Federal Register / Vol. 89, No. 29 / Monday, February 12, 2024 / Notices 9875 

5See Notice, supra note 3. 

6See Securities Exchange Act Release No. 98597 

(Sept. 28, 2023), 88 FR 68822 (Oct. 4, 2023). 

7 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 ‘‘Minimum Performance Standards’’ means a set 

of standards applicable to an LMM that may be 

determined from time to time by the Exchange. See 

Exchange Rule 11.8(e)(1)(E). 

4As defined in Rule 14.1(a), the term ‘‘Primary 

Equity Security’’ means a Company’s first class of 

Common Stock, Ordinary Shares, Shares or 

Certificates of Beneficial Interest of Trust, Limited 

Partnership Interests or American Depositary 

Receipts (‘‘ADRs’’) or Shares (‘‘ADSs’’). 

5The Exchange initially filed the proposed fee 

change on February 1, 2024 (SR–Cboe–BZX–2024– 

012). On February 2, 2024, the Exchange withdrew 

that filing and submitted this proposal. 

6See the Securities Exchange Act Release Nos. 

72020 (April 25, 2014) 79 FR 24807 (May 1, 2014) 

(SR–BATS–2014–015) (the ‘‘LMM Program filing’’); 

72333 (June 5, 2014) 79 FR 33630 (June 11, 2014) 

(SR–BATS–2014–019) (the ‘‘LMM Fee filing’’). 

7See Rule 11.8(e)(1)(A). 

8As provided in Rule 14.8(a), the term ‘‘ClosedEnd Funds’’ means closed-end management 

investment companies registered under the 

Investment Company Act of 1940. 

9See Securities Exchange Act Release No. 88617 

(April 10, 2020) 85 FR 21056 (April 15, 2020) (SR– 

CboeBZX–2020–032). 

10Qualified Securities are BZX-listed primary 

equity securities and closed-end funds for which 

LMMs are eligible to receive certain incentives, as 

set forth in the Exchange’s Fee Schedule, if the 

Minimum Performance Standards applicable to 

Qualified Securities are met. 

11Enhanced Securities are BZX-listed primary 

equity securities and closed-end funds securities for 

which LMMs are eligible to certain incentives that 

are higher than those available for Qualified 

Securities, if the more stringent Minimum 

Performance Standards applicable to Enhanced 

Securities are met. 

comment in the Federal Register on 

September 22, 2023.5 On September 28, 

2023, pursuant to Section 19(b)(3)(C) of 

the Act, the Commission temporarily 

suspended the proposed rule change 

and instituted proceedings under 

Section 19(b)(2)(B) of the Act to 

determine whether to approve or 

disapprove the proposed rule change.6

On February 1, 2024, the Exchange 

withdrew the proposed rule change 

(SR–CboeBZX–2023–071). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–02755 Filed 2–9–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99480; File No. SR– 

CboeBZX–2024–013] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Modify the 

Minimum Performance Standards 

Applicable to Primary Equity Securities 

Under the Lead Market Maker Program 

as Set forth in Rule 11.8(e)(1)(E), and 

To Make Corresponding Changes to Its 

Fee Schedule 

February 6, 2024. 

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 February 

2, 2024, Cboe BZX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BZX’’) 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 

Cboe BZX Exchange, Inc. (‘‘BZX’’ or 

the ‘‘Exchange’’) is filing with the 

Securities and Exchange Commission 

(‘‘Commission’’ or ‘‘SEC’’) a proposed 

rule change to modify the Minimum 

Performance Standards applicable to 

Primary Equity Securities under the 

Lead Market Maker program (‘‘LMM 

Program’’) as set forth in Rule 

11.8(e)(1)(E), and to make corresponding 

changes to its Fee Schedule. The text of 

the proposed rule change is provided in 

Exhibit 5 below. 

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 modify the 

Minimum Performance Standards 3

under the LMM Program as set forth in 

Rule 11.8(e)(1)(E) applicable to Primary 

Equity Securities 4 (also referred to as 

‘‘Corporate Securities’’) listed on the 

Exchange. The Exchange is not 

proposing any substantive changes to 

the LMM Program as it relates to 

Exchange-Traded Products (‘‘ETPs’’) or 

Closed-End Funds, but is merely 

proposing to make changes in its 

Rulebook to clearly delineate the LMM 

Program applicable to Corporate 

Securities. The Exchange also proposes 

to make corresponding changes to its 

Fee Schedule. The Exchange proposes 

to implement these changes on February 

2, 2024.5

On June 2, 2014,6 the Exchange 

implemented the LMM Program on the 

Exchange, which provided enhanced 

rebates to market makers registered with 

the Exchange (‘‘Market Makers’’) that 

were also registered as a lead market 

maker (‘‘LMM’’) in an LMM Security 

and met the Minimum Performance 

Standards in Exchange-listed exchangetraded products (‘‘ETPs’’).7 On April 8, 

2020, the Exchange amended the LMM 

Program to include Cboe-listed Primary 

Equity Securities and Closed-End 

Funds,8 and made corresponding 

changes to its Fee Schedule.9 Now, the 

Exchange proposes to modify the 

Minimum Performance Standards 

applicable to only Primary Equity 

Securities listed on the Exchange, and 

separate those Minimum Performance 

Standards from those applicable to 

Closed-End Funds in the Exchange’s 

rulebook. 

Currently, the Minimum Performance 

Standards for Primary Equity Securities 

and Closed-End Funds include the 

following under Rule 11.8(e)(1)(E)(i)– 

(v): 

(i) Registration as a market maker in 

good standing with the Exchange; 

(ii) Time at the inside requirements, 

which, for Qualified Securities,10

require that an LMM maintain quotes at 

the NBB and the NBO at least 5% of 

Regular Trading Hours where the 

security has a consolidated average 

daily volume equal to or greater than 

500,000 shares and at least 15% of 

Regular Trading Hours where the 

security has a consolidated average 

daily volume of less than 500,000 

shares. For Enhanced Securities,11 an 

LMM must quote at the NBB and the 

NBO at least 5% of Regular Trading 

Hours where the security has a 

consolidated average daily volume 


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9876 Federal Register / Vol. 89, No. 29 / Monday, February 12, 2024 / Notices 

equal to or greater than 500,000 shares 

and at least 40% of Regular Trading 

Hours where the security has a 

consolidated average daily volume of 

less than 500,000 shares; 

(iii) Auction participation 

requirements, which, for a Qualified 

Security, require that the Opening 

Auction price is within 4% of the last 

Reference Price, as defined in Rule 

11.23(a)(19), and 2% for an Enhanced 

Security. For a Qualified Security, such 

requirements provide that the Closing 

Auction price must be within 3% of the 

last Reference Price and 1% for an 

Enhanced Security; 

(iv) Market-wide NBB and NBO 

spread and size requirements, which 

require 300 shares at both the NBB and 

NBO during at least 50% of Regular 

Trading Hours for both Qualified 

Securities and Enhanced Securities. For 

Qualified Securities, the NBBO spread 

of such shares must be no wider than 

2% for a security priced equal to or 

greater than $5 and no wider than 7% 

for a security priced less than $5. For 

Enhanced Securities, the NBBO spread 

of such shares must be no wider than 

1% for securities priced equal to or 

greater than $5 and no wider than 2% 

for securities priced less than $5; and 

(v) Depth of book requirements, 

which, for securities priced equal to or 

greater than $5 requires at least 

$150,000 of displayed posted liquidity 

on both the buy and the sell side within 

the percentages described below during 

at least 90% of Regular Trading Hours 

and, for securities priced less than $5, 

at least $50,000 of displayed posted 

liquidity on both the buy and the sell 

side within the percentages described 

below during at least 90% of Regular 

Trading Hours. For Qualified Securities, 

such liquidity must be within 2% of 

both the NBB and NBO for securities 

priced equal to or greater than $5 and 

within 7% of both the NBB and NBO for 

securities priced less than $5. For 

Enhanced Securities, such liquidity 

must be within 1% of both the NBB and 

NBO for securities priced equal to or 

greater than $5 and within 2% of both 

the NBB and NBO for securities priced 

less than $5. 

Now, the Exchange proposes to adopt 

similar Minimum Performance 

Standards applicable to Primary Equity 

Securities under proposed Rule 

11.8(e)(1)(E)(i) and move the existing 

Minimum Performance Standards, 

which would be applicable only to 

Closed-End Funds, to proposed Rule 

11.8(e)(1)(E)(ii). Specifically, the 

Minimum Performance Standards 

applicable to Primary Equity Securities 

would be set forth in Rule 

11.8(e)(1)(E)(i)(a)–(e), as discussed 

below. 

Proposed subparagraph (a) would 

require that the LMM is registered as a 

market maker in good standing with the 

Exchange and is identical to the existing 

requirement under Rule 11.8(e)(1)(E)(i). 

Proposed subparagraph (b) would set 

forth the time at the inside requirements 

identical to existing Rule 

11.8(e)(1)(E)(ii), except for the 

percentage of time the LMM must have 

quotes at the NBB and NBO. 

Specifically, subparagraph (b) would 

provide that the time at the inside 

requirements, which, for Qualified 

Securities, require that an LMM 

maintain quotes at the NBB and the 

NBO at least 10% of Regular Trading 

Hours where the security has a 

consolidated average daily volume 

equal to or greater than 500,000 shares 

and at least 20% of Regular Trading 

Hours where the security has a 

consolidated average daily volume of 

less than 500,000 shares. For Enhanced 

Securities, an LMM must quote at the 

NBB and the NBO at least 10% of 

Regular Trading Hours where the 

security has a consolidated average 

daily volume equal to or greater than 

500,000 shares and at least 20% of 

Regular Trading Hours where the 

security has a consolidated average 

daily volume of less than 500,000 

shares. Under the current structure, 

LMMs in Corporate Securities and 

Closed-End Funds that meet the 

Enhanced Security Minimum 

Performance Standards are eligible to 

receive higher incentives than such 

LMMs that meet the Qualified Security 

Minimum Performance Standards 

because such Enhanced Security 

Minimum Performance Standards are 

more stringent. As proposed, the 

Qualified Security Minimum 

Performance Standards and Enhanced 

Security Minimum Performance 

Standards for Corporate Securities are 

identical, as are the proposed incentives 

which are discussed in further detail 

below. Nonetheless, the Exchange is 

proposing to keep the concept of 

Qualified Security Minimum 

Performance Standards and Enhanced 

Security Minimum Performance 

Standards in the Exchange’s Rulebook 

as the Exchange expects to modify those 

Minimum Performance Standards (at a 

later date through another proposal) so 

that they are not identical. 

Proposed subparagraph (c) would set 

forth the auction participation 

requirements identical to existing Rule 

11.8(e)(1)(E)(iii), except for the 

percentage requirements as it relates to 

Enhanced Securities for both the 

Opening and Closing Auction. 

Specifically, subparagraph (c) would 

require that for a Qualified Security, the 

Opening Auction price is within 4% of 

the last Reference Price, as defined in 

Rule 11.23(a)(19), and 4% for an 

Enhanced Security. For a Qualified 

Security, such requirements provide 

that the Closing Auction price must be 

within 3% of the last Reference Price 

and 3% for an Enhanced Security. As 

described above, while the Exchange 

acknowledges that the proposed quoting 

requirements for Qualified Security 

Minimum Performance Standards and 

Enhanced Security Minimum 

Performance Standards are identical, the 

Exchange expects to modify these 

requirements at a later date through 

another proposal. 

Proposed subparagraph (d) would set 

forth the market-wide NBB and NBO 

spread and size requirements identical 

to existing Rule 11.8(e)(1)(E)(iv), except 

that the requirements would not 

consider the price of the security, and 

that the applicable percentage 

requirements for both Qualified and 

Enhanced Securities could be different. 

Specifically, proposed Rule 

11.8(e)(1)(E)(i)(d) would require 300 

shares at both the NBB and NBO during 

at least 50% of Regular Trading Hours 

for both Qualified Securities and 

Enhanced Securities. For Qualified 

Securities, the NBBO spread of such 

shares must be no wider than 5%. For 

Enhanced Securities, the NBBO spread 

of such shares must be no wider than 

5%. As described above, while the 

Exchange acknowledges that the 

proposed spread requirements for 

Qualified Security Minimum 

Performance Standards and Enhanced 

Security Minimum Performance 

Standards are identical, the Exchange 

expects to modify these requirements at 

a later date through another proposal. 

Proposed subparagraph (e) would set 

forth the depth of book requirements 

identical to existing Rule 

11.8(e)(1)(E)(v), except that the 

requirements would not consider the 

price of the security, and the applicable 

percentage requirements for both 

Qualified and Enhanced Securities 

could be different. Specifically, 

proposed Rule 11.8(e)(1)(E)(i)(E) would 

require at least $50,000 of displayed 

posted liquidity on both the buy and the 

sell side within the percentages 

described below during at least 90% of 

Regular Trading Hours. For Qualified 

Securities, such liquidity must be 

within 5% of both the NBB and NBO. 

For Enhanced Securities, such liquidity 

must be within 5% of both the NBB and 

NBO. As described above, while the 

Exchange acknowledges that the 

proposed depth of book requirements 


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12Such standards applicable to ETPs and ClosedEnd Funds will vary between LMM Securities 

depending on the price, liquidity, and volatility of 

the LMM Security in which the LMM is registered. 

The performance measurements will include: (A) 

percent of time at the NBBO; (B) percent of 

executions better than the NBBO; (C) average 

displayed size; and (D) average quoted spread. For 

additional detail, see LMM Program Filing. 

for Qualified Security Minimum 

Performance Standards and Enhanced 

Security Minimum Performance 

Standards are identical, the Exchange 

expects to modify these requirements at 

a later date through another rule filing. 

As noted above, to conform the 

proposal to the Exchange’s rulebook, the 

Exchange proposes to move the existing 

Minimum Performance Standards for 

Closed-End Funds to proposed Rule 

11.8(e)(1)(E)(ii)(a)–(e). The Exchange is 

not proposing to modify any of the 

Minimum Price Standards applicable to 

Closed-End Funds at this time. 

The Exchange also proposes to modify 

the Exchange’s Fee Schedule to 

delineate the LMM program applicable 

to Primary Equity Securities from the 

LMM program applicable to ETPs and 

Closed-End Funds, as provided in 

footnote 14 of the Fee Schedule, and to 

adopt and amend definitions included 

in the Fee Schedule to clarify the 

difference in the LMM programs. The 

Exchange notes that it is not proposing 

any substantive change to the LMM 

Pricing under footnote 14 of the Fee 

Schedule as it relates to ETPs and 

Closed-End Funds, but is merely 

extricating Corporate Securities from 

existing LMM Pricing and establishing 

new applicable pricing to LMMs in 

Corporate Securities. 

First, the Exchange proposes to 

modify the current definition of 

Qualified LMM to apply only to 

Corporate Securities. Currently, the 

definition of Qualified LMM applies to 

all BZX-listed securities, including 

Corporate Securities, ETPs, and ClosedEnd Funds. Now, the Exchange 

proposes to modify the definition of 

Qualified LMM to provide that it meets 

the Minimum Performance Standards 

defined in proposed Rule 

11.8(e)(1)(E)(i), which are applicable to 

Corporate Securities. The Exchange also 

proposes to adopt a new definition for 

‘‘Qualified ETP LMM’’, which would 

mean an LMM in a BZX-listed ETP or 

Closed-End Fund security that meets 

Qualified ETP LMM performance 

standards set forth in Rule 

11.8(e)(1)(E).12 Such Minimum 

Performance Standards for Closed-End 

Funds are defined in Rule 

11.8(e)(1)(E)(ii). The Exchange is not 

proposing any substantive change to the 

term Qualified LMM as it pertains to 

ETPs or Closed-End Funds, but is 

simply proposing a new definition in 

order to clearly delineate Qualified 

LMMs in Corporate Securities from 

Qualified LMMs in ETPs and ClosedEnd Funds. Finally, while not new in 

concept, the Exchange proposes to 

adopt a new definition for ‘‘LMM 

Securities’’, which would mean BZXlisted securities for which a Member is 

an LMM. Currently, the term ‘‘LMM 

Security’’ is defined in footnote 14(A)(i) 

of the Fee Schedule, but, as described 

below, the Exchange is proposing to 

modify the existing definition so that it 

applies only to ETPs and Closed-End 

Funds. As the term ‘‘LMM Security’’ is 

used as a defined term elsewhere in the 

Fee Schedule, the Exchange is 

proposing to adopt a new definition 

under the ‘‘Definitions’’ section of the 

Fee Schedule that is substantively 

identical to the existing term in footnote 

14(A)(i). 

As noted above, footnote 14 of the Fee 

Schedule sets forth LMM Pricing on the 

Exchange. The Exchange proposes to reletter existing paragraphs (A) through 

(D) under footnote 14, to (B) through (E), 

respectively, to provide for new 

paragraph (A). Proposed paragraph (A) 

would set forth the Liquidity Provision 

Rates applicable to Primary Equity 

Securities (also referred to as ‘‘Corporate 

Securities’’) listed on the Exchange. 

Specifically, paragraph (A) would 

provide that Qualified LMMs in BZXlisted Primary Equity Securities are 

eligible to receive the Corporate LMM 

Add Liquidity Rebate for such Corporate 

Securities for a calendar month on a 

security-by-security basis. For each 

calendar month the Qualified LMM will 

receive a rebate of $0.0030 per share (or 

the greater of any other applicable 

rebate). Qualified LMMs in Corporate 

Securities will be subject to the standard 

remove fee of $0.0030 per share in 

securities priced at or above $1.00, and 

0.30% of the total dollar value for 

securities priced below $1.00. 

Currently, LMMs in Corporate 

Securities are eligible to receive the 

LMM Liquidity Provision Rates as 

provided under paragraph (A) of 

footnote 14 in the Fee Schedule, which 

provides for a maximum stipend for 

LMMs that meet the Minimum 

Performance Standards. As proposed, 

LMMs in Corporate Securities will no 

longer be eligible for the LMM Liquidity 

Provision Rates program but may have 

the potential to receive higher 

incentives under the proposed program 

as the rebates are transaction-based and 

therefore have no maximum incentive 

in a given month. 

Similarly, because the Exchange has 

proposed to modify the Minimum 

Performance Standards applicable to 

Corporate Securities, the Exchange is 

also proposing that LMMs in Corporate 

Securities will no longer be eligible for 

the LMM Add Liquidity Rebate as 

provided under paragraph (B) of 

footnote 14 in the Fee Schedule. As 

proposed, the LMM Add Liquidity 

Rebates would continue to be available 

to LMMs in ETPs and Closed-End 

Funds. The LMM Add Liquidity Rebate 

currently provides that LMMs in BZXlisted securities that have a consolidated 

average daily volume (‘‘CADV’’) greater 

than or equal to 1,000,000 (an ‘‘ALR 

Security’’) are eligible to receive the 

LMM Add Liquidity Rebate for such 

ALR Securities for a calendar month on 

a security-by-security basis. For each 

calendar month in which an LMM is a 

Qualified LMM in an ALR Security, the 

LMM will receive the greater of an 

enhanced rebate of $0.0039 per share 

(instead of any other applicable rebate 

for transactions in the ALR Security) or 

the LMM Liquidity Provision Rates 

described above that would otherwise 

apply for the LMM in the applicable 

ALR Security. While the proposed 

Corporate LMM Liquidity Provision 

Rates provide a lower rebate than the 

current LMM Add Liquidity Rebate, the 

Exchange believes that the proposed 

rebate is commensurate with the 

difficulty of meeting the proposed 

Minimum Performance Standards and 

transacting volume in Corporate 

Securities. 

The Exchange proposes to modify the 

naming conventions in proposed 

paragraph (B) under footnote 14 to make 

clear that the Liquidity Provision Rates 

are only applicable to ETPs and ClosedEnd Funds, and are not applicable to 

Corporate Securities. Specifically, 

proposed paragraph (B)(i) under 

footnote 14 would provide that LMMs 

in BZX-listed ETP and Closed-End Fund 

securities (‘‘ETP LMMs’’) will receive 

the applicable rates on a daily basis per 

security for which the LMM is a 

Qualified ETP LMM (a ‘‘Qualified ETP 

Security’’) based on the average 

aggregate daily auction volume of the 

BZX-listed securities for which the 

Member is the ETP LMM (‘‘ETP LMM 

Securities’’). Proposed paragraph (B)(ii) 

under footnote 14 would provide that 

LMMs in BZX-listed ETP and ClosedEnd Fund securities will receive the 

applicable rates on a daily basis per 

Qualified ETP Security for which they 

also meet certain enhanced market 

quality standards (an ‘‘Enhanced ETP 

Security’’) in addition to the Standard 

Rates provided in paragraph (B)(i) under 

footnote 14. The Exchange also proposes 

to modify the description of the rates to 


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

14 15 U.S.C. 78f(b)(5). 15 15 U.S.C. 78f(b)(4). 

16The end-of-day net asset value (‘‘NAV’’) of an 

ETP is a daily calculation based off of the most 

recent closing prices of the underlying assets and 

an accounting of the ETP’s total cash position at the 

time of calculation. ETPs are generally subject to a 

creation and redemption mechanism to ensure that 

the ETP’s price does not fluctuate too far from the 

NAV, which mechanisms mitigate the potential for 

exchange trading to impact the price of an ETP. The 

‘‘arbitrage function’’ performed by market 

participants influences the supply and demand of 

shares, and thus, trading prices relative to NAV. 

The arbitrage function helps to keep an ETP’s price 

in line with the value of its underlying portfolio, 

and the Exchange believes that the arbitrage 

mechanism is generally an effective and efficient 

means of ensuring that intraday pricing in ETPs 

closely tracks the value of the underlying portfolio 

or reference assets. 

provide that the daily incentive is 

applicable to a Qualified ETP Security 

or Enhanced ETP Security, as 

applicable. The Exchange is not 

proposing any changes to the 

calculation of the ETP and Closed-End 

Fund LMM Liquidity Provision Rates. 

The Exchange proposes to modify 

proposed paragraph (C) under footnote 

14 to provide that the LMM Add 

Liquidity Rebate is only applicable to 

ETP and Closed-End Fund securities 

listed on the Exchange. Accordingly, 

proposed paragraph (C) would state that 

ETP LMMs, as defined in paragraph 

(B)(i) of footnote 14, in BZX-listed 

securities that have a CADV ≥1,000,000 

(an ‘‘ALR Security’’) are eligible to 

receive the ETP LMM Add Liquidity 

Rebate for such ALR Securities for a 

calendar month on a security-bysecurity basis. For each calendar month 

in which an ETP LMM is a Qualified 

ETP LMM in an ALR Security, the ETP 

LMM will receive the greater of an 

enhanced rebate of $0.0039 per share 

(instead of any other applicable rebate 

for transactions in the ALR Security) or 

the ETP LMM Liquidity Provision Rates 

described above that would otherwise 

apply for the ETP LMM in the 

applicable ALR Security. ETP LMMs in 

an ALR Security remain eligible to 

achieve other incentives and tiers unless 

otherwise explicitly excluded. The 

Exchange is not proposing to change 

how the LMM Add Liquidity Rebate is 

calculated or the amount of the rebate, 

but is merely modifying it to extricate 

Corporate Securities from the rebate 

program. 

The Exchange is proposing no 

changes to proposed paragraph (D) 

under footnote 14. Closing Auction rates 

applicable to LMMs in ETP, Closed-End 

Funds and Corporate BZX-Listed 

securities will continue to transact for 

free in the Closing Auction in their 

LMM Securities. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 

and the rules and regulations 

thereunder applicable to the Exchange 

and, in particular, the requirements of 

Section 6(b) of the Act.13 Specifically, 

the Exchange believes the proposed rule 

change is consistent with the Section 

6(b)(5) 14 requirements that the rules of 

an exchange be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest. 

Further, the Exchange believes that the 

proposed rule change is consistent with 

Section 6(b)(4),15 in that it provides for 

the equitable allocation of reasonable 

dues, fees and other charges among 

members and other persons using any 

facility or system which the Exchange 

operates or controls and it does not 

unfairly discriminate between 

customers, issuers, brokers or dealers. 

The Exchange also notes that its listing 

business operates in a highlycompetitive market in which market 

participants, which includes both 

issuers of securities and LMMs, can 

readily transfer their listings or opt not 

to participate, respectively, if they deem 

fee levels, liquidity provision incentive 

programs, or any other factor at a 

particular venue to be insufficient or 

excessive. The LMM Program reflects a 

competitive pricing structure designed 

to incentivize issuers to list new 

products and transfer existing products 

to the Exchange and market participants 

to enroll and participate as LMMs on 

the Exchange, which the Exchange 

believes will enhance market quality in 

all ETPs, Primary Equity Securities, and 

Closed-End Funds listed on the 

Exchange. 

The Exchange believes that the 

proposal to adopt separate Minimum 

Performance Standards applicable to 

Primary Equity Securities is consistent 

with the Act because it will enhance 

market quality in those securities. 

Under the current LMM Program, LMMs 

in Corporate Securities are incentivized 

to provide tightened spreads, deeper 

liquidity, and provide better execution 

opportunities. As proposed, LMMs in 

Corporate Securities will continue to be 

incentivized to meet Minimum 

Performance Standards, albeit with 

slightly less stringent standards than are 

currently applicable. Nonetheless, the 

Exchange believes the proposed 

Minimum Performance Standards are 

appropriate for Corporate Securities, 

which are typically more liquid than 

other types of listed products. Further, 

the Exchange believes Minimum 

Performance Standards tailored 

specifically to Corporate Securities 

listed on the Exchange will be more 

attractive to LMMs as they more closely 

align with quoting and trading activity 

in those securities, while still generally 

aligning with the existing Minimum 

Performance Standards on the 

Exchange, which LMMs are already 

familiar with. 

The Exchange believes that the 

proposed rebate under the Proposed 

Corporate LMM Liquidity Provision 

Rates is reasonable as they are in-line 

with other rebates available to Members 

on the Exchange. For example, under 

the Add Volume Tiers of footnote 1 of 

the Fee Schedule, Members are eligible 

for rebates ranging from $0.0020 up to 

$0.0031 per share if they meet certain 

required criteria. Furthermore, as 

discussed above, LMMs will continue to 

be eligible for other rebates, such as 

those available under the Add Volume 

Tiers, and will receive the greater 

among the rebates that it qualifies. 

The Exchange believes it is reasonable 

to separate Corporate Securities from 

ETP and Closed-End Fund securities in 

the LMM Program. In particular, as the 

Exchange is proposing to adopt specific 

liquidity rates applicable to LMMs in 

Corporate Securities, the Exchange 

believes it follows to remove Corporate 

Securities from the existing liquidity 

provisions of proposed sections (B) and 

(C) under footnote 14 of the Fee 

Schedule. 

The Exchange also believes that it is 

reasonable to provide incentives to 

LMMs in Corporate Securities on a 

transaction basis rather than solely 

achieving certain objective market 

quality metrics. Unlike ETPs, Corporate 

Securities are valued on the trading 

price of the security rather than derived 

from the underlying assets owned by the 

ETP.16 Therefore, the Exchange believes 

it is important to incentivize both 

transactions and market quality metrics 

in those securities. The Exchange 

believes its proposed LMM Program for 

Corporate Securities strikes an 

appropriate balance by requiring an 

LMM to achieve certain Minimum 

Performance Standards in order to be 

eligible to receive the Corporate LMM 

Liquidity Provision Rates on the 


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Federal Register / Vol. 89, No. 29 / Monday, February 12, 2024 / Notices 9879 

17 15 U.S.C. 78s(b)(3)(A). 

18 17 CFR 240.19b–4(f)(6). 

19 17 CFR 240.19b–4(f)(6). 

20 17 CFR 240.19b–4(f)(6). 

21For purposes only of waiving the 30-day 

operative delay, the Commission has also 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

Exchange, as provided in proposed 

footnote 14(A) of the Fee Schedule. 

Registration as an LMM is and will 

continue to be available equally to all 

Members and allocation of listed 

securities between LMMs is governed by 

Exchange Rule 11.8(e)(2). Where an 

LMM does not meet the Minimum 

Performance Standards for Corporate 

Securities as provided in proposed Rule 

11.8(e)(1)(E)(i), they will not receive the 

Liquidity Provision Rates set forth in 

proposed footnote 14(A) of the 

Exchange’s Fee Schedule. If an LMM 

does not meet the applicable Minimum 

Performance Standards for three out of 

the past four months, the LMM will 

continue to be subject to forfeiture of 

LMM status for that LMM Security, at 

the Exchange’s discretion. 

As described above, the Exchange 

proposes to provide fees and rebates 

specifically applicable to a Qualified 

LMM in transactions in BZX-listed 

Primary Equity Securities as provided in 

proposed footnote 14(A). The Exchange 

believes that the proposed fee for 

liquidity removing transactions in 

Corporate Securities is reasonable as it 

is generally consistent with the standard 

liquidity removing fee on the Exchange 

which charges a fee of $0.0030 per share 

for securities priced above $1. The 

Exchange also believes the proposed 

rebate for liquidity adding transactions 

in Corporate Securities is reasonable as 

it appropriately incentivizes LMMs to 

meet the proposed Minimum 

Performance Standards throughout the 

month in addition to transacting in 

those Corporate Securities. The 

Exchange notes that the proposed rebate 

is generally in-line with other volume 

adding incentives (e.g., the add volume 

tiers under footnote 1 of the Fee 

Schedule offer rebates ranging from 

$0.0020 up to $0.0031 per share), and 

the Exchange believes such rebate is 

reasonably commensurate with the 

Minimum Performance Standards and 

transaction requirements of the 

proposed Corporate LMM Liquidity 

Provision Rates. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule changes will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange does not believe the proposed 

change burdens competition, but rather, 

enhances competition as it is intended 

to increase the competitiveness of BZX 

both among Members by incentivizing 

Members to become LMMs in BZXlisted Primary Equity Securities and as 

a listing venue by enhancing market 

quality in those securities. The 

marketplace for listings is extremely 

competitive and there are several other 

national securities exchanges that offer 

listings. Transfers between listing 

venues occur frequently for numerous 

reasons, including market quality. This 

proposal is intended to help the 

Exchange compete as a listing venue. 

Accordingly, the Exchange does not 

believe that the proposed changes will 

impair the ability of issuers, LMMs, or 

competing listing venues to maintain 

their competitive standing. The 

Exchange also notes that the proposed 

change is intended to enhance market 

quality in BZX-listed Primary Equity 

Securities, to the benefit of all investors 

in such BZX-listed securities. The 

Exchange does not believe the proposed 

amendment would burden intramarket 

competition as it would be available to 

all Members uniformly. Registration as 

an LMM is available equally to all 

Members and allocation of listed 

securities between LMMs is governed by 

Exchange Rule 11.8(e)(2). Further, if an 

LMM does not meet the applicable 

Minimum Performance Standards for 

three out of the past four months, the 

LMM would continue to be subject to 

forfeiture of LMM status for that LMM 

Security, at the Exchange’s discretion. 

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 

Because the foregoing proposed rule 

change does not: (i) significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 17 and Rule 19b– 

4(f)(6) 18 thereunder. 

A proposed rule change filed under 

Rule 19b–4(f)(6) 19 normally does not 

become operative prior to 30 days after 

the date of the filing. However, pursuant 

to Rule 19b–4(f)(6)(iii),20 the 

Commission may designate a shorter 

time of such action is consistent with 

the protection of investor and the public 

interest. The Exchange has asked the 

Commission to waive the 30-day 

operative delay so that the proposed 

rule change may become operative upon 

filing. The Exchange states that waiving 

the operative delay would allow market 

participants to realize immediately the 

benefits of the proposal, which the 

Exchange states include market quality 

enhancements, and would help the 

Exchange better compete as a listing 

venue for Primary Equity Securities 

without undue delay. The proposed 

change raises no novel legal or 

regulatory issues. Based on the 

foregoing, the Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest. 

Therefore, the Commission hereby 

waives the operative delay and 

designates the proposal operative upon 

filing.21

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission will institute proceedings 

to determine whether the proposed rule 

change should be approved or 

disapproved. 

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–2024–013 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–2024–013. This 

file number should be included on the 

subject line if email is used. To help the 


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9880 Federal Register / Vol. 89, No. 29 / Monday, February 12, 2024 / Notices 

22 17 CFR 200.30–3(a)(12), (59). 1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 98846 

(Nov. 2, 2023), 88 FR 77116 (‘‘Notice’’). Comments 

on the proposed rule change are available at: 

https://www.sec.gov/comments/sr-cboebzx-2023- 

087/srcboebzx2023087.htm. 

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

5See Securities Exchange Act Release No. 99151, 

88 FR 87822 (Dec. 19, 2023). The Commission 

designated February 6, 2024, as the date by which 

the Commission shall approve or disapprove, or 

institute proceedings to determine whether to 

disapprove, the proposed rule change. 

6 15 U.S.C. 78s(b)(2)(B). 

7See Notice, supra note 3. 

8See id. at 77118. Invesco Capital Management 

(‘‘Sponsor’’) is the sponsor of the Trust. See id. at 

77116. 

9See id. at 77116. The Trust generally does not 

intend to hold cash or cash equivalents; however, 

there may be situations where the Trust would 

unexpectedly hold cash on a temporary basis. See 

id. at 77116–17. 

10See id. at 77118. 

11See id. at 77119. 

12See id. 

13See id. at 77117. 

14 15 U.S.C. 78s(b)(2)(B). 

15 Id. 

16 15 U.S.C. 78f(b)(5). 

17BZX Rule 14.11(e)(4)(C)(i) defines the term 

‘‘Commodity-Based Trust Shares’’ as a security (a) 

that is issued by a trust that holds (1) a specified 

commodity deposited with the trust, or (2) a 

specified commodity and, in addition to such 

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 

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–2024–013 and should be 

submitted on or before March 4, 2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–02753 Filed 2–9–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99479; File No. SR– 

CboeBZX–2023–087] 

Self-Regulatory Organizations; Cboe 

BZX Exchange, Inc.; Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove a Proposed 

Rule Change To List and Trade Shares 

of the Invesco Galaxy Ethereum ETF 

Under BZX Rule 14.11(e)(4), 

Commodity-Based Trust Shares 

February 6, 2024. 

On October 20, 2023, Cboe BZX 

Exchange, Inc. (‘‘BZX’’ 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 list and trade shares 

(‘‘Shares’’) of the Invesco Galaxy 

Ethereum ETF (‘‘Trust’’) under BZX 

Rule 14.11(e)(4), Commodity-Based 

Trust Shares. The proposed rule change 

was published for comment in the 

Federal Register on November 8, 2023.3

On December 13, 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 This order 

institutes proceedings under Section 

19(b)(2)(B) of the Act 6 to determine 

whether to approve or disapprove the 

proposed rule change. 

I. Summary of the Proposal 

As described in more detail in the 

Notice,7 the Exchange proposes to list 

and trade the Shares of the Trust under 

BZX Rule 14.11(e)(4), which governs the 

listing and trading of Commodity-Based 

Trust Shares on the Exchange. 

The investment objective of the Trust 

is for the Shares to reflect the the spot 

price of ether as measured by using the 

Lukka Prime Reference Rate 

(‘‘Benchmark’’) less the Trust’s expenses 

and other liabilities.8 The Trust’s assets 

will consist of ether held by the Trust’s 

custodian on behalf of the Trust.9 The 

Trust will value its Shares daily based 

on the reported Benchmark.10 The 

administrator of the Trust will 

determine the net asset value (‘‘NAV’’) 

of the Trust on each day that the 

Exchange is open for regular trading, as 

promptly as practicable after 4:00 p.m. 

ET.11 In determining the Trust’s NAV, 

the administrator values the ether held 

by the Trust based on the price set by 

the Benchmark as of 4:00 p.m. ET.12

When the Trust sells or redeems its 

Shares, it will do so in ‘‘in-kind’’ 

transactions with authorized 

participants in large blocks of Shares.13

II. Proceedings To Determine Whether 

To Approve or Disapprove SR– 

CboeBZX–2023–087 and Grounds for 

Disapproval Under Consideration 

The Commission is instituting 

proceedings pursuant to Section 

19(b)(2)(B) of the Act 14 to determine 

whether the proposed rule change 

should be approved or disapproved. 

Institution of proceedings is appropriate 

at this time in view of the legal and 

policy issues raised by the proposed 

rule change, as discussed below. 

Institution of proceedings does not 

indicate that the Commission has 

reached any conclusions with respect to 

any of the issues involved. Rather, as 

described below, the Commission seeks 

and encourages interested persons to 

provide comments on the proposed rule 

change. 

Pursuant to Section 19(b)(2)(B) of the 

Act,15 the Commission is providing 

notice of the grounds for disapproval 

under consideration. The Commission is 

instituting proceedings to allow for 

additional analysis of the proposed rule 

change’s consistency with Section 

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

among other things, that the rules of a 

national securities exchange be 

‘‘designed to prevent fraudulent and 

manipulative acts and practices’’ and 

‘‘to protect investors and the public 

interest.’’ 16

The Commission asks that 

commenters address the sufficiency of 

the Exchange’s statements in support of 

the proposal, which are set forth in the 

Notice, in addition to any other 

comments they may wish to submit 

about the proposed rule change. In 

particular, the Commission seeks 

comment on the following questions 

and asks commenters to submit data 

where appropriate to support their 

views: 

1. Given the nature of the underlying 

assets held by the Trust, has the 

Exchange properly filed its proposal to 

list and trade the Shares under BZX 

Rule 14.11(e)(4), Commodity-Based 

Trust Shares? 17


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