Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To List and Trade Shares of the Agility Shares Managed Risk Equity ETF, a Series of the Northern Lights Fund Trust, Under Rule 14.11(i), 23408-23411 [2020-08813]
Download as PDF
<![CDATA[
23408
Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Notices
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.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88715; File No. SR–
CboeBZX–2020–021]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To List and
Trade Shares of the Agility Shares
Managed Risk Equity ETF, a Series of
the Northern Lights Fund Trust, Under
Rule 14.11(i)
April 21, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 15,
2020, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes a rule change
to list and trade shares of the Agility
Shares Managed Risk Equity ETF (the
‘‘Fund’’), a series of the Northern Lights
Fund Trust (the ‘‘Trust’’), under Rule
14.11(i) (‘‘Managed Fund Shares’’). The
shares of the Fund are referred to herein
as the ‘‘Shares.’’
The text of the proposed rule change
is 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.
lotter on DSKBCFDHB2PROD with NOTICES
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
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
17:32 Apr 24, 2020
Jkt 250001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade the Shares under Rule 14.11(i),
which governs the listing and trading of
Managed Fund Shares on the
Exchange.5 The Fund will be an actively
managed exchange-traded fund that
seeks to provide income and long-term
growth of capital. A secondary objective
of the Fund is to limit risk during
unfavorable market conditions. The
Exchange submits this proposal in order
to allow the Fund to hold listed
derivatives, in particular options and
futures on the S&P 500 Index, in a
manner that does not comply with Rule
14.11(i)(4)(C)(iv)(b).6 The Exchange
notes that this proposal is very similar
to a previously approved proposal to list
and trade a series of Managed Fund
Shares on the Exchange with similar
exposures to a single underlying
reference asset and U.S. exchange-listed
equity securities.7 Otherwise, the Fund
will comply with all other listing
requirements on an initial and
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 from both the 30% and 65%
requirements of Rule 14.11(i)(4)(C)(iv)(b).
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, especially S&P
500 Index derivatives, 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);
82906 (March 20, 2018), 83 FR 12992 (March 26,
2018) (SR–CboeBZX–2017–012); 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’’).
PO 00000
Frm 00084
Fmt 4703
Sfmt 4703
continued listing basis under Rule
14.11(i).
The Shares will be offered by the
Trust, which was established as a
Delaware statutory trust on January 19,
2005. The Trust is registered with the
Commission as an open-end investment
company and has filed a registration
statement on behalf of the Fund on
Form N–1A (‘‘Registration Statement’’)
with the Commission.8 The Fund’s
adviser, Toews Corporation (the
‘‘Adviser’’), is not registered as a brokerdealer and is not affiliated with a
broker-dealer. Adviser personnel who
make decisions regarding the Fund’s
portfolio are subject to procedures
designed to prevent the use and
dissemination of material nonpublic
information regarding the Fund’s
portfolio. In the event that (a) the
Adviser becomes registered as a brokerdealer or newly affiliated with a brokerdealer; or (b) any new adviser or subadviser 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.
The Fund intends to qualify each year
as a regulated investment company
under Subchapter M of the Internal
Revenue Code of 1986, as amended.
Agility Shares Managed Risk Equity ETF
In order to achieve its investment
objective of seeking to provide income
and long-term growth of capital, while
limiting risk, under Normal Market
Conditions,9 the Fund will generally
invest at least 80% of its net assets in
S&P 500 Derivatives (as defined below),
8 The Trust filed a post-effective amendment to
the Registration Statement on December 18, 2017.
See Registration Statement on Form N–1A for the
Trust (File Nos. 333–179562 and 811–22668). 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 exemptive relief to the
Trust under the Investment Company Act of 1940
(15 U.S.C. 80a–1) applicable to the activities of the
Fund. See Investment Company Act Release No.
32777 (August 8, 2017) (File No. 812–14787).
9 As defined in Rule 14.11(i)(3)(E), 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.
E:\FR\FM\27APN1.SGM
27APN1
Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Notices
lotter on DSKBCFDHB2PROD with NOTICES
options on ETFs,10 U.S. Component
Stocks,11 and U.S. exchange-listed ETFs
that principally invest in U.S.
Component Stocks (‘‘U.S. ETFs’’ and,
collectively, with U.S. Component
Stocks ‘‘U.S. Equities’’). The Fund
generally will invest in U.S. Component
Stocks in order to gain exposure to large
cap U.S. equity securities. The Exchange
notes that each of S&P 500 Index futures
and options, options on S&P 500 Index
futures, and options on ETFs are U.S.
exchange-listed. Under Normal Market
Conditions, the Fund may also invest its
remaining assets in fixed income
securities (including ETFs that
primarily invest in fixed income
securities), cash, and Cash
Equivalents 12 and such holdings will
meet the requirements applicable under
Rules 14.11(i)(4)(C)(ii) and (iii).
As noted above, Rule
14.11(i)(4)(C)(iv)(b) does not allow the
aggregate gross notional value of the
Fund’s holdings in listed derivatives
based on any five or fewer underlying
reference assets to 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 to exceed 30% of the
weight of its portfolio (including gross
notional exposures).13 The Exchange is
proposing to allow the Fund to hold up
to 100% of the weight of its portfolio
(including gross notional exposures) in
listed derivatives based on the S&P 500
10 For purposes of this proposal, the term ETF
means Portfolio Depositary Receipts, Index Fund
Shares, and Managed Fund Shares as defined in
Rule 14.11(b), 14.11(c), and 14.11(i), respectively,
and their equivalents on other national securities
exchanges as well as ETFs operating in reliance on
Rule 6c–11 of the Investment Company Act of 1940.
11 Pursuant to BZX Rule 14.11(c)(1)(D), the term
‘‘U.S. Component Stock’’ shall mean an equity
security that is registered under Sections 12(b) or
12(g) of the Act, or an American Depositary Receipt,
the underlying equity security of which is
registered under Sections 12(b) or 12(g) of the Act.
12 As defined in Rule 14.11(i)(4)(C)(iii), Cash
Equivalents are short-term instruments with
maturities of less than three months that are: (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.
13 The Exchange notes that the 80% and 20%
investment numbers above are based on the Fund’s
net assets, while Rule 14.11(i)(4)(C)(iv)(b) is
calculated on the basis of aggregate gross notional
value.
VerDate Sep<11>2014
17:32 Apr 24, 2020
Jkt 250001
Index, specifically futures traded on the
Chicago Mercantile Exchange (‘‘S&P 500
Futures’’) and options traded on Cboe
Exchange, Inc. (‘‘S&P 500 Options,’’), as
well as options on S&P 500 Futures
(‘‘Options on S&P 500 Futures’’ and,
collectively with S&P 500 Futures and
S&P 500 Options, ‘‘S&P 500
Derivatives’’).14 The Fund primarily
expects to utilize S&P 500 Derivatives to
implement its strategy. The Fund will
utilize short or long S&P 500 Derivatives
to the extent needed to reduce or
augment, respectively, the Fund’s
exposure relative to the exposure
resulting from investments in the U.S.
Equities described above in order to
achieve the desired net exposure. S&P
500 Derivatives are an efficient means
for reducing or augmenting exposure to
U.S. Equities, as described above.
Allowing the Fund to hold a greater
portion of its portfolio in S&P 500
Derivatives would mitigate the Fund’s
dependency on holding over-thecounter (‘‘OTC’’) instruments, which
would reduce the Fund’s operational
burden by allowing the Fund to use
listed futures and options contracts to
achieve its investment objective and
would further reduce counter-party risk
associated with holding OTC
instruments. The Exchange notes that
the Fund may also hold certain fixed
income securities, cash and Cash
Equivalents, and ETFs that primarily
invest in fixed income securities in
compliance with Rules 14.11(i)(4)(C)(ii),
(iii), and (i), respectively, as part of its
strategy and in order to collateralize its
S&P 500 Derivatives positions.
The combination of U.S. Equities,
fixed income securities, cash, Cash
Equivalents, and the cash value of
derivatives positions will constitute the
entirety of the Fund’s holdings and the
cash value of these holdings will be
used to form the basis for any
calculation that is based on net assets.
The Exchange notes that this is different
than the calculation used to measure the
Fund’s holdings in S&P 500 Derivatives
as it relates to the Fund holding up to
100% of the weight of its portfolio,
which, as noted above, is calculated
using gross notional exposures gained
through the S&P 500 Derivatives in both
the numerator and denominator, which
is consistent with the derivatives
exposure calculation under Rule
14 While the Adviser does not anticipate the gross
notional exposure of its holdings in S&P 500
Derivatives to approach 100% of the weight of the
Fund’s portfolio, the Adviser would like to have the
flexibility to do so in the event that the Adviser
determines that it is in the best interest of the Fund.
The Exchange also notes that while the Fund may
invest in options on ETFs, such holdings will be in
compliance with Rule 14.11(i)(4)(C)(iv)(b).
PO 00000
Frm 00085
Fmt 4703
Sfmt 4703
23409
14.11(i)(4)(C)(iv). The Exchange
represents that, except for the 30% and
65% limitations in Rule
14.11(i)(4)(C)(iv)(b) related to S&P 500
Derivatives, the Fund’s proposed
investments will satisfy, on an initial
and continued listing basis, 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 comply with all other requirements
applicable to Managed Fund Shares,
which includes the dissemination of key
information such as the Disclosed
Portfolio,15 Net Asset Value,16 and the
Intraday Indicative Value,17 suspension
of trading or removal,18 trading halts,19
surveillance,20 minimum price variation
for quoting and order entry,21 the
information circular,22 and firewalls 23
as set forth in Exchange rules applicable
to Managed Fund Shares and the orders
approving such rules. Moreover, all of
the exchange-listed instruments held by
the Fund, including S&P 500 Futures,
S&P 500 Options, Options on S&P 500
Futures, U.S. Equities, options on ETFs,
and ETFs that primarily invest in fixed
income instruments 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.24 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
securities listed on the Exchange. The
issuer has represented to the Exchange
that it will advise the Exchange of any
15 See
Rule 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii).
Rule 14.11(i)(4)(A)(ii).
17 See Rule 14.11(i)(4)(B)(i).
18 See Rule 14.11(i)(4)(B)(iii).
19 See Rule 14.11(i)(4)(B)(iv).
20 See Rule 14.11(i)(2)(C).
21 See Rule 14.11(i)(2)(B).
22 See Rule 14.11(i)(6).
23 See Rule 14.11(i)(7).
24 For a list of the current members and affiliate
members of ISG, see www.isgportal.com. The
Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on
markets that are members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.
16 See
E:\FR\FM\27APN1.SGM
27APN1
23410
Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Notices
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. If the
Fund or Shares are not in compliance
with the applicable listing requirements,
then, with respect to such Fund or
Shares, the Exchange will commence
delisting procedures under Exchange
Rule 14.12. FINRA conducts certain
cross-market 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.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with Section 6(b)
of the Act 25 in general and Section
6(b)(5) of the Act 26 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 initial and continued
listing criteria in BZX Rule 14.11(i) with
the exception 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).27 The Exchange believes
25 15
U.S.C. 78f.
U.S.C. 78f(b)(5).
27 As noted above, the Exchange is proposing that
the Fund be exempt from the requirement of Rule
14.11(i)(4)(C)(iv)(b) that prevents aggregate gross
notional value of listed derivatives based on any
five or fewer underlying reference assets from
exceeding 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 from
exceeding 30% of the weight of the portfolio
(including gross notional exposures). The Exchange
is proposing to allow the Fund to hold up to 100%
of the weight of its portfolio (including gross
notional exposures) in S&P 500 Derivatives.
lotter on DSKBCFDHB2PROD with NOTICES
26 15
VerDate Sep<11>2014
17:32 Apr 24, 2020
Jkt 250001
that the liquidity in the S&P 500
Futures, S&P 500 Options, and Options
on S&P 500 Futures markets mitigates
the concerns that Rule
14.11(i)(4)(C)(iv)(b) is intended to
address and that such liquidity would
prevent the Shares from being
susceptible to manipulation.28 Further,
allowing the Fund to hold a greater
portion of its portfolio in S&P 500
Derivatives would mitigate the Fund’s
dependency on holding OTC
instruments, which would reduce the
Fund’s operational burden by allowing
the Fund to primarily use listed futures
and options contracts to achieve its
investment objective and would further
reduce counter-party risk associated
with holding OTC instruments. The
Exchange further 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 Derivatives holdings.
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 futures contracts, options, ETFs, and
component stocks 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 and the underlying futures
contracts, options, component stocks,
and other ETFs held by the Fund via the
ISG from other exchanges who are
members or affiliates of the ISG or with
which the Exchange has entered into a
comprehensive surveillance sharing
agreement.29 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
28 The Exchange notes that there was an average
of more than $3 billion in notional volume traded
on a daily basis in S&P 500 Options in 2019. S&P
500 Futures generally trade over one million
contracts per day in the front month contract. More
than 1,000,000 Options on S&P 500 Futures
contracts traded per day in February 2020.
29 See note 21, supra [sic].
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
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 listing and
trading of an additional activelymanaged exchange-traded product that
will enhance competition among both
market participants and listing venues,
to the benefit of investors and the
marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the 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 30 and Rule 19b–
4(f)(6) thereunder.31
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 32 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 33
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 to waive
the 30-day operative delay so that the
30 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule19b–
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.
32 17 CFR 240.19b–4(f)(6).
33 17 CFR 240.19b–4(f)(6)(iii).
31 17
E:\FR\FM\27APN1.SGM
27APN1
Federal Register / Vol. 85, No. 81 / Monday, April 27, 2020 / Notices
proposal may become operative upon
filing.
The Exchange states that, while the
proposal seeks to allow the Fund to
hold listed derivatives, in particular
options and futures on the S&P 500
Index, in a manner that does not comply
with BZX Rule 14.11(i)(4)(C)(iv)(b), the
proposal is similar to another previously
approved proposal to list and trade a
series of Managed Fund Shares with
similar exposures to a single underlying
reference asset and U.S. exchange-listed
equity securities.34 The Exchange
represents that, except for the 30% and
65% limitations in BZX Rule
14.11(i)(4)(C)(iv)(b) related to S&P 500
Derivatives, the Fund’s proposed
investments will satisfy, on an initial
and continued listing basis, all of the
generic listing standards under BZX
Rule 14.11(i)(4)(C) and all other
applicable requirements for Managed
Fund Shares under BZX Rule 14.11(i).35
In addition, the Exchange further
represents that all of the exchange-listed
instruments held by the Fund, including
S&P 500 Futures, S&P 500 Options,
Options on S&P 500 Futures, U.S.
Equities, options on ETFs, and ETFs
that primarily invest in fixed income
instruments 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
Commission believes that the proposal
raises no novel or unique regulatory
issues and that waiver of the 30-day
operative delay is consistent with the
protection of investors and the public
interest. Therefore, the Commission
hereby waives the operative delay and
designates the proposed rule change
operative upon filing.36
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
34 See
supra note 7.
addition, the Exchange represents that the
Shares of the Fund will comply with all other
requirements applicable to Managed Fund Shares,
which includes 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 and the orders approving
such rules. See supra notes 15–23 and
accompanying text.
36 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).
lotter on DSKBCFDHB2PROD with NOTICES
35 In
VerDate Sep<11>2014
17:32 Apr 24, 2020
Jkt 250001
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–2020–021 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–2020–021. 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–2020–021 and
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
23411
should be submitted on or before May
18, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–08813 Filed 4–24–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88707; File No. SR–
CboeEDGA–2020–011]
Self-Regulatory Organizations; Cboe
EDGA Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Rule
13.4(a) To Add LTSE as a Source for
Market Data for Certain Purposes
April 21, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 6,
2020, Cboe EDGA Exchange, Inc. (the
‘‘Exchange’’) 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGA Exchange, Inc. proposes
to amend Rule 13.4(a), stating it will
utilize LTSE market data from the CQS/
UQDF for purposes of order handling,
routing, execution, and related
compliance processes. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/edga/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
37 17
CFR 200.30–3(a)(12).
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).
1 15
E:\FR\FM\27APN1.SGM
27APN1
]]>Agencies
[Federal Register Volume 85, Number 81 (Monday, April 27, 2020)]
[Notices]
[Pages 23408-23411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-08813]
[[Page 23408]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88715; File No. SR-CboeBZX-2020-021]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To List
and Trade Shares of the Agility Shares Managed Risk Equity ETF, a
Series of the Northern Lights Fund Trust, Under Rule 14.11(i)
April 21, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on April 15, 2020, 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 list and trade shares of the
Agility Shares Managed Risk Equity ETF (the ``Fund''), a series of the
Northern Lights Fund Trust (the ``Trust''), under Rule 14.11(i)
(``Managed Fund Shares''). The shares of the Fund are referred to
herein as the ``Shares.''
The text of the proposed rule change is 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade the Shares under Rule
14.11(i), which governs the listing and trading of Managed Fund Shares
on the Exchange.\5\ The Fund will be an actively managed exchange-
traded fund that seeks to provide income and long-term growth of
capital. A secondary objective of the Fund is to limit risk during
unfavorable market conditions. The Exchange submits this proposal in
order to allow the Fund to hold listed derivatives, in particular
options and futures on the S&P 500 Index, in a manner that does not
comply with Rule 14.11(i)(4)(C)(iv)(b).\6\ The Exchange notes that this
proposal is very similar to a previously approved proposal to list and
trade a series of Managed Fund Shares on the Exchange with similar
exposures to a single underlying reference asset and U.S. exchange-
listed equity securities.\7\ Otherwise, the Fund will comply with all
other listing requirements on an initial and continued listing basis
under Rule 14.11(i).
---------------------------------------------------------------------------
\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 from both the 30% and
65% requirements of Rule 14.11(i)(4)(C)(iv)(b).
\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, especially S&P 500 Index
derivatives, 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); 82906 (March 20, 2018), 83 FR 12992 (March
26, 2018) (SR-CboeBZX-2017-012); 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 will be offered by the Trust, which was established as a
Delaware statutory trust on January 19, 2005. The Trust is registered
with the Commission as an open-end investment company and has filed a
registration statement on behalf of the Fund on Form N-1A
(``Registration Statement'') with the Commission.\8\ The Fund's
adviser, Toews Corporation (the ``Adviser''), is not registered as a
broker-dealer and is not affiliated with a broker-dealer. Adviser
personnel who make decisions regarding the Fund's portfolio are subject
to procedures designed to prevent the use and dissemination of material
nonpublic information regarding the Fund's portfolio. In the event that
(a) the Adviser becomes 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.
---------------------------------------------------------------------------
\8\ The Trust filed a post-effective amendment to the
Registration Statement on December 18, 2017. See Registration
Statement on Form N-1A for the Trust (File Nos. 333-179562 and 811-
22668). 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 exemptive
relief to the Trust under the Investment Company Act of 1940 (15
U.S.C. 80a-1) applicable to the activities of the Fund. See
Investment Company Act Release No. 32777 (August 8, 2017) (File No.
812-14787).
---------------------------------------------------------------------------
The Fund intends to qualify each year as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as
amended.
Agility Shares Managed Risk Equity ETF
In order to achieve its investment objective of seeking to provide
income and long-term growth of capital, while limiting risk, under
Normal Market Conditions,\9\ the Fund will generally invest at least
80% of its net assets in S&P 500 Derivatives (as defined below),
[[Page 23409]]
options on ETFs,\10\ U.S. Component Stocks,\11\ and U.S. exchange-
listed ETFs that principally invest in U.S. Component Stocks (``U.S.
ETFs'' and, collectively, with U.S. Component Stocks ``U.S.
Equities''). The Fund generally will invest in U.S. Component Stocks in
order to gain exposure to large cap U.S. equity securities. The
Exchange notes that each of S&P 500 Index futures and options, options
on S&P 500 Index futures, and options on ETFs are U.S. exchange-listed.
Under Normal Market Conditions, the Fund may also invest its remaining
assets in fixed income securities (including ETFs that primarily invest
in fixed income securities), cash, and Cash Equivalents \12\ and such
holdings will meet the requirements applicable under Rules
14.11(i)(4)(C)(ii) and (iii).
---------------------------------------------------------------------------
\9\ As defined in Rule 14.11(i)(3)(E), 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.
\10\ For purposes of this proposal, the term ETF means Portfolio
Depositary Receipts, Index Fund Shares, and Managed Fund Shares as
defined in Rule 14.11(b), 14.11(c), and 14.11(i), respectively, and
their equivalents on other national securities exchanges as well as
ETFs operating in reliance on Rule 6c-11 of the Investment Company
Act of 1940.
\11\ Pursuant to BZX Rule 14.11(c)(1)(D), the term ``U.S.
Component Stock'' shall mean an equity security that is registered
under Sections 12(b) or 12(g) of the Act, or an American Depositary
Receipt, the underlying equity security of which is registered under
Sections 12(b) or 12(g) of the Act.
\12\ As defined in Rule 14.11(i)(4)(C)(iii), Cash Equivalents
are short-term instruments with maturities of less than three months
that are: (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, Rule 14.11(i)(4)(C)(iv)(b) does not allow the
aggregate gross notional value of the Fund's holdings in listed
derivatives based on any five or fewer underlying reference assets to
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 to exceed
30% of the weight of its portfolio (including gross notional
exposures).\13\ The Exchange is proposing to allow the Fund to hold up
to 100% of the weight of its portfolio (including gross notional
exposures) in listed derivatives based on the S&P 500 Index,
specifically futures traded on the Chicago Mercantile Exchange (``S&P
500 Futures'') and options traded on Cboe Exchange, Inc. (``S&P 500
Options,''), as well as options on S&P 500 Futures (``Options on S&P
500 Futures'' and, collectively with S&P 500 Futures and S&P 500
Options, ``S&P 500 Derivatives'').\14\ The Fund primarily expects to
utilize S&P 500 Derivatives to implement its strategy. The Fund will
utilize short or long S&P 500 Derivatives to the extent needed to
reduce or augment, respectively, the Fund's exposure relative to the
exposure resulting from investments in the U.S. Equities described
above in order to achieve the desired net exposure. S&P 500 Derivatives
are an efficient means for reducing or augmenting exposure to U.S.
Equities, as described above. Allowing the Fund to hold a greater
portion of its portfolio in S&P 500 Derivatives would mitigate the
Fund's dependency on holding over-the-counter (``OTC'') instruments,
which would reduce the Fund's operational burden by allowing the Fund
to use listed futures and options contracts to achieve its investment
objective and would further reduce counter-party risk associated with
holding OTC instruments. The Exchange notes that the Fund may also hold
certain fixed income securities, cash and Cash Equivalents, and ETFs
that primarily invest in fixed income securities in compliance with
Rules 14.11(i)(4)(C)(ii), (iii), and (i), respectively, as part of its
strategy and in order to collateralize its S&P 500 Derivatives
positions.
---------------------------------------------------------------------------
\13\ The Exchange notes that the 80% and 20% investment numbers
above are based on the Fund's net assets, while Rule
14.11(i)(4)(C)(iv)(b) is calculated on the basis of aggregate gross
notional value.
\14\ While the Adviser does not anticipate the gross notional
exposure of its holdings in S&P 500 Derivatives to approach 100% of
the weight of the Fund's portfolio, the Adviser would like to have
the flexibility to do so in the event that the Adviser determines
that it is in the best interest of the Fund. The Exchange also notes
that while the Fund may invest in options on ETFs, such holdings
will be in compliance with Rule 14.11(i)(4)(C)(iv)(b).
---------------------------------------------------------------------------
The combination of U.S. Equities, fixed income securities, cash,
Cash Equivalents, and the cash value of derivatives positions will
constitute the entirety of the Fund's holdings and the cash value of
these holdings will be used to form the basis for any calculation that
is based on net assets. The Exchange notes that this is different than
the calculation used to measure the Fund's holdings in S&P 500
Derivatives as it relates to the Fund holding up to 100% of the weight
of its portfolio, which, as noted above, is calculated using gross
notional exposures gained through the S&P 500 Derivatives 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% and 65% limitations in Rule
14.11(i)(4)(C)(iv)(b) related to S&P 500 Derivatives, the Fund's
proposed investments will satisfy, on an initial and continued listing
basis, 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
comply with all other requirements applicable to Managed Fund Shares,
which includes the dissemination of key information such as the
Disclosed Portfolio,\15\ Net Asset Value,\16\ and the Intraday
Indicative Value,\17\ suspension of trading or removal,\18\ trading
halts,\19\ surveillance,\20\ minimum price variation for quoting and
order entry,\21\ the information circular,\22\ and firewalls \23\ as
set forth in Exchange rules applicable to Managed Fund Shares and the
orders approving such rules. Moreover, all of the exchange-listed
instruments held by the Fund, including S&P 500 Futures, S&P 500
Options, Options on S&P 500 Futures, U.S. Equities, options on ETFs,
and ETFs that primarily invest in fixed income instruments 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.\24\ 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 securities
listed on the Exchange. The issuer has represented to the Exchange that
it will advise the Exchange of any
[[Page 23410]]
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. If the Fund or Shares are not in compliance with
the applicable listing requirements, then, with respect to such Fund or
Shares, the Exchange will commence delisting procedures under Exchange
Rule 14.12. FINRA conducts certain cross-market 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.
---------------------------------------------------------------------------
\15\ See Rule 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii).
\16\ See Rule 14.11(i)(4)(A)(ii).
\17\ See Rule 14.11(i)(4)(B)(i).
\18\ See Rule 14.11(i)(4)(B)(iii).
\19\ See Rule 14.11(i)(4)(B)(iv).
\20\ See Rule 14.11(i)(2)(C).
\21\ See Rule 14.11(i)(2)(B).
\22\ See Rule 14.11(i)(6).
\23\ See Rule 14.11(i)(7).
\24\ For a list of the current members and affiliate members of
ISG, see www.isgportal.com. The Exchange notes that not all
components of the Disclosed Portfolio for the Fund may trade on
markets that are members of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act \25\ in general and Section 6(b)(5) of the Act \26\ 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 initial and
continued listing criteria in BZX Rule 14.11(i) with the exception 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).\27\ The Exchange believes that the liquidity
in the S&P 500 Futures, S&P 500 Options, and Options on S&P 500 Futures
markets mitigates the concerns that Rule 14.11(i)(4)(C)(iv)(b) is
intended to address and that such liquidity would prevent the Shares
from being susceptible to manipulation.\28\ Further, allowing the Fund
to hold a greater portion of its portfolio in S&P 500 Derivatives would
mitigate the Fund's dependency on holding OTC instruments, which would
reduce the Fund's operational burden by allowing the Fund to primarily
use listed futures and options contracts to achieve its investment
objective and would further reduce counter-party risk associated with
holding OTC instruments. The Exchange further 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
Derivatives holdings.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78f.
\26\ 15 U.S.C. 78f(b)(5).
\27\ As noted above, the Exchange is proposing that the Fund be
exempt from the requirement of Rule 14.11(i)(4)(C)(iv)(b) that
prevents aggregate gross notional value of listed derivatives based
on any five or fewer underlying reference assets from exceeding 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 from exceeding 30% of the
weight of the portfolio (including gross notional exposures). The
Exchange is proposing to allow the Fund to hold up to 100% of the
weight of its portfolio (including gross notional exposures) in S&P
500 Derivatives.
\28\ The Exchange notes that there was an average of more than
$3 billion in notional volume traded on a daily basis in S&P 500
Options in 2019. S&P 500 Futures generally trade over one million
contracts per day in the front month contract. More than 1,000,000
Options on S&P 500 Futures contracts traded per day in February
2020.
---------------------------------------------------------------------------
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 futures
contracts, options, ETFs, and component stocks 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 and the underlying futures contracts,
options, component stocks, and other ETFs held by the Fund via the ISG
from other exchanges who are members or affiliates of the ISG or with
which the Exchange has entered into a comprehensive surveillance
sharing agreement.\29\ 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.
---------------------------------------------------------------------------
\29\ See note 21, supra [sic].
---------------------------------------------------------------------------
For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change, rather will facilitate the listing and trading of
an additional actively-managed exchange-traded product that will
enhance competition among both market participants and listing venues,
to the benefit of investors and the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the 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 \30\ and Rule 19b-4(f)(6) thereunder.\31\
---------------------------------------------------------------------------
\30\ 15 U.S.C. 78s(b)(3)(A).
\31\ 17 CFR 240.19b-4(f)(6). In addition, Rule19b-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 \32\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \33\ 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 to waive the 30-day operative delay
so that the
[[Page 23411]]
proposal may become operative upon filing.
---------------------------------------------------------------------------
\32\ 17 CFR 240.19b-4(f)(6).
\33\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------
The Exchange states that, while the proposal seeks to allow the
Fund to hold listed derivatives, in particular options and futures on
the S&P 500 Index, in a manner that does not comply with BZX Rule
14.11(i)(4)(C)(iv)(b), the proposal is similar to another previously
approved proposal to list and trade a series of Managed Fund Shares
with similar exposures to a single underlying reference asset and U.S.
exchange-listed equity securities.\34\ The Exchange represents that,
except for the 30% and 65% limitations in BZX Rule
14.11(i)(4)(C)(iv)(b) related to S&P 500 Derivatives, the Fund's
proposed investments will satisfy, on an initial and continued listing
basis, all of the generic listing standards under BZX Rule
14.11(i)(4)(C) and all other applicable requirements for Managed Fund
Shares under BZX Rule 14.11(i).\35\ In addition, the Exchange further
represents that all of the exchange-listed instruments held by the
Fund, including S&P 500 Futures, S&P 500 Options, Options on S&P 500
Futures, U.S. Equities, options on ETFs, and ETFs that primarily invest
in fixed income instruments 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 Commission
believes that the proposal raises no novel or unique regulatory issues
and that waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest. Therefore, the
Commission hereby waives the operative delay and designates the
proposed rule change operative upon filing.\36\
---------------------------------------------------------------------------
\34\ See supra note 7.
\35\ In addition, the Exchange represents that the Shares of the
Fund will comply with all other requirements applicable to Managed
Fund Shares, which includes 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 and the orders approving
such rules. See supra notes 15-23 and accompanying text.
\36\ 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-2020-021 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-2020-021. 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-2020-021 and should be submitted
on or before May 18, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
---------------------------------------------------------------------------
\37\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-08813 Filed 4-24-20; 8:45 am]
BILLING CODE 8011-01-P
