Document ID: SEC-2018-0864-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2018-06-07T04:00Z

[Federal Register Volume 83, Number 110 (Thursday, June 7, 2018)]
[Notices]
[Pages 26531-26533]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-12196]

[[Page 26531]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83363; File No. SR-CboeBZX-2018-036]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Amend a 
Representation Made in a Proposed Rule Change Previously Approved by 
the Commission Relating to the Listing and Trading of the iShares 
Inflation Hedged Corporate Bond ETF

June 1, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 24, 2018, Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange filed a proposal to amend a representation made in a 
proposed rule change previously approved by the Commission relating to 
the listing and trading of the iShares Inflation Hedged Corporate Bond 
ETF (the ``Fund'').
    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The shares of the Fund (the ``Shares'') were approved for listing 
and trading on the Exchange under Rule 14.11(i), which governs the 
listing and trading of Managed Fund Shares.\3\ The Shares have 
commenced trading on the Exchange. The Fund is a series of the iShares 
U.S. ETF Trust (the ``Trust''), which was established as a Delaware 
statutory trust on June 21, 2011. BlackRock Fund Advisors (the 
``Adviser'') is the investment adviser to the Fund. The Trust is 
registered with the Commission as an open-end management investment 
company and has filed a registration statement on behalf of the Fund on 
Form N-1A (``Registration Statement'') with the Commission.\4\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 82591 (January 26, 
2018), 83 FR 4707 (February 1, 2018) (SR-BatsBZX-2017-54) (the 
``Approval Order'').
    \4\ See Registration Statement on Form N-1A for the Trust, dated 
April 6, 2018 (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).
---------------------------------------------------------------------------

    The Exchange proposes to amend a representation made in the 
Approval Order such that the representation that limits Fund holdings 
in Inflation Hedging Instruments \5\ to 50% of the weight of its 
portfolio (including gross notional exposure) would instead limit the 
Fund's holdings in Inflation Hedging Instruments to 60% of the weight 
of its portfolio (including gross notional exposure). While the Fund 
generally expects to have approximately 50% of the weight of its 
portfolio (including gross notional exposure) in Inflation Hedging 
Instruments, the Adviser would prefer to allow the Fund the flexibility 
to increase to 60% in order to allow for potential market movement in 
the Fund's holdings. Specifically, the Exchange is proposing to change 
the sentence that reads:
---------------------------------------------------------------------------

    \5\ As defined in the Approval Order, Inflation Hedging 
Instruments include only the following instruments: OTC or listed 
inflation swaps (i.e., contracts in which the Fund will make fixed-
rate payments based on notional amount while receiving floating-rate 
payments determined from an inflation index), Treasury Inflation-
Protected Securities, total return swaps, credit default swaps, 
interest rate swaps, and U.S. Treasury futures.

    The Exchange is proposing to allow the Fund to hold up to 50% of 
the weight of its portfolio (including gross notional exposure) in 
Inflation Hedging Instruments, collectively, in a manner that may 
not comply with Rules 14.11(i)(4)(C)(iv)(a), 14.11(i)(4)(C)(iv)(b), 
---------------------------------------------------------------------------
and/or 14.11(i)(4)(C)(v), as discussed above.

The Exchange is proposing to replace that sentence with the following:

    The Exchange is proposing to allow the Fund to hold up to 60% of 
the weight of its portfolio (including gross notional exposure) in 
Inflation Hedging Instruments, collectively, in a manner that may 
not comply with Rules 14.11(i)(4)(C)(iv)(a), 14.11(i)(4)(C)(iv)(b), 
and/or 14.11(i)(4)(C)(v), as discussed above.

    The Exchange believes that this proposed change is a non-
controversial change because it is intended only to provide the Adviser 
with additional flexibility within the Fund's portfolio to hedge 
inflation risk associated with its exposure to corporate bonds. The 
Fund's investment objective and investment strategy are not changing. 
Further to this point, all other representations in the Approval Order 
that constitute Continued Listing Representations \6\ for the Fund 
remain true and will apply on a continuous basis, consistent with Rule 
14.11 and the proposed change to the representation above will be a 
Continued Listing Representation for the Fund going forward. The 
Exchange also notes that the statements in the filing that formed the 
basis for the Commission approving the Fund for listing and trading 
remain true. As such, the Exchange believes that the proposal does not 
raise any substantive issues that were not previously addressed in the 
Approval Order.
---------------------------------------------------------------------------

    \6\ As defined in Rule 14.11(a), the term ``Continued Listing 
Representations'' means any of the statements or representations 
regarding the index composition, the description of the portfolio or 
reference assets, limitations on portfolio holdings or reference 
assets, dissemination and availability of index, reference asset, 
and intraday indicative values (as applicable), or the applicability 
of Exchange listing rules specified in any filing to list a series 
of Other Securities.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \7\ in general and Section 6(b)(5) of the Act \8\ in 
particular in that it is 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. Specifically, the Exchange believes 
that the proposal is designed to prevent fraudulent and manipulative 
acts and

[[Page 26532]]

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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As described above, all of the Continued Listing Representations 
which formed the basis for the Commission approving the Approval Order 
remain true and will continue to constitute Continued Listing 
Representations for the Fund with the exception of the single 
representation that the Exchange is proposing to amend, which, as 
amended, will be a Continued Listing Representation for the Fund going 
forward. This proposed change will only provide the Adviser with 
additional flexibility within the Fund's portfolio to hedge inflation 
risk associated with its exposure to corporate bonds. The Fund's 
investment objective and investment strategy are not changing. As such, 
the Exchange believes that the proposal does not raise any substantive 
issues that were not previously addressed in the Approval Order.
    Based on the foregoing, the Exchange believes that the proposal is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest because there are no substantive issues raised by this 
proposal that were not otherwise addressed by the Approval Order.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes that 
adding the flexibility to fully implement the Fund's hedging strategy 
will have no impact on competition.

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A)(iii) of the Act \9\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \11\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \12\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposed rule change may become effective and operative immediately 
upon filing. The Exchange states that waiver of the operative delay 
would permit the Adviser of the Fund to immediately employ the 
Adviser's strategy for hedging against inflation risk. According to the 
Exchange, this hedging strategy will best allow the Fund to achieve its 
investment objective and employ its investment strategy.
---------------------------------------------------------------------------

    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
The proposal raises no new novel issues. Moreover, as the noted above, 
apart from increasing the Fund's holdings in Inflation Hedging 
Instruments to 60% of the weight of its portfolio (including gross 
notional exposure), all other representations in the Approval Order 
that constitute Continued Listing Representations for the Fund would 
remain true and will apply on a continuous basis. Further, the proposed 
change to the representation above will be a Continued Listing 
Representation for the Fund going forward. Accordingly, the Commission 
hereby waives the operative delay and designates the proposal operative 
upon filing.\13\
---------------------------------------------------------------------------

    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. Comments may be submitted by any of the 
following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeBZX-2018-036 on the subject line

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CboeBZX-2018-036. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing will also be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should

[[Page 26533]]

submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CboeBZX-2018-036 and should 
be submitted on or before June 28, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12196 Filed 6-6-18; 8:45 am]
 BILLING CODE 8011-01-P