83 FR 63932 - Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Granting Approval to 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 238 (December 12, 2018)

Page Range		63932-63933
FR Document		2018-26834
Federal Register, Volume 83 Issue 238 (Wednesday, December 12, 2018)
[Federal Register Volume 83, Number 238 (Wednesday, December 12, 2018)]
[Notices]
[Pages 63932-63933]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-26834]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84738; File No. SR-CboeBZX-2018-079]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order 
Granting Approval to 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

December 6, 2018.

I. Introduction

    On October 18, 2018, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend how the BZX Official Closing price would 
be determined for BZX-listed securities that are not corporate 
securities if the Exchange does not conduct a Closing Auction or if a 
Closing Auction trade is less than a round lot.\3\ The proposed rule 
change was published for comment in the Federal Register on November 5, 
2018.\4\ The Commission received no comments on the proposal. This 
order approves the proposed rule change, as modified by Amendment No. 
1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 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.
    \4\ See Securities Exchange Act Release No. 84507 (October 30, 
2018), 83 FR 55435 (``Notice'').
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II. Description of the Proposal, as Modified by Amendment No. 1

    The Exchange proposes to amend BZX Rule 11.23(c)(2)(B) to change 
how it would determine the BZX Official Closing Price \5\ for an 
Exchange-listed security that is not a corporate security (``Derivative 
Securities Product'') if the Exchange does not conduct a Closing 
Auction or if a Closing Auction trade is less than a round lot. Current 
Rule 11.23(c)(2)(B) provides that in the event that there is no Closing 
Auction for a BZX-listed security, the BZX Official Closing Price will 
be the price of the Final Last Sale Eligible Trade.\6\ The Exchange 
proposes to amend this provision to provide that for Derivative 
Securities Products only, in the event there is no Closing Auction, or 
if less than a round lost was executed in the Closing Auction, the BZX 
Official Closing Price will depend upon when the Final Last Sale 
Eligible Trade in that security occurred.
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    \5\ See BZX Rule 11.23(a)(3) (defining the term ``BZX Official 
Closing Price'' as the price disseminated to the consolidated tape 
as the market center closing trade).
    \6\ As defined in BZX Rule 11.23(a)(9), the term ``Final Last 
Sale Eligible Trade'' means 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.
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    Specifically, if the Final Last Sale Eligible Trade occurred 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.\7\ However, if such trade occurred prior to the last five 
minutes before the end of Regular Trading Hours, the time-weighted 
average price of the NBBO midpoint measured over the last five minutes 
before the end of Regular Trading Hours will be the BZX Official 
Closing Price.\8\
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    \7\ See proposed BZX Rule 11.23(c)(2)(B)(ii)(a).
    \8\ See proposed BZX Rule 11.23(c)(2)(B)(ii)(b).
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    If the BZX Official Closing Price cannot be determined under 
proposed BZX Rule 11.23(c)(2)(B)(i) or (ii), the Final Last Sale 
Eligible Trade will be the BZX Official Closing Price.\9\ If there is 
no qualifying trade for the current day, the BZX Official Closing Price 
from the previous trading day will be used.\10\
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    \9\ See proposed BZX Rule 11.23(c)(2)(B)(iii).
    \10\ See BZX Rule 11.23(a)(9).
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    The Exchange states that it will implement the proposed rule change 
as soon as is practicable after the Commission's approval and will 
announce the implementation date via Trade Desk Notice.\11\
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    \11\ See Notice, supra note 4, at 55436.
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III. Discussion and Commission Findings

    The Commission finds that the proposed rule change, as modified by 
Amendment No. 1, is consistent with the requirements of Section 6 of 
the Act \12\ 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 Sections 6(b)(5) the 
Act,\14\ which requires, among other things, that the rules of a 
national securities exchange be designed to

[[Page 63933]]

promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating 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, and not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers. The Commission also finds that the proposed rule change is 
consistent with Section 6(b)(8) of the Act,\15\ which requires that the 
rules of a national securities exchange not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \12\ 15 U.S.C. 78f(b).
    \13\ In approving this proposed rule change, the Commission has 
considered the proposed rules' impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ 15 U.S.C. 78f(b)(8).
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    The Commission notes that the primary listing market's official 
closing price for a security is relied upon by market participants for 
a variety of reasons, including, but not limited to, calculation of 
index values, calculation of the net asset value of mutual funds and 
exchange-traded products, the price of derivatives that are based on 
the security, and certain types of trading benchmarks such as volume 
weighted average price strategies. For Derivatives Securities Products, 
in circumstances where there is no Closing Auction, or the Closing 
Auction trade consists of less than one round lot, the Exchange 
proposes to utilize more recent firm quotations instead of less recent 
trades, as such trades may provide less information about the current 
value of a security. The Exchange asserts that by doing so, the BZX 
Official Closing Price for such a Derivative Securities Product would 
be more reflective of the true and current value of such security on 
that trading day than otherwise would under the Exchange's current 
rule, particularly for a Derivative Securities Product that is thinly 
traded.\16\ The Commission therefore believes that the Exchange's 
proposal is reasonably designed to achieve the Act's objectives to 
protect investors and the public interest. Accordingly, the Commission 
finds that the proposed rule change is consistent with the requirements 
of the Act.
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    \16\ See Notice, supra note 4, at 55437.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\17\ that the proposed rule change (SR-CboeBZX-2018-079), as modified 
by Amendment No. 1, be, and hereby is, approved.
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    \17\ 15 U.S.C. 78s(b)(2).
    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-26834 Filed 12-11-18; 8:45 am]
 BILLING CODE 8011-01-P
63932 Federal Register / Vol. 83, No. 238 / Wednesday, December 12, 2018 / Notices

2. Rule 17d–3 under the Act provides SECURITIES AND EXCHANGE Exchange proposes to amend this
an exemption from section 17(d) and COMMISSION provision to provide that for Derivative
rule 17d–1 to permit open-end Securities Products only, in the event
[Release No. 34–84738; File No. SR–
investment companies to enter into CboeBZX–2018–079]
there is no Closing Auction, or if less
distribution arrangements pursuant to than a round lost was executed in the
rule 12b–1 under the Act. Applicants Self-Regulatory Organizations; Cboe Closing Auction, the BZX Official
request an order under section 17(d) and BZX Exchange, Inc.; Order Granting Closing Price will depend upon when
rule 17d–1 under the Act to the extent Approval to a Proposed Rule Change, the Final Last Sale Eligible Trade in that
necessary to permit the Fund to impose as Modified by Amendment No. 1, To security occurred.
Establish How the BZX Official Closing Specifically, if the Final Last Sale
asset-based distribution and/or service
Price Would Be Determined for BZX- Eligible Trade occurred within the final
fees. Applicants have agreed to comply five minutes before the end of Regular
with rules 12b–1 and 17d–3 as if those Listed Securities
Trading Hours, the Final Last Sale
rules applied to closed-end investment December 6, 2018. Eligible Trade will be the BZX Official
companies, which they believe will Closing Price.7 However, if such trade
resolve any concerns that might arise in I. Introduction
occurred prior to the last five minutes
connection with a Fund financing the On October 18, 2018, Cboe BZX before the end of Regular Trading
distribution of its shares through asset- Exchange, Inc. (the ‘‘Exchange’’ or Hours, the time-weighted average price
based distribution fees. ‘‘BZX’’) filed with the Securities and of the NBBO midpoint measured over
Exchange Commission (‘‘Commission’’), the last five minutes before the end of
3. For the reasons stated above,
pursuant to Section 19(b)(1) of the Regular Trading Hours will be the BZX
applicants submit that the exemptions Securities Exchange Act of 1934
requested under section 6(c) are Official Closing Price.8
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 a If the BZX Official Closing Price
necessary and appropriate in the public proposed rule change to amend how the cannot be determined under proposed
interest and are consistent with the BZX Official Closing price would be BZX Rule 11.23(c)(2)(B)(i) or (ii), the
protection of investors and the purposes determined for BZX-listed securities Final Last Sale Eligible Trade will be the
fairly intended by the policy and that are not corporate securities if the BZX Official Closing Price.9 If there is
provisions of the Act. Applicants further Exchange does not conduct a Closing no qualifying trade for the current day,
submit that the relief requested Auction or if a Closing Auction trade is the BZX Official Closing Price from the
pursuant to section 23(c)(3) will be less than a round lot.3 The proposed previous trading day will be used.10
consistent with the protection of rule change was published for comment The Exchange states that it will
investors and will insure that applicants in the Federal Register on November 5, implement the proposed rule change as
do not unfairly discriminate against any 2018.4 The Commission received no soon as is practicable after the
holders of the class of securities to be comments on the proposal. This order Commission’s approval and will
purchased. Finally, applicants state that approves the proposed rule change, as announce the implementation date via
the Funds’ imposition of asset-based modified by Amendment No. 1. Trade Desk Notice.11
distribution and/or service fees is II. Description of the Proposal, as III. Discussion and Commission
consistent with the provisions, policies Modified by Amendment No. 1 Findings
and purposes of the Act and does not
The Exchange proposes to amend The Commission finds that the
involve participation on a basis different BZX Rule 11.23(c)(2)(B) to change how proposed rule change, as modified by
from or less advantageous than that of it would determine the BZX Official Amendment No. 1, is consistent with
other participants. Closing Price 5 for an Exchange-listed the requirements of Section 6 of the
Applicants’ Condition security that is not a corporate security Act 12 and the rules and regulations
(‘‘Derivative Securities Product’’) if the thereunder applicable to a national
Applicants agree that any order Exchange does not conduct a Closing securities exchange.13 In particular, the
granting the requested relief will be Auction or if a Closing Auction trade is Commission finds that the proposed
subject to the following condition: less than a round lot. Current Rule rule change is consistent with Sections
Each Fund relying on the order will 11.23(c)(2)(B) provides that in the event 6(b)(5) the Act,14 which requires, among
comply with the provisions of rules 6c– that there is no Closing Auction for a other things, that the rules of a national
10, 12b–1, 17d–3, 18f–3, 22d–1, and, BZX-listed security, the BZX Official securities exchange be designed to
Closing Price will be the price of the
where applicable, 11a–3 under the Act,
Final Last Sale Eligible Trade.6 The or, for Halt Auctions, trading in the security being
as amended from time to time, as if halted. Where the trade was not executed within
those rules applied to closed-end 1 15 U.S.C. 78s(b)(1). the last one second, the last trade reported to the
management investment companies, 2 17 consolidated tape received by BZX Exchange during
CFR 240.19b–4.
Regular Trading Hours and, where applicable, prior
and will comply with the FINRA Sales 3 On October 29, 2018, the Exchange filed
to trading in the security being halted will be used.
Charge Rule, as amended from time to Amendment No. 1 to the proposed rule change to If there is no qualifying trade for the current day,
specify the date upon which the Exchange’s
time, as if that rule applied to all closed- President (or designee) approved the proposed rule
the BZX Official Closing Price from the previous
trading day will be used.
end management investment change, pursuant to delegated authority. 7 See proposed BZX Rule 11.23(c)(2)(B)(ii)(a).
companies. 4 See Securities Exchange Act Release No. 84507
8 See proposed BZX Rule 11.23(c)(2)(B)(ii)(b).
(October 30, 2018), 83 FR 55435 (‘‘Notice’’).
For the Commission, by the Division of 9 See proposed BZX Rule 11.23(c)(2)(B)(iii).
amozie on DSK3GDR082PROD with NOTICES1

5 See BZX Rule 11.23(a)(3) (defining the term
10 See BZX Rule 11.23(a)(9).
Investment Management, under delegated ‘‘BZX Official Closing Price’’ as the price
11 See Notice, supra note 4, at 55436.
authority. disseminated to the consolidated tape as the market
12 15 U.S.C. 78f(b).
center closing trade).
Eduardo A. Aleman, 6 As defined in BZX Rule 11.23(a)(9), the term 13 In approving this proposed rule change, the

Assistant Secretary. ‘‘Final Last Sale Eligible Trade’’ means the last Commission has considered the proposed rules’
[FR Doc. 2018–26797 Filed 12–11–18; 8:45 am] trade occurring during Regular Trading Hours on impact on efficiency, competition, and capital
the Exchange if the trade was executed within the formation. See 15 U.S.C. 78c(f).
BILLING CODE P last one second prior to either the Closing Auction 14 15 U.S.C. 78f(b)(5).

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Federal Register / Vol. 83, No. 238 / Wednesday, December 12, 2018 / Notices 63933

promote just and equitable principles of For the Commission, by the Division of the Commission has received more than
trade, to foster cooperation and Trading and Markets, pursuant to delegated 1,600 comments on the proposed rule
coordination with persons engaged in authority.18 change.8
regulating transactions in securities, to Eduardo A. Aleman, Section 19(b)(2) of the Act 9 provides
remove impediments to and perfect the Assistant Secretary. that after initiating disapproval
mechanism of a free and open market [FR Doc. 2018–26834 Filed 12–11–18; 8:45 am] proceedings, the Commission shall issue
and a national market system and, in BILLING CODE 8011–01–P an order approving or disapproving the
general, to protect investors and the proposed rule change not later than 180
public interest, and not be designed to days after the date of publication of
permit unfair discrimination between SECURITIES AND EXCHANGE notice of filing of the proposed rule
customers, issuers, brokers, or dealers. COMMISSION change. The Commission may extend
The Commission also finds that the the period for issuing an order
[Release No. 34–84731; File No. SR–
proposed rule change is consistent with approving or disapproving the proposed
CboeBZX–2018–040]
Section 6(b)(8) of the Act,15 which rule change, however, by not more than
requires that the rules of a national Self-Regulatory Organizations; Cboe 60 days if the Commission determines
securities exchange not impose any BZX Exchange, Inc.; Notice of that a longer period is appropriate and
burden on competition that is not Designation of a Longer Period for publishes reasons for such
necessary or appropriate in furtherance Commission Action on Proceedings To determination. The proposed rule
of the purposes of the Act. Determine Whether To Approve or change was published for notice and
Disapprove a Proposed Rule Change comment in the Federal Register on July
The Commission notes that the 2, 2018. December 29, 2018, is 180 days
primary listing market’s official closing To List and Trade Shares of SolidX
Bitcoin Shares Issued by the VanEck from that date, and February 27, 2019 is
price for a security is relied upon by 240 days from that date.
market participants for a variety of SolidX Bitcoin Trust
The Commission finds it appropriate
reasons, including, but not limited to, December 6, 2018. to designate a longer period within
calculation of index values, calculation On June 20, 2018, Cboe BZX which to issue an order approving or
of the net asset value of mutual funds Exchange, Inc. (‘‘BZX’’) filed with the disapproving the proposed rule change
and exchange-traded products, the price Securities and Exchange Commission so that it has sufficient time to consider
of derivatives that are based on the (‘‘Commission’’), pursuant to Section this proposed rule change. Accordingly,
security, and certain types of trading 19(b)(1) of the Securities Exchange Act the Commission, pursuant to Section
benchmarks such as volume weighted of 1934 (‘‘Act’’) 1 and Rule 19b–4 19(b)(2) of the Act,10 designates
average price strategies. For Derivatives thereunder,2 a proposed rule change to February 27, 2019, as the date by which
Securities Products, in circumstances list and trade shares of SolidX Bitcoin the Commission shall either approve or
where there is no Closing Auction, or Shares issued by the VanEck SolidX disapprove the proposed rule change
the Closing Auction trade consists of Bitcoin Trust under BZX Rule (File No. SR–CboeBZX–2018–040).
less than one round lot, the Exchange 14.11(e)(4), Commodity-Based Trust
proposes to utilize more recent firm For the Commission, by the Division of
Shares. The proposed rule change was Trading and Markets, pursuant to delegated
quotations instead of less recent trades, published for comment in the Federal authority.11
as such trades may provide less Register on July 2, 2018.3 Eduardo A. Aleman,
information about the current value of a On August 7, 2018, pursuant to
security. The Exchange asserts that by Assistant Secretary.
Section 19(b)(2) of the Act,4 the
doing so, the BZX Official Closing Price [FR Doc. 2018–26828 Filed 12–11–18; 8:45 am]
Commission designated a longer period
for such a Derivative Securities Product within which to approve the proposed BILLING CODE 8011–01–P

would be more reflective of the true and rule change, disapprove the proposed
current value of such security on that rule change, or institute proceedings to
trading day than otherwise would under SECURITIES AND EXCHANGE
determine whether to disapprove the
the Exchange’s current rule, particularly COMMISSION
proposed rule change.5 On September
for a Derivative Securities Product that 20, 2018, the Commission instituted
is thinly traded.16 The Commission proceedings under Section 19(b)(2)(B) of [Release No. 34–84745; File No. SR–GEMX–
therefore believes that the Exchange’s 2018–40]
the Act 6 to determine whether to
proposal is reasonably designed to approve or disapprove the proposed Self-Regulatory Organizations; Nasdaq
achieve the Act’s objectives to protect rule change.7 As of December 6, 2018, GEMX, LLC; Notice of Filing and
investors and the public interest.
Immediate Effectiveness of Proposed
Accordingly, the Commission finds that 1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
Rule Change to Supplementary
the proposed rule change is consistent Material .02 to Rule 715
3 See Securities Exchange Act Release No. 83520
with the requirements of the Act.
(June 26, 2018), 83 FR 31014 (July 2, 2018).
December 7, 2018.
IV. Conclusion 4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 83792 Pursuant to Section 19(b)(1) of the
It is therefore ordered, pursuant to (Aug. 7, 2018), 83 FR 40112 (Aug. 13, 2018). Securities Exchange Act of 1934
6 15 U.S.C. 78s(b)(2)(B).
Section 19(b)(2) of the Act 17 that the 7 See Securities Exchange Act Release No. 84231
proposed rule change (SR–CboeBZX– interest.’’ See id. at 48667 (citing 15 U.S.C.
amozie on DSK3GDR082PROD with NOTICES1

(Sept. 20, 2018), 83 FR 48665 (Sept. 26, 2018).
2018–079), as modified by Amendment 78f(b)(5)).
Specifically, the Commission instituted proceedings 8 All comments on the proposed rule change are
No. 1, be, and hereby is, approved. to allow for additional analysis of the proposed rule
change’s consistency with Section 6(b)(5) of the available on the Commission’s website at: https://
Act, which requires among other things, that the www.sec.gov/comments/sr-cboebzx-2018-040/cboeb
15 15 U.S.C. 78f(b)(8). zx2018040.htm.
rules of a national securities exchange be ‘‘designed
16 See Notice, supra note 4, at 55437. 9 15 U.S.C. 78s(b)(2).
to prevent fraudulent and manipulative acts and
17 15 U.S.C. 78s(b)(2). 10 Id.
practices, to promote just and equitable principles
18 17 CFR 200.30–3(a)(12). of trade,’’ and ‘‘to protect investors and the public 11 17 CFR 200.30–3(a)(57).

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Document Created: 2018-12-12 01:40:09
Document Modified: 2018-12-12 01:40:09
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 63932