Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Allow the Main Sector Rotation ETF, a Series of the Northern Lights Fund Trust IV, To Hold Listed Options Contracts in a Manner That Does Not Comply With Rule 14.11(i), Managed Fund Shares, 23139-23142 [2019-10514]

Download as PDF Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Notices Dated: May 16, 2019. Vanessa A. Countryman, Acting Secretary. [FR Doc. 2019–10649 Filed 5–17–19; 11:15 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–85868; File No. SR– CboeBZX–2019–034] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Allow the Main Sector Rotation ETF, a Series of the Northern Lights Fund Trust IV, To Hold Listed Options Contracts in a Manner That Does Not Comply With Rule 14.11(i), Managed Fund Shares May 15, 2019. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on May 2, 2019, Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (the ‘‘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)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. jbell on DSK3GLQ082PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes a rule change to allow the Main Sector Rotation ETF (the ‘‘Fund’’), a series of the Northern Lights Fund Trust IV (the ‘‘Trust’’), to hold listed options contracts in a manner that does not comply with Rule 14.11(i) (‘‘Managed Fund Shares’’). The shares of the Fund are referred to herein as the ‘‘Shares.’’ The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/bzx/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 2 17 VerDate Sep<11>2014 17:50 May 20, 2019 Jkt 247001 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. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Fund began listing and trading on the Exchange pursuant to the generic listing standards under Rule 14.11(i) governing Managed Fund Shares on September 6, 2017 and remains currently listed on the Exchange pursuant to such rule.5 The Exchange proposes to continue listing and trading the Shares. The Shares would continue to comply with all of the generic listing standards with the exception of the requirement of Rule 14.11(i)(4)(C)(iv)(b) 6 that prevents the aggregate gross notional value of listed derivatives based on any single underlying reference asset from exceeding 30% of the weight of the portfolio (including gross notional exposures) (the ‘‘30% Restriction’’).7 5 The Commission originally approved BZX Rule 14.11(i) in Securities Exchange Act Release No. 65225 (August 30, 2011), 76 FR 55148 (September 6, 2011) (SR–BATS–2011–018) and subsequently approved generic listing standards for Managed Fund Shares under Rule 14.11(i) in Securities Exchange Act Release No. 78396 (July 22, 2016), 81 FR 49698 (July 28, 2016) (SR–BATS–2015–100). 6 Rule 14.11(i)(4)(C)(iv)(b) provides that ‘‘the aggregate gross notional value of listed derivatives based on any five or fewer underlying reference assets shall not exceed 65% of the weight of the portfolio (including gross notional exposures), and 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).’’ The Exchange is proposing that the Fund be exempt only from the requirement of Rule 14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross notional value of listed derivatives based on any single underlying reference asset from exceeding 30% of the weight of the portfolio (including gross notional exposures). The Fund will meet the requirement that the aggregate gross notional value of listed derivatives based on any five or fewer underlying reference assets shall not exceed 65% of the weight of the portfolio (including gross notional exposures). 7 The Exchange notes that this proposal is very similar to several previously submitted proposals to list and trade a series of Index Fund Shares and PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 23139 The Shares are offered by the Trust, which was established as a Delaware statutory trust on June 2, 2015. The Trust is registered with the Commission as an open-end investment company and has filed a registration statement on behalf of the Fund on Form N–1A with the Commission.8 The Fund’s adviser, Main Management ETF Advisors, LLC (the ‘‘Adviser’’), is not registered as a broker-dealer, and is not affiliated with a broker-dealer. Personnel who make decisions on the Fund’s portfolio composition are currently and shall continue to be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such 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, the Adviser or such new adviser or subadviser 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 Fund’s portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. Main Sector Rotation ETF The Fund seeks to outperform the S&P 500 Index in rising markets while limiting losses during periods of decline. In order to achieve its investment objective, under Normal Managed Fund Shares with similar exposures to a single underlying reference asset and U.S. exchange-listed equity securities that were either approved by the Commission or effective upon filing. See Securities Exchange Act Release Nos. 83146 (May 1, 2018), 83 FR 20103 (May 7, 2018) (SR–CboeBZX–2018–029); 83679 (July 20, 2018), 83 FR 35505 (July 26, 2018); 77045 (February 3, 2016), 81 FR 6916 (February 9, 2016) (SR–NYSEArca– 2015–113) (the ‘‘Amendment’’); and 74675 (April 8, 2015), 80 FR 20038 (April 14, 2015) (SR– NYSEArca–2015–05) (collectively, with the Amendment, the ‘‘Arca Filing’’). 8 The Trust filed a supplement to the Fund’s prospectus included in its Registration Statement on February 28, 2019 (as supplemented, the ‘‘Registration Statement’’). See Registration Statement on Form N–1A for the Trust (File Nos. 333–204808 and 811–23066). The descriptions of the Fund and the Shares contained herein are based, in part, on information included in the Registration Statement. The Commission has issued an order granting certain exemptive relief to the Trust and affiliated persons under the Investment Company Act of 1940 (15 U.S.C. 80a–1). See Investment Company Act Release No. 30695 (September 24, 2013) (File No. 812–14178). E:\FR\FM\21MYN1.SGM 21MYN1 23140 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Notices jbell on DSK3GLQ082PROD with NOTICES Market Conditions,9 the Fund utilizes a ‘‘fund of funds’’ structure to invest in U.S. national securities exchange listed sector based equity exchange traded funds (‘‘ETFs’’). The Fund seeks to achieve its objective through dynamic sector rotation. The Adviser focuses its research primarily on sector selection by carefully reviewing the sector, industry, and sub-industries in the Fund’s portfolio. The Adviser chooses sectors it believes are undervalued and poised to respond favorably to financial market catalysts. The Fund will sell a security when it achieves its target price and is, in the opinion of the Adviser, no longer undervalued. The Fund’s holdings in ETFs currently meet and will continue to meet the generic listing standards for U.S. Component Stocks in Rule 14.11(i)(4)(C)(i)(a). The Fund has the ability to buy or sell exchange-traded call and put options on the S&P 500 Index (‘‘S&P 500 Index Options’’) or exchange-traded options on ETFs that track the S&P 500 Index 10 (collectively, with S&P 500 Index Options, the ‘‘S&P 500 Options’’). The S&P 500 Index is the index most correlated to the Fund’s underlying equity holdings. The options overlay is actively managed by the Adviser and will adapt to both changing market environments and shifts in the underlying equity holdings of the Fund, but is currently limited by the requirement under Rule 14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross notional exposure of listed derivatives based on any single underlying reference asset from exceeding 30% of the weight of the portfolio (including gross notional exposures). As noted above, Rule 14.11(i)(4)(C)(iv)(b) prevents the Fund from holding listed derivatives based on any single underlying reference asset in excess of 30% of the weight of its portfolio (including gross notional exposures). As proposed, the Fund seeks to hold up to 60% of the weight of its portfolio (including gross notional exposures) in S&P 500 Options in a 9 The term ‘‘Normal Market Conditions’’ includes, but is not limited to, the absence of trading halts in the applicable financial markets generally; operational issues causing dissemination of inaccurate market information or system failures; or force majeure type events such as natural or manmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption, or any similar intervening circumstance. 10 Options on ETFs that track the S&P 500 Index will include only calls and puts on the five ETFs that track the performance of the S&P 500 Index that have the greatest total options consolidated average daily exchange trading volume in such options for the previous quarter. The Fund will not invest in options on leveraged (e.g., 2X, –2X, 3X, or –3X) ETFs. VerDate Sep<11>2014 17:50 May 20, 2019 Jkt 247001 manner that may not comply with Rule 14.11(i)(4)(C)(iv)(b). The Fund will utilize S&P 500 Options by employing an option strategy of writing covered call or index-based options. The Fund seeks to earn income and gains both from dividends paid on the ETFs and cash premiums received from writing: (i) Covered call options or index-based options on equity-based ETFs held in the Fund’s portfolio; and (ii) cash secured put options against cash balances in the Fund. The Fund may also buy puts as a buffer to market selloffs. The ability to hold S&P 500 Options with exposure to a single reference asset up to 60% of the weight of the portfolio (including gross notional exposures) would allow the Fund the flexibility to fully implement its investment strategy. The Exchange notes that the Fund may also hold cash and Cash Equivalents 11 in compliance with Rule 14.11(i)(4)(C)(iii). As noted above, the Fund’s investment in ETFs under Normal Market Conditions constitutes at least 80% of the Fund’s assets and such holdings will meet the requirements for U.S. Component Stocks in Rule 14.11(i)(4)(C)(i)(a). In addition to such ETFs holdings, the Fund may hold up to 20% of its assets in cash, Cash Equivalents, and the cash value of S&P 500 Options positions under Normal Market Conditions. The combination of ETFs, cash, Cash Equivalents, and the cash value of S&P 500 Options will constitute the entirety of the Fund’s holdings and the cash value of these holdings will be used to form the basis for these calculations. The Exchange notes that this is different than the calculation used to measure the Fund’s holdings in S&P 500 Options as it relates to the Fund holding up to 60% of the weight of its portfolio, which, as noted above, is calculated using gross notional exposures gained through the S&P 500 Options in both the numerator and denominator, which is consistent with the derivatives exposure 11 As defined in Exchange Rule 14.11(i)(4)(C)(iii)(b), Cash Equivalents are shortterm instruments with maturities of less than three months, which includes 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. PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 calculation under Rule 14.11(i)(4)(C)(iv). The Exchange represents that, except for the 30% Restriction in Rule 14.11(i)(4)(C)(iv)(b), the Fund’s investments will continue to satisfy all of the generic listing standards under BZX Rule 14.11(i)(4)(C) and all other applicable requirements for Managed Fund Shares under Rule 14.11(i). The Trust is required to comply with Rule 10A–3 under the Act for the initial and continued listing of the Shares of the Fund. In addition, the Exchange represents that the Shares of the Fund will continue to comply with all other requirements applicable to Managed Fund Shares, which include the dissemination of key information such as the Disclosed Portfolio,12 Net Asset Value,13 and the Intraday Indicative Value,14 suspension of trading or removal,15 trading halts,16 surveillance,17 minimum price variation for quoting and order entry,18 the information circular,19 and firewalls 20 as set forth in Exchange rules applicable to Managed Fund Shares and the orders approving such rules. Moreover, all of the ETFs and S&P 500 Options held by the Fund will trade on markets that are a member of Intermarket Surveillance Group (‘‘ISG’’) or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.21 All statements and representations made in this filing regarding the description of the portfolio or reference assets, limitations on portfolio holdings or reference assets, dissemination and availability of reference asset and intraday indicative values (as applicable), or the applicability of Exchange listing rules specified in this filing shall constitute continued listing requirements for the Shares. The Fund has represented to the Exchange that it will advise the Exchange of any failure by the Fund or 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. FINRA conducts certain cross-market 12 See Rule 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii). Rule 14.11(i)(4)(A)(ii). 14 See Rule 14.11(i)(4)(B)(i). 15 See Rule 14.11(i)(4)(B)(iii). 16 See Rule 14.11(i)(4)(B)(iv). 17 See Rule 14.11(i)(2)(C). 18 See Rule 14.11(i)(2)(B). 19 See Rule 14.11(i)(6). 20 See Rule 14.11(i)(7). 21 For a list of the current members of ISG, see www.isgportal.com. The Exchange notes that not all components of the Disclosed Portfolio for the Fund may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. 13 See E:\FR\FM\21MYN1.SGM 21MYN1 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Notices surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures with respect to such Fund under Exchange Rule 14.12. jbell on DSK3GLQ082PROD with NOTICES Availability of Information As noted above, the Fund will comply with the requirements under the Rule 14.11(i) related to Disclosed Portfolio, NAV, and the intraday indicative value. Additionally, the intra-day, closing and settlement prices of exchange-traded portfolio assets, specifically the ETFs and S&P 500 Options, will be readily available from the exchanges trading such securities or derivatives, as the case may be, automated quotation systems, published or other public sources, or online information services such as Bloomberg or Reuters. Quotation and last sale information for S&P 500 Options will be available via the Options Price Reporting Authority. Price information for Cash Equivalents will be available from major market data vendors. The Disclosed Portfolio will be available on the Fund’s website (www.mainmgtetfs.com) free of charge. The Fund’s website will include a form of the prospectus for the Fund and additional information related to NAV and other applicable quantitative information. Information regarding market price and trading volume of the Shares will be continuously available throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume for the Shares will be published daily in the financial section of newspapers. Trading in the Shares may be halted for market conditions or for reasons that, in the view of the Exchange, make trading inadvisable. 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 has appropriate rules to facilitate trading in the Shares during all trading sessions. The Exchange prohibits the distribution of material non-public information by its employees. Quotation and last sale information for the Shares and ETFs will be available via the CTA high-speed line. 2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6(b) VerDate Sep<11>2014 17:50 May 20, 2019 Jkt 247001 of the Act 22 in general and Section 6(b)(5) of the Act 23 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest in that the Shares will meet each of the continued listing criteria in BZX Rule 14.11(i) with the exception of the 30% Restriction in Rule 14.11(i)(4)(C)(iv)(b), which requires that the aggregate gross notional value of listed derivatives based on any five or fewer underlying reference assets shall not exceed 65% of the weight of the portfolio (including gross notional exposures), and 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).24 The Exchange believes that the diversity, liquidity, and market cap of the securities underlying the S&P 500 Index are sufficient to protect against market manipulation of both the Fund’s holdings and the Shares as it relates to the S&P 500 Options holdings. The Exchange also believes that the liquidity in the S&P 500 Index Options market 25 mitigates the concerns that Rule 14.11(i)(4)(C)(iv)(b) is intended to address and that such liquidity would also act to prevent other S&P 500 Options from being susceptible to manipulation, and thus, make the Shares less susceptible to manipulation. Further, allowing the Fund to hold a greater portion of its portfolio in S&P 500 Options would mean that the Fund would not be required to use over-thecounter (‘‘OTC’’) derivatives if the Adviser deemed it necessary to get exposure in excess of the 30% Restriction in Rule 14.11(i)(4)(C)(iv)(b), which would reduce the Fund’s 22 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 24 As noted above, the Exchange is proposing that the Fund be exempt only from the 30% Restriction of Rule 14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross notional value of listed derivatives based on any single underlying reference asset from exceeding 30% of the weight of the portfolio (including gross notional exposures). The Fund will continue to meet the requirement that the aggregate gross notional value of listed derivatives based on any five or fewer underlying reference assets shall not exceed 65% of the weight of the portfolio (including gross notional exposures). 25 In 2018, more than 1.48 million S&P 500 Index Options contracts were traded per day on Cboe Options, which is more than $350 billion in notional volume traded on a daily basis. 23 15 PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 23141 operational burden by allowing the Fund to use listed options contracts to achieve its investment objective and would eliminate the counter-party risk associated with holding OTC derivative instruments. 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. All of the ETFs and S&P 500 Options contracts held by the Fund will trade on markets that are a member of ISG or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. The Exchange may obtain information regarding trading in the Shares, ETFs, and the S&P 500 Options held by the Fund via the ISG from other exchanges who are a member of ISG or affiliated with a member of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement.26 The Exchange further notes that the Fund will meet and be subject to all other requirements of the generic listing rules and other applicable continued listing requirements for Managed Fund Shares under Rule 14.11(i), including those requirements regarding the dissemination of key information such as the Disclosed Portfolio, Net Asset Value, and the Intraday Indicative Value, suspension of trading or removal, trading halts, surveillance, minimum price variation for quoting and order entry, the information circular, and firewalls as set forth in Exchange rules applicable to Managed Fund Shares. For the above reasons, the Exchange believes that the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change, rather will facilitate the options strategy of an actively-managed exchange-traded product that will allow the Fund to better compete in the marketplace, thus enhancing competition among both market participants and listing venues, to the benefit of investors and the marketplace. 26 See E:\FR\FM\21MYN1.SGM note 21, supra. 21MYN1 23142 Federal Register / Vol. 84, No. 98 / Tuesday, May 21, 2019 / Notices 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 Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 27 and Rule 19b– 4(f)(6) thereunder.28 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 29 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 30 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 requested that the Commission waive the 30-day operative delay so that the proposed rule change may become operative upon filing. The Exchange represents that the Shares are currently listed and trading pursuant to the generic listing standards under Rule 14.11(i) governing Managed Fund Shares. The Exchange further represents that, while the Fund currently has the ability to buy or sell exchange-traded S&P 500 Options, under the proposal, the Fund seeks to hold up to 60% of the weight of its portfolio (including gross notional exposures) in S&P 500 Options in a manner that may not comply with Rule 14.11(i)(4)(C)(iv)(b).31 The Exchange represents that, except for the 30% Restriction in Rule jbell on DSK3GLQ082PROD with NOTICES 27 15 U.S.C. 78s(b)(3)(A). 28 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 29 17 CFR 240.19b–4(f)(6). 30 17 CFR 240.19b–4(f)(6)(iii). 31 The Exchange notes that the regulated S&P 500 options markets, and the broad base and scope of the S&P 500 Index, make securities that derive their value from that index, including S&P 500 Options, less susceptible to potential market manipulation in view of market capitalization and liquidity of the S&P 500 Index components, price and quote transparency, and arbitrage opportunities. See Form 19b–4 at 15, nn.7&25. VerDate Sep<11>2014 17:50 May 20, 2019 Jkt 247001 14.11(i)(4)(C)(iv)(b), the Fund’s investments will continue to satisfy all of the generic listing standards under BZX Rule 14.11(i)(4)(C) and all other applicable requirements for Managed Fund Shares under Rule 14.11(i). Further, waiver of the 30-day operative delay would allow the Fund to hold a greater portion of its portfolio in S&P 500 Options, which would allow the Fund the flexibility to fully implement its investment strategy and reduce the Fund’s operational burden by allowing the Fund to continue to use listed options contracts to achieve its investment objective. The Commission believes that the proposal raises no novel or unique regulatory issues and that, under these circumstances, waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. For these reasons, the Commission hereby waives the 30-day operative delay and designates the proposed rule change to be operative upon filing.32 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CboeBZX–2019–034 on the subject line. Paper Comments 32 For purposes only of waiving the 30-day operative delay, the Commission also has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). Frm 00126 Fmt 4703 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.33 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–10514 Filed 5–20–19; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #15956 and #15957; Guam Disaster Number GU–00007] Presidential Declaration of a Major Disaster for Public Assistance Only for the Territory of Guam U.S. Small Business Administration. ACTION: Notice. AGENCY: • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. PO 00000 All submissions should refer to File Number SR–CboeBZX–2019–034. 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 the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. 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–CboeBZX–2019–034 and should be submitted on or before June 11, 2019. Sfmt 4703 This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the Territory of Guam (FEMA–4433– DR), dated 05/07/2019. SUMMARY: 33 17 E:\FR\FM\21MYN1.SGM CFR 200.30–3(a)(12). 21MYN1

Agencies

[Federal Register Volume 84, Number 98 (Tuesday, May 21, 2019)]
[Notices]
[Pages 23139-23142]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-10514]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85868; File No. SR-CboeBZX-2019-034]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Allow 
the Main Sector Rotation ETF, a Series of the Northern Lights Fund 
Trust IV, To Hold Listed Options Contracts in a Manner That Does Not 
Comply With Rule 14.11(i), Managed Fund Shares

May 15, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on May 2, 2019, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (the 
``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)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

    The Exchange proposes a rule change to allow the Main Sector 
Rotation ETF (the ``Fund''), a series of the Northern Lights Fund Trust 
IV (the ``Trust''), to hold listed options contracts in a manner that 
does not comply with Rule 14.11(i) (``Managed Fund Shares''). The 
shares of the Fund are referred to herein as the ``Shares.''
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, 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 aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Fund began listing and trading on the Exchange pursuant to the 
generic listing standards under Rule 14.11(i) governing Managed Fund 
Shares on September 6, 2017 and remains currently listed on the 
Exchange pursuant to such rule.\5\ The Exchange proposes to continue 
listing and trading the Shares. The Shares would continue to comply 
with all of the generic listing standards with the exception of the 
requirement of Rule 14.11(i)(4)(C)(iv)(b) \6\ that prevents the 
aggregate gross notional value of listed derivatives based on any 
single underlying reference asset from exceeding 30% of the weight of 
the portfolio (including gross notional exposures) (the ``30% 
Restriction'').\7\
---------------------------------------------------------------------------

    \5\ The Commission originally approved BZX Rule 14.11(i) in 
Securities Exchange Act Release No. 65225 (August 30, 2011), 76 FR 
55148 (September 6, 2011) (SR-BATS-2011-018) and subsequently 
approved generic listing standards for Managed Fund Shares under 
Rule 14.11(i) in Securities Exchange Act Release No. 78396 (July 22, 
2016), 81 FR 49698 (July 28, 2016) (SR-BATS-2015-100).
    \6\ Rule 14.11(i)(4)(C)(iv)(b) provides that ``the aggregate 
gross notional value of listed derivatives based on any five or 
fewer underlying reference assets shall not exceed 65% of the weight 
of the portfolio (including gross notional exposures), and 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).'' The 
Exchange is proposing that the Fund be exempt only from the 
requirement of Rule 14.11(i)(4)(C)(iv)(b) that prevents the 
aggregate gross notional value of listed derivatives based on any 
single underlying reference asset from exceeding 30% of the weight 
of the portfolio (including gross notional exposures). The Fund will 
meet the requirement that the aggregate gross notional value of 
listed derivatives based on any five or fewer underlying reference 
assets shall not exceed 65% of the weight of the portfolio 
(including gross notional exposures).
    \7\ The Exchange notes that this proposal is very similar to 
several previously submitted proposals to list and trade a series of 
Index Fund Shares and Managed Fund Shares with similar exposures to 
a single underlying reference asset and U.S. exchange-listed equity 
securities that were either approved by the Commission or effective 
upon filing. See Securities Exchange Act Release Nos. 83146 (May 1, 
2018), 83 FR 20103 (May 7, 2018) (SR-CboeBZX-2018-029); 83679 (July 
20, 2018), 83 FR 35505 (July 26, 2018); 77045 (February 3, 2016), 81 
FR 6916 (February 9, 2016) (SR-NYSEArca-2015-113) (the 
``Amendment''); and 74675 (April 8, 2015), 80 FR 20038 (April 14, 
2015) (SR-NYSEArca-2015-05) (collectively, with the Amendment, the 
``Arca Filing'').
---------------------------------------------------------------------------

    The Shares are offered by the Trust, which was established as a 
Delaware statutory trust on June 2, 2015. The Trust is registered with 
the Commission as an open-end investment company and has filed a 
registration statement on behalf of the Fund on Form N-1A with the 
Commission.\8\ The Fund's adviser, Main Management ETF Advisors, LLC 
(the ``Adviser''), is not registered as a broker-dealer, and is not 
affiliated with a broker-dealer. Personnel who make decisions on the 
Fund's portfolio composition are currently and shall continue to be 
subject to procedures designed to prevent the use and dissemination of 
material non-public information regarding such 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, the Adviser or such new adviser or sub-adviser 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 Fund's portfolio, and 
will be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio.
---------------------------------------------------------------------------

    \8\ The Trust filed a supplement to the Fund's prospectus 
included in its Registration Statement on February 28, 2019 (as 
supplemented, the ``Registration Statement''). See Registration 
Statement on Form N-1A for the Trust (File Nos. 333-204808 and 811-
23066). The descriptions of the Fund and the Shares contained herein 
are based, in part, on information included in the Registration 
Statement. The Commission has issued an order granting certain 
exemptive relief to the Trust and affiliated persons under the 
Investment Company Act of 1940 (15 U.S.C. 80a-1). See Investment 
Company Act Release No. 30695 (September 24, 2013) (File No. 812-
14178).
---------------------------------------------------------------------------

    The Fund intends to qualify each year as a regulated investment 
company under Subchapter M of the Internal Revenue Code of 1986, as 
amended.
Main Sector Rotation ETF
    The Fund seeks to outperform the S&P 500 Index in rising markets 
while limiting losses during periods of decline. In order to achieve 
its investment objective, under Normal

[[Page 23140]]

Market Conditions,\9\ the Fund utilizes a ``fund of funds'' structure 
to invest in U.S. national securities exchange listed sector based 
equity exchange traded funds (``ETFs''). The Fund seeks to achieve its 
objective through dynamic sector rotation. The Adviser focuses its 
research primarily on sector selection by carefully reviewing the 
sector, industry, and sub-industries in the Fund's portfolio. The 
Adviser chooses sectors it believes are undervalued and poised to 
respond favorably to financial market catalysts. The Fund will sell a 
security when it achieves its target price and is, in the opinion of 
the Adviser, no longer undervalued.
---------------------------------------------------------------------------

    \9\ The term ``Normal Market Conditions'' includes, but is not 
limited to, the absence of trading halts in the applicable financial 
markets generally; operational issues causing dissemination of 
inaccurate market information or system failures; or force majeure 
type events such as natural or man-made disaster, act of God, armed 
conflict, act of terrorism, riot or labor disruption, or any similar 
intervening circumstance.
---------------------------------------------------------------------------

    The Fund's holdings in ETFs currently meet and will continue to 
meet the generic listing standards for U.S. Component Stocks in Rule 
14.11(i)(4)(C)(i)(a). The Fund has the ability to buy or sell exchange-
traded call and put options on the S&P 500 Index (``S&P 500 Index 
Options'') or exchange-traded options on ETFs that track the S&P 500 
Index \10\ (collectively, with S&P 500 Index Options, the ``S&P 500 
Options''). The S&P 500 Index is the index most correlated to the 
Fund's underlying equity holdings. The options overlay is actively 
managed by the Adviser and will adapt to both changing market 
environments and shifts in the underlying equity holdings of the Fund, 
but is currently limited by the requirement under Rule 
14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross notional 
exposure of listed derivatives based on any single underlying reference 
asset from exceeding 30% of the weight of the portfolio (including 
gross notional exposures).
---------------------------------------------------------------------------

    \10\ Options on ETFs that track the S&P 500 Index will include 
only calls and puts on the five ETFs that track the performance of 
the S&P 500 Index that have the greatest total options consolidated 
average daily exchange trading volume in such options for the 
previous quarter. The Fund will not invest in options on leveraged 
(e.g., 2X, -2X, 3X, or -3X) ETFs.
---------------------------------------------------------------------------

    As noted above, Rule 14.11(i)(4)(C)(iv)(b) prevents the Fund from 
holding listed derivatives based on any single underlying reference 
asset in excess of 30% of the weight of its portfolio (including gross 
notional exposures). As proposed, the Fund seeks to hold up to 60% of 
the weight of its portfolio (including gross notional exposures) in S&P 
500 Options in a manner that may not comply with Rule 
14.11(i)(4)(C)(iv)(b). The Fund will utilize S&P 500 Options by 
employing an option strategy of writing covered call or index-based 
options. The Fund seeks to earn income and gains both from dividends 
paid on the ETFs and cash premiums received from writing: (i) Covered 
call options or index-based options on equity-based ETFs held in the 
Fund's portfolio; and (ii) cash secured put options against cash 
balances in the Fund. The Fund may also buy puts as a buffer to market 
selloffs. The ability to hold S&P 500 Options with exposure to a single 
reference asset up to 60% of the weight of the portfolio (including 
gross notional exposures) would allow the Fund the flexibility to fully 
implement its investment strategy. The Exchange notes that the Fund may 
also hold cash and Cash Equivalents \11\ in compliance with Rule 
14.11(i)(4)(C)(iii).
---------------------------------------------------------------------------

    \11\ As defined in Exchange Rule 14.11(i)(4)(C)(iii)(b), Cash 
Equivalents are short-term instruments with maturities of less than 
three months, which includes 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.
---------------------------------------------------------------------------

    As noted above, the Fund's investment in ETFs under Normal Market 
Conditions constitutes at least 80% of the Fund's assets and such 
holdings will meet the requirements for U.S. Component Stocks in Rule 
14.11(i)(4)(C)(i)(a). In addition to such ETFs holdings, the Fund may 
hold up to 20% of its assets in cash, Cash Equivalents, and the cash 
value of S&P 500 Options positions under Normal Market Conditions. The 
combination of ETFs, cash, Cash Equivalents, and the cash value of S&P 
500 Options will constitute the entirety of the Fund's holdings and the 
cash value of these holdings will be used to form the basis for these 
calculations. The Exchange notes that this is different than the 
calculation used to measure the Fund's holdings in S&P 500 Options as 
it relates to the Fund holding up to 60% of the weight of its 
portfolio, which, as noted above, is calculated using gross notional 
exposures gained through the S&P 500 Options in both the numerator and 
denominator, which is consistent with the derivatives exposure 
calculation under Rule 14.11(i)(4)(C)(iv). The Exchange represents 
that, except for the 30% Restriction in Rule 14.11(i)(4)(C)(iv)(b), the 
Fund's investments will continue to satisfy all of the generic listing 
standards under BZX Rule 14.11(i)(4)(C) and all other applicable 
requirements for Managed Fund Shares under Rule 14.11(i).
    The Trust is required to comply with Rule 10A-3 under the Act for 
the initial and continued listing of the Shares of the Fund. In 
addition, the Exchange represents that the Shares of the Fund will 
continue to comply with all other requirements applicable to Managed 
Fund Shares, which include the dissemination of key information such as 
the Disclosed Portfolio,\12\ Net Asset Value,\13\ and the Intraday 
Indicative Value,\14\ suspension of trading or removal,\15\ trading 
halts,\16\ surveillance,\17\ minimum price variation for quoting and 
order entry,\18\ the information circular,\19\ and firewalls \20\ as 
set forth in Exchange rules applicable to Managed Fund Shares and the 
orders approving such rules. Moreover, all of the ETFs and S&P 500 
Options held by the Fund will trade on markets that are a member of 
Intermarket Surveillance Group (``ISG'') or affiliated with a member of 
ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.\21\ All statements and representations 
made in this filing regarding the description of the portfolio or 
reference assets, limitations on portfolio holdings or reference 
assets, dissemination and availability of reference asset and intraday 
indicative values (as applicable), or the applicability of Exchange 
listing rules specified in this filing shall constitute continued 
listing requirements for the Shares. The Fund has represented to the 
Exchange that it will advise the Exchange of any failure by the Fund or 
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. FINRA 
conducts certain cross-market

[[Page 23141]]

surveillances on behalf of the Exchange pursuant to a regulatory 
services agreement. The Exchange is responsible for FINRA's performance 
under this regulatory services agreement. If the Fund is not in 
compliance with the applicable listing requirements, the Exchange will 
commence delisting procedures with respect to such Fund under Exchange 
Rule 14.12.
---------------------------------------------------------------------------

    \12\ See Rule 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii).
    \13\ See Rule 14.11(i)(4)(A)(ii).
    \14\ See Rule 14.11(i)(4)(B)(i).
    \15\ See Rule 14.11(i)(4)(B)(iii).
    \16\ See Rule 14.11(i)(4)(B)(iv).
    \17\ See Rule 14.11(i)(2)(C).
    \18\ See Rule 14.11(i)(2)(B).
    \19\ See Rule 14.11(i)(6).
    \20\ See Rule 14.11(i)(7).
    \21\ For a list of the current members of ISG, see 
www.isgportal.com. The Exchange notes that not all components of the 
Disclosed Portfolio for the Fund may trade on markets that are 
members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

Availability of Information
    As noted above, the Fund will comply with the requirements under 
the Rule 14.11(i) related to Disclosed Portfolio, NAV, and the intraday 
indicative value. Additionally, the intra-day, closing and settlement 
prices of exchange-traded portfolio assets, specifically the ETFs and 
S&P 500 Options, will be readily available from the exchanges trading 
such securities or derivatives, as the case may be, automated quotation 
systems, published or other public sources, or online information 
services such as Bloomberg or Reuters. Quotation and last sale 
information for S&P 500 Options will be available via the Options Price 
Reporting Authority. Price information for Cash Equivalents will be 
available from major market data vendors. The Disclosed Portfolio will 
be available on the Fund's website (www.mainmgtetfs.com) free of 
charge. The Fund's website will include a form of the prospectus for 
the Fund and additional information related to NAV and other applicable 
quantitative information. Information regarding market price and 
trading volume of the Shares will be continuously available throughout 
the day on brokers' computer screens and other electronic services. 
Information regarding the previous day's closing price and trading 
volume for the Shares will be published daily in the financial section 
of newspapers. Trading in the Shares may be halted for market 
conditions or for reasons that, in the view of the Exchange, make 
trading inadvisable. 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 has appropriate rules to facilitate trading in the Shares 
during all trading sessions. The Exchange prohibits the distribution of 
material non-public information by its employees. Quotation and last 
sale information for the Shares and ETFs will be available via the CTA 
high-speed line.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \22\ in general and Section 6(b)(5) of the Act \23\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system and, in general, to protect investors and the 
public interest in that the Shares will meet each of the continued 
listing criteria in BZX Rule 14.11(i) with the exception of the 30% 
Restriction in Rule 14.11(i)(4)(C)(iv)(b), which requires that the 
aggregate gross notional value of listed derivatives based on any five 
or fewer underlying reference assets shall not exceed 65% of the weight 
of the portfolio (including gross notional exposures), and 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).\24\ The Exchange 
believes that the diversity, liquidity, and market cap of the 
securities underlying the S&P 500 Index are sufficient to protect 
against market manipulation of both the Fund's holdings and the Shares 
as it relates to the S&P 500 Options holdings. The Exchange also 
believes that the liquidity in the S&P 500 Index Options market \25\ 
mitigates the concerns that Rule 14.11(i)(4)(C)(iv)(b) is intended to 
address and that such liquidity would also act to prevent other S&P 500 
Options from being susceptible to manipulation, and thus, make the 
Shares less susceptible to manipulation. Further, allowing the Fund to 
hold a greater portion of its portfolio in S&P 500 Options would mean 
that the Fund would not be required to use over-the-counter (``OTC'') 
derivatives if the Adviser deemed it necessary to get exposure in 
excess of the 30% Restriction in Rule 14.11(i)(4)(C)(iv)(b), which 
would reduce the Fund's operational burden by allowing the Fund to use 
listed options contracts to achieve its investment objective and would 
eliminate the counter-party risk associated with holding OTC derivative 
instruments.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b).
    \23\ 15 U.S.C. 78f(b)(5).
    \24\ As noted above, the Exchange is proposing that the Fund be 
exempt only from the 30% Restriction of Rule 14.11(i)(4)(C)(iv)(b) 
that prevents the aggregate gross notional value of listed 
derivatives based on any single underlying reference asset from 
exceeding 30% of the weight of the portfolio (including gross 
notional exposures). The Fund will continue to meet the requirement 
that the aggregate gross notional value of listed derivatives based 
on any five or fewer underlying reference assets shall not exceed 
65% of the weight of the portfolio (including gross notional 
exposures).
    \25\ In 2018, more than 1.48 million S&P 500 Index Options 
contracts were traded per day on Cboe Options, which is more than 
$350 billion in notional volume traded on a daily basis.
---------------------------------------------------------------------------

    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. All of the ETFs and 
S&P 500 Options contracts held by the Fund will trade on markets that 
are a member of ISG or affiliated with a member of ISG or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement. The Exchange may obtain information regarding trading in the 
Shares, ETFs, and the S&P 500 Options held by the Fund via the ISG from 
other exchanges who are a member of ISG or affiliated with a member of 
ISG or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement.\26\ The Exchange further notes that the 
Fund will meet and be subject to all other requirements of the generic 
listing rules and other applicable continued listing requirements for 
Managed Fund Shares under Rule 14.11(i), including those requirements 
regarding the dissemination of key information such as the Disclosed 
Portfolio, Net Asset Value, and the Intraday Indicative Value, 
suspension of trading or removal, trading halts, surveillance, minimum 
price variation for quoting and order entry, the information circular, 
and firewalls as set forth in Exchange rules applicable to Managed Fund 
Shares.
---------------------------------------------------------------------------

    \26\ See note 21, supra.
---------------------------------------------------------------------------

    For the above reasons, the Exchange believes that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change, rather will facilitate the options strategy of an 
actively-managed exchange-traded product that will allow the Fund to 
better compete in the marketplace, thus enhancing competition among 
both market participants and listing venues, to the benefit of 
investors and the marketplace.

[[Page 23142]]

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \27\ and Rule 19b-
4(f)(6) thereunder.\28\
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(A).
    \28\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \29\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \30\ 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 requested that the Commission waive the 30-day operative delay so 
that the proposed rule change may become operative upon filing. The 
Exchange represents that the Shares are currently listed and trading 
pursuant to the generic listing standards under Rule 14.11(i) governing 
Managed Fund Shares. The Exchange further represents that, while the 
Fund currently has the ability to buy or sell exchange-traded S&P 500 
Options, under the proposal, the Fund seeks to hold up to 60% of the 
weight of its portfolio (including gross notional exposures) in S&P 500 
Options in a manner that may not comply with Rule 
14.11(i)(4)(C)(iv)(b).\31\ The Exchange represents that, except for the 
30% Restriction in Rule 14.11(i)(4)(C)(iv)(b), the Fund's investments 
will continue to satisfy all of the generic listing standards under BZX 
Rule 14.11(i)(4)(C) and all other applicable requirements for Managed 
Fund Shares under Rule 14.11(i). Further, waiver of the 30-day 
operative delay would allow the Fund to hold a greater portion of its 
portfolio in S&P 500 Options, which would allow the Fund the 
flexibility to fully implement its investment strategy and reduce the 
Fund's operational burden by allowing the Fund to continue to use 
listed options contracts to achieve its investment objective. The 
Commission believes that the proposal raises no novel or unique 
regulatory issues and that, under these circumstances, waiver of the 
30-day operative delay is consistent with the protection of investors 
and the public interest. For these reasons, the Commission hereby 
waives the 30-day operative delay and designates the proposed rule 
change to be operative upon filing.\32\
---------------------------------------------------------------------------

    \29\ 17 CFR 240.19b-4(f)(6).
    \30\ 17 CFR 240.19b-4(f)(6)(iii).
    \31\ The Exchange notes that the regulated S&P 500 options 
markets, and the broad base and scope of the S&P 500 Index, make 
securities that derive their value from that index, including S&P 
500 Options, less susceptible to potential market manipulation in 
view of market capitalization and liquidity of the S&P 500 Index 
components, price and quote transparency, and arbitrage 
opportunities. See Form 19b-4 at 15, nn.7&25.
    \32\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeBZX-2019-034 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-CboeBZX-2019-034. 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 the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. 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-CboeBZX-2019-034 and should be submitted 
on or before June 11, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-10514 Filed 5-20-19; 8:45 am]
 BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.