83 FR 47210 - Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To List and Trade Shares of the iShares iBonds Dec 2025 Term Muni Bond ETF of iShares Trust Under BZX Rule 14.11(c)(4) (Index Fund Shares)
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 181 (September 18, 2018)
Federal Register Volume 83, Issue 181 (September 18, 2018)
| Page Range | 47210-47215 | |
| FR Document | 2018-20237 |
[Federal Register Volume 83, Number 181 (Tuesday, September 18, 2018)] [Notices] [Pages 47210-47215] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-20237] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-84107; File No. SR-CboeBZX-2018-070] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To List and Trade Shares of the iShares iBonds Dec 2025 Term Muni Bond ETF of iShares Trust Under BZX Rule 14.11(c)(4) (Index Fund Shares) September 13, 2018. 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 August 30, 2018, Cboe BZX Exchange, Inc. (``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 Exchange has designated this proposal as a ``non-controversial'' proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with the Commission. 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. \3\ 15 U.S.C. 78s(b)(3)(A). \4\ 17 CFR 240.19b-4(f)(6)(iii). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to list and trade under BZX Rule 14.11(c)(4) the shares of the iShares iBonds Dec 2025 Term Muni Bond ETF (the ``Fund'') of iShares Trust (the ``Trust''). The text of the proposed rule change is available at the Exchange's website at www.markets.cboe.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 Exchange proposes to list and trade shares (``Shares'') of the Fund under BZX Rule 14.11(c)(4),\5\ which governs the listing and trading of index fund shares based on fixed income securities indexes.\6\ The Shares will be [[Page 47211]] offered by the Trust, which was established as a Delaware statutory trust on December 16, 1999. The Trust is registered with the Commission as an open-end investment company and has filed a registration statement on behalf of the Fund on Form N-1A (``Registration Statement'') with the Commission.\7\ --------------------------------------------------------------------------- \5\ The Commission approved BZX Rule 14.11(c) in Securities Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148 (September 6, 2011) (SR-BATS-2011-018). \6\ The Commission previously has approved proposed rule changes relating to listing and trading of funds based on municipal bond indexes. See Securities Exchange Act Release Nos. 78329 (July 14, 2016), 81 FR 47217 (July 20, 2016) (SR-BatsBZX-2016-01) (order approving the listing and trading of the following series of VanEck Vectors ETF Trust: VanEck Vectors AMT-Free 6-8 Year Municipal Index ETF; VanEck Vectors AMT-Free 8-12 Year Municipal Index ETF; and VanEck Vectors AMT-Free 12-17 Year Municipal Index ETF); 67985 (October 4, 2012), 77 FR 61804 (October 11, 2012) (SR-NYSEArca-2012- 92) (order approving proposed rule change relating to the listing and trading of iShares 2018 S&P AMT-Free Municipal Series and iShares 2019 S&P AMT-Free Municipal Series under NYSE Arca, Inc. (``NYSE Arca'') Rule 5.2(j)(3), Commentary .02); 72523 (July 2, 2014), 79 FR 39016 (July 9, 2014) (SR-NYSEArca-2014-37) (order approving proposed rule change relating to the listing and trading of iShares 2020 S&P AMT-Free Municipal Series under NYSE Arca Rule 5.2(j)(3), Commentary .02); and 75468 (July 16, 2015), 80 FR 43500 (July 22, 2015) (SR-NYSEArca-2015-25) (order approving proposed rule change relating to the listing and trading of the iShares iBonds Dec 2021 AMT-Free Muni Bond ETF and iShares iBonds Dec 2022 AMT-Free Muni Bond ETF under NYSE Arca Rule 5.2(j)(3), Commentary .02). \7\ See Registration Statement on Form N-1A for the Trust, dated [DATE] [sic] (File Nos. 333-92935 and 811-09729). The descriptions of the Fund and the Shares contained herein are based, in part, on information in the Registration Statement. The Commission has issued an order granting certain exemptive relief to the Trust under the Investment Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') (the ``Exemptive Order''). See Investment Company Act Release No. 28021 (October 24, 2007) (File No. 812-13426). --------------------------------------------------------------------------- Rule 14.11(c)(4)(B)(i)(b) requires that component fixed income securities that, in the aggregate, account for at least 75% of the weight of the index or portfolio shall have a minimum principal amount outstanding of $100 million or more. The Exchange submits this proposal because the Underlying Index does not meet this requirement. The Underlying Index does, however, meet all of the other requirements of Rule 14.11(c)(4). Description of the Shares and the Fund BlackRock Fund Advisors (``BFA'') is the investment adviser to the Fund.\8\ State Street Bank and Trust Company is the administrator, custodian, and transfer agent for the Trust. S&P is the index provider (the ``Index Provider'') for the Fund. BlackRock Investments, LLC serves as the distributor for the Trust. --------------------------------------------------------------------------- \8\ BFA is an indirect wholly owned subsidiary of BlackRock, Inc. --------------------------------------------------------------------------- S&P AMT-Free Municipal Series Dec 2025 Index According to the Registration Statement, the Fund will seek to track the investment results, before fees and expenses, of the S&P AMT- Free Municipal Series Dec 2025 Index (the ``Underlying Index''), which measures the performance of investment-grade (as determined by Index Provider), non-callable U.S. municipal bonds maturing in 2025. The Underlying Index includes municipal bonds from issuers that are state or local governments or agencies such that the interest on each such bond is exempt from U.S. federal income taxes and the federal alternative minimum tax (``AMT'') (``Municipal Securities''). As of July 13, 2018, the Underlying Index included 4,823 component fixed income municipal bond securities from issuers in 51 different states or U.S. territories.\9\ The most heavily weighted security in the Underlying Index represented approximately 1.10% of the total weight of the Underlying Index and the aggregate weight of the top five most heavily weighted securities in the Underlying Index represented less than 2.98% of the total weight of the Underlying Index. Approximately 6.73% of the weight of the components in the Underlying Index had a minimum original principal outstanding of $100 million or more and 75.56% of the weight of the components were a constituent of an offering where the original offering amount was at least $100 million. In addition, the total dollar amount outstanding of issues in the Underlying Index was approximately $40,600,000,000 and the average dollar amount outstanding of issues in the Underlying Index was approximately $8,419,000. --------------------------------------------------------------------------- \9\ Unless otherwise noted, all statistics related to the Underlying Index presented hereafter were accurate as of July 13, 2018. --------------------------------------------------------------------------- Requirement for Index Constituents Each bond in the Underlying Index must be denominated in U.S. dollars, must have a minimum par amount of $2 million. To remain in the Underlying Index, bonds must maintain a minimum par amount greater than or equal to $2 million as of the next rebalancing date. The Underlying Index includes Municipal Securities from issuers that are state or local governments or agencies such that the interest on each such bond is exempt from U.S. federal income taxes and the AMT. Each bond in the Underlying Index must be investment-grade (i.e., have a rating of at least BBB- by S&P Global Ratings, Baa3 by Moody's Investors Service, Inc., or BBB- by Fitch Ratings, Inc.). A bond must be rated by at least one of these three rating agencies in order to qualify for the Underlying Index, and the lowest rating will be used in determining if the bond is investment-grade. All bonds in the Underlying Index will mature after December 31, 2024 and before December 2, 2025. The Underlying Index will also contain at least 500 component securities. Portfolio Holdings The Fund's holdings may include only the following types of Municipal Securities: General obligation bonds,\10\ limited obligation bonds (or revenue bonds),\11\ municipal notes,\12\ municipal commercial paper,\13\ tender option bonds,\14\ variable rate notes and demand obligations (``VRDOs''),\15\ municipal lease obligations,\16\ stripped securities,\17\ structured securities,\18\ and zero coupon securities.\19\ --------------------------------------------------------------------------- \10\ General obligation bonds are obligations involving the credit of an issuer possessing taxing power and are payable from such issuer's general revenues and not from any particular source. \11\ Limited obligation bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other specific revenue source, and also include industrial development bonds issued pursuant to former U.S. federal tax law. Industrial development bonds generally are also revenue bonds and thus are not payable from the issuer's general revenues. The credit and quality of industrial development bonds are usually related to the credit of the corporate user of the facilities. Payment of interest on and repayment of principal of such bonds is the responsibility of the corporate user (and/or any guarantor). \12\ Municipal notes are shorter-term municipal debt obligations that may provide interim financing in anticipation of tax collection, receipt of grants, bond sales, or revenue receipts. \13\ Municipal commercial paper is generally unsecured debt that is issued to meet short-term financing needs. \14\ Tender option bonds are synthetic floating-rate or variable-rate securities issued when long-term bonds are purchased in the primary or secondary market and then deposited into a trust. Custodial receipts are then issued to investors, such as the Fund, evidencing ownership interests in the trust. \15\ VRDOs are tax-exempt obligations that contain a floating or variable interest rate adjustment formula and a right of demand on the part of the holder thereof to receive payment of the unpaid principal balance plus accrued interest upon a short notice period not to exceed seven days. \16\ Municipal lease obligations include certificates of participation issued by government authorities or entities to finance the acquisition or construction of equipment, land, and/or facilities. \17\ Stripped securities are created when an issuer separates the interest and principal components of an instrument and sells them as separate securities. In general, one security is entitled to receive the interest payments on the underlying assets and the other to receive the principal payments. \18\ Structured securities are privately negotiated debt obligations where the principal and/or interest is determined by reference to the performance of an underlying investment, index, or reference obligation, and may be issued by governmental agencies. While structured securities are part of the principal holdings of the Fund, the Issuer represents that such securities, when combined with those instruments held as part of the other portfolio holdings described below, will not exceed 20% of the Fund's net assets. \19\ Zero coupon securities are securities that are sold at a discount to par value and do not pay interest during the life of the security. The discount approximates the total amount of interest the security will accrue and compound over the period until maturity at a rate of interest reflecting the market rate of the security at the time of issuance. Upon maturity, the holder of a zero coupon security is entitled to receive the par value of the security. --------------------------------------------------------------------------- [[Page 47212]] Under normal market conditions,\20\ the Fund will invest at least 90% of its assets in the component securities of the Underlying Index, except during the last months of the Fund's operations. With respect to the remaining 10% of its assets, the Fund may invest in certain futures, options and swap contracts,\21\ cash and cash equivalents, including shares of money market funds advised by BFA or its affiliates, as well as in Municipal Securities not included in the Underlying Index, but which BFA believes will help the Fund track the Underlying Index. From time to time when conditions warrant, however, the Fund may invest at least 80% of its assets in the component securities of the Underlying Index. --------------------------------------------------------------------------- \20\ The term ``normal market conditions'' includes, but is not limited to, the absence of trading halts in the applicable financial markets generally; operational issues (e.g., systems failure) causing dissemination of inaccurate market information; or force majeure type events such as natural or manmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. \21\ Such futures, options and swap contracts will include only the following: Interest rate futures, interest rate options, and interest rate swaps. The derivatives will be centrally cleared and they will be collateralized. At least 90% of the Fund's net assets that are invested in listed derivatives will be invested in instruments that trade in markets that are members or affiliates of members of the Intermarket Surveillance Group (``ISG'') or are parties to a comprehensive surveillance sharing with the Exchange. --------------------------------------------------------------------------- In the last months of operation, as the bonds held by the Fund mature, the proceeds will not be reinvested in bonds but instead will be held in cash and cash equivalents, including, without limitation, shares of money market funds advised by BFA or its affiliates (``BlackRock Cash Funds''), AMT-free tax-exempt municipal notes, variable rate demand notes and obligations, tender option bonds and municipal commercial paper. These cash equivalents may not be included in the Fund's benchmark index. Discussion Based on the characteristics of the Underlying Index and the representations made in the Requirements for Index Constituents section above, the Exchange believes it is appropriate to allow the listing and trading of the Shares. The Underlying Index and Fund satisfy all of the generic listing requirements for Index Fund Shares based on a fixed income index, except for the minimum principal amount outstanding requirement of 14.11(c)(4)(B)(i)(b). The Exchange notes that the representations in the Requirements for Index Constituents for the Underlying Index are identical to the representations made regarding the S&P AMT-Free Municipal Series Dec 2023 Index and the S&P AMT-Free Municipal Series Dec 2024 Index (the ``Comparable Indexes''), each underlying a series of Index Fund Shares that were previously approved for listing and trading by the Commission.\22\ --------------------------------------------------------------------------- \22\ See Securities Exchange Act Release No. 79381 (November 22, 2016), 81 FR 86044 (November 29, 2016) (SR-BatsBZX-2016-48) (Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendments No. 1 and No. 2 Thereto, To List and Trade Shares of the iShares iBonds Dec 2023 Term Muni Bond ETF and iShares iBonds Dec 2024 Term Muni Bond ETF of the iShares U.S. ETF Trust Pursuant to BZX Rule 14.11(c)(4)) (the ``Approval Order''). --------------------------------------------------------------------------- The Approval Order included the representation that a bond must be investment-grade and must have an outstanding par value of at least $2 million in order to be included in the Comparable Indexes. To remain in the Underlying Index, bonds must be investment-grade and maintain a minimum par amount greater than or equal to $2 million and, further, BFA has represented that the Underlying Index will have at least 500 constituents on a continuous basis. As such, the Exchange believes that the proposal is consistent with the Act because the representations regarding the quality and size of the issuances included in the Underlying Index provide a strong degree of protection against index manipulation that is consistent with other proposals that have been approved for listing and trading by the Commission, which is only furthered by the additional representation that the Underlying Index will have at least 500 constituents on a continuous basis, which ensures diversification among constituent securities. In addition, the Exchange represents that: (1) Except for Rule 14.11(c)(4)(B)(i)(b), the Underlying Index currently satisfies all of the generic listing standards under Rule 14.11(c)(4); (2) the continued listing standards under Rule 14.11(c), as applicable to Index Fund Shares based on fixed income securities, will apply to the Shares; and (3) the issuer of the Fund is required to comply with Rule 10A-3 \23\ under the Act for the initial and continued listing of the Shares. In addition, the Exchange represents that the Fund will comply with all other requirements applicable to Index Fund Shares, including, but not limited to, requirements relating to the dissemination of key information such as the value of the Underlying Index and the Intraday Indicative Value (``IIV''),\24\ rules governing the trading of equity securities, trading hours, trading halts, surveillance, information barriers and the Information Circular, as set forth in the Exchange rules applicable to Index Fund Shares and prior Commission orders approving the generic listing rules applicable to the listing and trading of Index Fund Shares. --------------------------------------------------------------------------- \23\ 17 CFR 240.10A-3. \24\ The IIV will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Exchange's Regular Trading Hours. Currently, it is the Exchange's understanding that several major market data vendors display and/or make widely available IIVs taken from the Consolidated Tape Association (``CTA'') or other data feeds. --------------------------------------------------------------------------- The current value of the Underlying Index will be widely disseminated by one or more major market data vendors at least once per day, as required by Rule 14.11(c)(4)(C)(ii). The portfolio of securities held by the Fund will be disclosed daily on the Fund's website at www.ishares.com. Further, the Fund's website will contain the Fund's prospectus and additional data relating to net asset value (``NAV'') and other applicable quantitative information. The issuer has represented that the NAV will be calculated daily and will be made available to all market participants at the same time. The Index Provider is not a broker-dealer and is not affiliated with a broker- dealer. To the extent that the Index Provider becomes a broker-dealer or becomes affiliated with a broker-dealer, the Index Provider will implement and will maintain a ``fire wall'' around the personnel who have access to information concerning changes and adjustments to the Underlying Index and the Underlying Index shall be calculated by a third party who is not a broker-dealer or fund advisor. In addition, any advisory committee, supervisory board or similar entity that advises the Index Provider or that makes decisions on the Index, methodology and related matters, will implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material non-public information regarding the Underlying Index. The Exchange's existing rules require that the issuer of the Fund notify the Exchange of any material change to the methodology used to determine the composition of the Underlying Index and, therefore, if the methodology of the Underlying Index was changed in a manner that would materially alter its existing composition, the Exchange would have advance notice and would evaluate the modifications to determine [[Page 47213]] whether the Underlying Index remained sufficiently broad-based and well diversified. Availability of Information The Fund's website, which will be publicly available prior to the public offering of Shares, will include a form of the prospectus for the Fund that may be downloaded. The website will include additional quantitative information updated on a daily basis, including, for the Fund: (1) The prior business day's reported NAV, daily trading volume, and a calculation of the premium and discount of the Bid/Ask Price against the NAV; and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. Daily trading volume information for the Shares will also be available in the financial section of newspapers, through subscription services such as Bloomberg, Thomson Reuters, and International Data Corporation, which can be accessed by authorized participants and other investors, as well as through other electronic services, including major public websites. On each business day, the Fund will disclose on its website the identities and quantities of the portfolio of securities and other assets in the daily disclosed portfolio held by the Fund that formed the basis for the Fund's calculation of NAV at the end of the previous business day. The daily disclosed portfolio will include, as applicable: The ticker symbol; CUSIP number or other identifier, if any; a description of the holding (including the type of holding, such as the type of swap); the identity of the security, index or other asset or instrument underlying the holding, if any; for options, the option strike price; quantity held (as measured by, for example, par value, notional value or number of shares, contracts, or units); maturity date, if any; coupon rate, if any; effective date, if any; market value of the holding; and the percentage weighting of the holding in the Fund's portfolio. The website and information will be publicly available at no charge. The value, components, and percentage weightings of the Underlying Index will be calculated and disseminated at least once daily and will be available from major market data vendors. Rules governing the Underlying Index are available on S&P's website and in the Fund's prospectus. In addition, an estimated value, defined in BZX Rule 14.11(c)(6)(A) as the ``Intraday Indicative Value,'' that reflects an estimated intraday value of the Fund's portfolio, will be disseminated. Moreover, the Intraday Indicative Value will be based upon the current value for the components of the daily disclosed portfolio and 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.\25\ In addition, the quotations of certain of the Fund's holdings may not be updated during U.S. trading hours if updated prices cannot be ascertained. --------------------------------------------------------------------------- \25\ Currently, it is the Exchange's understanding that several major market data vendors display and/or make widely available Intraday Indicative Values published via the Consolidated Tape Association (``CTA'') or other data feeds. --------------------------------------------------------------------------- The dissemination of the Intraday Indicative Value, together with the daily disclosed portfolio, will allow investors to determine the value of the underlying portfolio of the Fund on a daily basis and provide a close estimate of that value throughout the trading day. Quotation and last sale information for the Shares will be available via the CTA high speed line. Price information regarding Municipal Securities and other non-exchange traded assets including certain derivatives, money market funds and other instruments, and repurchase agreements is available from third party pricing services and major market data vendors. For exchange-traded assets, including futures, and certain options, such intraday information is available directly from the applicable listing exchange. In addition, price information for U.S. exchange-traded options will be available from the Options Price Reporting Authority. Surveillance The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by the Financial Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, or by regulatory staff of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws. The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange.\26\ --------------------------------------------------------------------------- \26\ FINRA conducts cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA's performance under this regulatory services agreement. --------------------------------------------------------------------------- The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares with other markets and other entities that are members of the ISG, and the Exchange or FINRA, on behalf of the Exchange, or both, may obtain trading information regarding trading in the Shares from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. In addition, FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities held by a Fund reported to FINRA's Trade Reporting and Compliance Engine (``TRACE''). FINRA also can access data obtained from the Municipal Securities Rulemaking Board's Electronic Municipal Market Access (``EMMA'') system relating to municipal bond trading activity for surveillance purposes in connection with trading in the Shares. 2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6(b) of the Act \27\ in general and Section 6(b)(5) of the Act \28\ in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \27\ 15 U.S.C. 78f [sic]. \28\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria for Index Fund Shares based on a fixed income index in Rule 14.11(c)(4), except for the minimum principal amount outstanding requirement of 14.11(c)(4)(B)(i)(b). The [[Page 47214]] Exchange represents that trading in the Shares will be subject to the existing trading surveillances administered by the Exchange as well as cross-market surveillances administered by the FINRA on behalf of the Exchange, which are designed to detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange. The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares with other markets that are members of the ISG. In addition, the Exchange will communicate as needed regarding trading in the Shares with other markets that are members of the ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. FINRA also can access data obtained from the EMMA system relating to municipal bond trading activity for surveillance purposes in connection with trading in the Shares. FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities held by the Fund reported to TRACE. As discussed above, the Exchange believes that the Underlying Index is sufficiently broad-based to deter potential manipulation. The Underlying Index currently includes 4,823 component securities. Whereas the Rule 14.11(c)(4)(B)(i)(e) requires that an index contain securities from a minimum of 13 non-affiliated issuers, the Underlying Index includes securities issued by municipal entities in more than 51 states or U.S. territories. Further, whereas the generic listing rules permit a single component security to represent up to 30% of the weight of an index and the top five component securities to, in aggregate, represent up to 65% of the weight of an index, the largest component security in the Underlying Index only constitutes 1.10% of the weight of the Underlying Index and the largest five component securities represent 2.98% of the weight of the Underlying Index. The Exchange believes that this significant diversification and the lack of concentration among constituent securities provide a strong degree of protection against index manipulation. The Underlying Index and Fund satisfy all of the generic listing requirements for Index Fund Shares based on a fixed income index, except for the minimum principal amount outstanding requirement of 14.11(c)(4)(B)(i)(b). With this in mind, the Exchange notes that the representations in the Requirements for Index Constituents for the Underlying Index are identical to the representations made regarding the Comparable Indexes, each of which are underlying a series of Index Fund Shares that were previously approved for listing and trading by the Commission \29\ and, further, BFA has made an additional representation regarding diversification that was not included in the Approval Order. --------------------------------------------------------------------------- \29\ See supra note 9 [sic]. --------------------------------------------------------------------------- The Approval Order included the representation that a bond must be investment-grade and must have an outstanding par value of at least $2 million in order to be included in the Comparable Indexes. To remain in the Underlying Index, bonds must be investment-grade and maintain a minimum par amount greater than or equal to $2 million and, further, BFA has represented that the Underlying Index will have at least 500 constituents on a continuous basis. As such, the Exchange believes that the proposal is consistent with the Act because the representations regarding the quality and size of the issuances included in the Underlying Index provide a strong degree of protection against index manipulation that is consistent with other proposals that have been approved for listing and trading by the Commission, which is only furthered by the additional representation that the Underlying Index will have at least 500 constituents on a continuous basis, which ensures diversification among constituent securities. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that a large amount of information is publicly available regarding the Fund, thereby promoting market transparency. The Fund's portfolio holdings will be disclosed on the Fund's website daily after the close of trading on the Exchange. Moreover, the IIV for Shares will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Exchange's Regular Trading Hours. The current value of the Index will be disseminated by one or more major market data vendors at least once per day. 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, and quotation and last sale information will be available via the CTA high-speed line. The website for the Fund will include the prospectus for the Fund and additional data relating to NAV and other applicable quantitative information. If the Exchange becomes aware that the Fund's NAV is not being disseminated to all market participants at the same time, it will halt trading in the Shares until such time as the NAV is available to all market participants. With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the shares the Fund inadvisable. If the IIV and index value are not being disseminated for the Fund as required, the Exchange may halt trading during the day in which the interruption to the dissemination of the IIV or index value occurs. If the interruption to the dissemination of an IIV or index value persists past the trading day in which it occurred, the Exchange will halt trading. The Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares. The Exchange will halt trading in the Shares under the conditions specified in BZX Rule 11.18. 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 securities and/or the financial instruments composing the daily 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. Trading in the Shares also will be subject to Rule 14.11(c)(1)(B)(iv), which sets forth circumstances under which Shares of a Fund may be halted. In addition, investors will have ready access to information regarding the applicable IIV, and quotation and last sale information for the Shares. Trade price and other information relating to Municipal Securities is available through the EMMA system. All statements and representations made in this filing 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 listing rules shall constitute continued listing requirements for listing the Shares on the Exchange. The issuer is required to [[Page 47215]] advise the Exchange of any failure by the Fund to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor 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 Rule 14.12. The proposed rule change is designed 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 an exchange-traded product that principally holds Municipal Securities and that will enhance competition among market participants, to the benefit of investors and the marketplace. The Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information 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, investors will have ready access to information regarding the IIV and quotation and last sale information for the Shares. 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. The Exchange notes that the proposed rule change will facilitate the listing and trading of an additional exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. (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 Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act \30\ and Rule 19b- 4(f)(6) thereunder.\31\ --------------------------------------------------------------------------- \30\ 15 U.S.C. 78s(b)(3)(A). \31\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. --------------------------------------------------------------------------- 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. 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 rule-comments@sec.gov. Please include File Number SR-CboeBZX-2018-070 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-CboeBZX-2018-070. 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 website (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 website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CboeBZX-2018-070, and should be submitted on or before October 9, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\32\ Eduardo A. Aleman, Assistant Secretary. --------------------------------------------------------------------------- \32\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- [FR Doc. 2018-20237 Filed 9-17-18; 8:45 am] BILLING CODE 8011-01-P
![47210 Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Notices
immediately upon filing. The submission, all subsequent by the Exchange. The Exchange has
Commission notes that the Exchange’s amendments, all written statements designated this proposal as a ‘‘non-
proposal would conform the Exchange’s with respect to the proposed rule controversial’’ proposed rule change
rules to the amended OLPP, which the change that are filed with the pursuant to Section 19(b)(3)(A) of the
Commission previously approved.20 Commission, and all written Act 3 and Rule 19b–4(f)(6)(iii)
Accordingly, the Commission believes communications relating to the thereunder,4 which renders it effective
that the proposal raises no new or novel proposed rule change between the upon filing with the Commission. The
regulatory issues and waiver of the 30- Commission and any person, other than Commission is publishing this notice to
day operative delay is consistent with those that may be withheld from the solicit comments on the proposed rule
the protection of investors and the public in accordance with the change from interested persons.
public interest. The Commission provisions of 5 U.S.C. 552, will be
therefore waives the 30-day operative available for website viewing and I. Self-Regulatory Organization’s
delay and designates the proposed rule printing in the Commission’s Public Statement of the Terms of Substance of
change to be operative upon filing.21 Reference Room, 100 F Street NE, the Proposed Rule Change
At any time within 60 days of the Washington, DC 20549, on official The Exchange is proposing to list and
filing of such proposed rule change, the business days between the hours of trade under BZX Rule 14.11(c)(4) the
Commission summarily may 10:00 a.m. and 3:00 p.m. Copies of the shares of the iShares iBonds Dec 2025
temporarily suspend such rule change if filing also will be available for Term Muni Bond ETF (the ‘‘Fund’’) of
it appears to the Commission that such inspection and copying at the principal iShares Trust (the ‘‘Trust’’).
action is necessary or appropriate in the office of the Exchange. All comments The text of the proposed rule change
public interest, for the protection of received will be posted without change. is available at the Exchange’s website at
investors, or otherwise in furtherance of Persons submitting comments are www.markets.cboe.com, at the principal
the purposes of the Act. If the cautioned that we do not redact or edit office of the Exchange, and at the
Commission takes such action, the personal identifying information from Commission’s Public Reference Room.
Commission shall institute proceedings comment submissions. You should
under Section 19(b)(2)(B) 22 of the Act to submit only information that you wish II. Self-Regulatory Organization’s
determine whether the proposed rule to make available publicly. All Statement of the Purpose of, and
change should be approved or submissions should refer to File Statutory Basis for, the Proposed Rule
disapproved. Number SR–MIAX–2018–24 and should Change
be submitted on or before October 9, In its filing with the Commission, the
IV. Solicitation of Comments 2018. Exchange included statements
Interested persons are invited to For the Commission, by the Division of concerning the purpose of and basis for
submit written data, views, and Trading and Markets, pursuant to delegated the proposed rule change and discussed
arguments concerning the foregoing, authority.23 any comments it received on the
including whether the proposed rule Eduardo A. Aleman, proposed rule change. The text of these
change is consistent with the Act. Assistant Secretary. statements may be examined at the
Comments may be submitted by any of [FR Doc. 2018–20190 Filed 9–17–18; 8:45 am] places specified in Item IV below. The
the following methods: Exchange has prepared summaries, set
BILLING CODE 8011–01–P
Electronic Comments forth in Sections A, B, and C below, of
the most significant parts of such
• Use the Commission’s internet statements.
SECURITIES AND EXCHANGE
comment form (http://www.sec.gov/
COMMISSION (A) Self-Regulatory Organization’s
rules/sro.shtml); or
• Send an email to rule-comments@ [Release No. 34–84107; File No. SR– Statement of the Purpose of, and
sec.gov. Please include File Number SR– CboeBZX–2018–070] Statutory Basis for, the Proposed Rule
MIAX–2018–24 on the subject line. Change
Self-Regulatory Organizations; Cboe
Paper Comments BZX Exchange, Inc.; Notice of Filing 1. Purpose
• Send paper comments in triplicate and Immediate Effectiveness of a The Exchange proposes to list and
to Secretary, Securities and Exchange Proposed Rule Change To List and trade shares (‘‘Shares’’) of the Fund
Commission, 100 F Street NE, Trade Shares of the iShares iBonds under BZX Rule 14.11(c)(4),5 which
Washington, DC 20549–1090. Dec 2025 Term Muni Bond ETF of governs the listing and trading of index
All submissions should refer to File iShares Trust Under BZX Rule fund shares based on fixed income
Number SR–MIAX–2018–24. This file 14.11(c)(4) (Index Fund Shares) securities indexes.6 The Shares will be
number should be included on the September 13, 2018.
3 15 U.S.C. 78s(b)(3)(A).
subject line if email is used. To help the Pursuant to Section 19(b)(1) of the 4 17 CFR 240.19b–4(f)(6)(iii).
Commission process and review your Securities Exchange Act of 1934 5 The Commission approved BZX Rule 14.11(c) in
comments more efficiently, please use (‘‘Act’’),1 and Rule 19b–4 thereunder,2 Securities Exchange Act Release No. 65225 (August
only one method. The Commission will notice is hereby given that on August 30, 2011), 76 FR 55148 (September 6, 2011) (SR–
post all comments on the Commission’s 30, 2018, Cboe BZX Exchange, Inc. BATS–2011–018).
internet website (http://www.sec.gov/ (‘‘Exchange’’ or ‘‘BZX’’) filed with the
6 The Commission previously has approved
rules/sro.shtml). Copies of the proposed rule changes relating to listing and trading
Securities and Exchange Commission
daltland on DSKBBV9HB2PROD with NOTICES
of funds based on municipal bond indexes. See
(‘‘Commission’’) the proposed rule Securities Exchange Act Release Nos. 78329 (July
20 See OLPP Notice, supra note 3. change as described in Items I and II 14, 2016), 81 FR 47217 (July 20, 2016) (SR–
21 For purposes only of waiving the 30-day
below, which Items have been prepared BatsBZX–2016–01) (order approving the listing and
operative delay, the Commission has also trading of the following series of VanEck Vectors
considered the proposed rule’s impact on ETF Trust: VanEck Vectors AMT-Free 6–8 Year
23 17 CFR 200.30–3(a)(12).
efficiency, competition, and capital formation. See Municipal Index ETF; VanEck Vectors AMT-Free 8–
15 U.S.C. 78c(f). 1 15 U.S.C. 78s(b)(1). 12 Year Municipal Index ETF; and VanEck Vectors
22 15 U.S.C. 78s(b)(2)(B). 2 17 CFR 240.19b–4. AMT-Free 12–17 Year Municipal Index ETF); 67985
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![Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Notices 47211
offered by the Trust, which was determined by Index Provider), non- contain at least 500 component
established as a Delaware statutory trust callable U.S. municipal bonds maturing securities.
on December 16, 1999. The Trust is in 2025. The Underlying Index includes
Portfolio Holdings
registered with the Commission as an municipal bonds from issuers that are
open-end investment company and has state or local governments or agencies The Fund’s holdings may include
filed a registration statement on behalf such that the interest on each such bond only the following types of Municipal
of the Fund on Form N–1A is exempt from U.S. federal income Securities: General obligation bonds,10
(‘‘Registration Statement’’) with the taxes and the federal alternative limited obligation bonds (or revenue
Commission.7 minimum tax (‘‘AMT’’) (‘‘Municipal bonds),11 municipal notes,12 municipal
Rule 14.11(c)(4)(B)(i)(b) requires that Securities’’). commercial paper,13 tender option
component fixed income securities that, As of July 13, 2018, the Underlying bonds,14 variable rate notes and demand
in the aggregate, account for at least Index included 4,823 component fixed obligations (‘‘VRDOs’’),15 municipal
75% of the weight of the index or income municipal bond securities from lease obligations,16 stripped securities,17
portfolio shall have a minimum issuers in 51 different states or U.S. structured securities,18 and zero coupon
principal amount outstanding of $100 territories.9 The most heavily weighted securities.19
million or more. The Exchange submits security in the Underlying Index
this proposal because the Underlying represented approximately 1.10% of the 10 General obligation bonds are obligations
Index does not meet this requirement. involving the credit of an issuer possessing taxing
total weight of the Underlying Index power and are payable from such issuer’s general
The Underlying Index does, however, and the aggregate weight of the top five revenues and not from any particular source.
meet all of the other requirements of most heavily weighted securities in the 11 Limited obligation bonds are payable only from
Rule 14.11(c)(4). Underlying Index represented less than the revenues derived from a particular facility or
class of facilities or, in some cases, from the
Description of the Shares and the Fund 2.98% of the total weight of the proceeds of a special excise or other specific
Underlying Index. Approximately revenue source, and also include industrial
BlackRock Fund Advisors (‘‘BFA’’) is 6.73% of the weight of the components development bonds issued pursuant to former U.S.
the investment adviser to the Fund.8 in the Underlying Index had a minimum federal tax law. Industrial development bonds
State Street Bank and Trust Company is original principal outstanding of $100 generally are also revenue bonds and thus are not
the administrator, custodian, and payable from the issuer’s general revenues. The
million or more and 75.56% of the credit and quality of industrial development bonds
transfer agent for the Trust. S&P is the weight of the components were a are usually related to the credit of the corporate
index provider (the ‘‘Index Provider’’) constituent of an offering where the user of the facilities. Payment of interest on and
for the Fund. BlackRock Investments, original offering amount was at least
repayment of principal of such bonds is the
LLC serves as the distributor for the responsibility of the corporate user (and/or any
$100 million. In addition, the total guarantor).
Trust. dollar amount outstanding of issues in 12 Municipal notes are shorter-term municipal
S&P AMT-Free Municipal Series Dec the Underlying Index was debt obligations that may provide interim financing
in anticipation of tax collection, receipt of grants,
2025 Index approximately $40,600,000,000 and the bond sales, or revenue receipts.
According to the Registration average dollar amount outstanding of 13 Municipal commercial paper is generally
Statement, the Fund will seek to track issues in the Underlying Index was unsecured debt that is issued to meet short-term
approximately $8,419,000. financing needs.
the investment results, before fees and 14 Tender option bonds are synthetic floating-rate
expenses, of the S&P AMT-Free Requirement for Index Constituents or variable-rate securities issued when long-term
Municipal Series Dec 2025 Index (the Each bond in the Underlying Index
bonds are purchased in the primary or secondary
‘‘Underlying Index’’), which measures market and then deposited into a trust. Custodial
must be denominated in U.S. dollars, receipts are then issued to investors, such as the
the performance of investment-grade (as must have a minimum par amount of $2 Fund, evidencing ownership interests in the trust.
15 VRDOs are tax-exempt obligations that contain
million. To remain in the Underlying
(October 4, 2012), 77 FR 61804 (October 11, 2012) a floating or variable interest rate adjustment
(SR–NYSEArca–2012–92) (order approving Index, bonds must maintain a minimum formula and a right of demand on the part of the
proposed rule change relating to the listing and par amount greater than or equal to $2 holder thereof to receive payment of the unpaid
trading of iShares 2018 S&P AMT-Free Municipal million as of the next rebalancing date. principal balance plus accrued interest upon a short
Series and iShares 2019 S&P AMT-Free Municipal The Underlying Index includes notice period not to exceed seven days.
Series under NYSE Arca, Inc. (‘‘NYSE Arca’’) Rule 16 Municipal lease obligations include certificates
5.2(j)(3), Commentary .02); 72523 (July 2, 2014), 79 Municipal Securities from issuers that of participation issued by government authorities or
FR 39016 (July 9, 2014) (SR–NYSEArca–2014–37) are state or local governments or entities to finance the acquisition or construction of
(order approving proposed rule change relating to agencies such that the interest on each equipment, land, and/or facilities.
the listing and trading of iShares 2020 S&P AMT- such bond is exempt from U.S. federal 17 Stripped securities are created when an issuer
Free Municipal Series under NYSE Arca Rule separates the interest and principal components of
5.2(j)(3), Commentary .02); and 75468 (July 16, income taxes and the AMT. Each bond an instrument and sells them as separate securities.
2015), 80 FR 43500 (July 22, 2015) (SR–NYSEArca– in the Underlying Index must be In general, one security is entitled to receive the
2015–25) (order approving proposed rule change investment-grade (i.e., have a rating of at interest payments on the underlying assets and the
relating to the listing and trading of the iShares least BBB¥ by S&P Global Ratings, Baa3 other to receive the principal payments.
iBonds Dec 2021 AMT-Free Muni Bond ETF and 18 Structured securities are privately negotiated
iShares iBonds Dec 2022 AMT-Free Muni Bond by Moody’s Investors Service, Inc., or
debt obligations where the principal and/or interest
ETF under NYSE Arca Rule 5.2(j)(3), Commentary BBB¥ by Fitch Ratings, Inc.). A bond is determined by reference to the performance of an
.02). must be rated by at least one of these underlying investment, index, or reference
7 See Registration Statement on Form N–1A for
three rating agencies in order to qualify obligation, and may be issued by governmental
the Trust, dated [DATE] [sic] (File Nos. 333–92935 agencies. While structured securities are part of the
and 811–09729). The descriptions of the Fund and
for the Underlying Index, and the lowest principal holdings of the Fund, the Issuer
the Shares contained herein are based, in part, on rating will be used in determining if the represents that such securities, when combined
bond is investment-grade. All bonds in
daltland on DSKBBV9HB2PROD with NOTICES
information in the Registration Statement. The with those instruments held as part of the other
Commission has issued an order granting certain the Underlying Index will mature after portfolio holdings described below, will not exceed
exemptive relief to the Trust under the Investment 20% of the Fund’s net assets.
Company Act of 1940 (15 U.S.C. 80a–1) (‘‘1940
December 31, 2024 and before December 19 Zero coupon securities are securities that are
Act’’) (the ‘‘Exemptive Order’’). See Investment 2, 2025. The Underlying Index will also sold at a discount to par value and do not pay
Company Act Release No. 28021 (October 24, 2007) interest during the life of the security. The discount
(File No. 812–13426). 9 Unless otherwise noted, all statistics related to approximates the total amount of interest the
8 BFA is an indirect wholly owned subsidiary of the Underlying Index presented hereafter were security will accrue and compound over the period
BlackRock, Inc. accurate as of July 13, 2018. Continued
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![Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Notices 47213
whether the Underlying Index remained the Fund’s portfolio, will be which could be indicative of
sufficiently broad-based and well disseminated. Moreover, the Intraday manipulative or other violative activity.
diversified. Indicative Value will be based upon the When such situations are detected,
current value for the components of the surveillance analysis follows and
Availability of Information
daily disclosed portfolio and will be investigations are opened, where
The Fund’s website, which will be updated and widely disseminated by appropriate, to review the behavior of
publicly available prior to the public one or more major market data vendors all relevant parties for all relevant
offering of Shares, will include a form at least every 15 seconds during the trading violations.
of the prospectus for the Fund that may Exchange’s Regular Trading Hours.25 In The Exchange or FINRA, on behalf of
be downloaded. The website will addition, the quotations of certain of the the Exchange, or both, will
include additional quantitative Fund’s holdings may not be updated communicate as needed regarding
information updated on a daily basis, during U.S. trading hours if updated trading in the Shares with other markets
including, for the Fund: (1) The prior prices cannot be ascertained. and other entities that are members of
business day’s reported NAV, daily The dissemination of the Intraday the ISG, and the Exchange or FINRA, on
trading volume, and a calculation of the Indicative Value, together with the daily behalf of the Exchange, or both, may
premium and discount of the Bid/Ask disclosed portfolio, will allow investors obtain trading information regarding
Price against the NAV; and (2) data in to determine the value of the underlying trading in the Shares from such markets
chart format displaying the frequency portfolio of the Fund on a daily basis and other entities. In addition, the
distribution of discounts and premiums and provide a close estimate of that Exchange may obtain information
of the daily Bid/Ask Price against the value throughout the trading day. regarding trading in the Shares from
NAV, within appropriate ranges, for Quotation and last sale information markets and other entities that are
each of the four previous calendar for the Shares will be available via the members of ISG or with which the
quarters. Daily trading volume CTA high speed line. Price information Exchange has in place a comprehensive
information for the Shares will also be regarding Municipal Securities and surveillance sharing agreement. In
available in the financial section of other non-exchange traded assets addition, FINRA, on behalf of the
newspapers, through subscription including certain derivatives, money Exchange, is able to access, as needed,
services such as Bloomberg, Thomson market funds and other instruments, trade information for certain fixed
Reuters, and International Data and repurchase agreements is available income securities held by a Fund
Corporation, which can be accessed by from third party pricing services and reported to FINRA’s Trade Reporting
authorized participants and other major market data vendors. For and Compliance Engine (‘‘TRACE’’).
investors, as well as through other exchange-traded assets, including FINRA also can access data obtained
electronic services, including major futures, and certain options, such from the Municipal Securities
public websites. On each business day, intraday information is available Rulemaking Board’s Electronic
the Fund will disclose on its website the directly from the applicable listing Municipal Market Access (‘‘EMMA’’)
identities and quantities of the portfolio exchange. In addition, price information system relating to municipal bond
of securities and other assets in the for U.S. exchange-traded options will be trading activity for surveillance
daily disclosed portfolio held by the available from the Options Price purposes in connection with trading in
Fund that formed the basis for the Reporting Authority. the Shares.
Fund’s calculation of NAV at the end of
Surveillance 2. Statutory Basis
the previous business day. The daily
disclosed portfolio will include, as The Exchange represents that trading The Exchange believes that the
applicable: The ticker symbol; CUSIP in the Shares will be subject to the proposal is consistent with Section 6(b)
number or other identifier, if any; a existing trading surveillances, of the Act 27 in general and Section
description of the holding (including administered by the Financial Industry 6(b)(5) of the Act 28 in particular in that
the type of holding, such as the type of Regulatory Authority (‘‘FINRA’’) on it is designed to prevent fraudulent and
swap); the identity of the security, index behalf of the Exchange, or by regulatory manipulative acts and practices, to
or other asset or instrument underlying staff of the Exchange, which are promote just and equitable principles of
the holding, if any; for options, the designed to detect violations of trade, to foster cooperation and
option strike price; quantity held (as Exchange rules and applicable federal coordination with persons engaged in
measured by, for example, par value, securities laws. The Exchange facilitating transactions in securities, to
notional value or number of shares, represents that these procedures are remove impediments to and perfect the
contracts, or units); maturity date, if adequate to properly monitor Exchange mechanism of a free and open market
any; coupon rate, if any; effective date, trading of the Shares in all trading and a national market system and, in
if any; market value of the holding; and sessions and to deter and detect general, to protect investors and the
the percentage weighting of the holding violations of Exchange rules and federal public interest.
in the Fund’s portfolio. The website and securities laws applicable to trading on The Exchange believes that the
information will be publicly available at the Exchange.26 proposed rule change is designed to
no charge. The value, components, and The surveillances referred to above prevent fraudulent and manipulative
percentage weightings of the Underlying generally focus on detecting securities acts and practices in that the Shares will
Index will be calculated and trading outside their normal patterns, be listed and traded on the Exchange
disseminated at least once daily and pursuant to the initial and continued
25 Currently, it is the Exchange’s understanding
will be available from major market data listing criteria for Index Fund Shares
daltland on DSKBBV9HB2PROD with NOTICES
that several major market data vendors display and/
vendors. Rules governing the or make widely available Intraday Indicative Values based on a fixed income index in Rule
Underlying Index are available on S&P’s published via the Consolidated Tape Association 14.11(c)(4), except for the minimum
website and in the Fund’s prospectus. (‘‘CTA’’) or other data feeds. principal amount outstanding
26 FINRA conducts cross-market surveillances on
In addition, an estimated value, requirement of 14.11(c)(4)(B)(i)(b). The
behalf of the Exchange pursuant to a regulatory
defined in BZX Rule 14.11(c)(6)(A) as services agreement. The Exchange is responsible for
the ‘‘Intraday Indicative Value,’’ that FINRA’s performance under this regulatory services 27 15 U.S.C. 78f [sic].
reflects an estimated intraday value of agreement. 28 15 U.S.C. 78f(b)(5).
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![47214 Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Notices
Exchange represents that trading in the principal amount outstanding via the CTA high-speed line. The
Shares will be subject to the existing requirement of 14.11(c)(4)(B)(i)(b). With website for the Fund will include the
trading surveillances administered by this in mind, the Exchange notes that prospectus for the Fund and additional
the Exchange as well as cross-market the representations in the Requirements data relating to NAV and other
surveillances administered by the for Index Constituents for the applicable quantitative information.
FINRA on behalf of the Exchange, Underlying Index are identical to the If the Exchange becomes aware that
which are designed to detect violations representations made regarding the the Fund’s NAV is not being
of Exchange rules and federal securities Comparable Indexes, each of which are disseminated to all market participants
laws applicable to trading on the underlying a series of Index Fund at the same time, it will halt trading in
Exchange. The Exchange represents that Shares that were previously approved the Shares until such time as the NAV
these procedures are adequate to for listing and trading by the is available to all market participants.
properly monitor Exchange trading of Commission 29 and, further, BFA has With respect to trading halts, the
the Shares in all trading sessions and to made an additional representation Exchange may consider all relevant
deter and detect violations of Exchange regarding diversification that was not factors in exercising its discretion to
rules and federal securities laws included in the Approval Order. halt or suspend trading in the Shares.
applicable to trading on the Exchange. The Approval Order included the Trading also may be halted because of
The Exchange or FINRA, on behalf of representation that a bond must be market conditions or for reasons that, in
the Exchange, or both, will investment-grade and must have an the view of the Exchange, make trading
communicate as needed regarding outstanding par value of at least $2 in the shares the Fund inadvisable. If
trading in the Shares with other markets million in order to be included in the the IIV and index value are not being
that are members of the ISG. In addition, Comparable Indexes. To remain in the disseminated for the Fund as required,
the Exchange will communicate as Underlying Index, bonds must be the Exchange may halt trading during
needed regarding trading in the Shares investment-grade and maintain a the day in which the interruption to the
with other markets that are members of minimum par amount greater than or dissemination of the IIV or index value
the ISG or with which the Exchange has equal to $2 million and, further, BFA occurs. If the interruption to the
in place a comprehensive surveillance has represented that the Underlying dissemination of an IIV or index value
sharing agreement. FINRA also can Index will have at least 500 constituents persists past the trading day in which it
access data obtained from the EMMA on a continuous basis. As such, the occurred, the Exchange will halt
system relating to municipal bond Exchange believes that the proposal is trading. The Exchange may consider all
trading activity for surveillance consistent with the Act because the relevant factors in exercising its
purposes in connection with trading in representations regarding the quality discretion to halt or suspend trading in
the Shares. FINRA, on behalf of the and size of the issuances included in the the Shares. The Exchange will halt
Exchange, is able to access, as needed, Underlying Index provide a strong trading in the Shares under the
trade information for certain fixed degree of protection against index conditions specified in BZX Rule 11.18.
income securities held by the Fund manipulation that is consistent with Trading may be halted because of
reported to TRACE. other proposals that have been approved market conditions or for reasons that, in
As discussed above, the Exchange for listing and trading by the the view of the Exchange, make trading
believes that the Underlying Index is Commission, which is only furthered by in the Shares inadvisable. These may
sufficiently broad-based to deter the additional representation that the include: (1) The extent to which trading
potential manipulation. The Underlying Underlying Index will have at least 500 is not occurring in the securities and/or
Index currently includes 4,823 constituents on a continuous basis, the financial instruments composing the
component securities. Whereas the Rule which ensures diversification among daily disclosed portfolio of the Fund; or
14.11(c)(4)(B)(i)(e) requires that an constituent securities. (2) whether other unusual conditions or
index contain securities from a The proposed rule change is designed circumstances detrimental to the
minimum of 13 non-affiliated issuers, to promote just and equitable principles maintenance of a fair and orderly
the Underlying Index includes of trade and to protect investors and the market are present. Trading in the
securities issued by municipal entities public interest in that a large amount of Shares also will be subject to Rule
in more than 51 states or U.S. territories. information is publicly available 14.11(c)(1)(B)(iv), which sets forth
Further, whereas the generic listing regarding the Fund, thereby promoting circumstances under which Shares of a
rules permit a single component market transparency. The Fund’s Fund may be halted. In addition,
security to represent up to 30% of the portfolio holdings will be disclosed on investors will have ready access to
weight of an index and the top five the Fund’s website daily after the close information regarding the applicable
component securities to, in aggregate, of trading on the Exchange. Moreover, IIV, and quotation and last sale
represent up to 65% of the weight of an the IIV for Shares will be widely information for the Shares. Trade price
index, the largest component security in disseminated by one or more major and other information relating to
the Underlying Index only constitutes market data vendors at least every 15 Municipal Securities is available
1.10% of the weight of the Underlying seconds during the Exchange’s Regular through the EMMA system.
Index and the largest five component Trading Hours. The current value of the All statements and representations
securities represent 2.98% of the weight Index will be disseminated by one or made in this filing regarding the Index
of the Underlying Index. more major market data vendors at least composition, the description of the
The Exchange believes that this once per day. Information regarding portfolio or reference assets, limitations
significant diversification and the lack market price and trading volume of the on portfolio holdings or reference assets,
daltland on DSKBBV9HB2PROD with NOTICES
of concentration among constituent Shares will be continually available on dissemination and availability of Index,
securities provide a strong degree of a real-time basis throughout the day on reference asset, and intraday indicative
protection against index manipulation. brokers’ computer screens and other values (as applicable), or the
The Underlying Index and Fund satisfy electronic services, and quotation and applicability of Exchange listing rules
all of the generic listing requirements last sale information will be available shall constitute continued listing
for Index Fund Shares based on a fixed requirements for listing the Shares on
income index, except for the minimum 29 See supra note 9 [sic]. the Exchange. The issuer is required to
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![Federal Register / Vol. 83, No. 181 / Tuesday, September 18, 2018 / Notices 47215
advise the Exchange of any failure by as the Commission may designate, it has Washington, DC 20549 on official
the Fund to comply with the continued become effective pursuant to Section business days between the hours of
listing requirements, and, pursuant to 19(b)(3)(A) of the Act 30 and Rule 19b– 10:00 a.m. and 3:00 p.m. Copies of the
its obligations under Section 19(g)(1) of 4(f)(6) thereunder.31 filing also will be available for
the Act, the Exchange will monitor for At any time within 60 days of the inspection and copying at the principal
compliance with the continued listing filing of the proposed rule change, the office of the Exchange. All comments
requirements. If the Fund is not in Commission summarily may received will be posted without change.
compliance with the applicable listing temporarily suspend such rule change if Persons submitting comments are
requirements, the Exchange will it appears to the Commission that such cautioned that we do not redact or edit
commence delisting procedures under action is necessary or appropriate in the personal identifying information from
Rule 14.12. public interest, for the protection of comment submissions. You should
The proposed rule change is designed investors, or otherwise in furtherance of submit only information that you wish
to perfect the mechanism of a free and the purposes of the Act. to make available publicly. All
open market and, in general, to protect IV. Solicitation of Comments submissions should refer to File
investors and the public interest in that Number SR–CboeBZX–2018–070, and
it will facilitate the listing and trading Interested persons are invited to should be submitted on or before
of an exchange-traded product that submit written data, views, and October 9, 2018.
principally holds Municipal Securities arguments concerning the foregoing,
including whether the proposed rule For the Commission, by the Division of
and that will enhance competition Trading and Markets, pursuant to delegated
among market participants, to the change is consistent with the Act.
authority.32
benefit of investors and the marketplace. Comments may be submitted by any of
the following methods: Eduardo A. Aleman,
The Exchange has in place surveillance Assistant Secretary.
procedures relating to trading in the Electronic Comments [FR Doc. 2018–20237 Filed 9–17–18; 8:45 am]
Shares and may obtain information via
• Use the Commission’s internet BILLING CODE 8011–01–P
ISG from other exchanges that are
comment form (http://www.sec.gov/
members of ISG or with which the
rules/sro.shtml); or
Exchange has entered into a • Send an email to rule-comments@ SECURITIES AND EXCHANGE
comprehensive surveillance sharing sec.gov. Please include File Number SR– COMMISSION
agreement. In addition, investors will CboeBZX–2018–070 on the subject line.
have ready access to information Sunshine Act Meetings
regarding the IIV and quotation and last Paper Comments
sale information for the Shares. • Send paper comments in triplicate TIME AND DATE: 2:00 p.m. on Thursday,
For the above reasons, the Exchange to Secretary, Securities and Exchange September 20, 2018.
believes that the proposed rule change Commission, 100 F Street NE, PLACE: Closed Commission Hearing,
is consistent with the requirements of Washington, DC 20549–1090. Room 10800.
Section 6(b)(5) of the Act. All submissions should refer to File STATUS: This meeting will be closed to
(B) Self-Regulatory Organization’s Number SR–CboeBZX–2018–070. This the public.
Statement on Burden on Competition file number should be included on the
subject line if email is used. To help the MATTERS TO BE CONSIDERED:
The Exchange does not believe that Commissioners, Counsel to the
Commission process and review your
the proposed rule change will impose Commissioners, the Secretary to the
comments more efficiently, please use
any burden on competition that is not Commission, and recording secretaries
only one method. The Commission will
necessary or appropriate in furtherance will attend the closed meeting. Certain
post all comments on the Commission’s
of the purpose of the Act. The Exchange internet website (http://www.sec.gov/ staff members who have an interest in
notes that the proposed rule change will rules/sro.shtml). Copies of the the matters also may be present.
facilitate the listing and trading of an submission, all subsequent The General Counsel of the
additional exchange-traded product that amendments, all written statements Commission, or his designee, has
will enhance competition among market with respect to the proposed rule certified that, in his opinion, one or
participants, to the benefit of investors change that are filed with the more of the exemptions set forth in 5
and the marketplace. Commission, and all written U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
(C) Self-Regulatory Organization’s communications relating to the and (10) and 17 CFR 200.402(a)(3),
Statement on Comments on the proposed rule change between the (a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
Proposed Rule Change Received From Commission and any person, other than (a)(10), permit consideration of the
Members, Participants or Others those that may be withheld from the scheduled matters at the closed meeting.
public in accordance with the Commissioner Stein, as duty officer,
The Exchange has neither solicited
provisions of 5 U.S.C. 552, will be voted to consider the items listed for the
nor received written comments on the
available for website viewing and closed meeting in closed session.
proposed rule change.
printing in the Commission’s Public The subject matters of the closed
III. Date of Effectiveness of the Reference Room, 100 F Street NE, meeting will be:
Proposed Rule Change and Timing for Institution and settlement of
Commission Action 30 15 U.S.C. 78s(b)(3)(A). injunctive actions;
daltland on DSKBBV9HB2PROD with NOTICES
31 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
Because the foregoing proposed rule Institution and settlement of
4(f)(6)(iii) requires a self-regulatory organization to
change does not: (i) Significantly affect give the Commission written notice of its intent to
administrative proceedings;
the protection of investors or the public file the proposed rule change, along with a brief Resolution of litigation claims; and
interest; (ii) impose any significant description and text of the proposed rule change, Other matters relating to enforcement
at least five business days prior to the date of filing proceedings.
burden on competition; and (iii) become of the proposed rule change, or such shorter time
operative for 30 days from the date on as designated by the Commission. The Exchange
which it was filed, or such shorter time has satisfied this requirement. 32 17 CFR 200.30–3(a)(12).
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Document Created: 2018-09-18 01:18:15
Document Modified: 2018-09-18 01:18:15
| 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 | 83 FR 47210 |
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