83 FR 12633 - Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Listing Rules Under Rule 14.11(d)(2)(K)(i) Related to Equity Index-Linked Securities

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 56 (March 22, 2018)

[Federal Register Volume 83, Number 56 (Thursday, March 22, 2018)]
[Notices]
[Pages 12633-12635]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-05795]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82895; File No. SR-CboeBZX-2018-020]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Listing Rules Under Rule 14.11(d)(2)(K)(i) Related to Equity Index-
Linked Securities

March 16, 2018.
    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 March 8, 2018, 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 has designated this 
proposal as a ``non-controversial'' proposed rule change pursuant to 
Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(6)(iii)

[[Page 12634]]

thereunder,\4\ which renders it effective upon filing with the 
Commission. 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).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend its listing rules under Rule 
14.11(d)(2)(K)(i) related to Equity Index-Linked Securities.
    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.com, at the principal office of the 
Exchange, 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 parts 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 is submitting this proposal in order to bring its 
listing rules related to Equity Index-Linked Securities in line with 
those of NYSE Arca, Inc (``Arca'').\5\ Rule 14.11(d) sets forth certain 
rules related to the listing and trading of Linked Securities (as 
defined therein) on the Exchange and Rule 14.11(d)(2)(K)(i) relates 
specifically to the generic listing standards applicable to Equity 
Index-Linked Securities.\6\ Specifically, Rule 14.11(d)(2)(K)(i)(a) 
provides that the index underlying a series of Equity Index-Linked 
Securities must include at least 10 component securities and meet the 
requirements of either Rule 14.11(d)(2)(K)(i)(a)(1) or (2). Rule 
14.11(d)(2)(K)(i)(a)(1) provides that an index must have been reviewed 
and approved for the trading of options or other derivatives by the 
Commission under Section 19(b)(2) of the Act and rules thereunder and 
the conditions set forth in the Commission's approval order, including 
comprehensive surveillance sharing agreements for non-U.S. stocks, 
continue to be satisfied. Rule 14.11(d)(2)(K)(i)(a)(2) provides certain 
quantitative standards related to the market cap, trading volume, 
rebalancing, concentration, and surveillance sharing. As noted above, 
where an index has at least 10 component securities and meets the 
criteria either Rule 14.11(d)(2)(K)(i)(a)(1) or (2), it meets the 
initial listing criteria for Equity Index-Linked Securities. Rule 
14.11(d)(2)(K)(i)(b) includes the continued listing criteria for Equity 
Index-Linked Securities and provides that the Exchange will consider 
suspension and will initiate delisting proceedings where the standards 
set forth in Rule 14.11(d)(2)(K)(i)(a) are not continuously met, with 
some additional concentration and trading volume criteria.
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    \5\ See Arca Rule 5.2-E(j)(6)(B)(I).
    \6\ See Securities Exchange Act Release No. 65225 (August 30, 
2011), 76 FR 55148 (September 6, 2011) (SR-BATS-2011-018) (Order 
Approving Proposed Rule Change to Adopt Rules for the Qualification, 
Listing and Delisting of Companies on the Exchange).
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    The Exchange proposes to amend Rule 14.11(d)(2)(K)(i) related to 
Equity Index-Linked Securities in order to make it substantively 
identical to the comparable rule on Arca. In particular, the Exchange 
is proposing to make certain changes to its rules consistent with 
Arca's rule such that: (i) Derivative Securities Products and Linked 
Securities will be excluded from several initial and continued listing 
criteria; (ii) the rule text makes clear that Rule 
14.11(d)(2)(K)(i)(a)(1) includes a series of Index Fund Shares approved 
by the Commission under Section 19(b)(2) of the Act; (iii) the existing 
trading volume requirement under Rule 14.11(d)(2)(K)(i)(a)(2)(B) is 
replaced with a more flexible trading volume standard; (iv) rules with 
standards applicable only to certain index weightings, including equal-
dollar, modified equal-dollar, capitalization-weighted, and modified 
capitalization-weighted, are eliminated; and (v) Rule 
14.11(d)(2)(K)(i)(a)(2)(G) provides that securities of a foreign issuer 
(including when they underlie ADRs) whose primary trading market 
outside the United States is not a member of the Intermarket 
Surveillance Group (``ISG'') or a party to a comprehensive surveillance 
sharing agreement with the Exchange will not in the aggregate represent 
more than 50% of the dollar weight of the index, and (a) the securities 
of any one such market may not represent more than 20% of the dollar 
weight of the index, and (b) the securities of any two such markets may 
not represent more than 33% of the dollar weight of the index.
    As noted above, the Exchange believes that these proposed changes 
are non-controversial because the changes would make the Exchange's 
listing rules related to Equity Index-Linked Securities substantively 
identical to the rules of another listing exchange and do not present 
any new or novel issues that have not been previously considered by the 
Commission.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \7\ in general and Section 6(b)(5) of the Act \8\ 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, in general, to protect 
investors and the public interest. Specifically, the Exchange believes 
that the proposal 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, in general, to protect investors and the public interest.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(5).
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    The proposed changes to Rule 14.11(d)(2)(K)(i) related to the 
listing of Equity Index-Linked Securities on the Exchange remain 
consistent with the Act because the proposed changes generally 
constitute minor modifications to the existing listing requirements 
that do not significantly change the scope or applicability of the 
listing standards. Further and as noted throughout this filing, the 
changes will make the Exchange's listing rules for Equity Index-Linked 
Securities substantively identical to those of Arca.
    As such, the Exchange believes that the proposal 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 because 
there are no substantive issues raised by this proposal that were not 
otherwise addressed by the Commission in the approvals of Arca's 
listing rules related to Equity Index-Linked Securities.

[[Page 12635]]

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 believes that 
the proposal will allow the Exchange to better compete with Arca by 
putting the two exchanges on equal footing as it relates to listing 
standards applicable to Equity Index-Linked Securities.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written 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 \9\ and Rule 19b-
4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). 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. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \11\ normally 
does not become operative for 30 days after the date of its filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\12\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requests 
that the Commission waive the 30-day operative delay so that the 
proposal may become operative immediately upon filing. The Exchange 
represents that waiver of the 30-day operative delay will allow the 
Exchange to immediately compete with respect to listing new series of 
Equity Index-Linked Securities on the Exchange. Because the proposed 
rules previously have been approved by the Commission for, and are 
substantively identical to those of, another listing exchange, the 
Commission believes that the proposal promotes competition with respect 
to the listing and trading of Equity Index-Linked Securities, and does 
not believe that the proposal raises any novel or unique regulatory 
issues.\13\ Therefore, the Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. The Commission hereby waives the 30-day operative 
delay and designates the proposed rule change operative upon 
filing.\14\
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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ See supra note 5.
    \14\ For purposes only of waiving the 30-day 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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall 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-CboeBZX-2018-020 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-2018-020. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CboeBZX-2018-020, and should be 
submitted on or before April 12, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-05795 Filed 3-21-18; 8:45 am]
BILLING CODE 8011-01-P