Notice2024-21284
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Applicable to Securities Listed on the Exchange, Which Are Set Forth in BZX Rule 14.13, Company Listing Fees
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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
September 19, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 182 (Thursday, September 19, 2024)</title>
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[Federal Register Volume 89, Number 182 (Thursday, September 19, 2024)]
[Notices]
[Pages 76899-76902]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-21284]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101020; File No. SR-CboeBZX-2024-083]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Fees Applicable to Securities Listed on the Exchange, Which Are Set
Forth in BZX Rule 14.13, Company Listing Fees
September 13, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on September 11, 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 amend the fees applicable to securities
listed on the Exchange, which are set forth in BZX Rule 14.13, Company
Listing Fees. Changes to the fee schedule pursuant to this proposal are
effective upon filing. 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
The Exchange submits this proposal to adopt new Rule
14.13(b)(2)(E)(iv) in order to create an annual pricing cap for Defined
Distribution Strategy Series, as defined below, that are listed on the
Exchange.\3\ The Exchange is also proposing to make a corresponding
non-substantive numbering change to make current Rule
14.13(b)(2)(E)(iv) become 14.13(b)(2)(E)(v) and to add language to
proposed Rule 14.13(b)(2)(v) in order to make clear that exchange-
traded products (``ETPs'') \4\ that are subject to the new pricing for
Defined Distribution Strategy Series would not be subject to the fees
applicable under Rule 14.13(b)(2)(v) in the same way that Legacy
Listings,\5\ New Listings,\6\ an Outcome Strategy ETP \7\ subject to
Rule 14.13(b)(2)(E)(iii), and Transfer Listings \8\ are not subject to
such fees.
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\3\ The Exchange initially filed the proposed fee change on
August 30, 2024 (SR-CboeBZX-2024-081). On September 10, 2024, the
Exchange withdrew that filing and submitted this proposal.
\4\ As defined in Rule 11.8(e)(1)(A), the term ``ETP'' means any
security listed pursuant to Exchange Rule 14.11.
\5\ A ``Legacy Listing'' is an ETP that was listed on the
Exchange prior to January 1, 2019. See Exchange Rule
14.13(b)(2)(E)(i).
\6\ A ``New Listing'' is an ETP that first lists on the Exchange
or has been listed on for fewer than three calendar months on the
ETP's first trading day of the year. See Exchange Rule
14.13(b)(2)(E)(ii).
\7\ An ``Outcome Strategy Series'' are multiple ETPs listed by
the same issuer that are each designed to provide a pre-defined set
of returns; over a specified outcome period; based on the
performance of the same underlying instruments; and each employ the
same outcome strategy for achieving the pre-defined set of returns
(each an ``Outcome Strategy ETP'' and, collectively, an ``Outcome
Strategy Series''). See Exchange Rule 14.13(b)(2)(E)(iii).
\8\ A ``Transfer Listing'' is an ETP that transfers listing from
another national securities exchange to the Exchange. See Exchange
Rule 14.13(b)(1)(B)(v)(b).
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The Exchange is proposing to create a cap on annual fees where an
issuer lists a series of ETPs that are each designed to provide (i)
pre-defined set of cash distributions; (ii) over two specified periods
with the first period beginning at inception until a pre-defined date
and the second period beginning at that pre-defined date until another
pre-defined date by which the ETP intends to distribute substantially
all of its assets and liquidate the fund; (iii) where the first period
defined distributions are based on the market conditions at the
beginning of the first period, and the second period defined
distributions are based on the market conditions at the beginning of
the second period; and (iv) each employ the same strategy for achieving
the pre-defined distributions (each a ``Defined Distribution Strategy
ETP'' and collectively a ``Defined Distribution Strategy Series''). The
Exchange is proposing that such annual fees for Defined Distribution
Strategy Series will be capped at $16,000 per year.
As an example, a Defined Distribution Strategy ETP would include an
ETP that
[[Page 76900]]
intends to make an identical cash distribution each month equal to, for
example, $0.0833 per outstanding share of the fund, for a total of
$1.00 per share per year for 20 years. The Defined Distribution
Strategy ETP would achieve the identical cash distributions by
investing in specified securities consistent with the fund's investment
objective. At the conclusion of the first 20-year period a second pre-
defined period would commence and the ETP would seek to achieve a new
identical pre-defined cash distributions each month based on the
specified securities of the same investment strategy of the first
period. For example, $0.0417 per outstanding share of the fund, for a
total of $0.50 per per year. At the end of the second 20-year period,
the Defined Distribution Strategy ETP will have distributed
substantially all of its assets and would liquidate the fund (the
``planned liquidation date''). The Defined Distribution Strategy Series
would include multiple ETPs that employ the same described strategy but
would be applied across ETPs with planned liquidation dates occurring
on a yearly basis.
With this in mind, the Exchange is proposing to cap the maximum
listing fee per year for a Defined Distribution Strategy Series at
$16,000. Using the example above, if the issuer listed 10 ETPs
employing the defined distribution strategy, the annual fee on a per
ETP basis would be $7,000, and assuming each of the ETPs would
otherwise be subject to the Exchange's maximum annual listing fee, a
total of $70,000 for the Defined Distribution Strategy Series. Under
the proposed fee cap, the Defined Distribution Strategy Series would be
subject to a maximum total annual fee of $16,000 for the Defined
Distribution Strategy Series, which would result in a $1,600 annual fee
on a per ETP basis.
The proposed fee cap for Defined Distribution Strategy Series is
identical to that applicable to Outcome Strategy Series \9\ that was
adopted in 2019.\10\ The Exchange believes that applying the same fee
cap is appropriate for Defined Distribution Strategy Series given its
similar attributes to Outcome Strategy Series. Specifically, like
Outcome Strategy Series, Defined Distribution Strategy Series involve
multiple ETPs with identical strategies. While Outcome Strategy ETPs
allow investors the opportunity to choose the Outcome Strategy ETP with
the most appropriate pre-determined period of time (i.e., ``outcome
period''), Defined Distribution Strategy ETPs allow investors the
opportunity to choose the Defined Distribution Strategy ETP with the
most appropriate time horizon or target date. Listing numerous ETPs
with different time horizons allows investors to choose the Defined
Distribution Strategy ETP with the most appropriate time horizon for
their investment purposes. Further, providing a cap on annual listing
fees for such ETPs will ensure that listing fees will not be the basis
for such additional Defined Distribution Strategy ETPs not being
available to investors.
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\9\ An Outcome Strategy Series is comprised of multiple ETPs
listed by an issuer that are designed to provide a pre-defined set
of returns; over a specified outcome period; based on the
performance of the same underlying instruments; and each employ the
same outcome strategy for achieving the pre-defined set of returns
(each an ``Outcome Strategy ETP''). See Exchange Rule
14.13(b)(2)(E)(iii).
\10\ See Securities Exchange Act No. 86956 (September 12, 2019)
84 FR 49128 (September 18, 2019) (SR-CboeBZX-2019-081).
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With this in mind, the Exchange is proposing to cap the maximum
listing fee per year for a Defined Distribution Strategy Series at
$16,000. The Exchange does not currently list any Defined Distribution
Strategy ETPs on the Exchange but expects that at least one issuer will
list such ETPs on the Exchange in the coming months.
The Exchange proposes to implement these amendments upon filing.
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.\11\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \12\ 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) \13\ 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) \14\
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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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
\13\ Id.
\14\ 15 U.S.C. 78f(b)(4).
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The Exchange also notes that its ETP listing business operates in a
highly-competitive market in which ETP issuers can readily transfer
their listings if they deem fee levels or any other factor at a
particular venue to be insufficient or excessive. The proposed rule
changes reflect a competitive pricing structure designed to incentivize
issuers to list new products and transfer existing products to the
Exchange, which the Exchange believes will enhance competition both
among ETP issuers and listing venues, to the benefit of investors.
The Proposed Fee Cap Is An Equitable Allocation of Fees
The Exchange believes that the proposed cap on fees for Defined
Distribution Strategy Series and the associated changes is equitable
because it is available to all issuers and applies equally to all
Defined Distribution Strategy Series. The Exchange believes that
providing a fee cap for such ETPs is a more reasonable and equitable
approach than the current fee structure based on the unique features
that create the need to offer multiple ETPs based on the same strategy.
The Exchange notes that the proposed fee structure is a cap on fees
for Defined Distribution Strategy Series and will only act to leave
static or reduce fees for ETPs listed on the Exchange. Further, this
proposal will decrease the fees associated with listing ETPs with
varying time horizons on the Exchange, which will reduce the barriers
to entry into the space and incentivize enhanced competition among
issuers of Defined Distribution Strategy ETPs, to the benefit of
investors.
The Proposed Fee Cap Is Not Unfairly Discriminatory
The Exchange also believes that the proposed cap on fees for
Defined Distribution Strategy Series and the associated changes is not
unfairly discriminatory because, while it only applies to Defined
Distribution Strategy ETPs, it represents a significantly improved
approach to annual listing fees for ETPs that by their nature require
multiple listings. As noted above, Defined Distribution Strategy ETPs
are similar to Outcome Strategy ETPs and warrant revisiting the ETP
listing pricing model. Listing numerous ETPs with different time
horizons allows investors the opportunity to choose the Defined
Distribution Strategy ETP with the most appropriate time horizon for
[[Page 76901]]
their investment purposes. Providing a cap on annual listing fees for
such ETPs will ensure that listing fees will not be the basis for such
additional time horizons not being available to investors. The Exchange
also notes that the incremental ongoing regulatory burden associated
with listing an additional Defined Distribution Strategy ETP is reduced
as compared to the incremental regulatory burden associated with
listing additional non- Defined Distribution Strategy ETPs.
Specifically, each Defined Distribution Strategy ETP in an Defined
Distribution Strategy Series is based on the same reference instrument,
utilizes the same investment strategy, has nearly identical holdings to
the other Defined Distribution Strategy ETPs in the Defined
Distribution Strategy Series, and, to the extent that such Defined
Distribution Strategy ETPs are listed pursuant to an exchange rule
filing, subject to the same continued listing obligations related to
permissible holdings and portfolio limitations. As such, any testing,
monitoring, or surveillance for compliance with continued listing
standards and obligations applicable to a particular Defined
Distribution Strategy ETP will be nearly identical across the entirety
of the Defined Distribution Strategy Series, allowing the Exchange's
regulatory personnel to leverage the same processes across each Defined
Distribution Strategy ETP, which substantially reduces the regulatory
burden applicable for each Defined Distribution Strategy ETP.
Accordingly, the Exchange believes that the proposed cap on listing
fees on Defined Distribution Strategy ETPs is not unfairly
discriminatory due to their unique operation.
Further, the Exchange notes that an issuer will only receive the
benefit of the annual fee cap if they accrue greater than $16,000 in
listing fees for a particular Defined Distribution Strategy Series. The
Exchange notes that the proposed fee structure is a cap on fees for
Defined Distribution Strategy Series and will only act to leave static
or reduce fees for ETPs listed on the Exchange. This proposal will
decrease the fees associated with listing Defined Distribution Strategy
ETPs on the Exchange, which will reduce the barriers to entry into the
space and incentivize enhanced competition among issuers of Defined
Distribution Strategy ETPs, also to the benefit of investors.
The Proposed Fee Cap Is Reasonable
The Exchange believes that the proposed cap on fees for Defined
Distribution Strategy Series and the associated changes is a reasonable
means to incentivize issuers to list (or transfer) Defined Distribution
Strategy ETPs on the Exchange. The marketplace for listings is
extremely competitive and there are several other national securities
exchanges that offer ETP listings. Transfers between listing venues
occur frequently for numerous reasons, including listing fees. The
proposed rule changes reflect a competitive pricing structure designed
to incentivize issuers to list new products and transfer existing
products to the Exchange, which the Exchange believes will enhance
competition both among ETP issuers and listing venues, to the benefit
of investors.
The Exchange believes that this proposal represents a significantly
improved approach to annual listing fees for ETPs that by their nature
require multiple listings. The proposed fee structure is a cap on fees
for Defined Distribution Strategy Series and will only act to leave
static or reduce fees for ETPs listed on the Exchange. This proposal is
intended to help the Exchange compete as an ETP listing venue.
Furthermore, the proposed fee cap is identical to that applied to
Outcome Strategy Series, which similarly by their nature require
multiple listings.
Based on the foregoing, the Exchange believes that the proposed
rule changes are consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
the proposed change burdens competition, but rather, enhances
competition as it is intended to increase the competitiveness of BZX as
a listing venue by providing better pricing for Defined Distribution
Strategy Series. The marketplace for listings is extremely competitive
and there are several other national securities exchanges that offer
ETP listings. Transfers between listing venues occur frequently for
numerous reasons, including listing fees. This proposal is intended to
help the Exchange compete as an ETP listing venue. Accordingly, the
Exchange does not believe that the proposed change will impair the
ability of issuers or competing ETP listing venues to maintain their
competitive standing. The Exchange also notes that the proposed change
represents a competitive pricing structure designed to incentivize
issuers to list new products and transfer existing products to the
Exchange, which the Exchange believes will enhance competition both
among ETP issuers and listing venues, to the benefit of investors. The
Exchange believes that such proposed changes will directly enhance
competition among ETP listing venues by reducing the costs associated
with listing on the Exchange for Defined Distribution Strategy ETPs.
Similarly, the Exchange believes that putting a cap on such ETPs will
enhance competition both among listing venues of Defined Distribution
Strategy ETPs and among issuers and issuances of Defined Distribution
Strategy ETPs through an overall reduction of annual fees for listing
such products. As such, the proposal is a competitive proposal designed
to enhance pricing competition among listing venues and implement
pricing for listings that better reflects the revenue and expenses
associated with listing ETPs on the Exchange.
The Exchange does not believe the proposed amendments would burden
intramarket competition as they would be available to all issuers
uniformly.
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 \15\ and paragraph (f) of Rule 19b-4 \16\
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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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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.
[[Page 76902]]
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#e694938a83cb85898b8b83889295a6958385c8818990"><span class="__cf_email__" data-cfemail="384a4d545d155b5755555d564c4b784b5d5b165f574e">[email protected]</span></a>. Please include
file number SR-CboeBZX-2024-083 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-2024-083. 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-2024-083 and should
be submitted on or before October 10, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-21284 Filed 9-18-24; 8:45 am]
BILLING CODE 8011-01-P
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