[Federal Register Volume 83, Number 157 (Tuesday, August 14, 2018)]
[Notices]
[Pages 40361-40365]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-17392]


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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[reg] 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[reg] 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\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 82217 (December 5, 
2017), 82 FR 58243.
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    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.
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    \4\ See Securities Exchange Act Release No. 82558, 83 FR 3820 
(January 26, 2018).
    \5\ 15 U.S.C. 78s(b)(2)(B).
    \6\ See Securities Exchange Act Release No. 82842, 83 FR 11273 
(March 14, 2018).
    \7\ Amendment No. 1, which amended and replaced the proposed 
rule change in its entirety, is available at: https://www.sec.gov/comments/sr-cboebzx-2017-005/cboebzx2017005-3458514-162203.pdf.
    \8\ See 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.
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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[reg] 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[reg] Buffer

[[Page 40362]]

Protect Strategy (January) ETF; (2) Cboe Vest S&P 500[reg] Buffer 
Protect Strategy (February) ETF; (3) Cboe Vest S&P 500[reg] Buffer 
Protect Strategy (March) ETF; (4) Cboe Vest S&P 500[reg] Buffer Protect 
Strategy (April) ETF; (5) Cboe Vest S&P 500[reg] Buffer Protect 
Strategy (May) ETF; (6) Cboe Vest S&P 500[reg] Buffer Protect Strategy 
(June) ETF; (7) Cboe Vest S&P 500[reg] Buffer Protect Strategy (July) 
ETF; (8) Cboe Vest S&P 500[reg] Buffer Protect Strategy (August) ETF; 
(9) Cboe Vest S&P 500[reg] Buffer Protect Strategy (September) ETF; 
(10) Cboe Vest S&P 500[reg] Buffer Protect Strategy (October) ETF; (11) 
Cboe Vest S&P 500[reg] Buffer Protect Strategy (November) ETF; and (12) 
Cboe Vest S&P 500[reg] 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\
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    \10\ See Registration Statement on Form N-1A for the Trust, 
dated October 24, 2017 (File Nos. 333-179562 and 811-22668).
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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.
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    \11\ The 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, non-public 
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.
    \12\ As 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.
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1. Cboe Vest S&P 500[reg] 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%.
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    \13\ More information about the Indexes and methodology is 
available on the Index Provider's website at www.cboe.com.
    \14\ As 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[reg] S&P 500[reg] Buffer Protect Index January Series would be 
in January and the Roll Date for the Cboe[reg] S&P 500[reg] Buffer 
Protect Index February Series would be in February, a pattern which 
would continue through the rest of the calendar year.
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    Each Index is designed to provide the following outcomes between 
Roll Dates:
    <bullet> 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%);
    <bullet> If the S&P 500 Index declines between 0% and 10%: The 
Index provides a total return of zero (0%);
    <bullet> 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
    <bullet> 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

[[Page 40363]]

of the following: The FLEX Options that make up each respective 
underlying Index; standardized U.S. exchange-listed 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\
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    \15\ The 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 man-made disaster, act of God, armed 
conflict, act of terrorism, riot or labor disruption, or any similar 
intervening circumstance.
    \16\ For 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.
    \17\ The 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).
    \18\ For 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.
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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\
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    \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.
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    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\
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    \20\ The 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.
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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.
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    \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).
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    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 no-action 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 no-action 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\

[[Page 40364]]

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.
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    \24\ The 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 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.
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    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 exchange-listed 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 exchange-listed 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.
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    \25\ See 17 CFR 240.10A-3.
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    (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

[[Page 40365]]

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.
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    \26\ 15 U.S.C. 78f(b)(5).
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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.
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    \27\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-17392 Filed 8-13-18; 8:45 am]
BILLING CODE 8011-01-P