Document ID: SEC-2017-1647-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats BZX Exchange, Inc.
Posted Date: 2017-10-05T04:00Z

[Federal Register Volume 82, Number 192 (Thursday, October 5, 2017)]
[Notices]
[Pages 46583-46586]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-21412]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81777; File No. SR-BatsBZX-2017-63]

Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Extend 
the Implementation Date for Certain Changes to Exchange Rules 14.11 and 
14.12

September 29, 2017.
    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 September 28, 2017, Bats BZX Exchange, Inc. (``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).

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[[Page 46584]]

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

    The Exchange filed a proposal to extend the date on which certain 
changes to Exchange Rules 14.11 and 14.12 would be implemented.
    The text of the proposed rule change is available at the Exchange's 
Web site at www.bats.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
    On November 18, 2016 the Exchange filed a proposed rule change, as 
subsequently amended by Amendments No. 1 and 2 thereto (as amended, the 
``Proposed Rule Change''), to adopt certain changes to Exchange Rules 
14.11 and 14.12 to add additional continued listing standards for 
exchange-traded products (``ETP'') as well as clarify the procedures 
that the Exchange will undertake when an ETP is noncompliant with 
applicable rules. Given the scope of the amendments specified in the 
Proposed Rule Change, the Exchange proposed that such amendments not be 
implemented until October 1, 2017. On March 7, 2017, the Commission 
granted approval of the Proposed Rule Change, including the October 1, 
2017 implementation date. On September 20, 2017, the Exchange submitted 
an interpretive filing (the ``Interpretive Filing'') \5\ and on 
September 21, 2017 published a document that answers a series of 
frequently asked questions (the ``FAQs'').\6\ The Interpretive Filing 
and FAQs are intended to provide guidance as it relates to ETP issuers 
complying with the Proposed Rule Change upon implementation. The 
Exchange continues to engage with issuers about the Proposed Rule 
Change and will update the FAQs as needed based on those conversations. 
The Exchange now proposes to extend the implementation date of the 
amendments specified in the Proposed Rule Change to January 1, 2018.\7\
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    \5\ See SR-BatsBZX-2017-61, available at: http://cdn.batstrading.com/resources/regulation/rule_filings/approved/2017/SR-BatsBZX-2017-61.pdf.
    \6\ The FAQs are available at: http://cdn.batstrading.com/resources/listings/FAQs%20-%20New%20Cont%20List%20Standards%20FINAL.pdf.
    \7\ See Securities Exchange Act Release No. 80169 (March 7, 
2017), 82 FR 13536 (March 13, 2017) (SR-BatsBZX-2016-80).
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    Since the Proposed Rule Change was approved, the Exchange has 
engaged in extensive conversations with issuers of listed ETPs, 
industry advocacy groups and index providers to discuss the new rule 
requirements and offer guidance on rule interpretation and application, 
and, as noted above, the Exchange recently submitted the Interpretive 
Filing and distributed the FAQs. As part of these conversations, the 
Exchange has learned that many issuers have already engaged in building 
and testing the necessary compliance systems, but that they have been 
unable to finalize implementation without this additional guidance. As 
such, ETP issuers have expressed concern about their ability to have in 
place well-tested systems and procedures to ensure compliance by the 
current October 1, 2017 implementation date. ETP issuers, and industry 
advocacy groups on their behalf, have explained that issuers will 
require time to design and test new compliance systems as well as 
engage in discussions with third-party providers to source and track 
new data elements required for rule compliance.\8\ An additional three 
months prior to implementation will allow ETP issuers to finish 
building, more thoroughly test, and enhance the systems and procedures 
that they've already developed in advance of the current October 1, 
2017 implementation date. Further, the additional time prior to 
implementation will further facilitate the ongoing discussion, which 
will include progress updates, between the Exchange, ETP issuers, and 
index providers.
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    \8\ See, for example, Letter, dated July 11, 2017, from Dorothy 
Donohue, Acting General Counsel, Investment Company Institute to 
Brent J. Fields, Secretary, Securities and Exchange Commission, 
available at https://www.sec.gov/comments/sr-nasdaq-2016-135/nasdaq2016135-1846208-155175.pdf.
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    The Exchange believes it is appropriate to extend the 
implementation date of the Proposed Rule Change to January 1, 2018 to 
provide ETP issuers with the time needed to finish developing and test 
their compliance procedures. In support of its proposal, the Exchange 
notes that the Proposed Rule Change imposes significant new compliance 
requirements on issuers that they have not been subject to previously. 
To meet these new compliance requirements, issuers must develop 
internal systems as well as coordinate with third-party service 
providers, such as index providers, to develop procedures by which they 
can obtain essential data, which includes the form, timing, and means 
by which such data is conveyed. Listed issuers have informed the 
Exchange that they are unable to complete and sufficiently test this 
extensive project by the pending October 1, 2017 implementation date. 
The Exchange believes that it is critical for ETP issuers to have the 
appropriate procedures and systems in place to monitor and evidence ETP 
compliance with the new continued listing rules before such rules are 
implemented in order to ensure meaningful compliance upon initial 
implementation, which could help avoid trading disruption in the ETPs. 
Therefore, the Exchange proposes to extend the implementation date for 
the Proposed Rule Change until January 1, 2018.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \9\ in general and Section 6(b)(5) of the Act \10\ 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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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendment is consistent 
with the protection of investors because it will provide additional 
time for issuers to finish building, more thoroughly test, and enhance 
the systems and procedures prior to the initial implementation of the 
Proposed Rule Change which will help ensure compliance upon initial 
implementation which will further promote the policy goals underlying 
the Proposed Rule Change and would help avoid trading disruption in the 
ETPs. Since the Proposed Rule Change was approved, the Exchange has 
engaged in extensive

[[Page 46585]]

conversations with issuers of listed ETPs, industry advocacy groups and 
index providers to discuss the new rule requirements and offer guidance 
on rule interpretation and application, and, as noted above, the 
Exchange recently submitted the Interpretive Filing and distributed the 
FAQs. As a result of these conversations and the recent distribution of 
interpretive guidance, ETP issuers have expressed concern about their 
ability to have in place well-tested systems and procedures to ensure 
compliance by the current October 1, 2017 implementation date. ETP 
issuers, and industry advocacy groups on their behalf, have explained 
that issuers will require time to design and test new compliance 
systems as well as engage in discussions with third-party providers to 
source and track new data elements required for rule compliance.\11\ An 
additional three months prior to implementation will allow ETP issuers 
to more thoroughly test and enhance the systems and procedures that 
they've already developed in advance of the current October 1, 2017 
implementation date. Further, the additional time prior to 
implementation will further facilitate the ongoing dialogue between the 
Exchange, ETP issuers, and index providers.
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    \11\ See, for example, Letter, dated July 11, 2017, from Dorothy 
Donohue, Acting General Counsel, Investment Company Institute to 
Brent J. Fields, Secretary, Securities and Exchange Commission, 
available at https://www.sec.gov/comments/sr-nasdaq-2016-135/nasdaq2016135-1846208-155175.pdf.
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    Providing listed issuers with additional time before the 
implementation of the Proposed Rule Change furthers the protection of 
investors and the public interest because it will enhance investor 
confidence that listed issuers are complying with Exchange rules by 
providing sufficient time to finish building, more thoroughly test, and 
enhance the systems and procedures prior to the initial implementation, 
which could help avoid trading disruption in the ETPs.
    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 will facilitate ETP issuers' ability to monitor 
and evidence compliance with approved continued listing rules by 
providing issuers with additional time to finish developing and testing 
their internal systems and procedures prior to the implementation date.

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

    The Exchange received a copy of a letter from the Investment 
Company Institute, on behalf of ETP issuers, to the Securities [sic] 
Exchange Commission.\12\ As described in Item 3 [sic], above, the 
Investment Company Institute detailed challenges that ETP issuers are 
facing in developing compliance systems to address the amendments 
contained in the Proposed Rule Change and have requested that the 
implementation date for such amendments be extended.
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    \12\ See Footnote 5, infra [sic].
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III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\13\
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    \13\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \14\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \15\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposal may become operative immediately upon filing. The 
Commission notes that waiver of the operative delay will allow the 
Exchange to immediately extend the implementation date of the Proposed 
Rule Change, and avoid the potential confusion and disruption that 
could result if the extension did not become operative until after 
October 1, 2017. The Commission believes that waiver of the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission hereby waives the 30-day 
operative delay and designates the proposal operative upon filing.\16\
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    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 17 CFR 240.19b-4(f)(6)(iii).
    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BatsBZX-2017-63 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BatsBZX-2017-63. 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

[[Page 46586]]

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-2017-63 and should 
be submitted on or before October 26, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-21412 Filed 10-4-17; 8:45 am]
 BILLING CODE 8011-01-P