Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Applicable to Securities Listed on the Exchange, Which Are Set Forth in BZX Rule 14.13 (Company Listing Fees), 27002-27004 [2020-09637]
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27002
Federal Register / Vol. 85, No. 88 / Wednesday, May 6, 2020 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–09638 Filed 5–5–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88778; File No. SR–
CboeBZX–2020–034]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend the
Fees Applicable to Securities Listed on
the Exchange, Which Are Set Forth in
BZX Rule 14.13 (Company Listing
Fees)
April 30, 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 16,
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, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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 amend the fees applicable to
securities listed on the Exchange, which
are set forth in BZX Rule 14.13,
Company Listing Fees. 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/bzx/), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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
On August 30, 2011, the Exchange
received approval of rules applicable to
the qualification, listing, and delisting
of companies on the Exchange,3 which
it modified on February 8, 2012 in order
to adopt pricing for the listing of
exchange-traded products (‘‘ETPs’’) 4 on
the Exchange.5 On July 3, 2017, the
Exchange made certain changes to Rule
14.13 such that there were no entry fees
or annual fees for ETPs listed on the
Exchange.6 Effective January 1, 2019,
the Exchange made certain changes to
Rule 14.13 in order to charge an entry
fee for ETPs that are not GenericallyListed ETPs 7 and to add annual listing
fees for ETPs listed on the Exchange.8
The Exchange then made certain
additional modifications to Rule 14.13
in May 2019 related to listings that are
transferring to the Exchange and to
make certain changes to the fees
associated with Linked Securities.9 10
3 See Securities Exchange Act Release No. 65225
(August 30, 2011), 76 FR 55148 (September 6, 2011)
(SR–BATS–2011–018).
4 As defined in Rule 11.8(e)(1)(A), the term ‘‘ETP’’
means any security listed pursuant to Exchange
Rule 14.11.
5 See Securities Exchange Act Release No. 66422
(February 17, 2012), 77 FR 11179 (February 24,
2012) (SR–BATS–2012–010).
6 See Securities Exchange Act Release No. 81152
(July 14, 2017), 82 FR 33525 (July 20, 2017) (SR–
BatsBZX–2017–45).
7 As defined in Rule 14.13(b)(1)(C)(i), the term
‘‘Generically-Listed ETPs’’ means Index Fund
Shares, Portfolio Depositary Receipts, Managed
Fund Shares, Linked Securities, and Currency Trust
Shares that are listed on the Exchange pursuant to
Rule 19b–4(e) under the Exchange Act and for
which a proposed rule change pursuant to Section
19(b) of the Exchange Act is not required to be filed
with the Commission.
8 See Securities Exchange Act Release No. 83597
(July 5, 2018), 83 FR 32164 (July 11, 2018) (SR–
CboeBZX–2018–46).
9 As defined in Rule 14.11(d), the term ‘‘Linked
Securities’’ includes any product listed pursuant to
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Finally, on August 30, 2019, the
Exchange amended Rule 14.13(b)(2) in
order to create annual pricing cap for
Outcome Strategy Series 11 that are
listed on the Exchange.12 Now, the
Exchange submits this proposal in order
to amend Rule 14.13(b)(1)(C)(i) to
exclude generically-listed ExchangeTraded Fund Shares from entry fees.
By way of background, on April 6,
2020, the Exchange received approval
by the Commission to generically list
and trade Exchange-Traded Fund Shares
that are permitted to operate in reliance
of Rule 6c–11 (‘‘Rule 6c–11’’) under the
Investment Company Act of 1940 (the
‘‘1940 Act’’).13 The Commission
recently adopted Rule 6c–11 to permit
exchange-traded funds (‘‘ETFs’’) that
satisfy certain conditions to operate
without obtaining an exemptive order
from the Commission under the 1940
Act.14 Since the first ETF was approved
by the Commission in 1992, the
Commission has routinely granted
exemptive orders permitting ETFs to
operate under the 1940 Act because
there was no ETF specific rule in place
and they have characteristics that
distinguish them from the types of
structures contemplated and included
in the 1940 Act. After such an extended
period operating without a specific rule
set and only under exemptive relief,
Rule 6c–11 is designed to provide a
consistent, transparent, and efficient
regulatory framework for ETFs.15 Given
Rule 14.11(d), but specifically includes Equity
Index-Linked Securities, Commodity-Linked
Securities, Fixed Income Index-Linked Securities,
Futures-Linked Securities, and Multifactor IndexLinked Securities.
10 See Securities Exchange Act Release No. 85881
(May 16, 2019), 84 FR 23607 (May 22, 2019) (SR–
CboeBZX–2019–042).
11 As defined in Rule 14.13(b)(2)(C)(iv), an
Outcome Strategy Series is a series of ETPs that are
each designed to (i) a pre-defined set of returns; (ii)
over a specified outcome period; (iii) based on the
performance of the same underlying instrument;
and (iv) each employ the same outcome strategy for
achieving the predefined set of returns (each an
‘‘Outcome Strategy ETP’’ and, collectively, an
‘‘Outcome Strategy Series’’).
12 See Securities Exchange Act No. 86956
(September 12, 2019) 84 FR 49128 (September 18,
2019) (SR–CboeBZX–2019–081).
13 15 U.S.C. 80a–1.
14 See Release Nos. 33–10695; IC–33646; File No.
S7–15–18 (Exchange-Traded Funds) (September 25,
2019), 84 FR 57162 (October 24, 2019) (the ‘‘Rule
6c–11 Release’’).
15 In approving the rule, the Commission stated
that the ‘‘rule will modernize the regulatory
framework for ETFs to reflect our more than two
decades of experience with these investment
products. The rule is designed to further important
Commission objectives, including establishing a
consistent, transparent, and efficient regulatory
framework for ETFs and facilitating greater
competition and innovation among ETFs.’’ Rule 6c–
11 Release, at 57163. The Commission also stated
the following regarding the rule’s impact: ‘‘We
believe rule 6c–11 will establish a regulatory
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Federal Register / Vol. 85, No. 88 / Wednesday, May 6, 2020 / Notices
this, the Exchange adopted Rule 14.11(l)
to similarly promote consistency,
transparency, and efficiency
surrounding the exchange listing
process for ETF Shares in a manner that
is consistent with the Act.
Like Index Fund Shares and Managed
Fund Shares listed under generic listing
standards in Rules 14.11(c) and 14.11(i),
respectively, series of Exchange-Traded
Fund Shares that are permitted to
operate in reliance on Rule 6c–11 are
permitted to be listed and traded on the
Exchange without a prior Commission
approval order or notice of effectiveness
pursuant to Section 19(b) of the Act.16
Given this, the Exchange proposes to
include generically-listed ExchangeTraded Fund Shares in the list of
Generically-Listed ETPs set forth in
Rule 14.13(b)(1)(C)(i) that are excepted
from entry fees. Specifically, where
generically-listed Exchange-Traded
Fund Shares do not require a proposed
rule change pursuant to section 19(b) of
the Exchange Act to be filed with the
Commission prior to listing and trading
on the Exchange, the Exchange proposes
to exempt such Exchange-Traded Fund
Shares from entry fees. Such treatment
is consistent with the treatment of other
ETPs (such as Index Fund Shares and
Managed Fund Shares) that also
generally do not require a proposed rule
change pursuant to section 19(b) of the
Exchange Act to be filed with the
Commission prior to listing and trading
on the Exchange.
2. Statutory Basis
The Exchange believes that the
proposed rule changes are consistent
with the objectives of Section 6 of the
Act,17 in general, and furthers the
objectives of Section 6(b)(4) and
framework that: (1) Reduces the expense and delay
currently associated with forming and operating
certain ETFs unable to rely on existing orders; and
(2) creates a level playing field for ETFs that can
rely on the rule. As such, the rule will enable
increased product competition among certain ETF
providers, which can lead to lower fees for
investors, encourage financial innovation, and
increase investor choice in the ETF market.’’ Rule
6c–11 Release, at 57204.
16 Rule 19b–4(e)(1) provides that the listing and
trading of a new derivative securities product by a
self-regulatory organization (‘‘SRO’’) is not deemed
a proposed rule change, pursuant to paragraph
(c)(1) of Rule 19b–4, if the Commission has
approved, pursuant to Section 19(b) of the Act, the
SRO’s trading rules, procedures and listing
standards for the product class that would include
the new derivative securities product and the SRO
has a surveillance program for the product class. As
noted in the Approval Order, Exchange Rule
14.11(l) establishes generic listing standards for
ETFs that are permitted to operate in reliance on
Rule 6c–11. An ETF listed under proposed Rule
14.11(l) would therefore not need a separate
proposed rule change pursuant to Rule 19b–4 before
it can be listed and traded on the Exchange.
17 15 U.S.C. 78f.
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6(b)(5),18 in particular, as it is designed
to provide for the equitable allocation of
reasonable dues, fees and other charges
among its issuers. The Exchange also
notes that its ETP listing business
operates in a highly-competitive market
in which ETP issuers can readily
transfer their listings if they deem fee
levels or any other factor at a particular
venue to be insufficient or excessive.
The proposed rule change reflects a
competitive pricing structure designed
to incentivize issuers to list new
products and transfer existing products
to the Exchange, which the Exchange
believes will enhance competition both
among ETP issuers and listing venues,
to the benefit of investors.
The Proposed Entry Fee Exemption Is
an Equitable Allocation of Fees
The Exchange believes the proposal is
equitable because it is available to all
issuers and applies equally to all
generically-listed Exchange-Traded
Fund Shares. The Exchange only
recently amended its Rules to allow for
the generic listing of Exchange-Traded
Fund Shares. The Exchange believes
that providing an exemption to entry
fees for such ETPs is a reasonable and
equitable approach as they do not
require a proposed rule change pursuant
to Section 19(b) of the Exchange Act to
be filed with the Commission in order
to list and trade on the Exchange.
The Exchange notes that the proposed
entry fee exemption will only act to
leave static or reduce fees for ETPs
listed on the Exchange. Further, this
proposal will decrease the fees
associated with generically-listed
Exchange-Traded Fund Shares on the
Exchange, which will reduce the
barriers to entry into the space and
incentivize enhanced competition
among issuers of Exchange-Traded Fund
Shares, to the benefit of investors.
The Proposed Entry Fee Exemption Is
Not Unfairly Discriminatory
The Exchange also believes that the
proposed entry fee exemption for
generically-listed Exchange-Traded
Fund Shares is not unfairly
discriminatory because it does not
require a proposed rule change pursuant
to Section 19(b) of the Exchange Act to
be filed with the Commission in order
to list and trade on the Exchange. As
noted above, Exchange-Traded Funds
only recently became available to list
and trade generically on the Exchange.
Other similar types of ETPs (e.g.,
Managed Fund Shares and Index Fund
Shares) that are listed on the Exchange
generically are exempted from entry fees
18 15
PO 00000
U.S.C. 78f(b)(4) and (5).
Frm 00081
Fmt 4703
Sfmt 4703
27003
under Rule 14.13(b)(1)(C)(i) because
they do not require a proposed rule
change pursuant to Section 19(b) of the
Exchange Act to be filed with the
Commission in order to list and trade on
the Exchange. As such, the Exchange
believes it is not unfairly discriminatory
of the Exchange to similarly exempt
generically-listed Exchange-Traded
Fund Shares from such entry fees.
The Exchange notes that the proposed
entry fee exemption will only act to
leave static or reduce fees for ETPs
listed on the Exchange. This proposal
will decrease the fees associated with
generically listing Exchange-Traded
Fund Shares, which will reduce the
barriers to entry into the space and
incentivize enhanced competition
among issuers of Exchange-Traded Fund
Shares, also to the benefit of investors.
The Proposed Entry Fee Exemption Is
Reasonable
The Exchange believes that the
proposed entry fee exemption for
generically-listed Exchange-Traded
Fund Shares is a reasonable means to
incentivize issuers to list (or transfer)
such Exchange-Traded Fund Shares on
the Exchange. The marketplace for
listings is extremely competitive and
there are several other national
securities exchanges that offer ETP
listings. Transfers between listing
venues occur frequently for numerous
reasons, including listing fees. The
proposed rule change reflects a
competitive pricing structure designed
to incentivize issuers to list new
products and transfer existing products
to the Exchange, which the Exchange
believes will enhance competition both
among ETP issuers and listing venues,
to the benefit of investors. Based on the
foregoing, the Exchange believes that
the proposed rule changes are consistent
with 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 not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe the proposed
change burdens competition, but rather,
enhances competition as it is intended
to increase the competitiveness of BZX
as a listing venue by providing better
pricing for generically-listed ExchangeTraded Fund Shares. The marketplace
for listings is extremely competitive and
there are several other national
securities exchanges that offer ETP
listings. Transfers between listing
venues occur frequently for numerous
reasons, including listing fees. This
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Federal Register / Vol. 85, No. 88 / Wednesday, May 6, 2020 / Notices
proposal is intended to help the
Exchange compete as an ETP listing
venue. Accordingly, the Exchange does
not believe that the proposed change
will impair the ability of issuers or
competing ETP listing venues to
maintain their competitive standing.
The Exchange also notes that the
proposed change represents a
competitive pricing structure designed
to incentivize issuers to list new
products and transfer existing products
to the Exchange, which the Exchange
believes will enhance competition both
among ETP issuers and listing venues,
to the benefit of investors. The Exchange
believes that such proposed changes
will directly enhance competition
among ETP listing venues by reducing
the costs associated with listing on the
Exchange for generically-listed
Exchange-Traded Fund Shares.
Similarly, the Exchange believes that
exempting entry fees on such ETPs will
enhance competition both among listing
venues of Exchange-Traded Fund
Shares and among issuers through an
overall reduction of fees for listing such
products. As such, the proposal is a
competitive proposal designed to
enhance pricing competition among
listing venues and implement pricing
for listings that better reflects the
revenue and expenses associated with
listing ETPs on the Exchange. The
Exchange does not believe the proposed
amendments would burden intramarket
competition as they would be available
to all issuers uniformly.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
Members or other interested parties.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 19 and paragraph (f) of Rule
19b–4 20 thereunder. 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
19 15
20 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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19:08 May 05, 2020
Jkt 250001
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
J. Matthew DeLesDernier,
Assistant Secretary.
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:
[FR Doc. 2020–09637 Filed 5–5–20; 8:45 am]
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–2020–034 on the subject line.
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Extend the Operation
of Its Flexible Exchange Options
(‘‘FLEX Options’’) PM Exercise
Settlement Pilot Program for FLEX
Index Options
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–2020–034. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CboeBZX–2020–034 and
should be submitted on or before May
27, 2020.
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88782; File No. SR–CBOE–
2020–039]
April 30, 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 Exchange, Inc. (‘‘Exchange’’
or ‘‘Cboe Options’’) 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 Exchange, Inc. (the ‘‘Exchange’’
or ‘‘Cboe Options’’) proposes to extend
the operation of its Flexible Exchange
Options (‘‘FLEX Options’’) pilot
program regarding permissible exercise
settlement values for FLEX Index
Options. The text of the proposed rule
change is provided below.
(additions are in italics; deletions are
[bracketed])
*
*
*
*
*
Rules of Cboe Exchange, Inc.
*
*
*
*
*
Rule 4.21. Series of FLEX Options
(a) No change.
21 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
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]]>Agencies
[Federal Register Volume 85, Number 88 (Wednesday, May 6, 2020)]
[Notices]
[Pages 27002-27004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09637]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88778; File No. SR-CboeBZX-2020-034]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Fees Applicable to Securities Listed on the Exchange, Which Are Set
Forth in BZX Rule 14.13 (Company Listing Fees)
April 30, 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 16, 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, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 amend the fees applicable to securities listed on the
Exchange, which are set forth in BZX Rule 14.13, Company Listing Fees.
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/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
On August 30, 2011, the Exchange received approval of rules
applicable to the qualification, listing, and delisting of companies on
the Exchange,\3\ which it modified on February 8, 2012 in order to
adopt pricing for the listing of exchange-traded products (``ETPs'')
\4\ on the Exchange.\5\ On July 3, 2017, the Exchange made certain
changes to Rule 14.13 such that there were no entry fees or annual fees
for ETPs listed on the Exchange.\6\ Effective January 1, 2019, the
Exchange made certain changes to Rule 14.13 in order to charge an entry
fee for ETPs that are not Generically-Listed ETPs \7\ and to add annual
listing fees for ETPs listed on the Exchange.\8\ The Exchange then made
certain additional modifications to Rule 14.13 in May 2019 related to
listings that are transferring to the Exchange and to make certain
changes to the fees associated with Linked Securities.9 10
Finally, on August 30, 2019, the Exchange amended Rule 14.13(b)(2) in
order to create annual pricing cap for Outcome Strategy Series \11\
that are listed on the Exchange.\12\ Now, the Exchange submits this
proposal in order to amend Rule 14.13(b)(1)(C)(i) to exclude
generically-listed Exchange-Traded Fund Shares from entry fees.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 65225 (August 30,
2011), 76 FR 55148 (September 6, 2011) (SR-BATS-2011-018).
\4\ As defined in Rule 11.8(e)(1)(A), the term ``ETP'' means any
security listed pursuant to Exchange Rule 14.11.
\5\ See Securities Exchange Act Release No. 66422 (February 17,
2012), 77 FR 11179 (February 24, 2012) (SR-BATS-2012-010).
\6\ See Securities Exchange Act Release No. 81152 (July 14,
2017), 82 FR 33525 (July 20, 2017) (SR-BatsBZX-2017-45).
\7\ As defined in Rule 14.13(b)(1)(C)(i), the term
``Generically-Listed ETPs'' means Index Fund Shares, Portfolio
Depositary Receipts, Managed Fund Shares, Linked Securities, and
Currency Trust Shares that are listed on the Exchange pursuant to
Rule 19b-4(e) under the Exchange Act and for which a proposed rule
change pursuant to Section 19(b) of the Exchange Act is not required
to be filed with the Commission.
\8\ See Securities Exchange Act Release No. 83597 (July 5,
2018), 83 FR 32164 (July 11, 2018) (SR-CboeBZX-2018-46).
\9\ As defined in Rule 14.11(d), the term ``Linked Securities''
includes any product listed pursuant to Rule 14.11(d), but
specifically includes Equity Index-Linked Securities, Commodity-
Linked Securities, Fixed Income Index-Linked Securities, Futures-
Linked Securities, and Multifactor Index-Linked Securities.
\10\ See Securities Exchange Act Release No. 85881 (May 16,
2019), 84 FR 23607 (May 22, 2019) (SR-CboeBZX-2019-042).
\11\ As defined in Rule 14.13(b)(2)(C)(iv), an Outcome Strategy
Series is a series of ETPs that are each designed to (i) a pre-
defined set of returns; (ii) over a specified outcome period; (iii)
based on the performance of the same underlying instrument; and (iv)
each employ the same outcome strategy for achieving the predefined
set of returns (each an ``Outcome Strategy ETP'' and, collectively,
an ``Outcome Strategy Series'').
\12\ See Securities Exchange Act No. 86956 (September 12, 2019)
84 FR 49128 (September 18, 2019) (SR-CboeBZX-2019-081).
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By way of background, on April 6, 2020, the Exchange received
approval by the Commission to generically list and trade Exchange-
Traded Fund Shares that are permitted to operate in reliance of Rule
6c-11 (``Rule 6c-11'') under the Investment Company Act of 1940 (the
``1940 Act'').\13\ The Commission recently adopted Rule 6c-11 to permit
exchange-traded funds (``ETFs'') that satisfy certain conditions to
operate without obtaining an exemptive order from the Commission under
the 1940 Act.\14\ Since the first ETF was approved by the Commission in
1992, the Commission has routinely granted exemptive orders permitting
ETFs to operate under the 1940 Act because there was no ETF specific
rule in place and they have characteristics that distinguish them from
the types of structures contemplated and included in the 1940 Act.
After such an extended period operating without a specific rule set and
only under exemptive relief, Rule 6c-11 is designed to provide a
consistent, transparent, and efficient regulatory framework for
ETFs.\15\ Given
[[Page 27003]]
this, the Exchange adopted Rule 14.11(l) to similarly promote
consistency, transparency, and efficiency surrounding the exchange
listing process for ETF Shares in a manner that is consistent with the
Act.
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\13\ 15 U.S.C. 80a-1.
\14\ See Release Nos. 33-10695; IC-33646; File No. S7-15-18
(Exchange-Traded Funds) (September 25, 2019), 84 FR 57162 (October
24, 2019) (the ``Rule 6c-11 Release'').
\15\ In approving the rule, the Commission stated that the
``rule will modernize the regulatory framework for ETFs to reflect
our more than two decades of experience with these investment
products. The rule is designed to further important Commission
objectives, including establishing a consistent, transparent, and
efficient regulatory framework for ETFs and facilitating greater
competition and innovation among ETFs.'' Rule 6c-11 Release, at
57163. The Commission also stated the following regarding the rule's
impact: ``We believe rule 6c-11 will establish a regulatory
framework that: (1) Reduces the expense and delay currently
associated with forming and operating certain ETFs unable to rely on
existing orders; and (2) creates a level playing field for ETFs that
can rely on the rule. As such, the rule will enable increased
product competition among certain ETF providers, which can lead to
lower fees for investors, encourage financial innovation, and
increase investor choice in the ETF market.'' Rule 6c-11 Release, at
57204.
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Like Index Fund Shares and Managed Fund Shares listed under generic
listing standards in Rules 14.11(c) and 14.11(i), respectively, series
of Exchange-Traded Fund Shares that are permitted to operate in
reliance on Rule 6c-11 are permitted to be listed and traded on the
Exchange without a prior Commission approval order or notice of
effectiveness pursuant to Section 19(b) of the Act.\16\ Given this, the
Exchange proposes to include generically-listed Exchange-Traded Fund
Shares in the list of Generically-Listed ETPs set forth in Rule
14.13(b)(1)(C)(i) that are excepted from entry fees. Specifically,
where generically-listed Exchange-Traded Fund Shares do not require a
proposed rule change pursuant to section 19(b) of the Exchange Act to
be filed with the Commission prior to listing and trading on the
Exchange, the Exchange proposes to exempt such Exchange-Traded Fund
Shares from entry fees. Such treatment is consistent with the treatment
of other ETPs (such as Index Fund Shares and Managed Fund Shares) that
also generally do not require a proposed rule change pursuant to
section 19(b) of the Exchange Act to be filed with the Commission prior
to listing and trading on the Exchange.
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\16\ Rule 19b-4(e)(1) provides that the listing and trading of a
new derivative securities product by a self-regulatory organization
(``SRO'') is not deemed a proposed rule change, pursuant to
paragraph (c)(1) of Rule 19b-4, if the Commission has approved,
pursuant to Section 19(b) of the Act, the SRO's trading rules,
procedures and listing standards for the product class that would
include the new derivative securities product and the SRO has a
surveillance program for the product class. As noted in the Approval
Order, Exchange Rule 14.11(l) establishes generic listing standards
for ETFs that are permitted to operate in reliance on Rule 6c-11. An
ETF listed under proposed Rule 14.11(l) would therefore not need a
separate proposed rule change pursuant to Rule 19b-4 before it can
be listed and traded on the Exchange.
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2. Statutory Basis
The Exchange believes that the proposed rule changes are consistent
with the objectives of Section 6 of the Act,\17\ in general, and
furthers the objectives of Section 6(b)(4) and 6(b)(5),\18\ in
particular, as it is designed to provide for the equitable allocation
of reasonable dues, fees and other charges among its issuers. The
Exchange also notes that its ETP listing business operates in a highly-
competitive market in which ETP issuers can readily transfer their
listings if they deem fee levels or any other factor at a particular
venue to be insufficient or excessive. The proposed rule change
reflects a competitive pricing structure designed to incentivize
issuers to list new products and transfer existing products to the
Exchange, which the Exchange believes will enhance competition both
among ETP issuers and listing venues, to the benefit of investors.
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\17\ 15 U.S.C. 78f.
\18\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Entry Fee Exemption Is an Equitable Allocation of Fees
The Exchange believes the proposal is equitable because it is
available to all issuers and applies equally to all generically-listed
Exchange-Traded Fund Shares. The Exchange only recently amended its
Rules to allow for the generic listing of Exchange-Traded Fund Shares.
The Exchange believes that providing an exemption to entry fees for
such ETPs is a reasonable and equitable approach as they do not require
a proposed rule change pursuant to Section 19(b) of the Exchange Act to
be filed with the Commission in order to list and trade on the
Exchange.
The Exchange notes that the proposed entry fee exemption will only
act to leave static or reduce fees for ETPs listed on the Exchange.
Further, this proposal will decrease the fees associated with
generically-listed Exchange-Traded Fund Shares on the Exchange, which
will reduce the barriers to entry into the space and incentivize
enhanced competition among issuers of Exchange-Traded Fund Shares, to
the benefit of investors.
The Proposed Entry Fee Exemption Is Not Unfairly Discriminatory
The Exchange also believes that the proposed entry fee exemption
for generically-listed Exchange-Traded Fund Shares is not unfairly
discriminatory because it does not require a proposed rule change
pursuant to Section 19(b) of the Exchange Act to be filed with the
Commission in order to list and trade on the Exchange. As noted above,
Exchange-Traded Funds only recently became available to list and trade
generically on the Exchange. Other similar types of ETPs (e.g., Managed
Fund Shares and Index Fund Shares) that are listed on the Exchange
generically are exempted from entry fees under Rule 14.13(b)(1)(C)(i)
because they do not require a proposed rule change pursuant to Section
19(b) of the Exchange Act to be filed with the Commission in order to
list and trade on the Exchange. As such, the Exchange believes it is
not unfairly discriminatory of the Exchange to similarly exempt
generically-listed Exchange-Traded Fund Shares from such entry fees.
The Exchange notes that the proposed entry fee exemption will only
act to leave static or reduce fees for ETPs listed on the Exchange.
This proposal will decrease the fees associated with generically
listing Exchange-Traded Fund Shares, which will reduce the barriers to
entry into the space and incentivize enhanced competition among issuers
of Exchange-Traded Fund Shares, also to the benefit of investors.
The Proposed Entry Fee Exemption Is Reasonable
The Exchange believes that the proposed entry fee exemption for
generically-listed Exchange-Traded Fund Shares is a reasonable means to
incentivize issuers to list (or transfer) such Exchange-Traded Fund
Shares on the Exchange. The marketplace for listings is extremely
competitive and there are several other national securities exchanges
that offer ETP listings. Transfers between listing venues occur
frequently for numerous reasons, including listing fees. The proposed
rule change reflects a competitive pricing structure designed to
incentivize issuers to list new products and transfer existing products
to the Exchange, which the Exchange believes will enhance competition
both among ETP issuers and listing venues, to the benefit of investors.
Based on the foregoing, the Exchange believes that the proposed rule
changes are consistent with 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 not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
the proposed change burdens competition, but rather, enhances
competition as it is intended to increase the competitiveness of BZX as
a listing venue by providing better pricing for generically-listed
Exchange-Traded Fund Shares. The marketplace for listings is extremely
competitive and there are several other national securities exchanges
that offer ETP listings. Transfers between listing venues occur
frequently for numerous reasons, including listing fees. This
[[Page 27004]]
proposal is intended to help the Exchange compete as an ETP listing
venue. Accordingly, the Exchange does not believe that the proposed
change will impair the ability of issuers or competing ETP listing
venues to maintain their competitive standing. The Exchange also notes
that the proposed change represents a competitive pricing structure
designed to incentivize issuers to list new products and transfer
existing products to the Exchange, which the Exchange believes will
enhance competition both among ETP issuers and listing venues, to the
benefit of investors. The Exchange believes that such proposed changes
will directly enhance competition among ETP listing venues by reducing
the costs associated with listing on the Exchange for generically-
listed Exchange-Traded Fund Shares. Similarly, the Exchange believes
that exempting entry fees on such ETPs will enhance competition both
among listing venues of Exchange-Traded Fund Shares and among issuers
through an overall reduction of fees for listing such products. As
such, the proposal is a competitive proposal designed to enhance
pricing competition among listing venues and implement pricing for
listings that better reflects the revenue and expenses associated with
listing ETPs on the Exchange. The Exchange does not believe the
proposed amendments would burden intramarket competition as they would
be available to all issuers uniformly.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from Members or other interested
parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \19\ and paragraph (f) of Rule 19b-4 \20\
thereunder. 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.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f).
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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-2020-034 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeBZX-2020-034. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeBZX-2020-034 and should be submitted
on or before May 27, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-09637 Filed 5-5-20; 8:45 am]
BILLING CODE 8011-01-P
