[Federal Register Volume 85, Number 69 (Thursday, April 9, 2020)]
[Notices]
[Pages 20012-20013]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07446]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88558; File No. SR-CboeBZX-2020-007]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order 
Approving a Proposed Rule Change, as Modified by Amendment No. 1, To 
Eliminate the Requirement That an Intraday Indicative Value Be 
Disseminated as Set Forth Under Rule 14.11(c) for Certain Series of 
Index Fund Shares and Under Rule 14.11(i) for All Series of Managed 
Fund Shares

April 3, 2020.

I. Introduction

    On February 14, 2020, Cboe BZX Exchange, Inc. (``Exchange'' or 
``BZX'') 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 eliminate the requirements that an intraday 
indicative value be disseminated under Rule 14.11(c) (Index Fund 
Shares) for certain series of Index Fund Shares and under Rule 14.11(i) 
(Managed Fund Shares) for all series of Managed Fund Shares. The 
proposed rule change was published for comment in the Federal Register 
on February 27, 2020.\3\ On March 18, 2020, the Exchange filed 
Amendment No. 1 to the proposed rule change.\4\ The Commission has 
received no comments on the proposal. This order approves the proposed 
rule change, as modified by Amendment No. 1.
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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. 88259 (February 21, 
2020), 85 FR 11419 (``Notice'').
    \4\ In Amendment No. 1, the Exchange made various technical 
changes. Accordingly, Amendment No. 1 is not subject to notice and 
comment. Amendment No. 1 is available at: https://www.sec.gov/comments/sr-cboebzx-2020-007/srcboebzx2020007-6993239-214728.pdf.
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1

    BZX Rules 14.11(c) and 14.11(i) govern the listing and trading of 
Index Fund Shares and Managed Fund Shares, respectively, on the 
Exchange. BZX Rules 14.11(c)(3)(C), (c)(6)(A), and (c)(9)(B)(i)(e) as 
well as BZX Rules 14.11(i)(4)(B)(i) and (i)(4)(B)(iii)(b) require that 
an intraday estimate of the value of a share of each series (``IIV'') 
be disseminated and updated at least every 15 seconds. The Exchange 
proposes to eliminate the requirement to disseminate an IIV for all 
series of Managed Fund Shares and for each series of Index Fund Shares 
that publishes its ``Portfolio Holdings'' \5\ on its website on a daily 
basis. The Exchange also proposes to make corresponding changes to the 
Managed Fund Shares listing standards to remove the term ``Intraday 
Indicative Value'' from the definitional section and to eliminate the 
provisions relating to halting trading in a series of Managed Fund 
Shares when there is an interruption to the dissemination of the 
shares' IIV.
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    \5\ The Exchange is proposing to define ``Portfolio Holdings'' 
as the holdings of a particular series of Index Fund Shares that 
will form the basis for the calculation of its net asset value at 
the end of the business day, and includes the following information, 
to the extent applicable: (i) Ticker symbol; (ii) CUSIP or other 
identifier; (iii) description of the holding; (iv) identity of the 
security, commodity, index, or other asset upon which the derivative 
is based; (v) the strike price for any options; (vi) the quantity of 
each security or other asset held as measured by: (a) Par value; (b) 
notional value; (c) number of shares; (d) number of contracts; and 
(e) number of units; (vii) maturity date; (viii) coupon rate; (ix) 
effective date; (x) market value; and (xi) percentage weighting of 
the holding in the portfolio. See proposed BZX Rule 14.11(c)(1)(F).
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the Act and 
rules and regulations thereunder applicable to a national securities 
exchange.\6\ In particular, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with Section 
6(b)(5) of the Act,\7\ 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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    \6\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(5).
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    As discussed above, BZX proposes to eliminate the IIV dissemination 
requirement for all series of Managed Fund Shares, all of which are 
subject to a portfolio dissemination requirement,\8\

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and for those series of Index Fund Shares that publish their Portfolio 
Holdings on a daily basis.\9\ The Exchange's proposal is narrowly 
tailored to series of exchange-traded funds (``ETFs'') with daily 
portfolio holdings disclosure. The Commission believes that the 
transparency that comes from daily portfolio holdings disclosure should 
provide market participants with sufficient information to facilitate 
the intraday valuation of the shares of a series of Managed Fund Shares 
or Index Fund Shares without the additional requirement to disseminate 
an IIV.\10\
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    \8\ See BZX Rule 14.11(i)(4)(B)(ii)(a) (requiring that the 
Disclosed Portfolio for a series of Managed Fund Shares be 
disseminated at least once daily and be made available to all market 
participants at the same time; and BZX Rule 14.11(i)(4)(B)(iii)(b) 
(requiring that the Exchange consider suspension of trading in and 
commence delisting proceedings for a series of Managed Fund Shares 
where the Disclosed Portfolio is not made available to all market 
participants at the same time).
    \9\ Under BZX's Index Fund Shares listing rule, only certain 
series of Index Fund Shares are required to disclose their portfolio 
holdings daily. See BZX Rule 14.11(c)(1)(B)(iv).
    \10\ The Commission notes that last year it adopted Rule 6c-11 
under the Investment Company Act of 1940 (``1940 Act'') to permit 
ETFs that satisfy certain conditions to operate without obtaining an 
exemptive order from the Commission under the 1940 Act. See 
Investment Company Act Release No. 33646 (September 25, 2019), 84 FR 
57162, 57180 (October 24, 2019) (``Adopting Release''). See also 17 
CFR 270.6c-11. Rule 6c-11 does not require ETFs to disseminate an 
IIV as a condition for reliance on the rule. In the Adopting 
Release, the Commission stated that dissemination of an IIV ``is not 
necessary to support the arbitrage mechanism for ETFs that provide 
daily portfolio holdings disclosure.'' See Adopting Release at 
57179-80. Instead, the daily portfolio holdings disclosure required 
by the rule ``will provide market participants with the relevant 
data to input into their internal algorithms and thus allow them to 
determine if arbitrage opportunities exist.'' See id.
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    Accordingly, the Commission believes that the proposed rule change, 
as modified by Amendment No. 1, is designed to, among other things, 
remove impediments to and perfects the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest. 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 \11\ and 
the rules and regulations thereunder applicable to a national 
securities exchange.
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    \11\ 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,\12\ that the proposed rule change (SR-CboeBZX-2020-007), as 
modified by Amendment No. 1, be, and it hereby is, approved.
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    \12\ 15 U.S.C. 78s(b)(2).
    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-07446 Filed 4-8-20; 8:45 am]
 BILLING CODE 8011-01-P