Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To List and Trade Shares of the BondBloxx Private Credit Trust, 13257-13260 [2025-04657]

Download as PDF Federal Register / Vol. 90, No. 53 / Thursday, March 20, 2025 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.94 Vanessa A. Countryman, Secretary. [FR Doc. 2025–04660 Filed 3–19–25; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–102677; File No. SR– CboeBZX–2024–126] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To List and Trade Shares of the BondBloxx Private Credit Trust March 14, 2025. I. Introduction On December 17, 2024, Cboe BZX Exchange, Inc. (‘‘BZX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the BondBloxx Private Credit Trust (‘‘Trust’’) under BZX Rule 14.11(f). The proposed rule change was published for comment in the Federal Register on December 30, 2024.3 On February 7, 2025, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 This order institutes proceedings under Section 19(b)(2)(B) of the Act 6 to determine whether to disapprove the proposed rule change. 94 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 102003 (Dec. 19, 2024), 89 FR 106648 (‘‘Notice’’). The Commission has not received any comments regarding the proposed rule change. 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 102375, 90 FR 9559 (Feb. 13, 2025) (designating March 30, 2025, as the date by which the Commission shall either approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule change). 6 15 U.S.C. 78s(b)(2)(B). ddrumheller on DSK120RN23PROD with NOTICES1 1 15 VerDate Sep<11>2014 19:09 Mar 19, 2025 Jkt 265001 II. Description of the Proposed Rule Change 7 As described in the Notice, the Exchange proposes to list and trade Shares of the Trust 8 under BZX Rule 14.11(f)(4), which governs the listing and trading of Trust Issued Receipts 9 on the Exchange. According to the Exchange, the Trust seeks to provide risk-adjusted returns primarily through distributions of current income from the Trust’s portfolio.10 Description of the Trust BondBloxx Investment Management Corporation (‘‘Advisor’’) is the advisor to the Trust and is responsible for the overall management of the Trust’s business activities. HCG Fund Management LP (‘‘Sub-Advisor’’) will assist in the day-to-day management of the Trust’s assets. Brown Brothers Harriman & Co. serves as the administrator, custodian, and the transfer agent. CSC Delaware Trust Company, a Delaware trust company, is the sole trustee of the Trust. According to the Exchange, the Trust intends to achieve its investment objective by constructing a diversified portfolio of consumer and small business private credit assets.11 The Exchange states the Trust intends to target primarily whole loans that the Advisor believes will offer stable and 7 Additional information regarding the Trust and the Shares can be found in the Notice, supra note 3. 8 The Trust has filed a registration statement on Form S–1 under the Securities Act of 1933, dated December 13, 2024 (File No. 333–283852) (‘‘Registration Statement’’). The description of the Trust and the Shares contained herein is based on the Registration Statement. The Exchange states the Registration Statement for the Trust is not yet effective, and the Trust will not trade on the Exchange until such time that the Registration Statement is effective. See Notice, supra note 3, 89 FR at 106649, n. 5. 9 Rule 14.11(f)(4) applies to Trust Issued Receipts that invest in ‘‘Investment Shares’’ or ‘‘Financial Instruments’’. The term ‘‘Investment Shares,’’ as defined in Rule 14.11(f)(4)(A)(i), means a security (a) that is issued by a trust, partnership, commodity pool or other similar entity that invests in any combination of futures contracts, options on futures contracts, forward contracts, commodities, swaps or high credit quality short-term fixed income securities or other securities; and (b) issued and redeemed daily at net asset value in amounts correlating to the number of receipts created and redeemed in a specified aggregate minimum number. The term ‘‘Financial Instruments,’’ as defined in Rule 14.11(f)(4)(A)(iv), means any combination of investments, including cash; securities; options on securities and indices; futures contracts; options on futures contracts; forward contracts; equity caps, collars and floors; and swap agreements. 10 The Exchange states the Trust intends to operate its business so that it is falls outside of the definition of an investment company under the Investment Company Act of 1940 (the ‘‘1940 Act’’). See Notice, supra note 3, 89 FR at 106649, n. 6. 11 See Notice, supra note 3, 89 FR at 106649. PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 13257 predictable cash flows.12 The Trust generally intends to focus on loans that have short and medium terms (e.g., less than 60 months) which, through principal amortization, tend to have low duration (e.g., less than 30 months).13 Investable Instruments and Trust Liquidity The Exchange states the Trust intends to hold the following instruments: personal installment loans, small business loans, student loans, point of sale loans, and asset backed securities that are backed by such loans (collectively ‘‘Private Credit Assets’’), investment grade bonds, U.S. Treasuries, shares of certain exchange traded funds that invest in U.S. Treasuries or other short-term, interest bearing assets and cash and cash equivalents,14 including funds of an affiliated Trust for which the Advisor acts as the investment adviser.15 According to the Exchange, there is limited sell-side liquidity available in the market for Private Credit Assets.16 As such, the Advisor is proposing to utilize the following strategy to facilitate redemptions in the Trust: 1. The Trust will maintain a portion of the portfolio in cash and cash equivalents (‘‘Liquidity Sleeve’’). Under normal circumstances, the Trust expects to hold approximately 20% of the portfolio in these liquid assets. According to the Exchange, the Advisor expects that it will generally be able to fulfill redemption orders using this position.17 The Advisor may also strategically increase the size of the Liquidity Sleeve in order to better facilitate anticipated redemptions by retaining, rather than distributing the paydowns from Private Credit Assets as further described below. 2. The remaining 80% of the Trust’s holdings will consist of Private Credit Assets. The Exchange states these are short duration, high yielding products that are underwritten to pay a weighted average of 8% of the total Trust assets under management (‘‘AUM’’) per month or 10% of the private credit AUM per 12 See id. id. 14 Cash equivalents are short-term instruments with maturities of less than 3 months, specifically including U.S. Government securities, certificates of deposit, bankers’ acceptances, repurchase and reverse repurchase agreements, bank time deposits, commercial paper, and money market funds. This definition is consistent with the definition of cash and cash equivalents in Exchange Rule 14.11(i)(4)(C)(iii). 15 See Notice, supra note 3, 89 FR at 106649. 16 See id. 17 See Notice, supra note 3, 89 FR at 106649–50. 13 See E:\FR\FM\20MRN1.SGM 20MRN1 13258 Federal Register / Vol. 90, No. 53 / Thursday, March 20, 2025 / Notices ddrumheller on DSK120RN23PROD with NOTICES1 month.18 The underwritten yields are currently 10% and at origination typically have an underwritten average duration limit of 3 years, with a target for the initial portfolio of less than 1 year.19 The monthly cash flows, which are received throughout the month, may be reinvested to the extent necessary to maintain the approximate 20/80 allocation between the Liquidity Sleeve and Private Credit Assets described above.20 The Trust will consider the current level of the Liquidity Sleeve, among other factors, in determining its distribution policy, and may determine to use accumulated cash received from payments of interest and principal on its Private Credit Assets as well as cash proceeds from loan repayments to replenish or increase the Liquidity Sleeve before distributing such amounts to shareholders.21 3. Further, according to the Exchange, in the event that the cash and cash equivalents required to accommodate a series of redemptions or a single large redemption approaches the size of the Trust’s Liquidity Sleeve, the Trust may: a. Sell Private Credit Assets in the secondary market to raise cash; b. Arrange a line of credit or other financing facility with a bank or broker dealer, using the portfolio of Private Credit Assets as collateral.22 The Exchange states these options will likely come at a cost to the Trust or may not be available to the Trust depending on market conditions.23 4. In the event that items 1–3 above do not provide sufficient cash and cash equivalents to the Liquidity Sleeve to accommodate redemptions in the Trust, the Exchange states redemptions may be suspended until the Trust accumulates enough cash to facilitate additional redemptions, which the Advisor does not expect to last for longer than approximately 2.5 months.24 In the event that the Advisor implements a restriction on redemptions, the Shares on the secondary market may trade at deep discount.25 According to the Exchange, the discount could potentially serve to prompt investors to buy shares and potentially trigger primary market activity.26 According to the Exchange, the Advisor believes that the liquidity strategy laid out above will be sufficient to address concerns that may arise from Notice, supra note 3, 89 FR at 106650. id. 20 See id. 21 See id. 22 See id. 23 See id. 24 See id. 25 See id. 26 See id. the relative illiquidity of the secondary market for selling Private Credit Assets.27 Specifically, the Advisor believes that the 20% Liquidity Sleeve (with the flexibility to increase the sleeve during times of potentially high redemptions) will provide the Trust with sufficient liquidity to manage redemptions under the vast majority of market conditions.28 Additionally, because the Trust will target shorter duration loans that are underwritten to generate cash payments of interest and principal amortization of approximately 8% of the Trust’s AUM per month, even in the event that the Trust’s Liquidity Sleeve is exhausted, it is expected to be replenished by the cash payments generated by the Private Credit Assets.29 In the event that the cash generated by the Private Credit Assets is insufficient to satisfy incoming redemptions the Trust would then have the ability to facilitate additional redemptions by selling certain of the Private Credit Assets and/or using the Private Credit Assets as collateral for a cash loan from a bank or broker dealer.30 According to the Exchange, in a worst case scenario, the Trust would temporarily suspend redemptions.31 However, the Exchange states the Advisor does not expect such a suspension to last for longer than approximately 2.5 months because of the cash expected to be generated by the Private Credit Assets.32 In addition to the specific liquidity strategy described above, the Exchange states that the small size of loans sourced through Fintech lending platforms will enable the Trust to hold a portfolio that is diversified by sector, source, vintage, count and geography, which will help to manage idiosyncratic risk and ensure a diverse universe of lenders.33 The Exchange states the small loan size means that the Trust will need to hold a significant number of Private Credit Assets, further ensuring diversity and minimizing the risk that any single Private Credit Assets would have on the portfolio.34 Finally, the Exchange states the Advisor believes that the cash yields and short duration through regular principal amortization will, in addition to enhancing the liquidity of the Trust, help manage volatility of returns.35 18 See 27 See 19 See 28 See VerDate Sep<11>2014 19:09 Mar 19, 2025 Jkt 265001 id. id. 29 See id. 30 See id. 31 See id. 32 See id. 33 See id. 34 See id. 35 See id. PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 Availability of Information According to the Exchange, the net asset value (‘‘NAV’’) for the Trust will be calculated by an independent third party once each business day and will be disseminated daily to all market participants at the same time.36 Pricing information will be available on the Advisor’s website including: (1) the prior business day’s reported NAV, the closing market price or the bid/ask price, daily trading volume, and a calculation of the premium and discount of the closing market price or bid/ask price against the NAV; and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily closing price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. The Trust will also disclose its portfolio holdings on a daily basis on its website. The aforementioned information will be published as of the close of business and available on the Advisor’s website at www.bondbloxxetf.com.37 According to the Exchange, the Trust generally values its assets using market quotations when they are readily available.38 Whole loans, asset backed securities and certain other types of private credit assets that Trust may hold may not have readily available market quotations and typically are fair-valued based on prices provided by a thirdparty pricing service.39 Each loan and fractional loan is valued using inputs that factor in individual borrower performance data (e.g., payment history) that is updated as often as the NAV is calculated to reflect new information about the borrower or loan.40 Quotation and last-sale information regarding the Shares will be disseminated through the facilities of the Consolidated Tape Association. Pricing information regarding cash 36 See id. NAV means the total assets of the Trust including, but not limited to, all cash and cash equivalents and private credit assets, less any liabilities, divided by the total number of Shares outstanding. The Trust’s NAV is generally calculated at 4 p.m. ET. See Notice, supra note 3, 89 FR at 106650, n. 9. 37 See Notice, supra note 3, 89 FR at 106650. 38 See id. 39 See Notice, supra note 3, 89 FR at 106650–51. According to the Exchange, fair value represents the amount that the Trust could reasonably expect to receive if its assets were sold at the time of valuation, based on information reasonably available at the time the valuation is made and that the Advisor and the Sub-Advisor believe to be reliable. See Notice, supra note 3, 89 FR at 106651. Further, according to the Exchange, ‘‘fair valuation involves subjective judgments, and it is possible that the fair value determined for an asset may differ materially from the value that could be realized upon the sale of such asset.’’ Id. 40 See Notice, supra note 3, 89 FR at 106651. E:\FR\FM\20MRN1.SGM 20MRN1 Federal Register / Vol. 90, No. 53 / Thursday, March 20, 2025 / Notices equivalents in which the Trust will invest is generally available through nationally recognized data services providers, such as Reuters and Bloomberg, through subscription agreements.41 The Exchange states the Intraday Indicative Value (‘‘IIV’’) will be updated during Regular Trading Hours to reflect changes in the value of the Trust’s holdings during the trading day.42 The IIV disseminated during Regular Trading Hours should not be viewed as an actual real-time update of the NAV, which will be calculated only once at the end of each trading day.43 The IIV will be updated every 15 seconds, as calculated by the Exchange or a thirdparty financial data provider during the Exchange’s Regular Trading Hours (9:30 a.m. to 4:00 p.m. Eastern time). ddrumheller on DSK120RN23PROD with NOTICES1 III. Proceedings To Determine Whether To Approve or Disapprove SR– CboeBZX–2024–126 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act 44 to determine whether the proposed rule change should be approved or disapproved. Institution of such proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described below, the Commission seeks and encourages interested persons to provide comments on the proposed rule change. Pursuant to Section 19(b)(2)(B) of the Act,45 the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of the proposal’s consistency with Section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be ‘‘designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade,’’ and ‘‘to protect investors and the public interest.’’ 46 The Commission asks that commenters address the sufficiency of the Exchange’s statements in support of the proposal, which are set forth in the 41 See Notice, supra note 3, 89 FR at 106651. id. 43 See id. 44 15 U.S.C. 78s(b)(2)(B). 45 Id. 46 15 U.S.C. 78f(b)(5). 42 See VerDate Sep<11>2014 19:09 Mar 19, 2025 Jkt 265001 Notice, in addition to any other comments they may wish to submit about the proposed rule change. In particular, the Commission seeks comment on the following questions and asks commenters to submit data where appropriate to support their views: 1. What are commenters’ views generally with respect to the liquidity and transparency of the markets for Private Credit Assets? What sources of reliable pricing information (both intraday and end-of-day) are available for the Private Credit Assets? Are such sources of reliable pricing information generally available to investors? Do the answers to these questions depend upon the type of Private Credit Asset? 2. What are commenters’ views on whether the proposal would maintain alignment between intraday trading prices of the Shares and the contemporaneous value of the underlying portfolio? Will the proposed allocation of the Trust’s holdings, including the liquidity strategy described by the Exchange,47 facilitate alignment of the secondary market prices of the Shares with the value of the Trust’s underlying portfolio? Why or why not? Will authorized participants and market makers have sufficient information to value the Trust’s underlying portfolio and facilitate creation/redemption or trading in the Shares, respectively? Why or why not? 3. Given the nature of the underlying assets held by the Trust, what are commenters’ views on whether the proposed Trust and Shares would be susceptible to manipulation? What are commenters’ views generally on whether the Exchange’s proposal is designed to prevent fraudulent and manipulative acts and practices? IV. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposal is consistent with Section 6(b)(5) or any other provision of the Act, and the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to 47 See PO 00000 supra notes 16–26 and accompanying text. Frm 00128 Fmt 4703 Sfmt 4703 13259 Rule 19b–4, any request for an opportunity to make an oral presentation.48 Interested persons are invited to submit written data, views, and arguments regarding whether the proposed rule change should be approved or disapproved by April 10, 2025. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by April 24, 2025. 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–2024–126 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–2024–126. 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; 48 Section 19(b)(2) of the Act, as amended by the Securities Acts Amendments of 1975, Public Law 94–29 (June 4, 1975), grants the Commission flexibility to determine what type of proceeding— either oral or notice and opportunity for written comments—is appropriate for consideration of a particular proposal by a self-regulatory organization. See Securities Acts Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). E:\FR\FM\20MRN1.SGM 20MRN1 13260 Federal Register / Vol. 90, No. 53 / Thursday, March 20, 2025 / Notices you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–CboeBZX–2024–126 and should be submitted on or before April 10, 2025. Rebuttal comments should be submitted by April 24, 2025. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.49 Vanessa A. Countryman, Secretary. [FR Doc. 2025–04657 Filed 3–19–25; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–102678; File No. SR–ISE– 2025–10] Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Fees for FLEX Options March 14, 2025. 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 March 12, 2025, Nasdaq ISE, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Item I below, which Item has been substantially prepared by the Exchange. The Exchange has designated this proposal for immediate effectiveness pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 49 17 CFR 200.30–3(a)(57). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f). At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. ddrumheller on DSK120RN23PROD with NOTICES1 1 15 VerDate Sep<11>2014 19:09 Mar 19, 2025 Jkt 265001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to establish fees for its flexible exchange options functionality (‘‘FLEX Options’’), as described further below. While these amendments are effective upon filing, the Exchange has designated the proposed amendments to be operative on April 7, 2025. The proposed rule change, including the Exchange’s statement of the purpose of, and statutory basis for, the proposed rule change, is available on the Exchange’s website at https:// listingcenter.nasdaq.com/rulebook/ise/ rulefilings, and on the Commission’s website at https://www.sec.gov/rulesregulations/self-regulatory-organizationrulemaking/national-securitiesexchanges?file_number=SR-ISE-202510. II. 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.5 Comments may be submitted electronically by using the Commission’s internet comment form (https://www.sec.gov/rules-regulations/ self-regulatory-organizationrulemaking/national-securitiesexchanges?file_number=SR-ISE-202510) or by sending an email to rulecomments@sec.gov. Please include file number SR–ISE–2025–10 on the subject line. Alternatively, paper comments may be sent to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number SR–ISE–2025–10. 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-regulations/self-regulatoryorganization-rulemaking/nationalsecurities-exchanges?file_number=SRISE-2025-10). Do not include personal 5 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 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of SRO. PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–ISE–2025–10 and should be submitted on or before April 10, 2025. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 Vanessa A. Countryman, Secretary. [FR Doc. 2025–04658 Filed 3–19–25; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration [Docket No.: FAA–2024–2752; Summary Notice No. 2025–10] Petition for Exemption; Summary of Petition Received; Ameristar Air Cargo, Inc. Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice. AGENCY: This notice contains a summary of a petition seeking relief from specified requirements of Federal Aviation Regulations. The purpose of this notice is to improve the public’s awareness of, and participation in, the FAA’s exemption process. Neither publication of this notice nor the inclusion nor omission of information in the summary is intended to affect the legal status of the petition or its final disposition. SUMMARY: Comments on this petition must identify the petition docket number and must be received on or before April 9, 2025. ADDRESSES: Send comments identified by docket number FAA–2024–2752 using any of the following methods: • Federal eRulemaking Portal: Go to https://www.regulations.gov and follow the online instructions for sending your comments electronically. • Mail: Send comments to Docket Operations, M–30; U.S. Department of Transportation, 1200 New Jersey Avenue SE, Room W12–140, West Building Ground Floor, Washington, DC 20590–0001. • Hand Delivery or Courier: Take comments to Docket Operations in Room W12–140 of the West Building DATES: 6 17 CFR 200.30–3(a)(12). E:\FR\FM\20MRN1.SGM 20MRN1

Agencies

[Federal Register Volume 90, Number 53 (Thursday, March 20, 2025)]
[Notices]
[Pages 13257-13260]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-04657]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-102677; File No. SR-CboeBZX-2024-126]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order 
Instituting Proceedings To Determine Whether To Approve or Disapprove a 
Proposed Rule Change To List and Trade Shares of the BondBloxx Private 
Credit Trust

March 14, 2025.

I. Introduction

    On December 17, 2024, Cboe BZX Exchange, Inc. (``BZX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to list and trade shares 
(``Shares'') of the BondBloxx Private Credit Trust (``Trust'') under 
BZX Rule 14.11(f). The proposed rule change was published for comment 
in the Federal Register on December 30, 2024.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 102003 (Dec. 19, 
2024), 89 FR 106648 (``Notice''). The Commission has not received 
any comments regarding the proposed rule change.
---------------------------------------------------------------------------

    On February 7, 2025, pursuant to Section 19(b)(2) of the Act,\4\ 
the Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\5\ This order institutes proceedings under Section 19(b)(2)(B) 
of the Act \6\ to determine whether to disapprove the proposed rule 
change.
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 102375, 90 FR 9559 
(Feb. 13, 2025) (designating March 30, 2025, as the date by which 
the Commission shall either approve, disapprove, or institute 
proceedings to determine whether to disapprove the proposed rule 
change).
    \6\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposed Rule Change 7
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    \7\ Additional information regarding the Trust and the Shares 
can be found in the Notice, supra note 3.
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    As described in the Notice, the Exchange proposes to list and trade 
Shares of the Trust \8\ under BZX Rule 14.11(f)(4), which governs the 
listing and trading of Trust Issued Receipts \9\ on the Exchange. 
According to the Exchange, the Trust seeks to provide risk-adjusted 
returns primarily through distributions of current income from the 
Trust's portfolio.\10\
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    \8\ The Trust has filed a registration statement on Form S-1 
under the Securities Act of 1933, dated December 13, 2024 (File No. 
333-283852) (``Registration Statement''). The description of the 
Trust and the Shares contained herein is based on the Registration 
Statement. The Exchange states the Registration Statement for the 
Trust is not yet effective, and the Trust will not trade on the 
Exchange until such time that the Registration Statement is 
effective. See Notice, supra note 3, 89 FR at 106649, n. 5.
    \9\ Rule 14.11(f)(4) applies to Trust Issued Receipts that 
invest in ``Investment Shares'' or ``Financial Instruments''. The 
term ``Investment Shares,'' as defined in Rule 14.11(f)(4)(A)(i), 
means a security (a) that is issued by a trust, partnership, 
commodity pool or other similar entity that invests in any 
combination of futures contracts, options on futures contracts, 
forward contracts, commodities, swaps or high credit quality short-
term fixed income securities or other securities; and (b) issued and 
redeemed daily at net asset value in amounts correlating to the 
number of receipts created and redeemed in a specified aggregate 
minimum number. The term ``Financial Instruments,'' as defined in 
Rule 14.11(f)(4)(A)(iv), means any combination of investments, 
including cash; securities; options on securities and indices; 
futures contracts; options on futures contracts; forward contracts; 
equity caps, collars and floors; and swap agreements.
    \10\ The Exchange states the Trust intends to operate its 
business so that it is falls outside of the definition of an 
investment company under the Investment Company Act of 1940 (the 
``1940 Act''). See Notice, supra note 3, 89 FR at 106649, n. 6.
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Description of the Trust

    BondBloxx Investment Management Corporation (``Advisor'') is the 
advisor to the Trust and is responsible for the overall management of 
the Trust's business activities. HCG Fund Management LP (``Sub-
Advisor'') will assist in the day-to-day management of the Trust's 
assets. Brown Brothers Harriman & Co. serves as the administrator, 
custodian, and the transfer agent. CSC Delaware Trust Company, a 
Delaware trust company, is the sole trustee of the Trust.
    According to the Exchange, the Trust intends to achieve its 
investment objective by constructing a diversified portfolio of 
consumer and small business private credit assets.\11\ The Exchange 
states the Trust intends to target primarily whole loans that the 
Advisor believes will offer stable and predictable cash flows.\12\ The 
Trust generally intends to focus on loans that have short and medium 
terms (e.g., less than 60 months) which, through principal 
amortization, tend to have low duration (e.g., less than 30 
months).\13\
---------------------------------------------------------------------------

    \11\ See Notice, supra note 3, 89 FR at 106649.
    \12\ See id.
    \13\ See id.
---------------------------------------------------------------------------

Investable Instruments and Trust Liquidity

    The Exchange states the Trust intends to hold the following 
instruments: personal installment loans, small business loans, student 
loans, point of sale loans, and asset backed securities that are backed 
by such loans (collectively ``Private Credit Assets''), investment 
grade bonds, U.S. Treasuries, shares of certain exchange traded funds 
that invest in U.S. Treasuries or other short-term, interest bearing 
assets and cash and cash equivalents,\14\ including funds of an 
affiliated Trust for which the Advisor acts as the investment 
adviser.\15\
---------------------------------------------------------------------------

    \14\ Cash equivalents are short-term instruments with maturities 
of less than 3 months, specifically including U.S. Government 
securities, certificates of deposit, bankers' acceptances, 
repurchase and reverse repurchase agreements, bank time deposits, 
commercial paper, and money market funds. This definition is 
consistent with the definition of cash and cash equivalents in 
Exchange Rule 14.11(i)(4)(C)(iii).
    \15\ See Notice, supra note 3, 89 FR at 106649.
---------------------------------------------------------------------------

    According to the Exchange, there is limited sell-side liquidity 
available in the market for Private Credit Assets.\16\ As such, the 
Advisor is proposing to utilize the following strategy to facilitate 
redemptions in the Trust:
---------------------------------------------------------------------------

    \16\ See id.
---------------------------------------------------------------------------

    1. The Trust will maintain a portion of the portfolio in cash and 
cash equivalents (``Liquidity Sleeve''). Under normal circumstances, 
the Trust expects to hold approximately 20% of the portfolio in these 
liquid assets. According to the Exchange, the Advisor expects that it 
will generally be able to fulfill redemption orders using this 
position.\17\ The Advisor may also strategically increase the size of 
the Liquidity Sleeve in order to better facilitate anticipated 
redemptions by retaining, rather than distributing the paydowns from 
Private Credit Assets as further described below.
---------------------------------------------------------------------------

    \17\ See Notice, supra note 3, 89 FR at 106649-50.
---------------------------------------------------------------------------

    2. The remaining 80% of the Trust's holdings will consist of 
Private Credit Assets. The Exchange states these are short duration, 
high yielding products that are underwritten to pay a weighted average 
of 8% of the total Trust assets under management (``AUM'') per month or 
10% of the private credit AUM per

[[Page 13258]]

month.\18\ The underwritten yields are currently 10% and at origination 
typically have an underwritten average duration limit of 3 years, with 
a target for the initial portfolio of less than 1 year.\19\ The monthly 
cash flows, which are received throughout the month, may be reinvested 
to the extent necessary to maintain the approximate 20/80 allocation 
between the Liquidity Sleeve and Private Credit Assets described 
above.\20\ The Trust will consider the current level of the Liquidity 
Sleeve, among other factors, in determining its distribution policy, 
and may determine to use accumulated cash received from payments of 
interest and principal on its Private Credit Assets as well as cash 
proceeds from loan repayments to replenish or increase the Liquidity 
Sleeve before distributing such amounts to shareholders.\21\
---------------------------------------------------------------------------

    \18\ See Notice, supra note 3, 89 FR at 106650.
    \19\ See id.
    \20\ See id.
    \21\ See id.
---------------------------------------------------------------------------

    3. Further, according to the Exchange, in the event that the cash 
and cash equivalents required to accommodate a series of redemptions or 
a single large redemption approaches the size of the Trust's Liquidity 
Sleeve, the Trust may:
    a. Sell Private Credit Assets in the secondary market to raise 
cash;
    b. Arrange a line of credit or other financing facility with a bank 
or broker dealer, using the portfolio of Private Credit Assets as 
collateral.\22\
---------------------------------------------------------------------------

    \22\ See id.
---------------------------------------------------------------------------

    The Exchange states these options will likely come at a cost to the 
Trust or may not be available to the Trust depending on market 
conditions.\23\
---------------------------------------------------------------------------

    \23\ See id.
---------------------------------------------------------------------------

    4. In the event that items 1-3 above do not provide sufficient cash 
and cash equivalents to the Liquidity Sleeve to accommodate redemptions 
in the Trust, the Exchange states redemptions may be suspended until 
the Trust accumulates enough cash to facilitate additional redemptions, 
which the Advisor does not expect to last for longer than approximately 
2.5 months.\24\ In the event that the Advisor implements a restriction 
on redemptions, the Shares on the secondary market may trade at deep 
discount.\25\ According to the Exchange, the discount could potentially 
serve to prompt investors to buy shares and potentially trigger primary 
market activity.\26\
---------------------------------------------------------------------------

    \24\ See id.
    \25\ See id.
    \26\ See id.
---------------------------------------------------------------------------

    According to the Exchange, the Advisor believes that the liquidity 
strategy laid out above will be sufficient to address concerns that may 
arise from the relative illiquidity of the secondary market for selling 
Private Credit Assets.\27\ Specifically, the Advisor believes that the 
20% Liquidity Sleeve (with the flexibility to increase the sleeve 
during times of potentially high redemptions) will provide the Trust 
with sufficient liquidity to manage redemptions under the vast majority 
of market conditions.\28\ Additionally, because the Trust will target 
shorter duration loans that are underwritten to generate cash payments 
of interest and principal amortization of approximately 8% of the 
Trust's AUM per month, even in the event that the Trust's Liquidity 
Sleeve is exhausted, it is expected to be replenished by the cash 
payments generated by the Private Credit Assets.\29\ In the event that 
the cash generated by the Private Credit Assets is insufficient to 
satisfy incoming redemptions the Trust would then have the ability to 
facilitate additional redemptions by selling certain of the Private 
Credit Assets and/or using the Private Credit Assets as collateral for 
a cash loan from a bank or broker dealer.\30\ According to the 
Exchange, in a worst case scenario, the Trust would temporarily suspend 
redemptions.\31\ However, the Exchange states the Advisor does not 
expect such a suspension to last for longer than approximately 2.5 
months because of the cash expected to be generated by the Private 
Credit Assets.\32\
---------------------------------------------------------------------------

    \27\ See id.
    \28\ See id.
    \29\ See id.
    \30\ See id.
    \31\ See id.
    \32\ See id.
---------------------------------------------------------------------------

    In addition to the specific liquidity strategy described above, the 
Exchange states that the small size of loans sourced through Fintech 
lending platforms will enable the Trust to hold a portfolio that is 
diversified by sector, source, vintage, count and geography, which will 
help to manage idiosyncratic risk and ensure a diverse universe of 
lenders.\33\ The Exchange states the small loan size means that the 
Trust will need to hold a significant number of Private Credit Assets, 
further ensuring diversity and minimizing the risk that any single 
Private Credit Assets would have on the portfolio.\34\ Finally, the 
Exchange states the Advisor believes that the cash yields and short 
duration through regular principal amortization will, in addition to 
enhancing the liquidity of the Trust, help manage volatility of 
returns.\35\
---------------------------------------------------------------------------

    \33\ See id.
    \34\ See id.
    \35\ See id.
---------------------------------------------------------------------------

Availability of Information

    According to the Exchange, the net asset value (``NAV'') for the 
Trust will be calculated by an independent third party once each 
business day and will be disseminated daily to all market participants 
at the same time.\36\ Pricing information will be available on the 
Advisor's website including: (1) the prior business day's reported NAV, 
the closing market price or the bid/ask price, daily trading volume, 
and a calculation of the premium and discount of the closing market 
price or bid/ask price against the NAV; and (2) data in chart format 
displaying the frequency distribution of discounts and premiums of the 
daily closing price against the NAV, within appropriate ranges, for 
each of the four previous calendar quarters. The Trust will also 
disclose its portfolio holdings on a daily basis on its website. The 
aforementioned information will be published as of the close of 
business and available on the Advisor's website at 
www.bondbloxxetf.com.\37\
---------------------------------------------------------------------------

    \36\ See id. NAV means the total assets of the Trust including, 
but not limited to, all cash and cash equivalents and private credit 
assets, less any liabilities, divided by the total number of Shares 
outstanding. The Trust's NAV is generally calculated at 4 p.m. ET. 
See Notice, supra note 3, 89 FR at 106650, n. 9.
    \37\ See Notice, supra note 3, 89 FR at 106650.
---------------------------------------------------------------------------

    According to the Exchange, the Trust generally values its assets 
using market quotations when they are readily available.\38\ Whole 
loans, asset backed securities and certain other types of private 
credit assets that Trust may hold may not have readily available market 
quotations and typically are fair-valued based on prices provided by a 
third-party pricing service.\39\ Each loan and fractional loan is 
valued using inputs that factor in individual borrower performance data 
(e.g., payment history) that is updated as often as the NAV is 
calculated to reflect new information about the borrower or loan.\40\
---------------------------------------------------------------------------

    \38\ See id.
    \39\ See Notice, supra note 3, 89 FR at 106650-51. According to 
the Exchange, fair value represents the amount that the Trust could 
reasonably expect to receive if its assets were sold at the time of 
valuation, based on information reasonably available at the time the 
valuation is made and that the Advisor and the Sub-Advisor believe 
to be reliable. See Notice, supra note 3, 89 FR at 106651. Further, 
according to the Exchange, ``fair valuation involves subjective 
judgments, and it is possible that the fair value determined for an 
asset may differ materially from the value that could be realized 
upon the sale of such asset.'' Id.
    \40\ See Notice, supra note 3, 89 FR at 106651.
---------------------------------------------------------------------------

    Quotation and last-sale information regarding the Shares will be 
disseminated through the facilities of the Consolidated Tape 
Association. Pricing information regarding cash

[[Page 13259]]

equivalents in which the Trust will invest is generally available 
through nationally recognized data services providers, such as Reuters 
and Bloomberg, through subscription agreements.\41\
---------------------------------------------------------------------------

    \41\ See Notice, supra note 3, 89 FR at 106651.
---------------------------------------------------------------------------

    The Exchange states the Intraday Indicative Value (``IIV'') will be 
updated during Regular Trading Hours to reflect changes in the value of 
the Trust's holdings during the trading day.\42\ The IIV disseminated 
during Regular Trading Hours should not be viewed as an actual real-
time update of the NAV, which will be calculated only once at the end 
of each trading day.\43\ The IIV will be updated every 15 seconds, as 
calculated by the Exchange or a third-party financial data provider 
during the Exchange's Regular Trading Hours (9:30 a.m. to 4:00 p.m. 
Eastern time).
---------------------------------------------------------------------------

    \42\ See id.
    \43\ See id.
---------------------------------------------------------------------------

III. Proceedings To Determine Whether To Approve or Disapprove SR-
CboeBZX-2024-126 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \44\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of such 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the proposed rule change. Institution of proceedings 
does not indicate that the Commission has reached any conclusions with 
respect to any of the issues involved. Rather, as described below, the 
Commission seeks and encourages interested persons to provide comments 
on the proposed rule change.
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\45\ the Commission is 
providing notice of the grounds for disapproval under consideration. 
The Commission is instituting proceedings to allow for additional 
analysis of the proposal's consistency with Section 6(b)(5) of the Act, 
which requires, among other things, that the rules of a national 
securities exchange be ``designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade,'' and ``to protect investors and the public 
interest.'' \46\
---------------------------------------------------------------------------

    \45\ Id.
    \46\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission asks that commenters address the sufficiency of the 
Exchange's statements in support of the proposal, which are set forth 
in the Notice, in addition to any other comments they may wish to 
submit about the proposed rule change. In particular, the Commission 
seeks comment on the following questions and asks commenters to submit 
data where appropriate to support their views:
    1. What are commenters' views generally with respect to the 
liquidity and transparency of the markets for Private Credit Assets? 
What sources of reliable pricing information (both intraday and end-of-
day) are available for the Private Credit Assets? Are such sources of 
reliable pricing information generally available to investors? Do the 
answers to these questions depend upon the type of Private Credit 
Asset?
    2. What are commenters' views on whether the proposal would 
maintain alignment between intraday trading prices of the Shares and 
the contemporaneous value of the underlying portfolio? Will the 
proposed allocation of the Trust's holdings, including the liquidity 
strategy described by the Exchange,\47\ facilitate alignment of the 
secondary market prices of the Shares with the value of the Trust's 
underlying portfolio? Why or why not? Will authorized participants and 
market makers have sufficient information to value the Trust's 
underlying portfolio and facilitate creation/redemption or trading in 
the Shares, respectively? Why or why not?
---------------------------------------------------------------------------

    \47\ See supra notes 16-26 and accompanying text.
---------------------------------------------------------------------------

    3. Given the nature of the underlying assets held by the Trust, 
what are commenters' views on whether the proposed Trust and Shares 
would be susceptible to manipulation? What are commenters' views 
generally on whether the Exchange's proposal is designed to prevent 
fraudulent and manipulative acts and practices?

IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Section 6(b)(5) or any other provision of the Act, and 
the rules and regulations thereunder. Although there do not appear to 
be any issues relevant to approval or disapproval that would be 
facilitated by an oral presentation of views, data, and arguments, the 
Commission will consider, pursuant to Rule 19b-4, any request for an 
opportunity to make an oral presentation.\48\
---------------------------------------------------------------------------

    \48\ Section 19(b)(2) of the Act, as amended by the Securities 
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Acts Amendments of 1975, Senate Comm. 
on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change should be approved 
or disapproved by April 10, 2025. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
April 24, 2025.
    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-2024-126 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-2024-126. 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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions;

[[Page 13260]]

you should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-CboeBZX-2024-126 and 
should be submitted on or before April 10, 2025. Rebuttal comments 
should be submitted by April 24, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\49\
---------------------------------------------------------------------------

    \49\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

Vanessa A. Countryman,
Secretary.
[FR Doc. 2025-04657 Filed 3-19-25; 8:45 am]
BILLING CODE 8011-01-P
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