Document ID: SEC-2020-1808-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2020-11-12T05:00Z

[Federal Register Volume 85, Number 219 (Thursday, November 12, 2020)]
[Notices]
[Pages 71982-71984]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24965]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90356; File No. SR-CboeBZX-2020-082]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule To Eliminate the 
Listing Fee Waiver for Issuers of Certain ETPs

November 5, 2020.
    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 November 4, 2020, 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

    The Exchange is proposing to amend Rule 14.13(b)(2)(C) related to 
the listing of exchange traded products (``ETPs'') \3\ on the Exchange. 
Specifically, the Exchange is proposing to eliminate Rule 
14.13(b)(2)(C)(iii) related to Auction Fee Listings, as defined below, 
and to make several other corresponding amendments to Rule 
14.13(b)(2)(C).
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    \3\ As defined in Rule 11.8(e)(1)(A), the term ``ETP'' means any 
security listed pursuant to Exchange Rule 14.11.
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    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,

[[Page 71983]]

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 is proposing to amend Rule 14.13(b)(2)(C) related to 
the listing of exchange traded products (``ETPs'') \4\ on the Exchange. 
Specifically, the Exchange is proposing to eliminate Rule 
14.13(b)(2)(C)(iii) related to Auction Fee Listings, as defined below, 
and to make several other corresponding amendments to Rule 
14.13(b)(2)(C).\5\
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    \4\ As defined in Rule 11.8(e)(1)(A), the term ``ETP'' means any 
security listed pursuant to Exchange Rule 14.11.
    \5\ The Exchange initially filed the proposed fee change on 
November 2, 2020.
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Auction Fee Listings
    Currently, Rule 14.13(b)(2)(C)(iii) provides that any issuer that 
has an average daily auction volume combined between the opening and 
closing auctions on the Exchange across all of an issuer's ETPs listed 
on the Exchange that exceeds 500,000 shares (an ``Auction Fee 
Listing''), there is no annual listing fee for that issuer's ETPs 
listed on the Exchange. Any ETP that is not an Auction Fee Listing, a 
Legacy Listing,\6\ a New Listing,\7\ an Outcome Strategy ETP,\8\ or a 
Transfer Listing \9\ is currently charged an annual listing fee based 
on the consolidated average daily volume (``CADV'') of the ETP in the 
fourth quarter of the preceding calendar year, which ranges from $5,000 
to $7,000 annually and decreases as the CADV of an ETP increases, a 
model that is generally designed to reflect the additional revenue that 
an individual ETP listed on the Exchange creates for the Exchange as 
its CADV increases. The Exchange is proposing to eliminate Rule 
14.13(b)(2)(C)(iii) and the concept of the Auction Fee Listing from its 
rules. As such, the Exchange is proposing that ETPs under Rule 
14.13(b)(2)(C)(iii) that were previously not charged an annual listing 
fee will be charged an annual listing fee pursuant to the fees table in 
current Rule 14.13(b)(2)(C)(v) \10\ beginning on January 4, 2021, the 
first trading day of the applicable year.\11\
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    \6\ As defined in Rule 14.13(b)(2)(C)(i), a ``Legacy Listing'' 
is an ETP listed on the Exchange prior to January 1, 2019.
    \7\ As defined in Rule 14.13(b)(2)(C)(ii), a ``New Listing'' is 
an ETP during its first calendar year listed on the Exchange or an 
ETP that has been listed for fewer than three calendar months on the 
ETP's first trading day of the year.
    \8\ As defined in current Rule 14.13(b)(2)(C)(iv) (Rule 
14.13(b)(2)(C)(iii), as amended beginning January 4, 2021), an 
``Outcome Strategy ETP'' is an ETP where the issuer lists multiple 
ETPs 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 instrument; and (iv) each employ 
the same outcome strategy for achieving the pre-defined set of 
returns.
    \9\ As defined in Rule 14.13(b)(2)(C)(ii) [sic], a ``Transfer 
Listing'' is an ETP that transfers its listing from another national 
securities exchange to the Exchange.
    \10\ Rule 14.13(b)(2)(C)(iv), as amended beginning January 4, 
2021.
    \11\ The Exchange notes that if ETPs are Legacy Listings, New 
Listings, Outcome Strategy ETPs, and Transfer Listings, then they 
will be subject to those applicable annual fees as described in 
current Rule 14.13(b)(2)(C)(i), (ii) and (iv).
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    The Exchange is also proposing to make certain corresponding 
changes, including deleting a reference to ``Auction Fee Listing'' 
under current Rule 14.13(b)(2)(C)(v) and changing the numbering 
associated with Rules 14.13(b)(2)(C)(iv) and (v) to 14.13(b)(2)(C)(iii) 
and (iv), respectively.
Implementation Date
    As noted above, the Exchange intends to implement these amendments 
to its fee schedule on January 4, 2021, the first trading day of the 
upcoming year for which an ETP will be billed for applicable annual 
listing fees pursuant to Rule 14.13(b)(2)(C).\12\ The Exchange will 
announce to its Members the implementation of the rule change prior to 
its January 4, 2021 implementation date.
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    \12\ The Exchange notes that although this proposal may take 
effect upon filing with the Commission pursuant to Section 
19(b)(3)(A)(ii) of the Act and paragraph (f)(2) of Rule 19b-4 
thereunder, the Exchange may choose for such change to be effective 
on a date other than the filing date.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder that are applicable to a national securities exchange, and, 
in particular, with the requirements of Section 6 of the Act.\13\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) and 6(b)(5) of the Act,\14\ in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among issuers and it does not unfairly discriminate 
between customers, issuers, brokers or dealers.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed deletion of Rule 
14.13(b)(2)(C)(iii) to eliminate the Auction Fee Listing is a 
reasonable, fair and equitable, and not unfairly discriminatory 
allocation of fees and other charges because it would apply equally for 
all issuers and all ETPs. The pricing for Auction Fee Listings was 
originally designed to help the Exchange attract and retain listings 
from issuers of ETPs that had a collectively large auction volume. As 
the Exchange has continued to grow its ETP listing business, it has 
determined that such an incentive program is no longer necessary and 
that such ETPs should instead be subject to the standard annual listing 
fees on the Exchange, which are generally based on the CADV of the ETP, 
pursuant to current Rule 14.13(b)(2)(C)(v).\15\ Such a change will 
create a fee structure that will generally apply on a product by 
product basis instead of across all of an issuer's ETP listings on the 
Exchange, which will allow the Exchange to charge issuers in a manner 
more directly related to the incremental costs associated with the 
initial and continued listing of ETPs on the Exchange.
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    \15\ See supra notes 10 and 11.
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    The Exchange believes that this is a reasonable, fair and 
equitable, and not unfairly discriminatory allocation of fees and other 
charges because such standard fees are generally designed to reflect 
the additional revenue that an individual ETP listed on the Exchange 
creates for the Exchange through executions occurring in the auctions 
and additional shares executed on the Exchange. Listing exchanges 
generally receive an outsized portion of intraday trading activity and 
receive all auction volume for ETPs listed on the exchange. The higher 
the CADV for an ETP, the greater the likely income the Exchange will 
receive based on outsized intraday

[[Page 71984]]

trading activity and auction volume for such ETP. This structure is 
designed to reward the issuer of an ETP for such additional revenue 
brought to the Exchange as CADV increases, which the Exchange believes 
creates a more equitable and appropriate fee structure for issuers 
based on the revenue and expenses associated with listing ETPs on the 
Exchange. With this in mind, the Exchange believes that that it is 
reasonable, fair and equitable, and not unfairly discriminatory 
allocation of fees and other charges to charge lower fees for ETPs with 
a higher CADV.

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 not necessary or appropriate in 
furtherance of the purposes of the Act. With respect to the proposed 
elimination of Auction Fee Listings for ETPs, the Exchange does not 
believe that the changes burden competition, but instead, enhance 
competition, as it is intended to increase the revenue of the 
Exchange's listing program in order to better compete. Further, the 
standard fees that will apply on a going forward basis are directly 
related to the amount of revenue that the Exchange receives from ETPs 
listed on the Exchange. 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 has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from Members or other interested 
parties.

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 \16\ and paragraph (f) of Rule 19b-4 
thereunder.\17\ 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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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CboeBZX-2020-082 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-2020-082. 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 (http://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 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CboeBZX-2020-082 and should be submitted 
on or before December 3, 2020.
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    \18\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-24965 Filed 11-10-20; 8:45 am]
BILLING CODE 8011-01-P