Document ID: SEC-2016-0767-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats BZX Exchange, Inc.
Posted Date: 2016-05-03T04:00Z

[Federal Register Volume 81, Number 85 (Tuesday, May 3, 2016)]
[Notices]
[Pages 26600-26607]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-10272]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77723; File No. SR-BatsBZX-2016-09]

Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change to Rule 14.11, Managed Fund Shares, To 
List and Trade Shares of the Pointbreak Agriculture Commodity Strategy 
Fund of the Pointbreak ETF Trust

April 27, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 15, 2016, Bats BZX Exchange, Inc. (the ``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 
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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to list and trade shares of the 
Pointbreak Agriculture Commodity Strategy Fund (the ``Fund'') of the 
Pointbreak ETF Trust (the ``Trust'') under Rule 14.11(i) (``Managed 
Fund Shares''). The shares of the Fund are referred to herein as the 
``Shares''.
    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

[[Page 26601]]

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 list and trade the Shares under Rule 
14.11(i), which governs the listing and trading of Managed Fund Shares 
on the Exchange.\3\ All statements and representations made in this 
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 shall constitute continued 
listing requirements for listing the Shares on the Exchange. The Fund 
will be an actively managed fund that seeks to provide long term 
capital appreciation, primarily through exposure to the agriculture 
commodities futures markets.
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    \3\ The Commission approved Rule 14.11(i) in Securities Exchange 
Act Release No. 65225 (August 30, 2011), 76 FR 55148 (September 6, 
2011) (SR-BATS-2011-018).
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    The Shares will be offered by the Trust, which was organized as a 
Delaware statutory trust on June 18, 2015. 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.\4\ The Commodities 
[sic] Futures Trading Commission (``CFTC'') has recently adopted 
substantial amendments to CFTC Rule 4.5 relating to the permissible 
exemptions and conditions for reliance on exemptions from registration 
as a commodity pool operator. As a result of the instruments that will 
be held by the Fund, prior to listing on the Exchange, the Adviser will 
be registered as a Commodity Pool Operator (``CPO'') and will become a 
member of the National Futures Association (``NFA''). The Fund and a 
wholly-owned subsidiary of the Fund organized under the laws of the 
Cayman Islands (the ``Subsidiary'') will be subject to regulation by 
the CFTC and NFA and additional disclosure, reporting and recordkeeping 
rules imposed upon commodity pools. The Fund will generally obtain its 
exposure to commodity markets via investments in the Subsidiary. These 
investments are intended to provide the Fund with exposure to commodity 
markets in accordance with applicable rules and regulations. 
Henceforth, references to the investments of the Fund include 
investments of the Subsidiary to which the Fund gains indirect exposure 
through investment in the Subsidiary.
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    \4\ See Registration Statement on Form N-1A for the Trust, dated 
December 23, 2015 [sic] (File Nos. 333-205324 and 811-23068). 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 Trust under the Investment Company Act of 1940 (15 U.S.C. 80a-1) 
(``1940 Act'') (the ``Exemptive Order''). See Investment Company Act 
Release No. 32064 (April 4, 2016) (File No. 812-14577).
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Description of the Shares and the Fund
    Pointbreak Advisers LLC is the investment adviser (``Adviser'') to 
the Fund. Brown Brothers Harriman & Co. (``BBH'') is the administrator, 
custodian and transfer agent for the Trust. ALPS Distributors, Inc. 
(``Distributor'') serves as the distributor for the Trust. The Adviser 
is not affiliated with either BBH or the Distributor.
    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 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.\5\ 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 
and is not affiliated with a broker-dealer. The 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 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, it 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 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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    \5\ 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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Pointbreak Agriculture Commodity Strategy Fund
    According to the Registration Statement, the Fund is an actively 
managed exchange-traded fund that seeks to provide total return that 
exceeds that of a benchmark, the Solactive Agriculture Commodity Index 
(the ``Benchmark'') over time. The Fund is not an index tracking 
exchange-traded fund and is not required to invest in the specific 
components of the Benchmark. However, 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.
    The Benchmark is a rules-based index composed of futures contracts 
on 11 heavily traded agriculture commodities including cocoa, coffee, 
corn, cotton, feeder cattle, hard red winter wheat, lean hogs, live 
cattle, soybeans, sugar and soft red winter wheat. Commodities are 
investable assets with tangible, physical properties. Futures contracts 
on commodities (``Agriculture Commodities Futures'') generally are 
agreements between two parties where one party agrees to buy, and the 
counterparty to sell, a set amount of a physical commodity (or, in some 
contracts, a cash equivalent) at a pre-determined future date and 
price. The value of Agriculture Commodities Futures is based upon the 
price

[[Page 26602]]

movements of the underlying commodities. If the price of a long-term 
futures contract is greater than the near-term futures price, the 
market is considered to be in ``contango.'' If the price of a long-term 
futures contract is less than the near-term futures price, the market 
is considered to be in ``backwardation.'' The Benchmark will seek to 
increase the weightings of those commodities whose futures markets 
display the most backwardation, or the least contango, among the 11 
commodities. The Benchmark will further 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 does not 
attempt to always own those contracts that are closest to expiration. 
Although the Fund, through the Subsidiary (as further described below), 
will generally invest in Agriculture Commodities Futures that are 
components of the Benchmark, the Fund and the Subsidiary will be 
actively managed and will not be required to invest in all or limit 
their investments solely to such Agriculture Commodities Futures. In 
this regard, the Fund and the Subsidiary may hold the same Agriculture 
Commodities Futures in approximately, but not exactly, the same weights 
as the Benchmark. The Fund and the Subsidiary will generally hold such 
Agriculture Commodities Futures with the same maturity as the 
Benchmark, but may select a different month of maturity in seeking to 
achieve better performance than the Benchmark.
Principal Holdings
    According to the Registration Statement, under normal 
circumstances,\6\ the Fund will invest in a combination of Agriculture 
Commodities Futures, as defined below, through the Subsidiary, and Cash 
Instruments, as defined below, both directly through the Fund and 
through the Subsidiary. Agriculture Commodities Futures include only 
the following instruments: Exchange-traded futures on commodities; and 
exchange-traded futures contracts on commodity indices. These 
instruments provide exposure to the investment returns of the 
commodities markets, without investing directly in physical 
commodities.
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    \6\ 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.
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    Under normal circumstances, in addition to investing in Agriculture 
Commodities Futures through the Subsidiary, the Fund will invest its 
remaining assets in Cash Instruments, both directly and through the 
Subsidiary, including cash, cash-like instruments or high-quality 
collateral securities that provide liquidity, serve as margin, or 
collateralize the Subsidiary's investments in Agriculture Commodities 
Futures. Such Cash Instruments include only the following instruments: 
(i) Short-term obligations issued by the U.S. Government; (ii) cash and 
cash-like instruments; \7\ (iii) money market mutual funds, including 
affiliated money market mutual funds; and (iv) repurchase 
agreements.\8\ The Fund will not invest in Cash Instruments that are 
below investment grade.
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    \7\ 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.
    \8\ 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. 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 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 Fund generally will not invest directly in Agriculture 
Commodities Futures. The Fund expects to gain exposure to Agriculture 
Commodities Futures by investing a portion of its assets in the 
Subsidiary, which will invest in Agriculture Commodities Futures and 
Cash Instruments.\9\ The Subsidiary is also advised by the Adviser. 
Unlike the Fund, the Subsidiary is not an investment company registered 
under the 1940 Act. 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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    \9\ 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, 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 (``Board'') 
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 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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    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. Doing so could help the Fund 
avoid losses, but may mean lost investment opportunities. During these 
periods, the Fund may not achieve its investment objective.
    The Fund intends to qualify each year as a regulated investment 
company (a ``RIC'') under Subchapter M of the Internal Revenue Code of 
1986, as amended.\10\ The Fund will invest its assets (including via 
the Subsidiary), and otherwise conduct its operations, in a manner that 
is intended to satisfy the qualifying income, diversification and 
distribution requirements necessary to establish and maintain RIC 
qualification under Subchapter M.
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    \10\ 26 U.S.C. 851.
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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 \11\ under the 1940 Act.\12\ The

[[Page 26603]]

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. 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 Agriculture 
Commodities Futures.
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    \11\ 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).
    \12\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also, Investment Company 
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 
1970) (Statement Regarding ``Restricted Securities''); Investment 
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio 
security is illiquid if it cannot be disposed of in the ordinary 
course of business within seven days at approximately the value 
ascribed to it by the fund. See Investment Company Act Release No. 
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting 
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act 
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) 
(adopting Rule 144A under the Securities Act of 1933).
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    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 (e.g. two times or three times the Fund's 
benchmark).
Net Asset Value
    According to the Registration Statement, the net asset value 
(``NAV'') of the Shares of the Fund will be calculated by dividing the 
value of the net assets of the Fund (i.e., the value of its total 
assets less total liabilities) by the total number of Shares 
outstanding. Expenses and fees, including the management and 
administration fees, are accrued daily and taken into account for 
purposes of determining NAV. The NAV of the Fund is generally 
determined at 4:00 p.m. Eastern Time each business day when the 
Exchange is open for trading. If the Exchange or market on which the 
Fund's investments are primarily traded closes early, the NAV may be 
calculated prior to its normal calculation time. Creation/redemption 
transaction order time cutoffs (as further described below) would also 
be accelerated.
    Securities and other assets held by both the Fund and the 
Subsidiary are generally valued at their market price using market 
quotations or information provided by a pricing service. Agriculture 
Commodities Futures are generally valued at their settlement price as 
determined by the relevant exchange. Repurchase agreements will 
generally be valued at bid prices received from independent pricing 
services as of the announced closing time for trading in such 
instruments. Cash Instruments (other than money market mutual funds) 
also may be valued on the basis of information furnished by an 
independent pricing service that uses a valuation matrix which 
incorporates both dealer-supplied valuations and electronic data 
processing techniques. Shares of money market mutual funds will be 
valued at their current Net Asset Value per share.
    For more information regarding the valuation of Fund investments in 
calculating the Fund's NAV, see the Registration Statement.
The Shares
    The Fund will issue and redeem Shares on a continuous basis at the 
NAV per Share only in large blocks of a specified number of Shares or 
multiples thereof (``Creation Units'') in transactions with authorized 
participants who have entered into agreements with the Distributor. The 
Adviser currently anticipates that a Creation Unit will consist of 
50,000 Shares, though this number may change from time to time, 
including prior to listing of the Shares. The exact number of Shares 
that will constitute a Creation Unit will be disclosed in the 
Registration Statement. Once created, Shares of the Fund may trade on 
the secondary market in amounts less than a Creation Unit.
    Although the Adviser anticipates that purchases and redemptions for 
Creation Units will generally be executed on an all-cash basis, the 
consideration for purchase of Creation Units of the Fund may consist of 
an in-kind deposit of a designated portfolio of assets (including any 
portion of such assets for which cash may be substituted) (i.e., the 
``Deposit Assets''), and the ``Cash Component'' computed as described 
below. Together, the Deposit Assets and the Cash Component constitute 
the ``Fund Deposit,'' which represents the minimum initial and 
subsequent investment amount for a Creation Unit of the Fund. The 
specific terms surrounding the creation and redemption of shares are at 
the discretion of the Adviser.
    The Deposit Assets and Fund Securities (as defined below), as the 
case may be, in connection with a purchase or redemption of a Creation 
Unit, generally will correspond pro rata, to the extent practicable, to 
the assets held by the Fund.
    The Cash Component will be an amount equal to the difference 
between the NAV of the Shares (per Creation Unit) and the ``Deposit 
Amount,'' which will be an amount equal to the market value of the 
Deposit Assets, and serve to compensate for any differences between the 
NAV per Creation Unit and the Deposit Amount. The Adviser will make 
available through the National Securities Clearing Corporation 
(``NSCC'') on each business day, prior to the opening of business on 
the Exchange, the list of names and the required number or par value of 
each Deposit Asset and the amount of the Cash Component to be included 
in the current Fund Deposit (based on information as of the end of the 
previous business day) for the Fund.
    The identity and number or par value of the Deposit Assets may 
change pursuant to changes in the composition of the Fund's portfolio 
as rebalancing adjustments and corporate action events occur from time 
to time. The composition of the Deposit Assets may also change in 
response to adjustments to the weighting or composition of the holdings 
of the Fund.
    The Fund reserves the right to permit or require the substitution 
of a ``cash in lieu'' amount to be added to the Cash Component to 
replace any Deposit Asset that may not be available in sufficient 
quantity for delivery or that may not be eligible for transfer through 
the Depository Trust Company (``DTC'') or the clearing process through 
the NSCC.\13\
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    \13\ The Adviser represents that, to the extent the Trust 
permits or requires a ``cash in lieu'' amount, such transactions 
will be effected in the same or equitable manner for all authorized 
participants.
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    Except as noted below, all creation orders must be placed for one 
or more Creation Units and must be received by the Distributor at a 
time specified by the Adviser. The Fund currently intends that such 
orders must be received in proper form no later than 10:30 a.m. Eastern 
Time on the date such order is placed in order for creation of Creation 
Units to be effected based on the NAV of Shares of the Fund as next 
determined on such date after receipt of the order in proper form. The 
``Settlement Date'' is generally the third business day after the 
transmittal date. On days when the Exchange or the futures markets 
close earlier than normal, the Fund may require orders to create or to 
redeem Creation Units to be placed earlier in the day.
    A standard creation transaction fee may be imposed to offset the 
transfer and other transaction costs associated with the issuance of 
Creation Units.
    Shares of the Fund may be redeemed only in Creation Units at their 
NAV next determined after receipt of a redemption request in proper 
form by the Distributor and only on a business day. Adviser will make 
available through the

[[Page 26604]]

NSCC, prior to the opening of business on the Exchange on each business 
day, the designated portfolio of assets (including any portion of such 
assets for which cash may be substituted) that will be applicable 
(subject to possible amendment or correction) to redemption requests 
received in proper form on that day (``Fund Securities''). The 
redemption proceeds for a Creation Unit generally will consist of a 
specified amount of cash less a redemption transaction fee. The Fund 
generally will redeem Creation Units entirely for cash.
    A standard redemption transaction fee, in an amount disclosed in 
the current prospectus for the Fund, may be imposed to offset transfer 
and other transaction costs that may be incurred by the Fund.
    Redemption requests for Creation Units of the Fund must be 
submitted to the Distributor by or through an authorized participant by 
a time specified by the Adviser. The Fund currently intends that such 
requests must be received no later than 10:30 a.m. Eastern Time on any 
business day, in order to receive that day's NAV. The authorized 
participant must transmit the request for redemption in the form 
required by the Fund to the Distributor in accordance with procedures 
set forth in the authorized participant agreement.
    Additional information regarding the Shares and the Fund, including 
investment strategies, risks, creation and redemption procedures, fees 
and expenses, portfolio holdings disclosure policies, distributions, 
taxes and reports to be distributed to beneficial owners of the Shares 
can be found in the Registration Statement or on the Web site for the 
Fund (www.pointbreakETFs.com), as applicable.
Availability of Information
    The Fund's Web site, which will be publicly available prior to the 
public offering of Shares, will include a form of the prospectus for 
the Fund that may be downloaded. The Web site will include additional 
quantitative information updated on a daily basis, including, for the 
Fund: (1) The prior business day's reported NAV, the closing market 
price or the midpoint of the bid/ask spread at the time of calculation 
of such NAV (the ``Bid/Ask Price''),\14\ daily trading volume, and a 
calculation of the premium and discount of the closing market price or 
Bid/Ask Price against the NAV; and (2) data in chart format displaying 
the frequency distribution of discounts and premiums of the daily 
closing market price or Bid/Ask Price against the NAV, within 
appropriate ranges, for each of the four previous calendar quarters. 
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. 
On each business day, before commencement of trading in Shares during 
Regular Trading Hours \15\ on the Exchange, the Fund will disclose on 
its Web site the identities and quantities of the portfolio Agriculture 
Commodities Futures and other assets (the ``Disclosed Portfolio'') held 
by the Fund and the Subsidiary that will form the basis for the Fund's 
calculation of NAV at the end of the business day.\16\ 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.
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    \14\ The Bid/Ask Price of the Fund will be determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and its service 
providers.
    \15\ Regular Trading Hours are 9:30 a.m. to 4:00 p.m. Eastern 
Time.
    \16\ Under accounting procedures to be followed by the Fund, 
trades made on the prior business day (``T'') will be booked and 
reflected in NAV on the current business day (``T+1''). Accordingly, 
the Fund will be able to disclose at the beginning of the business 
day the portfolio that will form the basis for the NAV calculation 
at the end of the business day.
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    In addition, for the Fund, an estimated value, defined in Rule 
14.11(i)(3)(C) as the ``Intraday Indicative Value,'' that reflects an 
estimated intraday value of the Fund's portfolio, will be disseminated. 
Moreover, the Intraday Indicative Value will be based upon the current 
value for the components of the Disclosed Portfolio and 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.\17\ 
In addition, the 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.
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    \17\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Intraday Indicative Values published via the Consolidated Tape 
Association (``CTA'') or other data feeds.
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    The dissemination of the Intraday Indicative Value, together with 
the Disclosed Portfolio, will allow investors to determine the value of 
the underlying portfolio of the Fund on a daily basis and provide an 
estimate of that value throughout the trading day.
    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 Agriculture Commodities 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.
    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. 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. Quotation and last sale information for the Shares 
will be available on the facilities of the CTA.
Initial and Continued Listing
    The Shares will be subject to Rule 14.11(i), which sets forth the 
initial and continued listing criteria applicable to Managed Fund 
Shares. The Exchange represents that, for initial and/or continued 
listing, the Fund must be in compliance with Rule 10A-3 under the 
Act.\18\ A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange. 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.
---------------------------------------------------------------------------

    \18\ See 17 CFR 240.10A-3.
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Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. The Exchange will halt

[[Page 26605]]

trading in the Shares under the conditions specified in Rule 11.18. 
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 Agriculture Commodities 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. Trading in the Shares also will be 
subject to Rule 14.11(i)(4)(B)(iv), which sets forth circumstances 
under which Shares of the Fund may be halted.
Trading Rules
    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 will 
allow trading in the Shares from 8:00 a.m. until 5:00 p.m. Eastern 
Time. The Exchange has appropriate rules to facilitate transactions in 
the Shares during all trading sessions. As provided in Rule 
14.11(i)(2)(C), the minimum price variation for quoting and entry of 
orders in Managed Fund Shares traded on the Exchange is $0.01.
Surveillance
    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. Trading of the Shares 
through the Exchange will be subject to the Exchange's surveillance 
procedures for derivative products, including Managed Fund Shares. 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. 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.\19\ 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 (``TRACE''). The Exchange prohibits the distribution 
of material non-public information by its employees.
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    \19\ 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. The Exchange 
also notes that 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 of ISG or affiliate or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement.
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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 redemptions of Shares in Creation Units (and that Shares are not 
individually redeemable); (2) 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 Disclosed Portfolio are disseminated; 
(4) the risks involved in trading the Shares during the Pre-Opening 
\20\ and After Hours Trading Sessions \21\ when an updated Intraday 
Indicative 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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    \20\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m. 
Eastern Time.
    \21\ 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 
Web site. In addition, the Information Circular will reference that the 
Trust is subject to various fees and expenses described in the 
Registration Statement.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \22\ in general and Section 6(b)(5) of the Act \23\ 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.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f.
    \23\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Rule 14.11(i). 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. If the investment adviser to the 
investment company issuing Managed Fund Shares is affiliated with a 
broker-dealer, such investment adviser to the investment company shall 
erect 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. The Adviser is not 
a registered broker-dealer and is not affiliated with a broker-dealer. 
The Exchange may obtain information regarding trading in the Shares and 
the underlying futures, including those held by the Subsidiary, via the 
ISG from other exchanges who are members or affiliates of the ISG or 
with which the Exchange has entered into a comprehensive surveillance 
sharing

[[Page 26606]]

agreement.\24\ In addition, the Exchange is able to access, as needed, 
trade information for certain fixed income instruments reported to 
FINRA's TRACE.
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    \24\ See note 21, supra.
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    Under normal circumstances, the Fund will invest in a combination 
of Agriculture Commodities Futures through the Subsidiary and Cash 
Instruments both directly through the Fund and through the Subsidiary. 
Agriculture Commodities Futures provide exposure to the investment 
returns of the commodities markets, without investing directly in 
physical commodities. The Fund generally will not invest directly in 
Agriculture Commodities Futures. The Fund expects to gain exposure to 
these investments by investing a portion of its assets in the 
Subsidiary. Cash Instruments include only the following instruments: 
(i) Short-term obligations issued by the U.S. Government; (ii) cash and 
cash-like instruments; (iii) money market mutual funds, including 
affiliated money market mutual funds; and (iv) repurchase agreements. 
The Fund will not invest in Cash Instruments that are below investment 
grade.
    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. Doing so could help the Fund 
avoid losses, but may mean lost investment opportunities. During these 
periods, the Fund may not achieve its investment objective.
    Additionally, the Fund may hold up to an aggregate amount of 15% of 
its net assets in illiquid assets (calculated at the time of 
investment). 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.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that 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. In addition, a large amount of information is 
publicly available regarding the Fund and the Shares, thereby promoting 
market transparency. Moreover, the Intraday Indicative Value will be 
disseminated by one or more major market data vendors at least every 15 
seconds during Regular Trading Hours. On each business day, before 
commencement of trading in Shares during Regular Trading Hours, the 
Fund will disclose on its Web site the Disclosed Portfolio that will 
form the basis for the Fund's calculation of NAV at the end of the 
business day. Pricing information will be available on the Fund's Web 
site including: (1) The prior business day's reported NAV, the closing 
market price, or the Bid/Ask Price, daily trading volume, and a 
calculation of the premium and discount of the closing market price or 
Bid/Ask Price against the NAV; and (2) data in chart format displaying 
the frequency distribution of discounts and premiums of the daily 
closing market price or Bid/Ask Price against the NAV, within 
appropriate ranges, for each of the four previous calendar quarters. 
Additionally, information regarding market price and trading of the 
Shares will be continually available on a real-time basis throughout 
the day on brokers' computer screens and other electronic services, and 
quotation and last sale information for the Shares will be available on 
the facilities of the CTA. The Web site for the Fund will include a 
form of the prospectus for the Fund and additional data relating to NAV 
and other applicable quantitative information. Trading in Shares of the 
Fund will be halted under the conditions specified in Rule 11.18. 
Trading may also be halted because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable. Finally, trading in the Shares will be subject to Rule 
14.11(i)(4)(B)(iv), which sets forth circumstances under which Shares 
of the Fund may be halted. In addition, as noted above, investors will 
have ready access to information regarding the Fund's holdings, the 
Intraday Indicative Value, the Disclosed Portfolio, and quotation and 
last sale information for the Shares.
    Intraday price quotations on U.S. government securities and 
repurchase agreements of the type held by the Fund 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 
Agriculture Commodity [sic] Futures, such intraday pricing information 
is available directly from the applicable listing exchange.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement as well as trade information for certain 
fixed income instruments as reported to FINRA's TRACE. In addition, as 
noted above, investors will have ready access to information regarding 
the Fund's holdings, the Intraday Indicative Value, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.
    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 
additional actively-managed exchange-traded products 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. 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 of such 
date (i) as the Commission may designate if it finds such longer period 
to be appropriate and publishes its reasons for so finding

[[Page 26607]]

or (ii) as to which the Exchange 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:

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-2016-09 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-2016-09. 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 such filing will also 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-2016-09 and should 
be submitted on or before May 24, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-10272 Filed 5-2-16; 8:45 am]
 BILLING CODE 8011-01-P