Document ID: SEC-2018-1087-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe BZX Exchange, Inc.
Posted Date: 2018-07-11T04:00Z

[Federal Register Volume 83, Number 133 (Wednesday, July 11, 2018)]
[Notices]
[Pages 32164-32167]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14789]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83597; File No. SR-CboeBZX-2018-046]

Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
BZX Rule 14.13, Company Listing Fees

July 5, 2018.
    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 June 21, 2018, 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, II 
and III below, which Items have been prepared by the Exchange. The 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the fees applicable to 
securities listed on the Exchange, which are set forth in BZX Rule 
14.13.
    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.com, at the principal office of the 
Exchange, 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 parts of such 
statements.

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

1. Purpose
    On August 30, 2011, the Exchange received approval of rules 
applicable to the qualification, listing, and delisting of companies on 
the Exchange,\5\ which it modified on February 8, 2012 in order to 
adopt pricing for the listing of exchange traded products (``ETPs'') 
\6\ on the Exchange.\7\ On July 3, 2017, the Exchange made certain 
changes to Rule 14.13 such that there were no entry fees or annual fees 
for ETPs listed on the Exchange.\8\ The Exchange is proposing to amend 
Rule 14.13 in order to charge an entry fee for ETPs that are not 
Generically-Listed ETPs, as defined below and to add annual listing 
fees for ETPs listed on the Exchange.
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    \5\ See Securities Exchange Act Release No. 65225 (August 30, 
2011), 76 FR 55148 (September 6, 2011) (SR-BATS-2011-018).
    \6\ As defined in Rule 11.8(e)(1)(A), the term ``ETP'' means any 
security listed pursuant to Exchange Rule 14.11.
    \7\ See Securities Exchange Act Release No. 66422 (February 17, 
2012), 77 FR 11179 (February 24, 2012) (SR-BATS-2012-010).
    \8\ See Securities Exchange Act Release No. 81152 (July 14, 
2017), 82 FR 33525 (July 20, 2017) (SR-BatsBZX-2017-45).

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[[Page 32165]]

Entry Fee
    The Exchange is proposing that a Company that submits an 
application to list any ETP, which term includes all securities set 
forth in Rule 14.11, shall be required to pay an entry fee \9\ as 
follows:
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    \9\ The Exchange notes that the proposed entry fee is 
substantively identical to those charged by NYSE Arca, Inc. 
(``Arca''). See Securities Exchange Act Release No. 81796 (October 
2, 2017), 82 FR 46865 (October 6, 2017) (SR-NYSEArca-2017-105).
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    (i) All ETPs, with the exception of Index Fund Shares, Portfolio 
Depositary Receipts, Managed Fund Shares, and Currency Trust Shares 
that are listed on the Exchange pursuant to Rule 19b-4(e) under the 
Exchange Act and for which a proposed rule change pursuant to Section 
19(b) of the Exchange Act is not required to be filed with the 
Commission (collectively, ``Generically-Listed ETPs''), shall pay an 
entry fee of $7,500. Each issuer will be subject to an aggregate 
maximum entry fee of $22,500 per calendar year.
    (ii) There is no entry fee for Generically-Listed ETPs.
Annual Fees
    The Exchange is proposing to establish annual fees for listing on 
the Exchange, largely based on the consolidated average daily volume 
(``CADV'') of an ETP. The Exchange is also providing certain exceptions 
to such CADV-based annual fees for Legacy Listings, New Listings, and 
Auction Fee Listings, each defined below.
    Specifically, the Exchange is proposing that where an ETP was 
listed on the Exchange prior to January 1, 2019 (a ``Legacy Listing''), 
such ETP will have an annual listing fee of $4,000. Where an ETP first 
lists on the Exchange or has been listed for fewer than three calendar 
months on the ETP's first trading day of the year (a ``New 
Listing''),\10\ and is not a series of Linked Securities listed 
pursuant to Rule 14.11(d), such ETP will have an annual listing fee of 
$4,500. Where an ETP is a New Listing and is a series of Linked 
Securities listed pursuant to Rule 14.11(d), such ETP will have an 
annual listing fee of $10,000. Where the 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 exceeds 500,000 
shares (an ``Auction Fee Listing''), there is no annual listing fee for 
any of the issuer's ETPs listed on the Exchange.
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    \10\ Upon initial listing on the Exchange, the annual listing 
fee applicable to New Listings will be prorated based on the number 
of trading days remaining in the calendar year.
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    Where an ETP is not a Legacy Listing, a New Listing, an Auction Fee 
Listing, or a series of Linked Securities listed pursuant to Rule 
14.11(d), such ETP will have an annual listing fee as follows based on 
the CADV of the ETP in the fourth quarter of the preceding calendar 
year:

------------------------------------------------------------------------
                                                          Annual listing
                       CADV Range                               fee
------------------------------------------------------------------------
0-10,000 shares.........................................          $7,000
10,001-100,000 shares...................................           6,000
100,001-1,000,000 shares................................           5,500
Greater than 1,000,000 shares...........................           5,000
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    Where an ETP is not a Legacy Listing, a New Listing, or an Auction 
Fee Listing, but is a series of Linked Securities listed pursuant to 
Rule 14.11(d), such ETP will have an annual listing fee as follows 
based on the consolidated average daily volume (``CADV'') in the fourth 
quarter of the preceding calendar year:

------------------------------------------------------------------------
                                                          Annual listing
                       CADV Range                               fee
------------------------------------------------------------------------
0-10,000 shares.........................................         $15,000
10,001-100,000 shares...................................          14,000
100,001-1,000,000 shares................................          13,000
Greater than 1,000,000 shares...........................          12,000
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Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule on January 1, 2019.
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.\11\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4) and 6(b)(5) of the Act,\12\ 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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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed amendment to Rule 
14.13(b)(1)(C) to implement an entry fee for ETPs listed on the 
Exchange that are not Generically-Listed ETPs 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 Exchange believes that charging such entry fee is reasonable given 
the additional resources required by the Exchange in connection with 
ETPs requiring a proposed rule change pursuant to Section 19(b), 
specifically the significant additional time and extensive legal and 
business resources required by Exchange staff to prepare and review 
such filings and to communicate with issuers and the Commission 
regarding such filings. As noted above, this proposed change is also 
substantively identical to fees charged by Arca.\13\
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    \13\ See Securities Exchange Act Release No. 81796 (October 2, 
2017), 82 FR 46865 (October 6, 2017) (SR-NYSEArca-2017-105).
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    The Exchange believes that the proposed amendment to the annual 
listing fees in Rule 14.13(b)(2)(C) to charge issuers listed on the 
Exchange based on the CADV of the applicable ETPs is a reasonable, fair 
and equitable, and not unfairly discriminatory allocation of fees and 
other charges because it would create a distribution of fees and other 
charges applicable to all issuers that generally reflect the additional 
revenue that an 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 trading activity and auction volume for such ETP. As 
such, the Exchange is proposing lower annual listing fees for ETPs 
listed on the Exchange as their CADV increases. 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.
    Further, the Exchange believes that charging different fees for 
Linked Securities and other ETPs is reasonable because there is 
generally less auction volume for Linked Securities than for other 
ETPs, meaning that an exchange can generally expect less revenue from a 
Linked Security with the same CADV

[[Page 32166]]

as another ETP. The CADV structure proposed is designed to reward the 
issuer of an ETP for providing the Exchange with additional revenue as 
CADV increases, so it is logically consistent to charge higher fees to 
Linked Securities for which the Exchange does not expect as much 
revenue. The proposed annual listing fees for Linked Securities would, 
however, still reward the issuer of a series of Linked Securities for 
the additional revenue brought to the Exchange as the CADV of the 
Linked Securities 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.
    The Exchange believes that it is a reasonable, fair and equitable, 
and not unfairly discriminatory allocation of fees and other charges to 
offer lower annual listing fees to Legacy Listings because it will 
incentivize issuers to transfer ETPs to the Exchange in advance of 
January 1, 2019 in order to receive a lower long term listing fee while 
simultaneously providing reduced fees to those ETPs that have been 
listed on the Exchange at a time when the Exchange was not charging 
listing fees. The Exchange believes that this proposed change is not 
unfairly discriminatory because it is available to all issuers and, 
because any ETP that is listed on the Exchange prior to January 1, 2019 
will qualify as a Legacy Listing, issuers have plenty of time to 
coordinate transferring ETPs to the Exchange and still receiving such 
pricing.\14\
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    \14\ The Exchange notes that there is precedent for offering 
listing fees that are dependent on when the listing occurs. For 
example, Investors Exchange, LLC (``IEX'') offers credits of at 
least $250,000 that are paid out over up to five years to corporate 
issuers that announce a transfer of their listing to IEX within 120 
days of the first listing on IEX. See Securities Exchange Act 
Release No. 81725 (September 26, 2017), 82 FR 45917 (October 2, 
2017) (SR-IEX-2017-30).
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    The Exchange also believes that it is a reasonable, fair and 
equitable, and not unfairly discriminatory allocation of fees and other 
charges to offer lower annual listing fees to New Listings because the 
Exchange believes that offering such lower pricing to ETPs that are 
either just beginning their listing on the Exchange or have been listed 
on the Exchange for fewer than three months on January 1 of a given 
year will help to incentivize issuers to bring new ETPs to market. 
Further, such ETPs have not had any meaningful amount of time to 
increase CADV and potentially reduce the applicable annual listing 
fees. As such, the Exchange believes that it is reasonable, fair and 
equitable, and not unfairly discriminatory allocation of fees and other 
charges to offer lower annual listing fees to New Listings.
    The Exchange also believes that it is a reasonable, fair and 
equitable, and not unfairly discriminatory allocation of fees and other 
charges to not charge an annual listing fee to Auction Fee Listings 
because, similar to determining annual listing fees based on CADV, it 
would create a distribution of fees and other charges applicable to all 
issuers that generally reflect the additional revenue that such ETPs 
create for the Exchange through auction volume. As noted above, 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 auction volume of ETPs listed on the Exchange, 
the greater the income the Exchange will receive through the daily 
opening and closing auctions. As such, the Exchange is proposing to 
eliminate annual listing fees for ETPs from an issuer for which the 
average daily auction volume combined between the opening and closing 
auctions on the Exchange across all of that issuer's ETPs listed on the 
Exchange exceeds 500,000 shares. This structure is designed to reward 
the issuer of an ETP for such additional revenue that the Exchange will 
receive from the auctions, 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. 
Finally, the Exchange also believes that such a fee structure will also 
incentivize issuers to transfer products with greater auction volume, 
which are thus more profitable, to the Exchange. As such, 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 Auction Fee Listings.

(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 
new pricing for the listing of 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, such proposed changes 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 \15\ and Rule 19b-4(f)(2) thereunder.\16\ 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 shall institute proceedings to determine whether 
the proposed rule 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 proposal 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 [email protected]. Please include 
File No. SR-CboeBZX-2018-046 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.

[[Page 32167]]

All submissions should refer to File No. SR-CboeBZX-2018-046. 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 such filing will also 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 No. SR-CboeBZX-2018-046 and should be submitted on 
or before August 1, 2018.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-14789 Filed 7-10-18; 8:45 am]
 BILLING CODE 8011-01-P