81 FR 41355 - Self-Regulatory Organizations; BATS Exchange, Inc.; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1, 2, and 3, To List and Trade Shares of the Pointbreak Diversified Commodity Strategy Fund of the Pointbreak ETF Trust Under BATS Rule 14.11(i), Managed Fund Shares

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 122 (June 24, 2016)

Page Range		41355-41358
FR Document		2016-14928

Federal Register, Volume 81 Issue 122 (Friday, June 24, 2016)

[Federal Register Volume 81, Number 122 (Friday, June 24, 2016)]
[Notices]
[Pages 41355-41358]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2016-14928]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78104; File No. SR-BATS-2016-16]

Self-Regulatory Organizations; BATS Exchange, Inc.; Order
Granting Approval of a Proposed Rule Change, as Modified by Amendment
Nos. 1, 2, and 3, To List and Trade Shares of the Pointbreak
Diversified Commodity Strategy Fund of the Pointbreak ETF Trust Under
BATS Rule 14.11(i), Managed Fund Shares

June 20, 2016.

I. Introduction

On March 7, 2016, 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
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule
change to list and trade shares (``Shares'') of the Pointbreak
Diversified Commodity Strategy Fund (``Fund'') of the Pointbreak ETF
Trust (``Trust'') under BATS Rule 14.11(i). The proposed rule change
was published for comment in the Federal Register on March 22, 2016.\3\
On April 8, 2016, the Exchange filed Amendment No. 1 to the proposed
rule change, and on April 14, 2016, the Exchange filed Amendment No. 2
to the proposed rule change.\4\ On May 5, 2016, pursuant to Section
19(b)(2) of the Act,\5\ 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.\6\ On June 17, 2016, the Exchange
filed Amendment No. 3 to the proposed rule change.\7\ The Commission
received no comments on the proposed rule change. This order grants
approval of the proposed rule change, as modified by Amendment Nos. 1,
2, and 3.
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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. 77379 (March 16,
2016), 81 FR 15387 (``Notice'').
\4\ In Amendment No. 1, which replaced the original filing in
its entirety, the Exchange: (1) Changed the name of the Fund from
``Pointbreak Diversified Commodity Fund'' to ``Pointbreak
Diversified Commodity Strategy Fund''; (2) clarified that the Fund
will invest in Commodity Futures through the Subsidiary and invest
in Cash Instruments both directly and through the Subsidiary; (3)
provided additional clarification and specificity regarding the
instruments in which the Fund may invest; (4) provided additional
clarification regarding the investment restrictions of the Fund; (5)
clarified how certain investments will be valued for computing the
Fund's net asset value (``NAV''); (6) clarified where price
information can be obtained for certain investments of the Fund; (7)
clarified that all statements and representations made in the filing
regarding the description of the portfolio, limitations on portfolio
holdings or reference assets, or the applicability of Exchange rules
and surveillance procedures constitute continued listing
requirements for listing the Shares on the Exchange; (8) stated that
the issuer has represented to the Exchange that it will advise the
Exchange of any failure by the Fund to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Exchange Act, the Exchange will surveil for
compliance with the continued listing requirements, and if the Fund
is not in compliance with the applicable listing requirements, the
Exchange will commence delisting procedures under Exchange Rule
14.12; and (9) made other technical amendments. Amendment No. 1 is
available at http://www.sec.gov/comments/sr-bats-2016-16/bats201616-1.pdf. In Amendment No. 2, the Exchange clarified where price
information can be obtained for certain investments of the Fund.
Amendment No. 2 is available at http://www.sec.gov/comments/sr-bats-2016-16/bats201616-2.pdf. Because Amendment Nos. 1 and 2 do not
materially alter the substance of the proposed rule change or raise
unique or novel regulatory issues, Amendment Nos. 1 and 2 are not
subject to notice and comment.
\5\ 15 U.S.C. 78s(b)(2).
\6\ See Securities Exchange Act Release No. 77770, 81 FR 29311
(May 11, 2016). The Commission designated June 20, 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.
\7\ In Amendment No. 3, the Exchange provided additional
information regarding the creation and redemption process, and made
certain technical amendments. Amendment No. 3 is available at
https://www.sec.gov/rules/sro/bats.shtml. 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.
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II. The Exchange's Description of the Proposal

The Exchange proposes to list and trade the Shares under 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. According to
the Exchange, the Trust is registered with the Commission as an open-
end investment company.\8\ Pointbreak Advisers LLC will be the
investment adviser (``Adviser'') \9\ to the Fund.\10\ Brown Brothers
Harriman & Co. will be the administrator, custodian, and transfer agent
for the Trust and ALPS Distributors, Inc. will serve as the distributor
for the Trust.\11\
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\8\ The Exchange states that the Trust has filed a registration
statement on behalf of the Fund with the Commission. See
Registration Statement on Form N-1A for the Trust, dated December
23, 2015 (File Nos. 333-205324 and 811-23068) (``Registration
Statement''). The Exchange states that the Commission has issued an
order granting certain exemptive relief to the Trust under the
Investment Company Act of 1940 (``1940 Act''). See Investment
Company Act Release No. 32064 (April 4, 2016) (File No. 812-14577).
\9\ The Exchange states that prior to listing on the Exchange,
the Adviser will be registered as a Commodity Pool Operator and will
become a member of the National Futures Association (``NFA''), and
that the Fund and its Subsidiary will be subject to regulation by
the Commodity Futures Trading Commission and NFA and additional
disclosure, reporting, and recordkeeping rules imposed upon
commodity pools.
\10\ The Exchange states that the Adviser is not a registered
broker-dealer and is not affiliated with a broker-dealer. In the
event that (a) the Adviser becomes a broker-dealer or newly
affiliated with a broker-dealer, or (b) any new adviser or sub-
adviser is a broker-dealer or becomes affiliated with a broker-
dealer, such adviser or sub-adviser 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 and/or changes to the portfolio, and will be subject
to procedures designed to prevent the use and dissemination of
material non-public information regarding the portfolio.
\11\ Additional information regarding the Trust, the Fund, and
the Shares, including investment strategies, risks, creation and
redemption procedures, fees, portfolio holdings, disclosure
policies, calculation of the NAV, distributions, and taxes, among
other things, can be found in Amendment Nos. 1, 2, and 3, and the
Registration Statement, as applicable. See Amendment Nos. 1 and 2,
supra note 4; Amendment No. 3, supra note 7; and Registration
Statement, supra note 8.

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[[Page 41356]]

A. The Fund's Investments

According to the Exchange, the Fund is an actively managed
exchange-traded fund (``ETF'') that seeks to provide total return that
exceeds that of the Solactive Diversified Commodity Index
(``Benchmark'') over time. The Fund is not an index tracking ETF and is
not required to invest in the specific components of the Benchmark, and
the Fund can have a higher or lower exposure to any component within
the Benchmark at any time and may invest in other commodity-linked
instruments as well. However, the Exchange represents that the Fund
will generally seek to maintain a portfolio of instruments similar to
those included in the Benchmark and will seek exposure to commodities
included in the Benchmark.\12\ The Benchmark is a rules-based index
composed of futures contracts on the following 16 commodities:
Aluminum, Brent crude oil, cocoa, copper, corn, gold, heating oil, live
cattle, natural gas, Reformulated Gasoline Blendstock for Oxygen
Blending gasoline, silver, soybeans, sugar #11, wheat, WTI light crude
oil, and zinc. The Exchange states that the Benchmark will seek to
select the contract month for each specific commodity among the next 13
months that display the most backwardation or the least contango and
will not attempt to always own those contracts that are closest to
expiration.
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\12\ The Fund will generally obtain its exposure to commodity
markets via investments in a wholly-owned subsidiary organized under
the laws of the Cayman Islands (``Subsidiary''). References to the
investments of the Fund include investments of the Subsidiary to
which the Fund gains indirect exposure.
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According to the Exchange, under normal circumstances,\13\ the Fund
will invest in Commodity Futures (as defined below) through the
Subsidiary and Cash Instruments (as defined below) both directly
through the Fund and through the Subsidiary. Commodity Futures include
only exchange-traded futures on commodities and exchange-traded futures
contracts on commodity indices. Cash Instruments include only: (i)
Short-term obligations issued by the U.S. Government; (ii) cash and
cash-like instruments; \14\ (iii) money market mutual funds; and (iv)
repurchase agreements.\15\ Cash Instruments would provide liquidity,
serve as margin, or collateralize the Subsidiary's investments in
Commodity Futures. The Fund will not invest in Cash Instruments that
are below investment-grade.
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\13\ According to the Exchange, the term ``under normal
circumstances'' includes, but is not limited to, the absence of
extreme volatility or trading halts in the 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.
\14\ Cash-like instruments include only the following: Short-
term negotiable obligations of commercial banks, fixed-time
deposits, bankers acceptances of U.S. banks and similar
institutions, and commercial paper rated at the date of purchase
``Prime-1'' by Moody's Investors Service, Inc. or ``A-1+'' or ``A-
1'' by Standard & Poor's or, if unrated, of comparable quality, as
the Adviser determines.
\15\ According to the Exchange, the Fund follows certain
procedures designed to minimize the risks inherent in repurchase
agreements. Such procedures include effecting repurchase
transactions only with large, well-capitalized, and well-established
financial institutions whose condition will be continually monitored
by the Adviser. The Exchange represents that it is the current
policy of the Fund not to invest in repurchase agreements that do
not mature within seven days if any such investment, together with
any other illiquid assets held by the Fund, amount to more than 15%
of the Fund's net assets. The Exchange states that the investments
of the Fund in repurchase agreements, at times, may be substantial
when, in the view of the Adviser, liquidity or other considerations
so warrant.
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The Exchange states that the Fund generally will not invest
directly in Commodity Futures and expects to gain exposure to Commodity
Futures by investing a portion of its assets in the Subsidiary.\16\ The
Fund's investment in the Subsidiary is intended to provide the Fund
with exposure to commodity markets in accordance with applicable rules
and regulations. The Subsidiary has the same investment objective and
investment restrictions as the Fund. The Fund will generally invest up
to 25% of its total assets in the Subsidiary.
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\16\ The Exchange states that the Subsidiary is not registered
under the 1940 Act and is not directly subject to its investor
protections, except as noted in the Registration Statement. However,
according to the Exchange, the Subsidiary is wholly-owned and
controlled by the Fund and is advised by the Adviser. Therefore,
because of the Fund's ownership and control of the Subsidiary, the
Subsidiary would not take action contrary to the interests of the
Fund or its shareholders. The Fund's Board of Trustees has 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 Adviser receives no
additional compensation for managing the assets of the Subsidiary.
The Exchange states that 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 Exchange represents that during times of adverse market,
economic, political, or other conditions, the Fund may depart
temporarily from its principal investment strategies (such as by
maintaining a significant uninvested cash position) for defensive
purposes. The Exchange states that doing so could help the Fund avoid
losses, but may mean lost investment opportunities, and that during
these periods, the Fund may not achieve its investment objective.
The Fund intends to qualify each year as a regulated investment
company under the Internal Revenue Code.

B. The Fund's Investment Restrictions

The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment) deemed
illiquid by the Adviser \17\ under the 1940 Act. The Fund will monitor
its portfolio liquidity on an ongoing basis to determine whether, in
light of current circumstances, an adequate level of liquidity is being
maintained, and will consider taking appropriate steps in order to
maintain adequate liquidity if, through a change in values, net assets,
or other circumstances, more than 15% of the Fund's net assets are held
in illiquid assets. Illiquid assets include assets 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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\17\ The Exchange states that, 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 in
which it 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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Aside from the Fund's investments in the Subsidiary, neither the
Fund nor the Subsidiary will invest in non-U.S. equity securities.
Neither the Fund nor the Subsidiary will invest in derivatives other
than Commodity Futures.
The Fund's investments will be consistent with the Fund's
investment objective and will not be used to achieve leveraged or
inverse leveraged returns.

III. Discussion and Commission Findings

After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act and the rules and regulations thereunder applicable to a national
securities exchange.\18\ In particular, the Commission finds that

[[Page 41357]]

the proposed rule change, as modified by Amendment Nos. 1, 2, and 3, is
consistent with Section 6(b)(5) of the Exchange Act,\19\ which
requires, among other things, that the Exchange's rules be designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general, to protect investors and the public interest.
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\18\ 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).
\19\ 15 U.S.C. 78f(b)(5).
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The Commission also finds that the proposal to list and trade the
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of
the Exchange Act,\20\ which sets forth Congress's finding that it is in
the public interest and appropriate for the protection of investors and
the maintenance of fair and orderly markets to assure the availability
to brokers, dealers, and investors of information with respect to
quotations for, and transactions in, securities.
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\20\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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According to the Exchange, quotation and last sale information for
the Shares will be available on the facilities of the Consolidated Tape
Association (``CTA''), and the previous day's closing price and trading
volume information for the Shares will be generally available daily in
the print and online financial press. Also, daily trading volume
information for the Fund will 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. Additionally,
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.
In addition, the Intraday Indicative Value \21\ (as defined in BATS
Rule 14.11(i)(3)(C)) 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.\22\ On each business day, before
commencement of trading in the Shares during Regular Trading Hours on
the Exchange, the Fund will disclose on its Web site the Disclosed
Portfolio (as defined in BATS Rule 14.11(i)(3)(B)) \23\ that will form
the basis for the Fund's calculation of NAV at the end of the business
day.\24\ The Web site for the Fund will also include a form of the
prospectus for the Fund and additional data relating to NAV and other
applicable quantitative information.
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\21\ According to the Exchange, the Intraday Indicative Value
will be based upon the current value for the components of the
Disclosed Portfolio (as defined below). The Exchange states that
quotations of certain of the Fund's holdings may not be updated for
purposes of calculating Intraday Indicative Value during U.S.
trading hours where the market on which the underlying asset is
traded settles prior to the end of the Exchange's Regular Trading
Hours. The Exchange's Regular Trading Hours are 9:30 a.m. to 4:00
p.m. Eastern Time.
\22\ The Exchange notes that several major market data vendors
display and/or make widely available Intraday Indicative Values
published via the CTA or other data feeds.
\23\ The Disclosed Portfolio will include for each portfolio
holding, as applicable: Ticker symbol or other identifier, a
description of the holding, identity of the asset upon which the
derivative is based, the quantity of each security or other asset
held as measured by select metrics, maturity date, coupon rate,
effective date, market value and percentage weight of the holding in
the portfolio. The Web site and information will be publicly
available at no charge.
\24\ The NAV of the Fund will generally be determined at 4:00
p.m. Eastern Time each business day when the Exchange is open for
trading. The Fund intends to require all creation and redemption
requests to be received no later than 10:30 a.m. Eastern Time
(``cutoff time'') in order to create or redeem Shares based on that
day's NAV. In support of this early cutoff time, the Exchange
represents that the early cutoff time will provide the Fund with
certainty as to whether to buy or sell certain Commodity Futures in
advance of their settlement times, which should help to minimize the
difference between the price used to calculate the NAV and the price
at which the Fund is able to buy or sell the Commodity Futures. The
Exchange also represents that the early cutoff time will provide
authorized participants and market makers with certainty regarding
the prices that will be used for calculating the NAV and that they
will be able to transact at those prices, which should assist
authorized participants and market makers to efficiently hedge their
positions. Moreover, the Exchange represents that the early cutoff
time should not significantly interfere with the arbitrage mechanism
because authorized participants and market makers will continue to
be able to hedge their positions in the Fund by investing directly
in Commodity Futures as trading in these Commodity Futures continues
after the settlement time. Finally, the Exchange represents that
although the authorized participants and market makers that
accumulate positions after the cutoff time may take on risk or
additional costs to the extent they have to hold part or all of
their positions overnight, the risk or additional costs do not
generally interfere with the arbitrage mechanism. See Amendment No.
3, supra note 7.
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Intraday price quotations on Cash Instruments of the type held by
the Fund, with the exception of money market mutual funds, are
available from major broker-dealer firms and from third-parties, which
may provide prices free with a time delay, or ``live'' with a paid fee.
For Commodity Futures, such intraday pricing information is available
directly from the applicable listing exchange. Price information for
money market mutual funds will be available from the applicable
investment company's Web site.
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 Exchange will obtain a representation from the issuer of
the Shares that the NAV will be calculated daily and that the NAV and
the Disclosed Portfolio will be made available to all market
participants at the same time. Further, trading in the Shares will be
subject to BATS Rules 11.18 and 14.11(i)(4)(B)(iv), which set forth
circumstances under which trading in Shares of the Fund may be halted.
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 Commodity Futures and other assets composing the Disclosed
Portfolio of the Fund; or (2) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present. 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.\25\ The
Exchange represents that it prohibits the distribution of material,
non-public information by its employees. The Exchange states that the
Adviser is not a registered broker-dealer and is not affiliated with a
broker-dealer, and that in the event that (a) the Adviser becomes a
broker-dealer or newly affiliated with a broker-dealer, or (b) any new
adviser or sub-adviser is a broker-dealer or becomes affiliated with a
broker-dealer, such adviser or sub-adviser 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 and/or changes to the portfolio, and will be subject to
procedures designed to prevent the use and dissemination of material
non-public information regarding such portfolio.\26\
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\25\ See BATS Rule 14.11(i)(4)(B)(ii)(b).
\26\ The Exchange represents that an investment adviser to an
open-end fund is required to be registered under the Investment
Advisers Act of 1940.
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Prior to the commencement of trading, the Exchange will inform its

[[Page 41358]]

members in an Information Circular of the special characteristics and
risks associated with trading the Shares. The Exchange represents that
trading of the Shares through the Exchange will be subject to the
Exchange's surveillance procedures for derivative products, including
Managed Fund Shares, and such 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.
The Exchange represents that it deems the Shares to be equity
securities, thus rendering trading in the Shares subject to the
Exchange's existing rules governing the trading of equity securities.
In support of this proposal, the Exchange has made the following
representations:
(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 may obtain information regarding trading in the
Shares and the underlying futures, including futures contracts held by
the Subsidiary, via the Intermarket Surveillance Group (``ISG'') from
other exchanges who are members or affiliates of the ISG or with which
the Exchange has entered into a comprehensive surveillance sharing
agreement. In addition, the Exchange is able to access, as needed,
trade information for certain fixed income instruments reported to
FINRA's Trade Reporting and Compliance Engine.
(4) All of the futures contracts in the Disclosed Portfolio for the
Fund (including those held by the Subsidiary) will trade on markets
that are a member or affiliate of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement.
(5) Prior to the commencement of trading, the Exchange will inform
its members in an Information Circular of the special characteristics
and risks associated with trading the Shares. Specifically, the
Information Circular will discuss the following: (a) The procedures for
purchases and redemptions of Shares in creation units (and that Shares
are not individually redeemable); (b) 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 Intraday Indicative Value and Disclosed
Portfolio are disseminated; (d) the risks involved in trading the
Shares during the Pre-Opening and After Hours Trading Sessions (as
defined in the Exchange's rules) when an updated Intraday Indicative
Value 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.
(6) For initial and continued listing, the Fund must be in
compliance with Rule 10A-3 under the Exchange Act.\27\
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\27\ See 17 CFR 240.10A-3.
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(7) Aside from the Fund's investments in the Subsidiary, neither
the Fund nor the Subsidiary will invest in non-U.S. equity securities.
(8) Neither the Fund nor the Subsidiary will invest in derivatives
other than Commodity Futures.
(9) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment) deemed
illiquid by the Adviser under the 1940 Act. The Fund will monitor its
portfolio liquidity on an ongoing basis to determine whether, in light
of current circumstances, an adequate level of liquidity is being
maintained, and will consider taking appropriate steps in order to
maintain adequate liquidity if, through a change in values, net assets,
or other circumstances, more than 15% of the Fund's net assets are held
in illiquid assets.
(10) The Fund's investments will be consistent with the Fund's
investment objective and will not be used to achieve leveraged or
inverse leveraged returns.
(11) 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 Exchange 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, including those set forth above and in Amendment Nos.
1, 2, and 3. The Commission notes that the Fund and the Shares must
comply with the requirements of BATS Rule 14.11(i) to be initially and
continuously listed and traded on the Exchange.
For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment Nos. 1, 2, and 3, is consistent
with Section 6(b)(5) of the Exchange Act \28\ and Section
11A(a)(1)(C)(iii) of the Exchange Act \29\ and the rules and
regulations thereunder applicable to a national securities exchange.
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\28\ 15 U.S.C. 78f(b)(5).
\29\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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IV. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\30\ that the proposed rule change (SR-BATS-2016-16), as
modified by Amendment Nos. 1, 2, and 3, be, and it hereby is, approved.
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\30\ 15 U.S.C. 78s(b)(2).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-14928 Filed 6-23-16; 8:45 am]
BILLING CODE 8011-01-P

41358 Federal Register / Vol. 81, No. 122 / Friday, June 24, 2016 / Notices

members in an Information Circular of are disseminated; (d) the risks involved commence delisting procedures under
the special characteristics and risks in trading the Shares during the Pre- Exchange Rule 14.12.
associated with trading the Shares. The Opening and After Hours Trading This approval order is based on all of
Exchange represents that trading of the Sessions (as defined in the Exchange’s the Exchange’s representations,
Shares through the Exchange will be rules) when an updated Intraday including those set forth above and in
subject to the Exchange’s surveillance Indicative Value will not be calculated Amendment Nos. 1, 2, and 3. The
procedures for derivative products, or publicly disseminated; (e) the Commission notes that the Fund and the
including Managed Fund Shares, and requirement that members deliver a Shares must comply with the
such surveillance procedures are prospectus to investors purchasing requirements of BATS Rule 14.11(i) to
adequate to properly monitor the newly issued Shares prior to or be initially and continuously listed and
trading of the Shares on the Exchange concurrently with the confirmation of a traded on the Exchange.
during all trading sessions and to deter transaction; and (f) trading information. For the foregoing reasons, the
and detect violations of Exchange rules (6) For initial and continued listing, Commission finds that the proposed
and the applicable federal securities the Fund must be in compliance with rule change, as modified by Amendment
laws. Rule 10A–3 under the Exchange Act.27 Nos. 1, 2, and 3, is consistent with
The Exchange represents that it deems (7) Aside from the Fund’s investments Section 6(b)(5) of the Exchange Act 28
the Shares to be equity securities, thus in the Subsidiary, neither the Fund nor and Section 11A(a)(1)(C)(iii) of the
rendering trading in the Shares subject the Subsidiary will invest in non-U.S. Exchange Act 29 and the rules and
to the Exchange’s existing rules equity securities. regulations thereunder applicable to a
governing the trading of equity (8) Neither the Fund nor the national securities exchange.
securities. In support of this proposal, Subsidiary will invest in derivatives
the Exchange has made the following other than Commodity Futures. IV. Conclusion
representations: (9) The Fund may hold up to an It is therefore ordered, pursuant to
(1) The Shares will be subject to aggregate amount of 15% of its net Section 19(b)(2) of the Exchange Act,30
BATS Rule 14.11(i), which sets forth the assets in illiquid assets (calculated at that the proposed rule change (SR–
initial and continued listing criteria the time of investment) deemed illiquid BATS–2016–16), as modified by
applicable to Managed Fund Shares. by the Adviser under the 1940 Act. The Amendment Nos. 1, 2, and 3, be, and it
(2) The Exchange has appropriate Fund will monitor its portfolio liquidity hereby is, approved.
rules to facilitate transactions in the on an ongoing basis to determine
Shares during all trading sessions. whether, in light of current For the Commission, by the Division of
(3) The Exchange may obtain circumstances, an adequate level of Trading and Markets, pursuant to delegated
authority.31
information regarding trading in the liquidity is being maintained, and will
Shares and the underlying futures, consider taking appropriate steps in Robert W. Errett,
including futures contracts held by the order to maintain adequate liquidity if, Deputy Secretary.
Subsidiary, via the Intermarket through a change in values, net assets, [FR Doc. 2016–14928 Filed 6–23–16; 8:45 am]
Surveillance Group (‘‘ISG’’) from other or other circumstances, more than 15% BILLING CODE 8011–01–P
exchanges who are members or affiliates of the Fund’s net assets are held in
of the ISG or with which the Exchange illiquid assets.
has entered into a comprehensive (10) The Fund’s investments will be SECURITIES AND EXCHANGE
surveillance sharing agreement. In consistent with the Fund’s investment COMMISSION
addition, the Exchange is able to access, objective and will not be used to
as needed, trade information for certain achieve leveraged or inverse leveraged [Release No. SIPA–177; File No. SIPC–2016–
fixed income instruments reported to returns. 02]
FINRA’s Trade Reporting and (11) A minimum of 100,000 Shares
will be outstanding at the Securities Investor Protection
Compliance Engine.
(4) All of the futures contracts in the commencement of trading on the Corporation; Notice of Filing of
Disclosed Portfolio for the Fund Exchange. Proposed Bylaw Amendments Relating
(including those held by the Subsidiary) The Exchange represents that all to Assessment of SIPC Members
will trade on markets that are a member statements and representations made in June 15, 2016.
or affiliate of ISG or with which the the filing regarding (a) the description of
Exchange has in place a comprehensive the portfolio, (b) limitations on portfolio Correction
surveillance sharing agreement. holdings or reference assets, or (c) the In notice document 2016–14499,
(5) Prior to the commencement of applicability of Exchange rules and appearing on pages 39986 through
trading, the Exchange will inform its surveillance procedures constitute 39990 in the issue of Monday, June 20,
members in an Information Circular of continued listing requirements for 2016, make the following corrections:
the special characteristics and risks listing the Shares on the Exchange. In 1. On page 39986, in the third
associated with trading the Shares. addition, the issuer has represented to column, in the document heading,
Specifically, the Information Circular the Exchange that it will advise the under SECURITIES AND EXCHANGE
will discuss the following: (a) The Exchange of any failure by the Fund to COMMISSION, ‘‘[Release No. SIPA–177;
procedures for purchases and comply with the continued listing File No. SIPC–2016–01]’’ should read
redemptions of Shares in creation units requirements, and, pursuant to its ‘‘[Release No. SIPA–177; File No. SIPC–
(and that Shares are not individually obligations under Section 19(g)(1) of the
sradovich on DSK3GDR082PROD with NOTICES

2016–02]’’.
redeemable); (b) BATS Rule 3.7, which Exchange Act, the Exchange will surveil 2. On page 39989, in the third
imposes suitability obligations on for compliance with the continued column, in the fifth paragraph, on the
Exchange members with respect to listing requirements. If the Fund is not
recommending transactions in the in compliance with the applicable 28 15 U.S.C. 78f(b)(5).
Shares to customers; (c) how listing requirements, the Exchange will 29 15 U.S.C. 78k–1(a)(1)(C)(iii).
information regarding the Intraday 30 15 U.S.C. 78s(b)(2).

Indicative Value and Disclosed Portfolio 27 See 17 CFR 240.10A–3. 31 17 CFR 200.30–3(a)(12).

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Document Created: 2016-06-24 00:53:05
Document Modified: 2016-06-24 00:53:05

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 41355