[Federal Register Volume 85, Number 88 (Wednesday, May 6, 2020)]
[Notices]
[Pages 27002-27004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09637]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88778; File No. SR-CboeBZX-2020-034]


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)

April 30, 2020.
    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 April 16, 2020, 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. (the ``Exchange'' or ``BZX'') is filing 
with the Securities and Exchange Commission (``Commission'') 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. 
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/equities/regulation/rule_filings/bzx/), 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
    On August 30, 2011, the Exchange received approval of rules 
applicable to the qualification, listing, and delisting of companies on 
the Exchange,\3\ which it modified on February 8, 2012 in order to 
adopt pricing for the listing of exchange-traded products (``ETPs'') 
\4\ on the Exchange.\5\ On July 3, 2017, the Exchange made certain 
changes to Rule 14.13 such that there were no entry fees or annual fees 
for ETPs listed on the Exchange.\6\ Effective January 1, 2019, the 
Exchange made certain changes to Rule 14.13 in order to charge an entry 
fee for ETPs that are not Generically-Listed ETPs \7\ and to add annual 
listing fees for ETPs listed on the Exchange.\8\ The Exchange then made 
certain additional modifications to Rule 14.13 in May 2019 related to 
listings that are transferring to the Exchange and to make certain 
changes to the fees associated with Linked Securities.9 10 
Finally, on August 30, 2019, the Exchange amended Rule 14.13(b)(2) in 
order to create annual pricing cap for Outcome Strategy Series \11\ 
that are listed on the Exchange.\12\ Now, the Exchange submits this 
proposal in order to amend Rule 14.13(b)(1)(C)(i) to exclude 
generically-listed Exchange-Traded Fund Shares from entry fees.
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    \3\ See Securities Exchange Act Release No. 65225 (August 30, 
2011), 76 FR 55148 (September 6, 2011) (SR-BATS-2011-018).
    \4\ As defined in Rule 11.8(e)(1)(A), the term ``ETP'' means any 
security listed pursuant to Exchange Rule 14.11.
    \5\ See Securities Exchange Act Release No. 66422 (February 17, 
2012), 77 FR 11179 (February 24, 2012) (SR-BATS-2012-010).
    \6\ See Securities Exchange Act Release No. 81152 (July 14, 
2017), 82 FR 33525 (July 20, 2017) (SR-BatsBZX-2017-45).
    \7\ As defined in Rule 14.13(b)(1)(C)(i), the term 
``Generically-Listed ETPs'' means Index Fund Shares, Portfolio 
Depositary Receipts, Managed Fund Shares, Linked Securities, and 
Currency Trust Shares that are listed on the Exchange pursuant to 
Rule 19b-4(e) under the Exchange Act and for which a proposed rule 
change pursuant to Section 19(b) of the Exchange Act is not required 
to be filed with the Commission.
    \8\ See Securities Exchange Act Release No. 83597 (July 5, 
2018), 83 FR 32164 (July 11, 2018) (SR-CboeBZX-2018-46).
    \9\ As defined in Rule 14.11(d), the term ``Linked Securities'' 
includes any product listed pursuant to Rule 14.11(d), but 
specifically includes Equity Index-Linked Securities, Commodity-
Linked Securities, Fixed Income Index-Linked Securities, Futures-
Linked Securities, and Multifactor Index-Linked Securities.
    \10\ See Securities Exchange Act Release No. 85881 (May 16, 
2019), 84 FR 23607 (May 22, 2019) (SR-CboeBZX-2019-042).
    \11\ As defined in Rule 14.13(b)(2)(C)(iv), an Outcome Strategy 
Series is a series of ETPs that are each designed to (i) a pre-
defined set of returns; (ii) over a specified outcome period; (iii) 
based on the performance of the same underlying instrument; and (iv) 
each employ the same outcome strategy for achieving the predefined 
set of returns (each an ``Outcome Strategy ETP'' and, collectively, 
an ``Outcome Strategy Series'').
    \12\ See Securities Exchange Act No. 86956 (September 12, 2019) 
84 FR 49128 (September 18, 2019) (SR-CboeBZX-2019-081).
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    By way of background, on April 6, 2020, the Exchange received 
approval by the Commission to generically list and trade Exchange-
Traded Fund Shares that are permitted to operate in reliance of Rule 
6c-11 (``Rule 6c-11'') under the Investment Company Act of 1940 (the 
``1940 Act'').\13\ The Commission recently adopted Rule 6c-11 to permit 
exchange-traded funds (``ETFs'') that satisfy certain conditions to 
operate without obtaining an exemptive order from the Commission under 
the 1940 Act.\14\ Since the first ETF was approved by the Commission in 
1992, the Commission has routinely granted exemptive orders permitting 
ETFs to operate under the 1940 Act because there was no ETF specific 
rule in place and they have characteristics that distinguish them from 
the types of structures contemplated and included in the 1940 Act. 
After such an extended period operating without a specific rule set and 
only under exemptive relief, Rule 6c-11 is designed to provide a 
consistent, transparent, and efficient regulatory framework for 
ETFs.\15\ Given

[[Page 27003]]

this, the Exchange adopted Rule 14.11(l) to similarly promote 
consistency, transparency, and efficiency surrounding the exchange 
listing process for ETF Shares in a manner that is consistent with the 
Act.
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    \13\ 15 U.S.C. 80a-1.
    \14\ See Release Nos. 33-10695; IC-33646; File No. S7-15-18 
(Exchange-Traded Funds) (September 25, 2019), 84 FR 57162 (October 
24, 2019) (the ``Rule 6c-11 Release'').
    \15\ In approving the rule, the Commission stated that the 
``rule will modernize the regulatory framework for ETFs to reflect 
our more than two decades of experience with these investment 
products. The rule is designed to further important Commission 
objectives, including establishing a consistent, transparent, and 
efficient regulatory framework for ETFs and facilitating greater 
competition and innovation among ETFs.'' Rule 6c-11 Release, at 
57163. The Commission also stated the following regarding the rule's 
impact: ``We believe rule 6c-11 will establish a regulatory 
framework that: (1) Reduces the expense and delay currently 
associated with forming and operating certain ETFs unable to rely on 
existing orders; and (2) creates a level playing field for ETFs that 
can rely on the rule. As such, the rule will enable increased 
product competition among certain ETF providers, which can lead to 
lower fees for investors, encourage financial innovation, and 
increase investor choice in the ETF market.'' Rule 6c-11 Release, at 
57204.
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    Like Index Fund Shares and Managed Fund Shares listed under generic 
listing standards in Rules 14.11(c) and 14.11(i), respectively, series 
of Exchange-Traded Fund Shares that are permitted to operate in 
reliance on Rule 6c-11 are permitted to be listed and traded on the 
Exchange without a prior Commission approval order or notice of 
effectiveness pursuant to Section 19(b) of the Act.\16\ Given this, the 
Exchange proposes to include generically-listed Exchange-Traded Fund 
Shares in the list of Generically-Listed ETPs set forth in Rule 
14.13(b)(1)(C)(i) that are excepted from entry fees. Specifically, 
where generically-listed Exchange-Traded Fund Shares do not require a 
proposed rule change pursuant to section 19(b) of the Exchange Act to 
be filed with the Commission prior to listing and trading on the 
Exchange, the Exchange proposes to exempt such Exchange-Traded Fund 
Shares from entry fees. Such treatment is consistent with the treatment 
of other ETPs (such as Index Fund Shares and Managed Fund Shares) that 
also generally do not require a proposed rule change pursuant to 
section 19(b) of the Exchange Act to be filed with the Commission prior 
to listing and trading on the Exchange.
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    \16\ Rule 19b-4(e)(1) provides that the listing and trading of a 
new derivative securities product by a self-regulatory organization 
(``SRO'') is not deemed a proposed rule change, pursuant to 
paragraph (c)(1) of Rule 19b-4, if the Commission has approved, 
pursuant to Section 19(b) of the Act, the SRO's trading rules, 
procedures and listing standards for the product class that would 
include the new derivative securities product and the SRO has a 
surveillance program for the product class. As noted in the Approval 
Order, Exchange Rule 14.11(l) establishes generic listing standards 
for ETFs that are permitted to operate in reliance on Rule 6c-11. An 
ETF listed under proposed Rule 14.11(l) would therefore not need a 
separate proposed rule change pursuant to Rule 19b-4 before it can 
be listed and traded on the Exchange.
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2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with the objectives of Section 6 of the Act,\17\ in general, and 
furthers the objectives of Section 6(b)(4) and 6(b)(5),\18\ in 
particular, as it is designed to provide for the equitable allocation 
of reasonable dues, fees and other charges among its issuers. 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 change 
reflects 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.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4) and (5).
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The Proposed Entry Fee Exemption Is an Equitable Allocation of Fees
    The Exchange believes the proposal is equitable because it is 
available to all issuers and applies equally to all generically-listed 
Exchange-Traded Fund Shares. The Exchange only recently amended its 
Rules to allow for the generic listing of Exchange-Traded Fund Shares. 
The Exchange believes that providing an exemption to entry fees for 
such ETPs is a reasonable and equitable approach as they do not require 
a proposed rule change pursuant to Section 19(b) of the Exchange Act to 
be filed with the Commission in order to list and trade on the 
Exchange.
    The Exchange notes that the proposed entry fee exemption will only 
act to leave static or reduce fees for ETPs listed on the Exchange. 
Further, this proposal will decrease the fees associated with 
generically-listed Exchange-Traded Fund Shares on the Exchange, which 
will reduce the barriers to entry into the space and incentivize 
enhanced competition among issuers of Exchange-Traded Fund Shares, to 
the benefit of investors.
The Proposed Entry Fee Exemption Is Not Unfairly Discriminatory
    The Exchange also believes that the proposed entry fee exemption 
for generically-listed Exchange-Traded Fund Shares is not unfairly 
discriminatory because it does not require a proposed rule change 
pursuant to Section 19(b) of the Exchange Act to be filed with the 
Commission in order to list and trade on the Exchange. As noted above, 
Exchange-Traded Funds only recently became available to list and trade 
generically on the Exchange. Other similar types of ETPs (e.g., Managed 
Fund Shares and Index Fund Shares) that are listed on the Exchange 
generically are exempted from entry fees under Rule 14.13(b)(1)(C)(i) 
because they do not require a proposed rule change pursuant to Section 
19(b) of the Exchange Act to be filed with the Commission in order to 
list and trade on the Exchange. As such, the Exchange believes it is 
not unfairly discriminatory of the Exchange to similarly exempt 
generically-listed Exchange-Traded Fund Shares from such entry fees.
    The Exchange notes that the proposed entry fee exemption will only 
act to leave static or reduce fees for ETPs listed on the Exchange. 
This proposal will decrease the fees associated with generically 
listing Exchange-Traded Fund Shares, which will reduce the barriers to 
entry into the space and incentivize enhanced competition among issuers 
of Exchange-Traded Fund Shares, also to the benefit of investors.
The Proposed Entry Fee Exemption Is Reasonable
    The Exchange believes that the proposed entry fee exemption for 
generically-listed Exchange-Traded Fund Shares is a reasonable means to 
incentivize issuers to list (or transfer) such Exchange-Traded Fund 
Shares 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 change reflects 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. 
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 change 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 generically-listed 
Exchange-Traded Fund Shares. 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

[[Page 27004]]

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 generically-
listed Exchange-Traded Fund Shares. Similarly, the Exchange believes 
that exempting entry fees on such ETPs will enhance competition both 
among listing venues of Exchange-Traded Fund Shares and among issuers 
through an overall reduction of 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 has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from Members or other interested 
parties.

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 \19\ and paragraph (f) of Rule 19b-4 \20\ 
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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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     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-CboeBZX-2020-034 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-CboeBZX-2020-034. 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 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-CboeBZX-2020-034 and should be submitted 
on or before May 27, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-09637 Filed 5-5-20; 8:45 am]
 BILLING CODE 8011-01-P


