83 FR 12992 - Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade Shares of the LHA Market State® Tactical U.S. Equity ETF, a Series of the ETF Series Solutions, Under Rule 14.11(i), Managed Fund Shares
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 58 (March 26, 2018)
Federal Register Volume 83, Issue 58 (March 26, 2018)
| Page Range | 12992-12995 | |
| FR Document | 2018-06013 |
[Federal Register Volume 83, Number 58 (Monday, March 26, 2018)] [Notices] [Pages 12992-12995] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-06013] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82906; File No. SR-CboeBZX-2017-012] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade Shares of the LHA Market State[supreg] Tactical U.S. Equity ETF, a Series of the ETF Series Solutions, Under Rule 14.11(i), Managed Fund Shares March 20, 2018. I. Introduction On December 7, 2017, 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 (``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to list and trade the shares (``Shares'') of the LHA Market State[supreg] Tactical U.S. Equity ETF (``Fund''), a Series of the ETF Series Solutions (``Trust''). The proposed rule change was published for comment in the Federal Register on December 28, 2017.\3\ On January 31, 2018, the Exchange filed Amendment No. 1 to the proposed rule change.\4\ On February 6, 2018, pursuant to Section 19(b)(2) of the Exchange Act,\5\ 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 disapprove the proposed [[Page 12993]] rule change.\6\ On February 13, 2018, the Exchange filed Amendment No. 2 to the proposed rule change.\7\ The Commission received no comment letters on the proposed rule change. This order approves the proposed rule change, as modified by Amendment No. 2. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 82379 (Dec. 21, 2017), 82 FR 61608. \4\ Amendment No. 1, which amended and replaced the proposed rule change in its entirety, is available on the Commission's website at: https://www.sec.gov/comments/sr-cboebzx-2017-012/cboebzx2017012-3002921-161895.pdf. \5\ 15 U.S.C. 78s(b)(2). \6\ See Securities Exchange Act Release No. 82643, 83 FR 6071 (Feb. 12, 2018). The Commission designated March 28, 2018, as the date by which the Commission shall either approve, disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. \7\ In Amendment No. 2, which amended and replaced the proposed rule change, as modified by Amendment No. 1, in its entirety, the Exchange: (a) Supplemented the description of the Fund's relative exposures to the U.S. equity and S&P 500 futures markets; (b) made conforming informational and rule reference corrections to maintain internal consistency; (c) updated the status of the registration statement for the Fund; (d) clarified the use of certain defined terms; and (e) made other technical and non-substantive changes. Because Amendment No. 2 does not materially alter the substance of the proposed rule change or raise unique or novel regulatory issues, it is not subject to notice and comment. Amendment No. 2 is available on the Commission's website at: https://www.sec.gov/comments/sr-cboebzx-2017-012/cboebzx2017012-3033817-161904.pdf. --------------------------------------------------------------------------- II. Exchange's Description of the Proposal, as Modified by Amendment No. 2 The Exchange proposes to list and trade the Shares under BZX Rule 14.11(i), which governs the listing and trading of Managed Fund Shares on the Exchange. The Exchange represents that the Fund will be an actively managed exchange-traded fund that seeks to provide investment results that exceed the total return performance of the broader U.S. equity market on a risk-adjusted basis. The Exchange has submitted this proposal in order to allow the Fund to hold listed derivatives, in particular S&P 500 futures, in a manner that would exceed the limitations of BZX Rule 14.11(i)(4)(C)(iv)(b), which prevents, among other things, a series of Managed Fund Shares from holding listed derivatives based on any single underlying reference asset in excess of 30 percent of the weight of its portfolio (including gross notional exposures) (``30% Limitation'').\8\ Otherwise, the Fund will comply with all other listing requirements of BZX Rule 14.11(i), including BZX Rule 14.11(i)(4)(C), on an initial and continued listing basis. --------------------------------------------------------------------------- \8\ BZX Rule 14.11(i)(4)(C)(iv)(b) requires that the aggregate gross notional value of listed derivatives based on any five or fewer underlying reference assets to not exceed 65% of the weight of the portfolio (including gross notional exposures), and the aggregate gross notional value of listed derivatives based on any single underlying reference asset to not exceed 30% of the weight of the portfolio (including gross notional exposures). The Exchange states that the proposal is to allow the Fund to exceed the specific requirement of BZX Rule 14.11(i)(4)(C)(iv)(b) that prevents the aggregate gross notional value of listed derivatives based on any single underlying reference asset from exceeding 30% of the weight of the portfolio (including gross notional exposures). According to the Exchange, the Fund will meet the other requirement of BZX Rule 14.11(i)(4)(C)(iv)(b). --------------------------------------------------------------------------- The Shares will be offered by the Trust, which is registered with the Commission as an open-end investment company.\9\ The Fund's adviser, Little Harbor Advisors, LLC (``Adviser''), is not registered as a broker-dealer and is not affiliated with a broker-dealer. Adviser personnel who make decisions regarding the Fund's portfolio are subject to procedures designed to prevent the use and dissemination of material, nonpublic information regarding the Fund's portfolio. In the event that (a) the Adviser becomes registered as a broker-dealer or newly affiliated with a broker-dealer; or (b) any new adviser or sub- adviser is a registered broker-dealer or becomes affiliated with a broker-dealer; it will implement a fire wall with respect to its relevant personnel or such broker-dealer affiliate, as applicable, regarding access to information concerning the composition of, or changes to, the portfolio, and will be subject to procedures designed to prevent the use and dissemination of material, nonpublic information regarding such portfolio. --------------------------------------------------------------------------- \9\ The Exchange represents that the Trust has filed a post- effective amendment to its registration statement (``Registration Statement'') on December 18, 2017. See Registration Statement on Form N-1A for the Trust (File Nos. 333-179562 and 811-22668). The Commission has not yet issued an order granting exemptive relief to the Trust under the Investment Company Act of 1940 applicable to the activities of the Fund, but the Exchange further represents that the Fund Shares will not be listed on the Exchange until such an order is issued and any conditions contained therein are satisfied. --------------------------------------------------------------------------- In order to achieve its investment objective, under Normal Market Conditions,\10\ the Fund will invest approximately 80% of its net assets at the time of investment in U.S. exchange-listed exchange- traded funds that principally invest in U.S. equity securities (``U.S. ETFs'') \11\ or the constituent stock holdings of a U.S. ETF (together with U.S. ETFs, collectively, ``U.S. Equities''). The Fund generally will invest in U.S. Equities in order to gain exposure to large cap U.S. equity securities. --------------------------------------------------------------------------- \10\ As defined in BZX Rule 14.11(i)(3)(E), the term ``Normal Market Conditions'' includes, but is not limited to, the absence of trading halts in the applicable financial markets generally; operational issues causing dissemination of inaccurate market information or system failures; or force majeure type events, such as natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption, or any similar intervening circumstance. \11\ The Exchange states that, for purposes of the proposal, the term ``U.S. ETFs'' means Portfolio Depositary Receipts, Index Fund Shares, and Managed Fund Shares as defined in BZX Rules 14.11(b), 14.11(c), and 14.11(i), respectively, and their equivalents on other national securities exchanges. --------------------------------------------------------------------------- As noted above, BZX Rule 14.11(i)(4)(C)(iv)(b) imposes a 30% Limitation. The Exchange is proposing to allow the Fund to hold up to 60% of the weight of its portfolio at the time of investment (including gross notional exposures) in S&P 500 futures contracts traded on the Chicago Mercantile Exchange (``S&P 500 Futures''). The Fund will utilize short or long S&P 500 Futures to the extent needed to reduce or augment, respectively, the Fund's exposure relative to the exposure resulting from investments in the U.S. Equities in order to achieve the desired net exposure. The Exchange represents that S&P 500 Futures are an efficient means of reducing or augmenting exposure to U.S. Equities, as described above. According to the Exchange, allowing the Fund to hold a greater portion of its portfolio in S&P 500 Futures would mitigate the Fund's dependency on holding over-the-counter (``OTC'') instruments, which would reduce the Fund's operational burden by allowing the Fund to primarily use listed futures contracts to achieve its investment objective and would further reduce counter-party risk associated with holding OTC instruments. The Exchange notes that the Fund may also hold certain fixed income securities and cash and cash equivalents in compliance with BZX Rules 14.11(i)(4)(C)(ii) and (iii) in order to collateralize its S&P 500 Futures positions. As noted above, the Fund's investment in U.S. ETFs or the constituent stocks of a U.S. ETF will constitute approximately 80% of the Fund's net assets at the time of investment and under Normal Market Conditions, and such holdings will meet the requirements for U.S. Component Stocks in BZX Rule 14.11(i)(4)(C)(i)(a). The Fund may hold approximately 20% of its net assets at the time of investment in fixed income securities, cash, cash equivalents, and the cash value of futures positions \12\ under Normal Market Conditions. The combination of U.S. ETFs, constituent stocks of U.S. ETFs, fixed income securities, cash, cash equivalents, and the cash value of futures positions will constitute the entirety of the Fund's holdings and the cash value of these holdings will be [[Page 12994]] used to form the basis for these calculations. The Exchange notes that this is different than the calculation used to measure the Fund's holdings in S&P 500 Futures (as it relates to the Fund holding up to 60% of the weight of its portfolio), which, as noted above, is calculated using gross notional exposures gained through the S&P 500 Futures in both the numerator and denominator, and which is consistent with the derivatives exposure calculation under BZX Rule 14.11(i)(4)(C)(iv). The Exchange represents that, except for the 30% Limitation, the Fund's proposed investments will satisfy, on an initial and continued listing basis, all of the generic listing standards under BZX Rule 14.11(i)(4)(C) and all other applicable requirements for Managed Fund Shares under BZX Rule 14.11(i). --------------------------------------------------------------------------- \12\ The Exchange states that cash value of futures positions is based on the value of the Fund's daily margin account with the applicable futures exchange(s). --------------------------------------------------------------------------- III. Discussion and Commission Findings After careful review, the Commission finds that the Exchange's proposal to list and trade the Shares, as modified by Amendment No. 2, is consistent with the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange.\13\ In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Exchange Act,\14\ 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. --------------------------------------------------------------------------- \13\ 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). \14\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Commission notes that, according to the Exchange, the Shares will meet each of the initial and continued listing criteria in BZX Rule 14.11(i), including BZX Rule 14.11(i)(4)(C), with the exception of the 30% Limitation. According to the Exchange, the liquidity in the S&P 500 Futures markets mitigates the concerns that BZX Rule 14.11(i)(4)(C)(iv)(b) is intended to address and that such liquidity would prevent the Shares from being susceptible to manipulation.\15\ --------------------------------------------------------------------------- \15\ According to the Exchange, as of December 7, 2017, the average daily notional volume for S&P 500 Futures was more than $180 billion over the previous thirty trading days. The Exchange represents that allowing the Fund to hold a greater portion of its portfolio in S&P 500 Futures would mitigate the Fund's dependency on holding OTC instruments, which would reduce the Fund's operational burden by allowing the Fund to primarily use listed futures contracts to achieve its investment objective and would further reduce counter-party risk associated with holding OTC instruments. Moreover, the Exchange represents that the diversity, liquidity, and market capitalization of the securities underlying the S&P 500 Index are sufficient to protect against market manipulation of both the Fund's holdings and the Shares as it relates to the S&P 500 Futures holdings. --------------------------------------------------------------------------- In addition, the Exchange represents that its surveillance procedures are adequate to properly monitor the trading of the Shares on the Exchange during all trading sessions and to deter and detect violations of Exchange rules and the applicable federal securities laws. The Exchange further represents that all of the futures contracts and U.S. ETFs held by the Fund will trade on markets that are members of the Intermarket Surveillance Group (``ISG'') or affiliated with a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. Moreover, the Exchange represents that it may obtain information regarding trading in the Shares and the underlying futures contracts and U.S. ETFs held by the Fund via the ISG from other exchanges who are members of the ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement.\16\ The Commission also notes that, according to the Exchange, the Fund's investment in U.S. ETFs or the constituent stocks of a U.S. ETF will meet the requirements for U.S. Component Stocks in BZX Rule 14.11(i)(4)(C)(i)(a). BZX Rule 14.11(i)(4)(C)(i)(a) provides that equity securities in the portfolio shall be listed on a national securities exchange, except that no more than 10% of the equity weight of the portfolio may be non-exchange traded ADRs. As all national securities exchanges are ISG members, the Commission notes that no less than 90% of constituent stocks of a U.S. ETF that the Fund will hold will be traded on markets that are members of ISG. In addition, the Exchange also represents that the Shares of the Fund will comply with all requirements applicable to Managed Fund Shares, including, but not limited to, requirements relating to the dissemination of key information such as the Disclosed Portfolio,\17\ net asset value,\18\ and the Intraday Indicative Value,\19\ suspension of trading or removal,\20\ trading halts,\21\ surveillance,\22\ minimum price variation for quoting and order entry,\23\ the information circular,\24\ and firewalls \25\ as set forth in Exchange rules applicable to Managed Fund Shares. Likewise, the Exchange represents that all statements and representations made in this filing regarding (a) the description of the portfolio or reference assets, (b) limitations on portfolio holdings or reference assets, (c) dissemination and availability of reference asset and intraday indicative values, (d) or the applicability of Exchange listing rules specified in this filing shall constitute continued listing requirements for listing the Shares on the Exchange. Moreover, according to the Exchange, the issuer has represented to the Exchange that it will advise the Exchange of any failure by the Fund or Shares 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.\26\ If the Fund or the Shares are not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under BZX Rule 14.12. --------------------------------------------------------------------------- \16\ As stated above, S&P 500 Futures are traded on the Chicago Mercantile Exchange. The Commission notes that the Chicago Mercantile Exchange represents a significant market in S&P 500 Futures, is a regulated futures and options market, and is a member of ISG. See supra note 16. For a list of the current members and affiliate members of ISG, see www.isgportal.com. The Exchange notes that not all components of the Disclosed Portfolio for the Fund may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. \17\ See BZX Rules 14.11(i)(4)(A)(ii) and 14.11(i)(4)(B)(ii). \18\ See BZX Rule 14.11(i)(4)(A)(ii). \19\ See BZX Rule 14.11(i)(4)(B)(i). \20\ See BZX Rule 14.11(i)(4)(B)(iii). \21\ See BZX Rule 14.11(i)(4)(B)(iv). \22\ See BZX Rule 14.11(i)(2)(C). \23\ See BZX Rule 14.11(i)(2)(B). \24\ See BZX Rule 14.11(i)(6). \25\ See BZX Rule 14.11(i)(7). \26\ The Exchange represents that FINRA conducts certain cross- market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange further represents that it is responsible for FINRA's performance under this regulatory services agreement. --------------------------------------------------------------------------- This approval order is based on all of the Exchange's representations and description of the Fund, including those set forth above and in Amendment No. 2 to the proposed rule change. For the foregoing reasons, the Commission finds that the proposed rule change, as modified by Amendment No. 2, is consistent with Section 6(b)(5) of the Exchange Act \27\ and the rules and regulations thereunder applicable to a national securities exchange. --------------------------------------------------------------------------- \27\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act,\28\ [[Page 12995]] that the proposed rule change (SR-CboeBZX-2017-012), as modified by Amendment No. 2, be, and hereby is, approved. --------------------------------------------------------------------------- \28\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\29\ --------------------------------------------------------------------------- \29\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-06013 Filed 3-23-18; 8:45 am] BILLING CODE 8011-01-P
![12992 Federal Register / Vol. 83, No. 58 / Monday, March 26, 2018 / Notices
assure the safeguarding of securities and Proposed Rule Change should be information that you wish to make
funds which are in the custody or approved or disapproved by April 16, available publicly. All submissions
control of the clearing agency or for 2018. Any person who wishes to file a should refer to File Number SR–FICC–
which it is responsible, and to protect rebuttal to any other person’s 2017–022 and should be submitted on
investors and the public interest; submission must file that rebuttal by or before April 16, 2018. Rebuttal
• Rule 17Ad–22(e)(13) under the April 30, 2018. comments should be submitted by April
Act,39 which requires, in general, a The Commission asks that 30, 2018.
covered clearing agency, such as FICC, commenters address the sufficiency of For the Commission, by the Division of
to establish, implement, maintain and FICC’s statements in support of the Trading and Markets, pursuant to delegated
enforce written policies and procedures Proposed Rule Change, which are set authority.47
reasonably designed to ensure the forth in the Notice,46 in addition to any Eduardo A. Aleman,
covered clearing agency has the other comments they may wish to
Assistant Secretary.
authority and operational capacity to submit about the Proposed Rule Change.
Comments may be submitted by any [FR Doc. 2018–06015 Filed 3–23–18; 8:45 am]
take timely action to contain losses and
liquidity demands and continue to meet of the following methods: BILLING CODE 8011–01–P
its obligations. Electronic Comments
• Rule 17Ad–22(e)(23)(i) under the
Act,40 which requires a covered clearing • Use the Commission’s internet SECURITIES AND EXCHANGE
agency, such as FICC, to establish, comment form (http://www.sec.gov/ COMMISSION
implement, maintain and enforce rules/sro.shtml); or
written policies and procedures • Send an email to rule-comments@ [Release No. 34–82906; File No. SR–
sec.gov. Please include File Number SR– CboeBZX–2017–012]
reasonably designed to publicly disclose
all relevant rules and material FICC–2017–022 on the subject line.
Self-Regulatory Organizations; Cboe
procedures, including key aspects of its Paper Comments BZX Exchange, Inc.; Order Approving
default rules and procedures.
• Send paper comments in triplicate a Proposed Rule Change, as Modified
IV. Procedure: Request for Written to Secretary, Securities and Exchange by Amendment No. 2, To List and
Comments Commission, 100 F Street NE, Trade Shares of the LHA Market State®
The Commission requests that Washington, DC 20549–1090. Tactical U.S. Equity ETF, a Series of
interested persons provide written All submissions should refer to File the ETF Series Solutions, Under Rule
submissions of their views, data, and Number SR–FICC–2017–022. This file 14.11(i), Managed Fund Shares
arguments with respect to the issues number should be included on the March 20, 2018.
identified above, as well as any other subject line if email is used. To help the
concerns they may have with the Commission process and review your I. Introduction
Proposed Rule Change. In particular, the comments more efficiently, please use On December 7, 2017, Cboe BZX
Commission invites the written views of only one method. The Commission will Exchange, Inc. (‘‘Exchange’’ or ‘‘BZX’’)
interested persons concerning whether post all comments on the Commission’s filed with the Securities and Exchange
the Proposed Rule Change is consistent internet website (http://www.sec.gov/ Commission (‘‘Commission’’), pursuant
with Section 17A(b)(3)(F) of the Act,41 rules/sro.shtml). Copies of the to Section 19(b)(1) of the Securities
Rule 17Ad–22(e)(13) under the Act,42 submission, all subsequent Exchange Act of 1934 (‘‘Exchange
Rule 17Ad–22(e)(23)(i) under the Act,43 amendments, all written statements Act’’) 1 and Rule 19b–4 thereunder,2 a
or any other provision of the Act, or the with respect to the Proposed Rule proposed rule change to list and trade
rules and regulations thereunder. Change that are filed with the the shares (‘‘Shares’’) of the LHA Market
Although there do not appear to be any Commission, and all written State® Tactical U.S. Equity ETF
issues relevant to approval or communications relating to the (‘‘Fund’’), a Series of the ETF Series
disapproval that would be facilitated by Proposed Rule Change between the Solutions (‘‘Trust’’). The proposed rule
an oral presentation of views, data, and Commission and any person, other than change was published for comment in
arguments, the Commission will those that may be withheld from the the Federal Register on December 28,
consider, pursuant to Rule 19b–4(g) public in accordance with the 2017.3 On January 31, 2018, the
under the Act,44 any request for an provisions of 5 U.S.C. 552, will be Exchange filed Amendment No. 1 to the
opportunity to make an oral available for website viewing and proposed rule change.4 On February 6,
presentation.45 printing in the Commission’s Public 2018, pursuant to Section 19(b)(2) of the
Interested persons are invited to Reference Room, 100 F Street NE, Exchange Act,5 the Commission
submit written data, views, and Washington, DC 20549 on official designated a longer period within which
arguments regarding whether the business days between the hours of to approve the proposed rule change,
10:00 a.m. and 3:00 p.m. Copies of the disapprove the proposed rule change, or
39 17 CFR 240.17Ad–22(e)(13). filing also will be available for institute proceedings to determine
40 17 CFR 240.17Ad–22(e)(23)(i). inspection and copying at the principal whether to disapprove the proposed
41 15 U.S.C. 78q–1(b)(3)(F).
office of FICC and on The Depository
42 17 CFR 240.17Ad–22(e)(13).
Trust & Clearing Corporation’s website 47 17 CFR 200.30–3(a)(57).
43 17 CFR 240.17Ad–22(e)(23)(i).
(http://dtcc.com/legal/sec-rule- 1 15 U.S.C. 78s(b)(1).
44 17 CFR 240.19b–4(g).
sradovich on DSK3GMQ082PROD with NOTICES
45 Section 19(b)(2) of the Act grants to the
filings.aspx). All comments received 2 17 CFR 240.19b–4.
Commission flexibility to determine what type of will be posted without change. Persons 3 See Securities Exchange Act Release No. 82379
proceeding—either oral or notice and opportunity submitting comments are cautioned that (Dec. 21, 2017), 82 FR 61608.
4 Amendment No. 1, which amended and
for written comments—is appropriate for we do not redact or edit personal
consideration of a particular proposal by a self- replaced the proposed rule change in its entirety,
identifying information from comment is available on the Commission’s website at: https://
regulatory organization. See Securities Act
Amendments of 1975, Senate Comm. on Banking, submissions. You should submit only www.sec.gov/comments/sr-cboebzx-2017-012/
Housing & Urban Affairs, S. Rep. No. 75, 94th cboebzx2017012-3002921-161895.pdf.
Cong., 1st Sess. 30 (1975). 46 See Notice, supra note 4. 5 15 U.S.C. 78s(b)(2).
VerDate Sep<11>2014 16:38 Mar 23, 2018 Jkt 244001 PO 00000 Frm 00055 Fmt 4703 Sfmt 4703 E:\FR\FM\26MRN1.SGM 26MRN1](https://thefederalregister.org/doc/83_FR_13050/page/1.svg)
![Federal Register / Vol. 83, No. 58 / Monday, March 26, 2018 / Notices 12995
that the proposed rule change (SR– office of the Exchange, and at the Exchange’s network. Market centers on
CboeBZX–2017–012), as modified by Commission’s Public Reference Room. the Exchange’s network include
Amendment No. 2, be, and hereby is, Alternative Trading Systems operated
II. Self-Regulatory Organization’s
approved. by broker-dealers, but do not currently
Statement of the Purpose of, and
For the Commission, by the Division of Statutory Basis for, the Proposed Rule include single-dealer platforms. The
Trading and Markets, pursuant to delegated Change Exchange proposes to expand Cboe
authority.29 Connect to now provide optional
Eduardo A. Aleman, In its filing with the Commission, the connectivity by which market
Exchange included statements participant may send orders to these
Assistant Secretary.
concerning the purpose of and basis for single-dealer trading platforms
[FR Doc. 2018–06013 Filed 3–23–18; 8:45 am]
the proposed rule change and discussed connected to the Exchange’s network.
BILLING CODE 8011–01–P
any comments it received on the The exchange proposes to refer to this
proposed rule change. The text of these connectivity option under Cboe Connect
statements may be examined at the as C–LNK.
SECURITIES AND EXCHANGE
places specified in Item IV below. The
COMMISSION Orders routed via Cboe Connect to a
Exchange has prepared summaries, set
[Release No. 34–82904; File No. SR– forth in Sections A, B, and C below, of single-dealer platform would be treated
CboeEDGA–2018–004] the most significant parts of such the same as orders routed today via
statements. Cboe Connect to an exchange or market
Self-Regulatory Organizations; Cboe center connected to the Exchange’s
EDGA Exchange, Inc.; Notice of Filing (A) Self-Regulatory Organization’s network. Cboe Connect does not effect
and Immediate Effectiveness of a Statement of the Purpose of, and trade executions and would not report
Proposed Rule Change To Expand an Statutory Basis for, the Proposed Rule trades to the relevant Securities
Offering Known as Cboe Connect To Change Information Processor and the Exchange
Provide Connectivity to Single-Dealer 1. Purpose does not propose to do so for orders sent
Platforms Connected to the to single-dealer platforms. An order sent
Exchange’s Network and To Propose a Cboe Connect is an optional
communication service that provides via the service to a single-dealer
Per Share Executed Fee for Such platform would be handled by the
Service Members 5 an additional means to
receive market data from and route Exchange’s affiliated broker-dealer,
March 20, 2018. orders to any destination connected to Cboe Trading, Inc., and bypass the
Pursuant to Section 19(b)(1) of the the Exchange’s network.6 Cboe Connect EDGA Book before going to a market
Securities Exchange Act of 1934 (the is offered by the Exchange on a center outside of the Exchange (i.e., a
‘‘Act’’),1 and Rule 19b–4 thereunder,2 voluntary basis in a capacity similar to participant could choose to route an
notice is hereby given that on March 14, a vendor. The servers of the participant order directly to any single-dealer
2018, Cboe EDGA Exchange, Inc. (the need not be located in the same platform on the Exchange’s network). A
‘‘Exchange’’ or ‘‘EDGA’’) filed with the facilities as the Exchange in order to participant would be responsible for
Securities and Exchange Commission subscribe to Cboe Connect. Participants identifying the single-dealer platform
(‘‘Commission’’) the proposed rule may also seek to utilize Cboe Connect in for any orders sent through the service
change as described in Items I and II the event of a market disruption where and for ensuring that it had authority to
below, which Items have been prepared other alternative connection methods access the selected destination; the
by the Exchange. The Exchange has become unavailable. Exchange would merely provide the
designated this proposal as a ‘‘non- Today, market participants are able to connectivity by which orders (and
controversial’’ proposed rule change send orders directly to broker-dealers associated messages) could be sent by a
pursuant to Section 19(b)(3)(A) of the that operate single-dealer platforms, participant to the single-dealer platform
Act 3 and Rule 19b–4(f)(6)(iii) where broker-dealers would execute and from the destination back to the
thereunder,4 which renders it effective orders received on a principal basis or participant.
upon filing with the Commission. The return the unexecuted order (or portion The Exchange notes that Users
Commission is publishing this notice to thereof) back to their customers. To sending orders to single-dealer
solicit comments on the proposed rule connect to a single-dealer platform, the platforms via the C–LNK connectivity
change from interested persons. broker-dealer’s customer must purchase service would be subject to any
connectivity and perform the necessary transaction related rates applied by the
I. Self-Regulatory Organization’s infrastructure work to be able to send single-dealer platform executing their
Statement of the Terms of Substance of orders to that single-dealer platform. order.7 This is not unique to C–LNK or
the Proposed Rule Change Cboe Connect allows participants to Cboe Connect as market participants
The Exchange filed a proposal to send orders to other exchanges and who chose another method to connect to
expand an offering known as Cboe market centers that are connected to the a single-dealer platform would also be
Connect to provide connectivity to required to pay any transaction related
single-dealer platforms connected to the 5 The term ‘‘Member’’ is defined as ‘‘any
fees directly to that single-dealer
Exchange’s network and to propose a registered broker or dealer, or any person associated
with a registered broker or dealer, that has been
platform. In addition, market
per share executed fee for such service. admitted to membership in the Exchange. A participants who send orders through
The text of the proposed rule change Member will have the status of a ‘‘member’’ of the Cboe Connect are subject to separate per
sradovich on DSK3GMQ082PROD with NOTICES
is available at the Exchange’s website at Exchange as that term is defined in Section 3(a)(3) transaction rates (fees/rebates) provided
www.markets.cboe.com, at the principal of the Act.’’ See Exchange Rule 1.5(n).
6 See Exchange Rule 13.9. See also Securities
directly by the other exchanges and
29 17 Exchange Act Release Nos. 75112 (June 5, 2015), 80
CFR 200.30–3(a)(12).
1 15
FR 33316 (June 11, 2015) (SR–EDGA–2015–20) 7 Like alternative trading systems, single-dealer
U.S.C. 78s(b)(1). (proposal adopting Cboe Connect (f/k/a Bats platforms are operated by broker-dealers and any
2 17 CFR 240.19b–4.
Connect); and 34753 (June 11, 2015), 80 FR 34753 transaction related rates are presumed to be
3 15 U.S.C. 78s(b)(3)(A).
(June 17, 2015) (SR–EDGA–2015–24) (proposal similarly pre-negotiated between the broker-dealer
4 17 CFR 240.19b–4(f)(6)(iii). adopting fees for Cboe Connect). and their customer.
VerDate Sep<11>2014 16:38 Mar 23, 2018 Jkt 244001 PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 E:\FR\FM\26MRN1.SGM 26MRN1](https://thefederalregister.org/doc/83_FR_13050/page/4.svg)
Document Created: 2018-03-24 01:00:07
Document Modified: 2018-03-24 01:00:07
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 83 FR 12992 |
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