Document ID: SEC-2012-0259-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2012-02-14T05:00Z

[Federal Register Volume 77, Number 30 (Tuesday, February 14, 2012)]
[Notices]
[Pages 8315-8318]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-3331]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66357; File No. SR-BATS-2012-004]

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to the Listing and Trading of Shares of the iShares[supreg] MSCI 
Denmark Capped Investable Market Index Fund

February 8, 2012.
    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 January 24, 2012, BATS Exchange, Inc. (``Exchange'' or ``BATS'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Exchange filed the proposal as 
a ``non-controversial'' proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6) thereunder,\4\ which 
renders the proposal effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the 
iShares[supreg] MSCI Denmark Capped Investable Market Index Fund as 
Index Fund Shares pursuant to Exchange Rule 14.11(c).
    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 shares (``Shares'') of the 
following fund of the iShares Trust (``Trust''): iShares[supreg] MSCI 
Denmark Capped Investable Market Index Fund (``Fund'') pursuant to 
Exchange Rule 14.11(c) related to Index Fund Shares.\5\ According to 
the registration statement,\6\ the Fund seeks investment results that 
correspond generally to the price and yield performance, before fees 
and expenses, of the MSCI Denmark IMI 25/50 Index (``Index''). The 
Index is sponsored by MSCI, Inc. (``Index Provider''),\7\ which is 
independent of the Fund, and BlackRock Fund Advisors is the investment 
adviser to the Fund. The Index Provider determines the composition and 
relative weightings of the securities in the Index and publishes 
information regarding the market value of the Index. The Index is a 
custom, free float-adjusted market capitalization weighted index 
designed to measure the performance of equity securities of companies 
whose market capitalization represents the top 85% of companies in the 
Danish securities market. The Index consists of stocks traded primarily 
on the Danish stock market, NASDAQ OMX Copenhagen. Component companies 
include financial, health care, and industrial companies.
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    \5\ An Index Fund Share is a security ``(i) that is issued by an 
open-end management investment company based on a portfolio of 
stocks or fixed income securities or a combination thereof, that 
seeks to provide investment results that correspond generally to the 
price and yield performance or total return performance of a 
specified foreign or domestic stock index, fixed income securities 
index or combination thereof; (ii) that is issued by such an open-
end management investment company in a specified aggregate minimum 
number in return for a deposit of specified numbers of shares of 
stock and/or a cash amount, a specified portfolio of fixed income 
securities and/or a cash amount and/or a combination of the above, 
with a value equal to the next determined net asset value; and (iii) 
that, when aggregated in the same specified minimum number, may be 
redeemed at a holder's request by such open-end investment company 
which will pay to the redeeming holder the stock and/or cash, fixed 
income securities and/or cash and/or a combination thereof, with a 
value equal to the next determined net asset value.'' See Exchange 
Rule 14.11(c).
    \6\ See the Trust's Registration Statement for the Fund on Form 
N-1A, dated December 16, 1999 (File Nos. 333-92935 and 811-09729) 
(``Registration Statement'').
    \7\ The Index Provider, MSCI, Inc., is not a broker-dealer or 
fund advisor. The Exchange notes that pursuant to the Exchange's 
rules ``any advisory committee, supervisory board, or similar entity 
* * * that makes decisions on the index or portfolio composition, 
methodology and related matters, must implement and maintain, or be 
subject to, procedures designed to prevent the use and dissemination 
of material non-public information regarding the applicable index.'' 
See Rule 14.11(c)(3)(B)(i) and (iii).
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    The Exchange is submitting this proposed rule change because the 
Index for the Fund does not meet all of the ``generic'' listing 
requirements of Exchange Rule 14.11(c) applicable to the listing of 
Index Fund Shares based on international or global indexes. The Index 
meets all such requirements except for those set forth in Rule 
14.11(c)(3)(A)(ii)(b). Specifically, the Index fails to meet the 
requirement that component stocks that in the aggregate account for at 
least 90% of the weight of the index or portfolio each shall have a 
minimum worldwide monthly trading volume during each of the last six 
months of at least 250,000 shares. As of January 13, 2012, 83.22% of 
the Index weight had at least 250,000 shares traded during each of the 
previous six months. Accordingly, the Index only narrowly misses 
satisfaction of the monthly trading volume requirement of Rule 
14.11(c)(3)(A)(ii)(b). The Exchange notes that other products have 
become immediately effective based on

[[Page 8316]]

relatively narrow misses that are similar in nature.\8\ The Exchange 
also notes that average volumes exceeded 250,000 shares for 90.73% of 
the Index weight when volumes are considered as an average over the 
past 6 months rather than looking at each of the past 6 months 
individually.
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    \8\ See, e.g., Securities Exchange Act Release No. 59471 (March 
6, 2009), 74 FR 9862 (February 27, 2009) (SR-NYSEArca-2009-13).
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    The Exchange represents that: (1) The Shares of the Fund currently 
satisfy all of the generic listing standards for Index Fund Shares 
except for the volume requirement under Rule 14.11(c)(3)(A)(ii)(b), as 
described above; (2) the continued listing standards under Exchange 
Rule 14.11(c)(9)(B) applicable to Index Fund Shares shall apply to the 
Shares; and (3) the Trust is required to comply with Rule 10A-3 under 
the Act for the initial and continued listing of the Shares.\9\ In 
addition, the Exchange represents that the Shares will comply with all 
other requirements applicable to Index Fund Shares including, but not 
limited to, requirements relating to the dissemination of key 
information such as the Index value and intraday indicative value, the 
rules governing the trading of equity securities, trading hours, 
trading halts, surveillance,\10\ and the Information Circulars to 
members of the Exchange, as set forth in Exchange rules applicable to 
exchange traded funds (Index Fund Shares) and in the Commission's order 
approving the generic listing rules applicable to the listing and 
trading of exchange traded funds (Index Fund Shares).\11\ Detailed 
descriptions of the Fund, the Index, the Index Provider, procedures for 
creating and redeeming Shares, transaction fees and expenses, risks, 
dividends, distributions, taxes, and reports to be distributed to 
beneficial owners of the Shares can be found in the Trust's 
Registration Statement and/or on the Web site for the Fund (http://www.ishares.com), as applicable.
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    \9\ 17 CFR 240.10A-3.
    \10\ The Exchange may obtain information for surveillance 
purposes via the Intermarket Surveillance Group (``ISG'') from other 
exchanges who are members of ISG. The Exchange notes that the Index 
component stocks are listed and traded on NASDAQ OMX Copenhagen A/S, 
which is a member of the ISG. For a list of the current members of 
ISG, see www.isgportal.org.
    \11\ See Securities Exchange Act Release No. 65225 (August 30, 
2011), 76 FR 55148 (September 6, 2011).
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2. Statutory Basis
    The rule change proposed in this submission is consistent with the 
requirements of the Act and the rules and regulations thereunder that 
are applicable to a national securities exchange, and, in particular, 
with the requirements of Section 6(b) of the Act.\12\ Specifically, the 
proposed change is consistent with Section 6(b)(5) of the Act \13\ 
because it is designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system and, in general, to protect investors and 
the public interest.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices and is generally 
designed to protect investors and the public interest in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in Exchange Rule 14.11(c). As 
noted above, the Shares of the Fund currently satisfy all of the 
generic listing standards for Index Fund Shares except for the volume 
requirement under Rule 14.11(c)(3)(A)(ii)(b), which the Index only 
narrowly misses. The Exchange also reiterates that the continued 
listing standards under Exchange Rule 14.11(c)(9)(B) applicable to 
Index Fund Shares shall apply to the Shares, and the Trust is required 
to comply with Rule 10A-3 under the Act for the initial and continued 
listing of the Shares.\14\ In addition, the Exchange represents that 
the Shares will comply with all other requirements applicable to Index 
Fund Shares including, but not limited to, requirements relating to the 
dissemination of key information such as the Index value and intraday 
indicative value, the rules governing the trading of equity securities, 
trading hours, trading halts, surveillance, and the Information 
Circulars to members of the Exchange, as set forth in Exchange rules 
applicable to exchange traded funds (Index Fund Shares) and in the 
Commission's order approving the generic listing rules applicable to 
the listing and trading of exchange traded funds (Index Fund Shares). 
The Exchange has in place surveillance procedures that are adequate to 
properly monitor trading in the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws. The Exchange 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. The 
Exchange notes that the Index component stocks are listed and traded on 
NASDAQ OMX Copenhagen A/S, which is a member of the ISG.
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    \14\ 17 CFR 240.10A-3.
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    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 is publicly available regarding the 
Fund and the Shares, thereby promoting market transparency. The 
Consolidated Tape Association will disseminate real time trade and 
quote information for the Shares. In addition, the current Index value 
will be widely disseminated by one or more major market data vendors at 
least every 60 seconds during the Exchange's regular market session. 
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. The 
Exchange will halt trading in the Shares in accordance with Exchange 
Rules. The grounds for a halt include a halt because the intraday 
indicative value of the security and/or the value of its underlying 
index are not being disseminated as required, a halt for other 
regulatory reasons or due to other conditions or circumstances deemed 
to be detrimental to the maintenance of a free and orderly market. In 
addition, as noted above, investors will have ready access to 
information regarding the Fund, the current Index value, the intraday 
indicative value, and quotation and last sale information for the 
Shares.
    The Exchange believes that the proposed rule change is designed to 
remove impediments to, and perfect the mechanism of, a free and open 
market and a national market system in that the listing and trading of 
the Fund on the Exchange will enhance competition among market 
participants, which the Exchange believes will benefit investors and 
the marketplace. The Exchange is commencing a listings business at a 
time when there are two dominant primary listing venues, the New York 
Stock Exchange and Nasdaq. Because the proposal will allow the Fund to 
list and trade on the Exchange, and without the proposal the Fund would 
likely be listed on another market, the Exchange believes that the 
proposal will provide companies with another option for raising capital 
in the public markets, thereby promoting the aforementioned principles 
discussed in Section 6(b)(5) of the Act.\15\ In addition, as noted 
above, investors will have ready access to information regarding the 
Fund's

[[Page 8317]]

holdings, the current Index value, the intraday indicative value, and 
quotation and last sale information for the Shares.
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    \15\ 15 U.S.C. 78f(b)(5).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change imposes 
any burden on competition.

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

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

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \16\ and Rule 19b-4(f)(6) thereunder.\17\ 
Because the foregoing proposed rule does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, provided that the self-regulatory organization 
has given the Commission written notice of its intent to file the 
proposed rule change at least five business days prior to the date of 
filing of the proposed rule change or such shorter time as designated 
by the Commission,\18\ the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-4(f)(6) 
thereunder.\20\
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    \16\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ The Commission notes that the Exchange has satisfied this 
requirement.
    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6).
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    The Commission believes that the proposed rule change is properly 
designated as ``non-controversial'' under Rule 19b-4(f)(6) because the 
Index for the Fund fails to meet the requirements set forth in Rule 
14.11(c)(3)(A)(ii)(b) by a small amount, and the Shares of the Fund 
currently satisfy all of the other applicable generic listing standards 
under Rule 14.11(c)(3)(A)(ii) and all other requirements applicable to 
Index Fund Shares, as set forth in the Exchange's rules. As described 
above, 83.22% of the Fund is comprised of component stocks with over 
250,000 shares traded in each of the last six months. The Exchange 
represents that the Shares of the Fund currently satisfy all of the 
generic listing standards for Index Fund Shares except for the volume 
requirement under Rule 14.11(c)(3)(A)(ii)(b), the continued listing 
standards under Exchange Rule 14.11(c)(9)(B) applicable to Index Fund 
Shares shall apply to the Shares, and the Trust is required to comply 
with Rule 10A-3 under the Act \21\ for the initial and continued 
listing of the Shares. In addition, the Exchange represents that the 
Shares will comply with all other requirements applicable to Index Fund 
Shares including, but not limited to, requirements relating to the 
dissemination of key information such as the Index value and intraday 
indicative value, the rules governing the trading of equity securities, 
trading hours, trading halts, surveillance, and the Information 
Circulars to members of the Exchange, as set forth in Exchange rules 
applicable to Index Fund Shares and in the Commission's order approving 
the generic listing rules applicable to the listing and trading of 
Index Fund Shares.
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    \21\ 17 CFR 240.10A-3.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) \22\ permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has asked that the 
Commission waive the 30 day operative delay so that the proposed rule 
change may become immediately effective in accordance with Section 
19(b)(3)(A) of the Act \23\ and Rule 19b-4(f)(6) thereunder.\24\ The 
Commission believes that waiver of the operative delay is consistent 
with the protection of investors and the public interest. The 
Commission notes that the Index narrowly misses only one component of 
the criteria applicable to Index Fund Shares and that the Shares of the 
Fund currently satisfy all of the other generic listing standards under 
Exchange Rule 14.11(c) and all other requirements applicable to Index 
Fund Shares, as set forth in Exchange rules and prior Commission orders 
approving the generic listing rules applicable to the listing and 
trading of Index Fund Shares. The Commission believes that the listing 
and trading of the Shares do not present any novel regulatory issues or 
impose any significant burden on competition, and that waiving the 30-
day operative delay would benefit the market and investors by providing 
market participants with additional investing choices. For these 
reasons, the Commission designates the proposal operative upon 
filing.\25\
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    \22\ 17 CFR 240.19b-4(f)(6)(iii)
    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 17 CFR 240.19b-4(f)(6).
    \25\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

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-BATS-2012-004 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BATS-2012-004. 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 
a.m. and 3 p.m. Copies of such filing

[[Page 8318]]

also will be available for inspection and copying at the principal 
office of the Exchange. All comments received will be posted without 
change; the Commission does not edit personal identifying information 
from submissions. You should submit only information that you wish to 
make available publicly. All submissions should refer to File Number 
SR-BATS-2012-004 and should be submitted on or before March 6, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-3331 Filed 2-13-12; 8:45 am]
BILLING CODE 8011-01-P