[Federal Register Volume 84, Number 232 (Tuesday, December 3, 2019)]
[Notices]
[Pages 66248-66251]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26157]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87636; File No. SR-CboeBZX-2019-023]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order 
Granting Approval of a Proposed Rule Change, as Modified by Amendment 
No. 1, To Amend Rule 14.11(c) (Index Fund Shares) To Adopt Generic 
Listing Standards for Index Fund Shares Based on an Index of Municipal 
Securities

November 27, 2019.

I. Introduction

    On April 3, 2019, Cboe BZX Exchange, Inc. (``BZX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
amend Cboe BZX Rule 14.11(c) to adopt generic listing standards for 
Index Fund Shares (``Shares'') based on an index or portfolio of 
municipal securities. The proposed rule change was published for 
comment in the Federal Register on April 22, 2019.\3\ On May 30, 2019, 
pursuant to Section 19(b)(2) of the Act,\4\ the Commission designated a 
longer period within which to approve the proposed rule change, 
disapprove the proposed rule change, or institute proceedings to 
determine whether to approve or disapprove the proposed rule change.\5\ 
On July 18, 2019, the Commission instituted proceedings under Section 
19(b)(2)(B) of the Act \6\ to determine whether to approve or 
disapprove the proposed rule change.\7\ On October 15, 2019, the 
Commission extended the period for issuing an order approving or 
disapproving the proposed rule change.\8\ On October 31, 2019, the 
Exchange filed Amendment No. 1 to the proposed rule change, which 
amended and replaced in its entirety the original proposed rule 
change.\9\ The Commission has received no comment letters on the 
proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 85656 (April 16, 
2019), 84 FR 16753.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 85966, 84 FR 26172 
(June 5, 2019). The Commission designated July 21, 2019, as the date 
by which the Commission shall approve or disapprove, or institute 
proceedings to determine whether to approve or disapprove, the 
proposed rule change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ See Securities Exchange Act Release No. 86410, 84 FR 35698 
(July 24, 2019).
    \8\ See Securities Exchange Act Release No. 87300, 84 FR 56209 
(October 21, 2019). The Commission designated December 18, 2019, as 
the date by which the Commission shall either approve or disapprove 
the proposed rule change.
    \9\ In Amendment No. 1, the Exchange: (1) Clarified that its 
proposed requirement that an underlying index or portfolio must 
include a minimum of 13 ``non-affiliated'' issuers means a minimum 
of 13 ``unique'' issuers; and (2) prohibited its generic listing of 
Index Fund Shares based on Municipal Securities (defined below) that 
seeks to provide investment results, before fees and expenses, in an 
amount that exceeds -300% of the percentage performance on a given 
day of an index of Municipal Securities. Amendment No. 1 is 
available at: https://www.sec.gov/comments/sr-cboebzx-2019-023/srcboebzx2019023-6388601-198128.pdf. In view of the Commission's 
recent approval of another exchange's substantively identical 
proposal, Amendment No. 1 raises no novel issues and is therefore 
not subject to notice and comment. See Securities Exchange Act 
Release Nos. 85170 (February 21, 2019), 84 FR 6451 (February 27, 
2019) and 87382 (October 22, 2019), 84 FR 57789 (October 28, 2019) 
(SR-NYSEArca-2019-04) (``NYSE Arca Proposal'').
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II. The Exchange's Description of the Proposed Rule Change, as Modified 
by Amendment No. 1

    Rule 14.11(c) permits the Exchange to list a series of Index Fund 
Shares based on an index or portfolio of underlying securities. 
Currently, Rule 14.11(c)(4)(B)(i) provides generic listing standards 
for Index Fund Shares based on an index or portfolio of fixed income 
securities. The Exchange proposes to amend the Rule to add a new 
subsection Rule 14.11(c)(4)(B)(ii) to provide quantitative generic 
listing standards for Index Fund Shares based on an index or portfolio 
of Municipal Securities \10\ that do not meet the generic listing 
standards under Rule 14.11(c)(4)(B)(i).\11\ All other standards, 
however, not included in Rule 14.11(c)(4)(B)(i) applicable to series of 
Index Fund Shares based on an index composed of fixed income securities 
will continue to apply to a series of Index Fund Shares based on an 
index or portfolio of Municipal Securities listed pursuant to Rule 
14.11(c)(4)(B)(ii). The Exchange also proposes to add language that 
would prohibit the listing of Shares under proposed Rule 
14.11(c)(4)(B)(ii) that would seek to provide investment results, 
before fees and expenses, in an amount exceeding -300% of the 
percentage performance on a given day.
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    \10\ According to the proposal, the term ``Municipal 
Securities'' has the definition given to it in Section 3(a)(29) of 
the Act.
    \11\ The Exchange notes that its proposal is substantively 
identical to the NYSE Arca Proposal. See supra note 9.
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    According to the Exchange, indices of Municipal Securities are able 
to satisfy all of the generic listing requirements applicable to fixed 
income indices in Rule 14.11(c)(4)(b)(i) except the requirement that 
component securities in an index have a minimum original principal 
amount outstanding of $100 million or more. The Exchange provides that 
Municipal Securities are generally issued with individual maturities of 
relatively small size, although they generally are constituents of a 
much larger municipal bond offering. Therefore, Municipal Securities 
are unable to satisfy the Rule's requirement that ``at least 75% of the 
Fixed Income Securities portion of the weight of the index or portfolio 
each shall have a minimum original principal amount outstanding of $100 
million or more.'' Notwithstanding the inability of a Municipal 
Securities index to meet this aspect of the generic listing standards, 
the Exchange notes that the Commission previously approved for listing 
and trading Index Fund Shares based on such indices.\12\
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    \12\ See Securities Exchange Act Release Nos. 84107 (September 
13, 2018), 83 FR 47210 (September 18, 2018) (SR-CboeBZX-2018-070) 
(Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To List and Trade Shares of the iShares iBonds Dec 2025 Term 
Muni Bond ETF of iShares Trust Under BZX Rule 14.11(c)(4) (Index 
Fund Shares)); 79381 (November 22, 2016), 81 FR 86044 (November 29, 
2016) (SR-BatsBZX-2016-48) (Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendments No. 1 and No. 2 
Thereto, To List and Trade Shares of the iShares iBonds Dec 2023 
Term Muni Bond ETF and iShares iBonds Dec 2024 Term Muni Bond ETF of 
the iShares U.S. ETF Trust Pursuant to BZX Rule 14.11(c)(4); 67985 
(October 4, 2012), 77 FR 61804 (October 11, 2012) (SR-NYSEArca-2012-
92) (order approving proposed rule change relating to the listing 
and trading of iShares 2018 S&P AMT-Free Municipal Series and 
iShares 2019 S&P AMT-Free Municipal Series under NYSE Arca Equities 
Rule 5.2(j)(3), Commentary .02); 67729 (August 24, 2012), 77 FR 
52776 (August 30, 2012) (SR-NYSEArca-2012-92) (notice of proposed 
rule change relating to the listing and trading of iShares 2018 S&P 
AMT-Free Municipal Series and iShares 2019 S&P AMT-Free Municipal 
Series under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 
72523 (July 2, 2014), 79 FR 39016 (July 9, 2014) (SR-NYSEArca-2014-
37) (order approving proposed rule change relating to the listing 
and trading of iShares 2020 S&P AMT-Free Municipal Series under NYSE 
Arca Equities Rule 5.2(j)(3), Commentary.02); 72172 (May 15, 2014), 
79 FR 29241 (May 21, 2014) (SR-NYSEArca-2014-37) (notice of proposed 
rule change relating to the listing and trading of iShares 2020 S&P 
AMT-Free Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), 
Commentary.02); 72464 (June 25, 2014), 79 FR 37373 (July 1, 2014) 
(File No. SR-NYSEArca-2014-45) (order approving proposed rule change 
governing the continued listing and trading of shares of the 
PowerShares Insured California Municipal Bond Portfolio, PowerShares 
Insured National Municipal Bond Portfolio, and PowerShares Insured 
New York Municipal Bond Portfolio); 75468 (July 16, 2015), 80 FR 
43500 (July 22, 2015) (SR-NYSEArca-2015-25) (order approving 
proposed rule change relating to the listing and trading of iShares 
iBonds Dec 2021 AMT-Free Muni Bond ETF and iShares iBonds Dec 2022 
AMT-Free Muni Bond ETF under NYSE Arca Equities Rule 5.2(j)(3)); 
74730 (April 15, 2015), 76 FR 22234 (April 21, 2015) (notice of 
proposed rule change relating to the listing and trading of iShares 
iBonds Dec 2021 AMT-Free Muni Bond ETF and iShares iBonds Dec 2022 
AMT-Free Muni Bond ETF under NYSE Arca Equities Rule 5.2(j)(3), 
Commentary .02); 74730 75376 (July 7, 2015), 80 FR 40113 (July 13, 
2015) (SR-NYSEArca-2015-18) (order approving proposed rule change 
relating to the listing and trading of Vanguard Tax-Exempt Bond 
Index Fund under NYSE Arca Equities Rule 5.2(j)(3)).

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[[Page 66249]]

    In light of the characteristics of Municipal Securities as 
described above, the Exchange proposes in its filing to apply existing 
Rule 14.11(c)(4)(b)(i) and proposed Rule 14.11(c)(4)(B)(ii) in a 
``waterfall'' manner. Specifically, the Exchange proposes that every 
series of Index Fund Shares based on an index of fixed income 
securities and cash (including an index that contains Municipal 
Securities) would initially be evaluated against the generic listing 
standards of the existing Rule 14.11(c)(4)(b)(i). If the index 
underlying a series of Index Fund Shares satisfies the existing 
criteria of Rule 14.11(c)(4)(b)(i), the Exchange would proceed with 
listing the Index Fund Shares under that provision. However, if the 
index does not meet the requirements of Rule 14.11(c)(4)(b)(i) and such 
index contains only Municipal Securities and cash, the Exchange would 
apply the proposed Rule 14.11(c)(4)(B)(ii) to such index.
    The Exchange believes that proposed Rule 14.11(c)(4)(B)(ii) 
includes many requirements that are more stringent than those 
applicable to an index of fixed income securities and cash under 
existing Rule 14.11(c)(4)(B)(i). The Exchange accordingly believes 
these heightened requirements would deter potential manipulation of 
such Municipal Securities indices, even though the indices may include 
securities that have smaller original principal amounts outstanding. 
Below is a comparison of the existing quantitative requirements for 
Index Fund Shares based on an index of fixed income securities 
(existing Rule 14.11(c)(4)(B)(i)) versus the Exchange's proposed 
alternative quantitative requirements for Index Fund Shares based on an 
index of Municipal Securities (proposed Rule 14.11(c)(4)(B)(ii)). The 
Exchange proposes that the quantitative requirements described below 
would apply to a Municipal Securities index underlying a series of 
Index Fund Shares on both an initial and continued basis.

                  Original Principal Amount Outstanding
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Existing Requirement for Fixed      Fixed Income Security components
 Income Securities.                  that in aggregate account for at
                                     least 75% of the Fixed Income
                                     Securities portion of the weight of
                                     the index or portfolio each shall
                                     have a minimum original principal
                                     amount outstanding of $100 million
                                     or more.
Proposed Requirement for Municipal  Municipal Security components that
 Securities.                         in aggregate account for at least
                                     90% of the Municipal Securities
                                     portion of the weight of the index
                                     or portfolio each shall have a
                                     minimum original principal amount
                                     outstanding of at least $5 million
                                     and have been issued as part of a
                                     transaction of at least $20
                                     million.
------------------------------------------------------------------------

    As discussed above, according to the Exchange, Municipal Securities 
are typically issued with individual maturities of relatively small 
size, although they generally are constituents of a much larger 
municipal bond offering. In recognition of these smaller offering 
sizes, the Exchange proposes to reduce the minimum original principal 
amount outstanding requirement for component securities to at least $5 
million. However, the Exchange proposes that qualifying securities must 
have been issued as part of a transaction of at least $20 million. 
Lastly, the Exchange proposes to increase the percentage weight of an 
index that must satisfy the original principal amount outstanding 
requirement from 75% to 90%.
    The Exchange does not believe that reducing the requirement for 
minimum original principal amount outstanding will make an index of 
Municipal Securities more susceptible to manipulation. The Exchange 
believes that the requirement that component securities in a fixed 
income index have a minimum principal amount outstanding, in concert 
with the other requirements of Rule 14.11(c)(4)(B)(i), is to ensure 
that such index is sufficiently broad-based in scope as to minimize 
potential manipulation of the index. However, based on empirical 
analysis, the Exchange does not believe that an index of Municipal 
Securities with lower original principal amounts outstanding is 
necessarily more susceptible to manipulation.\13\ According to the 
Exchange, in 2016, Blackrock, Inc. analyzed the potential for 
manipulation of Municipal Securities to affect an exchange traded fund 
and found that such manipulation ``may be uneconomical and is 
unsupported in practice.'' \14\ In addition, the Exchange believes that 
its proposal to require that 90% of the weight of a Municipal 
Securities index meet the original principal amount outstanding 
requirement (as opposed to 75% for fixed income indices) will further 
deter potential manipulation by ensuring that a greater portion of the 
index meet this minimum size requirement.
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    \13\ See Letter from Samara Cohen, Managing Director, U.S. Head 
of iShares Capital Markets, Joanne Medero, Managing Director, 
Government Relations & Public Policy, and Deepa Damre, Managing 
Director, Legal and Compliance, BlackRock, Inc., to Brent J. Fields, 
Secretary, Commission, dated October 18, 2017, in support of the 
Exchange's proposal to facilitate the listing and trading of Index 
Fund Shares listed pursuant to NYSE Arca Rule 5.2-E(j)(3) (SR-
NYSEArca-2017-56).
    \14\ See id. at 3 and accompanying note 11. In the letter, 
Blackrock states that Blackrock's ``empirical analysis indicated 
that: (1) given the over-the-counter dealer-centric market for 
municipal bonds, the bid-ask spread decreases with trade size; 
therefore, trading many small lots to move matrix prices is likely 
to be costly; (2) large trades move prices significantly and this 
effect is incorporated into prices quickly; for manipulation to work 
by affecting bond prices, the trades must be large, implying greater 
dollar cost and more likelihood of detection even if markets were 
segmented; (3) while pricing agents apply matrix pricing techniques 
to value non-traded bonds, the effect is likely too small to permit 
price manipulation of the corresponding index or ETF; and (4) market 
participants will use all intraday data to come up with their own 
valuations independently of pricing providers; ultimately, the price 
of an ETF at a point in time reflects these estimates in a manner 
that balances supply and demand.''
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    The Exchange further notes that the Commission previously approved 
the listing and trading of several series of Index Fund Shares where 
the component securities representing at least 90% of the weight of the

[[Page 66250]]

underlying index must have a minimum original principal amount 
outstanding of at least $5 million and have been issued as part of a 
transaction of at least $20 million.\15\
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    \15\ See, e.g., Securities Exchange Act Release No. 84049 
(September 6, 2018), 83 FR 46228 (September 12, 2018) (SR-NYSEArca-
2018-38) (order approving, among other things, revisions to the 
continued listing criteria applicable to the iShares New York AMT-
Free Muni Bond ETF).

                 Maximum Weight of Component Securities
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Existing Requirement for Fixed      No component fixed income security
 Income Securities.                  (excluding Treasury Securities and
                                     GSE Securities) shall represent
                                     more than 30% of the Fixed Income
                                     Securities portion of the weight of
                                     the index or portfolio, and the
                                     five most heavily weighted
                                     component fixed income securities
                                     in the index or portfolio shall not
                                     in the aggregate account for more
                                     than 65% of the Fixed Income
                                     Securities portion of the weight of
                                     the index or portfolio.
Proposed Requirement for Municipal  No component Municipal Security
 Securities.                         shall represent more than 10% of
                                     the Municipal Securities portion of
                                     the weight of the index or
                                     portfolio, and the five most
                                     heavily weighted component
                                     Municipal Securities in the index
                                     or portfolio shall not in the
                                     aggregate account for more than 30%
                                     of the Municipal Securities portion
                                     of the weight of the index or
                                     portfolio.
------------------------------------------------------------------------

    The Exchange proposes to reduce the maximum weight that any 
individual Municipal Security, or group of five Municipal Securities, 
can have in a Municipal Securities index. The current generic listing 
rules for Index Fund Shares based on a fixed income index permit 
individual component securities to account for up to 30% of the weight 
of such index and the top five weighted component securities to account 
for up to 65% of the weight of such index. The Exchange proposes to 
reduce these criteria to 10% for individual Municipal Securities and 
30% for the top five weighted Municipal Securities in an index.
    The Exchange believes that its proposal will reduce the likelihood 
that a Municipal Securities index underlying a series of Index Fund 
Shares could be subject to manipulation by ensuring that no individual 
Municipal Security, or group of five Municipal Securities, represents 
an outsized weight of a Municipal Securities index.

                       Diversification of Issuers
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Existing Requirement for Fixed Income    An underlying index or
 Securities.                              portfolio (excluding one
                                          consisting entirely of
                                          exempted securities) must
                                          include a minimum of 13 non-
                                          affiliated issuers.
Proposed Requirement for Municipal       An underlying index or
 Securities.                              portfolio must include a
                                          minimum of 13 unique issuers.
------------------------------------------------------------------------

    The current generic listing rules for Index Fund Shares based on an 
index of fixed income securities require that such index must include 
securities from at least thirteen non-affiliated \16\ issuers. Notably, 
the current Rule does not apply the issuer diversification requirement 
to indices consisting entirely of exempted securities. Municipal 
Securities are included in the definition of exempted securities.\17\ 
Therefore, an index of Municipal Securities that otherwise meets the 
requirements of Rule 14.11(c)(4)(b)(i) would not be required to satisfy 
the minimum issuer diversification requirement.
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    \16\ The Exchange notes that Rule 405 under the Securities Act 
of 1933 defines an affiliate as a person that directly, or 
indirectly through one or more intermediaries, controls or is 
controlled by, or is under common control with such person. Rule 405 
defines control as the possession, direct or indirect, of the power 
to direct or cause the direction of the management and policies of a 
person, whether through the ownership of voting securities, by 
contract, or otherwise.
    \17\ See Section 3(a)(12) of the Act.
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    Under the proposed Rule 14.11(c)(4)(b)(ii), the Exchange proposes 
that a Municipal Securities index be required to include securities 
from at least 13 unique issuers. The Exchange believes that requiring 
such diversification will reduce the likelihood that an index can be 
manipulated by ensuring that securities from a variety of issuers are 
represented in an index of Municipal Securities.

                          Number of Components
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Existing Requirement for Fixed Income    Thirteen.
 Securities.
Proposed Requirement for Municipal       Five hundred.
 Securities.
------------------------------------------------------------------------

    The current generic listing requirements for Index Fund Shares 
based on an index of fixed income securities do not have an explicit 
requirement that an index contain a minimum number of securities. 
However, given that such requirements also specify that an index must 
contain securities from at least thirteen non-affiliated issuers, there 
is a de facto requirement that an index of fixed income securities 
contain at least thirteen component securities. As described above, 
however, a fixed income index comprised entirely of exempted securities 
(including Municipal Securities) is not required to satisfy the issuer 
diversification requirement, thereby allowing it to have no minimum 
number of component securities.
    Under the proposed Rule 14.11(c)(4)(b)(ii), the Exchange proposes 
to require that a Municipal Securities index contain at least 500 
component securities. The Exchange believes that such requirement will 
ensure that a Municipal Securities index is sufficiently broad-based 
and diversified to make it less susceptible to manipulation.
    In addition to these changes, the Exchange proposes to amend Rule 
14.11(c)(5) to specify that the Exchange may approve a series of Index 
Fund Shares for listing based on a combination of indexes, including an 
index of Municipal Securities. To the extent that an index of Municipal 
Securities is included in a combination, amended Rule 14.11(c)(5) will 
specify that the Municipal Securities index must meet all requirements 
of proposed Rule 14.11(c)(4)(B)(ii). In addition, amended Rule 
14.11(c)(5) will specify that requirements related to index 
dissemination and related continued listing standards will apply to 
indexes of Municipal Securities. The Exchange notes that a combination 
index (including one that includes an index of Municipal Securities) 
will not be permitted to seek to provide investment results, before 
fees and expenses, in an amount that exceeds -300% of the percentage 
performance on a given day of any index included in such combination 
index.
    Finally, as noted above, the Exchange proposes that existing rules 
applicable

[[Page 66251]]

to Index Fund Shares based on fixed income securities will continue to 
apply to any series of Index Fund Shares listed pursuant to proposed 
Rule 14.11(c)(4)(B)(ii), including: (i) Index methodology and 
calculation; \18\ (ii) dissemination of information; \19\ (iii) initial 
shares outstanding; \20\ (iv) hours of trading; \21\ (v) surveillance 
procedures; \22\ and (vi) all continued listing requirements under Rule 
14.11(c)(9)(B).
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    \18\ See Rule 14.11(c)(4)(C).
    \19\ See Rule 14.11(c)(6)(A).
    \20\ See Rule 14.11(c)(6)(B).
    \21\ See Rule 14.11(c)(7).
    \22\ See Rule 14.11(c)(6)(C).
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\23\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\24\ which 
requires, among other things, that the Exchange's rules be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general, to protect investors and the public interest.
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    \23\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \24\ 15 U.S.C. 78f(b)(5).
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    With respect to the quantitative requirements of proposed Rule 
14.11(c)(4)(B)(ii), the original principal amount outstanding 
requirement is lower than what is currently applicable to Index Fund 
Shares based on an index or portfolio of fixed income securities. The 
Commission notes, however, that the other proposed quantitative 
requirements (i.e., component concentration, issuer diversification, 
and minimum number of components) are more stringent than the existing 
generic listing requirements. Accordingly, the Commission believes 
that, taken together, the proposed criteria are sufficiently designed 
to prevent fraudulent and manipulative acts and practices. 
Specifically, the Commission believes that the proposed generic listing 
requirements for an index or portfolio of Municipal Securities, in 
aggregate, should help to ensure that an index underlying a series of 
Index Fund Shares will be sufficiently large, not concentrated, and 
diversified to prevent manipulation of that benchmark. Additionally, 
the Commission notes that it recently approved a proposal by another 
national securities exchange to adopt substantially similar generic 
listing standards.\25\
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    \25\ See NYSE Arca Proposal, supra note 9.
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    The Commission also finds that the proposed amendments to Rule 
14.11(c)(5) are designed to extend the requirements related to the 
generic listing and trading of Index Fund Shares based on a combination 
of two or more types of indexes to an index of Municipal Securities.
    In support of its proposal, the Exchange represents the following:

    (1) Index Fund Shares listed pursuant to proposed Rule 
14.11(c)(4)(B)(ii) will be subject to the existing trading 
surveillances, administered by the Financial Industry Regulatory 
Authority (``FINRA'') on behalf of the Exchange, which are designed 
to detect violations of Exchange rules and applicable federal 
securities laws.\26\ The Exchange represents that these procedures 
are adequate to properly monitor Exchange trading of the Shares in 
all trading sessions and to deter and detect violations of Exchange 
rules and applicable federal securities laws.\27\ FINRA, on behalf 
of the Exchange, will communicate as needed regarding trading in the 
Shares 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.\28\ FINRA also can 
access data obtained from the Municipal Securities Rulemaking Board 
(``MSRB'') relating to municipal bond trading activity for 
surveillance purposes.\29\ FINRA, on behalf of the Exchange, is able 
to access, as needed, trade information for certain fixed income 
securities held by a Fund reported to FINRA's Trade Reporting and 
Compliance Engine.\30\
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    \26\ See Amendment No. 1, supra note 9, at 14-15.
    \27\ See id. at 15.
    \28\ See id.
    \29\ See id.
    \30\ See id.
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    (2) Index Fund Shares listed pursuant to the proposed generic 
listing rule will comply with all other requirements applicable to 
Index Fund Shares including, but not limited to, the applicable 
rules governing the trading of equity securities, trading hours, 
trading halts, surveillance, information barriers, and the 
Information Circular to members, as set forth in Exchange rules 
applicable to Index Fund Shares.\31\
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    \31\ See id. at 16.
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    (3) The Exchange has in place surveillance procedures relating 
to trading in the Index Fund Shares and may obtain information via 
ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement.\32\ In addition, investors will have ready access to 
information regarding the intraday indicative value and quotation 
and last-sale information for the Index Fund Shares. Trade price and 
other information relating to municipal bonds is available through 
the MSRB's Electronic Municipal Market Access.\33\

    \32\ See id. at 18-19.
    \33\ See id. at 19.
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    This approval order is based on all of the Exchange's 
representations, including those set forth above. For the foregoing 
reasons, the Commission finds that the proposed rule change, as 
modified by Amendment No. 1, is consistent with Section 6(b)(5) of the 
Act \34\ and the rules and regulations thereunder applicable to a 
national securities exchange.
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    \34\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\35\ that the proposed rule change (SR-CboeBZX-2019-023), as 
modified by Amendment No. 1, be, and it hereby is, approved.
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    \35\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
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    \36\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-26157 Filed 12-2-19; 8:45 am]
 BILLING CODE 8011-01-P