Document ID: SEC-2016-0639-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2016-04-14T04:00Z

[Federal Register Volume 81, Number 72 (Thursday, April 14, 2016)]
[Notices]
[Pages 22143-22148]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08554]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77567; File No. SR-BATS-2015-94]

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing of Amendment No. 1 and Order Approving on an Accelerated Basis a 
Proposed Rule Change, as Modified by Amendments No. 1, No. 2, and No. 
3, To List and Trade Shares of the SPDR DoubleLine Emerging Markets 
Fixed Income ETF of the SSgA Active Trust

April 8, 2016.

I. Introduction

    On December 28, 2015, BATS Exchange, Inc. (``Exchange'') filed with 
the Securities and Exchange Commission (``Commission''), pursuant

[[Page 22144]]

to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') 
\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to list and 
trade shares of the SPDR[supreg] DoubleLine[supreg] Emerging Markets 
Fixed Income ETF of the SSgA Active Trust under BATS Rule 14.11(i). The 
proposed rule change was published for comment in the Federal Register 
on January 15, 2016.\3\ On February 23, 2016, pursuant to Section 
19(b)(2) of the Act,\4\ the Commission designated a longer period 
within which to approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
disapprove the proposed rule change.\5\ On February 26, 2016, the 
Exchange filed Amendment No. 1 to the proposal.\6\ On March 24, 2016, 
the Exchange filed Amendment No. 2 to the proposal.\7\ On April 7, 
2016, Exchange filed Amendment No. 3 to the proposed rule change.\8\ 
The Commission has received no comments on the proposal. The Commission 
is publishing this notice to solicit comments on Amendment No. 1 from 
interested persons, and is approving the proposed rule change, as 
modified by Amendments No. 1, No. 2, and No. 3, on an accelerated 
basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 76862 (Jan. 11, 
2016), 81 FR 2282.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 77209, 81 FR 10315 
(Feb. 29, 2016). The Commission designated April 14, 2016, as the 
date by which it should approve, disapprove, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.
    \6\ Amendment No. 1 replaced and superseded the proposed rule 
change in its entirety. In Amendment No. 1, the Exchange clarified 
that: (1) The Fund may invest without limit in investments 
denominated in any currency, but expects to invest a portion of its 
assets in U.S.-dollar-denominated investments; (2) the Fund may 
invest up to 20% of its portfolio in structured securities and 
junior bank loans; and (3) to limit the potential risk associated 
with derivative transactions, the Fund will segregate or ``earmark'' 
assets determined to be liquid by the Adviser in accordance with 
procedures established by the Trust's Board of Trustees and in 
accordance with the Investment Company Act of 1940 (15 U.S.C. 80a-1) 
(``1940 Act'') (or, as permitted by applicable regulations, enter 
into certain offsetting positions) to cover its obligations under 
derivative instruments, and will include appropriate risk disclosure 
in its offering documents, including leveraging risk. Amendment No. 
1 also adds a representation that the Adviser believes there will be 
minimal, if any, impact to the arbitrage mechanism as a result of 
the use of derivatives, and makes changes of a technical nature. The 
amendments to the proposed rule change are available at: http://www.sec.gov/comments/sr-bats-2015-94/bats201594.shtml.
    \7\ In Amendment No. 2, the Exchange clarifies that: (1) All 
statements and representations made in this filing regarding (a) the 
description of the portfolio, (b) limitations on portfolio holdings 
or reference assets, or (c) the applicability of Exchange rules and 
surveillance procedures shall constitute continued listing 
requirements for listing the Shares on the Exchange; and (2) the 
issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Exchange Act, the Exchange will surveil for 
compliance with the continued listing requirements. If the Fund is 
not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under Exchange Rule 
14.12. Because Amendment No. 2 adds clarification to the proposal 
and does not materially alter the substance of the proposed rule 
change or raise unique or novel regulatory issues, Amendment No. 2 
is not subject to notice and comment.
    \8\ In Amendment No. 3, the Exchange made a conforming change to 
confirm that the Fund may invest in unsponsored American Depositary 
Receipts (``ADRs''), which are not exchange traded. Because 
Amendment No. 3 clarifies the proposal and does not materially alter 
the substance of the proposed rule change or raise unique or novel 
regulatory issues, Amendment No. 3 is not subject to notice and 
comment.
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II. The Exchange's Description of the Proposal \9\
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    \9\ Additional information regarding, among other things, the 
Shares, the Fund, its investment objective, its investments, its 
investment strategies, its investment methodology, its investment 
restrictions, its fees, its creation and redemption procedures, 
availability of information, trading rules and halts, and 
surveillance procedures can be found in Amendment No. 1 and in the 
Registration Statement. See Amendment No. 1, supra note 6, and 
Registration Statement, infra note 10, respectively.
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    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. The Shares will be offered by SSgA Active Trust 
(``Trust''), which is organized as a Massachusetts business trust and 
is registered with the Commission as an open-end management investment 
company.\10\ SSGA Funds Management, Inc. will serve as the investment 
adviser to the Fund (``Adviser'') \11\ as well as the administrator for 
the Fund. DoubleLine Capital LP will be the Fund's sub-adviser (``Sub-
Adviser''). State Street Global Markets, LLC will be the principal 
underwriter and distributor of the Shares. State Street Bank and Trust 
Company will serve as the sub-administrator, custodian (``Custodian''), 
transfer agent, and, where applicable, lending agent (``Lending 
Agent'') for the Fund.
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    \10\ See Registration Statement on Form N-1A for the Trust, 
dated October 8, 2015 (File Nos. 333-173276 and 811-22542) 
(``Registration Statement''). The Exchange states that the 
Commission has issued an order granting certain exemptive relief to 
the Trust under the 1940 Act. See Investment Company Act Release No. 
29524 (December 13, 2010) (File No. 812-13487).
    \11\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (``Advisers 
Act''). As a result, the Adviser and its related personnel as well 
as the Sub-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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    Neither the Adviser nor the Sub-Adviser is registered as a broker-
dealer, but the Adviser is affiliated with a broker-dealer and has 
implemented a ``fire wall'' with respect to that broker-dealer 
regarding access to information concerning the composition of and 
changes to the Fund's portfolio. The Sub-Adviser is not affiliated with 
a broker-dealer.\12\
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    \12\ See Amendment No. 1, supra note 6, at 6. In the event (a) 
the Adviser or Sub-Adviser becomes registered as a broker-dealer or 
newly affiliated with a broker-dealer, or (b) any new adviser or 
sub-adviser is a registered broker-dealer or becomes affiliated with 
a broker-dealer, it will implement a fire wall with respect to its 
relevant personnel or broker-dealer affiliate regarding access to 
information concerning the composition of and 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. See id.
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A. Principal Investments of the Fund

    The Fund is an actively managed fund that does not seek to 
replicate the performance of a specified index. The Fund will seek to 
provide high total return from current income and capital appreciation. 
To achieve its objective, the Fund will invest, under normal 
circumstances, \13\ at least 80% of its net assets (plus the amount of 
borrowings for investment purposes) in emerging-market fixed income 
securities.\14\ More specifically, the Fund will invest at least 80% of 
its net assets (plus the amount

[[Page 22145]]

of borrowings for investment purposes) in fixed income instruments 
(``Fixed Income Securities''), which are defined as the following 
instruments: Fixed income securities issued or guaranteed by foreign 
corporations \15\ or foreign governments, including securities issued 
or guaranteed by companies (including hybrid securities), financial 
institutions, or government entities in emerging market countries; 
corporate or government bonds; sovereign debt; structured securities; 
\16\ foreign currency transactions (discussed below); certain 
derivatives (discussed below); exchange-traded foreign equity 
securities (described below) and preferred securities; unsponsored 
ADRs; \17\ zero coupon bonds; credit linked notes; pass-through notes; 
bank loans; and perpetual maturity bonds. Fixed Income Securities may 
have fixed or variable interest rates and any maturity. The Fund will 
generally invest in Fixed Income Securities from at least five emerging 
market countries,\18\ with no more than 20% allocated to a single 
country. The Fund may invest in Fixed Income Securities of any credit 
quality, but seeks to invest no more than 20%, at the time of 
investment, in Fixed Income Securities that are unrated, rated BB+ or 
lower by Standard & Poor's Rating Service or Ba1 or lower by Moody's 
Investor Service, Inc. or the equivalent by any other nationally 
recognized statistical rating organization.
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    \13\ The term ``under normal circumstances'' includes, but is 
not limited to, the absence of 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.
    \14\ Under normal market conditions, the Sub-Adviser intends to 
seek to construct an investment portfolio with a weighted average 
effective duration of no less than two years and no more than eight 
years.
    \15\ While the Fund is permitted to invest without restriction 
in corporate bonds, the Sub-Adviser expects that, under normal 
circumstances, the Fund will generally seek to invest in corporate 
bond issuances that have at least $100,000,000 par amount 
outstanding. Further, component corporate bonds that in the 
aggregate account for at least 75% of the weight of corporate bonds 
will have a minimum original principal outstanding of $100 million 
or more.
    \16\ Structured securities generally include privately issued 
and publicly issued structured securities, including certain 
publicly issued structured securities that are not agency 
securities. The Fund may invest up to 20% of its portfolio in 
structured securities and junior bank loans.
    \17\ See Amendment No. 3, supra note 8.
    \18\ An ``emerging market country'' is a country that, at the 
time the Fund invests in the related fixed income instruments, is 
classified as an emerging or developing economy by any supranational 
organization such as the World Bank or the United Nations, or 
related entities, or is considered an emerging market country for 
purposes of constructing a major emerging market securities index. A 
fixed income instrument is considered to be from an emerging market 
country if the issuer or guarantor of the instrument is either 
domiciled in an emerging market country or derives a majority of its 
cash flow or revenue from an emerging market country.
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    The Fund may purchase exchange-traded common stocks and exchange-
traded preferred securities of foreign corporations. The Fund's 
investments in common stock of foreign corporations may also be in the 
form of ADRs (sponsored and unsponsored, as noted above),\19\ Global 
Depositary Receipts, and European Depositary Receipts (collectively 
``Depositary Receipts'').
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    \19\ The Fund may invest in sponsored or unsponsored ADRs; 
however, not more than 10% of the net assets of the Fund will be 
invested in unsponsored ADRs. All exchange-traded equity securities 
in which the Fund may invest will trade on markets that are members 
of the Intermarket Surveillance Group (``ISG'') or that have entered 
into a comprehensive surveillance agreement with the Exchange.
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    The Fund may conduct foreign currency transactions on a spot (i.e., 
cash) or forward basis (i.e., by entering into forward contracts to 
purchase or sell foreign currencies). The Fund may also invest in the 
following derivatives: Foreign currency futures; credit default 
swaps;\20\ and options, swaps, futures, and forward contracts on Fixed 
Income Securities. All such derivatives will be exchange traded or 
centrally cleared.\21\
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    \20\ The Fund will enter into CDS agreements only with 
counterparties that meet certain standards of creditworthiness. The 
Fund will segregate assets necessary to meet any accrued payment 
obligations when it is the buyer of CDSs. In cases where the Fund is 
a seller of a CDS, if the CDS is physically settled or cash settled, 
the Fund will be required to segregate the full notional amount of 
the CDS.
    \21\ The Exchange states that the Adviser believes there will be 
minimal, if any, impact to the arbitrage mechanism as a result of 
the use of derivatives. Market makers and participants should be 
able to value derivatives as long as the positions are disclosed 
with relevant information. The Exchange states that the Adviser 
believes that the price at which Shares trade will continue to be 
disciplined by arbitrage opportunities created by the ability to 
purchase or redeem creation Shares at their net asset value 
(``NAV''), which should ensure that Shares will not trade at a 
material discount or premium in relation to their NAV.
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B. Non-Principal Investments

    While the Adviser and Sub-Adviser, under normal circumstances, will 
invest at least 80% of the Fund's net assets in the instruments 
described above, the Adviser and Sub-Adviser may invest up to 20% of 
the Fund's net assets in other securities and financial instruments, as 
described below.
    The Fund may invest in U.S. Government obligations and U.S. equity 
securities. The Fund's investments in such U.S. equity securities may 
include securities traded over-the-counter (``OTC'') as well as those 
traded on a securities exchange. The Fund may invest in convertible 
securities traded on an exchange or OTC.
    The Fund may invest in repurchase agreements with commercial banks, 
brokers or dealers to generate income from its excess cash balances and 
to invest securities-lending cash collateral. The Fund may also enter 
into reverse repurchase agreements, which involve the sale of 
securities with an agreement to repurchase the securities at an agreed-
upon price, date, and interest payment and which have the 
characteristics of borrowing. The Fund's exposure to reverse repurchase 
agreements will be covered by securities having a value equal to or 
greater than such commitments. Although there is no limit on the 
percentage of Fund assets that can be used in connection with reverse 
repurchase agreements, the Fund does not expect to engage, under normal 
circumstances, in reverse repurchase agreements with respect to more 
than 10% of its net assets.
    In addition to repurchase agreements, the Fund may invest in short-
term instruments, including money market instruments \22\ and cash 
equivalents, and may hold cash.
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    \22\ Money market instruments are generally short-term 
investments that may include but are not limited to: (i) Shares of 
money market funds (including those advised by the Adviser); (ii) 
obligations issued or guaranteed by the U.S. government, its 
agencies or instrumentalities (including government-sponsored 
enterprises); (iii) negotiable certificates of deposit (``CDs''), 
bankers' acceptances, fixed time deposits and other obligations of 
U.S. and foreign banks (including foreign branches) and similar 
institutions; (iv) commercial paper rated at the date of purchase 
``Prime-1'' by Moody's or ``A-1'' by S&P, or if unrated, of 
comparable quality as determined by the Adviser; (v) non-convertible 
corporate debt securities (e.g., bonds and debentures) with 
remaining maturities at the date of purchase of not more than 397 
days and that satisfy the rating requirements set forth in Rule 2a-7 
under the 1940 Act; and (vi) short-term U.S. dollar-denominated 
obligations of foreign banks (including U.S. branches) that, in the 
opinion of the Adviser, are of comparable quality to obligations of 
U.S. banks that may be purchased by the Fund. Any of these 
instruments may be purchased on a current or a forward-settled 
basis.
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    The Fund may lend its portfolio securities in an amount not to 
exceed 33 \1/3\% of the value of its total assets via a securities 
lending program through the Lending Agent, to brokers, dealers, and 
other financial institutions desiring to borrow securities to complete 
transactions and for other purposes. A securities lending program 
allows the Fund to receive a portion of the income generated by lending 
its securities and investing the respective collateral. The Fund will 
receive collateral for each loaned security that is at least equal to 
102% of the market value of that security, marked to market each 
trading day.
    The Fund may invest in Restricted Securities. Restricted Securities 
are securities that are not registered under the Securities Act, but 
which can be offered and sold to ``qualified institutional buyers'' 
under Rule 144A under the Securities Act or securities purchased after 
the lapse of the appropriate distribution compliance

[[Page 22146]]

period under Regulation S under the Securities Act.
    The Fund may invest in the securities of other investment 
companies, including affiliated funds and money market funds, subject 
to applicable limitations under Section 12(d)(1) of the 1940 Act.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\23\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Exchange 
Act,\24\ which requires, among other things, that the Exchange's rules 
be designed 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.
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    \23\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition and 
capital formation. See 15 U.S.C. 78c(f).
    \24\ 15 U.S.C. 78f(b)(5).
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    The Commission also finds that the proposal to list and trade the 
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Exchange Act,\25\ which sets forth Congress' finding that it is in 
the public interest and appropriate for the protection of investors and 
the maintenance of fair and orderly markets to assure the availability 
to brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. Quotation and last-sale 
information for the Shares will be available on the facilities of the 
Consolidated Tape Association. The Exchange represents that the 
intraday, closing, and settlement prices of common stocks and other 
exchange-listed instruments (including Depositary Receipts, preferred 
securities, convertible securities, common stock, and ETPs) will be 
readily available from the securities exchanges trading those 
securities as well as from automated quotation systems, published or 
other public sources, or online information services. Intraday and 
closing price information for exchange-traded options and futures will 
be available from the applicable exchange and from major market data 
vendors. In addition, price information for U.S. exchange-traded 
options will be available from the Options Price Reporting Authority.
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    \25\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    Quotation information from brokers and dealers or pricing services 
will be available for Fixed Income Securities and U.S. Government 
obligations. Price information regarding short-term instruments, spot 
currency transactions, OTC-traded derivative instruments (including 
options, swaps, and forward currency transactions), and non-exchange-
listed equity securities traded in the OTC market (including Restricted 
Securities, repurchase and reverse repurchase agreements, OTC equity 
securities, OTC-traded preferred securities, and OTC-traded convertible 
securities) is available from major market data vendors.
    The Commission also believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. 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\ 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.
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    \26\ Regular Trading Hours are 9:30 a.m. to 4:00 p.m. Eastern 
Time.
    \27\ The Fund's disclosure of derivative positions in the 
Disclosed Portfolio will include information that market 
participants can use to value these positions intraday. The 
Disclosed Portfolio will include, as applicable: The ticker symbol; 
CUSIP number or other identifier, if any; a description of the 
holding (including the type of holding, such as the type of swap); 
the identity of the security, commodity, index or other asset or 
instrument underlying the holding, if any; for options, the option 
strike price; quantity held (as measured by, for example, par value, 
notional value or number of shares, contracts, or units); maturity 
date, if any; coupon rate, if any; effective date, if any; market 
value of the holding; and the percentage weighting of the holding in 
the Fund's portfolio. The Web site and information will be publicly 
available at no charge. Under accounting procedures to be followed 
by the Fund, trades made on the prior business day will be booked 
and reflected in NAV on the current business day. 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.
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    In addition, 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. The Custodian, through the National Securities Clearing 
Corporation, will make available on each business day, prior to the 
opening of business on the Exchange, the list of the names and the 
required number of shares of each Deposit Security or the required 
amount of Deposit Cash, as applicable, to be included in the current 
Fund Deposit (based on information at the end of the previous business 
day) for the Fund.
    The NAV of the 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. 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 and 
additional information relating to NAV and other applicable 
information.
    The Exchange represents that trading in the Shares will be halted 
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.\28\ Trading in 
the Shares also will be subject to Rule 14.11(i)(4)(B)(iv), which sets 
forth circumstances under which trading in the Shares may be halted.
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    \28\ 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.
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    The Exchange states that it prohibits the distribution of material 
non-public information by its employees. The Exchange represents that 
the Adviser is not registered as a broker-dealer but is affiliated with 
a broker-dealer and has implemented a ``fire wall'' with respect to 
that broker-dealer regarding access to information concerning the 
composition of and changes to the Fund's portfolio.
    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, U.S. equity securities, foreign equity 
securities, futures, and options via the ISG, from other exchanges who 
are

[[Page 22147]]

members or affiliates of the ISG, or from other exchanges with which 
the Exchange has entered into a comprehensive surveillance sharing 
agreement.\29\ 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.
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    \29\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com. The Exchange also notes that all 
exchange-traded instruments, including investment company 
securities, futures, and options will trade on markets that are a 
member of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. See Amendment No. 1, 
supra note 6, at 30, n.27.
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    The Exchange represents that it 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. 
In support of this proposal, the Exchange has also made the following 
representations:
    (1) 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.\30\
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    \30\ See Amendment No. 1, supra note 6, at 28.
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    (2) All statements and representations made regarding (a) the 
description of the portfolio, (b) limitations on portfolio holdings or 
reference assets, or (c) the applicability of Exchange rules and 
surveillance procedures shall constitute continued listing requirements 
for listing the Shares on the Exchange.\31\
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    \31\ See Amendment No. 2, supra note 7, at 3.
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    (3) The issuer will advise the Exchange of any failure by the Fund 
to comply with the continued listing requirements, and, pursuant to its 
obligations under Section 19(g)(1) of the Exchange Act, the Exchange 
will surveil for compliance with the continued listing requirements. If 
the Fund is not in compliance with the applicable listing requirements, 
the Exchange will commence delisting procedures under Exchange Rule 
14.12.\32\
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    \32\ Id. at 4.
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    (4) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.\33\
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    \33\ See Amendment No. 1, supra note 6, at 29.
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    (5) Trading of the Shares through the Exchange will be subject to 
the Exchange's surveillance procedures for derivative products, 
including Managed Fund Shares, and these 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.\34\
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    \34\ Id. at 29-30.
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    (6) 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: (a) The procedures for 
purchases and redemptions of Shares in Creation Units (and that Shares 
are not individually redeemable); (b) BATS Rule 3.7, which imposes 
suitability obligations on Exchange members with respect to 
recommending transactions in the Shares to customers; (c) how 
information regarding the Intraday Indicative Value and the Disclosed 
Portfolio is disseminated; (d) the risks involved in trading the Shares 
during the Pre-Opening and After Hours Trading Sessions when an updated 
Intraday Indicative Value will not be calculated or publicly 
disseminated; (e) the requirement that members deliver a prospectus to 
investors purchasing newly issued Shares prior to or concurrently with 
the confirmation of a transaction; and (f) trading information.\35\
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    \35\ Id. at 30-31.
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    (7) For initial and continued listing, the Fund must be in 
compliance with Rule 10A-3 under the Act.\36\
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    \36\ Id. at 28. See also 17 CFR 240.10A-3.
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    (8) A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange.\37\
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    \37\ See Amendment No. 1, supra note 6, at 28.
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    (9) The Fund will enter into CDS agreements only with 
counterparties that meet certain standards of creditworthiness.\38\
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    \38\ Id. at 12.
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    (10) The Fund may invest up to 20% of its portfolio in structured 
securities and junior bank loans in the aggregate.\39\
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    \39\ Id. at 9.
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    (11) Under normal circumstances, the Fund will generally seek to 
invest in corporate bond issuances that have at least $100,000,000 par 
amount outstanding. Further, component corporate bonds that in the 
aggregate account for at least 75% of the weight of corporate bonds 
will have a minimum original principal outstanding of $100 million or 
more.\40\
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    \40\ Id.
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    (12) The Fund may invest in sponsored or unsponsored ADRs; however, 
not more than 10% of the net assets of the Fund will be invested in 
unsponsored ADRs.\41\
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    \41\ Id. at 11.
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    (13) All exchange-traded instruments, including investment company 
securities, futures, and options will trade on markets that are a 
member of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.\42\
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    \42\ Id. at 30, n.27.
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    This approval order is based on all of the Exchange's 
representations, including those set forth above and in Amendments No. 
1, No. 2, and No. 3.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1, No. 2, and No. 3, is 
consistent with Section 6(b)(5) of the Act \43\ and the rules and 
regulations thereunder applicable to a national securities exchange.
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    \43\ 15 U.S.C. 78f(b)(5).
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IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 1 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 rule-comments@sec.gov. Please include 
File Number SR-BATS-2015-94 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-BATS-2015-94. 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

[[Page 22148]]

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-2015-94 and should be 
submitted on or before May 5, 2016.

V. Accelerated Approval of Proposed Rule Change as Modified by 
Amendment Nos. 1, 2, and 3

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, No. 2, and No. 3, prior to the 
30th day after the date of publication of notice of Amendment No. 1 in 
the Federal Register. The Exchange submitted Amendment No. 1 to, among 
other things, provide clarifying details about the investments the Fund 
would be permitted to hold; to further limit the percentage of the 
Fund's portfolio that may be composed of structured securities and 
junior bank loans; to limit the potential risk associated with 
derivative transactions; and to represent that the Adviser believes 
there will be minimal, if any, impact to the arbitrage mechanism as a 
result of the Fund's use of derivatives. This information aided the 
Commission in evaluating the likelihood that market participants may 
engage in effective arbitrage. Accordingly, the Commission finds good 
cause, pursuant to Section 19(b)(2) of the Act,\44\ to approve the 
proposed rule change, as modified by Amendment No. 1, No. 2, and No. 3, 
on an accelerated basis.
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    \44\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    IT IS THEREFORE ORDERED, pursuant to Section 19(b)(2) of the 
Exchange Act, that the proposed rule change (SR-BATS-2015-94), as 
modified by Amendment No. 1, No. 2, and No. 3, is hereby approved on an 
accelerated basis.
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    \45\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\45\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08554 Filed 4-13-16; 8:45 am]
 BILLING CODE 8011-01-P