Notice2026-05022
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Granting Approval of a Proposed Rule Change To Amend Exchange Rule 14.12
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
March 16, 2026
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 91 Issue 50 (Monday, March 16, 2026)</title>
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[Federal Register Volume 91, Number 50 (Monday, March 16, 2026)]
[Notices]
[Pages 12650-12652]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-05022]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104970; File No. SR-CboeBZX-2026-005]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order
Granting Approval of a Proposed Rule Change To Amend Exchange Rule
14.12
March 11, 2026.
I. Introduction
On January 29, 2026, Cboe BZX Exchange, Inc. (``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend Exchange Rule 14.12 (Failure to Meet
Listing Standards) to authorize the Listing Qualifications Department
(``Exchange Staff'') to grant an issuer of a security listed or
applying to list on the Exchange (``Company'') an additional 180-day
compliance period for deficiencies related to the beneficial holder
continued listing requirement that require submission of a Plan of
Compliance under Rule 14.12(f).\3\ The Commission has received two
comments on the proposal.\4\ As discussed further below, this order
approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 104744 (January 29,
2026), 91 FR 4990 (February 3, 2026) (``Notice''). See also Exchange
Rule 14.12(b)(7) (defining ``Listing Qualifications Department'');
Exchange Rule 14.1(a)(3) (defining ``Company'' as the issuer of a
security listed or applying to list on the Exchange, includes an
issuer that is not incorporated, such as, for example, a limited
partnership). The ``beneficial holders'' continued listing
requirement refers to the record and/or beneficial holders
requirement. See Exchange Rules 14.11(b)(9)(B)(i)(a),
14.11(c)(9)(B)(i)(a), 14.11(e)(4)(I)(i), 14.11(e)(5)(E)(ii)(a),
14.11(e)(6)(E)(ii)(a), 14.11(e)(7)(E)(ii)(a), 14.11(e)(8)(D)(ii)(a),
14.11(e)(9)(D)(ii)(a)(1), 14.11(e)(10)(E)(ii)(d)(1),
14.11(f)(2)(D)(ii)(a), 14.11(f)(4)(C)(ii)(a),
14.11(i)(4)(B)(iii)(a), 14.11(k)(4)(B)(ii)(a), 14.11(l)(4)(B)(i)(c),
14.11(m)(4)(B)(iv)(a), and 14.11(n)(4)(B)(i)(c).
\4\ See Letter to Vanessa Countryman, Secretary, Commission,
from Kevin Ehrlich, Managing Director, Asset Management Group of the
Securities Industry and Financial Markets Association, dated
February 24, 2026 (``SIFMA Letter'') and Letter to Vanessa
Countryman, Secretary, Commission, from Stuart S. Parker, President,
PGIM Investments LLC, dated February 24, 2026 (``PGIM Letter'').
Comments received on the proposed rule change are available at
<a href="https://www.sec.gov/rules-regulations/public-comments/sr-cboebzx-2026-005">https://www.sec.gov/rules-regulations/public-comments/sr-cboebzx-2026-005</a>.
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II. Description of the Proposal
As described in greater detail in the Notice, Exchange Rule 14.12
generally governs the procedures for the independent review,
suspension, and delisting of Companies that fail to satisfy one or more
standards for initial or continued listing on the Exchange.\5\ When
Exchange Staff determines that a Company does not meet a listing
standard, including the beneficial holder continued listing
requirement, Exchange Staff will immediately notify the Company of the
deficiency; and, unless the Company is currently under review by an
Adjudicatory Body for an Exchange Staff Delisting Determination,
Exchange Staff may accept and review a plan to regain compliance (a
``Company Compliance Plan'').\6\ Upon review of a Company Compliance
Plan, the Exchange may grant an extension of time to regain compliance
not greater than 180 calendar days from the date of Exchange Staff's
initial notification.\7\
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\5\ See Notice at 4990-91.
\6\ See id. at 4991.
\7\ See id.
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The Exchange proposed to adopt new Exchange Rule 14.12(f)(2)(B)(ii)
to permit Exchange Staff to grant an additional cure period of 180
calendar days for deficiencies related to the beneficial holders
continued listing requirement, with such total cure period not to
exceed a total of 360 calendar days from the date of the Exchange's
initial notification.\8\ The proposed rule change applies to all
exchange-traded products (``ETPs'' or ``products'') eligible to list
pursuant to Exchange Rule 14.11, and any issuer that demonstrates
quantifiable progress toward compliance with the beneficial holder
requirement during the initial 180-day compliance period may be granted
the additional time at Exchange Staff's discretion.\9\
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\8\ See id. A Company currently under review by an Adjudicatory
Body for an Exchange Staff Delisting Determination will not be
eligible for this additional extension. If Exchange Staff grants an
extension, it will inform the Company in writing of the basis for
granting the extension and the terms of the extension. See id.
\9\ See id.
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III. Discussion, Comments, and Commission Findings
The Exchange states that, given that the beneficial holder
requirement is a quantifiable standard, Exchange Staff can readily
assess whether a product is nearing compliance by reviewing periodic
beneficial holder counts and determining whether the product has shown
measurable improvement, and may consider whether the beneficial holder
count has increased by a meaningful percentage during the initial
compliance period, whether the rate of holder accumulation is
accelerating, or whether the product has achieved a threshold number of
holders indicating that compliance is likely within the
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extended period.\10\ The Exchange states that this discretionary
approach ensures that the additional 180 days is granted only to
products demonstrating genuine progress toward compliance.\11\
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\10\ See id.
\11\ See id.
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While the proposed rule change applies uniformly to all products,
the Exchange states that certain products--for example, ``Outcome
Strategy ETPs''--may face unique challenges in achieving beneficial
holder requirements within the initial 180-day timeframe, particularly
where a tranche of funds that seeks to achieve its investment objective
through a laddered portfolio of the fund's investment in multiple
underlying ETFs that have outcome period expiration dates which occur
on a rolling, or staggered, basis and where each tranche represents a
different starting point within the same overall strategy.\12\ The
Exchange believes that the threat of delisting to a single tranche of
such a series impairs the fund manager's ability to distribute and
maintain the entire series and, unlike ETPs where one product's
delisting does not affect other products, laddered portfolios are
marketed, distributed, and understood by investors as complete
series.\13\ The Exchange states that an incomplete series may cause
market participants to abandon the entire product resulting in asset
outflows and beneficial holder reductions across all tranches,
including those in full compliance with listing standards.\14\ The
Exchange states that many investors in Outcome Strategy ETFs roll
assets into the next ``front-month'' or near-dated tranche as their
current holdings approach expiration, and near-term tranches may
accumulate assets and beneficial holders while tranches further from
expiration tend to see less interest, fewer assets, and fewer
beneficial holders.\15\ Thus, tranches farther from expiration may
temporarily fall below the beneficial holder threshold during their
early life, but cure as they become front-month tranches and attract
rolling assets from maturing positions.\16\ The Exchange states that
the initial 180-day timeframe may be insufficient for a newly-launched
or back-dated tranche to progress through this natural maturation cycle
and benefit from the rolling behavior that drives holder
accumulation.\17\
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\12\ See id. The Exchange defines Outcome Strategy ETPs as
multiple ETPs listed by an issuer that are each designed to provide
(i) a pre-defined set of returns; (ii) over a specified outcome
period; (iii) based on the performance of the same underlying
instruments; and (iv) each employ the same outcome strategy for
achieving the pre-defined set of returns.
\13\ See id.
\14\ See id.
\15\ See id.
\16\ See id.
\17\ See id.
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The Exchange states that the proposed extended compliance period
provides issuers with sufficient time to implement comprehensive
remediation strategies that stabilize integrated product series,
protecting the interests of holders across all tranches and preventing
unnecessary market disruption.\18\ The Exchange states that the
extended compliance period can apply to any product where premature
delisting based on temporary beneficial holder deficiencies could harm
investors when the issuer is making measurable progress toward
compliance.\19\ The Exchange further states that a 180-day compliance
period may be insufficient in certain circumstances where issuers are
making genuine progress toward compliance but require additional time
to achieve the listing standard due to product-specific
characteristics, market conditions, or other factors affecting
beneficial holder accumulation; and that the additional cure period
provides appropriate flexibility to prevent premature delistings of
products that are demonstrably moving toward compliance.\20\
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\18\ See id. at 4993.
\19\ See id.
\20\ See id. at 4991 and 4992-93. The Exchange also states that
the minimum beneficial holder requirement itself remains unchanged
at 50 beneficial holders, and all other continued listing standards
continue to apply without modification. See id. at 4992-93. The
Exchange further states that companies currently under review by an
Adjudicatory Body for an Exchange Staff Delisting Determination are
ineligible for the additional extension, ensuring that the extended
compliance period is not used to indefinitely delay delisting
proceedings. See id.
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The Commission received two comment letters, both supporting the
proposed rule change.\21\ One commenter acknowledged that it can be
challenging for new funds to develop a broad shareholder base, and
stating that the additional compliance period would not be an automatic
or indefinite extension of the compliance period, but instead permits
the Exchange to take into account tangible progress toward meeting the
beneficial holder requirement.\22\ Another commenter stated that the
proposed rule change provides a measured and appropriate degree of
flexibility for issuers that are making demonstrable progress toward
regaining compliance while maintaining the integrity of existing
standards, reduces the risk of unnecessary or premature delistings,
promotes orderly markets and mitigates potential disruption to
investors without weakening investor protections.\23\ One commenter
specifically states that some laddered strategies utilize a tranche of
ETFs, which each have their own unique date parameters, and the
dynamics and timing of such strategies have implications for beneficial
shareholder activity as the strategy goes through its expected life
cycle.\24\ The commenter additionally states that later-dated ETFs are
a part of the overall strategy, but would not be expected to attract
assets in the same way as stand-alone products.\25\
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\21\ See SIFMA Letter and PGIM Letter.
\22\ See SIFMA Letter at 1-2.
\23\ See PGIM Letter at 2.
\24\ See SIFMA Letter at 2.
\25\ See id. at 2.
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The Exchange also states that NYSE Arca rules do not explicitly set
forth the parameters of its staff review of a compliance plan and that
NYSE Arca's internal policies provide NYSE Arca staff with discretion
in determining how to handle failures to meet continued listing
standards,\26\ and that the Exchange's proposed rule change would
better align its rules with NYSE Arca.\27\ The Exchange states that,
without the proposed rule change, issuers--and particularly those of
ETPs with unique structural characteristics--might favor listing on
other exchanges that provide greater flexibility in compliance
timeframes, which could disadvantage the Exchange and reduce
competition among listing venues.\28\
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\26\ See Notice at 4991-92 (citing
2025_NYSE_Arca_Listed_ETP_Compliance_Guidance_Letter.pdf which
states that NYSE Arca staff will conduct its own review and make a
determination on how to proceed with non-compliance with continued
listing standards).
\27\ See id. at 4992.
\28\ See id. at 4993-94.
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After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\29\ In particular, the Commission finds that the proposed
rule change is consistent with Sections 6(b)(5) of the Act which
requires, among other things, that the rules of a national securities
exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, to protect investors and the
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public interest; and not be designed to permit unfair discrimination
between customers, issuers, brokers or dealers.\30\ The Exchange will
grant the extended 180-day compliance period based on whether issuers
are making genuine progress toward compliance, and such extensions can
minimize the likelihood of market disruptions while maintaining
meaningful compliance pressure through Exchange Staff's ongoing review
of beneficial holder trends. Additionally, discretion in extending the
compliance period beyond the initial 180 days already exists on another
exchange. For these reasons, the Commission finds that the proposed
rule change is consistent with the requirements of the Act.
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\29\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\30\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\31\ that the proposed rule change (SR-CboeBZX-2026-005) be, and hereby
is, approved.
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\31\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2026-05022 Filed 3-13-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on March 16, 2026.
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