Notice2024-16222
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the Fees the Exchange Charges Companies Seeking a Review of a Delisting Determination, Public Reprimand Letter, or Written Denial of an Initial Listing Application
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
July 24, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 142 (Wednesday, July 24, 2024)</title>
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[Federal Register Volume 89, Number 142 (Wednesday, July 24, 2024)]
[Notices]
[Pages 59941-59944]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-16222]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100551; File No. SR-CboeBZX-2024-065]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify
the Fees the Exchange Charges Companies Seeking a Review of a Delisting
Determination, Public Reprimand Letter, or Written Denial of an Initial
Listing Application
July 18, 2024.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') and Rule 19b-4 thereunder,\2\ notice is hereby given
that on July 3, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (``Commission'' or ``SEC'')
a proposed rule change to modify the fees the Exchange charges
Companies seeking a review of a Delisting Determination, public
reprimand letter, or written denial of an initial listing application.
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="http://markets.cboe.com/us/equities/regulation/rule_filings/BZX/">http://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
Pursuant to Exchange Rule 14.12(h), Companies \3\ may seek review
of a determination by the Exchange's Listing Qualifications Department
\4\ to deny initial or delisting a Company's securities or to issue a
Public Reprimand Letter,\5\ by requesting a hearing before an
independent Hearings Panel (the ``Hearings Panel'').\6\ Exchange Rule
14.12(h)(1)(C) provides that a Company requesting a hearing must,
within 15 calendar days of the Staff Delisting Determination,\7\ must
submit a hearing fee. Hearing fees are currently charged as follows:
(i) when the Company has requested a written hearing, $1,000; or (ii)
when the Company has requested an oral hearing, whether in person or by
telephone, $5,000. Companies may also appeal a Hearings Panel decision
to the Exchange Listing Council.\8\ Exchange Rule 14.12(i)(1) requires
a Company seeking such an appeal to submit a fee of $4,000. The
Exchange has not amended these fees since the Exchange listing rules
were originally adopted in 2011.\9\ The Exchange now proposes to (i)
increase the hearing fee for both written and oral hearings to $20,000;
and (ii) increase the fee to appeal a Hearings Panel decision
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to the Exchange Listing Council to $15,000. The Exchange is increasing
the fees because the anticipated costs incurred in preparing for and
conducting hearings and appeals have increased since the fees were
originally adopted.\10\
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\3\ See Exchange Rule 14.1(a)(3).
\4\ See Exchange Rule 14.12(b)(7).
\5\ See Exchange Rule 14.12(b)(9).
\6\ See Exchange Rule 14.12(b)(5).
\7\ See Exchange Rule 14.12(b)(11).
\8\ See Exchange Rule 14.12(b)(6).
\9\ See Securities Exchange Act Release Nos. 64546 (May 25,
2011) 76 FR 31660 (June 1, 2011) (SR-BATS-2011-018) (Notice of
Filing of Proposed Rule Change To Adopt Rules for the Qualification,
Listing and Delisting of Companies on the Exchange); 65225 (August
30, 2011) 76 FR 55148 (September 6, 2011) (Order Approving Proposed
Rule Change To Adopt Rules for the Qualification, Listing and
Delisting of Companies on the Exchange).
\10\ The Exchange initially filed the proposed fee changes on
June 13, 2024 (SR-CboeBZX-2024-056). On June 25, 2024, the Exchange
withdrew that filing and submitted SR-CboeBZX-2024-060. On July 3,
2024, the Exchange withdrew that filing and submitted this filing.
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The Exchange recognizes that in the past, fees for a written
hearing have been lower than fees for an oral one. The Exchange
believes that the basis for this historical distinction is unclear, and
upon review, found to be unwarranted. The cost to a company that elects
a written hearing may be lower because the company's related expenses,
such as travel and legal representation, may be avoided. However, the
anticipated costs to the Exchange associated with a written hearing are
similar to those associated with an oral hearing. The Exchange believes
that the fees should reflect that Staff and Panels expend similar
resources, time, and effort in ensuring a full and fair hearing for all
hearing participants, and both processes afford the same benefit to the
issuer. Therefore, while the proposed amendment preserves the
availability of a written hearing to any company that requests one, the
Exchange proposes to charge the same fee for a written hearing as for
an oral one.\11\
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\11\ The Exchange notes that Nasdaq similarly eliminated the
distinction in fees between a written and an oral hearing. See
Securities Exchange Act Release No. 68676 (January 16, 2013) 78 FR
4914 (January 23, 2013) (SR-Nasdaq-2013-004) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Modify Fees for
Review of Delisting Determinations and Appeal of Panel Decisions).
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While the Exchange has had no Company request a hearing by the
Hearings Panel for Tier I or Tier II securities listed on the Exchange,
the Exchange expects that the costs of the review process would include
significant time and resources to maintain the infrastructure for the
processes and to prepare for and conduct individual hearings and
appeals.\12\ For example, with respect to review by the Hearings
Panels, the Exchange expects to incur expenses related to the Exchange
staff that facilitates the hearings and provides legal counsel and
support to the independent Hearings Panel members, the honorarium paid
to the Hearings Panel members, the cost of maintaining a transcript of
the hearing, and the cost of obtaining an advisor to the Hearing Panel.
Listings Qualification Staff reviews each Company's submissions to the
Hearings Panel and provides the Hearings Panel with its analysis of the
Company's plans; Listings Qualification Staff also provides written
submissions in support of the delisting, listing denial, or Public
Reprimand determination. In addition, in some matters Listings
Qualification Staff is expected to attend hearings to respond to
presentations by the Company and answer questions from the Hearings
Panel members. Listings Qualification Staff also must manage and
coordinate the Hearings Panel dockets, maintain the systems that track
hearing matters, draft initial decisions for review by the Hearings
Panel members, and monitor post-hearing compliance efforts in matters
where the Hearings Panel has granted the Company a period of time to
cure a deficiency.\13\
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\12\ The Exchange notes that issuers of two exchange-traded
products (``ETPs'') listed on the Exchange have requested a hearing
by the Hearings Panel under Rule 14.12(h) in prior years, which are
listed under Exchange Rule 14.11 rather than Rules 14.8 or 14.9. The
Exchange anticipates the costs for a Hearings Panel would generally
be the same for ETPs as they would for Tier I or Tier II securities
listed on the Exchange.
\13\ The Exchange notes that Nasdaq similarly increased its fees
to request review by a Hearings Panel to $20,000 and the fee for an
appeal to the Exchange's Listing Council to $15,000. See Securities
Exchange Act Release No. 96966 (February 22, 2023) 88 FR 12710
(February 28, 2023) (SR-Nasdaq-2023-004) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change To Modify the Fees
the Exchange Charges Companies Seeking Review of a Delisting
Determination, Public Reprimand Letter, or Written Denial of an
Initial Listing Application).
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The Exchange also expects additional costs associated with the
Exchange Listing Council's review of every Hearings Panel decision, in
determining whether to call that decision for review as described in
Rule 14.12(j)(2). In that regard, the Exchange expects to incur
expenses related to the Exchange staff that facilitates the call for
review process and that provides legal counsel and support to the
Exchange's Listing Council members, the cost of obtaining an advisor to
the Listing Council, as well as the honorarium paid to the Exchange's
Listing Council members. When a matter is called for review, the
Exchange expects to incur costs related to the staff in the Listing
Qualifications Department, which reviews the Company's submissions to
the Exchange's Listing Council and provides the Exchange's Listing
Council with Listing Qualification Staff's analysis of the Company's
plans and any issues identified by the Exchange's Listing Council in
its call for review. The Exchange staff also must manage and coordinate
the Exchange's Listing Council docket, maintain the systems that track
call for review matters, and draft initial decisions for review by
Exchange's Listing Council members. The Exchange believes that these
additional costs for the call for review process are appropriately
considered as part of the cost of the Hearings Panel review, since
every Hearings Panel decision is subject to review by the Exchange's
Listing Council and the decision as to whether to call a matter for
review rests with the Exchange's Listing Council.\14\
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\14\ Id.
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Where a Company appeals a matter to the Exchange's Listing Council,
the Exchange expects similar additional costs as well, which the
Exchange believes should be borne by the Company through the appeal
fee. Specifically, like where a decision is called for review, when a
Company appeals a decision the Exchange would incur expenses related to
the Exchange staff that facilitates the process and that provides legal
counsel and support to the Exchange's Listing Council members, the
honorarium paid to the Exchange's Listing Council members, Listings
Qualification Staff review and analysis of the Company's submissions to
the Exchange's Listing Council, management of the docket, maintaining
the systems that track Exchange's Listing Council appellate matters and
drafting the initial decisions for review by Exchange's Listing Council
members.
Throughout the hearing and Exchange's Listing Council process, the
Exchange expects to incur costs to maintain and upgrade its electronic
systems for tracking Companies and maintaining a clear record, as
required by Exchange and SEC rules.\15\ The Exchange will also maintain
lists on its website,\16\ updated every business day, that reflect the
status of all Companies in the deficiency process.\17\
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\15\ See Exchange Rule 14.12(m)(1). See also Rule 420(e) of the
SEC Rules of Practice, 17 CFR 201.420(e) which requires the Exchange
to certify and file a copy of the record upon which a delisting or
denial was based where the Company requests Commission review of the
Exchange's action.
\16\ See <a href="https://www.cboe.com/us/equities/listings/listed_products/below_standard/">https://www.cboe.com/us/equities/listings/listed_products/below_standard/</a>.
\17\ Supra note 13.
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All of these expenses have presumably increased in the 13 years
since the fees were adopted in 2011. Accordingly, the Exchange proposes
to increase the fee to request review by a Hearings Panel to $20,000
and the fee for an appeal to the Exchange's Listing Council to $15,000,
which the Exchange believes will accurately reflect the Exchange's
anticipated costs. The Exchange believes that this is an equitable
allocation based on the expenses incurred in connection with
[[Page 59943]]
each portion of the overall appellate process. The revised fees will
allow the Exchange to recoup a portion of the expected expenses it
incurs in the review and appeal processes that will more closely
approximate its actual costs associated with those processes.\18\ The
proposed fee would be effective to any Company that was issued a Staff
Delisting Determination with an issuance date on or after the date of
this filing.\19\
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\18\ Supra note 13.
\19\ As noted above, this filing was originally filed June 13,
2024.
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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.\20\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \21\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \22\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \23\
as it is designed to provide for the equitable allocation of reasonable
dues, fees and other charges among its Members and other persons using
its facilities.
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\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(5).
\22\ Id.
\23\ 15 U.S.C. 78f(b)(4).
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Specifically, the proposed fee increase is reasonable because it
will better reflect the Exchange's expected costs related to hearings
and appeals. The Exchange has not increased these fees since adopted in
2011, but the expected costs have increased since that time.\24\ The
fees will help offset the anticipated costs of conducting hearings and
appeals, which serve to ensure that the Exchange's listing standards
are properly enforced for the protection of investors. The proposed
changes are equitable and not unfairly discriminatory because they
would apply equally to all Companies that choose to request a hearing
for review of a Delisting Determination. In addition, aligning the fees
for hearings with the underlying costs of the review process is
equitable because doing so will help minimize the extent that Companies
that are compliant with all listing standards may subsidize the costs
of review for Companies that are non-compliant.
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\24\ Supra note 13.
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The Exchange also believes that the proposed fees are consistent
with the investor protection objectives of Section 6(b)(5) of the Act
\25\ in that they are designed to promote just and equitable principles
of trade, to remove impediments to a free and open market and national
market systems, and in general to protect investors and the public
interest. Specifically, the fees are designed to provide adequate
resources for appropriate preparation to conduct reviews of the
Exchange's Listing Qualifications' Staff determinations and appeals of
Hearings Panel decisions, which help to assure that the Exchange's
listing standards are properly enforced and investors are protected.
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\25\ 15 U.S.C. 78f(b)(5).
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The Exchange also believes that the proposed changes are consistent
with Section 6(b)(7) of the Act,\26\ in that the proposed fees are
consistent with the provision by the Exchange of a fair procedures for
the prohibition or limitation by the Exchange of any person with
respect to access to services offered by the Exchange. In particular,
the Exchange believes that the proposed amended fees should not deter
listed issuers from availing themselves of the right to appeal because
the fees will still be set at a level that will be affordable for
listed Companies. The Exchange does not believe that the proposed fee
is unduly burdensome or would discourage any company from seeking a
hearing or appeal. Furthermore, the proposed fees are in-line with
similar fees on Nasdaq.
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\26\ 15. U.S.C. 78f(b)(7).
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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. As discussed above, this
proposed fee is based on the anticipated increase in costs to the
Exchange to provide a delisting review process, which is in turn
necessary to ensure investor protection as well as a transparent
process for issuers.\27\ Moreover, the market for listing services is
extremely competitive and listed companies may freely choose
alternative venues based on the aggregate fees assessed, and the value
provided by each listing. This rule proposal does not burden
competition with other listing venues, which are similarly free to
align their fees on the costs incurred by the process they offer. For
this reason, and the reasons discussed in connection with the statutory
basis for the proposed rule change, the Exchange does not believe that
the proposed rule change will result in any burden on competition for
listings.
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\27\ Supra note 13.
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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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \28\ and paragraph (f) of Rule 19b-4 \29\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\28\ 15 U.S.C. 78s(b)(3)(A).
\29\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<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#94e6e1f8f1b9f7fbf9f9f1fae0e7d4e7f1f7baf3fbe2"><span class="__cf_email__" data-cfemail="a9dbdcc5cc84cac6c4c4ccc7dddae9daccca87cec6df">[email protected]</span></a>. Please include
file number SR-CboeBZX-2024-065 on the subject line.
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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-2024-065. 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
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; 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-2024-065 and should
be submitted on or before August 14, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-16222 Filed 7-23-24; 8:45 am]
BILLING CODE 8011-01-P
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