[Federal Register Volume 80, Number 3 (Tuesday, January 6, 2015)]
[Notices]
[Pages 585-593]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30901]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73965; File No. SR-BATS-2014-056]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To List and Trade Shares of the 
iShares U.S. Fixed Income Balanced Risk ETF of the iShares U.S. ETF 
Trust Under Rule 14.11(i)

December 30, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 19, 2014, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange filed a proposal list and trade shares of the iShares 
U.S. Fixed Income Balanced Risk ETF (the ``Fund'') of the iShares U.S. 
ETF Trust (the ``Trust'') under BATS Rule 14.11(i) (``Managed Fund 
Shares''). The shares of the Fund are collectively referred to herein 
as the ``Shares.''
    The text of the proposed rule change is available at the Exchange's 
Web site at http://www.batstrading.com/, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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

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

[[Page 586]]

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 the Shares under BATS Rule 
14.11(i), which governs the listing and trading of Managed Fund Shares 
on the Exchange.\3\ The Fund will be an actively managed fund. The 
Shares will be offered by the Trust, which was established as a 
Delaware statutory trust on June 21, 2011. 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.\4\
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    \3\ The Commission approved BATS Rule 14.11(i) in Securities 
Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148 
(September 6, 2011) (SR-BATS-2011-018).
    \4\ See Registration Statement on Form N-1A for the Trust, dated 
April 21, 2014 (File Nos. 333-179904 and 811-22649). 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 Company under the Investment Company Act of 1940 (15 U.S.C. 80a-
1) (``1940 Act'') (the ``Exemptive Order''). See Investment Company 
Act Release No. 29571 (January 24, 2011) (File No. 812-13601).
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Description of the Shares and the Fund
    BlackRock Fund Advisors is the investment adviser (``BFA'' or 
``Adviser'') to the Fund.\5\ State Street Bank and Trust Company is the 
administrator, custodian, and transfer agent for the Trust. BlackRock 
Investments, LLC (``Distributor'') serves as the distributor for the 
Trust.
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    \5\ BlackRock Fund Advisors is an indirect wholly owned 
subsidiary of BlackRock, Inc.
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    BATS Rule 14.11(i)(7) provides that, if the investment adviser to 
the investment company issuing Managed Fund Shares is affiliated with a 
broker-dealer, such investment adviser shall erect a ``fire wall'' 
between the investment adviser and the broker-dealer with respect to 
access to information concerning the composition and/or changes to such 
investment company portfolio.\6\ In addition, Rule 14.11(i)(7) further 
requires that personnel who make decisions on the investment company's 
portfolio composition must be subject to procedures designed to prevent 
the use and dissemination of material nonpublic information regarding 
the applicable investment company portfolio. Rule 14.11(i)(7) is 
similar to BATS Rule 14.11(b)(5)(A)(i), however, Rule 14.11(i)(7) in 
connection with the establishment of a ``fire wall'' between the 
investment adviser and the broker-dealer reflects the applicable open-
end fund's portfolio, not an underlying benchmark index, as is the case 
with index-based funds. The Adviser is not a registered broker-dealer, 
but is affiliated with multiple broker-dealers and has implemented 
``fire walls'' with respect to such broker-dealers regarding access to 
information concerning the composition and/or changes to the Fund's 
portfolio. In addition, Adviser personnel who make decisions regarding 
the Fund's portfolio are subject to procedures designed to prevent the 
use and dissemination of material nonpublic information regarding the 
Fund's portfolio. In the event that (a) the Adviser becomes a broker-
dealer or newly affiliated with a broker-dealer, or (b) any new adviser 
or sub-adviser is a broker-dealer or becomes affiliated with a broker-
dealer, it will implement a fire wall with respect to its relevant 
personnel or such broker-dealer affiliate, as applicable, regarding 
access to information concerning the composition and/or changes to the 
portfolio, and will be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding such 
portfolio.
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    \6\ 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, the Adviser 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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iShares U.S. Fixed Income Balanced Risk Fund
    According to the Registration Statement, the Fund will seek total 
return and preservation of capital. To achieve its objective, the Fund 
will invest, under normal circumstances,\7\ at least 80% of its net 
assets in U.S. dollar-denominated investment-grade and high-yield 
fixed-income securities, futures, and swaps, as described below. The 
Fund seeks to provide exposure to a portfolio of Fixed Income 
Securities, as defined below, where the expected contribution of 
interest rate risk and credit spread risk are approximately equal. The 
Fund will attempt to achieve an aggregate credit spread risk based on 
the credit spread risk of the underlying securities (as determined by 
BFA) primarily by adjusting the allocation among underlying securities. 
To the extent necessary, the Fund will attempt to balance the aggregate 
interest rate risk against the aggregate credit spread risk of the 
underlying securities (as determined by BFA) primarily by taking short 
or long positions in U.S. Treasury futures contracts and interest rate 
swaps, as further described below. In the absence of normal 
circumstances, the Fund may temporarily depart from its normal 
investment process, provided that such departure is, in the opinion of 
BFA, consistent with the Fund's investment objective and in the best 
interests of the Fund. For example, the Fund may hold a higher than 
normal proportion of its assets in cash in response to adverse market, 
economic, or political conditions.
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    \7\ The term ``under normal circumstances'' includes, but is not 
limited to, the absence of adverse market, economic, political, or 
other conditions, including extreme volatility or trading halts in 
the fixed income markets or the financial markets generally; 
operational issues causing dissemination of inaccurate market 
information; or force majeure type events such as systems failure, 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot, or labor disruption, or any similar intervening 
circumstance.
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    The Fund is a non-diversified fund and therefore may invest a 
greater portion of its assets in the securities of one or more issuers 
than a diversified fund. The Fund, however, will not purchase the 
securities of issuers conducting their principal business activity in 
the same industry if, immediately after the purchase and as a result 
thereof, the value of the Fund's investments in that industry would 
equal or exceed 25% of the current value of the Fund's total assets, 
provided that this restriction does not limit the Fund's: (i) 
Investments in securities of other investment companies, (ii) 
investments in securities issued or guaranteed by the U.S. government, 
its agencies or instrumentalities, or (iii) investments in repurchase 
agreements collateralized by U.S. government securities.\8\
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    \8\ See Form N-1A, Item 9. The Commission has taken the position 
that a fund is concentrated if it invests in more than 25% of the 
value of its total assets in any one industry. See, e.g., Investment 
Company Act Release No. 9011 (October 30, 1975), 40 FR 54241 
(November 21, 1975).

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[[Page 587]]

    The Fund intends to qualify each year as a regulated investment 
company (a ``RIC'') under Subchapter M of the Internal Revenue Code of 
1986, as amended.\9\ The Fund will invest its assets, and otherwise 
conduct its operations, in a manner that is intended to satisfy the 
qualifying income, diversification and distribution requirements 
necessary to establish and maintain RIC qualification under Subchapter 
M.
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    \9\ 26 U.S.C. 851.
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Principal Holdings--Fixed Income Securities and Derivatives
    The Fund intends to achieve its investment objective by investing, 
under normal circumstances, at least 80% of its net assets in a 
portfolio of U.S. dollar-denominated investment-grade and high-yield 
fixed-income securities (``Fixed Income Securities''), futures, and 
swaps, as described below. The Fund may invest, without limitation, in 
high-yield securities rated CCC or higher by Moody's Investors Service, 
Inc. or equivalently rated by Standard & Poor's Financial Services LLC 
and/or Fitch, or, if unrated, determined by BFA to be of equivalent 
quality.\10\ Under normal circumstances, the Fund will invest primarily 
in fixed-rate Fixed Income Securities of varying maturities.
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    \10\ According to the Adviser, BFA may determine that unrated 
Fixed Income Securities are of ``equivalent quality'' based on such 
credit quality factors that it deems appropriate, which may include 
among other things, performing an analysis similar, to the extent 
possible, to that performed by a nationally recognized statistical 
ratings organization when rating similar securities and issuers. In 
making such a determination, BFA may consider internal analyses and 
risk ratings, third party research and analysis, and other sources 
of information, as deemed appropriate by the Adviser.
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    The Fund seeks to balance interest rate and credit spread risk by 
investing in a portfolio of Fixed Income Securities that in the 
aggregate has approximately equal exposure to credit spread risk and 
interest rate risk, which are measured by BFA as the volatility of 
returns of a security associated with changes in the security's credit 
spread or changes in interest rates. The Fund will adjust the 
allocation among its underlying securities in an effort to achieve a 
target credit spread risk and interest rate risk for the Fund's 
portfolio. When necessary to balance the Fund's exposure to interest 
rate risk against its exposure to credit spread risk, the Fund may take 
short or long positions in U.S. Treasury futures and, through 
transactions in interest rate swaps, take short positions in U.S. 
Treasury securities. BFA will determine the aggregate credit spread 
risk and interest rate risk of the Fund's portfolio. The Fund may also 
invest in other interest rate futures contracts, including but not 
limited to, Eurodollar and Federal Funds futures. The Fund's short 
positions in U.S. Treasury futures and similar positions through 
transaction in interest rate swaps are not intended to mitigate credit 
spread risk or other factors influencing the price of non-government 
bonds, which may have a greater impact than interest rates.\11\
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    \11\ Derivatives held as part of the Fund's principal investment 
strategy will be exchange traded and/or centrally cleared, and they 
will be collateralized.
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    Fixed Income Securities will include only the following 
instruments: Fixed and floating rate debt securities, such as corporate 
\12\ and government bonds, agency securities,\13\ instruments of non-
U.S. issuers,\14\ privately-issued securities,\15\ municipal bonds, 
money market securities,\16\ and exchange traded and non-exchange 
traded investment companies (including investment companies advised by 
BFA or its affiliates) that invest in such Fixed Income 
Securities.<SUP>17 18</SUP>
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    \12\ While the Fund is permitted to invest without restriction 
in corporate bonds, the Adviser expects that, under normal 
circumstances, the Fund will generally invest in corporate bond 
issuances that have at least $250 million par amount outstanding.
    \13\ ``Agency securities'' for these purposes generally includes 
securities issued by the following entities: Government National 
Mortgage Association (Ginnie Mae), Federal National Mortgage 
Association (Fannie Mae), Federal Home Loan Banks (FHLBanks), 
Federal Home Loan Mortgage Corporation (Freddie Mac), Farm Credit 
System (FCS) Farm Credit Banks (FCBanks), Student Loan Marketing 
Association (Sallie Mae), Resolution Funding Corporation (REFCORP), 
Financing Corporation (FICO), and the Farm Credit System (FCS) 
Financial Assistance Corporation (FAC). Agency securities can 
include, but are not limited to, mortgage-backed securities.
    \14\ ``Instruments of non-U.S. issuers'' means U.S. dollar-
denominated fixed income securities issued by non-U.S. corporate or 
sovereign entities.
    \15\ ``Privately-issued securities'' generally includes Rule 
144A securities and, in this context, may include both mortgage-
backed and non-mortgage 144A securities. To the Extent that the 
Fund's holding of privately-issued securities include non-agency 
mortgage-backed securities or illiquid assets, such holdings will be 
subject to the limitations established in the ``Other Portfolio 
Holdings'' and ``Investment Restrictions'' sections set forth below, 
as applicable.
    \16\ The Adviser expects that, under normal circumstances, the 
Fund intends to invest in money market securities (as described 
below) in a manner consistent with its investment objective in order 
to help manage cash flows in and out of the Fund, such as in 
connection with payment of dividends or expenses, and to satisfy 
margin requirements, to provide collateral or to otherwise back 
investments in derivative instruments. For these purposes, money 
market securities include: Short-term, high-quality obligations 
issued or guaranteed by the U.S. Treasury or the agencies or 
instrumentalities of the U.S. government; short-term, high-quality 
securities issued or guaranteed by non-U.S. governments, agencies 
and instrumentalities; repurchase agreements; money market mutual 
funds; commercial paper; and deposits and other obligations of U.S. 
and non-U.S. banks and financial institutions. All money market 
securities acquired by the Fund will be rated investment grade. The 
Fund does not intend to invest in any unrated money market 
securities. However, it may do so, to a limited extent, such as 
where a rated money market security becomes unrated, if such money 
market security is determined by the Adviser to be of comparable 
quality. BFA may determine that unrated securities are of comparable 
quality based on such credit quality factors that it deems 
appropriate, which may include, among other things, performing an 
analysis similar, to the extent possible, to that performed by a 
nationally recognized statistical rating organization rating similar 
securities and issuers.
    \17\ The Fund currently anticipates investing in only registered 
open-end investment companies, including mutual funds and the open-
end investment company funds described in BATS Rule 14.11, but notes 
that the Exemptive Order allows the Fund to invest in ``shares of 
other ETFs, shares of money market mutual funds, or other investment 
companies.''
    \18\ See BATS Rule 14.11(c)(4)(B)(i) governing fixed income 
based Index Fund Shares. For the purposes of this footnote, the term 
``fixed income securities'' will include all holdings of the Fund. 
The Fund's portfolio will meet the following requirements of Rule 
14.11(c)(4)(B)(i): (1) Components that in the aggregate account for 
at least 75% of the weight of the index or portfolio must have a 
minimum original principal amount outstanding of $100 million or 
more (Rule 14.11(c)(4)(B)(i)(b)); (2) a component may be a 
convertible security, however, once the convertible security 
component converts to an underlying equity security, the component 
is removed from the index or portfolio (Rule 14.11(c)(4)(B)(i)(c)); 
and (3) no component fixed-income security (excluding Treasury 
Securities) will represent more than 30% of the weight of the index 
or portfolio, and the five highest weighted component fixed-income 
securities do not in the aggregate account for more than 65% of the 
weight of the index or portfolio (Rule 14.11(c)(4)(B)(i)(d)).
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    BFA utilizes a model-based proprietary investment process to 
assemble an investment portfolio comprised of (i) long positions in 
U.S. dollar denominated investment-grade corporate bonds selected by 
BFA based on certain criteria determined by BFA to be indicators of 
creditworthiness; (ii) long positions in U.S. dollar-denominated high-
yield corporate bonds selected by BFA based on certain criteria 
determined by BFA to be indicators of creditworthiness; (iii) long 
positions in U.S. dollar-denominated agency mortgage backed securities; 
(iv) long positions in U.S. dollar denominated agency mortgage to-be-
announced transactions; (v) long positions in U.S. Treasury securities; 
(vi) short positions in U.S. Treasury futures; and (vii) short 
positions in U.S. Treasury securities through transactions in interest 
rate swaps. The Fund seeks to invest in a portfolio of Fixed Income 
Securities that in the aggregate has approximately equal exposure to 
credit spread risk and interest rate risk, which is measured by BFA as 
the volatility of returns of a security associated with changes in the 
security's credit spread or changes in interest rates.
    In selecting corporate securities for the Fund, BFA may employ a 
credit

[[Page 588]]

screening process centered on research and analysis of issuer credit 
quality to reduce exposure to credit issuers that have potential for 
experiencing credit deterioration. The remaining credit portfolio is 
then constructed to match the key target risk characteristics which BFA 
determines to be relevant in prevailing market conditions.
    To adjust the exposure to interest rate risks, BFA may employ short 
positions primarily in U.S. Treasury futures and interest rate swaps. 
By taking these short positions, BFA seeks to mitigate, but not 
eliminate, the impact of Treasury interest rates on the performance of 
the underlying bonds. The short positions are not intended to mitigate 
other factors influencing the price of bonds.
    The Fund is an actively-managed fund that does not seek to 
replicate the performance of a specified index.
Other Portfolio Holdings
    In addition to the derivatives holdings described above as part of 
the Fund's principal investment strategy, the Fund may also, to a 
limited extent (under normal circumstances, less than 20% of the Fund's 
net assets), engage in transactions in the following instruments:
    Treasury futures, interest rate swaps, credit default swaps, asset-
backed Fixed Income Securities, non-Agency mortgage-backed fixed-income 
securities, and structured securities \19\ in order to serve additional 
investment objectives of the Fund.\20\ Asset-backed securities are 
fixed-income securities that are backed by a pool of assets, usually 
loans such as installment sale contracts or credit card receivables. 
Mortgage-backed securities are asset-backed securities based on a 
particular type of asset, a mortgage. There are a wide variety of 
mortgage-backed securities involving commercial or residential, fixed-
rate or adjustable rate mortgages and mortgages issued by banks or 
government agencies.
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    \19\ ``Structured securities'' generally includes privately-
issued and publicly-issued structured securities, including certain 
publicly-issued structured securities that are not agency 
securities, excluding agency mortgage backed securities. Examples 
include, but are not limited to: Asset-backed securities backed by 
assets such as consumer receivables, credit cards, student loans, 
and equipment leases; asset-backed commercial paper; credit linked 
notes; and secured funding notes. Structured securities do not 
include agency mortgage-backed securities.
    \20\ In addition to the uses described above, derivatives might 
be included in the Fund's investments to serve additional investment 
objectives of the Fund. Such uses are limited to the following: 
Using a combination of treasury futures, interest rate swaps, and 
credit default swaps to equitize coupon income and cash holdings. 
The derivatives will be exchange traded and/or centrally cleared, 
and they will be collateralized.
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Investment Restrictions
    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Adviser \21\ 
under the 1940 Act.\22\ The Fund will monitor its portfolio liquidity 
on an ongoing basis to determine whether, in light of current 
circumstances, an adequate level of liquidity is being maintained, and 
will consider taking appropriate steps in order to maintain adequate 
liquidity if, through a change in values, net assets, or other 
circumstances, more than 15% of the Fund's net assets are held in 
illiquid assets. Illiquid assets include securities subject to 
contractual or other restrictions on resale and other instruments that 
lack readily available markets as determined in accordance with 
Commission staff guidance.
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    \21\ In reaching liquidity decisions, the Adviser may consider 
factors including: The frequency of trades and quotes for the 
security; the number of dealers wishing to purchase or sell the 
security and the number of other potential purchasers; dealer 
undertakings to make a market in the security; the nature of the 
security and the nature of the marketplace in which it trades (e.g., 
the time needed to dispose of the security, the method of soliciting 
offers, and the mechanics of transfer); any legal or contractual 
restrictions on the ability to transfer the security or asset; 
significant developments involving the issuer or counterparty 
specifically (e.g., default, bankruptcy, etc.) or the securities 
markets generally; and settlement practices, registration 
procedures, limitations on currency conversion or repatriation, and 
transfer limitations (for foreign securities or other assets).
    \22\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also, Investment Company 
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 
1970) (Statement Regarding ``Restricted Securities''); Investment 
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio 
security is illiquid if it cannot be disposed of in the ordinary 
course of business within seven days at approximately the value 
ascribed to it by the fund. See Investment Company Act Release No. 
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting 
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act 
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) 
(adopting Rule 144A under the Securities Act of 1933).
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    The Fund's investments will be consistent with the Fund's 
investment objective and will not be used to achieve leveraged or 
inverse leveraged returns (i.e. two times or three times the Fund's 
benchmark).
Net Asset Value
    According to the Registration Statement, the net asset value 
(``NAV'') of the Fund's Shares generally will be calculated once daily 
Monday through Friday as of the close of regular trading on the 
Exchange, generally 4:00 p.m. Eastern Time (the ``NAV Calculation 
Time'') on each day that the Exchange is open for trading, based on 
prices at the NAV Calculation Time. NAV per Share is calculated by 
dividing the Fund's net assets by the number of Fund Shares 
outstanding. The Fund's net assets are valued primarily on the basis of 
market quotations.
    According to the Registration Statement, the Fund values non-
exchange traded Fixed Income Securities using prices provided directly 
from one or more broker-dealers, market makers, independent third-party 
pricing services which may use matrix pricing and valuation models to 
derive values, or, for investment companies, NAV. Exchange traded 
instruments, including exchange traded Fixed Income Securities and 
futures, will be valued at market closing price or, if no sale has 
occurred, at the last quoted bid price on the primary exchange on which 
they are traded. Price information for exchange traded instruments, 
including exchange traded derivatives, will be taken from the exchange 
where the security is primarily traded. Over-the-counter derivatives 
are valued based upon quotations from market makers or by a pricing 
service in accordance with valuation procedures approved by the Fund's 
board of directors. Certain short-term debt securities will be valued 
on the basis of amortized cost.
    According to the Registration Statement, generally, trading in 
certain Fixed Income Securities is substantially completed each day at 
various times prior to the close of business on the Exchange. 
Additionally, trading in certain derivatives is substantially completed 
each day at various times prior to the close of business on the 
Exchange. The values of such securities and derivatives used in 
computing the NAV of the Fund are determined at such times.
    According to the Registration Statement, when market quotations are 
not readily available or are believed by BFA to be unreliable, the 
Fund's investments are valued at fair value. Fair value determinations 
are made by BFA in accordance with policies and procedures approved by 
the Fund's board of directors and in accordance with the 1940 Act. BFA 
may conclude that a market quotation is not readily available or is 
unreliable if a security or other asset or liability is thinly traded,

[[Page 589]]

or where there is a significant event \23\ subsequent to the most 
recent market quotation.
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    \23\ 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 the Fund.
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    According to the Registration Statement, 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 the Fund is the amount the 
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. Valuing the Fund's investments using fair value pricing 
will result in prices that may differ from current valuations and that 
may not be the prices at which those investments could have been sold 
during the period in which the particular fair values were used.
The Shares
    The Fund will issue and redeem Shares on a continuous basis at the 
NAV per Share only in large blocks of a specified number of Shares or 
multiples thereof (``Creation Units'') in transactions with authorized 
participants who have entered into agreements with the Distributor. The 
Fund currently anticipates that a Creation Unit will consist of 50,000 
Shares, though this number may change from time to time, including 
prior to listing of the Fund. The exact number of Shares that will 
constitute a Creation Unit will be disclosed in the Registration 
Statement of the Fund. Once created, Shares of the Fund trade on the 
secondary market in amounts less than a Creation Unit.
    The consideration for purchase of Creation Units of the 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''), 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 the Fund.
    The portfolio of securities required for purchase of a Creation 
Unit may not be identical to the portfolio of securities the Fund will 
deliver upon redemption of Fund 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 securities held by the Fund.
    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. The Fund generally 
offers Creation Units partially for cash. 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 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 the Fund.
    The identity and number or par value of the Deposit Securities may 
change pursuant to changes in the composition of the Fund's portfolio 
as rebalancing adjustments and corporate action events occur from time 
to time. The composition of the Deposit Securities may also change in 
response to adjustments to the weighting or composition of the holdings 
of the Fund.
    The 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'') or the clearing process through 
the NSCC.\24\
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    \24\ The Adviser represents that, to the extent the Trust 
permits or requires a ``cash in lieu'' amount, such transactions 
will be effected in the same or equitable manner for all authorized 
participants.
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    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 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 the 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 the Settlement 
Date. The ``Settlement Date'' is generally the third business day after 
the transmittal date. On days when the Exchange or the bond markets 
close earlier than normal, the Fund may require orders to create or to 
redeem Creation Units to be placed earlier in the day.
    Fund Deposits must be delivered through the Federal Reserve System 
(for cash and government securities), through DTC (for corporate and 
municipal securities), or through a central depository account, such as 
with Euroclear or DTC, maintained by State Street or a sub-custodian (a 
``Central Depository Account'') by an authorized participant. Any 
portion of a Fund Deposit that may not be delivered through the Federal 
Reserve System or DTC must be delivered through a Central Depository 
Account. The Fund Deposit transfer must be ordered by the authorized 
participant in a timely fashion so as to ensure the delivery of the 
requisite number of Deposit Securities to the account of the Fund by no 
later than 3:00 p.m., Eastern Time, on the Settlement 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 the Fund may be redeemed only in Creation Units at their 
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 the 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. The Fund generally 
redeems Creation Units partially for cash.
    A standard redemption transaction fee will be imposed to offset 
transfer and other transaction costs that may be incurred by the Fund.
    Redemption requests for Creation Units of the 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

[[Page 590]]

request for redemption in the form required by the Fund to the 
Distributor in accordance with procedures set forth in the authorized 
participant agreement.
    Additional information regarding the Shares and the Fund, including 
investment strategies, risks, creation and redemption procedures, fees 
and expenses, portfolio holdings disclosure policies, distributions, 
taxes and reports to be distributed to beneficial owners of the Shares 
can be found in the Registration Statement or on the Web site for the 
Fund (www.iShares.com), as applicable.
Availability of Information
    The Fund's Web site, 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 Web site will include additional 
quantitative information updated on a daily basis, including, for the 
Fund: (1) The prior business day's reported NAV, mid-point of the bid/
ask spread at the time of calculation of such NAV (the ``Bid/Ask 
Price''),\25\ 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 Fund 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 Web sites. On 
each business day, before commencement of trading in Shares during 
Regular Trading Hours \26\ on the Exchange, the Fund will disclose on 
its Web site the identities and quantities of the portfolio of 
securities and other assets (the ``Disclosed Portfolio'') held by the 
Fund that will form the basis for the Fund's calculation of NAV at the 
end of the business day.\27\
---------------------------------------------------------------------------

    \25\ The Bid/Ask Price of the Fund will be determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and its service 
providers.
    \26\ Regular Trading Hours are 9:30 a.m. to 4:00 p.m. Eastern 
Time.
    \27\ Under accounting procedures to be followed by the Fund, 
trades made on the prior business day (``T'') will be booked and 
reflected in NAV on the current business day (``T + 1''). 
Accordingly, the 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, the Disclosed Portfolio displayed on the Fund's 
Web site will include the following information regarding each 
portfolio holding, as applicable to the type of holding: Ticker symbol, 
if any, 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 or other asset or instrument underlying the 
holding,\28\ if any; 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; market value of the 
holding; and the percentage weighting of the holding in the Fund's 
portfolio. The Web site information will be publicly available at no 
charge.
---------------------------------------------------------------------------

    \28\ Derivatives that reference or allow delivery of more than 
one asset, such as U.S. Treasury futures, will identify the 
underlying asset generically.
---------------------------------------------------------------------------

    In addition, for the Fund, an estimated value, defined in BATS Rule 
14.11(i)(3)(C) 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 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.\29\ 
In addition, the quotations of certain of the Fund's holdings may not 
be updated during U.S. trading hours if such holdings do not trade in 
the United States or if updated prices cannot be ascertained.
---------------------------------------------------------------------------

    \29\ 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 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.
    Intraday, executable price quotations on Fixed Income Securities 
and non-exchange traded derivatives, including non-exchange listed 
investment companies, are available from major broker-dealer firms and 
for exchange-traded assets, including exchange listed investment 
companies and futures, such intraday information is available directly 
from the applicable listing exchange. All such intraday price 
information is available through subscription services, such as 
Bloomberg, Thomson Reuters and International Data Corporation, which 
can be accessed by authorized participants and other investors.
    Information regarding market price and trading volume will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services. 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 will be available on the 
facilities of the CTA.
Initial and Continued Listing
    The Shares will be subject to BATS Rule 14.11(i), which sets forth 
the initial and continued listing criteria applicable to Managed Fund 
Shares. The Exchange represents that, for initial and/or continued 
listing, the Fund must be in compliance with Rule 10A-3 under the 
Act.\30\ A minimum of 100,000 Shares 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 
will be calculated daily and that the NAV and the Disclosed Portfolio 
will be made available to all market participants at the same time.
---------------------------------------------------------------------------

    \30\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Trading Halts
    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 Fund. The Exchange will halt trading in 
the Shares under the conditions specified in BATS 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 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(i)(4)(B)(iv), which sets forth circumstances under which Shares 
of the Fund may be halted.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. BATS will allow 
trading in the Shares from 8:00 a.m.

[[Page 591]]

until 5:00 p.m. Eastern Time. The Exchange has appropriate rules to 
facilitate transactions in the Shares during all trading sessions. As 
provided in BATS Rule 11.11(a), the minimum price variation for quoting 
and entry of orders in Managed Fund Shares traded on the Exchange is 
$0.01, with the exception of securities that are priced less than 
$1.00, for which the minimum price variation for order entry is 
$0.0001.
Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the Shares on the Exchange during 
all trading sessions and to deter and detect violations of Exchange 
rules and the applicable federal securities laws. Trading of the Shares 
through the Exchange will be subject to the Exchange's surveillance 
procedures for derivative products, including Managed Fund Shares. The 
Exchange may obtain information regarding trading in the Shares and the 
underlying shares in exchange traded investment companies and futures 
via the Intermarket Surveillance Group (``ISG''), from other exchanges 
who are members or affiliates of the ISG, or with which the Exchange 
has entered into a comprehensive surveillance sharing agreement.\31\ In 
addition, the Exchange is able to access, as needed, trade information 
for certain fixed income instruments reported to FINRA's Trade 
Reporting and Compliance Engine (``TRACE''). The Exchange prohibits the 
distribution of material non-public information by its employees.
---------------------------------------------------------------------------

    \31\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com. The Exchange notes that not all 
components of the Disclosed Portfolio for the Fund may trade on 
markets that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement. The Exchange 
also notes that all of the investment company securities and futures 
will trade on markets that are a member of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing 
agreement.
---------------------------------------------------------------------------

Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. Specifically, the Information 
Circular will discuss the following: (1) The procedures for purchases 
and redemptions of Shares in Creation Units (and that Shares are not 
individually redeemable); (2) BATS Rule 3.7, which imposes suitability 
obligations on Exchange members with respect to recommending 
transactions in the Shares to customers; (3) how information regarding 
the Intraday Indicative Value and the Disclosed Portfolio is 
disseminated; (4) the risks involved in trading the Shares during the 
Pre-Opening \32\ and After Hours Trading Sessions \33\ when an updated 
Intraday Indicative Value will not be calculated or publicly 
disseminated; (5) the requirement that members deliver a prospectus to 
investors purchasing newly issued Shares prior to or concurrently with 
the confirmation of a transaction; and (6) trading information.
---------------------------------------------------------------------------

    \32\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m. 
Eastern Time.
    \33\ The After Hours Trading Session is from 4:00 p.m. to 5:00 
p.m. Eastern Time.
---------------------------------------------------------------------------

    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Fund. Members purchasing Shares from the Fund for 
resale to investors will deliver a prospectus to such investors. The 
Information Circular will also discuss any exemptive, no-action, and 
interpretive relief granted by the Commission from any rules under the 
Act.
    In addition, the Information Circular will reference that the Fund 
is subject to various fees and expenses described in the Registration 
Statement. The Information Circular will also disclose the trading 
hours of the Shares of the Fund and the applicable NAV Calculation Time 
for the Shares. The Information Circular will disclose that information 
about the Shares of the Fund will be publicly available on the Fund's 
Web site. In addition, the Information Circular will reference that the 
Trust is subject to various fees and expenses described in the Fund's 
Registration Statement.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \34\ in general and Section 6(b)(5) of the Act \35\ 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.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f.
    \35\ 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 BATS Rule 14.11(i). The 
Exchange believes that its surveillance procedures are adequate to 
properly monitor the trading of the Shares on the Exchange during all 
trading sessions and to deter and detect violations of Exchange rules 
and the applicable federal securities laws. If the investment adviser 
to the investment company issuing Managed Fund Shares is affiliated 
with a broker-dealer, such investment adviser to the investment company 
shall erect a ``fire wall'' between the investment adviser and the 
broker-dealer with respect to access to information concerning the 
composition and/or changes to such investment company portfolio. The 
Adviser is not a registered broker-dealer, but is affiliated with 
multiple broker-dealers and has implemented ``fire walls'' with respect 
to such broker-dealers regarding access to information concerning the 
composition and/or changes to the Fund's portfolio. The Exchange may 
obtain information regarding trading in the Shares and the underlying 
shares in investment companies and futures via the ISG, from other 
exchanges who are members or affiliates of the ISG, or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement.\36\
---------------------------------------------------------------------------

    \36\ See supra note 31.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund expects that it 
will have at least 80% of its assets invested in U.S. dollar-
denominated investment grade Fixed Income Securities, futures, and 
swaps. The Fund's exposure to any single industry will generally be 
limited to 25% of the Fund's assets. The Fund's investments will be 
consistent with the Fund's investment objective and will not be used to 
achieve leveraged or inverse leveraged returns (i.e. two times or three 
times the Fund's benchmark). The Fund also may invest its net assets in 
money market instruments at the discretion of the Adviser. While the 
Fund is permitted to invest without restriction in corporate bonds, the 
Adviser expects that, under normal circumstances, the Fund will 
generally invest in corporate bond issuances that have at least $250 
million par amount outstanding. The Fund will not invest in non-U.S. 
equity securities.
    The Fund may employ short positions primarily in U.S. Treasury 
futures and interest rate swaps in order to mitigate the impact of 
Treasury interest rates on the performance of the underlying bonds. The 
short positions are not

[[Page 592]]

intended to mitigate other factors influencing the price of bonds.
    Additionally, the Fund may hold up to an aggregate amount of 15% of 
its net assets in illiquid assets (calculated at the time of 
investment), including Rule 144A securities. The Fund will monitor its 
portfolio liquidity on an ongoing basis to determine whether, in light 
of current circumstances, an adequate level of liquidity is being 
maintained, and will consider taking appropriate steps in order to 
maintain adequate liquidity if, through a change in values, net assets, 
or other circumstances, more than 15% of the Fund's net assets are held 
in illiquid assets. Illiquid assets include securities subject to 
contractual or other restrictions on resale and other instruments that 
lack readily available markets as determined in accordance with 
Commission staff guidance.
    In addition to the derivatives holdings described above as part of 
the Fund's principal investment strategy, the Fund may also, to a 
limited extent (under normal circumstances, less than 20% of the Fund's 
net assets), engage in transactions in the following instruments:
    Treasury futures, interest rate swaps, credit default swaps, asset-
backed Fixed Income Securities, non-Agency mortgage-backed fixed-income 
securities, and structured securities in order to serve additional 
investment objectives of the Fund, as described above.\37\
---------------------------------------------------------------------------

    \37\ See supra note 20.
---------------------------------------------------------------------------

    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information is publicly available regarding the Fund and the Shares, 
thereby promoting market transparency. Moreover, the Intraday 
Indicative Value will be disseminated by one or more major market data 
vendors at least every 15 seconds during Regular Trading Hours. On each 
business day, before commencement of trading in Shares during Regular 
Trading Hours, the Fund will disclose on its Web site the Disclosed 
Portfolio that will form the basis for the Fund's calculation of NAV at 
the end of the business day. Pricing information will be available on 
the Fund's Web site including: (1) The prior business day's reported 
NAV, the Bid/Ask Price of the Fund, 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. Additionally, 
information regarding market price and trading 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 for the Shares will be available on the 
facilities of the CTA. The Web site for the Fund will include a form of 
the prospectus for the Fund and additional data relating to NAV and 
other applicable quantitative information. Trading in Shares of the 
Fund will be halted under the conditions specified in BATS Rule 11.18. 
Trading may also be halted because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable. Finally, trading in the Shares will be subject to BATS 
Rule 14.11(i)(4)(B)(iv), which sets forth circumstances under which 
Shares of the Fund may be halted. In addition, the Exchange is able to 
access, as needed, trade information for certain fixed income 
instruments reported to FINRA's TRACE. As noted above, investors will 
also have ready access to information regarding the Fund's holdings, 
the Intraday Indicative Value, the Disclosed Portfolio, and quotation 
and last sale information for the Shares.
    Intraday, executable price quotations on Fixed Income Securities 
and non-exchange traded derivatives are available from major broker-
dealer firms and for exchange-traded assets, including investment 
companies and futures, such intraday information is available directly 
from the applicable listing exchange. All such intraday price 
information is available through subscription services, such as 
Bloomberg, Thomson Reuters and International Data Corporation, which 
can be accessed by authorized participants and other investors.
    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 actively-managed exchange-traded product 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, as noted above, investors 
will have ready access to information regarding the Fund's holdings, 
the Intraday Indicative Value, the Disclosed Portfolio, 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 actively-managed 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

    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 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

[[Page 593]]

    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#e795928b82ca84888a8a82899394a7948284c9808891"><span class="__cf_email__" data-cfemail="c1b3b4ada4eca2aeacaca4afb5b281b2a4a2efa6aeb7">[email protected]</span></a>. Please include 
File Number SR-BATS-2014-056 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-BATS-2014-056. 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 at 100 F Street NE., 
Washington, DC 20549-1090 on official business days between the hours 
of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
BATS-2014-056, and should be submitted on or before January 27, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
---------------------------------------------------------------------------

    \38\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2014-30901 Filed 1-5-15; 8:45 am]
BILLING CODE 8011-01-P


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