Notice2025-15255
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To List and Trade Shares of the BondBloxx Private Credit Trust Under BZX Rule 14.11(f), Trust Issued Receipts
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
August 12, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 153 (Tuesday, August 12, 2025)</title>
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[Federal Register Volume 90, Number 153 (Tuesday, August 12, 2025)]
[Notices]
[Pages 38849-38855]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-15255]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103654; File No. SR-CboeBZX-2025-096]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing of a Proposed Rule Change To List and Trade Shares of the
BondBloxx Private Credit Trust Under BZX Rule 14.11(f), Trust Issued
Receipts
August 7, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 25, 2025, Cboe BZX Exchange, Inc. (``Exchange'') filed with the
Securities and Exchange Commission (``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 list and trade shares of the BondBloxx
Private Credit Trust (the ``Trust''), under BZX Rule 14.11(f), Trust
Issued Receipts.
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>) and at the Exchange's Office of the Secretary.
[[Page 38850]]
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 list and trade the Shares of the Trust
under BZX Rule 14.11(f)(4), which governs the listing and trading of
Trust Issued Receipts \3\ on the Exchange.\4\ The Trust seeks to
provide attractive risk-adjusted returns primarily through
distributions of current income from the Trust's portfolio, as further
described below. The Trust has filed a registration statement on Form
S-1 under the Securities Act of 1933.<SUP>5 6</SUP>
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\3\ Rule 14.11(f)(4) applies to Trust Issued Receipts that
invest in ``Investment Shares'' or ``Financial Instruments''. The
term ``Investment Shares,'' as defined in Rule 14.11(f)(4)(A)(i),
means a security (a) that is issued by a trust, partnership,
commodity pool or other similar entity that invests in any
combination of futures contracts, options on futures contracts,
forward contracts, commodities, swaps or high credit quality short-
term fixed income securities or other securities; and (b) issued and
redeemed daily at net asset value in amounts correlating to the
number of receipts created and redeemed in a specified aggregate
minimum number. The term ``Financial Instruments,'' as defined in
Rule 14.11(f)(4)(A)(iv), means any combination of investments,
including cash; securities; options on securities and indices;
futures contracts; options on futures contracts; forward contracts;
equity caps, collars and floors; and swap agreements.
\4\ The Commission approved BZX Rule 14.11(f)(4) in Securities
Exchange Act Release No. 68619 (January 10, 2013), 78 FR 3489
(January 16, 2013) (SR-BZX-2012-044).
\5\ The Trust has filed an amended registration statement on
Form S-1 under the Securities Act of 1933, dated May 21, 2025 (File
No. 333-283852) (``Registration Statement''). The description of the
Trust and the Shares contained herein are based on the Registration
Statement. The Registration Statement for the Trust is not yet
effective, and the Trust will not trade on the Exchange until such
time that the Registration Statement is effective.
\6\ The Trust intends to operate its business so that it is
falls outside of the definition of an investment company under the
Investment Company Act of 1940 (the ``1940 Act''). Section
3(a)(1)(C) of the 1940 Act generally defines an investment company
as an entity primarily engaged in investing, reinvesting, or trading
in securities and holds investment securities exceeding 40% of its
total assets (exclusive of U.S. federal government securities and
cash items) on a non-consolidated basis, which the Trust refers to
as the 40% test. Excluded from the term ``investment securities,''
among other things, are securities issued by majority-owned
subsidiaries that are not themselves investment companies and are
not relying on the exclusions from the definition of investment
company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940
Act. The Trust intends to comply with this 40% test by primarily
conducting its business through its majority-owned subsidiaries,
which are not classified as investment companies and not relying on
either the Section 3(c)(1) or Section 3(c)(7) exclusions from
registration under the 1940 Act.
The Trust anticipates that its subsidiaries will primarily
qualify for exclusions under Section 3(c)(5)(A) of the 1940 Act,
which applies to issuers primarily engaged in the business of
purchasing or otherwise acquiring notes, drafts, acceptances, open
accounts receivable, and other obligations representing part or all
of the sales price of merchandise, insurance and services, or
Section 3(c)(5)(B) of the 1940 Act, which is available to entities
primarily engaged in the business of making loans to manufacturers,
wholesalers, and retailers of, and to prospective purchasers of,
specified merchandise, insurance and services. These exceptions
require that at least 55% of the subsidiaries' portfolios consist of
qualifying assets that meet the requirements of the relevant
exception.
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Description of the Trust
BondBloxx Investment Management Corporation (the ``Advisor'') is
the advisor to the Trust and is responsible for the overall management
of the Trust's business activities. HCG Fund Management LP (the ``Sub-
Advisor'') is responsible for the day-to-day management of the Trust's
private credit assets. Brown Brothers Harriman & Co. serves as the
administrator (the ``Administrator''), custodian (the ``Custodian''),
and the transfer agent (the ``Transfer Agent''). CSC Delaware Trust
Company, a Delaware trust company, is the sole trustee of the Trust.
If the Advisor to the Trust issuing the Trust Issued Receipts is
affiliated with a broker-dealer, such Advisor to the Trust shall erect
and maintain a ``fire wall'' between the Advisor and the broker-dealer
with respect to access to information concerning the composition and/or
changes to the Trust's portfolio. The Advisor is not a broker-dealer or
affiliated with a broker-dealer. In the event that (a) the Advisor
becomes a broker-dealer or newly affiliated with a broker-dealer, or
(b) any new Advisor is a broker-dealer or becomes affiliated with a
broker-dealer, it will implement and maintain a fire wall with respect
to its relevant personnel or such broker-dealer affiliate, as
applicable, regarding access to information concerning the composition
and/or changes to the portfolio, and will be subject to procedures
designed to prevent the use and dissemination of material non-public
information regarding the portfolio.
The Trust seeks to provide attractive risk-adjusted returns to
Shareholders primarily through distributions of current income from the
Trust's portfolio. The Trust intends to achieve this objective by
constructing a diversified portfolio of consumer and small business
private credit assets. The Trust intends to target primarily whole
loans that the Advisor believes will offer stable and predictable cash
flows. The Trust generally intends to focus on loans that have short
and medium terms (e.g., less than 60 months) which, through principal
amortization, tend to have low duration (e.g., less than 30 months).
The Trust believes that targeting assets with a combination of short
duration and high cash yields will enhance the liquidity of the Trust's
portfolio and provide the Trust the opportunity to earn attractive
returns while managing the risk of losses in market value that can
result from increases in interest rates. The Trust expects to acquire
its initial portfolio of assets using the net proceeds of this
offering.
Investable Instruments and Trust Liquidity
The Trust intends to hold the following instruments: personal
installment loans, small business loans, student loans, point of sale
loans, and asset backed securities that are backed by such loans
(collectively ``Private Credit Assets''), investment grade bonds, U.S.
Treasuries, shares of certain exchange traded funds that invest in U.S.
Treasuries or other short-term, interest bearing assets and cash and
cash equivalents,\7\ including funds of an affiliated Trust for which
the Advisor acts as the investment adviser.
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\7\ Cash equivalents are short-term instruments with maturities
of less than 3 months, specifically including U.S. Government
securities, certificates of deposit, bankers' acceptances,
repurchase and reverse repurchase agreements, bank time deposits,
commercial paper, and money market funds. This definition is
consistent with the definition of cash and cash equivalents in
Exchange Rule 14.11(i)(4)(C)(iii).
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The Trust plans to participate in the rapidly growing market for
small balance, short duration, amortizing loans enabled by Fintech
lending platforms. The Advisor believes consumer and small business
loans sourced through Fintech lending platforms offer investors
attractive value propositions that have primarily been available to
institutional investors. However, there is limited sell-side liquidity
available in the market for Private Credit Assets. As such, the
[[Page 38851]]
Advisor is proposing to utilize the following strategy to facilitate
redemptions in the Trust:
1. The Trust will maintain a portion of the portfolio in cash and
cash equivalents (the ``Liquidity Sleeve''). Under normal
circumstances, the Trust expects to hold approximately 20% of the
portfolio in these liquid assets. The Advisor expects that it will
generally be able to fulfill redemption orders using this position. The
Advisor may also strategically increase the size of the Liquidity
Sleeve in order to better facilitate anticipated redemptions by
retaining, rather than distributing the paydowns from Private Credit
Assets as further described below.
2. The remaining 80% of the Trust's holdings will consist of
Private Credit Assets. These are short duration, high yielding products
that are underwritten to pay a weighted average of 8% of the total
Trust AUM per month or 10% of the private credit AUM per month. The
underwritten yields are currently 10% and at origination typically have
an underwritten average duration limit of 3 years, with a target for
the initial portfolio of less than 1 year. The monthly cash flows,
which are received throughout the month, may be reinvested to the
extent necessary to maintain the approximate 20/80 allocation between
the Liquidity Sleeve and Private Credit Assets described above. The
Trust will consider the current level of the Liquidity Sleeve, among
other factors, in determining its distribution policy, and may
determine to use accumulated cash received from payments of interest
and principal on its Private Credit Assets as well as cash proceeds
from loan repayments to replenish or increase the Liquidity Sleeve
before distributing such amounts to shareholders.
3. In the event that the cash and cash equivalents required to
accommodate a series of redemptions or a single large redemption
approaches the size of the Trust's Liquidity Sleeve, the Trust may:
a. Sell Private Credit Assets in the secondary market to raise
cash;
b. Arrange a line of credit or other financing facility with a bank
or broker dealer, using the portfolio of Private Credit Assets as
collateral.
These options will likely come at a cost to the Trust or may not be
available to the Trust depending on market conditions.
4. In the event that items 1-3 above do not provide sufficient cash
and cash equivalents to the Liquidity Sleeve to accommodate redemptions
in the Trust, redemptions may be suspended until the Trust accumulates
enough cash to facilitate additional redemptions, which the Advisor
does not expect to last for longer than approximately 2.5 months. In
the event that the Advisor implements a restriction on redemptions, the
Shares on the secondary market may trade at deep discount. The discount
could potentially serve to prompt investors to buy shares and
potentially trigger primary market activity.
The Advisor believes that the liquidity strategy laid out above
will be sufficient to address concerns that may arise from the relative
illiquidity of the secondary market for selling Private Credit Assets.
Specifically, the Advisor believes that the 20% Liquidity Sleeve (with
the flexibility to increase the sleeve during times of potentially high
redemptions) will provide the Trust with sufficient liquidity to manage
redemptions under the vast majority of market conditions. Additionally,
because the Trust will target shorter duration loans that are
underwritten to generate cash payments of interest and principal
amortization of approximately 8% of the Trust's AUM per month, even in
the event that the Trust's Liquidity Sleeve is exhausted, it is
expected to be replenished by the cash payments generated by the
Private Credit Assets. In the event that the cash generated by the
Private Credit Assets is insufficient to satisfy incoming redemptions
the Trust would then have the ability to facilitate additional
redemptions by selling certain of the Private Credit Assets and/or
using the Private Credit Assets as collateral for a cash loan from a
bank or broker dealer. In a worst case scenario, the Trust would
temporarily suspend redemptions. However, as noted above, the Advisor
does not expect such a suspension to last for longer than approximately
2.5 months because of the cash expected to be generated by the Private
Credit Assets.
In addition to the specific liquidity strategy described above, the
Advisor also notes that the small size of loans sourced through Fintech
lending platforms will enable the Trust to hold a portfolio that is
diversified by sector, source, vintage, count and geography, which will
help to manage idiosyncratic risk and ensure a diverse universe of
lenders. Further to this point, the small loan size means that the
Trust will need to hold a significant number of Private Credit Assets,
further ensuring diversity and minimizing the risk that any single
Private Credit Assets would have on the portfolio. The Advisor further
believes that the cash yields and short duration through regular
principal amortization will, in addition to enhancing the liquidity of
the Trust, help manage volatility of returns.
Purchases and Redemptions of Creation Unites
The Trust will create and redeem Shares from time to time only in
large blocks of a specified number of Shares or multiples thereof
(``Creation Units''). A Creation Unit is a block of at least 50,000
Shares. Except when aggregated in Creation Units, the Shares are not
redeemable securities. Creation Units are only redeemable by authorized
participants.
On any Business Day, an authorized participant may place an order
with the Advisor to create one or more Creation Units.\8\ The total
cash payment required to create each Creation Unit is the NAV of at
least 50,000 Shares on the purchase order date plus the applicable
transaction fee.
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\8\ Authorized participants have a cut-off time of 2:00 p.m. ET
to place creation and redemption orders and orders received after
2:00 p.m. will not be deemed to be received until the following
business day.
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The procedures by which an authorized participant can redeem one or
more Creation Units mirror the procedures for the purchase of Creation
Units. On any Business Day, an authorized participant may place an
order with the Transfer Agent to redeem one or more Creation Units. The
redemption proceeds from the Trust consist of the cash redemption
amount. The cash redemption amount is equal to the NAV of the number of
Creation Unit(s) of the Trust requested in the authorized participant's
redemption order on the business day the redemption order is received
by the Transfer Agent, less transaction fees.
Availability of Information
The NAV for the Trust will be calculated by an independent third
party once each Business Day and will be disseminated daily to all
market participants at the same time.\9\ Pricing information will be
available on the Advisor's website including: (1) the prior Business
Day's reported NAV, the closing market price or the bid/ask price,
daily trading volume, and a calculation of the premium and discount of
the closing market price or bid/ask price against the NAV; and (2) data
in chart format displaying the frequency distribution of discounts and
premiums of the daily closing price against the NAV, within appropriate
ranges, for each of the four previous calendar quarters. The Trust will
also
[[Page 38852]]
disclose its portfolio holdings on a daily basis on its website. The
aforementioned information will be published as of the close of
business and available on the Advisor's website at
<a href="http://www.bondbloxxetf.com">www.bondbloxxetf.com</a>.
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\9\ NAV means the total assets of the Trust including, but not
limited to, all cash and cash equivalents and private credit assets,
less any liabilities, divided by the total number of Shares
outstanding. The Trust's NAV is generally calculated at 4 p.m. ET.
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Generally, the Trust values its assets using market quotations when
they are readily available. Whole loans, asset backed securities and
certain other types of private credit assets that Trust may hold may
not have readily available market quotations. In accordance with the
Advisor's valuation policies and procedures, the Sub-Advisor will fair
value the Trust's private credit assets based on a discounted cash flow
(``DCF'') analysis of the loan portfolio's expected future net cash
flows over the lifetime of the loan, discounted by the expected return,
The difference between the calculated net present value and carrying
value of the loan portfolio reflects the valuation adjustment that will
be updated daily. In accordance with the valuation policy and
procedures, and independent third-party pricing service will provide
the inputs for the DCF model, including daily loan tapes (e.g., loan
balances, payment history, interest rates, and FICO scores) along with
forward outlook on the portfolio (e.g., loss expectation).
Additionally, the model may incorporate any publicly available
information such as pricing from recent deals or information specific
to the Fintech lending platform. The model will be updated for daily
changes to reflect any new information regarding the borrower or loan.
Further, daily cash balances will reflect ending account balances per
the Trust's bank account interest receivable will reflect accrued
interest balances for the loan portfolio per the loan servicer's
statement and prepaid and other assets will reflect ending accrued
balances per the general ledger. The Sub-Advisor will review for
reasonableness the fair values of the private credit assets provided by
the independent third-party pricing services. There is no single
standard for determining the fair value of an asset. Rather, fair value
calculations will involve significant professional judgment in the
application of both observable and unobservable attributes, and as a
result, the calculated NAV of the Trust's assets may differ from their
actual realizable value or future fair value.
Quotation and last-sale information regarding the Shares will be
disseminated through the facilities of the Consolidated Tape
Association (``CTA''). Pricing information regarding cash equivalents
in which the Trust will invest is generally available through
nationally recognized data services providers, such as Reuters and
Bloomberg, through subscription agreements.
Additional information regarding the Trust and the Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings, disclosure policies,
distributions and taxes will be included in the registration statement.
The Intraday Indicative Value (``IIV'') will be updated during
Regular Trading Hours to reflect changes in the value of the Trust's
holdings during the trading day. The IIV disseminated during Regular
Trading Hours should not be viewed as an actual real-time update of the
NAV, which will be calculated only once at the end of each trading day.
The IIV will be updated every 15 seconds, as calculated by the Exchange
or a third-party financial data provider during the Exchange's Regular
Trading Hours (9:30 a.m. to 4:00 p.m. Eastern time). The IIV will be
widely disseminated on a per Share basis every 15 seconds during the
Exchange's Regular Trading Hours through the facilities of the
consolidated tape association (CTA) and Consolidated Quotation System
(CQS) high speed lines. In addition, the IIV will be available through
on-line information services such as Bloomberg and Reuters.
Initial and Continued Listing
The Shares will conform to the initial and continued listing
criteria under BZX Rule 14.11(f)(4). A minimum of 100,000 Shares will
be outstanding at the commencement of trading on the Exchange. The
Exchange will obtain a representation from the Advisor of the Shares
that the NAV per Share for the Trust will be calculated daily and will
be made available to all market participants at the same time.
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. The Exchange will halt trading in the Shares
under the conditions specified in BZX Rule 11.18. Trading may be halted
because of market conditions or for reasons that, in the view of the
Exchange, make trading in the Shares inadvisable. These may include:
(1) the extent to which trading is not occurring in the securities and/
or the financial instruments composing the daily disclosed portfolio of
the Trust; or (2) whether other unusual conditions or circumstances
detrimental to the maintenance of a fair and orderly market are
present.
Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. The Exchange will
allow trading in the Shares from 8:00 a.m. until 8:00 p.m. ET and has
the appropriate rules to facilitate transactions in the Shares during
all trading sessions. As provided in BZX Rule 11.11(a), the minimum
price variation for quoting and entry of orders in securities traded on
the Exchange is $0.01, with the exception of securities that are priced
less than $1.00, for which the minimum price variation for order entry
is $0.0001.
Surveillance
Trading of the Shares through the Exchange will be subject to the
Exchange's existing surveillance for securities traded on the Exchange.
The Exchange also has a general policy prohibiting the distribution of
material, non-public information by its employees.
All statements and representations made in this filing regarding
(a) the description of the portfolio, reference assets, and index, (b)
limitations on portfolio holdings or reference assets, or (c) the
applicability of Exchange rules shall constitute continued listing
requirements for listing the Shares on the Exchange. The issuer has
represented to the Exchange that it will advise the Exchange of any
failure by the Trust or the Shares to comply with the continued listing
requirements, and, pursuant to its obligations under Section 19(g)(1)
of the Act, the Exchange will surveil for compliance with the continued
listing requirements. If the Trust or the Shares are not in compliance
with the applicable listing requirements, the Exchange will commence
delisting procedures under Exchange Rule 14.12.
Information Circular
Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares. Specifically, the Information
Circular will discuss the following: (1) the procedures for purchases
and redemptions of Shares in Creation Units (and that Shares are not
individually redeemable); (2) BZX Rule 3.7, which imposes suitability
obligations on Exchange members with respect to recommending
transactions in the Shares to customers; (3) Interpretation and Policy
.01 of BZX Rule 3.7 which
[[Page 38853]]
imposes a duty of due diligence on its Members to learn the essential
facts relating to every customer prior to trading the Shares; \10\ (4)
how information regarding the IIV and the Trust's holdings is
disseminated; (5) the risks involved in trading the Shares during the
Pre-Opening \11\ and After Hours Trading Sessions \12\ when an updated
IIV will not be calculated or publicly disseminated; (6) the
requirement that members deliver a prospectus to investors purchasing
newly issued Shares prior to or concurrently with the confirmation of a
transaction; and (7) trading information.
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\10\ Specifically, in part, Interpretation and Policy .01 of
Rule 3.7 states ``[n]o Member shall recommend to a customer a
transaction in any such product unless the Member has a reasonable
basis for believing at the time of making the recommendation that
the customer has such knowledge and experience in financial matters
that he may reasonably be expected to be capable of evaluating the
risks of the recommended transaction and is financially able to bear
the risks of the recommended position.''
\11\ The Pre-Opening Session is from 8:00 a.m. to 9:30 a.m. ET.
\12\ The After Hours Trading Session is from 4 p.m. to 8:00 p.m.
ET.
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In addition, the Information Circular will advise members, prior to
the commencement of trading, of the prospectus delivery requirements
applicable to the Trust. Members purchasing Shares from the Trust for
resale to investors will deliver a prospectus to such investors. The
Information Circular will also discuss any exemptive, no-action and
interpretive relief granted by the Commission from any rules under the
Act. In addition, the Information Circular will reference that the
Trust is subject to various fees and expenses described in the Trust's
registration statement. The Information Circular will also disclose the
trading hours of the Shares and the applicable NAV calculation time for
the Shares. The Information Circular will disclose that information
about the Shares will be publicly available on the Advisor's website.
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.\13\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \14\ 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) \15\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Exchange notes that the
Commission has approved numerous series of Trust Issued Receipts \16\
to be listed on U.S. national securities exchanges and several other
vehicles holding private credit instruments have recently launched.\17\
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ Id.
\16\ See Exchange Rule 14.11(f).
\17\ See ``First Private-Credit ETFs Launch,'' December 3, 2024,
<a href="https://www.wsj.com/livecoverage/stock-market-today-dow-sp500-nasdaq-live-12-03-2024/card/first-private-credit-etfs-launch-s0032D60wa2zgI2uy7pY">https://www.wsj.com/livecoverage/stock-market-today-dow-sp500-nasdaq-live-12-03-2024/card/first-private-credit-etfs-launch-s0032D60wa2zgI2uy7pY</a>.
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Trust Issued Receipts
Trading of the Shares through the Exchange will be subject to the
Exchange's existing surveillance for securities traded on the Exchange.
The Exchange also has a general policy prohibiting the distribution of
material, non-public information by its employees. All statements and
representations made in this filing regarding (a) the description of
the portfolio, reference assets, and index, (b) limitations on
portfolio holdings or reference assets, or (c) the applicability of
Exchange rules shall constitute continued listing requirements for
listing the Shares on the Exchange. The issuer has represented to the
Exchange that it will advise the Exchange of any failure by the Trust
or the Shares to comply with the continued listing requirements, and,
pursuant to its obligations under Section 19(g)(1) of the Act, the
Exchange will surveil for compliance with the continued listing
requirements. If the Trust or the Shares are not in compliance with the
applicable listing requirements, the Exchange will commence delisting
procedures under Exchange Rule 14.12.
The Sponsor has represented to the Exchange that it will advise the
Exchange of any failure by the Trust or the Shares to comply with the
continued listing requirements, and, pursuant to its obligations under
Section 19(g)(1) of the Exchange Act, the Exchange will surveil for
compliance with the continued listing requirements. If the Trust or the
Shares are not in compliance with the applicable listing requirements,
the Exchange will commence delisting procedures under Exchange Rule
14.12.
Investable Instruments and Trust Liquidity
The Trust intends to hold Private Credit Assets, investment grade
bonds, U.S. Treasuries, shares of certain exchange traded funds that
invest in U.S. Treasuries or other short-term, interest bearing assets
and cash and cash equivalents, including funds of an affiliated Trust
for which the Advisor acts as the investment adviser.
The Trust plans to participate in the rapidly growing market for
small balance, short duration, amortizing loans enabled by Fintech
lending platforms. The Advisor believes consumer and small business
loans sourced through Fintech lending platforms offer investors
attractive value propositions that have primarily been available to
institutional investors. However, there is limited sell-side liquidity
available in the market for Private Credit Assets. As such, the Advisor
is proposing to utilize the following strategy to facilitate
redemptions in the Trust:
1. The Trust will maintain a portion of the portfolio in its
Liquidity Sleeve. Under normal circumstances, the Trust expects to hold
approximately 20% of the portfolio in these liquid assets. The Advisor
expects that it will generally be able to fulfill redemption orders
using this position. The Advisor may also strategically increase the
size of the Liquidity Sleeve in order to better facilitate anticipated
redemptions by retaining, rather than distributing the paydowns from
Private Credit Assets as further described below.
2. The remaining 80% of the Trust's holdings will consist of
Private Credit Assets. These are short duration, high yielding products
that are underwritten to pay a weighted average of 8% of the total
Trust AUM per month or 10% of the private credit AUM per month. The
underwritten yields are currently 10% and at origination typically have
an underwritten average duration limit of 3 years, with a target for
the initial portfolio of less than 1 year. The monthly cash flows,
which are received throughout the month, may be reinvested to the
extent necessary to maintain the approximate 20/80 allocation between
the Liquidity Sleeve and Private Credit Assets described above. The
Trust will consider the current level of the Liquidity Sleeve, among
other factors, in determining its
[[Page 38854]]
distribution policy, and may determine to use accumulated cash received
from payments of interest and principal on its Private Credit Assets as
well as cash proceeds from loan repayments to replenish or increase the
Liquidity Sleeve before distributing such amounts to shareholders.
3. In the event that the cash and cash equivalents required to
accommodate a series of redemptions or a single large redemption
approaches the size of the Trust's Liquidity Sleeve, the Trust may:
a. Sell Private Credit Assets in the secondary market to raise
cash;
b. Arrange a line of credit or other financing facility with a bank
or broker dealer, using the portfolio of Private Credit Assets as
collateral.
These options will likely come at a cost to the Trust or may not be
available to the Trust depending on market conditions.
4. In the event that items 1-3 above do not provide sufficient cash
and cash equivalents to the Liquidity Sleeve to accommodate redemptions
in the Trust, redemptions may be suspended until the Trust accumulates
enough cash to facilitate additional redemptions, which the Advisor
does not expect to last for longer than approximately 2.5 months. In
the event that the Advisor implements a restriction on redemptions, the
Shares on the secondary market may trade at deep discount. The discount
could potentially serve to prompt investors to buy shares and
potentially trigger primary market activity.
The Advisor believes that the liquidity strategy laid out above
will be sufficient to address concerns that may arise from the relative
illiquidity of the secondary market for selling Private Credit Assets.
Specifically, the Advisor believes that the 20% Liquidity Sleeve (with
the flexibility to increase the sleeve during times of potentially high
redemptions) will provide the Trust with sufficient liquidity to manage
redemptions under the vast majority of market conditions. Additionally,
because the Trust will target shorter duration loans that are
underwritten to generate cash payments of interest and principal
amortization of approximately 8% of the Trust's AUM per month, even in
the event that the Trust's Liquidity Sleeve is exhausted, it is
expected to be replenished by the cash payments generated by the
Private Credit Assets. In the event that the cash generated by the
Private Credit Assets is insufficient to satisfy incoming redemptions
the Trust would then have the ability to facilitate additional
redemptions by selling certain of the Private Credit Assets and/or
using the Private Credit Assets as collateral for a cash loan from a
bank or broker dealer. In a worst case scenario, the Trust would
temporarily suspend redemptions. However, as noted above, the Advisor
does not expect such a suspension to last for longer than approximately
2.5 months because of the cash expected to be generated by the Private
Credit Assets.
In addition to the specific liquidity strategy described above, the
Advisor also notes that the small size of loans sourced through Fintech
lending platforms will enable the Trust to hold a portfolio that is
diversified by sector, source, vintage, count and geography, which will
help to manage idiosyncratic risk and ensure a diverse universe of
lenders. Further to this point, the small loan size means that the
Trust will need to hold a significant number of Private Credit Assets,
further ensuring diversity and minimizing the risk that any single
Private Credit Assets would have on the portfolio. The Advisor further
believes that the cash yields and short duration through regular
principal amortization will, in addition to enhancing the liquidity of
the Trust, help manage volatility of returns.
Availability of Information
The NAV for the Trust will be calculated by an independent third
party once each Business Day and will be disseminated daily to all
market participants at the same time. Pricing information will be
available on the Advisor's website including: (1) the prior Business
Day's reported NAV, the closing market price or the bid/ask price,
daily trading volume, and a calculation of the premium and discount of
the closing market price or bid/ask price against the NAV; and (2) data
in chart format displaying the frequency distribution of discounts and
premiums of the daily closing price against the NAV, within appropriate
ranges, for each of the four previous calendar quarters. The Trust will
also disclose its portfolio holdings on a daily basis on its website.
The aforementioned information will be published as of the close of
business and available on the Advisor's website at
<a href="http://www.bondbloxxetf.com">www.bondbloxxetf.com</a>.
Generally, the Trust values its assets using market quotations when
they are readily available. Whole loans, asset backed securities and
certain other types of private credit assets that Trust may hold may
not have readily available market quotations. In accordance with the
Advisor's valuation policies and procedures, the Sub-Advisor will fair
value the Trust's private credit assets based on a DCF analysis of the
loan portfolio's expected future net cash flows over the lifetime of
the loan, discounted by the expected return, The difference between the
calculated net present value and carrying value of the loan portfolio
reflects the valuation adjustment that will be updated daily. In
accordance with the valuation policy and procedures, and independent
third-party pricing service will provide the inputs for the DCF model,
including daily loan tapes (e.g., loan balances, payment history,
interest rates, and FICO scores) along with forward outlook on the
portfolio (e.g., loss expectation). Additionally, the model may
incorporate any publicly available information such as pricing from
recent deals or information specific to the Fintech lending platform.
The model will be updated for daily changes to reflect any new
information regarding the borrower or loan. Further, daily cash
balances will reflect ending account balances per the Trust's bank
account interest receivable will reflect accrued interest balances for
the loan portfolio per the loan servicer's statement and prepaid and
other assets will reflect ending accrued balances per the general
ledger. The Sub-Advisor will review for reasonableness the fair values
of the private credit assets provided by the independent third-party
pricing services. There is no single standard for determining the fair
value of an asset. Rather, fair value calculations will involve
significant professional judgment in the application of both observable
and unobservable attributes, and as a result, the calculated NAV of the
Trust's assets may differ from their actual realizable value or future
fair value. Quotation and last-sale information regarding the Shares
will be disseminated through the facilities of the CTA. Pricing
information regarding cash equivalents in which the Trust will invest
is generally available through nationally recognized data services
providers, such as Reuters and Bloomberg, through subscription
agreements.
Additional information regarding the Trust and the Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings, disclosure policies,
distributions and taxes will be included in the registration statement.
The IIV will be updated during Regular Trading Hours to reflect
changes in the value of the Trust's holdings during the trading day.
The IIV disseminated during Regular Trading Hours should not be viewed
as an actual real-time update of the NAV, which will be calculated only
once at the end of each trading day. The IIV will be updated every 15
seconds, as calculated
[[Page 38855]]
by the Exchange or a third-party financial data provider during the
Exchange's Regular Trading Hours (9:30 a.m. to 4:00 p.m. Eastern time).
The IIV will be widely disseminated on a per Share basis every 15
seconds during the Exchange's Regular Trading Hours through the
facilities of the consolidated tape association (CTA) and Consolidated
Quotation System (CQS) high speed lines. In addition, the IIV will be
available through on-line information services such as Bloomberg and
Reuters.
The proposed rule change is designed to perfect the mechanism of a
free and open market, and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of exchange-traded product that will enhance
competition among market participants, to the benefit of investors and
the marketplace. As noted above, the Exchange has in place surveillance
procedures relating to trading in the Shares and may obtain information
via ISG from other exchanges that are members of ISG or with which the
Exchange has entered into a surveillance sharing agreement. The
Exchange or FINRA, on behalf of the Exchange, or both, will communicate
as needed regarding trading in the Shares. The Exchange may obtain
information regarding trading in the Shares from other exchanges who
are members or affiliates of the ISG,\18\ or with which the Exchange
has entered into a comprehensive surveillance sharing agreement.
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\18\ For a list of the current members and affiliate members of
ISG, see <a href="http://www.isgportal.com">www.isgportal.com</a>.
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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 purposes of the Act. The Exchange notes that the
proposed rule change, rather will facilitate the listing and trading of
an additional exchange-traded product that will enhance 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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. by order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
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#4634332a236b25292b2b232832350635232568212930"><span class="__cf_email__" data-cfemail="3f4d4a535a125c5052525a514b4c7f4c5a5c11585049">[email protected]</span></a>. Please include
file number SR-CboeBZX-2025-096 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-2025-096. 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 filing 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-2025-096 and should be submitted
on or before September 2, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-15255 Filed 8-11-25; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on August 12, 2025.
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.