the Fund’s investments in derivatives will primarily consist of Gold Futures, and at least 80% of the Fund’s investment in Gold Futures, as calculated using gross notional exposure, will be in CME-listed gold futures, LME-listed gold futures, or other exchange-traded gold futures with a similar liquidity profile. In addition, the Commission notes that all of the Listed Gold Derivatives the Fund may invest in will trade on markets that are a member of ISG or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. In addition, as noted above, the Fund’s Fixed Income Investments may not comply with Rule 14.11(i)(4)(C)(ii).47 The Exchange states that the types of fixed income instruments that the Fund will hold are highly liquid and of high credit quality and are, therefore, less susceptible to price manipulation and volatility than other types of fixed income instruments. The Commission notes that the Fixed Income Investments will consist of only those instruments that are included in the definition of ‘‘Cash Equivalents’’ as 46 See supra notes 38 and 39 and accompanying text. 47 The Exchange represents that the Fixed Income Investments will meet the requirement in Rule 14.11(i)(4)(C)(ii)(e) that any non-agency, non-GSE, and privately-issued mortgage-related and other asset-backed securities components of a portfolio shall not account, in the aggregate, for more than 20% of the weight of the fixed income portion of the portfolio. PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 16155 set forth in Rule 14.11(i)(4)(C)(iii), with the exception of Non-U.S. Sovereign Debt, but are not considered Cash Equivalents because they have maturities of three months or longer. The Commission further notes that the Fixed Income Investments will all be investment grade and will have a maturity of 397 days or less, and that the Fund will not invest in mortgagebacked or other asset-backed government obligations or sovereign debt obligations of emerging market countries. The Commission also notes that, other than Rule 14.11(i)(4)(C)(iv)(b) with respect to the Listed Gold Derivatives and Rule 14.11(i)(4)(C)(ii) with respect to the Fixed Income Investments, the Fund will meet all other requirements of Rule 14.11(i). The Commission believes that these proposed initial and continued listing requirements, including the requirements with respect to Listed Gold Derivatives and Fixed Income Investments, are designed to mitigate the potential for manipulation of the Shares. The Commission also finds that the proposal is consistent with Section 11A(a)(1)(C)(iii) of the Act,48 which sets forth Congress’s finding that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure the availability to brokers, dealers, and investors of information with respect to quotations for, and transactions in, securities. Quotation and last-sale information for the Shares will be available via the CTA high-speed line. Further, as required by Rule 14.11(i)(4)(B)(i), the Intraday Indicative Value (as defined in Rule 14.11(i)(3)(C)) will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Exchange’s Regular Trading Hours (as defined in Rule 1.5(w)). Information regarding market price and trading volume of the Shares will be continually available throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume for the Shares will be published daily in the financial section of newspapers. The intra-day, closing, and settlement prices of exchange-traded portfolio assets, including the Gold ETPs and Listed Gold Derivatives, will be readily available from the exchanges trading such securities or derivatives, as the case may be, automated quotation systems, published or other public sources, or online information services such as Bloomberg or Reuters. Intraday 48 15 E:\FR\FM\13APN1.SGM U.S.C. 78k–1(a)(1)(C)(iii). 13APN1 daltland on DSKBBV9HB2PROD with NOTICES 16156 Federal Register / Vol. 83, No. 72 / Friday, April 13, 2018 / Notices price quotations on OTC Gold Derivatives and Fixed Income Investments are available from major broker-dealer firms and from thirdparties, which may provide prices free with a time delay or in real-time for a paid fee. Price information for Cash Equivalents will be available from major market data vendors. In addition, the Fund’s website will include a form of the prospectus for the Fund and additional data relating to NAV and other applicable quantitative information. The Commission also believes that the proposal is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. As required by Rule 14.11(i)(4)(A)(ii), the Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio (as defined in Rule 14.11(i)(3)(B)) will be made available to all market participants at the same time. The Exchange represents that the Disclosed Portfolio will be available on the Fund’s website free of charge. Further, trading in the Shares may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. Trading in the Shares will also be subject to Rule 14.11(i)(4)(B)(iv), which sets forth circumstances under which Shares of a Fund may be halted. The Exchange states that it prohibits the distribution of material, non-public information by its employees. The Exchange states that the Adviser is not a registered broker-dealer but the Adviser is affiliated with multiple broker-dealers and has implemented and will maintain ‘‘fire walls’’ with respect to such broker-dealers regarding access to information concerning the composition of and/or changes to the Fund’s portfolio. Further, the Commission notes that the Reporting Authority that provides the Disclosed Portfolio must implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material, non-public information regarding the actual components of the portfolio.49 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. In support of this proposal, the Exchange represents that: 49 See Rule 14.11(i)(4)(B)(ii)(b). VerDate Sep<11>2014 17:41 Apr 12, 2018 Jkt 244001 (1) Other than Rule 14.11(i)(4)(C)(iv)(b) and Rule 14.11(i)(4)(C)(ii), the Fund will comply with all other requirements under Rule 14.11(i) for Managed Fund Shares on an initial and continued listing basis. (2) The Fund’s investments in derivatives will primarily consist of Gold Futures. However, should Gold Futures become unavailable or illiquid or under such other circumstances the Adviser deems to be in the best interest of shareholders of the Fund, the Fund may invest in other Listed Gold Derivatives or OTC Gold Derivatives. (3) At least 80% of the Gold Futures held by the Fund, as calculated using gross notional exposure, will be in CMElisted gold futures, LME-listed gold futures, or other exchange-traded gold futures with a similar liquidity profile. (4) All of the Listed Gold Derivatives and Gold ETPs held by the Fund will trade on markets that are a member of ISG or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. (5) All of the Fixed Income Investments held by the Fund will be investment grade and will have a maturity of 397 days or less. The Fixed Income Investments will be consist of only those instruments that are included in the definition of ‘‘Cash Equivalents’’ (with the exception of Non-U.S. Sovereign Debt), but are not considered Cash Equivalents because they have maturities of three months or longer. The Fund will not invest in mortgagebacked or other asset-backed government obligations or sovereign debt obligations of emerging market countries. (6) At least 100,000 Shares will be outstanding upon the commencement of trading. (7) Trading of the Shares on the Exchange will be subject to the Exchange’s surveillance procedures for derivative securities products, and these 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. (8) The Exchange, or FINRA, on behalf of the Exchange, or both, will communicate with ISG, other markets or entities who are members or affiliates of the ISG, or other markets or entities with which the Exchange has entered into a comprehensive surveillance sharing agreement regarding trading in the Shares and the underlying Listed Gold Derivatives and Gold ETPs held by PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 the Fund.50 The Exchange, FINRA, on behalf of the Exchange, or both, may obtain information regarding trading in the Shares, the Listed Gold Derivatives, and Gold ETPs via the ISG from other markets or entities who are members or affiliates of the ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. Additionally, the Exchange or FINRA, on behalf of the Exchange, are able to access, as needed, trade information for certain fixed income instruments reported to TRACE. (9) 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: (a) The procedures for purchases and redemptions of Shares in creation units (and that Shares are not individually redeemable); (b) Exchange Rule 3.7, which imposes suitability obligations on Exchange members with respect to recommending transactions in the Shares to customers; (c) how information regarding the Intraday Indicative Value and Disclosed Portfolio will be disseminated; (d) the risks involved in trading the Shares during the Pre-Opening and After Hours Trading Sessions when an updated Intraday Indicative Value will not be calculated or publicly disseminated; (e) the requirement that Exchange members deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction in Shares; and (f) trading information. (10) The Exchange has appropriate rules to facilitate trading in the Shares during all trading sessions. (11) For initial and continued listing of the Shares, the Trust is required to comply with Rule 10A–3 under the Act.51 The Exchange represents that all statements and representations made in the filing regarding the description of the portfolio or reference assets, limitations on portfolio holdings or reference assets, dissemination and availability of reference assets and intraday indicative values, and the applicability of Exchange listing rules specified in the filing shall constitute continued listing requirements for the Fund. In addition, the Trust, on behalf of the Fund, has represented to the Exchange that it will advise the Exchange of any failure by the Fund or the Shares to comply with the 50 See 51 See E:\FR\FM\13APN1.SGM supra note 42. 17 CFR 240.10A–3. 13APN1 Federal Register / Vol. 83, No. 72 / Friday, April 13, 2018 / Notices continued listing requirements and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will surveil for compliance with the continued listing requirements. If the Fund or the Shares are not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under Exchange Rule 14.12. This approval order is based on all of the Exchange’s statements and representations, including those set forth above and in Amendment No. 2 to the proposed rule change. For the foregoing reasons, the Commission finds that the proposed rule change, as modified by Amendment No. 2, is consistent with Section 6(b)(5) of the Act 52 and Section 11A(a)(1)(C)(iii) of the Act 53 and the rules and regulations thereunder applicable to a national securities exchange. IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule Change Interested persons are invited to submit written data, views, and arguments concerning whether Amendment No. 2 is consistent with the Act. Comments may be submitted by any of the following methods: daltland on DSKBBV9HB2PROD with NOTICES Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CboeBZX–2017–023 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–CboeBZX–2017–023. 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 website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CboeBZX–2017–023, and should be submitted on or before May 4, 2018. V. Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 2 The Commission finds good cause to approve the proposed rule change, as modified by Amendment No. 2, prior to the thirtieth day after the date of publication of notice of the filing of Amendment No. 2 in the Federal Register. The Commission notes that Amendment No. 2 clarified the application of Exchange Rule 14.11(i) to the Fund’s investments. Amendment No. 2 also provided other clarifications and additional information to the proposed rule change. The changes and additional information in Amendment No. 2 assisted the Commission in finding that the proposal is consistent with the Act. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act,54 to approve the proposed rule change, as modified by Amendment No. 2, on an accelerated basis. VI. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,55 that the proposed rule change (SR–CboeBZX– 2017–023), as modified by Amendment No. 2 be, and it hereby is, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.56 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–07670 Filed 4–12–18; 8:45 am] BILLING CODE 8011–01–P 54 15 52 15 U.S.C. 78f(b)(5). 53 15 U.S.C. 78k–1(a)(1)(C)(iii). VerDate Sep<11>2014 17:41 Apr 12, 2018 56 17 Jkt 244001 PO 00000 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83016; File No. SR–Phlx– 2018–26] Self-Regulatory Organizations; Nasdaq PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange’s Pricing Schedule April 9, 2018. 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 March 27, 2018, Nasdaq PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) 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 proposes to amend Sections VIII, X, and XI of the Exchange’s Pricing Schedule, as described below. The text of the proposed rule change is available on the Exchange’s website at https://nasdaqphlx.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects 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 amend several sections of its Pricing Schedule to harmonize its colocation, U.S.C. 78s(b)(2). 55 Id. 1 15 CFR 200.30–3(a)(12). Frm 00114 Fmt 4703 Sfmt 4703 16157 2 17 E:\FR\FM\13APN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 13APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 83, Number 72 (Friday, April 13, 2018)]
[Notices]
[Pages 16150-16157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07670]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83014; File No. SR-CboeBZX-2017-023]


Self-Regulatory Organizations; CboeBZX Exchange, Inc.; Notice of 
Filing of Amendment No. 2 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade 
Shares of the iShares Gold Strategy ETF Under Exchange Rule 14.11(i)

April 9, 2018.

I. Introduction

    On December 21, 2017, CboeBZX Exchange, Inc. (``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares (``Shares'') of the 
iShares Gold Strategy ETF (``Fund''), a series of the iShares U.S. ETF 
Trust (``Trust''), under Exchange Rule 14.11(i) (``Managed Fund 
Shares''). The proposed rule change was published for comment in the 
Federal Register on January 11, 2018.\3\ On February 22, 2018, pursuant 
to Section 19(b)(2) of the Act,\4\ the Commission designated a longer 
period within which to approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
disapprove the proposed rule change.\5\ On February 28, 2018, the 
Exchange filed Amendment No. 1 to the proposed rule change, which 
replaced and superseded the proposed rule change as originally filed. 
On April 4, 2018, the Exchange filed Amendment No. 2 to the proposed 
rule change, which replaced and superseded the proposed rule change as 
modified by Amendment No. 1.\6\ The Commission has received no comments 
on the proposal. The Commission is publishing this notice to solicit 
comments on Amendment No. 2 from interested persons and is approving 
the proposed rule change, as modified by Amendment No. 2, on an 
accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 82444 (Jan. 5, 
2018), 83 FR 1438.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 82758, 83 FR 8717 
(Feb. 28, 2018). The Commission designated April 11, 2018, as the 
date by which it should approve or disapprove, or institute 
proceedings to determine whether to disapprove, the proposed rule 
change.
    \6\ In Amendment No. 2, the Exchange: (1) Made changes to 
reflect that the Fund's name changed; (2) represented that the 
Adviser (as defined below) will erect and maintain fire walls with 
respect to its current and future broker-dealer affiliates; (3) 
stated that the Fund's investments in fixed income instruments may 
not comply with Exchange Rule 14.11(i)(4)(C)(ii); (4) modified and 
clarified the Fund's permitted investments, including with respect 
to the listed and over-the-counter derivatives and the fixed income 
instruments that the Fund may invest in; (5) represented that at 
least 80% of the Fund's investments in Gold Futures (as defined 
below), as calculated using gross notional exposure, will be in CME-
listed or LME-listed gold futures or other exchange-traded gold 
futures with a similar liquidity profile; (6) represented that all 
of the Listed Gold Derivatives (as defined below) held by the Fund 
will trade on markets that are a member of, or affiliated with a 
member of, the Intermarket Surveillance Group, or with which the 
Exchange has in place a comprehensive surveillance sharing 
agreement; (7) represented that all exchange-traded products held by 
the Fund will be listed on U.S. national securities exchanges; (8) 
stated that the Fund's investments in derivatives will primarily 
consist of Gold Futures and clarified the circumstances under which 
the Fund may invest in other specified derivatives; (9) represented 
that the Fund will not hold mortgage-backed or other asset-backed 
government obligations; (10) clarified that the Fund will not invest 
in sovereign debt obligations of emerging market countries; (11) 
represented that all Fixed Income Investments (as defined below) 
held by the Fund will be investment grade and will not include 
instruments with a maturity longer than 397 days; (12) clarified the 
Cash Equivalents (as defined below) in which the Fund may invest; 
(13) stated that up to 25% of the total assets of the Fund may be 
indirectly held through the Subsidiary (as defined below); (14) made 
representations relating to the Fund's investments in derivatives, 
including that such investments will be made consistent with the 
Investment Company Act of 1940 and the Fund's objective and 
policies, that the Fund does not intend to make investments for the 
purposes of enhancing leverage, and that the Fund will take certain 
actions to mitigate and disclose leveraging risk; (15) stated where 
pricing information for the Fund's permitted investments will be 
publicly available; (16) made additional representations regarding 
the Fund, including where information relating to the Fund and the 
Shares will be made available; (17) provided additional 
justification for why the Fund's proposed investments are consistent 
with the Act, including why it is consistent with the Act for the 
Fund to hold fixed income instruments in a manner that may not 
comply with Exchange Rule 14.11(i)(4)(C)(ii); (18) represented that 
the Fixed Income Investments of the Fund will meet the requirements 
of Exchange Rule 14.11(i)(4)(C)(ii)(e); (19) made additional 
representations regarding the ability of the Exchange and the 
Financial Industry Regulatory Authority, on behalf of the Exchange, 
to surveil trading in the Shares and certain of the underlying 
investments; and (20) made other clarifications, corrections, and 
technical changes. Amendment No. 2 is available at: https://www.sec.gov/comments/sr-cboebzx-2017-023/cboebzx2017023-3383514-162149.pdf.
---------------------------------------------------------------------------

II. Exchange's Description of the Proposal, as Modified by Amendment 
No. 2

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

1. Purpose
    This Amendment No. 2 to SR-CboeBZX-2017-023 amends and replaces in 
its entirety Amendment No.

[[Page 16151]]

1 to the proposal, which was submitted on February 28, 2018, which 
amended and replaced in its entirety the proposal as originally 
submitted on December 23, 2017. The Exchange submits this Amendment No. 
2 in order to clarify certain points and add additional details about 
the Fund.
    The Exchange proposes to list and trade the Shares under Exchange 
Rule 14.11(i), which governs the listing and trading of Managed Fund 
Shares on the Exchange.\7\ The Fund is a series of, and the Shares will 
be offered by, the Trust, which was established as a Delaware statutory 
trust on June 21, 2011. BlackRock Fund Advisors (the ``Adviser'') will 
serve as the investment adviser to the Fund. The Trust is registered 
with the Commission as an open-end management investment company and 
has filed a registration statement on behalf of the Fund on Form N-1A 
(``Registration Statement'') with the Commission.\8\
---------------------------------------------------------------------------

    \7\ The Commission originally approved Exchange Rule 14.11(i) in 
Securities Exchange Act Release No. 65225 (August 30, 2011), 76 FR 
55148 (September 6, 2011) (SR-BATS-2011-018) and subsequently 
approved generic listing standards for Managed Fund Shares under 
Exchange Rule 14.11(i)(4)(C) in Securities Exchange Act Release No. 
78396 (July 22, 2016), 81 FR 49698 (July 28, 2016) (SR-BATS-2015-
100) (``Generic Listing Rules'').
    \8\ See Registration Statement on Form N-1A for the Trust, filed 
with the Commission on November 1, 2017 (File Nos. 333-179904 and 
811-22649). The descriptions of the Fund and the Shares contained 
herein are based, in part, on information in the Registration 
Statement. The Commission has issued an order granting certain 
exemptive relief to the Adviser and open-end management companies 
advised by the Adviser under the Investment Company Act of 1940 (15 
U.S.C. 80a-1). See Investment Company Act Release No. 29571 (January 
24, 2011) (File No. 812-13601).
---------------------------------------------------------------------------

    As a result of the instruments that will be indirectly held by the 
Fund, the Adviser, which is a member of the National Futures 
Association (``NFA''), will register as a commodity pool operator \9\ 
with respect to the Fund. If the Fund retains any sub-adviser in the 
future, such sub-adviser will register as a commodity pool operator or 
commodity trading adviser, if required by Commodity Futures Trading 
Commission (``CFTC'') regulations. The Fund will be subject to 
regulation by the CFTC and NFA and applicable disclosure, reporting and 
recordkeeping rules imposed upon commodity pools.
---------------------------------------------------------------------------

    \9\ As defined in Section 1a(11) of the Commodity Exchange Act.
---------------------------------------------------------------------------

    Exchange Rule 14.11(i)(7) provides that, if the investment adviser 
to the investment company issuing Managed Fund Shares is affiliated 
with a broker-dealer, such investment adviser shall erect and maintain 
a ``fire wall'' between the investment adviser and the broker-dealer 
with respect to access to information concerning the composition and/or 
changes to such investment company portfolio.\10\ In addition, Exchange 
Rule 14.11(i)(7) further requires that personnel who make decisions on 
the investment company's portfolio composition must be subject to 
procedures designed to prevent the use and dissemination of material 
nonpublic information regarding the applicable investment company 
portfolio. Exchange Rule 14.11(i)(7) is similar to Exchange Rule 
14.11(b)(5)(A)(i) (which applies to index-based funds); however, 
Exchange Rule 14.11(i)(7) in connection with the establishment of a 
``fire wall'' between the investment adviser and the broker-dealer 
reflects the applicable open-end fund's portfolio, not an underlying 
benchmark index, as is the case with index-based funds. The Adviser is 
not a registered broker-dealer, but is affiliated with multiple broker-
dealers and has implemented and will maintain ``fire walls'' with 
respect to such broker-dealers regarding access to information 
concerning the composition and/or changes to the Fund's portfolio. In 
addition, 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. In the event that (a) the Adviser becomes registered as a 
broker-dealer or newly affiliated with another broker-dealer, or (b) 
any new adviser or sub-adviser is a registered broker-dealer or becomes 
affiliated with a broker-dealer, it will implement and maintain a fire 
wall with respect to its relevant personnel or such broker-dealer 
affiliate, as applicable, regarding access to information concerning 
the composition and/or changes to the portfolio, and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding such portfolio.
---------------------------------------------------------------------------

    \10\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and its related personnel are 
subject to the provisions of Rule 204A-1 under the Advisers Act 
relating to codes of ethics. This Rule requires investment advisers 
to adopt a code of ethics that reflects the fiduciary nature of the 
relationship to clients as well as compliance with other applicable 
securities laws. Accordingly, procedures designed to prevent the 
communication and misuse of non-public information by an investment 
adviser must be consistent with Rule 204A-1 under the Advisers Act. 
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful 
for an investment adviser to provide investment advice to clients 
unless such investment adviser has (i) adopted and implemented 
written policies and procedures reasonably designed to prevent 
violation, by the investment adviser and its supervised persons, of 
the Advisers Act and the Commission rules adopted thereunder; (ii) 
implemented, at a minimum, an annual review regarding the adequacy 
of the policies and procedures established pursuant to subparagraph 
(i) above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
---------------------------------------------------------------------------

    The Fund intends to qualify each year as a regulated investment 
company under Subchapter M of the Internal Revenue Code of 1986, as 
amended.
    The Exchange submits this proposal in order to allow the Fund to 
hold listed derivatives (i.e., Listed Gold Derivatives, as defined 
below) in a manner that does not comply with Exchange Rule 
14.11(i)(4)(C)(iv)(b) \11\ and to employ a cash management strategy 
which include fixed income instruments that do not necessarily comply 
with Exchange Rule 14.11(i)(4)(C)(ii). Otherwise, the Fund will comply 
with all other listing requirements on an initial and continued listing 
basis under Exchange Rule 14.11(i) for Managed Fund Shares.
---------------------------------------------------------------------------

    \11\ Exchange Rule 14.11(i)(4)(C)(iv)(b) provides that ``the 
aggregate gross notional value of listed derivatives based on any 
five or fewer underlying reference assets shall not exceed 65% of 
the weight of the portfolio (including gross notional exposures), 
and the aggregate gross notional value of listed derivatives based 
on any single underlying reference asset shall not exceed 30% of the 
weight of the portfolio (including gross notional exposures).''
---------------------------------------------------------------------------

iShares Gold Strategy ETF
    The Fund will seek to provide exposure, on a total return basis, to 
the price performance of gold. The Fund will seek to achieve its 
investment objective by investing primarily in a combination of (i) 
exchange-traded gold futures contracts (``Gold Futures'') \12\ and 
exchange-listed options or listed swaps that correlate to the 
investment returns of physical gold (such other listed derivatives 
together with Gold Futures, ``Listed Gold Derivatives''),\13\ based on 
the notional value of such derivative instruments; (ii) over-the-
counter (``OTC'') derivatives that correlate to the investment returns 
of physical gold (``OTC Gold Derivatives''),\14\ based on the notional 
value of such derivative instruments; and (iii) exchange-traded 
products

[[Page 16152]]

(``ETPs'') \15\ backed by or linked to physical gold (``Gold ETPs,'' 
and collectively with Listed Gold Derivatives and OTC Gold Derivatives, 
the ``Gold Investments''). While the Fund may invest in Gold Futures, 
Listed Gold Derivatives, or OTC Gold Derivatives, the Fund's 
investments in derivatives will primarily consist of Gold Futures. 
Should Gold Futures become unavailable or illiquid or under such other 
circumstances the Adviser deems to be in the best interest of 
shareholders of the Fund, however, the Fund may invest in other Listed 
Gold Derivatives or OTC Gold Derivatives.
---------------------------------------------------------------------------

    \12\ At least 80% of the Fund's Gold Futures investment, as 
calculated using gross notional exposure, will be in CME-listed gold 
futures, LME-listed gold futures, or other exchange-traded gold 
futures with a similar liquidity profile.
    \13\ All of the Listed Gold Derivatives held by the Fund will 
trade on markets that are a member of the Intermarket Surveillance 
Group (``ISG'') or affiliated with a member of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing 
agreement.
    \14\ OTC Gold Derivatives include only OTC forwards, options, 
and swaps.
    \15\ As defined in Exchange Rule 11.8(e)(1)(A), ETP means any 
security listed pursuant to Exchange Rule 14.11. All ETPs will be 
listed on a U.S. national securities exchange.
---------------------------------------------------------------------------

    In seeking total return, the Fund will additionally aim to generate 
interest income and capital appreciation through a cash management 
strategy consisting of repurchase agreements, reverse repurchase 
agreements, money market instruments, certificates of deposit issued 
against funds deposited in a bank or savings and loan association, 
bankers acceptances, bank time deposits, commercial paper, investments 
in government obligations, including U.S. government and agency 
securities,\16\ treasury inflation-protected securities, and sovereign 
debt obligations of non-U.S. countries excluding emerging market 
countries (``Non-U.S. Sovereign Debt'') \17\ (collectively, ``Fixed 
Income Investments'') \18\ and cash and Cash Equivalents\19\ 
(collectively, with Fixed Income Investments, ``Cash Management 
Holdings'').\20\ The Fund will be an actively managed exchange-traded 
fund and will not seek to replicate the performance of a specified 
index.
---------------------------------------------------------------------------

    \16\ The Fund will not hold mortgage-backed or other asset-
backed government obligations.
    \17\ An ``emerging market country'' is a country that, at the 
time of investment, is considered an emerging market country for 
purposes of constructing a major emerging market securities index.
    \18\ All of the Fixed Income Investments held by the Fund will 
be investment grade and will not include instruments with a maturity 
longer than 397 days.
    \19\ As defined in Exchange Rule 14.11(i)(4)(C)(iii)(b), Cash 
Equivalents are short-term instruments with maturities of less than 
three months, which includes only the following: (i) U.S. Government 
securities, including bills, notes, and bonds differing as to 
maturity and rates of interest, which are either issued or 
guaranteed by the U.S. Treasury or by U.S. Government agencies or 
instrumentalities; (ii) certificates of deposit issued against funds 
deposited in a bank or savings and loan association; (iii) bankers 
acceptances, which are short-term credit instruments used to finance 
commercial transactions; (iv) repurchase agreements and reverse 
repurchase agreements; (v) bank time deposits, which are monies kept 
on deposit with banks or savings and loan associations for a stated 
period of time at a fixed rate of interest; (vi) commercial paper, 
which are short-term unsecured promissory notes; and (vii) money 
market funds.
    \20\ The Fund's Cash Management Holdings will consist of both 
fixed income securities, as described in Exchange Rule 
14.11(i)(4)(C)(ii), and Cash Equivalents, as described in Exchange 
Rule 14.11(i)(4)(C)(iii). The Exchange is proposing to allow the 
Fund to hold such fixed income instruments in a manner that may not 
meet the requirements of Exchange Rule 14.11(i)(4)(C)(ii). The Fixed 
Income Investments portion of the Fund's Cash Management Holdings 
will be only those instruments that are included in Cash Equivalents 
(with the exception of Non-U.S. Sovereign Debt), but are not 
considered Cash Equivalents because they have maturities of three 
months or longer. The Exchange believes, however, that because these 
instruments, including Non-U.S. Sovereign Debt, are highly liquid 
and of high credit quality, they are less susceptible than other 
types of fixed income instruments both to price manipulation and 
volatility and that the holdings as proposed are generally 
consistent with the policy concerns which Rule 14.11(i)(4)(C)(ii) is 
intended to address.
---------------------------------------------------------------------------

    The Fund's investment strategy related to the Gold Investments will 
seek to maximize correlation with the Bloomberg Composite Gold Index 
(the ``Bloomberg Benchmark''), which is comprised of exchange-traded 
gold futures contracts and one or more ETPs backed by or linked to 
physical gold. The Bloomberg Benchmark is designed to track the price 
performance of gold. Although the Fund generally will hold, among other 
instruments, the same futures contracts under the same futures rolling 
schedule, and the same ETPs backed by or linked to physical gold, as 
those included in the Bloomberg Benchmark, the Fund is not obligated to 
invest in any such futures contracts or ETPs included in, and does not 
seek to track the performance of, the Bloomberg Benchmark.
    The Fund expects to seek to gain exposure to Gold Investments by 
investing through a wholly-owned subsidiary organized in the Cayman 
Islands (the ``Subsidiary''). The Subsidiary is advised by the Adviser. 
Unlike the Fund, the Subsidiary is not an investment company registered 
under the Investment Company Act of 1940 (the ``1940 Act''). The 
Subsidiary has the same investment objective as the Fund. References 
below to the holdings of the Fund, including any restrictions thereon 
that are described within this proposal, are inclusive of the direct 
holdings of the Fund as well as the indirect holdings of the Fund 
through the Subsidiary, which may constitute up to 25% of the total 
assets of the Fund.
    In order to achieve its investment objective, under Normal Market 
Conditions,\21\ the aggregate gross notional value of Listed Gold 
Derivatives is generally not expected to exceed 75%, but may, in 
certain circumstances, approach 100%, of the Fund (including gross 
notional values). As noted above, Exchange Rule 14.11(i)(4)(C)(iv)(b) 
prohibits the Fund from holding listed derivatives based on any five or 
fewer underlying reference assets in excess of 65% of the weight of the 
portfolio (including gross notional exposures) and from holding listed 
derivatives based on any single underlying reference asset in excess of 
30% of the weight of its portfolio (including gross notional 
exposures). The Exchange is proposing to allow the Fund to hold up to 
100% of the weight of its portfolio (including gross notional 
exposures) in listed derivatives based on a single underlying reference 
asset (physical gold) through its investment in Listed Gold 
Derivatives. Allowing the Fund to hold a greater portion of its 
portfolio in Listed Gold Derivatives than permitted by the Generic 
Listing Rules would mitigate the Fund's dependency on holding OTC 
derivative instruments, which would reduce the Fund's operational 
burden by allowing the Fund to primarily use listed futures contracts 
and other listed derivatives to achieve its investment objective and 
would also reduce counter-party risk associated with holding OTC 
instruments. The Exchange also notes that holding listed derivatives 
instead of OTC derivatives would reduce the risk of manipulation 
because all of the Listed Gold Derivatives the Fund may invest in will 
trade on markets that are a member of ISG or affiliated with a member 
of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.
---------------------------------------------------------------------------

    \21\ As defined in Exchange Rule 14.11(i)(3)(E), the term 
``Normal Market Conditions'' includes, but is not limited to, the 
absence of trading halts in the applicable financial markets 
generally; operational issues causing dissemination of inaccurate 
market information or system failures; or force majeure type events 
such as natural or man-made disaster, act of God, armed conflict, 
act of terrorism, riot or labor disruption, or any similar 
intervening circumstance.
---------------------------------------------------------------------------

    Under Normal Market Conditions, the Fund generally will hold Gold 
Investments (which include Listed Gold Derivatives, OTC Gold 
Derivatives,\22\ and Gold ETPs \23\) and Cash Management Holdings. The 
Exchange represents that, except for the 65% and 30% limitations in 
Exchange Rule 14.11(i)(4)(C)(iv)(b) and except for the Cash Management 
Holdings that may

[[Page 16153]]

not meet the requirements of Exchange Rule 14.11(i)(4)(C)(ii), the 
Fund's proposed investments will satisfy, on an initial and continued 
listing basis, all of the Generic Listing Rules and all other 
applicable requirements for Managed Fund Shares under Exchange Rule 
14.11(i).
---------------------------------------------------------------------------

    \22\ The aggregate gross notional value of the Fund's holdings 
in OTC Gold Derivatives will not exceed 20% of the weight of the 
portfolio (including gross notional exposures) in compliance with 
Exchange Rule 14.11(i)(4)(C)(v).
    \23\ The Fund's holdings in Gold ETPs will comply with the 
requirements of Exchange Rule 14.11(i)(4)(C)(i)(a).
---------------------------------------------------------------------------

    The Fund's investments, including derivatives, will be made 
consistent with the 1940 Act and the Fund's investment objective and 
policies, and the Fund does not intend to make investments for the 
purposes of enhancing leverage (although certain derivatives and other 
investments may have a leveraging effect).\24\ That is, while the Fund 
will be permitted to borrow as permitted under the 1940 Act, the Fund's 
investments will not be used to seek performance that is the multiple 
or inverse multiple (e.g., 2Xs and 3Xs) of the Fund's ``appropriate 
broad-based securities market index'' (as defined in Form N-1A).
---------------------------------------------------------------------------

    \24\ 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. The Fund's investments 
in derivative instruments will be made in accordance with the 1940 
Act and consistent with the Fund's investment objective and 
policies. To mitigate leveraging risk, the Fund will segregate or 
earmark liquid assets determined to be liquid by the Adviser in 
accordance with procedures established by the Trust's Board of 
Trustees and in accordance with the 1940 Act (or, as permitted by 
applicable regulations, enter into certain offsetting positions) to 
cover its obligations under derivative instruments. These procedures 
have been adopted consistent with Section 18 of the 1940 Act and 
related Commission guidance. 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).
---------------------------------------------------------------------------

    The Trust is required to comply with Rule 10A-3 under the Act \25\ 
for the initial and continued listing of the Shares of the Fund. In 
addition, the Exchange represents that the Shares of the Fund will meet 
and be subject to all other requirements of the Generic Listing Rules 
and other applicable continued listing requirements for Managed Fund 
Shares under Exchange Rule 14.11(i), including those requirements 
regarding the Disclosed Portfolio (as defined in the Exchange rules) 
and the requirement that the Disclosed Portfolio and the net asset 
value (``NAV'') will be made available to all market participants at 
the same time,\26\ intraday indicative value,\27\ suspension of trading 
or removal,\28\ trading halts,\29\ disclosure,\30\ and firewalls.\31\ 
Further, at least 100,000 Shares will be outstanding upon the 
commencement of trading.\32\ Moreover, all of the Listed Gold 
Derivatives and Gold ETPs the Fund may invest in will trade on markets 
that are a member of ISG or affiliated with a member of ISG or with 
which the Exchange has in place a comprehensive surveillance sharing 
agreement.\33\ Additionally, the Exchange or Financial Industry 
Regulatory Authority (``FINRA''), on behalf of the Exchange, are able 
to access, as needed, trade information for certain fixed income 
instruments reported to FINRA's Trade Reporting and Compliance Engine 
(``TRACE''). All statements and representations made in this filing 
regarding the description of the portfolio or reference assets, 
limitations on portfolio holdings or reference assets, dissemination 
and availability of reference assets and intraday indicative values, 
and the applicability of Exchange listing rules specified in this 
filing shall constitute continued listing requirements for the Fund. 
The Trust, on behalf of the Fund, has represented to the Exchange that 
it will advise the Exchange of any failure by the Fund or the Shares to 
comply with the continued listing requirements, and, pursuant to its 
obligations under Section 19(g)(1) of the Act, the Exchange will 
surveil for compliance with the continued listing requirements. If the 
Fund or the Shares are not in compliance with the applicable listing 
requirements, the Exchange will commence delisting procedures under 
Exchange Rule 14.12.
---------------------------------------------------------------------------

    \25\ 17 CFR 240.10A-3.
    \26\ See Exchange Rules 14.11(i)(4)(A)(ii) and 
14.11(i)(4)(B)(ii).
    \27\ See Exchange Rule 14.11(i)(4)(B)(i).
    \28\ See Exchange Rule 14.11(i)(4)(B)(iii).
    \29\ See Exchange Rule 14.11(i)(4)(B)(iv).
    \30\ See Exchange Rule 14.11(i)(6).
    \31\ See Exchange Rule 14.11(i)(7).
    \32\ See Exchange Rule 14.11(i)(4)(A)(i).
    \33\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com. The Exchange notes that not all 
components of the Disclosed Portfolio for the Fund may trade on 
markets that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

Availability of Information
    As noted above, the Fund will comply with the requirements under 
the Generic Listing Rules for Managed Fund Shares related to Disclosed 
Portfolio, NAV, and the intraday indicative value. Additionally, the 
intra-day, closing and settlement prices of exchange-traded portfolio 
assets, including the Gold ETPs and Listed Gold Derivatives, will be 
readily available from the exchanges trading such securities or 
derivatives, as the case may be, automated quotation systems, published 
or other public sources, or online information services such as 
Bloomberg or Reuters. Intraday price quotations on OTC Gold Derivatives 
and Fixed Income Investments are available from major broker-dealer 
firms and from third-parties, which may provide prices free with a time 
delay or in real-time for a paid fee. Price information for Cash 
Equivalents will be available from major market data vendors. The 
Disclosed Portfolio will be available on the Fund's website 
(www.ishares.com) free of charge. The Fund's website will include a 
form of the prospectus for the Fund and additional information related 
to NAV and other applicable quantitative information. Information 
regarding market price and trading volume of the Shares will be 
continuously available throughout the day on brokers' computer screens 
and other electronic services. Information regarding the previous day's 
closing price and trading volume for the Shares will be published daily 
in the financial section of newspapers. Trading in the Shares may be 
halted for market conditions or for reasons that, in the view of the 
Exchange, make trading inadvisable. 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 has appropriate rules to facilitate trading in the Shares 
during all trading sessions. The Exchange prohibits the distribution of 
material non-public information by its employees. Quotation and last 
sale information for the Shares will be available via the CTA high-
speed line.
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) Exchange Rule 3.7, which imposes 
suitability obligations on Exchange members with respect to 
recommending transactions in the Shares to customers; (3) how 
information regarding the intraday indicative value and the Disclosed 
Portfolio will be disseminated; (4) the risks involved in trading the 
Shares during the Pre-Opening \34\ and After

[[Page 16154]]

Hours Trading Sessions \35\ when an updated intraday indicative value 
will not be calculated or publicly disseminated; (5) the requirement 
that Exchange members deliver a prospectus to investors purchasing 
newly issued Shares prior to or concurrently with the confirmation of a 
transaction in Shares; and (6) trading information.
---------------------------------------------------------------------------

    \34\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m. 
Eastern Time.
    \35\ The After Hours Trading Session is from 4:00 p.m. to 5:00 
p.m. Eastern Time.
---------------------------------------------------------------------------

    The Information Circular will also discuss any exemptive, no-action 
and interpretive relief granted by the Commission from any rules under 
the Act. The Information Circular will also reference that the Fund 
will be 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 Fund and the applicable NAV 
calculation time for the Shares. The Information Circular will disclose 
that information about the Shares of the Fund will be publicly 
available on the Fund's website.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \36\ in general and Section 6(b)(5) of the Act \37\ in 
particular because the Exchange believes that the proposed rule change 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system and, 
in general, to protect investors and the public interest given that the 
Shares will meet each of the initial and continued listing criteria in 
Exchange Rule 14.11(i) with the exception of (a) Exchange Rule 
14.11(i)(4)(C)(iv)(b), which requires that the aggregate gross notional 
value of listed derivatives based on any five or fewer underlying 
reference assets shall not exceed 65% of the weight of the portfolio 
(including gross notional exposures), and the aggregate gross notional 
value of listed derivatives based on any single underlying reference 
asset shall not exceed 30% of the weight of the portfolio (including 
gross notional exposures), and (b) Exchange Rule 14.11(i)(4)(C)(ii) 
related to fixed income securities. The Exchange believes that the 
liquidity in the spot gold \38\ and the underlying derivatives markets, 
in particular the market for Gold Futures,\39\ minimize the risk for 
manipulation in the underlying gold market, which mitigates the risk of 
manipulation in Listed Gold Derivatives and the concerns related to the 
susceptibility to manipulation of an underlying reference asset that 
Exchange Rule 14.11(i)(4)(C)(iv)(b) is intended to address. Further, at 
least 80% of the Fund's Gold Futures investment, as calculated using 
gross notional exposure, will be in CME-listed gold futures, LME-listed 
gold futures, or other exchange-traded gold futures with a similar 
liquidity profile. As such, the Exchange believes that the liquidity in 
the spot gold and Gold Futures markets acts to prevent manipulation in 
Listed Gold Derivatives and will act to prevent manipulation in the 
Shares. Further, allowing the Fund to hold a greater portion of its 
portfolio in Listed Gold Derivatives would mitigate the Fund's 
dependency on holding OTC instruments, which would reduce the Fund's 
operational burden by allowing the Fund to primarily use listed futures 
contracts and other listed derivatives to achieve its investment 
objective and would also reduce counter-party risk associated with 
holding OTC instruments. The Exchange also notes that Listed Gold 
Derivatives are traded on markets with surveillance procedures and 
price transparency. Trading in the Shares is subject to the Exchange's 
surveillance procedures for derivative securities products. 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.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78f.
    \37\ 15 U.S.C. 78f(b)(5).
    \38\ According to the London Precious Metals Clearing Limited, 
there was an average of $29.8 billion and $25.3 billion cleared 
daily by its five member firms in January and February of 2018, 
respectively, which represents only a part of the total spot gold 
trading volumes. See https://www.lbma.org.uk/clearing-statistics.
    \39\ For the months of February and March of 2018, CME-listed 
gold futures traded an average of approximately $40 billion in daily 
notional value, while LME-listed gold futures traded an average of 
approximately $280 million in daily notional value.
---------------------------------------------------------------------------

    While Exchange Rule 14.11(i)(4)(C)(ii) includes rules intended to 
ensure that the fixed income securities included in a fund's portfolio 
are sufficiently large, diverse, and have sufficient publicly available 
information regarding the issuances, the Exchange believes that such 
concerns are mitigated by the types of instruments that the Fund would 
hold. The Fixed Income Investments portion of the Fund's Cash 
Management Holdings includes only those instruments that are included 
in Cash Equivalents (with the exception of Non-U.S. Sovereign Debt), 
but are not considered Cash Equivalents because they have maturities of 
three months or longer.\40\ The Exchange believes, however, that 
because these instruments, including Non-U.S. Sovereign Debt, are 
highly liquid and investment grade, they are less susceptible than 
other types of fixed income instruments both to price manipulation and 
volatility and that the holdings as proposed are generally consistent 
with the policy concerns which Rule 14.11(i)(4)(C)(ii) is intended to 
address. The Cash Equivalents portion of the Cash Management Holdings 
will meet Exchange Rule 14.11(i)(4)(C)(iii), which allows a fund to 
hold Cash Equivalents without limitation. Because the Cash Management 
Holdings will consist of both high-quality fixed income securities 
described above and other instruments that meet the definition of Cash 
Equivalents, the Exchange believes that the policy concerns that 
Exchange Rule 14.11(i)(4)(C)(ii) is intended to address are otherwise 
mitigated and that the Fund should be permitted to hold its Cash 
Management Holdings in a manner that may not comply with Exchange Rule 
14.11(i)(4)(C)(ii).\41\
---------------------------------------------------------------------------

    \40\ The Fixed Income Investments will not include instruments 
with a maturity longer than 397 days.
    \41\ The Exchange notes that the Fixed Income Investments 
portion of the Fund will meet the requirement of Rule 
14.11(i)(4)(C)(ii)(e).
---------------------------------------------------------------------------

    All of the Listed Gold Derivatives and Gold ETPs the Fund may 
invest in will trade on markets that are a member of ISG or affiliated 
with a member of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. The Exchange, or FINRA, 
on behalf of the Exchange, or both, will communicate with ISG, other 
markets or entities who are members or affiliates of the ISG, or other 
markets or entities with which the Exchange has entered into a 
comprehensive surveillance sharing agreement regarding trading in the 
Shares and the underlying Listed Gold Derivatives and Gold ETPs held by 
the Fund.\42\ The Exchange, FINRA, on behalf of the Exchange, or both, 
may obtain information regarding trading in the Shares and the Listed 
Gold Derivatives and Gold ETPs via the ISG from other markets or 
entities who are members or affiliates of the ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing

[[Page 16155]]

agreement.\43\ Additionally, the Exchange or FINRA, on behalf of the 
Exchange, are able to access, as needed, trade information for certain 
fixed income instruments reported to TRACE. The Exchange further notes 
that other than Rule 14.11(i)(4)(C)(ii) and Rule 14.11(i)(4)(C)(iv)(b), 
the Fund will meet and be subject to all other requirements of the 
Generic Listing Rules and other applicable continued listing 
requirements for Managed Fund Shares under Exchange Rule 14.11(i), 
including those requirements regarding the Disclosed Portfolio and the 
requirement that the Disclosed Portfolio and the NAV will be made 
available to all market participants at the same time, intraday 
indicative value, suspension of trading or removal, trading halts, 
disclosure, and firewalls. Further, at least 100,000 Shares will be 
outstanding upon the commencement of trading.
---------------------------------------------------------------------------

    \42\ FINRA conducts cross-market surveillances on behalf of the 
exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
    \43\ See note 33, supra.
---------------------------------------------------------------------------

    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 rather will facilitate the listing and trading of 
an additional actively-managed exchange-traded fund that will enhance 
competition among both market participants and listing venues, 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. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 2, is consistent with the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\44\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\45\ which 
requires, among other things, that the Exchange's rules be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \44\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \45\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As noted above, the Fund's investments in listed derivatives will 
not comply with Rule 14.11(i)(4)(C)(iv)(b). Under the proposal, the 
Fund could hold up to 100% of the weight of its portfolio (including 
gross notional exposures) in listed derivatives based on a single 
underlying reference asset (physical gold) through its investment in 
Listed Gold Derivatives. According to the Exchange, the liquidity in 
the spot gold market and the underlying derivatives markets, and in 
particular the market for Gold Futures,\46\ minimizes the risk for 
manipulation in the underlying gold market, which in turn mitigates the 
risk of manipulation in Listed Gold Derivatives and the concerns that 
Rule 14.11(i)(4)(C)(iv)(b) is intended to address. The Commission notes 
that the Fund's investments in derivatives will primarily consist of 
Gold Futures, and at least 80% of the Fund's investment in Gold 
Futures, as calculated using gross notional exposure, will be in CME-
listed gold futures, LME-listed gold futures, or other exchange-traded 
gold futures with a similar liquidity profile. In addition, the 
Commission notes that all of the Listed Gold Derivatives the Fund may 
invest in will trade on markets that are a member of ISG or affiliated 
with a member of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    \46\ See supra notes 38 and 39 and accompanying text.
---------------------------------------------------------------------------

    In addition, as noted above, the Fund's Fixed Income Investments 
may not comply with Rule 14.11(i)(4)(C)(ii).\47\ The Exchange states 
that the types of fixed income instruments that the Fund will hold are 
highly liquid and of high credit quality and are, therefore, less 
susceptible to price manipulation and volatility than other types of 
fixed income instruments. The Commission notes that the Fixed Income 
Investments will consist of only those instruments that are included in 
the definition of ``Cash Equivalents'' as set forth in Rule 
14.11(i)(4)(C)(iii), with the exception of Non-U.S. Sovereign Debt, but 
are not considered Cash Equivalents because they have maturities of 
three months or longer. The Commission further notes that the Fixed 
Income Investments will all be investment grade and will have a 
maturity of 397 days or less, and that the Fund will not invest in 
mortgage-backed or other asset-backed government obligations or 
sovereign debt obligations of emerging market countries.
---------------------------------------------------------------------------

    \47\ The Exchange represents that the Fixed Income Investments 
will meet the requirement in Rule 14.11(i)(4)(C)(ii)(e) that any 
non-agency, non-GSE, and privately-issued mortgage-related and other 
asset-backed securities components of a portfolio shall not account, 
in the aggregate, for more than 20% of the weight of the fixed 
income portion of the portfolio.
---------------------------------------------------------------------------

    The Commission also notes that, other than Rule 
14.11(i)(4)(C)(iv)(b) with respect to the Listed Gold Derivatives and 
Rule 14.11(i)(4)(C)(ii) with respect to the Fixed Income Investments, 
the Fund will meet all other requirements of Rule 14.11(i). The 
Commission believes that these proposed initial and continued listing 
requirements, including the requirements with respect to Listed Gold 
Derivatives and Fixed Income Investments, are designed to mitigate the 
potential for manipulation of the Shares.
    The Commission also finds that the proposal is consistent with 
Section 11A(a)(1)(C)(iii) of the Act,\48\ which sets forth Congress's 
finding that it is in the public interest and appropriate for the 
protection of investors and the maintenance of fair and orderly markets 
to assure the availability to brokers, dealers, and investors of 
information with respect to quotations for, and transactions in, 
securities. Quotation and last-sale information for the Shares will be 
available via the CTA high-speed line. Further, as required by Rule 
14.11(i)(4)(B)(i), the Intraday Indicative Value (as defined in Rule 
14.11(i)(3)(C)) will be widely disseminated by one or more major market 
data vendors at least every 15 seconds during the Exchange's Regular 
Trading Hours (as defined in Rule 1.5(w)). Information regarding market 
price and trading volume of the Shares will be continually available 
throughout the day on brokers' computer screens and other electronic 
services. Information regarding the previous day's closing price and 
trading volume for the Shares will be published daily in the financial 
section of newspapers. The intra-day, closing, and settlement prices of 
exchange-traded portfolio assets, including the Gold ETPs and Listed 
Gold Derivatives, will be readily available from the exchanges trading 
such securities or derivatives, as the case may be, automated quotation 
systems, published or other public sources, or online information 
services such as Bloomberg or Reuters. Intraday

[[Page 16156]]

price quotations on OTC Gold Derivatives and Fixed Income Investments 
are available from major broker-dealer firms and from third-parties, 
which may provide prices free with a time delay or in real-time for a 
paid fee. Price information for Cash Equivalents will be available from 
major market data vendors. In addition, the Fund's website will include 
a form of the prospectus for the Fund and additional data relating to 
NAV and other applicable quantitative information.
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    The Commission also believes that the proposal is reasonably 
designed to promote fair disclosure of information that may be 
necessary to price the Shares appropriately and to prevent trading when 
a reasonable degree of transparency cannot be assured. As required by 
Rule 14.11(i)(4)(A)(ii), the Exchange will obtain a representation from 
the issuer of the Shares that the NAV per Share will be calculated 
daily and that the NAV and the Disclosed Portfolio (as defined in Rule 
14.11(i)(3)(B)) will be made available to all market participants at 
the same time. The Exchange represents that the Disclosed Portfolio 
will be available on the Fund's website free of charge. Further, 
trading in the Shares may be halted because of market conditions or for 
reasons that, in the view of the Exchange, make trading in the Shares 
inadvisable. Trading in the Shares will also be subject to Rule 
14.11(i)(4)(B)(iv), which sets forth circumstances under which Shares 
of a Fund may be halted.
    The Exchange states that it prohibits the distribution of material, 
non-public information by its employees. The Exchange states that the 
Adviser is not a registered broker-dealer but the Adviser is affiliated 
with multiple broker-dealers and has implemented and will maintain 
``fire walls'' with respect to such broker-dealers regarding access to 
information concerning the composition of and/or changes to the Fund's 
portfolio. Further, the Commission notes that the Reporting Authority 
that provides the Disclosed Portfolio must implement and maintain, or 
be subject to, procedures designed to prevent the use and dissemination 
of material, non-public information regarding the actual components of 
the portfolio.\49\
---------------------------------------------------------------------------

    \49\ See Rule 14.11(i)(4)(B)(ii)(b).
---------------------------------------------------------------------------

    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. In support of this 
proposal, the Exchange represents that:
    (1) Other than Rule 14.11(i)(4)(C)(iv)(b) and Rule 
14.11(i)(4)(C)(ii), the Fund will comply with all other requirements 
under Rule 14.11(i) for Managed Fund Shares on an initial and continued 
listing basis.
    (2) The Fund's investments in derivatives will primarily consist of 
Gold Futures. However, should Gold Futures become unavailable or 
illiquid or under such other circumstances the Adviser deems to be in 
the best interest of shareholders of the Fund, the Fund may invest in 
other Listed Gold Derivatives or OTC Gold Derivatives.
    (3) At least 80% of the Gold Futures held by the Fund, as 
calculated using gross notional exposure, will be in CME-listed gold 
futures, LME-listed gold futures, or other exchange-traded gold futures 
with a similar liquidity profile.
    (4) All of the Listed Gold Derivatives and Gold ETPs held by the 
Fund will trade on markets that are a member of ISG or affiliated with 
a member of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.
    (5) All of the Fixed Income Investments held by the Fund will be 
investment grade and will have a maturity of 397 days or less. The 
Fixed Income Investments will be consist of only those instruments that 
are included in the definition of ``Cash Equivalents'' (with the 
exception of Non-U.S. Sovereign Debt), but are not considered Cash 
Equivalents because they have maturities of three months or longer. The 
Fund will not invest in mortgage-backed or other asset-backed 
government obligations or sovereign debt obligations of emerging market 
countries.
    (6) At least 100,000 Shares will be outstanding upon the 
commencement of trading.
    (7) Trading of the Shares on the Exchange will be subject to the 
Exchange's surveillance procedures for derivative securities products, 
and these 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.
    (8) The Exchange, or FINRA, on behalf of the Exchange, or both, 
will communicate with ISG, other markets or entities who are members or 
affiliates of the ISG, or other markets or entities with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement regarding trading in the Shares and the underlying Listed 
Gold Derivatives and Gold ETPs held by the Fund.\50\ The Exchange, 
FINRA, on behalf of the Exchange, or both, may obtain information 
regarding trading in the Shares, the Listed Gold Derivatives, and Gold 
ETPs via the ISG from other markets or entities who are members or 
affiliates of the ISG or with which the Exchange has entered into a 
comprehensive surveillance sharing agreement. Additionally, the 
Exchange or FINRA, on behalf of the Exchange, are able to access, as 
needed, trade information for certain fixed income instruments reported 
to TRACE.
---------------------------------------------------------------------------

    \50\ See supra note 42.
---------------------------------------------------------------------------

    (9) 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: (a) The procedures for 
purchases and redemptions of Shares in creation units (and that Shares 
are not individually redeemable); (b) Exchange Rule 3.7, which imposes 
suitability obligations on Exchange members with respect to 
recommending transactions in the Shares to customers; (c) how 
information regarding the Intraday Indicative Value and Disclosed 
Portfolio will be disseminated; (d) the risks involved in trading the 
Shares during the Pre-Opening and After Hours Trading Sessions when an 
updated Intraday Indicative Value will not be calculated or publicly 
disseminated; (e) the requirement that Exchange members deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction in Shares; and (f) 
trading information.
    (10) The Exchange has appropriate rules to facilitate trading in 
the Shares during all trading sessions.
    (11) For initial and continued listing of the Shares, the Trust is 
required to comply with Rule 10A-3 under the Act.\51\
---------------------------------------------------------------------------

    \51\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    The Exchange represents that all statements and representations 
made in the filing regarding the description of the portfolio or 
reference assets, limitations on portfolio holdings or reference 
assets, dissemination and availability of reference assets and intraday 
indicative values, and the applicability of Exchange listing rules 
specified in the filing shall constitute continued listing requirements 
for the Fund. In addition, the Trust, on behalf of the Fund, has 
represented to the Exchange that it will advise the Exchange of any 
failure by the Fund or the Shares to comply with the

[[Page 16157]]

continued listing requirements and, pursuant to its obligations under 
Section 19(g)(1) of the Act, the Exchange will surveil for compliance 
with the continued listing requirements. If the Fund or the Shares are 
not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under Exchange Rule 14.12.
    This approval order is based on all of the Exchange's statements 
and representations, including those set forth above and in Amendment 
No. 2 to the proposed rule change.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 2, is consistent with Section 
6(b)(5) of the Act \52\ and Section 11A(a)(1)(C)(iii) of the Act \53\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.
---------------------------------------------------------------------------

    \52\ 15 U.S.C. 78f(b)(5).
    \53\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule 
Change

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 2 is consistent with the 
Act. Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeBZX-2017-023 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CboeBZX-2017-023. 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 website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CboeBZX-2017-023, and should be 
submitted on or before May 4, 2018.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 2

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 2, prior to the thirtieth day 
after the date of publication of notice of the filing of Amendment No. 
2 in the Federal Register. The Commission notes that Amendment No. 2 
clarified the application of Exchange Rule 14.11(i) to the Fund's 
investments. Amendment No. 2 also provided other clarifications and 
additional information to the proposed rule change. The changes and 
additional information in Amendment No. 2 assisted the Commission in 
finding that the proposal is consistent with the Act. Accordingly, the 
Commission finds good cause, pursuant to Section 19(b)(2) of the 
Act,\54\ to approve the proposed rule change, as modified by Amendment 
No. 2, on an accelerated basis.
---------------------------------------------------------------------------

    \54\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\55\ that the proposed rule change (SR-CboeBZX-2017-023), as 
modified by Amendment No. 2 be, and it hereby is, approved on an 
accelerated basis.
---------------------------------------------------------------------------

    \55\ Id.


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\56\
---------------------------------------------------------------------------

    \56\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-07670 Filed 4-12-18; 8:45 am]
 BILLING CODE 8011-01-P

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.