[Federal Register Volume 89, Number 182 (Thursday, September 19, 2024)]
[Notices]
[Pages 76899-76902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-21284]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101020; File No. SR-CboeBZX-2024-083]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Fees Applicable to Securities Listed on the Exchange, Which Are Set 
Forth in BZX Rule 14.13, Company Listing Fees

September 13, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on September 11, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' 
or ``BZX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of 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 amend the fees applicable to securities 
listed on the Exchange, which are set forth in BZX Rule 14.13, Company 
Listing Fees. Changes to the fee schedule pursuant to this proposal are 
effective upon filing. The text of the proposed rule change is provided 
in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/BZX/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange submits this proposal to adopt new Rule 
14.13(b)(2)(E)(iv) in order to create an annual pricing cap for Defined 
Distribution Strategy Series, as defined below, that are listed on the 
Exchange.\3\ The Exchange is also proposing to make a corresponding 
non-substantive numbering change to make current Rule 
14.13(b)(2)(E)(iv) become 14.13(b)(2)(E)(v) and to add language to 
proposed Rule 14.13(b)(2)(v) in order to make clear that exchange-
traded products (``ETPs'') \4\ that are subject to the new pricing for 
Defined Distribution Strategy Series would not be subject to the fees 
applicable under Rule 14.13(b)(2)(v) in the same way that Legacy 
Listings,\5\ New Listings,\6\ an Outcome Strategy ETP \7\ subject to 
Rule 14.13(b)(2)(E)(iii), and Transfer Listings \8\ are not subject to 
such fees.
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    \3\ The Exchange initially filed the proposed fee change on 
August 30, 2024 (SR-CboeBZX-2024-081). On September 10, 2024, the 
Exchange withdrew that filing and submitted this proposal.
    \4\ As defined in Rule 11.8(e)(1)(A), the term ``ETP'' means any 
security listed pursuant to Exchange Rule 14.11.
    \5\ A ``Legacy Listing'' is an ETP that was listed on the 
Exchange prior to January 1, 2019. See Exchange Rule 
14.13(b)(2)(E)(i).
    \6\ A ``New Listing'' is an ETP that first lists on the Exchange 
or has been listed on for fewer than three calendar months on the 
ETP's first trading day of the year. See Exchange Rule 
14.13(b)(2)(E)(ii).
    \7\ An ``Outcome Strategy Series'' are multiple ETPs listed by 
the same issuer that are each designed to provide a pre-defined set 
of returns; over a specified outcome period; based on the 
performance of the same underlying instruments; and each employ the 
same outcome strategy for achieving the pre-defined set of returns 
(each an ``Outcome Strategy ETP'' and, collectively, an ``Outcome 
Strategy Series''). See Exchange Rule 14.13(b)(2)(E)(iii).
    \8\ A ``Transfer Listing'' is an ETP that transfers listing from 
another national securities exchange to the Exchange. See Exchange 
Rule 14.13(b)(1)(B)(v)(b).
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    The Exchange is proposing to create a cap on annual fees where an 
issuer lists a series of ETPs that are each designed to provide (i) 
pre-defined set of cash distributions; (ii) over two specified periods 
with the first period beginning at inception until a pre-defined date 
and the second period beginning at that pre-defined date until another 
pre-defined date by which the ETP intends to distribute substantially 
all of its assets and liquidate the fund; (iii) where the first period 
defined distributions are based on the market conditions at the 
beginning of the first period, and the second period defined 
distributions are based on the market conditions at the beginning of 
the second period; and (iv) each employ the same strategy for achieving 
the pre-defined distributions (each a ``Defined Distribution Strategy 
ETP'' and collectively a ``Defined Distribution Strategy Series''). The 
Exchange is proposing that such annual fees for Defined Distribution 
Strategy Series will be capped at $16,000 per year.
    As an example, a Defined Distribution Strategy ETP would include an 
ETP that

[[Page 76900]]

intends to make an identical cash distribution each month equal to, for 
example, $0.0833 per outstanding share of the fund, for a total of 
$1.00 per share per year for 20 years. The Defined Distribution 
Strategy ETP would achieve the identical cash distributions by 
investing in specified securities consistent with the fund's investment 
objective. At the conclusion of the first 20-year period a second pre-
defined period would commence and the ETP would seek to achieve a new 
identical pre-defined cash distributions each month based on the 
specified securities of the same investment strategy of the first 
period. For example, $0.0417 per outstanding share of the fund, for a 
total of $0.50 per per year. At the end of the second 20-year period, 
the Defined Distribution Strategy ETP will have distributed 
substantially all of its assets and would liquidate the fund (the 
``planned liquidation date''). The Defined Distribution Strategy Series 
would include multiple ETPs that employ the same described strategy but 
would be applied across ETPs with planned liquidation dates occurring 
on a yearly basis.
    With this in mind, the Exchange is proposing to cap the maximum 
listing fee per year for a Defined Distribution Strategy Series at 
$16,000. Using the example above, if the issuer listed 10 ETPs 
employing the defined distribution strategy, the annual fee on a per 
ETP basis would be $7,000, and assuming each of the ETPs would 
otherwise be subject to the Exchange's maximum annual listing fee, a 
total of $70,000 for the Defined Distribution Strategy Series. Under 
the proposed fee cap, the Defined Distribution Strategy Series would be 
subject to a maximum total annual fee of $16,000 for the Defined 
Distribution Strategy Series, which would result in a $1,600 annual fee 
on a per ETP basis.
    The proposed fee cap for Defined Distribution Strategy Series is 
identical to that applicable to Outcome Strategy Series \9\ that was 
adopted in 2019.\10\ The Exchange believes that applying the same fee 
cap is appropriate for Defined Distribution Strategy Series given its 
similar attributes to Outcome Strategy Series. Specifically, like 
Outcome Strategy Series, Defined Distribution Strategy Series involve 
multiple ETPs with identical strategies. While Outcome Strategy ETPs 
allow investors the opportunity to choose the Outcome Strategy ETP with 
the most appropriate pre-determined period of time (i.e., ``outcome 
period''), Defined Distribution Strategy ETPs allow investors the 
opportunity to choose the Defined Distribution Strategy ETP with the 
most appropriate time horizon or target date. Listing numerous ETPs 
with different time horizons allows investors to choose the Defined 
Distribution Strategy ETP with the most appropriate time horizon for 
their investment purposes. Further, providing a cap on annual listing 
fees for such ETPs will ensure that listing fees will not be the basis 
for such additional Defined Distribution Strategy ETPs not being 
available to investors.
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    \9\ An Outcome Strategy Series is comprised of multiple ETPs 
listed by an issuer that are designed to provide a pre-defined set 
of returns; over a specified outcome period; based on the 
performance of the same underlying instruments; and each employ the 
same outcome strategy for achieving the pre-defined set of returns 
(each an ``Outcome Strategy ETP''). See Exchange Rule 
14.13(b)(2)(E)(iii).
    \10\ See Securities Exchange Act No. 86956 (September 12, 2019) 
84 FR 49128 (September 18, 2019) (SR-CboeBZX-2019-081).
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    With this in mind, the Exchange is proposing to cap the maximum 
listing fee per year for a Defined Distribution Strategy Series at 
$16,000. The Exchange does not currently list any Defined Distribution 
Strategy ETPs on the Exchange but expects that at least one issuer will 
list such ETPs on the Exchange in the coming months.
    The Exchange proposes to implement these amendments upon filing.
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.\11\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \12\ 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. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \13\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \14\ 
as it is designed to provide for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
    \14\ 15 U.S.C. 78f(b)(4).
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    The Exchange also notes that its ETP listing business operates in a 
highly-competitive market in which ETP issuers can readily transfer 
their listings if they deem fee levels or any other factor at a 
particular venue to be insufficient or excessive. The proposed rule 
changes reflect a competitive pricing structure designed to incentivize 
issuers to list new products and transfer existing products to the 
Exchange, which the Exchange believes will enhance competition both 
among ETP issuers and listing venues, to the benefit of investors.
The Proposed Fee Cap Is An Equitable Allocation of Fees
    The Exchange believes that the proposed cap on fees for Defined 
Distribution Strategy Series and the associated changes is equitable 
because it is available to all issuers and applies equally to all 
Defined Distribution Strategy Series. The Exchange believes that 
providing a fee cap for such ETPs is a more reasonable and equitable 
approach than the current fee structure based on the unique features 
that create the need to offer multiple ETPs based on the same strategy.
    The Exchange notes that the proposed fee structure is a cap on fees 
for Defined Distribution Strategy Series and will only act to leave 
static or reduce fees for ETPs listed on the Exchange. Further, this 
proposal will decrease the fees associated with listing ETPs with 
varying time horizons on the Exchange, which will reduce the barriers 
to entry into the space and incentivize enhanced competition among 
issuers of Defined Distribution Strategy ETPs, to the benefit of 
investors.
The Proposed Fee Cap Is Not Unfairly Discriminatory
    The Exchange also believes that the proposed cap on fees for 
Defined Distribution Strategy Series and the associated changes is not 
unfairly discriminatory because, while it only applies to Defined 
Distribution Strategy ETPs, it represents a significantly improved 
approach to annual listing fees for ETPs that by their nature require 
multiple listings. As noted above, Defined Distribution Strategy ETPs 
are similar to Outcome Strategy ETPs and warrant revisiting the ETP 
listing pricing model. Listing numerous ETPs with different time 
horizons allows investors the opportunity to choose the Defined 
Distribution Strategy ETP with the most appropriate time horizon for

[[Page 76901]]

their investment purposes. Providing a cap on annual listing fees for 
such ETPs will ensure that listing fees will not be the basis for such 
additional time horizons not being available to investors. The Exchange 
also notes that the incremental ongoing regulatory burden associated 
with listing an additional Defined Distribution Strategy ETP is reduced 
as compared to the incremental regulatory burden associated with 
listing additional non- Defined Distribution Strategy ETPs. 
Specifically, each Defined Distribution Strategy ETP in an Defined 
Distribution Strategy Series is based on the same reference instrument, 
utilizes the same investment strategy, has nearly identical holdings to 
the other Defined Distribution Strategy ETPs in the Defined 
Distribution Strategy Series, and, to the extent that such Defined 
Distribution Strategy ETPs are listed pursuant to an exchange rule 
filing, subject to the same continued listing obligations related to 
permissible holdings and portfolio limitations. As such, any testing, 
monitoring, or surveillance for compliance with continued listing 
standards and obligations applicable to a particular Defined 
Distribution Strategy ETP will be nearly identical across the entirety 
of the Defined Distribution Strategy Series, allowing the Exchange's 
regulatory personnel to leverage the same processes across each Defined 
Distribution Strategy ETP, which substantially reduces the regulatory 
burden applicable for each Defined Distribution Strategy ETP. 
Accordingly, the Exchange believes that the proposed cap on listing 
fees on Defined Distribution Strategy ETPs is not unfairly 
discriminatory due to their unique operation.
    Further, the Exchange notes that an issuer will only receive the 
benefit of the annual fee cap if they accrue greater than $16,000 in 
listing fees for a particular Defined Distribution Strategy Series. The 
Exchange notes that the proposed fee structure is a cap on fees for 
Defined Distribution Strategy Series and will only act to leave static 
or reduce fees for ETPs listed on the Exchange. This proposal will 
decrease the fees associated with listing Defined Distribution Strategy 
ETPs on the Exchange, which will reduce the barriers to entry into the 
space and incentivize enhanced competition among issuers of Defined 
Distribution Strategy ETPs, also to the benefit of investors.
The Proposed Fee Cap Is Reasonable
    The Exchange believes that the proposed cap on fees for Defined 
Distribution Strategy Series and the associated changes is a reasonable 
means to incentivize issuers to list (or transfer) Defined Distribution 
Strategy ETPs on the Exchange. The marketplace for listings is 
extremely competitive and there are several other national securities 
exchanges that offer ETP listings. Transfers between listing venues 
occur frequently for numerous reasons, including listing fees. The 
proposed rule changes reflect a competitive pricing structure designed 
to incentivize issuers to list new products and transfer existing 
products to the Exchange, which the Exchange believes will enhance 
competition both among ETP issuers and listing venues, to the benefit 
of investors.
    The Exchange believes that this proposal represents a significantly 
improved approach to annual listing fees for ETPs that by their nature 
require multiple listings. The proposed fee structure is a cap on fees 
for Defined Distribution Strategy Series and will only act to leave 
static or reduce fees for ETPs listed on the Exchange. This proposal is 
intended to help the Exchange compete as an ETP listing venue. 
Furthermore, the proposed fee cap is identical to that applied to 
Outcome Strategy Series, which similarly by their nature require 
multiple listings.
    Based on the foregoing, the Exchange believes that the proposed 
rule changes are consistent with the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule 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 as 
a listing venue by providing better pricing for Defined Distribution 
Strategy Series. The marketplace for listings is extremely competitive 
and there are several other national securities exchanges that offer 
ETP listings. Transfers between listing venues occur frequently for 
numerous reasons, including listing fees. This proposal is intended to 
help the Exchange compete as an ETP listing venue. Accordingly, the 
Exchange does not believe that the proposed change will impair the 
ability of issuers or competing ETP listing venues to maintain their 
competitive standing. The Exchange also notes that the proposed change 
represents a competitive pricing structure designed to incentivize 
issuers to list new products and transfer existing products to the 
Exchange, which the Exchange believes will enhance competition both 
among ETP issuers and listing venues, to the benefit of investors. The 
Exchange believes that such proposed changes will directly enhance 
competition among ETP listing venues by reducing the costs associated 
with listing on the Exchange for Defined Distribution Strategy ETPs. 
Similarly, the Exchange believes that putting a cap on such ETPs will 
enhance competition both among listing venues of Defined Distribution 
Strategy ETPs and among issuers and issuances of Defined Distribution 
Strategy ETPs through an overall reduction of annual fees for listing 
such products. As such, the proposal is a competitive proposal designed 
to enhance pricing competition among listing venues and implement 
pricing for listings that better reflects the revenue and expenses 
associated with listing ETPs on the Exchange.
    The Exchange does not believe the proposed amendments would burden 
intramarket competition as they would be available to all issuers 
uniformly.

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

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

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \15\ and paragraph (f) of Rule 19b-4 \16\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act.

[[Page 76902]]

Comments may be submitted by any of the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#e694938a83cb85898b8b83889295a6958385c8818990"><span class="__cf_email__" data-cfemail="384a4d545d155b5755555d564c4b784b5d5b165f574e">[email protected]</span></a>. Please include 
file number SR-CboeBZX-2024-083 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-CboeBZX-2024-083. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
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-2024-083 and should 
be submitted on or before October 10, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-21284 Filed 9-18-24; 8:45 am]
BILLING CODE 8011-01-P


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