[Federal Register Volume 90, Number 81 (Tuesday, April 29, 2025)]
[Notices]
[Pages 17853-17856]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-07315]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102920; File No. SR-CboeBZX-2025-057]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Fidelity Blue Chip Growth ETF, Fidelity Blue Chip Value ETF,
Fidelity Magellan ETF, Fidelity Real Estate Investment ETF, and the
Fidelity Fundamental Small-Mid Cap ETF, Shares of Which Are Listed and
Traded on the Exchange Pursuant to BZX Rule 14.11(m)
April 23, 2025.
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 April 11, 2025, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'')
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (``Commission'' or ``SEC'')
a proposed rule change to permit the Fidelity Blue Chip Growth ETF,
Fidelity Blue Chip Value ETF, Fidelity Magellan ETF, Fidelity Real
Estate Investment ETF, and the Fidelity Fundamental Small-Mid Cap ETF
\5\ (collectively referred to as the ``Funds''), shares of which are
listed and traded on the Exchange pursuant to BZX Rule 14.11(m), to
operate a ``Semi-Transparent Sleeve'' and ``Fully-Transparent Sleeve''
and to expand the investible universe for the proposed Fully-
Transparent Sleeve.
---------------------------------------------------------------------------
\5\ The Fidelity Small-Mid Cap Opportunities ETF was renamed the
Fidelity Fundamental Small-Mid Cap ETF on February 26, 2024.
---------------------------------------------------------------------------
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 adopted BZX Rule 14.11(m) for the purpose of
permitting the listing and trading, or trading pursuant to unlisted
trading privileges, of Tracking Fund Shares, which are securities
issued by an actively managed open-end management investment
company.\6\ Exchange Rule 14.11(m)(2)(A) requires the Exchange to file
separate proposals under Section 19(b) of the Act before listing and
trading any series of Tracking Fund Shares on the Exchange. Pursuant to
this provision, the Exchange submitted proposals to list and trade
shares (``Shares'') of Tracking Fund Shares of the Fidelity Blue Chip
Growth ETF, Fidelity Blue Chip Value ETF, Fidelity Magellan ETF,
Fidelity Real Estate Investment ETF, and the Fidelity Fundamental
Small-Mid Cap ETF \7\ (collectively referred to as the ``Funds'').\8\
---------------------------------------------------------------------------
\6\ Rule 14.11(m)(3)(A) provides that ``[t]he term ``Tracking
Fund Share'' means a security that (i) represents an interest in an
investment company registered under the Investment Company Act of
1940 (``Investment Company'') organized as an open-end management
investment company, that invests in a portfolio of securities
selected by the Investment Company's investment adviser consistent
with the Investment Company's investment objectives and policies;
(ii) is issued in a specified aggregate minimum number in return for
a deposit of a specified Tracking Basket or Custom Basket, as
applicable, and/or a cash amount with a value equal to the next
determined net asset value; (iii) when aggregated in the same
specified minimum number, may be redeemed at a holder's request,
which holder will be paid a specified Tracking Basket or Custom
Basket, as applicable, and/or a cash amount with a value equal to
the next determined net asset value; and (iv) the portfolio holdings
for which are disclosed within at least 60 days following the end of
every fiscal quarter. Rule 14.11(m)(3)(E) provides that ``[t]he 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.'' Rule
14.11(m)(3)(F) provides that ``the term ``Custom Basket'' means a
portfolio of securities that is different from the Tracking Basket
and is otherwise consistent with the exemptive relief issued
pursuant to the Investment Company Act of 1940 applicable to a
series of Tracking Fund Shares.
\7\ The Fidelity Small-Mid Cap Opportunities ETF was renamed the
Fidelity Fundamental Small-Mid Cap ETF on February 26, 2024.
\8\ See Securities Exchange Act Nos. 88887 (May 15, 2020) 85 FR
30990 (May 21, 2020) (SR-CboeBZX-2019-107) (Notice of Filing of
Amendment No. 5 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 5, To Adopt Rule
14.11(m), Tracking Fund Shares, and To List and Trade Shares of the
Fidelity Blue Chip Value ETF, Fidelity Blue Chip Growth ETF, and
Fidelity New Millennium ETF) (the ``Original Order''); 90530
(November 30, 2020) 85 FR 78366 (December 4, 2020) (SR-CboeBZX-2020-
085) (Notice of Filing and Immediate Effectiveness of a Proposed
Rule Change Relating to List and Trade Shares of the Fidelity Growth
Opportunities ETF, Fidelity Magellan ETF, Fidelity Real Estate
Investment ETF, and Fidelity Small-Mid Cap Opportunities ETF Under
Rule 14.11(m)) (the ``Original Notice''); 92946 (September 13, 2021)
86 FR 51941 (September 17, 2021) (SR-CboeBZX-2021-060) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Reflect an Amendment to the Application and Exemptive Order
Governing the Following Funds, Shares of Which Are Listed and Traded
on the Exchange Under BZX Rule 14.11(m): Fidelity Growth
Opportunities ETF, Fidelity Magellan ETF, Fidelity Real Estate
Investment ETF, Fidelity Small-Mid Cap Opportunities ETF, Fidelity
Blue Chip Value ETF, Fidelity Blue Chip Growth ETF, and Fidelity New
Millennium ETF) (the ``First Subsequent Notice''); 94401 (March 11,
2022) 87 FR 15296 (March 17, 2022) (SR-CboeBZX-2022-018) (Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Permit
Certain Series of Tracking Fund Shares Issued by Fidelity Covington
Trust, Which Are Listed and Traded on the Exchange Pursuant to Rule
14.11(m), To Use Custom Baskets) (the ``Second Subsequent Notice'',
and together with the Original Order, Original Notice, and First
Subsequent Notice the ``Prior Filings'').
---------------------------------------------------------------------------
[[Page 17854]]
The Funds are actively-managed exchange-traded funds for which
Fidelity Covington Trust, among others, submitted an application for
exemptive relief (the ``Original Application'') which was granted under
an exemptive order (the ``Original Exemptive Order'', and the Original
Exemptive Order together with the Original Application the ``Original
Exemptive Relief'') issued on December 10, 2019.\9\ Pursuant to the
Original Exemptive Relief, the Funds are generally excluded from
investing in asset classes that are not U.S. Equities. Furthermore, the
Original Order and Original Notice to list and trade shares of the
Funds provided that each of the Fund's holdings will conform to the
permissible investments as set forth in the Original Exemptive
Relief.\10\
---------------------------------------------------------------------------
\9\ See Investment Company Act Release No. 33683 (November 14,
2019), 84 FR 64140 (November 20, 2019) (the ``Original
Application'') and 33712 (December 10, 2019) (the ``Original
Exemptive Order'') (File No. 812-14364).
\10\ Pursuant to the Original Exemptive Relief, each Fund's
permissible investments include only the following instruments:
ETFs, exchange-traded notes, exchange-traded common stocks, common
stocks listed on a foreign exchange that trade on such exchange
contemporaneously with the Shares (``foreign common stocks''),
exchange-traded preferred stocks, exchange-traded American
Depositary Receipts, exchange-traded real estate investment trusts,
exchange-traded commodity pools, exchange-traded metals trusts,
exchange-traded currency trusts, and exchange-traded futures that
trade contemporaneously with the Shares, as well as cash and cash
equivalents. With the exception of foreign common stocks and cash
and cash equivalents, all holdings of each Fund will be listed on a
U.S. national securities exchange.
---------------------------------------------------------------------------
On March 3, 2025, the issuer filed an amendment to the Original
Application (the ``Amended Application'') \11\ for which the Commission
issued an exemptive order on March 31, 2025 (the ``Amended Exemptive
Order'',\12\ and the Amended Exemptive Order together with the Amended
Application, the ``Amended Exempted Relief'') to allow the Funds to
operate a ``Fully-Transparent Sleeve'' and ``Semi-Transparent Sleeve''
and allow the Fully-Transparent Sleeve of the Funds additional
flexibility to invest in securities and instruments including fixed
income securities, foreign investments that do not trade
contemporaneously with the Shares, and derivatives (the ``Amended
Exemptive Order Investments'').
---------------------------------------------------------------------------
\11\ See Investment Company Act Release No. 35486 (March 3,
2025) 90 FR 11445 (March 6, 2025) (File No. 81215606) (the ``Amended
Application'').
\12\ See Investment Company Act Release No. 35517 (March 31,
2025) (File No. 812-15606) (the ``Amended Exemptive Order'').
---------------------------------------------------------------------------
Pursuant to the Amended Exemptive Relief, for the Fully-Transparent
Sleeve, each Fund will comply with the portfolio holdings disclosure
requirements of Rule 6c-11 under the Investment Company Act of 1940
(the ``1940 Act'') and will publish, on a daily basis, its portfolio
holdings only with respect to the Fully-Transparent Sleeve as of the
end of the prior business day in accordance with the requirements of
Rule 6c-11(c)(1)(i). The remainder of a Funds' portfolio will invest
solely in the permissible investments provided for in the Original
Exemptive Relief, which constitutes the Semi-Transparent Sleeve, and
will continue to disclose portfolio holdings in a manner consistent
with the Original Exemptive Relief. Flexibility to operate the Fully-
Transparent Sleeve would allow a Fund to pursue investment strategies
similar to those utilized by Exchange-Traded Funds (``ETFs'') that
operate pursuant to Rule 6c-11 under the 1940 Act because, with respect
to the Fully-Transparent Sleeve only, a Fund would be able to invest in
the Amended Exemptive Order Investments not permitted under the
Original Exemptive Relief.
Now, the Exchange is submitting this proposal to modify
representations made in the Original Order and Original Notice to allow
the Funds to operate a Fully-Transparent Sleeve and Semi-Transparent
Sleeve and also to expand the list of permissible instruments for the
Fully-Transparent Sleeves of each Fund to include the Amended Exemptive
Order Investments.\13\ The Fully-Transparent Sleeve would comply with
the portfolio holdings disclosure requirements of Rule 6c-11 of the
1940 Act, and both the Fully-Transparent Sleeve and the Semi-
Transparent Sleeve would continue to comply with Exchange Rule 14.11(m)
(Tracking Fund Shares).
---------------------------------------------------------------------------
\13\ See File No. 812-15606, dated February 24, 2025. The Funds
sought the same investment flexibility to choose its investments as
ETFs relying on Rule 6c-11 under the 1940 Act (``Rule 6c-11'')
subject to the same portfolio holdings disclosure requirements as
Rule 6c-11 ETFs with respect to Amended Exemptive Order Investments.
The Funds are not able to operate in reliance on Rule 6c-11 under
the Amended Exemptive Order because they do not and will not
disclose all of their portfolio holdings daily as required by the
rule.
---------------------------------------------------------------------------
The principal difference between Tracking Fund Shares and ETFs
operating under Rule 6c-11 is that, in lieu of disclosing their full
portfolio holdings daily, a series of Tracking Fund Shares provides
daily disclosure of the Tracking Basket \14\ and discloses its full
portfolio holdings within at least 60 days following the end of every
fiscal quarter.\15\ Under the Amended Exemptive Order, the ratio of the
Fully-Transparent Sleeve portion of the Tracking Basket to the total
Tracking Basket will correspond to the ratio of the Amended Exemptive
Order Investments to the ETF's aggregate portfolio holdings. The ratio
of the Semi-Transparent portion of the Tracking Basket to the total
Tracking Basket will correspond to the ratio of all investments other
than Amended Exemptive Order Investments to the ETF's aggregate
portfolio holdings.\16\ All Amended Exemptive Order Investments held by
a Fund will be included in the Fund's Tracking Basket in their actual
weights (i.e., they will be fully disclosed).\17\ Additionally, the
Funds will continue to publicly disclose the Fund Portfolio \18\ within
at least 60 days following the end of every fiscal quarter and will be
made available to all market participants at the same time as required
under Rule 14.11(m)(4)(B)(iii). Consistent with the Amended Exemptive
Order, each Fund, to the extent it invests in Amended Exemptive Order
Investments, will publish a new Tracking Basket that consists of two
distinct portions: (1) a first portion corresponding to the Semi-
Transparent Sleeve; and (2) a second portion corresponding to the
Fully-Transparent Sleeve that fully discloses all Amended Exemptive
Order Investments in a manner consistent with Rule 6c-11(c)(1).
---------------------------------------------------------------------------
\14\ See Exchange Rule 14.11(m)(3)(E).
\15\ See Exchange Rule 14.11(m)(4)(B)(iii).
\16\ See Investment Company Act Release No. 812-15606 (March 31,
2025).
\17\ Id.
\18\ See Exchange Rule 14.11(m)(3)(B).
---------------------------------------------------------------------------
The Exchange also proposes to expand the universe of investments
for the Fully-Transparent Sleeve of each Fund. Specifically, the
Exchange proposes to provide the Fully-Transparent Sleeve of each Fund
the flexibility to invest in the Amended Exemptive Order Investments as
well as the permissible investments provided in the Original Exemptive
Relief. The Semi-Transparent Sleeve of each Fund would continue to
invest only in the permissible investments noted in the Original Order,
Original Notice, and the Original Exemptive Relief.
Each of the Funds will comply with the conditions of the Amended
Exemptive Order and the Exchange is
[[Page 17855]]
updating representations in the Original Order and Original Notice
accordingly. Except for the changes noted above, all other
representations made in the Prior Filings for each of the Funds \19\
remain unchanged and will continue to constitute continued listing
requirements for each of the Shares.\20\ Both the Semi-Transparent
Sleeve and Fully-Transparent Sleeve of the Funds will continue to
comply with all of the requirements of Rule 14.11(m) as the proposal
would only add more transparency to the Tracking Basket.
---------------------------------------------------------------------------
\19\ Supra note 8.
\20\ The Funds' use of Custom Baskets would remain the same as
described in the Second Subsequent Notice.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\21\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \22\ requirements that the rules
of an exchange be 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 regulating,
clearing, settling, processing information with respect to, and
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.
---------------------------------------------------------------------------
\21\ 15 U.S.C. 78f(b).
\22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest. The proposed amendment would permit each of the Funds
the use of a Semi-Transparent Sleeve and Fully-Transparent Sleeve, as
provided in the Amended Exemptive Relief. The amendment would also
expand the investible universe for the Fully-Transparent Sleeve to
include the Amended Exemptive Order Investments in addition to the
permitted investments provided in the Original Order, Original Notice,
and the Original Exemptive Relief. As the proposed Fully- Transparent
Sleeve of each Fund would comply with the portfolio holdings disclosure
requirements of Rule 6c-11 of the 1940 Act and Rule 14.11(m), the
proposal would only add more transparency to the Tracking Basket. Each
of the Funds would continue to comply with the requirements of Rule
14.11(m) and would be able to operate in a manner consistent with the
Amended Exemptive Relief.
Except for the changes noted above, all other representations made
in the Prior Filings remain unchanged and, as noted, will continue to
constitute continued listing requirements for the Funds.
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 purposes of the Act. As noted, the proposed
amendment is intended to permit each Fund to use a Fully-Transparent
Sleeve and Semi-Transparent Sleeve, and to expand the investible
universe of the Fully-Transparent Sleeve to include the Amended
Exemptive Order Investments, as provided in the Amended Exemptive
Order. The proposal will allow for the listing and trading of a unique
series of Tracking Fund Shares that will encourage competition. The
Exchange believes that these changes will not impose any burden on
competition.
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
Pursuant to Section 19(b)(3)(A) of the Act \23\ and Rule 19b-
4(f)(6) \24\ thereunder, the Exchange has designated this proposal as
one that effects a change that: (i) does not significantly affect the
protection of investors or the public interest; (ii) does not impose
any significant burden on competition; and (iii) by its terms, does not
become operative for 30 days after the date of the filing, or such
shorter time as the Commission may designate if consistent with the
protection of investors and the public interest.\25\
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 CFR 240.19b-4(f)(6).
\25\ In addition, Rule 19b-4(f)(6) requires a self-regulatory
organization to give the Commission written notice of its intent to
file 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. See id. The Exchange has satisfied
this requirement.
---------------------------------------------------------------------------
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act normally does not become operative for 30 days after the date of
its filing. However, Rule 19b-4(f)(6)(iii) \26\ permits the Commission
to designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange requested
that the Commission waive the 30-day operative delay so that the
proposal may become operative immediately upon filing. The Exchange
represents that, pursuant to the Amended Exemptive Order,\27\ the Funds
are permitted to operate a Fully-Transparent Sleeve and Semi-
Transparent Sleeve, and that the Fully-Transparent Sleeve of the Funds
is able to invest in Amended Exemptive Order Investments. The proposed
rule change seeks to revise certain descriptions of the Funds made in
the Prior Filings to permit the Funds to operate a Fully-Transparent
Sleeve and Semi-Transparent Sleeve, and, with respect to the Fully-
Transparent Sleeve, to invest in Amended Exemptive Order Investments,
in accordance with the requirements set forth in the Amended Exemptive
Order. The Exchange also represents that the Fully-Transparent Sleeve
will comply with the portfolio holdings disclosure requirements of Rule
6c-11 under the 1940 Act, and both the Fully-Transparent Sleeve and the
Semi-Transparent Sleeve will continue to comply with the requirements
of BZX Rule 14.11(m). In addition, the Exchange represents that, except
for the changes noted above, all other representations made in the
Prior Filings remain unchanged and will continue to constitute
continued listing requirements for the Funds. As such, the proposal,
which seeks to conform to certain of the requirements of the Amended
Exemptive Order (as described above), raises no novel legal or
regulatory issues. Therefore, the Commission believes that waiver of
the 30-day operative delay is consistent with the protection of
investors and the public interest. Accordingly, the Commission hereby
waives the 30-day operative delay and designates the proposed rule
change operative upon filing.\28\
---------------------------------------------------------------------------
\26\ 17 CFR 240.19b-4(f)(6)(iii).
\27\ See supra note 12 and accompanying text.
\28\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
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
[[Page 17856]]
investors, or otherwise in furtherance of the purposes of the Act.
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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-CboeBZX-2025-057 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-2025-057. 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 (https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-CboeBZX-2025-057 and should
be submitted on or before May 20, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
---------------------------------------------------------------------------
\29\ 17 CFR 200.30-3(a)(12), (59).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-07315 Filed 4-28-25; 8:45 am]
BILLING CODE 8011-01-P