Document ID: SEC-2015-1365-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2015-08-17T04:00Z

[Federal Register Volume 80, Number 158 (Monday, August 17, 2015)]
[Notices]
[Pages 49288-49296]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-20157]

[[Page 49288]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75664; File No. SR-BATS-2015-56]

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing of a Proposal To List and Trade Shares of the ProShares Managed 
Futures Strategy ETF of the ProShares Trust Under BATS Rule 14.11 on 
BATS Exchange, Inc.

August 11, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on July 30, 2015, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to list and trade shares of the ProShares 
Managed Futures Strategy ETF (the ``Fund'') of the ProShares Trust (the 
``Trust'') under BATS Rule 14.11(i) (``Managed Fund Shares''). The 
shares of the Fund are referred to herein as the ``Shares.''
    The text of the proposed rule change is available at the Exchange's 
Web site at 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.

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

1. Purpose
    The Exchange proposes to list and trade the Shares under BATS Rule 
14.11(i), which governs the listing and trading of Managed Fund Shares 
on the Exchange.\4\ The Fund will be an actively managed fund that 
seeks to provide positive returns that are not directly correlated to 
broad equity or fixed income markets.
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    \4\ 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).
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    The Shares will be offered by the Trust, which was established as a 
Delaware statutory trust on May 29, 2002. 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.\5\ The Commodity 
Futures Trading Commission (``CFTC'') has recently adopted substantial 
amendments to CFTC Rule 4.5 relating to the permissible exemptions and 
conditions for reliance on exemptions from registration as a commodity 
pool operator. As a result of the instruments that will be held by the 
Fund, the Adviser has registered as a Commodity Pool Operator (``CPO'') 
and is also a member of the National Futures Association (``NFA''). The 
Fund and ProShares Cayman Trust I, a wholly-owned subsidiary of the 
Fund organized under the laws of the Cayman Islands (the ``Subsidiary'' 
as further described herein) will be subject to regulation by the CFTC 
and NFA and additional disclosure, reporting and recordkeeping rules 
imposed upon commodity pools.
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    \5\ See Registration Statement on Form N-1A for the Trust, dated 
May 31, 2013 (File Nos. 333-89822 and 811-21114). 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. 30562 
(June 18, 2013) (File No. 812-14041).
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Description of the Shares and the Fund
    ProShare Advisors LLC is the investment adviser (``PSA'' or 
``Adviser'') to the Fund. JPMorgan Chase Bank, National Association is 
the administrator, custodian, fund account agent, index receipt agent 
and transfer agent for the Trust. SEI Investments Distribution Co. 
(``Distributor'') serves as the distributor for the Trust.
    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 currently affiliated with a broker-dealer and, in the future may 
be affiliated with other broker dealers. The 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

[[Page 49289]]

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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ProShares Managed Futures Strategy ETF
    According to the Registration Statement, the Fund seeks to achieve 
positive returns that are not directly correlated to broad equity or 
fixed income markets. The Fund uses the S&P[supreg] Strategic Futures 
Index as a performance benchmark (the ``Benchmark''). The Benchmark 
seeks to reflect trends (in either direction) in the commodity, foreign 
currency and fixed income markets by taking long or short positions in 
the related futures contracts. While the Fund generally will seek 
exposure to the commodity and financial markets included in the 
Benchmark, the Fund is not an index tracking ETF and will generally 
seek to enhance its performance by actively selecting investments for 
the Fund with varying maturities from the underlying components of the 
Benchmark.
    There can be no assurance that the Fund's performance will exceed 
the performance of the Benchmark at any time. The Fund is not 
sponsored, endorsed, sold or promoted by S&P[supreg]. S&P's[supreg] 
only relationship to the Fund is the licensing of certain service marks 
and service names of S&P[supreg] and of the Benchmark, which is 
determined, composed and calculated by S&P[supreg] without regard to 
the Fund's investment advisor or the Fund. S&P[supreg] has no 
obligation to take the needs of the Fund's investment advisor or the 
Fund into consideration in determining, composing or calculating the 
Benchmark.
    Under normal market conditions,\7\ the Fund invests in a portfolio 
of exchange-traded commodity futures contracts (``Commodity Futures 
Contracts'') and exchange-traded currency and U.S. Treasury futures 
contracts (``Financial Futures Contracts'') (collectively, ``Futures 
Contracts'').
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    \7\ The term ``under normal market conditions'' includes, but is 
not limited to, the absence of extreme volatility or trading halts 
in the fixed income markets, futures 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 manmade disaster, act of God, armed 
conflict, act of terrorism, riot or labor disruption or any similar 
intervening circumstance.
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    The Fund, in part through the Subsidiary, attempts to capture the 
economic benefit derived from rising and declining trends based on the 
price changes of these Futures Contracts. Each month, the Fund's 
investments will generally be positioned long or short based on a 
comparison of the recent returns of each Futures Contract with its own 
seven-month weighted moving average return. To be ``long'' means to 
hold or have long exposure to an asset with the expectation that its 
value will increase over time. To be ``short'' means to sell or have 
short exposure to an asset with the expectation that it will fall in 
value. The Fund will benefit if it is long an asset that increases in 
value or is short an asset that decreases in value. Conversely, the 
Fund will be adversely impacted if it is long an asset that decreases 
in value or short an asset that increases in value.
    The following table describes each of the commodities, currencies 
and U.S. Treasuries underlying the futures contracts included in the 
Benchmark as of June 30, 2015. The table also provides each 
instrument's trading hours, exchange and ticker symbol. This table is 
subject to change:

----------------------------------------------------------------------------------------------------------------
                                  Weight                        Weight
            Sector                 (%)         Component         (%)         Exchange        Trading hours \8\
----------------------------------------------------------------------------------------------------------------
Energy........................       6.99  Light Crude......       1.31  NYMEX (CME).....  6:00 p.m.-5: 15 p.m.
                                                                                            next day.
                                           Heating Oil......       1.78  NYMEX (CME).....  6:00 p.m.-5: 15 p.m.
                                                                                            next day.
                                           RBOB Gasoline....      1.64%  NYMEX (CME).....  6:00 p.m.-5: 15 p.m.
                                                                                            next day.
                                           Natural Gas......      2.26%  NYMEX (CME).....  6:00 p.m.-5: 15 p.m.
                                                                                            next day.
Industrial Metals.............      3.64%  Copper...........      3.64%  COMEX (CME).....  6:00 p.m.-5: 15 p.m.
                                                                                            next day.
Precious Metals...............      3.87%  Gold.............      3.37%  COMEX (CME).....  6:00 p.m.-5: 15 p.m.
                                                                                            next day.
                                           Silver...........      1.76%  COMEX (CME).....  6:00 p.m.-5: 15 p.m.
                                                                                            next day.
Livestock.....................      8.72%  Lean Hogs........      3.95%  CME.............  10:05 a.m.-2:55 p.m.;
                                                                                            Daily trading halts:
                                                                                            5:00 p.m.-6:00p.m.
                                           Live Cattle......      4.77%  CME.............  10:05 a.m.-2:55 p.m.
                                                                                            Daily trading halts
                                                                                            5:00 p.m.-6:00 p.m.
----------------------------------------------------------------------------------------------------------------

     
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    \8\ All times are E.T., inclusive of electronic and open outcry 
trading sessions, as applicable.

                                                  Index Weights
----------------------------------------------------------------------------------------------------------------
                                  Weight                        Weight
            Sector                 (%)         Component         (%)         Exchange          Trading hours
----------------------------------------------------------------------------------------------------------------
Grains........................       8.60  Corn.............       2.73  CBOT (CME)......  8:00 p.m.-2:20 p.m.
                                                                                            next day.
                                                                                           Daily trading halt
                                                                                            from 8:45 am to 9:30
                                                                                            a.m.
                                           Soybeans.........       3.10  CBOT (CME)......  8:00 p.m.-2:20 p.m.
                                                                                            next day.
                                                                                           Daily trading halt
                                                                                            from 8:45 a.m. to
                                                                                            9:30 a.m.
                                           Wheat............       2.77  CBOT (CME)......  8:00 p.m.-2:20 p.m.
                                                                                            next day.
                                                                                           Daily trading halt
                                                                                            from 8:45 a.m. to
                                                                                            9:30 a.m.
Softs.........................      13.01  Coffee...........       2.11  ICE.............  4:15 a.m.-1:30 p.m.
                                           Cocoa............       4.76  ICE.............  4:45 a.m.-1:30 p.m.
                                           Sugar............       2.72  ICE.............  3:30 a.m.-1:00 p.m.
                                           Cotton...........       3.42  ICE.............  9:00 p.m.-2:20 p.m.
                                                                                            next day.
Australian Dollar.............       4.37  Australian Dollar  .........  CME.............  6:00 p.m.-5:15 p.m.
                                                                                            next day.
British Pound.................       6.28  British Pound....  .........  CME.............  6:00 p.m.-5:15 p.m.
                                                                                            next day.
Canadian Dollar...............       4.73  Canadian Dollar..  .........  CME.............  6:00 p.m.-5:15 p.m.
                                                                                            next day.
Euro..........................       4.56  Euro.............  .........  CME.............  6:00 p.m.-5:15 p.m.
                                                                                            Next day.

[[Page 49290]]

 
Japanese Yen..................       5.95  Japanese Yen.....  .........  CME.............  6:00 p.m.-5:15 p.m.
                                                                                            Next day.
Swiss Franc...................       3.39  Swiss Franc......  .........  CME.............  6:00 p.m.-5:15 p.m.
                                                                                            Next day.
U.S. Treasury Notes \9\.......      14.58  U.S. Treasury      .........  CBOT (CME)......  6:00 p.m.-5:00 p.m.
                                            Notes.                                          Next day.
U.S. Treasury Bonds \10\......      10.04  U.S. Treasury      .........  CBOT (CME)......  6:00 p.m.-5:00 p.m.
                                            Bonds.                                          Next day.
                                      100  .................        100
----------------------------------------------------------------------------------------------------------------

    In order to achieve its investment objective, the Fund will invest 
in: (i) Futures Contracts; \11\ and/or (ii) under limited circumstances 
(as further described herein), swap agreements whose value is derived 
from the level of the Benchmark, other indexes, one or more futures 
contracts or their underlying reference assets. The Fund may also 
invest up to 100% of its assets in cash or cash equivalents such as 
U.S. Treasury securities or other high credit quality short-term fixed-
income or similar securities (including shares of money market funds, 
bank deposits, bank money market accounts, certain variable rate-demand 
notes, and repurchase agreements collateralized by government 
securities) for direct investment or as collateral for the Futures 
Contracts or swap agreements.
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    \9\ ``U.S. Treasury Notes'' refers to 10 year U.S. Treasury Note 
futures.
    \10\ ``U.S. Treasury Bonds'' refers to those futures with 
underlying bonds of a remaining term to call or maturity of 15-25 
years.
    \11\ Futures Contracts will be the same type of contracts as the 
Index Components, but the expiration dates of such Futures Contracts 
may differ from the expiration dates of the Index Components at any 
given point in time.
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    The Adviser does not expect that the Fund will invest directly in 
any commodity or currency. In the event position accountability rules 
or position limits with respect to a Futures Contract are reached with 
respect to a Fund, the Adviser may, in its commercially reasonable 
judgment, obtain exposure through swaps whose value is derived from the 
level of the Benchmark, other Indexes, one or more Futures Contracts or 
their underlying reference assets, or invest in other futures contracts 
or swaps if such instruments tend to exhibit trading prices or returns 
that will further the investment objective of the Fund.\12\ The Fund 
may also invest in swaps if the market for a specific Futures Contract 
experiences emergencies (e.g., natural disaster, terrorist attack, or 
an act of God) or disruptions (e.g., a trading halt or a flash crash) 
that would prevent the Fund from obtaining the appropriate amount of 
investment exposure to the affected Futures Contracts or other futures 
contracts directly.\13\
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    \12\ To the extent practicable, the Fund will invest in swaps 
cleared through the facilities of a centralized clearing house.
    \13\ The Adviser will also attempt to mitigate the Fund's credit 
risk by transacting only with large, well-capitalized institutions 
using measures designed to determine the creditworthiness of a 
counterparty. The Adviser will take various steps to limit 
counterparty credit risk, as described in the Registration 
Statement.
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    According to the Registration Statement, the Fund will invest a 
substantial portion of its assets in fixed income securities that 
include U.S. government and agency securities, money market 
instruments,\14\ overnight and fixed-term repurchase agreements, cash 
and other cash equivalents. The Fund will use the fixed-income 
securities as investments and to meet asset coverage tests resulting 
from the Subsidiary's derivative exposure on a day-to-day basis. As a 
whole, the Fund's investments are meant to achieve its investment 
objective within the limitations of the federal tax requirements 
applicable to regulated investment companies.
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    \14\ The Fund may invest in shares of money market funds to the 
extent permitted by the 1940 Act.
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    The Fund expects to gain exposure to certain of these investments 
by investing a portion of its assets in the Subsidiary. The Subsidiary 
will be advised by the Adviser.\15\ The Fund's investment in the 
Subsidiary is intended to provide the Fund with exposure to markets (in 
general, the commodity markets) within the limits of current federal 
income tax laws applicable to investment companies such as the Fund, 
which limit the ability of investment companies to invest directly in 
certain Futures Contracts. The Subsidiary will have the same investment 
objective as the Fund. Except as otherwise noted, references to the 
Fund's investments may also be deemed to include the Fund's indirect 
investments through the Subsidiary. The Fund will invest up to 25% of 
its total assets in the Subsidiary.
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    \15\ The Subsidiary is not registered under the 1940 Act and is 
not directly subject to its investor protections, except as noted in 
the Registration Statement. However, the Subsidiary is wholly-owned 
and controlled by the Fund and is advised by the Adviser. Therefore, 
because of the Fund's ownership and control of the Subsidiary, the 
Subsidiary would not take action contrary to the interests of the 
Fund or its shareholders. The Fund's Board of Trustees (``Board'') 
has oversight responsibility for the investment activities of the 
Fund, including its expected investment in the Subsidiary, and the 
Fund's role as the sole shareholder of the Subsidiary. The Adviser 
receives no additional compensation for managing the assets of the 
Subsidiary. The Subsidiary will also enter into separate contracts 
for the provision of custody, transfer agency, and accounting agent 
services with the same or with affiliates of the same service 
providers that provide those services to the Fund.
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    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.\16\ The Fund will invest its assets (including via 
the Subsidiary), 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. Aside from its investments in the 
Subsidiary, The Fund will not invest in options or non-U.S. equity 
securities.
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    \16\ 26 U.S.C. 851.
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Additional Information Regarding the Benchmark
    Developed by S&P[supreg] and launched on August 14, 2014, the 
Benchmark is a long/short rules-based investable index that seeks to 
capture the economic benefit derived from both rising and declining 
trends in futures prices. The Benchmark is typically composed of 
futures contracts representing unleveraged long or short positions in 
the commodity and financial markets.
    The weight assigned to each futures contract in the Benchmark is 
determined on a monthly basis, and implemented each month in an index 
rebalancing. Weights are determined using a proprietary risk-weighting 
methodology that measures the risk exposure of the futures contracts 
included in the Benchmark and then weights each futures contract so 
that it

[[Page 49291]]

contributes the same level of risk to the Benchmark.
    The Benchmark's exposure to futures contracts are not long-only, 
but are either short or long based on a comparison of the price change 
in the contract during the most recent month to a seven-month 
exponential weighted moving average price change of that contact. 
During the monthly rebalancing, the Benchmark also ``rolls'' certain of 
its positions in futures contracts from the current contract to a 
contract further from settlement.
    Each month, S&P[supreg] will determine whether a futures contract 
that is a part of the Benchmark should be either a long or short 
position by comparing the price change of the most recent month (the 
``First Month Price Change'') of the futures contract to the seven-
month exponential weighted moving average price change (the ``Seven 
Month Price Change''). Long positions are tracked when a futures 
contract's First Month Price Change is greater than or equal to the 
Seven Month Price Change. Short positions are tracked when a futures 
contract's First Month Price Change is less than the Seven Month Price 
Change. The First Month Price Change of each futures contract is 
calculated by calculating the percentage difference of each futures 
contract's price on the last PDD (as defined below) relative to the 
current PDD.
    When calculating the Seven Month Price Change, each month's price 
input is represented as the monthly percentage change of a futures 
contract price which is calculated in the same manner as the First 
Month Price Change. Monthly positions are determined on the second to 
last Benchmark business day of the month (defined as the position 
determination date, or ``PDD'') when the monthly percentage change of a 
futures contract's price is compared to past monthly price changes, 
exponentially weighted to give greatest weight to the most recent 
return and least weight to the return seven months prior. The weighted 
sum of the percentage changes of all futures contract prices in the 
Benchmark equals the daily movement of the Benchmark. To create an 
exponential average for comparison, price inputs (percentage change 
from current and previous PDDs) are weighted per the schedule below. 
Due to this weighting methodology, current price movements are more 
important than those of the more distant past.
    During this monthly rebalancing, the Benchmark will also ``roll'' 
certain of its positions from the current contract to a contract 
further from settlement. In order to maintain consistent exposure to 
the futures contracts that compose the Benchmark, each futures contract 
must be sold prior to its expiration date and replaced by a contract 
maturing at a specified date in the future. This process is known as 
``rolling.'' The futures contracts that are a part of the Benchmark are 
rolled periodically. The rolls are implemented pursuant to a roll 
schedule over a five-day period from the first (1st) through the fifth 
(5th) index business days of the month. An index business day is any 
day on which the majority of the futures contracts included in the 
Benchmark are open for official trading and official settlement prices 
are provided, excluding holidays and weekends.
    In order to mitigate the potential negative impact of contango on 
long commodity positions, certain futures contracts in commodities will 
be rolled according to an ``enhanced'' rolling methodology. This 
methodology seeks to modify the normal roll methodology for futures 
contracts in the energy sector when such long position would be 
materially and negatively impacted by contango. In addition, the 
methodology identifies seasonal factors applicable to both the energy 
and agricultural futures markets and implements a modified roll to 
mitigate potential costs of such seasonal impacts.
Other Portfolio Holdings
    In addition to the instruments described above, the Fund will 
invest in money market instruments \17\ in a manner consistent with its 
investment objective in order to generate additional returns, to help 
manage cash flows in and out of the Fund, such as in connection with 
payment of dividends or expenses, to satisfy margin requirements, and 
to provide collateral or to otherwise back investments Futures 
Contracts.
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    \17\ The specific money market instruments are Treasury 
securities and repurchase agreements and, in the future, may include 
money market fund shares.
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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) deemed 
illiquid by the Adviser \18\ under the 1940 Act.\19\ 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 assets 
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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    \18\ In reaching liquidity decisions, the Adviser may consider 
the following factors: 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; and the nature of the 
security and the nature of the marketplace trades (e.g., the time 
needed to dispose of the security, the method of soliciting offers, 
and the mechanics of transfer).
    \19\ 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).
---------------------------------------------------------------------------

    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 Shares of the Fund will be calculated by dividing the 
value of the net assets of the Fund (i.e., the value of its total 
assets less total liabilities) by the total number of Shares 
outstanding. Expenses and fees, including the management and 
administration fees, are accrued daily and taken into account for 
purposes of determining NAV. The NAV of the Fund is generally 
determined at 3:00 p.m. Eastern Time each business day when the 
Exchange is open for trading. If the Exchange or market on which the 
Fund's investments are primarily traded closes early, the NAV may be 
calculated prior to its normal calculation time. Creation/redemption 
transaction order time cutoffs (as further described below) would also 
be accelerated.
    Securities and other assets are generally valued at their market 
price using information provided by a pricing service or market 
quotations. Certain short-term securities are valued on the basis of 
amortized cost. Futures

[[Page 49292]]

Contracts are generally valued at their settlement price as determined 
by the relevant exchange. The settlement value of the Fund's swap 
agreements will be determined by applying the then-current disseminated 
value for the Index Components to the terms of the Fund's swap 
agreements. Repurchase agreements are generally valued at cost. U.S 
government securities are generally priced at a quoted market price 
from an active market, generally the midpoint between the bid/ask 
quotes. For U.S. government securities that mature within sixty days, 
amortized cost may be used to approximate fair value. Money market 
funds would generally be valued at their current Net Asset Value per 
share, typically $1.00 per share. Certain short-term debt securities 
will be valued on the basis of amortized cost.
    When the Adviser determines that the price of a security or 
derivative is not readily available or deems the price unreliable, it 
may, in good faith, establish a fair value for that security or 
derivative in accordance with procedures established by and under the 
general supervision and responsibility of the Board. The use of a fair 
valuation method may be appropriate if, for example, market quotations 
do not accurately reflect fair value for an investment, a trading halt 
closes an exchange or market early, or other events result in an 
exchange or market delaying its normal close. The Adviser may consider 
applying appropriate valuation methodologies, which may include 
discounts of market value of similar freely traded securities, yields 
to maturity, or any other appropriate method. In determining the 
appropriate methodology, the Adviser may consider all relevant factors, 
including, among other things: Fundamental analytical data; the types 
of securities affected; pricing history of the security; whether dealer 
quotations are available; liquidity of the market; news or other 
events; and other factors the Adviser deems relevant.
    For more information regarding the valuation of Fund investments in 
calculating the Fund's NAV, see the Registration Statement.
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 
Adviser currently anticipates that a Creation Unit will consist of 
25,000 Shares, though this number may change from time to time, 
including prior to listing of the Shares. The exact number of Shares 
that will constitute a Creation Unit will be disclosed in the 
Registration Statement. Once created, Shares of the Fund trade on the 
secondary market in amounts less than a Creation Unit.
    Although the Adviser anticipates that purchases and redemptions for 
Creation Units will generally be executed on an all-cash basis, the 
consideration for purchase of Creation Units of the Fund may consist of 
an in-kind deposit of a designated portfolio of securities (including 
any portion of such assets for which cash may be substituted) (i.e., 
the ``Deposit Assets''), and the ``Cash Component'' computed as 
described below. Together, the Deposit Assets 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 
specific terms surrounding the creation and redemption of shares are at 
the discretion of the Adviser.
    The Deposit Assets and Fund Securities (as defined below), as the 
case may be, in connection with a purchase or redemption of a Creation 
Unit, generally will correspond pro rata, to the extent practicable, to 
the assets 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 Assets, and serve to compensate for any differences between the 
NAV per Creation Unit and the Deposit Amount. The Fund generally offers 
Creation Units partially or entirely for cash. PSA 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 Assets 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 Assets 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.
    Except as noted below, all creation orders must be placed for one 
or more Creation Units and must be received by the Distributor at a 
time specified by the Adviser. Currently, such orders must be received 
in proper form no later than 2:30 p.m. Eastern Time 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. 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 either the Continuous Net 
Settlement facility of the NSCC, 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''), in any case at the discretion of the 
Adviser, by an authorized participant. Any portion of a Fund Deposit 
that may not be delivered through the NSCC, Federal Reserve System or 
DTC must be delivered through a Central Depository Account.
    A standard creation transaction fee may 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. PSA 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''). The redemption proceeds for a Creation Unit 
generally will consist of a specified amount of cash less a redemption 
transaction fee. The Fund generally will redeem Creation Units entirely 
for cash.

[[Page 49293]]

    A standard redemption transaction fee may 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 by 
a time specified by the Adviser. Currently, such requests must be 
received no later than 10:45 a.m. Eastern Time on any business day, in 
order to receive that day's NAV. The authorized participant must 
transmit the request for redemption in the form required by 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.ProShares.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 sites will include additional 
quantitative information updated on a daily basis, including, for the 
Fund: (1) The prior business day's reported NAV, the closing market 
price or the midpoint of the bid/ask spread at the time of calculation 
of such NAV (the ``Bid/Ask price''),\20\ daily trading volume, and a 
calculation of the premium and discount of the closing market price or 
Bid/Ask Price against the NAV; and (2) data in chart format displaying 
the frequency distribution of discounts and premiums of the daily 
closing price against the NAV, within appropriate ranges, for each of 
the four previous calendar quarters. Daily trading volume information 
will 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 
\21\ on the Exchange, the Fund will disclose on its Web site the 
identities and quantities of the portfolio Futures Contracts 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.\22\ The Disclosed Portfolio will include, as applicable, the 
names, quantity, exposure value (notional value + gains/losses), and 
market value of the Futures Contracts and other assets held by the Fund 
and the characteristics of such assets. The Web site and information 
will be publicly available at no charge.
---------------------------------------------------------------------------

    \20\ 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.
    \21\ Regular Trading Hours are 9:30 a.m. to 4:00 p.m. Eastern 
Time.
    \22\ 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.
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    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.\23\ 
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.
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    \23\ 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 an 
estimate of that value throughout the trading day.
    Intraday price quotations on repurchase agreements and U.S. 
Government securities of the type held by the Fund are available from 
major broker-dealer firms and from third-parties, which may provide 
prices free with a time delay, or ``live'' with a paid fee. For Futures 
Contracts, such intraday information is available directly from the 
applicable listing exchange. Intraday price information is also 
available through subscription services, such as Bloomberg and Thomson 
Reuters, which can be accessed by authorized participants and other 
investors. Money market fund shares are not generally priced or quoted 
on an intraday basis.
    Information regarding market price and volume of the Shares 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 generally available daily in the print and online financial press. 
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.\24\ 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 will be 
calculated daily and that the NAV and the Disclosed Portfolio will be 
made available to all market participants at the same time.
---------------------------------------------------------------------------

    \24\ 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 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 
Futures Contracts and other assets 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

[[Page 49294]]

equity securities. BATS will allow trading in the Shares from 8:00 a.m. 
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 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.\25\ 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.
---------------------------------------------------------------------------

    \25\ 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 futures contracts in the Disclosed 
Portfolio for the Fund 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 is disseminated; (4) the risks involved 
in trading the Shares during the Pre-Opening \26\ and After Hours 
Trading Sessions \27\ 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.
---------------------------------------------------------------------------

    \26\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m. 
Eastern Time.
    \27\ 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 
Registration Statement.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \28\ in general and Section 6(b)(5) of the Act \29\ 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.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78f.
    \29\ 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 a 
broker-dealer and has implemented a ``fire wall'' with respect to such 
broker-dealer 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 
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.\30\ In addition, the Exchange is able 
to access, as needed, trade information for certain fixed income 
instruments reported to FINRA's TRACE.
---------------------------------------------------------------------------

    \30\ See note 24, supra.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund expects that, 
under normal circumstances, it will have at least 80% of its assets 
invested, either directly or indirectly via the Subsidiary, in Futures 
Contracts. The Fund also may invest its net assets in money market 
instruments as collateral for the Futures Contracts and in order to 
help manage cash flows in and out of the Fund.
    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). 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 assets subject to contractual or other

[[Page 49295]]

restrictions on resale and other instruments that lack readily 
available markets as determined in accordance with Commission staff 
guidance.
    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 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, 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.
    Intraday price quotations on repurchase agreements and U.S. 
Government securities of the type held by the Fund are available from 
major broker-dealer firms and from third-parties, which may provide 
prices free with a time delay, or ``live'' with a paid fee. For Futures 
Contracts, such intraday information is available directly from the 
applicable listing exchange. Intraday price information is also 
available through subscription services, such as Bloomberg and Thomson 
Reuters, which can be accessed by authorized participants and other 
investors. Money market fund shares are not generally priced or quoted 
on an intraday basis.
    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 
additional types 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 as well as trade information for certain 
fixed income instruments as reported to FINRA's TRACE. 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, rather will facilitate the listing and trading of 
additional actively-managed exchange-traded products that will enhance 
competition among both market participants and listing venues, 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 (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will: (a) By order approve 
or disapprove such 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

     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-2015-56 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-2015-56. 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

[[Page 49296]]

available for Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
such filing will also be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-BATS-2015-56 and should be submitted on or before 
September 8, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
---------------------------------------------------------------------------

    \31\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-20157 Filed 8-14-15; 8:45 am]
 BILLING CODE 8011-01-P