83 FR 55435 - Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To Establish How the BZX Official Closing Price Would Be Determined for BZX-Listed Securities
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 83, Issue 214 (November 5, 2018)
Federal Register Volume 83, Issue 214 (November 5, 2018)
| Page Range | 55435-55438 | |
| FR Document | 2018-24067 |
[Federal Register Volume 83, Number 214 (Monday, November 5, 2018)] [Notices] [Pages 55435-55438] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2018-24067] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-84507; File No. SR-CboeBZX-2018-079] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To Establish How the BZX Official Closing Price Would Be Determined for BZX-Listed Securities October 30, 2018. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that on October 18, 2018, Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange.\3\ The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ On October 29, 2018, the Exchange filed Amendment No. 1 to the proposed rule change to specify the date upon which the Exchange's President (or designee) approved the proposed rule change, pursuant to delegated authority. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes a rule change to establish how the BZX Official Closing Price would be determined for BZX-listed securities. 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend BZX Rule 11.23, Auctions, to amend how the BZX Official Closing Price \4\ would be determined for any BZX- listed security that is not a corporate security (a ``Derivative Securities Product'') \5\ if the Exchange does not conduct a Closing Auction or if a Closing Auction trade is less than a round lot (collectively, an ``Illiquid Auction''). Rule 11.23(c)(2)(B) currently provides how the Exchange determines the price of the Closing Auction and the BZX Official Closing Price. This proposed functionality is very similar to functionality that has already been approved by the Commission and is operational on NYSE Arca, Inc. (``Arca'') (the ``Arca Rule'') \6\ and the Exchange believes that it raises no new [[Page 55436]] substantive issues for the Commission to review. --------------------------------------------------------------------------- \4\ As defined in Rule 11.23(a)(3), the term ``BZX Official Closing Price'' shall mean the price disseminated to the consolidated tape as the market center closing trade. \5\ With respect to equities traded on the Exchange, the term ``new derivative securities product'' means a security that meets the definition of ``new derivative securities product'' in Rule 19b- 4(e) under the Securities Exchange Act of 1934. See BZX Rule 14.11(j). For purposes of Rule 19b-4(e), a ``new derivative securities product'' means any type of option, warrant, hybrid securities product or any other security, other than a single equity option or a security futures product, whose value is based, in whole or in part, upon the performance of, or interest, in, an underlying instrument. 17 CFR 240.19b-4(e). \6\ See Securities Exchange Act Release No. 82907 (March 20, 2018), 83 FR 12980 (March 26, 2018) (SR-NYSEArca-2018-08) (order approving proposed changes to Arca Rule 1.1(ll) related to determining an Official Closing Price). --------------------------------------------------------------------------- Current Rule 11.23(c)(2)(B) outlines the process for determining the price level at which the Closing Auction will occur \7\ and provides that the Closing Auction price will be the BZX Official Closing Price or, in the event that there is no Closing Auction for an issue, the BZX Official Closing Price will be the price of the Final Last Sale Eligible Trade.\8\ --------------------------------------------------------------------------- \7\ The Exchange notes that it is not proposing to make changes to the process for determining the price level at which the Closing Auction will occur. \8\ As defined in Rule 11.23(a)(9), the term ``Final Last Sale Eligible Trade'' shall mean the last trade occurring during Regular Trading Hours on the Exchange if the trade was executed within the last one second prior to either the Closing Auction or, for Halt Auctions, trading in the security being halted. Where the trade was not executed within the last one second, the last trade reported to the consolidated tape received by BZX Exchange during Regular Trading Hours and, where applicable, prior to trading in the security being halted will be used. If there is no qualifying trade for the current day, the BZX Official Closing Price from the previous trading day will be used. --------------------------------------------------------------------------- The Exchange proposes to amend Rule 11.23(c)(2)(B) in order to change how the BZX Official Closing Price for an Exchange-listed security that is a Derivative Securities Product would be determined in the event of an Illiquid Auction. The proposed rule change is intended to make the BZX Official Closing Price more reflective of the value of such a Derivative Securities Product. Specifically, if a security is thinly traded or generally illiquid, it's currently possible that the BZX Official Closing Price for such Derivatives Securities Product will be based on a Final Last Sale Eligible Trade that may be hours, days, or even months old and therefore not necessarily reflect the true and current value of the security. The Exchange believes that an execution that qualifies as a Final Last Sale Eligible Trade that occurs in the last five minutes of trading during Regular Trading Hours \9\ is sufficiently recent as to be reflective of the current market value of a Derivative Securities Product and, in the event of an Illiquid Auction, should be used as the BZX Official Closing Price. Where no such execution occurs, however, the Exchange believes that a time-weighted value based on the midpoint of the NBBO \10\ leading into the close is likely to be more indicative of the true and current value of the security than a Final Last Sale Eligible Trade that occurred more than five minutes prior to the close. As such, in the event that there is an Illiquid Auction in a BZX-listed Derivative Securities Product, the Exchange proposes that the BZX Official Closing Price would be the time-weighted average price of the midpoint of the NBBO over the last five minutes of trading before the end of Regular Trading Hours (the ``TWAP''). Based on the foregoing, the Exchange notes that it is proposing to use only the Final Last Sale Eligible Trade or the TWAP and not any weighting or combination of the two. --------------------------------------------------------------------------- \9\ As defined in Rule 1.5(w), the term ``Regular Trading Hours'' means the time between 9:30 a.m. and 4:00 p.m. Eastern Time. \10\ As defined in Rule 1.5(o), the term ``NBBO'' shall mean the national best bid or offer. --------------------------------------------------------------------------- In order to implement these proposed changes, the Exchange is proposing to amend Rule 11.23(c)(2)(B) to make clear that for a BZX- listed corporate security, the Closing Auction price will be the BZX Official Closing Price, which is consistent with current functionality. The Exchange is further proposing to amend Rule 11.23(c)(2)(B) in order to add a three part test for determining the BZX Official Closing Price for Derivative Securities Products, as follows. Proposed new Rule 11.23(c)(2)(B)(i) would provide that where at least one round lot is executed in the Closing Auction, the Closing Auction price will be the BZX Official Closing Price. Proposed new Rule 11.23(c)(2)(B)(ii) would provide that in the event that the BZX Official Closing Price for an issue that is a Derivative Securities Product cannot be determined under paragraph (B)(i) of this Rule, the BZX Official Closing Price for such security will depend on when the last Final Last Sale Eligible Trade occurs. If a trade that would qualify as a Final Last Sale Eligible Trade occurred: (a) Within the final five minutes before the end of Regular Trading Hours, the Final Last Sale Eligible Trade will be the BZX Official Closing Price; or (b) prior to five minutes before the end of Regular Trading Hours, the time-weighted average price of the NBBO midpoint measured over the last 5 minutes before the end Regular Trading Hours will be the BZX Official Closing Price. Proposed new Rule 11.23(c)(2)(B)(iii) would provide that if the BZX Official Closing Price cannot be determined under proposed paragraphs (B)(i) or (B)(ii) of this Rule, the Final Last Sale Eligible Trade will be the BZX Official Closing Price. As noted above, the Exchange believes that the proposed functionality is very similar to the Arca Rule and does not raise any substantive issues not already considered by the Commission. The only substantive difference between the proposal and the Arca Rule relates to the Exchange proposing only to use one of the TWAP or the Final Last Sale Eligible Trade for the BZX Official Closing Price and to exclude, contrary to the Arca Rule, any scenarios that would result in a blended price by changing the weight of the TWAP and the Final Last Sale Eligible Trade depending on how many minutes prior to the end of the trading day such Final Last Sale Eligible Trade occurs. There are also two differences that the Exchange believes are non- substantive. First, the Exchange's proposed functionality for determining the BZX Official Closing Price applies to all securities listed on the Exchange that are not corporate securities, while the Arca Rule applies to all ``derivative securities products.'' \11\ Substantively, however, there is no practical difference between these definitions because the Exchange only offers listing of corporate securities (which it has excluded from the proposed new functionality) and products that would fall under the definition of derivative securities products. Second, the Arca Rule references the ``consolidated last-sale eligible trade'' in several instances where the Exchange proposed rule references the Final Last Sale Eligible Trade. The only difference between the definition of the consolidated last-sale eligible trade and the Final Last Sale Eligible Trade for purposes of this application is that the value of the Final Last Sale Eligible Trade will default to any execution on the Exchange that occurs within the last one second prior to the Closing Auction. For purposes of this proposal, the definitions are otherwise identical. The Exchange does not believe that this is a substantive difference because it is unlikely that securities for which this functionality is intended to improve a BZX Official Closing Price because of a lack of trading activity will have trading activity in the final second prior to the Closing Auction. --------------------------------------------------------------------------- \11\ The term ``Derivative Securities Product'' as used in Arca's rules means a security that meets the definition of ``derivative securities product'' in Rule 19b-4(e) under the Securities Exchange Act of 1934. See Arca Rule 1.1(k). For purposes of Rule 19b-4(e), a ``derivative securities product'' means any type of option, warrant, hybrid securities product or any other security, other than a single equity option or a security futures product, whose value is based, in whole or in part, upon the performance of, or interest, in, an underlying instrument. 17 CFR 240.19b-4(e). --------------------------------------------------------------------------- Implementation The Exchange will implement the proposed rule change for determining the BZX Official Closing Price as soon as is practicable after the approval date of this proposed rule change and will announce the implementation date via Trade Desk Notice. [[Page 55437]] 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,\12\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\13\ in particular, in particular, in that it is 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 facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. --------------------------------------------------------------------------- \12\ 15 U.S.C. 78f(b). \13\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide for a method of determining the BZX Official Closing Price in an Exchange-listed security that is a Derivative Securities Product if there is no Closing Auction or if a Closing Auction trade is less than a round lot on a trading day. More specifically, the Exchange believes the proposed methodology for determining the BZX Official Closing Price would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide for a more up-to-date indication of the value of such a security if there have not been any Final Last Sale Eligible Trades leading in to the close of trading. The Exchange believes the proposed BZX Official Closing Price calculation would also provide a closing price that more accurately reflects the most recent and reliable market information possible. The Exchange further believes that the proposed TWAP calculation would remove impediments to and perfect the mechanism of a free and open market and a national market system because it would provide for a more robust mechanism to determine the value of an affected security for purposes of determining a BZX Official Closing Price. By using either the price of a Final Last Sale Eligible Trade that occurs within five minutes of the close or a time-weighted calculation based on the midpoint of the NBBO over the last five minutes of trading leading into the close, the Exchange believes that the proposed calculation would result in a BZX Official Closing Price that is more reflective of the true and current value of such security on that trading day than would otherwise occur under the current Closing Auction mechanism. The Exchange also believes that the proposed methodology for determining a BZX Official Closing Price would be appropriate for Derivative Securities Products because if such securities are thinly traded, the price of the Final Last Sale Eligible Trade that occurred earlier in a trading day or even from a prior trading day may no longer be reflective of the value of such product, which should be priced relative to the value of the components of such security. In such case, either a more recent execution (in the last five minutes of Regular Trading Hours) or recent quoting activity will likely be more reflective of the value of the security. As such, the Exchange is proposing to use the TWAP in order to measure such quoting activity in order to avoid overly weighting a potentially stale quote that may occur leading into the close, which the Exchange believes would provide a greater indication of the value of such securities. Finally, the Exchange believes that the proposed functionality does not raise any substantive issues not already considered by the Commission in approving the Arca Rule. For the above reasons, the Exchange believes that the proposal is consistent with the requirements of Section 6(b)(5) of the Act. 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. The proposed rule change is designed to provide for how the Exchange would determine the BZX Official Closing Price for Exchange-listed securities that are Derivative Securities Products if there is no Closing Auction or if a Closing Auction trade is less than a round lot on a trading day, which will help it better compete as a listing venue. 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 Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: A. By order approve or disapprove such proposed rule change, or B. institute proceedings to determine whether the proposed rule change should be 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 CommentsUse 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-2018-079 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-2018-079. 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 [[Page 55438]] to make available publicly. All submissions should refer to File Number SR-CboeBZX-2018-079, and should be submitted on or before November 26, 2018. --------------------------------------------------------------------------- \14\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\14\ Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018-24067 Filed 11-2-18; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 83, No. 214 / Monday, November 5, 2018 / Notices 55435
III. Date of Effectiveness of the inspection and copying at the principal website (http://markets.cboe.com/us/
Proposed Rule Change and Timing for office of the Exchange. All comments equities/regulation/rule_filings/bzx/), at
Commission Action received will be posted without change. the Exchange’s Office of the Secretary,
Within 45 days of the date of Persons submitting comments are and at the Commission’s Public
publication of this notice in the Federal cautioned that we do not redact or edit Reference Room.
Register or within such longer period personal identifying information from
comment submissions. You should II. Self-Regulatory Organization’s
up to 90 days (i) as the Commission may Statement of the Purpose of, and
submit only information that you wish
designate if it finds such longer period Statutory Basis for, the Proposed Rule
to make available publicly. All
to be appropriate and publishes its Change
submissions should refer to File
reasons for so finding or (ii) as to which
Number SR–NASDAQ–2018–080, and In its filing with the Commission, the
the self-regulatory organization
should be submitted on or before Exchange included statements
consents, the Commission will:
November 26, 2018. concerning the purpose of and basis for
(A) By order approve or disapprove
such proposed rule change, or For the Commission, by the Division of the proposed rule change and discussed
(B) institute proceedings to determine Trading and Markets, pursuant to delegated any comments it received on the
authority.122 proposed rule change. The text of these
whether the proposed rule change
should be disapproved. Eduardo A. Aleman, statements may be examined at the
Assistant Secretary. places specified in Item IV below. The
IV. Solicitation of Comments [FR Doc. 2018–24068 Filed 11–2–18; 8:45 am] Exchange has prepared summaries, set
Interested persons are invited to BILLING CODE 8011–01–P forth in sections A, B, and C below, of
submit written data, views, and the most significant aspects of such
arguments concerning the foregoing, statements.
including whether the proposed rule SECURITIES AND EXCHANGE
change is consistent with the Act. COMMISSION A. Self-Regulatory Organization’s
Comments may be submitted by any of Statement of the Purpose of, and the
[Release No. 34–84507; File No. SR– Statutory Basis for, the Proposed Rule
the following methods: CboeBZX–2018–079]
Change
Electronic Comments Self-Regulatory Organizations; Cboe 1. Purpose
• Use the Commission’s internet BZX Exchange, Inc.; Notice of Filing of
comment form (http://www.sec.gov/ a Proposed Rule Change, as Modified The Exchange proposes to amend
rules/sro.shtml); or by Amendment No. 1, To Establish BZX Rule 11.23, Auctions, to amend
• Send an email to rule-comments@ How the BZX Official Closing Price how the BZX Official Closing Price 4
sec.gov. Please include File Number SR– Would Be Determined for BZX-Listed would be determined for any BZX-listed
NASDAQ–2018–080 on the subject line. Securities security that is not a corporate security
(a ‘‘Derivative Securities Product’’) 5 if
Paper Comments October 30, 2018.
the Exchange does not conduct a
• Send paper comments in triplicate Pursuant to Section 19(b)(1) of the Closing Auction or if a Closing Auction
to Secretary, Securities and Exchange Securities Exchange Act of 1934 (the trade is less than a round lot
Commission, 100 F Street NE, ‘‘Act’’),1 and Rule 19b–4 thereunder,2 (collectively, an ‘‘Illiquid Auction’’).
Washington, DC 20549–1090. notice is hereby given that on October Rule 11.23(c)(2)(B) currently provides
18, 2018, Cboe BZX Exchange, Inc. (the how the Exchange determines the price
All submissions should refer to File
‘‘Exchange’’ or ‘‘BZX’’) filed with the of the Closing Auction and the BZX
Number SR–NASDAQ–2018–080. This Securities and Exchange Commission
file number should be included on the Official Closing Price. This proposed
(the ‘‘Commission’’) the proposed rule
subject line if email is used. To help the functionality is very similar to
change as described in Items I, II, and
Commission process and review your functionality that has already been
III below, which Items have been
comments more efficiently, please use approved by the Commission and is
prepared by the Exchange.3 The
only one method. The Commission will operational on NYSE Arca, Inc. (‘‘Arca’’)
Commission is publishing this notice to
post all comments on the Commission’s (the ‘‘Arca Rule’’) 6 and the Exchange
solicit comments on the proposed rule
internet website (http://www.sec.gov/ believes that it raises no new
change, as modified by Amendment No.
rules/sro.shtml). Copies of the 1, from interested persons.
submission, all subsequent 4 As defined in Rule 11.23(a)(3), the term ‘‘BZX
amendments, all written statements I. Self-Regulatory Organization’s Official Closing Price’’ shall mean the price
Statement of the Terms of Substance of disseminated to the consolidated tape as the market
with respect to the proposed rule center closing trade.
change that are filed with the the Proposed Rule Change 5 With respect to equities traded on the Exchange,
Commission, and all written The Exchange proposes a rule change the term ‘‘new derivative securities product’’ means
communications relating to the to establish how the BZX Official a security that meets the definition of ‘‘new
proposed rule change between the derivative securities product’’ in Rule 19b–4(e)
Closing Price would be determined for under the Securities Exchange Act of 1934. See BZX
Commission and any person, other than BZX-listed securities. Rule 14.11(j). For purposes of Rule 19b–4(e), a ‘‘new
those that may be withheld from the The text of the proposed rule change derivative securities product’’ means any type of
public in accordance with the is also available on the Exchange’s option, warrant, hybrid securities product or any
provisions of 5 U.S.C. 552, will be other security, other than a single equity option or
a security futures product, whose value is based, in
available for website viewing and 122 17 CFR 200.30–3(a)(12). whole or in part, upon the performance of, or
printing in the Commission’s Public 1 15 U.S.C. 78s(b)(1). interest, in, an underlying instrument. 17 CFR
Reference Room, 100 F Street NE, 2 17 CFR 240.19b–4. 240.19b–4(e).
3 On October 29, 2018, the Exchange filed 6 See Securities Exchange Act Release No. 82907
Washington, DC 20549, on official
Amendment No. 1 to the proposed rule change to (March 20, 2018), 83 FR 12980 (March 26, 2018)
business days between the hours of specify the date upon which the Exchange’s (SR–NYSEArca–2018–08) (order approving
10:00 a.m. and 3:00 p.m. Copies of the President (or designee) approved the proposed rule proposed changes to Arca Rule 1.1(ll) related to
filing also will be available for change, pursuant to delegated authority. determining an Official Closing Price).
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![55438 Federal Register / Vol. 83, No. 214 / Monday, November 5, 2018 / Notices
to make available publicly. All by 5:30 p.m. on November 26, 2018, and Agreement, the Adviser, subject to the
submissions should refer to File should be accompanied by proof of supervision of the board of trustees of
Number SR–CboeBZX–2018–079, and service on applicants, in the form of an the Trust (‘‘Board’’), provides
should be submitted on or before affidavit or, for lawyers, a certificate of continuous investment management of
November 26, 2018. service. Pursuant to rule 0–5 under the the assets of each Subadvised Fund.
For the Commission, by the Division of Act, hearing requests should state the Consistent with the terms of the
Trading and Markets, pursuant to delegated nature of the writer’s interest, any facts Investment Management Agreement, the
authority.14 bearing upon the desirability of a Adviser may, subject to the approval of
Eduardo A. Aleman, hearing on the matter, the reason for the the Board, delegate portfolio
Assistant Secretary. request, and the issues contested. management responsibilities of all or a
Persons who wish to be notified of a portion of the assets of a Subadvised
[FR Doc. 2018–24067 Filed 11–2–18; 8:45 am]
hearing may request notification by Fund to one or more Sub-Advisers.2 The
BILLING CODE 8011–01–P
writing to the Commission’s Secretary. Adviser will continue to have overall
ADDRESSES: Secretary, U.S. Securities responsibility for the management and
SECURITIES AND EXCHANGE and Exchange Commission, 100 F Street investment of the assets of each
COMMISSION NE, Washington, DC 20549–1090. Subadvised Fund. The Adviser will
Applicants: Cushing Asset Management, evaluate, select, and recommend Sub-
[Investment Company Act Release No. LP and Cushing ETF Trust, 8117 Preston Advisers to manage the assets of a
33285; 812–14945] Road, Suite 440, Dallas, TX 75225. Subadvised Fund and will oversee,
FOR FURTHER INFORMATION CONTACT: monitor and review the Sub-Advisers
Cushing Asset Management, LP and
Rachel Loko, Senior Counsel, at (202) and their performance and recommend
Cushing ETF Trust
551–6883, or Aaron Gilbride, Branch the removal or replacement of Sub-
October 30, 2018. Chief, at (202) 551–6906 (Division of Advisers.
AGENCY: Securities and Exchange Investment Management, Chief 2. Applicants request an order to
Commission (‘‘Commission’’). Counsel’s Office). permit the Adviser, subject to the
ACTION: Notice. SUPPLEMENTARY INFORMATION: The approval of the Board, to enter into
following is a summary of the investment sub-advisory agreements
Notice of an application under section application. The complete application with the Sub-Advisers (each, a ‘‘Sub-
6(c) of the Investment Company Act of may be obtained via the Commission’s Advisory Agreement’’) and materially
1940 (‘‘Act’’) for an exemption from website by searching for the file amend such Sub-Advisory Agreements
section 15(a) of the Act and rule 18f–2 number, or for an applicant using the without obtaining the shareholder
under the Act, as well as from certain Company name box, at http:// approval required under section 15(a) of
disclosure requirements in rule 20a–1 www.sec.gov/search/search.htm or by the Act and rule 18f–2 under the Act.3
under the Act, Item 19(a)(3) of Form calling (202) 551–8090. Applicants also seek an exemption from
N–1A, Items 22(c)(1)(ii), 22(c)(1)(iii), the Disclosure Requirements to permit a
22(c)(8) and 22(c)(9) of Schedule 14A Summary of the Application
Subadvised Fund to disclose (as both a
under the Securities Exchange Act of 1. The Initial Adviser is the dollar amount and a percentage of the
1934, and Sections 6–07(2)(a), (b), and investment adviser to the Cushing Subadvised Fund’s net assets): (a) The
(c) of Regulation S–X (‘‘Disclosure Energy & MLP ETF, Cushing Utility & aggregate fees paid to the Adviser and
Requirements’’). The requested MLP ETF, Cushing Transportation & any Wholly-Owned Sub-Adviser; (b) the
exemption would permit an investment MLP ETF and Cushing Energy Supply aggregate fees paid to Non-Affiliated
adviser to hire and replace certain sub- Chain & MLP ETF (together, the ‘‘Initial Sub-Advisers; and (c) the fee paid to
advisers without shareholder approval Funds’’), each a series of the Trust, each Affiliated Sub-Adviser
and grant relief from the Disclosure pursuant to an investment management (collectively, Aggregate Fee
Requirements as they relate to fees paid agreement with the Trust (‘‘Investment Disclosure’’).4
to the sub-advisers. Management Agreement’’).1 Under the
APPLICANTS: Cushing ETF Trust (the terms of the Investment Management 2 As used herein, a ‘‘Sub-Adviser’’ for a
‘‘Trust’’), a Delaware statutory trust Subadvised Fund is (1) an indirect or direct
registered under the Act as an open-end 1 Applicants request relief with respect to the ‘‘wholly owned subsidiary’’ (as such term is defined
Initial Funds, as well as to any future series of the in the Act) of the Adviser for that Subadvised Fund,
management investment company with or (2) a sister company of the Adviser for that
Trust and any other existing or future registered
multiple series, and Cushing Asset open-end management investment company or Subadvised Fund that is an indirect or direct
Management, LP (the ‘‘Initial Adviser’’), series thereof that, in each case, is advised by the ‘‘wholly-owned subsidiary’’ of the same company
a Texas limited partnership registered as Initial Adviser or any entity controlling, controlled that, indirectly or directly, wholly owns the Adviser
by, or under common control with, the Initial (each of (1) and (2) a ‘‘Wholly-Owned Sub-Adviser’’
an investment adviser under the and collectively, the ‘‘Wholly-Owned Sub-
Adviser or its successors (each, also an ‘‘Adviser’’),
Investment Advisers Act of 1940. uses the multi-manager structure described in the Advisers’’), or (3) not an ‘‘affiliated person’’ (as such
FILING DATES: The application was filed application, and complies with the terms and term is defined in section 2(a)(3) of the Act) of the
on August 31, 2018. conditions set forth in the application (each, a Subadvised Fund, any Feeder Fund invested in a
‘‘Subadvised Fund’’). For purposes of the requested Master Fund, the Trust, or the Adviser, except to
HEARING OR NOTIFICATION OF HEARING: An order, ‘‘successor’’ is limited to an entity that the extent that an affiliation arises solely because
order granting the application will be results from a reorganization into another the Sub-Adviser serves as a sub-adviser to a
issued unless the Commission orders a jurisdiction or a change in the type of business Subadvised Fund (‘‘Non-Affiliated Sub-Advisers’’).
3 The requested relief will not extend to any sub-
hearing. Interested persons may request organization. Future Subadvised Funds may be
operated as a master-feeder structure pursuant to adviser, other than a Wholly-Owned Sub-Adviser,
a hearing by writing to the section 12(d)(1)(E) of the Act. In such a structure, who is an affiliated person, as defined in section
Commission’s Secretary and serving certain series of the Trust (each, a ‘‘Feeder Fund’’) 2(a)(3) of the Act, of the Subadvised Fund, of any
applicants with a copy of the request, may invest substantially all of their assets in a Feeder Fund, or of the Adviser, other than by
Subadvised Fund (a ‘‘Master Fund’’) pursuant to reason of serving as a sub-adviser to one or more
personally or by mail. Hearing requests of the Subadvised Funds (‘‘Affiliated Sub-
section 12(d)(1)(E) of the Act. No Feeder Fund will
should be received by the Commission engage any sub-advisers other than through Adviser’’).
approving the engagement of one or more of the 4 For any Subadvised Fund that is a Master Fund,
14 17 CFR 200.30–3(a)(12). Master Fund’s sub-advisers. the relief would also permit any Feeder Fund
VerDate Sep<11>2014 18:38 Nov 02, 2018 Jkt 247001 PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 E:\FR\FM\05NON1.SGM 05NON1](https://thefederalregister.org/doc/83_FR_55649/page/4.svg)
Document Created: 2018-11-03 00:28:21
Document Modified: 2018-11-03 00:28:21
| 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 55435 |
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