[Federal Register Volume 80, Number 76 (Tuesday, April 21, 2015)]
[Notices]
[Pages 22234-22242]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09066]



[[Page 22234]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74730; File No. SR-NYSEArca-2015-25]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change, and Amendment No. 1 Thereto, To List and Trade 
Shares of the iShares iBonds Dec 2021 AMT-Free Muni Bond ETF and 
iShares iBonds Dec 2022 AMT-Free Muni Bond ETF Under NYSE Arca Equities 
Rule 5.2(j)(3)

April 15, 2015.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 31, 2015, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. On April 14, 2015, the Exchange filed Amendment No. 1 to 
the proposed rule change, which superseded the original filing. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended by Amendment No. 1, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade under NYSE Arca Equities 
Rule 5.2(j)(3), Commentary .02, the shares of the following series of 
the iShares Trust: iShares iBonds Dec 2021 AMT-Free Muni Bond ETF and 
iShares iBonds Dec 2022 AMT-Free Muni Bond ETF. The text of the 
proposed rule change is available on the Exchange's Web site at 
www.nyse.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 self-regulatory organization 
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 those 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
following series of the iShares Trust (the ``Trust'') under NYSE Arca 
Equities Rule 5.2(j)(3), Commentary .02, which governs the listing and 
trading of Investment Company Units (``Units'') based on fixed income 
securities indexes: iShares iBonds Dec 2021 AMT-Free Muni Bond ETF and 
iShares iBonds Dec 2022 AMT-Free Muni Bond ETF (each a ``Fund'' and, 
collectively, the ``Funds'').\4\
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    \4\ The Commission previously has approved a proposed rule 
change relating to listing and trading on the Exchange of Units 
based on municipal bond indexes. See Securities Exchange Act Release 
Nos. 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 Equities 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 Equities Rule 
5.2(j)(3), Commentary .02). The Commission also has issued a notice 
of filing and immediate effectiveness of a proposed rule change 
relating to listing and trading on the Exchange of the iShares 
Taxable Municipal Bond Fund. See Securities Exchange Act Release No. 
63176 (October 25, 2010), 75 FR 66815 (October 29, 2010) (SR-
NYSEArca-2010-94). The Commission has approved two actively managed 
funds of the PIMCO ETF Trust that hold municipal bonds. See 
Securities Exchange Act Release No. 60981 (November 10, 2009), 74 FR 
59594 (November 18, 2009) (SR-NYSEArca-2009-79) (order approving 
listing and trading of PIMCO Short-Term Municipal Bond Strategy Fund 
and PIMCO Intermediate Municipal Bond Strategy Fund, among others). 
The Commission also has approved listing and trading on the Exchange 
of the SPDR Nuveen S&P High Yield Municipal Bond Fund. See 
Securities Exchange Act Release No. 63881 (February 9, 2011), 76 FR 
9065 (February 16, 2011) (SR-NYSEArca-2010-120).
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    Blackrock Fund Advisors (``BFA'') will be the investment adviser 
for the Funds.\5\
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    \5\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, BFA and its related personnel are subject to 
the provisions of Rule 204A-1 under the Advisers Act relating to 
codes of ethics. This Rule requires investment advisers to adopt a 
code of ethics that reflects the fiduciary nature of the 
relationship to clients as well as compliance with other applicable 
securities laws. Accordingly, procedures designed to prevent the 
communication and misuse of non-public information by an investment 
adviser must be consistent with Rule 204A-1 under the Advisers Act. 
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful 
for an investment adviser to provide investment advice to clients 
unless such investment adviser has (i) adopted and implemented 
written policies and procedures reasonably designed to prevent 
violation, by the investment adviser and its supervised persons, of 
the Advisers Act and the Commission rules adopted thereunder; (ii) 
implemented, at a minimum, an annual review regarding the adequacy 
of the policies and procedures established pursuant to subparagraph 
(i) above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
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    BlackRock Investments, LLC is the Funds' distributor 
(``Distributor'').\6\
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    \6\ With respect to the iShares iBonds Dec 2021 AMT-Free Muni 
Bond ETF, see Post-Effective Amendment No. 1,380 to the Trust's 
registration statement on Form N-1A under the Securities Act of 1933 
(15 U.S.C. 77a) (``1933 Act'') and the Investment Company Act of 
1940 (``1940 Act'') (15 U.S.C. 80a-1), dated March 26, 2015 (File 
Nos. 333-92935 and 811-09729), and, with respect to the iShares 
iBonds Dec 2022 AMT-Free Muni Bond ETF, see Post-Effective Amendment 
No. 1,381 to the Trust's registration statement on Form N-1A under 
the 1933 Act and 1940 Act, dated March 26, 2015 (File Nos. 333-92935 
and 811-09729) (each a ``Registration Statement'' and, collectively, 
the ``Registration Statements''). The description of the operation 
of the Trust and the Funds herein is based, in part, on the 
Registration Statements. In addition, the Commission has issued an 
order granting certain exemptive relief to the Trust under the 1940 
Act. See Investment Company Act Release No. 27608 (December 21, 
2006) (File No. 812-13208) (``Exemptive Order'').
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iShares iBonds Dec 2021 AMT-Free Muni Bond ETF
    The Fund will seek to track the investment results of an index 
composed of investment-grade U.S. municipal bonds maturing after 
December 31, 2020 and before December 2, 2021. Specifically, the Fund 
will seek to track the investment results of the S&P AMT-Free Municipal 
Series December 2021 Index\TM\ (the ``2021 Index''), which measures the 
performance of investment-grade, non-callable U.S. municipal bonds 
maturing after December 31, 2020 and before December 2, 2021.\7\ As of 
February 10, 2015, there were 4,217 issues in the 2021 Index.
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    \7\ The 2021 Index and the S&P AMT-Free Municipal Series 
December 2022 Index\TM\ (or the ``2022 Index'') (described below) 
are products of S&P Dow Jones Indices LLC, a subsidiary of McGraw 
Hill Financial, Inc. (the ``Index Provider''), which is independent 
of the Funds and BFA. The Index Provider determines the composition 
and relative weightings of the securities in the 2021 Index and 2022 
Index and publishes information regarding the market value of the 
2021 Index and 2022 Index. The Index Provider is not a broker-dealer 
or affiliated with a broker-dealer and has implemented procedures 
designed to prevent the use and dissemination of material, non-
public information regarding the 2021 Index and 2022 Index.
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    The 2021 Index includes municipal bonds primarily from issuers that 
are state or local governments or agencies such that the interest on 
the bonds is exempt from U.S. federal income taxes and the federal 
alternative minimum tax (``AMT''). Each bond must have a rating

[[Page 22235]]

of at least BBB- by Standard & Poor's Ratings Services (``S&P''), Baa3 
by Moody's Investors Service, Inc. (``Moody's''), or BBB- by Fitch 
Ratings, Inc. (``Fitch'') and must have a minimum maturity par amount 
of $2 million to be eligible for inclusion in the 2021 Index. To remain 
in the 2021 Index, bonds must maintain a minimum par amount greater 
than or equal to $2 million as of each rebalancing date. All bonds in 
the 2021 Index will mature after December 31, 2020 and before December 
2, 2021. When a bond matures in the 2021 Index, an amount representing 
its value at maturity will be included in the 2021 Index throughout the 
remaining life of the 2021 Index, and any such amount will be assumed 
to earn a rate equal to the performance of the Standard & Poor's 
Financial Services LLC's (a subsidiary of The McGraw-Hill Companies, 
Inc.) Weekly High Grade Index, municipal tax-exempt notes that are not 
subject to federal AMT. The 2021 Index is a market value weighted index 
and is rebalanced after the market close on the last business day of 
each month.
    The Fund generally will invest at least 80% of its assets in the 
securities of the 2021 Index, except during the last months of the 
Fund's operations, as described below. The Fund may invest the 
remainder of its assets in cash and cash equivalents (including shares 
of money market funds affiliated with BFA), as well as in municipal 
bonds not included in the 2021 Index, but which BFA believes will help 
the Fund track the 2021 Index. The Fund will seek to track the 
investment results of the 2021 Index before fees and expenses of the 
Fund.
    The Fund will generally hold municipal bond securities issued by 
state and local municipalities whose interest payments are exempt from 
U.S. federal income tax, the federal AMT and a federal Medicare 
contribution tax of 3.8% on ``net investment income,'' including 
dividends, interest and capital gains. In addition, the Fund may invest 
any cash assets in one or more affiliated municipal money market funds. 
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 affiliated with BFA, 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 2021 Index. Around December 1, 2021, the Fund will wind 
up and terminate, and its net assets will be distributed to then-
current shareholders.
    The Exchange is submitting this proposed rule change because the 
2021 Index for the Fund does not meet all of the ``generic'' listing 
requirements of Commentary .02(a) to NYSE Arca Equities Rule 5.2(j)(3) 
applicable to the listing of Units based on fixed income securities 
indexes. The 2021 Index meets all such requirements except for those 
set forth in Commentary .02(a)(2).\8\ Specifically, as of February 10, 
2015, 6.8% of the weight of the 2021 Index components have a minimum 
original principal amount outstanding of $100 million or more.
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    \8\ Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that components that in the aggregate account for at least 
75% of the weight of the index or portfolio each shall have a 
minimum original principal amount outstanding of $100 million or 
more.
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    As of February 10, 2015, 72% of the weight of the 2021 Index 
components was comprised of individual maturities that were part of an 
entire municipal bond offering with a minimum original principal amount 
outstanding of $100 million or more for all maturities of the offering. 
In addition, the total dollar amount outstanding of issues in the 2021 
Index was approximately $38.9 billion and the average dollar amount 
outstanding of issues in the 2021 Index was approximately $9.2 million. 
Further, the most heavily weighted component represented 0.57% of the 
weight of the 2021 Index and the five most heavily weighted components 
represented 2.51% of the weight of the 2021 Index.\9\ Therefore, the 
Exchange believes that, notwithstanding that the 2021 Index does not 
satisfy the criterion in NYSE Arca Equities Rule 5.2(j)(3), Commentary 
.02 (a)(2), the 2021 Index is sufficiently broad-based to deter 
potential manipulation, given that it is comprised of approximately 
4217 issues. In addition, the 2021 Index securities are sufficiently 
liquid to deter potential manipulation in that a substantial portion 
(72%) of the 2021 Index weight is comprised of maturities that are part 
of a minimum original principal amount outstanding of $100 million or 
more, and in view of the substantial total dollar amount outstanding 
and the average dollar amount outstanding of 2021 Index issues, as 
referenced above.\10\
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    \9\ Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that no component fixed-income security (excluding Treasury 
Securities and GSE Securities, as defined therein) shall represent 
more than 30% of the weight of the index or portfolio, and the five 
most heavily weighted component fixed-income securities in the index 
or portfolio shall not in the aggregate account for more than 65% of 
the weight of the index or portfolio.
    \10\ BFA represents that when bonds are close substitutes for 
one another, pricing vendors can use executed trade information from 
all similar bonds as pricing inputs for an individual security. This 
can make individual securities more liquid, because valuations for a 
single security are better estimators of actual trading prices when 
they are informed by trades in a large group of closely related 
securities. As a result, securities are more likely to trade at 
prices close to their valuation when they need to be sold.
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    As of February 10, 2015, 58.2% of the 2021 Index weight consisted 
of issues with a rating of AA/Aa2 or higher.
    The 2021 Index value, calculated and disseminated at least once 
daily, as well as the components of the 2021 Index and their percentage 
weighting, will be available from major market data vendors. In 
addition, the portfolio of securities held by the Fund will be 
disclosed on the Fund's Web site at www.iShares.com.
    According to the Registration Statement, BFA expects that, over 
time, the Fund's tracking error will not exceed 5%. ``Tracking error'' 
is the difference between the performance (return) of the Fund's 
portfolio and that of the 2021 Index.
iShares iBonds Dec 2022 AMT-Free Muni Bond ETF
    According to the Registration Statement, the iShares iBonds Dec 
2022 AMT-Free Muni Bond ETF will seek to track the investment results 
of an index composed of investment-grade U.S. municipal bonds maturing 
after December 31, 2021 and before December 2, 2022. The Fund will seek 
to track the investment results of the S&P AMT-Free Municipal Series 
December 2022 Index\TM\ (the ``2022 Index''), which measures the 
performance of investment-grade, non-callable U.S. municipal bonds 
maturing after December 31, 2021 and before December 2, 2022. As of 
February 10, 2015, there were 3473 issues in the 2022 Index.
    The 2022 Index includes municipal bonds primarily from issuers that 
are state or local governments or agencies such that the interest on 
the bonds is exempt from U.S. federal income taxes and the federal 
alternative minimum tax (``AMT''). Each bond must have a rating of at 
least BBB- by S&P, Baa3 by Moody's, or BBB- by Fitch Ratings, Inc. and 
must have a minimum maturity par amount of $2 million to be eligible 
for inclusion in the 2022 Index. To remain in the 2022 Index, bonds 
must maintain a minimum par amount greater than or equal to $2 million 
as of each rebalancing date. All bonds in the 2022 Index will mature in 
after December 31, 2021 and before December 2, 2022.

[[Page 22236]]

When a bond matures in the 2022 Index, an amount representing its value 
at maturity will be included in the 2022 Index throughout the remaining 
life of the 2022 Index, and any such amount will be assumed to earn a 
rate equal to the performance of the Standard & Poor's Financial 
Services LLC's Weekly High Grade Index, which consists of Moody's 
Investment Grade-1 municipal tax-exempt notes that are not subject to 
federal AMT. The 2022 Index is a market value weighted index and is 
rebalanced after the market close on the last business day of each 
month.
    The Fund generally will invest at least 80% of its assets in the 
securities of the 2022 Index, except during the last months of the 
Fund's operations, as described below. The Fund may invest the 
remainder of its assets in cash and cash equivalents (including shares 
of money market funds affiliated with BFA), as well as in municipal 
bonds not included in the 2022 Index, but which BFA believes will help 
the Fund track the 2022 Index. The Fund will seek to track the 
investment results of the 2022 Index before fees and expenses of the 
Fund.
    The Fund will generally hold municipal bond securities issued by 
state and local municipalities whose interest payments are exempt from 
U.S. federal income tax, the federal AMT and a federal Medicare 
contribution tax of 3.8% on ``net investment income,'' including 
dividends, interest and capital gains. 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 affiliated with BFA, 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 2022 Index. Around December 1, 2022, the Fund will wind up and 
terminate, and its net assets will be distributed to then-current 
shareholders.
    The Exchange is submitting this proposed rule change because the 
2022 Index for the Fund does not meet all of the ``generic'' listing 
requirements of Commentary .02(a) to NYSE Arca Equities Rule 5.2(j)(3) 
applicable to the listing of Units based on fixed income securities 
indexes. The 2022 Index meets all such requirements except for those 
set forth in Commentary .02(a)(2).\11\ Specifically, as of February 10, 
2015, 5.8% of the weight of the 2022 Index components have a minimum 
original principal amount outstanding of $100 million or more.
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    \11\ Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that components that in the aggregate account for at least 
75% of the weight of the index or portfolio each shall have a 
minimum original principal amount outstanding of $100 million or 
more.
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    As of February 10, 2015, 72.4% of the weight of the 2022 Index 
components was comprised of individual maturities that were part of an 
entire municipal bond offering with a minimum original principal amount 
outstanding of $100 million or more for all maturities of the offering. 
In addition, the total dollar amount outstanding of issues in the 2022 
Index was approximately $30.5 billion and the average dollar amount 
outstanding of issues in the 2022 Index was approximately $8.8 million. 
Further, the most heavily weighted component represented 0.55% of the 
weight of the 2022 Index and the five most heavily weighted components 
represented 2.67% of the weight of the 2022 Index.\12\ Therefore, the 
Exchange believes that, notwithstanding that the 2022 Index does not 
satisfy the criterion in NYSE Arca Equities Rule 5.2(j)(3), Commentary 
.02 (a)(2), the 2022 Index is sufficiently broad-based to deter 
potential manipulation, given that it is comprised of approximately 
3473 issues. In addition, the 2022 Index securities are sufficiently 
liquid to deter potential manipulation in that a substantial portion 
(72.4%) of the 2022 Index weight is comprised of maturities that are 
part of an offering with a minimum original principal amount 
outstanding of $100 million or more, and in view of the substantial 
total dollar amount outstanding and the average dollar amount 
outstanding of 2022 Index issues, as referenced above.\13\
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    \12\ Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that no component fixed-income security (excluding Treasury 
Securities and GSE Securities, as defined therein) shall represent 
more than 30% of the weight of the index or portfolio, and the five 
most heavily weighted component fixed-income securities in the index 
or portfolio shall not in the aggregate account for more than 65% of 
the weight of the index or portfolio.
    \13\ BFA represents that when bonds are close substitutes for 
one another, pricing vendors can use executed trade information from 
all similar bonds as pricing inputs for an individual security. This 
can make individual securities more liquid, because valuations for a 
single security are better estimators of actual trading prices when 
they are informed by trades in a large group of closely related 
securities. As a result, securities are more likely to trade at 
prices close to their valuation when they need to be sold.
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    As of February 10, 2015, 59.7% of the 2022 Index weight consisted 
of issues with a rating of AA/Aa2 or higher.
    The 2022 Index value, calculated and disseminated at least once 
daily, as well as the components of the 2022 Index and their percentage 
weighting, will be available from major market data vendors. In 
addition, the portfolio of securities held by the Fund will be 
disclosed on the Fund's Web site at www.iShares.com.
    According to the Registration Statement, BFA expects that, over 
time, the Fund's tracking error will not exceed 5%. ``Tracking error'' 
is the difference between the performance (return) of the Fund's 
portfolio and that of the 2022 Index.
    The Exchange represents that: (1) Except for Commentary .02(a)(2) 
to NYSE Arca Equities Rule 5.2(j)(3), the 2021 Index and 2022 Index 
currently satisfy all of the generic listing standards under NYSE Arca 
Equities Rule 5.2(j)(3); (2) the continued listing standards under NYSE 
Arca Equities Rules 5.2(j)(3) and 5.5(g)(2) applicable to Units shall 
apply to the Shares of a Fund; and (3) the Trust is required to comply 
with Rule 10A-3 \14\ under the Act for the initial and continued 
listing of the Shares of a Fund. In addition, the Exchange represents 
that the Shares of the Funds will comply with all other requirements 
applicable to Units including, but not limited to, requirements 
relating to the dissemination of key information such as the value of 
the 2021 Index and 2022 Index, respectively, and the Intraday 
Indicative Value (``IIV''),\15\ rules governing the trading of equity 
securities, trading hours, trading halts, surveillance, and the 
Information Bulletin to Equity Trading Permit Holders (``ETP 
Holders''), as set forth in Exchange rules applicable to Units and 
prior Commission orders approving the generic listing rules applicable 
to the listing and trading of Units.\16\
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    \14\ 17 CFR 240.10A-3.
    \15\ The IIV will be widely disseminated by one or more major 
market data vendors at least every 15 seconds during the Exchange's 
Core Trading Session of 9:30 a.m. to 4:00 p.m., Eastern time. 
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.
    \16\ See, e.g., Securities Exchange Act Release Nos. 55783 (May 
17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36) (order 
approving NYSE Arca generic listing standards for Units based on a 
fixed income index); 44551 (July 12, 2001), 66 FR 37716 (July 19, 
2001) (SR-PCX-2001-14) (order approving generic listing standards 
for Units and Portfolio Depositary Receipts); 41983 (October 6, 
1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (order 
approving rules for listing and trading of Units).
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    The current value of the 2021 Index and 2022 Index will be widely 
disseminated by one or more major market data vendors at least once per 
day, as required by NYSE Arca Equities Rule 5.2(j)(3), Commentary 
.02(b)(ii).

[[Page 22237]]

The IIV for Shares of a Fund will be disseminated by one or more major 
market data vendors, updated at least every 15 seconds during the 
Exchange's Core Trading Session, as required by NYSE Arca Equities Rule 
5.2(j)(3), Commentary .02(c).
Correlation Among Municipal Bond Instruments With Common 
Characteristics
    With respect to the Funds, BFA represents that the nature of the 
municipal bond market and municipal bond instruments makes it feasible 
to categorize individual issues represented by CUSIPs (i.e., the 
specific identifying number for a security) into categories according 
to common characteristics-- specifically, rating, geographical region, 
purpose (i.e., general obligation bonds, revenue bonds or ``double-
barreled'' bonds),\17\ and maturity. Bonds that share similar 
characteristics tend to trade similarly to one another; therefore, 
within these categories, the issues may be considered fungible from a 
portfolio management perspective, allowing one CUSIP to be represented 
by another that shares similar characteristics for purposes of 
developing an investment strategy. Therefore, while 6.8% of the weight 
of the 2021 Index and 5.8% of the weight of the 2022 Index components 
have a minimum original principal amount outstanding of $100 million or 
more, the nature of the municipal bond market makes the issues 
relatively fungible for investment purposes when aggregated into 
categories such as ratings, geographical region, purpose and maturity. 
In addition, within a single municipal bond issuer, there are often 
multiple contemporaneous or sequential issuances that have the same 
rating, structure and maturity, but have different CUSIPs; these 
separate issues by the same issuer are also likely to trade similarly 
to one another.
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    \17\ General obligation (``GO'') bonds are backed by the full 
faith and credit of the issuer and by its taxing power. Revenue 
bonds (``REV'') are payable solely from net or gross non-tax 
revenues derived from a specific project. Double barreled (``DB'') 
GO bonds are secured by both a specific revenue stream and by the 
taxing power of the issuer. As of February 10, 2015, the market 
value of GO, REV and DB bonds in the 2021 Index was approximately 
$14.3 billion, $23.4 billion and $1.3 million, respectively, 
representing 36.7%, 60.0% and 3.3% of the 2021 Index weight, 
respectively. As of February 10, 2015, the market value of GO, REV 
and DB bonds in the 2022 Index was approximately $11.7 billion, $ 
17.8 billion and $987 million, respectively, representing 38.4%, 
58.4% and 3.2% of the 2022 Index weight, respectively.
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    BFA represents that iShares municipal bond funds are managed 
utilizing the principle that municipal bond issues are generally 
fungible in nature when sharing common characteristics, and 
specifically make use of the four categories referred to above. In 
addition, this principle is used in, and consistent with, the portfolio 
construction process for other iShares funds--namely, portfolio 
optimization. These portfolio optimization techniques are designed to 
facilitate the creation and redemption process, and to enhance 
liquidity (among other benefits, such as reducing transaction costs), 
while still allowing each fund to closely track its reference index.
    In addition, individual CUSIPs within the 2021 Index and 2022 Index 
that share characteristics with other CUSIPs based on the four 
categories described above have a high yield to maturity correlation, 
and frequently have a correlation of one or close to one. Such 
correlation demonstrates that the CUSIPs within their respective 
category behave similarly; this reinforces the fungible nature of 
municipal bond issues for purposes of developing an investment 
strategy.
    Attached as Exhibit 3 to this proposed rule change are two examples 
reflecting the correlation among CUSIPs in the 2021 Index and 2022 
Index, respectively.\18\ These examples show the correlation of 
selected constituents that share three common characteristics: rating, 
purpose and geographical region. Example 1 relating to the 2021 Index 
shows the yield to maturity of issues sharing the following 
characteristics: Rating AA/Aa; \19\ West; GO Bonds maturing July 1, 
2021. Example 2 relating to the 2022 Index shows the yield to maturity 
of issues sharing the following characteristics: Rating AA/Aa; West; GO 
Bonds maturing July 1, 2022.
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    \18\ Source: Standard and Poor's, January 1, 2014 to January 1, 
2015, daily evaluated prices. Evaluated prices, as defined by 
Standard and Poor's, are based on a methodology that incorporates, 
among other things, trade data, broker dealer quotes, new issue 
pricing, and certain fundamental characteristics such as credit 
quality and sector.
    \19\ This is a composite rating among Standard & Poor's, Moody's 
and Fitch ratings. Under BFA's methodology, the median rating is 
used if all three ratings are available; the lowest rating is used 
if only two ratings are available; and, if only one rating is 
available, that one is used.
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Creation and Redemption of Shares
    According to the Registration Statement, each Fund will issue and 
redeem Shares on a continuous basis at the net asset value per Share 
(``NAV'') only in a large specified number of Shares called a 
``Creation Unit'', or multiples thereof, with each Creation Unit 
consisting of 50,000 Shares, provided, however, that from time to time 
a Fund may change the number of Shares (or multiples thereof) required 
for each Creation Unit, if a Fund determines such a change would be in 
the best interests of a Fund.
    The consideration for purchase of Creation Units of a Fund 
generally will consist of the in-kind deposit of a designated portfolio 
of securities (including any portion of such securities for which cash 
may be substituted) (i.e., the Deposit Securities), which constitutes a 
representative sample of the securities of the 2021 Index or 2022 
Index, as applicable,\20\ and the Cash Component computed as described 
below. Together, the Deposit Securities and the Cash Component 
constitute the ``Fund Deposit,'' which represents the minimum initial 
and subsequent investment amount for a Creation Unit of a Fund.
---------------------------------------------------------------------------

    \20\ According to the Registration Statement, ``representative 
sampling'' is an indexing strategy that involves investing in a 
representative sample of securities that collectively has an 
investment profile similar to the 2021 Index or 2022 Index, 
respectively. The securities selected are expected to have, in the 
aggregate, investment characteristics (based on factors such as 
market capitalization and industry weightings), fundamental 
characteristics (such as return variability, duration, maturity or 
credit ratings and yield) and liquidity measures similar to those of 
the Index. A Fund may or may not hold all of the securities in the 
2021 Index or 2022 Index.
---------------------------------------------------------------------------

    The portfolio of securities required for purchase of a Creation 
Unit may not be identical to the portfolio of securities a Fund will 
deliver upon redemption of a Fund's Shares. The Deposit Securities and 
Fund Securities (as defined below), as the case may be, in connection 
with a purchase or redemption of a Creation Unit, generally will 
correspond pro rata, to the extent practicable, to the securities held 
by such Fund. As the planned termination date of a Fund approaches, and 
particularly as the bonds held by a Fund begin to mature, a Fund would 
expect to effect both creations and redemptions increasingly for cash.
    The Cash Component will be an amount equal to the difference 
between the NAV of the Shares (per Creation Unit) and the ``Deposit 
Amount,'' which will be an amount equal to the market value of the 
Deposit Securities, and serve to compensate for any differences between 
the NAV per Creation Unit and the Deposit Amount. A Fund currently will 
offer Creation Units for in-kind deposits but reserves the right to 
utilize a ``cash'' option in lieu of some or all of the applicable 
Deposit Securities for creation of Shares.
    BFA will make available through the National Securities Clearing 
Corporation (``NSCC'') on each business day, prior to the opening of 
business on the Exchange, the list of names and the

[[Page 22238]]

required number or par value of each Deposit Security and the amount of 
the Cash Component to be included in the current Fund Deposit (based on 
information as of the end of the previous business day) for a Fund.
    The identity and number or par value of the Deposit Securities will 
change pursuant to changes in the composition of a Fund's portfolio and 
as rebalancing adjustments and corporate action events will be 
reflected from time to time by BFA with a view to the investment 
objective of a Fund. The composition of the Deposit Securities may also 
change in response to adjustments to the weighting or composition of 
the component securities constituting the 2021 Index or 2022 Index.
    Each Fund reserves the right to permit or require the substitution 
of a ``cash in lieu'' amount to be added to the Cash Component to 
replace any Deposit Security that may not be available in sufficient 
quantity for delivery or that may not be eligible for transfer through 
the Depository Trust Company (``DTC'').
    Creation Units may be purchased only by or through a DTC 
participant that has entered into an ``Authorized Participant 
Agreement'' (as described in the applicable Registration Statement) 
with the Distributor (an ``Authorized Participant''). Except as noted 
below, all creation orders must be placed for one or more Creation 
Units and must be received by the Distributor in proper form no later 
than the closing time of the regular trading session of the Exchange 
(normally 4:00 p.m., Eastern time) in each case on the date such order 
is placed in order for creation of Creation Units to be effected based 
on the NAV of Shares of a Fund as next determined on such date after 
receipt of the order in proper form. Orders requesting substitution of 
a ``cash in lieu'' amount generally must be received by the Distributor 
no later than 2:00 p.m., Eastern time. On days when the Exchange or the 
bond markets close earlier than normal, a Fund may require orders to 
create Creation Units to be placed earlier in the day.
    Fund Deposits must be delivered through the Federal Reserve System 
(for cash and government securities) and through DTC (for corporate and 
municipal securities) by an Authorized Participant. The Fund Deposit 
transfer must be ordered by the DTC participant in a timely fashion so 
as to ensure the delivery of the requisite number of Deposit Securities 
through DTC to the account of a Fund by no later than 3:00 p.m., 
Eastern time, on the ``Settlement Date''. The Settlement Date is 
generally the third business day after the transmittal date.
    A standard creation transaction fee will be imposed to offset the 
transfer and other transaction costs associated with the issuance of 
Creation Units.
    Shares of a Fund may be redeemed only in Creation Units at the NAV 
next determined after receipt of a redemption request in proper form by 
the Distributor and only on a business day. BFA will make available 
through the NSCC, prior to the opening of business on the Exchange on 
each business day, the designated portfolio of securities (including 
any portion of such securities for which cash may be substituted) that 
will be applicable (subject to possible amendment or correction) to 
redemption requests received in proper form on that day (``Fund 
Securities''). Fund Securities received on redemption may not be 
identical to Deposit Securities that are applicable to creations of 
Creation Units.
    Unless cash redemptions are available or specified for a Fund, the 
redemption proceeds for a Creation Unit generally will consist of a 
specified amount of cash, Fund Securities, plus additional cash in an 
amount equal to the difference between the NAV of the Shares being 
redeemed, as next determined after the receipt of a request in proper 
form, and the value of the specified amount of cash and Fund 
Securities, less a redemption transaction fee. A Fund currently will 
redeem Shares for Fund Securities, but a Fund reserves the right to 
utilize a ``cash'' option for redemption of Shares.
    A standard redemption transaction fee will be imposed to offset 
transfer and other transaction costs that may be incurred by a Fund.
    Redemption requests for Creation Units of a Fund must be submitted 
to the Distributor by or through an Authorized Participant no later 
than 4:00 p.m. Eastern time on any business day, in order to receive 
that day's NAV. The Authorized Participant must transmit the request 
for redemption in the form required by a Fund to the Distributor in 
accordance with procedures set forth in the Authorized Participant 
Agreement.
    Detailed descriptions of the Funds, the 2021 Index and 2022 Index, 
procedures for creating and redeeming Shares, transaction fees and 
expenses, dividends, distributions, taxes, risks, and reports to be 
distributed to beneficial owners of the Shares can be found in the 
Registration Statements or on the Web site for the Funds 
(www.iShares.com), as applicable.
Net Asset Value
    The NAV of a Fund normally will be determined once daily Monday 
through Friday, generally as of the regularly scheduled close of 
business of the New York Stock Exchange (``NYSE'') (normally 4:00 p.m., 
Eastern time) on each day that the NYSE is open for trading, based on 
prices at the time of closing provided that (a) any Fund assets or 
liabilities denominated in currencies other than the U.S. dollar will 
be translated into U.S. dollars at the prevailing market rates on the 
date of valuation as quoted by one or more data service providers and 
(b) U.S. fixed-income assets may be valued as of the announced closing 
time for trading in fixed-income instruments in a particular market or 
exchange. The NAV of a Fund will be calculated by dividing the value of 
the net assets of a Fund (i.e., the value of its total assets less 
total liabilities) by the total number of outstanding Shares of a Fund, 
generally rounded to the nearest cent.
    The value of the securities and other assets and liabilities held 
by a Fund will be determined pursuant to valuation policies and 
procedures approved by the Trust's Board of Trustees (``Board''). A 
Fund's assets and liabilities will be valued on the basis of market 
quotations, when readily available.
    Each Fund will value fixed-income portfolio securities using prices 
provided directly from one or more broker-dealers, market makers, or 
independent third-party pricing services which may use matrix pricing 
and valuation models, as well as recent market transactions for the 
same or similar assets, to derive values. Certain short-term debt 
securities may be valued on the basis of amortized cost.
    Generally, trading in non-U.S. securities, U.S. government 
securities, money market instruments and certain fixed-income 
securities is substantially completed each day at various times prior 
to the close of business on the NYSE. The values of such securities 
used in computing the NAV of a Fund are determined as of such times.
    When market quotations are not readily available or are believed by 
BFA to be unreliable, a Fund's investments will be valued at fair 
value. Fair value determinations will be made by BFA in accordance with 
policies and procedures approved by the Trust's Board. BFA may conclude 
that a market quotation is not readily available or is unreliable if a 
security or other asset or liability does not have a price source due 
to its lack of liquidity, if a market quotation differs significantly 
from recent price quotations or otherwise no longer appears to reflect 
fair value, where the security or other asset or liability is thinly 
traded, or where there is a significant event subsequent to the

[[Page 22239]]

most recent market quotation. A ``significant event'' is an event that, 
in the judgment of BFA, is likely to cause a material change to the 
closing market price of the asset or liability held by a Fund.
    Fair value represents a good faith approximation of the value of an 
asset or liability. The fair value of an asset or liability held by a 
Fund is the amount a Fund might reasonably expect to receive from the 
current sale of that asset or the cost to extinguish that liability in 
an arm's-length transaction.
Availability of Information
    On each business day, each Fund will disclose on its Web site the 
portfolio that will form the basis for a Fund's calculation of NAV at 
the end of the business day.\21\
---------------------------------------------------------------------------

    \21\ Under accounting procedures followed by a Fund, trades made 
on the prior business day (``T'') will be booked and reflected in 
NAV on the current business day (``T+1''). Accordingly, a Fund will 
be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
---------------------------------------------------------------------------

    On a daily basis, a Fund will disclose for each portfolio security 
or other financial instrument of a Fund the following information on 
the Funds' Web site: Ticker symbol (if applicable), name of security 
and financial instrument, a common identifier such as CUSIP or ISIN (if 
applicable), number of shares (if applicable), and dollar value of 
securities and financial instruments held in the portfolio, and 
percentage weighting of the security and financial instrument in the 
portfolio. The Web site information will be publicly available at no 
charge.
    The current value of the 2021 Index and 2022 Index will be widely 
disseminated by one or more major market data vendors at least once per 
day, as required by NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 
(b)(ii). The IIV for Shares of a Fund will be disseminated by one or 
more major market data vendors, updated at least every 15 seconds 
during the Exchange's Core Trading Session, as required by NYSE Arca 
Equities Rule 5.2(j)(3), Commentary .02(c).
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), a Fund's Shareholder Reports, and its Form N-CSR 
and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports are available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at www.sec.gov. 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. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers.
    Quotation and last sale information for the Shares of each Fund 
will be available via the Consolidated Tape Association (``CTA'') high 
speed line. Quotation information for investment company securities 
(excluding ETFs) may be obtained through nationally recognized pricing 
services through subscription agreements or from brokers and dealers 
who make markets in such securities. Price information regarding 
municipal bonds, AMT-free tax-exempt municipal notes, variable rate 
demand notes and obligations, tender option bonds and municipal 
commercial paper is available from third party pricing services and 
major market data vendors.
Trading Rules
    The Exchange deems the Shares of the Funds to be equity securities, 
thus rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares of the Funds 
will trade on the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. 
Eastern time in accordance with NYSE Arca Equities Rule 7.34 (Opening, 
Core, and Late Trading Sessions). The Exchange has appropriate rules to 
facilitate transactions in the Shares during all trading sessions. As 
provided in NYSE Arca Equities Rule 7.6, Commentary .03, the minimum 
price variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
    The Shares of each Fund will conform to the initial and continued 
listing criteria under NYSE Arca Equities Rules 5.2(j)(3) and 
5.5(g)(2), respectively (except for those set forth in Commentary 
.02(a)(2)). The Exchange represents that, for initial and/or continued 
listing, the Fund [sic] will be in compliance with Rule 10A-3 \22\ 
under the Act, as provided by NYSE Arca Equities Rule 5.3. A minimum of 
100,000 Shares for each Fund will be outstanding at the commencement of 
trading on the Exchange. The Exchange will obtain a representation from 
the issuer of the Shares that the NAV per Share of each Fund will be 
calculated daily and that the NAV per Share will be made available to 
all market participants at the same time.
---------------------------------------------------------------------------

    \22\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Trading Halts
    The Exchange will halt trading in the Shares if the circuit breaker 
parameters of NYSE Arca Equities Rule 7.12 have been reached. In 
exercising its discretion to halt or suspend trading in the Shares, the 
Exchange may consider factors such as the extent to which trading in 
the underlying securities is not occurring or whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present, in addition to other factors that may 
be relevant. If the IIV (as defined in Commentary .01 to Rule 
5.2(j)(3)) or the value of the 2021 Index or 2022 Index is not being 
disseminated as required, the Exchange may halt trading during the day 
in which the interruption to the dissemination of the IIV or the 2021 
Index value or 2022 Index value occurs. If the interruption to the 
dissemination of the IIV, 2021 Index value or 2022 Index value persists 
past the trading day in which it occurred, the Exchange will halt 
trading.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'') 
of the special characteristics and risks associated with trading the 
Shares. Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its Equity Trading Permit Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated IIV will not be calculated or publicly 
disseminated; (4) how information regarding the IIV is disseminated; 
(5) the requirement that Equity Trading Permit Holders deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (6) trading 
information.
    In addition, the Bulletin will reference that a Fund is subject to 
various fees and expenses described in the Registration Statement. The 
Bulletin will discuss any exemptive, no-action, and interpretive relief 
granted by the Commission from any rules under the Act. The Bulletin 
will also disclose that the NAV for the Shares will be calculated after 
4:00 p.m. Eastern time each trading day.

[[Page 22240]]

2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under section 6(b)(5) \23\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \23\ 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 in NYSE Arca Equities Rule 
5.2(j)(3). 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, which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\24\ 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. FINRA, on behalf of the Exchange, will communicate as 
needed regarding trading in the Shares with other markets or other 
entities that are members of the Intermarket Surveillance group 
(``ISG''), and FINRA may obtain trading information regarding trading 
in the Shares from such markets or entities. FINRA also can access data 
obtained from the Municipal Securities Rulemaking Board 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 a Fund reported to FINRA's Trade Reporting and 
Compliance Engine (``TRACE''). In addition, the Exchange may obtain 
information regarding trading in the Shares from markets or other 
entities that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    \24\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------

    The Index Provider is not a broker-dealer or affiliated with a 
broker-dealer and has implemented procedures designed to prevent the 
use and dissemination of material, non-public information regarding the 
2021 Index and 2022 Index. As of February 10, 2015, there were 4,217 
issues in the 2021 Index. As of February 10, 2015, 6.8% of the weight 
of the 2021 Index components have a minimum original principal amount 
outstanding of $100 million or more. As of February 10, 2015, 72% of 
the weight of the 2021 Index components was comprised of individual 
maturities that were part of an entire municipal bond offering with a 
minimum original principal amount outstanding of $100 million or more 
for all maturities of the offering. In addition, the total dollar 
amount outstanding of issues in the 2021 Index was approximately $38.9 
billion and the average dollar amount outstanding of issues in the 2021 
Index was approximately $9.2 million. Further, the most heavily 
weighted component represented 0.57% of the weight of the 2021 Index 
and the five most heavily weighted components represented 2.51% of the 
weight of the 2021 Index.\25\ Therefore, the Exchange believes that, 
notwithstanding that the Index does not satisfy the criterion in NYSE 
Arca Equities Rule 5.2(j)(3), Commentary .02 (a)(2), the Index is 
sufficiently broad-based to deter potential manipulation, given that it 
is comprised of approximately 4217 issues. In addition, the 2021 Index 
securities are sufficiently liquid to deter potential manipulation in 
that a substantial portion (72%) of the 2021 Index weight is comprised 
of maturities that are part of a minimum original principal amount 
outstanding of $100 million or more, and in view of the substantial 
total dollar amount outstanding and the average dollar amount 
outstanding of Index issues.
---------------------------------------------------------------------------

    \25\ Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that no component fixed-income security (excluding Treasury 
Securities and GSE Securities, as defined therein) shall represent 
more than 30% of the weight of the index or portfolio, and the five 
most heavily weighted component fixed-income securities in the index 
or portfolio shall not in the aggregate account for more than 65% of 
the weight of the index or portfolio.
---------------------------------------------------------------------------

    As of February 10, 2015, there were 3473 issues in the 2022 Index. 
As of February 10, 2015, 5.8% of the weight of the 2022 Index 
components have a minimum original principal amount outstanding of $100 
million or more. As of February 10, 2015, 72.4% of the weight of the 
2022 Index components was comprised of individual maturities that were 
part of an entire municipal bond offering with a minimum original 
principal amount outstanding of $100 million or more for all maturities 
of the offering. In addition, the total dollar amount outstanding of 
issues in the 2022 Index was approximately $30.5 billion and the 
average dollar amount outstanding of issues in the 2022 Index was 
approximately $8.8 million. Further, the most heavily weighted 
component represented 0.55% of the weight of the 2022 Index and the 
five most heavily weighted components represented 2.67% of the weight 
of the 2022 Index.\26\ Therefore, the Exchange believes that, 
notwithstanding that the 2022 Index does not satisfy the criterion in 
NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 (a)(2), the 2022 
Index is sufficiently broad-based to deter potential manipulation, 
given that it is comprised of approximately 3473 issues. In addition, 
the 2022 Index securities are sufficiently liquid to deter potential 
manipulation in that a substantial portion (72.4%) of the 2022 Index 
weight is comprised of maturities that are part of an offering with a 
minimum original principal amount outstanding of $100 million or more, 
and in view of the substantial total dollar amount outstanding and the 
average dollar amount outstanding of 2022 Index issues, as referenced 
above.
---------------------------------------------------------------------------

    \26\ Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that no component fixed-income security (excluding Treasury 
Securities and GSE Securities, as defined therein) shall represent 
more than 30% of the weight of the index or portfolio, and the five 
most heavily weighted component fixed-income securities in the index 
or portfolio shall not in the aggregate account for more than 65% of 
the weight of the index or portfolio.
---------------------------------------------------------------------------

    The 2021 Index value and 2022 Index value, calculated and 
disseminated at least once daily, as well as the components of the 2021 
Index and 2022 Index and their percentage weightings, will be available 
from major market data vendors. In addition, the portfolio of 
securities held by the Funds will be disclosed on the Funds' Web site 
at www.iShares.com. The IIV for Shares of the Funds will be 
disseminated by one or more major market data vendors, updated at least 
every 15 seconds during the Exchange's Core Trading Session. According 
to the Registration Statement, BFA expects that, over time, a Fund's 
tracking error will not exceed 5%. BFA represents that bonds that share 
similar characteristics, as described above, tend to trade similarly to 
one another; therefore, within these categories, the issues may be 
considered fungible from a portfolio management perspective. Within a 
single municipal bond issuer, BFA represents that separate issues by 
the same issuer are also likely to trade similarly to one another. In 
addition, BFA represents that individual CUSIPs within the 2021 Index 
and 2022 Index that share

[[Page 22241]]

characteristics with other CUSIPs based on the four categories 
described above have a high yield to maturity correlation, and 
frequently have a correlation of one or close to one.
    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 will be publicly available regarding 
the Funds and the Shares, thereby promoting market transparency. The 
Funds' portfolio holdings will be disclosed on the Funds' Web site 
daily after the close of trading on the Exchange and prior to the 
opening of trading on the Exchange the following day. Moreover, the IIV 
will be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the Exchange's Core Trading Session. The 
current values of the 2021 Index and 2022 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 Web site for the Funds will include the prospectus for 
the Funds and additional data relating to NAV and other applicable 
quantitative information. Moreover, prior to the commencement of 
trading, the Exchange will inform its ETP Holders in an Information 
Bulletin of the special characteristics and risks associated with 
trading the Shares. If the Exchange becomes aware that the 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 of the Funds. Trading also may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable. If the IIV, the 
2021 Index value or the 2022 Index value are not being disseminated as 
required, the Corporation may halt trading during the day in which the 
interruption to the dissemination of the IIV, the 2021 Index value or 
the 2022 Index value occurs. If the interruption to the dissemination 
of the IIV, the 2021 Index value or the 2022 Index value persists past 
the trading day in which it occurred, the Corporation will halt 
trading. Trading in Shares of the Funds will be halted if the circuit 
breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Shares inadvisable, and trading in the 
Shares will be subject to NYSE Arca Equities Rule 7.34, which sets 
forth circumstances under which Shares of the Funds may be halted. In 
addition, investors will have ready access to information regarding the 
IIV, and quotation and last sale information for the Shares.
    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 additional type of exchange-traded fund that holds municipal bonds 
and that will enhance competition among market participants, to the 
benefit of investors and the marketplace. As noted above, the Exchange 
has in place surveillance procedures relating to trading in 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.

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 another 
exchange-traded product that holds municipal securities and 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as modified by Amendment No. 1, is consistent with the Act. 
Comments may be submitted by any of the following methods:

Electronic Comments

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3b494e575e16585456565e554f487b485e58155c544d"><span class="__cf_email__" data-cfemail="1c6e697079317f7371717972686f5c6f797f327b736a">[email protected]</span></a>. Please include 
File Number SR-NYSEArca-2015-25 on the subject line.

Paper Comments

    <bullet> 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-NYSEArca-2015-25. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal 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-

[[Page 22242]]

NYSEArca-2015-25 and should be submitted on or before May 12, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-09066 Filed 4-20-15; 8:45 am]
 BILLING CODE 8011-01-P


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