Federal Register / Vol. 83, No. 157 / Tuesday, August 14, 2018 / Notices 40361 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 82217 

(December 5, 2017), 82 FR 58243. 

4See Securities Exchange Act Release No. 82558, 

83 FR 3820 (January 26, 2018). 

5 15 U.S.C. 78s(b)(2)(B). 

6See Securities Exchange Act Release No. 82842, 

83 FR 11273 (March 14, 2018). 

7Amendment No. 1, which amended and 

replaced the proposed rule change in its entirety, 

is available at: https://www.sec.gov/comments/srcboebzx-2017-005/cboebzx2017005-3458514- 

162203.pdf. 

8See Securities Exchange Act Release No. 83390, 

83 FR 27355 (June 12, 2018). 

9 In Amendment No. 2, which amended and 

replaced the proposed rule change, as modified by 

Amendment No. 1, in its entirety, the Exchange: (a) 

Represented that the issuer will provide and 

maintain a publicly available web tool for each of 

the Funds (as defined herein) on its website that 

provides existing and prospective shareholders 

with important information to help inform 

investment decisions, including the start and end 

dates of the current outcome periods, the time 

remaining in the outcome periods, each Fund’s 

current net asset value, each Fund’s cap for the 

outcome period, the maximum investment gain 

available up to the cap for a shareholder purchasing 

Shares at the current net asset value, and 

information regarding each Fund’s buffer; (b) 

represented that, based on certain potential 

limitations of the Investment Company Act of 1940 

(‘‘1940 Act’’) associated with trading options on 

Cboe Exchange, Inc. (‘‘Cboe Options’’) and any 

other exchanges owned or controlled by Cboe 

Global Markets, Inc. (together with Cboe Options, 

collectively, ‘‘Cboe Exchanges’’), (i) the Funds will 

not be able to hold FLEX Options (as defined 

herein) or Standardized S&P 500 Index Options (as 

defined herein) until such time that appropriate 

exemptive and/or no-action relief is obtained from 

the Commission and/or its staff with respect to the 

Funds, and (ii) the Exchange will not list and trade 

the Shares of the Funds on the Exchange until such 

time that appropriate exemptive and/or no-action 

relief is obtained from the Commission and/or its 

staff with respect to the Funds; (c) conformed 

certain continued listing requirements to maintain 

consistency with BZX listing rules; (d) added 

representations relating to protections against 

market manipulation in the context of the 

underlying indexes and index values; (e) 

supplemented its description of the Comparable 

ETF Options (as defined herein); (f) provided a 

representation relating to the Exchange’s ability to 

access trade information for certain fixed income 

instruments reported to FINRA’s Trade Reporting 

and Compliance Engine for surveillance purposes; 

and (g) made other non-substantive, technical, and 

clarifying corrections to the proposal. Because 

Amendment No. 2 adds certain limiting conditions 

to the commencement of listing and trading the 

Shares on the Exchange based on requirements of 

the 1940 Act, represents that the issuer will provide 

and maintain an additional web-based tool to aid 

investors with respect to the Funds, and otherwise 

does not materially alter the substance of the 

proposed rule change or raise unique or novel 

regulatory issues under the Act, Amendment No. 2 

is not subject to notice and comment. Amendment 

No. 2 to the proposed rule change is available at: 

https://www.sec.gov/comments/sr-cboebzx-2017- 

005/cboebzx2017005-4171830-172318.pdf. 

Affected Public: None of the forms is 

used for any purpose other than a 

personnel background investigation. 

The completed forms are maintained by 

OPM subject to the protections of the 

Privacy Act of 1974, as amended. 

Procedurally, the subject of a 

personnel background investigation 

discloses the identity of relevant 

sources, such as supervisors, coworkers, 

neighbors, friends, current or former 

spouses, instructors, relatives, or 

schools attended, on the standard form 

(SF) 85, Questionnaire for Non-Sensitive 

Positions; the SF 85P, Questionnaire for 

Public Trust Positions; or the SF 86, 

Questionnaire for National Security 

Positions. After OPM receives a 

completed SF 85, SF 85P, or SF 86, the 

INV forms are distributed to the 

provided source contacts through an 

automated mailing operation. 

The INV 40 is used to collect records 

from a Federal or State record repository 

or a credit bureau. The INV 44 is used 

to collect law enforcement data from a 

criminal justice agency. The INV 41, 42, 

and 43 are sent to employment 

references, associates, and schools 

attended. The forms disclose that the 

source’s name was provided by the 

subject to assist in completing a 

background investigation to help 

determine the subject’s suitability for 

employment or security clearance, and 

request that the source complete the 

form with information to help in this 

determination. Generally the subject of 

the investigation will identify these 

employment references, associates, and 

schools on his or her SF 85, SF 85P, or 

SF 86 questionnaire. If information is 

omitted on the questionnaire, however, 

the information may be provided in a 

follow-up contact between the subject 

and an investigator. 

Number of Respondents: 5,682,744 

(58,071 (INV 40); 3,358,486 (INV 41); 

56,090 (INV 42); 855,051 (INV 43); 

1,355,046 (INV 44)). 

Estimated Time per Respondent: 5 

minutes. 

Total Burden Hours: 473,562 (4,839 

(INV 40); 279,874 (INV 41); 4,674 (INV 

42); 71,254 (INV 43); 112,921 (INV 44)) 

U.S. Office of Personnel Management. 

Jeff T.H. Pon, 

Director. 

[FR Doc. 2018–17431 Filed 8–13–18; 8:45 am] 

BILLING CODE 6325–53–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83796; File No. SR– 

CboeBZX–2017–005] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Order Granting 

Approval of a Proposed Rule Change, 

as Modified by Amendment No. 2, To 

List and Trade Shares of Twelve 

Monthly Series of the Cboe Vest S&P 

500® Buffer Protect Strategy ETF 

Under the ETF Series Solutions Trust 

Under Rule 14.11(c)(3), Index Fund 

Shares 

August 8, 2018. 

I. Introduction 

On November 21, 2017, Cboe BZX 

Exchange, Inc. (‘‘Exchange’’ or ‘‘BZX’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to list and trade shares 

(‘‘Shares’’) of twelve monthly series of 

the Cboe Vest S&P 500® Buffer Protect 

Strategy ETF of the ETF Series Solutions 

Trust (‘‘Trust’’) under BZX Rule 

14.11(c)(3). The proposed rule change 

was published for comment in the 

Federal Register on December 11, 

2017.3

On January 22, 2018, the Commission 

extended the time period within which 

to approve the proposed rule change, 

disapprove the proposed rule change, or 

institute proceedings to determine 

whether to approve or disapprove the 

proposed rule change.4 On March 9, 

2018, the Commission instituted 

proceedings under Section 19(b)(2)(B) of 

the Act 5 to determine whether to 

approve or disapprove the proposed 

rule change.6 On April 13, 2018, the 

Exchange filed Amendment No. 1 to the 

proposed rule change.7 On June 6, 2018, 

the Commission designated a longer 

period for Commission action on the 

proposed rule change.8 On August 6, 

2018, the Exchange filed Amendment 

No. 2 to the proposed rule change.9 The 

Commission has received no comments 

on the proposed rule change. This order 

grants approval of the proposed rule 

change, as modified by Amendment No. 

2. 

II. Exchange’s Description of the 

Proposal, as Modified by Amendment 

No. 2 

The Exchange proposes to list and 

trade the Shares of twelve monthly 

series of the Cboe Vest S&P 500® Buffer 

Protect Strategy ETF (individually, 

‘‘Fund,’’ and, collectively, ‘‘Funds’’) 

under BZX Rule 14.11(c)(3), which 

governs the listing and trading of Index 

Fund Shares. Each Fund will be an 

index-based exchange traded fund 

(‘‘ETF’’): (1) Cboe Vest S&P 500® Buffer 


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40362 Federal Register / Vol. 83, No. 157 / Tuesday, August 14, 2018 / Notices 

10See Registration Statement on Form N–1A for 

the Trust, dated October 24, 2017 (File Nos. 333– 

179562 and 811–22668). 

11The Exchange represents that the Index 

Provider has implemented and will maintain a ‘‘fire 

wall’’ with respect to such broker-dealer and its 

personnel regarding access to information 

concerning the composition of, or changes to, the 

Indexes. In addition, Index Provider personnel who 

make decisions regarding the Index composition or 

methodology are subject to procedures designed to 

prevent the use and dissemination of material, nonpublic information regarding the Indexes, pursuant 

to BZX Rule 14.11(c)(3)(B)(iii). According to the 

Exchange, the Adviser has also implemented and 

will maintain a ‘‘fire wall’’ with respect to such 

broker-dealer and its personnel regarding access to 

information concerning the composition of, or 

changes to, the portfolio, and Adviser personnel 

who make decisions regarding a Fund’s portfolio 

are subject to procedures designed to prevent the 

use and dissemination of material, non-public 

information regarding a Fund’s portfolio. In the 

event that (a) the Adviser or Index Provider 

becomes registered as a broker-dealer or newly 

affiliated with another broker-dealer, or (b) any new 

adviser or sub-adviser is a registered broker-dealer 

or becomes affiliated with a broker-dealer, it will 

implement and maintain a fire wall with respect to 

its relevant personnel or such broker-dealer 

affiliate, as applicable, regarding access to 

information concerning the composition of, or 

changes to, the portfolio, and will be subject to 

procedures designed to prevent the use and 

dissemination of material, non-public information 

regarding such portfolio. 

12As defined in Rule 14.11(c)(1)(D), the term 

‘‘U.S. Component Stock’’ shall mean an equity 

security that is registered under Sections 12(b) or 

12(g) of the Act, or an American Depositary receipt, 

the underlying equity security of which is 

registered under Sections 12(b) or 12(g) of the Act. 

13More information about the Indexes and 

methodology is available on the Index Provider’s 

website at www.cboe.com. 

14As described above, each of the twelve Indexes 

is designed to provide returns over a defined year 

long period and, thus, there would be an Index 

associated with each month. As such, the Roll Date 

for a specific Index would be dependent on the 

monthly series for which the Index is associated. 

For example, the Roll Date for the Cboe® S&P 500® 

Buffer Protect Index January Series would be in 

January and the Roll Date for the Cboe® S&P 500® 

Buffer Protect Index February Series would be in 

February, a pattern which would continue through 

the rest of the calendar year. 

15The term ‘‘Normal Market Conditions’’ 

includes, but is not limited to, the absence of 

trading halts in the applicable financial markets 

generally; operational issues causing dissemination 

of inaccurate market information or system failures; 

or force majeure type events such as natural or manmade disaster, act of God, armed conflict, act of 

terrorism, riot or labor disruption, or any similar 

intervening circumstance. 

Protect Strategy (January) ETF; (2) Cboe 

Vest S&P 500® Buffer Protect Strategy 

(February) ETF; (3) Cboe Vest S&P 500® 

Buffer Protect Strategy (March) ETF; (4) 

Cboe Vest S&P 500® Buffer Protect 

Strategy (April) ETF; (5) Cboe Vest S&P 

500® Buffer Protect Strategy (May) ETF; 

(6) Cboe Vest S&P 500® Buffer Protect 

Strategy (June) ETF; (7) Cboe Vest S&P 

500® Buffer Protect Strategy (July) ETF; 

(8) Cboe Vest S&P 500® Buffer Protect 

Strategy (August) ETF; (9) Cboe Vest 

S&P 500® Buffer Protect Strategy 

(September) ETF; (10) Cboe Vest S&P 

500® Buffer Protect Strategy (October) 

ETF; (11) Cboe Vest S&P 500® Buffer 

Protect Strategy (November) ETF; and 

(12) Cboe Vest S&P 500® Buffer Protect 

Strategy (December) ETF. Each Fund 

will be based on the Cboe S&P 500 

Buffer Protect Index (Month) Series, 

where ‘‘Month’’ is the corresponding 

month associated with the roll date of 

the applicable Fund (individually, 

‘‘Index,’’ and, collectively, ‘‘Indexes’’). 

The Shares will be offered by the Trust, 

which was established as a Delaware 

statutory trust on February 9, 2012. The 

Exchange represents that the Trust has 

filed a registration statement on behalf 

of the Funds on Form N–1A 

(‘‘Registration Statement’’) with the 

Commission.10

A. Description of the Funds and 

Underlying Indexes 

The Funds’ adviser, Cboe Vest 

Financial, LLC (‘‘Adviser’’), and Cboe 

Options (‘‘Index Provider’’), are not 

registered as broker-dealers, but are 

affiliated with a broker-dealer.11 Each 

Fund’s investment objective would be to 

track, before fees and expenses, the 

performance of its respective Index. The 

value of each Index would be calculated 

daily by Cboe Options utilizing an 

option valuation model. The Exchange 

submitted this proposed rule change 

because the Indexes for the Funds 

would not meet the listing requirements 

of Rule 14.11(c)(3), which requires, 

among other things, that all securities in 

the index or portfolio be U.S. 

Component Stocks 12 listed on the 

Exchange or another national securities 

exchange and be NMS Stocks as defined 

in Rule 600 of Regulation NMS under 

the Act. Specifically, the Indexes would 

consist of options on an index of U.S. 

Component Stocks. Because the Indexes 

would consist of options, which are not 

NMS Stocks as defined in Rule 600 of 

Regulation NMS under the Act, the 

Exchange represents that the Indexes 

would not meet the criteria set forth in 

BZX Rule 14.11(c)(3). As a result, the 

Exchange submitted this proposal to list 

the Shares on the Exchange. 

1. Cboe Vest S&P 500® Buffer Protect 

Index 

Each Index is a rules-based options 

index that would consist exclusively of 

FLexible EXchange Options on the S&P 

500 Index (‘‘FLEX Options’’) listed on 

Cboe Options.13 The Indexes are 

designed to provide exposure to the 

large capitalization U.S. equity market 

with lower volatility and downside risks 

than traditional equity indices, except 

in environments of rapid appreciation 

in the U.S. equity market over the 

course of one year. On a specified day 

of the applicable month for each Index 

(‘‘Roll Date’’),14 the applicable Index 

would implement a portfolio of put and 

call FLEX Options with expirations on 

the next Roll Date that, if held to such 

Roll Date, would seek to ‘‘buffer 

protect’’ against the first 10% decline in 

the value of the S&P 500 Index, while 

providing participation up to a 

maximum capped gain in the value of 

the S&P 500 Index (‘‘Capped Level’’). 

The Capped Level would be calculated 

as of each Roll Date based on the prices 

of the applicable FLEX Options, such 

that the value of the portfolio of FLEX 

Options that comprises each Index 

would be equivalent to the value of a 

portfolio comprised of the S&P 500 

Index constituents. As of the 2017 Roll 

Date, the Capped Level for the January 

Index was 11%, meaning that the 

January Index is designed to provide 

participation up to a maximum 11% 

gain in the value of the S&P 500 Index 

from the 2017 Roll Date to the 2018 Roll 

Date, but would not provide any 

participation for gains in the S&P 500 

Index in excess of 11%. 

Each Index is designed to provide the 

following outcomes between Roll Dates: 

• If the S&P 500 Index declines more 

than 10%: The Index declines 10% less 

than the S&P 500 Index (e.g., if the S&P 

500 Index returns ¥35%, the Index is 

designed to return ¥25%); 

• If the S&P 500 Index declines 

between 0% and 10%: The Index 

provides a total return of zero (0%); 

• If the S&P 500 Index appreciates 

between 0% and the Capped Level: The 

Index appreciates the same amount as 

the S&P 500 Index; and 

• If the S&P 500 Index appreciates 

more than the Capped Level: The Index 

appreciates by the amount of the 

Capped Level. 

Each Index would include a mix of 

purchased and written (sold) put and 

call FLEX Options structured to achieve 

the results described above. Such results 

would only be applicable for each full 

12-month period from one Roll Date to 

the next Roll Date, and the Index may 

not return such results for shorter or 

longer periods. The value of each Index 

would be calculated daily by Cboe 

Options utilizing a rules-based options 

valuation model. 

2. Holdings of the Funds 

Under Normal Market Conditions,15

each Fund would seek to track the total 

return performance, before fees and 

expenses, of its respective Index by 

investing all, or substantially all, of its 

assets in a combination of some or all 


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Federal Register / Vol. 83, No. 157 / Tuesday, August 14, 2018 / Notices 40363 

16For purposes of this proposal, the term ETF 

means Portfolio Depositary Receipts and Index 

Fund Shares as defined in Rule 14.11(b) and 

14.11(c), respectively, and their equivalents on 

other national securities exchanges. 

17The term ‘‘Comparable ETF Options’’ will at 

any time include only the five ETFs based on the 

S&P 500 Index with the greatest options 

consolidated average daily exchange trading 

volume for the previous quarter. The Adviser 

expects that, to the extent that the Funds use 

Comparable ETF Options, such options contracts 

will primarily consist of options on the SPDR S&P 

500 ETF (ticker: SPY). 

18For purposes of this filing, cash equivalents are 

short-term instruments with maturities of less than 

three months, including: (i) U.S. Government 

securities, including bills, notes, and bonds 

differing as to maturity and rates of interest, which 

are either issued or guaranteed by the U.S. Treasury 

or by U.S. Government agencies or 

instrumentalities; (ii) certificates of deposit issued 

against funds deposited in a bank or savings and 

loan association; (iii) bankers acceptances, which 

are short-term credit instruments used to finance 

commercial transactions; (iv) repurchase 

agreements and reverse repurchase agreements; (v) 

bank time deposits, which are monies kept on 

deposit with banks or savings and loan associations 

for a stated period of time at a fixed rate of interest; 

(vi) commercial paper, which are short-term 

unsecured promissory notes; and (vii) money 

market funds. 

19 In addition, the Exchange represents that, to the 

extent that any information in this proposal is or 

becomes inaccurate, the Exchange will submit a 

proposed rule change to reflect any new 

information before the Shares of the Funds will be 

listed on the Exchange. 

20The Commission notes that additional 

information regarding the Funds, the Trust, and the 

Shares, including information about the FLEX 

Options, investment strategies, risks, creation and 

redemption procedures, fees, portfolio holdings 

disclosure policies, calculation of net asset value, 

distributions, and taxes, among other things, can be 

found in Amendment 2 to the proposed rule change 

and the Registration Statement, as applicable. See 

Amendment 2 and Registration Statement, supra 

notes 9 and 10 and accompanying text, respectively. 

21 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

22 15 U.S.C. 78f(b)(5). 

23 15 U.S.C. 78k–1(a)(1)(C)(iii). 

24The Exchange notes that BZX Rule 

14.11(c)(3)(B)(ii) requires that the index value must 

be disseminated by one or more major market data 

vendors at least once every 15 seconds during 

regular market session; provided however, that if 

Continued 

of the following: The FLEX Options that 

make up each respective underlying 

Index; standardized U.S. exchangelisted options contracts on the S&P 500 

Index (‘‘Standardized S&P 500 Index 

Options’’ and, together with FLEX 

Options, collectively, ‘‘S&P 500 Index 

Options’’); and U.S. exchange-listed 

options on one or more ETFs 16 that 

track the performance of the S&P 500 

Index and have the same economic 

characteristics as the FLEX Options that 

make up each Index (‘‘Comparable ETF 

Options’’).17 The Fund may also hold 

cash and cash equivalents.18

B. Conditions To Listing and Trading 

the Shares on the Exchange 

According to the Exchange, the Trust 

is registered with the Commission as an 

open-end investment company. 

However, the Commission has not yet 

issued an order(s) granting exemptive 

relief to the Trust under the 1940 Act 

applicable to the activities of the Funds, 

and, as a result, the Exchange represents 

that the Shares of the Funds will not be 

listed and traded on the Exchange until 

such an order(s) is issued and any 

conditions contained therein are 

satisfied.19

Specifically, the Exchange represents 

that, because of certain potential 

limitations of the 1940 Act associated 

with trading options on the Cboe 

Exchanges, the Exchange will not list 

and trade the Shares on the Exchange 

until such time that appropriate 

exemptive and/or no-action relief is 

obtained from the Commission and/or 

its staff with respect to the Funds. This 

restriction does not prevent the Adviser 

or the Funds from engaging in other 

transactions or receiving other services 

from the Cboe Exchanges or for which 

the Cboe Exchanges may receive a 

benefit, such as pricing services, 

provided such transactions and/or the 

receipt of such services is consistent 

with applicable statutes, rules, 

regulations, and interpretive positions 

of the Commission and its staff. As a 

result, because FLEX Options are listed 

exclusively on Cboe Options, the Funds 

will not be able to hold FLEX Options 

until such time that appropriate 

exemptive and/or no-action relief is 

obtained from the Commission and/or 

its staff with respect to the Funds. 

Similarly, because Standardized S&P 

500 Index Options are listed exclusively 

on Cboe Options, the Funds will not be 

able to hold Standardized S&P 500 

Index Options until such time that 

appropriate exemptive and/or no-action 

relief is obtained from the Commission 

and/or its staff with respect to the 

Funds.20

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the Exchange’s proposal to list 

and trade the Shares, as modified by 

Amendment No. 2, is consistent with 

the Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.21 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,22 which requires, 

among other things, that the Exchange’s 

rules be designed to prevent fraudulent 

and manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. The 

Commission also finds that the proposal 

to list and trade the Shares on the 

Exchange is consistent with Section 

11A(a)(1)(C)(iii) of the Act 23 which sets 

forth Congress’ finding that it is in the 

public interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to assure the availability to brokers, 

dealers and investors of information 

with respect to quotations for and 

transactions in securities. 

As noted above, the Commission has 

not yet issued an order granting 

exemptive relief to the Trust under the 

1940 Act applicable to the activities of 

the Funds. Because of certain potential 

limitations of the 1940 Act associated 

with trading options on the Cboe 

Exchanges, the Exchange will not list 

and trade the Shares until such time 

that appropriate exemptive and/or noaction relief is obtained from the 

Commission and/or its staff with respect 

to the Funds. As a result, because FLEX 

Options are listed exclusively on Cboe 

Options, the Funds will not be able to 

hold FLEX Options until such time that 

appropriate exemptive and/or no-action 

relief is obtained from the Commission 

and/or its staff with respect to the 

Funds. Similarly, because Standardized 

S&P 500 Index Options are listed 

exclusively on Cboe Options, the Funds 

will not be able to hold Standardized 

S&P 500 Index Options until such time 

that appropriate exemptive and/or noaction relief is obtained from the 

Commission and/or its staff with respect 

to the Funds. In addition, the Exchange 

represents that, to the extent that any 

information in this proposal is or 

becomes inaccurate, the Exchange will 

submit a proposed rule change to reflect 

any new information before the Shares 

of the Funds will be listed on the 

Exchange. 

Notwithstanding the conditions to 

commence listing and trading the 

Shares on the Exchange, as set forth 

above, the Commission notes that, 

according to the Exchange, except as it 

relates to the options portion of the 

Indexes described above, the Funds will 

meet and be subject to all other 

requirements of BZX Rule 14.11(c)(3) 

related to generic listing standards of 

the Indexes and other applicable 

requirements for series of Index Fund 

Shares on an initial and continued 

listing basis, including requirements 

related to the dissemination of key 

information such as the Index values,24


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the index value does not change during some or all 

of the period when trading is occurring on the 

Exchange, then the last official calculated index 

value must remain available throughout the 

Exchange’s trading hours. The value of the Indexes 

will not change during the period when trading is 

occurring on the Exchange and the last official 

calculated Index value will remain available 

throughout the Exchange’s trading hours. 25See 17 CFR 240.10A–3. 

net asset value, and the intraday 

indicative values, rules governing the 

trading of equity securities, trading 

hours, trading halts, surveillance, 

suitability, and the information circular, 

as set forth in Exchange rules applicable 

to Index Fund Shares and the orders 

approving such rules. 

In support of its proposal, the 

Exchange has made the following 

additional representations: 

(1) The Exchange has in place a 

surveillance program for transactions in 

ETFs to ensure the availability of 

information necessary to detect and 

deter potential manipulation and other 

trading abuses. The Exchange believes 

that its surveillance procedures are 

adequate to properly monitor the 

trading of the Shares on the Exchange 

during all trading sessions and to deter 

and detect violations of Exchange rules 

and the applicable federal securities 

laws. Trading of the Shares through the 

Exchange will be subject to the 

Exchange’s surveillance procedures for 

derivative products, including Index 

Fund Shares. The Exchange represents 

that the Financial Industry Regulatory 

Authority (‘‘FINRA’’) conducts certain 

cross-market surveillances on behalf of 

the Exchange pursuant to a regulatory 

services agreement, and the Exchange is 

responsible for FINRA’s performance 

under this regulatory services 

agreement. The Exchange or FINRA, on 

behalf of the Exchange, will 

communicate as needed regarding 

trading in the Shares and exchangelisted options contracts with other 

markets and other entities that are 

members of the Intermarket 

Surveillance Group (‘‘ISG’’) and may 

obtain trading information regarding 

trading in the Shares and exchangelisted options contracts from such 

markets and other entities. In addition, 

the Exchange may obtain information 

regarding trading in the Shares and 

exchange-listed options contracts from 

markets and other entities that are 

members of ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement. The 

Exchange represents that all of the 

options contracts held by the Funds will 

trade on markets that are a member of 

ISG or affiliated with a member of ISG 

or with which the Exchange has in place 

a comprehensive surveillance sharing 

agreement. The Exchange also 

represents that the Funds will not hold 

any non-exchange-listed options 

contracts. Additionally, the Exchange or 

FINRA, on behalf of the Exchange, is 

able to access, as needed, trade 

information for certain fixed income 

instruments reported to FINRA’s Trade 

Reporting and Compliance Engine. In 

addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

(2) Quotation and last-sale 

information for exchange-listed options 

contracts cleared by The Options 

Clearing Corporation will be available 

via the Options Price Reporting 

Authority, and the intra-day, closing 

and settlement prices of exchange-listed 

options will be readily available from 

the options exchanges, automated 

quotation systems, published or other 

public sources, or online information 

services such as Bloomberg or Reuters. 

Price information on Treasury bills and 

other cash equivalents is available from 

major broker-dealer firms or market data 

vendors, as well as from automated 

quotation systems, published or other 

public sources, or online information 

services. On each business day, before 

commencement of trading in the Shares 

on the Exchange during Regular Trading 

Hours, the portfolio that will form the 

basis for each Fund’s calculation of the 

net asset value at the end of the business 

day will be provided on the Advisor’s 

website. 

(3) The issuer will provide and 

maintain a publicly available web tool 

for each of the Funds on its website that 

provides existing and prospective 

shareholders with certain information 

that may help inform their investment 

decisions. For each Fund, the 

information provided will include the 

start and end dates of the current 

outcome period, the time remaining in 

the outcome period, current net asset 

value, the cap for the outcome period, 

and the maximum investment gain 

available up to the cap for a shareholder 

purchasing Shares at the current net 

asset value. For each of the Funds, the 

web tool also will provide information 

regarding the Fund’s buffer. This 

information will include the remaining 

buffer available for a shareholder 

purchasing Shares at the current net 

asset value or the amount of losses that 

a shareholder purchasing Shares at the 

current net asset value would incur 

before benefitting from the protection of 

the buffer. The cover of each Fund’s 

prospectus, as well as the disclosure 

contained in ‘‘Principal Investment 

Strategies,’’ will provide the specific 

web address for each Fund’s web tool. 

(4) BZX Rule 3.7(a) provides that a 

Member, before recommending a 

transaction in any security, must have 

reasonable grounds to believe that the 

recommendation is suitable for the 

customer based on any facts disclosed 

by the customer, after reasonable 

inquiry by the Member, as to the 

customer’s other securities holdings and 

as to the customer’s financial situation 

and needs. Interpretation and Policy .01 

to Rule 3.7 provides that no Member 

shall recommend to a customer a 

transaction in any such product unless 

the Member has a reasonable basis for 

believing at the time of making the 

recommendation that the customer has 

such knowledge and experience in 

financial matters that he may reasonably 

be expected to be capable of evaluating 

the risks of the recommended 

transaction and is financially able to 

bear the risks of the recommended 

position. Prior to the commencement of 

trading, the Exchange will inform its 

Members of the suitability requirements 

of Rule 3.7 in an Information Circular. 

Specifically, Members will be reminded 

in the Information Circular that, in 

recommending transactions in these 

securities, they must have a reasonable 

basis to believe that (a) the 

recommendation is suitable for a 

customer given reasonable inquiry 

concerning the customer’s investment 

objectives, financial situation, needs, 

and any other information known by 

such member, and (b) the customer can 

evaluate the special characteristics, and 

is able to bear the financial risks, of an 

investment in the Shares. 

(5) Each Fund’s investments will be 

consistent with its investment objective 

and will not be used to enhance 

leverage (although certain derivatives 

and other investments may result in 

leverage). 

(6) Each Fund’s investments will not 

be used to seek performance that is the 

multiple or inverse multiple (i.e., 2x or 

¥2x) of its respective Index, and each 

Fund’s use of derivative instruments 

will be collateralized. 

(7) The Trust is required to comply 

with Rule 10A–3 under the Act 25 for the 

initial and continued listing of the 

Shares of the Funds, and a minimum of 

100,000 Shares for each Fund will be 

outstanding at the commencement of 

trading on the Exchange. 

(8) All statements and representations 

made in this filing regarding (a) the 

description of the portfolios, reference 

assets, and indexes, (b) limitations on 

portfolio holdings or reference assets, (c) 

dissemination and availability of index, 

reference asset, and intraday indicative 


amozie on DSK3GDR082PROD with NOTICES1
Federal Register / Vol. 83, No. 157 / Tuesday, August 14, 2018 / Notices 40365 

26 15 U.S.C. 78f(b)(5). 

27 15 U.S.C. 78s(b)(2). 

28 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4 15 U.S.C. 78s(b)(1). 

5 17 CRF 240.19b–4. 

6Executions below $1.00 are assessed a fee of 

0.30% of TDV unless the Fee Code Combination 

results in a free execution. See Investors Exchange 

Fee Schedule, available on the Exchange public 

website. 

7Pursuant to Rule 11.190(g), the Protected 

Quotations of the New York Stock Exchange, 

Nasdaq Stock Market, NYSE Arca, Nasdaq BX, Cboe 

BZX Exchange, Cboe BYX Exchange, Cboe EDGX 

Exchange, and Cboe EDGA Exchange. 

8See, Rule 600(b)(42) under Regulation NMS. 

9See supra note 4 [sic]. 

values, or (d) the applicability of 

Exchange rules specified in this filing 

shall constitute continued listing 

requirements for listing the Shares on 

the Exchange. The issuer has 

represented to the Exchange that it will 

advise the Exchange of any failure by a 

Fund or Shares to comply with the 

continued listing requirements, and, 

pursuant to its obligations under 

Section 19(g)(1) of the Act, the Exchange 

will surveil for compliance with the 

continued listing requirements. If a 

Fund or Shares is not in compliance 

with the applicable listing requirements, 

then, with respect to such Fund or 

Shares, the Exchange will commence 

delisting procedures under BZX Rule 

14.12. 

This approval order is based on all of 

the Exchange’s representations and 

description of the Funds, including 

those set forth above and in Amendment 

No. 2 to the proposed rule change. 

Except as described herein, the 

Commission notes that the Shares must 

comply with all other applicable 

requirements of BZX Rule 14.11(c) to be 

listed and traded on the Exchange on an 

initial and continuing basis. The 

Commission further notes that the 

Shares of the Funds will not be listed 

and traded on the Exchange until any 

and all exemptive and/or no-action 

relief required under the 1940 Act has 

been obtained with respect to the Funds 

and the Shares and any conditions 

related thereto are satisfied. 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

No. 2, is consistent with Section 6(b)(5) 

of the Act 26 and the rules and 

regulations thereunder applicable to a 

national securities exchange. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,27 that the 

proposed rule change (SR–CboeBZX– 

2017–005), as modified by Amendment 

No. 2, be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–17392 Filed 8–13–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83800; File No. SR–IEX– 

2018–16] 

Self-Regulatory Organizations: 

Investors Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Revise the 

Threshold for Imposition of the 

Crumbling Quote Remove Fee 

August 8, 2018. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on July 26, 

2018, the Investors Exchange LLC 

(‘‘IEX’’ or the ‘‘Exchange’’) 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 self-regulatory organization. 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 

Pursuant to the provisions of Section 

19(b)(1) under the Securities Exchange 

Act of 1934 (‘‘Act’’),4 and Rule 19b–4 

thereunder,5 IEX is filing with the 

Commission a proposed rule change to 

revise the threshold for imposition of 

the Crumbling Quote Remove Fee 

(‘‘CQRF’’) to more narrowly tailor it to 

trading activity that is indicative of a 

deliberate trading strategy that may 

adversely affect execution quality on the 

Exchange. The text of the proposed rule 

change is available at the Exchange’s 

website at www.iextrading.com, at the 

principal office of the Exchange, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization 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 statement may be examined at 

the places specified in Item IV below. 

The self-regulatory organization 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 its 

fee schedule, pursuant to IEX Rule 

15.110 (a) and (c), to revise the 

threshold for imposition of the CQRF to 

more narrowly tailor it to trading 

activity that is indicative of a deliberate 

trading strategy that may adversely 

affect execution quality on the 

Exchange. 

The Exchange charges the CQRF to 

orders that remove resting liquidity 

when the crumbling quote indicator 

(‘‘CQI’’) is on if such executions 

constitute at least 5% of the Member’s 

volume executed on IEX and at least 1 

million shares, on a monthly basis, 

measured on a per market participant 

identifier (‘‘MPID’’) basis (the ‘‘CQRF 

Threshold’’). Orders that exceed the 5% 

and 1 million share thresholds are 

assessed a fee of $0.0030 per each 

incremental share executed at or above 

$1.00 that exceeds the CQRF 

Threshold.6

Pursuant to IEX Rule 11.190(g), in 

determining whether quote instability or 

a crumbling quote exists, the Exchange 

utilizes real time relative quoting 

activity of certain Protected Quotations 7

and a proprietary mathematical 

calculation (the ‘‘quote instability 

calculation’’) to assess the probability of 

an imminent change to the current 

Protected National Best Bid 8 to a lower 

price or the Protected National Best 

Offer 9 to a higher price for a particular 

security (‘‘quote instability factor’’). 

When the quoting activity meets 

predefined criteria and the quote 

instability factor calculated is greater 

than the Exchange’s defined quote 

instability threshold, the System treats 

the quote as unstable and the CQI is on. 

During all other times, the quote is 

considered stable, and the CQI is off. 

The System independently assesses the 

stability of the Protected NBB and 

Protected NBO for each security. When 

the System determines that a quote, 


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