[Federal Register Volume 86, Number 16 (Wednesday, January 27, 2021)]
[Notices]
[Pages 7327-7329]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01728]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90957; File No. SR-CboeBZX-2021-012]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Expand 
the Annual Listing Fee Cap for Outcome Strategy ETPs To Include Series 
Having Returns Based on Two or More Reference Indexes

January 21, 2021.
    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 January 13, 2021, 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. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') is filing 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change to amend the fees applicable to securities listed on the 
Exchange, which are set forth in BZX Rule 14.13.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend Rule 14.13(b)(2)(C) related to 
the listing of exchange-traded products (``ETPs'') \3\ on the Exchange. 
Specifically, the Exchange is proposing to modify the fee definition of 
Outcome Strategy ETPs provided under Rule 14.13(b)(2)(C)(iii) (the 
``Rule'') to include ETPs that provide returns based on the performance 
of more than one underlying instruments.
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    \3\ As defined in Rule 11.8(e)(1)(A), the term ``ETP'' means any 
security listed pursuant to Exchange Rule 14.11.
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    By way of background, Outcome Strategy ETPs are ETPs that are 
designed to provide a particular set of returns over a specified 
outcome period based on the performance of an underlying instrument 
during the ETP's outcome period. As an example, an Outcome Strategy ETP 
would include an ETP that employs the following strategy (the ``Buffer 
Strategy''): The ETP seeks to provide investment returns that match the 
gains of a particular index (the ``Reference Index'') up to a maximized 
annual return (the ``Cap Level'') while guarding against certain 
declines in that same underlying index (the ``Buffer Level'') over a 
particular period of time (the ``Outcome Period''). If over the course 
of the Outcome Period, the Reference Index increases in value, the ETP 
would appreciate by approximately the same amount, up to the Cap Level. 
If over the course of the Outcome Period, the Reference Index decreases 
in value by an amount equal to or less than the Buffer Level, then the 
ETP would provide an approximate total return of zero. If over the 
course of the Outcome Period, the Reference Index decreases in value by 
an amount greater than the Buffer Level, then the ETP would decrease in 
value by approximately the same percentage as the Reference Index, 
minus the Buffer Level. Such outcomes would only apply for the 
specified Outcome Period and the ETP would reset at the end of that 
Outcome Period in order to employ the same Buffer Strategy for the 
following Outcome Period.\4\
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    \4\ The Exchange notes that the Cap Levels, Buffer Levels, and 
the duration of each Outcome Period will vary across Outcome 
Strategy Series, but that the concepts of providing exposure to a 
particular reference instrument with an upside cap and limited 
downside over a particular period of time generally define Outcome 
Strategy ETPs.
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    As such, the Outcome Period applicable to each ETP is particularly 
important and investors need to have

[[Page 7328]]

more granular Outcome Periods in order to ensure that they are able to 
achieve the full Cap Level upside and Buffer Level downside protection. 
Issuers of Outcome Strategy ETPs generally issue the products in at 
least quarterly versions of each strategy. The issuer may also elect to 
list ETPs employing the Buffer Strategy in order to provide monthly 
Outcome Periods, meaning that there would be twelve separate ETPs 
listed on the Exchange that each employ the same Buffer Strategy, but 
have different Outcome Periods. Again, this provides investors with 
more precision when deciding which Outcome Strategy ETP to purchase 
among the series of Outcome Strategy ETPs (the ``Outcome Strategy 
Series'').
    With this in mind, the Exchange adopted the Rule which capped the 
maximum listing fee per year for an Outcome Strategy Series at $16,000. 
Specifically, the Rule provides that where an issuer lists multiple 
ETPs that are each designed to provide (i) a pre-defined set of 
returns; (ii) over a specified outcome period; (iii) based on the 
performance of the same underlying instrument; and (iv) each employ the 
same outcome strategy for achieving the predefined set of returns, the 
maximum annual listing fee applicable to such Outcome Strategy Series 
will be $16,000 per year.
    Now, the Exchange proposes to expand criteria (iii) of the Rule to 
include ETPs that are based on the performance of two or more 
underlying instruments. Such an amendment would expand the annual 
listing fee cap to include an Outcome Strategy Series that may, for 
example, include Outcome Strategy ETPs with returns based on the 
performance of two or more Reference Indexes. The Exchange intends to 
implement the proposed amendments to its fee schedule on January 4, 
2021.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\5\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \6\ in that it provides for the 
equitable allocation of reasonable dues, fees and other charges among 
issuers and it does not unfairly discriminate between customers, 
issuers, brokers or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendment to the Rule is 
reasonable, fair and equitable, and not an unfairly discriminatory 
allocation of fees and other charges because it would apply equally for 
all issuers and all Outcome Strategy Series. The Rule was designed to 
implement a cap on the listing fees for multiple series of Outcome 
Strategy ETPs with, among other things, returns based on the same 
underlying instrument. However, the Rule does not contemplate such a 
cap for a series of Outcome Strategy ETPs with returns based on the 
performance of multiple instruments. As such, the proposed amendment 
would allow a greater number of Outcome Strategy Series to benefit from 
the fee cap of $16,000.
    The Exchange notes that the proposal would only expand the cap on 
fees for ETPs meeting the amended definition of Outcome Strategy ETPs 
and would only act to leave static or reduce fees for ETPs listed on 
the Exchange. Further, as proposed, the Rule would decrease the fees 
associated with Outcome Strategy ETPs that are based on the performance 
of the same underlying instruments, which may reduce the barriers to 
entry into the space and incentivize enhanced competition among issuers 
of Outcome Strategy ETPs, to the benefit of investors. The Exchange 
notes that an issuer would only receive the benefit of the annual fee 
cap if they accrue greater than $16,000 in listing fees for a 
particular Outcome Strategy Series.
    The Exchange believes that the proposed cap on fees for Outcome 
Strategy Series and the associated changes is a reasonable means to 
incentivize issuers to list (or transfer) Outcome Strategy ETPs on the 
Exchange. The marketplace for listings is extremely competitive and 
there are several other national securities exchanges that offer ETP 
listings. Transfers between listing venues occur frequently for 
numerous reasons, including listing fees. The proposed rule changes 
reflect a competitive pricing structure designed to incentivize issuers 
to list new products and transfer existing products to the Exchange, 
which the Exchange believes will enhance competition both among ETP 
issuers and listing venues, to the benefit of investors.
    Based on the foregoing, the Exchange believes that the proposed 
rule changes are consistent with 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 not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
that the proposed change burdens competition, but instead, enhances 
competition, as it is intended to apply the $16,000 fee cap to Outcome 
Strategy ETPs that are based on the performance of two or more 
instruments, which may lead to reduced fees for issuers of such 
products. The marketplace for listings is extremely competitive and 
there are several other national securities exchanges that offer ETP 
listings. Transfers between listing venues occur frequently for 
numerous reasons, including listing fees. This proposal is intended to 
help the Exchange compete as an ETP listing venue. Accordingly, the 
Exchange does not believe that the proposed change will impair the 
ability of issuers or competing ETP listing venues to maintain their 
competitive standing. The Exchange also notes that the proposed change 
represents a competitive pricing structure designed to incentivize 
issuers to list new products and transfer existing products to the 
Exchange, which the Exchange believes will enhance competition both 
among ETP issuers and listing venues, to the benefit of investors. The 
Exchange believes that such proposed changes will directly enhance 
competition among ETP listing venues by reducing the costs associated 
with listing on the Exchange for ETPs meeting the proposed definition 
of Outcome Strategy ETPs. As such, the proposal is a competitive 
proposal designed to enhance pricing competition among listing venues 
and implement pricing for listings that better reflects the revenue and 
expenses associated with listing ETPs on the Exchange. The Exchange 
does not believe the proposed amendments would burden intramarket 
competition as they would be available to all issuers uniformly.

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

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \7\ and paragraph (f) of Rule 19b-4 \8\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if

[[Page 7329]]

it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#2153544d440c424e4c4c444f5552615244420f464e57"><span class="__cf_email__" data-cfemail="493b3c252c642a2624242c273d3a093a2c2a672e263f">[email protected]</span></a>. Please include 
File Number SR-CboeBZX-2021-012 on the subject line.

Paper Comments

    <bullet> 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-2021-012. 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 such filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CboeBZX-2021-012, and should be 
submitted on or before February 17, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-01728 Filed 1-26-21; 8:45 am]
BILLING CODE 8011-01-P


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