Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule To List and Trade Shares of the iShares iBonds Dec 2026 Term Muni Bond ETF, iShares iBonds Dec 2027 Term Muni Bond ETF, and iShares iBonds Dec 2028 Term Muni Bond ETF Under BZX Rule 14.11(c)(4), 11364-11371 [2019-05700]
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Federal Register / Vol. 84, No. 58 / Tuesday, March 26, 2019 / Notices
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 not
necessary or appropriate in furtherance
of the purposes of the Act. As discussed
above, the proposed functionality is
partly based on existing functionality
available on competitor exchanges.14
Furthermore, the Exchange provides
routing services in a highly competitive
market in which participants may avail
themselves of a wide variety of routing
options offered by other exchanges,
alternative trading systems, other
broker-dealers, market participants’ own
proprietary routing systems, and service
bureaus. In such an environment,
system enhancements such as the
changes proposed in this rule filing do
not burden competition, because they
can succeed in attracting order flow to
the Exchange only if they offer investors
higher quality and better value than
services offered by others. Encouraging
competitors to provide higher quality
and better value is the essence of a wellfunctioning competitive marketplace.
Lastly, SCAR would not provide any
advantage to members when routing to
the Nasdaq Affiliated Exchanges as
compared to other methods of routing or
connectivity available to members by
the Exchange. For the foregoing reasons,
the Exchange does not believe the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
jbell on DSK30RV082PROD with NOTICES
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 15 and Rule 19b–
4(f)(6) thereunder.16
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
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–BX–2019–004 and should
be submitted on or before April 16,
2019.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Eduardo A. Aleman,
Deputy Secretary.
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–
BX–2019–004 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
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–BX–2019–004. 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
14 Id.
15 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
16 17
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description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
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[FR Doc. 2019–05699 Filed 3–25–19; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–85370; File No. SR–
CboeBZX–2019–017]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule To List and Trade
Shares of the iShares iBonds Dec 2026
Term Muni Bond ETF, iShares iBonds
Dec 2027 Term Muni Bond ETF, and
iShares iBonds Dec 2028 Term Muni
Bond ETF Under BZX Rule 14.11(c)(4)
March 20, 2019.
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 19,
2019, Cboe BZX Exchange, Inc.
(‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 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 list and
trade under BZX Rule 14.11(c)(4) the
shares of the iShares iBonds Dec 2026
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
1 15
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Federal Register / Vol. 84, No. 58 / Tuesday, March 26, 2019 / Notices
Term Muni Bond ETF (the ‘‘2026
Fund’’), iShares iBonds Dec 2027 Term
Muni Bond ETF (the ‘‘2027 Fund’’), and
iShares iBonds Dec 2028 Term Muni
Bond ETF (the ‘‘2028 Fund’’, each a
‘‘Fund’’ and, collectively, the ‘‘Funds’’)
of iShares Trust (the ‘‘Trust’’).
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
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
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1. Purpose
The Exchange proposes to list and
trade shares (‘‘Shares’’) of the Funds
under BZX Rule 14.11(c)(4),5 which
governs the listing and trading of index
fund shares based on fixed income
securities indexes.6 The Shares will be
5 The Commission approved BZX Rule 14.11(c) in
Securities Exchange Act Release No. 65225 (August
30, 2011), 76 FR 55148 (September 6, 2011) (SR–
BATS–2011–018).
6 The Exchange notes that the Commission has
already published an immediately effective rule
filing allowing the listing and trading of shares of
a series of Index Fund Shares very similar to the
Funds on the Exchange. See Securities Exchange
Act Release No. 84107 (September 13, 2018), 83 FR
47210 (September 18, 2018) (SR–CboeBZX–2018–
070) (the ‘‘2025 Filing’’). Further, the Commission
has also approved a proposed rule change allowing
the listing and trading of shares of two series of
Index Fund Shares very similar to the Funds on the
Exchange. See Securities Exchange Act Release No.
79381 (November 22, 2016), 81 FR 86044
(November 29, 2016) (SR–BatsBZX–2016–48)
(Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by
Amendments No. 1 and No. 2 Thereto, To List and
Trade Shares of the iShares iBonds Dec 2023 Term
Muni Bond ETF and iShares iBonds Dec 2024 Term
Muni Bond ETF of the iShares U.S. ETF Trust
Pursuant to BZX Rule 14.11(c)(4)) (the ‘‘Approval
Order’’). Finally, the Commission has also
published an immediately effective rule filing
allowing the listing and trading of shares of the
2026 Fund on NYSE Arca, Inc. (‘‘NYSE Arca’’). See
Securities Exchange Act Release No. 84396 (October
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offered by the Trust, which was
established as a Delaware statutory trust
on December 16, 1999. The Trust is
registered with the Commission as an
open-end investment company and has
filed a registration statement on behalf
of the Funds on Form N–1A
(‘‘Registration Statement’’) with the
Commission.7
Rule 14.11(c)(4)(B)(i)(b) requires that
component fixed income securities that,
in the aggregate, account for at least
75% of the weight of the index or
portfolio shall have a minimum
principal amount outstanding of $100
million or more. The Exchange submits
this proposal because the Underlying
Indexes, as defined below, do not meet
this requirement. The Underlying
Indexes do, however, meet all of the
other requirements of Rule 14.11(c)(4).
Description of the Shares and the Funds
BlackRock Fund Advisors (‘‘BFA’’) is
the investment adviser to the Funds.8
State Street Bank and Trust Company is
the administrator, custodian, and
transfer agent for the Trust. S&P is the
index provider (the ‘‘Index Provider’’)
for the Funds. BlackRock Investments,
LLC serves as the distributor for the
Trust.
S&P AMT-Free Municipal Callable
Factor Adjusted 2026 Series Index
According to the Registration
Statement, the 2026 Fund will seek to
track the investment results, before fees
and expenses, of the S&P AMT-Free
Municipal Callable Factor Adjusted
2026 Series Index (the ‘‘2026
Underlying Index’’), which measures
the performance of investment-grade (as
determined by Index Provider), noncallable and callable U.S. municipal
10, 2018), 83 FR 52266 (October 16, 2018) (SR–
NYSEArca–2018–70) (the ‘‘Arca Filing’’). While the
Arca Filing was published and would have allowed
the listing and trading of shares of the 2026 Fund
on NYSE Arca, the shares of the 2026 Fund have
not been listed or traded. In addition to proposing
to list and trade the Shares of each Fund on the
Exchange, this proposal would change the
underlying index associated with the 2026 Fund, as
described in the Arca Filing, from the S&P AMTFree Municipal Series Dec 2026 Index to the S&P
AMT-Free Municipal Callable Factor Adjusted 2026
Series Index, which would expand the index
universe to include certain callable securities, as
described below.
7 See Registration Statement on Form N–1A for
the Trust, dated January 11, 2019 (File Nos. 333–
92935 and 811–09729). The descriptions of the
Funds and the Shares contained herein are based,
in part, on information in the Registration
Statement. The Commission has issued an order
granting certain exemptive relief to the Trust under
the Investment Company Act of 1940 (15 U.S.C.
80a–1) (‘‘1940 Act’’) (the ‘‘Exemptive Order’’). See
Investment Company Act Release No. 27661
(January 17, 2007) (File No. 812–13208).
8 BFA is an indirect wholly owned subsidiary of
BlackRock, Inc.
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11365
bonds which will mature or be
redeemed prior to December 1, 2026.
The 2026 Underlying Index includes
only municipal bonds from issuers that
are state, local or federal district
governments or agencies such that the
interest on each such bond is exempt
from U.S. federal income taxes and the
federal alternative minimum tax
(‘‘AMT’’) (‘‘Municipal Securities’’).
As of December 31, 2018, the 2026
Underlying Index included 12,222
component fixed income municipal
bond securities from issuers in 51
different states or U.S. territories.9 The
most heavily weighted security in the
2026 Underlying Index represented
approximately 0.41% of the total weight
of the 2026 Underlying Index and the
aggregate weight of the top five most
heavily weighted securities in the 2026
Underlying Index represented less than
1.33% of the total weight of the 2026
Underlying Index. Approximately
6.76% of the weight of the components
in the 2026 Underlying Index had a
minimum original principal outstanding
of $100 million or more and 76.02% of
the weight of the components were a
constituent of an offering where the
original offering amount was at least
$100 million. In addition, the total
dollar amount outstanding of issues in
the 2026 Underlying Index was
approximately $101,777,956,000 and
the average dollar amount outstanding
of issues in the 2026 Underlying Index
was approximately $8,327,000.
Requirement for Index Constituents
Each bond in the 2026 Underlying
Index must be denominated in U.S.
dollars and must have a minimum par
amount of $2 million. To remain in the
2026 Underlying Index, bonds must
maintain a minimum par amount greater
than or equal to $2 million as of the next
rebalancing date. The 2026 Underlying
Index includes Municipal Securities
that have a rating of at least BBB– by
S&P Global Ratings, Baa3 by Moody’s
Investors Service, Inc., or BBB by Fitch
Ratings, Inc. A bond must be rated by
at least one of these three rating
agencies in order to qualify for the 2026
Underlying Index, and the lowest rating
will be used in determining if the bond
is investment-grade. All non-callable
bonds in the 2026 Underlying Index
will mature after December 31, 2025 and
before December 2, 2026. Callable bonds
are eligible subject to the following: (i)
A final maturity date after December 31,
2025 and before December 2, 2026, and
a next call date no sooner than two
9 Unless otherwise noted, all statistics related to
the 2026 Underlying Index presented hereafter were
accurate as of December 31, 2018.
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Federal Register / Vol. 84, No. 58 / Tuesday, March 26, 2019 / Notices
years prior to final maturity; or (ii) a
final maturity up to four years after the
index maturity year, if the next call date
is within the index maturity range. The
2026 Underlying Index will also contain
at least 500 component securities.
jbell on DSK30RV082PROD with NOTICES
S&P AMT-Free Municipal Callable
Factor Adjusted 2027 Series Index
According to the Registration
Statement, the 2027 Fund will seek to
track the investment results, before fees
and expenses, of the S&P AMT-Free
Municipal Callable Factor Adjusted
2027 Series Index (the ‘‘2027
Underlying Index’’), which measures
the performance of investment-grade (as
determined by Index Provider), noncallable and callable U.S. municipal
bonds which will mature or be
redeemed prior to December 1, 2027.
The 2027 Underlying Index includes
only Municipal Securities.
As of December 31, 2018, the 2027
Underlying Index included 9,582
component fixed income municipal
bond securities from issuers in 51
different states or U.S. territories.10 The
most heavily weighted security in the
2027 Underlying Index represented
approximately 0.57% of the total weight
of the 2027 Underlying Index and the
aggregate weight of the top five most
heavily weighted securities in the 2027
Underlying Index represented less than
2.56% of the total weight of the 2027
Underlying Index. Approximately
5.87% of the weight of the components
in the 2027 Underlying Index had a
minimum original principal outstanding
of $100 million or more and 77.82% of
the weight of the components were a
constituent of an offering where the
original offering amount was at least
$100 million. In addition, the total
dollar amount outstanding of issues in
the 2027 Underlying Index was
approximately $81,765,343,000 and the
average dollar amount outstanding of
issues in the 2027 Underlying Index was
approximately $8,533,000.
Ratings, Inc. A bond must be rated by
at least one of these three rating
agencies in order to qualify for the 2027
Underlying Index, and the lowest rating
will be used in determining if the bond
is investment-grade. All non-callable
bonds in the 2027 Underlying Index
will mature after December 31, 2026 and
before December 2, 2027. Callable bonds
are eligible subject to the following: (i)
A final maturity after December 31,
2026 and before December 2, 2027, and
a next call date no sooner than two
years prior to final maturity; or (ii) a
final maturity up to four years after the
index maturity year, if the next call date
is within the index maturity range. The
2027 Underlying Index will also contain
at least 500 component securities.
Requirement for Index Constituents
Each bond in the 2027 Underlying
Index must be denominated in U.S.
dollars and must have a minimum par
amount of $2 million. To remain in the
2027 Underlying Index, bonds must
maintain a minimum par amount greater
than or equal to $2 million as of the next
rebalancing date. The 2027 Underlying
Index includes Municipal Securities
that have a rating of at least BBB–by
S&P Global Ratings, Baa3 by Moody’s
Investors Service, Inc., or BBB by Fitch
S&P AMT-Free Municipal Callable
Factor Adjusted 2028 Series Index
According to the Registration
Statement, the 2028 Fund will seek to
track the investment results, before fees
and expenses, of the S&P AMT-Free
Municipal Callable Factor Adjusted
2028 Series Index (the ‘‘2028
Underlying Index’’ and, collectively
with the 2026 Underlying Index and the
2027 Underlying Index, the ‘‘Underlying
Indexes’’), which measures the
performance of investment-grade (as
determined by Index Provider), noncallable and callable U.S. municipal
bonds which will mature or be
redeemed prior to December 1, 2028.
The 2028 Underlying Index includes
only Municipal Securities.
As of December 31, 2018, the 2028
Underlying Index included 5,852
component fixed income municipal
bond securities from issuers in 51
different states or U.S. territories.11 The
most heavily weighted security in the
2028 Underlying Index represented
approximately 0.85% of the total weight
of the 2028 Underlying Index and the
aggregate weight of the top five most
heavily weighted securities in the 2028
Underlying Index represented less than
2.42% of the total weight of the 2028
Underlying Index. Approximately
6.97% of the weight of the components
in the 2028 Underlying Index had a
minimum original principal outstanding
of $100 million or more and 80.36% of
the weight of the components were a
constituent of an offering where the
original offering amount was at least
$100 million. In addition, the total
dollar amount outstanding of issues in
the 2028 Underlying Index was
approximately $54,637,103,000 and the
average dollar amount outstanding of
10 Unless otherwise noted, all statistics related to
the 2027 Underlying Index presented hereafter were
accurate as of December 31, 2018.
11 Unless otherwise noted, all statistics related to
the 2028 Underlying Index presented hereafter were
accurate as of December 31, 2018.
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issues in the 2028 Underlying Index was
approximately $9,336,000.
Requirement for Index Constituents
Each bond in the 2028 Underlying
Index must be denominated in U.S.
dollars and must have a minimum par
amount of $2 million. To remain in the
2028 Underlying Index, bonds must
maintain a minimum par amount greater
than or equal to $2 million as of the next
rebalancing date. The 2028 Underlying
Index includes Municipal Securities
that have a rating of at least BBB– by
S&P Global Ratings, Baa3 by Moody’s
Investors Service, Inc., or BBB– by Fitch
Ratings, Inc. A bond must be rated by
at least one of these three rating
agencies in order to qualify for the 2028
Underlying Index, and the lowest rating
will be used in determining if the bond
is investment-grade. All non-callable
bonds in the 2028 Underlying Index
will mature after December 31, 2027 and
before December 2, 2028. Callable bonds
are eligible subject to the following: (i)
A final maturity after December 31,
2027 and before December 2, 2028, and
a next call date no sooner than two
years prior to final maturity; or (ii) a
final maturity up to four years after the
index maturity year, if the next call date
is within the index maturity range. The
2028 Underlying Index will also contain
at least 500 component securities.
Portfolio Holdings
Each Fund’s holdings may include
only the following types of Municipal
Securities: General obligation bonds,12
limited obligation bonds (or revenue
bonds),13 municipal notes,14 municipal
commercial paper,15 tender option
bonds,16 variable rate demand notes and
12 General obligation bonds are obligations
involving the credit of an issuer possessing taxing
power and are payable from such issuer’s general
revenues and not from any particular source.
13 Limited obligation bonds are payable only from
the revenues derived from a particular facility or
class of facilities or, in some cases, from the
proceeds of a special excise or other specific
revenue source, and also include industrial
development bonds issued pursuant to former U.S.
federal tax law. Industrial development bonds
generally are also revenue bonds and thus are not
payable from the issuer’s general revenues. The
credit and quality of industrial development bonds
are usually related to the credit of the corporate
user of the facilities. Payment of interest on and
repayment of principal of such bonds is the
responsibility of the corporate user (and/or any
guarantor).
14 Municipal notes are shorter-term municipal
debt obligations that may provide interim financing
in anticipation of tax collection, receipt of grants,
bond sales, or revenue receipts.
15 Municipal commercial paper is generally
unsecured debt that is issued to meet short-term
financing needs.
16 Tender option bonds are synthetic floating-rate
or variable-rate securities issued when long-term
bonds are purchased in the primary or secondary
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demand obligations (‘‘VRDOs’’),17
municipal lease obligations,18 stripped
securities,19 structured securities,20 and
zero coupon securities.21
Under normal market conditions,22
each Fund will generally invest at least
90% of its assets in the component
securities of its respective Underlying
Index, except during the last months of
the Fund’s operations. With respect to
the remaining 10% of its assets, each
Fund may invest in certain futures,
options and swap contracts,23 cash and
cash equivalents, including shares of
money market funds advised by BFA or
its affiliates, as well as in Municipal
Securities not included in its respective
Underlying Index, but which BFA
believes will help the Fund track the
Underlying Index. From time to time
market and then deposited into a trust. Custodial
receipts are then issued to investors, such as the
Fund, evidencing ownership interests in the trust.
17 VRDOs are tax-exempt obligations that contain
a floating or variable interest rate adjustment
formula and a right of demand on the part of the
holder thereof to receive payment of the unpaid
principal balance plus accrued interest upon a short
notice period not to exceed seven days.
18 Municipal lease obligations include certificates
of participation issued by government authorities or
entities to finance the acquisition or construction of
equipment, land, and/or facilities.
19 Stripped securities are created when an issuer
separates the interest and principal components of
an instrument and sells them as separate securities.
In general, one security is entitled to receive the
interest payments on the underlying assets and the
other to receive the principal payments.
20 Structured securities are privately negotiated
debt obligations where the principal and/or interest
is determined by reference to the performance of an
underlying investment, index, or reference
obligation, and may be issued by governmental
agencies. While structured securities are part of the
principal holdings of the Fund, the Issuer
represents that such securities, when combined
with those instruments held as part of the other
portfolio holdings described below, will not exceed
20% of the Fund’s net assets.
21 Zero coupon securities are securities that are
sold at a discount to par value and do not pay
interest during the life of the security. The discount
approximates the total amount of interest the
security will accrue and compound over the period
until maturity at a rate of interest reflecting the
market rate of the security at the time of issuance.
Upon maturity, the holder of a zero coupon security
is entitled to receive the par value of the security.
22 The term ‘‘normal market conditions’’ includes,
but is not limited to, the absence of trading halts
in the applicable financial markets generally;
operational issues (e.g., systems failure) causing
dissemination of inaccurate market information; or
force majeure type events such as natural or
manmade disaster, act of God, armed conflict, act
of terrorism, riot or labor disruption or any similar
intervening circumstance.
23 Such futures, options and swap contracts will
include only the following: Interest rate futures,
interest rate options, and interest rate swaps. The
derivatives will be centrally cleared and they will
be collateralized. At least 90% of the Fund’s net
assets that are invested in listed derivatives will be
invested in instruments that trade in markets that
are members or affiliates of members of the
Intermarket Surveillance Group (‘‘ISG’’) or are
parties to a comprehensive surveillance sharing
with the Exchange.
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17:54 Mar 25, 2019
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when conditions warrant, however, a
Fund may invest at least 80% of its
assets in the component securities of its
respective Underlying Index.
In the last months of operation, as the
bonds held by a Fund mature (other
than the tender options bonds
mentioned below), the proceeds will not
be reinvested in bonds (except as
discussed below) but instead will be
held in cash and cash equivalents,
including, without limitation, shares of
money market funds advised by BFA or
its affiliates (‘‘BlackRock Cash Funds’’),
AMT-free tax-exempt municipal notes,
variable rate demand notes and
obligations, tender option bonds and
municipal commercial paper. These
cash equivalents may not be included in
the Fund’s benchmark index.
Discussion
Based on the characteristics of the
Underlying Indexes and the
representations made in the
Requirements for Index Constituents
sections above, the Exchange believes it
is appropriate to allow the listing and
trading of the Shares. The Underlying
Indexes and Funds each satisfy all of the
generic listing requirements for Index
Fund Shares based on a fixed income
index, except for the minimum
principal amount outstanding
requirement of 14.11(c)(4)(B)(i)(b). The
Exchange notes that the representations
in the Requirements for Index
Constituents for the Underlying Indexes
include the same representations made
regarding the S&P AMT-Free Municipal
Series Dec 2023 Index, the S&P AMTFree Municipal Series Dec 2024 Index,
and the S&P AMT-Free Municipal
Series Dec 2025 Index (collectively,
with the S&P AMT-Free Municipal
Series Dec 2023 Index and the S&P
AMT-Free Municipal Series Dec 2024
Index, the ‘‘Comparable Indexes’’).
Further, the Requirements for Index
Constituents also include an additional
representation that each Underyling
[sic] Index will have at least 500
constituents on a continuous basis,
which was also included in the filing
related to the S&P AMT-Free Municipal
Series Dec 2025 Index. The Exchange
believes that this representation ensures
diversification among constituent
securities of the Indexes.24
The Approval Order and 2025 Filing
included the representation that a bond
must be investment-grade and must
have an outstanding par value of at least
$2 million in order to be included in the
Comparable Indexes. Each Underlying
Index requires that, in order to remain
in the Underlying Index, bonds must be
investment-grade and maintain a
minimum par amount greater than or
equal to $2 million and, further, BFA
has represented that each Underlying
Index will have at least 500 constituents
on a continuous basis. As such, the
Exchange believes that the proposal is
consistent with the Act because the
representations regarding the quality
and size of the issuances included in
each Underlying Index provide a strong
degree of protection against index
manipulation that is consistent with
other proposals that have either been
approved for listing and trading by the
Commission or were effective upon
filing, which is only furthered by the
additional representation that each
Underyling [sic] Index will have at least
500 constituents on a continuous basis,
which ensures diversification among
constituent securities.
In addition, the Exchange represents
that: (1) Except for Rule
14.11(c)(4)(B)(i)(b), each Underyling
[sic] Index currently satisfies all of the
generic listing standards under Rule
14.11(c)(4); (2) the continued listing
standards under Rule 14.11(c), as
applicable to Index Fund Shares based
on fixed income securities, will apply to
the Shares; and (3) the issuer of the
Funds is required to comply with Rule
10A–3 25 under the Act for the initial
and continued listing of the Shares. In
addition, the Exchange represents that
each Fund will comply with all other
requirements applicable to Index Fund
Shares, including, but not limited to,
requirements relating to the
dissemination of key information such
as the value of the Underlying Indexes
and the Intraday Indicative Value
(‘‘IIV’’),26 rules governing the trading of
equity securities, trading hours, trading
halts, surveillance, information barriers
and the Information Circular, as set
forth in the Exchange rules applicable to
Index Fund Shares and prior
Commission orders approving the
generic listing rules applicable to the
listing and trading of Index Fund
Shares.
25 17
24 See
Approval Order and the 2025 Filing. The
Exchange notes that the only substantive difference
between the Comparable Indexes and the
Underlying Indexes, other than the maturity dates
of the constituents, is that the Underlying Indexes
may include callable and non-callable Municipal
Securities, while the Comparable Indexes include
only non-callable Municipal Securities.
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11367
CFR 240.10A–3.
IIV will be widely disseminated by one or
more major market data vendors at least every 15
seconds during the Exchange’s Regular Trading
Hours. Currently, it is the Exchange’s
understanding that several major market data
vendors display and/or make widely available IIVs
taken from the Consolidated Tape Association
(‘‘CTA’’) or other data feeds.
26 The
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The current value of each Underlying
Index will be widely disseminated by
one or more major market data vendors
at least once per day, as required by
Rule 14.11(c)(4)(C)(ii). The portfolio of
securities and other assets held by each
Fund will be disclosed daily on its
respective website at www.ishares.com.
Further, each Fund’s website will
contain the Fund’s prospectus and
additional data relating to net asset
value (‘‘NAV’’) and other applicable
quantitative information. The issuer has
represented that the NAV of each Fund
will be calculated daily and will be
made available to all market
participants at the same time. The Index
Provider is not a broker-dealer and is
not affiliated with a broker-dealer. To
the extent that the Index Provider
becomes a broker-dealer or becomes
affiliated with a broker-dealer, the Index
Provider will implement and will
maintain a ‘‘fire wall’’ around the
personnel who have access to
information concerning changes and
adjustments to each Underlying Index
and each Underlying Index shall be
calculated by a third party who is not
a broker-dealer or fund advisor. In
addition, any advisory committee,
supervisory board or similar entity that
advises the Index Provider or that makes
decisions on each Index, methodology
and related matters, will implement and
maintain, or be subject to, procedures
designed to prevent the use and
dissemination of material non-public
information regarding the Underlying
Indexes.
The Exchange’s existing rules require
that the issuer of the Funds notify the
Exchange of any material change to the
methodology used to determine the
composition of an Underlying Index
and, therefore, if the methodology of an
Underlying Index was to be changed in
a manner that would materially alter its
existing composition, the Exchange
would have advance notice and would
evaluate the modifications to determine
whether that Underyling [sic] Index
remained sufficiently broad-based and
well diversified.
Availability of Information
The Funds’ website, which will be
publicly available prior to the public
offering of Shares, will include a form
of the prospectus for the Funds that may
be downloaded. The website will
include additional quantitative
information updated on a daily basis,
including, for each Fund: (1) The prior
business day’s reported NAV, daily
trading volume, and a calculation of the
premium and discount of the Bid/Ask
Price against the NAV; and (2) data in
chart format displaying the frequency
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distribution of discounts and premiums
of the daily Bid/Ask Price against the
NAV, within appropriate ranges, for
each of the four previous calendar
quarters. Daily trading volume
information for the Shares will also be
available in the financial section of
newspapers, through subscription
services such as Bloomberg, Thomson
Reuters, and International Data
Corporation, which can be accessed by
authorized participants and other
investors, as well as through other
electronic services, including major
public websites. On each business day,
each Fund will disclose on its website
the identities and quantities of the
portfolio of securities and other assets in
the daily disclosed portfolio held by the
Fund that formed the basis for the
Fund’s calculation of NAV at the end of
the previous business day. The daily
disclosed portfolio will include, as
applicable: The ticker symbol; CUSIP
number or other identifier, if any; a
description of the holding (including
the type of holding, such as the type of
swap); the identity of the security, index
or other asset or instrument underlying
the holding, if any; for options, the
option strike price; quantity held (as
measured by, for example, par value,
notional value or number of shares,
contracts, or units); maturity date, if
any; coupon rate, if any; effective date,
if any; market value of the holding; and
the percentage weighting of the holding
in each Fund’s portfolio. The website
and information will be publicly
available at no charge. The value,
components, and percentage weightings
of each Underlying Index will be
calculated and disseminated at least
once daily and will be available from
major market data vendors. Rules
governing each Fund’s respective
Underlying Indexes are available on
S&P’s website and in the applicable
Fund’s prospectus.
In addition, an estimated value,
defined in BZX Rule 14.11(c)(6)(A) as
the IIV that reflects an estimated
intraday value of each Fund’s portfolio,
will be disseminated. Moreover, the IIV
will be based upon the current value for
the components of the daily disclosed
portfolio and will be updated and
widely disseminated by one or more
major market data vendors at least every
15 seconds during the Exchange’s
Regular Trading Hours.27 In addition,
the quotations of certain of a Fund’s
holdings may not be updated during
27 Currently,
it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available IIVs published via the
CTA or other data feeds.
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Sfmt 4703
U.S. trading hours if updated prices
cannot be ascertained.
The dissemination of the IIV, together
with the daily disclosed portfolio, will
allow investors to determine the value
of the underlying portfolio of each Fund
on a daily basis and provide a close
estimate of that value throughout the
trading day.
Quotation and last sale information
for the Shares will be available via the
CTA high speed line. Price information
regarding Municipal Securities and
other non-exchange traded assets
including certain derivatives, money
market funds and other instruments,
and repurchase agreements is available
from third party pricing services and
major market data vendors. Price
information regarding Municipal
Securities can also be obtained from the
Municipal Securities Rulemaking
Board’s Electronic Municipal Market
Access (‘‘EMMA’’) system. For
exchange-traded assets, including
futures, and certain options, such
intraday information is available
directly from the applicable listing
exchange. In addition, price information
for U.S. exchange-traded options will be
available from the Options Price
Reporting Authority.
Surveillance
The Exchange represents that trading
in the Shares will be subject to the
existing trading surveillances,
administered by the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, or by regulatory
staff of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws. The Exchange
represents that these procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and federal
securities laws applicable to trading on
the Exchange.28
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows and
investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
The Exchange or FINRA, on behalf of
the Exchange, or both, will
28 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.
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communicate as needed regarding
trading in the Shares with other markets
and other entities that are members of
the ISG, and the Exchange or FINRA, on
behalf of the Exchange, or both, may
obtain trading information regarding
trading in the Shares from such markets
and other entities. In addition, the
Exchange may obtain information
regarding trading in the Shares from
markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement. In
addition, FINRA, on behalf of the
Exchange, is able to access, as needed,
trade information for certain fixed
income securities held by the Funds
reported to FINRA’s Trade Reporting
and Compliance Engine (‘‘TRACE’’).
FINRA also can access data obtained
from the Municipal Securities
Rulemaking Board’s EMMA system
relating to municipal bond trading
activity for surveillance purposes in
connection with trading in the Shares.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with Section 6(b)
of the Act 29 in general and Section
6(b)(5) of the Act 30 in particular in that
it is designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares will
be listed and traded on the Exchange
pursuant to the initial and continued
listing criteria for Index Fund Shares
based on a fixed income index in Rule
14.11(c)(4), except for the minimum
principal amount outstanding
requirement of 14.11(c)(4)(B)(i)(b). The
Exchange represents that trading in the
Shares will be subject to the existing
trading surveillances administered by
the Exchange as well as cross-market
surveillances administered by the
FINRA on behalf of the Exchange,
which are designed to detect violations
of Exchange rules and federal securities
laws applicable to trading on the
Exchange. The Exchange represents that
these procedures are adequate to
properly monitor Exchange trading of
29 15
30 15
U.S.C. 78f.
U.S.C. 78f(b)(5).
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17:54 Mar 25, 2019
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the Shares in all trading sessions and to
deter and detect violations of Exchange
rules and federal securities laws
applicable to trading on the Exchange.
The Exchange or FINRA, on behalf of
the Exchange, or both, will
communicate as needed regarding
trading in the Shares with other markets
that are members of the ISG. In addition,
the Exchange will communicate as
needed regarding trading in the Shares
with other markets that are members of
the ISG or with which the Exchange has
in place a comprehensive surveillance
sharing agreement. FINRA also can
access data obtained from the EMMA
system relating to municipal bond
trading activity for surveillance
purposes in connection with trading in
the Shares. FINRA, on behalf of the
Exchange, is able to access, as needed,
trade information for certain fixed
income securities held by the Funds
reported to TRACE.
As discussed above, the Exchange
believes that each Underlying Index is
sufficiently broad-based to deter
potential manipulation. The Underlying
Indexes currently include at least 5,852
component securities. Whereas the Rule
14.11(c)(4)(B)(i)(e) requires that an
index contain securities from a
minimum of 13 non-affiliated issuers,
the Underlying Indexes each include
securities issued by municipal entities
in at least 51 states or U.S. territories.
Further, whereas the generic listing
rules permit a single component
security to represent up to 30% of the
weight of an index and the top five
component securities to, in aggregate,
represent up to 65% of the weight of an
index, the largest component security in
each Underlying Index constitutes no
more than 0.85% of the weight of the
Underlying Index and the largest five
component securities represent no more
than 2.56% of the weight of an
Underlying Index.
The Exchange believes that this
significant diversification and the lack
of concentration among constituent
securities provide each Underlying
Index with a strong degree of protection
against index manipulation. Each
Underlying Index and Fund satisfy all of
the generic listing requirements for
Index Fund Shares based on a fixed
income index, except for the minimum
principal amount outstanding
requirement of 14.11(c)(4)(B)(i)(b). With
this in mind, the Exchange notes that
the representations in the Requirements
for Index Constituents for each
Underlying Index are identical to or
more robust than the representations
made regarding the Comparable Indexes
and, further, BFA has made an
additional representation regarding
PO 00000
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11369
diversification that was also included in
the 2025 Filing.
The Approval Order and 2025 Filing
included the representation that a bond
must be investment-grade and must
have an outstanding par value of at least
$2 million in order to be included in the
Comparable Indexes. To remain in an
Underlying Index, bonds must be
investment-grade and maintain a
minimum par amount greater than or
equal to $2 million and, further, BFA
has represented that each Underlying
Index will have at least 500 constituents
on a continuous basis, which ensures
diversification among constituent
securities, a representation that was also
included in the 2025 Filing. As such,
the Exchange believes that the proposal
is consistent with the Act because the
representations regarding the quality
and size of the issuances included in
each Underlying Index provide a strong
degree of protection against index
manipulation that is consistent with
other proposals that have either been
approved for listing and trading by the
Commission or were effective upon
filing, which is only furthered by the
additional representation that each
Underyling [sic] Index will have at least
500 constituents on a continuous basis,
which ensures diversification among
constituent securities.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest in that a large amount of
information is publicly available
regarding each Fund, thereby promoting
market transparency. Each Fund’s
portfolio holdings will be disclosed on
its respective website daily after the
close of trading on the Exchange.
Moreover, the IIV for the Shares will be
widely disseminated by one or more
major market data vendors at least every
15 seconds during the Exchange’s
Regular Trading Hours. The current
value of each Underlying Index will be
disseminated by one or more major
market data vendors at least once per
day. Information regarding market price
and trading volume of the Shares will be
continually available on a real-time
basis throughout the day on brokers’
computer screens and other electronic
services, and quotation and last sale
information will be available via the
CTA high-speed line. The website for
the Funds will include the prospectus
for each Fund and additional data
relating to NAV and other applicable
quantitative information.
If the Exchange becomes aware that a
Fund’s NAV is not being disseminated
to all market participants at the same
time, it will halt trading in the
applicable Fund’s Shares until such
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time as the NAV is available to all
market participants. With respect to
trading halts, the Exchange may
consider all relevant factors in
exercising its discretion to halt or
suspend trading in the Shares. Trading
also may be halted because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable. If the IIV and
index value are not being disseminated
for a Fund as required, the Exchange
may halt trading during the day in
which the interruption to the
dissemination of the IIV or index value
occurs. If the interruption to the
dissemination of an IIV or index value
persists past the trading day in which it
occurred, the Exchange will halt
trading. The Exchange may consider all
relevant factors in exercising its
discretion to halt or suspend trading in
the Shares. The Exchange will halt
trading in the Shares under the
conditions specified in BZX Rule 11.18.
Trading may be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable. These may
include: (1) The extent to which trading
is not occurring in the securities and/or
the financial instruments composing the
daily disclosed portfolio of a Fund; or
(2) whether other unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market are present. In addition,
investors will have ready access to
information regarding the applicable
IIV, and quotation and last sale
information for the Shares. Trade price
and other information relating to
Municipal Securities is available
through the EMMA system.
All statements and representations
made in this filing regarding the
composition of the Underlying Indexes,
the description of the portfolio or
reference assets, limitations on portfolio
holdings or reference assets,
dissemination and availability of index,
reference asset, and IIV, or the
applicability of Exchange listing rules
shall constitute continued listing
requirements for listing the Shares on
the Exchange. The issuer is required to
advise the Exchange of any failure by a
Fund to comply with the continued
listing requirements, and, pursuant to
its obligations under Section 19(g)(1) of
the Act, the Exchange will monitor for
compliance with the continued listing
requirements. If a Fund is not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
Rule 14.12.
The proposed rule change is designed
to perfect the mechanism of a free and
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open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of several new exchange-traded
products that principally hold
Municipal Securities and that will
enhance competition among market
participants, to the benefit of investors
and the marketplace. The Exchange has
in place surveillance procedures
relating to trading in the Shares and
may obtain information via ISG from
other exchanges that are members of ISG
or with which the Exchange has entered
into a comprehensive surveillance
sharing agreement. In addition,
investors will have ready access to
information regarding the IIV and
quotation and last sale information for
the Shares.
For the above reasons, the Exchange
believes that the proposed rule change
is consistent with the requirements of
Section 6(b)(5) of the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purpose of the Act. The Exchange
notes that the proposed rule change will
facilitate the listing and trading of three
additional exchange-traded products
that will enhance competition among
market participants, to the benefit of
investors and the marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 31 and Rule 19b–
4(f)(6) thereunder.32
31 15
U.S.C. 78s(b)(3)(A).
32 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
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A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 33 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 34
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has
requested that the Commission waive
the 30-day operative delay so that the
proposed rule change may become
operative upon filing. The Exchange
noted that this proposal includes
identical representations regarding the
requirements for index constituents of
each Underlying Index as are included
in relation to the Comparable Indexes in
the Approval Order and the 2025 Filing
and thus raises no new or novel issues.
The Exchange noted this proposal
further includes an additional
representation that each Underlying
Index will have at least 500 constituents
on a continuous basis, which the
Commission believes should help
ensure diversification among
constituent securities in a manner
similar to the 2025 Filing. Finally, the
Exchange notes that waiver of the 30day operative delay will expedite the
listing and trading of the Shares, which
may enhance competition among market
participants, without undue delay, to
the benefit of investors and the
marketplace. The Commission believes
that the proposal raises no new or
substantive issues and that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. The Commission hereby
waives the operative delay and
designates the proposed rule change
operative upon filing.35
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
as designated by the Commission. The Exchange
has satisfied this requirement.
33 17 CFR 240.19b–4(f)(6).
34 17 CFR 240.19b–4(f)(6)(iii).
35 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
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Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–85383; File No. 265–30]
• 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–2019–017 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.
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All submissions should refer to File
Number SR–CboeBZX–2019–017. 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–2019–017, and
should be submitted on or before April
16, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–05700 Filed 3–25–19; 8:45 am]
BILLING CODE 8011–01–P
36 17
CFR 200.30–3(a)(12).
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17:54 Mar 25, 2019
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Fixed Income Market Structure
Advisory Committee
Securities and Exchange
Commission.
ACTION: Notice of meeting.
AGENCY:
SUMMARY: Notice is being provided that
the Securities and Exchange
Commission Fixed Income Market
Structure Advisory Committee will hold
a public meeting on Monday, April 15,
2019 in Multi-Purpose Room LL–006 at
the Commission’s headquarters, 100 F
Street NE, Washington, DC. The meeting
will begin at 9:30 a.m. (ET) and will be
open to the public. The meeting will be
webcast on the Commission’s website at
www.sec.gov. Persons needing special
accommodations to take part because of
a disability should notify the contact
persons listed below. The public is
invited to submit written statements to
the Committee. The meeting will
include updates and presentations from
the subcommittees and a discussion on
the transition away from LIBOR.
DATES: The public meeting will be held
on April 15, 2019. Written statements
should be received on or before April
10, 2019.
ADDRESSES: The meeting will be held at
the Commission’s headquarters, 100 F
Street NE, Washington, DC. Written
statements may be submitted by any of
the following methods:
Electronic Statements
• Use the Commission’s internet
submission form (https://www.sec.gov/
rules/other.shtml); or
• Send an email message to rulecomments@sec.gov. Please include File
Number 265–30 on the subject line; or
Paper Statements
• Send paper statements in triplicate
to Vanessa A. Countryman, Federal
Advisory Committee Management
Officer, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
No. 265–30. This file number should be
included on the subject line if email is
used. To help us process and review
your statement more efficiently, please
use only one method. The Commission
will post all statements on the
Commission’s internet website at https://
www.sec.gov/comments/265-30/26530.shtml.
Statements also will be available for
website viewing and printing in the
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
11371
Commission’s Public Reference Room,
100 F Street NE, Room 1580,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. All statements
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
FOR FURTHER INFORMATION CONTACT:
David Dimitrious, Senior Special
Counsel, at (202) 551–5131, or Benjamin
Bernstein, Special Counsel, at (202)
551–5354, Division of Trading and
Markets, Securities and Exchange
Commission, 100 F Street NE,
Washington DC 20549–7010.
SUPPLEMENTARY INFORMATION: In
accordance with Section 10(a) of the
Federal Advisory Committee Act, 5
U.S.C.–App. 1, and the regulations
thereunder, Brett Redfearn, Designated
Federal Officer of the Committee, has
ordered publication of this notice.
Dated: March 21, 2019.
Vanessa A. Countryman,
Acting Committee Management Officer.
[FR Doc. 2019–05734 Filed 3–25–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33404; File No. 812–15011]
Wells Fargo Securities, LLC, et al.
March 20, 2019.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Temporary order and notice of
application for a permanent order under
section 9(c) of the Investment Company
Act of 1940 (‘‘Act’’).
AGENCY:
Applicants
have received a temporary order
(‘‘Temporary Order’’) exempting them
from section 9(a) of the Act, with
respect to an injunction entered against
Wells Fargo Securities, LLC (‘‘WFS’’) on
March 20, 2019 by the U.S. District
Court for the District of Rhode Island
(‘‘District Court’’), in connection with a
consent order between WFS and the
Commission, until the Commission
takes final action on an application for
a permanent order (the ‘‘Permanent
Order,’’ and with the Temporary Order,
the ‘‘Orders’’). Applicants also have
applied for a Permanent Order.
APPLICANTS: WFS; Wells Fargo Bank,
N.A. (‘‘WFBNA’’), Galliard Capital
SUMMARY OF APPLICATION:
E:\FR\FM\26MRN1.SGM
26MRN1
]]>Agencies
[Federal Register Volume 84, Number 58 (Tuesday, March 26, 2019)]
[Notices]
[Pages 11364-11371]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05700]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85370; File No. SR-CboeBZX-2019-017]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule To List and Trade
Shares of the iShares iBonds Dec 2026 Term Muni Bond ETF, iShares
iBonds Dec 2027 Term Muni Bond ETF, and iShares iBonds Dec 2028 Term
Muni Bond ETF Under BZX Rule 14.11(c)(4)
March 20, 2019.
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 19, 2019, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Exchange filed the proposal as
a ``non-controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade under BZX Rule 14.11(c)(4)
the shares of the iShares iBonds Dec 2026
[[Page 11365]]
Term Muni Bond ETF (the ``2026 Fund''), iShares iBonds Dec 2027 Term
Muni Bond ETF (the ``2027 Fund''), and iShares iBonds Dec 2028 Term
Muni Bond ETF (the ``2028 Fund'', each a ``Fund'' and, collectively,
the ``Funds'') of iShares Trust (the ``Trust'').
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, 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 list and trade shares (``Shares'') of the
Funds under BZX Rule 14.11(c)(4),\5\ which governs the listing and
trading of index fund shares based on fixed income securities
indexes.\6\ The Shares will be offered by the Trust, which was
established as a Delaware statutory trust on December 16, 1999. The
Trust is registered with the Commission as an open-end investment
company and has filed a registration statement on behalf of the Funds
on Form N-1A (``Registration Statement'') with the Commission.\7\
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\5\ The Commission approved BZX Rule 14.11(c) in Securities
Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148
(September 6, 2011) (SR-BATS-2011-018).
\6\ The Exchange notes that the Commission has already published
an immediately effective rule filing allowing the listing and
trading of shares of a series of Index Fund Shares very similar to
the Funds on the Exchange. See Securities Exchange Act Release No.
84107 (September 13, 2018), 83 FR 47210 (September 18, 2018) (SR-
CboeBZX-2018-070) (the ``2025 Filing''). Further, the Commission has
also approved a proposed rule change allowing the listing and
trading of shares of two series of Index Fund Shares very similar to
the Funds on the Exchange. See Securities Exchange Act Release No.
79381 (November 22, 2016), 81 FR 86044 (November 29, 2016) (SR-
BatsBZX-2016-48) (Order Granting Accelerated Approval of a Proposed
Rule Change, as Modified by Amendments No. 1 and No. 2 Thereto, To
List and Trade Shares of the iShares iBonds Dec 2023 Term Muni Bond
ETF and iShares iBonds Dec 2024 Term Muni Bond ETF of the iShares
U.S. ETF Trust Pursuant to BZX Rule 14.11(c)(4)) (the ``Approval
Order''). Finally, the Commission has also published an immediately
effective rule filing allowing the listing and trading of shares of
the 2026 Fund on NYSE Arca, Inc. (``NYSE Arca''). See Securities
Exchange Act Release No. 84396 (October 10, 2018), 83 FR 52266
(October 16, 2018) (SR-NYSEArca-2018-70) (the ``Arca Filing'').
While the Arca Filing was published and would have allowed the
listing and trading of shares of the 2026 Fund on NYSE Arca, the
shares of the 2026 Fund have not been listed or traded. In addition
to proposing to list and trade the Shares of each Fund on the
Exchange, this proposal would change the underlying index associated
with the 2026 Fund, as described in the Arca Filing, from the S&P
AMT-Free Municipal Series Dec 2026 Index to the S&P AMT-Free
Municipal Callable Factor Adjusted 2026 Series Index, which would
expand the index universe to include certain callable securities, as
described below.
\7\ See Registration Statement on Form N-1A for the Trust, dated
January 11, 2019 (File Nos. 333-92935 and 811-09729). The
descriptions of the Funds and the Shares contained herein are based,
in part, on information in the Registration Statement. The
Commission has issued an order granting certain exemptive relief to
the Trust under the Investment Company Act of 1940 (15 U.S.C. 80a-1)
(``1940 Act'') (the ``Exemptive Order''). See Investment Company Act
Release No. 27661 (January 17, 2007) (File No. 812-13208).
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Rule 14.11(c)(4)(B)(i)(b) requires that component fixed income
securities that, in the aggregate, account for at least 75% of the
weight of the index or portfolio shall have a minimum principal amount
outstanding of $100 million or more. The Exchange submits this proposal
because the Underlying Indexes, as defined below, do not meet this
requirement. The Underlying Indexes do, however, meet all of the other
requirements of Rule 14.11(c)(4).
Description of the Shares and the Funds
BlackRock Fund Advisors (``BFA'') is the investment adviser to the
Funds.\8\ State Street Bank and Trust Company is the administrator,
custodian, and transfer agent for the Trust. S&P is the index provider
(the ``Index Provider'') for the Funds. BlackRock Investments, LLC
serves as the distributor for the Trust.
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\8\ BFA is an indirect wholly owned subsidiary of BlackRock,
Inc.
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S&P AMT-Free Municipal Callable Factor Adjusted 2026 Series Index
According to the Registration Statement, the 2026 Fund will seek to
track the investment results, before fees and expenses, of the S&P AMT-
Free Municipal Callable Factor Adjusted 2026 Series Index (the ``2026
Underlying Index''), which measures the performance of investment-grade
(as determined by Index Provider), non-callable and callable U.S.
municipal bonds which will mature or be redeemed prior to December 1,
2026. The 2026 Underlying Index includes only municipal bonds from
issuers that are state, local or federal district governments or
agencies such that the interest on each such bond is exempt from U.S.
federal income taxes and the federal alternative minimum tax (``AMT'')
(``Municipal Securities'').
As of December 31, 2018, the 2026 Underlying Index included 12,222
component fixed income municipal bond securities from issuers in 51
different states or U.S. territories.\9\ The most heavily weighted
security in the 2026 Underlying Index represented approximately 0.41%
of the total weight of the 2026 Underlying Index and the aggregate
weight of the top five most heavily weighted securities in the 2026
Underlying Index represented less than 1.33% of the total weight of the
2026 Underlying Index. Approximately 6.76% of the weight of the
components in the 2026 Underlying Index had a minimum original
principal outstanding of $100 million or more and 76.02% of the weight
of the components were a constituent of an offering where the original
offering amount was at least $100 million. In addition, the total
dollar amount outstanding of issues in the 2026 Underlying Index was
approximately $101,777,956,000 and the average dollar amount
outstanding of issues in the 2026 Underlying Index was approximately
$8,327,000.
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\9\ Unless otherwise noted, all statistics related to the 2026
Underlying Index presented hereafter were accurate as of December
31, 2018.
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Requirement for Index Constituents
Each bond in the 2026 Underlying Index must be denominated in U.S.
dollars and must have a minimum par amount of $2 million. To remain in
the 2026 Underlying Index, bonds must maintain a minimum par amount
greater than or equal to $2 million as of the next rebalancing date.
The 2026 Underlying Index includes Municipal Securities that have a
rating of at least BBB- by S&P Global Ratings, Baa3 by Moody's
Investors Service, Inc., or BBB by Fitch Ratings, Inc. A bond must be
rated by at least one of these three rating agencies in order to
qualify for the 2026 Underlying Index, and the lowest rating will be
used in determining if the bond is investment-grade. All non-callable
bonds in the 2026 Underlying Index will mature after December 31, 2025
and before December 2, 2026. Callable bonds are eligible subject to the
following: (i) A final maturity date after December 31, 2025 and before
December 2, 2026, and a next call date no sooner than two
[[Page 11366]]
years prior to final maturity; or (ii) a final maturity up to four
years after the index maturity year, if the next call date is within
the index maturity range. The 2026 Underlying Index will also contain
at least 500 component securities.
S&P AMT-Free Municipal Callable Factor Adjusted 2027 Series Index
According to the Registration Statement, the 2027 Fund will seek to
track the investment results, before fees and expenses, of the S&P AMT-
Free Municipal Callable Factor Adjusted 2027 Series Index (the ``2027
Underlying Index''), which measures the performance of investment-grade
(as determined by Index Provider), non-callable and callable U.S.
municipal bonds which will mature or be redeemed prior to December 1,
2027. The 2027 Underlying Index includes only Municipal Securities.
As of December 31, 2018, the 2027 Underlying Index included 9,582
component fixed income municipal bond securities from issuers in 51
different states or U.S. territories.\10\ The most heavily weighted
security in the 2027 Underlying Index represented approximately 0.57%
of the total weight of the 2027 Underlying Index and the aggregate
weight of the top five most heavily weighted securities in the 2027
Underlying Index represented less than 2.56% of the total weight of the
2027 Underlying Index. Approximately 5.87% of the weight of the
components in the 2027 Underlying Index had a minimum original
principal outstanding of $100 million or more and 77.82% of the weight
of the components were a constituent of an offering where the original
offering amount was at least $100 million. In addition, the total
dollar amount outstanding of issues in the 2027 Underlying Index was
approximately $81,765,343,000 and the average dollar amount outstanding
of issues in the 2027 Underlying Index was approximately $8,533,000.
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\10\ Unless otherwise noted, all statistics related to the 2027
Underlying Index presented hereafter were accurate as of December
31, 2018.
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Requirement for Index Constituents
Each bond in the 2027 Underlying Index must be denominated in U.S.
dollars and must have a minimum par amount of $2 million. To remain in
the 2027 Underlying Index, bonds must maintain a minimum par amount
greater than or equal to $2 million as of the next rebalancing date.
The 2027 Underlying Index includes Municipal Securities that have a
rating of at least BBB-by S&P Global Ratings, Baa3 by Moody's Investors
Service, Inc., or BBB by Fitch Ratings, Inc. A bond must be rated by at
least one of these three rating agencies in order to qualify for the
2027 Underlying Index, and the lowest rating will be used in
determining if the bond is investment-grade. All non-callable bonds in
the 2027 Underlying Index will mature after December 31, 2026 and
before December 2, 2027. Callable bonds are eligible subject to the
following: (i) A final maturity after December 31, 2026 and before
December 2, 2027, and a next call date no sooner than two years prior
to final maturity; or (ii) a final maturity up to four years after the
index maturity year, if the next call date is within the index maturity
range. The 2027 Underlying Index will also contain at least 500
component securities.
S&P AMT-Free Municipal Callable Factor Adjusted 2028 Series Index
According to the Registration Statement, the 2028 Fund will seek to
track the investment results, before fees and expenses, of the S&P AMT-
Free Municipal Callable Factor Adjusted 2028 Series Index (the ``2028
Underlying Index'' and, collectively with the 2026 Underlying Index and
the 2027 Underlying Index, the ``Underlying Indexes''), which measures
the performance of investment-grade (as determined by Index Provider),
non-callable and callable U.S. municipal bonds which will mature or be
redeemed prior to December 1, 2028. The 2028 Underlying Index includes
only Municipal Securities.
As of December 31, 2018, the 2028 Underlying Index included 5,852
component fixed income municipal bond securities from issuers in 51
different states or U.S. territories.\11\ The most heavily weighted
security in the 2028 Underlying Index represented approximately 0.85%
of the total weight of the 2028 Underlying Index and the aggregate
weight of the top five most heavily weighted securities in the 2028
Underlying Index represented less than 2.42% of the total weight of the
2028 Underlying Index. Approximately 6.97% of the weight of the
components in the 2028 Underlying Index had a minimum original
principal outstanding of $100 million or more and 80.36% of the weight
of the components were a constituent of an offering where the original
offering amount was at least $100 million. In addition, the total
dollar amount outstanding of issues in the 2028 Underlying Index was
approximately $54,637,103,000 and the average dollar amount outstanding
of issues in the 2028 Underlying Index was approximately $9,336,000.
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\11\ Unless otherwise noted, all statistics related to the 2028
Underlying Index presented hereafter were accurate as of December
31, 2018.
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Requirement for Index Constituents
Each bond in the 2028 Underlying Index must be denominated in U.S.
dollars and must have a minimum par amount of $2 million. To remain in
the 2028 Underlying Index, bonds must maintain a minimum par amount
greater than or equal to $2 million as of the next rebalancing date.
The 2028 Underlying Index includes Municipal Securities that have a
rating of at least BBB- by S&P Global Ratings, Baa3 by Moody's
Investors Service, Inc., or BBB- by Fitch Ratings, Inc. A bond must be
rated by at least one of these three rating agencies in order to
qualify for the 2028 Underlying Index, and the lowest rating will be
used in determining if the bond is investment-grade. All non-callable
bonds in the 2028 Underlying Index will mature after December 31, 2027
and before December 2, 2028. Callable bonds are eligible subject to the
following: (i) A final maturity after December 31, 2027 and before
December 2, 2028, and a next call date no sooner than two years prior
to final maturity; or (ii) a final maturity up to four years after the
index maturity year, if the next call date is within the index maturity
range. The 2028 Underlying Index will also contain at least 500
component securities.
Portfolio Holdings
Each Fund's holdings may include only the following types of
Municipal Securities: General obligation bonds,\12\ limited obligation
bonds (or revenue bonds),\13\ municipal notes,\14\ municipal commercial
paper,\15\ tender option bonds,\16\ variable rate demand notes and
[[Page 11367]]
demand obligations (``VRDOs''),\17\ municipal lease obligations,\18\
stripped securities,\19\ structured securities,\20\ and zero coupon
securities.\21\
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\12\ General obligation bonds are obligations involving the
credit of an issuer possessing taxing power and are payable from
such issuer's general revenues and not from any particular source.
\13\ Limited obligation bonds are payable only from the revenues
derived from a particular facility or class of facilities or, in
some cases, from the proceeds of a special excise or other specific
revenue source, and also include industrial development bonds issued
pursuant to former U.S. federal tax law. Industrial development
bonds generally are also revenue bonds and thus are not payable from
the issuer's general revenues. The credit and quality of industrial
development bonds are usually related to the credit of the corporate
user of the facilities. Payment of interest on and repayment of
principal of such bonds is the responsibility of the corporate user
(and/or any guarantor).
\14\ Municipal notes are shorter-term municipal debt obligations
that may provide interim financing in anticipation of tax
collection, receipt of grants, bond sales, or revenue receipts.
\15\ Municipal commercial paper is generally unsecured debt that
is issued to meet short-term financing needs.
\16\ Tender option bonds are synthetic floating-rate or
variable-rate securities issued when long-term bonds are purchased
in the primary or secondary market and then deposited into a trust.
Custodial receipts are then issued to investors, such as the Fund,
evidencing ownership interests in the trust.
\17\ VRDOs are tax-exempt obligations that contain a floating or
variable interest rate adjustment formula and a right of demand on
the part of the holder thereof to receive payment of the unpaid
principal balance plus accrued interest upon a short notice period
not to exceed seven days.
\18\ Municipal lease obligations include certificates of
participation issued by government authorities or entities to
finance the acquisition or construction of equipment, land, and/or
facilities.
\19\ Stripped securities are created when an issuer separates
the interest and principal components of an instrument and sells
them as separate securities. In general, one security is entitled to
receive the interest payments on the underlying assets and the other
to receive the principal payments.
\20\ Structured securities are privately negotiated debt
obligations where the principal and/or interest is determined by
reference to the performance of an underlying investment, index, or
reference obligation, and may be issued by governmental agencies.
While structured securities are part of the principal holdings of
the Fund, the Issuer represents that such securities, when combined
with those instruments held as part of the other portfolio holdings
described below, will not exceed 20% of the Fund's net assets.
\21\ Zero coupon securities are securities that are sold at a
discount to par value and do not pay interest during the life of the
security. The discount approximates the total amount of interest the
security will accrue and compound over the period until maturity at
a rate of interest reflecting the market rate of the security at the
time of issuance. Upon maturity, the holder of a zero coupon
security is entitled to receive the par value of the security.
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Under normal market conditions,\22\ each Fund will generally invest
at least 90% of its assets in the component securities of its
respective Underlying Index, except during the last months of the
Fund's operations. With respect to the remaining 10% of its assets,
each Fund may invest in certain futures, options and swap
contracts,\23\ cash and cash equivalents, including shares of money
market funds advised by BFA or its affiliates, as well as in Municipal
Securities not included in its respective Underlying Index, but which
BFA believes will help the Fund track the Underlying Index. From time
to time when conditions warrant, however, a Fund may invest at least
80% of its assets in the component securities of its respective
Underlying Index.
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\22\ The term ``normal market conditions'' includes, but is not
limited to, the absence of trading halts in the applicable financial
markets generally; operational issues (e.g., systems failure)
causing dissemination of inaccurate market information; or force
majeure type events such as natural or manmade disaster, act of God,
armed conflict, act of terrorism, riot or labor disruption or any
similar intervening circumstance.
\23\ Such futures, options and swap contracts will include only
the following: Interest rate futures, interest rate options, and
interest rate swaps. The derivatives will be centrally cleared and
they will be collateralized. At least 90% of the Fund's net assets
that are invested in listed derivatives will be invested in
instruments that trade in markets that are members or affiliates of
members of the Intermarket Surveillance Group (``ISG'') or are
parties to a comprehensive surveillance sharing with the Exchange.
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In the last months of operation, as the bonds held by a Fund mature
(other than the tender options bonds mentioned below), the proceeds
will not be reinvested in bonds (except as discussed below) but instead
will be held in cash and cash equivalents, including, without
limitation, shares of money market funds advised by BFA or its
affiliates (``BlackRock Cash Funds''), AMT-free tax-exempt municipal
notes, variable rate demand notes and obligations, tender option bonds
and municipal commercial paper. These cash equivalents may not be
included in the Fund's benchmark index.
Discussion
Based on the characteristics of the Underlying Indexes and the
representations made in the Requirements for Index Constituents
sections above, the Exchange believes it is appropriate to allow the
listing and trading of the Shares. The Underlying Indexes and Funds
each satisfy all of the generic listing requirements for Index Fund
Shares based on a fixed income index, except for the minimum principal
amount outstanding requirement of 14.11(c)(4)(B)(i)(b). The Exchange
notes that the representations in the Requirements for Index
Constituents for the Underlying Indexes include the same
representations made regarding the S&P AMT-Free Municipal Series Dec
2023 Index, the S&P AMT-Free Municipal Series Dec 2024 Index, and the
S&P AMT-Free Municipal Series Dec 2025 Index (collectively, with the
S&P AMT-Free Municipal Series Dec 2023 Index and the S&P AMT-Free
Municipal Series Dec 2024 Index, the ``Comparable Indexes''). Further,
the Requirements for Index Constituents also include an additional
representation that each Underyling [sic] Index will have at least 500
constituents on a continuous basis, which was also included in the
filing related to the S&P AMT-Free Municipal Series Dec 2025 Index. The
Exchange believes that this representation ensures diversification
among constituent securities of the Indexes.\24\
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\24\ See Approval Order and the 2025 Filing. The Exchange notes
that the only substantive difference between the Comparable Indexes
and the Underlying Indexes, other than the maturity dates of the
constituents, is that the Underlying Indexes may include callable
and non-callable Municipal Securities, while the Comparable Indexes
include only non-callable Municipal Securities.
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The Approval Order and 2025 Filing included the representation that
a bond must be investment-grade and must have an outstanding par value
of at least $2 million in order to be included in the Comparable
Indexes. Each Underlying Index requires that, in order to remain in the
Underlying Index, bonds must be investment-grade and maintain a minimum
par amount greater than or equal to $2 million and, further, BFA has
represented that each Underlying Index will have at least 500
constituents on a continuous basis. As such, the Exchange believes that
the proposal is consistent with the Act because the representations
regarding the quality and size of the issuances included in each
Underlying Index provide a strong degree of protection against index
manipulation that is consistent with other proposals that have either
been approved for listing and trading by the Commission or were
effective upon filing, which is only furthered by the additional
representation that each Underyling [sic] Index will have at least 500
constituents on a continuous basis, which ensures diversification among
constituent securities.
In addition, the Exchange represents that: (1) Except for Rule
14.11(c)(4)(B)(i)(b), each Underyling [sic] Index currently satisfies
all of the generic listing standards under Rule 14.11(c)(4); (2) the
continued listing standards under Rule 14.11(c), as applicable to Index
Fund Shares based on fixed income securities, will apply to the Shares;
and (3) the issuer of the Funds is required to comply with Rule 10A-3
\25\ under the Act for the initial and continued listing of the Shares.
In addition, the Exchange represents that each Fund will comply with
all other requirements applicable to Index Fund Shares, including, but
not limited to, requirements relating to the dissemination of key
information such as the value of the Underlying Indexes and the
Intraday Indicative Value (``IIV''),\26\ rules governing the trading of
equity securities, trading hours, trading halts, surveillance,
information barriers and the Information Circular, as set forth in the
Exchange rules applicable to Index Fund Shares and prior Commission
orders approving the generic listing rules applicable to the listing
and trading of Index Fund Shares.
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\25\ 17 CFR 240.10A-3.
\26\ The IIV will be widely disseminated by one or more major
market data vendors at least every 15 seconds during the Exchange's
Regular Trading Hours. Currently, it is the Exchange's understanding
that several major market data vendors display and/or make widely
available IIVs taken from the Consolidated Tape Association
(``CTA'') or other data feeds.
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[[Page 11368]]
The current value of each Underlying Index will be widely
disseminated by one or more major market data vendors at least once per
day, as required by Rule 14.11(c)(4)(C)(ii). The portfolio of
securities and other assets held by each Fund will be disclosed daily
on its respective website at www.ishares.com. Further, each Fund's
website will contain the Fund's prospectus and additional data relating
to net asset value (``NAV'') and other applicable quantitative
information. The issuer has represented that the NAV of each Fund will
be calculated daily and will be made available to all market
participants at the same time. The Index Provider is not a broker-
dealer and is not affiliated with a broker-dealer. To the extent that
the Index Provider becomes a broker-dealer or becomes affiliated with a
broker-dealer, the Index Provider will implement and will maintain a
``fire wall'' around the personnel who have access to information
concerning changes and adjustments to each Underlying Index and each
Underlying Index shall be calculated by a third party who is not a
broker-dealer or fund advisor. In addition, any advisory committee,
supervisory board or similar entity that advises the Index Provider or
that makes decisions on each Index, methodology and related matters,
will implement and maintain, or be subject to, procedures designed to
prevent the use and dissemination of material non-public information
regarding the Underlying Indexes.
The Exchange's existing rules require that the issuer of the Funds
notify the Exchange of any material change to the methodology used to
determine the composition of an Underlying Index and, therefore, if the
methodology of an Underlying Index was to be changed in a manner that
would materially alter its existing composition, the Exchange would
have advance notice and would evaluate the modifications to determine
whether that Underyling [sic] Index remained sufficiently broad-based
and well diversified.
Availability of Information
The Funds' website, which will be publicly available prior to the
public offering of Shares, will include a form of the prospectus for
the Funds that may be downloaded. The website will include additional
quantitative information updated on a daily basis, including, for each
Fund: (1) The prior business day's reported NAV, daily trading volume,
and a calculation of the premium and discount of the Bid/Ask Price
against the NAV; and (2) data in chart format displaying the frequency
distribution of discounts and premiums of the daily Bid/Ask Price
against the NAV, within appropriate ranges, for each of the four
previous calendar quarters. Daily trading volume information for the
Shares will also be available in the financial section of newspapers,
through subscription services such as Bloomberg, Thomson Reuters, and
International Data Corporation, which can be accessed by authorized
participants and other investors, as well as through other electronic
services, including major public websites. On each business day, each
Fund will disclose on its website the identities and quantities of the
portfolio of securities and other assets in the daily disclosed
portfolio held by the Fund that formed the basis for the Fund's
calculation of NAV at the end of the previous business day. The daily
disclosed portfolio will include, as applicable: The ticker symbol;
CUSIP number or other identifier, if any; a description of the holding
(including the type of holding, such as the type of swap); the identity
of the security, index or other asset or instrument underlying the
holding, if any; for options, the option strike price; quantity held
(as measured by, for example, par value, notional value or number of
shares, contracts, or units); maturity date, if any; coupon rate, if
any; effective date, if any; market value of the holding; and the
percentage weighting of the holding in each Fund's portfolio. The
website and information will be publicly available at no charge. The
value, components, and percentage weightings of each Underlying Index
will be calculated and disseminated at least once daily and will be
available from major market data vendors. Rules governing each Fund's
respective Underlying Indexes are available on S&P's website and in the
applicable Fund's prospectus.
In addition, an estimated value, defined in BZX Rule 14.11(c)(6)(A)
as the IIV that reflects an estimated intraday value of each Fund's
portfolio, will be disseminated. Moreover, the IIV will be based upon
the current value for the components of the daily disclosed portfolio
and will be updated and widely disseminated by one or more major market
data vendors at least every 15 seconds during the Exchange's Regular
Trading Hours.\27\ In addition, the quotations of certain of a Fund's
holdings may not be updated during U.S. trading hours if updated prices
cannot be ascertained.
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\27\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available IIVs
published via the CTA or other data feeds.
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The dissemination of the IIV, together with the daily disclosed
portfolio, will allow investors to determine the value of the
underlying portfolio of each Fund on a daily basis and provide a close
estimate of that value throughout the trading day.
Quotation and last sale information for the Shares will be
available via the CTA high speed line. Price information regarding
Municipal Securities and other non-exchange traded assets including
certain derivatives, money market funds and other instruments, and
repurchase agreements is available from third party pricing services
and major market data vendors. Price information regarding Municipal
Securities can also be obtained from the Municipal Securities
Rulemaking Board's Electronic Municipal Market Access (``EMMA'')
system. For exchange-traded assets, including futures, and certain
options, such intraday information is available directly from the
applicable listing exchange. In addition, price information for U.S.
exchange-traded options will be available from the Options Price
Reporting Authority.
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, or
by regulatory staff of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities laws.
The Exchange represents that these procedures are adequate to properly
monitor Exchange trading of the Shares in all trading sessions and to
deter and detect violations of Exchange rules and federal securities
laws applicable to trading on the Exchange.\28\
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\28\ 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.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
The Exchange or FINRA, on behalf of the Exchange, or both, will
[[Page 11369]]
communicate as needed regarding trading in the Shares with other
markets and other entities that are members of the ISG, and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares from such markets
and other entities. In addition, the Exchange may obtain information
regarding trading in the Shares from markets and other entities that
are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement. In addition, FINRA, on
behalf of the Exchange, is able to access, as needed, trade information
for certain fixed income securities held by the Funds reported to
FINRA's Trade Reporting and Compliance Engine (``TRACE''). FINRA also
can access data obtained from the Municipal Securities Rulemaking
Board's EMMA system relating to municipal bond trading activity for
surveillance purposes in connection with trading in the Shares.
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act \29\ in general and Section 6(b)(5) of the Act \30\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest.
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\29\ 15 U.S.C. 78f.
\30\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria for Index Fund Shares based on a
fixed income index in Rule 14.11(c)(4), except for the minimum
principal amount outstanding requirement of 14.11(c)(4)(B)(i)(b). The
Exchange represents that trading in the Shares will be subject to the
existing trading surveillances administered by the Exchange as well as
cross-market surveillances administered by the FINRA on behalf of the
Exchange, which are designed to detect violations of Exchange rules and
federal securities laws applicable to trading on the Exchange. The
Exchange represents that these procedures are adequate to properly
monitor Exchange trading of the Shares in all trading sessions and to
deter and detect violations of Exchange rules and federal securities
laws applicable to trading on the Exchange. The Exchange or FINRA, on
behalf of the Exchange, or both, will communicate as needed regarding
trading in the Shares with other markets that are members of the ISG.
In addition, the Exchange will communicate as needed regarding trading
in the Shares with other markets that are members of the ISG or with
which the Exchange has in place a comprehensive surveillance sharing
agreement. FINRA also can access data obtained from the EMMA system
relating to municipal bond trading activity for surveillance purposes
in connection with trading in the Shares. FINRA, on behalf of the
Exchange, is able to access, as needed, trade information for certain
fixed income securities held by the Funds reported to TRACE.
As discussed above, the Exchange believes that each Underlying
Index is sufficiently broad-based to deter potential manipulation. The
Underlying Indexes currently include at least 5,852 component
securities. Whereas the Rule 14.11(c)(4)(B)(i)(e) requires that an
index contain securities from a minimum of 13 non-affiliated issuers,
the Underlying Indexes each include securities issued by municipal
entities in at least 51 states or U.S. territories. Further, whereas
the generic listing rules permit a single component security to
represent up to 30% of the weight of an index and the top five
component securities to, in aggregate, represent up to 65% of the
weight of an index, the largest component security in each Underlying
Index constitutes no more than 0.85% of the weight of the Underlying
Index and the largest five component securities represent no more than
2.56% of the weight of an Underlying Index.
The Exchange believes that this significant diversification and the
lack of concentration among constituent securities provide each
Underlying Index with a strong degree of protection against index
manipulation. Each Underlying Index and Fund satisfy all of the generic
listing requirements for Index Fund Shares based on a fixed income
index, except for the minimum principal amount outstanding requirement
of 14.11(c)(4)(B)(i)(b). With this in mind, the Exchange notes that the
representations in the Requirements for Index Constituents for each
Underlying Index are identical to or more robust than the
representations made regarding the Comparable Indexes and, further, BFA
has made an additional representation regarding diversification that
was also included in the 2025 Filing.
The Approval Order and 2025 Filing included the representation that
a bond must be investment-grade and must have an outstanding par value
of at least $2 million in order to be included in the Comparable
Indexes. To remain in an Underlying Index, bonds must be investment-
grade and maintain a minimum par amount greater than or equal to $2
million and, further, BFA has represented that each Underlying Index
will have at least 500 constituents on a continuous basis, which
ensures diversification among constituent securities, a representation
that was also included in the 2025 Filing. As such, the Exchange
believes that the proposal is consistent with the Act because the
representations regarding the quality and size of the issuances
included in each Underlying Index provide a strong degree of protection
against index manipulation that is consistent with other proposals that
have either been approved for listing and trading by the Commission or
were effective upon filing, which is only furthered by the additional
representation that each Underyling [sic] Index will have at least 500
constituents on a continuous basis, which ensures diversification among
constituent securities.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that a large amount of information is publicly available regarding each
Fund, thereby promoting market transparency. Each Fund's portfolio
holdings will be disclosed on its respective website daily after the
close of trading on the Exchange. Moreover, the IIV for the Shares will
be widely disseminated by one or more major market data vendors at
least every 15 seconds during the Exchange's Regular Trading Hours. The
current value of each Underlying Index will be disseminated by one or
more major market data vendors at least once per day. Information
regarding market price and trading volume of the Shares will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services, and quotation
and last sale information will be available via the CTA high-speed
line. The website for the Funds will include the prospectus for each
Fund and additional data relating to NAV and other applicable
quantitative information.
If the Exchange becomes aware that a Fund's NAV is not being
disseminated to all market participants at the same time, it will halt
trading in the applicable Fund's Shares until such
[[Page 11370]]
time as the NAV is available to all market participants. With respect
to trading halts, the Exchange may consider all relevant factors in
exercising its discretion to halt or suspend trading in the Shares.
Trading also may be halted because of market conditions or for reasons
that, in the view of the Exchange, make trading in the Shares
inadvisable. If the IIV and index value are not being disseminated for
a Fund as required, the Exchange may halt trading during the day in
which the interruption to the dissemination of the IIV or index value
occurs. If the interruption to the dissemination of an IIV or index
value persists past the trading day in which it occurred, the Exchange
will halt trading. The Exchange may consider all relevant factors in
exercising its discretion to halt or suspend trading in the Shares. The
Exchange will halt trading in the Shares under the conditions specified
in BZX Rule 11.18. Trading may be halted because of market conditions
or for reasons that, in the view of the Exchange, make trading in the
Shares inadvisable. These may include: (1) The extent to which trading
is not occurring in the securities and/or the financial instruments
composing the daily disclosed portfolio of a Fund; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present. In addition, investors will have
ready access to information regarding the applicable IIV, and quotation
and last sale information for the Shares. Trade price and other
information relating to Municipal Securities is available through the
EMMA system.
All statements and representations made in this filing regarding
the composition of the Underlying Indexes, the description of the
portfolio or reference assets, limitations on portfolio holdings or
reference assets, dissemination and availability of index, reference
asset, and IIV, or the applicability of Exchange listing rules shall
constitute continued listing requirements for listing the Shares on the
Exchange. The issuer is required to advise the Exchange of any failure
by a Fund to comply with the continued listing requirements, and,
pursuant to its obligations under Section 19(g)(1) of the Act, the
Exchange will monitor for compliance with the continued listing
requirements. If a Fund is not in compliance with the applicable
listing requirements, the Exchange will commence delisting procedures
under Rule 14.12.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
several new exchange-traded products that principally hold Municipal
Securities and that will enhance competition among market participants,
to the benefit of investors and the marketplace. The Exchange has in
place surveillance procedures relating to trading in the Shares and may
obtain information via ISG from other exchanges that are members of ISG
or with which the Exchange has entered into a comprehensive
surveillance sharing agreement. In addition, investors will have ready
access to information regarding the IIV and quotation and last sale
information for the Shares.
For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of three
additional exchange-traded products that will enhance competition among
market participants, to the benefit of investors and the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \31\ and Rule 19b-
4(f)(6) thereunder.\32\
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\31\ 15 U.S.C. 78s(b)(3)(A).
\32\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \33\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \34\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the proposed rule change may become operative upon filing. The
Exchange noted that this proposal includes identical representations
regarding the requirements for index constituents of each Underlying
Index as are included in relation to the Comparable Indexes in the
Approval Order and the 2025 Filing and thus raises no new or novel
issues. The Exchange noted this proposal further includes an additional
representation that each Underlying Index will have at least 500
constituents on a continuous basis, which the Commission believes
should help ensure diversification among constituent securities in a
manner similar to the 2025 Filing. Finally, the Exchange notes that
waiver of the 30-day operative delay will expedite the listing and
trading of the Shares, which may enhance competition among market
participants, without undue delay, to the benefit of investors and the
marketplace. The Commission believes that the proposal raises no new or
substantive issues and that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest.
The Commission hereby waives the operative delay and designates the
proposed rule change operative upon filing.\35\
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\33\ 17 CFR 240.19b-4(f)(6).
\34\ 17 CFR 240.19b-4(f)(6)(iii).
\35\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act.
[[Page 11371]]
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-CboeBZX-2019-017 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-2019-017. 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-2019-017, and should be
submitted on or before April 16, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05700 Filed 3-25-19; 8:45 am]
BILLING CODE 8011-01-P
