Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 2 Thereto, To List and Trade Shares of Eighteen ADRPLUS Funds of the Precidian ETFs Trust Under Rule 14.11(i), Managed Fund Shares, 29589-29593 [2018-13508]
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Federal Register / Vol. 83, No. 122 / Monday, June 25, 2018 / Notices
provisions of 5 U.S.C. 552, will be
available for website 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 also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–ISE–2018–55, and should
be submitted on or before July 16, 2018.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.49
Eduardo A. Aleman,
Assistant Secretary.
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–ISE–2018–55 on the subject
line.
amozie on DSK3GDR082PROD with NOTICES1
protections are substantially similar to
protections offered on Phlx. Therefore,
the Commission designates the
proposed rule change operative upon
filing.47
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) of the Act 48 to
determine whether the proposed rule
change should be approved or
disapproved.
SECURITIES AND EXCHANGE
COMMISSION
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–ISE–2018–55. This file
number should be included on the
subject line if e-mail 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 website (https://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
47 For purpose only of waiving the operative
delay, the Commission has considered the proposed
rule’s impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
48 15 U.S.C. 78s(b)(2)(B).
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Commission, 100 F Street NE,
Washington, DC 20549–2521.
SUPPLEMENTARY INFORMATION: The draft
strategic plan is available at the
Commission’s website at https://
www.sec.gov/files/sec-strategic-plan2018-2022.pdf or by contacting Nicole
Puccio, Branch Chief, Office of
Financial Management, at (202) 551–
6638, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–2521.
By the Commission.
Dated: June 19, 2018.
Brent J. Fields,
Secretary.
[FR Doc. 2018–13484 Filed 6–22–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83467; File No. SR–
CboeBZX–2018–019]
[FR Doc. 2018–13505 Filed 6–22–18; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–83463]
Draft 2018–2022 Strategic Plan for
Securities and Exchange Commission
Securities and Exchange
Commission.
ACTION: Request for comment.
AGENCY:
The Securities and Exchange
Commission (SEC) is providing notice
that it is seeking comments on its draft
2018–2022 Strategic Plan. The draft
Strategic Plan includes a draft of the
SEC’s mission, vision, values, strategic
goals, and planned initiatives.
DATES: Comments should be received on
or before July 25, 2018.
ADDRESSES: Comments may be
submitted by any of the following
methods:
SUMMARY:
Electronic Comments
Send an email to
PerformancePlanning@sec.gov.
Paper Comments
Send paper comments to Nicole
Puccio, Branch Chief, Securities and
Exchange Commission, 100 F Street NE,
Washington, DC 20549–2521.
FOR FURTHER INFORMATION CONTACT:
Nicole Puccio, Branch Chief, Office of
Financial Management, at (202) 551–
6638, Securities and Exchange
49 17
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CFR 200.30–3(a)(12).
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Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change, as Modified by
Amendment No. 2 Thereto, To List and
Trade Shares of Eighteen ADRPLUS
Funds of the Precidian ETFs Trust
Under Rule 14.11(i), Managed Fund
Shares
June 19, 2018.
I. Introduction
On March 5, 2018, Cboe BZX
Exchange, Inc. filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
list and trade shares (‘‘Shares’’) of
eighteen ADRPLUS Funds (‘‘Funds’’) of
the Precidian ETFs Trust (‘‘Trust’’). The
proposed rule change was published for
comment in the Federal Register on
March 21, 2018.3 On April 25, 2018, the
Exchange filed Amendment No. 1 to the
proposed rule change,4 and the
Commission, pursuant to Section
19(b)(2) of the Act,5 designated a longer
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 82881
(March 15, 2018), 83 FR 12449.
4 Amendment No. 1 replaced and superseded the
original rule filing in its entirety. Amendment
No. 1 is available at https://www.sec.gov/comments/
sr-cboebzx-2018-019/cboebzx2018019-3551361162325.pdf. Amendment No. 1 was subsequently
replaced and superseded in its entirety by
Amendment No. 2. See note 7, infra.
5 15 U.S.C. 78s(b)(2).
2 17
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period within which to approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether to
disapprove the proposed rule change.6
On May 17, 2018, the Exchange filed
Amendment No. 2 to the proposed rule
change.7 The Commission has received
no comment letters on the proposed rule
change, as modified by Amendment
No. 2 thereto. This order institutes
proceedings under Section 19(b)(2)(B) of
the Act 8 to determine whether to
approve or disapprove the proposed
rule change, as modified by Amendment
No. 2 thereto.
II. Description of the Proposed Rule
Change
The Exchange proposes to list and
trade Shares of eighteen different series
of the Trust under Rule 14.11(i), which
governs the listing and trading of
Managed Fund Shares on the Exchange.
Specifically, the Exchange proposes to
list Shares of Anheuser-Busch InBev
SA/NV ADRPLUS Fund, AstraZeneca
PLC ADRPLUS Fund, Banco Santander,
S.A. ADRPLUS Fund, BP P.L.C.
ADRPLUS Fund, British American
Tobacco p.l.c. ADRPLUS Fund, Diageo
plc ADRPLUS Fund, GlaxoSmithKline
plc ADRPLUS Fund, HSBC Holdings Plc
ADRPLUS Fund, Mitsubishi UFJ
Financial Group, Inc. ADRPLUS Fund,
Novartis AG ADRPLUS Fund, Novo
Nordisk A/S (B Shares) ADRPLUS
Fund, Royal Dutch Shell plc (Class A)
ADRPLUS Fund, Royal Dutch Shell plc
(Class B) ADRPLUS Fund, Sanofi
ADRPLUS Fund, SAP AG ADRPLUS
Fund, Total S.A. ADRPLUS Fund,
Toyota Motor Corporation ADRPLUS
Fund, and Vodafone Group Plc
ADRPLUS Fund. The Funds are a series
of, and the Shares will be offered by, the
Trust, which was organized as a
Delaware statutory trust on August 27,
2010.9 Precidian Funds LLC
(‘‘Adviser’’) 10 will serve as the
investment adviser to the Funds.11 The
Exchange has made the following
representations and statements in
describing the Funds and their
investment strategies.12
A. Exchange’s Description of the
ADRPLUS Funds
Each Fund seeks to provide
investment results that correspond
generally, before fees and expenses, to
the price and yield performance of a
particular American Depositary Receipt,
hedged against fluctuations in the
exchange rate between the U.S. dollar
and the local currency of the foreign
security underlying the American
Depositary Receipt (‘‘Local Currency’’).
The following chart lists the underlying
company and the Local Currency for
each of the Funds.
Underlying company
Anheuser-Busch InBev SA/NV ADRPLUS Fund .......................................................
AstraZeneca PLC ADRPLUS Fund ............................................................................
Banco Santander, S.A. ADRPLUS Fund ...................................................................
BP P.L.C. ADRPLUS Fund ........................................................................................
British American Tobacco p.l.c. ADRPLUS Fund ......................................................
Diageo plc ADRPLUS Fund .......................................................................................
GlaxoSmithKline plc ADRPLUS Fund ........................................................................
HSBC Holdings Plc ADRPLUS Fund .........................................................................
Mitsubishi UFJ Financial Group, Inc. ADRPLUS Fund ..............................................
Novartis AG ADRPLUS Fund .....................................................................................
Novo Nordisk A/S (B Shares) ADRPLUS Fund .........................................................
Royal Dutch Shell plc (Class A) ADRPLUS Fund .....................................................
Royal Dutch Shell plc (Class B) ADRPLUS Fund .....................................................
Sanofi ADRPLUS Fund ..............................................................................................
SAP AG ADRPLUS Fund ...........................................................................................
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Fund name
Anheuser-Busch InBev SA/NV ................
AstraZeneca PLC ....................................
Banco Santander, S.A .............................
BP p.l.c ....................................................
British American Tobacco p.l.c ...............
Diageo plc ...............................................
GlaxoSmithKline plc ................................
HSBC Holdings Plc .................................
Mitsubishi UFJ Financial Group, Inc .......
Novartis AG .............................................
Novo Nordisk A/S (B Shares) .................
Royal Dutch Shell plc (Class A) ..............
Royal Dutch Shell plc (Class B) ..............
Sanofi ......................................................
SAP AG ...................................................
6 See Securities Exchange Act Release No. 83102
(April 25, 2018), 83 FR 19126 (May 1, 2018). The
Commission designated June 19, 2018, as the date
by which the Commission would either approve or
disapprove, or institute proceedings to determine
whether to disapprove, the proposed rule change.
7 In Amendment No. 2, which amends the
proposed rule change and replaces and supersedes
Amendment No. 1 in its entirety, the Exchange: (1)
Specified that the Funds’ investments in derivatives
would be limited to over-the-counter (‘‘OTC’’)
currency swaps; (2) corrected references to
Exchange rules; (3) deleted a representation that the
Funds may not meet the requirement in Exchange
Rule 14.11(i)(4)(C)(iv)(b) that the aggregate gross
notional value of listed derivatives based on any
single underlying reference asset shall not exceed
30% of the weight of the portfolio (including gross
notional exposures); (4) represented that the Funds’
investments in cash equivalents would be limited
to the cash equivalents listed in Exchange Rule
14.11(i)(4)(C)(iii); (5) represented that the Trust
would comply with the surveillance requirements
for Managed Fund Shares under Exchange Rule
14.11(i); (6) represented that each Fund expects to
invest in excess of 95% of its net assets in the
Unhedged ADRs (as defined herein), and that each
Fund expects that the gross notional value of the
Currency Hedge (as defined herein) would be equal
to the value of the Unhedged ADRs, which would
be approximately 50% of the weight of the portfolio
(including gross notional exposures); (7)
represented that the Exchange will suspend trading
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and commence delisting proceedings for a Fund if
the Unhedged ADR held by the Fund has been
suspended from trading or delisted by the
Unhedged ADR’s listing exchange; (8) represented
that the Exchange or FINRA, on behalf of the
Exchange, is able to access, as needed, trade
information for certain fixed income instruments
reported to TRACE; (9) deleted repetitive
information and information irrelevant to this
proposal; and (10) made other clarifications,
corrections, and technical and conforming changes.
Amendment No. 2 is available at: https://
www.sec.gov/comments/sr-cboebzx-2018-019/cboeb
zx2018019-3665011-162423.pdf. Because
Amendment No. 2 to the proposed rule change does
not materially alter the substance of the proposed
rule change or raise unique or novel regulatory
issues, Amendment No. 2 is not subject to notice
and comment.
8 15 U.S.C. 78s(b)(2)(B).
9 The Exchange represents that the Trust is
registered with the Commission as an open-end
management investment company and has filed a
registration statement on behalf of the Funds on
Form N–1A (‘‘Registration Statement’’) with the
Commission. See Registration Statement on Form
N–1A for the Trust, filed with the Commission on
June 14, 2017 (File Nos. 333–171987 and 811–
22524). The descriptions of the Funds and the
Shares contained herein are based, in part, on
information in the Registration Statement.
10 The Exchange represents that the Commission
has issued an order granting certain exemptive
PO 00000
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Local currency
Euro.
British pound.
Euro.
British pound.
British pound.
British pound.
British pound.
British pound.
Japanese yen.
Swiss franc.
Danish krone.
Euro.
British pound.
Euro.
Euro.
relief to the Adviser and open-end management
companies advised by the Adviser under the
Investment Company Act of 1940 (15 U.S.C. 80a–
1). See Investment Company Act Release No. 32622
(May 2, 2017) (File No. 812–14584).
11 According to the Exchange, the Adviser is not
a registered broker-dealer and is not affiliated with
a broker-dealer. In addition, Adviser personnel who
make decisions regarding a Fund’s portfolio are
subject to procedures designed to prevent the use
and dissemination of material nonpublic
information regarding the Fund’s portfolio. In the
event that (a) the Adviser becomes registered as a
broker-dealer or newly affiliated with a brokerdealer, or (b) any new adviser or sub-adviser is a
registered broker-dealer or becomes affiliated with
a broker-dealer, it will implement and maintain a
fire wall with respect to its relevant personnel or
such broker-dealer affiliate, as applicable, regarding
access to information concerning the composition
and/or changes to the portfolio, and will be subject
to procedures designed to prevent the use and
dissemination of material non-public information
regarding such portfolio.
12 Additional information regarding the Funds,
the Trust, and the Shares, including investment
strategies, risks, creation and redemption
procedures, fees, portfolio holdings disclosure
policies, calculation of net asset value (‘‘NAV’’),
distributions, and taxes, among other things, can be
found in Amendment No. 2 to the proposed rule
change and the Registration Statement, as
applicable. See supra notes 7 and 9, respectively.
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Fund name
Underlying company
Total S.A. ADRPLUS Fund ........................................................................................
Toyota Motor Corporation ADRPLUS Fund ...............................................................
Vodafone Group Plc ADRPLUS Fund ........................................................................
Total S.A ..................................................
Toyota Motor Corporation .......................
Vodafone Group Plc ................................
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Each of the Funds will hold only: (i)
Shares of an American Depositary
Receipt (‘‘Unhedged ADR’’) listed on a
U.S. national securities exchange; (ii)
OTC currency swaps that hedge against
fluctuations in the exchange rate
(‘‘Exchange Rate’’) between the U.S.
dollar and the Local Currency
(‘‘Currency Hedge’’); and (iii) cash and
cash equivalents.13
The Exchange states that the Funds
will provide investors with the
opportunity to easily eliminate currency
exposure that they may not even realize
exists with Unhedged ADRs without
having to transact in the currency
derivatives market. The Exchange
believes that this confers a significant
benefit to investors and the broader
marketplace by adding transparency and
simplifying the process of eliminating
risk from an investor’s portfolio. As
further described below in the section
entitled Policy Discussion, the Exchange
believes that the policy concerns
underlying the listing rules which the
Funds would or may not meet,
specifically Rules 14.11(i)(4)(C)(i)(a)(3)–
(4) 14 and 14.11(i)(4)(C)(v),15 are
mitigated by the structure, holdings, and
purpose of the Funds.
13 The Exchange states that for purposes of this
filing and consistent with Rule 14.11(i)(4)(C)(iii),
cash equivalents are short-term instruments with
maturities of less than three months, that include
only the following: (i) U.S. Government securities,
including bills, notes, and bonds differing as to
maturity and rates of interest, which are either
issued or guaranteed by the U.S. Treasury or by U.S.
Government agencies or instrumentalities; (ii)
certificates of deposit issued against funds
deposited in a bank or savings and loan association;
(iii) bankers acceptances, which are short-term
credit instruments used to finance commercial
transactions; (iv) repurchase agreements and reverse
repurchase agreements; (v) bank time deposits,
which are monies kept on deposit with banks or
savings and loan associations for a stated period of
time at a fixed rate of interest; (vi) commercial
paper, which are short-term unsecured promissory
notes; and (vii) money market funds.
14 The Exchange states that the Funds will not
meet: (i) The requirement under Exchange Rule
14.11(i)(4)(C)(i)(a)(3) that the most heavily weighted
component stock shall not exceed 30% of the equity
weight of the portfolio; and (ii) the requirement
under Exchange Rule 14.11(i)(4)(C)(i)(a)(4) that the
equity portion of the portfolio shall include a
minimum of 13 component stocks.
15 The Exchange states that the Funds may not
meet the requirement under Exchange Rule
14.11(i)(4)(C)(v) that the aggregate gross notional
value of OTC derivatives shall not exceed 20% of
the weight of the portfolio (including gross notional
exposures).
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17:58 Jun 22, 2018
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The Trust is required to comply with
Rule 10A–3 under the Act 16 for the
initial and continued listing of the
Shares of each Fund. In addition, the
Exchange represents that the Shares of
each Fund will meet and be subject to
all other requirements of the Generic
Listing Rules, as defined below, and
other applicable continued listing
requirements for Managed Fund Shares
under Exchange Rule 14.11(i), including
those requirements regarding the
Disclosed Portfolio (as defined in the
Exchange rules) and the requirement
that the Disclosed Portfolio and the
NAV will be made available to all
market participants at the same time,17
intraday indicative value,18 suspension
of trading or removal,19 trading halts,20
disclosure,21 firewalls,22 and
surveillance.23 Further, at least 100,000
Shares of each Fund will be outstanding
upon the commencement of trading.24
The Exchange also provides that all
statements and representations made in
the filing regarding the description of
the portfolio or reference assets,
limitations on portfolio holdings or
reference assets, dissemination and
availability of reference assets and
intraday indicative values, and the
applicability of Exchange listing rules
specified in the filing will constitute
continued listing requirements for the
Funds. The Exchange states that the
Trust, on behalf of the Funds, has
represented to the Exchange that it will
advise the Exchange of any failure by a
Fund or the Shares to comply with the
continued listing requirements, and,
pursuant to its obligations under
Section 19(g)(1) of the Act, the Exchange
will surveil for compliance with the
continued listing requirements. If a
Fund or the Shares are not in
compliance with the applicable listing
requirements, the Exchange will
16 17
CFR 240.10A–3.
Exchange Rules 14.11(i)(4)(A)(ii) and
14.11(i)(4)(B)(ii).
18 See Exchange Rule 14.11(i)(4)(B)(i).
19 See Exchange Rule 14.11(i)(4)(B)(iii).
20 See Exchange Rule 14.11(i)(4)(B)(iv). The
Exchange will also halt trading in a Fund where
there has been a regulatory trading halt declared in
the associated Unhedged ADR until trading in the
Unhedged ADR resumes.
21 See Exchange Rule 14.11(i)(6).
22 See Exchange Rule 14.11(i)(7).
23 See Exchange Rule 14.11(i)(2)(C).
24 See Exchange Rule 14.11(i)(4)(A)(i).
17 See
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29591
Local currency
Euro.
Japanese yen.
British pound.
commence delisting procedures under
Exchange Rule 14.12.
B. Exchange’s Policy Discussion
The Exchange believes that, while the
Funds do not meet the Generic Listing
Standards, in particular Rules
14.11(i)(4)(C)(i)(a)(3) and (4) and
14.11(i)(4)(C)(v), the policy issues that
those rules are intended to address are
otherwise mitigated by the structure,
holdings, and purpose of the Funds.25
The Exchange believes that Rule
14.11(i)(4)(C)(i)(a)(3) is intended to
ensure that no single equity security
constitutes too concentrated of a
position in a series of Managed Fund
Shares, and Rule 14.11(i)(4)(C)(i)(a)(4) is
similarly intended to diversify the
holdings of a series of Managed Fund
Shares. The Exchange believes that
these policy concerns are mitigated
because: (i) The Unhedged ADR will
meet the market cap and liquidity
requirements of Rules
14.11(i)(4)(C)(i)(a)(1) and (2); and (ii) the
intended function of the Funds is to
eliminate currency exposure risk for a
single security, which means that the
Funds are necessarily concentrated. The
Exchange represents that the creation
and redemption mechanism will
provide a near frictionless arbitrage
opportunity that would minimize the
risk of manipulation of either the
Unhedged ADR or the applicable Fund
and, thus, mitigate the manipulation
concerns that Rules
14.11(i)(4)(C)(i)(a)(3) and (4) were
intended to address.
The Exchange also believes that the
policy issues that Rule 14.11(i)(4)(C)(v)
is intended to address are also mitigated
by the way that the Funds would use
OTC currency swaps. According to the
Exchange, the rule is intended to
mitigate concerns around the
manipulability of a particular
underlying reference asset or derivatives
contract and to minimize counterparty
risk. While the Currency Hedge
positions taken by the Currency Hedged
ADRs would not meet the Generic
Listing Standards related to OTC
25 The Exchange represents that each Fund
expects to invest in excess of 95% of its net assets
in the Unhedged ADRs, and each Fund expects that
the gross notional value of the Currency Hedge
would be equal to the value of the Unhedged ADRs,
which would be approximately 50% of the weight
of the portfolio (including gross notional
exposures).
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derivatives holdings, the Exchange
believes that the policy concerns about
limiting exposure to potentially
manipulable underlying reference assets
that the Generic Listing Standards are
intended to address are otherwise
mitigated by the liquidity in the
underlying spot currency market that
prevents manipulation of the reference
prices used by the Currency Hedge.
Further, the Exchange states that the
Funds will attempt to limit counterparty
risk in OTC currency swaps by: (i)
Entering into such contracts only with
counterparties the Advisor believes are
creditworthy; (ii) limiting a Fund’s
exposure to each counterparty; and (iii)
monitoring the creditworthiness of each
counterparty and the Fund’s exposure to
each counterparty on an ongoing basis.
The Exchange believes that counterparty
risk associated with OTC currency
swaps is further mitigated because the
currency swaps are settled on a daily
basis and, thus, the counterparty risk for
any particular swap is limited in two
ways—first, that the counterparty credit
exposure is always limited to a 24 hour
period and second, that the exposure of
the swap is only to the movement in the
currencies over that same 24 hour
period.
III. Proceedings To Determine Whether
To Approve or Disapprove SR–
CboeBZX–2018–019 and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 26 to determine
whether the proposed rule change, as
modified by Amendment No. 2, should
be approved or disapproved. Institution
of such proceedings is appropriate at
this time in view of the legal and policy
issues raised by the proposed rule
change. Institution of proceedings does
not indicate that the Commission has
reached any conclusions with respect to
any of the issues involved. Rather, as
described below, the Commission seeks
and encourages interested persons to
provide comments on the proposed rule
change.
Pursuant to Section 19(b)(2)(B) of the
Act,27 the Commission is providing
notice of the grounds for disapproval
under consideration. The Commission is
instituting proceedings to allow for
additional analysis of the proposed rule
change’s consistency with Section
6(b)(5) of the Act, which requires,
among other things, that the rules of a
national securities exchange be
‘‘designed to prevent fraudulent and
manipulative acts and practices, to
26 15
U.S.C. 78s(b)(2)(B).
27 Id.
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17:58 Jun 22, 2018
Jkt 244001
promote just and equitable principles of
trade,’’ and ‘‘to protect investors and the
public interest.’’ 28
IV. Procedure: Request for Written
Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the issues
identified above, as well as any other
concerns they may have with the
proposal. In particular, the Commission
invites the written views of interested
persons concerning whether the
proposal is consistent with Section
6(b)(5) or any other provision of the Act,
or the rules and regulations thereunder.
Although there do not appear to be any
issues relevant to approval or
disapproval that would be facilitated by
an oral presentation of views, data, and
arguments, the Commission will
consider, pursuant to Rule 19b–4, any
request for an opportunity to make an
oral presentation.29
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposal should be approved or
disapproved by July 16, 2018. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by July 30, 2018. The
Commission asks that commenters
address the sufficiency of the
Exchange’s statements in support of the
proposal, which are set forth in
Amendment No. 2 to the proposed rule
change,30 in addition to any other
comments they may wish to submit
about the proposed rule change.
The Commission notes that the
Exchange proposes to list and trade,
pursuant to its Rule 14.11(i), Managed
Fund Shares of Funds that would invest
in shares of a single Unhedged ADR,
along with a Currency Hedge and cash
and cash equivalents. A proposal to list
and trade Managed Fund Shares hat are
designed to reflect, generally, the price
and performance of a single equity
security, hedged against fluctuations in
a given exchange rate, is novel.
Accordingly, the Commission
specifically seeks comment on whether
it is appropriate to permit the listing
28 15
U.S.C. 78f(b)(5).
19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Public Law
94–29 (June 4, 1975), grants the Commission
flexibility to determine what type of proceeding—
either oral or notice and opportunity for written
comments—is appropriate for consideration of a
particular proposal by a self-regulatory
organization. See Securities Act Amendments of
1975, Senate Comm. on Banking, Housing & Urban
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975).
30 See supra note 7.
29 Section
PO 00000
Frm 00065
Fmt 4703
Sfmt 4703
and trading of shares of an exchangetraded fund with underlying holdings
concentrated in a single (or a few
unique) equity securities. What impact,
if any, would such shares have on the
market for the underlying equity
security (or securities)? What impact, if
any, would such shares have on the
equity markets more generally,
especially if funds investing in a single
equity security proliferate? Are the
listing and trading of such shares
consistent with the requirements of
Section 6(b)(5) of the Act, which, among
other things, requires that the rules of an
exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, and, in general, to
protect investors and the public
interest?
Comments may be submitted by any
of the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2018–019 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
Numbers SR–CboeBZX–2018–019. 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 website (https://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 website 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 these
filings 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
E:\FR\FM\25JNN1.SGM
25JNN1
Federal Register / Vol. 83, No. 122 / Monday, June 25, 2018 / Notices
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
CboeBZX–2018–019 and should be
submitted on or before July 16, 2018.
Rebuttal comments should be submitted
by July 30, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–13508 Filed 6–22–18; 8:45 am]
BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83466; File No. SR–
NASDAQ–2018–045]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Relocate
the Exchange’s Rules Pertaining to CoLocation and Direct Connectivity
June 19, 2018.
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 June 5,
2018, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) 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.
amozie on DSK3GDR082PROD with NOTICES1
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to relocate the
Exchange’s rules pertaining to colocation and direct connectivity, which
are presently at Rules 7034 and 7051, to
Sections 1 and 2, respectively, under a
new General 8 (‘‘Connectivity’’) heading
within the Exchange’s new rulebook
shell, entitled ‘‘General Equity and
Options Rules.’’
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaq.cchwallstreet.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
31 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
17:58 Jun 22, 2018
Jkt 244001
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 aspects of such
statements.
1. Purpose
The Exchange proposes to relocate its
rules governing co-location and direct
connectivity services, which presently
comprise Rules 7034 and 7051,
respectively. The Exchange proposes to
establish, within its new rulebook
shell,3 a new General 8 heading, entitled
‘‘Connectivity,’’ to renumber Rule 7034
as Section 1 thereunder, and to
renumber Rule 7051 as Section 2
thereunder. The Exchange furthermore
proposes to amend Equity Rules 7007,
7015, 7025, and 7030, and Options
Rules, Chapter XV to update cross
references therein to Rules 7034 and
7051.4 The Exchange also proposes to
update internal cross-references in the
renumbered Rules.
The Exchange considers it appropriate
to relocate these Rules to better organize
its Rulebook. The other Affiliated
Exchanges intend to propose similar
reorganizations of their co-location and
direct connectivity rules so that these
rules will be harmonized among all of
the Affiliated Exchanges.
The relocation of the co-location and
direct connectivity rules is part of the
Exchange’s continued effort to promote
efficiency and conformity of its
3 Recently, the Exchange added a shell structure
to its Rulebook with the purpose of improving
efficiency and readability and to align its rules
closer to those of its five sister exchanges: Nasdaq
BX, Inc.; Nasdaq PHLX LLC; Nasdaq ISE, LLC;
Nasdaq GEMX, LLC; and Nasdaq MRX, LLC
(together with Nasdaq, the ‘‘Affiliated Exchanges’’).
See Securities Exchange Act Release No. 82175
(November 29, 2017), 82 FR 57494 (December 5,
2017) (SR–NASDAQ–2017–125).
4 In addition to the above, the Exchange proposes
to delete language that exists presently in Rule
7034(b) (‘‘Connectivity to Third Party Services’’)
and Rule 7051(b) (‘‘Direct Circuit Connection to
Third Party Services’’) that each refer to expired
waivers of fees for connections to third party
services that were applicable ‘‘through April 30,
2017.’’
PO 00000
Frm 00066
Fmt 4703
Sfmt 4703
29593
processes with those of its Affiliated
Exchanges. The Exchange believes that
moving the co-location and direct
connectivity rules to their new location
will facilitate the use of the Rulebook by
Members of the Exchange who are
members of other Affiliated Exchanges.
Moreover, the proposed changes are of
a non-substantive nature and will not
amend the relocated rules other than to
update their numbers and make
conforming cross-reference changes.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,5 in general, and furthers the
objectives of Section 6(b)(5) of the Act,6
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest, by
improving the way its Rulebook is
organized, providing ease of reference in
locating co-location and direct
connectivity rules, and harmonizing the
Exchange’s Rules with those of the other
Affiliated Exchanges. As previously
stated, the proposed Rule relocation is
non-substantive.
The Exchange also believes that it is
just and equitable and consistent with
the protection of investors and the
interest of the public to remove expired
waiver language from the Exchange’s
Rules.
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 intermarket or intramarket competition that is not necessary
or appropriate in furtherance of the
purposes of the Act. The proposed
changes do not impose a burden on
competition because, as previously
stated, they (i) are of a non-substantive
nature, (ii) are intended to harmonize
the Exchange’s rules with those of its
Affiliated Exchanges, and (iii) are
intended to organize the Rulebook in a
way that it will ease the Members’
navigation and reading of the rules
across the Affiliated Exchanges.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
5 15
6 15
E:\FR\FM\25JNN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
25JNN1
]]>Agencies
[Federal Register Volume 83, Number 122 (Monday, June 25, 2018)]
[Notices]
[Pages 29589-29593]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-13508]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83467; File No. SR-CboeBZX-2018-019]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order
Instituting Proceedings To Determine Whether To Approve or Disapprove a
Proposed Rule Change, as Modified by Amendment No. 2 Thereto, To List
and Trade Shares of Eighteen ADRPLUS Funds of the Precidian ETFs Trust
Under Rule 14.11(i), Managed Fund Shares
June 19, 2018.
I. Introduction
On March 5, 2018, Cboe BZX Exchange, Inc. filed with the Securities
and Exchange Commission (``Commission''), pursuant to Section 19(b)(1)
of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to list and trade shares
(``Shares'') of eighteen ADRPLUS Funds (``Funds'') of the Precidian
ETFs Trust (``Trust''). The proposed rule change was published for
comment in the Federal Register on March 21, 2018.\3\ On April 25,
2018, the Exchange filed Amendment No. 1 to the proposed rule
change,\4\ and the Commission, pursuant to Section 19(b)(2) of the
Act,\5\ designated a longer
[[Page 29590]]
period within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
disapprove the proposed rule change.\6\ On May 17, 2018, the Exchange
filed Amendment No. 2 to the proposed rule change.\7\ The Commission
has received no comment letters on the proposed rule change, as
modified by Amendment No. 2 thereto. This order institutes proceedings
under Section 19(b)(2)(B) of the Act \8\ to determine whether to
approve or disapprove the proposed rule change, as modified by
Amendment No. 2 thereto.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 82881 (March 15,
2018), 83 FR 12449.
\4\ Amendment No. 1 replaced and superseded the original rule
filing in its entirety. Amendment No. 1 is available at https://www.sec.gov/comments/sr-cboebzx-2018-019/cboebzx2018019-3551361-162325.pdf. Amendment No. 1 was subsequently replaced and superseded
in its entirety by Amendment No. 2. See note 7, infra.
\5\ 15 U.S.C. 78s(b)(2).
\6\ See Securities Exchange Act Release No. 83102 (April 25,
2018), 83 FR 19126 (May 1, 2018). The Commission designated June 19,
2018, as the date by which the Commission would either approve or
disapprove, or institute proceedings to determine whether to
disapprove, the proposed rule change.
\7\ In Amendment No. 2, which amends the proposed rule change
and replaces and supersedes Amendment No. 1 in its entirety, the
Exchange: (1) Specified that the Funds' investments in derivatives
would be limited to over-the-counter (``OTC'') currency swaps; (2)
corrected references to Exchange rules; (3) deleted a representation
that the Funds may not meet the requirement in Exchange Rule
14.11(i)(4)(C)(iv)(b) that the aggregate gross notional value of
listed derivatives based on any single underlying reference asset
shall not exceed 30% of the weight of the portfolio (including gross
notional exposures); (4) represented that the Funds' investments in
cash equivalents would be limited to the cash equivalents listed in
Exchange Rule 14.11(i)(4)(C)(iii); (5) represented that the Trust
would comply with the surveillance requirements for Managed Fund
Shares under Exchange Rule 14.11(i); (6) represented that each Fund
expects to invest in excess of 95% of its net assets in the Unhedged
ADRs (as defined herein), and that each Fund expects that the gross
notional value of the Currency Hedge (as defined herein) would be
equal to the value of the Unhedged ADRs, which would be
approximately 50% of the weight of the portfolio (including gross
notional exposures); (7) represented that the Exchange will suspend
trading and commence delisting proceedings for a Fund if the
Unhedged ADR held by the Fund has been suspended from trading or
delisted by the Unhedged ADR's listing exchange; (8) represented
that the Exchange or FINRA, on behalf of the Exchange, is able to
access, as needed, trade information for certain fixed income
instruments reported to TRACE; (9) deleted repetitive information
and information irrelevant to this proposal; and (10) made other
clarifications, corrections, and technical and conforming changes.
Amendment No. 2 is available at: https://www.sec.gov/comments/sr-cboebzx-2018-019/cboebzx2018019-3665011-162423.pdf. Because
Amendment No. 2 to the proposed rule change does not materially
alter the substance of the proposed rule change or raise unique or
novel regulatory issues, Amendment No. 2 is not subject to notice
and comment.
\8\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to list and trade Shares of eighteen
different series of the Trust under Rule 14.11(i), which governs the
listing and trading of Managed Fund Shares on the Exchange.
Specifically, the Exchange proposes to list Shares of Anheuser-Busch
InBev SA/NV ADRPLUS Fund, AstraZeneca PLC ADRPLUS Fund, Banco
Santander, S.A. ADRPLUS Fund, BP P.L.C. ADRPLUS Fund, British American
Tobacco p.l.c. ADRPLUS Fund, Diageo plc ADRPLUS Fund, GlaxoSmithKline
plc ADRPLUS Fund, HSBC Holdings Plc ADRPLUS Fund, Mitsubishi UFJ
Financial Group, Inc. ADRPLUS Fund, Novartis AG ADRPLUS Fund, Novo
Nordisk A/S (B Shares) ADRPLUS Fund, Royal Dutch Shell plc (Class A)
ADRPLUS Fund, Royal Dutch Shell plc (Class B) ADRPLUS Fund, Sanofi
ADRPLUS Fund, SAP AG ADRPLUS Fund, Total S.A. ADRPLUS Fund, Toyota
Motor Corporation ADRPLUS Fund, and Vodafone Group Plc ADRPLUS Fund.
The Funds are a series of, and the Shares will be offered by, the
Trust, which was organized as a Delaware statutory trust on August 27,
2010.\9\ Precidian Funds LLC (``Adviser'') \10\ will serve as the
investment adviser to the Funds.\11\ The Exchange has made the
following representations and statements in describing the Funds and
their investment strategies.\12\
---------------------------------------------------------------------------
\9\ The Exchange represents that the Trust is registered with
the Commission as an open-end management investment company and has
filed a registration statement on behalf of the Funds on Form N-1A
(``Registration Statement'') with the Commission. See Registration
Statement on Form N-1A for the Trust, filed with the Commission on
June 14, 2017 (File Nos. 333-171987 and 811-22524). The descriptions
of the Funds and the Shares contained herein are based, in part, on
information in the Registration Statement.
\10\ The Exchange represents that the Commission has issued an
order granting certain exemptive relief to the Adviser and open-end
management companies advised by the Adviser under the Investment
Company Act of 1940 (15 U.S.C. 80a-1). See Investment Company Act
Release No. 32622 (May 2, 2017) (File No. 812-14584).
\11\ According to the Exchange, the Adviser is not a registered
broker-dealer and is not affiliated with a broker-dealer. In
addition, Adviser personnel who make decisions regarding a Fund's
portfolio are subject to procedures designed to prevent the use and
dissemination of material nonpublic information regarding the Fund's
portfolio. In the event that (a) the Adviser becomes registered as a
broker-dealer or newly affiliated with a broker-dealer, or (b) any
new adviser or sub-adviser is a registered broker-dealer or becomes
affiliated with a broker-dealer, it will implement and maintain a
fire wall with respect to its relevant personnel or such broker-
dealer affiliate, as applicable, regarding access to information
concerning the composition and/or changes to the portfolio, and will
be subject to procedures designed to prevent the use and
dissemination of material non-public information regarding such
portfolio.
\12\ Additional information regarding the Funds, the Trust, and
the Shares, including investment strategies, risks, creation and
redemption procedures, fees, portfolio holdings disclosure policies,
calculation of net asset value (``NAV''), distributions, and taxes,
among other things, can be found in Amendment No. 2 to the proposed
rule change and the Registration Statement, as applicable. See supra
notes 7 and 9, respectively.
---------------------------------------------------------------------------
A. Exchange's Description of the ADRPLUS Funds
Each Fund seeks to provide investment results that correspond
generally, before fees and expenses, to the price and yield performance
of a particular American Depositary Receipt, hedged against
fluctuations in the exchange rate between the U.S. dollar and the local
currency of the foreign security underlying the American Depositary
Receipt (``Local Currency''). The following chart lists the underlying
company and the Local Currency for each of the Funds.
------------------------------------------------------------------------
Underlying
Fund name company Local currency
------------------------------------------------------------------------
Anheuser-Busch InBev SA/NV Anheuser-Busch Euro.
ADRPLUS Fund. InBev SA/NV.
AstraZeneca PLC ADRPLUS Fund.. AstraZeneca PLC.. British pound.
Banco Santander, S.A. ADRPLUS Banco Santander, Euro.
Fund. S.A.
BP P.L.C. ADRPLUS Fund........ BP p.l.c......... British pound.
British American Tobacco British American British pound.
p.l.c. ADRPLUS Fund. Tobacco p.l.c.
Diageo plc ADRPLUS Fund....... Diageo plc....... British pound.
GlaxoSmithKline plc ADRPLUS GlaxoSmithKline British pound.
Fund. plc.
HSBC Holdings Plc ADRPLUS Fund HSBC Holdings Plc British pound.
Mitsubishi UFJ Financial Mitsubishi UFJ Japanese yen.
Group, Inc. ADRPLUS Fund. Financial Group,
Inc.
Novartis AG ADRPLUS Fund...... Novartis AG...... Swiss franc.
Novo Nordisk A/S (B Shares) Novo Nordisk A/S Danish krone.
ADRPLUS Fund. (B Shares).
Royal Dutch Shell plc (Class Royal Dutch Shell Euro.
A) ADRPLUS Fund. plc (Class A).
Royal Dutch Shell plc (Class Royal Dutch Shell British pound.
B) ADRPLUS Fund. plc (Class B).
Sanofi ADRPLUS Fund........... Sanofi........... Euro.
SAP AG ADRPLUS Fund........... SAP AG........... Euro.
[[Page 29591]]
Total S.A. ADRPLUS Fund....... Total S.A........ Euro.
Toyota Motor Corporation Toyota Motor Japanese yen.
ADRPLUS Fund. Corporation.
Vodafone Group Plc ADRPLUS Vodafone Group British pound.
Fund. Plc.
------------------------------------------------------------------------
Each of the Funds will hold only: (i) Shares of an American
Depositary Receipt (``Unhedged ADR'') listed on a U.S. national
securities exchange; (ii) OTC currency swaps that hedge against
fluctuations in the exchange rate (``Exchange Rate'') between the U.S.
dollar and the Local Currency (``Currency Hedge''); and (iii) cash and
cash equivalents.\13\
---------------------------------------------------------------------------
\13\ The Exchange states that for purposes of this filing and
consistent with Rule 14.11(i)(4)(C)(iii), cash equivalents are
short-term instruments with maturities of less than three months,
that include only the following: (i) U.S. Government securities,
including bills, notes, and bonds differing as to maturity and rates
of interest, which are either issued or guaranteed by the U.S.
Treasury or by U.S. Government agencies or instrumentalities; (ii)
certificates of deposit issued against funds deposited in a bank or
savings and loan association; (iii) bankers acceptances, which are
short-term credit instruments used to finance commercial
transactions; (iv) repurchase agreements and reverse repurchase
agreements; (v) bank time deposits, which are monies kept on deposit
with banks or savings and loan associations for a stated period of
time at a fixed rate of interest; (vi) commercial paper, which are
short-term unsecured promissory notes; and (vii) money market funds.
---------------------------------------------------------------------------
The Exchange states that the Funds will provide investors with the
opportunity to easily eliminate currency exposure that they may not
even realize exists with Unhedged ADRs without having to transact in
the currency derivatives market. The Exchange believes that this
confers a significant benefit to investors and the broader marketplace
by adding transparency and simplifying the process of eliminating risk
from an investor's portfolio. As further described below in the section
entitled Policy Discussion, the Exchange believes that the policy
concerns underlying the listing rules which the Funds would or may not
meet, specifically Rules 14.11(i)(4)(C)(i)(a)(3)-(4) \14\ and
14.11(i)(4)(C)(v),\15\ are mitigated by the structure, holdings, and
purpose of the Funds.
---------------------------------------------------------------------------
\14\ The Exchange states that the Funds will not meet: (i) The
requirement under Exchange Rule 14.11(i)(4)(C)(i)(a)(3) that the
most heavily weighted component stock shall not exceed 30% of the
equity weight of the portfolio; and (ii) the requirement under
Exchange Rule 14.11(i)(4)(C)(i)(a)(4) that the equity portion of the
portfolio shall include a minimum of 13 component stocks.
\15\ The Exchange states that the Funds may not meet the
requirement under Exchange Rule 14.11(i)(4)(C)(v) that the aggregate
gross notional value of OTC derivatives shall not exceed 20% of the
weight of the portfolio (including gross notional exposures).
---------------------------------------------------------------------------
The Trust is required to comply with Rule 10A-3 under the Act \16\
for the initial and continued listing of the Shares of each Fund. In
addition, the Exchange represents that the Shares of each Fund will
meet and be subject to all other requirements of the Generic Listing
Rules, as defined below, and other applicable continued listing
requirements for Managed Fund Shares under Exchange Rule 14.11(i),
including those requirements regarding the Disclosed Portfolio (as
defined in the Exchange rules) and the requirement that the Disclosed
Portfolio and the NAV will be made available to all market participants
at the same time,\17\ intraday indicative value,\18\ suspension of
trading or removal,\19\ trading halts,\20\ disclosure,\21\
firewalls,\22\ and surveillance.\23\ Further, at least 100,000 Shares
of each Fund will be outstanding upon the commencement of trading.\24\
The Exchange also provides that all statements and representations made
in the filing regarding the description of the portfolio or reference
assets, limitations on portfolio holdings or reference assets,
dissemination and availability of reference assets and intraday
indicative values, and the applicability of Exchange listing rules
specified in the filing will constitute continued listing requirements
for the Funds. The Exchange states that the Trust, on behalf of the
Funds, has represented to the Exchange that it will advise the Exchange
of any failure by a Fund or the Shares to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will surveil for compliance with the
continued listing requirements. If a Fund or the Shares are not in
compliance with the applicable listing requirements, the Exchange will
commence delisting procedures under Exchange Rule 14.12.
---------------------------------------------------------------------------
\16\ 17 CFR 240.10A-3.
\17\ See Exchange Rules 14.11(i)(4)(A)(ii) and
14.11(i)(4)(B)(ii).
\18\ See Exchange Rule 14.11(i)(4)(B)(i).
\19\ See Exchange Rule 14.11(i)(4)(B)(iii).
\20\ See Exchange Rule 14.11(i)(4)(B)(iv). The Exchange will
also halt trading in a Fund where there has been a regulatory
trading halt declared in the associated Unhedged ADR until trading
in the Unhedged ADR resumes.
\21\ See Exchange Rule 14.11(i)(6).
\22\ See Exchange Rule 14.11(i)(7).
\23\ See Exchange Rule 14.11(i)(2)(C).
\24\ See Exchange Rule 14.11(i)(4)(A)(i).
---------------------------------------------------------------------------
B. Exchange's Policy Discussion
The Exchange believes that, while the Funds do not meet the Generic
Listing Standards, in particular Rules 14.11(i)(4)(C)(i)(a)(3) and (4)
and 14.11(i)(4)(C)(v), the policy issues that those rules are intended
to address are otherwise mitigated by the structure, holdings, and
purpose of the Funds.\25\ The Exchange believes that Rule
14.11(i)(4)(C)(i)(a)(3) is intended to ensure that no single equity
security constitutes too concentrated of a position in a series of
Managed Fund Shares, and Rule 14.11(i)(4)(C)(i)(a)(4) is similarly
intended to diversify the holdings of a series of Managed Fund Shares.
The Exchange believes that these policy concerns are mitigated because:
(i) The Unhedged ADR will meet the market cap and liquidity
requirements of Rules 14.11(i)(4)(C)(i)(a)(1) and (2); and (ii) the
intended function of the Funds is to eliminate currency exposure risk
for a single security, which means that the Funds are necessarily
concentrated. The Exchange represents that the creation and redemption
mechanism will provide a near frictionless arbitrage opportunity that
would minimize the risk of manipulation of either the Unhedged ADR or
the applicable Fund and, thus, mitigate the manipulation concerns that
Rules 14.11(i)(4)(C)(i)(a)(3) and (4) were intended to address.
---------------------------------------------------------------------------
\25\ The Exchange represents that each Fund expects to invest in
excess of 95% of its net assets in the Unhedged ADRs, and each Fund
expects that the gross notional value of the Currency Hedge would be
equal to the value of the Unhedged ADRs, which would be
approximately 50% of the weight of the portfolio (including gross
notional exposures).
---------------------------------------------------------------------------
The Exchange also believes that the policy issues that Rule
14.11(i)(4)(C)(v) is intended to address are also mitigated by the way
that the Funds would use OTC currency swaps. According to the Exchange,
the rule is intended to mitigate concerns around the manipulability of
a particular underlying reference asset or derivatives contract and to
minimize counterparty risk. While the Currency Hedge positions taken by
the Currency Hedged ADRs would not meet the Generic Listing Standards
related to OTC
[[Page 29592]]
derivatives holdings, the Exchange believes that the policy concerns
about limiting exposure to potentially manipulable underlying reference
assets that the Generic Listing Standards are intended to address are
otherwise mitigated by the liquidity in the underlying spot currency
market that prevents manipulation of the reference prices used by the
Currency Hedge. Further, the Exchange states that the Funds will
attempt to limit counterparty risk in OTC currency swaps by: (i)
Entering into such contracts only with counterparties the Advisor
believes are creditworthy; (ii) limiting a Fund's exposure to each
counterparty; and (iii) monitoring the creditworthiness of each
counterparty and the Fund's exposure to each counterparty on an ongoing
basis. The Exchange believes that counterparty risk associated with OTC
currency swaps is further mitigated because the currency swaps are
settled on a daily basis and, thus, the counterparty risk for any
particular swap is limited in two ways--first, that the counterparty
credit exposure is always limited to a 24 hour period and second, that
the exposure of the swap is only to the movement in the currencies over
that same 24 hour period.
III. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2018-019 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \26\ to determine whether the proposed rule
change, as modified by Amendment No. 2, should be approved or
disapproved. Institution of such proceedings is appropriate at this
time in view of the legal and policy issues raised by the proposed rule
change. Institution of proceedings does not indicate that the
Commission has reached any conclusions with respect to any of the
issues involved. Rather, as described below, the Commission seeks and
encourages interested persons to provide comments on the proposed rule
change.
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\26\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\27\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with Section 6(b)(5)
of the Act, which requires, among other things, that the rules of a
national securities exchange be ``designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade,'' and ``to protect investors and the public
interest.'' \28\
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\27\ Id.
\28\ 15 U.S.C. 78f(b)(5).
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IV. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal is
consistent with Section 6(b)(5) or any other provision of the Act, or
the rules and regulations thereunder. Although there do not appear to
be any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4, any request for an
opportunity to make an oral presentation.\29\
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\29\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by July 16, 2018. Any person who wishes to file a rebuttal
to any other person's submission must file that rebuttal by July 30,
2018. The Commission asks that commenters address the sufficiency of
the Exchange's statements in support of the proposal, which are set
forth in Amendment No. 2 to the proposed rule change,\30\ in addition
to any other comments they may wish to submit about the proposed rule
change.
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\30\ See supra note 7.
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The Commission notes that the Exchange proposes to list and trade,
pursuant to its Rule 14.11(i), Managed Fund Shares of Funds that would
invest in shares of a single Unhedged ADR, along with a Currency Hedge
and cash and cash equivalents. A proposal to list and trade Managed
Fund Shares hat are designed to reflect, generally, the price and
performance of a single equity security, hedged against fluctuations in
a given exchange rate, is novel. Accordingly, the Commission
specifically seeks comment on whether it is appropriate to permit the
listing and trading of shares of an exchange-traded fund with
underlying holdings concentrated in a single (or a few unique) equity
securities. What impact, if any, would such shares have on the market
for the underlying equity security (or securities)? What impact, if
any, would such shares have on the equity markets more generally,
especially if funds investing in a single equity security proliferate?
Are the listing and trading of such shares consistent with the
requirements of Section 6(b)(5) of the Act, which, among other things,
requires that the rules of an exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, and, in general, to protect investors
and the public interest?
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeBZX-2018-019 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 Numbers SR-CboeBZX-2018-019. 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 website (https://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 website 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 these filings 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
[[Page 29593]]
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeBZX-2018-019 and should be submitted
on or before July 16, 2018. Rebuttal comments should be submitted by
July 30, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(57).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-13508 Filed 6-22-18; 8:45 am]
BILLING CODE 8011-01-P
