Document ID: SEC-2016-1266-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats BZX Exchange, Inc.
Posted Date: 2016-07-20T04:00Z

[Federal Register Volume 81, Number 139 (Wednesday, July 20, 2016)]
[Notices]
[Pages 47217-47222]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17089]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78329; File No. SR-BatsBZX-2016-01]

Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment No. 
8 Thereto, to List and Trade Under BZX Rule 14.11(c)(4) Shares of the 
Following Series of VanEck Vectors ETF Trust: VanEck Vectors AMT-Free 
6-8 Year Municipal Index ETF; VanEck Vectors AMT-Free 8-12 Year 
Municipal Index ETF; and VanEck Vectors AMT-Free 12-17 Year Municipal 
Index ETF

July 14, 2016.

I. Introduction

    On March 29, 2016, Bats BZX Exchange, Inc. (``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade under BZX Rule 14.11(c)(4) the 
shares (``Shares'') of the following series of VanEck Vectors ETF Trust 
(``Trust''): VanEck Vectors AMT-Free 6-8 Year Municipal Index ETF; 
VanEck Vectors AMT-Free 8-12 Year Municipal Index ETF; and VanEck 
Vectors AMT-Free 12-17 Year Municipal Index ETF (individually, ``Fund'' 
and, collectively, ``Funds''). The proposed rule change was published 
for comment in the Federal Register on April 18, 2016.\3\ On June 1, 
the Exchange filed Amendment No. 1 to the proposed rule change.\4\ On 
June 14, 2016, the Exchange filed Amendment No. 2 to the proposed rule 
change.\5\ On June 23, 2016, the Exchange filed Amendment No. 3 to the 
proposed rule change.\6\ On July 8, 2016, the Exchange filed: (1) 
Amendment No. 4 to the proposed rule change; \7\ (2) Amendment No. 5 to 
the proposed rule change; \8\ and (3) Amendment No. 6 to the proposed 
rule change.\9\ On July 12, 2016, the

[[Page 47218]]

Exchange filed Amendment No. 7 to the proposed rule change.\10\ On July 
13, 2016, the Exchange filed Amendment No. 8 to the proposed rule 
change.\11\ The Commission received one comment on the proposed rule 
change.\12\ This order grants approval of the proposed rule change, as 
modified by Amendment No. 8 thereto.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 77596 (April 18, 
2016), 81 FR 22681 (``Notice'').
    \4\ In Amendment No. 1, the Exchange: (a) Clarified the names of 
the exchange-traded funds (``ETFs'') by replacing references to 
``Market Vectors'' with ``VanEck Vectors''; (b) added 
representations relating to continued listing compliance and 
Exchange delisting procedures in the event of non-compliance with 
respect to the proposal; (c) clarified certain holdings of the Funds 
by (i) replacing references to ``to-be-announced'' or ``TBA'' 
transactions with ``when-issued'' or ``WI'' transactions, (ii) 
deleting references to over-the-counter options on futures 
contracts, (iii) deleting statements relating to certain swaps, and 
(iv) deleting information relating to municipal bonds that are not 
included in the applicable underlying indices; (d) made conforming 
and clarifying changes in describing the calculation of net asset 
value of the Funds; (e) changed the creation unit size of the Funds 
from 100,000 Shares to 50,000 Shares; and (f) clarified that 
information with respect to the mid-point of the bid/ask spread 
would not be publicly available; and (g) added availability of 
information relating to the underlying indices. Because the changes 
in Amendment No. 1 to the proposed rule change clarify certain 
statements in the proposal and do not materially alter the substance 
of the proposed rule change or raise any novel regulatory issues, it 
is not subject to notice and comment. Amendment No. 1, which amended 
and replaced the Notice in its entirety, is available on the 
Commission's Web site at: https://www.sec.gov/comments/sr-batsbzx-2016-01/batsbzx201601-2.pdf.
    \5\ In Amendment No. 2, the Exchange: (a) Clarified the other 
portfolio holdings of the Funds with respect to other municipal 
bonds; (b) added statements with respect to certain swaps; (c) 
corrected a typographical error; and (d) clarified that each Fund 
will disclose on its Web site the identities and quantities of the 
portfolio of securities and other assets in the daily disclosed 
portfolio held by the Funds that formed the basis for each Fund's 
calculation of net asset value at the end of the previous business 
day. Because the changes in Amendment No. 2 to the proposed rule 
change are technical in nature and do not materially alter the 
substance of the proposed rule change or raise any novel regulatory 
issues, it is not subject to notice and comment. Amendment No. 2, 
which amended and replaced the proposed rule change, as modified by 
Amendment No. 1 thereto, in its entirety, is available on the 
Commission's Web site at: https://www.sec.gov/comments/sr-batsbzx-2016-01/batsbzx201601-3.pdf.
    \6\ In Amendment No. 3, the Exchange: (a) Deleted extraneous 
language previously corrected by Amendment No. 2 to the proposed 
rule change relating to certain swaps; and (b) corrected a technical 
redundancy with respect to a defined term. Because the changes in 
Amendment No. 3 to the proposed rule change are technical in nature 
and do not materially alter the substance of the proposed rule 
change or raise any novel regulatory issues, it is not subject to 
notice and comment. Amendment No. 3, which amended and replaced the 
proposed rule change, as modified by Amendment No. 2 thereto, in its 
entirety, is available on the Commission's Web site at: https://www.sec.gov/comments/sr-batsbzx-2016-01/batsbzx201601-4.pdf.
    \7\ In Amendment No. 4, the Exchange corrected errors made with 
respect to the names of the Funds by adding ``AMT-Free'' to certain 
references made in the proposal. Because the changes in Amendment 
No. 4 to the proposed rule change are technical in nature and do not 
materially alter the substance of the proposed rule change or raise 
any novel regulatory issues, it is not subject to notice and 
comment. Amendment No. 4, which amended and replaced the proposed 
rule change, as modified by Amendment No. 3 thereto, in its 
entirety, is available on the Commission's Web site at: https://www.sec.gov/comments/sr-batsbzx-2016-01/batsbzx201601-5.pdf.
    \8\ On July 8, 2016, the Exchange withdrew Amendment No. 5 to 
the proposed rule change.
    \9\ In Amendment No. 6, the Exchange further corrected the names 
of the Funds by removing references to ``AMT-Free.'' Because the 
changes in Amendment No. 6 to the proposed rule change are technical 
in nature and do not materially alter the substance of the proposed 
rule change or raise any novel regulatory issues, it is not subject 
to notice and comment. Amendment No. 6, which amended and replaced 
the proposed rule change, as modified by Amendment No. 4 thereto, in 
its entirety, is available on the Commission's Web site at: https://www.sec.gov/comments/sr-batsbzx-2016-01/batsbzx201601-6.pdf.
    \10\ In Amendment No. 7, the Exchange (a) further corrected 
errors in the names of the Funds; and (b) clarified that (i) all 
statements and representations regarding each Fund's 80% Investment 
Policy (as defined herein) constitute continued listing requirements 
for listing the Shares on the Exchange, (ii) the issuer has 
represented to the Exchange that it will advise the Exchange of any 
failure by a Fund to comply with the continued listing requirements 
(or any changes made with respect to a Fund's 80% Investment 
Policy), and, pursuant to its obligations under Section 19(g)(1) of 
the Act, the Exchange will surveil for compliance with the continued 
listing requirements, and (iii) if the Fund is not in compliance 
with the applicable listing requirements, the Exchange will commence 
delisting procedures under Exchange Rule 14.12. See infra note 16 
and accompanying text. Because the changes in Amendment No. 7 to the 
proposed rule change do not materially alter the substance of the 
proposed rule change or raise any novel regulatory issues, it is not 
subject to notice and comment. Amendment No. 7, which amended and 
replaced the proposed rule change, as modified by Amendment No. 6 
thereto, in its entirety, is available on the Commission's Web site 
at: https://www.sec.gov/comments/sr-batsbzx-2016-01/batsbzx201601-7.pdf.
    \11\ In Amendment No. 8, the Exchange corrected an error 
identifying the Amendment number. Because the changes in Amendment 
No. 8 to the proposed rule change do not materially alter the 
substance of the proposed rule change or raise any novel regulatory 
issues, it is not subject to notice and comment. Amendment No. 8, 
which amended and replaced the proposed rule change, as modified by 
Amendment No. 7 thereto, in its entirety, is available on the 
Commission's Web site at: https://www.sec.gov/comments/sr-batsbzx-2016-01/batsbzx201601-8.pdf.
    \12\ See Letter from Anonymous dated May 3, 2016, available at: 
http://www.sec.gov/comments/sr-batsbzx-2016-01/batsbzx201601-1.htm 
(commenting that the proposed rule change was ``good'').
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II. Exchange's Description of the Proposal

    The Exchange proposes to list and trade Shares of the following 
series of the Trust under BZX Rule 14.11(c)(4): VanEck Vectors AMT-Free 
6-8 Year Municipal Index ETF; VanEck Vectors AMT-Free 8-12 Year 
Municipal Index ETF; and VanEck Vectors AMT-Free 12-17 Year Municipal 
Index ETF. The Shares will be offered by the Trust, which was 
established as a Delaware statutory trust on March 15, 2001. 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.\13\
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    \13\ See Registration Statement on Form N-1A (File Nos. 333-
123257 and 811-10325) dated October 29, 2015. According to the 
Exchange, the Trust has obtained certain exemptive relief from the 
Commission under the Investment Company Act of 1940 (``1940 Act''). 
See Investment Company Act Release No. 28021 (October 24, 2007) 
(File No. 812-13426).
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    Van Eck Associates Corporation will be the investment adviser 
(``Adviser'') to the Funds. The Adviser will serve as the administrator 
for the Fund. The Bank of New York Mellon will serve as the custodian 
and transfer agent for the Funds. Van Eck Securities Corporation will 
be the distributor of the Shares. Barclays Inc. will be the index 
provider.
    The Exchange has made the following representations and statements 
in describing the Funds and their respective investment strategies, 
including the Funds' portfolio holdings and investment 
restrictions.\14\
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    \14\ The Commission notes that additional information regarding 
the Funds, the Trust, and the Shares, including investment 
strategies, risks, creation and redemption procedures, fees, 
portfolio holdings disclosure policies, calculation of net asset 
value (``NAV''), distributions, and taxes, among other things, can 
be found in the Notice, as modified by Amendment No. 8 thereto, and 
the Registration Statement, as applicable. See Notice and 
Registration Statement, supra notes 3 and 13, respectively. See also 
Amendment No. 8 to the proposed rule change, supra note 11.
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A. Exchange's Description of the Funds' Principal Investments

    According to the Exchange, the Funds and the Shares will seek to 
track the performance of a benchmark index that measures the 
investment-grade segment of the U.S. municipal bond market, as 
described below. Specifically, with respect to each of the VanEck 
Vectors AMT-Free 6-8 Year Municipal Index ETF, VanEck Vectors AMT-Free 
8-12 Year Municipal Index ETF, and VanEck Vectors AMT-Free 12-17 Year 
Municipal Index ETF, the Shares will replicate as closely as possible, 
before fees and expense, the price and yield performance of the 
Barclays AMT-Free-6-8 Year Intermediate Continuous Municipal Index 
(``6-8 Year Index''); the Barclays AMT-Free-8-12 Year Intermediate 
Continuous Municipal Index (``8-12 Year Index''); and the Barclays AMT-
Free-12-17 Year Intermediate Continuous Municipal Index (``12-17 Year 
Index,'' and together with the 6-8 Year Index and the 8-12 Year Index, 
collectively, ``Indices''), respectively.
    To be included in each of the Funds, the Exchange states that a 
bond must be rated Baa3/BBB- or higher by at least two of the following 
ratings agencies if all three agencies rate the security: Moody's, S&P 
and Fitch. If only two of the three agencies rate the security, the 
lower rating is used to determine index eligibility. If only one of the 
three agencies rates a security, the rating must be at least Baa3/BBB-. 
Potential constituents must have an outstanding par value of at least 
$7 million and be issued as part of a transaction of at least $75 
million. The bonds must be fixed rate, have a dated date within the 
last five years, and have an effective maturity that tracks each 
respective Fund. The following types of bonds are excluded from each of 
the Funds: Bonds subject to the alternative minimum tax, taxable 
municipal bonds, floating rate bonds, and derivatives. The Funds are 
calculated using a market value weighting methodology.
    The composition of each of the Funds is rebalanced monthly. 
Interest and principal payments earned by the component securities are 
held in the Fund without a reinvestment return until month end when 
they are removed. Qualifying securities issued, but not necessarily 
settled, on or before the month end rebalancing date qualify for 
inclusion in each of the Funds in the following month. The Exchange 
notes that when-issued transactions (``WIs'') \15\ representing 
securities in the 6-8 Year, 8-12 Year, and 12-17 Year Indices may be 
used by the Fund in seeking performance that corresponds to the 6-8 
Year, 8-12 Year, and 12-17 Year Indices, respectively, and, in such 
cases, would count towards the respective Fund's 80% policy.
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    \15\ According to the Exchange, when-issued is a transaction 
that is made conditionally because a security has been authorized 
but not yet issued. Treasury securities, stock splits, and new 
issues of stocks and bonds are all traded on a when-issued basis.
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    Each of the Funds normally will invest at least 80% of its total 
assets in securities that comprise the Fund's corresponding benchmark 
index. The Funds will be comprised of publicly traded municipal bonds 
that cover the U.S. dollar-denominated intermediate term tax-exempt 
bond market with final maturities corresponding to the Index timeframe. 
Each Fund's 80% investment policy is non-fundamental and may be changed 
without shareholder approval upon 60 days' prior written notice to 
shareholders.\16\
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    \16\ While each Fund's policy to invest 80% of its total assets 
in securities that comprise the Fund's benchmark index (``80% 
Investment Policy'') is non-fundamental and may be changed without 
shareholder approval upon 60 days' prior written notice to 
shareholders, the Exchange represents that, notwithstanding the 
foregoing, all statements and representations made in this filing 
regarding (a) the description of the portfolios, (b) limitations on 
portfolio holdings or reference assets (including, for example, each 
Fund's 80% Investment Policy), or (c) the applicability of Exchange 
rules and surveillance procedures shall constitute continued listing 
requirements for listing the Shares on the Exchange. As noted 
herein, the issuer also has represented to the Exchange that it will 
advise the Exchange of any failure by a Fund to comply with the 
continued listing requirements (or any changes made with respect to 
a Fund's 80% Investment Policy), and, pursuant to its obligations 
under Section 19(g)(1) of the Act, the Exchange will surveil for 
compliance with the continued listing requirements. If the Fund is 
not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under Exchange Rule 
14.12.

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[[Page 47219]]

B. Exchange's Description of the Funds' Other Investments

    While each of the Funds normally will invest at least 80% of its 
total assets in securities that compose the 6-8 Year, 8-12 Year, and 
12-17 Year Indices, as described above, the Funds may invest their 
remaining assets in other financial instruments, as described below.
    The Funds may invest remaining assets in securities not included in 
the respective Indices, including only the following instruments: 
Municipal bonds (not described above); money market instruments, 
including repurchase agreements or other funds which invest exclusively 
in money market instruments; convertible securities; structured notes 
(notes on which the amount of principal repayment and interest payments 
are based on the movement of one or more specified factors, such as the 
movement of a particular stock or stock index); \17\ certain derivative 
instruments described below; and, to the extent permitted by the 1940 
Act, affiliated and unaffiliated funds, such as open-end or closed-end 
management investment companies, including other ETFs.\18\ In addition 
to the use described above, WIs not included in each of the Indices may 
also be used by each of the Funds in managing cash flows.
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    \17\ Structured notes are derivative securities for which the 
amount of principal repayment and/or interest payments is based on 
the movement of one or more factors, including, but not limited to, 
currency exchange rates, interest rates (such as the prime lending 
rate or LIBOR), referenced bonds, and stock indices.
    \18\ For purposes of this proposal, ETFs include: Index Fund 
Shares (as described in BZX Rule 14.11(c)); Portfolio Depositary 
Receipts (as described in BZX Rule 14.11(b)); and Managed Fund 
Shares (as described in BZX Rule 14.11(i)). The ETFs all will be 
listed and traded in the U.S. on registered exchanges. The Funds may 
invest in the securities of ETFs registered under the 1940 Act 
consistent with the requirements of Section 12(d)(1) of the 1940 
Act, or any rule, regulation or order of the Commission or 
interpretation thereof. While the Funds may invest in inverse ETFs, 
the Funds will not invest in leveraged (e.g., 2X, -2X, 3X, or -3X) 
ETFs.
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    The Funds may invest in repurchase agreements with commercial 
banks, brokers or dealers to generate income from its excess cash 
balances and to invest securities lending cash collateral.
    The Funds may use exchange-traded futures contracts and exchange-
traded options thereon, together with positions in cash and money 
market instruments, to simulate full investment.
    The Funds may use cleared or non-cleared index, interest rate or 
credit default swap agreements. According to the Exchange, interest 
rate swaps and credit default swaps on indexes currently may be 
cleared; however, credit default swaps on a specific security are 
currently uncleared.
    The Funds may invest in exchange-traded warrants, which are equity 
securities in the form of options issued by a corporation which give 
the holder the right to purchase stock, usually at a price that is 
higher than the market price at the time the warrant is issued.
    The Funds may invest in participation notes, which are issued by 
banks or broker-dealers and are designed to offer a return linked to 
the performance of a particular underlying equity security or market.
    The Funds will only enter into transactions in derivative 
instruments with counterparties that the Adviser reasonably believes 
are capable of performing under the contract and will post collateral 
as required by the counterparty.\19\
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    \19\ The Funds will seek, where possible, to use counterparties, 
as applicable, whose financial status is such that the risk of 
default is reduced; however, the risk of losses resulting from 
default is still possible. The Adviser will evaluate the 
creditworthiness of counterparties on a regular basis. In addition 
to information provided by credit agencies, the Adviser will review 
approved counterparties using various factors, which may include the 
counterparty's reputation, the Adviser's past experience with the 
counterparty and the price/market actions of debt of the 
counterparty.
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C. Exchange's Description of the Indices and Bats BZX Rule 14.11(c)(4)

    The Exchange is submitting this proposed rule change because the 
Indices underlying the corresponding Funds do not meet all of the 
``generic'' listing requirements of BZX Rule 14.11(c)(4) applicable to 
the listing of Index Fund Shares based on fixed income securities 
indexes.
    1. 6-8 Year Index. According to the Exchange, the 6-8 Year Index 
meets all of the requirements of BZX Rule 14.11(c)(4) except for those 
set forth in BZX Rule 14.11(c)(4)(B)(i)(b).\20\ Specifically, as of 
December 31, 2015, only 9.8% of the weight of the 6-8 Year Index 
components have a minimum original principal amount outstanding of $100 
million or more.
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    \20\ BZX Rule 14.11(c)(4)(B)(i)(b) provides that components that 
in the aggregate account for at least 75% of the weight of the index 
or portfolio each shall have a minimum original principal amount 
outstanding of $100 million or more.
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    According to the Exchange, as of December 31, 2015, 95.1% of the 
weight of the 6-8 Year Index components was comprised of individual 
maturities that were part of an entire municipal bond offering with a 
minimum original principal amount outstanding $100 million or more for 
all maturities of the offering. In addition, the total dollar amount 
outstanding of issues in the 6-8 Year Index was approximately $57.4 
billion, and the average dollar amount outstanding of issues in the 6-8 
Year Index was approximately $19.8 million. Further, the most heavily 
weighted component represented 1.07% of the weight of the 6-8 Year 
Index, and the five most heavily weighted components represented 3.0% 
of the weight of the 6-8 Year Index.\21\ In addition, the Exchange 
notes that the 6-8 Year Index is comprised of approximately 2,894 
issues, and that 63.8% of the 6-8 Year Index weight consisted of issues 
with a rating of AA/Aa2 or higher.
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    \21\ BZX Rule 14.11(c)(4)(B)(i)(d) provides that no component 
fixed-income security (excluding Treasury Securities, as defined 
therein) shall represent more than 30% of the weight of the index or 
portfolio, and the five most heavily weighted component fixed-income 
securities in the index or portfolio shall not in the aggregate 
account for more than 65% of the weight of the index or portfolio.
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    The 6-8 Year Index value, calculated and disseminated at least once 
daily, as well as the components of the 6-8 Year Index and their 
percentage weighting, will be available from major market data vendors. 
In addition, the portfolio of securities held by the Fund will be 
disclosed on the Fund's Web site.
    2. 8-12 Year Index. According to the Exchange, the 8-12 Year Index 
for the Fund meets all of the requirements of BZX Rule 14.11(c)(4), 
except for those set forth in BZX Rule 14.11(c)(4)(B)(i)(b).\22\ 
Specifically, as of December 31, 2015, only 5.7% of the weight of the 
8-12 Year Index components have a minimum original principal amount 
outstanding of $100 million or more.
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    \22\ See supra note 20.
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    According to the Exchange, as of December 31, 2015, 95.1% of the 
weight of the 8-12 Year Index components was comprised of individual 
maturities that were part of an entire municipal bond offering with a 
minimum original principal amount outstanding of $100 million or more 
for all maturities of the offering. In addition, the total dollar 
amount outstanding of issues in the 8-12 Year Index was approximately 
$108.6 billion, and the average dollar amount outstanding of issues in 
the 8-12 Year Index was approximately $19.2

[[Page 47220]]

million. Further, the most heavily weighted component represented 0.26% 
of the weight of the 8-12 Year Index, and the five most heavily 
weighted components represented 1.04% of the weight of the 8-12 Year 
Index.\23\ In addition, the Exchange represents that the 8-12 Year 
Index is comprised of approximately 5,662 issues, and that 64.7% of the 
8-12 Year Index weight consisted of issues with a rating of AA/Aa2 or 
higher.
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    \23\ See supra note 21.
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    The 8-12 Year Index value, calculated and disseminated at least 
once daily, as well as the components of the 8-12 Year Index and their 
percentage weighting, will be available from major market data vendors. 
In addition, the portfolio of securities held by the Fund will be 
disclosed on the Fund's Web site.
    3. 12-17 Year Index. According to the Exchange, the 12-17 Year 
Index meets all of the requirements of BZX Rule 14.11(c)(4), except for 
those set forth in BZX Rule 14.11(c)(4)(B)(i)(b).\24\ Specifically, as 
of December 31, 2015, only 8.3% of the weight of the 12-17 Year Index 
components have a minimum original principal amount outstanding of $100 
million or more.
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    \24\ See supra note 20.
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    According to the Exchange, as of December 31, 2015, 95.3% of the 
weight of the 12-17 Year Index components was comprised of individual 
maturities that were part of an entire municipal bond offering with a 
minimum original principal amount outstanding $100 million or more for 
all maturities of the offering. In addition, the total dollar amount 
outstanding of issues in the 12-17 Year Index was approximately $123.5 
billion, and the average dollar amount outstanding of issues in the 12-
17 Year Index was approximately $20 million. Further, the most heavily 
weighted component represented 0.29% of the weight of the 12-17 Year 
Index, and the five most heavily weighted components represented 1.11% 
of the weight of the 12-17 Year Index.\25\ The Exchange further 
represents that the 12-17 Year Index is comprised of approximately 
6,171 issues, and that 61.2% of the 12-17 Year Index weight consisted 
of issues with a rating of AA/Aa2 or higher.
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    \25\ See supra note 21.
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    The 12-17 Year Index value, calculated and disseminated at least 
once daily, as well as the components of the 12-17 Year Index and their 
percentage weighting, will be available from major market data vendors. 
In addition, the portfolio of securities held by the Fund will be 
disclosed on the Fund's Web site.

D. Additional Exchange Representations

    The Exchange represents that: (1) Except for BZX Rule 
14.11(c)(4)(B)(i)(b), the 6-8 Year Index, the 8-12 Year Index, and the 
12-17 Year Index currently and will continue to satisfy all of the 
generic listing standards under BZX Rule 14.11(c)(4); (2) the continued 
listing standards under BZX Rule 14.11(c) applicable to Index Fund 
Shares will apply to the Shares of each Fund; and (3) the Trust is 
required to comply with Rule 10A-3 under the Act \26\ for the initial 
and continued listing of the Shares of each Fund. In addition, the 
Exchange represents that the Shares of the Funds 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 Indices and the Intraday 
Indicative Value (``IIV''), rules governing the trading of equity 
securities, trading hours, trading halts, surveillance, and the 
information circular, as set forth in Exchange rules applicable to 
Index Fund Shares and the orders approving such rules.
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    \26\ 17 CFR 240.10A-3.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act \27\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\28\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\29\ which 
requires, among other things, that the Exchange's rules be 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 regulating, clearing, settling, 
processing information with respect to, and 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.
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    \27\ 15 U.S.C. 78f.
    \28\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \29\ 17 U.S.C. 78f(b)(5).
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    The Commission also finds that the proposal to list and trade the 
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Act,\30\ which sets forth Congress' finding that it is in the 
public interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. Quotation and last-
sale information for the Shares will be available via the Consolidated 
Tape Association (``CTA''). The current value of the Indices will be 
widely disseminated by one or more major market data vendors \31\ at 
least once per day. In addition, during Regular Trading Hours \32\ an 
IIV for the Shares of the Funds will be disseminated by one or more 
major market data vendors and updated at least every 15 seconds.\33\ On 
each business day, before commencement of trading in Shares during 
Regular Trading Hours on the Exchange, each Fund will disclose on its 
Web site the identities and quantities of the portfolio of securities 
and other assets in the daily disclosed portfolio held by the Funds 
that formed the basis for each Fund's calculation of NAV at the end of 
the previous business day.\34\

[[Page 47221]]

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. Quotation 
information for investment company securities (excluding ETFs) may be 
obtained through nationally recognized pricing services through 
subscription agreements or from brokers and dealers who make markets in 
such securities. Price information regarding municipal bonds, 
convertible securities, and non-exchange traded assets, including 
investment companies, derivatives, money market instruments, repurchase 
agreements, structured notes, participation notes, and WIs is available 
from third party pricing services and major market data vendors. For 
exchange-traded assets, including investment companies, futures, 
warrants, and options, such intraday information is available directly 
from the applicable listing exchange. Rules governing the Indices are 
available on Barclays' Web site and in each respective Fund's 
prospectus. The Web site for the Funds also will include the prospectus 
for the Funds and additional data relating to the NAV and other 
applicable quantitative information.
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    \30\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \31\ The Exchange further states that the components of the 
Indices and their percentage weighting will be available from major 
market data vendors.
    \32\ Regular Trading Hours are 9:30 a.m. to 4:00 p.m. Eastern 
Time.
    \33\ According to the Exchange, several major market data 
vendors display and/or make widely available IIVs taken from the CTA 
or other data feeds. See Notice, as modified by Amendment No. 8 
thereto, supra note 11, at n.29.
    \34\ The NAV of each Fund will be determined each business day 
as of the close of trading (ordinarily 4:00 p.m. Eastern Time) on 
the Exchange. Any assets or liabilities denominated in currencies 
other than the U.S. dollar are converted into U.S. dollars at the 
current market rates on the date of valuation as quoted by one or 
more sources. The values of each Fund's portfolio securities are 
based on the securities' closing prices, when available. In the 
absence of a last reported sales price, or if no sales were 
reported, and for other assets for which market quotes are not 
readily available, values may be based on quotes obtained from a 
quotation reporting system, established market makers or by an 
outside independent pricing service. Fixed income securities, 
repurchase agreements, and money market instruments with maturities 
of more than 60 days are normally valued on the basis of quotes from 
brokers or dealers, established market makers, or an outside 
independent pricing service. Prices obtained by an outside 
independent pricing service may use information provided by market 
makers or estimates of market values obtained from yield data 
related to investments or securities with similar characteristics 
and may use a computerized grid matrix of securities and its 
evaluations in determining what it believes is the fair value of the 
portfolio securities. Short-term investments and money market 
instruments having a maturity of 60 days or less are valued at 
amortized cost. Futures contracts will be valued at the settlement 
price established each day by the board or exchange on which they 
are traded. Exchange-traded options will be valued at the closing 
price in the market where such contracts are principally traded. 
Swaps, structured notes, participation notes, convertible 
securities, and WIs will be valued based on valuations provided by 
independent, third-party pricing agents. Securities of non-exchange-
traded investment companies will be valued at NAV. Exchange-traded 
instruments, including investment companies and warrants, will be 
valued at the last reported sale price on the primary exchange or 
market on which they are traded. If a market quotation for a 
security is not readily available or the Adviser believes it does 
not otherwise accurately reflect the market value of the security at 
the time the Fund calculates its NAV, the security will be fair 
valued by the Adviser in accordance with the Trust's valuation 
policies and procedures approved by the Board of Trustees and in 
accordance with the 1940 Act.
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    The Commission believes that the proposal to list and trade the 
Shares is reasonably designed to promote fair disclosure of information 
that may be necessary to price the Shares appropriately and to prevent 
trading when a reasonable degree of transparency cannot be assured. 
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. With respect to trading 
halts, the Exchange may consider all relevant factors in exercising its 
discretion to halt or suspend trading in the Shares of the Funds. 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 the Funds; 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 BZX Rule 14.11(c)(1)(B)(iv), which sets 
forth circumstances under which Shares of a Fund may be halted.
    Based on the Exchange's representations, the Commission believes 
that the Indices are sufficiently broad-based to deter potential 
manipulation. The Exchange represents that, as of December 31, 2015, 
the 6-8 Year Index had the following characteristics: there were 2,894 
issues; 9.8% of the weight of components had a minimum original 
principal amount outstanding of $100 million or more; 95.1% of the 
weight of components was comprised of individual maturities that were 
part of an entire municipal bond offering with a minimum original 
principal amount outstanding of $100 million or more for all maturities 
of the offering; the total dollar amount outstanding of all issues was 
approximately $57.4 billion, and the average dollar amount outstanding 
per issue was approximately $19.8 million; and the most heavily 
weighted component represented 1.07% of the 6-8 Year Index, and the 
five most heavily weighted components represented 3.0% of the 6-8 Year 
Index. The Exchange also represents that, as of December 31, 2015, the 
8-12 Year Index had the following characteristics: there were 5,662 
issues; 5.7% of the weight of components had a minimum original 
principal amount outstanding of $100 million or more; 95.1% of the 
weight of components was comprised of individual maturities that were 
part of an entire municipal bond offering with a minimum original 
principal amount outstanding of $100 million or more for all maturities 
of the offering; the total dollar amount outstanding of all issues was 
approximately $108.6 billion, and the average dollar amount outstanding 
per issue was approximately $19.2 million; and the most heavily 
weighted component represented 0.26% of the 8-12 Year Index, and the 
five most heavily weighted components represented 1.04% of the 8-12 
Year Index. Likewise, the Exchange represents that, as of December 31, 
2015, the 12-17 Year Index had the following characteristics: there 
were 6,171 issues; 8.3% of the weight of components had a minimum 
original principal amount outstanding of $100 million or more; 95.3% of 
the weight of components was comprised of individual maturities that 
were part of an entire municipal bond offering with a minimum original 
principal amount outstanding of $100 million or more for all maturities 
of the offering; the total dollar amount outstanding of all issues was 
approximately $123.5 billion, and the average dollar amount outstanding 
per issue was approximately $20 million; and the most heavily weighted 
component represented 0.29% of the 12-17 Year Index, and the five most 
heavily weighted components represented 1.11% of the 12-17 Year Index.
    In support of this proposal, the Exchange has also made 
representations, including:
    (1) The Shares of each Fund will conform to the initial and 
continued listing criteria under BZX Rule 14.11(c)(4), except for those 
set forth in 14.11(c)(4)(B)(i)(b).
    (2) Except for BZX Rule 14.11(c)(4)(B)(i)(b), the 6-8 Year Index, 
the 8-12 Year Index, and the 12-17 Year Index currently and will 
continue to satisfy all of the generic listing standards under BZX Rule 
14.11(c)(4)
    (3) The continued listing standards under BZX Rule 14.11(c) 
applicable to Index Fund Shares will apply to the Shares of each Fund.
    (4) The Shares of the Funds 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 Indices and the Intraday Indicative Value, rules 
governing the trading of equity securities, trading hours, trading 
halts, surveillance, and the information circular, as set forth in 
Exchange rules applicable to Index Fund Shares and the orders approving 
such rules.
    (5) The Exchange represents that trading in the Shares will be 
subject to the existing Exchange trading surveillances procedures. 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

[[Page 47222]]

securities laws applicable to trading on the Exchange.
    (6) The Exchange may obtain information regarding trading in the 
Shares and the underlying shares in exchange traded equity securities 
via the Intermarket Surveillance Group (``ISG''), from other exchanges 
that are members or affiliates of the ISG, or with which the Exchange 
has entered into a comprehensive surveillance sharing agreement.\35\ In 
addition, the Exchange is able to access, as needed, trade information 
for certain fixed income instruments reported to the Financial Industry 
Regulatory Authority's Trade Reporting and Compliance Engine. The 
Exchange also can access data obtained from the Municipal Securities 
Rulemaking Board relating to municipal bond trading activity for 
surveillance purposes in connection with trading in the Shares. In 
addition, the Exchange may obtain information regarding trading in the 
Shares and the underlying shares in exchange-traded investment 
companies, futures, options, and warrants from markets or other 
entities that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement. The Exchange 
prohibits the distribution of material, non-public information by its 
employees.
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    \35\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
portfolio for a Fund may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
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    (7) For initial and continued listing of the Shares, the Trust is 
required to comply with Rule 10A-3 under the Act.\36\
---------------------------------------------------------------------------

    \36\ See 17 CFR 240.10A-3.
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    (8) The Funds generally will invest at least 80% of their 
respective assets in the securities of the corresponding Indices. The 
Funds may invest up to 20% of their respective assets in other 
securities and financial instruments as described above and in the 
Notice, as modified by Amendment No. 3 thereto.
    (9) If the Exchange becomes aware that the NAV is not being 
disseminated to all market participants at the same time, it will halt 
trading in the Shares until such time as the NAV is available to all 
market participants.
    The Exchange represents that all statements and representations 
made in this filing regarding (a) the description of the portfolio, (b) 
limitations on portfolio holdings or reference assets (including, for 
example, each Fund's 80% Investment Policy), or (c) the applicability 
of Exchange rules and surveillance procedures shall constitute 
continued listing requirements for listing the Shares on the Exchange. 
In addition, the issuer has represented to the Exchange that it will 
advise the Exchange of any failure by the Fund to comply with the 
continued listing requirements (or any changes made with respect to a 
Fund's 80% Investment Policy), and, pursuant to its obligations under 
Section 19(g)(1) of the Act, the Exchange will surveil for compliance 
with the continued listing requirements. If the Fund is not in 
compliance with the applicable listing requirements, the Exchange will 
commence delisting procedures under Exchange Rule 14.12. This approval 
order is based on all of the Exchange's representations, including 
those set forth above and in the Notice, as modified by Amendment No. 3 
thereto, and the Exchange's description of the Funds.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 8 thereto, is consistent with 
Section 6(b)(5) of the Act \37\ and the rules and regulations 
thereunder applicable to a national securities exchange.
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    \37\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\38\ that the proposed rule change (SR-BatsBZX-2016-01), as 
modified by Amendment No. 8 thereto, be, and it hereby is, approved.
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    \38\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
Jill M. Peterson,
Assistant Secretary.
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    \39\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-17089 Filed 7-19-16; 8:45 am]
 BILLING CODE 8011-01-P