Document ID: SEC-2018-0201-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats BZX Exchange, Inc.
Posted Date: 2018-02-01T05:00Z

[Federal Register Volume 83, Number 22 (Thursday, February 1, 2018)]
[Notices]
[Pages 4707-4715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01951]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82591; File No. SR-BatsBZX-2017-54]

Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing of Amendment No. 4 and Order Approving on an Accelerated Basis a 
Proposed Rule Change, as Modified by Amendment No. 4 Thereto, To List 
and Trade Shares of the iShares Inflation Hedged Corporate Bond ETF 
Under Rule 14.11(i), Managed Fund Shares

January 26, 2018.

I. Introduction

    On September 7, 2017, Bats BZX Exchange, Inc. (``BZX'' or 
``Exchange'') 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 Shares (``Shares'') of the 
iShares Inflation Hedged Corporate Bond ETF (``Fund'') under Exchange 
Rule 14.11(i) (``Managed Fund Shares''). The Commission published 
notice of the proposed rule change in the Federal Register on September 
27, 2017.\3\ On November 7, 2017, pursuant to Section 19(b)(2) of the 
Act,\4\ the Commission designated a longer period within which to 
approve the proposed rule change, disapprove the proposed rule change, 
or institute proceedings to determine whether to disapprove the 
proposed

[[Page 4708]]

rule change.\5\ On December 8, 2017, the Exchange submitted Amendment 
No. 1 to the proposed rule change. On December 15, 2017, the Exchange 
withdrew Amendment No.1 and submitted Amendment No. 2 to the proposed 
rule change, which amended and replaced in its entirety the proposed 
rule change as originally filed. On December 22, 2017, the Commission 
instituted proceedings under Section 19(b)(2)(B) of the Act \6\ to 
determine whether to approve or disapprove the proposed rule change.\7\ 
On January 9, 2018, the Exchange submitted Amendment No. 3 to the 
proposed rule change, which amended and replaced in its entirety the 
proposed rule change, as modified by Amendment No. 2. On January, 11, 
2018, the Exchange submitted Amendment No. 4 to the proposed rule 
change, which amended and replaced in its entirety the proposed rule 
change, as modified by Amendment No. 3.\8\ The Commission has received 
no comments on the proposed rule change. The Commission is publishing 
this notice to solicit comments on Amendment No. 4 from interested 
persons, and is approving the proposed rule change, as modified by 
Amendment No. 4, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 81671 (September 21, 
2017), 82 FR 45103.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 82025, 82 FR 52763 
(November 14, 2017). The Commission designated December 26, 2017, as 
the date by which it should approve or disapprove, or institute 
proceedings to determine whether to disapprove, the proposed rule 
change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ See Securities Exchange Act Release No. 82388, 82 FR 61596 
(December 28, 2017).
    \8\ In Amendment No. 4, the Exchange: (1) Identified the adviser 
of the Fund and made certain representations relating to the adviser 
and its personnel; (2) clarified the investment strategy and 
holdings of the Fund; (3) supplemented its description of the 
Inflation Hedging Instruments (as defined below) that the Fund may 
invest, including by adding interest rate swaps that are either 
listed and traded on a U.S. SEF registered with the CFTC or are 
centrally cleared; (4) stated that the listed interest rate swaps 
that the Fund may invest in will not comply with the generic 
requirements for listed derivatives set forth in Rule 
14.11(i)(4)(C)(iv)(a) or (b) (as further described below) and that 
the OTC interest swaps that the Fund may invest in will not comply 
with the generic requirements for OTC derivatives set forth in Rule 
14.11(i)(4)(C)(v) (as further described below); (5) represented that 
the Fund's investments in derivative instruments will be made in 
accordance with the Investment Company Act of 1940 (``1940 Act'') 
and consistent with the Fund's investment objective and policies, 
and that the Fund would take certain actions to mitigate and 
disclose leveraging risk; (6) stated that price information for cash 
equivalents will be available from major market data vendors; (7) 
made additional representations regarding the Fund and information 
relating to the Shares, including that (a) the Disclosed Portfolio 
will be available on the issuer's website free of charge; (b) the 
Fund's website will include a form of the prospectus for the Fund 
and additional information related to net asset value (``NAV'') and 
other applicable quantitative information; (c) information regarding 
market price and trading volume of the Shares will be continuously 
available throughout the day on brokers' computer screens and other 
electronic services and information regarding the previous day's 
closing price, and trading volume for the Shares will be published 
daily in the financial section of newspapers; (d) quotation and last 
sale information for the Shares will be available through the 
Consolidated Tape Association; (e) trading in the Shares may be 
halted for market conditions or for reasons that, in the view of the 
Exchange, make trading inadvisable; (f) the Exchange deems the 
Shares to be equity securities, thus rendering trading in the Shares 
subject to the Exchange's existing rules governing the trading of 
equity securities; (g) the Exchange has appropriate rules to 
facilitate trading in the Shares during all trading sessions; and 
(h) 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; (8) 
provided additional justification for why the Fund's proposed 
investments are consistent with the Act; (9) made additional 
representations regarding the ability of the Exchange to surveil 
trading in the Shares and certain of the underlying investments, 
including that the Exchange has a policy prohibiting the 
distribution of material non-public information by its employees; 
and (10) made other clarifications, corrections, and technical 
changes. Amendment No. 4 is available at https://www.sec.gov/comments/sr-batsbzx-2017-54/batsbzx201754-2916905-161845.pdf.
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 4

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant parts of such 
statements.

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

1. Purpose
    This Amendment No. 4 to SR-BatsBZX-2017-54 amends and replaces in 
its entirety Amendment No. 3 to SR-BatsBZX-2017-54, which was submitted 
on January 9, 2017, which amended and replaced in its entirety 
Amendment No. 2 to SR-BatsBZX-2017-54, which was submitted on December 
15, 2017, which amended and replaced in its entirety the proposal as 
originally submitted on September 7, 2017. The Exchange submits this 
Amendment No. 3 [sic] in order to clarify certain points and add 
additional details about the Fund.
    The Exchange proposes to list and trade the Shares under Rule 
14.11(i), which governs the listing and trading of Managed Fund Shares 
on the Exchange.\9\ The Fund will be an actively managed exchange-
traded fund that seeks to mitigate the inflation risk of a portfolio 
composed of U.S. dollar-denominated investment-grade corporate bonds 
either through holding such bonds or through holding exchange-traded 
funds (``ETFs'') that hold such bonds, as further described below. The 
Exchange submits this proposal in order to allow the Fund to hold 
Inflation Hedging Instruments, as defined below, in a manner that may 
not comply with Rule 14.11(i)(4)(C)(iv)(a),\10\ Rule 
14.11(i)(4)(C)(iv)(b),\11\ and/or Rule 14.11(i)(4)(C)(v),\12\ as 
further described

[[Page 4709]]

below. Otherwise, the Fund will comply with all other listing 
requirements on an initial and continued listing basis under Rule 
14.11(i).
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    \9\ The Commission originally approved BZX Rule 14.11(i) in 
Securities Exchange Act Release No. 65225 (August 30, 2011), 76 FR 
55148 (September 6, 2011) (SR-BATS-2011-018) and subsequently 
approved generic listing standards for Managed Fund Shares under 
Rule 14.11(i) in Securities Exchange Act Release No. 78396 (July 22, 
2016), 81 FR 49698 (July 28, 2016) (SR-BATS-2015-100).
    \10\ Rule 14.11(i)(4)(C)(iv)(a) provides that ``there shall be 
no limitation to the percentage of the portfolio invested in such 
holdings; provided, however, that in the aggregate, at least 90% of 
the weight of such holdings invested in futures, exchange-traded 
options, and listed swaps shall, on both an initial and continuing 
basis, consist of futures, options, and swaps for which the Exchange 
may obtain information via the Intermarket Surveillance Group 
(``ISG'') from other members or affiliates of the ISG or for which 
the principal market is a market with which the Exchange has a 
comprehensive surveillance sharing agreement, calculated using the 
aggregate gross notional value of such holdings.'' The Exchange is 
proposing that the Fund be exempt from this requirement only as it 
relates to the Fund's holdings in certain credit default swaps, 
interest rate swaps, and Inflation Swaps, as further described 
below.
    \11\ Rule 14.11(i)(4)(C)(iv)(b) provides that ``the aggregate 
gross notional value of listed derivatives based on any five or 
fewer underlying reference assets shall not exceed 65% of the weight 
of the portfolio (including gross notional exposures), and the 
aggregate gross notional value of listed derivatives based on any 
single underlying reference asset shall not exceed 30% of the weight 
of the portfolio (including gross notional exposures).'' The 
Exchange is proposing that the Fund be exempt only from the 
requirement of Rule 14.11(i)(4)(C)(iv)(b) that prevents the 
aggregate gross notional value of listed derivatives based on any 
single underlying reference asset from exceeding 30% of the weight 
of the portfolio (including gross notional exposures). The Exchange 
is proposing that the Fund be exempt from this requirement as it 
relates to the Fund's holdings in listed derivatives, which include 
U.S. Treasury futures, credit default swaps, and certain Inflation 
Swaps and interest rate swaps, as further described below. The Fund 
will meet the requirement that the aggregate gross notional value of 
listed derivatives based on any five or fewer underlying reference 
assets shall not exceed 65% of the weight of the portfolio 
(including gross notional exposures).
    \12\ Rule 14.11(i)(4)(C)(v) provides that ``the portfolio may, 
on both an initial and continuing basis, hold OTC derivatives, 
including forwards, options, and swaps on commodities, currencies 
and financial instruments (e.g., stocks, fixed income, interest 
rates, and volatility) or a basket or index of any of the foregoing, 
however the aggregate gross notional value of OTC Derivatives shall 
not exceed 20% of the weight of the portfolio (including gross 
notional exposures).'' The Exchange is proposing that the Fund be 
exempt from this requirement only as it relates to the Fund's 
holdings in OTC derivatives, which include total return swaps and 
certain Inflation Swaps and interest rate swaps, as further 
described below.
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    The Shares will be offered by the Trust, which was established as a 
Delaware statutory trust on June 21, 2011. BlackRock Fund Advisors (the 
``Adviser'') is the investment adviser to the Fund. The Trust is 
registered with the Commission as an open-end investment company and 
has filed a registration statement on behalf of the Fund on Form N-1A 
(``Registration Statement'') with the Commission.\13\
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    \13\ See Registration Statement on Form N-1A for the Trust, 
dated April 6, 2017 (File Nos. 333-179904 and 811-22649). The 
descriptions of the Fund and the Shares contained herein are based, 
in part, on information in the Registration Statement. The 
Commission has issued an order granting certain exemptive relief to 
the Company under the Investment Company Act of 1940 (15 U.S.C. 80a-
1) (``1940 Act'') (the ``Exemptive Order''). See Investment Company 
Act Release No. 29571 (January 24, 2011) (File No. 812-13601).
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    Rule 14.11(i)(7) provides that, if the investment adviser to the 
investment company issuing Managed Fund Shares is affiliated with a 
broker-dealer, such investment adviser shall erect and maintain a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio.\14\ In addition, Rule 
14.11(i)(7) further requires that personnel who make decisions on the 
investment company's portfolio composition must be subject to 
procedures designed to prevent the use and dissemination of material 
nonpublic information regarding the applicable investment company 
portfolio. Rule 14.11(i)(7) is similar to Rule 14.11(b)(5)(A)(i), 
however, Rule 14.11(i)(7) in connection with the establishment of a 
``fire wall'' between the investment adviser and the broker-dealer 
reflects the applicable open-end fund's portfolio, not an underlying 
benchmark index, as is the case with index-based funds. The Adviser is 
not a registered broker-dealer, but is affiliated with multiple broker-
dealers and has implemented and will maintain ``fire walls'' with 
respect to such broker-dealers regarding access to information 
concerning the composition and/or changes to the Fund's portfolio. In 
addition, Adviser personnel who make decisions regarding the Fund's 
portfolio are subject to procedures designed to prevent the use and 
dissemination of material nonpublic information regarding the Fund's 
portfolio. In the event that (a) the Adviser becomes registered as a 
broker-dealer or newly affiliated with another broker-dealer, or (b) 
any new adviser or sub-adviser is a registered broker-dealer or becomes 
affiliated with a broker-dealer, it will implement and maintain a fire 
wall with respect to its relevant personnel or such broker-dealer 
affiliate, as applicable, regarding access to information concerning 
the composition and/or changes to the portfolio, and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding such portfolio.
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    \14\ 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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    The Fund intends to qualify each year as a regulated investment 
company under Subchapter M of the Internal Revenue Code of 1986, as 
amended.
iShares Inflation Hedged Corporate Bond ETF
    According to the Registration Statement, the Fund will be an 
actively managed exchange-traded fund that will seek to mitigate the 
inflation risk of a portfolio with exposure to U.S. dollar-denominated 
investment-grade corporate bonds. The Fund seeks to achieve its 
investment objective by investing, under Normal Market Conditions,\15\ 
at least 80% of its net assets in the iShares iBoxx $ Investment Grade 
Corporate Bond ETF (the ``Underlying Fund''), U.S. dollar-denominated 
investment-grade corporate bonds, in one or more other ETFs \16\ that 
principally invest in U.S. dollar-denominated investment-grade 
corporate bonds, and in Inflation Hedging Instruments, as defined 
below. The Fund will gain exposure to U.S. dollar-denominated 
investment-grade corporate bonds primarily through investing in the 
Underlying Fund. As an alternative, the Fund may gain such exposure by 
investing in U.S. dollar-denominated investment-grade corporate bonds 
or through other ETFs that are listed on a U.S. national securities 
exchange that principally invest in U.S. dollar-denominated investment-
grade corporate bonds. The Fund will attempt to mitigate the inflation 
risk of the Fund's exposure to U.S. dollar-denominated investment-grade 
corporate bonds primarily through the use of either OTC or listed 
inflation swaps (i.e., contracts in which the Fund will make fixed-rate 
payments based on notional amount while receiving floating-rate 
payments determined from an inflation index) (``Inflation Swaps''),\17\ 
which are managed on an active basis. As an alternative, the Fund may 
also attempt to mitigate the inflation risk of the underlying 
securities or the Underlying Fund through investing in other products 
designed to transfer inflation risk from one party to another, 
including only the following: Treasury Inflation-Protected Securities 
(``TIPS''), total return swaps,\18\ credit default swaps,\19\ interest 
rate swaps,\20\ and U.S. Treasury

[[Page 4710]]

futures \21\ (collectively with Inflation Swaps, ``Inflation Hedging 
Instruments''). The Exchange is proposing to allow the Fund to hold up 
to 50% of the weight of its portfolio (including gross notional 
exposure) in Inflation Hedging Instruments, collectively, in a manner 
that may not comply with Rules 14.11(i)(4)(C)(iv)(a),\22\ 
14.11(i)(4)(C)(iv)(b),\23\ and/or 14.11(i)(4)(C)(v),\24\ as discussed 
above.
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    \15\ As defined in Rule 14.11(i)(3)(E), the term ``Normal Market 
Conditions'' includes, but is not limited to, the absence of trading 
halts in the applicable financial markets generally; operational 
issues causing dissemination of inaccurate market information or 
system failures; or force majeure type events such as natural or 
man-made disaster, act of God, armed conflict, act of terrorism, 
riot or labor disruption, or any similar intervening circumstance.
    \16\ For purposes of this proposal, the term ETF includes 
Portfolio Depositary Receipts, Index Fund Shares, and Managed Fund 
Shares as defined in Rule 14.11(b), (c), and (i), respectively, and 
their equivalents on other national securities exchanges.
    \17\ See supra notes 10, 11, and 12. All Inflation Swaps held by 
the Fund will be listed and/or centrally cleared in order to reduce 
counterparty risk. All listed Inflation Swaps held by the Fund will 
be traded on a U.S. Swap Execution Facility registered with the 
Commodity Futures Trading Commission.
    \18\ See supra note 12. All total return swaps held by the Fund 
will be traded OTC. The Fund will attempt to limit counterparty risk 
in non-cleared swap contracts by entering into such contracts only 
with counterparties the Adviser believes are creditworthy and by 
limiting the Fund's exposure to each counterparty. The Adviser will 
monitor the creditworthiness of each counterparty and the Fund's 
exposure to each counterparty on an ongoing basis. The total return 
swaps will generally reference TIPS, the Consumer Price Index, or a 
corporate bond index.
    \19\ See supra notes 10 and 11. Credit default swaps held by the 
Fund will be traded on a U.S. Swap Execution Facility registered 
with the Commodity Futures Trading Commission.
    \20\ See supra note 10, 11, and 12. All interest rate swaps held 
by the Fund will be listed and/or centrally cleared in order to 
reduce counterparty risk. All listed interest rate swaps held by the 
Fund will be traded on a U.S. Swap Execution Facility registered 
with the Commodity Futures Trading Commission
    \21\ See supra note 11.
    \22\ See supra note 10.
    \23\ See supra note 11.
    \24\ See supra note 12.
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    The Fund's investments, including derivatives, will be consistent 
with the 1940 Act and the Fund's investment objective and policies and 
will not be used to enhance leverage (although certain derivatives and 
other investments may result in leverage).\25\ That is, while the Fund 
will be permitted to borrow as permitted under the 1940 Act, the Fund's 
investments will not be used to seek performance that is the multiple 
or inverse multiple (i.e., 2Xs and 3Xs) of the Fund's primary broad-
based securities benchmark index (as defined in Form N-1A). The Fund 
will only use those derivatives included in the defined term Inflation 
Hedging Instruments. The Fund's use of derivative instruments will be 
collateralized. As noted above, the Fund will only use derivative 
instruments in order to attempt to mitigate the inflation risk of the 
U.S. dollar-denominated investment-grade corporate bonds.
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    \25\ The Fund will include appropriate risk disclosure in its 
offering documents, including leveraging risk. Leveraging risk is 
the risk that certain transactions of a fund, including a fund's use 
of derivatives, may give rise to leverage, causing a fund to be more 
volatile than if it had not been leveraged. The Fund's investments 
in in derivative instruments will be made in accordance with the 
1940 Act and consistent with the Fund's investment objective and 
policies. To mitigate leveraging risk, the Fund will segregate or 
earmark liquid assets determined to be liquid by the Adviser in 
accordance with procedures established by the Trust's Board and in 
accordance with the 1940 Act (or, as permitted by applicable 
regulations, enter into certain offsetting positions) to cover its 
obligations under derivative instruments. These procedures have been 
adopted consistent with Section 18 of the 1940 Act and related 
Commission guidance. See 15 U.S.C. 80a-18; Investment Company Act 
Release No. 10666 (April 18, 1979), 44 FR 25128 (April 27, 1979); 
Dreyfus Strategic Investing, Commission No-Action Letter (June 22, 
1987); Merrill Lynch Asset Management, L.P., Commission No-Action 
Letter (July 2, 1996).
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    The Exchange notes that the Fund may also hold certain fixed income 
securities and cash and cash equivalents in compliance with Rules 
14.11(i)(4)(C)(ii) and (iii) in order to collateralize its derivatives 
positions.
    The Exchange represents that, except for the exceptions to BZX Rule 
14.11(i)(4)(C) described above, the Fund's proposed investments will 
satisfy, on an initial and continued listing basis, all of the generic 
listing standards under BZX Rule 14.11(i)(4)(C) and all other 
applicable requirements for Managed Fund Shares under Rule 14.11(i). 
The Trust is required to comply with Rule 10A-3 under the Act for the 
initial and continued listing of the Shares of the Fund. In addition, 
the Exchange represents that the Shares of the Fund will comply with 
all other requirements applicable to Managed Fund Shares including, but 
not limited to, requirements relating to the dissemination of key 
information such as the Disclosed Portfolio, Net Asset Value, and the 
Intraday Indicative Value, rules governing the trading of equity 
securities, trading hours, trading halts, surveillance, firewalls, and 
the information circular, as set forth in Exchange rules applicable to 
Managed Fund Shares and the orders approving such rules. At least 
100,000 Shares will be outstanding upon the commencement of trading.
    Moreover, all of the equity securities and futures contracts held 
by the Fund will trade on markets that are a member of Intermarket 
Surveillance Group (``ISG'') or affiliated with a member of ISG or with 
which the Exchange has in place a comprehensive surveillance sharing 
agreement.\26\ Additionally, the Exchange or FINRA, on behalf of the 
Exchange, are able to access, as needed, trade information for certain 
fixed income instruments reported to FINRA's Trade Reporting and 
Compliance Engine (``TRACE''). All statements and representations made 
in this filing regarding the description of the portfolio or reference 
assets, limitations on portfolio holdings or reference assets, 
dissemination and availability of index, reference asset, and intraday 
indicative values, and the applicability of Exchange rules specified in 
this filing shall constitute continued listing requirements for the 
Fund. The issuer has represented to the Exchange that it will advise 
the Exchange of any failure by the Fund or the Shares to comply with 
the continued listing requirements, 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 or the 
Shares are not in compliance with the applicable listing requirements, 
the Exchange will commence delisting procedures under Exchange Rule 
14.12.
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    \26\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com. The Exchange notes that not all 
components of the Disclosed Portfolio for the Fund may trade on 
markets that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.
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Availability of Information
    As noted above, the Fund will comply with the requirements for 
Managed Fund Shares related to Disclosed Portfolio, Net Asset Value, 
and the Intraday Indicative Value. Additionally, the intra-day, closing 
and settlement prices of exchange-traded portfolio assets, including 
ETFs and futures, will be readily available from the securities 
exchanges and futures exchanges trading such securities and futures, as 
the case may be, automated quotation systems, published or other public 
sources, or online information services such as Bloomberg or Reuters. 
Intraday price quotations on both listed and OTC swaps, TIPS, and fixed 
income instruments are available from major broker-dealer firms and 
from third-parties, which may provide prices free with a time delay or 
in real-time for a paid fee. Price information for cash equivalents 
will be available from major market data vendors. The Disclosed 
Portfolio will be available on the issuer's website free of charge. The 
Fund's website includes a form of the prospectus for the Fund and 
additional information related to NAV and other applicable quantitative 
information. Information regarding market price and trading volume of 
the Shares will be continuously available throughout the day on 
brokers' computer screens and other electronic services. Quotation and 
last sale information on the Shares will be available through the 
Consolidated Tape Association. Information regarding the previous day's 
closing price and trading volume for the Shares will be published daily 
in the financial section of newspapers. Trading in the Shares may be 
halted for market conditions or for reasons that, in the view of the 
Exchange, make trading inadvisable. The Exchange deems the Shares to be 
equity securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities. 
The Exchange has appropriate rules to facilitate trading in the shares 
during all trading sessions.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. Specifically, the Information 
Circular will discuss the following: (1) The procedures for purchases 
and

[[Page 4711]]

redemptions of Shares in Creation Units (and that Shares are not 
individually redeemable); (2) BZX Rule 3.7, which imposes suitability 
obligations on Exchange members with respect to recommending 
transactions in the Shares to customers; (3) how information regarding 
the Intraday Indicative Value and the Disclosed Portfolio is 
disseminated; (4) the risks involved in trading the Shares during the 
Pre-Opening \27\ and After Hours Trading Sessions \28\ when an updated 
Intraday Indicative Value and Underlying Index value will not be 
calculated or publicly disseminated; (5) the requirement that members 
deliver a prospectus to investors purchasing newly issued Shares prior 
to or concurrently with the confirmation of a transaction; and (6) 
trading information.
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    \27\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m. 
Eastern Time.
    \28\ The After Hours Trading Session is from 4:00 p.m. to 5:00 
p.m. Eastern Time.
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    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Fund. Members purchasing Shares from the Fund for 
resale to investors will deliver a prospectus to such investors. The 
Information Circular will also discuss any exemptive, no-action and 
interpretive relief granted by the Commission from any rules under the 
Act.
    In addition, the Information Circular will reference that the Fund 
is subject to various fees and expenses described in the Registration 
Statement. The Information Circular will also disclose the trading 
hours of the Shares of the Fund and the applicable NAV calculation time 
for the Shares. The Information Circular will disclose that information 
about the Shares of the Fund will be publicly available on the Fund's 
website.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \29\ in general and Section 6(b)(5) of the Act \30\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest.
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    \29\ 15 U.S.C. 78f.
    \30\ 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, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest in that the Shares will meet 
each of the initial and continued listing criteria in BZX Rule 14.11(i) 
except that the Fund may not comply with Rules 
14.11(i)(4)(C)(iv)(a),\31\ 14.11(i)(4)(C)(iv)(b),\32\ and/or 
14.11(i)(4)(C)(v).\33\ The Exchange believes that the liquidity in the 
Treasury futures markets mitigates the concerns that Rule 
14.11(i)(4)(C)(iv)(b) is intended to address and that such liquidity 
would help prevent the Shares from being susceptible to manipulation. 
Further, the Exchange believes that for listed swaps, including credit 
default swaps, interest rate swaps, and Inflation Swaps, the price 
transparency and surveillance performed by the applicable swap 
execution facility would similarly act to mitigate the risk of 
manipulation of the Shares. The Exchange also believes that the size of 
the inflation swaps market,\34\ which would include all of the listed 
and OTC swaps that the Fund intends to invest in, also mitigates 
manipulation concerns relating to both listed and OTC swaps held by the 
Fund.\35\
---------------------------------------------------------------------------

    \31\ See supra note 10.
    \32\ See supra note 11.
    \33\ See supra note 12.
    \34\ For purposes of this discussion, the term ``inflation swaps 
market'' means any swap contract that references either a measure of 
inflation, an inflation index, or an instrument designed to transfer 
inflation risk from one party to another.
    \35\ According to publicly available numbers from LCH. Clearnet 
Limited, which clears both listed and OTC swaps, as of November 28, 
2017 there was approximately $2.3 billion in average daily volume in 
inflation swaps, which would include the credit default swaps, 
interest rate swaps, and Inflation Swaps that the Fund intends to 
invest in, cleared through their platform alone and over $241 
billion in notional interest outstanding in such inflation swaps.
---------------------------------------------------------------------------

    As it relates to Rule 14.11(i)(4)(C)(v), which provides that the 
notional value of OTC Derivatives shall not exceed 20% of the weight of 
the portfolio (including gross notional exposures), in an effort to 
mitigate counterparty risk and exposure to potentially illiquid and 
manipulable derivatives contracts, the Exchange notes that the Fund 
will attempt to limit counterparty risk in non-cleared OTC swap 
contracts, namely total return swaps, by entering into such contracts 
only with counterparties the Adviser believes are creditworthy and by 
limiting the Fund's exposure to each counterparty. The Adviser will 
monitor the creditworthiness of each counterparty and the Fund's 
exposure to each counterparty on an ongoing basis. OTC Inflation Swaps 
and interest rate swaps held by the Fund will be centrally cleared. 
Further, the Exchange notes that notional principal never changes hands 
in such swaps transactions, and it is a theoretical value used to base 
the exchanged payments. A more accurate representation of the swaps 
value in order to monitor total counterparty risk would be the mark-to 
market value of the swap since inception, which the Adviser generally 
expects to remain at around 5% of the Fund's net assets.\36\ As noted 
above, the inflation swap market,\37\ which would include all of the 
listed and OTC swaps that the Fund intends to invest in, is large and 
liquid, which the Exchange believes further mitigates the concerns 
which Rule 14.11(i)(4)(C)(v) is intended to address.
---------------------------------------------------------------------------

    \36\ The Adviser plans to implement a hedging strategy very 
similar to the strategy that it employs with interest rate swaps for 
several other funds, each of which have approximately 50% of the 
weight of their notional exposure in interest rate swaps while each 
maintains less than 10% exposure as calculated using mark-to-market.
    \37\ See note 35, supra.
---------------------------------------------------------------------------

    As it relates to the requirement in Rule 14.11(i)(4)(C)(iv)(a) that 
at least 90% of the weight of the listed derivatives portion of the 
portfolio be in listed derivatives for which the Exchange may obtain 
information via ISG or for which the principal market is a market with 
which the Exchange has a comprehensive surveillance sharing agreement, 
the Exchange believes that its surveillance procedures are adequate to 
properly monitor the trading of the Shares on the Exchange during all 
trading sessions and to deter and detect violations of Exchange rules 
and the applicable federal securities laws. Additionally, all of the 
instruments that would not meet this requirement would nevertheless 
have a primary market that is a swap execution facility that is 
registered with and under the regulatory oversight of the CFTC.\38\
---------------------------------------------------------------------------

    \38\ The Exchange represents that not all CFTC registered swap 
execution facilities are members or affiliates of members of the 
ISG.
---------------------------------------------------------------------------

    Trading of the Shares through the Exchange will be subject to the 
Exchange's surveillance procedures for derivative products, including 
Managed Fund Shares. All of the futures contracts, equity securities, 
and certain of the listed Inflation Swaps, listed credit default swaps, 
and listed interest

[[Page 4712]]

rate swaps held by the Fund will trade on markets that are a member of 
ISG or affiliated with a member of ISG or with which the Exchange has 
in place a comprehensive surveillance sharing agreement. The Exchange, 
FINRA, on behalf of the Exchange, or both will communicate regarding 
trading in the Shares and the underlying futures contracts, equity 
securities, and certain of the listed Inflation Swaps, listed credit 
default swaps, and listed interest rate swaps held by the Fund with the 
ISG, other markets or entities who are members or affiliates of the 
ISG, or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement.\39\ The Exchange, FINRA, on behalf of 
the Exchange, or both may obtain information regarding trading in the 
Shares and the underlying futures contracts, equity securities, and 
certain of the listed Inflation Swaps, listed credit default swaps, and 
listed interest rate swaps held by the Fund via the ISG from other 
markets or entities who are members or affiliates of the ISG or with 
which the Exchange has entered into a comprehensive surveillance 
sharing agreement.\40\ Additionally, the Exchange or FINRA, on behalf 
of the Exchange, may access, as needed, trade information for certain 
fixed income instruments reported to FINRA's Trade Reporting and 
Compliance Engine (``TRACE''). The Exchange has a policy prohibiting 
the distribution of material non-public information by its employees.
---------------------------------------------------------------------------

    \39\ See note 26, supra.
    \40\ See note 26, supra.
---------------------------------------------------------------------------

    The Exchange notes that the Fund will meet and be subject to all 
other requirements of the Generic Listing Rules and other applicable 
continued listing requirements for Managed Fund Shares under Rule 
14.11(i), including those requirements regarding the Disclosed 
Portfolio and the requirement that the Disclosed Portfolio and the NAV 
will be made available to all market participants at the same time,\41\ 
Intraday Indicative Value,\42\ suspension of trading or removal,\43\ 
trading halts,\44\ disclosure,\45\ and firewalls.\46\ Further, at least 
100,000 Shares will be outstanding upon the commencement of 
trading.\47\
---------------------------------------------------------------------------

    \41\ See Rules 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii).
    \42\ See Rule 14.11(i)(4)(B)(i).
    \43\ See Rule 14.11(i)(4)(B)(iii).
    \44\ See Rule 14.11(i)(4)(B)(iv).
    \45\ See Rule 14.11(i)(6).
    \46\ See Rule 14.11(i)(7).
    \47\ See Rule 14.11(i)(4)(A)(i).
---------------------------------------------------------------------------

    For the above reasons, the Exchange believes that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act.

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

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

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

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

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 4, is consistent with the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\48\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment No. 4, is consistent 
with Section 6(b)(5) of the Act,\49\ 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 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.
---------------------------------------------------------------------------

    \48\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \49\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As noted above, the Fund may hold up to 50% of the weight of its 
portfolio (including gross notional exposure) in Inflation Hedging 
Instruments, including certain derivatives, in a manner that may not 
comply with the generic listing requirements in Rules 
14.11(i)(4)(C)(iv)(a), 14.11(i)(4)(C)(iv)(b), and 
14.11(i)(4)(C)(v).\50\ The Exchange states that the Fund will only use 
those derivatives included in the defined term Inflation Hedging 
Instruments and that the Fund will only use derivative instruments in 
order to attempt to mitigate the inflation risk of the U.S. dollar-
denominated investment-grade corporate bonds to which the Fund will 
have exposure. The Exchange states that the Fund's use of derivative 
instruments will be collateralized. In addition, the Exchange 
represents that the Shares of the Fund will comply with all other 
requirements applicable to Managed Fund Shares including, but not 
limited to, requirements relating to the dissemination of key 
information such as the Disclosed Portfolio (as defined in BZX Rule 
14.11(i)(3)(B)).\51\
---------------------------------------------------------------------------

    \50\ The Exchange states that the Fund's investments in 
derivative instruments will be made in accordance with the 1940 Act 
and consistent with the Fund's investment objective and policies. To 
mitigate leveraging risk, the Fund will segregate or earmark liquid 
assets determined to be liquid by the Adviser in accordance with 
procedures established by the Trust's Board and in accordance with 
the 1940 (or, as permitted by applicable regulations, enter into 
certain offsetting positions) to cover its obligations under 
derivative instruments. According to the Exchange, these procedures 
have been adopted consistent with Section 18 of the 1940 Act and 
related Commission guidance. In addition, the Fund will include 
appropriate risk disclosure in its offering documents, including 
leveraging risk. See supra note 25.
    \51\ Rule 14.11(i)(4)(B)(ii) requires that the Disclosed 
Portfolio will be disseminated at least once daily and will be made 
available to all market participants at the same time. Rule 
14.11(i)(3)(B) requires that the website for each series of Managed 
Fund Shares disclose the following information regarding the 
Disclosed Portfolio, to the extent applicable: (i) Ticker symbol; 
(ii) CUSIP or other identifier; (iii) description of the holding; 
(iv) the identity of the security, commodity, index, or other asset 
upon which a derivative is based; (v) the strike price for any 
options; (vi) the quantity of each security or other asset held as 
measured by (a) par value, (b) notional value, (c) number of shares, 
(d) number of contracts, and (e) number of units; (vii) maturity 
date; (viii) coupon rate; (ix) effective date; (x) market value; and 
(xi) percentage weighting of the holding in the portfolio. The 
Exchange represents that this website information will be publicly 
available free of charge.
---------------------------------------------------------------------------

    The Exchange states that the Fund's investments in certain listed 
credit default swaps, certain listed interest rate swaps, and certain 
listed Inflation Swaps will not meet the generic listing requirement 
that at least 90% of the weight of the listed derivatives holdings in 
the portfolio be in listed derivatives for which the Exchange may 
obtain information via the ISG from other members or affiliates of the 
ISG or for which the principal market is a market with which the 
Exchange has a comprehensive surveillance sharing agreement.\52\ The 
Exchange represents that all of the listed credit default swaps, listed 
interest rate swaps, and listed Inflation Swaps that would not meet 
this requirement would nevertheless be listed on a U.S. SEF and, 
therefore, have as a primary market a SEF registered with, and under 
the regulatory oversight of, the CFTC.\53\
---------------------------------------------------------------------------

    \52\ See Rule 14.11(i)(4)(C)(iv)(a).
    \53\ The Exchange represents that not all CFTC-registered SEFs 
are members or affiliates of members of the ISG.

---------------------------------------------------------------------------

[[Page 4713]]

    The Exchange states that the Fund's investments in listed 
derivatives, including U.S. Treasury futures, listed credit default 
swaps, listed Inflation Swaps, and listed interest rate swaps, will not 
meet the generic listing requirement that the aggregate gross notional 
value of listed derivatives based on any single underlying reference 
asset not exceed 30% of the weight of the portfolio.\54\ The Exchange 
states that it believes the liquidity in the Treasury futures markets 
mitigates manipulation concerns. In addition, as discussed above, all 
listed credit default swaps, listed interest rate swaps and listed 
Inflation Swaps that the Fund will invest in will be traded on U.S. 
SEFs registered with the CFTC. The Exchange states that the price 
transparency and surveillance performed by the applicable SEF on which 
the credit default swaps, interest rate swaps, or Inflation Swaps are 
listed would act to mitigate the risk of manipulation of the Shares. 
The Exchange also states that it believes that the size of the 
inflation swaps market,\55\ which would include all of the listed swaps 
that the Fund intends to invest in, mitigates manipulation concerns 
relating to both the listed and OTC swaps held by the Fund.\56\
---------------------------------------------------------------------------

    \54\ See Rule 14.11(i)(4)(C)(iv)(b).
    \55\ See supra note 34.
    \56\ The Exchange states that, as of November 28, 2017, 
according to publicly available data from LCH.Clearnet Limited, 
there was approximately $2.3 billion in average daily volume in 
inflation swaps (which would include the listed and OTC credit 
default swaps, interest rate swaps, and Inflation Swaps that the 
Fund intends to invest in) cleared through LCH.Clearnet Limited and 
over $241 billion in notional interest outstanding in such inflation 
swaps. See supra note 35.
---------------------------------------------------------------------------

    The Exchange states that the Fund's holdings in OTC derivatives, 
which include OTC total return swaps, OTC interest rate swaps, and OTC 
Inflation Swaps, will exceed 20% of the weight of the portfolio and, 
therefore, not meet the generic listing requirements.\57\ The Exchange 
states that the Fund will attempt to limit counterparty risk in non-
cleared OTC total return swaps by entering into such contracts only 
with counterparties the Adviser believes are creditworthy and by 
limiting the Fund's exposure to each counterparty, and that the Adviser 
will monitor the creditworthiness of each counterparty and the Fund's 
exposure to each counterparty on an ongoing basis. In addition, the 
Exchange represents that all OTC Inflation Swaps and OTC interest rate 
swaps held by the Fund will be centrally cleared. The Exchange also 
represents that the Adviser generally expects the mark-to-market value 
of the OTC swaps to remain at around 5% of the Fund's net assets.\58\ 
Finally, the Exchange states that the inflation swap market,\59\ which 
would include all of the listed and OTC swaps that the Fund intends to 
invest in, is large and liquid, which mitigates the concerns the 20% 
limitation on OTC derivatives is intended to address.\60\
---------------------------------------------------------------------------

    \57\ See Rule 14.11(i)(4)(C)(v).
    \58\ The Exchange states that with respect to valuing the OTC 
swaps in the portfolio, the notional principal never changes hands, 
it is a theoretical value used to base the exchanged payments on, 
and a more accurate representation of the swaps value in order to 
monitor total counterparty risk would be the mark-to market value of 
the swap since inception. See supra note 36 and accompanying text.
    \59\ See supra note 34.
    \60\ See supra note 56.
---------------------------------------------------------------------------

    The Commission also finds that the proposal is consistent with 
Section 11A(a)(1)(C)(iii) of the Act,\61\ which sets forth Congress's 
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''). Further, as 
required by Rule 14.11(i)(4B)(i), the Intraday Indicative Value will be 
widely disseminated by one or more major market data vendors at least 
every 15 seconds during the Exchange's Regular Trading Hours (as 
defined in Rule 1.5(w))). 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. 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. The intra-day, closing 
and settlement prices of exchange-traded portfolio assets, including 
ETFs and futures, will be readily available from the securities 
exchanges and futures exchanges trading such securities and futures, as 
the case may be, automated quotation systems, published or other public 
sources, or online information services, such as Bloomberg or Reuters. 
Intraday price quotations on both listed and OTC swaps, TIPS, and fixed 
income instruments will be available from major broker-dealer firms and 
from third-parties, which may provide prices free with a time delay or 
in real-time for a paid fee. Price information for cash equivalents 
will be available from major market data vendors. In addition, the 
Fund's website includes a form of the prospectus for the Fund and 
additional data relating to NAV and other applicable quantitative 
information.
---------------------------------------------------------------------------

    \61\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    The Commission also believes that the proposal 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. As required by 
Rule 14.11(i)(4)(A)(ii), the Exchange will obtain a representation from 
the issuer of the Shares that the NAV per Share will be calculated 
daily and that the NAV and the Disclosed Portfolio will be made 
available to all market participants at the same time. Further, trading 
in the Shares may be halted because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable.\62\ Trading in the Shares will also be subject to Rule 
14.11(i)(4)(B)(iv), which sets forth circumstances under which Shares 
of a Fund may be halted.
---------------------------------------------------------------------------

    \62\ See Amendment No. 4, supra note 8.
---------------------------------------------------------------------------

    The Exchange states that it has a policy prohibiting the 
distribution of material, non-public information by its employees. The 
Exchange states that the Adviser is not a registered broker-dealer but 
the Adviser is affiliated with multiple broker-dealer and has 
implemented and will maintain ``fire walls'' with respect to such 
broker-dealers regarding access to information concerning the 
composition of and/or changes to the Fund's portfolio. Further, the 
Commission notes that the Reporting Authority that provides the 
Disclosed Portfolio must implement and maintain, or be subject to, 
procedures designed to prevent the use and dissemination of material, 
non-public information regarding the actual components of the 
portfolio.\63\
---------------------------------------------------------------------------

    \63\ See Rule 14.11(i)(4)(B)(ii)(b).
---------------------------------------------------------------------------

    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. In support of this 
proposal, the Exchange represents that:
    (1) Other than Rule 14.11(i)(4)(C)(iv)(a), Rule 
14.11(i)(4)(C)(iv)(b), and Rule 14.11(i)(4)(C)(v), the Fund will comply 
with all other requirements for Managed Fund Shares under Rule 
14.11(i).
    (2) The Fund may to hold up to 50% of the weight of its portfolio 
(including gross notional exposure) in Inflation Hedging Instruments, 
which includes only the listed and OTC derivatives as described above. 
The Fund will only use derivative instruments to attempt to mitigate 
the inflation risk of the

[[Page 4714]]

portfolio's exposure to U.S. dollar-denominated investment-grade 
corporate bonds.
    (3) At least 100,000 Shares will be outstanding upon the 
commencement of trading.
    (4) Trading of the Shares on the Exchange will be subject to the 
Exchange's surveillance procedures for derivative products, and these 
procedures are adequate to properly monitor the trading of the Shares 
on the Exchange during all trading sessions and to deter and detect 
violations of Exchange rules and the applicable federal securities 
laws.
    (5) The Exchange, the Financial Industry Regulatory Authority 
(``FINRA'') on behalf of the Exchange, or both, will communicate 
regarding trading in the Shares and the underlying futures contracts, 
equity securities, and certain of the listed swaps held by the Fund 
with the ISG, other markets or entities who are members or affiliates 
of the ISG, or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, the Exchange, FINRA on 
behalf of the Exchange, or both may obtain information regarding 
trading in the Shares and the underlying futures contracts, equity 
securities, and certain of the listed swaps held by the Fund via the 
ISG from other markets or entities who are members or affiliates of the 
ISG or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. The Exchange or FINRA, on behalf of the 
Exchange, may access, as needed, trade information for certain fixed 
income instruments reported to FINRA's Trade Reporting and Compliance 
Engine.
    (6) Prior to the commencement of trading, the Exchange will inform 
its members in an Information Circular of the special characteristics 
and risks associated with trading the Shares. Specifically, the 
Information Circular will discuss the following: (a) The procedures for 
purchases and redemptions of Shares in creation units (and that Shares 
are not individually redeemable); (b) Rule 3.7, which imposes 
suitability obligations on Exchange members with respect to 
recommending transactions in the Shares to customers; (c) how 
information regarding the Intraday Indicative Value and Disclosed 
Portfolio is disseminated; (d) the risks involved in trading the Shares 
during the Pre-Opening and After Hours Trading Sessions when an updated 
Intraday Indicative Value will not be calculated or publicly 
disseminated; (e) the requirement that members deliver a prospectus to 
investors purchasing newly issued Shares prior to or concurrently with 
the confirmation of a transaction; and (f) trading information.
    (7) All of the equity securities and futures contracts, and certain 
of the listed Inflation Swaps, listed credit default swaps, and listed 
interest rate swaps held by the Fund will trade on markets that are a 
member of ISG or affiliated with a member of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement.
    (8) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (9) For initial and continued listing of the Shares, the Trust must 
be in compliance with Rule 10A-3 under the Act.\64\
---------------------------------------------------------------------------

    \64\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    The Exchange represents that all statements and representations 
made in the filing regarding (1) the description of the portfolio or 
reference assets; (2) limitations on portfolio holdings or reference 
assets; (3) dissemination and availability of index, reference asset, 
and Intraday Indicative Values; and (4) the applicability of Exchange 
rules specified in the rule filing constitute continued listing 
requirements for the Fund. In addition, the issuer has represented to 
the Exchange that it will advise the Exchange of any failure by the 
Fund or the Shares to comply with the continued listing requirements 
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 or the Shares 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 statements 
and representations, including those set forth above and in Amendment 
No. 4.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 4, is consistent with Section 
6(b)(5) of the Act \65\ and Section 11A(a)(1)(C)(iii) of the Act \66\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.
---------------------------------------------------------------------------

    \65\ 15 U.S.C. 78f(b)(5).
    \66\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 4 to the Proposed Rule 
Change

    Interested persons are invited to submit written data, views and 
arguments concerning Amendment No. 4 to the proposed rule change. 
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 [email protected]. Please include 
File No. SR-BatsBZX-2017-54 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 No. SR-BatsBZX-2017-54. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File No. SR-BatsBZX-2017-54 and should be submitted on 
or before February 22, 2018.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 4

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 4, prior to the 30th day after the 
date of publication of notice of Amendment No. 4 in the Federal 
Register. Amendment No. 4 supplements the proposal by, among other 
things: (1) Providing

[[Page 4715]]

additional information regarding the Fund's holdings in Inflation 
Hedging Instruments; (2) making additional representations regarding 
the Fund and Shares, including representations relating to the Fund's 
investments in derivatives and the ability of the Exchange to surveil 
trading in the Shares and certain of the underlying investments; and 
(3) providing additional justification for why the Fund's proposed 
investments are consistent with the Act. These changes assist the 
Commission in evaluating the Exchange's proposal and in determining 
that the listing and trading of the Shares is consistent with the Act. 
Accordingly, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Act,\67\ to approve the proposed rule change, as 
modified by Amendment No. 4, on an accelerated basis.
---------------------------------------------------------------------------

    \67\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\68\ that the proposed rule change (SR-BatsBZX-2017-54), as 
modified by Amendment No. 4 thereto, be, and it hereby is, approved on 
an accelerated basis.
---------------------------------------------------------------------------

    \68\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\69\
---------------------------------------------------------------------------

    \69\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-01951 Filed 1-31-18; 8:45 am]
BILLING CODE 8011-01-P