Document ID: SEC-2016-2148-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats BZX Exchange, Inc.
Posted Date: 2016-12-07T05:00Z

[Federal Register Volume 81, Number 235 (Wednesday, December 7, 2016)]
[Notices]
[Pages 88284-88286]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29294]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79450; File No. SR-BatsBZX-2016-80]

Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing of Proposed Rule Changes to BZX Rule 14.11, Other Securities, 
and BZX Rule 14.12, Failure To Meet Listing Standards

December 1, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 18, 2016, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the listing rules for 
exchange-traded products in Bats Rule 14.11 (``ETPs'') to add 
additional continued listing standards as well as a related amendment 
to Rule 14.12, entitled ``Failure to Meet Listing Standards.'' The 
Exchange is also proposing to make certain cleanup changes throughout 
Rule 14.11 in order to make the rule text more clear.
    The text of the proposed rule change is available at the Exchange's 
Web site at www.batstrading.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the 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
    The Exchange proposes to amend the listing rules for ETPs in Bats 
Rule 14.11, entitled ``Other Securities,'' to add additional continued 
listing standards as well as a related amendment to Rule 14.12, 
entitled ``Failure to Meet Listing Standards.'' The Exchange is also 
proposing to make certain cleanup changes throughout Rule 14.11 in 
order to make the rule text more clear.
    The proposed rule changes are being made at the request of and as 
part of discussions with the Commission. Based on concerns about 
certain of the ETP listing rules applying only on an initial basis, SEC 
staff has requested that the Exchange adopt certain additional 
continued listing standards for ETPs. As a result, the proposed 
amendment reflects guidance provided by SEC staff to clarify that most 
initial listing standards, as well as certain representations 
(``Continued Listing Representations'') included in Exchange rule 
filings pursuant to Section 19(b) of the Act \3\ to list an ETP on the 
Exchange (``Rule Filing''), are also considered continued listing 
standards. Continued Listing Representations will also be required to 
be maintained on a continuous basis and include any of the 
representations regarding the index composition, the description of the 
portfolio or reference assets, limitations on portfolio holdings or 
reference assets,

[[Page 88285]]

dissemination and availability of index and intraday indicative values 
(as applicable), and the applicability of Exchange rules and 
surveillance procedures made in any filing to list a series of ETPs.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

    The proposed rule changes require that ETPs listed by the Exchange 
without a Rule Filing must maintain the initial index or reference 
asset criteria, among other requirements, on both an initial listing 
and continual basis. For example, in the case of a domestic equity 
index, these criteria generally include: (a) Stocks with 90% of the 
weight of the index must have a minimum market value of at least $75 
million; (b) stocks with 70% of the weight of the index must have a 
minimum monthly trading volume of at least 250,000 shares; (c) the most 
heavily weighted component cannot exceed 30% of the weight of the 
index, and the five most heavily weighted stocks cannot exceed 65%; (d) 
there must be at least 13 stocks in the index; and (e) all securities 
in the index must be listed in the U.S. Such requirements are currently 
only applicable on an initial listing basis, but the proposal would 
require that such criteria be met on a continual basis as well. The 
Exchange is also proposing similar changes as it relates to the 
comparable criteria for international indexes, fixed-income indexes, 
indexes with a combination of components, and other underlying 
reference assets. Where an ETP fails to meet the proposed applicable 
continued listing requirements, the Exchange would, generally, initiate 
delisting proceedings pursuant to Rule 14.12.
    If an ETP is listed on the Exchange pursuant to a Rule Filing, this 
proposed rule change would require that the issuer of the security 
comply on an ongoing basis with any Continued Listing Representations, 
which include any of the representations in the rule filing regarding 
the index composition, the description of the portfolio or reference 
assets, limitations on portfolio holdings or reference assets, 
dissemination and availability of index and intraday indicative values 
(as applicable), and the applicability of Exchange rules and 
surveillance procedures made in any filing to list a series of ETPs. As 
proposed, where an ETP fails to meet the Continued Listing 
Representations, the Exchange would initiate delisting proceedings 
pursuant to Rule 14.12.
    The Exchange is also proposing to modify its rules such that 
issuers of securities listed under Rule 14.11 would be required to 
provide the Exchange with prompt notification after an Executive 
Officer \4\ of the [sic] becomes aware of any noncompliance. In 
addition, while listed ETPs are currently subject to the delisting 
process in Rule 14.12, the rules will be clarified to make this 
explicit. As proposed, Rule 14.12 will also be clarified to make 
explicit that an ETP that it is deficient under one or more listing 
standards may submit a plan to regain compliance to the Listing 
Qualifications Department. In this regard, the Exchange proposes to 
allow issuers of ETPs 45 calendar days to submit such a plan, which is 
consistent with deficiencies from most other rules that allow issuers 
to submit a plan to regain compliance.\5\ Exchange staff will review 
the plan and may grant a limited period of time for the ETP to regain 
compliance as permitted under Rule 14.12. If Exchange staff does not 
accept the plan, a Staff Delisting Determination will be issued, which 
could be appealed to a Hearings Panel pursuant to Rule 14.12(h).
---------------------------------------------------------------------------

    \4\ As defined in Rule 14.10(c)(1)(A), the term ``Executive 
Officer'' means those officers covered in Rule 16a-1(f) under the 
Act.
    \5\ The Exchange notes that the following deficiencies are 
allowed 45 calendar days to submit a plan to regain compliance: 
Deficiencies from the standards of Rules 14.10(f)(3) (Quorum), 
14.10(h) (Review of Related Party Transactions), 14.10(i) 
(Shareholder Approval), 14.6(c)(3) (Auditor Registration), 14.7 
(Direct Registration Program), 14.10(d) (Code of Conduct), 
14.10(e)(1)(D)(v) (Quorum of Limited Partnerships), 
14.10(e)(1)(D)(vii) (Related Party Transactions of Limited 
Partnerships), or 14.10(j) (Voting Rights).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \6\ in general and Section 6(b)(5) of the Act \7\ in 
particular in that it is designed 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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposed rule changes accomplish these objectives by enhancing 
the current continued listing standards by clarifying that most initial 
listing standards, as well as Continued Listing Representations, are 
considered continued listing standards. Additionally, the Exchange is 
proposing to require issuers to provide the Exchange with prompt 
notification after an Executive Officer of the [sic] becomes aware of 
any noncompliance and to clarify that deficiencies will be subject to 
potential trade halts and delisting proceedings pursuant to Rule 14.12. 
The Exchange believes that these amendments will enhance the Exchange's 
listing rules, thereby serving to improve the national market system 
and protect investors and the public interest.
    The Exchange does not believe that the cleanup changes have any 
impact on the reasonable and equitable and not unfairly discriminatory 
nature of the proposal.
    For these 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 not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. The Exchange 
believes that the proposed rule change to amend Rule 14.11 related to 
the listing of ETPs, the notification requirement in Rule 14.11(a), and 
the proposed related amendments to Rule 14.12 will have no impact on 
competition. Furthermore, since Commission staff has provided the same 
guidance regarding ETP continued listing requirements to all listing 
exchanges, the Exchange believes that there will be no effect on 
competition.

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

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

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

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

IV. Solicitation of Comments

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

[[Page 88286]]

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please 
include File Number SR-BatsBZX-2016-80 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BatsBZX-2016-80. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BatsBZX-2016-80 and should 
be submitted on or before December 28, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
---------------------------------------------------------------------------

    \8\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-29294 Filed 12-6-16; 8:45 am]
 BILLING CODE 8011-01-P