[Federal Register Volume 84, Number 161 (Tuesday, August 20, 2019)]
[Notices]
[Pages 43216-43218]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17856]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86661; File No. SR-CboeEDGX-2019-025]


Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating To Clarify Portions of Its Rules Under Chapter 14 (Securities 
Traded) Related to the Applicability of Certain Disclosure Requirements

August 14, 2019.
    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 July 31, 2019, Cboe EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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 
Exchange filed the proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 
19b-4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to 
clarify portions of its rules under Chapter 14 (Securities Traded) 
related to the applicability of certain disclosure requirements. 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 (http://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to clarify portions of the rules under 
Chapter 14 (Securities Traded) related to the applicability of certain 
disclosure requirements.
    Currently, under Rule 14.1 (Unlisted Trading Privileges), Rule 14.2 
(Investment Company Units), and Rule 14.8 (Portfolio Depositary 
Receipts) a Member is required to provide to all purchasers a written 
description of the terms and characteristics of the applicable 
securities (or a ``product description''). In addition, Members also 
have a separate prospectus delivery requirement under Section 24(d) of 
the Investment Company Act of 1940 (``1940 Act''). A Member, however, 
is not required to send a Section 24(d) prospectus for a security if 
such security is subject of an order by the Securities and Exchange 
Commission (``Commission'') exempting it from Section 24(d) prospectus 
delivery requirements, and is not otherwise subject to prospectus 
delivery requirements under the Securities Act of 1933 (``1933 Act''). 
As such, the Exchange provides rules requiring Members to deliver a 
product description for securities exempt from the prospectus delivery 
requirements. The Exchange notes that a product description is a 
written description of the terms and characteristics of a security in a 
form prepared or approved by the Exchange, whereas a prospectus is a 
legal document required by and filed with the Commission which contains 
detailed disclosers about a security.
    Currently, Rule 14.1(c)(3)(A), Rule 14.2(d)(1), and Rule 14.8(j)(1) 
provide govern the written description requirements for derivative 
securities traded under unlisted trading privileges (``UTP Derivative 
Securities''), series of Investment Company Units, and series of 
Portfolio Depositary Receipts, respectively. As written, these 
subparagraphs under their respective Rules do not make it explicit to 
Members that the product description requirement is applicable only to 
prospectus-exempt products. Furthermore, current Rules 14.2(d)(1) and 
14.8(j)(1) do not contain a provision (like that of 14.1(c)(3)(B)) that 
the Exchange will inform its Members by means of an information 
circular when the product description delivery requirements apply. 
Therefore, in order to provide Members with better understanding of the 
provisions in connection with these requirements, the Exchange now 
proposes to amend its rules to explicitly state that the product 
description delivery requirements apply only to the respective products 
that are exempt from the 1940 Act prospectus delivery requirements and 
are not otherwise subject to the prospectus delivery requirements under 
the 1933 Act. The Exchange also proposes to add language to Rule 
14.2(d)(1) and Rule 14.8(j)(1) to inform Members that the Exchange will 
announce the applicability of the product description delivery 
requirements to particular series of Portfolio Depositary Receipts or 
Investment Company Units via information circular. This change is 
intended to provide clarity to Members regarding when and how the 
Exchange will notify Members of their product delivery obligations. The 
Exchange notes that Rule 14.1(c)(3)(B) currently provides that the 
Exchange informs its Members of the application of product description 
delivery requirements related to UTP Derivative Securities by means of 
information circular. The Exchange also notes that the proposed 
amendments are substantially similar to the disclosure requirement 
provision currently applicable to Managed Fund Shares on its affiliated 
exchange, Cboe BZX Exchange, Inc. (``BZX'').\5\
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    \5\ See BZX Rule 14.11(i)(6).
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    The Exchange proposes to update the heading of Rule 14.1(c)(3)(A), 
which currently states ``Prospectus Delivery'', to ``Scope of Product 
Description'' as it believes this better aligns with the requirements 
provided for under paragraph (c)(3), thus provides further clarity 
regarding the product description requirements contained within this 
paragraph.

[[Page 43217]]

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\6\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \7\ 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) \8\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange also believes the proposed rule 
change is consistent with Section 6(b)(1) of the Act, which provides 
that the Exchange be organized and have the capacity to be able to 
carry out the purposes of the Act and to enforce compliance by the 
Exchange's Members and persons associated with its Members with the 
Act, the rules and regulations thereunder, and the rules of the 
Exchange.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ Id.
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    In particular, the Exchange believes that this proposal benefits 
and protects investors because it is designed to bolster Member 
understanding of its rules and the applicability of the subparagraphs 
providing for written description disclosure requirements to certain 
products. Because such current subparagraphs (Rule 14.1(c)(3)(A), Rule 
14.2(d)(1), and Rule 14.8(j)(1)) do not explicitly state under what 
circumstances they will apply to the respective products under each 
subparagraph, the Exchange has found that it is unclear to Members that 
the subparagraphs in connection with the required written description 
only apply to securities or series that are exempt from the Section 
24(d) prospectus delivery requirements, and otherwise not subject to 
prospectus delivery requirements under the 1933 Act. The Exchange thus 
believes this proposed change will enhance Members' understanding with 
respect to when and to which products the relevant subparagraphs are 
applicable, thereby protecting investors and the public interest. The 
Exchange notes that this proposal does not alter any of the disclosure 
requirements applicable to market participants, but merely intends to 
make explicit when the written disclosure provisions apply, as well as 
establish that the Exchange will notify Members via information 
circular of their product description obligations for particular series 
of Portfolio Depositary Receipts and Investment Company Units. 
Additionally, the Exchange believes that providing clear rules 
regarding the applicability of provisions requiring written product 
description deliveries will enable the Exchange to be organized and 
have the capacity to enforce compliance its Members with the Act and 
the rules of Exchange.
    Additionally, the proposed changes are substantially similar to the 
rule of affiliated exchange, BZX, for disclosure requirements currently 
applicable to Managed Fund Shares.\9\
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    \9\ See supra note 5.
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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 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. On 
the contrary, the proposed rule change is not designed to address any 
competitive issues but is only intended to bolster Member understanding 
of its rules with respect to the applicability of certain disclosure 
requirement provisions.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No comments were solicited or received on the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) of the Act \10\ and 
Rule 19b-4(f)(6) \11\ 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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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CboeEDGX-2019-025 on the subject line.

Paper Comments

     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-CboeEDGX-2019-025. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the

[[Page 43218]]

filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change. Persons submitting comments are cautioned that we do 
not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
CboeEDGX-2019-025 and should be submitted on or before September 10, 
2019.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-17856 Filed 8-19-19; 8:45 am]
BILLING CODE 8011-01-P


