Notice2022-08569
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Eliminate the Minimum Price Variance Provisions of Exchange Rule 14.11(i) (Managed Fund Shares), (l) (Exchange-Traded Fund Shares), and (m) (Tracking Fund Shares)
Primary source
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Published
April 22, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 78 (Friday, April 22, 2022)</title>
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[Federal Register Volume 87, Number 78 (Friday, April 22, 2022)]
[Notices]
[Pages 24208-24210]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-08569]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94741; File No. SR-CboeBZX-2022-026]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Eliminate the Minimum Price Variance Provisions of Exchange Rule
14.11(i) (Managed Fund Shares), (l) (Exchange-Traded Fund Shares), and
(m) (Tracking Fund Shares)
April 18, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on April 11, 2022, Cboe BZX Exchange, Inc. (``Exchange'') filed with
the Securities and Exchange Commission (``Commission'') the proposed
rule change as described in Items I and II below, which Items have been
prepared by the Exchange. The Exchange filed the proposal as a ``non-
controversial'' proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') is filing
with the Securities and Exchange Commission (``Commission'') a proposal
to eliminate the Minimum Price Variance provisions of Exchange Rule
14.11(i) (Managed Fund Shares), (l) (Exchange-Traded Fund Shares), and
(m) (Tracking Fund Shares). The text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (<a href="https://markets.cboe.com/us/equities/regulation/rule_filings/bzx/">https://markets.cboe.com/us/equities/regulation/rule_filings/bzx/</a>), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to eliminate the Minimum Price Variance
provisions of Exchange Rule 14.11(i), (l), and (m), which correspond to
the Exchange's listing rules for Managed Fund Shares,\5\ Exchange-
Traded Fund Shares (``ETF Shares''),\6\ and Tracking Fund Shares,\7\
respectively.
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\5\ The term ``Managed Fund Share'' means a security that (i)
represents an interest in a registered investment company
(``Investment Company'') organized as an open-end management
investment company or similar entity, that invests in a portfolio of
securities selected by the Investment Company's investment adviser
consistent with the Investment Company's investment objectives and
policies; (ii) is issued in a specified aggregate minimum number in
return for a deposit of a specified portfolio of securities and/or a
cash amount with a value equal to the next determined net asset
value; and (iii) when aggregated in the same specified minimum
number, may be redeemed at a holder's request, which holder will be
paid a specified portfolio of securities and/or cash with a value
equal to the next determined net asset value. See Exchange Rule
14.11(i)(3)(A).
\6\ The term ``ETF Shares'' means shares of stock issued by an
Exchange-Traded Fund. See Exchange Rule 14.11(l)(3)(A). The term
``Exchange-Traded Fund'' has the same meaning as the term
``exchange-traded fund'' as defined in Rule 6c-11 under the
Investment Company Act of 1940. See Exchange Rule 14.11(l)(3)(B).
\7\ The term ``Tracking Fund Share'' means a security that: (i)
Represents an interest in an investment company registered under the
Investment Company Act of 1940 (``Investment Company'') organized as
an open-end management investment company, that invests in a
portfolio of securities selected by the Investment Company's
investment adviser consistent with the Investment Company's
investment objectives and policies; (ii) is issued in a specified
aggregate minimum number in return for a deposit of a specified
Tracking Basket or Custom Basket, as applicable, and/or a cash
amount with a value equal to the next determined net asset value;
(iii) when aggregated in the same specified minimum number, may be
redeemed at a holder's request, which holder will be paid a
specified Tracking Basket or Custom Basket, as applicable, and/or a
cash amount with a value equal to the next determined net asset
value; and (iv) the portfolio holdings for which are disclosed
within at least 60 days following the end of every fiscal quarter.
See Exchange Rule 14.11(m)(3)(A).
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Currently, Exchange Rules 14.11(i)(2)(B), (l)(2)(B), and (m)(2)(C)
provide that the minimum price variation for quoting and entry of
orders in Managed Fund Shares, ETF Shares, and Tracking Fund Shares,
respectively, is $0.01 (collectively, the ``ETP MPV Rules'') regardless
of the price of the security. The Exchange proposes to delete the ETP
MPV Rules because they may appear to be inconsistent with Exchange Rule
11.11 and Rule 612 of Regulation National Market System (``NMS'') \8\
because the ETP MPV Rules do not specifically include the minimum price
variance for securities that are priced less than $1.00. Specifically,
Rule 612 of Regulation NMS specifies minimum pricing increments for NMS
stocks, which include Managed Fund Shares, ETF Shares, and Tracking
Fund Shares.\9\ In general, Rule 612 of Regulation NMS prohibits market
participants from displaying, ranking, or accepting quotations, orders,
or indications of interest in any NMS stock priced in an increment
smaller than $0.01 if the quotation, order, or indication of interest
is priced equal to or greater than $1.00 per share. If the quotation,
order, or indication of interest is priced less than $1.00 per share,
the minimum pricing increment is $0.0001. Similarly, Exchange Rule
11.11 provides that bids, offers, orders or indications of interest in
securities traded on the Exchange shall not be made in an increment
smaller than (1) $0.01 if those bids, offers or indications of
interests are priced equal to or greater than $1.00 per share; or (2)
$0.0001 if those bids, offers or indications of interests are priced
less
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than $1.00 per share and the security is an NMS stock pursuant to
Commission Rule 600(b)(46) under the Act and is trading on the
Exchange; or (3) any other increment established by the Commission for
any security which has been granted an exemption from the minimum price
increments requirements of Commission Rule 612(a) or 612(b).\10\
Because the intent was not for ETP MPV Rules to supersede Rule 612 of
Regulation NMS or Exchange Rule 11.11, the Exchange is proposing to
delete these paragraphs to remove any potential confusion as to the
minimum price variance requirements for Managed Fund Shares, ETF
Shares, and Tracking Fund Shares priced less than $1.00.\11\
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\8\ 17 CFR 242.612.
\9\ An ``NMS stock'' is any NMS security other than an option.
See 17 CFR 242.600(b)(55). An ``NMS security'' is any security or
class of securities for which transaction reports are collected,
processed, and made available pursuant to an effective transaction
reporting plan, or an effective national market system plan for
reporting transactions in listed options. See 17 CFR 242.600(b)(54).
\10\ See Exchange Rule 11.11.
\11\ See Securities Exchange Act Release Nos. 78396 (July 22,
2016), 81 FR 49698 (July 28, 2016) (SR-BATS-2015-100) (Order
Approving a Proposed Rule Change, as Modified by Amendment No. 6, To
Amend BATS Rule 14.11(i) To Adopt Generic Listing Standards for
Managed Fund Shares); 88566 (April 6, 2020), 85 FR 20312 (April 10,
2016) (SR-CboeBZX-2019-097) (Order Granting Accelerated Approval of
a Proposed Rule Change, as Modified by Amendment No. 2, To Adopt BZX
Rule 14.11(l) Governing the Listing and Trading of Exchange-Traded
Fund Shares); 88887 (May 15, 2020), 85 FR 30990 (May 21, 2020) (SR-
CboeBZX-2019-107) (Order Granting Accelerated Approval of a Proposed
Rule Change, as Modified by Amendment No. 5, To Adopt Rule 14.11(m),
Tracking Fund Shares, and To List and Trade Shares of the Fidelity
Blue Chip Value ETF, Fidelity Blue Chip Growth ETF, and Fidelity New
Millennium ETF) (collectively, with the corresponding notices
referred to as the ``Original ETP MPV Rule filings''). None of the
Original ETP MPV Rule filings contain any discussion that the ETP
MPV Rule was intended to supersede Exchange Rule 11.11 or Rule 612
of Regulation NMS.
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Based on the Exchange's proposal to remove the ETP MPV Rules, the
Exchange also proposes to re-letter subparagraphs under Rules
14.11(i)(2), (l)(2), and (m)(2) to reflect the removal of those
paragraphs.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\12\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \13\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
The Exchange also believes the proposed rule change is consistent with
the Section 6(b)(1) \14\ requirements that the Exchange is so organized
and has the capacity to be able to carry out the purposes of the Act
and to comply, and (subject to any rule or order of the Commission
pursuant to section 78q(d) or 78s(g)(2) of the Act) to enforce
compliance by its members and persons associated with its members, with
the provisions of the Act, the rules and regulations thereunder, and
the rules of the Exchange.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
\14\ 15 U.S.C. 78f(b)(1).
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The Exchange's proposal to delete the ETP MPV Rules is intended to
remove any potential confusion as to the minimum price variance for
Managed Fund Shares, ETF Shares, and Tracking Fund Shares listed on the
Exchange and priced less than $1.00. As discussed above, the ETP MPV
Rules were not intended to supersede Rule 612 of Regulation NMS or
Exchange Rule 11.11.
The proposal is intended to remove any potential confusion in the
Exchange's Rules as it relates to the minimum price variance for
Managed Fund Shares, ETF Shares, and Tracking Fund Shares listed on the
Exchange and priced less than $1.00, which the Exchange believes will
remove impediments to, and perfect the mechanism of, a free and open
market and a national market system and, in general, to protect
investors and the public interest. The Exchange believes that re-
lettering current Rules to correspond to the proposed changes will
allow the Exchange to maintain a clear and organized rule structure,
thus preventing investor confusion. For these reasons, the Exchange
believes the proposed rule change is consistent with the requirements
of Sections 6(b)(5) and 6(b)(1) of the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed rule change is
not designed to address any competitive issues but rather to remove any
potential confusion regarding the minimum price variance for Managed
Fund Shares, ETF Shares, and Tracking Fund Shares listed on the
Exchange and priced less than $1.00.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) thereunder.\16\
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\18\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Commission notes that
waiver of the 30-day operative delay will add clarity to BZX's rules
and remove any potential inconsistency between the ETP MPV Rules and
Exchange Rule 11.11 and Rule 612 of Regulation NMS. For these reasons,
the Commission believes that waiver of the 30-day operative delay is
consistent with the protection of investors and the public interest.
Accordingly, the Commission waives the 30-day operative delay and
designates the proposed rule change operative upon filing.\19\
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\17\ 17 CFR 240.19b-4(f)(6).
\18\ 17 CFR 240.19b-4(f)(6)(iii).
\19\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such
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action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#4133342d246c222e2c2c242f3532013224226f262e37"><span class="__cf_email__" data-cfemail="2755524b420a44484a4a424953546754424409404851">[email protected]</span></a>. Please include
File Number SR-CboeBZX-2022-026 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-2022-026. 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="https://www.sec.gov/rules/sro.shtml">https://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-2022-026 and should
be submitted on or before May 13, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2022-08569 Filed 4-21-22; 8:45 am]
BILLING CODE 8011-01-P
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