[Federal Register Volume 85, Number 94 (Thursday, May 14, 2020)]
[Notices]
[Pages 28996-29000]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10287]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88843; File No. SR-CboeEDGX-2020-021]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change
Adopting Rule 14.12 Governing the Trading, Pursuant to Unlisted Trading
Privileges, of Exchange-Traded Fund Shares
May 8, 2020.
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 May 7, 2020, Cboe EDGX Exchange, Inc. (``Exchange'' or ``EDGX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II 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'') is filing
with the Securities and Exchange Commission (``Commission'') a proposed
rule change to adopt Rule 14.12 to permit the trading, pursuant to
unlisted trading privileges, of Exchange-Traded Fund Shares.
Additionally, the Exchange proposes to make corresponding changes to
Rule 14.1(a). 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 adopt Rule 14.12 to permit the trading,
pursuant to unlisted trading privileges (``UTP''), of Exchange-Traded
Fund (also referred to as ``ETF'') Shares,\5\ which substantially
conforms to Cboe BZX Exchange, Inc. (``BZX'') Rule 14.11(l).\6\
Additionally, the Exchange proposes to make corresponding changes to
Rule 14.1(a) to reference Exchange-Traded Fund Shares and proposed Rule
14.12, where applicable.
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\5\ ETF Shares means shares of stock issued by an Exchange-
Traded Fund. See proposed Rule 14.12(c)(1).
\6\ See Securities and Exchange Act Release No. 88566 (April 6,
2020) 85 FR 20312 (April 10, 2020) (SR-CboeBZX-2019-097) (the ``BZX
Approval Order'').
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The Exchange does not currently list any securities as a primary
listing market. Consistent with this fact, Exchange Rule 14.1(a)
currently states that all securities traded on the Exchange are traded
pursuant to UTP and that the Exchange will not list any securities
before first filing and obtaining Commission approval of rules that
incorporate qualitative listing criteria and comply with Rules 10A-3
\7\ (``Rule 10A-3'') and 10C-1 \8\ (``Rule 10C-1'') under the Act.
Therefore, the provisions of existing Rules 14.2 through 14.9, 14.11,
and proposed Rule 14.12 that permit the listing of certain Equity
Securities \9\ will not be effective
[[Page 28997]]
until the Exchange files a proposed rule change under Section 19(b)(2)
under the Exchange Act to amend its rules to comply with Rule 10A-3 and
10C-1 under the Exchange Act and to incorporate qualitative listing
criteria, and such proposed rule change is approved by the Commission.
Considering the foregoing, the Exchange proposes to adopt Rule 14.12 as
set forth below.
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\7\ Rule 10A-3 obligates the Exchange to prohibit the initial or
continued listing of any security of an issuer that is not in
compliance with certain required standards. See 17 CFR 240.10A-3.
\8\ Rule 10C-1 obligates the Exchange to establish listing
standards that require each member of a listed issuer's compensation
committee to be a member of the issuer's board and to be
independent, as well as establish certain factors that an issuer
must consider when evaluating the independence of a director. See 17
CFR 240.10C-1.
\9\ As provided in Rule 14.1(a), the term ``Equity Security''
means, but is not limited to, common stock, secondary classes of
common stock, preferred stock and similar issues, shares or
certificates of beneficial interest of trusts, notes, limited
partnership interests, warrants, certificates of deposit for common
stock, convertible debt securities, ADRs, CVRs, Investment Company
Units, Trust Issued Receipts (including those based on Investment
Shares), Commodity-Based Trust Shares, Currency Trust Shares,
Partnership Units, Equity-Linked Securities, Commodity-Linked
Securities, Currency-Linked Securities, Portfolio Depositary
Receipts, Equity-Linked Debt Securities, and Managed Portfolio
Shares. Further, the Exchange now proposes to include the term
``Exchange-Traded Fund Shares'' to the definition of Equity
Security.
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Proposed Listing Rules
Proposed Rule 14.12(a) provides that the Exchange will consider for
trading, whether by listing or pursuant to UTP, ETF Shares that meet
the criteria of Rule 14.12.
Proposed Rule 14.12(b) provides that Rule 14.12 is applicable only
to ETF Shares and that, except to the extent inconsistent with Rule
14.12, or unless the context otherwise requires, the rules and
procedures of the Exchange's Board of Directors shall be applicable to
the trading on the Exchange of such securities. Proposed Rule 14.12(b)
provides further that ETF Shares are included within the definition of
``security'' or ``securities'' as such terms are used in the Rules of
the Exchange.
Proposed Rule 14.12(b)(1) provides that transactions in ETF Shares
will occur throughout the Exchange's trading hours.
Proposed Rule 14.12(b)(2) provides that the minimum price variation
for quoting and entry of orders in ETF Shares will be $0.01.
Proposed Rule 14.12(b)(3) provides that the Exchange will implement
and maintain written surveillance procedures for ETF Shares.
Proposed Rule 14.12(c)(1) defines the term ``ETF Shares'' as shares
of stock issued by an Exchange-Traded Fund.\10\
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\10\ For purposes of this filing, references to a series of
Exchange-Traded Fund Shares are referred to interchangeably as a
series of Exchange-Traded Fund Shares or as a ``Fund'' and shares of
a series of Exchange-Traded Fund Shares are generally referred to as
the ``Shares''.
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Proposed Rule 14.12(c)(2) defines the term ``Exchange-Traded Fund''
as having the same meaning as the term ``exchange-traded fund'' as
defined in Rule 6c-11 under the Investment Company Act of 1940.\11\
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\11\ Per Rule 6c-11, an exchange-traded fund means a registered
open-end management company: (A) That issues (and redeems) creation
units to (and from) authorized participants in exchange for a basket
and a cash balancing amount if any; and (B) Whose shares are listed
on a national securities exchange and traded at market-determined
prices.
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Proposed Rule 14.12(c)(3) defines the term ``Reporting Authority''
in respect of a particular series of ETF Shares means the Exchange, an
institution, or a reporting service designated by the Exchange or by
the exchange that lists a particular series of ETF Shares (if the
Exchange is trading such series pursuant to UTP) as the official source
for calculating and reporting information relating to such series,
including, but not limited to, the amount of any dividend equivalent
payment or cash distribution to holders of ETF Shares, the net asset
value (the ``NAV''), index or portfolio value, the current value of the
portfolio of securities required to be deposited in connection with
issuance of ETF Shares, or other information relating to the issuance,
redemption or trading of ETF Shares. A series of ETF Shares may have
more than one Reporting Authority, each having different functions.
Proposed Rule 14.12(d) provides for the initial and continued
listing and/or trading of ETF Shares, including trading pursuant to
UTP, pursuant to Rule 19b-4(e) under the Act. Proposed Rule 14.12(d)(1)
sets forth initial listing criteria applicable to ETF Shares.
Specifically, proposed Rule 14.12(d)(1) provides that the requirements
of Rule 6c-11 must be satisfied by a series of ETF Shares on an initial
and continued listing basis. Such securities must also satisfy the
criteria on an initial and, with the exception of proposed subparagraph
(d)(1)(A), a continued listing basis. Proposed Rule 14.12(d)(1)(A)
provides that for each series, the Exchange will establish a minimum
number of ETF Shares required to be outstanding at the time of
commencement of trading on the Exchange. However, as noted above, such
criteria is not applicable on a continued listing basis. Proposed rule
14.12(d)(1)(B) provides that if an index underlying a series of ETF
Shares is maintained by a broker-dealer or fund adviser, the broker-
dealer or fund adviser shall erect and maintain a ``fire wall'' around
the personnel who have access to information concerning changes and
adjustments to the index and the index shall be calculated by a third
party who is not a broker-dealer or fund adviser. If the investment
adviser to the investment company issuing an actively managed series of
ETF Shares is affiliated with a broker-dealer, such investment adviser
shall erect and maintain a ``fire wall'' between the investment adviser
and the broker-dealer with respect to access to information concerning
the composition and/or changes to such Exchange-Traded Fund's
portfolio. Additionally proposed rule 14.12(d)(1)(C) provides that any
advisory committee, supervisory board, or similar entity that advises a
Reporting Authority or that makes decisions on the composition,
methodology, and related matters of an index underlying a series of ETF
Shares, must implement and maintain, or be subject to, procedures
designed to prevent the use and dissemination of material non-public
information regarding the applicable index. For actively managed
Exchange-Traded Funds, personnel who make decisions on the portfolio
composition must be subject to procedures designed to prevent the use
and dissemination of material nonpublic information regarding the
applicable portfolio.
Proposed Rule 14.12(d)(2) provides that each series of ETF Shares
will be listed and traded subject to application of the following
continued listing criteria. Proposed Rule 14.12(d)(2)(A) provides that
the Exchange will consider the suspension of trading in or removal from
listing of or termination of unlisted trading privileges for a series
of ETF Shares under any of the following circumstances: (i) If the
Exchange becomes aware that the issuer of the ETF Shares is no longer
eligible to operate in reliance on Rule 6c-11 under the Investment
Company Act of 1940; (ii) if any of the other listing requirements set
forth in this Rule 14.12 are not continuously maintained; (iii) if,
following the initial twelve month period after commencement of trading
on the Exchange of a series of ETF Shares, there are fewer than 50
beneficial holders of the series of ETF Shares for 30 or more
consecutive trading days; or (iv) if such other event shall occur or
condition exists which, in the opinion of the Exchange, makes further
dealings on the Exchange inadvisable. Proposed Rule 14.12(d)(2)(B)
provides that upon termination of an investment company, the Exchange
will require that ETF Shares issued in connection with such entity be
removed from Exchange listing.
Proposed Rule 14.12(e), which relates to limitation of Exchange
liability, provides that neither the Exchange, the Reporting Authority,
nor any agent of the Exchange shall have any liability for damages,
claims, losses or expenses caused by any errors, omissions, or delays
in calculating or disseminating any current index or portfolio value;
the current value of the portfolio of securities required to be
deposited to the open-end management investment company in connection
with issuance of ETF Shares; the amount of any dividend
[[Page 28998]]
equivalent payment or cash distribution to holders of ETF Shares; net
asset value; or other information relating to the purchase, redemption,
or trading of ETF Shares, resulting from any negligent act or omission
by the Exchange, the Reporting Authority, or any agent of the Exchange,
or any act, condition, or cause beyond the reasonable control of the
Exchange, its agent, or the Reporting Authority, including, but not
limited to, an act of God; fire; flood; extraordinary weather
conditions; war; insurrection; riot; strike; accident; action of
government; communications or power failure; equipment or software
malfunction; or any error, omission, or delay in the reports of
transactions in one or more underlying securities.
The Exchange does not propose to adopt BZX Rule 14.11(l)(6) because
it is not applicable as the Exchange does not currently have any listed
products.
Quantitative Standards
The Exchange believes that the proposal is designed to prevent
fraudulent and manipulative acts and practices because the Exchange
will perform ongoing surveillance of ETF Shares listed on the Exchange
in order to ensure compliance with Rule 6c-11 and the 1940 Act on an
ongoing basis. While proposed Rule 14.12 does not include the
quantitative requirements applicable to an ETF or an ETF's holdings or
underlying index that are included in Rule 14.2, the Exchange believes
that the manipulation concerns that such standards are intended to
address are otherwise mitigated by a combination of the Exchange's
surveillance procedures and the Exchange's ability to suspend trading
or terminate unlisted trading privileges under the proposed Rule
14.12(d)(2)(A). The Exchange will also halt trading in ETF Shares under
the conditions specified in Rule 11.16, ``Trading Halts Due to
Extraordinary Market Volatility.'' The Exchange believes that such
concerns are further mitigated by enhancements to the arbitrage
mechanism that will come from Rule 6c-11, specifically the additional
flexibility provided to issuers of ETF Shares through the use of custom
baskets for creations and redemptions and the additional information
made available to the public through the additional daily website
disclosure obligations applicable under Rule 6c-11.\12\ The Exchange
believes that the combination of these factors will act to keep ETF
Shares trading near the value of their underlying holdings and further
mitigate concerns around manipulation of ETF Shares on the Exchange
without the inclusion of quantitative standards.\13\
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\12\ The Exchange notes that the Commission came to a similar
conclusion in several places in the Rule 6c-11 Release. 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'') at 15-18; 60-61; 69-70; 78-79; 82-84; and 95-96.
\13\ The Exchange believes that this applies to all quantitative
standards, whether applicable to the portfolio holdings of a series
of ETF Shares or the distribution of the ETF Shares.
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Surveillance
The Exchange believes that its surveillance procedures are adequate
to properly monitor the trading of ETF Shares on the Exchange during
all trading sessions and to deter and detect violations of Exchange
rules and the applicable federal securities laws. Trading of ETF Shares
through the Exchange will be subject to the Exchange's surveillance
procedures for derivative products. The Exchange will require the
issuer of each series of ETF Shares listed on the Exchange to represent
to the Exchange that it will advise the Exchange of any failure by a
Fund 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.
Specifically, the Exchange intends to utilize its existing
surveillance procedures applicable to derivative products, which are
currently applicable to Investment Company Units, among other product
types, to monitor trading in ETF Shares. The Exchange or the Financial
Industry Regulatory Authority, Inc. (``FINRA''), on behalf of the
Exchange, will communicate as needed regarding trading in ETF Shares
and certain of their applicable underlying components with other
markets that are members of the Intermarket Surveillance Group
(``ISG'') or with which the Exchange has in place a comprehensive
surveillance sharing agreement. In addition, the Exchange may obtain
information regarding trading in ETF Shares and certain of their
applicable underlying components from markets and other entities that
are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement. Additionally, FINRA, on
behalf of the Exchange, is able to access, as needed, trade information
for certain fixed income securities that may be held by a series of ETF
Shares reported to FINRA's Trade Reporting and Compliance Engine
(``TRACE''). FINRA also can access data obtained from the Municipal
Securities Rulemaking Board's (``MSRB'') Electronic Municipal Market
Access (``EMMA'') system relating to municipal bond trading activity
for surveillance purposes in connection with trading in a series of ETF
Shares, to the extent that a series of ETF Shares holds municipal
securities.
Trading Halts
As proposed above, the Exchange may consider all relevant factors
in exercising its discretion to halt trading in a series of Managed
Portfolio Shares. Trading may be halted because of market conditions or
for reasons that, in the view of the Exchange, make trading in the
series of ETF Shares inadvisable. These may include: (i) The extent to
which trading is not occurring in the securities and/or the financial
instruments composing the portfolio; or (ii) whether other unusual
conditions or circumstances detrimental to the maintenance of a fair
and orderly market are present. Additionally, the Exchange would halt
trading as soon as practicable where the Exchange becomes aware that:
(i) If the Exchange becomes aware that the issuer of the ETF Shares is
no longer eligible to operate in reliance on Rule 6c-11 under the
Investment Company Act of 1940; (ii) if any of the other listing
requirements set forth in this Rule 14.12 are not continuously
maintained; (iii) if, following the initial twelve month period after
commencement of trading on the Exchange of a series of ETF Shares,
there are fewer than 50 beneficial holders of the series of ETF Shares
for 30 or more consecutive trading days; or (iv) if such other event
shall occur or condition exists which, in the opinion of the Exchange,
makes further dealings on the Exchange inadvisable.
Trading Rules
The Exchange deems ETF Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. ETF Shares will trade
on the Exchange throughout the Exchange's trading hours. As provided in
proposed Rule 14.12(b)(2), the minimum price variation for quoting and
entry of orders in ETF Shares traded on the Exchange is $0.01.
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act \14\ in general and Section
[[Page 28999]]
6(b)(5) of the Act \15\ in particular in that it is 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 public interest.
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\14\ 15 U.S.C. 78f.
\15\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that proposed Rule 14.12 will remove
impediments to and perfect the mechanism of a free and open market and
national market system. Specifically, the proposed amendment raises no
substantive issues that have not otherwise been considered by the
Commission in either the BZX Approval Order or in the context of other
similar Exchange Rules. This proposal is substantively similar to the
BZX Approval Order, with the exception that the Exchange is only
proposing to trade series of ETF Shares pursuant to unlisted trading
privileges, while BZX will both list and trade series of ETF Shares.
Further, while proposed Rule 14.12(d)(2)(A) provides that the Exchange
may terminate unlisted trading privileges and BZX Rule 14.11(l) does
not, the proposed rule text is substantially similar to existing
Exchange Rules 14.3(g)(2) and 14.11(d)(2)(B) and therefore raises no
novel issues.
The Exchange believes that proposed Rule 14.12 is designed to
prevent fraudulent and manipulative acts and practices in that the
proposed rules relating to listing and trading ETF Shares on the
Exchange provide specific initial and continued listing criteria
required to be met by such securities. Proposed Rule 14.12(d) sets
forth initial and continued listing criteria applicable to ETF Shares,
specifically providing that the Exchange may approve a series of ETF
Shares for listing and/or trading (including pursuant to unlisted
trading privileges) on the Exchange pursuant to Rule 19b-4(e) under the
Act, provided such series of ETF Shares is eligible to operate in
reliance on Rule 6c-11 under the Investment Company Act of 1940 and
must satisfy the requirements of this Rule 14.12 on an initial and
continued listing basis.
Proposed Rule 14.12(d)(1) provides that initial listing criteria
which includes (A) for each series, the Exchange will establish a
minimum number of ETF Shares required to be outstanding at the time of
commencement of trading on the Exchange; (B) if an index underlying a
series of ETF Shares is maintained by a broker-dealer or fund adviser,
the broker-dealer or fund adviser shall erect and maintain a ``fire
wall'' around the personnel who have access to information concerning
changes and adjustments to the index and the index shall be calculated
by a third party who is not a broker-dealer or fund adviser. If the
investment adviser to the investment company issuing an actively
managed series of ETF Shares is affiliated with a broker-dealer, such
investment adviser shall erect and maintain a ``fire wall'' between the
investment adviser and the broker-dealer with respect to access to
information concerning the composition and/or changes to such Exchange-
Traded Fund's portfolio; and (C) any advisory committee, supervisory
board, or similar entity that advises a Reporting Authority or that
makes decisions on the composition, methodology, and related matters of
an index underlying a series of ETF Shares, must implement and
maintain, or be subject to, procedures designed to prevent the use and
dissemination of material non-public information regarding the
applicable index. For actively managed Exchange-Traded Funds, personnel
who make decisions on the portfolio composition must be subject to
procedures designed to prevent the use and dissemination of material
nonpublic information regarding the applicable portfolio.
Proposed Rule 14.12(d)(2) provides that each series of ETF Shares
will be listed and traded on the Exchange subject to application of
Proposed Rule 14.12(d)(2)(A) and (B). Proposed Rule 14.12(d)(2)(A)
provides that the Exchange will consider the suspension of trading in
or removal from listing of or termination of UTP for a series of ETF
Shares under any of the following circumstances: (i) If the Exchange
becomes aware that the issuer of the ETF Shares is no longer eligible
to operate in reliance on Rule 6c-11 under the Investment Company Act
of 1940; (ii) if any of the other listing requirements set forth in
this Rule 14.12 are not continuously maintained; (iii) if, following
the initial twelve month period after commencement of trading on the
Exchange of a series of ETF Shares, there are fewer than 50 beneficial
holders of the series of ETF Shares for 30 or more consecutive trading
days; or (iv) if such other event shall occur or condition exists
which, in the opinion of the Exchange, makes further dealings on the
Exchange inadvisable. Proposed Rule 14.12(d)(2)(B) provides that upon
termination of an investment company, the Exchange requires that ETF
Shares issued in connection with such entity be removed from Exchange
listing.
The Exchange further believes that proposed Rule 14.12 is designed
to prevent fraudulent and manipulative acts and practices because of
the robust surveillances in place on the Exchange as required under
proposed Rule 14.12(b)(3) along with the similarities of proposed Rule
14.12 to the rules related to other securities that are already traded
on the Exchange pursuant to UTP and which would qualify as ETF Shares.
Proposed Rule 14.12 is based in large part on Rule 14.2 related to the
listing and trading of Investment Company Units on the Exchange, which
are issued under the 1940 Act and would qualify as ETF Shares after
Rule 6c-11 is effective. As such, the Exchange believes that using Rule
14.2 (the ``Current ETF Standards'') as the basis for proposed Rule
14.12 is appropriate because they are generally designed to address the
issues associated with ETF Shares. The only substantial differences
between proposed Rule 14.12 and the Current ETF Standards that are not
otherwise required under Rule 6c-11 are as follows: (i) Proposed Rule
14.12 does not include the quantitative standards applicable to a fund
or an index that are included in the Current ETF Standards; and (ii)
Proposed Rule 14.12 does not include any requirements related to the
dissemination of a fund's intraday indicative value.\16\
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\16\ For purposes of this filing, the term ``intraday indicative
value'' or ``IIV'' shall mean an intraday estimate of the value of a
share of each series Investment Company Units.
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Further, the Exchange also represents that its surveillance
procedures are adequate to properly monitor the trading of the ETF
Shares in all trading sessions and to deter and detect violations of
Exchange rules and applicable federal securities laws. Specifically,
the Exchange intends to utilize its existing surveillance procedures
applicable to derivative products, which are currently applicable to
Investment Company Units, among other product types, to monitor trading
in ETF Shares. The Exchange or the FINRA, on behalf of the Exchange,
will communicate as needed regarding trading in ETF Shares and certain
of their applicable underlying components with other markets that are
members of the ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement. In addition, the Exchange
may obtain information regarding trading in ETF Shares and certain of
their applicable underlying components from markets
[[Page 29000]]
and other entities that are members of ISG or with which the Exchange
has in place a comprehensive surveillance sharing agreement.
Additionally, FINRA, on behalf of the Exchange, is able to access, as
needed, trade information for certain fixed income securities that may
be held by a series of ETF Shares reported to FINRA's TRACE. FINRA also
can access data obtained from the MSRB EMMA system relating to
municipal bond trading activity for surveillance purposes in connection
with trading in a series of ETF Shares, to the extent that a series of
ETF Shares holds municipal securities.
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 facilitate the trading, pursuant to
UTP, of ETF Shares 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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
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 \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally
does not become operative for 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\20\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay to immediately allow
ETF Shares to be traded on another venue. The Commission believes that
waiver of the 30-day operative delay for this purpose is consistent
with the protection of investors and the public interest and hereby
waives the 30-day operative delay and designates the proposed rule
change operative upon filing.\21\
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\19\ 17 CFR 240.19b-4(f)(6).
\20\ 17 CFR 240.19b-4(f)(6)(iii).
\21\ For purposes only of waiving the operative delay, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
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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.
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 [email protected]. Please include
File Number SR-CboeEDGX-2020-021 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-2020-021. 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-CboeEDGX-2020-021 and should be
submitted on or before June 4, 2020.
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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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10287 Filed 5-13-20; 8:45 am]
BILLING CODE 8011-01-P