81 FR 45185 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of Proposed Rule Change to BZX Rule 14.11(d) To Add the EURO STOXX 50® Volatility Futures to the Definition of Futures Reference Asset
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 133 (July 12, 2016)
Federal Register Volume 81, Issue 133 (July 12, 2016)
| Page Range | 45185-45188 | |
| FR Document | 2016-16380 |
[Federal Register Volume 81, Number 133 (Tuesday, July 12, 2016)] [Notices] [Pages 45185-45188] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-16380] ======================================================================= ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78236; File No. SR-BatsBZX-2016-26] Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of Proposed Rule Change to BZX Rule 14.11(d) To Add the EURO STOXX 50[supreg] Volatility Futures to the Definition of Futures Reference Asset July 6, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on June 23, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') filed with the Securities and Exchange Commission (``Commission'') the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of the Substance of the Proposed Rule Change The Exchange filed a proposal to amend Rule 14.11(d) in order to add the EURO STOXX 50[supreg] Volatility (VSTOXX[supreg]) Futures (``VSTOXX Futures'') to the definition of Futures Reference Asset. The text of the proposed rule change is available at the Exchange's Web site at www.batstrading.com, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Commission has approved the listing of debt securities known as Linked Securities \3\ and, in particular, Futures-Linked Securities, which are Linked Securities with a payment at maturity based on the performance of a Futures Reference Asset,\4\ including listing pursuant to Rule 19b-4(e) under Rule 14.11(d)(2).\5\ Rule 19b-4(e) \6\ under the Act provides that the listing and trading of a new derivative securities product by a self-regulatory organization (``SRO'') shall not be deemed a proposed rule change, pursuant to section (c)(1) of Rule 19b-4,\7\ if the Commission has [[Page 45186]] approved, pursuant to Section 19(b) of the Act,\8\ the SRO's trading rules, procedures, and listing standards for the product class and the SRO has a surveillance program for the product class.\9\ --------------------------------------------------------------------------- \3\ As defined in Rule 14.11(d), ``Linked Securities'' includes Multifactor Index-Linked Securities, Equity Index-Linked Securities, Commodity-Linked Securities, Fixed Income Index-Linked Securities, and Futures-Linked Securities. \4\ As defined in Rule 14.11(d), ``Futures Reference Asset'' includes ``an index of (a) futures on Treasury Securities, GSE Securities, supranational debt and debt of a foreign country or a subdivision thereof, or options or other derivatives on any of the foregoing; or (b) interest rate futures or options or derivatives on the foregoing in this subparagraph (b); or (c) CBOE Volatility Index (VIX) Futures.'' \5\ See Securities Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148 (September 6, 2011) (SR-BATS-2011-018) (Order Approving Proposed Rule Change to Adopt Rules for the Qualification, Listing and Delisting of Companies on the Exchange) (the ``Approval Order''). The Approval Order approved the rules permitting the listing of both Tier I and Tier II securities on the Exchange and the requirements associated therewith, which includes, among others, the listing and trading of Linked Securities, trading hours and halts, and listing fees originally applicable to Linked Securities. \6\ 17 CFR 240.19b-4(e). \7\ 17 CFR 240.19b-4(c)(1). \8\ 15 U.S.C. 78s(b). \9\ See Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998). --------------------------------------------------------------------------- The Exchange proposes to amend Rule 14.11(d) in order to add VSTOXX Futures to the definition of Futures Reference Asset, which would allow the Exchange to list Futures-Linked Securities linked to VSTOXX Futures through generic listing standards pursuant to Rule 19b-4(e) under BZX Rule 14.11(d)(2)(K)(iv). Rule 14.11(d)(2)(K)(iv)(a) requires that a Futures-Linked Security meet one of the following standards: (1) That the Futures Reference Asset to which the security is linked shall have been reviewed and approved for the trading of Futures-Linked Securities or options or other derivatives by the Commission under Section 19(b)(2) of the Act and rules thereunder and the conditions set forth in the Commission's approval order, including with respect to comprehensive surveillance sharing agreements, continue to be satisfied; or (2) the pricing information for components of a Futures Reference Asset must be derived from a market which is a member or affiliate of a member of the Intermarket Surveillance Group (``ISG'') or a market with which the Exchange has a comprehensive surveillance sharing agreement (``CSSA'').\10\ A Futures Reference Asset may include components not representing more than 10% of the dollar weight of such Futures Reference Asset for which the pricing information is derived from markets that do not meet requirement (2); provided, however, that no single component subject to this exceptions [sic] exceeds 7% of the dollar weight of the Futures Reference Asset. As proposed, adding VSTOXX Futures to the definition of Futures Reference Asset would satisfy the first criterion described above and the second criterion would be satisfied by virtue of Eurex Deutschland's membership in ISG, as further described below. --------------------------------------------------------------------------- \10\ ISG is comprised of an international group of exchanges, market centers, and market regulators that perform front-line market surveillance in their respective jurisdictions. See https://www.isgportal.org/home.html. --------------------------------------------------------------------------- Further, any Futures-Linked Securities linked to VSTOXX Futures would also be required to meet both the initial and continued listing standards under Rule 14.11(d)(2)(K)(iv)(b) and (c) or be subject to delisting or removal proceedings, which include: (i) That the value of the Futures Reference Asset be calculated and widely disseminated by one or more major market data vendors on at least a 15-second basis during the Exchange's regular market session; (ii) for Futures-Linked Securities that are periodically redeemable, the Intraday Indicative Value of the securities must be calculated and widely disseminated by the Exchange or one or more major market data vendors on at least a 15- second basis during the Exchange's regular market session; (iii) the aggregate market value or the principal amount of the Futures-Linked Securities must be at least $400,000; (iv) the value of the VSTOXX Futures must be calculated and available; and (v) any other event occurs or condition exists which in the opinion of the Exchange makes further dealings on the Exchange inadvisable. Any Futures-Linked Securities linked to VSTOXX Futures would also be required to meet the listing standards applicable to all Linked Securities under 14.11(d)(2). Finally, all Linked Securities listed pursuant to Rule 14.11(d) are included within the definition of ``security'' or ``securities'' as such terms are used in the Rules of the Exchange and, as such, are subject to the full panoply of Exchange Rules and procedures that currently govern the trading of securities on the Exchange. The Exchange believes that the proposed standards would continue to ensure transparency surrounding the listing process for Linked Securities. Additionally, the Exchange believes that the existing standards for listing and trading Futures-Linked Securities are reasonably designed to promote a fair and orderly market for such Futures-Linked Securities and the addition of VSTOXX Futures to Futures Reference Assets does not affect this. The proposed addition of VSTOXX Futures to those instruments included in Futures Reference Assets would also work in conjunction with the existing initial and continued listing criteria related to surveillance procedures and trading guidelines. The Exchange believes that its surveillance procedures are adequate to continue to properly monitor the trading of the Futures-Linked Securities linked to VSTOXX Futures in all trading sessions and to deter and detect violations of Exchange rules. Specifically, the Exchange intends to utilize its existing surveillance procedures applicable to derivative products, which includes Linked Securities, to monitor trading in the Futures-Linked Securities. The issuer of a series of Linked Securities is and will continue to be required to comply with Rule 10A-3 under the Act for the initial and continued listing of Linked Securities, as provided under Rule 14.11(d)(2)(F). The Exchange notes that the proposed change is not intended to amend any other component or requirement of Rule 14.11(d). VSTOXX The information in this filing relating to the VSTOXX was taken from the Web site of STOXX Limited (``STOXX''). The VSTOXX was originally developed by STOXX in 2005 and is based on EURO STOXX 50 Index real-time option prices that are listed on the Eurex Deutschland (``Eurex'') and are designed to reflect the market expectations of near-term up to long-term volatility by measuring the square root of the implied variances across all options of a given time to expiration. The EURO STOXX 50 Index, Europe's leading Blue-chip index for the Eurozone, provides a blue-chip representation of super sector leaders in the Eurozone. The index covers 50 stocks from 12 Eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. The model for VSTOXX aims at making pure volatility tradable--i.e. it should be possible to replicate the indices with an options portfolio which does not react to price fluctuations, but to changes in volatility only. The VSTOXX does not measure implied volatilities of at-the-money EURO STOXX 50 Index options, but the implied variance across all options of a given time to expiry. A portfolio of EURO STOXX 50 Index options with different exercise price and weighting meets this goal: the implied volatilities of all eligible options with a given time to expiry are considered. The VSTOXX is calculated using a series of sub-indices that are based on put and call options on the EURO STOXX in eight expiry months with a maximum time to expiry of two years in order to bracket a 30-day calendar period. The VSTOXX is calculated using linear interpolation of the sub-indices whose times to expiration closely surround the targeted fixed time to expiry. If there are no such surrounding sub-indices, the VSTOXX is calculated by extrapolation of two sub-indices with closest time to expiry. Because the calculation relies on two sub-indices, VSTOXX is independent of a specific time to expiry, which helps to eliminate effects that typically result in strong volatility fluctuations close to expiry. [[Page 45187]] STOXX will compute the index on a real-time basis throughout each trading day, from 8:50 a.m. until 5:30 p.m. Central European Time (``CET'') (3:50 a.m. until 12:30 p.m. Eastern Time (``ET'')). VSTOXX levels will be calculated by STOXX and disseminated by major market data vendors such as Bloomberg and Thomson Reuters. VSTOXX Futures Additional information regarding the VSTOXX Futures can be found on the Eurex Web site. Eurex \11\ began listing and trading VSTOXX Futures in June 2009 under the ticker symbol FVS. VSTOXX Futures are cash settled and trade between the hours of 7:30 a.m. and 10:30 p.m. CET (2:30 a.m. and 5:30 p.m. ET). The VSTOXX Futures contract value is 100 Euros per index point of the underlying and it is traded to two decimal places with a minimum price change of 0.05 points (equivalent to a value of 5 Euros). The daily settlement price is determined during the closing auction of the respective futures contract. The last trading day and final settlement day is 30 calendar days prior to the third Friday of the expiration month of the underlying options, which is usually the Wednesday prior to the second to last Friday of the respective maturity month. --------------------------------------------------------------------------- \11\ The Exchange notes that Eurex is a member of the ISG and, as such, the Exchange may obtain information regarding trading in the underlying VSTOXX futures contracts. For a list of the current members and affiliate members of ISG, see www.isgportal.com. --------------------------------------------------------------------------- The monthly volume and open interest, in USD, as of the last day of each month in 2015 for the VSTOXX Futures was as follows: ------------------------------------------------------------------------ Monthly volume Open interest (USD) (USD) ------------------------------------------------------------------------ Jan-15................................ 1,916,437,601 486,772,067 Feb-15................................ 1,126,070,071 409,419,303 Mar-15................................ 1,318,852,657 414,012,733 Apr-15................................ 1,484,997,987 451,249,212 May-15................................ 1,236,975,400 426,194,591 Jun-15................................ 1,952,524,278 588,991,482 Jul-15................................ 1,658,790,585 575,821,234 Aug-15................................ 1,269,161,197 469,785,978 Sep-15................................ 2,059,860,768 684,640,331 Oct-15................................ 1,354,413,865 600,708,025 Nov-15................................ 1,239,076,845 397,025,249 Dec-15................................ 15,350,681,777 276,743,850 ------------------------------------------------------------------------ Both in the numbers shown above and throughout the history of VSTOXX Futures, the monthly trading volume and open interest in VSTOXX Futures has, subject to natural fluctuation in the market, continued to grow. The Exchange notes that the monthly trading volume in the VSTOXX Futures is very similar to the trading volume of the CBOE Volatility Index[supreg] (VIX[supreg]) Futures prior to NYSE Arca, Inc. adding the VIX Futures to the definition of futures reference asset in its comparable rule,\12\ which, as noted above, the Exchange also added to its rules related to Futures-Linked Securities. Much like the Futures- Linked Securities linked to the VIX Futures, Futures-Linked Securities linked to the VSTOXX Futures will provide investors with the ability to better diversify and hedge their portfolios using an exchange listed security without having to trade directly in the underlying futures contracts. --------------------------------------------------------------------------- \12\ See Securities Exchange Act Release No. 58968 (November 17, 2008), 73 FR 71082 (November 24, 2008) (NYSEArca-2008-111). --------------------------------------------------------------------------- As such, the Exchange believes that the proposed amendment to add VSTOXX Futures as an underlying Futures Reference asset will facilitate the listing and trading of an additional Futures-Linked Security that will enhance competition among market participants, to the benefit of investors and the marketplace. 2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6(b) of the Act \13\ in general and Section 6(b)(5) of the Act \14\ in particular in that it is designed 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. --------------------------------------------------------------------------- \13\ 15 U.S.C. 78f. \14\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The proposed rule change is designed to promote just and equitable principles of trade, to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of additional types of Futures-Linked Securities that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in Futures-Linked Securities and may obtain information regarding both the Futures-Linked Securities and VSTOXX Futures via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, as noted above, investors will have ready access to information on an intraday basis regarding: (i) The value of the Futures Reference Asset, which will be calculated and widely disseminated by one or more major market data vendors on at least a 15- second basis during the Exchange's regular market session; (ii) for Futures-Linked Securities that are periodically redeemable, the Intraday Indicative Value of the securities, which must be calculated and widely disseminated by the Exchange or one or more major market data vendors on at least a 15-second basis during the Exchange's regular market session; and (iii) information regarding market price and trading of Futures-Linked Securities will be continually available on a real-time basis throughout the day on brokers' computer screens and other electronic services, and quotation and last sale information for the securities will be available on the facilities of the CTA. Further, any Futures-Linked Securities linked to VSTOXX Futures would be required to meet both the initial and continued listing standards, including certain of those named above, under Rule 14.11(d)(2)(K)(iv)(b) and (c) or be subject to delisting or removal proceedings, which include: (i) That the value of the Futures Reference Asset be calculated and widely disseminated by one or more major market data vendors on at least a 15-second basis during the Exchange's regular market session; (ii) for Futures-Linked Securities that are periodically redeemable, the Intraday Indicative Value of the securities must be calculated and widely disseminated by the Exchange or one or more major market data vendors on at least a 15-second basis during the Exchange's regular market session; (iii) the aggregate market value or the principal amount of the Futures-Linked Securities must be at least $400,000; (iv) the value of the VSTOXX Futures must be calculated and available; and (v) any other event occurs or condition exists which in the opinion of the Exchange makes further dealings on the Exchange inadvisable. Any Futures-Linked Securities linked to VSTOXX Futures would also be required to meet the listing standards applicable to all Linked Securities under 14.11(d)(2). Finally, all Linked Securities listed pursuant to Rule 14.11(d) are included within the definition of ``security'' or ``securities'' as such terms are used in the Rules of the Exchange and, as such, are subject to the full panoply of Exchange Rules and procedures that currently govern the trading of securities on the Exchange. Additionally, trading in the securities will be halted under the conditions specified in BZX Rule 11.18. Trading may also be halted because of market conditions, for reasons that, in the view of the Exchange, make trading in the [[Page 45188]] securities inadvisable, or the circumstances set forth in BZX Rule 14.11(d)(2)(H), which sets forth circumstances under which Linked Securities may be halted. As noted above, both in the context presented herein and throughout the history of VSTOXX Futures, the monthly trading volume and open interest in VSTOXX Futures has, subject to natural fluctuation in the market, continued to grow. The Exchange notes that the monthly trading volume in the VSTOXX Futures is very similar to the trading volume of the CBOE Volatility Index[supreg] (VIX[supreg]) Futures prior to NYSE Arca, Inc. adding the VIX Futures to the definition of futures reference asset in its comparable rule,\15\ which, as noted above, the Exchange also added to its rules related to Futures-Linked Securities. Much like the Futures-Linked Securities linked to the VIX Futures, Futures-Linked Securities linked to the VSTOXX Futures will provide investors with the ability to better diversify and hedge their portfolios using an exchange listed security without having to trade directly in the underlying futures contracts. The Exchange also believes that the proposed rule change would fulfill the intended objective of Rule 19b-4(e) under the Act by allowing Futures-Linked Securities linked to the VSTOXX Futures that satisfy the listing standards in Rule 14.11(d) to be listed and traded without separate Commission approval. However, as proposed, the Exchange would continue to file separate proposed rule changes before the listing and trading of Futures-Linked Securities that do not satisfy the criteria of Rule 14.11(d)(2)(K)(iv). As such, the Exchange believes that the proposed amendment to add VSTOXX Futures as an underlying Futures Reference asset will facilitate the listing and trading of an additional Futures- Linked Security that will enhance competition among market participants, to the benefit of investors and the marketplace. --------------------------------------------------------------------------- \15\ See Securities Exchange Act Release No. 58968 (November 17, 2008), 73 FR 71082 (November 24, 2008) (NYSEArca-2008-111). --------------------------------------------------------------------------- For the above reasons, the Exchange believes that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. Instead, the Exchange believes that the proposed rule change would facilitate the listing and trading of additional types of Futures-Linked Securities, which will enhance competition among market participants, to the benefit of investors and the marketplace and provide investors with the ability to better diversify and hedge their portfolios using an exchange listed security without having to trade directly in the underlying futures contracts. The Exchange believes that this would reduce the time frame for bringing Futures-Linked Securities linked to the VSTOXX Futures to market, thereby reducing the burdens on issuers and other market participants and promoting competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (a) By order approve or disapprove such proposed rule change; or (b) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-BatsBZX-2016-26 on the subject line. Paper Comments Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-BatsBZX-2016-26. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing will also be available for inspection and copying at the principal offices of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-BatsBZX-2016- 26, and should be submitted on or before August 2, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\16\ --------------------------------------------------------------------------- \16\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2016-16380 Filed 7-11-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 133 / Tuesday, July 12, 2016 / Notices 45185
in the U.S. and other nations that is spreadsheet if desired. Each institution’s The text of the proposed rule change
relevant and useful to practitioners, record is pre-loaded with the 2 previous is available at the Exchange’s Web site
researchers, policymakers, and the years of comparable data that facilitate at www.batstrading.com, at the
public, including statistical data on editing and trend checking. Response to principal office of the Exchange, and at
(A) research and development trends; this voluntary survey has exceeded 95 the Commission’s Public Reference
(B) the science and engineering percent each year. Room.
workforce; The average burden estimate is 1 hour
(C) U.S. competitiveness in science, II. Self-Regulatory Organization’s
for the approximately 150 institutions
engineering, technology, and research Statement of the Purpose of, and
responding to the population screener
and development. . .’’ Statutory Basis for, the Proposed Rule
form, 55 hours for the approximately
Use of the information: The proposed Change
700 institutions reporting over $1
project will continue the annual survey million in R&D expenditures on the In its filing with the Commission, the
cycle for three years. The Higher standard form, 8 hours for the Exchange included statements
Education R&D Survey will provide approximately 300 institutions reporting concerning the purpose of and basis for
continuity of statistics on R&D less than $1 million on the short form, the proposed rule change and discussed
expenditures by source of funding, type and 12 hours for the 42 organizations any comments it received on the
of R&D (basic research, applied completing the FFRDC survey. The total proposed rule change. The text of these
research, or development), and field of calculated burden across all forms is statements may be examined at the
R&D, with separate data requested on places specified in Item IV below. The
40,812 hours.
research equipment by field. Further Exchange has prepared summaries, set
breakdowns are collected on funds Dated: July 6, 2016.
forth in Sections A, B, and C below, of
passed through to subrecipients and Suzanne H. Plimpton,
the most significant parts of such
funds received as a subrecipient, and on Reports Clearance Officer, National Science statements.
R&D expenditures by field from specific Foundation.
federal agency sources. As of FY 2010, [FR Doc. 2016–16421 Filed 7–11–16; 8:45 am] A. Self-Regulatory Organization’s
the survey also requests total R&D BILLING CODE 7555–01–P Statement of the Purpose of, and
expenditures funded from foreign Statutory Basis for, the Proposed Rule
sources, R&D within an institution’s Change
medical school, clinical trial
SECURITIES AND EXCHANGE 1. Purpose
expenditures, R&D by type of funding
mechanism (contracts vs. grants), and COMMISSION The Commission has approved the
R&D by cost category (salaries, listing of debt securities known as
[Release No. 34–78236; File No. SR– Linked Securities 3 and, in particular,
equipment, software, etc.). The survey BatsBZX–2016–26]
also requests headcounts of principal Futures-Linked Securities, which are
investigators and other personnel paid Self-Regulatory Organizations; Bats Linked Securities with a payment at
from R&D funds. BZX Exchange, Inc.; Notice of Filing of maturity based on the performance of a
Data are published in NSF’s annual Proposed Rule Change to BZX Rule Futures Reference Asset,4 including
publication series Higher Education 14.11(d) To Add the EURO STOXX 50® listing pursuant to Rule 19b–4(e) under
Research and Development, available on Volatility Futures to the Definition of Rule 14.11(d)(2).5 Rule 19b–4(e) 6 under
the web at http://www.nsf.gov/statistics/ Futures Reference Asset the Act provides that the listing and
srvyherd/. trading of a new derivative securities
Expected respondents: The FY 2016 July 6, 2016. product by a self-regulatory organization
Higher Education R&D Survey will be Pursuant to Section 19(b)(1) of the (‘‘SRO’’) shall not be deemed a proposed
administered to approximately 700 Securities Exchange Act of 1934 (the rule change, pursuant to section (c)(1) of
institutions. In addition, a shorter ‘‘Act’’),1 and Rule 19b–4 thereunder,2 Rule 19b–4,7 if the Commission has
version of the survey asking for R&D notice is hereby given that on June 23,
expenditures by source of funding and 2016, Bats BZX Exchange, Inc. (the 3 As defined in Rule 14.11(d), ‘‘Linked
broad field will be sent to ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities’’ includes Multifactor Index-Linked
Securities, Equity Index-Linked Securities,
approximately 300 institutions spending Securities and Exchange Commission Commodity-Linked Securities, Fixed Income Index-
under $1 million on R&D in their (‘‘Commission’’) the proposed rule Linked Securities, and Futures-Linked Securities.
previous fiscal year. We also expect change as described in Items I and II 4 As defined in Rule 14.11(d), ‘‘Futures Reference
approximately 150 institutions to below, which Items have been prepared Asset’’ includes ‘‘an index of (a) futures on Treasury
Securities, GSE Securities, supranational debt and
respond to the population screener form by the Exchange. The Commission is debt of a foreign country or a subdivision thereof,
sent to determine eligibility for the publishing this notice to solicit or options or other derivatives on any of the
survey. Finally, a survey requesting R&D comments on the proposed rule change foregoing; or (b) interest rate futures or options or
expenditures by source of funds, cost from interested persons. derivatives on the foregoing in this subparagraph
(b); or (c) CBOE Volatility Index (VIX) Futures.’’
categories, and type of R&D will be
I. Self-Regulatory Organization’s 5 See Securities Exchange Act Release No. 65225
administered to the 42 Federally (August 30, 2011), 76 FR 55148 (September 6, 2011)
Statement of the Terms of the Substance
Funded Research and Development (SR–BATS–2011–018) (Order Approving Proposed
of the Proposed Rule Change
Centers. Rule Change to Adopt Rules for the Qualification,
Estimate of burden: The survey is a The Exchange filed a proposal to Listing and Delisting of Companies on the
Exchange) (the ‘‘Approval Order’’). The Approval
fully automated web data collection amend Rule 14.11(d) in order to add the
mstockstill on DSK3G9T082PROD with NOTICES
Order approved the rules permitting the listing of
effort and is handled primarily by EURO STOXX 50® Volatility both Tier I and Tier II securities on the Exchange
administrators in university sponsored (VSTOXX®) Futures (‘‘VSTOXX and the requirements associated therewith, which
programs and accounting offices. To Futures’’) to the definition of Futures includes, among others, the listing and trading of
Linked Securities, trading hours and halts, and
minimize burden, institutions are Reference Asset. listing fees originally applicable to Linked
provided with an abundance of Securities.
guidance and resources on the web, and 1 15 U.S.C. 78s(b)(1). 6 17 CFR 240.19b–4(e).
are able to respond via downloadable 2 17 CFR 240.19b–4. 7 17 CFR 240.19b–4(c)(1).
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approved, pursuant to Section 19(b) of or be subject to delisting or removal a series of Linked Securities is and will
the Act,8 the SRO’s trading rules, proceedings, which include: (i) That the continue to be required to comply with
procedures, and listing standards for the value of the Futures Reference Asset be Rule 10A–3 under the Act for the initial
product class and the SRO has a calculated and widely disseminated by and continued listing of Linked
surveillance program for the product one or more major market data vendors Securities, as provided under Rule
class.9 on at least a 15-second basis during the 14.11(d)(2)(F). The Exchange notes that
The Exchange proposes to amend Exchange’s regular market session; (ii) the proposed change is not intended to
Rule 14.11(d) in order to add VSTOXX for Futures-Linked Securities that are amend any other component or
Futures to the definition of Futures periodically redeemable, the Intraday requirement of Rule 14.11(d).
Reference Asset, which would allow the Indicative Value of the securities must
Exchange to list Futures-Linked be calculated and widely disseminated VSTOXX
Securities linked to VSTOXX Futures by the Exchange or one or more major The information in this filing relating
through generic listing standards market data vendors on at least a 15- to the VSTOXX was taken from the Web
pursuant to Rule 19b–4(e) under BZX second basis during the Exchange’s site of STOXX Limited (‘‘STOXX’’). The
Rule 14.11(d)(2)(K)(iv). regular market session; (iii) the VSTOXX was originally developed by
Rule 14.11(d)(2)(K)(iv)(a) requires that aggregate market value or the principal STOXX in 2005 and is based on EURO
a Futures-Linked Security meet one of amount of the Futures-Linked Securities STOXX 50 Index real-time option prices
the following standards: (1) That the must be at least $400,000; (iv) the value that are listed on the Eurex Deutschland
Futures Reference Asset to which the of the VSTOXX Futures must be (‘‘Eurex’’) and are designed to reflect the
security is linked shall have been calculated and available; and (v) any market expectations of near-term up to
reviewed and approved for the trading other event occurs or condition exists long-term volatility by measuring the
of Futures-Linked Securities or options which in the opinion of the Exchange square root of the implied variances
or other derivatives by the Commission makes further dealings on the Exchange across all options of a given time to
under Section 19(b)(2) of the Act and inadvisable. Any Futures-Linked expiration. The EURO STOXX 50 Index,
rules thereunder and the conditions set Securities linked to VSTOXX Futures Europe’s leading Blue-chip index for the
forth in the Commission’s approval would also be required to meet the Eurozone, provides a blue-chip
order, including with respect to listing standards applicable to all representation of super sector leaders in
comprehensive surveillance sharing Linked Securities under 14.11(d)(2). the Eurozone. The index covers 50
agreements, continue to be satisfied; or Finally, all Linked Securities listed stocks from 12 Eurozone countries:
(2) the pricing information for pursuant to Rule 14.11(d) are included Austria, Belgium, Finland, France,
components of a Futures Reference within the definition of ‘‘security’’ or Germany, Greece, Ireland, Italy,
Asset must be derived from a market ‘‘securities’’ as such terms are used in Luxembourg, the Netherlands, Portugal
which is a member or affiliate of a the Rules of the Exchange and, as such, and Spain.
member of the Intermarket Surveillance are subject to the full panoply of
The model for VSTOXX aims at
Group (‘‘ISG’’) or a market with which Exchange Rules and procedures that
making pure volatility tradable—i.e. it
the Exchange has a comprehensive currently govern the trading of
securities on the Exchange. should be possible to replicate the
surveillance sharing agreement
The Exchange believes that the indices with an options portfolio which
(‘‘CSSA’’).10 A Futures Reference Asset
proposed standards would continue to does not react to price fluctuations, but
may include components not
ensure transparency surrounding the to changes in volatility only. The
representing more than 10% of the
listing process for Linked Securities. VSTOXX does not measure implied
dollar weight of such Futures Reference
Additionally, the Exchange believes that volatilities of at-the-money EURO
Asset for which the pricing information
the existing standards for listing and STOXX 50 Index options, but the
is derived from markets that do not meet
trading Futures-Linked Securities are implied variance across all options of a
requirement (2); provided, however, that
reasonably designed to promote a fair given time to expiry. A portfolio of
no single component subject to this
and orderly market for such Futures- EURO STOXX 50 Index options with
exceptions [sic] exceeds 7% of the
Linked Securities and the addition of different exercise price and weighting
dollar weight of the Futures Reference
VSTOXX Futures to Futures Reference meets this goal: the implied volatilities
Asset. As proposed, adding VSTOXX
Assets does not affect this. The of all eligible options with a given time
Futures to the definition of Futures
proposed addition of VSTOXX Futures to expiry are considered. The VSTOXX
Reference Asset would satisfy the first
to those instruments included in is calculated using a series of sub-
criterion described above and the
Futures Reference Assets would also indices that are based on put and call
second criterion would be satisfied by
work in conjunction with the existing options on the EURO STOXX in eight
virtue of Eurex Deutschland’s
initial and continued listing criteria expiry months with a maximum time to
membership in ISG, as further described
related to surveillance procedures and expiry of two years in order to bracket
below.
trading guidelines. a 30-day calendar period. The VSTOXX
Further, any Futures-Linked
The Exchange believes that its is calculated using linear interpolation
Securities linked to VSTOXX Futures
surveillance procedures are adequate to of the sub-indices whose times to
would also be required to meet both the
continue to properly monitor the trading expiration closely surround the targeted
initial and continued listing standards
of the Futures-Linked Securities linked fixed time to expiry. If there are no such
under Rule 14.11(d)(2)(K)(iv)(b) and (c)
to VSTOXX Futures in all trading surrounding sub-indices, the VSTOXX
sessions and to deter and detect is calculated by extrapolation of two
mstockstill on DSK3G9T082PROD with NOTICES
8 15 U.S.C. 78s(b).
9 See Securities Exchange Act Release No. 40761 violations of Exchange rules. sub-indices with closest time to expiry.
(December 8, 1998), 63 FR 70952 (December 22, Specifically, the Exchange intends to Because the calculation relies on two
1998). utilize its existing surveillance sub-indices, VSTOXX is independent of
10 ISG is comprised of an international group of
procedures applicable to derivative a specific time to expiry, which helps to
exchanges, market centers, and market regulators
that perform front-line market surveillance in their
products, which includes Linked eliminate effects that typically result in
respective jurisdictions. See https:// Securities, to monitor trading in the strong volatility fluctuations close to
www.isgportal.org/home.html. Futures-Linked Securities. The issuer of expiry.
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![45188 Federal Register / Vol. 81, No. 133 / Tuesday, July 12, 2016 / Notices
securities inadvisable, or the rule change would facilitate the listing number should be included on the
circumstances set forth in BZX Rule and trading of additional types of subject line if email is used. To help the
14.11(d)(2)(H), which sets forth Futures-Linked Securities, which will Commission process and review your
circumstances under which Linked enhance competition among market comments more efficiently, please use
Securities may be halted. participants, to the benefit of investors only one method. The Commission will
As noted above, both in the context and the marketplace and provide post all comments on the Commission’s
presented herein and throughout the investors with the ability to better Internet Web site (http://www.sec.gov/
history of VSTOXX Futures, the diversify and hedge their portfolios rules/sro.shtml). Copies of the
monthly trading volume and open using an exchange listed security submission, all subsequent
interest in VSTOXX Futures has, subject without having to trade directly in the amendments, all written statements
to natural fluctuation in the market, underlying futures contracts. The with respect to the proposed rule
continued to grow. The Exchange notes Exchange believes that this would change that are filed with the
that the monthly trading volume in the reduce the time frame for bringing Commission, and all written
VSTOXX Futures is very similar to the Futures-Linked Securities linked to the communications relating to the
trading volume of the CBOE Volatility VSTOXX Futures to market, thereby proposed rule change between the
Index® (VIX®) Futures prior to NYSE reducing the burdens on issuers and Commission and any person, other than
Arca, Inc. adding the VIX Futures to the other market participants and promoting those that may be withheld from the
definition of futures reference asset in competition. public in accordance with the
its comparable rule,15 which, as noted provisions of 5 U.S.C. 552, will be
above, the Exchange also added to its C. Self-Regulatory Organization’s available for Web site viewing and
rules related to Futures-Linked Statement on Comments on the printing in the Commission’s Public
Securities. Much like the Futures- Proposed Rule Change Received From Reference Room, 100 F Street NE.,
Linked Securities linked to the VIX Members, Participants, or Others Washington, DC 20549 on official
Futures, Futures-Linked Securities The Exchange has neither solicited business days between the hours of
linked to the VSTOXX Futures will nor received written comments on the 10:00 a.m. and 3:00 p.m. Copies of such
provide investors with the ability to proposed rule change. filing will also be available for
better diversify and hedge their inspection and copying at the principal
III. Date of Effectiveness of the offices of the Exchange. All comments
portfolios using an exchange listed Proposed Rule Change and Timing for
security without having to trade directly received will be posted without change;
Commission Action the Commission does not edit personal
in the underlying futures contracts. The
Exchange also believes that the Within 45 days of the date of identifying information from
proposed rule change would fulfill the publication of this notice in the Federal submissions. You should submit only
intended objective of Rule 19b–4(e) Register or within such longer period information that you wish to make
under the Act by allowing Futures- up to 90 days (i) as the Commission may available publicly. All submissions
Linked Securities linked to the VSTOXX designate if it finds such longer period should refer to File Number SR-
Futures that satisfy the listing standards to be appropriate and publishes its BatsBZX–2016–26, and should be
in Rule 14.11(d) to be listed and traded reasons for so finding or (ii) as to which submitted on or before August 2, 2016.
without separate Commission approval. the self-regulatory organization For the Commission, by the Division of
However, as proposed, the Exchange consents, the Commission will: (a) By Trading and Markets, pursuant to delegated
would continue to file separate order approve or disapprove such authority.16
proposed rule changes before the listing proposed rule change; or (b) institute Brent J. Fields,
and trading of Futures-Linked Securities proceedings to determine whether the Secretary.
that do not satisfy the criteria of Rule proposed rule change should be [FR Doc. 2016–16380 Filed 7–11–16; 8:45 am]
14.11(d)(2)(K)(iv). As such, the disapproved. BILLING CODE 8011–01–P
Exchange believes that the proposed IV. Solicitation of Comments
amendment to add VSTOXX Futures as
an underlying Futures Reference asset Interested persons are invited to SECURITIES AND EXCHANGE
will facilitate the listing and trading of submit written data, views, and COMMISSION
an additional Futures-Linked Security arguments concerning the foregoing,
including whether the proposed rule [Release No. 34–78234; File No. SR–BX–
that will enhance competition among 2016–033]
market participants, to the benefit of change is consistent with the Act.
investors and the marketplace. Comments may be submitted by any of Self-Regulatory Organizations;
For the above reasons, the Exchange the following methods: NASDAQ BX, Inc.; Notice of Filing and
believes that the proposed rule change Electronic Comments Immediate Effectiveness of Proposed
is consistent with the requirements of Rule Change To Amend Rule 4120
• Use the Commission’s Internet
Section 6(b)(5) of the Act.
comment form (http://www.sec.gov/ July 6, 2016.
B. Self-Regulatory Organization’s rules/sro.shtml); or Pursuant to Section 19(b)(1) of the
Statement on Burden on Competition • Send an email to rule-comments@ Securities Exchange Act of 1934
The Exchange does not believe that sec.gov. Please include File Number SR- (‘‘Act’’),1 and Rule 19b–4 thereunder,2
the proposed rule change will impose BatsBZX–2016–26 on the subject line. notice is hereby given that on June 22,
mstockstill on DSK3G9T082PROD with NOTICES
any burden on competition that is not Paper Comments 2016, NASDAQ BX, Inc. (‘‘BX’’ or
necessary or appropriate in furtherance ‘‘Exchange’’) filed with the Securities
• Send paper comments in triplicate and Exchange Commission
of the purpose of the Act. Instead, the to Secretary, Securities and Exchange
Exchange believes that the proposed (‘‘Commission’’) the proposed rule
Commission, 100 F Street NE.,
15 See Securities Exchange Act Release No. 58968
Washington, DC 20549–1090. 16 17 CFR 200.30–3(a)(12).
(November 17, 2008), 73 FR 71082 (November 24, All submissions should refer to File 1 15 U.S.C. 78s(b)(1).
2008) (NYSEArca–2008–111). Number SR-BatsBZX–2016–26. This file 2 17 CFR 240.19b–4.
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Document Created: 2016-07-12 01:59:14
Document Modified: 2016-07-12 01:59:14
| 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 45185 |
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