[Federal Register Volume 86, Number 161 (Tuesday, August 24, 2021)]
[Notices]
[Pages 47359-47362]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-18120]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92701; File No. SR-CboeBZX-2021-056]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change To Allow the Invesco Focused Discovery 
Growth ETF and Invesco Select Growth ETF To Strike and Publish an 
Intra-Day NAV and an End-of-Day NAV

August 18, 2021.
    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 August 12, 2021, Cboe BZX Exchange, Inc. filed with the 
Securities and Exchange Commission the proposed rule change as 
described in Items I and II 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 amendment to allow the Invesco Focused Discovery Growth ETF and 
Invesco Select Growth ETF (each a ``Fund'' and, collectively, the 
``Funds''), each a series of the Invesco Actively Managed Exchange-
Traded Fund Trust (the ``Trust''), to strike and publish an intra-day 
net asset value (``NAV'') and an end-of-day NAV.
    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
    The Exchange proposed and the Commission approved a rule to permit 
the listing and trading of the Shares of each Fund.\3\ On December 22, 
2020, the Exchange commenced trading in the Shares of each Fund. The 
Exchange now proposes to continue listing and trading the Shares of 
each Fund pursuant to Rule 14.11(m) and to permit the Funds to strike 
and publish a single intra-day NAV in addition to the current practice 
of striking and publishing an end-of-day NAV. This proposal is designed 
to assist market makers in assessing and managing their intra-day risk, 
provide greater flexibility in creating and redeeming shares and 
provide the marketplace with additional information about the Funds. 
The Exchange believes this feature of the Funds will allow market 
participants to better assess and manage their intra-day risk in making 
a market in the Funds' shares, and provide additional certainty around 
intra-day price and hedging for the Funds' shares.
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    \3\ See Securities Exchange Act Release No. 90684 (December 16, 
2020) 85 FR 83637 (December 22, 2020) (SR-CboeBZX-2020-091) (the 
``Initial Filing'').
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    The NAV represents the value of a fund's assets minus its 
liabilities divided by the number of shares outstanding and is used in 
valuing exchange-traded products (``ETPs''), including Tracking Fund 
Shares. By way of background, an ETP issues shares that can be bought 
or sold throughout the day in the secondary market at a market-
determined price. Authorized participants that have contractual 
arrangements with the ETP (and/or its distributor) purchase and redeem 
ETP shares directly from the ETP in blocks called creation units at a 
price equal to the next-calculated NAV, and may then purchase or sell 
individual ETP shares in the secondary market at market-determined 
prices. ETP shares trade at market prices, but the market price 
typically will be more or less than the fund's NAV per share due to a 
variety of factors, including the underlying prices of the ETP's assets 
and the demand for the ETP shares. Nonetheless, an ETP's market price 
is generally kept close to the ETP's end-of-day NAV because of the 
arbitrage function inherent to the structure of the ETP. An arbitrage 
opportunity is

[[Page 47360]]

inherent in the ETP structure because the ETP share's intra-day market 
price fluctuates in response to standard supply/demand dynamics during 
the trading day. Due to this fluctuation, the ETP's intra-day market 
price may not equal the actual value of ETP's underlying holdings that 
would form the basis of the NAV. Accordingly, authorized participants 
can arbitrage this difference (and make a profit) because they can 
trade directly with the ETP at NAV \4\ as well as on the market at 
market-determined prices. The expected result of the arbitrage activity 
is that the market value of the ETP moves back in line with the ETP's 
NAV per share and investors are able to buy ETP shares on an exchange 
that is close to the ETP's NAV per share. The arbitrage mechanism is 
important because it provides a means to maintain a close tie between 
market price and NAV per share of the ETP throughout the day and on 
market close, thereby helping to ensure that ETP investors are treated 
equitably when buying and selling fund shares.
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    \4\ An open-end fund is required by law to redeem its securities 
on demand from shareholders at a price approximately the 
proportionate share of the fund's NAV at the time of redemption. See 
15 U.S.C. 80a-22(d).
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    In order for the arbitrage mechanism described above to operate 
efficiently, market participants need to be able to hedge their intra-
day risk effectively and estimate, with high accuracy, the value of the 
ETP's holdings, such that it can then observe instances when the value 
of such holdings, on a per-share basis, is higher or lower than the 
current trading price of the shares on an exchange. Principal aspects 
of the ETP structure that facilitate these two processes are: (i) 
Timing of the NAV strike and creation/redemption order window; and (ii) 
the volume of information available regarding the underlying holdings 
of the ETP, from which the authorized participant can estimate the 
ETP's NAV per share at any given time. With respect to the former, if 
an ETP can offer a more than one opportunity to ``lock in'' the 
purchase price of the ETP (i.e., shorten the duration of the market 
risk that the authorized participant is bearing), the Exchange believes 
that the arbitrage mechanism will operate more efficiently, resulting 
in tighter spreads for the trading of the ETP shares.
    Additionally, with respect to information dissemination, in 
general, the more information that is available to assist the market 
participants in estimating the value of the fund's holdings, the better 
the arbitrage mechanism will operate with respect to the Tracking Fund 
Shares. In the case of Tracking Fund Shares, the applicable ETP 
disseminates various information to achieve that goal, while not 
publishing a full list of fund holdings daily. First, as noted in the 
Initial Filing, each Fund will disclose its respective Fund Portfolio 
\5\ including the name, identifier, market value and weight of each 
security and instrument in the portfolio, at a minimum within at least 
60 days following the end of every fiscal quarter.\6\ Additionally, the 
Tracking Basket \7\ (also referred to as the ``substitute basket'') for 
each Fund will be publicly disseminated at least once daily.\8\ The 
Tracking Basket is designed to closely track the daily performance of 
the Fund, but is not fully-representative of the Fund Portfolio. The 
Tracking Basket often will include a significant percentage of the 
securities held in the Fund Portfolio, but it will exclude (or modify 
the weightings of) certain securities held in the Fund Portfolio, such 
as those securities that the Fund's portfolio managers are actively 
looking to purchase or sell, or securities which, if disclosed, could 
increase the risk of front-running of free-riding. The Tracking Basket 
may also include cash. Lastly, the issuer of the Funds represented that 
the NAV per share for each of the Funds will be calculated daily along 
with certain metrics, including the premium or discount between NAV and 
final trading price of the Shares and information about how well the 
performance of the Tracking Basket has correlated with the performance 
of the Fund Portfolio.\9\ While nothing in the Initial Filing, the 
Exemptive Relief, or Rule 14.11(m) requires the Funds to disseminate an 
intraday indicative value (``IIV''), both Funds disseminate an IIV as 
such dissemination is not prohibited by the Initial Filing, Exemptive 
Relief or Rule 14.11(m).\10\ The IIV refers to an intraday estimate of 
a fund's NAV per share, and is calculated based on the valuation of 
Fund Portfolio holdings from the prior Business Day, and accounting for 
intra-day price movements for such holdings. The IIV is disseminated by 
each Fund every second during Regular Trading Hours.\11\ Due to the 
accounting method for trading activity for the Funds (i.e., T+1 
accounting), the portfolio upon which the IIV is calculated is the same 
as the portfolio that would serve as the basis for the Intra-Day NAV 
strike. Accordingly, it is expected that the IIV disseminated at the 
same time that the Intra-Day NAV is struck would be identical (e.g. the 
12:00 p.m. Eastern Time IIV and an Intra-Day NAV struck at 12:00 p.m. 
Eastern Time would be the same). However, although the IIV provides a 
great deal of price transparency to the market, it is not an official 
NAV of the Funds derived using the processes and governance designed to 
ensure an accurate and reliable calculation before dissemination. 
Accordingly, an official NAV would, in concert with the IIV, provide a 
reliable verification and further clarity as to Fund portfolio 
pricing.\12\
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    \5\ The term ``Fund Portfolio'' means the identities and 
quantities of the securities and other assets held by the Investment 
Company that will form the basis for the Investment Company's 
calculation of net asset value at the end of the business day. See 
Exchange Rule 14.11(m)(3)(B).
    \6\ See Exchange Rule 14.11(m)(4)(B)(ii).
    \7\ The term ``Tracking Basket'' means the identities and 
quantities of the securities and other assets included in a basket 
that is designed to closely track the daily performance of the Fund 
Portfolio, as provided in the exemptive relief under the Investment 
Company Act of 1940 applicable to a series of Tracking Fund Shares 
(the ``Exemptive Relief''). The website for each series of Tracking 
Fund Shares shall disclose the following information regarding the 
Tracking Basket as required under this Rule 14.11(m), to the extent 
applicable: (i) Ticker symbol; (ii) CUSIP or other identifier; (iii) 
Description of holding; (iv) Quantity of each security or other 
asset held; (v) and Percentage weight of the holding in the 
portfolio.
    \8\ See Exchange Rule 14.11(m)(4)(B)(i).
    \9\ See Exchange Rule 14.11(m)(4)(A)(ii).
    \10\ As noted above, nothing in the Initial Filing, the 
Exemptive Relief, or Rule 14.11(m) requires the Funds to disseminate 
an IIV; therefore, the Fund is not representing that it will in the 
future continue to disseminate an IIV for either or both of the 
Funds.
    \11\ ``Regular Trading Hours'' refers to the time between 9:30 
a.m. and 4:00 p.m. Eastern time. See Exchange Rule 1.5(w).
    \12\ Further, in the rare instances where there may be a delay 
or error in calculating the IIV the dissemination of the official 
Intra-Day NAV would alert the market to any disparity. As discussed 
herein, the calculation of an official NAV takes more time to 
disseminate than the IIV, reflecting the robust verification and 
validation processes employed.
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    In furtherance of the Funds' objectives of tightening spreads in 
the trading of their shares and increasing the efficiency of the 
arbitrage mechanism, the Funds will strike one NAV during normal 
trading (the ``Intra-Day NAV'') and one NAV again at the close of 
trading at 4:00 p.m. ET (the ``End-of-Day NAV'' and collectively with 
Intra-Day NAV, the ``Published NAVs''). The Funds anticipate that the 
Intra-Day NAV will be struck at 12:00 p.m. ET; however, the Funds 
represent that the Intra-Day NAV may be struck at a pre-determined, and 
publicly disclosed, time between 11:00 a.m. ET and 2 p.m. ET. The 
timing of the Intra-Day NAV will be disclosed in each Fund's prospectus 
and will not change without prior notification to shareholders and the 
market in the form of a prospectus supplement. The Intra-Day NAV would 
be calculated based on the values of the

[[Page 47361]]

securities in the Fund Portfolio at the time the Intra-Day NAV is 
struck, which may differ from the values of the securities in the Fund 
Portfolio at the time the End-of-Day NAV is struck. As noted in the 
Initial Filing, Shares of each of the Funds are offered by the Trust, 
which is registered with the Commission as an open-end investment 
company and has filed a registration statement on behalf of the Funds 
on Form N-1A with the Commission.\13\ The Registration Statement 
provides that the Funds may calculate the NAV per Share more than once 
daily (e.g., at 12 p.m. ET and 4:00 p.m. ET), however, the Initial 
Filing did not seek to allow the Funds to calculate more than one NAV 
per day. Now, the Exchange is seeking approval to explicitly allow the 
Funds to strike and publish an intra-day NAV per Share daily in 
addition to the end-of-day NAV.\14\
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    \13\ The Trust is registered under the 1940 Act. On September 
25, 2020, the Trust filed post-effective amendments to its 
registration statement on Form N-1A relating to each Fund (File No. 
811-22148) (the ``Registration Statement''). The descriptions of the 
Funds and the Shares contained herein are based, in part, on 
information included in the Registration Statement. The Commission 
has issued an order granting certain exemptive relief to the Trust 
(the ``Exemptive Relief'') under the 1940 Act. See Investment 
Company Act of 1940 Release No. 34127 (December 2, 2020).
    \14\ The Exchange's proposal is similar to functionality offered 
for other ETPs. For example, the prospectus for the Invesco Treasury 
Collateral ETF provides that the Fund is calculated at 12 p.m. and 4 
p.m. ET every day the New York Stock Exchange (``NYSE'') is open and 
the Goldman Sachs Access Treasury 0-1 Year ETF has similar 
practices. See http://hosted.rightprospectus.com/Invesco/Fund.aspx?cu=46138G888&dt=P&ss=ETF and https://www.gsam.com/bin/gsam/servlets/LiteratureViewerServlet?pdflink=%2Fcontent%2Fdam%2Fgsam%2Fpdfs%2Fus%2Fen%2Fprospectus-and-regulatory%2Fprospectus%2Fetf-combined-access-prospectus.pdf&RequestURI=/content/gsam/us/en/advisors/fund-center/etf-fund-finder&sa=n.
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    As noted above, the Intra-Day NAV for the Funds will be struck 
based on the Portfolio Holdings at a pre-determined time between 11:00 
a.m. and 2:00 p.m. Eastern Time on each day the Exchange is open. The 
Intra-Day NAV will be calculated based on the valuation of Fund 
holdings as of the NAV strike time, with the calculation of such NAV 
typically occurring within two hours of the time the NAV strike time 
(e.g., 12:00 p.m. Eastern Time), and will be disseminated to market 
participants shortly after calculation. Further, the Intra-Day NAV will 
be disseminated to all market participants at the same time in the same 
manner as the End-of-Day NAV is currently disseminated.\15\
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    \15\ Currently, the end-of-day NAV is disseminated publicly via 
the Issuer's website at www.invesco.com/ETFs.
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    Currently, all orders to purchase or redeem creation units must be 
received by the transfer agent and/or distributor no later than the 
order cut-off time designated in the participant agreement \16\ on the 
relevant Business Day in order for the creation or redemption of 
creation units to be effected based on the NAV of Shares as determined 
on such date. With certain exceptions, the order cut-off time for the 
Funds, as set forth in the participant agreement, usually is the 
closing time of the regular trading session--i.e., ordinarily 4:00 p.m. 
Eastern time.\17\ In the case of custom orders,\18\ the order cut-off 
time is 3:00 p.m. Eastern time. Additionally, on days when the Exchange 
closes earlier than normal, the Trust may require the creation orders 
to be placed earlier in the day.
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    \16\ The ``participant agreement'' refers to the executed 
written agreement between an authorized participant and the Fund, or 
one of its service providers, that allows the authorized participant 
to place creation and redemption orders.
    \17\ See also Exchange Rule 14.11(m)(3)(B).
    \18\ A ``custom order'' refers to creation or redemption orders 
using Shares that consist of securities that differ from the 
composition of the Tracking Basket.
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    As proposed, with certain exceptions the order cut-off time for the 
Intra-Day NAV will be the time at which the Intra-Day NAV is struck 
(e.g.,12:00 p.m. Eastern time). In the case of custom orders, the 
transfer agent must receive the creation or redemption order no later 
than one hour prior to the time at which the Intra-Day NAV is struck 
(e.g., 11:00 a.m. Eastern time). The Funds will issue and redeem Shares 
in creation units at the NAV per Share next determined after an order 
in proper form is received (which may be the Intra-Day NAV or the End-
of-Day NAV depending on when the order is received). Specifically, if 
an order to purchase or redeem Shares of either of the Funds was 
received by the transfer agent prior to the time at which the Intra-Day 
NAV is struck (or, in the case of custom orders, one hour prior to the 
time at which the Intra-Day NAV is struck), the Fund would issue or 
redeem Shares in creation units at the Intra-Day NAV. Conversely, if an 
order to purchase or redeem Shares of either of the Funds was received 
by the transfer agent after the Intra-Day NAV is struck but before 4:00 
Eastern time(or, in the case of custom orders, by 3:00 p.m. Eastern 
time), the Fund would issue or redeem Shares in creation units at the 
End-of-Day NAV.
    The Exchange believes that providing authorized participants with 
the ability to create and redeem during the trading day, coupled with 
the price certainty of a second official NAV being available to market 
participants, will reduce the risk that market participants face intra-
day related to the possible divergence between the Tracking Basket and 
the value of the Fund Portfolio, which should enable them to reduce 
spreads on Shares. Authorized participants will be able to ``lock in'' 
their creation and redemption transactions during the trading day at an 
Intra-Day NAV, and at the end of the trading day at the End-of-Day 
NAV.\19\ As proposed, the Funds will continue to meet all listings 
standards provided in Rule 14.11(m). The only change to the Funds that 
the Exchange is proposing is to allow the Funds to strike an Intra-Day 
NAV. All other material representations contained within the Initial 
Filing remain true and will continue to constitute continued listing 
requirements for the Funds.
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    \19\ The Exchange believes that the beneficial effect of having 
the ability to ``lock in'' the Intra-Day NAV will exist even if 
authorized participants do not regularly make use of the first 
creation/redemption window. By having the flexibility to place 
orders with less remaining time until the official NAV is struck, 
authorized participants will be able to hedge risk with a shorter 
time horizon contemplated.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \20\ in general and Section 6(b)(5) of the Act \21\ in 
particular in that it is 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 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 in that the Shares of each Fund will meet each of the 
continued listing criteria in BZX Rule 14.11(m), as provided in the 
Initial Filing.
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    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78f(b)(5).
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    The proposal to allow the Funds to strike and publish an Intra-Day 
NAV will afford authorized participants with additional flexibility in 
the timing of creation and redemption activity and provide the 
marketplace with additional, official information related to each 
Fund's underlying holdings on an intra-day basis The Exchange believes 
that this additional feature will allow market participants to better 
assess and manage their intra-day risk in making a market in the Funds' 
shares, and provide additional certainty around intra-day price and 
hedging for the Funds' shares. Further, the Exchange believes that the 
likely resulting tighter

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spreads and deeper liquidity will deter potential fraudulent or 
manipulative acts associated with the Funds' Share price. The only 
change to the Funds that the Exchange is proposing is to allow the 
Funds to strike an Intra-Day NAV. All other material representations 
contained within the Initial Filing remain true and will continue to 
constitute continued listing requirements for the Funds.
    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 purpose of the Act. The Exchange notes that the 
proposed rule change, rather, will provide additional information to 
market participants thereby reducing market participants risk and 
intra-day price uncertainty which will allow the Fund to better compete 
in the marketplace, thus enhancing 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 self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the 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

     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-2021-056 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-2021-056. 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-2021-056 and should be submitted 
on or before September 14, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-18120 Filed 8-23-21; 8:45 am]
BILLING CODE 8011-01-P


