81 FR 20016 - Self-Regulatory Organizations; BATS Exchange, Inc.; Order Granting Approval of Proposed Rule Change, as Modified by Amendment Nos. 1, 2, and 3 Thereto, To List and Trade Shares of the Elkhorn S&P GSCI Dynamic Roll Commodity ETF of Elkhorn ETF Trust

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 66 (April 6, 2016)

Page Range		20016-20021
FR Document		2016-07832

Federal Register, Volume 81 Issue 66 (Wednesday, April 6, 2016)

[Federal Register Volume 81, Number 66 (Wednesday, April 6, 2016)]
[Notices]
[Pages 20016-20021]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2016-07832]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77487; File No. SR-BATS-2015-105]

Self-Regulatory Organizations; BATS Exchange, Inc.; Order
Granting Approval of Proposed Rule Change, as Modified by Amendment
Nos. 1, 2, and 3 Thereto, To List and Trade Shares of the Elkhorn S&P
GSCI Dynamic Roll Commodity ETF of Elkhorn ETF Trust

March 31, 2016.

I. Introduction

On December 18, 2015, BATS Exchange, Inc. (``Exchange'' or
``BATS'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to list and trade shares (``Shares'') of the
Elkhorn S&P GSCI Dynamic Roll Commodity ETF (``Fund'') of Elkhorn ETF
Trust (``Trust'') under BATS Rule 14.11(i). The proposed rule change
was published for comment in the Federal Register on January 4,
2016.\3\ On February 17, 2016, pursuant to Section 19(b)(2) of the
Act,\4\ the Commission designated a longer period within which to
approve the proposed rule change, disapprove the proposed rule change,
or institute proceedings to determine whether to disapprove the
proposed rule change.\5\ On February 18, 2016, the Exchange filed
Amendment No. 1 to the proposed rule change.\6\ On February 24, 2016,
the Exchange filed Amendment No. 2 to the proposed rule change.\7\ On
March 22, 2016, the Exchange filed Amendment No. 3 to the proposed rule
change.\8\ The Commission received no comments on the proposal. This
order grants approval of the proposed rule change, as modified by
Amendment Nos. 1, 2, and 3 thereto.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 76776 (Dec. 28,
2015), 81 FR 120 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 77159, 81 FR 9041
(Feb. 23, 2016). The Commission designated April 1, 2016 as the date
by which the Commission shall either approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change. See id.
\6\ In Amendment No. 1, which amended and replaced the proposed
rule change in its entirety, the Exchange clarified the scope of the
non-exchange-traded investment companies, futures, and exchange-
traded options on futures to be held by the Fund and the Subsidiary.
Because Amendment No. 1 to the proposed rule change does not
materially alter the substance of the proposed rule change or raise
unique or novel regulatory issues, Amendment No. 1 is not subject to
notice and comment (Amendment No. 1 to the proposed rule change is
available at: https://www.sec.gov/comments/sr-bats-2015-105/bats2015105-2.pdf).
\7\ In Amendment No. 2, which amended and replaced the proposed
rule change, as modified by Amendment No. 1 thereto, in its
entirety, the Exchange clarified: (a) That the Fund and the
Subsidiary would not invest in leveraged or inverse leveraged
securities of investment companies; (b) that the commodity-linked
instruments in which the Fund invests will be listed and traded in
the U.S. on registered exchanges; (c) that, for surveillance, the
Exchange would be able to obtain information regarding trading in
the underlying commodity-linked instruments; and (d) the scope of
exchange-traded options on futures contracts to be held by the Fund
and Subsidiary. Because Amendment No. 2 to the proposed rule change
does not materially alter the substance of the proposed rule change
or raise unique or novel regulatory issues, Amendment No. 2 is not
subject to notice and comment (Amendment No. 2 to the proposed rule
change is available at: https://www.sec.gov/comments/sr-bats-2015-105/bats2015105-1.pdf).
\8\ In Amendment No. 3 to the proposed rule change, the Exchange
clarified that: (a) All statements and representations made in the
proposal shall constitute continued listing requirements for listing
the Shares on the Exchange; (b) the issuer will advise the Exchange
of any failure by the Fund to comply with the continued listing
requirements; (c) pursuant to its obligations under Section 19(g)(1)
of the Act, the Exchange will surveil for compliance with the
continued listing requirements; and (d) if the Fund is not in
compliance with the applicable listing requirements, the Exchange
will commence delisting procedures under Exchange Rule 14.12.
Because Amendment No. 3 does not materially alter the substance of
the proposed rule change or raise unique or novel regulatory issues,
Amendment No. 3 is not subject to notice and comment (Amendment No.
3 to the proposed rule change is available at: https://www.sec.gov/comments/sr-bats-2015-105/bats2015105-3.pdf).

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[[Page 20017]]

II. Exchange's Description of the Proposed Rule Change

The Exchange proposes to list and trade the Shares of the Fund
pursuant to BATS Rule 14.11(i), which governs the listing and trading
of Managed Fund Shares on the Exchange. The Shares will be offered by
the Trust, which was established as a Massachusetts business trust on
December 12, 2013.\9\ Elkhorn Investments, LLC will be the investment
adviser (``Adviser'') to the Fund. It is currently anticipated that
day-to-day portfolio management for the Fund will be provided by the
Adviser. However, the Fund and the Adviser may contract with an
investment sub-adviser (``Sub-Adviser'') to provide day-to-day
portfolio management for the Fund. ALPS Distributors, Inc. will be the
principal underwriter and distributor of the Fund's Shares. The Fund
will contract with unaffiliated third parties to provide
administrative, custodial and transfer agency services to the Fund. The
Exchange represents the Adviser is not a broker-dealer, but is
affiliated with a broker-dealer, and it has implemented a fire wall
with respect to its broker-dealer affiliate regarding access to
information concerning the composition of, or changes to, the Fund's
portfolio.\10\
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\9\ The Exchange represents that the Trust is registered under
the Investment Company Act of 1940 (``1940 Act''). See Registration
Statement on Form N-1A for the Trust, dated November 10, 2015 (File
Nos. 333-201473 and 811-22926) (``Registration Statement''). The
Exchange further states that the Trust has obtained certain
exemptive relief under the 1940 Act.
\10\ See BATS Rule 14.11(i)(7). The Exchange further represents
that, in the event that (a) the Adviser or a Sub-Adviser becomes, or
becomes newly affiliated with, a broker-dealer or registers as a
broker-dealer, or (b) any new adviser or sub-adviser is a registered
broker-dealer or becomes affiliated with a broker-dealer, it will
implement a fire wall with respect to its relevant personnel or such
broker-dealer affiliate, as applicable, regarding access to
information concerning the composition of, or changes to, the
portfolio, and will be subject to procedures designed to prevent the
use and dissemination of material, non-public information regarding
such portfolio.
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A. Exchange's Description of the Fund's Investments \11\
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\11\ The Commission notes that additional information regarding
the Fund, the Trust, the Subsidiary (as defined herein), and the
Shares, including investment strategies, risks, creation and
redemption procedures, fees, portfolio holdings disclosure policies,
calculation of net asset value (``NAV''), distributions, and taxes,
among other things, can be found in the Notice and the Registration
Statement, as applicable. See Notice and Registration Statement,
supra notes 3 and 9, respectively.
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According to the Exchange, the Fund's investment objective will be
to provide total return which exceeds that of the S&P GSCI Dynamic Roll
Index (``Benchmark'') \12\ consistent with prudent investment
management.\13\ The Fund will seek excess return above the Benchmark
through the active management of a short duration portfolio of highly
liquid, high quality bonds.
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\12\ The Benchmark is developed, maintained, and sponsored by
S&P Dow Jones Indices LLC (``S&P Indices'').
\13\ According to the Exchange, the Benchmark currently contains
24 commodity futures on physical commodities across five sectors:
energy, agriculture; livestock; industrial metals; and precious
metals. See Notice, supra note 3 (providing additional information
regarding the Benchmark and its components, including a table
describing each of the commodities underlying the futures contracts
included in the Benchmark as of October 31, 2015, and each
instrument's trading hours, exchange, and ticker symbol).
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The Fund will be an actively managed fund that seeks to achieve its
investment objective by investing, under normal market conditions,\14\
in exchange-traded commodity futures contracts, centrally cleared and
non-centrally cleared swaps,\15\ exchange-traded options on futures
contracts, and exchange-traded commodity-linked instruments \16\
(collectively, ``Commodities'') through a wholly-owned subsidiary
controlled by the Fund and organized under the laws of the Cayman
Islands (``Subsidiary''), thereby obtaining exposure to the commodities
markets.
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\14\ The term ``under normal market conditions'' includes, but
is not limited to, the absence of extreme volatility or trading
halts in the fixed income markets, futures markets or the financial
markets generally; operational issues causing dissemination of
inaccurate market information; or force majeure type events such as
systems failure, natural or man-made disaster, act of God, armed
conflict, act of terrorism, riot or labor disruption, or any similar
intervening circumstance.
\15\ Investments in non-centrally cleared swaps (through the
Subsidiary) will not represent more than 20% of the Fund's net
assets. When investing in non-centrally cleared swaps, the
Subsidiary will seek, where possible, to use counterparties, as
applicable, whose financial status is such that the risk of default
is reduced; however, the risk of losses resulting from default is
still possible. The Adviser and/or a Sub-Adviser will evaluate the
creditworthiness of counterparties on an ongoing basis. In addition
to information provided by credit agencies, the Adviser's and/or a
Sub-Adviser's analysis will evaluate each approved counterparty
using various methods of analysis and may consider such factors as
the counterparty's liquidity, its reputation, the Adviser's and/or a
Sub-Adviser's past experience with the counterparty, its known
disciplinary history and its share of market participation.
\16\ Exchange-traded commodity-linked instruments include only
the following: (1) Funds that provide exposure to commodities as
would be listed under Exchange Rules 14.11(b), (c), and (i); and (2)
pooled investment vehicles that invest primarily in commodities and
commodity-linked instruments as would be listed under Exchange Rules
14.11(d) and 14.11(e)(2), (4), (6), (7), (8), (9), and (10).
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The Fund's Commodities investments, in part, will be comprised of
exchange-traded futures contracts on commodities that comprise the
Benchmark. Although the Fund, through the Subsidiary, will generally
hold many of the futures contracts included in the Benchmark, the Fund
and the Subsidiary will be actively managed and will not be obligated
to invest in all of (or to limit investments solely to) such futures
contracts. In addition, with respect to investments in exchange-traded
futures contracts, the Fund and the Subsidiary will not be obligated to
invest in the same amount or proportion as the Benchmark, or be
obligated to track the performance of the Benchmark. In addition to
exchange-traded futures contracts, the Fund's Commodities investments
will also be comprised of the following: centrally cleared and non-
centrally cleared swaps on commodities; exchange-traded options on
futures contracts that provide exposure to the investment returns of
the commodities markets; and exchange-traded commodity-linked
instruments, without investing directly in physical commodities.
The Fund will invest in Commodities through investments in the
Subsidiary and will not invest directly in physical commodities. The
Fund's investment in the Subsidiary may not exceed 25% of the Fund's
total assets. In addition to Commodities, the Fund's assets will be
invested in: (1) short-term, investment grade fixed income securities,
including only the following instruments: U.S. government and agency
securities,\17\ corporate debt obligations,\18\ and repurchase
agreements;\19\ (2) money market instruments; \20\ (3) investment

[[Page 20018]]

companies (other than those that are commodity-linked instruments),\21\
including both exchange traded and non-exchange-traded investment
companies, that provide exposure to commodities, equity securities, and
fixed income securities to the extent permitted under the 1940 Act and
any applicable exemptive relief; \22\ (4) certain bank instruments;
\23\ and (5) cash and other cash equivalents (collectively, ``Other
Investments''). The Fund will use the Other Investments as investments,
to provide liquidity, and to collateralize the Subsidiary's commodity
exposure on a day-to-day basis.
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\17\ Such securities are securities that are issued or
guaranteed by the U.S. Treasury, by various agencies of the U.S.
government, or by various instrumentalities, which have been
established or sponsored by the U.S. government. U.S. Treasury
obligations are backed by the ``full faith and credit'' of the U.S.
government. Securities issued or guaranteed by federal agencies and
U.S. government-sponsored instrumentalities may or may not be backed
by the full faith and credit of the U.S. government.
\18\ At least 75% of corporate debt obligations will have a
minimum principal amount outstanding of $100 million or more.
\19\ The Fund intends to enter into repurchase agreements only
with financial institutions and dealers believed by the Adviser and/
or a Sub-Adviser to present minimal credit risks in accordance with
criteria approved by the Trust's Board of Trustees (``Board''). The
Adviser and/or a Sub-Adviser will review and monitor the
creditworthiness of such institutions. The Adviser and/or a Sub-
Adviser will monitor the value of the collateral at the time the
transaction is entered into and at all times during the term of the
repurchase agreement.
\20\ For the Fund's purposes, money market instruments will
include only the following instruments: short-term, high-quality
securities issued or guaranteed by non-U.S. governments, agencies
and instrumentalities; non-convertible corporate debt securities
with remaining maturities of not more than 397 days that satisfy
ratings requirements under Rule 2a-7 under the 1940 Act; money
market mutual funds; and deposits and other obligations of U.S. and
non-U.S. banks and financial institutions. In addition, the Fund may
invest in commercial paper (short-term unsecured promissory notes),
but only if the commercial paper has received the highest rating
from at least one nationally recognized statistical rating
organization or, if unrated, has been judged by the Adviser and/or a
Sub-Adviser to be of comparable quality.
\21\ According to the Exchange, the Fund may invest in the
securities of certain other investment companies in excess of the
limits imposed under the 1940 Act pursuant to an exemptive order
obtained by the Trust and the Adviser from the Commission. The
exchange-traded investment companies in which the Fund may invest
include Index Fund Shares (as described in Rule 14.11(c)), Portfolio
Depository Receipts (as described in Rule 14.11(b)), and Managed
Fund Shares (as described in Rule 14.11(i)). The non-exchange-traded
investment companies in which the Fund may invest include all non-
exchange-traded investment companies that are not money market
mutual funds, as described above. While the Fund and the Subsidiary
may invest in inverse commodity-linked instruments and securities of
investment companies, the Fund and the Subsidiary will not invest in
leveraged or inverse leveraged (e.g., 2X or -3X) commodity-linked
instruments or securities of investment companies.
\22\ The exchange-traded investment companies and commodity-
linked instruments in which the Fund invests will be listed and
traded in the U.S. on registered exchanges.
\23\ The term ``certain bank instruments'' includes only the
following instruments: certificates of deposit issued against funds
deposited in a bank or savings and loan association; bankers'
acceptances, which are short-term credit instruments used to finance
commercial transactions; and bank time deposits, which are monies
kept on deposit with banks or savings and loan associations for a
stated period of time at a fixed rate of interest.
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The Fund's investment in the Subsidiary will be designed to help
the Fund achieve exposure to commodity returns in a manner consistent
with the federal tax requirements applicable to the Fund and other
regulated investment companies. The Fund intends to qualify for, and to
elect to be treated as, a separate regulated investment company under
Subchapter M of the Internal Revenue Code.

B. Exchange's Description of the Subsidiary's Investments

The Subsidiary will generally seek to make investments in
Commodities, and its portfolio will be managed by the Adviser or a Sub-
Adviser.\24\ The Adviser or a Sub-Adviser will use its discretion to
determine the percentage of the Fund's assets allocated to the
Commodities held by the Subsidiary that will be invested in exchange-
traded commodity futures contracts, centrally cleared and non-centrally
cleared swaps, exchange-traded options on futures contracts, and
exchange-traded commodity-linked instruments. In this regard, under
normal market conditions, the Subsidiary is expected, as a general
matter, to invest in futures contracts in proportional weights and
allocations that are similar to the Benchmark, as well as in the other
Commodities. Additionally, the Subsidiary, like the Fund, may invest in
Other Investments (e.g., as investments, to serve as margin or
collateral, or to otherwise support the Subsidiary's positions in
Commodities).
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\24\ The Exchange states that the Subsidiary will not be
registered under the 1940 Act and will not be directly subject to
its investor protections, except as noted in the Registration
Statement. However, the Subsidiary will be wholly-owned and
controlled by the Fund. Therefore, the Fund's ownership and control
of the Subsidiary will prevent the Subsidiary from taking action
contrary to the interests of the Fund or its shareholders. The Board
will have oversight responsibility for the investment activities of
the Fund, including its expected investment in the Subsidiary, and
the Fund's role as the sole shareholder of the Subsidiary. The
Subsidiary will also enter into separate contracts for the provision
of custody, transfer agency, and accounting agent services with the
same or with affiliates of the same service providers that provide
those services to the Fund.
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The Fund's investment in the Subsidiary is intended to provide the
Fund with exposure to commodity markets within the limits of current
federal income tax laws applicable to investment companies such as the
Fund, which limit the ability of investment companies to invest
directly in the derivative instruments. The Subsidiary will have the
same investment objective as the Fund, but unlike the Fund, it may
invest without limitation in Commodities. The Subsidiary's investments
will provide the Fund with exposure to domestic and international
markets.

C. Exchange's Description of Commodities Regulation

The Commodity Futures Trading Commission (``CFTC'') has adopted
substantial amendments to CFTC Rule 4.5 relating to the permissible
exemptions and conditions for reliance on exemptions from registration
as a commodity pool operator. As a result of the instruments that will
be indirectly held by the Fund, the Adviser will register as a
commodity pool operator and will also become a member of the National
Futures Association (``NFA''). Any Sub-Adviser will register as a
commodity pool operator or commodity trading adviser, as required by
CFTC regulations. The Fund and the Subsidiary will be subject to
regulation by the CFTC and NFA and additional disclosure, reporting,
and recordkeeping rules imposed upon commodity pools.

D. Exchange's Description of the Fund's Investment Restrictions

While the Fund will be permitted to borrow as permitted under the
1940 Act, the Fund's investments will not be used to seek performance
that is the multiple or inverse multiple (i.e., 2X and -3X) of the
Benchmark. In addition, the Fund may not invest more than 25% of the
value of its total assets in securities of issuers in any one industry
or group of industries. This restriction will not apply to obligations
issued or guaranteed by the U.S. government, its agencies or
instrumentalities, or securities of other investment companies.
The Subsidiary's shares will be offered only to the Fund, and the
Fund will not sell shares of the Subsidiary to other investors. The
Fund and the Subsidiary will not invest in any non-U.S. equity
securities (other than shares of the Subsidiary). The Fund will not
purchase securities of open-end or closed-end investment companies,
except in compliance with the 1940 Act or any applicable exemptive
relief. In addition, the Exchange represents that, with respect to the
futures contracts and exchange-traded options on futures contracts in
which the Subsidiary invests, not more than 10% of the weight (to be
calculated as the value of the contract divided by the total absolute
notional value of the Subsidiary's futures and options contracts) of
the futures and options contracts held by the Subsidiary, in the
aggregate, shall consist of instruments whose principal trading market
is a market from which the Exchange may not obtain information
regarding trading in the futures contracts and exchange-traded options
on futures contracts by virtue of: (a) Its membership in the
Intermarket Surveillance Group (``ISG''); or (b) a comprehensive
surveillance sharing agreement.
The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including securities deemed illiquid by the Adviser.\25\ The

[[Page 20019]]

Fund will monitor its portfolio liquidity on an ongoing basis to
determine whether, in light of current circumstances, an adequate level
of liquidity is being maintained, and will consider taking appropriate
steps in order to maintain adequate liquidity if, through a change in
values, net assets, or other circumstances, more than 15% of the Fund's
net assets are held in illiquid assets. Illiquid assets include
securities subject to contractual or other restrictions on resale and
other instruments that lack readily available markets, as determined in
accordance with Commission staff guidance.
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\25\ In reaching liquidity decisions, the Adviser may consider
the following factors: The frequency of trades and quotes for the
security; the number of dealers wishing to purchase or sell the
security and the number of other potential purchasers; dealer
undertakings to make a market in the security; and the nature of the
security and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers,
and the mechanics of transfer).
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III. Discussion and Commission's Findings

The Commission has carefully reviewed the proposed rule change and
finds that it is consistent with the requirements of Section 6 of the
Act \26\ and the rules and regulations thereunder applicable to a
national securities exchange.\27\ In particular, the Commission finds
that the proposal is consistent with Section 6(b)(5) of the Act,\28\
which requires, among other things, that the Exchange's rules be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to 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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\26\ 15 U.S.C. 78f.
\27\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\28\ 15 U.S.C. 78f(b)(5).
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The Commission also finds that the proposal is consistent with
Section 11A(a)(1)(C)(iii) of the Act,\29\ which sets forth the finding
of Congress that it is in the public interest and appropriate for the
protection of investors and the maintenance of fair and orderly markets
to assure the availability to brokers, dealers, and investors of
information with respect to quotations for, and transactions in,
securities. Quotation and last-sale information for the Shares will be
available on the facilities of the Consolidated Tape Association
(``CTA''). An estimated value, defined in BATS Rule 14.11(i)(3)(C) as
the Intraday Indicative Value (``IIV''), that reflects an estimated
intraday value of the Fund's portfolio (including the Subsidiary's
portfolio), will be disseminated. The IIV will be based upon the
current value for the components of the Disclosed Portfolio (as defined
below) and will be updated and widely disseminated by one or more major
market data vendors and broadly displayed at least every 15 seconds
during the Exchange's Regular Trading Hours.\30\ On each business day,
before commencement of trading in Shares during Regular Trading
Hours,\31\ the Fund will disclose on its Web site the identities and
quantities of the portfolio of securities, Commodities, and other
assets (``Disclosed Portfolio'' as defined in Rule 14.11(i)(3)(B)) held
by the Fund and the Subsidiary that will form the basis for the Fund's
calculation of NAV at the end of the business day.\32\ The NAV of the
Fund's Shares generally will be calculated once daily Monday through
Friday as of the close of regular trading on the New York Stock
Exchange, generally 4:00 p.m. Eastern Time.\33\ Additionally,
information regarding market price and volume of the Shares will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services. The previous
day's closing price and trading volume information for the Shares will
also be published daily in the financial section of newspapers. Intra-
day executable price quotations on the securities and other assets held
by the Fund and the Subsidiary will be available from major broker-
dealer firms or on the exchange on which they are traded, as
applicable. Intra-day price information on the securities and other
assets held by the Fund and the Subsidiary will also be available
through subscription services,

[[Page 20020]]

such as Bloomberg and Thomson Reuters, which can be accessed by
authorized participants and other investors.\34\ Daily trading volume
information for the Fund 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 Web sites.
The Fund's Web site will include a form of the prospectus for the Fund
and additional data relating to NAV and other applicable quantitative
information. Information relating to the Benchmark, including its
constituents, weightings, and changes to its constituents, will be
available on the Web site of S&P Indices.
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\29\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\30\ According to the Exchange, several major market data
vendors display and/or make widely available Intraday Indicative
Values published via the CTA or other data feeds.
\31\ Regular Trading Hours are 9:30 a.m. to 4:00 p.m. Eastern
Time.
\32\ According to the Exchange, the Fund's disclosure of
derivative positions in the Disclosed Portfolio will include
information that market participants can use to value these
positions intraday. On a daily basis, the Disclosed Portfolio
displayed on the Fund's Web site will include the following
information regarding each portfolio holding, as applicable to the
type of holding: Ticker symbol, CUSIP number or other identifier, if
any; a description of the holding (including the type of holding,
such as the type of swap), the identity of the security, commodity,
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 percentage weighting
of the holding in the Fund's portfolio. The Web site and information
will be publicly available at no charge.
\33\ In determining the value of the assets held by the Fund and
the Subsidiary, the Fund's and the Subsidiary's investments will be
generally valued using market valuations. A market valuation
generally means a valuation (i) obtained from an exchange, a pricing
service, or a major market maker (or dealer), (ii) based on a price
quotation or other equivalent indication of value supplied by an
exchange, a pricing service, or a major market maker (or dealer), or
(iii) based on amortized cost. The Fund and the Subsidiary may use
various pricing services or discontinue the use of any pricing
service. A price obtained from a pricing service based on such
pricing service's valuation matrix may be considered a market
valuation. If available, debt securities and money market
instruments with maturities of more than 60 days will typically be
priced based on valuations provided by independent, third party
pricing agents. Such values will generally reflect the last reported
sales price if the security is actively traded. The third party
pricing agents may also value debt securities at an evaluated bid
price by employing methodologies that utilize actual market
transactions, broker supplied valuations, or other methodologies
designed to identify the market value for such securities. Debt
obligations with remaining maturities of 60 days or less may be
valued on the basis of amortized cost, which approximates market
value. If such prices are not available, the security will be valued
based on values supplied by independent brokers or by fair value
pricing, as described below. Futures contracts will be valued at the
settlement price established each day by the board or exchange on
which they are traded. Exchange-traded options will be valued at the
closing price in the market where such contracts are principally
traded. Swaps will be valued based on valuations provided by
independent, third-party pricing agents. Securities of non-exchange-
traded investment companies will be valued at NAV. Equity securities
listed on a securities exchange (including exchange-traded commodity
linked instruments and exchange-traded investment companies), market
or automated quotation system for which quotations are readily
available (except for securities traded on The NASDAQ Stock Market
LLC (``NASDAQ'') and the London Stock Exchange Alternative
Investment Market (``LSE AIM'')) will be valued at the last reported
sale price on the primary exchange or market on which they are
traded on the valuation date (or at approximately 4:00 p.m. Eastern
Time if a security's primary exchange is normally open at that
time). For a security that trades on multiple exchanges, the primary
exchange will generally be considered to be the exchange on which
the security generally has the highest volume of trading activity.
If it is not possible to determine the last reported sale price on
the relevant exchange or market on the valuation date, the value of
the security will be taken to be the most recent mean between the
bid and asked prices on such exchange or market on the valuation
date. Absent both bid and asked prices on such exchange, the bid
price may be used. For securities traded on NASDAQ or LSE AIM, the
official closing price will be used. If such prices are not
available, the security will be valued based on values supplied by
independent brokers or by fair value pricing, as described below.
The prices for foreign instruments will be reported in local
currency and converted to U.S. dollars using currency exchange
rates. Exchange rates will be provided daily by recognized
independent pricing agents. In the event that current market
valuations are not readily available or such valuations do not
reflect current market values, the affected investments will be
valued using fair value pricing pursuant to the pricing policy and
procedures approved by the Board in accordance with the 1940 Act.
Fair value pricing may require subjective determinations about the
value of an asset and may result in prices that differ from the
value that would be realized if the asset was sold.
\34\ More specifically, the Exchange represents that pricing
information for exchange-traded commodity futures contracts,
exchange-traded options on futures contracts, exchange-traded
commodity-linked instruments, exchange-traded investment companies
other than exchange-traded commodity-linked instruments will be
available on the exchanges on which they are traded and through
subscription services. Pricing information for securities of non-
exchange-traded investment companies will be available through the
applicable fund's Web site or major market data vendors. Pricing
information for swaps, fixed income securities, and money market
instruments will be available through subscription services, broker-
dealer firms, and/or pricing services. Additionally, the Trade
Reporting and Compliance Engine (``TRACE'') of the Financial
Industry Regulatory Authority (``FINRA'') will be a source of price
information for certain fixed income securities held by the Fund.
---------------------------------------------------------------------------

The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Commission notes that the Exchange will obtain a
representation from the issuer of the Shares that the NAV per Share
will be calculated daily, and that the NAV and the Disclosed Portfolio
will be made available to all market participants at the same time.\35\
Trading in the Shares also will be subject to BATS Rule
14.11(i)(4)(B)(iv), which sets forth circumstances under which Shares
of the Fund may be halted.\36\ The Exchange may halt trading in the
Shares if trading is not occurring in the securities, Commodities, or
other assets constituting the Disclosed Portfolio of the Fund and the
Subsidiary, or if other unusual conditions or circumstances detrimental
to the maintenance of a fair and orderly market are present.\37\
Further, the Commission notes that the Reporting Authority that
provides the Disclosed Portfolio must implement and maintain, or be
subject to, procedures designed to prevent the use and dissemination of
material, non-public information regarding the actual components of the
portfolio.\38\ The Exchange states that it prohibits the distribution
of material, non-public information by its employees. The Exchange also
represents that the Adviser is affiliated with a broker-dealer, and the
Adviser has implemented a fire wall with respect to that broker-dealer
affiliate regarding access to information concerning the composition
of, or changes to, the Fund's portfolio.\39\ Moreover, the Exchange
represents that it may obtain information regarding trading in the
Shares and the underlying shares in exchange-traded investment
companies, commodity-linked instruments, futures, and options on
futures via ISG, from other exchanges who are members or affiliates of
ISG, or with which the Exchange has entered into a comprehensive
surveillance sharing agreement.
---------------------------------------------------------------------------

\35\ See BATS Rule 14.11(i)(4)(A)(ii).
\36\ See BATS Rule 14.11(i)(4)(B)(iv).
\37\ See BATS Rule 14.11(i)(4)(B)(iii) (providing additional
considerations for the suspension of trading in or removal from
listing of Managed Fund Shares on the Exchange). With respect to
trading halts, the Exchange may consider all relevant factors in
exercising its discretion to halt or suspend trading in the Shares
of the Fund. The Exchange will halt trading in the Shares under the
conditions specified in BATS Rule 11.18. 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.
\38\ See BATS Rule 14.11(i)(4)(B)(ii)(B).
\39\ See supra note 10 and accompanying text. An investment
adviser to an open-end fund is required to be registered under the
Investment Advisers Act of 1940 (``Advisers Act''). As a result, the
Adviser and any Sub-Adviser and their related personnel are subject
to the provisions of Rule 204A-1 under the Advisers Act relating to
codes of ethics. This Rule requires investment advisers to adopt a
code of ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with other applicable
securities laws. Accordingly, procedures designed to prevent the
communication and misuse of non-public information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless such investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violation, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
---------------------------------------------------------------------------

The Exchange further represents that the Shares are deemed to be
equity securities, thus rendering trading in the Shares subject to the
Exchange's existing rules governing the trading of equity securities.
In support of this proposal, the Exchange has made representations,
including:
(1) The Shares will be subject to BATS Rule 14.11(i), which sets
forth the initial and continued listing criteria applicable to Managed
Fund Shares.
(2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(3) The Exchange believes that its surveillance procedures are
adequate to properly monitor the trading of the Shares on the Exchange
during all trading sessions and to deter and detect violations of
Exchange rules and the applicable federal securities laws. Trading of
the Shares through the Exchange will be subject to the Exchange's
surveillance procedures for derivative products, including Managed Fund
Shares.
(4) The Exchange will communicate as needed regarding trading in
the Shares and in the exchange-traded Commodities and exchange-traded
investment companies not included within the definition of Commodities
(together, ``Exchange Traded Instruments'') held by the Fund and the
Subsidiary with other markets and other entities that are members of
ISG and may obtain trading information regarding trading in the Shares
and in the Exchange Traded Instruments held by the Fund and the
Subsidiary from such markets and other entities. In addition, the
Exchange may obtain information regarding trading in the Shares and in
the Exchange Traded Instruments held by the Fund and the Subsidiary
from markets and other entities that are members of ISG, which includes
securities and futures exchanges, or with which the Exchange has in
place a comprehensive surveillance sharing agreement. The Exchange also
will be able to access, as needed, trade information for certain fixed
income securities held by the Fund reported to FINRA's TRACE.
(5) With respect to the futures contracts and exchange-traded
options on futures contracts in which the Subsidiary invests, not more
than 10% of the weight (to be calculated as the value of the contract
divided by the total absolute notional value of the Subsidiary's
futures and options contracts) of the futures and options contracts
held by the Subsidiary, in the aggregate, shall consist of instruments
whose principal trading market is a market from which the Exchange may
not obtain information regarding trading in the futures contracts and
exchange-

[[Page 20021]]

traded options on futures contracts by virtue of: (a) Its membership in
ISG; or (b) a comprehensive surveillance sharing agreement.
(6) Prior to the commencement of trading, the Exchange will inform
its members in an Information Circular (``Circular'') of the special
characteristics and risks associated with trading the Shares.
Specifically, the Circular will discuss the following: (a) The
procedures for purchases and redemptions of Shares in Creation Units
(and that Shares are not individually redeemable); (b) BATS Rule 3.7,
which imposes suitability obligations on Exchange members with respect
to recommending transactions in the Shares to customers; (c) how
information regarding the IIV and the Disclosed Portfolio is
disseminated; (d) the risks involved in trading the Shares during the
Pre-Opening \40\ and After Hours Trading Sessions \41\ when an updated
IIV will not be calculated or publicly disseminated; (e) the
requirement that members deliver a prospectus to investors purchasing
newly issued Shares prior to or concurrently with the confirmation of a
transaction; and (f) trading information.
---------------------------------------------------------------------------

\40\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m.
Eastern Time.
\41\ The After Hours Trading Session is from 4:00 p.m. to 5:00
p.m. Eastern Time.
---------------------------------------------------------------------------

(7) For initial and continued listing, the Fund and the Subsidiary
must be in compliance with Rule 10A-3 under the Act.\42\
---------------------------------------------------------------------------

\42\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

(8) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including securities deemed illiquid by the Adviser under the 1940 Act.
(9) The Fund will invest in Commodities through investments in the
Subsidiary and will not invest directly in physical commodities. The
Fund's investment in the Subsidiary may not exceed 25% of the Fund's
total assets. The Fund and the Subsidiary will not invest in any non-
U.S. equity securities (other than shares of the Subsidiary).
(10) Investments in non-centrally cleared swaps (through the
Subsidiary) will not represent more than 20% of the Fund's net assets.
(11) At least 75% of corporate debt obligations will have a minimum
principal amount outstanding of $100 million or more. In addition, the
exchange-traded investment companies and commodity-linked instruments
in which the Fund invests will be listed and traded in the U.S. on
registered exchanges.
(12) While the Fund will be permitted to borrow as permitted under
the 1940 Act, the Fund's investments will not be used to seek
performance that is the multiple or inverse multiple (i.e., 2X and -3X)
of the Benchmark.
(13) A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange.
The Exchange represents that all statements and representations
made in the filing regarding (a) the description of the portfolio, (b)
limitations on portfolio holdings or reference assets, or (c) the
applicability of Exchange rules and surveillance procedures constitute
continued listing requirements for listing the Shares on the Exchange.
In addition, the issuer has represented to the Exchange that it will
advise the Exchange of any failure by the Fund to comply with the
continued listing requirements, and, pursuant to its obligations under
Section 19(g)(1) of the Act, the Exchange will surveil for compliance
with the continued listing requirements. If the Fund is not in
compliance with the applicable listing requirements, the Exchange will
commence delisting procedures under Exchange Rule 14.12. This approval
order is based on all of the Exchange's representations and description
of the Fund, including those set forth above and in the Notice. The
Commission notes that the Fund and the Shares must comply with the
requirements of BATS Rule 14.11(i), including those set forth in this
proposed rule change, to be listed and traded on the Exchange on an
initial and continuing basis.
For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment Nos. 1, 2, and 3 thereto, is
consistent with Section 6(b)(5) of the Act \43\ and the rules and
regulations thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

\43\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\44\ that the proposed rule change (SR-BATS-2015-105), as modified
by Amendment Nos. 1, 2, and 3 thereto, be, and it hereby is, approved.
---------------------------------------------------------------------------

\44\ 15 U.S.C. 78s(b)(2).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\45\
---------------------------------------------------------------------------

\45\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-07832 Filed 4-5-16; 8:45 am]
BILLING CODE 8011-01-P

20016 Federal Register / Vol. 81, No. 66 / Wednesday, April 6, 2016 / Notices

8. Each Underlying Fund will These findings and their basis will be Commission designated a longer period
maintain and preserve permanently in fully recorded in the minute books of within which to approve the proposed
an easily accessible place a written copy the appropriate Investing Management rule change, disapprove the proposed
of the procedures described in the Company. rule change, or institute proceedings to
preceding condition, and any 11. Any sales charges and/or service determine whether to disapprove the
modifications to such procedures, and fees charged with respect to shares of a proposed rule change.5 On February 18,
will maintain and preserve for a period Fund of Funds will not exceed the 2016, the Exchange filed Amendment
of not less than six years from the end limits applicable to a fund of funds as No. 1 to the proposed rule change.6 On
of the fiscal year in which any purchase set forth in NASD Conduct Rule 2830. February 24, 2016, the Exchange filed
in an Affiliated Underwriting occurred, 12. No Underlying Fund will acquire
Amendment No. 2 to the proposed rule
the first two years in an easily accessible securities of an investment company or
company relying on section 3(c)(1) or change.7 On March 22, 2016, the
place, a written record of each purchase
of securities in Affiliated Underwritings 3(c)(7) of the Act in excess of the limits Exchange filed Amendment No. 3 to the
once an investment by a Fund of Funds contained in section 12(d)(1)(A) of the proposed rule change.8 The Commission
in the securities of the Underlying Fund Act, except to the extent the Underlying received no comments on the proposal.
exceeds the limit of section Fund acquires securities of another This order grants approval of the
12(d)(1)(A)(i) of the Act, setting forth investment company pursuant to proposed rule change, as modified by
from whom the securities were exemptive relief from the Commission Amendment Nos. 1, 2, and 3 thereto.
acquired, the identity of the permitting the Underlying Fund to
underwriting syndicate’s members, the acquire securities of one or more 5 See Securities Exchange Act Release No. 77159,

terms of the purchase, and the investment companies for short-term 81 FR 9041 (Feb. 23, 2016). The Commission
designated April 1, 2016 as the date by which the
information or materials upon which cash management purposes. Commission shall either approve or disapprove, or
the determinations of the Board of the For the Commission, by the Division of institute proceedings to determine whether to
Underlying Fund were made. Investment Management, under delegated disapprove, the proposed rule change. See id.
9. Before investing in an Underlying authority.
6 In Amendment No. 1, which amended and

Fund in excess of the limit in section replaced the proposed rule change in its entirety,
Robert W. Errett, the Exchange clarified the scope of the non-
12(d)(1)(A), a Fund of Funds and the
Deputy Secretary. exchange-traded investment companies, futures,
Trust will execute a FOF Participation and exchange-traded options on futures to be held
[FR Doc. 2016–07835 Filed 4–5–16; 8:45 am]
Agreement stating, without limitation, by the Fund and the Subsidiary. Because
that their respective boards of directors BILLING CODE 8011–01–P Amendment No. 1 to the proposed rule change does
or trustees and their investment not materially alter the substance of the proposed
rule change or raise unique or novel regulatory
advisers, or trustee and Sponsor, as issues, Amendment No. 1 is not subject to notice
applicable, understand the terms and SECURITIES AND EXCHANGE
and comment (Amendment No. 1 to the proposed
conditions of the order, and agree to COMMISSION rule change is available at: https://www.sec.gov/
fulfill their responsibilities under the [Release No. 34–77487; File No. SR–BATS– comments/sr-bats-2015–105/bats2015105–2.pdf).
7 In Amendment No. 2, which amended and
order. At the time of its investment in 2015–105]
replaced the proposed rule change, as modified by
Underlying Fund Shares in excess of the Amendment No. 1 thereto, in its entirety, the
limit in section 12(d)(1)(A)(i), a Fund of Self-Regulatory Organizations; BATS Exchange clarified: (a) That the Fund and the
Funds will notify the Underlying Fund Exchange, Inc.; Order Granting Subsidiary would not invest in leveraged or inverse
of the investment. At such time, the Approval of Proposed Rule Change, as leveraged securities of investment companies; (b)
Modified by Amendment Nos. 1, 2, and that the commodity-linked instruments in which
Fund of Funds will also transmit to the the Fund invests will be listed and traded in the
Underlying Fund a list of the names of 3 Thereto, To List and Trade Shares of U.S. on registered exchanges; (c) that, for
each Fund of Funds Affiliate and the Elkhorn S&P GSCI Dynamic Roll surveillance, the Exchange would be able to obtain
Underwriting Affiliate. The Fund of Commodity ETF of Elkhorn ETF Trust information regarding trading in the underlying
commodity-linked instruments; and (d) the scope of
Funds will notify the Underlying Fund March 31, 2016. exchange-traded options on futures contracts to be
of any changes to the list of the names held by the Fund and Subsidiary. Because
as soon as reasonably practicable after a I. Introduction Amendment No. 2 to the proposed rule change does
change occurs. The Underlying Fund not materially alter the substance of the proposed
On December 18, 2015, BATS rule change or raise unique or novel regulatory
and the Fund of Funds will maintain Exchange, Inc. (‘‘Exchange’’ or ‘‘BATS’’) issues, Amendment No. 2 is not subject to notice
and preserve a copy of the order, the filed with the Securities and Exchange and comment (Amendment No. 2 to the proposed
FOF Participation Agreement, and the Commission (‘‘Commission’’), pursuant rule change is available at: https://www.sec.gov/
list with any updated information for to Section 19(b)(1) of the Securities
comments/sr-bats-2015–105/bats2015105–1.pdf).
8 In Amendment No. 3 to the proposed rule
the duration of the investment and for Exchange Act of 1934 (‘‘Act’’) 1 and Rule change, the Exchange clarified that: (a) All
a period of not less than six years 19b–4 thereunder,2 a proposed rule statements and representations made in the
thereafter, the first two years in an change to list and trade shares proposal shall constitute continued listing
easily accessible place. (‘‘Shares’’) of the Elkhorn S&P GSCI requirements for listing the Shares on the Exchange;
10. Before approving any advisory (b) the issuer will advise the Exchange of any
Dynamic Roll Commodity ETF (‘‘Fund’’) failure by the Fund to comply with the continued
contract under section 15 of the Act, the
of Elkhorn ETF Trust (‘‘Trust’’) under listing requirements; (c) pursuant to its obligations
board of directors or trustees of each under Section 19(g)(1) of the Act, the Exchange will
BATS Rule 14.11(i). The proposed rule
Investing Management Company surveil for compliance with the continued listing
change was published for comment in
including a majority of the disinterested
asabaliauskas on DSK3SPTVN1PROD with NOTICES

requirements; and (d) if the Fund is not in
the Federal Register on January 4, compliance with the applicable listing
directors or trustees, will find that the
2016.3 On February 17, 2016, pursuant requirements, the Exchange will commence
advisory fees charged under such delisting procedures under Exchange Rule 14.12.
to Section 19(b)(2) of the Act,4 the
contract are based on services provided Because Amendment No. 3 does not materially alter
that will be in addition to, rather than 1 15
the substance of the proposed rule change or raise
U.S.C. 78s(b)(1). unique or novel regulatory issues, Amendment No.
duplicative of, the services provided 2 17 CFR 240.19b–4. 3 is not subject to notice and comment
under the advisory contract(s) of any 3 See Securities Exchange Act Release No. 76776
(Amendment No. 3 to the proposed rule change is
Underlying Fund in which the Investing (Dec. 28, 2015), 81 FR 120 (‘‘Notice’’). available at: https://www.sec.gov/comments/sr-bats-
Management Company may invest. 4 15 U.S.C. 78s(b)(2). 2015-105/bats2015105-3.pdf).

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Federal Register / Vol. 81, No. 66 / Wednesday, April 6, 2016 / Notices 20021

traded options on futures contracts by (12) While the Fund will be permitted SECURITIES AND EXCHANGE
virtue of: (a) Its membership in ISG; or to borrow as permitted under the 1940 COMMISSION
(b) a comprehensive surveillance Act, the Fund’s investments will not be
[Release No. 34–77488; File No. SR–
sharing agreement. used to seek performance that is the ISEGemini–2016–03]
(6) Prior to the commencement of multiple or inverse multiple (i.e., 2X
trading, the Exchange will inform its and ¥3X) of the Benchmark. Self-Regulatory Organizations; ISE
members in an Information Circular (13) A minimum of 100,000 Shares Gemini, LLC; Notice of Filing of
(‘‘Circular’’) of the special will be outstanding at the Proposed Rule Change Related to
characteristics and risks associated with commencement of trading on the Market Wide Risk Protection
trading the Shares. Specifically, the Exchange.
Circular will discuss the following: (a) The Exchange represents that all March 31, 2016.
The procedures for purchases and statements and representations made in Pursuant to Section 19(b)(1) of the
redemptions of Shares in Creation Units the filing regarding (a) the description of Securities Exchange Act of 1934
(and that Shares are not individually the portfolio, (b) limitations on portfolio (‘‘Act’’),1 and Rule 19b–4 thereunder,2
redeemable); (b) BATS Rule 3.7, which holdings or reference assets, or (c) the notice is hereby given that, on March
imposes suitability obligations on applicability of Exchange rules and 17, 2016, the ISE Gemini, LLC (the
Exchange members with respect to surveillance procedures constitute ‘‘Exchange’’ or ‘‘ISE Gemini’’) filed with
recommending transactions in the continued listing requirements for the Securities and Exchange
Shares to customers; (c) how listing the Shares on the Exchange. In Commission (‘‘Commission’’) the
information regarding the IIV and the addition, the issuer has represented to proposed rule change, as described in
Disclosed Portfolio is disseminated; (d) the Exchange that it will advise the Items I, II, and III below, which Items
the risks involved in trading the Shares Exchange of any failure by the Fund to have been prepared by the self-
during the Pre-Opening 40 and After comply with the continued listing regulatory organization. The
Hours Trading Sessions 41 when an requirements, and, pursuant to its Commission is publishing this notice to
updated IIV will not be calculated or obligations under Section 19(g)(1) of the solicit comments on the proposed rule
publicly disseminated; (e) the Act, the Exchange will surveil for change from interested persons.
requirement that members deliver a compliance with the continued listing
I. Self-Regulatory Organization’s
prospectus to investors purchasing requirements. If the Fund is not in
Statement of the Terms of Substance of
newly issued Shares prior to or compliance with the applicable listing
the Proposed Rule Change
concurrently with the confirmation of a requirements, the Exchange will
transaction; and (f) trading information. commence delisting procedures under The Exchange proposes to introduce
(7) For initial and continued listing, Exchange Rule 14.12. This approval new activity based order protections as
the Fund and the Subsidiary must be in order is based on all of the Exchange’s described in more detail below. The text
compliance with Rule 10A–3 under the representations and description of the of the proposed rule change is available
Act.42 Fund, including those set forth above on the Exchange’s Web site (http://
(8) The Fund may hold up to an and in the Notice. The Commission www.ise.com), at the principal office of
aggregate amount of 15% of its net notes that the Fund and the Shares must the Exchange, and at the Commission’s
assets in illiquid assets (calculated at comply with the requirements of BATS Public Reference Room.
the time of investment), including Rule 14.11(i), including those set forth II. Self-Regulatory Organization’s
securities deemed illiquid by the in this proposed rule change, to be Statement of the Purpose of, and
Adviser under the 1940 Act. listed and traded on the Exchange on an Statutory Basis for, the Proposed Rule
(9) The Fund will invest in initial and continuing basis. Change
Commodities through investments in For the foregoing reasons, the
the Subsidiary and will not invest Commission finds that the proposed In its filing with the Commission, the
directly in physical commodities. The rule change, as modified by Amendment self-regulatory organization included
Fund’s investment in the Subsidiary Nos. 1, 2, and 3 thereto, is consistent statements concerning the purpose of,
may not exceed 25% of the Fund’s total with Section 6(b)(5) of the Act 43 and the and basis for, the proposed rule change
assets. The Fund and the Subsidiary rules and regulations thereunder and discussed any comments it received
will not invest in any non-U.S. equity applicable to a national securities on the proposed rule change. The text
securities (other than shares of the exchange. of these statements may be examined at
Subsidiary). the places specified in Item IV below.
(10) Investments in non-centrally IV. Conclusion The self-regulatory organization has
cleared swaps (through the Subsidiary) It is therefore ordered, pursuant to prepared summaries, set forth in
will not represent more than 20% of the Section 19(b)(2) of the Act,44 that the sections A, B and C below, of the most
Fund’s net assets. proposed rule change (SR–BATS–2015– significant aspects of such statements.
(11) At least 75% of corporate debt 105), as modified by Amendment Nos.
A. Self-Regulatory Organization’s
obligations will have a minimum 1, 2, and 3 thereto, be, and it hereby is,
Statement of the Purpose of, and
principal amount outstanding of $100 approved.
Statutory Basis for, the Proposed Rule
million or more. In addition, the For the Commission, by the Division of
exchange-traded investment companies Change
Trading and Markets, pursuant to delegated
and commodity-linked instruments in authority.45 1. Purpose
asabaliauskas on DSK3SPTVN1PROD with NOTICES

which the Fund invests will be listed Robert W. Errett, The purpose of the proposed rule
and traded in the U.S. on registered Deputy Secretary. change is to introduce new risk
exchanges. [FR Doc. 2016–07832 Filed 4–5–16; 8:45 am] protections for orders designed to aid
40 The
BILLING CODE 8011–01–P members in their risk management by
Pre-Opening Session is from 8:00 a.m. to
9:30 a.m. Eastern Time. supplementing current price
41 The After Hours Trading Session is from 4:00 43 15 U.S.C. 78f(b)(5).
p.m. to 5:00 p.m. Eastern Time. 44 15 U.S.C. 78s(b)(2). 1 15 U.S.C. 78s(b)(1).
42 See 17 CFR 240.10A–3. 45 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4.

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Document Created: 2018-02-07 13:51:45
Document Modified: 2018-02-07 13:51:45

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		81 FR 20016