Notice2021-25751
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 2, To Allow the Invesco Focused Discovery Growth ETF and Invesco Select Growth ETF To Strike and Publish an Intra-Day Net Asset Value
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 26, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 86 Issue 225 (Friday, November 26, 2021)</title>
</head>
<body><pre>
[Federal Register Volume 86, Number 225 (Friday, November 26, 2021)]
[Notices]
[Pages 67527-67531]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-25751]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93624; File No. SR-CboeBZX-2021-056]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of Amendment No. 2 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 2, To Allow the
Invesco Focused Discovery Growth ETF and Invesco Select Growth ETF To
Strike and Publish an Intra-Day Net Asset Value
November 19, 2021.
I. Introduction
On August 12, 2021, Cboe BZX Exchange, Inc. (``Exchange'' or
``BZX'') 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 allow the Invesco Focused
Discovery Growth ETF and Invesco Select Growth ETF (collectively,
``Funds''), the shares of which (collectively, ``Shares'') BZX
currently lists and trades, to strike and publish an intra-day net
asset value (``NAV'') and an end of-day NAV. The proposed rule change
was published for comment in the Federal Register on August 24,
2021.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 92701 (August 18,
2021), 86 FR 47359.
---------------------------------------------------------------------------
On September 28, 2021, 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\ On November 5, 2021, the Exchange filed Amendment No. 1,
which replaced and superseded the proposed rule change as originally
filed. On November 16, 2021, the Exchange filed Amendment No. 2, which
replaced and superseded the proposed rule change as modified by
Amendment No. 1.\6\ The Commission has received no comments on the
proposed rule change. The Commission is publishing this notice to
solicit comments on the proposed rule change, as modified by Amendment
No. 2, from interested persons and is approving the proposed rule
change, as modified by Amendment No. 2, on an accelerated basis.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 93144, 86 FR 54774
(October 4, 2021). The Commission designated November 22, 2021, as
the date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change.
\6\ Amendments No. 1 and No. 2 are available on the Commission's
website at <a href="https://www.sec.gov/comments/sr-cboebzx-2021-056/srcboebzx2021056.htm">https://www.sec.gov/comments/sr-cboebzx-2021-056/srcboebzx2021056.htm</a>.
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change, as Modified by Amendment
No. 2
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change, as Modified by Amendment
No. 2
1. Purpose
This Amendment No. 2 to SR-CboeBZX-2021-056 amends and replaces in
its entirety the proposal as amended November 5, 2021 and as originally
submitted on August 12, 2021. The Exchange submits this Amendment No. 2
in order to clarify certain points and add additional details to the
proposal.
The Exchange proposed and the Commission approved a rule to permit
the listing and trading of the Shares of each Fund.\7\ On December 22,
2020, the Exchange commenced trading in the Shares of each Fund. The
Exchange now proposes to continue listing and trading the Shares of
each Fund pursuant to Rule 14.11(m) and to permit the Funds to strike
and publish a single intra-day NAV in addition to the current practice
of striking and publishing an end-of-day NAV. This proposal is designed
to assist market makers in assessing and managing their intra-day risk,
provide greater flexibility in creating and redeeming shares and
provide market participants with additional information about the
Funds, all of which may assist market participants in hedging the
Funds' shares and generally making a market in the Funds' shares.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 90684 (December 16,
2020) 85 FR 83637 (December 22, 2020) (SR-CboeBZX-2020-091) (the
``Initial Filing'').
---------------------------------------------------------------------------
[[Page 67528]]
The NAV represents the value of a fund's assets minus its
liabilities divided by the number of shares outstanding and is used in
valuing exchange-traded products (``ETPs''), including Tracking Fund
Shares. By way of background, an ETP issues shares that can be bought
or sold throughout the day in the secondary market at a market-
determined price. Authorized participants (entities that have
contractual arrangements with the ETP and/or its distributor) purchase
and redeem ETP shares directly from the ETP in blocks called creation
units at a price equal to the next-calculated NAV, and may then
purchase or sell individual ETP shares in the secondary market at
market-determined prices. ETP shares trade at market prices, but the
market price typically will be more or less than the fund's NAV per
share due to a variety of factors, including the underlying prices of
the ETP's assets and the demand for the ETP shares. Nonetheless, an
ETP's market price is generally kept close to the ETP's end-of-day NAV
because of the arbitrage function inherent to the structure of the ETP.
An arbitrage opportunity is inherent in the ETP structure because the
ETP share's intra-day market price fluctuates in response to standard
supply/demand dynamics during the trading day. Due to this fluctuation,
the ETP's intra-day market price may not equal the actual value of
ETP's underlying holdings that would form the basis of the NAV
calculation. Accordingly, authorized participants can arbitrage this
difference (and make a profit) because they can trade directly with the
ETP at NAV \8\ as well as on the market at market-determined prices.
The expected result of the arbitrage activity is that the market value
of the ETP moves back in line with the ETP's NAV per share and
investors are able to buy ETP shares on an exchange that is close to
the ETP's NAV per share. The arbitrage mechanism is important because
it provides a means to maintain a close tie between market price and
NAV per share of the ETP throughout the day and on market close,
thereby helping to ensure that ETP investors are treated equitably when
buying and selling fund shares.
---------------------------------------------------------------------------
\8\ See generally Investment Company Act Release No. 33646.
---------------------------------------------------------------------------
In order for the arbitrage mechanism described above to operate
efficiently, market participants need to be able to hedge their intra-
day risk effectively and estimate, with high accuracy, the value of the
ETP's holdings, such that it can then observe instances when the value
of such holdings, on a per-share basis, is higher or lower than the
current trading price of the shares on an exchange. Principal aspects
of the ETP structure that facilitate these two processes are: (i)
Timing of the NAV strike and creation/redemption order window; and (ii)
the volume of information available regarding the underlying holdings
of the ETP, from which the authorized participant can estimate the
ETP's NAV per share at any given time. With respect to the former, if
an ETP can offer more than one opportunity to ``lock in'' the purchase
price of the ETP (i.e., shorten the duration of the market risk that
the authorized participant is bearing), the Exchange believes that the
arbitrage mechanism will operate more efficiently, resulting in tighter
spreads for the trading of the ETP shares.
Additionally, with respect to information dissemination, in
general, the more information that is available to assist the market
participants in estimating the value of the fund's holdings, the better
the arbitrage mechanism will operate with respect to the Tracking Fund
Shares. In the case of Tracking Fund Shares, the applicable ETP
disseminates various information to achieve that goal, while not
publishing a full list of fund holdings daily. First, as noted in the
Initial Filing, each Fund will disclose its respective Fund Portfolio
\9\ including the name, identifier, market value and weight of each
security and instrument in the portfolio, at a minimum within at least
60 days following the end of every fiscal quarter.\10\ Additionally,
the Tracking Basket \11\ (also referred to as the ``substitute
basket'') for each Fund will be publicly disseminated at least once
daily.\12\ The Tracking Basket is designed to closely track the daily
performance of the Fund, but is not fully-representative of the Fund
Portfolio. The Tracking Basket often will include a significant
percentage of the securities held in the Fund Portfolio, but it will
exclude (or modify the weightings of) certain securities held in the
Fund Portfolio, such as those securities that the Fund's portfolio
managers are actively looking to purchase or sell, or securities which,
if disclosed, could increase the risk of front-running or free-riding.
The Tracking Basket may also include cash. Further, the issuer of the
Funds represented that the NAV per share for each of the Funds is
currently being calculated once daily along with certain metrics,
including the premium or discount between NAV and final trading price
of the Shares at the close of Regular Trading Hours \13\ and
information about how well the performance of the Tracking Basket has
correlated with the performance of the Fund Portfolio on a day-over-day
basis.\14\ While nothing in the Initial Filing, the Exemptive Relief,
or Rule 14.11(m) requires the Funds to disseminate an intraday
indicative value (``IIV''), both Funds disseminate IIVs as such
dissemination is not prohibited by the Initial Filing, Exemptive Relief
or Rule 14.11(m).\15\ The IIV refers to an intraday estimate of a
fund's NAV per share, and is calculated based on the valuation of the
Fund Portfolio that will form the basis for the next-calculated NAV
(including any trades from the prior day that are accounted for on a
T+1 basis), reflecting intra-day price movements for such holdings. For
example, if a security were bought by a Fund during a trading session
on a Monday, it would be not be part of the NAV calculation at the end
of that day (Monday), but instead would be accounted for in the NAV (or
NAVs if the Fund struck more than one) the next day (Tuesday, or T+1).
Similarly, that security would be valued intraday and reflected in the
IIV throughout the day in which it would form a part of the portfolio
upon which the NAV is calculated (e.g., Tuesday). As such, the
portfolio securities upon which the IIV and the NAV are based on any
given day are the same and, therefore, it is expected that the IIV
disseminated at the same time that a NAV struck intra-day during the
trading session (an ``Intra-Day NAV'') would be substantively the same
(e.g. the 12:00 p.m. Eastern Time IIV and an Intra-Day NAV struck at
12:00 p.m. Eastern Time
[[Page 67529]]
would be substantially the same).\16\ The IIV is disseminated by each
Fund every second during Regular Trading Hours,\17\ but, although the
IIV provides a great deal of price transparency to the market, it is
not an official NAV of the Funds derived using the processes and
governance designed to ensure an accurate and reliable calculation
before dissemination. Accordingly, an official Intra-Day NAV would, in
concert with the IIV, provide a reliable verification and further
clarity as to Fund portfolio pricing.\18\
---------------------------------------------------------------------------
\9\ The term ``Fund Portfolio'' means the identities and
quantities of the securities and other assets held by the Investment
Company that will form the basis for the Investment Company's
calculation of net asset value at the end of the business day. See
Exchange Rule 14.11(m)(3)(B).
\10\ See Exchange Rule 14.11(m)(4)(B)(ii).
\11\ The term ``Tracking Basket'' means the identities and
quantities of the securities and other assets included in a basket
that is designed to closely track the daily performance of the Fund
Portfolio, as provided in the exemptive relief under the Investment
Company Act of 1940 applicable to a series of Tracking Fund Shares
(the ``Exemptive Relief''). The website for each series of Tracking
Fund Shares shall disclose the following information regarding the
Tracking Basket as required under this Rule 14.11(m), to the extent
applicable: (i) Ticker symbol; (ii) CUSIP or other identifier; (iii)
Description of holding; (iv) Quantity of each security or other
asset held; (v) and Percentage weight of the holding in the
portfolio.
\12\ See Exchange Rule 14.11(m)(4)(B)(i).
\13\ See Exchange Rule 1.5(w).
\14\ See Exchange Rule 14.11(m)(4)(A)(ii).
\15\ As noted above, nothing in the Initial Filing, the
Exemptive Relief, or Rule 14.11(m) requires the Funds to disseminate
an IIV; therefore, the Fund is not representing that it will in the
future continue to disseminate an IIV for either or both of the
Funds.
\16\ Although the portfolio of securities on which the Intra-Day
NAV and the IIV would be based would be identical, it is possible
that differences in pricing sources or data points used by the Funds
compared to the IIV provider may create minor variances between the
values. Such variances are expected to be immaterial and should not
create investor confusion.
\17\ ``Regular Trading Hours'' refers to the time between 9:30
a.m. and 4:00 p.m. Eastern time. See Exchange Rule 1.5(w).
\18\ Further, in the rare instances where there may be a delay
or error in calculating the IIV the dissemination of the official
Intra-Day NAV would alert the market to any disparity. As discussed
herein, the calculation of an official NAV takes more time to
disseminate than the IIV, reflecting the robust verification and
validation processes employed.
---------------------------------------------------------------------------
In furtherance of the Funds' objectives of tightening spreads in
the trading of their shares and increasing the efficiency of the
arbitrage mechanism, the Funds will strike one NAV during normal
trading (the Intra-Day NAV) and one NAV again at the close of trading
at 4:00 p.m. ET (the ``End-of-Day NAV'' and collectively with Intra-Day
NAV, the ``Published NAVs''). The Funds anticipate that the Intra-Day
NAV will be struck at 12:00 p.m. ET; however, the Funds represent that
the Intra-Day NAV may be struck at a pre-determined, and publicly
disclosed, time between 11:00 a.m. ET and 2 p.m. ET. The timing of the
calculation time of the Intra-Day NAV will be disclosed in each Fund's
prospectus and will not change without prior notification to
shareholders and the market in the form of a prospectus supplement. The
Intra-Day NAV would be calculated based on the values of the securities
in the Fund Portfolio (as well as any cash or other assets booked to
the Fund) at the time the Intra-Day NAV is struck, which may differ
from the values of the securities in the Fund Portfolio at the time the
End-of-Day NAV is struck. However, as noted in the discussion of IIV
above, the Fund Portfolio will not change between the Intra-Day NAV and
End-of-Day NAV, since all trades occurring during the trading day will
be reflected in the following day's Published NAVs (i.e., T+1).
As noted in the Initial Filing, Shares of each of the Funds are
offered by the Trust, which is registered with the Commission as an
open-end investment company and has filed a registration statement on
behalf of the Funds on Form N-1A with the Commission.\19\ The
Registration Statement provides that the Funds may calculate the NAV
per Share more than once daily (e.g., at 12 p.m. ET and 4:00 p.m. ET),
however, the Initial Filing did not seek to allow the Funds to
calculate more than one NAV per day. Now, the Exchange is seeking
approval to explicitly allow the Funds to strike and publish an Intra-
Day NAV daily in addition to the End-of-Day NAV.\20\
---------------------------------------------------------------------------
\19\ The Trust is registered under the 1940 Act. On September
25, 2020, the Trust filed post-effective amendments to its
registration statement on Form N-1A relating to each Fund (File No.
811-22148) (the ``Registration Statement''). The descriptions of the
Funds and the Shares contained herein are based, in part, on
information included in the Registration Statement. The Commission
has issued an order granting certain exemptive relief to the Trust
(the ``Exemptive Relief'') under the 1940 Act. See Investment
Company Act of 1940 Release No. 34127 (December 2, 2020).
\20\ The Exchange's proposal is similar to functionality offered
for other ETPs. For example, the prospectus for the Invesco Treasury
Collateral ETF provides that the Fund is calculated at 12 p.m. and 4
p.m. ET every day the New York Stock Exchange (``NYSE'') is open and
the Goldman Sachs Access Treasury 0-1 Year ETF has similar
practices. See <a href="http://hosted.rightprospectus.com/Invesco/Fund.aspx?cu=46138G888&dt=P&ss=ETF">http://hosted.rightprospectus.com/Invesco/Fund.aspx?cu=46138G888&dt=P&ss=ETF</a> and <a href="https://www.gsam.com/bin/gsam/servlets/LiteratureViewerServlet?pdflink=%2Fcontent%2Fdam%2Fgsam%2Fpdfs%2Fus%2Fen%2Fprospectus-and-regulatory%2Fprospectus%2Fetf-combined-access-prospectus.pdf&RequestURI=/content/gsam/us/en/advisors/fund-center/etf-fund-finder&sa=n">https://www.gsam.com/bin/gsam/servlets/LiteratureViewerServlet?pdflink=%2Fcontent%2Fdam%2Fgsam%2Fpdfs%2Fus%2Fen%2Fprospectus-and-regulatory%2Fprospectus%2Fetf-combined-access-prospectus.pdf&RequestURI=/content/gsam/us/en/advisors/fund-center/etf-fund-finder&sa=n</a>.
---------------------------------------------------------------------------
As noted above, the Intra-Day NAV for the Funds will be struck
based on the Fund Portfolio at a pre-determined time between 11:00 a.m.
and 2:00 p.m. Eastern Time on each day the Exchange is open. The Intra-
Day NAV will be calculated based on the valuation of Fund Portfolio as
of the NAV strike time, with the calculation of such NAV typically
occurring within two hours of the time the NAV strike time (e.g., if
the Intra-Day NAV is struck as of 12:00 p.m. Eastern Time,
dissemination of such Intra-Day NAV will typically occur prior to 2:00
p.m. Eastern Time), and will be disseminated to market participants
shortly after calculation. Such dissemination will clearly indicate
that such Intra-Day NAV is as of the specified time (e.g. NAV as of
12:00 p.m. Eastern Time) and not as of the time it is disseminated.
Further, the Intra-Day NAV will be disseminated to all market
participants at the same time through the Fund's website.\21\
---------------------------------------------------------------------------
\21\ Currently, the End-of-Day NAV is disseminated publicly via
the Issuer's website at <a href="http://www.invesco.com/ETFs">www.invesco.com/ETFs</a>. Additionally, the End-
of-Day NAV is captured by other data feeds, such as Bloomberg,
Reuters and others.
---------------------------------------------------------------------------
Currently, all orders to purchase or redeem creation units must be
received by the transfer agent and/or distributor no later than the
order cut-off time designated in the participant agreement \22\ on the
relevant Business Day in order for the creation or redemption of
creation units to be effected based on the NAV of Shares as determined
on such date. With certain exceptions, the order cut-off time for the
Funds, as set forth in the participant agreement, usually is one hour
prior to the closing time of the regular trading session--i.e.,
ordinarily 4:00 p.m. Eastern time. Additionally, on days when the
Exchange closes earlier than normal, the Trust may require the creation
orders to be placed earlier in the day.
---------------------------------------------------------------------------
\22\ The ``participant agreement'' refers to the executed
written agreement between an authorized participant and the Fund, or
one of its service providers, that allows the authorized participant
to place creation and redemption orders.
---------------------------------------------------------------------------
As proposed, with certain exceptions the order cut-off time for the
Intra-Day NAV will be one hour prior to the time at which the Intra-Day
NAV is struck (e.g., 11:00 a.m. Eastern time if the NAV is struck at
12:00 p.m. Eastern time). The Funds will issue and redeem Shares in
creation units at the NAV per Share next determined after an order in
proper form is received (which may be the Intra-Day NAV or the End-of-
Day NAV depending on when the order is received). Specifically, if an
order to purchase or redeem Shares of either of the Funds was received
by the transfer agent prior to the order cut-off time for the Intra-Day
NAV (generally one hour prior to the time at which the Intra-Day NAV is
struck), the Fund would issue or redeem Shares in creation units at the
Intra-Day NAV. Conversely, if an order to purchase or redeem Shares of
either of the Funds was received by the transfer agent after that cut-
off time but before the cut-off time for the End-of-Day NAV (generally
3:00 p.m. Eastern time), the Fund would issue or redeem Shares in
creation units at the End-of-Day NAV.
The Exchange believes that providing authorized participants with
the ability to create and redeem during the trading day, coupled with
the price certainty of a second official Intra-Day NAV being available
to market participants, will reduce the risk that market participants
face intra-day related to the possible divergence between the Tracking
Basket and the value of the Fund Portfolio. By having an option
available to authorized participants by which they can ``lock in''
their creation and redemption transactions during the trading day at an
Intra-Day NAV, as well as at the end of
[[Page 67530]]
the trading day at the End-of-Day NAV,\23\ the intra-day market risk
experienced by authorized participants may be mitigated. Such
optionality could thereby help authorized participants and market
makers to reduce spreads on Shares.
---------------------------------------------------------------------------
\23\ The Exchange believes that the beneficial effect of having
the ability to ``lock in'' the Intra-Day NAV will exist even if
authorized participants do not regularly make use of the first
creation/redemption window. By having the flexibility to place
orders with less remaining time until the End-of-Day NAV is struck,
authorized participants will be able to hedge risk with a shorter
time horizon contemplated. Further, even in the unlikely event that
the Intra-Day NAV is not disseminated until after markets close
(which would only happen if the Intra-Day NAV were set at 2:00 p.m.
ET and the Fund experienced delays in calculation), such risk
management benefits would nonetheless be present with having the
first creation/redemption window.
---------------------------------------------------------------------------
As proposed, the Funds will continue to meet all listings standards
provided in Rule 14.11(m). The only change to the Funds that the
Exchange is proposing is to allow the Funds to strike an Intra-Day NAV.
All other material representations contained within the Initial Filing
remain true and will continue to constitute continued listing
requirements for the Funds.
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act \24\ in general and Section 6(b)(5) of the Act \25\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest in that the Shares of each Fund will meet each of the
continued listing criteria in BZX Rule 14.11(m), as provided in the
Initial Filing.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78f(b).
\25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The proposal to allow the Funds to strike and publish an Intra-Day
NAV will afford authorized participants with additional flexibility in
the timing of creation and redemption activity and provide the
marketplace with additional information, produced through rigorous
controls and verification, related to each Fund's underlying holdings
on an intra-day basis. The Exchange believes that this additional
feature will allow market participants to better assess and manage
their intra-day risk in making a market in the Funds' shares, and
provide additional certainty around intra-day price and hedging for the
Funds' shares. Further, the Exchange believes that the likely resulting
tighter spreads and deeper liquidity will deter potential fraudulent or
manipulative acts associated with the Funds' Share price. The only
change to the Funds that the Exchange is proposing is to allow the
Funds to strike an Intra-Day NAV. The website for the Funds will
include additional quantitative information, including, on a per Share
basis for each Fund, the prior business day's Intra-Day NAV and End-of-
Day NAV. All other material representations contained within the
Initial Filing remain true and will continue to constitute continued
listing requirements for the Funds.
For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change, rather, will provide additional information to
market participants thereby reducing market participants risk and
intra-day price uncertainty which will allow the Fund to better compete
in the marketplace, thus enhancing competition among both market
participants and listing venues, to the benefit of investors and the
marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment No. 2, is consistent with the Act and
the rules and regulations thereunder applicable to a national
securities exchange.\26\ In particular, the Commission finds that the
proposed rule change, as modified by Amendment No. 2, is consistent
with Section 6(b)(5) of the Act,\27\ which requires, among other
things, that the Exchange's rules be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, 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.
---------------------------------------------------------------------------
\26\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\27\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In addition to the End-of-Day NAV that currently is calculated and
disseminated, the proposal permits the calculation and dissemination of
an Intra-Day NAV for certain Tracking Fund Shares.\28\ The Commission
believes that the Exchange's proposal to permit Intra-Day NAV for the
Shares is reasonably designed to assist market participants assess and
manage their intra-day risk by providing greater flexibility in
creation and redemption of the Shares while providing additional
information about the Shares and not unduly creating investor
confusion. Specifically, the Exchange represents that each Intra-Day
NAV will be struck at a pre-determined time between 11:00 a.m. ET and
2:00 p.m. ET and that the timing of the calculation of the Intra-Day
NAV will be disclosed in each Fund's prospectus and will not change
without prior notification to shareholders and the market. Further,
according to the Exchange, the portfolio securities upon which the IIV
and the NAV are based on any given day are the same, and, therefore, it
is expected that the IIV disseminated at the same time that an Intra-
Day NAV is struck. Further, dissemination of Intra-Day NAV will clearly
indicate that the value is as of the specified time when the Intra-Day
NAV is struck, which will not be the time it is disseminated. Finally,
the Intra-Day NAV will be disseminated to all market participants at
the same time through the Fund's website.
---------------------------------------------------------------------------
\28\ The portfolio holdings for Tracking Fund Shares are
disclosed within at least 60 days following the end of every fiscal
quarter. See supra text accompanying note 10.
---------------------------------------------------------------------------
For the foregoing reasons, the Commission finds that the proposal
is consistent with Section 11A(a)(1)(C)(iii) of the Act, which sets
forth Congress's finding that it is in the public interest and
appropriate for the protection of investors and the maintenance of fair
and orderly markets to assure the availability to brokers, dealers, and
investors of information with respect to quotations for, and
transactions in, securities.
IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule
Change
Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 2 is consistent with the
[[Page 67531]]
Exchange Act. Comments may be submitted by any of the following
methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3c4e495059115f5351515952484f7c4f595f125b534a"><span class="__cf_email__" data-cfemail="f587809990d8969a9898909b8186b5869096db929a83">[email protected]</span></a>. Please include
File Number SR-CboeBZX-2021-056 on the subject line.
Paper Comments
<bullet> 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-2021-056. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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-2021-056, and should be
submitted on or before December 17, 2021.
V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment No. 2
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 2, prior to the thirtieth day
after the date of publication of notice of the filing of Amendment No.
2 in the Federal Register. In Amendment No. 2, the Exchange provided
additional information regarding: (a) The calculation and dissemination
of the Funds' IIVs and Intra-Day NAVs; and (b) the creation and
redemption order cut-off times applicable to the Shares; and (c) the
posting of the prior business day's Intra-Day (in addition to the End-
of-Day) NAVs for the Shares on the Funds' website.\29\ The changes and
additional information in Amendment No. 2 assist the Commission in
finding that the proposal is consistent with the Exchange Act.
Accordingly, the Commission finds good cause, pursuant to Section
19(b)(2) of the Exchange Act,\30\ to approve the proposed rule change,
as modified by Amendment No. 2, on an accelerated basis.
---------------------------------------------------------------------------
\29\ Amendment No. 2 also made certain clarifying changes. For
example, the Exchange: (1) Confirms that the IIVs and the Intra-Day
NAV for each Fund would be based on the same portfolio and therefore
likely would be substantially the same; (2) clarifies its analysis
of the market impact of its proposal; and (3) corrects a citation.
\30\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\31\ that the proposed rule change (SR-CboeBZX-2021-056), as modified
by Amendment No. 2, be, and it hereby is, approved on an accelerated
basis.
---------------------------------------------------------------------------
\31\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
---------------------------------------------------------------------------
\32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25751 Filed 11-24-21; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on November 26, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.