[Federal Register Volume 89, Number 214 (Tuesday, November 5, 2024)]
[Notices]
[Pages 87904-87907]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25635]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101479; File No. SR-CboeBZX-2024-102]


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

October 30, 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 October 18, 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 certain 
exchange-traded products listed on the Exchange, which are set forth in 
BZX Rule 14.13, Company Listing Fees. 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 \3\ to adopt new Rule 
14.13(b)(2)(E)(v) in order to adopt a new annual fee applicable to 
exchange-traded products (``ETPs'') \4\ that consist only of an 
American Depository Receipt (``ADR'') and instruments designed to hedge 
the ETP's foreign currency exposure in the

[[Page 87905]]

ADR (an ``ADR Hedge'').\5\ The Exchange is also proposing to make a 
corresponding non-substantive numbering change to make current Rule 
14.13(b)(2)(E)(v) become 14.13(b)(2)(E)(vi) and to add language to 
proposed Rule 14.13(b)(2)(E)(vi) in order to make clear that ETPs that 
are subject to the new pricing for an ADR Hedge would not be subject to 
the standard annual fees applicable under Rule 14.13(b)(2)(E)(vi) \6\ 
in the same way that Legacy Listings,\7\ New Listings,\8\ an Outcome 
Strategy ETP \9\ subject to Rule 14.13(b)(2)(E)(iii), a Defined 
Distribution Strategy ETP \10\ subject to Rule 14.13(b)(2)(E)(iv), and 
Transfer Listings \11\ are not subject to such fees.
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    \3\ The Exchange initially filed the proposed fee change on 
September 26, 2024 (SR-CboeBZX-2024-092). On October 4, 2024, the 
Exchange withdrew that filing and submitted SR-CboeBZX-2024-096. On 
October 16, 2024, the Exchange withdrew that filing and submitted 
SR-CboeBZX-2024-100. On October 18, 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\ An ADR Hedge is an ETP designed to provide investors with 
exposure to individual international companies without the currency 
exposure associated with traditional means of individual 
international company investing. Therefore, an ADR Hedge consists of 
a U.S.-listed ADR on an underlying international company (e.g., 
Toyota Motors) and a currency contract designed to mitigate the 
currency risk resulting from variable foreign exchange rates between 
the local currency of the international shares (e.g., Japanese Yen) 
and the U.S. Dollar. Three ADR Hedges are listed on the Exchange 
under Exchange Rule 14.11(l) (Exchange-Traded Fund Shares). Exchange 
Rule 14.11(l) is applicable to ETPs that are eligible to operate in 
reliance on Rule 6c-11 under the Investment Company Act of 1940 
(``Rule 6c-11'').
    \6\ Instead, these products are assessed annual fees as provided 
under Rules 14.13(b)(2)(E)(i) through (v), as applicable.
    \7\ 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).
    \8\ 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).
    \9\ An ``Outcome Strategy Series'' are multiple ETPs listed by 
the same issuer that are each designed to provide (i) a pre-defined 
set of returns; (ii) over a specified outcome period; (iii) based on 
the performance of the same underlying instruments; and (iv) 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).
    \10\ A ``Defined Distribution Strategy Series'' are multiple 
ETPs listed by the same issuer 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''). See Exchange Rule 
14.13(b)(2)(E)(iv).
    \11\ 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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    Annual fees for ETPs (not including Legacy Listings, New Listings, 
an Outcome Strategy ETP subject to Rule 14.13(b)(2)(E)(iii), a Defined 
Distribution Strategy ETP subject to Rule 14.13(b)(2)(E)(iv), and 
Transfer Listings) are generally based on the consolidated average 
daily volume (``CADV'') of the ETP in the fourth quarter of the 
preceding calendar year and range from $5,000 up to $7,000 per ETP.\12\
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    \12\ See Exchange Rule 14.13(b)(2)(E)(v).
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    Now, the Exchange proposes to adopt an annual fee of $9,000 for ADR 
Hedges. The Exchange is proposing to adopt this fee in in order to 
provide uniform pricing for all ADR Hedges listed on the Exchange. The 
Exchange believes that these higher proposed fees are appropriate for 
this new product type because of the higher Exchange costs associated 
with issuer services, listing administration, and product development 
that have historically come along with the introduction of new product 
types on the Exchange. Specifically, based on prior experience with 
listing new product types, the Exchange believes that these could 
include adding ADR Hedge products to a liquidity incentive program, 
e.g. the Liquidity Enhancement Program,\13\ educating market 
participants about the product type, and any other unanticipated needs, 
each of which would require time and/or Exchange resources to 
accommodate. Without the ability to increase its fees in such 
instances, the Exchange will be less able to support innovation and 
changes in the marketplace. The Exchange also notes that this proposed 
fee is only $2,000 more than the highest tier of the Exchange's 
standard fee schedule and is significantly less than the standard fees 
charged by another exchange.\14\ To the extent that any issuer finds 
the Exchange's fees to be excessive, they could choose to list the ADR 
Hedge product on another national securities exchange.
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    \13\ See LEP Tier 1 under Footnote 13 of the BZX Fee Schedule; 
Securities Exchange Act No. 99147 (December 12, 2023) 88 FR 87476 
(December 18, 2023) (SR-CboeBZX-2023-099) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend the Fee 
Schedule Applicable to Members and Non-Members of the Exchange 
Pursuant to BZX Rules 15.1(a) and (c) in Order To Adopt a New Tier 
Under Footnote 13 (Tape B Volume and Quoting) Specific to Single-
Stock Exchange Traded Funds (``Single-Stock ETFs'').The Exchange 
would not add ADR Hedges to the Liquidity Enhancement Program 
without first submitting an exchange rule filing to the SEC.
    \14\ See NYSE Arca, Inc. (``Arca'') Schedule of Fees and Charges 
for Exchange Services as of January 10, 2024, Annual Fees, Item 6. 
If an ADR Hedge listed on Arca, the listing fee would be between 
$10,000 and $35,000, depending on the number of shares outstanding.
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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.\15\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \16\ 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) \17\ 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) \18\ 
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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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ Id.
    \18\ 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 Exchange believes that it is reasonable to charge higher annual 
fees for an ADR Hedge because the proposed fees better correlate with 
the anticipated higher Exchange costs associated with issuer services, 
listing administration, and product development that generally come 
along with the introduction of any new product type. Specifically, 
based on prior experience with listing new product types, the Exchange 
believes that these could include adding ADR Hedge products to a 
liquidity incentive program, e.g., the Liquidity

[[Page 87906]]

Enhancement Program,\19\ educating market participants about the 
product type, and any other unanticipated needs, each of which would 
require time and/or Exchange resources to accommodate. Without the 
ability to increase its fees in such instances, the Exchange will be 
less able to support innovation and changes in the marketplace. The 
Exchange also notes that this proposed fee is only $2,000 more than the 
highest tier of the Exchange's standard fee schedule and is 
significantly less than the standard fees charged by another 
exchange.\20\ The Exchange also notes that another exchange charges a 
higher annual fee for certain sub-categories of ETPs that are eligible 
to operate in reliance on Rule 6c-11 citing the higher costs associated 
with issuer services, listing administration, product development and 
regulatory oversight.\21\ As such, the Exchange believes it is 
reasonable to charge a higher annual fee for ADR Hedges than other ETPs 
because such a fee better correlates with costs associated with the 
listing and supporting of ADR Hedges and the inability to increase its 
fees in such instances would leave the Exchange less able to both 
support innovation and changes in the marketplace and to compete with 
other venues that already have disparate pricing arrangements.
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    \19\ See LEP Tier 1 under Footnote 13 of the BZX Fee Schedule; 
Securities Exchange Act No. 99147 (December 12, 2023) 88 FR 87476 
(December 18, 2023) (SR-CboeBZX-2023-099) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend the Fee 
Schedule Applicable to Members and Non-Members of the Exchange 
Pursuant to BZX Rules 15.1(a) and (c) in Order To Adopt a New Tier 
Under Footnote 13 (Tape B Volume and Quoting) Specific to Single-
Stock Exchange Traded Funds (``Single-Stock ETFs'').
    \20\ See Arca Schedule of Fees and Charges for Exchange Services 
as of January 10, 2024, Annual Fees, Item 6. If an ADR Hedge listed 
on Arca, the listing fee would be between $10,000 and $35,000, 
depending on the number of shares outstanding.
    \21\ See Arca Schedule of Fees and Charges for Exchange Services 
as of January 10, 2024, Annual Fees, Item 6b. Specifically, Arca 
differentiates its annual listing fee for ETPs based on whether the 
ETP tracks an index, regardless of whether the ETP may rely on Rule 
6c-11. See e.g., Securities Exchange Act No. 90988 (January 26, 
2021) 86 FR 7754 (February 1, 2021) (SR-NYSEArca-2021-04) (Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
Its Schedule of Fees and Charges To Establish Annual Fees for 
Exchange Traded Products).
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    The Exchange believes its proposal equitably allocates its fees 
among its market participants. In the prevailing competitive 
environment, issuers can readily favor competing venues or transfer 
listings if they deem fee levels at a particular venue to be excessive, 
or discount opportunities available at other venues to be more 
favorable. The proposed annual fee for ADR Hedges is only $2,000 more 
than the highest tier of the Exchange's standard fee schedule and is 
significantly less than the standard fees charged by Arca, that charge 
up to $35,000.\22\ The proposed annual fees for ADR Hedges are 
equitable because the proposed increased annual fees would apply 
uniformly to all issuers. As noted above, the Exchange is proposing to 
adopt this fee in in order to provide uniform pricing for all ADR 
Hedges listed on the Exchange.
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    \22\ See Arca Schedule of Fees and Charges for Exchange Services 
as of January 10, 2024, Annual Fees, Item 6b.
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    The Exchange believes that the proposal is not unfairly 
discriminatory. In the prevailing competitive environment, issuers are 
free to list elsewhere if they believe that alternative venues offer 
them better value. The Exchange believes it is not unfairly 
discriminatory to apply a higher annual fee to ADR Hedges because the 
proposed fee would be offered on an equal basis to all issuers listing 
an ADR Hedge on the Exchange. Even though the proposed annual fee for 
ADR Hedges is higher than the standard ETP annual fee, the Exchange 
believes that the proposal is not unfairly discriminatory because of 
the higher Exchange costs associated with issuer services, listing 
administration, and product development that have historically come 
along with the introduction of new product types on the Exchange. As 
discussed above, based on prior experience with listing new product 
types, the Exchange believes that these could include potentially 
adding ADR Hedge products to a liquidity incentive program, e.g., the 
Liquidity Enhancement Program, educating market participants about the 
product type, and any other unanticipated needs, each of which would 
require time and/or Exchange resources to accommodate. Without the 
ability to increase its fees in such instances, the Exchange will be 
less able to support innovation and changes in the marketplace. 
Finally, the Exchange believes that it is subject to significant 
competitive forces, as described below in the Exchange's statement 
regarding the burden on competition.
    For the foregoing reasons, the Exchange believes that the proposal 
is consistent with the Act.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposal ensures that 
the fees charged by the Exchange accurately reflect the services 
provided and benefits realized by listed issuers. The market for 
listing services is extremely competitive. Issuers have the option to 
list their securities on these alternative venues based on the fees 
charged and the value provided by each listing exchange. Because 
issuers have a choice to list their securities on a different national 
securities exchange, the Exchange does not believe that the proposed 
fee changes impose a burden on competition.
    Intramarket Competition. The Exchange's listing fees are designed 
to attract additional listings to the Exchange. The Exchange believes 
that the proposed changes would continue to incentivize issuers to 
develop and list new products, transfer existing products to the 
Exchange, and maintain listings on the Exchange. The proposed fees 
would be applicable to all issuers that list ADR Hedges on the 
Exchange, and, as such, the proposed change would not impose a 
disparate burden on competition among market participants listing ADR 
Hedges on the Exchange. Further, the Exchange is proposing to adopt 
this fee in in order to provide uniform pricing for all ADR Hedges 
listed on the Exchange.
    While the proposed annual fee for ADR Hedges is higher than the 
standard annual ETP fee, the Exchange does not believe that the 
proposed rule change will impose any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. As 
discussed above, the Exchange believes that these higher proposed fees 
are appropriate for this new product type because of the higher 
Exchange costs associated with issuer services, listing administration, 
and product development that have historically come along with the 
introduction of new product types on the Exchange. Based on prior 
experience with listing new product types, the Exchange believes that 
these could include potentially adding ADR Hedge products to a 
liquidity incentive program, e.g. the Liquidity Enhancement Program, 
educating market participants about the product type, and any other 
unanticipated needs, each of which would require time and/or Exchange 
resources to accommodate. Without the ability to increase its fees in 
such instances, the Exchange will be less able to support innovation 
and changes in the marketplace.
    Intermarket Competition. The Exchange operates in a highly 
competitive listings market in which issuers can readily choose 
alternative

[[Page 87907]]

listing venues. In such an environment, the Exchange must adjust its 
fees and discounts to remain competitive with other exchanges competing 
for the same listings. Because competitors are free to modify their own 
fees and discounts in response, and because issuers may readily adjust 
their listing decisions and practices, the Exchange does not believe 
its proposed fee change can impose any burden on intermarket 
competition. As such, the proposal is a competitive proposal designed 
to enhance pricing competition among listing venues and implement 
pricing for Fund Shares to reflect the revenue and expenses associated 
with listing on the Exchange.

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 \23\ and paragraph (f) of Rule 19b-4 \24\ 
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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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 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. 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#3c4e495059115f5351515952484f7c4f595f125b534a"><span class="__cf_email__" data-cfemail="255750494008464a4848404b5156655640460b424a53">[email protected]</span></a>. Please include 
file number SR-CboeBZX-2024-102 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-2024-102. 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-2024-102 and should 
be submitted on or before November 26, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-25635 Filed 11-4-24; 8:45 am]
BILLING CODE 8011-01-P


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