82 FR 31650 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Order Approving a Proposed Rule Change, To Amend BZX Rule 14.11 To Provide for the Inclusion of Cash in an Index Underlying a Series of Index Fund Shares
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 129 (July 7, 2017)
Federal Register Volume 82, Issue 129 (July 7, 2017)
| Page Range | 31650-31650 | |
| FR Document | 2017-14248 |
[Federal Register Volume 82, Number 129 (Friday, July 7, 2017)] [Notices] [Page 31650] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-14248] [[Page 31650]] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-81070; File No. SR-BatsBZX-2017-26] Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Order Approving a Proposed Rule Change, To Amend BZX Rule 14.11 To Provide for the Inclusion of Cash in an Index Underlying a Series of Index Fund Shares June 30, 2017. I. Introduction On May 12, 2017, Bats BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (``Act'' or ``Exchange Act'') \2\ and Rule 19b-4 thereunder,\3\ a proposed rule change to amend BZX Rule 14.11 to provide for the inclusion of cash in an index underlying a series of Index Fund Shares. The proposed rule change was published for comment in the Federal Register on May 25, 2017.\4\ The Commission received no comments on the proposed rule change. This order approves the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. \4\ See Securities Exchange Act Release No. 80728 (May 19, 2017), 82 FR 24171 (``Notice''). --------------------------------------------------------------------------- II. Description of the Proposal BZX Rules 14.11(c)(3) and 14.11(c)(4) permit the Exchange to generically list Index Fund Shares (``Shares'') that overlie an index or portfolio of U.S. Component Stocks,\5\ Non-U.S. Component Stocks,\6\ U.S. Component Stocks and Non-U.S. Component Stocks, and Fixed Income Securities \7\ that meets specified criteria. Although open-end investment management companies may hold cash, currently, the generic listing criteria of BZX Rules 14.11(c) do not contemplate the generic listing of Shares overlying an index or portfolio with a cash component. --------------------------------------------------------------------------- \5\ ``U.S. Component Stock'' is defined in BZX Rule 14.11(c)(1)(D) as an equity security that is registered under Sections 12(b) or 12(g) of the Act, or an American Depositary Receipt, the underlying equity security of which is registered under Sections 12(b) or 12(g) of the Act. \6\ ``Non-U.S. Component Stock'' is defined in BZX Rule 14.11(c)(1)(E) as an equity security that (a) is not registered under Sections 12(b) or 12(g) of Act, (b) is issued by an entity that is not organized, domiciled or incorporated in the United States, and (c) is issued by an entity that is an operating company (including Real Estate Investment Trusts and income trusts, but excluding investment trusts, unit trusts, mutual funds, and derivatives). \7\ BZX Rule 14.11(c)(4) defines Fixed Income Securities as debt securities that are notes, bonds, debentures or evidence of indebtedness that include, but are not limited to, U.S. Department of Treasury securities, government-sponsored entity securities, municipal securities, trust preferred securities, supranational debt and debt of a foreign country or a subdivision thereof. --------------------------------------------------------------------------- The Exchange proposes to amend BZX Rules 14.11(c)(3) and 14.11(c)(4) to permit the generic listing and trading of Shares overlying an index or portfolio of cash and: (1) U.S. Component Stocks; (2) Non-U.S. Component Stocks; (3) U.S. Component Stocks and Non-U.S. Component Stocks; and (4) Fixed Income Securities. The Exchange is not proposing to otherwise amend the applicable generic listing criteria, except to specify that the following generic listing criteria will not apply to the cash portion of the index or portfolio:Under proposed BZX Rule 14.11(c)(3)(A)(i)(a) through (d), the percentage weighting requirements would apply only to the U.S. Component Stocks portion of the underlying index or portfolio. Under proposed BZX Rule 14.11(c)(3)(A)(ii)(a) through (d), the percentage weighting requirements would not apply to the cash component of the underlying index or portfolio. Under proposed BZX Rule 14.11(c)(4)(B)(i)(b), (d), and (f), the percentage weighting requirements would apply only to the Fixed Income Securities portion of the underlying index or portfolio. The Exchange does not propose any limit to the weighting of cash in an index or portfolio underlying a series of Shares.\8\ The Commission notes that, under a provision of its current rule, the Exchange may generically list Shares overlying a combination of indexes so long as each index satisfies the generic listing criteria.\9\ --------------------------------------------------------------------------- \8\ See Notice, supra note 4, 82 FR at 24172. \9\ See BZX Rule 14.11(c)(5). --------------------------------------------------------------------------- III. Discussion and Commission Findings The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\10\ In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,\11\ which requires, among other things, that the rules of a national securities exchange 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. --------------------------------------------------------------------------- \10\ 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). \11\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Commission believes that permitting the Exchange to generically list Shares that overlie an index or portfolio with a cash component may enhance competition among generically listed Shares, to the benefit of investors and the marketplace. Additionally, the Commission believes that the generic listing criteria referenced above, applicable only to the non-cash portion(s) of the index or portfolio will neither dilute the generic listing criteria nor render the indexes or portfolios underlying generically listed Shares more susceptible to manipulation.\12\ Lastly, the Commission notes that it recently approved a substantively similar proposal by another national securities exchange.\13\ --------------------------------------------------------------------------- \12\ The Commission also notes that the Exchange represents that it has in place surveillance procedures that are adequate to properly monitor trading in Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. See Notice, supra note 4, 82 FR at 24172. \13\ See Securities Exchange Act Release No. 80777 (May 25, 2017), 82 FR 25378 (June 1, 2017) (SR-NYSEArca-2017-30). --------------------------------------------------------------------------- For the foregoing reasons, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act \14\ and the rules and regulations thereunder applicable to a national securities exchange. --------------------------------------------------------------------------- \14\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act,\15\ that the proposed rule change (SR-BatsBZX-2017-26) be, and it hereby is, approved. --------------------------------------------------------------------------- \15\ 15 U.S.C. 78s(b)(2). 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. 2017-14248 Filed 7-6-17; 8:45 am] BILLING CODE 8011-01-P
![31650 Federal Register / Vol. 82, No. 129 / Friday, July 7, 2017 / Notices
SECURITIES AND EXCHANGE may hold cash, currently, the generic trade, to remove impediments to and
COMMISSION listing criteria of BZX Rules 14.11(c) do perfect the mechanism of a free and
not contemplate the generic listing of open market and a national market
[Release No. 34–81070; File No. SR–
BatsBZX–2017–26]
Shares overlying an index or portfolio system and, in general, to protect
with a cash component. investors and the public interest.
Self-Regulatory Organizations; Bats The Exchange proposes to amend
BZX Rules 14.11(c)(3) and 14.11(c)(4) to The Commission believes that
BZX Exchange, Inc.; Order Approving permitting the Exchange to generically
a Proposed Rule Change, To Amend permit the generic listing and trading of
Shares overlying an index or portfolio of list Shares that overlie an index or
BZX Rule 14.11 To Provide for the portfolio with a cash component may
Inclusion of Cash in an Index cash and: (1) U.S. Component Stocks;
(2) Non-U.S. Component Stocks; (3) U.S. enhance competition among generically
Underlying a Series of Index Fund
Shares Component Stocks and Non-U.S. listed Shares, to the benefit of investors
Component Stocks; and (4) Fixed and the marketplace. Additionally, the
June 30, 2017. Income Securities. The Exchange is not Commission believes that the generic
I. Introduction proposing to otherwise amend the listing criteria referenced above,
applicable generic listing criteria, except applicable only to the non-cash
On May 12, 2017, Bats BZX Exchange, to specify that the following generic portion(s) of the index or portfolio will
Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed listing criteria will not apply to the cash neither dilute the generic listing criteria
with the Securities and Exchange portion of the index or portfolio: nor render the indexes or portfolios
Commission (‘‘Commission’’), pursuant • Under proposed BZX Rule underlying generically listed Shares
to Section 19(b)(1) 1 of the Securities 14.11(c)(3)(A)(i)(a) through (d), the
Exchange Act of 1934 (‘‘Act’’ or more susceptible to manipulation.12
percentage weighting requirements Lastly, the Commission notes that it
‘‘Exchange Act’’) 2 and Rule 19b–4 would apply only to the U.S.
thereunder,3 a proposed rule change to recently approved a substantively
Component Stocks portion of the
amend BZX Rule 14.11 to provide for similar proposal by another national
underlying index or portfolio.
the inclusion of cash in an index securities exchange.13
• Under proposed BZX Rule
underlying a series of Index Fund 14.11(c)(3)(A)(ii)(a) through (d), the For the foregoing reasons, the
Shares. The proposed rule change was percentage weighting requirements Commission finds that the proposed
published for comment in the Federal would not apply to the cash component rule change is consistent with Section
Register on May 25, 2017.4 The of the underlying index or portfolio. 6(b)(5) of the Act 14 and the rules and
Commission received no comments on • Under proposed BZX Rule regulations thereunder applicable to a
the proposed rule change. This order 14.11(c)(4)(B)(i)(b), (d), and (f), the national securities exchange.
approves the proposed rule change. percentage weighting requirements
would apply only to the Fixed Income IV. Conclusion
II. Description of the Proposal
Securities portion of the underlying It is therefore ordered, pursuant to
BZX Rules 14.11(c)(3) and 14.11(c)(4) index or portfolio.
permit the Exchange to generically list The Exchange does not propose any Section 19(b)(2) of the Exchange Act,15
Index Fund Shares (‘‘Shares’’) that limit to the weighting of cash in an that the proposed rule change (SR–
overlie an index or portfolio of U.S. index or portfolio underlying a series of BatsBZX–2017–26) be, and it hereby is,
Component Stocks,5 Non-U.S. Shares.8 The Commission notes that, approved.
Component Stocks,6 U.S. Component under a provision of its current rule, the For the Commission, by the Division of
Stocks and Non-U.S. Component Stocks, Exchange may generically list Shares Trading and Markets, pursuant to delegated
and Fixed Income Securities 7 that overlying a combination of indexes so authority.16
meets specified criteria. Although open- long as each index satisfies the generic
end investment management companies Brent J. Fields,
listing criteria.9
Secretary.
1 15 U.S.C. 78s(b)(1). III. Discussion and Commission [FR Doc. 2017–14248 Filed 7–6–17; 8:45 am]
2 15 U.S.C. 78a. Findings BILLING CODE 8011–01–P
3 17 CFR 240.19b–4.
4 See Securities Exchange Act Release No. 80728
The Commission finds that the
(May 19, 2017), 82 FR 24171 (‘‘Notice’’). proposed rule change is consistent with
5 ‘‘U.S. Component Stock’’ is defined in BZX Rule the requirements of the Act and the
14.11(c)(1)(D) as an equity security that is registered rules and regulations thereunder
under Sections 12(b) or 12(g) of the Act, or an applicable to a national securities
American Depositary Receipt, the underlying equity
security of which is registered under Sections 12(b)
exchange.10 In particular, the
or 12(g) of the Act. Commission finds that the proposed
6 ‘‘Non-U.S. Component Stock’’ is defined in BZX rule change is consistent with Section
Rule 14.11(c)(1)(E) as an equity security that (a) is 6(b)(5) of the Act,11 which requires,
not registered under Sections 12(b) or 12(g) of Act, among other things, that the rules of a 12 The Commission also notes that the Exchange
(b) is issued by an entity that is not organized,
domiciled or incorporated in the United States, and national securities exchange be represents that it has in place surveillance
(c) is issued by an entity that is an operating designed to prevent fraudulent and procedures that are adequate to properly monitor
manipulative acts and practices, to trading in Shares in all trading sessions and to deter
asabaliauskas on DSKBBXCHB2PROD with NOTICES
company (including Real Estate Investment Trusts
and income trusts, but excluding investment trusts, and detect violations of Exchange rules and
promote just and equitable principles of
unit trusts, mutual funds, and derivatives). applicable federal securities laws. See Notice, supra
7 BZX Rule 14.11(c)(4) defines Fixed Income note 4, 82 FR at 24172.
8 See
Notice, supra note 4, 82 FR at 24172.
Securities as debt securities that are notes, bonds, 13 See Securities Exchange Act Release No. 80777
9 See
BZX Rule 14.11(c)(5).
debentures or evidence of indebtedness that (May 25, 2017), 82 FR 25378 (June 1, 2017) (SR–
10 In approving this proposed rule change, the
include, but are not limited to, U.S. Department of NYSEArca–2017–30).
Treasury securities, government-sponsored entity Commission has considered the proposed rule’s
14 15 U.S.C. 78f(b)(5).
securities, municipal securities, trust preferred impact on efficiency, competition, and capital
15 15 U.S.C. 78s(b)(2).
securities, supranational debt and debt of a foreign formation. See 15 U.S.C. 78c(f).
country or a subdivision thereof. 11 15 U.S.C. 78f(b)(5). 16 17 CFR 200.30–3(a)(12).
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Document Created: 2017-07-07 02:19:46
Document Modified: 2017-07-07 02:19:46
| 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 | 82 FR 31650 |
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