Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Regarding the Listing Rule of the Hartford Core Bond ETF, 25490-25493 [2020-09248]
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25490
Federal Register / Vol. 85, No. 85 / Friday, May 1, 2020 / Notices
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Roscoe, 100 F Street NE, Washington,
DC 20549; or send an email to: PRA_
Mailbox@sec.gov.
Dated: April 28, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–09299 Filed 4–30–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–107 OMB Control No.
3235–0116]
Proposed Collection; Comment
Request
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
Extension:
Form 6–K
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
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summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Form 6–K (17 CFR 249.306) is a
disclosure document under the
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foreign investors do when making
investment decisions. Form 6–K takes
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and is filed by approximately 34,794
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total annual reporting burden of 227,031
hours (6.525 hours per response ×
34,794 responses).
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Please direct your written comment to
David Bottom, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Cynthia
Roscoe 100 F Street NE, Washington, DC
20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: April 28, 2020.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–09293 Filed 4–30–20; 8:45 am]
BILLING CODE 8011–01–P
PO 00000
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88752; File No. SR–
CboeBZX–2020–035]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change Regarding the
Listing Rule of the Hartford Core Bond
ETF
April 27, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 16,
2020, Cboe BZX Exchange, Inc.
(‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The 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 BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
to allow the Hartford Core Bond ETF
(the ‘‘Fund’’), a series of the Hartford
Funds Exchange-Traded Trust (the
‘‘Trust’’), to expand the over-the-counter
(‘‘OTC’’) derivative product types the
Fund may hold and also to allow the
Fund to hold credit default swap
indices that are either listed or OTC
derivatives.
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
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
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Federal Register / Vol. 85, No. 85 / Friday, May 1, 2020 / Notices
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 adopted a rule to
permit the listing and trading the
Shares.5 On February 20, 2020, the
Exchange commenced trading in the
Shares. The Exchange now proposes to
continue listing and trading the Shares
pursuant to Rule 14.11(i) and expand
the realm of derivatives in which the
Fund may invest pursuant to the Initial
Filing and allow the Fund to hold credit
default swap indices that are either
listed or OTC derivatives. As proposed,
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)(ii)(d),6 as described
in the Initial Filing.
As noted in the Initial Filing, the
Exchange proposed a Rule amendment
in order to allow the listing and trading
of the Shares which would not meet the
requirements of Rule
14.11(i)(4)(C)(ii)(d), which requires that
component securities that in aggregate
account for at least 90% of the fixed
income weight of the portfolio must
satisfy at least one of five conditions.
Therefore, the Exchange proposed that
the fixed income portion of the portfolio
excluding Non-Agency ABS and MBS 7
would satisfy the 90% requirement. In
the Initial Filing, the Exchange also
provided that the Fund would generally
5 See Securities Exchange Act No. 88107 (January
31, 2020) 85 FR 6988 (February 6, 2020) (SR–
CboeBZX–2020–008) (the ‘‘Initial Filing’’).
6 Rule 14.11(i)(4)(C)(ii)(d) provides that
‘‘component securities that in aggregate account for
at least 90% of the fixed income weight of the
portfolio must be either: (a) From issuers that are
required to file reports pursuant to Sections 13 and
15(d) of the Act; (b) from issuers that have a
worldwide market value of its outstanding common
equity held by non-affiliates of $700 million or
more; (c) from issuers that have outstanding
securities that are notes, bonds, debentures, or
evidence of indebtedness having a total remaining
principal amount of at least $1 billion; (d) exempted
securities as defined in Section 3(a)(12) of the Act;
or (e) from issuers that are a government of a foreign
country or a political subdivision of a foreign
country.’’
7 As noted in the Initial Filing, non-Agency ABS
and MBS refers to non-agency, non-GSE (i.e., a type
of financial services corporation created by the
United States Congress, which include Fannie Mae
and Freddie Mac), and privately-issued mortgagerelated and other asset-backed securities.
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invest up to 20%, but may exceed 20%,
of its assets in cash and Cash
Equivalents,8 certain listed derivatives,9
and certain OTC derivatives.10 Further,
the Exchange provided that the Fund’s
holdings in cash and Cash Equivalents,
listed derivatives, and OTC derivatives
would be in compliance with all generic
listing standards, including those in
Rules 14.11(i)(4)(C)(iii),
14.11(i)(4)(C)(iv), 14.11(i)(4)(C)(v), and
14.11(i)(4)(C)(vi).
Pursuant to the Initial Filing the Fund
is permitted to invest in the following
listed derivatives:
• Treasury futures;
• U.S. interest rate futures; and
• Eurodollar futures.
Additionally, pursuant to the Initial
Filing, the Fund is permitted to invest
in the following OTC Derivatives:
• Interest rate swaps;
• Currency forwards; and
• Credit default swap indices.
Now, the Exchange proposes to
amend that credit default swap indices
will continue to be held by the Fund,
but may be listed derivatives or OTC
derivatives. Therefore, the Exchange
proposes that the Fund may invest in
the following listed derivatives:
• Treasury futures;
• U.S. interest rate futures;
• Eurodollar futures; and
• Credit default swap indices.
Additionally, the Exchange proposes
to expand the types of OTC derivatives
in which the Fund may invest to be the
following instruments:
• Interest rate swaps and consumer
price index (‘‘CPI’’) swaps, credit
default swaps, and total return swaps;
• Interest rate options, options on
interest rate swaps (‘‘swaptions’’), and
options on credit default swaps;
8 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.
9 As noted in the Initial Filing, listed derivatives
include only the following instruments: Treasury
futures, U.S. interest rate futures, and Eurodollar
futures.
10 As noted in the Initial Filing, OTC derivatives
include only the following instruments: Interest rate
swaps, currency forwards, and credit default swap
indices.
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• Currency forwards and bond
forwards; and
• Credit default swap indices.11
Rule 14.11(i)(4)(C)(v) is intended to
mitigate concerns around the
manipulability of a particular
underlying reference asset or derivatives
contract. As the proposal does not seek
to allow the Fund to hold more than
20% of the weight of the portfolio
(including gross notional exposures) in
OTC derivatives, the Exchange believes
the concerns around the manipulability
of a particular underlying reference
asset or derivatives contract are
mitigated. Further, by allowing the
Fund additional flexibility to further
diversify its holdings to provide
exposure to a broader array of OTC
derivatives would allow the Fund to
better achieve its investment objective,
and, as such, benefit both investors and
the Fund. As proposed, the Fund will
continue to meet all generic listings
standards related to OTC derivatives,
including those in Rules
14.11(i)(4)(C)(v) and 14.11(i)(4)(C)(vi).
The Fund’s investments, including
those in derivatives, will continue to be
consistent with the 1940 Act and the
Fund’s investment objective. Moreover,
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.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with Section 6(b)
of the Act 21 in general and Section
6(b)(5) of the Act 22 in particular in that
it is designed to prevent fraudulent and
manipulative acts and practices, to
11 As noted in the Initial Filing, intraday price
quotations for OTC derivatives are available from
major broker-dealer firms and from third-parties,
which may provide prices free with a time delay or
in real-time for a paid fee.
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 15 U.S.C. 78f(b).
22 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 85, No. 85 / Friday, May 1, 2020 / Notices
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 Rule 14.11(i)(4)(C)(ii)(d), as
provided in the Initial Filing.
The Exchange believes the proposal to
expand the types of derivatives in
which the Fund may invest as discussed
herein will allow the Fund additional
flexibility to further diversify its
holdings to better achieve its investment
objective, and, as such, benefit both
investors and the Fund. Further, as the
proposal does not seek to allow the
Fund to hold more than 20% of the
weight of the portfolio (including gross
notional exposures) in OTC derivatives,
the Exchange believes the concerns
around the manipulability of a
particular underlying reference asset or
derivatives contract are mitigated. The
Exchange also believes the proposal to
clarify that credit default swap indices
that the Fund may hold may be listed
or OTC derivatives will eliminate any
potential investor confusion as to the
types of derivatives the Fund may hold.
Lastly, the Fund’s investments in cash
and Cash Equivalents, listed derivatives,
and OTC derivatives will continue to be
in compliance with all generic listing
standards, including those in Rules
14.11(i)(4)(C)(iii), 14.11(i)(4)(C)(iv),
14.11(i)(4)(C)(v), and 14.11(i)(4)(C)(vi).
The Fund will comply with all
representations made in the Initial
Filing, aside from the changes
specifically discussed herein related to
permitted derivatives.
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 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.
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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 23 and Rule 19b–
4(f)(6) thereunder.24
A proposed rule change filed under
Rule 19b–4(f)(6) 25 normally does not
become operative for 30 days after the
date of the filing. However, pursuant to
Rule 19b–4(f)(6)(iii),26 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay to
allow the Fund to immediately modify
its permitted investments in derivatives.
The Exchange represents that all
derivatives would be held in
compliance with BZX’s generic listing
standards, including those in Rules
14.11(i)(4)(C)(iii), 14.11(i)(4)(C)(iv),
14.11(i)(4)(C)(v), and 14.11(i)(4)(C)(vi),
and therefore the proposal raises no
novel or substantive issues. Therefore,
the Commission believes that waiver of
the 30-day operative delay is consistent
with the protection of investors and the
public interest and hereby waives the
30-day operative delay and designates
the proposed rule change operative
upon filing.27
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
23 15
U.S.C. 78s(b)(3)(A).
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.
25 17 CFR 240.19b–4(f)(6).
26 17 CFR 240.19b–4(f)(6)(iii).
27 For purposes only of waiving the operative
delay, the Commission has considered the proposed
rule’s impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
24 17
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action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2020–035 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–2020–035. 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–2020–035 and
should be submitted on or before May
22, 2020.
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Federal Register / Vol. 85, No. 85 / Friday, May 1, 2020 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–09248 Filed 4–30–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88755; File No. SR–
NYSEArca–2020–36]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 6.40–O
Relating to the Risk Limitation
Mechanism
April 27, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on April 17,
2020, NYSE Arca, Inc. (‘‘NYSE Arca’’ or
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 self-regulatory organization. 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 to amend
Rule 6.40–O (Risk Limitation
Mechanism) to reflect modifications to
the operation of the trade and trigger
counters as well as the applicable time
periods for determining if a risk setting
is triggered in the event of a trading halt
or for transactions at the open in regards
to the Risk Limitation Mechanism. The
Exchange also proposes to relocate
certain text from Rule 6.40–O to Rule
6.86–O (Firm Quotes). The proposed
rule change is available on the
Exchange’s website at www.nyse.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
28 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 6.40–O (Risk Limitation
Mechanism) (the ‘‘Rule’’) to reflect
modifications to the operation of the
trade and trigger counters as well as the
applicable time periods for determining
if a risk setting is triggered in the event
of a trading halt or for transactions at
the open in regards to the Risk
Limitation Mechanism. The Exchange
also proposes to relocate certain text
from Rule 6.40–O to Rule 6.86–O (Firm
Quotes).
Risk Limitation Mechanism
Rule 6.40–O sets forth the risklimitation mechanism (the
‘‘Mechanism’’), which is designed to
help Market Makers, as well as OTP
Holders and OTP Firms (collectively,
‘‘OTP Holders’’ for the purpose of this
filing) better manage risk related to
quoting and submitting orders during
periods of increased and significant
trading activity.4 Specifically, the
Mechanism calculates for quotes and
orders, respectively: The number of
trades executed by the Market Maker or
OTP Holder in a particular options
class; the volume of contracts traded by
the Market Maker or OTP Holder in a
particular options class; or the aggregate
percentage of the Market Maker’s quoted
size or OTP Holder’s order size(s)
4 Market Makers are included in the definition of
OTP Holders and therefore, unless the Exchange is
discussing the quoting activity of Market Makers,
the Exchange does not distinguish Market Makers
from OTP Holders when discussing the risk
limitation mechanisms. See Rule 1.1(nn) (defining
OTP Holder as ‘‘a natural person, in good standing,
who has been issued an OTP, or has been named
as a Nominee’’ that is ‘‘a registered broker or dealer
pursuant to Section 15 of the Securities Exchange
Act of 1934, or a nominee or an associated person
of a registered broker or dealer that has been
approved by the Exchange to conduct business on
the Exchange’s Trading Facilities’’). See also Rule
6.32–O(a) (defining a Market Maker as an
individual ‘‘registered with the Exchange for the
purpose of making transactions as a dealerspecialist on the Floor of the Exchange or for the
purpose of submitting quotes electronically and
making transactions as a dealer-specialist through
the NYSE Arca OX electronic trading system’’).
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25493
executed in a particular options class.5
To determine whether the Mechanism is
triggered (i.e., the risk setting breached),
the Exchange maintains separate trade
counters that are incremented every
time a trade is executed; that aggregate
the number of contracts traded during
each such execution; and that calculate
applicable percentages depending on
the risk setting at issue.6 A breach of the
Mechanism occurs if the number of
increments to the trade counter, within
a time period specified by the Exchange,
exceeds the threshold set by the OTP
Holder. Under the current Rule, the
applicable time period will not be less
than 100 milliseconds.7
Proposed Clarification to Time Period
for Triggering of Risk Limitation
Mechanism
Currently, the timer elapses at the
conclusion of the time period specified
by the Exchange, unless a breach occurs
sooner than the timer expiration. The
Exchange proposes to modify this
functionality such that the time period
is rolling (as opposed to static) and is
activated each time a trade counter is
incremented such that the Exchange
‘‘looks back’’ at other trades that
occurred within the time period
specified by the Exchange to see if a
breach has occurred (See examples at
the end of this section). The Exchange
believes this modification will enhance
the operation of the timer—and hence
the risk protection. The Exchange
proposes to modify the Rule to ensure
that it is consistent with this proposed
functionality change.
First, the Exchange proposes to
modify the Rule regarding the
applicable time period during which the
increments of the trade counters are
tallied, including, to account for the
occurrence of trading halts or
transactions occurring at the open of
trading in a series. Specifically, the
Exchange proposes to modify
Commentary .03 to Rule 6.40–O to
provide that the minimum time period
determined by the Exchange would be
‘‘inclusive of the duration of any trading
halt occurring within that time’’;
however, ‘‘[f]or transactions occurring at
the open per Rule 6.64–O, the
applicable time period is the lesser of (i)
the time between the opening of a series
and the initial transaction or (ii) the
time period specified by the
Exchange.’’ 8 The Exchange believes this
5 See Rule 6.40–O(b)–(d) (setting forth the three
risk limitation mechanisms available).
6 See Rule 6.40–O(a).
7 See Commentary .03 to Rule 6.40–O.
8 See proposed Commentary .03 to Rule 6.40–O.
See also Rule 6.65–O (Trading Halts and
E:\FR\FM\01MYN1.SGM
Continued
01MYN1
]]>Agencies
[Federal Register Volume 85, Number 85 (Friday, May 1, 2020)]
[Notices]
[Pages 25490-25493]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09248]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88752; File No. SR-CboeBZX-2020-035]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Regarding
the Listing Rule of the Hartford Core Bond ETF
April 27, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 16, 2020, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') is filing
with the Securities and Exchange Commission (``Commission'') a proposed
rule change to allow the Hartford Core Bond ETF (the ``Fund''), a
series of the Hartford Funds Exchange-Traded Trust (the ``Trust''), to
expand the over-the-counter (``OTC'') derivative product types the Fund
may hold and also to allow the Fund to hold credit default swap indices
that are either listed or OTC derivatives.
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
[[Page 25491]]
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 adopted a rule to permit the listing and trading the
Shares.\5\ On February 20, 2020, the Exchange commenced trading in the
Shares. The Exchange now proposes to continue listing and trading the
Shares pursuant to Rule 14.11(i) and expand the realm of derivatives in
which the Fund may invest pursuant to the Initial Filing and allow the
Fund to hold credit default swap indices that are either listed or OTC
derivatives. As proposed, 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)(ii)(d),\6\ as described in the Initial Filing.
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\5\ See Securities Exchange Act No. 88107 (January 31, 2020) 85
FR 6988 (February 6, 2020) (SR-CboeBZX-2020-008) (the ``Initial
Filing'').
\6\ Rule 14.11(i)(4)(C)(ii)(d) provides that ``component
securities that in aggregate account for at least 90% of the fixed
income weight of the portfolio must be either: (a) From issuers that
are required to file reports pursuant to Sections 13 and 15(d) of
the Act; (b) from issuers that have a worldwide market value of its
outstanding common equity held by non-affiliates of $700 million or
more; (c) from issuers that have outstanding securities that are
notes, bonds, debentures, or evidence of indebtedness having a total
remaining principal amount of at least $1 billion; (d) exempted
securities as defined in Section 3(a)(12) of the Act; or (e) from
issuers that are a government of a foreign country or a political
subdivision of a foreign country.''
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As noted in the Initial Filing, the Exchange proposed a Rule
amendment in order to allow the listing and trading of the Shares which
would not meet the requirements of Rule 14.11(i)(4)(C)(ii)(d), which
requires that component securities that in aggregate account for at
least 90% of the fixed income weight of the portfolio must satisfy at
least one of five conditions. Therefore, the Exchange proposed that the
fixed income portion of the portfolio excluding Non-Agency ABS and MBS
\7\ would satisfy the 90% requirement. In the Initial Filing, the
Exchange also provided that the Fund would generally invest up to 20%,
but may exceed 20%, of its assets in cash and Cash Equivalents,\8\
certain listed derivatives,\9\ and certain OTC derivatives.\10\
Further, the Exchange provided that the Fund's holdings in cash and
Cash Equivalents, listed derivatives, and OTC derivatives would be in
compliance with all generic listing standards, including those in Rules
14.11(i)(4)(C)(iii), 14.11(i)(4)(C)(iv), 14.11(i)(4)(C)(v), and
14.11(i)(4)(C)(vi).
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\7\ As noted in the Initial Filing, non-Agency ABS and MBS
refers to non-agency, non-GSE (i.e., a type of financial services
corporation created by the United States Congress, which include
Fannie Mae and Freddie Mac), and privately-issued mortgage-related
and other asset-backed securities.
\8\ 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.
\9\ As noted in the Initial Filing, listed derivatives include
only the following instruments: Treasury futures, U.S. interest rate
futures, and Eurodollar futures.
\10\ As noted in the Initial Filing, OTC derivatives include
only the following instruments: Interest rate swaps, currency
forwards, and credit default swap indices.
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Pursuant to the Initial Filing the Fund is permitted to invest in
the following listed derivatives:
Treasury futures;
U.S. interest rate futures; and
Eurodollar futures.
Additionally, pursuant to the Initial Filing, the Fund is permitted
to invest in the following OTC Derivatives:
Interest rate swaps;
Currency forwards; and
Credit default swap indices.
Now, the Exchange proposes to amend that credit default swap
indices will continue to be held by the Fund, but may be listed
derivatives or OTC derivatives. Therefore, the Exchange proposes that
the Fund may invest in the following listed derivatives:
Treasury futures;
U.S. interest rate futures;
Eurodollar futures; and
Credit default swap indices.
Additionally, the Exchange proposes to expand the types of OTC
derivatives in which the Fund may invest to be the following
instruments:
Interest rate swaps and consumer price index (``CPI'')
swaps, credit default swaps, and total return swaps;
Interest rate options, options on interest rate swaps
(``swaptions''), and options on credit default swaps;
Currency forwards and bond forwards; and
Credit default swap indices.\11\
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\11\ As noted in the Initial Filing, intraday price quotations
for OTC derivatives are available from major broker-dealer firms and
from third-parties, which may provide prices free with a time delay
or in real-time for a paid fee.
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Rule 14.11(i)(4)(C)(v) is intended to mitigate concerns around the
manipulability of a particular underlying reference asset or
derivatives contract. As the proposal does not seek to allow the Fund
to hold more than 20% of the weight of the portfolio (including gross
notional exposures) in OTC derivatives, the Exchange believes the
concerns around the manipulability of a particular underlying reference
asset or derivatives contract are mitigated. Further, by allowing the
Fund additional flexibility to further diversify its holdings to
provide exposure to a broader array of OTC derivatives would allow the
Fund to better achieve its investment objective, and, as such, benefit
both investors and the Fund. As proposed, the Fund will continue to
meet all generic listings standards related to OTC derivatives,
including those in Rules 14.11(i)(4)(C)(v) and 14.11(i)(4)(C)(vi).
The Fund's investments, including those in derivatives, will
continue to be consistent with the 1940 Act and the Fund's investment
objective. Moreover, 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.
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\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).
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2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act \21\ in general and Section 6(b)(5) of the Act \22\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to
[[Page 25492]]
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 Rule 14.11(i)(4)(C)(ii)(d), as provided in the Initial
Filing.
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\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposal to expand the types of
derivatives in which the Fund may invest as discussed herein will allow
the Fund additional flexibility to further diversify its holdings to
better achieve its investment objective, and, as such, benefit both
investors and the Fund. Further, as the proposal does not seek to allow
the Fund to hold more than 20% of the weight of the portfolio
(including gross notional exposures) in OTC derivatives, the Exchange
believes the concerns around the manipulability of a particular
underlying reference asset or derivatives contract are mitigated. The
Exchange also believes the proposal to clarify that credit default swap
indices that the Fund may hold may be listed or OTC derivatives will
eliminate any potential investor confusion as to the types of
derivatives the Fund may hold. Lastly, the Fund's investments in cash
and Cash Equivalents, listed derivatives, and OTC derivatives will
continue to be in compliance with all generic listing standards,
including those in Rules 14.11(i)(4)(C)(iii), 14.11(i)(4)(C)(iv),
14.11(i)(4)(C)(v), and 14.11(i)(4)(C)(vi). The Fund will comply with
all representations made in the Initial Filing, aside from the changes
specifically discussed herein related to permitted derivatives.
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 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.
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 \23\ and Rule 19b-
4(f)(6) thereunder.\24\
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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 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.
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A proposed rule change filed under Rule 19b-4(f)(6) \25\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\26\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay to allow the Fund to
immediately modify its permitted investments in derivatives. The
Exchange represents that all derivatives would be held in compliance
with BZX's generic listing standards, including those in Rules
14.11(i)(4)(C)(iii), 14.11(i)(4)(C)(iv), 14.11(i)(4)(C)(v), and
14.11(i)(4)(C)(vi), and therefore the proposal raises no novel or
substantive issues. Therefore, the Commission believes that waiver of
the 30-day operative delay is consistent with the protection of
investors and the public interest and hereby waives the 30-day
operative delay and designates the proposed rule change operative upon
filing.\27\
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\25\ 17 CFR 240.19b-4(f)(6).
\26\ 17 CFR 240.19b-4(f)(6)(iii).
\27\ For purposes only of waiving the operative delay, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeBZX-2020-035 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-2020-035. 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-2020-035 and should be submitted
on or before May 22, 2020.
[[Page 25493]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-09248 Filed 4-30-20; 8:45 am]
BILLING CODE 8011-01-P
