Document ID: SEC-2016-1534-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats BZX Exchange, Inc.
Posted Date: 2016-08-30T04:00Z

[Federal Register Volume 81, Number 168 (Tuesday, August 30, 2016)]
[Notices]
[Pages 59700-59709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-20735]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78666; File No. SR-BatsBZX-2016-48]

Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change to Rule 14.11(c)(4) To List and Trade 
Shares of the iShares iBonds Dec 2023 Term Muni Bond ETF and iShares 
iBonds Dec 2024 Term Muni Bond ETF of the iShares U.S. ETF Trust

August 24, 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 August 9, 2016, 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 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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[[Page 59701]]

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 under BZX Rule 
14.11(c)(4) shares of the iShares iBonds Dec 2023 Term Muni Bond ETF 
and iShares iBonds Dec 2024 Term Muni Bond ETF (each a ``Fund'' or, 
collectively, the ``Funds'') of the iShares U.S. ETF Trust (the 
``Trust''). The shares of the Funds 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 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 of the following 
series of the Trust under BZX Rule 14.11(c)(4),\3\ which governs the 
listing and trading of index fund shares based on fixed income 
securities indexes.\4\ The Shares will be offered by the Trust, which 
was established as a Delaware statutory trust on March 15, 2001. The 
Trust is registered with the Commission as an open-end investment 
company and has filed a registration statement on behalf of the Funds 
on Form N-1A (``Registration Statement'') with the Commission.\5\ 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.
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    \3\ The Commission approved BZX Rule 14.11(c) in Securities 
Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148 
(September 6, 2011) (SR-BATS-2011-018).
    \4\ The Commission previously has approved a proposed rule 
change relating to listing and trading of funds based on municipal 
bond indexes. See Securities Exchange Act Release Nos. 78329 (July 
14, 2016), 81 FR 47217 (July 20, 2016) (SR-BatsBZX-2016-01) (order 
approving proposed rule change relating to the listing and trading 
of VanEck Vectors AMT-Free 6-8 Year Municipal Index ETF, VanEck 
Vectors AMT-Free 8-12 Year Municipal Index ETF, and VanEck Vectors 
AMT-Free 12-17 Year Municipal Index ETF); 67985 (October 4, 2012), 
77 FR 61804 (October 11, 2012) (SR-NYSEArca-2012-92) (order 
approving proposed rule change relating to the listing and trading 
of iShares 2018 S&P AMT-Free Municipal Series and iShares 2019 S&P 
AMT-Free Municipal Series under NYSE Arca, Inc. (``NYSE Arca'') Rule 
5.2(j)(3), Commentary .02); 72523 (July 2, 2014), 79 FR 39016 (July 
9, 2014) (SR-NYSEArca-2014-37) (order approving proposed rule change 
relating to the listing and trading of iShares 2020 S&P AMT-Free 
Municipal Series under NYSE Arca Rule 5.2(j)(3), Commentary .02); 
and 75468 (July 16, 2015), 80 FR 43500 (July 22, 2015) (SR-NYSEArca-
2015-25) (order approving proposed rule change relating to the 
listing and trading of the iShares iBonds Dec 2021 AMT-Free Muni 
Bond ETF and iShares iBonds Dec 2022 AMT-Free Muni Bond ETF under 
NYSE Arca Rule 5.2(j)(3), Commentary .02). The Commission also has 
issued a notice of filing and immediate effectiveness of a proposed 
rule change relating to listing and trading on the Exchange of the 
iShares Taxable Municipal Bond Fund. See Securities Exchange Act 
Release No. 63176 (October 25, 2010), 75 FR 66815 (October 29, 2010) 
(SR-NYSEArca-2010-94). The Commission has approved two actively 
managed funds of the PIMCO ETF Trust that hold municipal bonds. See 
Securities Exchange Act Release No. 60981 (November 10, 2009), 74 FR 
59594 (November 18, 2009) (SR-NYSEArca-2009-79) (order approving 
listing and trading of PIMCO ShortTerm Municipal Bond Strategy Fund 
and PIMCO Intermediate Municipal Bond Strategy Fund, among others). 
The Commission also has approved listing and trading on the Exchange 
of the SPDR Nuveen S&P High Yield Municipal Bond Fund. See 
Securities Exchange Act Release No. 63881 (February 9, 2011), 76 FR 
9065 (February 16, 2011) (SR-NYSEArca-2010-120).
    \5\ See Registration Statement on Form N-1A for the Trust, dated 
October 29, 2015 (File Nos. 333-123257 and 811-10325). The 
descriptions of the Funds 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. 28021 (October 24, 2007) (File No. 812-13426).
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Description of the Shares and the Funds
    BlackRock Fund Advisors is the investment adviser (``BFA'' or 
``Adviser'') to the Funds.\6\ State Street Bank and Trust Company is 
the administrator, custodian, and transfer agent (``Administrator,'' 
``Custodian,'' and ``Transfer Agent,'' respectively) for the Trust. 
BlackRock Investments, LLC serves as the distributor (``Distributor'') 
for the Trust.
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    \6\ BFA is an indirect wholly owned subsidiary of BlackRock, 
Inc.
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iShares iBonds Dec 2023 Term Muni Bond ETF
    According to the Registration Statement, the Fund will seek to 
replicate as closely as possible, before fees and expenses, the price 
and yield performance of the S&P AMT-Free Municipal Series Dec 2023 
Index (the ``2023 Index''). As of July 18, 2016, there were 4,612 
issues in the 2023 Index. Unless otherwise noted, all statistics 
related to the 2023 Index presented hereafter were accurate as of July 
18, 2016.
    To be included in the 2023 Index, a bond must have a rating of at 
least BBB- by S&P, Baa3 by Moody's, or BBB- by Fitch (except in the 
case of a pre-refunded/escrowed to maturity bond). A bond must be rated 
by at least one of the three rating agencies in order to qualify for 
index inclusion. For the avoidance of doubt, the lowest rating is used 
in determining if a bond is investment grade. Potential constituents 
must have an outstanding par value of at least $2 million. The bonds 
will have a maturity range of January 1, 2023 to December 1, 2023. The 
following types of bonds are excluded from the 2023 Index: Bonds 
subject to the alternative minimum tax, bonds with early redemption 
dates (callable provisions), bonds with sinking fund provisions, 
commercial paper, conduit bonds where the obligor is a for-profit 
institution, derivative securities, non-rated bonds (except pre-
refunded/escrowed to maturity bonds), notes, taxable municipals, 
tobacco bonds, and variable rate debt (except for known step-up/down 
coupon schedule bonds). The 2023 Index is calculated using a market 
value weighting methodology. The composition of the 2023 Index is 
rebalanced monthly.
    The Fund generally invests at least 90% of its assets in the 
component securities of the Fund's benchmark index, except during the 
last months of the Fund's operations. From time to time when conditions 
warrant, however, the Fund may invest at least 80% of its assets in the 
component securities of the Fund's benchmark index. The 2023 Index 
measures the performance of the non-callable investment-grade, tax-
exempt U.S. municipal bonds with specific annual maturities 
(``Municipal Securities''). The Fund has adopted a non-fundamental 
investment policy to invest at least 80% of its net assets, plus the 
amount of any borrowings for investment purposes, in securities in the 
Fund's benchmark index. This policy may be changed without shareholder 
approval upon 60 days' prior written notice to shareholders.\7\ 
Municipal

[[Page 59702]]

Securities are fixed and variable rate securities issued in the U.S. by 
U.S. states and territories, municipalities and other political 
subdivisions, agencies, authorities, and instrumentalities of states 
and multi-state agencies and authorities and will include only the 
following instruments: General obligation bonds,\8\ limited obligation 
bonds (or revenue bonds),\9\ municipal notes,\10\ municipal commercial 
paper,\11\ tender option bonds,\12\ variable rate demand obligations 
(``VRDOs''),\13\ municipal lease obligations,\14\ stripped 
securities,\15\ structured securities,\16\ and zero coupon 
securities.\17\
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    \7\ As noted herein, each Fund's policy to invest 80% of its 
total assets in securities that comprise the Fund's benchmark index 
(the ``80% Investment Policy'') is non-fundamental and may be 
changed without shareholder approval upon 60 days' prior written 
notice to shareholders. The Exchange notes that, notwithstanding the 
foregoing, all statements and representations made in this filing 
regarding (a) the description of the portfolios, (b) limitations on 
portfolio holdings or reference assets (including, for example, each 
Fund's 80% Investment Policy), or (c) the applicability of Exchange 
rules and surveillance procedures shall constitute continued listing 
requirements for listing the Shares on the Exchange. As noted below, 
the issuer has represented to the Exchange that it will advise the 
Exchange of any failure by a Fund to comply with the continued 
listing requirements (or any changes made with respect to a Fund's 
80% Investment Policy), 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.
    \8\ General obligation bonds are obligations involving the 
credit of an issuer possessing taxing power and are payable from 
such issuer's general revenues and not from any particular source.
    \9\ Limited obligation bonds are payable only from the revenues 
derived from a particular facility or class of facilities or, in 
some cases, from the proceeds of a special excise or other specific 
revenue source, and also include industrial development bonds issued 
pursuant to former U.S. federal tax law. Industrial development 
bonds generally are also revenue bonds and thus are not payable from 
the issuer's general revenues. The credit and quality of industrial 
development bonds are usually related to the credit of the corporate 
user of the facilities. Payment of interest on and repayment of 
principal of such bonds is the responsibility of the corporate user 
(and/or any guarantor).
    \10\ Municipal notes are shorter-term municipal debt obligations 
that may provide interim financing in anticipation of tax 
collection, receipt of grants, bond sales, or revenue receipts.
    \11\ Municipal commercial paper is generally unsecured debt that 
is issued to meet short-term financing needs.
    \12\ Tender option bonds are synthetic floating-rate or 
variable-rate securities issued when long-term bonds are purchased 
in the primary or secondary market and then deposited into a trust. 
Custodial receipts are then issued to investors, such as the Fund, 
evidencing ownership interests in the trust.
    \13\ VRDOs are tax-exempt obligations that contain a floating or 
variable interest rate adjustment formula and a right of demand on 
the part of the holder thereof to receive payment of the unpaid 
principal balance plus accrued interest upon a short notice period 
not to exceed seven days.
    \14\ Municipal lease obligations include certificates of 
participation issued by government authorities or entities to 
finance the acquisition or construction of equipment, land, and/or 
facilities.
    \15\ Stripped securities are created when an issuer separates 
the interest and principal components of an instrument and sells 
them as separate securities. In general, one security is entitled to 
receive the interest payments on the underlying assets and the other 
to receive the principal payments.
    \16\ Structured securities are privately negotiated debt 
obligations where the principal and/or interest is determined by 
reference to the performance of an underlying investment, index, or 
reference obligation, and may be issued by governmental agencies. 
While structured securities are part of the principal holdings of 
the Fund, the Issuer represents that such securities, when combined 
with those instruments held as part of the other portfolio holdings 
described below, will not exceed 20% of the Fund's net assets.
    \17\ Zero coupon securities are securities that are sold at a 
discount to par value and do not pay interest during the life of the 
security. The discount approximates the total amount of interest the 
security will accrue and compound over the period until maturity at 
a rate of interest reflecting the market rate of the security at the 
time of issuance. Upon maturity, the holder of a zero coupon 
security is entitled to receive the par value of the security.
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    In the last months of operation, as the bonds held by the Fund 
mature, the proceeds will not be reinvested in bonds but instead will 
be held in cash and cash equivalents, including, without limitation, 
shares of money market funds advised by BFA or its affiliates 
(``BlackRock Cash Funds''), AMT-free tax-exempt municipal notes, 
variable rate demand notes and obligations, tender option bonds and 
municipal commercial paper. These cash equivalents may not be included 
in the Underlying Index. By December 2, 2023, the Underlying Index is 
expected to consist entirely of cash earned in this manner. Around the 
same time, the Fund will wind up and terminate, and its net assets will 
be distributed to then-current shareholders.
    The Fund intends to qualify for and to elect treatment as a 
regulated investment company (a ``RIC'') under Subchapter M of the 
Internal Revenue Code of 1986, as amended. The Fund will invest its 
assets, 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.
Other Portfolio Holdings
    The Fund may also, to a limited extent (under normal circumstances, 
less than 20% of the Fund's net assets), engage in transactions in 
futures contracts, options, or swaps in order to facilitate trading or 
to reduce transaction costs.\18\ The Fund's investments will be 
consistent with its investment objective and will not be used to 
achieve leveraged returns (i.e. two times or three times the Fund's 
benchmark, as described in the Registration Statement).
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    \18\ Derivatives might be included in the Fund's investments to 
serve the investment objectives of the Fund. Such derivatives 
include only the following: Interest rate futures, interest rate 
options, interest rate swaps, and swaps on Municipal Securities 
indexes. The derivatives will be centrally cleared and they will be 
collateralized. Derivatives are not a principal investment strategy 
of the Fund.
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    The Fund may also enter into repurchase and reverse repurchase 
agreements for Municipal Securities (collectively, ``Repurchase 
Agreements''). Repurchase Agreements involve the sale of securities 
with an agreement to repurchase the securities at an agreed-upon price, 
date and interest payment and have the characteristics of borrowing as 
part of the Fund's principal holdings.\19\
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    \19\ The Fund's exposure to reverse repurchase agreements will 
be covered by liquid assets having a value equal to or greater than 
such commitments. The use of reverse repurchase agreements is a form 
of leverage because the proceeds derived from reverse repurchase 
agreements may be invested in additional securities. As further 
stated below, the Fund's investments will be consistent with its 
investment objective and will not be used to achieve leveraged 
returns.
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    The Fund may also invest in short-term instruments (``Short-Term 
Instruments''),\20\ which include exchange traded and non-exchange 
traded investment companies (including investment companies advised by 
BFA

[[Page 59703]]

or its affiliates) that invest in money market instruments.
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    \20\ The Fund may invest in Short-Term Instruments, including 
money market instruments, on an ongoing basis to provide liquidity 
or for other reasons. Money market instruments are generally short-
term investments that include only the following: (i) Shares of 
money market funds (including those advised by BFA or otherwise 
affiliated with BFA); (ii) obligations issued or guaranteed by the 
U.S. government, its agencies or instrumentalities (including 
government-sponsored enterprises); (iii) negotiable certificates of 
deposit (``CDs''), bankers' acceptances, fixed-time deposits and 
other obligations of U.S. and non-U.S. banks (including non-U.S. 
branches) and similar institutions; (iv) commercial paper, including 
asset-backed commercial paper; (v) non-convertible corporate debt 
securities (e.g., bonds and debentures) with remaining maturities at 
the date of purchase of not more than 397 days and that satisfy the 
rating requirements set forth in Rule 2a-7 under the 1940 Act; and 
(vi) short-term U.S. dollar-denominated obligations of non-U.S. 
banks (including U.S. branches) that, in the opinion of BFA, are of 
comparable quality to obligations of U.S. banks which may be 
purchased by the Fund. All money market securities acquired by the 
Fund will be rated investment grade. The Fund does not intend to 
invest in any unrated money market securities. However, it may do 
so, to a limited extent, such as where a rated money market security 
becomes unrated, if such money market security is determined by the 
Adviser to be of comparable quality. BFA may determine that unrated 
securities are of comparable quality based on such credit quality 
factors that it deems appropriate, which may include, among other 
things, performing an analysis similar, to the extent possible, to 
that performed by a nationally recognized statistical rating 
organization rating similar securities and issuers.
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Index Overview
    The Exchange is submitting this proposed rule change because the 
2023 Index for the Fund does not meet all of the ``generic'' listing 
requirements of Rule 14.11(c)(4) applicable to the listing of index 
fund shares based on fixed income securities indexes. The 2023 Index 
meets all such requirements except for those set forth in Rule 
14.11(c)(4)(B)(i)(b).\21\ Specifically, as of July 18, 2016, 5.83% of 
the weight of the 2023 Index components have a minimum original 
principal amount outstanding of $100 million or more.
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    \21\ Rule 14.11(c)(4)(B)(i)(b) provides that components that in 
the aggregate account for at least 75% of the weight of the index or 
portfolio each shall have a minimum original principal amount 
outstanding of $100 million or more.
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    As of July 18, 2016, 73.56% of the weight of the 2023 Index 
components was comprised of individual maturities that were part of an 
entire municipal bond offering with a minimum original principal amount 
outstanding $100 million or more for all maturities of the offering. In 
addition, the total face amount outstanding of issues in the 2023 Index 
was approximately $38.5 billion, the market value was $46.4 billion, 
and the average dollar amount outstanding of issues in the 2023 Index 
was approximately $8.3 million. Further, the most heavily weighted 
component represented 1.61% of the weight of the 2023 Index and the 
five most heavily weighted components represented 3.66% of the weight 
of the 2023 Index.\22\ Therefore, the Exchange believes that, 
notwithstanding that the 2023 Index does not satisfy the criterion in 
Rule 14.11(c)(4)(B)(i)(b), the 2023 Index is sufficiently broad-based 
to deter potential manipulation, given that it is comprised of 
approximately 4,612 issues. In addition, the 2023 Index securities are 
sufficiently liquid to deter potential manipulation in that a 
substantial portion (73.56%) of the 2023 Index weight is comprised of 
maturities that are part of a minimum original principal amount 
outstanding of $100 million or more, and in view of the substantial 
total dollar amount outstanding and the average dollar amount 
outstanding of the 2023 Index issues, as referenced above.\23\ 48% of 
the 2023 Index weight consisted of issues with a rating of AA/Aa2 or 
higher.
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    \22\ Rule 14.11(c)(4)(B)(i)(d) provides that no component fixed-
income security (excluding Treasury Securities, as defined therein) 
shall represent more than 30% of the weight of the index or 
portfolio, and the five most heavily weighted component fixed-income 
securities in the index or portfolio shall not in the aggregate 
account for more than 65% of the weight of the index or portfolio.
    \23\ The Adviser represents that when bonds are close 
substitutes for one another, pricing vendors can use executed trade 
information from all similar bonds as pricing inputs for an 
individual security. This can make individual securities more 
liquid.
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    The 2023 Index value, calculated and disseminated at least once 
daily, as well as the components of the 2023 Index and their percentage 
weighting, will be available from major market data vendors. In 
addition, the portfolio of securities held by the Fund will be 
disclosed on the Fund's Web site at www.iShares.com.
iShares iBonds Dec 2024 Term Muni Bond ETF
    According to the Registration Statement, the Fund will seek to 
replicate as closely as possible, before fees and expenses, the price 
and yield performance of the S&P AMT-Free Municipal Series Dec 2024 
Index (the ``2024 Index''). As of July 18, 2016, there were 3,624 
issues in the 2024 Index. Unless otherwise noted, all statistics 
related to the 2024 Index presented hereafter were accurate as of July 
18, 2016.
    To be included in the 2024 Index, a bond must have a rating of at 
least BBB- by S&P, Baa3 by Moody's, or BBB- by Fitch (except in the 
case of a pre-refunded/escrowed to maturity bond). A bond must be rated 
by at least one of the three rating agencies in order to qualify for 
index inclusion. For the avoidance of doubt, the lowest rating is used 
in determining if a bond is investment grade. Potential constituents 
must have an outstanding par value of at least $2 million. The bonds 
will have a maturity range of January 1, 2024 to December 1, 2024. The 
following types of bonds are excluded from the 2024 Index: Bonds 
subject to the alternative minimum tax, bonds with early redemption 
dates (callable provisions), bonds with sinking fund provisions, 
commercial paper, conduit bonds where the obligor is a for-profit 
institution, derivative securities, non-rated bonds (except pre-
refunded/escrowed to maturity bonds), notes, taxable municipals, 
tobacco bonds, and variable rate debt (except for known step-up/down 
coupon schedule bonds). The 2024 Index is calculated using a market 
value weighting methodology. The composition of the 2024 Index is 
rebalanced monthly.
    The Fund generally invests at least 90% of its assets in the 
component securities of the Fund's benchmark index, except during the 
last months of the Fund's operations. From time to time when conditions 
warrant, however, the Fund may invest at least 80% of its assets in the 
component securities of the Fund's benchmark index. The 2024 Index 
measures the performance of the non-callable investment-grade, tax-
exempt U.S. municipal bonds with specific annual maturities 
(``Municipal Securities''). The Fund has adopted a non-fundamental 
investment policy to invest at least 80% of its net assets, plus the 
amount of any borrowings for investment purposes, in securities in the 
Fund's benchmark index. This policy may be changed without shareholder 
approval upon 60 days' prior written notice to shareholders.\24\ 
Municipal Securities are fixed and variable rate securities issued in 
the U.S. by U.S. states and territories, municipalities and other 
political subdivisions, agencies, authorities, and instrumentalities of 
states and multi-state agencies and authorities and will include only 
the following instruments: General obligation bonds,\25\ limited 
obligation bonds (or revenue bonds),\26\ municipal

[[Page 59704]]

notes,\27\ municipal commercial paper,\28\ tender option bonds,\29\ 
variable rate demand obligations (``VRDOs''),\30\ municipal lease 
obligations,\31\ stripped securities,\32\ structured securities,\33\ 
and zero coupon securities.\34\
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    \24\ As noted herein, each Fund's policy to invest 80% of its 
total assets in securities that comprise the Fund's benchmark index 
(the ``80% Investment Policy'') is non-fundamental and may be 
changed without shareholder approval upon 60 days' prior written 
notice to shareholders. The Exchange notes that, notwithstanding the 
foregoing, all statements and representations made in this filing 
regarding (a) the description of the portfolios, (b) limitations on 
portfolio holdings or reference assets (including, for example, each 
Fund's 80% Investment Policy), or (c) the applicability of Exchange 
rules and surveillance procedures shall constitute continued listing 
requirements for listing the Shares on the Exchange. As noted below, 
the issuer has represented to the Exchange that it will advise the 
Exchange of any failure by a Fund to comply with the continued 
listing requirements (or any changes made with respect to a Fund's 
80% Investment Policy), 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.
    \25\ General obligation bonds are obligations involving the 
credit of an issuer possessing taxing power and are payable from 
such issuer's general revenues and not from any particular source.
    \26\ Limited obligation bonds are payable only from the revenues 
derived from a particular facility or class of facilities or, in 
some cases, from the proceeds of a special excise or other specific 
revenue source, and also include industrial development bonds issued 
pursuant to former U.S. federal tax law. Industrial development 
bonds generally are also revenue bonds and thus are not payable from 
the issuer's general revenues. The credit and quality of industrial 
development bonds are usually related to the credit of the corporate 
user of the facilities. Payment of interest on and repayment of 
principal of such bonds is the responsibility of the corporate user 
(and/or any guarantor).
    \27\ Municipal notes are shorter-term municipal debt obligations 
that may provide interim financing in anticipation of tax 
collection, receipt of grants, bond sales, or revenue receipts.
    \28\ Municipal commercial paper is generally unsecured debt that 
is issued to meet short-term financing needs.
    \29\ Tender option bonds are synthetic floating-rate or 
variable-rate securities issued when long-term bonds are purchased 
in the primary or secondary market and then deposited into a trust. 
Custodial receipts are then issued to investors, such as the Fund, 
evidencing ownership interests in the trust.
    \30\ VRDOs are tax-exempt obligations that contain a floating or 
variable interest rate adjustment formula and a right of demand on 
the part of the holder thereof to receive payment of the unpaid 
principal balance plus accrued interest upon a short notice period 
not to exceed seven days.
    \31\ Municipal lease obligations include certificates of 
participation issued by government authorities or entities to 
finance the acquisition or construction of equipment, land, and/or 
facilities.
    \32\ Stripped securities are created when an issuer separates 
the interest and principal components of an instrument and sells 
them as separate securities. In general, one security is entitled to 
receive the interest payments on the underlying assets and the other 
to receive the principal payments.
    \33\ Structured securities are privately negotiated debt 
obligations where the principal and/or interest is determined by 
reference to the performance of an underlying investment, index, or 
reference obligation, and may be issued by governmental agencies. 
While structured securities are part of the principal holdings of 
the Fund, the Issuer represents that such securities, when combined 
with those instruments held as part of the other portfolio holdings 
described below, will not exceed 20% of the Fund's net assets.
    \34\ Zero coupon securities are securities that are sold at a 
discount to par value and do not pay interest during the life of the 
security. The discount approximates the total amount of interest the 
security will accrue and compound over the period until maturity at 
a rate of interest reflecting the market rate of the security at the 
time of issuance. Upon maturity, the holder of a zero coupon 
security is entitled to receive the par value of the security.
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    In the last months of operation, as the bonds held by the Fund 
mature, the proceeds will not be reinvested in bonds but instead will 
be held in cash and cash equivalents, including, without limitation, 
shares of BlackRock Cash Funds, AMT-free tax-exempt municipal notes, 
variable rate demand notes and obligations, tender option bonds and 
municipal commercial paper. These cash equivalents may not be included 
in the Underlying Index. By December 2, 2023, the Underlying Index is 
expected to consist entirely of cash earned in this manner. Around the 
same time, the Fund will wind up and terminate, and its net assets will 
be distributed to then-current shareholders.
    The Fund intends to qualify for and to elect treatment as a RIC 
under Subchapter M of the Internal Revenue Code of 1986, as amended. 
The Fund will invest its assets, 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.
Other Portfolio Holdings
    The Fund may also, to a limited extent (under normal circumstances, 
less than 20% of the Fund's net assets), engage in transactions in 
futures contracts, options, or swaps in order to facilitate trading or 
to reduce transaction costs.\35\ The Fund's investments will be 
consistent with its investment objective and will not be used to 
achieve leveraged returns (i.e. two times or three times the Fund's 
benchmark, as described in the Registration Statement).
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    \35\ Derivatives might be included in the Fund's investments to 
serve the investment objectives of the Fund. Such derivatives 
include only the following: Interest rate futures, interest rate 
options, interest rate swaps, and swaps on Municipal Securities 
indexes. The derivatives will be centrally cleared and they will be 
collateralized. Derivatives are not a principal investment strategy 
of the Fund.
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    The Fund may also enter into repurchase and reverse repurchase 
agreements for Municipal Securities (collectively, ``Repurchase 
Agreements''). Repurchase Agreements involve the sale of securities 
with an agreement to repurchase the securities at an agreed-upon price, 
date and interest payment and have the characteristics of borrowing as 
part of the Fund's principal holdings.\36\
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    \36\ The Fund's exposure to reverse repurchase agreements will 
be covered by liquid assets having a value equal to or greater than 
such commitments. The use of reverse repurchase agreements is a form 
of leverage because the proceeds derived from reverse repurchase 
agreements may be invested in additional securities. As further 
stated below, the Fund's investments will be consistent with its 
investment objective and will not be used to achieve leveraged 
returns.
---------------------------------------------------------------------------

    The Fund may also invest in short-term instruments (``Short-Term 
Instruments''),\37\ which include exchange traded and non-exchange 
traded investment companies (including investment companies advised by 
BFA or its affiliates) that invest in money market instruments.
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    \37\ The Fund may invest in Short-Term Instruments, including 
money market instruments, on an ongoing basis to provide liquidity 
or for other reasons. Money market instruments are generally short-
term investments that include only the following: (i) Shares of 
money market funds (including those advised by BFA or otherwise 
affiliated with BFA); (ii) obligations issued or guaranteed by the 
U.S. government, its agencies or instrumentalities (including 
government-sponsored enterprises); (iii) negotiable certificates of 
deposit (``CDs''), bankers' acceptances, fixed-time deposits and 
other obligations of U.S. and non-U.S. banks (including non-U.S. 
branches) and similar institutions; (iv) commercial paper, including 
asset-backed commercial paper; (v) non-convertible corporate debt 
securities (e.g., bonds and debentures) with remaining maturities at 
the date of purchase of not more than 397 days and that satisfy the 
rating requirements set forth in Rule 2a-7 under the 1940 Act; and 
(vi) short-term U.S. dollar-denominated obligations of non-U.S. 
banks (including U.S. branches) that, in the opinion of BFA, are of 
comparable quality to obligations of U.S. banks which may be 
purchased by the Fund. All money market securities acquired by the 
Fund will be rated investment grade. The Fund does not intend to 
invest in any unrated money market securities. However, it may do 
so, to a limited extent, such as where a rated money market security 
becomes unrated, if such money market security is determined by the 
Adviser to be of comparable quality. BFA may determine that unrated 
securities are of comparable quality based on such credit quality 
factors that it deems appropriate, which may include, among other 
things, performing an analysis similar, to the extent possible, to 
that performed by a nationally recognized statistical rating 
organization rating similar securities and issuers.
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Index Overview
    The Exchange is submitting this proposed rule change because the 
2024 Index for the Fund does not meet all of the ``generic'' listing 
requirements of Rule 14.11(c)(4) applicable to the listing of index 
fund shares based on fixed income securities indexes. The 2024 Index 
meets all such requirements except for those set forth in Rule 
14.11(c)(4)(B)(i)(b).\38\ Specifically, as of July 18, 2016, 5.72% of 
the weight of the 2024 Index components have a minimum original 
principal amount outstanding of $100 million or more.
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    \38\ Rule 14.11(c)(4)(B)(i)(b) provides that components that in 
the aggregate account for at least 75% of the weight of the index or 
portfolio each shall have a minimum original principal amount 
outstanding of $100 million or more.
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    As of July 18, 2016, 72.27% of the weight of the 2024 Index 
components was comprised of individual maturities that were part of an 
entire municipal bond offering with a minimum original principal amount 
outstanding $100 million or more for all maturities of the offering. In 
addition, the total face amount outstanding of issues in the 2024 Index 
was approximately $29.9 billion, the market value is $36.4 billion, and 
the average dollar amount outstanding of issues in the 2024 Index was 
approximately $8.3 million. Further, the most heavily weighted 
component represented 0.72% of the weight of the 2024 Index and the 
five most heavily weighted components represented 2.74% of the weight 
of the 2024 Index.\39\ Therefore, the Exchange believes that, 
notwithstanding that the

[[Page 59705]]

2024 Index does not satisfy the criterion in Rule 14.11(c)(4)(B)(i)(b), 
the 2024 Index is sufficiently broad-based to deter potential 
manipulation, given that it is comprised of approximately 3,624 issues. 
In addition, the 2024 Index securities are sufficiently liquid to deter 
potential manipulation in that a substantial portion (72.27%) of the 
2024 Index weight is comprised of maturities that are part of a minimum 
original principal amount outstanding of $100 million or more, and in 
view of the substantial total dollar amount outstanding and the average 
dollar amount outstanding of the 2024 Index issues, as referenced 
above.\40\ 47.71% of the 2024 Index weight consisted of issues with a 
rating of AA/Aa2 or higher.
---------------------------------------------------------------------------

    \39\ Rule 14.11(c)(4)(B)(i)(d) provides that no component fixed-
income security (excluding Treasury Securities, as defined therein) 
shall represent more than 30% of the weight of the index or 
portfolio, and the five most heavily weighted component fixed-income 
securities in the index or portfolio shall not in the aggregate 
account for more than 65% of the weight of the index or portfolio.
    \40\ The Adviser represents that when bonds are close 
substitutes for one another, pricing vendors can use executed trade 
information from all similar bonds as pricing inputs for an 
individual security. This can make individual securities more 
liquid.
---------------------------------------------------------------------------

    The 2024 Index value, calculated and disseminated at least once 
daily, as well as the components of the 2024 Index and their percentage 
weighting, will be available from major market data vendors. In 
addition, the portfolio of securities held by the Fund will be 
disclosed on the Fund's Web site at www.iShares.com.
Correlation Among Municipal Bond Instruments With Common 
Characteristics
    With respect to the Funds, the Adviser represents that the nature 
of the municipal bond market and municipal bond instruments makes it 
feasible to categorize individual issues represented by CUSIPs (i.e., 
the specific identifying number for a security) into categories 
according to common characteristics, specifically, rating, geographical 
region, purpose, and maturity. Bonds that share similar characteristics 
tend to trade similarly to one another; therefore, within these 
categories, the issues may be considered fungible from a portfolio 
management perspective, allowing one CUSIP to be represented by another 
that shares similar characteristics for purposes of developing an 
investment strategy. Therefore, while 5.83% of the weight of the 2023 
Index and 5.72% of the 2024 Index components have a minimum original 
principal amount outstanding of $100 million or more, the nature of the 
municipal bond market makes the issues relatively fungible for 
investment purposes when aggregated into categories such as ratings, 
geographical region, purpose and maturity. In addition, within a single 
municipal bond issuer, there are often multiple contemporaneous or 
sequential issuances that have the same rating, structure and maturity, 
but have different CUSIPs; these separate issues by the same issuer are 
also likely to trade similarly to one another.
    The Adviser represents that the Funds are managed utilizing the 
principle that municipal bond issues are generally fungible in nature 
when sharing common characteristics, and specifically make use of the 
four categories referred to above. In addition, this principle is used 
in, and consistent with, the portfolio construction process in order to 
facilitate the creation and redemption process, and to enhance 
liquidity (among other benefits, such as reducing transaction costs), 
while still allowing each Fund to closely track its reference index.
Net Asset Value
    According to the Registration Statement, the net asset value 
(``NAV'') of each Fund will be determined each business day as of the 
close of trading (ordinarily 4:00 p.m. Eastern time) on the Exchange. 
Any assets or liabilities denominated in currencies other than the U.S. 
dollar are converted into U.S. dollars at the current market rates on 
the date of valuation as quoted by one or more sources.
    The values of each Fund's portfolio securities are based on the 
securities' closing prices, when available. In the absence of a last 
reported sales price, or if no sales were reported, and for other 
assets for which market quotes are not readily available, values may be 
based on quotes obtained from a quotation reporting system, established 
market makers or by an outside independent pricing service. Municipal 
Securities, repurchase agreements, reverse repurchase agreements, and 
money market instruments with maturities of more than 60 days are 
normally valued on the basis of quotes from brokers or dealers, 
established market makers or an outside independent pricing service. 
Prices obtained by an outside independent pricing service may use 
information provided by market makers or estimates of market values 
obtained from yield data related to investments or securities with 
similar characteristics and may use a computerized grid matrix of 
securities and its evaluations in determining what it believes is the 
fair value of the portfolio securities. Short-term investments, 
including money market instruments having a maturity of 60 days or 
less, are valued at amortized cost. Futures contracts will be valued at 
the settlement price established each day by the board or exchange on 
which they are traded. Exchange-traded options will be valued at the 
closing price in the market where such contracts are principally 
traded. Swaps will be valued based on valuations provided by 
independent, third-party pricing agents. Securities of non-exchange-
traded investment companies will be valued at NAV. Exchange-traded 
investment companies will be valued at the last reported sale price on 
the primary exchange on which they are traded.
Creation and Redemption of Shares
    The NAV of the Funds will be determined each business day as of the 
close of trading, (normally 4:00 p.m. Eastern time) on the exchange. 
The Funds currently anticipate that a ``Creation Unit'' will consist of 
50,000 Shares, though this number may change from time to time, 
including prior to the listing of a Fund. The exact number of Shares 
that will comprise a Creation Unit will be disclosed in the 
Registration Statement of each Fund. The Trust will issue and sell 
Shares of the Funds only in Creation Units on a continuous basis 
through the Distributor, without an initial sales load (but subject to 
transaction fees), at their NAV per Share next determined after 
receipt, on any business day, of an order in proper form.
    The consideration for purchase of a Creation Unit of a Fund 
generally will consist of either (i) the in-kind deposit of a 
designated portfolio of fixed income securities (the ``Deposit 
Securities'') per each Creation Unit and the Cash Component (defined 
below), computed as described below, or (ii) as permitted or required 
by the Funds, of cash. The Cash Component together with the Deposit 
Securities, as applicable, are referred to as the ``Fund Deposit,'' 
which represents the minimum initial and subsequent investment amount 
for Shares. The Cash Component represents the difference between the 
NAV of a Creation Unit and the market value of Deposit Securities and 
may include a Dividend Equivalent Payment. The ``Dividend Equivalent 
Payment'' enables the Funds to make a complete distribution of 
dividends on the next dividend payment date, and is an amount equal, on 
a per Creation Unit basis, to the dividends on all the securities held 
by each of the Funds (``Fund Securities'') with ex-dividend dates 
within the accumulation period for such distribution (the 
``Accumulation Period''), net of expenses and liabilities for such 
period, as if all of the Fund Securities had been held by the Trust for 
the entire Accumulation Period. The Accumulation Period begins on the 
ex-

[[Page 59706]]

dividend date for each Fund and ends on the next ex-dividend date.
    The Administrator, through the National Securities Clearing 
Corporation (``NSCC''), makes available on each business day, 
immediately prior to the opening of business on the Exchange (currently 
9:30 a.m. Eastern time), the list of the names and the required number 
of shares of each Deposit Security to be included in the current Fund 
Deposit (based on information at the end of the previous business day) 
as well as the Cash Component for each Fund. Such Fund Deposit is 
applicable, subject to any adjustments as described below, in order to 
effect creations of Creation Units of each Fund until such time as the 
next-announced Fund Deposit composition is made available.
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by the 
Distributor,\41\ only on a business day and only through a 
Participating Party or DTC Participant who has executed a Participation 
Agreement.
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    \41\ To be eligible to place orders with the Distributor to 
create Creation Units of the Funds, an entity or person either must 
be: (1) a ``Participating Party,'' i.e., a broker-dealer or other 
participant in the Clearing Process through the Continuous Net 
Settlement System of the NSCC; or (2) a DTC Participant (as defined 
below); and, in either case, must have executed an agreement with 
the Distributor and the Transfer Agent (as it may be amended from 
time to time in accordance with its terms) (``Participant 
Agreement''). DTC Participants are participants of the Depository 
Trust Company (``DTC'') that acts as securities depositary for Index 
Fund Shares. A Participating Party and DTC Participant are 
collectively referred to as an ``Authorized Participant.''
---------------------------------------------------------------------------

    The Administrator, through NSCC, makes available immediately prior 
to the opening of business on the Exchange (currently 9:30 a.m. Eastern 
time) on each day that the Exchange is open for business, the Fund 
Securities that will be applicable (subject to possible amendment or 
correction) to redemption requests received in proper form (as defined 
below) on that day.
    Unless cash redemptions are permitted or required for the Fund, the 
redemption proceeds for a Creation Unit generally consist of Fund 
Securities as announced by the Administrator on the business day of the 
request for redemption, plus cash in an amount equal to the difference 
between the NAV of the Shares being redeemed, as next determined after 
a receipt of a request in proper form, and the value of the Fund 
Securities, less the redemption transaction fee and variable fees 
described below. Should the Fund Securities have a value greater than 
the NAV of the Shares being redeemed, a compensating cash payment to 
the Trust equal to the differential plus the applicable redemption 
transaction fee will be required to be arranged for by or on behalf of 
the redeeming shareholder. Each Fund reserves the right to honor a 
redemption request by delivering a basket of securities or cash that 
differs from the Fund Securities.\42\
---------------------------------------------------------------------------

    \42\ The Adviser represents that, to the extent that 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.
---------------------------------------------------------------------------

    Orders to redeem Creation Units of the Funds must be delivered 
through a DTC Participant that has executed the Participant Agreement 
with the Distributor and with the Trust. A DTC Participant who wishes 
to place an order for redemption of Creation Units of a Fund to be 
effected need not be a Participating Party, but such orders must state 
that redemption of Creation Units of the Fund will instead be effected 
through transfer of Creation Units of the Fund directly through DTC. An 
order to redeem Creation Units of a Fund is deemed received by the 
Administrator on the transmittal date if (i) such order is received by 
the Administrator not later than 4:00 p.m. Eastern time on such 
transmittal date; (ii) such order is preceded or accompanied by the 
requisite number of Shares of Creation Units specified in such order, 
which delivery must be made through DTC to the Administrator no later 
than 11:00 a.m. Eastern time, on such transmittal date (the ``DTC Cut-
Off-Time''); and (iii) all other procedures set forth in the 
Participant Agreement are properly followed.
    After the Administrator has deemed an order for redemption 
received, the Administrator will initiate procedures to transfer the 
requisite Fund Securities (or contracts to purchase such Fund 
Securities) which are expected to be delivered within three business 
days and the cash redemption payment to the redeeming beneficial owner 
by the third business day following the transmittal date on which such 
redemption order is deemed received by the Administrator.
Availability of Information
    Each 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, daily trading volume, 
and a calculation of the premium and discount of the Bid/Ask Price 
against the NAV; and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily Bid/Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. Daily trading volume information for the 
Funds will also 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 
\43\ on the Exchange, each Fund will disclose on its Web site the 
identities and quantities of the portfolio of securities and other 
assets in the daily disclosed portfolio held by the Funds that formed 
the basis for each Fund's calculation of NAV at the end of the previous 
business day. The daily disclosed portfolio will include, as 
applicable: the ticker symbol; CUSIP number or other identifier, if 
any; a description of the holding (including the type of holding, such 
as the type of swap); the identity of the security, index or other 
asset or instrument underlying the holding, if any; for options, the 
option strike price; quantity held (as measured by, for example, par 
value, notional value or number of shares, contracts, or units); 
maturity date, if any; coupon rate, if any; effective date, if any; 
market value of the holding; and the percentage weighting of the 
holding in each Fund's portfolio. The Web site and information will be 
publicly available at no charge. The value, components, and percentage 
weightings of each of the Indices will be calculated and disseminated 
at least once daily and will be available from major market data 
vendors. Rules governing the Indices are available on Barclays' Web 
site and in each respective Fund's prospectus.
---------------------------------------------------------------------------

    \43\ Regular Trading Hours are 9:30 a.m. to 4:00 p.m. Eastern 
Time.
---------------------------------------------------------------------------

    In addition, for each Fund, an estimated value, defined in BZX Rule 
14.11(c)(6)(A) as the ``Intraday Indicative Value,'' that reflects an 
estimated intraday value of each Fund's portfolio, will be 
disseminated. Moreover, the Intraday Indicative Value will be based 
upon the current value for the components of the daily 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.\44\ In addition,

[[Page 59707]]

the quotations of certain of each Fund's holdings may not be updated 
during U.S. trading hours if updated prices cannot be ascertained.
---------------------------------------------------------------------------

    \44\ 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.
---------------------------------------------------------------------------

    The dissemination of the Intraday Indicative Value, together with 
the daily disclosed portfolio, will allow investors to determine the 
value of the underlying portfolio of the Funds on a daily basis and 
provide a close estimate of that value throughout the trading day.
    Quotation and last sale information for the Shares of each Fund 
will be available via the CTA high speed line. Quotation information 
for investment company securities (excluding ETFs) may be obtained 
through nationally recognized pricing services through subscription 
agreements or from brokers and dealers who make markets in such 
securities. Price information regarding Municipal Securities and non-
exchange traded assets, including investment companies, derivatives, 
money market instruments, repurchase agreements, and reverse repurchase 
agreements is available from third party pricing services and major 
market data vendors. For exchange-traded assets, including investment 
companies, futures, and options, such intraday information is available 
directly from the applicable listing exchange.
    Initial and Continued Listing
    The Shares of each Fund will conform to the initial and continued 
listing criteria under BZX Rule 14.11(c)(4), except for those set forth 
in 14.11(c)(4)(B)(i)(b). The Exchange represents that, for initial and/
or continued listing, the Funds and the Trust must be in compliance 
with Rule 10A-3 under the Act.\45\ A minimum of 50,000 Shares of each 
Fund 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 per Share for each Fund will be calculated 
daily and will be made available to all market participants at the same 
time.
---------------------------------------------------------------------------

    \45\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

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 Funds. The Exchange will halt trading in 
the Shares under the conditions specified in BZX 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 
securities and/or the financial instruments composing the daily 
disclosed portfolio of the Funds; 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(c)(1)(B)(iv), which sets forth circumstances 
under which Shares of a 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 
and has the appropriate rules to facilitate transactions in the Shares 
during all trading sessions. As provided in BZX Rule 11.11(a), the 
minimum price variation for quoting and entry of orders in securities 
traded on the Exchange is $0.01, with the exception of securities that 
are priced less than $1.00, for which the minimum price variation for 
order entry is $0.0001.
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 Index 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 shares 
in exchange traded equity securities via the ISG, from other exchanges 
that are members or affiliates of the ISG, or with which the Exchange 
has entered into a comprehensive surveillance sharing agreement.\46\ 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''). FINRA also can access data 
obtained from the Municipal Securities Rulemaking Board (``MSRB'') 
relating to municipal bond trading activity for surveillance purposes 
in connection with trading in the Shares. In addition, the Exchange may 
obtain information regarding trading in the Shares and the underlying 
shares in exchange-traded investment companies, futures, and options 
from markets or other entities that are members of ISG or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement. The Exchange prohibits the distribution of material non-
public information by its employees.
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    \46\ For a list of the current members of ISG, see 
www.isgportal.org. 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.
---------------------------------------------------------------------------

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) BZX Rule 3.7, which imposes suitability 
obligations on Exchange members with respect to recommending 
transactions in the Shares to customers; (3) how information regarding 
the Intraday Indicative Value is disseminated; (4) the risks involved 
in trading the Shares during the Pre-Opening \47\ and After Hours 
Trading Sessions \48\ 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.
---------------------------------------------------------------------------

    \47\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m. 
Eastern Time.
    \48\ The After Hours Trading Session is from 4:00 p.m. to 5:00 
p.m. Eastern Time.
---------------------------------------------------------------------------

    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Funds. Members purchasing Shares from the Funds for 
resale to investors will deliver a prospectus to such investors. The 
Information Circular will also discuss any exemptive, no-action, and

[[Page 59708]]

interpretive relief granted by the Commission from any rules under the 
Act.
    In addition, the Information Circular will reference that each 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 Funds and the applicable NAV calculation 
time for the Shares. The Information Circular will disclose that 
information about the Shares of the Funds will be publicly available on 
the Funds' Web site. In addition, the Information Circular will 
reference that the Trust is subject to various fees and expenses 
described in each Fund's Registration Statement.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \49\ in general and Section 6(b)(5) of the Act \50\ 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.
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 78f.
    \50\ 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 
listing criteria in BZX Rule 14.11(c). The Exchange believes that its 
surveillances, which generally focus on detecting securities trading 
outside of their normal patterns which could be indicative of 
manipulative or other violative activity, and associated 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 will communicate as needed regarding trading in the 
Shares with other markets or other entities that are members of the 
Intermarket Surveillance group (``ISG''), and may obtain trading 
information regarding trading in the Shares from such markets or 
entities. The Exchange can also access data obtained from the Municipal 
Securities Rulemaking Board relating to municipal bond trading activity 
for surveillance purposes in connection with trading in the Shares. The 
Exchange is able to access, as needed, trade information for certain 
fixed income securities held by a Fund reported to FINRA's TRACE. FINRA 
also can access data obtained from the Municipal Securities Rulemaking 
Board (``MSRB'') relating to municipal bond trading activity for 
surveillance purposes in connection with trading in the Shares. In 
addition, the Exchange may obtain information regarding trading in the 
Shares and the underlying shares in exchange-traded investment 
companies, futures, and options from markets or other entities that are 
members of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.
    The Index Provider is not a broker-dealer, but is affiliated with a 
broker-dealer and has implemented a ``fire wall'' with respect to such 
broker-dealer regarding access to information concerning the 
composition and/or changes to the Indices. The Index Provider has also 
implemented procedures designed to prevent the use and dissemination of 
material, non-public information regarding the Indices.
    As of July 18, 2016, the 2023 Index had the following 
characteristics: there were 4,612 issues; 5.83% of the weight of 
components had a minimum original principal amount outstanding of $100 
million or more; 73.56% of the weight of components was comprised of 
individual maturities that were part of an entire municipal bond 
offering with a minimum original principal amount outstanding of $100 
million or more for all maturities of the offering; total face amount 
outstanding of issues in the 2023 Index was approximately $38.5 
billion, the market value is $46.4 billion, and the average dollar 
amount outstanding per issue was approximately $8.3 million; the most 
heavily weighted component represented 1.61% of the 2023 Index and the 
five most heavily weighted components represented 3.66% of the 2023 
Index. Therefore, the Exchange believes that, notwithstanding that the 
2023 Index does not satisfy the criterion in BZX Rule 
14.11(c)(4)(B)(i), the 2023 Index is sufficiently broad-based to deter 
potential manipulation in that a substantial portion (73.56%) of the 
2023 Index weight is comprised of maturities that are part of a minimum 
original principal amount outstanding of $100 million or more, and in 
view of the substantial total dollar amount outstanding and the average 
dollar amount outstanding of index issues.
    As of July 18, 2016, the 2024 Index had the following 
characteristics: there were 3,624 issues; 5.72% of the weight of 
components had a minimum original principal amount outstanding of $100 
million or more; 72.27% of the weight of components was comprised of 
individual maturities that were part of an entire municipal bond 
offering with a minimum original principal amount outstanding of $100 
million or more for all maturities of the offering; the total face 
amount outstanding of issues in the 2024 Index was approximately $29.9 
billion, the market value is $36.4 billion, and the average dollar 
amount outstanding of issues in the 2024 Index was approximately $8.3 
million; the most heavily weighted component represented 0.72% of the 
2024 Index and the five most heavily weighted components represented 
2.74% of the 2024 Index. Therefore, the Exchange believes that, 
notwithstanding that the 2024 Index does not satisfy the criterion in 
BZX Rule 14.11(c)(4)(B)(i), the 2024 Index is sufficiently broad-based 
to deter potential manipulation in that a substantial portion (72.27%) 
of the 2024 Index weight is comprised of maturities that are part of a 
minimum original principal amount outstanding of $100 million or more, 
and in view of the substantial total dollar amount outstanding and the 
average dollar amount outstanding of index issues.
    The value, components, and percentage weightings of each of the 
Indices will be calculated and disseminated at least once daily and 
will be available from major market data vendors. In addition, the 
portfolio of securities held by the Funds will be disclosed on the 
Funds' Web site at www.iShares.com. The intraday indicative value for 
Shares of the Funds will be disseminated by one or more major market 
data vendors, updated at least every 15 seconds during Regular Trading 
Hours. The Adviser represents that bonds that share similar 
characteristics, as described above, tend to trade similarly to one 
another; therefore, within these categories, the issues may be 
considered fungible from a portfolio management perspective. Within a 
single municipal bond issuer, [sic] Adviser represents that separate 
issues by the same issuer are also likely to trade similarly to one 
another.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that a large amount of information will be publicly available regarding 
the Funds and the Shares, thereby promoting market transparency. The 
Funds' portfolio holdings will be disclosed on the Funds' Web site 
daily after the close of trading on the Exchange and prior to the 
opening of

[[Page 59709]]

trading on the Exchange the following day. Moreover, the IIV will be 
widely disseminated by one or more major market data vendors at least 
every 15 seconds during Regular Trading Hours. The current value of 
each of the Indices will be disseminated by one or more major market 
data vendors at least once per day. 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, and quotation and last sale information will 
be available via the CTA high-speed line. The Web site for the Funds 
will include the prospectus for the Funds and additional data relating 
to NAV and other applicable quantitative information. Moreover, 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. If the Exchange becomes aware that 
the NAV is not being disseminated to all market participants at the 
same time, it will halt trading in the Shares until such time as the 
NAV is available to all market participants. 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 Funds. 
Trading also 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 securities and/or the financial instruments composing 
the daily disclosed portfolio of each 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(c)(1)(B)(iv), which sets forth circumstances 
under which Shares of a Fund may be halted. If the IIV of any of the 
Funds or value of the Indices are not being disseminated as required, 
the Exchange may halt trading during the day in which the interruption 
to the dissemination of the IIV or index value occurs.
    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 
additional types of exchange-traded funds that holds municipal bonds 
and 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 in the Shares and the underlying shares in 
exchange-traded investment companies, futures, and options via ISG from 
other exchanges that are members of ISG or with which the Exchange has 
entered into a comprehensive surveillance sharing agreement. In 
addition, investors will have ready access to information regarding the 
IIV 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 will facilitate the listing and trading of 
additional exchange-traded products that will enhance competition among 
market participants, 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 (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 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-2016-48 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-2016-48. 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-2016-48 and should 
be submitted on or before September 20, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\51\
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    \51\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-20735 Filed 8-29-16; 8:45 am]
 BILLING CODE 8011-01-P