82 FR 48560 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Provide Interpretation With Respect to the Meaning, Administration, or Enforcement of Rule 14.11, Other Securities, and Rule 14.12, Failure To Meet Listing Standards

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 200 (October 18, 2017)

[Federal Register Volume 82, Number 200 (Wednesday, October 18, 2017)]
[Notices]
[Pages 48560-48562]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-22539]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81864; File No. SR-BatsBZX-2017-61]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Provide 
Interpretation With Respect to the Meaning, Administration, or 
Enforcement of Rule 14.11, Other Securities, and Rule 14.12, Failure To 
Meet Listing Standards

October 12, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 29, 2017, Bats BZX Exchange, Inc. (``Exchange'') 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 48561]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to provide interpretation with 
respect to the meaning, administration, or enforcement of Rule 14.11 
and 14.12.
    The text of the proposed rule change is also available on the 
Exchange's Web site (www.bats.com), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
Background
    On November 18, 2016 the Exchange filed a proposed rule change, as 
subsequently amended by Amendments No. 1 and 2 thereto (as amended, the 
``Continued Listing Standards''), to adopt certain changes to Exchange 
Rules 14.11 and 14.12 to add additional continued listing standards for 
exchange-traded products (``ETP'') as well as clarify the procedures 
that the Exchange will undertake when an ETP is noncompliant with 
applicable rules, which was approved by the Commission on March 7, 
2017. The Exchange submits this proposal in order to provide 
interpretive guidance as it relates to ETP issuers complying with the 
changes upon implementation.
Testing and Exchange Notification
    The Continued Listing Standards include language in numerous places 
that would require certain criteria related to index composition, 
portfolio holdings, or reference assets to be met ``upon initial 
listing and on a continual basis'' and that delisting proceedings will 
be initiated where ''any of the requirements set forth in this rule are 
not continuously met.'' As such, any instance of noncompliance reported 
to or discovered by the Exchange will be subject to delisting 
proceedings pursuant to Rule 14.12. If at any point during delisting 
proceedings the ETP regains compliance, such delisting proceedings will 
be terminated.
    The Exchange notes that, unless otherwise specified within the rule 
text, issuers of index-based ETPs listed on the Exchange should test 
for compliance with such criteria upon any index rebalance, 
reconstitution, or other material change to the index components 
(collectively, a ``Material Index Change''), as applicable, and no less 
frequently than on a quarterly basis. Similarly, unless otherwise 
specified within the rule text, issuers of Managed Fund Shares, as 
defined in Rule 14.11(i), listed on the Exchange should test for 
compliance with such criteria upon any material change to the 
portfolio's holdings (collectively with Material Index Change, a 
``Material Change''), as applicable, and no less frequently than on a 
quarterly basis. Any test conducted as part of a Material Change would 
satisfy the testing requirement for the applicable quarter. For 
purposes of this interpretation, the issuer may set the quarterly 
schedule, whether based on the fiscal year end of a fund, the calendar 
quarters, or otherwise. At no point should there be a period of greater 
than four months during which such a test for compliance has not been 
conducted. Nothing in this proposal should be construed as restricting 
the frequency with which an issuer may test for compliance. The 
Continued Listing Standards also include language in numerous places 
that would require the Exchange to initiate delisting proceedings for 
an ETP listed pursuant to a proposal submitted by the Exchange pursuant 
to Section 19(b) that has become effective or has been approved by the 
Commission where ``any of the applicable Continued Listing 
Representations \3\ are not continuously met.'' Similarly, to the 
extent that any Continued Listing Representations for index-based ETPs 
or Managed Fund Shares relate to index composition, portfolio holdings, 
or reference assets, issuers of ETPs listed on the Exchange should test 
for compliance with such criteria upon any Material Change, as 
applicable, and no less frequently than on a quarterly basis. The 
Exchange notes that it will also be independently reviewing ETPs listed 
on the Exchange for compliance with the Continued Listing Standards.
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    \3\ Pursuant to Rule 14.11(a) of the Continued Listing 
Standards, the term ``Continued Listing Representations'' shall mean 
any of the statements or representations regarding the index 
composition, the description of the portfolio or reference assets, 
limitations on portfolio holdings or reference assets, dissemination 
and availability of index, reference asset, and intraday indicative 
values (as applicable), or the applicability of Exchange rules 
specified in any filing to list a series of Other Securities.
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    Issuers shall provide annual attestations affirming that such tests 
are being conducted and that the issuer is not aware of any undisclosed 
instances of noncompliance. To the extent that an issuer believes that 
it will not be able to comply with the Continued Listing Standards, the 
Exchange encourages issuers to proactively reach out to the Listing 
Qualifications Department to work on a proposal to submit pursuant to 
19(b) of the Act. If managed proactively, the Exchange believes that 
such issues can be managed without interruption to the listing of the 
ETP on the Exchange.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder that 
are applicable to a national securities exchange, and, in particular, 
with the requirements of Section 6(b) of the Act.\4\ In particular, the 
Exchange believes the proposed change furthers the objectives of 
Section 6(b)(5) of the Act,\5\ in that it is designed to prevent 
fraudulent and manipulative acts and practices, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, and to remove impediments to and perfect the mechanism of a 
free and open market and a national market system by providing 
interpretations for issuers of ETPs to comply with the Continued 
Listing Standards. The Exchange believes that such interpretive 
guidance will provide issuers with the clarity needed to dedicate the 
resources necessary to build adequate compliance systems in furtherance 
of the protection of investors and the public interest.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
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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 purposes of the Act. The Exchange notes that the 
proposed rule change will facilitate ETP issuers' ability to monitor 
and evidence compliance with the Continued Listing Standards by 
providing interpretation that will provide additional clarity and 
certainty around the Continued Listing Standards on which issuers will 
be able to rely.

[[Page 48562]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(1) thereunder.\7\ 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission will institute proceedings to determine whether 
the proposed rule change should be approved or disapproved.
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(1).
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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 Comments

     Use 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-2017-61 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-2017-61. 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 the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; 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-2017-61 and should 
be submitted on or before November 8, 2017.
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    \8\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-22539 Filed 10-17-17; 8:45 am]
 BILLING CODE 8011-01-P