Document ID: SEC-2014-2157-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2014-12-23T05:00Z

[Federal Register Volume 79, Number 246 (Tuesday, December 23, 2014)]
[Notices]
[Pages 77069-77075]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-29969]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73857; File No. SR-NYSEArca-2014-139]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to Shares of the iShares California 
AMT-Free Muni Bond ETF and iShares New York AMT-Free Muni Bond ETF

December 17, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on December 3, 2014, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which have been prepared by the self-regulatory organization. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes a rule change relating to shares of the 
following series of Investment Company Units that are currently listed 
and traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(3): 
iShares California AMT-Free Muni Bond ETF and iShares New York AMT-Free 
Muni Bond ETF. The text of the proposed rule change is available on the 
Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The Exchange currently lists and trades shares (``Shares'') of the 
iShares California AMT-Free Muni Bond ETF (``CA Fund'') and iShares New 
York AMT-Free Muni Bond ETF (``NY Fund'' and, together with the CA 
Fund, the ``Funds'') \4\ under NYSE Arca Equities Rule 5.2(j)(3), 
Commentary .02, which governs the listing and trading of Investment 
Company Units (``Units'') based on fixed income securities indexes.\5\ 
The Funds are series of the iShares Trust (``Trust'').\6\
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    \4\ On June 24, 2014, the Trust filed an amendment to its 
registration statement on Form N-1A under the Securities Act of 1933 
(15 U.S.C. 77a) (``1933 Act'') and the Investment Company Act of 
1940 (``1940 Act'') (15 U.S.C. 80a-1) (File Nos. 333-92935 and 811-
09729) (the ``Registration Statement''). The description of the 
operation of the Trust and the Funds herein is based, in part, on 
the Registration Statement. The Commission has issued an order 
granting certain exemptive relief to the Trust under the 1940 Act. 
See Investment Company Act Release No. 27608 (December 21, 2006) 
(File No. 812-13208) (``Exemptive Order'').
    \5\ The Funds were initially listed on the American Stock 
Exchange, Inc. (``Amex'') (now NYSE MKT) on October 4, 2007 pursuant 
to the generic listing criteria of Amex Rule 1000A. On October 6, 
2008, the listings transferred from the Amex to NYSE Arca, which 
changes were effected pursuant to NYSE Arca Equities Rule 5.2(j)(3), 
Commentary .02.
    \6\ The Commission previously has approved a proposed rule 
change relating to listing and trading on the Exchange of Units 
based on municipal bond indexes. See Securities Exchange Act Release 
No. 67985 (October 4, 2012), 77 FR 61804 (October 11, 2012) (SR-
NYSEArca-2012-92) (order approving proposed rule change relating to 
the listing and trading of iShares 2018 S&P AMT-Free Municipal 
Series and iShares 2019 S&P AMT-Free Municipal Series under NYSE 
Arca Equities Rule 5.2(j)(3), Commentary .02). The Commission also 
has issued a notice of filing and immediate effectiveness of a 
proposed rule change relating to listing and trading on the Exchange 
of the iShares Taxable Municipal Bond Fund. See Securities Exchange 
Act Release No. 63176 (October 25, 2010), 75 FR 66815 (October 29, 
2010) (SR-NYSEArca-2010-94). The Commission has approved two 
actively managed funds of the PIMCO ETF Trust that hold municipal 
bonds. See Securities Exchange Act Release No. 60981 (November 10, 
2009), 74 FR 59594 (November 18, 2009) (SR-NYSEArca-2009-79) (order 
approving listing and trading of PIMCO Short-Term Municipal Bond 
Strategy Fund and PIMCO Intermediate Municipal Bond Strategy Fund, 
among others).
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    Blackrock Fund Advisors is the investment adviser (``BFA'' or 
``Adviser'') for the Funds.\7\ Blackrock Investments, LLC. is the 
Funds' distributor (``Distributor''). State Street Bank and Trust 
Company is the administrator, custodian and fund accounting and 
transfer agent for each Fund.
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    \7\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and its related personnel are 
subject to the provisions of Rule 204A-1 under the Advisers Act 
relating to codes of ethics. This Rule requires investment advisers 
to adopt a code of ethics that reflects the fiduciary nature of the 
relationship to clients as well as compliance with other applicable 
securities laws. Accordingly, procedures designed to prevent the 
communication and misuse of non-public information by an investment 
adviser must be consistent with Rule 204A-1 under the Advisers Act. 
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful 
for an investment adviser to provide investment advice to clients 
unless such investment adviser has (i) adopted and implemented 
written policies and procedures reasonably designed to prevent 
violation, by the investment adviser and its supervised persons, of 
the Advisers Act and the Commission rules adopted thereunder; (ii) 
implemented, at a minimum, an annual review regarding the adequacy 
of the policies and procedures established pursuant to subparagraph 
(i) above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
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Changes to Indexes Underlying the Funds
    The index currently underlying the CA Fund is the S&P California 
AMT-Free Muni Bond Index (``CA Index'')

[[Page 77070]]

and the index underlying the NY Fund is the S&P New York AMT-Free Muni 
Bond Index (``NY Index'', and, together with the CA Index, the 
``Municipal Bond Indexes''). As described below, Standard & Poor's 
Financial Services LLC (a subsidiary of the McGraw-Hill Companies, the 
index provider (``Index Provider'') of the Municipal Bond Indexes has 
proposed changes to the inclusion rules of both the CA Index and the NY 
Index.\8\
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    \8\ On November 7, 2014, S&P Dow Jones Indices issued a press 
release announcing methodology changes for the Municipal Bond 
Indexes, as described below, to be implemented prior to the February 
2015 month end rebalance for such indexes. The proposed changes to 
the underlying indexes for the Funds will be reflected in an 
amendment to the Funds' Registration Statement.
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The Funds and the Municipal Bond Indexes
The iShares California AMT-Free Muni Bond ETF
    The CA Fund currently seeks to track the investment results of the 
CA Index, which measures the performance of the investment-grade 
segment of the California municipal bond market. As of March 17, 2014, 
there were 1,740 issues in the CA Index.
    The CA Fund generally holds municipal bond securities issued by the 
State of California and its municipalities whose interest payments are 
exempt from U.S. federal and California state income tax, the federal 
AMT and the federal Medicare contribution tax of 3.8% on ``net 
investment income.'' In addition, the Fund intends to invest any cash 
assets in one or more affiliated municipal money market funds, which 
may be advised by BFA or its affiliates. The Fund seeks to track the 
investment results of the Underlying Index before the fees and expenses 
of the Fund.
    The CA Fund generally invests at least 80% of its assets in the 
securities of the CA Index and generally invests 90% of its assets in 
the securities of the CA Index and in securities that provide 
substantially similar exposure to the securities in the CA Index. The 
Fund may at times invest up to 20% of its assets in cash and cash 
equivalents, including money market funds advised by BFA or its 
affiliates, AMT-free tax-exempt municipal notes, variable rate demand 
notes and obligations, tender option bonds, municipal commercial paper, 
and municipal bonds not included in the CA Index, but which BFA 
believes will help the Fund track the CA Index.
    The CA Index is a subset of the S&P National AMT-Free Municipal 
Bond IndexTM and is comprised of municipal bonds issued in 
the State of California. The CA Index includes municipal bonds from 
issuers in the State of California that are California state or local 
governments or agencies whose interest payments are exempt from U.S. 
federal and California state income taxes and the federal alternative 
minimum tax (``AMT''). Each bond must have a rating of at least BBB- by 
Standard & Poor's Ratings Services, Baa3 by Moody's Investors Service, 
Inc. (``Moody's''), or BBB- by Fitch, Inc. (``Fitch''). A bond must be 
rated by at least one of the three rating agencies in order to qualify 
for the Underlying Index. For the avoidance of doubt, the lowest rating 
will be used in determining if the bond is investment-grade. Each bond 
must be denominated in U.S. dollars. Each bond in the CA Index must be 
a constituent of an offering where the original offering amount was at 
least $100 million. The bond must have a minimum par amount of $25 
million to be eligible for inclusion. To remain in the CA Index, bonds 
must maintain a minimum par amount greater than or equal to $25 million 
as of the next Rebalancing Date. In addition, each bond must have a 
minimum term to maturity and/or pre-refunded or call date greater than 
or equal to one calendar month to be included in the CA Index. The CA 
Index is a market-value weighted index, and the securities in the CA 
Index are updated after the close on the last business day of each 
month.
iShares New York AMT-Free Muni Bond ETF
    The NY Fund seeks to track the investment results of the NY Index, 
which measures the performance of the investment-grade segment of the 
New York municipal bond market. As of March 17, 2014, there were 1837 
issues in the NY Index.
    The NY Fund generally holds municipal bond securities issued by the 
State of New York and its municipalities whose interest payments are 
exempt from U.S. federal and New York State income tax, the federal AMT 
and the federal Medicare contribution tax of 3.8% on ``net investment 
income.'' In addition, the Fund intends to invest any cash assets in 
one or more affiliated municipal money market funds, which may be 
advised by BFA or its affiliates. The Fund seeks to track the 
investment results of the Underlying Index before the fees and expenses 
of the Fund.
    The Fund generally invests at least 80% of its assets in the 
securities of the NY Index and generally invests 90% of its assets in 
the securities of the Underlying Index and in securities that provide 
substantially similar exposure to the securities in the NY Index. The 
Fund may at times invest up to 20% of its assets in cash and cash 
equivalents, including money market funds advised by BFA or its 
affiliates, AMT-free tax-exempt municipal notes, variable rate demand 
notes and obligations, tender option bonds, municipal commercial paper, 
and municipal bonds not included in the NY Index, but which BFA 
believes will help the Fund track the NY Index.
    The NY Index also is a subset of the S&P National AMT-Free 
Municipal Bond IndexTM and is comprised of municipal bonds 
issued in the State of New York. The NY Index includes municipal bonds 
from issuers in the State of New York that are New York state or local 
governments or agencies whose interest payments are exempt from U.S. 
federal and New York state income taxes and the federal AMT. Each bond 
must have a rating of at least BBB- by Standard & Poor's Ratings 
Services, Baa3 by Moody's, or BBB- by Fitch. A bond must be rated by at 
least one of the three rating agencies in order to qualify for the 
index. For avoidance of doubt, the lowest rating will be used in 
determining if the bond is investment-grade. Each bond must be 
denominated in U.S. dollars. Each bond in the NY Index must be a 
constituent of an offering where the original offering amount was at 
least $100 million. The bond must have a minimum par amount of $25 
million to be eligible for inclusion. To remain in the NY Index, bonds 
must maintain a minimum par amount greater than or equal to $25 million 
as of the next Rebalancing Date. In addition, each bond must have a 
minimum term to maturity and/or pre-refunded or call date greater than 
or equal to one calendar month to be included in the NY Index. The NY 
Index is a market-value weighted index, and the securities in the 
Underlying Index are updated after the close on the last business day 
of each month.
The Revised Indexes
    The Index Provider is proposing to change the rules relating to the 
Municipal Bond Indexes. The ``Revised NY Index'' and the ``Revised CA 
Index'' (each, a ``Revised Index'' and, together, the ``Revised 
Indexes'') will remain rules based, as described below, though the S&P 
Dow Jones Indices' Municipal Bond Index Committee (``Committee'') 
reserves the right to exercise discretion, when necessary.\9\
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    \9\ The Index Provider with respect to the Revised Indexes is 
Standard & Poor's Financial Services LLC (a subsidiary of The 
McGraw-Hill Companies) (``S&P''). The Index Provider is not a 
broker-dealer or affiliated with a broker-dealer and has implemented 
procedures designed to prevent the use and dissemination of 
material, non-public information regarding the Revised Indexes. S&P 
Capital IQ's Securities Evaluations (SPSE) will report the price of 
each bond in the Revised Indexes. S&P Capital IQ is a trademark of 
Standard & Poor's Financial Services LLC. S&P Capital IQ is a 
leading provider of multi-asset class and real time data, research 
and analytics to institutional investors, investment and commercial 
banks, investment advisors and wealth managers, corporations and 
universities around the world.

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[[Page 77071]]

    The Committee is comprised of employees or agents of S&P Dow Jones 
Indices. The Committee oversees the day-to-day management of the Index, 
including monthly rebalancing, maintenance and inclusion policies 
including additions and deletions of bonds, and other matters affecting 
the maintenance and calculation of the Revised Indexes.
    The following are the criteria that will be applied to bonds 
included in the Revised CA Index. On each ``Rebalancing Date'' (i.e., 
the last business day of each month), a bond must meet all of the 
following criteria in order to be classified as an ``Eligible Bond'' 
for inclusion in the Revised CA Index: (1) The bond issuer must be a 
local government or agency in the state of California such that 
interest on the bond is exempt from U.S. federal income taxes; (2) the 
bond must have an investment grade rating of at least BBB- by Standard 
& Poor's, Baa3 by Moody's, or BBB- by Fitch, and a bond must be rated 
by at least one of the three rating agencies; \10\ and (3) the bond 
must be denominated in U.S. dollars.\11\
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    \10\ For the avoidance of doubt, the lowest rating will be used 
in determining if a bond is investment grade.
    \11\ For clarity, the following bond types are specifically 
excluded: Bonds subject to the AMT; commercial paper; inverse 
floaters; forwards; housing bonds; insured conduit bonds where the 
obligor is a for-profit institution; non-insured conduit bonds; non-
rated bonds; notes; taxable municipals; tobacco bonds; variable rate 
debt.
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    The following are the criteria that will be applied to bonds 
included in the Revised NY Index. On each ``Rebalancing Date'' (i.e., 
the last business day of each month), a bond must meet all of the 
following criteria in order to be classified as an ``Eligible Bond'' 
for inclusion in the Revised NY Index; (1) the bond issuer must be a 
local government or agency in the state of New York such that interest 
on the bond is exempt from U.S. federal income taxes; (2) the bond must 
have an investment grade rating of at least BBB- by Standard & Poor's, 
Baa3 by Moody's, or BBB- by Fitch, and a bond must be rated by at least 
one of the three rating agencies; \12\ and (3) the bond must be 
denominated in U.S. dollars.
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    \12\ For the avoidance of doubt, the lowest rating will be used 
in determining if a bond is investment grade.
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    With respect to each of the Revised Indexes, the market value will 
be used to determine the weight of the bond in the Revised Index. With 
respect to the Revised CA Index, the bond must have a minimum Par 
Amount of $15 million, and be part of an offering with an original 
total offering amount of at least $100 million to be eligible for 
inclusion. To remain in the Revised CA Index, bonds must maintain a 
minimum Par Amount greater than or equal to $15 million as of the next 
Rebalancing Date. With respect to the Revised NY Index, the bond must 
have a minimum Par Amount of $5 million and be part of an offering with 
an original total offering amount of at least $20 million to be 
eligible for inclusion. To remain in the Revised NY Index, bonds must 
maintain a minimum Par Amount greater than or equal to $5 million as of 
the next Rebalancing Date.
    For each of the Revised Indexes, as of the Rebalancing Date, the 
bond must have a minimum term to maturity and/or call date greater than 
or equal to the next subsequent rebalance date. In addition, at each 
monthly rebalancing, no one issuer can represent more than 25% of the 
weight of the applicable Revised Index, and individual issuers that 
represent at least 5% of the weight of the applicable Revised Index 
cannot account for more than 50% of the weight of such Revised Index in 
aggregate.
Application of the Generic Listing Criteria
    The Revised Indexes currently do not meet the generic listing 
criteria of NYSE Arca Equities Rule 5.2(j)(3), as described below. 
Accordingly, the Exchange is submitting this proposed rule change to 
permit the continued listing of Shares of each of the Funds. The 
Revised Indexes meet all of the requirements of the generic listing 
criteria of NYSE Arca Equities Rule 5.2(j)(3), except for those set 
forth in Commentary .02(a)(2).\13\ Specifically, as of October 29, 
2014, approximately 36.62% and 16.82% of the weight of the components 
of the Revised CA Index and Revised NY Index, respectively, have a 
minimum original principal amount outstanding of $100 million or more.
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    \13\ Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3) 
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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    As of October 29, 2014, there were 2,882 issues in the Revised CA 
Index, the total dollar amount outstanding of issues in the Revised CA 
Index was approximately $ 164 billion and the average dollar amount 
outstanding of issues in the Revised CA Index was approximately $57 
million. Further, the most heavily weighted component represents 0.84% 
of the weight of the Revised CA Index and the five most heavily 
weighted components represent 2.55% of the weight of the Revised CA 
Index.\14\ Therefore, the Exchange believes that, notwithstanding that 
the Revised CA Index does not satisfy the criterion in NYSE Arca 
Equities Rule 5.2(j)(3), Commentary .02 (a)(2), the Revised CA Index is 
sufficiently broad-based to deter potential manipulation, given that it 
is composed of approximately 2,882 issues. In addition, the Revised CA 
Index securities are sufficiently large to deter potential manipulation 
in view of the substantial total dollar amount outstanding and the 
average dollar amount outstanding of Revised CA Index issues, as 
referenced above.\15\
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    \14\ Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that no component fixed-income security (excluding Treasury 
Securities and GSE 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.
    \15\ When bonds are close substitutes for one another, pricing 
vendors can use executed trade information from all similar bonds as 
pricing inputs for an individual security. This can make individual 
securities more liquid, because valuations for a single security are 
better estimators of actual trading prices when they are informed by 
trades in a large group of closely related securities. As a result, 
securities are more likely to trade at prices close to their 
valuation when they need to be sold.
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    In addition, the average daily notional trading volume for Revised 
CA Index components for the calendar year 2013 was approximately $404 
million and the sum of the notional trading volumes for the same period 
was approximately $102.2 billion.
    As of October 29, 2014, there were 4,581 issues in the Revised NY 
Index, the total dollar amount outstanding of issues in the Revised NY 
Index was approximately $155 billion and the average dollar amount 
outstanding of issues in the Revised NY Index was approximately $ 33.8 
million. Further, the most heavily weighted component represents 1.02% 
of the weight of the Revised NY Index and the five most heavily 
weighted components represent 1.36% of the weight of the Revised NY 
Index.\16\ Therefore, the Exchange

[[Page 77072]]

believes that, notwithstanding that the NY Index does not satisfy the 
criterion in NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 (a)(2), 
the Revised NY Index is sufficiently broad-based to deter potential 
manipulation, given that it is composed of approximately 4,581 issues. 
In addition, the Revised NY Index securities are sufficiently large to 
deter potential manipulation in view of the substantial total dollar 
amount outstanding and the average dollar amount outstanding of Revised 
NY Index issues, as referenced above.
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    \16\ Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that no component fixed-income security (excluding Treasury 
Securities and GSE 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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    In addition, the average daily notional trading volume for Revised 
NY Index components for the calendar year 2013 was approximately $486 
million and the sum of the notional trading volumes for the same period 
was approximately $123.1 billion.
    With respect to each of the Funds, the value of each Revised Index 
will be calculated and disseminated via a major market data vendor at 
least once daily; further, the components and percentage weightings of 
each Revised Index also will be available from major market data 
vendors. In addition, the portfolio of securities held by each Fund 
will be disclosed daily on the Funds' Web site at www.iShares.com.
    The Exchange represents that: (1) With respect to the Funds, except 
for Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3), the 
Shares of each Fund currently satisfy all of the generic listing 
standards under NYSE Arca Equities Rule 5.2(j)(3); (2) the continued 
listing standards under NYSE Arca Equities Rules 5.2(j)(3) and 
5.5(g)(2) applicable to Units shall apply to the Shares of the Funds; 
and (3) the Trust is required to comply with Rule 10A-3 \17\ under the 
Act for the initial and continued listing of the Shares of the Funds. 
In addition, the Exchange represents that the Shares of the Funds will 
comply with all other requirements applicable to Units including, but 
not limited to, requirements relating to the dissemination of key 
information such as the value of the Index and the applicable Intraday 
Indicative Value (``IIV''),\18\ rules governing the trading of equity 
securities, trading hours, trading halts, surveillance, and the 
Information Bulletin to Equity Trading Permit Holders (``ETP 
Holders''), as set forth in Exchange rules applicable to Units and 
prior Commission orders approving the generic listing rules applicable 
to the listing and trading of Units.\19\
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    \17\ 17 CFR 240.10A-3.
    \18\ The IIV will be widely disseminated by one or more major 
market data vendors at least every 15 seconds during the Exchange's 
Core Trading Session of 9:30 a.m. to 4:00 p.m., Eastern time. 
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.
    \19\ See, e.g., Securities Exchange Act Release Nos. 55783 (May 
17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36) (order 
approving NYSE Arca generic listing standards for Units based on a 
fixed income index); 44551 (July 12, 2001), 66 FR 37716 (July 19, 
2001) (SR-PCX-2001-14) (order approving generic listing standards 
for Units and Portfolio Depositary Receipts); 41983 (October 6, 
1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (order 
approving rules for listing and trading of Units).
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    Each of the Revised Indexes is sponsored by an organization (the 
``Index Provider'') that is independent of the Funds and the Adviser. 
The Index Provider determines the composition and relative weightings 
of the securities in the Underlying Indexes and publishes information 
regarding the market value of the Underlying Indexes. The Index 
Provider with respect to the Revised Indexes is S&P Dow Jones Indices 
LLC (a subsidiary of The McGraw-Hill Companies) (``S&P''). The Index 
Provider is not a broker-dealer or affiliated with a broker-dealer and 
has implemented procedures designed to prevent the use and 
dissemination of material, non-public information regarding the Revised 
Indexes.
    The current value of the Revised Indexes will be widely 
disseminated by one or more major market data vendors at least once per 
day, as required by NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 
(b)(ii). The IIVs for Shares of the Funds are disseminated by one or 
more major market data vendors, updated at least every 15 seconds 
during the Exchange's Core Trading Session, as required by NYSE Arca 
Equities Rule 5.2(j)(3), Commentary .02 (c), and Commentary .01(c), 
respectively.
    Detailed descriptions of the Funds, the Revised Indexes, procedures 
for creating and redeeming Shares, transaction fees and expenses, 
dividends, distributions, taxes, risks, and reports to be distributed 
to beneficial owners of the Shares can be found in the Registration 
Statement or on the Web site for the Funds (www.iShares.com), as 
applicable.
Net Asset Value
    The NAV of each Fund will be calculated by dividing the value of 
the net assets of the Fund (i.e., the value of its total assets less 
total liabilities) by the total number of outstanding shares of a Fund, 
generally rounded to the nearest cent.
    The value of the securities and other assets and liabilities held 
by each Fund will be determined pursuant to valuation policies and 
procedures approved by the Fund's Board of Trustees (``Board'').
    Each Fund will value fixed income portfolio securities, including 
municipal bonds, AMT-free tax-exempt municipal notes, variable rate 
demand notes and obligations, tender option bonds and municipal 
commercial paper using prices provided directly from independent third-
party pricing services which may use matrix pricing and valuation 
models to derive values or from one or more broker-dealers or market 
makers. Certain short-term debt securities may be valued on the basis 
of amortized cost. Money market funds will be valued at NAV.
    When market quotations are not readily available or are believed by 
BFA to be unreliable, a Fund's investments will be valued at fair 
value. Fair value determinations are made by BFA in accordance with 
policies and procedures approved by the Funds' Board. BFA may conclude 
that a market quotation is not readily available or is unreliable if a 
security or other asset or liability does not have a price source due 
to its lack of liquidity, if a market quotation differs significantly 
from recent price quotations or otherwise no longer appears to reflect 
fair value, where the security or other asset or liability is thinly 
traded, or where there is a significant event subsequent to the most 
recent market quotation. A ``significant event'' is an event that, in 
the judgment of BFA, is likely to cause a material change to the 
closing market price of the asset or liability held by a Fund.
    Fair value represents a good faith approximation of the value of an 
asset or liability. The fair value of an asset or liability held by a 
Fund is the amount a Fund might reasonably expect to receive from the 
current sale of that asset or the cost to extinguish that liability in 
an arm's-length transaction.
Availability of Information
    On each business day, before commencement of trading in Shares of 
each Fund in the Core Trading Session on the Exchange, a Fund will 
disclose on its Web site the portfolio that will form the basis for a 
Fund's calculation of NAV at the end of the business day.\20\
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    \20\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Funds 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
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    On a daily basis, each Fund will disclose for each portfolio 
security or

[[Page 77073]]

other financial instrument of a Fund the following information on the 
Funds' Web site: ticker symbol (if applicable), name of security and 
financial instrument, a common identifier such as CUSIP or ISIN (if 
applicable), number of shares (if applicable), and dollar value of 
securities and financial instruments held in the portfolio, and 
percentage weighting of the security and financial instrument in the 
applicable portfolio. The Web site information will be publicly 
available at no charge.
    The current value of the Revised Indexes will be widely 
disseminated by one or more major market data vendors at least once per 
day, as required by NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 
(b)(ii). The IIV for Shares of each Fund will be disseminated by one or 
more major market data vendors, updated at least every 15 seconds 
during the Exchange's Core Trading Session, as required by NYSE Arca 
Equities Rule 5.2(j)(3), Commentary .02 (c).
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Funds' Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports are available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at www.sec.gov. Information 
regarding market price and trading volume of the Shares of each Fund 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers.
    Quotation and last sale information for the Shares will be 
available via the Consolidated Tape Association (``CTA'') high speed 
line. Price information regarding municipal bonds, and AMT-free tax-
exempt municipal notes, variable rate demand notes and obligations, 
tender option bonds and municipal commercial paper is available from 
major market data vendors and third party pricing services. Price 
information regarding exchange-traded assets will be available from the 
principal exchange on which such assets are traded.
Trading Rules
    The Exchange deems the Shares of each Fund to be equity securities, 
thus rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. Eastern time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
    The Shares of the Funds will conform to the initial and continued 
listing criteria under NYSE Arca Equities Rules 5.2(j)(3) and 
5.5(g)(2), respectively. The Exchange represents that, for initial and/
or continued listing, the Funds will be in compliance with Rule 10A-3 
\21\ under the Act, as provided by NYSE Arca Equities Rule 5.3. The 
Exchange will obtain a representation from the issuer of the Shares 
that the net asset value (``NAV'') per Share of each Fund will be 
calculated daily and that the NAV per Share will be made available to 
all market participants at the same time.
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    \21\ 17 CFR 240.10A-3.
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Trading Halts
    The Exchange will halt trading in the Shares if the circuit breaker 
parameters of NYSE Arca Equities Rule 7.12 have been reached. In 
exercising its discretion to halt or suspend trading in the Shares, the 
Exchange may consider factors such as the extent to which trading in 
the underlying securities is not occurring or whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present, in addition to other factors that may 
be relevant. If the Intraday Indicative Value (as defined in Commentary 
.01 to Rule 5.2(j)(3)) or the Index value is not being disseminated as 
required, the Exchange may halt trading during the day in which the 
interruption to the dissemination of the Intraday Indicative Value or 
the Index value occurs. If the interruption to the dissemination of the 
Intraday Indicative Value or the Index value persists past the trading 
day in which it occurred, the Exchange will halt trading.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'') 
of the special characteristics and risks associated with trading the 
Shares. Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its Equity Trading Permit Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated IIV will not be calculated or publicly 
disseminated; (4) how information regarding the IIV is disseminated; 
(5) the requirement that Equity Trading Permit Holders deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (6) trading 
information.
    In addition, the Bulletin will reference that each Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m. Eastern time each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \22\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
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    \22\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
5.2(j)(3). 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, which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\23\ The Exchange

[[Page 77074]]

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 applicable federal securities 
laws. FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares with other markets that are members of 
the Intermarket Surveillance Group (``ISG'') or with which the Exchange 
has in place a comprehensive surveillance sharing agreement. FINRA 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. FINRA, on behalf of the 
Exchange, is able to access, as needed, trade information for certain 
fixed income securities held by the Fund reported to FINRA's Trade 
Reporting and Compliance Engine (``TRACE'').
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    \23\ FINRA surveils trading on 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 Index Provider is a broker-dealer and has implemented a 
firewall and will maintain procedures designed to prevent the use and 
dissemination of material non-public information regarding the Revised 
Indexes.
    The Revised Index values, calculated and disseminated at least once 
daily, as well as the components of the Revised Indexes and their 
respective percentage weightings, will be available from major market 
data vendors. In addition, the portfolio of securities held by the 
Funds will be disclosed on the Funds' Web site. The IIV for Shares of 
the Funds will be disseminated by one or more major market data 
vendors, updated at least every 15 seconds during the Exchange's Core 
Trading Session.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest. 
In addition, a large amount of information is publicly available 
regarding the Funds and the Shares, thereby promoting market 
transparency. The Funds' portfolio holdings will be disclosed on the 
Funds' Web site daily after the close of trading on the Exchange and 
prior to the opening of trading on the Exchange the following day. 
Moreover, the IIV will be widely disseminated by one or more major 
market data vendors at least every 15 seconds during the Exchange's 
Core Trading Session. The current value of the 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 Web site for the Funds will include the prospectus for 
the Funds and additional data relating to NAV and other applicable 
quantitative information. Moreover, prior to the commencement of 
trading, the Exchange will inform its ETP Holders in an Information 
Bulletin of the special characteristics and risks associated with 
trading the Shares. 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. 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. 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 or the 
Revised Index values are not being disseminated as required, the 
Corporation may halt trading during the day in which the interruption 
to the dissemination of the applicable IIV or Revised Index value 
occurs. If the interruption to the dissemination of the applicable IIV 
or Revised Index value persists past the trading day in which it 
occurred, the Corporation will halt trading. Trading in Shares of the 
Funds will be halted if the circuit breaker parameters in NYSE Arca 
Equities Rule 7.12 have been reached or because of market conditions or 
for reasons that, in the view of the Exchange, make trading in the 
Shares inadvisable, and trading in the Shares will be subject to NYSE 
Arca Equities Rule 7.34, which sets forth circumstances under which 
Shares of the Funds may be halted. In addition, investors will have 
ready access to information regarding the IIV, and quotation and last 
sale information for the Shares.
    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 
an additional type of exchange-traded product 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.

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 continued listing and trading 
of exchange-traded products that hold municipal securities and 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2014-139 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-NYSEArca-2014-139. This

[[Page 77075]]

file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2014-139, and 
should be submitted on or before January 13, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29969 Filed 12-22-14; 8:45 am]
BILLING CODE 8011-01-P