60516 Federal Register / Vol. 88, No. 169 / Friday, September 1, 2023 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 96979 

(February 24, 2023), 88 FR 13182. 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 97261, 

88 FR 22509 (April 13, 2023). 

6Amendment No. 1 is available at: https://

www.sec.gov/comments/sr-ise-2023-08/ 

srise202308.htm. 

7See Securities Exchange Act Release No. 97626, 

88 FR 37110 (June 6, 2023). 

8 15 U.S.C. 78s(b)(2). 

9See supra note 3 and accompanying text. 

10 15 U.S.C. 78s(b)(2). 

11 17 CFR 200.30–3(a)(57). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

to ‘‘Research on PPPs directly associated 

with testing and/or producing vaccines, 

such as generation of high growth 

strains’’? 

6. NSABB recommends that 

continued assessment of the risks and 

benefits associated with advances and 

applications of bioinformatics, 

modeling, and other in silico 

experimental approaches and research 

involving genes from or encoding 

pathogens, toxins, or other agents must 

inform future evaluations of the scope of 

research oversight policies to help 

ensure that associated risks are 

appropriately identified and managed. 

(Recommendation 10.2). This type of 

research is not currently included in the 

DURC and ePPP oversight policies. 

(a) Is there a subset of such in silico 

research that should require risk 

assessment and review in a Revised 

Policy, and if so, how should this 

research be defined so that the Policy 

captures the appropriate research 

without hampering activities with 

limited biosecurity risks? 

(b) One possible way to define this 

category of in silico research within a 

Revised Policy would be to include 

experiments that are reasonably 

anticipated to: 

‘‘(i) Develop in silico models that 

directly enable the predictive design of 

an enhanced potential pandemic 

pathogen or novel pathogen or toxin 

covered under a Revised Policy that 

could be constructed via genomic 

editing or de novo synthesis; and/or 

(ii) Develop a dataset(s) connecting 

nucleic acid or amino acid sequences 

with experimentally-determined 

pathogenic functions in a manner 

sufficient to enable the development of 

in silico models described in (i).’’ 

If a new category of research, similar 

to the examples provided above, were to 

require risk assessment and review in a 

Revised Policy, what would be the 

benefits and challenges with 

implementation? 

Dated: August 28, 2023. 

Stacy Murphy, 

Deputy Chief Operations Officer/Security 

Officer. 

[FR Doc. 2023–18906 Filed 8–31–23; 8:45 am] 

BILLING CODE 3270–F1–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98233; File No. SR–ISE– 

2023–08] 

Self-Regulatory Organizations; Nasdaq 

ISE, LLC; Notice of Designation of a 

Longer Period for Commission Action 

on Proceedings To Determine Whether 

To Approve or Disapprove a Proposed 

Rule Change, as Modified by 

Amendment No. 1, To Make Permanent 

Certain P.M.-Settled Pilots 

August 28, 2023. 

On February 23, 2023, Nasdaq ISE 

LLC (‘‘ISE’’ or ‘‘Exchange’’) 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 make permanent the pilot 

program to permit the listing and 

trading of options based on 1⁄5 the value 

of the Nasdaq-100 Index and the 

Exchange’s nonstandard expirations 

pilot program. The proposed rule 

change was published for comment in 

the Federal Register on March 2, 2023.3

On April 7, 2023, pursuant to section 

19(b)(2) of the Act,4 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 

rule change.5 On May 11, 2023, the 

Exchange filed Amendment No. 1 to the 

proposed rule change (‘‘Amendment No. 

1’’).6 On May 31, 2023, the Commission 

instituted proceedings to determine 

whether to approve or disapprove the 

proposed rule change and published 

Amendment No. 1 for notice and 

comment.7

Section 19(b)(2) of the Exchange Act 8

provides that, after initiating 

proceedings, the Commission shall issue 

an order approving or disapproving the 

proposed rule change not later than 180 

days after the date of publication of 

notice of filing of the proposed rule 

change. The Commission may extend 

the period for issuing an order 

approving or disapproving the proposed 

rule change, however, by not more than 

60 days if the Commission determines 

that a longer period is appropriate and 

publishes reasons for such 

determination. The proposed rule 

change was published for notice and 

comment in the Federal Register on 

March 2, 2023.9 The 180th day after 

publication of the proposed rule change 

is August 29, 2023. The Commission is 

extending the time period for approving 

or disapproving the proposed rule 

change for an additional 60 days. 

The Commission finds it appropriate 

to designate a longer period within 

which to issue an order approving or 

disapproving the proposed rule change 

so that it has sufficient time to consider 

the proposed rule change and the issues 

raised therein. Accordingly, the 

Commission, pursuant to section 

19(b)(2) of the Exchange Act,10

designates October 28, 2023, as the date 

by which the Commission shall either 

approve or disapprove the proposed 

rule change (File No. SR–ISE–2023–08). 

For the Commission, by the Division 

of Trading and Markets, pursuant to 

delegated authority.11

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–18898 Filed 8–31–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98231; File No. SR– 

CboeBZX–2023–062] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing of 

a Proposed Rule Change To Amend 

the Initial Period After Commencement 

of Trading of a Series of ETF Shares 

on the Exchange as It Relates to the 

Holders of Record and/or Beneficial 

Holders, as Provided in Exchange Rule 

14.11(l) 

August 28, 2023. 

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 August 

14, 2023, 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 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 169 / Friday, September 1, 2023 / Notices 60517 

3The term ‘‘ETF Shares’’ means shares of stock 

issued by an Exchange-Traded Fund. See Exchange 

Rule 14.11(l)(3)(A). The term ‘‘Exchange-Traded 

Fund’’ has the same meaning as the term 

‘‘exchange-traded fund’’ as defined in Rule 6c–11 

under the Investment Act of 1940. See Exchange 

Rule 14.11(l)(3)(B). 

4As it relates to this filing, ‘‘Beneficial Holders’’ 

shall mean beneficial holders and, where applicable 

in a particular continued listing standard, record 

holders. 

5The Exchange notes that its Rules related to the 

listing and trading of other product types (that is, 

products that are not ETF Shares as defined above) 

have similar requirements related to Beneficial 

Holders which the Exchange is not proposing to 

change at this time. Specifically, the Exchange is 

only proposing to amend the Beneficial Holders 

Rules as it pertains to ETF Shares because such 

product type represents the vast majority of 

products listed on the Exchange. The Exchange may 

consider proposing to amend the Beneficial Holders 

standards for other product types in a future 

proposal. 

6The Exchange notes that a different proposal to 

modify the Beneficial Holders Rules was 

disapproved by the Commission on December 29, 

2020. See Securities Exchange Act No. 90819 

(December 29, 2020) 86 FR 332 (January 5, 2021) 

(SR–CboeBZX–2020–036) (the ‘‘Prior Disapproval’’). 

7The Exchange notes that ETF Shares is a type 

of ETP. 

8Exchange Rule 14.12(f)(2) provides that the 

Listings Qualifications Department may accept and 

review a plan to regain compliance when a 

Company is deficient with respect to certain listing 

standards, including a failure to meet a continued 

listing requirement contained in Rule 14.11. 

Generally, Exchange staff may grant up to 180 

calendar days from the date of the staff’s initial 

deficiency notification. 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘Cboe’’) is filing with the 

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

to Exchange Rule 14.11(l), ExchangeTraded Fund Shares (‘‘ETF Shares’’), to 

amend the initial period after 

commencement of trading of a series of 

ETF Shares on the Exchange as it 

specifically relates to holders of record 

and/or beneficial holders. The text of 

the proposed rule change is provided in 

Exhibit 5. 

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 proposes to change to 

Rule 14.11(l)(4)(B)(i)(c) (the ‘‘Beneficial 

Holders Rule’’) in order to amend the 

continued listing standard applicable to 

ETF Shares 3 listed on the Exchange. 

Specifically, the Exchange is proposing 

to amend the Beneficial Holders Rule 

such that it would provide additional 

time for a series of ETF Shares to meet 

the Beneficial Holders 4 standards.5 6

Currently, the Exchange’s continued 

listing standard for ETF Shares under 

the Beneficial Holders Rule requires 

that, following the initial 12-month 

period after commencement of trading 

on the Exchange, the Exchange shall 

consider the suspension of trading in 

and will commence delisting 

proceedings under Rule 14.12 for a 

series of ETF Shares for which there are 

fewer than 50 Beneficial Holders for 30 

or more consecutive trading days. The 

Exchange is proposing to change the 

date at which a series of ETF Shares 

would need to have at least 50 

Beneficial Holders or be subject to 

delisting proceedings under Rule 14.12 

from 12 months after commencement of 

trading on the Exchange to 36 months 

after commencement of trading on the 

Exchange. 

As further described below, the 

Exchange believes it is appropriate to 

increase the period of time for a series 

of ETF Shares to comply with the 

Beneficial Holders Rule from 12 months 

to 36 months because: (i) it would bring 

the rule more in line with the life cycle 

of an ETP; (ii) the economic and 

competitive structures in place in the 

ETP ecosystem naturally incentivize 

issuers to de-list products rather than 

continuing to list products that do not 

garner investor interest; and (iii) 

extending the period from 12 to 36 

months will not meaningfully impact 

the manipulation concerns that the 

Beneficial Holders Rule is intended to 

address. 

First, the Exchange-Traded Product 

(‘‘ETP’’) 7 space generally is more 

competitive than it has ever been—with 

more than 2,000 ETPs listed on U.S. 

national securities exchanges competing 

for investor assets, the natural cycle for 

an average ETP to gain traction in the 

market is growing longer and longer. As 

more and more ETPs have come to 

market, many distribution platforms 

have become more restrictive about the 

ETPs that they allow on their systems, 

often requiring a minimum existing 

track record (e.g., at least 12 months) 

and meeting certain thresholds for 

assets under management (e.g., at least 

$100 million) for an ETP to be added. 

Similarly, many larger entities are 

unwilling to invest in ETPs that do not 

have at least one calendar year track 

record. All of these factors have 

contributed to the natural slowing of the 

average ETP’s growth cycle and, 

unsurprisingly, the Exchange has seen a 

significant number of deficiencies based 

on a failure to meet the Beneficial 

Holders standards over the last several 

years. 

The Exchange has issued deficiency 

notifications to 39 ETPs for noncompliance with the Beneficial Holders 

standards since 2015. Of those 39 ETPs, 

30 attained compliance with the 

Beneficial Holder standards after the 

deficiency notice was issued. This 

means that more than three quarters of 

these ETPs had to go through the 

process of requesting and justifying an 

extension,8 dealing with shareholder 

uncertainty, waste of internal resources, 

potentially engage outside counsel, etc. 

all to end up remaining listed on the 

Exchange. This false positive rate is 

unnecessarily high and makes clear that 

a 12-month threshold is an 

inappropriately short time frame for the 

Beneficial Holder standards. It only 

served as regulatory and administrative 

burdens for impacted issuers, which 

makes it more difficult for smaller 

issuers to compete because they have 

limited resources to overcome legal, 

marketing, or other obstacles that arise 

from the Beneficial Holders standards. 

Changing the timeline for meeting the 

Beneficial Holders Rule from 12 months 

to 36 months would provide ETF Shares 

with a more reasonable runway to 

establish a track record and grow assets 

under management, both of which 

generally precede the accumulation of 

Beneficial Holders. Further, the 

Exchange believes that extending that 

runway will encourage smaller issuers 

to make the necessary capital 

expenditures to launch additional ETF 


lotter on DSK11XQN23PROD with NOTICES1
60518 Federal Register / Vol. 88, No. 169 / Friday, September 1, 2023 / Notices 

9Approximately 43 ETPs have voluntarily 

delisted within their first year listed on the 

Exchange since 2015. The Exchange notes that a 

subset of this group might also include those who 

didn’t want to spend the extra funds to get an 

extension to the requirement. 

10There are currently 613 ETPs listed on the 

Exchange and 777 have been listed on the Exchange 

for at least some period since 2018, meaning that 

there’s been a nearly 19% voluntary turnover of 

ETPs listed on the Exchange since 2018. 

11FINRA conducts cross-market surveillances on 

behalf of the Exchange pursuant to a regulatory 

services agreement. The Exchange is responsible for 

FINRA’s performance under this regulatory services 

agreement. 

12 15 U.S.C. 78f. 

13 15 U.S.C. 78f(b)(5). 

Shares, as well as help both large and 

small issuers by allowing them to 

continue to list and promote products 

that they believe can succeed and that 

they are willing to continue paying for, 

all of which will help to foster 

competition and innovation in the ETP 

marketplace. 

Second, the economic and 

competitive structures in place in the 

ETP ecosystem naturally incentivize 

issuers to de-list products rather than 

continuing to list products that do not 

garner investor interest, meaning that 

the rule does not provide any 

meaningful ‘‘pruning’’ function for the 

industry.9 Rather, the Exchange has 

found that, as currently constructed, the 

12 month Beneficial Holders standards 

have instead resulted in the forced 

termination of ETPs that issuers 

believed were still economically viable. 

While some observers might argue that 

forced delisting of an ETP based on a 

failure to meet the Beneficial Holders 

standards is a good way to reduce the 

number of ETPs in the marketplace that 

have not drawn meaningful market 

interest, the Exchange disagrees with 

this sentiment. First, there are 

significant costs associated with both 

the initial launch and continued 

operation of an ETP and the Exchange 

has found that the ecosystem tends to 

prune itself of ETPs without meaningful 

investor interest. In fact, the Exchange 

has had 148 products that have 

voluntarily delisted since 2018,10

creating meaningful turnover in 

products which issuers believe are not 

economically viable. Second, the 

Exchange contests the underlying 

assumption that the number of 

Beneficial Holders is even a meaningful 

measure of market interest in an ETP. 

While a very high Beneficial Holder 

count would most certainly indicate an 

ETP’s success, the absence of Beneficial 

Holders is not necessarily a good 

measure of market interest or the 

amount of assets held by the ETP. 

Further to this point, the Beneficial 

Holders standards are not rules that an 

ETP issuer is incentivized to cut close 

or exceed by the smallest amount 

possible. Unlike many other 

quantitative or disclosure based listing 

requirements, an ETP issuer is 

incentivized to have as many Beneficial 

Holders as possible and would almost 

certainly prefer that they were able to 

meet and exceed the applicable 

Beneficial Holders standard as soon as 

possible after beginning trading on the 

Exchange. As such, extending the time 

period from 12 months to 36 months 

will not provide issuers of ETF Shares 

with a longer window to intentionally 

keep the number of Beneficial Holders 

lower, but, rather, will only extend the 

period during which a series of ETF 

Shares could have fewer than 50 

Beneficial Holders in specific instances 

where an issuer is unable to meet the 50 

Beneficial Holders threshold but still 

believes that the series of ETF Shares is 

viable and worth the cost of continued 

operation. Again, it takes money and 

resources to launch and operate an ETP 

and where an issuer does not believe 

that an ETP is economically viable, both 

common sense and prior experience 

point to issuers delisting these products. 

Finally, the Exchange believes that 

making this change does not create any 

significant change in the risk of 

manipulation for ETF Shares listed on 

the Exchange for several reasons. First, 

a time extension to meet the 

requirement would present no new 

issues because the Exchange already has 

no Beneficial Holder requirement for the 

first 12 months of trading ETF Shares on 

the Exchange. Any risk that is present 

during months 12 through 36 of initial 

listing would also be present during the 

first 12 months as provided under 

current rules. The Exchange believes 

that the Beneficial Holders standards are 

generally intended to ensure that 

products that do not have broad 

ownership and could be susceptible to 

manipulation by a few parties are not 

able to list on the Exchange after they’ve 

had sufficient time to diversify their 

ownership base. Leaving aside the issue 

of whether an open-ended ETP with 

creation and redemption processes 

would really be subject to manipulation 

by virtue of narrow ownership, the 

Exchange believes that, for all of the 

reasons explained above, 36 months is 

a more appropriate amount of time to 

consider sufficient time to diversify a 

series of ETF Shares ownership base. 

Further to this point, the Exchange 

has in place a robust surveillance 

program for ETPs that allows it to 

monitor trading of ETPs, including ETF 

Shares, during all trading sessions on 

the Exchange and it believes are 

sufficient to deter and detect violations 

of Exchange rules and the applicable 

federal securities laws. These 

surveillances generally focus on 

detecting securities trading outside of 

their normal patterns, which could be 

indicative of manipulative or other 

violative activity. When such situations 

are detected, surveillance analysis 

follows and investigations are opened, 

where appropriate, to review the 

behavior of all relevant parties for all 

relevant trading violations. Further, the 

Exchange or the Financial Industry 

Regulatory Authority (‘‘FINRA’’),11 on 

behalf of the Exchange, or both, 

communicate as needed regarding 

trading in ETPs with other markets and 

other entities that are members of the 

Intermarket Surveillance Group (‘‘ISG’’). 

The Exchange believes these robust 

surveillance procedures have 

successfully mitigated manipulation 

concerns during an ETPs first 12 months 

of listing on the Exchange, during which 

there is currently no Beneficial Holder 

requirement, and further believes that 

these surveillance procedures will act to 

mitigate any manipulation concerns that 

arise from extending the compliance 

period for the Beneficial Holders Rules 

from 12 months to 36 months. 

The Exchange also believes that the 

other continued listing standards in the 

Exchange’s rules or representations that 

constitute continued listing standards in 

Exchange rule filings (the disclosure 

obligations applicable under Rule 6c–11 

of the Investment Company Act of 1940 

for series of ETF Shares) are generally 

sufficient to mitigate manipulation 

concerns associated with ETF Shares. 

During the first 12 months of trading on 

the Exchange when the Beneficial 

Holders standards do not apply, these 

disclosure obligations, in conjunction 

with the Exchange’s surveillance 

program (as discussed above), are 

generally deemed sufficient to prevent 

any manipulation concerns in 

Exchange-listed ETPs. As such, the 

Exchange believes that extending the 

period from 12 months to 36 months 

does not significantly increase any risk 

of manipulation that wasn’t already 

generally deemed acceptable for the first 

12 months that an ETP was listed. 

Again, the Exchange is not proposing to 

eliminate the Beneficial Holders Rule, 

but merely to extend the period for a 

series of ETF Shares to meet the 50 

Beneficial Holder requirement. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with section 6(b) 

of the Act 12 in general and section 

6(b)(5) of the Act 13 in particular in that 

it is designed to promote just and 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 169 / Friday, September 1, 2023 / Notices 60519 

14Exchange Rule 14.12(f)(2) provides that the 

Listings Qualifications Department may accept and 

review a plan to regain compliance when a 

Company is deficient with respect to certain listing 

standards, including a failure to meet a continued 

listing requirement contained in Rule 14.11. 

Generally, Exchange staff may grant up to 180 

calendar days from the date of the staff’s initial 

deficiency notification. 

15Approximately 43 ETPs have voluntarily 

delisted within their first year listed on the 

Exchange since 2015. The Exchange notes that a 

subset of this group might also include those who 

didn’t want to spend the extra funds to get an 

extension to the requirement. 

16There are currently 613 ETPs listed on the 

Exchange and 777 have been listed on the Exchange 

for at least some period since 2018, meaning that 

there’s been a nearly 19% voluntary turnover of 

ETPs listed on the Exchange since 2018. 

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. 

The proposed rule changes are 

designed to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and, in general, to protect investors and 

the public interest because it would 

prevent the premature delisting of ETF 

Shares that have not had sufficient time 

to build up to 50 Beneficial Holders 

without significantly impacting the 

manipulation concerns that the 

Beneficial Holders Rule is intended to 

address. 

The Exchange believes it is 

appropriate to increase the period of 

time for a series of ETF Shares to 

comply with the applicable Beneficial 

Holders Rule from 12 months to 36 

months because: (i) it would bring the 

rule more in line with the life cycle of 

an ETP; (ii) the economic and 

competitive structures in place in the 

ETP ecosystem naturally incentivize 

issuers to de-list products rather than 

continuing to list products that do not 

garner investor interest; and (iii) 

extending the period from 12 to 36 

months will not meaningfully impact 

the manipulation concerns that the 

Beneficial Holders Rule is intended to 

address. 

First, the ETP space is more 

competitive than it has ever been—with 

more than 2,000 ETPs listed on U.S. 

national securities exchanges competing 

for investor assets, the natural cycle for 

an average ETP to gain traction in the 

market is growing longer and longer. As 

more and more ETPs have come to 

market, many distribution platforms 

have become more restrictive about the 

ETPs that they allow on their systems, 

often requiring a minimum existing 

track record (e.g., at least 12 months) 

and meeting certain thresholds for 

assets under management (e.g., at least 

$100 million) for an ETP to be added. 

Similarly, many larger entities are 

unwilling to invest in ETPs that do not 

have at least one calendar year track 

record. All of these factors have 

contributed to the natural slowing of the 

average ETP’s growth cycle and, 

unsurprisingly, the Exchange has seen a 

significant number of deficiencies based 

on a failure to meet the applicable 

Beneficial Holders standards over the 

last several years. 

The Exchange has issued deficiency 

notifications to 39 ETPs for noncompliance with the Beneficial Holders 

standards since 2015. Of those 39 ETPs, 

30 attained compliance with the 

Beneficial Holder standards after the 

deficiency notice was issued. This 

means that more than three quarters of 

these ETPs had to go through the 

process of requesting and justifying an 

extension,14 dealing with shareholder 

uncertainty, waste of internal resources, 

potentially engage outside counsel, etc. 

all to end up remaining listed on the 

Exchange. This false positive rate is 

unnecessarily high and makes clear that 

a 12-month threshold is an 

inappropriately short time frame for the 

Beneficial Holder standards. It only 

served as regulatory and administrative 

burdens for impacted issuers, which 

makes it more difficult for smaller 

issuers to compete because they have 

limited resources to overcome legal, 

marketing, or other obstacles that arise 

from the Beneficial Holders 

requirement. 

Changing the timeline for meeting the 

Beneficial Holders Rules from 12 

months to 36 months would provide 

ETF Shares with a more reasonable 

runway to establish a track record and 

grow assets under management, both of 

which generally precede the 

accumulation of Beneficial Holders. 

Further, the Exchange believes that 

extending that runway will encourage 

smaller issuers to make the necessary 

capital expenditures to launch 

additional ETF Shares, as well as help 

both large and small issuers by allowing 

them to continue to list and promote 

products that they believe can succeed 

and that they are willing to continue 

paying for, all of which will help to 

foster competition and innovation in the 

ETP marketplace. 

Second, the economic and 

competitive structures in place in the 

ETP ecosystem naturally incentivize 

issuers to de-list products rather than 

continuing to list products that do not 

garner investor interest, meaning that 

the rule does not provide any 

meaningful ‘‘pruning’’ function for the 

industry.15 Rather, the Exchange has 

found that, as currently constructed, the 

12 month Beneficial Holders Rule has 

instead resulted in the forced 

termination of ETPs that issuers 

believed were still economically viable. 

While some observers might argue that 

forced delisting of an ETP based on a 

failure to meet the Beneficial Holders 

Rule is a good way to reduce the 

number of ETPs in the marketplace that 

have not drawn meaningful market 

interest, the Exchange disagrees with 

this sentiment. First, there are 

significant costs associated with both 

the initial launch and continued 

operation of an ETP and the Exchange 

has found that the ecosystem tends to 

prune itself of ETPs without meaningful 

investor interest. In fact, the Exchange 

has had 148 products that have 

voluntarily delisted since 2018,16

creating meaningful turnover in 

products which issuers believe are not 

economically viable. Second, the 

Exchange contests the underlying 

assumption that the number of 

Beneficial Holders is even a meaningful 

measure of market interest in an ETP. 

While a very high Beneficial Holder 

count would most certainly indicate an 

ETP’s success, the absence of Beneficial 

Holders is not necessarily a good 

measure of market interest or the 

amount of assets held by the ETP. 

Further to this point, the Beneficial 

Holders Rule is not a rule that an ETP 

issuer is incentivized to cut close or 

exceed by the smallest amount possible. 

Unlike many other quantitative or 

disclosure based listing requirements, 

an ETP issuer is incentivized to have as 

many Beneficial Holders as possible and 

would almost certainly prefer that they 

were able to meet and exceed the 

Beneficial Holders Rule as soon as 

possible after beginning trading on the 

Exchange. As such, extending the time 

period from 12 months to 36 months 

will not provide issuers with a longer 

window to intentionally keep the 

number of Beneficial Holders lower, 

but, rather, will only extend the period 

during which a series of ETF Shares 

could have fewer than 50 Beneficial 

Holders in specific instances where an 

issuer is unable to meet the 50 

Beneficial Holders threshold but still 

believes that the ETP is viable and 

worth the cost of continued operation. 

Again, it takes money and resources to 

launch and operate an ETP and where 

an issuer does not believe that an ETP 

is economically viable, both common 

sense and prior experience point to 

issuers delisting these products. 

Finally, the Exchange believes that 

making this change does not create any 


lotter on DSK11XQN23PROD with NOTICES1
60520 Federal Register / Vol. 88, No. 169 / Friday, September 1, 2023 / Notices 

17FINRA conducts cross-market surveillances on 

behalf of the Exchange pursuant to a regulatory 

services agreement. The Exchange is responsible for 

FINRA’s performance under this regulatory services 

agreement. 

significant change in the risk of 

manipulation for ETF Shares listed on 

the Exchange for several reasons. First, 

a time extension to meet the 

requirement would present no new 

issues because the Exchange already has 

no Beneficial Holder requirement for the 

first 12 months of trading ETF Shares on 

the Exchange. Any risk that is present 

during months 12 through 36 of initial 

listing would also be present during the 

first 12 months as provided under 

current rules. The Exchange believes 

that the rule is generally intended to 

ensure that products that do not have 

broad ownership and could be 

susceptible to manipulation by a few 

parties are not able to list on the 

Exchange after they’ve had sufficient 

time to diversify their ownership base. 

Leaving aside the issue of whether an 

open-ended ETP with creation and 

redemption processes would really be 

subject to manipulation by virtue of 

narrow ownership, the Exchange 

believes that, for all of the reasons 

explained above, 36 months is a more 

appropriate amount of time to consider 

sufficient time to diversify an ETP’s 

ownership base. 

Further to this point, the Exchange 

has in place a robust surveillance 

program for ETPs that allows it to 

monitor trading of ETPs during all 

trading sessions on the Exchange and it 

believes are sufficient to deter and 

detect violations of Exchange rules and 

the applicable federal securities laws. 

These surveillances generally focus on 

detecting securities trading outside of 

their normal patterns, which could be 

indicative of manipulative or other 

violative activity. When such situations 

are detected, surveillance analysis 

follows and investigations are opened, 

where appropriate, to review the 

behavior of all relevant parties for all 

relevant trading violations. Further, the 

Exchange or the FINRA,17 on behalf of 

the Exchange, or both, communicate as 

needed regarding trading in ETPs with 

other markets and other entities that are 

members of the ISG. The Exchange 

believes these robust surveillance 

procedures have successfully mitigated 

manipulation concerns during an ETPs 

first 12 months of listing on the 

Exchange, during which there is 

currently no Beneficial Holder 

requirement, and further believes that 

these surveillance procedures will act to 

mitigate any manipulation concerns that 

arise from extending the compliance 

period for the Beneficial Holders Rule 

from 12 months to 36 months. 

The Exchange also believes that the 

other continued listing standards in the 

Exchange’s rules or representations that 

constitute continued listing standards in 

Exchange rule filings (the disclosure 

obligations applicable under Rule 6c–11 

of the Investment Company Act of 1940 

for series of ETF Shares) are generally 

sufficient to mitigate manipulation 

concerns associated with the ETF 

Shares. During the first 12 months of 

trading on the Exchange when the 

Beneficial Holders Rule does not apply, 

these disclosure obligations, in 

conjunction with the Exchange’s 

surveillance program (as discussed 

above), are generally deemed sufficient 

to prevent any manipulation concerns 

in Exchange-listed ETF Shares. As such, 

the Exchange believes that extending 

the period from 12 months to 36 months 

will not significantly increase any risk 

of manipulation that wasn’t already 

generally deemed acceptable for the first 

12 months that a series of ETF Shares 

was listed. Again, the Exchange is not 

proposing to eliminate the Beneficial 

Holders Rule, but merely to extend the 

period for a series ETF Shares to meet 

the 50 Beneficial Holder requirement. 

The proposed rule change is also 

designed to protect investors and the 

public interest because the Exchange is 

only proposing to amend the continued 

listing requirement related to Beneficial 

Holders and all ETPs listed on the 

Exchange would continue to be subject 

to the full panoply of Exchange rules 

and procedures that currently govern 

the trading of equity securities on the 

Exchange. 

For the above reasons, the Exchange 

believes that the proposed rule change 

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. Instead, the 

Exchange believes that the proposed 

rule change would help to encourage 

smaller issuers to make the necessary 

capital expenditures to launch 

additional ETF Shares, as well as help 

both large and small issuers by allowing 

them to continue to list and promote 

products that they believe can succeed 

and that they are willing to continue 

paying for, which will enhance 

competition among market participants, 

to the benefit of investors and the 

marketplace. 

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 

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 Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

CboeBZX–2023–062 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–2023–062. 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 (https://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 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 88, No. 169 / Friday, September 1, 2023 / Notices 60521 

18 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

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 

a.m. and 3 p.m. Copies of the filing also 

will be available for inspection and 

copying at the principal office of the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–CboeBZX–2023–062 and should be 

submitted on or before September 22, 

2023. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–18896 Filed 8–31–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[SEC File No. 270–087, OMB Control No. 

3235–0078] 

Submission for OMB Review; 

Comment Request; Extension: Rule 

15c3–3 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE, Washington, DC 

20549–2736. 

Notice is hereby given that pursuant 

to the Paperwork Reduction Act of 1995 

(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the 

Securities and Exchange Commission 

(‘‘Commission’’) has submitted to the 

Office of Management and Budget 

(‘‘OMB’’) a request for approval of 

extension of the previously approved 

collection of information provided for in 

Rule 15c3–3 (17 CFR 240.15c3–3), 

under the Securities Exchange Act of 

1934 (15 U.S.C. 78a et seq.). 

Furthermore, notice is given regarding 

new collections of information that were 

previously proposed in Rule 18a–4 

(OMB No. 3235–0700) and that were 

moved to this Rule 15c3–3 (OMB No. 

3235–0078) based on comments 

received during the rulemaking process. 

With respect to the extension of the 

previously approved collection of 

information, Rule 15c3–3 requires that a 

broker-dealer that holds customer 

securities obtain and maintain 

possession and control of fully paid and 

excess margin securities they hold for 

customers. In addition, the Rule 

requires that a broker-dealer that holds 

customer funds make either a weekly or 

monthly computation to determine 

whether certain customer funds need to 

be segregated in a special reserve bank 

account for the exclusive benefit of the 

firm’s customers. It also requires that a 

broker-dealer maintain a written 

notification from each bank where a 

Special Reserve Bank Account is held 

acknowledging that all assets in the 

account are for the exclusive benefit of 

the broker-dealer’s customers, and to 

provide written notification to the 

Commission (and its designated 

examining authority) under certain, 

specified circumstances. Finally, brokerdealers that sell securities futures 

products (‘‘SFP’’) to customers must 

provide certain notifications to 

customers and make a record of any 

changes of account type. 

A broker-dealer required to maintain 

the Special Reserve Bank Account 

prescribed by Rule 15c3–3 must obtain 

and retain a written notification from 

each bank in which it has a Special 

Reserve Bank Account to evidence the 

bank’s acknowledgement that assets 

deposited in the Account are being held 

by the bank for the exclusive benefit of 

the broker-dealer’s customers. In 

addition, a broker-dealer must 

immediately notify the Commission and 

its designated examining authority if it 

fails to make a required deposit to its 

Special Reserve Bank Account. Finally, 

a broker-dealer that effects transactions 

in SFPs for customers will also have 

paperwork burdens to make a record of 

each change in account type. 

The Commission staff estimates a total 

annual time burden of approximately 

1,109,518 hours and a total annual cost 

burden of approximately $3,516,241 to 

comply with the existing information 

collection requirements of the rule. 

In 2019, the Commission adopted 

amendments to establish segregation 

and notice requirements for brokerdealers with respect to their securitybased swap activity. The Commission 

staff estimates a total annual time 

burden of approximately 19,487 hours 

and a total annual cost burden of 

approximately $13,860 to comply with 

the information collection requirements 

of the 2019 amendments to the rule. 

The Commission staff thus estimates 

that the aggregate annual information 

collection burden associated with Rule 

15c3–3 is approximately 1,129,005 

hours and $3,530,101. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

under the PRA unless it displays a 

currently valid OMB control number. 

The public may view background 

documentation for this information 

collection at the following website, 

www.reginfo.gov. Find this particular 

information collection by selecting 

‘‘Currently under 30-day Review—Open 

for Public Comments’’ or by using the 

search function. Written comments and 

recommendations for the proposed 

information collection should be sent by 

October 2, 2023 to (i) www.reginfo.gov/ 

public/do/PRAMain and (ii) David 

Bottom, Director/Chief Information 

Officer, Securities and Exchange 

Commission, c/o John Pezzullo, 100 F 

Street NE, Washington, DC 20549, or by 

sending an email to: PRA_Mailbox@

sec.gov. 

Dated: August 29, 2023. 

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2023–18968 Filed 8–31–23; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–98228; File No. SR–Phlx– 

2023–38] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend Options 8 

Rules 

August 28, 2023. 

Pursuant to section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on August 

14, 2023, Nasdaq PHLX LLC (‘‘Phlx’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend its 

Rules at Options 8 concerning Floor 

Trading. 

The text of the proposed rule change 

is available on the Exchange’s website at 


lotter on DSK11XQN23PROD with NOTICES1