Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Define the Terms “Derivative Security” and “UTP Derivative Security” and Amend Certain Related Rules, 29305-29308 [2021-11408]
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Federal Register / Vol. 86, No. 103 / Tuesday, June 1, 2021 / Notices
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[FR Doc. 2021–11286 Filed 5–28–21; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92015; File No. SR–
CboeBZX–2021–041]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Define the
Terms ‘‘Derivative Security’’ and ‘‘UTP
Derivative Security’’ and Amend
Certain Related Rules
May 25, 2021.
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29305
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 May 19,
2021, Cboe BZX Exchange, Inc.
(‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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18:20 May 28, 2021
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.
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed amendment
to define the terms ‘‘Derivative
Security’’ and ‘‘UTP Derivative
Security’’ in Exchange Rule 1.5.
Additionally, the Exchange proposes to
make certain amendments to Rules 3.21
and 14.11 to both simplify and clarify
the Exchange’s rules as they pertain to
UTP Derivative Securities. The text of
3 15
4 17
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PO 00000
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
Frm 00073
Fmt 4703
Sfmt 4703
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.
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Federal Register / Vol. 86, No. 103 / Tuesday, June 1, 2021 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
As part of this proposal, the Exchange
proposes to (1) adopt a new definition
for Derivative Security under proposed
Rule 1.5(dd); (2) move the definition of
unlisted trading privileges (‘‘UTP’’)
Derivative Security 5 from Rule 14.11(j)
to Exchange Rule 1.5(ee); and (3) amend
Exchange Rule 14.11(j) applicable to
UTP Derivative Securities. The
Exchange also proposes to make
ministerial changes to update
numbering, lettering, Rule references,
and provide clarifying text to Rules 1.5,
3.21, and 14.11. As discussed in further
detail below, all of the proposed
substantive changes are substantially
similar to other exchange rules.
(1) Proposal To Define Derivative
Security in Exchange Rule 1.5(dd) and
UTP Derivative Security in Exchange
Rule 1.5(ee)
The Exchange proposes to define
‘‘Derivative Security’’ in proposed Rule
1.5(dd) and amend existing Rule 1.5(ee)
to include the definition of ‘‘UTP
Derivative Security’’. ‘‘Derivative
Security’’ would be a new definition
and would mean a security that meets
the definition of ‘‘new derivative
securities product’’ in Rule 19b–4(e)
under the Act. ‘‘UTP Derivative
Security’’ would refer to any one of a
list of Derivative Securities that trades
on the Exchange pursuant to unlisted
trading privileges. The list of proposed
Derivative Securities that may meet the
definition of UTP Derivative Security
are as follows: Equity Linked Notes;
Index Fund Shares listed pursuant to
Exchange Rule 14.11(c) or Nasdaq Stock
Market LLC (‘‘Nasdaq’’) Rule 5705(b)
and Investment Company Units listed
pursuant to NYSE Arca, Inc. (‘‘NYSE
Arca’’) Rule 5.2–E(j)(3); Index-Linked
Exchangeable Notes; Equity Gold
Shares; Equity Index-Linked Securities;
Commodity-Linked Securities;
Currency-Linked Securities; Fixed
Income Index-Linked Securities;
Futures-Linked Securities; Multifactor
Index-Linked Securities; Trust
Certificates; Currency and Index
Warrants; Portfolio Depository Receipts;
Trust Issued Receipts; CommodityBased Trust Shares; Currency Trust
Shares; Commodity Index Trust Shares;
Commodity Futures Trust Shares;
Partnership Units; Paired Trust Shares;
Trust Units; Managed Fund Shares;
5 See Rule 14.11(j) and proposed amendments to
Rule 1.5(ee).
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18:20 May 28, 2021
Jkt 253001
Managed Trust Securities; Managed
Portfolio Shares; Tracking Fund Shares
listed pursuant to Exchange Rule
14.11(m), Active Proxy Portfolio Shares
listed pursuant to NYSE Arca Rule
8.601–E, and Proxy Portfolio Shares
listed pursuant to Nasdaq Stock Market
LLC Rule 5750; Selected Equity-linked
Debt Securities (‘‘SEEDS’’); and
Exchange-Traded Fund Shares.6 The
proposal is substantially similar to
NYSE National, Inc. (‘‘NYSE National’’)
Rule 1.1(m), but the list of Derivative
Securities that may be UTP Derivative
Securities includes two additional
Derivative Securities, SEEDS and
Exchange-Traded Fund Shares. While
SEEDS and Exchange-Traded Fund
Shares are not included in NYSE
National Rule 1.1(m), they are
Derivative Securities set forth not only
in Exchange Rules 14.11(e)(12) and
14.11(l), respectively, but also in section
5700 of the Nasdaq Rules.
The Exchange also proposes to reletter existing Rules 1.5(dd) through (ee)
to allow for the addition of proposed
Rule 1.5(dd). Further, the Exchange
proposes to amend Rule 3.21 to
reference the proposed definition of
UTP Derivative Securities in Rule
1.5(ee).
(2) Proposal To Amend the Exchange’s
Rule Applicable to UTP Derivative
Securities
First, the Exchange proposes to rename Rule 14.11(j) to ‘‘UTP Derivative
Securities’’ so that it is consistent with
the proposed definition set forth in Rule
1.5(ee). The Exchange also proposes to
amend the preamble to Rule 14.11(j) to
refer to the defined term UTP Derivative
Security, as proposed in Exchange Rule
1.5(ee).
The Exchange also proposes to
eliminate existing Rule 14.11(j)(1),
which provides that the Exchange shall
file with the Commission a Form 19b–
4(e) with respect to each UTP Derivative
Security. The Exchange believes that it
should not be necessary to file a Form
19b–4(e) with the Commission if it
begins trading a UTP Derivative
Security because Rule 19b–4(e) under
the Act refers to the ‘‘listing and
trading’’ of a ‘‘new derivative securities
product’’. The Exchange believes that
the requirements of Rule 19b–4(e) refer
to when an exchange lists and trades a
Derivative Security, and not when an
exchange seeks only to trade such
product on a UTP basis pursuant to Rule
12f–2 under the Act.7 The proposal is
6 For inclusiveness, all Derivative Securities that
are subject to unlisted trading privileges have been
identified in the list of proposed UTP Derivative
Securities.
7 17 CFR 240.12f–2.
PO 00000
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Fmt 4703
Sfmt 4703
substantially identical to rule
amendments made by other exchanges.8
The Exchange proposes to amend
proposed Rule 14.11(j)(1) to replace the
term ‘‘new derivative securities
product’’ with the defined term
‘‘Derivative Security’’ as provided in
proposed Rule 1.5(dd). Additionally, the
Exchange proposes to clarify that the
Early Trading Session is from 7:00 a.m.
to 8:00 a.m. Eastern Time in order to
consistently reference the relevant time
zone throughout the paragraph.
The Exchange also proposes to add
additional explanatory language to
paragraph (j)(3) that states nothing in
the Rule will limit the power of the
Exchange under the Rules or procedures
of the Exchange with respect to the
Exchange’s ability to suspend trading in
any securities if such suspension is
necessary for the protection of investors
or in the public interest. The proposed
text is identical to that included in
NYSE National Rule 5.1(a)(2)(C).
Further, the proposed text reinforces
existing Exchange Rule 11.18(d).
Lastly, based on the proposal to
eliminate Rule 14.11(j)(1), the Exchange
proposes to renumber existing
paragraphs (j)(2) through (j)(6)
accordingly.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act. Specifically, the
Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 9 requirements that the rules of
an exchange be 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 regulating, clearing, settling,
processing information with respect to,
and 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.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 10 requirement that
the rules of an exchange not be designed
8 See Securities Exchange Act No. 83289 (May 17,
2018) 83 FR 23968 (May 23, 2018) (SR–NYSENAT–
2018–02). See also Securities Exchange Act No.
84546 (November 7, 2018) 83 FR 56888 (November
14, 2018) (SR–BX–2018–051).
9 15 U.S.C. 78f(b)(5).
10 Id.
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Federal Register / Vol. 86, No. 103 / Tuesday, June 1, 2021 / Notices
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
the proposed definitions of Derivative
Security and UTP Derivative Security
are reasonable as the proposed
substantive changes are substantially
similar to other exchanges’ rules.
Specifically, the proposed definition of
Derivative Security in Rule 1.5(dd) is
substantially similar to the definition of
Exchange Traded Product provided for
in NYSE National Rule 1.1(m), except
that it better conforms to the defined
term ‘‘new derivative securities
product’’ of Rule 19b–4(e) under the
Act. The proposed definition of UTP
Derivative Securities is substantially
similar to UTP Exchange Traded
Product provided under NYSE National
Rule 1.1(m), but includes two additional
Derivative Securities, SEEDS and
Exchange-Traded Fund Shares. While
SEEDS and Exchange-Traded Fund
Shares are not included in NYSE
National Rule 1.1(m), they are
Derivative Securities set forth not only
in Exchange Rules 14.11(e)(12) and
14.11(l), respectively, but also in section
5700 of the Nasdaq Rules.
Eliminating the requirement to file a
Form 19b–4(e) for each Derivative
Security is consistent with the Act
because the regulatory requirement was
not intended to apply in the context of
Derivative Securities trading on a UTP
basis. Moreover, the proposal to
eliminate Rule 14.11(j)(1) will provide
for a more efficient process for adding
Derivative Securities to trading on the
Exchange on a UTP basis. The Exchange
also notes that the proposal is
substantially identical to other exchange
rules.11
The Exchange believes that its
proposal to amend the preamble to Rule
14.11(j) to correspond to Rule 1.5(ee)
and the proposed defined term UTP
Derivative Security will add clarity to
the Exchange’s Rules. Further, the
Exchange believes that its proposal to
amend the preamble to Rule 14.11(j)(1)
to reference the proposed term UTP
Derivative Security rather than ‘‘new
derivative securities product’’ will
conform the Rule to proposed Rule
1.5(dd) and will add clarity to the
Exchange’s Rules. Additionally, the
proposal to add ‘‘Eastern Time’’ to the
description of the Early Trading Session
in proposed Rule 14.11(j)(1) will
consistently reference the applicable
time zone throughout the paragraph.
The proposed amendment to
proposed Rule 14.11(j)(3) is identical to
a sentence provided in NYSE National
Rule 5.1(a)(2)(C) (trading halts).
11 See
supra note 8.
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18:20 May 28, 2021
Jkt 253001
Furthermore, the proposal reinforces
existing Exchange Rule 11.18(d). Lastly,
the Exchange’s proposal to renumber
existing paragraphs 14.11(j)(2)–(j)(6)
based on its proposal to eliminate Rule
14.11(j)(1) will clarify and simplify the
Exchange’s Rules.
The Exchange believes that its
proposal to amend Rule 3.21 to
reference the proposed definition of
UTP Derivative Securities in Rule
1.5(ee) will add clarity to the Exchange’s
Rules.
In light of the above proposals, the
Exchange has also proposed to
renumber and re-letter certain
paragraphs or subparagraphs of Rules
1.5 and 14.11 and update applicable
rule references.
The proposal is intended to simplify
and clarify the Exchange’s Rules as it
relates to UTP Derivative Securities,
which the Exchange believes will
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. The Exchange believes
that renumbering and re-lettering
current Rules to correspond to the
proposed changes will allow the
Exchange to maintain a clear and
organized rule structure, thus
preventing investor confusion. For these
reasons, the Exchange believes 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 purposes of the Act. The
proposed rule change is not designed to
address any competitive issues but
rather to harmonize certain Exchange
Rules with those of other exchanges
which will simplify and clarify the
Exchange’s Rules. The Exchange further
believes that the proposed rule change
would promote transparency on the
Exchange, thus making the Exchange’s
rules easier to navigate.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
PO 00000
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29307
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 12 and Rule 19b–
4(f)(6) thereunder.13
A proposed rule change filed under
Rule 19b–4(f)(6) 14 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),15 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. Waiver of the operative
delay would allow certain of the
Exchange’s rules to conform to
equivalent rules on other exchanges, as
discussed herein, and to make clarifying
and technical changes. The Commission
therefore believes that waiver of the 30day operative delay is consistent with
the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the
operative delay and designates the
proposed rule change operative upon
filing.16
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
12 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) under the Act 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.
14 17 CFR 240.19b–4(f)(6).
15 17 CFR 240.19b–4(f)(6)(iii).
16 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
13 17
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Federal Register / Vol. 86, No. 103 / Tuesday, June 1, 2021 / Notices
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–92016; File No. SR–
NYSEARCA–2021–40]
• 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–2021–041 on the subject line.
Paper Comments
May 25, 2021.
• 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–2021–041. 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–2021–041 and
should be submitted on or before June
23, 2021.
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Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend the NYSE Arca
Equities Fees and Charges
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Assistant Secretary.
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 May 11,
2021, 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, II, and
III 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 the
NYSE Arca Equities Fees and Charges
(‘‘Fee Schedule’’) to adopt reduced fees
for Retail Orders that are executed in the
Exchange’s opening and closing
auctions. The Exchange proposes to
implement the fee changes effective
May 11, 2021. 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
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.
[FR Doc. 2021–11408 Filed 5–28–21; 8:45 am]
BILLING CODE 8011–01–P
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
17 17
CFR 200.30–3(a)(12).
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Fee Schedule to adopt reduced fees for
Retail Orders 4 that are executed in the
Exchange’s opening and closing
auctions.
The proposed changes respond to the
current competitive environment where
order flow providers have a choice of
where to direct Retail Orders by offering
further incentives for ETP Holders 5 to
send such orders to the Exchange.
The Exchange proposes to implement
the fee changes effective May 11, 2021.6
Background
As noted above, the Exchange
operates in a highly competitive market.
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets. In
Regulation NMS, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and, also, recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 7
While Regulation NMS has enhanced
competition, it has also fostered a
‘‘fragmented’’ market structure where
trading in a single stock can occur
across multiple trading centers. When
multiple trading centers compete for
order flow in the same stock, the
Commission has recognized that ‘‘such
competition can lead to the
fragmentation of order flow in that
stock.’’ 8 Indeed, equity trading is
4 A Retail Order is an agency order that originates
from a natural person and is submitted to the
Exchange by an ETP Holder, provided that no
change is made to the terms of the order to price
or side of market and the order does not originate
from a trading algorithm or any other computerized
methodology. See Securities Exchange Act Release
No. 67540 (July 30, 2012), 77 FR 46539 (August 3,
2012) (SR–NYSEArca–2012–77).
5 All references to ETP Holders in connection
with this proposed fee change include Market
Makers.
6 The Exchange originally filed to amend the Fee
Schedule on May 3, 2021 (SR–NYSEArca–2021–36).
SR–NYSEArca–2021–36 was subsequently
withdrawn and replaced by this filing.
7 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(File No. S7–10–04) (Final Rule) (‘‘Regulation
NMS’’).
8 See Securities Exchange Act Release No. 61358,
75 FR 3594, 3597 (January 21, 2010) (File No. S7–
02–10) (Concept Release on Equity Market
Structure).
E:\FR\FM\01JNN1.SGM
01JNN1
]]>Agencies
[Federal Register Volume 86, Number 103 (Tuesday, June 1, 2021)]
[Notices]
[Pages 29305-29308]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11408]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92015; File No. SR-CboeBZX-2021-041]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Define
the Terms ``Derivative Security'' and ``UTP Derivative Security'' and
Amend Certain Related Rules
May 25, 2021.
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 May 19, 2021, Cboe BZX Exchange, Inc. (``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I and II below, which Items have been
prepared by the Exchange. The 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
amendment to define the terms ``Derivative Security'' and ``UTP
Derivative Security'' in Exchange Rule 1.5. Additionally, the Exchange
proposes to make certain amendments to Rules 3.21 and 14.11 to both
simplify and clarify the Exchange's rules as they pertain to UTP
Derivative Securities. 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.
[[Page 29306]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
As part of this proposal, the Exchange proposes to (1) adopt a new
definition for Derivative Security under proposed Rule 1.5(dd); (2)
move the definition of unlisted trading privileges (``UTP'') Derivative
Security \5\ from Rule 14.11(j) to Exchange Rule 1.5(ee); and (3) amend
Exchange Rule 14.11(j) applicable to UTP Derivative Securities. The
Exchange also proposes to make ministerial changes to update numbering,
lettering, Rule references, and provide clarifying text to Rules 1.5,
3.21, and 14.11. As discussed in further detail below, all of the
proposed substantive changes are substantially similar to other
exchange rules.
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\5\ See Rule 14.11(j) and proposed amendments to Rule 1.5(ee).
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(1) Proposal To Define Derivative Security in Exchange Rule 1.5(dd) and
UTP Derivative Security in Exchange Rule 1.5(ee)
The Exchange proposes to define ``Derivative Security'' in proposed
Rule 1.5(dd) and amend existing Rule 1.5(ee) to include the definition
of ``UTP Derivative Security''. ``Derivative Security'' would be a new
definition and would mean a security that meets the definition of ``new
derivative securities product'' in Rule 19b-4(e) under the Act. ``UTP
Derivative Security'' would refer to any one of a list of Derivative
Securities that trades on the Exchange pursuant to unlisted trading
privileges. The list of proposed Derivative Securities that may meet
the definition of UTP Derivative Security are as follows: Equity Linked
Notes; Index Fund Shares listed pursuant to Exchange Rule 14.11(c) or
Nasdaq Stock Market LLC (``Nasdaq'') Rule 5705(b) and Investment
Company Units listed pursuant to NYSE Arca, Inc. (``NYSE Arca'') Rule
5.2-E(j)(3); Index-Linked Exchangeable Notes; Equity Gold Shares;
Equity Index-Linked Securities; Commodity-Linked Securities; Currency-
Linked Securities; Fixed Income Index-Linked Securities; Futures-Linked
Securities; Multifactor Index-Linked Securities; Trust Certificates;
Currency and Index Warrants; Portfolio Depository Receipts; Trust
Issued Receipts; Commodity-Based Trust Shares; Currency Trust Shares;
Commodity Index Trust Shares; Commodity Futures Trust Shares;
Partnership Units; Paired Trust Shares; Trust Units; Managed Fund
Shares; Managed Trust Securities; Managed Portfolio Shares; Tracking
Fund Shares listed pursuant to Exchange Rule 14.11(m), Active Proxy
Portfolio Shares listed pursuant to NYSE Arca Rule 8.601-E, and Proxy
Portfolio Shares listed pursuant to Nasdaq Stock Market LLC Rule 5750;
Selected Equity-linked Debt Securities (``SEEDS''); and Exchange-Traded
Fund Shares.\6\ The proposal is substantially similar to NYSE National,
Inc. (``NYSE National'') Rule 1.1(m), but the list of Derivative
Securities that may be UTP Derivative Securities includes two
additional Derivative Securities, SEEDS and Exchange-Traded Fund
Shares. While SEEDS and Exchange-Traded Fund Shares are not included in
NYSE National Rule 1.1(m), they are Derivative Securities set forth not
only in Exchange Rules 14.11(e)(12) and 14.11(l), respectively, but
also in section 5700 of the Nasdaq Rules.
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\6\ For inclusiveness, all Derivative Securities that are
subject to unlisted trading privileges have been identified in the
list of proposed UTP Derivative Securities.
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The Exchange also proposes to re-letter existing Rules 1.5(dd)
through (ee) to allow for the addition of proposed Rule 1.5(dd).
Further, the Exchange proposes to amend Rule 3.21 to reference the
proposed definition of UTP Derivative Securities in Rule 1.5(ee).
(2) Proposal To Amend the Exchange's Rule Applicable to UTP Derivative
Securities
First, the Exchange proposes to re-name Rule 14.11(j) to ``UTP
Derivative Securities'' so that it is consistent with the proposed
definition set forth in Rule 1.5(ee). The Exchange also proposes to
amend the preamble to Rule 14.11(j) to refer to the defined term UTP
Derivative Security, as proposed in Exchange Rule 1.5(ee).
The Exchange also proposes to eliminate existing Rule 14.11(j)(1),
which provides that the Exchange shall file with the Commission a Form
19b-4(e) with respect to each UTP Derivative Security. The Exchange
believes that it should not be necessary to file a Form 19b-4(e) with
the Commission if it begins trading a UTP Derivative Security because
Rule 19b-4(e) under the Act refers to the ``listing and trading'' of a
``new derivative securities product''. The Exchange believes that the
requirements of Rule 19b-4(e) refer to when an exchange lists and
trades a Derivative Security, and not when an exchange seeks only to
trade such product on a UTP basis pursuant to Rule 12f-2 under the
Act.\7\ The proposal is substantially identical to rule amendments made
by other exchanges.\8\
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\7\ 17 CFR 240.12f-2.
\8\ See Securities Exchange Act No. 83289 (May 17, 2018) 83 FR
23968 (May 23, 2018) (SR-NYSENAT-2018-02). See also Securities
Exchange Act No. 84546 (November 7, 2018) 83 FR 56888 (November 14,
2018) (SR-BX-2018-051).
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The Exchange proposes to amend proposed Rule 14.11(j)(1) to replace
the term ``new derivative securities product'' with the defined term
``Derivative Security'' as provided in proposed Rule 1.5(dd).
Additionally, the Exchange proposes to clarify that the Early Trading
Session is from 7:00 a.m. to 8:00 a.m. Eastern Time in order to
consistently reference the relevant time zone throughout the paragraph.
The Exchange also proposes to add additional explanatory language
to paragraph (j)(3) that states nothing in the Rule will limit the
power of the Exchange under the Rules or procedures of the Exchange
with respect to the Exchange's ability to suspend trading in any
securities if such suspension is necessary for the protection of
investors or in the public interest. The proposed text is identical to
that included in NYSE National Rule 5.1(a)(2)(C). Further, the proposed
text reinforces existing Exchange Rule 11.18(d).
Lastly, based on the proposal to eliminate Rule 14.11(j)(1), the
Exchange proposes to renumber existing paragraphs (j)(2) through (j)(6)
accordingly.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act. Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \9\ requirements that the rules of
an exchange be 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 regulating,
clearing, settling, processing information with respect to, and
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.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \10\ requirement that the rules of
an exchange not be designed
[[Page 29307]]
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
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In particular, the Exchange believes the proposed definitions of
Derivative Security and UTP Derivative Security are reasonable as the
proposed substantive changes are substantially similar to other
exchanges' rules. Specifically, the proposed definition of Derivative
Security in Rule 1.5(dd) is substantially similar to the definition of
Exchange Traded Product provided for in NYSE National Rule 1.1(m),
except that it better conforms to the defined term ``new derivative
securities product'' of Rule 19b-4(e) under the Act. The proposed
definition of UTP Derivative Securities is substantially similar to UTP
Exchange Traded Product provided under NYSE National Rule 1.1(m), but
includes two additional Derivative Securities, SEEDS and Exchange-
Traded Fund Shares. While SEEDS and Exchange-Traded Fund Shares are not
included in NYSE National Rule 1.1(m), they are Derivative Securities
set forth not only in Exchange Rules 14.11(e)(12) and 14.11(l),
respectively, but also in section 5700 of the Nasdaq Rules.
Eliminating the requirement to file a Form 19b-4(e) for each
Derivative Security is consistent with the Act because the regulatory
requirement was not intended to apply in the context of Derivative
Securities trading on a UTP basis. Moreover, the proposal to eliminate
Rule 14.11(j)(1) will provide for a more efficient process for adding
Derivative Securities to trading on the Exchange on a UTP basis. The
Exchange also notes that the proposal is substantially identical to
other exchange rules.\11\
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\11\ See supra note 8.
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The Exchange believes that its proposal to amend the preamble to
Rule 14.11(j) to correspond to Rule 1.5(ee) and the proposed defined
term UTP Derivative Security will add clarity to the Exchange's Rules.
Further, the Exchange believes that its proposal to amend the preamble
to Rule 14.11(j)(1) to reference the proposed term UTP Derivative
Security rather than ``new derivative securities product'' will conform
the Rule to proposed Rule 1.5(dd) and will add clarity to the
Exchange's Rules. Additionally, the proposal to add ``Eastern Time'' to
the description of the Early Trading Session in proposed Rule
14.11(j)(1) will consistently reference the applicable time zone
throughout the paragraph.
The proposed amendment to proposed Rule 14.11(j)(3) is identical to
a sentence provided in NYSE National Rule 5.1(a)(2)(C) (trading halts).
Furthermore, the proposal reinforces existing Exchange Rule 11.18(d).
Lastly, the Exchange's proposal to renumber existing paragraphs
14.11(j)(2)-(j)(6) based on its proposal to eliminate Rule 14.11(j)(1)
will clarify and simplify the Exchange's Rules.
The Exchange believes that its proposal to amend Rule 3.21 to
reference the proposed definition of UTP Derivative Securities in Rule
1.5(ee) will add clarity to the Exchange's Rules.
In light of the above proposals, the Exchange has also proposed to
renumber and re-letter certain paragraphs or subparagraphs of Rules 1.5
and 14.11 and update applicable rule references.
The proposal is intended to simplify and clarify the Exchange's
Rules as it relates to UTP Derivative Securities, which the Exchange
believes will 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. The Exchange believes that
renumbering and re-lettering current Rules to correspond to the
proposed changes will allow the Exchange to maintain a clear and
organized rule structure, thus preventing investor confusion. For these
reasons, the Exchange believes 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 purposes of the Act. The proposed rule change is
not designed to address any competitive issues but rather to harmonize
certain Exchange Rules with those of other exchanges which will
simplify and clarify the Exchange's Rules. The Exchange further
believes that the proposed rule change would promote transparency on
the Exchange, thus making the Exchange's rules easier to navigate.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received 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 \12\ and Rule 19b-
4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
under the Act 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) \14\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\15\ 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. Waiver of the
operative delay would allow certain of the Exchange's rules to conform
to equivalent rules on other exchanges, as discussed herein, and to
make clarifying and technical changes. The Commission therefore
believes that waiver of the 30-day operative delay is consistent with
the protection of investors and the public interest. Accordingly, the
Commission hereby waives the operative delay and designates the
proposed rule change operative upon filing.\16\
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\14\ 17 CFR 240.19b-4(f)(6).
\15\ 17 CFR 240.19b-4(f)(6)(iii).
\16\ For purposes only of waiving the 30-day operative delay,
the Commission has also 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
[[Page 29308]]
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-2021-041 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-2021-041. 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-2021-041 and should be submitted
on or before June 23, 2021.
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\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-11408 Filed 5-28-21; 8:45 am]
BILLING CODE 8011-01-P
