Document ID: SEC-2019-0645-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2019-05-14T04:00Z

[Federal Register Volume 84, Number 93 (Tuesday, May 14, 2019)]
[Notices]
[Pages 21375-21382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09860]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85804; File No. SR-CboeBZX-2019-035]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To List 
And Trade Under BZX Rule 14.11(c)(4) the Shares of the iShares iBonds 
2021 Term High Yield and Income ETF, iShares iBonds 2022 Term High 
Yield and Income ETF, iShares iBonds 2023 Term High Yield and Income 
ETF, iShares iBonds 2024 Term High Yield and Income ETF, and iShares 
iBonds 2025 Term High Yield and Income ETF of iShares Trust

May 8, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 26, 2019, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade under BZX Rule 14.11(c)(4) 
the shares of the iShares iBonds 2021 Term High Yield and Income ETF 
(the ``2021 Fund''), iShares iBonds 2022 Term High Yield and Income ETF 
(the ``2022 Fund''), iShares iBonds 2023 Term High Yield and Income ETF 
(the ``2023 Fund''), iShares iBonds 2024 Term High Yield and Income ETF 
(the ``2024 Fund''), and iShares iBonds 2025 Term High Yield and Income 
ETF (the ``2025 Fund'', each a ``Fund'' and, collectively, the 
``Funds'') of iShares Trust (the ``Trust'').
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, 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 aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
Funds under BZX Rule 14.11(c)(4),\5\ which governs the listing and 
trading of index fund shares based on fixed income securities indexes. 
The Shares will be offered by the Trust, which was established as a 
Delaware statutory trust on December 16, 1999. The Trust is registered 
with the Commission as an open-end investment company and has filed a 
registration statement on behalf of the Funds on Form N-1A 
(``Registration Statement'') with the Commission.\6\
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    \5\ The Commission approved BZX Rule 14.11(c) in Securities 
Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148 
(September 6, 2011) (SR-BATS-2011-018).
    \6\ See Registration Statement on Form N-1A for the Trust, dated 
February 7, 2019 (File Nos. 333-92935 and 811-09729). The 
descriptions of the Funds 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 Trust under the Investment Company Act of 1940 (15 U.S.C. 80a-1) 
(``1940 Act'') (the ``Exemptive Order''). See Investment Company Act 
Release No. 27661 (January 17, 2007) (File No. 812-13208).
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    The Exchange notes that the Underlying Indexes, as defined below, 
currently meet the requirements of Rule 14.11(c)(4)(B)(i)(f) (the ``90% 
Rule''),\7\

[[Page 21376]]

but the Exchange submits this proposal because, the Underlying Indexes 
may not meet this requirement in the future.\8\ As such, the Exchange 
is proposing to instead require that component securities that in 
aggregate account for at least 85% of the fixed income weight of the 
portfolio fall into at least one of five of the categories included in 
the 90% Rule. The Underlying Indexes currently meet and will continue 
to meet all other requirements of Rule 14.11(c)(4).\9\ If a Fund or the 
related Shares are not in compliance with the applicable listing 
requirements, then, with respect to such Fund or Shares, the Exchange 
will commence delisting procedures under Exchange Rule 14.12.
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    \7\ Rule 14.11(c)(4)(B)(i)(f) provides that ``component 
securities that in aggregate account for at least 90% of the Fixed 
Income Securities portion of the weight of the index or portfolio 
must be either: (1) From issuers that are required to file reports 
pursuant to Sections 13 and 15(d) of the Act; (2) from issuers that 
have a worldwide market value of its outstanding common equity held 
by non-affiliates of $700 million or more; (3) from issuers that 
have outstanding securities that are notes, bonds, debentures, or 
evidence of indebtedness having a total remaining principal amount 
of at least $1 billion; (4) exempted securities as defined in 
Section 3(a)(12) of the Act; or (5) from issuers that are a 
government of a foreign country or a political subdivision of a 
foreign country.'' The Exchange instead is proposing that at least 
85% of the fixed income weight of each portfolio will satisfy at 
least one of parts (1) through (5) described above.
    \8\ As of January 31, 2019, the following percentages of the 
Fixed Income Securities portion of the weight of each respective 
Underlying Index satisfied the criteria of Rule 
14.11(c)(4)(B)(i)(f): 91.24% of the 2021 Index; 91.03% of the 2022 
Index; 93.55% of the 2023 Index; 96.22% of the 2024 Index; and 
92.69% of the 2025 Index.
    \9\ The Exchange notes that the Commission has recently approved 
a proposal to list and trade a series of Managed Fund Shares that 
would not comply with the equivalent of the 90% Rule for Managed 
Fund Shares, which is substantively identical to the 90% Rule. 
Specifically, that series was approved to list and trade on Nasdaq 
Stock Market LLC as long as the fund's fixed income holdings that 
are not ABS and private MBS met the equivalent of the 90% Rule. The 
fund was allowed to hold up to 20% of the weight of the fixed income 
portion of the portfolio in ABS and private MBS, effectively 
reducing the threshold for compliance with the equivalent to the 90% 
Rule to 70%. Here, the Exchange is proposing only to reduce the 
compliance threshold for the 90% Rule to 85% and further believes 
that there are additional factors that further mitigate the policy 
concerns underlying the 90% Rule, as further discussed below. See 
Securities Exchange Act Release No. 84047 (September 6, 2018), 83 FR 
46200 (September 12, 2018) (SR-NASDAQ-2017-128) (the ``Approval 
Order'').
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Description of the Shares and the Funds
    BlackRock Fund Advisors (``BFA'') is the investment adviser to the 
Funds.\10\ State Street Bank and Trust Company is the administrator, 
custodian, and transfer agent for the Trust. Bloomberg Index Services 
Limited is the index provider (the ``Index Provider'' or ``Bloomberg'') 
for the Funds. BlackRock Investments, LLC serves as the distributor for 
the Trust.
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    \10\ BFA is an indirect wholly owned subsidiary of BlackRock, 
Inc.
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Bloomberg Barclays 2021 Term High Yield and Income Index
    According to the Registration Statement, the 2021 Fund will seek to 
track the investment results, before fees and expenses, of the 
Bloomberg Barclays 2021 Term High Yield and Income Index (the ``2021 
Index''), which is rebalanced monthly and composed of U.S. dollar-
denominated, high yield and other income generating corporate bonds 
maturing in 2021.
    The 2021 Index is composed of U.S. dollar-denominated, taxable, 
fixed-rate, high yield and BBB or equivalently rated (as determined by 
the Index Provider) corporate bonds scheduled to mature after December 
31, 2020 and before December 15, 2021.
    The bonds in the 2021 Index have $250 million or more of 
outstanding face value at the time of inclusion. The non-U.S. corporate 
issuers included in the 2021 Index consist primarily of corporate bonds 
issued by companies domiciled in developed countries. The 2021 Fund 
will invest in non-U.S. issuers to the extent necessary for it to track 
the 2021 Index. Each bond included in the 2021 Index must be registered 
with the SEC, have been exempt from registration at issuance, or have 
been offered pursuant to Rule 144A under the Securities Act of 1933, as 
amended (the ``1933 Act'').
    The 2021 Index consists of bonds chosen from two sub-indices, the 
Bloomberg Barclays U.S. High Yield Index (the ``High Yield Index'') and 
the Bloomberg Barclays U.S. Corporate Index (the ``Corporate Index''), 
both of which are stripped of securities maturing outside of the 
maturity range defined above. BBB-rated bonds from the Corporate Index 
will be introduced to the 2021 Index under the following conditions 
occurring at rebalance: (1) In the last 2.5 years but before the last 6 
months of the 2021 Index's term, the 2021 Index will add BBB-rated 
bonds as constituent high yield bonds are called, no longer qualify for 
inclusion, or decline in value compared to a reference point set at 2.5 
years from the 2021 Index's term or (2) if, prior to the last 2.5 years 
remaining in the 2021 Index's term, the market value of the high yield 
bonds in the 2021 Index declines below $30 billion, the 2021 Index will 
add BBB-rated bonds to maintain a $30 billion minimum market value for 
the 2021 Index. In the final year of the 2021 Index's term, any 
principal and interest paid by index constituents is treated as 
follows: (1) During the first six months of the final year, the 2021 
Index reinvests proceeds pro-rata into the remaining bonds in the 2021 
Index, and (2) during the last six months of the final year, proceeds 
are not reinvested and are presumed to be held in cash while earning no 
interest.
Bloomberg Barclays 2022 Term High Yield and Income Index
    According to the Registration Statement, the 2022 Fund will seek to 
track the investment results, before fees and expenses, of the 
Bloomberg Barclays 2022 Term High Yield and Income Index (the ``2022 
Index''), which is rebalanced monthly and composed of U.S. dollar-
denominated, high yield and other income generating corporate bonds 
maturing in 2022.
    The 2022 Index is composed of U.S. dollar-denominated, taxable, 
fixed-rate, high yield and BBB or equivalently rated (as determined the 
by Index Provider) corporate bonds scheduled to mature after December 
31, 2021 and before December 15, 2022.
    The bonds in the 2022 Index have $250 million or more of 
outstanding face value at the time of inclusion. The non-U.S. corporate 
issuers included in the 2022 Index consist primarily of corporate bonds 
issued by companies domiciled in developed countries. The 2022 Fund 
will invest in non-U.S. issuers to the extent necessary for it to track 
the 2022 Index. Each bond included in the 2022 Index must be registered 
with the SEC, have been exempt from registration at issuance, or have 
been offered pursuant to Rule 144A under the 1933 Act.
    The 2022 Index consists of bonds chosen from two sub-indices, the 
High Yield Index and the Corporate Index, both of which are stripped of 
securities maturing outside of the maturity range defined above. BBB-
rated bonds from the Corporate Index will be introduced to the 2022 
Index under the following conditions occurring at rebalance: (1) In the 
last 2.5 years but before the last 6 months of the 2022 Index's term, 
the 2022 Index will add BBB-rated bonds as constituent high yield bonds 
are called, no longer qualify for inclusion, or decline in value 
compared to a reference point set at 2.5 years from the 2022 Index's 
term or (2) if, prior to the last 2.5 years remaining in the 2022 
Index's term, the market value of the high yield bonds in the 2022 
Index declines below $30 billion, the 2022 Index will add BBB-rated 
bonds to maintain a $30 billion minimum market value for the 2022 
Index. In the final year of the 2022 Index's term, any principal and 
interest paid by index constituents is treated as follows: (1) During 
the first six months of the final year, the 2022 Index reinvests 
proceeds pro-rata into the remaining bonds in the 2022 Index, and (2) 
during the last six months of the final year, proceeds are not 
reinvested and are presumed to be held in cash while earning no 
interest.

[[Page 21377]]

Bloomberg Barclays 2023 Term High Yield and Income Index
    According to the Registration Statement, the 2023 Fund will seek to 
track the investment results, before fees and expenses, of the 
Bloomberg Barclays 2023 Term High Yield and Income Index (the ``2023 
Index''), which is rebalanced monthly and composed of U.S. dollar-
denominated, high yield and other income generating corporate bonds 
maturing in 2023.
    The 2023 Index is composed of U.S. dollar-denominated, taxable, 
fixed-rate, high yield and BBB or equivalently rated (as determined by 
the Index Provider) corporate bonds scheduled to mature after December 
31, 2022 and before December 15, 2023.
    The bonds in the 2023 Index have $250 million or more of 
outstanding face value at the time of inclusion. The non-U.S. corporate 
issuers included in the 2023 Index consist primarily of corporate bonds 
issued by companies domiciled in developed countries. The 2023 Fund 
will invest in non-U.S. issuers to the extent necessary for it to track 
the 2023 Index. Each bond included in the 2023 Index must be registered 
with the SEC, have been exempt from registration at issuance, or have 
been offered pursuant to Rule 144A under the 1933 Act.
    The 2023 Index consists of bonds chosen from two sub-indices, the 
High Yield Index and the Corporate Index, both of which are stripped of 
securities maturing outside of the maturity range defined above. BBB-
rated bonds from the Corporate Index will be introduced to the 2023 
Index under the following conditions occurring at rebalance: (1) In the 
last 2.5 years but before the last 6 months of the 2023 Index's term, 
the 2023 Index will add BBB-rated bonds as constituent high yield bonds 
are called, no longer qualify for inclusion, or decline in value 
compared to a reference point set at 2.5 years from the 2023 Index's 
term or (2) if, prior to the last 2.5 years remaining in the 2023 
Index's term, the market value of the high yield bonds in the 2023 
Index declines below $30 billion, the 2023 Index will add BBB-rated 
bonds to maintain a $30 billion minimum market value for the 2023 
Index. In the final year of the 2023 Index's term, any principal and 
interest paid by index constituents is treated as follows: (1) During 
the first six months of the final year, the 2023 Index reinvests 
proceeds pro-rata into the remaining bonds in the 2023 Index, and (2) 
during the last six months of the final year, proceeds are not 
reinvested and are presumed to be held in cash while earning no 
interest.
Bloomberg Barclays 2024 Term High Yield and Income Index
    According to the Registration Statement, the 2024 Fund will seek to 
track the investment results, before fees and expenses, of the 
Bloomberg Barclays 2024 Term High Yield and Income Index (the ``2024 
Index''), which is rebalanced monthly and composed of U.S. dollar-
denominated, high yield and other income generating corporate bonds 
maturing in 2024.
    The 2024 Index is composed of U.S. dollar-denominated, taxable, 
fixed-rate, high yield and BBB or equivalently rated (as determined by 
the Index Provider) corporate bonds scheduled to mature after December 
31, 2023 and before December 15, 2024.
    The bonds in the 2024 Index have $250 million or more of 
outstanding face value at the time of inclusion. The non-U.S. corporate 
issuers included in the 2024 Index consist primarily of corporate bonds 
issued by companies domiciled in developed countries. The 2024 Fund 
will invest in non-U.S. issuers to the extent necessary for it to track 
the 2024 Index. Each bond included in the 2024 Index must be registered 
with the SEC, have been exempt from registration at issuance, or have 
been offered pursuant to Rule 144A under the 1933 Act.
    The 2024 Index consists of bonds chosen from two sub-indices, the 
High Yield Index and the Corporate Index, both of which are stripped of 
securities maturing outside of the maturity range defined above. BBB-
rated bonds from the Corporate Index will be introduced to the 2024 
Index under the following conditions occurring at rebalance: (1) In the 
last 2.5 years but before the last 6 months of the 2024 Index's term, 
the 2024 Index will add BBB-rated bonds as constituent high yield bonds 
are called, no longer qualify for inclusion, or decline in value 
compared to a reference point set at 2.5 years from the 2024 Index's 
term or (2) if, prior to the last 2.5 years remaining in the 2024 
Index's term, the market value of the high yield bonds in the 2024 
Index declines below $30 billion, the 2024 Index will add BBB-rated 
bonds to maintain a $30 billion minimum market value for the 2024 
Index. In the final year of the 2024 Index's term, any principal and 
interest paid by index constituents is treated as follows: (1) During 
the first six months of the final year, the 2024 Index reinvests 
proceeds pro-rata into the remaining bonds in the 2024 Index, and (2) 
during the last six months of the final year, proceeds are not 
reinvested and are presumed to be held in cash while earning no 
interest.
Bloomberg Barclays 2025 Term High Yield and Income Index
    According to the Registration Statement, the 2025 Fund will seek to 
track the investment results, before fees and expenses, of the 
Bloomberg Barclays 2025 Term High Yield and Income Index (the ``2025 
Index'' and, collectively with the 2021 Index, the 2022 Index, the 2023 
Index, and the 2024 Index, the ``Underlying Indexes''), which is 
rebalanced monthly and composed of U.S. dollar-denominated, high yield 
and other income generating corporate bonds maturing in 2025.
    The 2025 Index is composed of U.S. dollar-denominated, taxable, 
fixed-rate, high yield and BBB or equivalently rated (as determined by 
the Index Provider) corporate bonds scheduled to mature after December 
31, 2024 and before December 15, 2025.
    The bonds in the 2025 Index have $250 million or more of 
outstanding face value at the time of inclusion. The non-U.S. corporate 
issuers included in the 2025 Index consist primarily of corporate bonds 
issued by companies domiciled in developed countries. The 2025 Fund 
will invest in non-U.S. issuers to the extent necessary for it to track 
the 2025 Index. Each bond included in the 2025 Index must be registered 
with the SEC, have been exempt from registration at issuance, or have 
been offered pursuant to Rule 144A under the 1933 Act.
    The 2025 Index consists of bonds chosen from two sub-indices, the 
High Yield Index and the Corporate Index, both of which are stripped of 
securities maturing outside of the maturity range defined above. BBB-
rated bonds from the Corporate Index will be introduced to the 2025 
Index under the following conditions occurring at rebalance: (1) In the 
last 2.5 years but before the last 6 months of the 2025 Index's term, 
the 2025 Index will add BBB-rated bonds as constituent high yield bonds 
are called, no longer qualify for inclusion, or decline in value 
compared to a reference point set at 2.5 years from the 2025 Index's 
term or (2) if, prior to the last 2.5 years remaining in the 2025 
Index's term, the market value of the high yield bonds in the 2025 
Index declines below $30 billion, the 2025 Index will add BBB-rated 
bonds to maintain a $30 billion minimum market value for the 2025 
Index. In the final year of the 2025 Index's term, any principal and 
interest paid by index constituents is treated as follows: (1) During 
the first six months of the final year, the 2025 Index reinvests 
proceeds pro-rata into the remaining bonds in the 2025 Index, and (2) 
during the last six months of the

[[Page 21378]]

final year, proceeds are not reinvested and are presumed to be held in 
cash while earning no interest.
Portfolio Holdings
    According to the Registration Statement, under Normal Market 
Conditions,\11\ each Fund generally will invest at least 90% of its 
assets in the component securities of its respective Underlying Index, 
except during the last months of the Fund's operations, as described 
below. A Fund may also invest in other ETFs in order to obtain indirect 
exposure to such component securities.\12\ A Fund may also invest up to 
10% of its respective assets in certain listed derivatives, including 
futures, options and swap contracts,\13\ U.S. government securities, 
short-term paper, cash and cash equivalents, including shares of money 
market funds advised by BFA or its affiliates, cash and cash 
equivalents, as well as in securities not included in the Underlying 
Index, but which BFA believes will help the Fund track the Underlying 
Index.
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    \11\ For purposes of this proposal and consistent with the 
definition in Rule 14.11(i)(3)(E) applicable to Managed Fund Shares, 
the term ``Normal Market Conditions'' includes, but is not limited 
to, the absence of trading halts in the applicable financial markets 
generally; operational issues causing dissemination of inaccurate 
market information or system failures; or force majeure type events 
such as natural or man-made disaster, act of God, armed conflict, 
act of terrorism, riot or labor disruption, or any similar 
intervening circumstance.
    \12\ For purposes of this proposal, the term ETF means Portfolio 
Depositary Receipts, Index Fund Shares, and Managed Fund Shares as 
defined in Rule 14.11(b), 14.11(c), and 14.11(i), respectively, and 
their equivalents on other national securities exchanges.
    \13\ Such futures, options and swap contracts will include only 
the following: Interest rate futures, interest rate options, and 
interest rate swaps. The derivatives will be centrally cleared and 
they will be collateralized. At least 90% of the Fund's net assets 
that are invested in listed derivatives will be invested in 
instruments that trade in markets that are members or affiliates of 
members of the Intermarket Surveillance Group (``ISG'') or are 
parties to a comprehensive surveillance sharing with the Exchange.
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    From time to time when conditions warrant, however, a Fund may 
invest at least 80% of its assets in the component securities of its 
respective Underlying Index. In the last months of a Fund's operation, 
as the bonds held by the Fund mature, the proceeds will not be 
reinvested by the Fund in bonds but instead will be held in cash and 
cash equivalents. By December 15 of each Fund's respective expiration 
year, the Fund's Underlying Index is expected to consist almost 
entirely of cash earned in this manner. Around the same time, the Fund 
will wind up and terminate, and its net assets will be distributed to 
then-current shareholders pursuant to a plan of liquidation.
Discussion
    Based on the characteristics of the Underlying Indexes and the 
representations made in the Requirements for Index Constituents 
sections above, the Exchange believes it is appropriate to allow the 
listing and trading of the Shares. The Underlying Indexes and Funds 
each currently satisfy all of the generic listing requirements for 
Index Fund Shares based on a fixed income index. The Underyling Indexes 
and the Funds will also continue to satisfy all such generic listing 
requirements, with the possible exception to the 90% Rule. In the event 
that an Underlying Index no longer satisfies the 90% Rule, the Exchange 
is only requesting that the threshold applicable to the 90% Rule be 
lowered from 90% to 85% and will commence delisting procedures under 
Rule 14.12 for a Fund for which less than 85% of the weight of its 
respective Underlying Index satisfies one of the five applicable 
categories under the 90% Rule. Further, if a Fund or the related Shares 
are not in compliance with the applicable listing requirements under 
Rule 14.11(c)(4), then, with respect to such Fund or Shares, the 
Exchange will commence delisting procedures under Exchange Rule 14.12.
    As such, the Exchange believes that this proposed limited exception 
to the 90% Rule is consistent with the Act for several reasons. 
Specifically, the Exchange believes that the limited nature of the 
proposed exception combined with the minimum size requirements 
applicable to each Underlying Index (a minimum outstanding face value 
of $250 million at the time of inclusion) act to mitigate the policy 
concerns which the 90% Rule is intended to address. With a minimum 
outstanding face value of $250 million, the issuances included in the 
Underlying Indexes will be large enough that such the types of 
instruments included in the Index will be more liquid and less 
susceptible to manipulation than smaller issuances that could otherwise 
be allowed under the generic listing standards. Further, this proposal 
is only seeking to reduce the possible weight of index constituents 
that meet the 90% Rule from 90% to 85%. Combining this minimal 
exception with the additional liquidity and lower likelihood of 
manipulation associated with the increased minimum outstanding face 
value of the issuance, the Exchange firmly believes that the concerns 
related to manipulation that underly the generic listing standards are 
sufficiently mitigated.
    Further, the Exchange believes that this proposal is designed to 
address a near-miss of the generic listing standards because under 
current market conditions each of the Underlying Indexes meet the 
generic listing standards under Rule 14.11(c), and this proposed 
limited exception to the 90% Rule is designed to ensure that the 
Underlying Indexes would continue to meet the applicable continued 
listing standards under a broader array of possible future market 
conditions. Similarly, because the Funds could today (and potentially 
indefinitely into the future) be listed on the Exchange pursuant to the 
generic listing standards, such a limited exception provides investors 
with certainty as to whether the Funds will continue to be listed on 
the Exchange going forward. Finally, the Exchange is only proposing a 
reduction of the applicable standard from 90% to 85%, as noted above.
    In addition, the Exchange represents that: (1) Except for Rule 
14.11(c)(4)(B)(i)(b), each Underyling Index currently satisfies all of 
the generic listing standards under Rule 14.11(c)(4); (2) the continued 
listing standards under Rule 14.11(c), as applicable to Index Fund 
Shares based on fixed income securities, will apply to the Shares; and 
(3) the issuer of the Funds is required to comply with Rule 10A-3 \14\ 
under the Act for the initial and continued listing of the Shares. In 
addition, the Exchange represents that each Fund will comply with all 
other requirements applicable to Index Fund Shares, including, but not 
limited to, requirements relating to the dissemination of key 
information such as the value of the Underlying Indexes and the 
Intraday Indicative Value (``IIV''),\15\ rules governing the trading of 
equity securities, trading hours, trading halts, surveillance, 
information barriers and the Information Circular, as set forth in the 
Exchange rules applicable to Index Fund Shares and prior Commission 
orders approving the generic listing rules applicable to the listing 
and trading of Index Fund Shares.
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    \14\ 17 CFR 240.10A-3.
    \15\ The IIV will be widely disseminated by one or more major 
market data vendors at least every 15 seconds during the Exchange's 
Regular Trading Hours. Currently, it is the Exchange's understanding 
that several major market data vendors display and/or make widely 
available IIVs taken from the Consolidated Tape Association 
(``CTA'') or other data feeds.
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    The current value of each Underlying Index will be widely 
disseminated by one or more major market data vendors at least once per 
day, as required by Rule 14.11(c)(4)(C)(ii). The portfolio of

[[Page 21379]]

securities and other assets held by each Fund will be disclosed daily 
on its respective website at www.ishares.com. Further, each Fund's 
website will contain the Fund's prospectus and additional data relating 
to net asset value (``NAV'') and other applicable quantitative 
information. The issuer has represented that the NAV of each Fund will 
be calculated daily and will be made available to all market 
participants at the same time. The Index Provider is not a broker-
dealer and is not affiliated with a broker-dealer. To the extent that 
the Index Provider becomes a broker-dealer or becomes affiliated with a 
broker-dealer, the Index Provider will implement and will maintain a 
``fire wall'' around the personnel who have access to information 
concerning changes and adjustments to each Underlying Index and each 
Underlying Index shall be calculated by a third party who is not a 
broker-dealer or fund advisor. In addition, any advisory committee, 
supervisory board or similar entity that advises the Index Provider or 
that makes decisions on each Index, methodology and related matters, 
will implement and maintain, or be subject to, procedures designed to 
prevent the use and dissemination of material non-public information 
regarding the Underlying Indexes.
    The Exchange's existing rules require that the issuer of the Funds 
notify the Exchange of any material change to the methodology used to 
determine the composition of an Underlying Index and, therefore, if the 
methodology of an Underlying Index was to be changed in a manner that 
would materially alter its existing composition, the Exchange would 
have advance notice and would evaluate the modifications to determine 
whether that Underyling Index remained sufficiently broad-based and 
well diversified.
Availability of Information
    The Funds' website, which will be publicly available prior to the 
public offering of Shares, will include a form of the prospectus for 
the Funds that may be downloaded. The website will include additional 
quantitative information updated on a daily basis, including, for each 
Fund: (1) The prior business day's reported NAV, daily trading volume, 
and a calculation of the premium and discount of the Bid/Ask Price 
against the NAV; and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily Bid/Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. Daily trading volume information for the 
Shares will also be available in the financial section of newspapers, 
through subscription services such as Bloomberg, Thomson Reuters, and 
International Data Corporation, which can be accessed by authorized 
participants and other investors, as well as through other electronic 
services, including major public websites. On each business day, each 
Fund will disclose on its website the identities and quantities of the 
portfolio of securities and other assets in the daily disclosed 
portfolio held by the Fund that formed the basis for the Fund's 
calculation of NAV at the end of the previous business day. The daily 
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, 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 each Fund's portfolio. The 
website and information will be publicly available at no charge. The 
value, components, and percentage weightings of each Underlying Index 
will be calculated and disseminated at least once daily and will be 
available from major market data vendors. Rules governing each Fund's 
respective Underlying Indexes are available on Bloomberg's website and 
in the applicable Fund's prospectus.
    In addition, an estimated value, defined in BZX Rule 14.11(c)(6)(A) 
as the IIV that reflects an estimated intraday value of each Fund's 
portfolio, will be disseminated. Moreover, the IIV will be based upon 
the current value for the components of the daily 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.\16\ In addition, the quotations of certain of a Fund's 
holdings may not be updated during U.S. trading hours if updated prices 
cannot be ascertained.
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    \16\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available IIVs 
published via the CTA or other data feeds.
---------------------------------------------------------------------------

    The dissemination of the IIV, together with the daily disclosed 
portfolio, will allow investors to determine the value of the 
underlying portfolio of each Fund on a daily basis and provide a close 
estimate of that value throughout the trading day.
    Quotation and last sale information for the Shares will be 
available via the CTA high speed line. Price information regarding 
corporate bonds and other non-exchange traded assets including certain 
derivatives, money market funds and other instruments, and repurchase 
agreements is available from third party pricing services and major 
market data vendors. For exchange-traded assets, including futures, and 
certain options, such intraday information is available directly from 
the applicable listing exchange. In addition, price information for 
U.S. exchange-traded options will be available from the Options Price 
Reporting Authority.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, or 
by regulatory staff of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities laws. 
The Exchange represents that these procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and federal securities 
laws applicable to trading on the Exchange.\17\
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    \17\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
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    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares with other 
markets and other entities that are members of the ISG, and the 
Exchange or FINRA, on behalf of the Exchange, or both, may obtain 
trading information regarding trading in the Shares from such markets 
and other entities. In addition, the Exchange may obtain information 
regarding trading in the Shares from markets and other entities that 
are members of ISG or with which the

[[Page 21380]]

Exchange has in place a comprehensive surveillance sharing agreement. 
In addition, FINRA, on behalf of the Exchange, is able to access, as 
needed, trade information for certain fixed income securities held by 
the Funds reported to FINRA's Trade Reporting and Compliance Engine 
(``TRACE'').
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \18\ in general and Section 6(b)(5) of the Act \19\ 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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f.
    \19\ 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 for Index Fund Shares based on a 
fixed income index in Rule 14.11(c)(4), with the possible exception of 
the 90% Rule. In the event that an Underlying Index no longer satisfies 
the 90% Rule, the Exchange is only requesting that the threshold 
applicable to the 90% Rule be lowered from 90% to 85% and will commence 
delisting procedures under Rule 14.12 for a Fund for which less than 
85% of the weight of its respective Underlying Index satisfies one of 
the five applicable categories under the 90% Rule.
    As such, the Exchange believes that this proposed limited exception 
to the 90% Rule is consistent with the Act for several reasons. 
Specifically, the Exchange believes that the limited nature of the 
proposed exception combined with the minimum size requirements 
applicable to each Underlying Index (a minimum outstanding face value 
of $250 million at the time of inclusion) act to mitigate the policy 
concerns which the 90% Rule is intended to address. With a minimum 
outstanding face value of $250 million, the issuances included in the 
Underlying Indexes will each be at least 2.5 times as large as the 
threshold provided in Rule 14.11(c)(4)(B)(i)(b), generally making such 
issuances more liquid and less susceptible to manipulation than smaller 
issuances that would be allowed under the generic listing standards. 
Further, this proposal is only seeking to reduce the possible weight of 
index constituents that meet the 90% Rule from 90% to 85%. Combining 
this minimal exception with the additional liquidity and lower 
likelihood of manipulation associated with the increased minimum 
outstanding face value of the issuance, the Exchange firmly believes 
that the concerns related to manipulation that underly the generic 
listing standards are sufficiently mitigated.
    Further, under current market conditions each of the Underlying 
Indexes meet the generic listing standards under Rule 14.11(c), and 
this proposed limited exception to the 90% Rule is designed to ensure 
that the Underlying Indexes would continue to meet the applicable 
continued listing standards under a broader array of possible future 
market conditions. Similarly, because the Funds could today (and 
potentially indefinitely into the future) be listed on the Exchange 
pursuant to the generic listing standards, allowing such a limited 
exception provides investors with certainty as to whether the Funds 
will continue to be listed on the Exchange going forward. Finally, the 
Exchange is only proposing a reduction of the applicable standard from 
90% to 85%, as noted above.
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances administered by the Exchange as 
well as cross-market surveillances administered by the FINRA on behalf 
of the Exchange, which are designed to detect violations of Exchange 
rules and federal securities laws applicable to trading on the 
Exchange. The Exchange represents that these procedures are adequate to 
properly monitor Exchange trading of the Shares in all trading sessions 
and to deter and detect violations of Exchange rules and federal 
securities laws applicable to trading on the Exchange. The Exchange or 
FINRA, on behalf of the Exchange, or both, will communicate as needed 
regarding trading in the Shares with other markets that are members of 
the ISG. In addition, the Exchange will communicate as needed regarding 
trading in the Shares with other markets that are members of the ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement. FINRA, on behalf of the Exchange, is able to access, 
as needed, trade information for certain fixed income securities held 
by the Funds reported to TRACE.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that a large amount of information is publicly available regarding each 
Fund, thereby promoting market transparency. Each Fund's portfolio 
holdings will be disclosed on its respective website daily after the 
close of trading on the Exchange. Moreover, the IIV for the Shares will 
be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the Exchange's Regular Trading Hours. The 
current value of each Underlying Index will be disseminated by one or 
more major market data vendors at least once per day. Information 
regarding market price and trading volume of the Shares will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services, and quotation 
and last sale information will be available via the CTA high-speed 
line. The website for the Funds will include the prospectus for each 
Fund and additional data relating to NAV and other applicable 
quantitative information.
    If the Exchange becomes aware that a Fund's NAV is not being 
disseminated to all market participants at the same time, it will halt 
trading in the applicable Fund's Shares until such time as the NAV is 
available to all market participants. With respect to trading halts, 
the Exchange may consider all relevant factors in exercising its 
discretion to halt or suspend trading in the Shares. Trading also may 
be halted because of market conditions or for reasons that, in the view 
of the Exchange, make trading in the Shares inadvisable. If the IIV and 
index value are not being disseminated for a Fund as required, the 
Exchange may halt trading during the day in which the interruption to 
the dissemination of the IIV or index value occurs. If the interruption 
to the dissemination of an IIV or index value persists past the trading 
day in which it occurred, the Exchange will halt trading. The Exchange 
may consider all relevant factors in exercising its discretion to halt 
or suspend trading in the Shares. The Exchange will halt trading in the 
Shares under the conditions specified in BZX Rule 11.18. Trading may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable. These may 
include: (1) The extent to which trading is not occurring in the 
securities and/or the financial instruments composing the daily 
disclosed portfolio of a Fund; or (2) whether other unusual conditions 
or circumstances detrimental to the

[[Page 21381]]

maintenance of a fair and orderly market are present. In addition, 
investors will have ready access to information regarding the 
applicable IIV, and quotation and last sale information for the Shares.
    All statements and representations made in this filing regarding 
the composition of the Underlying Indexes, the description of the 
portfolio or reference assets, limitations on portfolio holdings or 
reference assets, dissemination and availability of index, reference 
asset, and IIV, or the applicability of Exchange listing rules shall 
constitute continued listing requirements for listing the Shares on the 
Exchange. The issuer is required to advise the Exchange of any failure 
by a Fund to comply with the continued listing requirements, and, 
pursuant to its obligations under Section 19(g)(1) of the Act, the 
Exchange will monitor for compliance with the continued listing 
requirements. If a Fund is not in compliance with the applicable 
listing requirements, the Exchange will commence delisting procedures 
under Rule 14.12.
    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 
several new exchange-traded products that will enhance competition 
among market participants, to the benefit of investors and the 
marketplace. The Exchange has in place surveillance procedures relating 
to trading in the Shares and may obtain information via ISG from other 
exchanges that are members of ISG or with which the Exchange has 
entered into a comprehensive surveillance sharing agreement. In 
addition, investors will have ready access to information regarding the 
IIV and quotation and last sale information for the Shares.
    For the above reasons, the Exchange believes that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of three 
additional exchange-traded products that will enhance competition among 
market participants, to the benefit of investors and the marketplace.

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

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

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \20\ and Rule 19b-
4(f)(6) thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \22\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \23\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the proposed rule change may become operative upon filing. The 
Exchange asserts that the limited extent of the Funds' deviation from 
the generic listing standards' 90% Rule, combined with the Funds' 
holdings having a minimum outstanding face value that is 2.5 times 
larger than the threshold in the generic listing standards, 
sufficiently mitigates concerns related to manipulation. Further, 
according to the Exchange, waiver of the 30-day operative delay would 
facilitate the listing and trading of additional exchange-traded 
products that will enhance competition among market participants, to 
the benefit of investors and the marketplace. For those reasons, the 
Exchange asserts that waiver of the operative delay would be consistent 
with the protection of investors and the public interest. The 
Commission believes that the proposal raises no new or substantive 
issues and that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest. The Commission 
hereby waives the operative delay and designates the proposed rule 
change operative upon filing.\24\
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    \22\ 17 CFR 240.19b-4(f)(6).
    \23\ 17 CFR 240.19b-4(f)(6)(iii).
    \24\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

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

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the 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-CboeBZX-2019-035 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CboeBZX-2019-035. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be

[[Page 21382]]

available for website viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE, Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change. Persons submitting comments are cautioned that we do 
not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
CboeBZX-2019-035 and should be submitted on or before June 4, 2019.
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    \25\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-09860 Filed 5-13-19; 8:45 am]
BILLING CODE 8011-01-P