Document ID: SEC-2016-1077-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2016-06-24T04:00Z

[Federal Register Volume 81, Number 122 (Friday, June 24, 2016)]
[Notices]
[Pages 41355-41358]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14928]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78104; File No. SR-BATS-2016-16]

Self-Regulatory Organizations; BATS Exchange, Inc.; Order 
Granting Approval of a Proposed Rule Change, as Modified by Amendment 
Nos. 1, 2, and 3, To List and Trade Shares of the Pointbreak 
Diversified Commodity Strategy Fund of the Pointbreak ETF Trust Under 
BATS Rule 14.11(i), Managed Fund Shares

June 20, 2016.

I. Introduction

    On March 7, 2016, BATS Exchange, Inc. (``Exchange'' or ``BATS'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule 
change to list and trade shares (``Shares'') of the Pointbreak 
Diversified Commodity Strategy Fund (``Fund'') of the Pointbreak ETF 
Trust (``Trust'') under BATS Rule 14.11(i). The proposed rule change 
was published for comment in the Federal Register on March 22, 2016.\3\ 
On April 8, 2016, the Exchange filed Amendment No. 1 to the proposed 
rule change, and on April 14, 2016, the Exchange filed Amendment No. 2 
to the proposed rule change.\4\ On May 5, 2016, pursuant to Section 
19(b)(2) of the Act,\5\ 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 rule change.\6\ On June 17, 2016, the Exchange 
filed Amendment No. 3 to the proposed rule change.\7\ The Commission 
received no comments on the proposed rule change. This order grants 
approval of the proposed rule change, as modified by Amendment Nos. 1, 
2, and 3.
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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. 77379 (March 16, 
2016), 81 FR 15387 (``Notice'').
    \4\ In Amendment No. 1, which replaced the original filing in 
its entirety, the Exchange: (1) Changed the name of the Fund from 
``Pointbreak Diversified Commodity Fund'' to ``Pointbreak 
Diversified Commodity Strategy Fund''; (2) clarified that the Fund 
will invest in Commodity Futures through the Subsidiary and invest 
in Cash Instruments both directly and through the Subsidiary; (3) 
provided additional clarification and specificity regarding the 
instruments in which the Fund may invest; (4) provided additional 
clarification regarding the investment restrictions of the Fund; (5) 
clarified how certain investments will be valued for computing the 
Fund's net asset value (``NAV''); (6) clarified where price 
information can be obtained for certain investments of the Fund; (7) 
clarified that all statements and representations made in the filing 
regarding the description of the portfolio, limitations on portfolio 
holdings or reference assets, or the applicability of Exchange rules 
and surveillance procedures constitute continued listing 
requirements for listing the Shares on the Exchange; (8) stated that 
the issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Exchange Act, the Exchange will surveil for 
compliance with the continued listing requirements, and if the Fund 
is not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under Exchange Rule 
14.12; and (9) made other technical amendments. Amendment No. 1 is 
available at http://www.sec.gov/comments/sr-bats-2016-16/bats201616-1.pdf. In Amendment No. 2, the Exchange clarified where price 
information can be obtained for certain investments of the Fund. 
Amendment No. 2 is available at http://www.sec.gov/comments/sr-bats-2016-16/bats201616-2.pdf. Because Amendment Nos. 1 and 2 do not 
materially alter the substance of the proposed rule change or raise 
unique or novel regulatory issues, Amendment Nos. 1 and 2 are not 
subject to notice and comment.
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 77770, 81 FR 29311 
(May 11, 2016). The Commission designated June 20, 2016 as the date 
by which the Commission shall either approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \7\ In Amendment No. 3, the Exchange provided additional 
information regarding the creation and redemption process, and made 
certain technical amendments. Amendment No. 3 is available at 
https://www.sec.gov/rules/sro/bats.shtml. Because Amendment No. 3 
does not materially alter the substance of the proposed rule change 
or raise unique or novel regulatory issues, Amendment No. 3 is not 
subject to notice and comment.
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II. The Exchange's Description of the Proposal

    The Exchange proposes to list and trade the Shares under BATS Rule 
14.11(i), which governs the listing and trading of Managed Fund Shares 
on the Exchange. The Shares will be offered by the Trust. According to 
the Exchange, the Trust is registered with the Commission as an open-
end investment company.\8\ Pointbreak Advisers LLC will be the 
investment adviser (``Adviser'') \9\ to the Fund.\10\ Brown Brothers 
Harriman & Co. will be the administrator, custodian, and transfer agent 
for the Trust and ALPS Distributors, Inc. will serve as the distributor 
for the Trust.\11\
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    \8\ The Exchange states that the Trust has filed a registration 
statement on behalf of the Fund with the Commission. See 
Registration Statement on Form N-1A for the Trust, dated December 
23, 2015 (File Nos. 333-205324 and 811-23068) (``Registration 
Statement''). The Exchange states that the Commission has issued an 
order granting certain exemptive relief to the Trust under the 
Investment Company Act of 1940 (``1940 Act''). See Investment 
Company Act Release No. 32064 (April 4, 2016) (File No. 812-14577).
    \9\ The Exchange states that prior to listing on the Exchange, 
the Adviser will be registered as a Commodity Pool Operator and will 
become a member of the National Futures Association (``NFA''), and 
that the Fund and its Subsidiary will be subject to regulation by 
the Commodity Futures Trading Commission and NFA and additional 
disclosure, reporting, and recordkeeping rules imposed upon 
commodity pools.
    \10\ The Exchange states that the Adviser is not a registered 
broker-dealer and is not affiliated with a broker-dealer. In the 
event that (a) the Adviser becomes a broker-dealer or newly 
affiliated with a broker-dealer, or (b) any new adviser or sub-
adviser is a broker-dealer or becomes affiliated with a broker-
dealer, such adviser or sub-adviser will implement a fire wall with 
respect to its relevant personnel or such broker-dealer affiliate, 
as applicable, regarding access to information concerning the 
composition of 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 the portfolio.
    \11\ Additional information regarding the Trust, the Fund, and 
the Shares, including investment strategies, risks, creation and 
redemption procedures, fees, portfolio holdings, disclosure 
policies, calculation of the NAV, distributions, and taxes, among 
other things, can be found in Amendment Nos. 1, 2, and 3, and the 
Registration Statement, as applicable. See Amendment Nos. 1 and 2, 
supra note 4; Amendment No. 3, supra note 7; and Registration 
Statement, supra note 8.

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[[Page 41356]]

A. The Fund's Investments

    According to the Exchange, the Fund is an actively managed 
exchange-traded fund (``ETF'') that seeks to provide total return that 
exceeds that of the Solactive Diversified Commodity Index 
(``Benchmark'') over time. The Fund is not an index tracking ETF and is 
not required to invest in the specific components of the Benchmark, and 
the Fund can have a higher or lower exposure to any component within 
the Benchmark at any time and may invest in other commodity-linked 
instruments as well. However, the Exchange represents that the Fund 
will generally seek to maintain a portfolio of instruments similar to 
those included in the Benchmark and will seek exposure to commodities 
included in the Benchmark.\12\ The Benchmark is a rules-based index 
composed of futures contracts on the following 16 commodities: 
Aluminum, Brent crude oil, cocoa, copper, corn, gold, heating oil, live 
cattle, natural gas, Reformulated Gasoline Blendstock for Oxygen 
Blending gasoline, silver, soybeans, sugar #11, wheat, WTI light crude 
oil, and zinc. The Exchange states that the Benchmark will seek to 
select the contract month for each specific commodity among the next 13 
months that display the most backwardation or the least contango and 
will not attempt to always own those contracts that are closest to 
expiration.
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    \12\ The Fund will generally obtain its exposure to commodity 
markets via investments in a wholly-owned subsidiary organized under 
the laws of the Cayman Islands (``Subsidiary''). References to the 
investments of the Fund include investments of the Subsidiary to 
which the Fund gains indirect exposure.
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    According to the Exchange, under normal circumstances,\13\ the Fund 
will invest in Commodity Futures (as defined below) through the 
Subsidiary and Cash Instruments (as defined below) both directly 
through the Fund and through the Subsidiary. Commodity Futures include 
only exchange-traded futures on commodities and exchange-traded futures 
contracts on commodity indices. Cash Instruments include only: (i) 
Short-term obligations issued by the U.S. Government; (ii) cash and 
cash-like instruments; \14\ (iii) money market mutual funds; and (iv) 
repurchase agreements.\15\ Cash Instruments would provide liquidity, 
serve as margin, or collateralize the Subsidiary's investments in 
Commodity Futures. The Fund will not invest in Cash Instruments that 
are below investment-grade.
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    \13\ According to the Exchange, the term ``under normal 
circumstances'' includes, but is not limited to, the absence of 
extreme volatility or trading halts in the futures markets or the 
financial markets generally; operational issues causing 
dissemination of inaccurate market information; or force majeure 
type events such as systems failure, natural or man-made disaster, 
act of God, armed conflict, act of terrorism, riot or labor 
disruption, or any similar intervening circumstance.
    \14\ Cash-like instruments include only the following: Short-
term negotiable obligations of commercial banks, fixed-time 
deposits, bankers acceptances of U.S. banks and similar 
institutions, and commercial paper rated at the date of purchase 
``Prime-1'' by Moody's Investors Service, Inc. or ``A-1+'' or ``A-
1'' by Standard & Poor's or, if unrated, of comparable quality, as 
the Adviser determines.
    \15\ According to the Exchange, the Fund follows certain 
procedures designed to minimize the risks inherent in repurchase 
agreements. Such procedures include effecting repurchase 
transactions only with large, well-capitalized, and well-established 
financial institutions whose condition will be continually monitored 
by the Adviser. The Exchange represents that it is the current 
policy of the Fund not to invest in repurchase agreements that do 
not mature within seven days if any such investment, together with 
any other illiquid assets held by the Fund, amount to more than 15% 
of the Fund's net assets. The Exchange states that the investments 
of the Fund in repurchase agreements, at times, may be substantial 
when, in the view of the Adviser, liquidity or other considerations 
so warrant.
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    The Exchange states that the Fund generally will not invest 
directly in Commodity Futures and expects to gain exposure to Commodity 
Futures by investing a portion of its assets in the Subsidiary.\16\ The 
Fund's investment in the Subsidiary is intended to provide the Fund 
with exposure to commodity markets in accordance with applicable rules 
and regulations. The Subsidiary has the same investment objective and 
investment restrictions as the Fund. The Fund will generally invest up 
to 25% of its total assets in the Subsidiary.
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    \16\ The Exchange states that the Subsidiary is not registered 
under the 1940 Act and is not directly subject to its investor 
protections, except as noted in the Registration Statement. However, 
according to the Exchange, the Subsidiary is wholly-owned and 
controlled by the Fund and is advised by the Adviser. Therefore, 
because of the Fund's ownership and control of the Subsidiary, the 
Subsidiary would not take action contrary to the interests of the 
Fund or its shareholders. The Fund's Board of Trustees has oversight 
responsibility for the investment activities of the Fund, including 
its expected investment in the Subsidiary, and the Fund's role as 
the sole shareholder of the Subsidiary. The Adviser receives no 
additional compensation for managing the assets of the Subsidiary. 
The Exchange states that the Subsidiary will also enter into 
separate contracts for the provision of custody, transfer agency, 
and accounting agent services with the same or with affiliates of 
the same service providers that provide those services to the Fund.
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    The Exchange represents that during times of adverse market, 
economic, political, or other conditions, the Fund may depart 
temporarily from its principal investment strategies (such as by 
maintaining a significant uninvested cash position) for defensive 
purposes. The Exchange states that doing so could help the Fund avoid 
losses, but may mean lost investment opportunities, and that during 
these periods, the Fund may not achieve its investment objective.
    The Fund intends to qualify each year as a regulated investment 
company under the Internal Revenue Code.

B. The Fund's Investment Restrictions

    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment) deemed 
illiquid by the Adviser \17\ under the 1940 Act. The Fund will monitor 
its portfolio liquidity on an ongoing basis to determine whether, in 
light of current circumstances, an adequate level of liquidity is being 
maintained, and will consider taking appropriate steps in order to 
maintain adequate liquidity if, through a change in values, net assets, 
or other circumstances, more than 15% of the Fund's net assets are held 
in illiquid assets. Illiquid assets include assets subject to 
contractual or other restrictions on resale and other instruments that 
lack readily available markets as determined in accordance with 
Commission staff guidance.
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    \17\ The Exchange states that, in reaching liquidity decisions, 
the Adviser may consider the following factors: The frequency of 
trades and quotes for the security; the number of dealers wishing to 
purchase or sell the security and the number of other potential 
purchasers; dealer undertakings to make a market in the security; 
and the nature of the security and the nature of the marketplace in 
which it trades (e.g., the time needed to dispose of the security, 
the method of soliciting offers, and the mechanics of transfer).
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    Aside from the Fund's investments in the Subsidiary, neither the 
Fund nor the Subsidiary will invest in non-U.S. equity securities. 
Neither the Fund nor the Subsidiary will invest in derivatives other 
than Commodity Futures.
    The Fund's investments will be consistent with the Fund's 
investment objective and will not be used to achieve leveraged or 
inverse leveraged returns.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\18\ In particular, the Commission finds that

[[Page 41357]]

the proposed rule change, as modified by Amendment Nos. 1, 2, and 3, is 
consistent with Section 6(b)(5) of the Exchange Act,\19\ 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.
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    \18\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \19\ 15 U.S.C. 78f(b)(5).
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    The Commission also finds that the proposal to list and trade the 
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Exchange Act,\20\ 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.
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    \20\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    According to the Exchange, quotation and last sale information for 
the Shares will be available on the facilities of the Consolidated Tape 
Association (``CTA''), and the previous day's closing price and trading 
volume information for the Shares will be generally available daily in 
the print and online financial press. Also, daily trading volume 
information for the Fund will be available in the financial section of 
newspapers, through subscription services such as Bloomberg, Thomson 
Reuters, and International Data Corporation, which can be accessed by 
authorized participants and other investors, as well as through other 
electronic services, including major public Web sites. Additionally, 
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.
    In addition, the Intraday Indicative Value \21\ (as defined in BATS 
Rule 14.11(i)(3)(C)) will be updated and widely disseminated by one or 
more major market data vendors at least every 15 seconds during the 
Exchange's Regular Trading Hours.\22\ On each business day, before 
commencement of trading in the Shares during Regular Trading Hours on 
the Exchange, the Fund will disclose on its Web site the Disclosed 
Portfolio (as defined in BATS Rule 14.11(i)(3)(B)) \23\ that will form 
the basis for the Fund's calculation of NAV at the end of the business 
day.\24\ The Web site for the Fund will also include a form of the 
prospectus for the Fund and additional data relating to NAV and other 
applicable quantitative information.
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    \21\ According to the Exchange, the Intraday Indicative Value 
will be based upon the current value for the components of the 
Disclosed Portfolio (as defined below). The Exchange states that 
quotations of certain of the Fund's holdings may not be updated for 
purposes of calculating Intraday Indicative Value during U.S. 
trading hours where the market on which the underlying asset is 
traded settles prior to the end of the Exchange's Regular Trading 
Hours. The Exchange's Regular Trading Hours are 9:30 a.m. to 4:00 
p.m. Eastern Time.
    \22\ The Exchange notes that several major market data vendors 
display and/or make widely available Intraday Indicative Values 
published via the CTA or other data feeds.
    \23\ The Disclosed Portfolio will include for each portfolio 
holding, as applicable: Ticker symbol or other identifier, a 
description of the holding, identity of the asset upon which the 
derivative is based, the quantity of each security or other asset 
held as measured by select metrics, maturity date, coupon rate, 
effective date, market value and percentage weight of the holding in 
the portfolio. The Web site and information will be publicly 
available at no charge.
    \24\ The NAV of the Fund will generally be determined at 4:00 
p.m. Eastern Time each business day when the Exchange is open for 
trading. The Fund intends to require all creation and redemption 
requests to be received no later than 10:30 a.m. Eastern Time 
(``cutoff time'') in order to create or redeem Shares based on that 
day's NAV. In support of this early cutoff time, the Exchange 
represents that the early cutoff time will provide the Fund with 
certainty as to whether to buy or sell certain Commodity Futures in 
advance of their settlement times, which should help to minimize the 
difference between the price used to calculate the NAV and the price 
at which the Fund is able to buy or sell the Commodity Futures. The 
Exchange also represents that the early cutoff time will provide 
authorized participants and market makers with certainty regarding 
the prices that will be used for calculating the NAV and that they 
will be able to transact at those prices, which should assist 
authorized participants and market makers to efficiently hedge their 
positions. Moreover, the Exchange represents that the early cutoff 
time should not significantly interfere with the arbitrage mechanism 
because authorized participants and market makers will continue to 
be able to hedge their positions in the Fund by investing directly 
in Commodity Futures as trading in these Commodity Futures continues 
after the settlement time. Finally, the Exchange represents that 
although the authorized participants and market makers that 
accumulate positions after the cutoff time may take on risk or 
additional costs to the extent they have to hold part or all of 
their positions overnight, the risk or additional costs do not 
generally interfere with the arbitrage mechanism. See Amendment No. 
3, supra note 7.
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    Intraday price quotations on Cash Instruments of the type held by 
the Fund, with the exception of money market mutual funds, are 
available from major broker-dealer firms and from third-parties, which 
may provide prices free with a time delay, or ``live'' with a paid fee. 
For Commodity Futures, such intraday pricing information is available 
directly from the applicable listing exchange. Price information for 
money market mutual funds will be available from the applicable 
investment company's Web site.
    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Exchange will obtain a representation from the issuer of 
the Shares that the NAV will be calculated daily and that the NAV and 
the Disclosed Portfolio will be made available to all market 
participants at the same time. Further, trading in the Shares will be 
subject to BATS Rules 11.18 and 14.11(i)(4)(B)(iv), which set forth 
circumstances under which trading in Shares of the Fund may be halted. 
Trading may be halted because of market conditions or for reasons that, 
in the view of the Exchange, make trading in the Shares inadvisable. 
These may include: (1) The extent to which trading is not occurring in 
the Commodity Futures and other assets composing the Disclosed 
Portfolio of the Fund; or (2) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present. 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.\25\ The 
Exchange represents that it prohibits the distribution of material, 
non-public information by its employees. The Exchange states that the 
Adviser is not a registered broker-dealer and is not affiliated with a 
broker-dealer, and that in the event that (a) the Adviser becomes a 
broker-dealer or newly affiliated with a broker-dealer, or (b) any new 
adviser or sub-adviser is a broker-dealer or becomes affiliated with a 
broker-dealer, such adviser or sub-adviser will implement a fire wall 
with respect to its relevant personnel or such broker-dealer affiliate, 
as applicable, regarding access to information concerning the 
composition of 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.\26\
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    \25\ See BATS Rule 14.11(i)(4)(B)(ii)(b).
    \26\ The Exchange represents that an investment adviser to an 
open-end fund is required to be registered under the Investment 
Advisers Act of 1940.
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    Prior to the commencement of trading, the Exchange will inform its

[[Page 41358]]

members in an Information Circular of the special characteristics and 
risks associated with trading the Shares. The Exchange represents that 
trading of the Shares through the Exchange will be subject to the 
Exchange's surveillance procedures for derivative products, including 
Managed Fund Shares, and such 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.
    The Exchange represents that it 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 has made the following 
representations:
    (1) The Shares will be subject to BATS Rule 14.11(i), which sets 
forth the initial and continued listing criteria applicable to Managed 
Fund Shares.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) The Exchange may obtain information regarding trading in the 
Shares and the underlying futures, including futures contracts held by 
the Subsidiary, via the Intermarket Surveillance Group (``ISG'') from 
other exchanges who are members or affiliates of the ISG or with which 
the Exchange has entered into a comprehensive surveillance sharing 
agreement. In addition, the Exchange is able to access, as needed, 
trade information for certain fixed income instruments reported to 
FINRA's Trade Reporting and Compliance Engine.
    (4) All of the futures contracts in the Disclosed Portfolio for the 
Fund (including those held by the Subsidiary) will trade on markets 
that are a member or affiliate of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.
    (5) 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) BATS 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 are disseminated; (d) the risks involved in trading the 
Shares during the Pre-Opening and After Hours Trading Sessions (as 
defined in the Exchange's rules) 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.
    (6) For initial and continued listing, the Fund must be in 
compliance with Rule 10A-3 under the Exchange Act.\27\
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    \27\ See 17 CFR 240.10A-3.
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    (7) Aside from the Fund's investments in the Subsidiary, neither 
the Fund nor the Subsidiary will invest in non-U.S. equity securities.
    (8) Neither the Fund nor the Subsidiary will invest in derivatives 
other than Commodity Futures.
    (9) The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment) deemed 
illiquid by the Adviser under the 1940 Act. The Fund will monitor its 
portfolio liquidity on an ongoing basis to determine whether, in light 
of current circumstances, an adequate level of liquidity is being 
maintained, and will consider taking appropriate steps in order to 
maintain adequate liquidity if, through a change in values, net assets, 
or other circumstances, more than 15% of the Fund's net assets are held 
in illiquid assets.
    (10) The Fund's investments will be consistent with the Fund's 
investment objective and will not be used to achieve leveraged or 
inverse leveraged returns.
    (11) A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange.
    The Exchange represents that all statements and representations 
made in the filing regarding (a) the description of the portfolio, (b) 
limitations on portfolio holdings or reference assets, or (c) the 
applicability of Exchange rules and surveillance procedures constitute 
continued listing requirements for listing the Shares on the Exchange. 
In addition, the issuer has represented to the Exchange that it will 
advise the Exchange of any failure by the Fund to comply with the 
continued listing requirements, and, pursuant to its obligations under 
Section 19(g)(1) of the Exchange Act, the Exchange will surveil for 
compliance with the continued listing requirements. If the Fund is not 
in compliance with the applicable listing requirements, the Exchange 
will commence delisting procedures under Exchange Rule 14.12.
    This approval order is based on all of the Exchange's 
representations, including those set forth above and in Amendment Nos. 
1, 2, and 3. The Commission notes that the Fund and the Shares must 
comply with the requirements of BATS Rule 14.11(i) to be initially and 
continuously listed and traded on the Exchange.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment Nos. 1, 2, and 3, is consistent 
with Section 6(b)(5) of the Exchange Act \28\ and Section 
11A(a)(1)(C)(iii) of the Exchange Act \29\ and the rules and 
regulations thereunder applicable to a national securities exchange.
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    \28\ 15 U.S.C. 78f(b)(5).
    \29\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\30\ that the proposed rule change (SR-BATS-2016-16), as 
modified by Amendment Nos. 1, 2, and 3, be, and it hereby is, approved.
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    \30\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-14928 Filed 6-23-16; 8:45 am]
 BILLING CODE 8011-01-P